Gordon Gecko's MessageStream

Fitch Updates Ratings Model; Projects Steep Housing Price Declines (25% and more). San Diego and San Francisco to decline by more than 30%.

Gordon Gecko (boilerroom) — 2008-07-28T15:52:53Z

http://www.housingwire.com/2008/07/24/fitch-updates-ratings-model-projects-steep-price-declines/

Fitch Ratings said Thursday that it had enhanced its U.S. residential mortgage loss model, called ResiLogic, a key component of the agency's overall approach to assessing U.S. RMBS new-issue ratings. While the new-issue market has been essentially dead for all of 2008, Fitch's revisions suggest that the agency is preparing for where the market might be headed next: seasoned mortgage issuance.

They also suggest a very bearish take on housing prices over the next five years: Fitch said in its report that it is expecting home prices to decline by an average of 25 percent in real terms at the national level over the next five years, starting from the second quarter of 2008.

And that's the base case scenario.

Seasoned securitizations?

In face of those sort of expectations for housing, more than a few market participants have suggested to HW as of late that in order for the battered securitization market to regain its footing, it may have to revert back to issuing deals only for mortgages that have already been "seasoned."

Seasoning refers to the usual pattern of increasing defaults during the first 24 months of a deal's life; so-called "seasoned deals" typically exhibit much more stable and predictable default patterns.

While the updates to ResiLogic cover other areas, it's Fitch's addition of the ability to analyze seasoned loans and to take into account loan payment history and house price changes since loan origination that are probably the most telling, at least in terms of where the securitization market is headed next.

"The ability to look at seasoned loans through ResiLogic is significant because the dearth of new mortgage origination has placed emphasis on the securitization of seasoned loans," said Huxley Somerville, group managing director and head of Fitch's U.S. RMBS group. "To rate transactions with seasoned loans, it is imperative to understand how they are performing in the current environment."

Fitch will also roll out new 25 MSA-level risk factors influencing frequency of foreclosure and loss severity estimates, the agency said; the 25 MSAs chosen are those that have exhibited strong non-conforming mortgage lending activity in the past.

"Some MSAs such as San Diego and San Francisco, CA are expected to experience home price declines by as much as 47 percent and 33 percent over the next five years, while home prices in MSAs such as San Antonio, TX are expected to appreciate by 7 percent," Somerville said.

"The home price forecasts are embedded in the state and MSA level risk indicators and will be updated quarterly."

For many investors, the updates come too late to salvage existing deals; but it's clear that the agency has become much more bearish on prospects in the primary housing market.

California foreclosures up 261% from '07 levels

Gordon Gecko (boilerroom) — 2008-07-22T14:47:53Z

Breaking: DataQuick reports today that foreclosures in California soared 33% from the first quarter to the second quarter of 2008, and are running 261% ahead of year-ago levels.

From DataQuick: "Lenders started foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home values and the rampant spoilage of a batch of especially risky home loans made in late 2005 and 2006."

Writing on LATimes.com, Peter Hong leads with defaults rising to record levels: "A record number of California homeowners defaulted on mortgages last quarter, a real estate information service reported today."

Numbers:
-- DataQuick counted 121,341 "notices of default" in the second quarter, up 6.6% from the first quarter and up 124.9% from year-ago levels. The relatively small increase from quarter to quarter "may indicate that we're nearing a plateau," said DataQuick President John Walsh. "We won't know until the end of the year, but it may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process."

-- Trustee deeds recorded, or actual loss of a home to foreclosure, totaled 63,061 during the quarter -- up 33.5% from the first quarter and up 261% from the second quarter of last year, DataQuick reported

Quarter # of defaults in Cal.      "escape rate"
2Q 06    20,909                             88%
3Q 06    27,218                             80.9%
4Q 06    37,994                             71%
1Q 07    46,760                             52%
2Q 07    53,943                             54.6%
3Q 07    72,571                             45.9%
4Q 07    81,550                             41%
1Q 08   113,809                            32%
2Q 08   121,341                            22%

Source: DataQuick Information Systems

HELLO Anybody need a Porsche 911 Carrera Cabriolet?

Fannie, Freddie bailout may have $25 billion tag

Gordon Gecko (boilerroom) — 2008-07-22T14:39:52Z

via News for Freddie Mac - Google Finance on 7/22/08

Fannie, Freddie bailout may have $25 billion tag
MSN Money - 5 hours ago

WASHINGTON ( Reuters ) - Congressional budget analysts on Tuesday put a $25 billion cost estimate on a Bush administration plan to bolster mortgage finance giants Fannie Mae and Freddie Mac , ...

Taxpayer Bill for Fannie/Freddie May Be Zero - TheStreet.com
Fannie/Freddie Costs May Be Exaggerated - TheStreet.com

Washington Mutual loses $3.3 billion

Gordon Gecko (boilerroom) — 2008-07-22T14:32:54Z

Wooohoooooo

via Business and financial news - CNNMoney.com on 7/22/08

Washington Mutual reported a $3.3 billion quarterly loss Tuesday -- far worse than Wall Street was anticipating -- as it set aside more money for bad loans.

How bad is housing? Due for 30% Nip Tuck?

Gordon Gecko (boilerroom) — 2008-07-18T18:53:12Z

Peter Goodman can breath. Housing is far far from bottom.

How bad is housing?

Bad in many markets, awful in some, and still O.K. in a few.

The downturn has its roots in the real estate frenzy that turned lonely Nevada ranches into suburban ranch homes and swampland in Florida into condominiums. Speculators drove home prices beyond any historical connection to incomes. Gravity did the rest. After roughly doubling in value from 2000 to 2005, home prices have fallen about 17 percent — and more like 25 percent in inflation-adjusted terms — according to the widely watched Case-Shiller index.

Even so, most economists think house prices must fall an additional 10 to 15 percent to get back to reality. One useful measure is the relationship between the costs of buying and renting a home. From 1985 to 2002, the average American home sold for about 14 times the annual rent for a similar home, according to Moody's Economy.com. By early 2006, home prices ballooned to 25 times rental prices. Since then, the ratio has dipped back to about 20 — still far above the historical norm.

With mortgages now hard to obtain and speculation no longer attractive, arithmetic has replaced momentum as the guiding force for housing prices. The fundamental equation points down: Even as construction grinds down, there are still many more houses on the market than there are people to buy them, and more on the way as more homeowners slip into foreclosure.

By the reckoning of Economy.com, enough houses are on the market to satisfy demand for the next two-and-a-half years without building a single new one. <-- BUILDERS GO HOME

The time it takes to sell a newly completed house has expanded from an average of four months in 2005 to about nine months, according to analysis by Dean Baker, co-director of the Center for Economic and Policy Research.

And many sales are falling through — more than 30 percent in some parts of California and Florida — as buyers fail to secure financing, exacerbating the glut of homes, Mr. Baker said.

No wonder that in Los Angeles, San Francisco, Phoenix and Las Vegas, house prices have in recent months declined at annual rates of more than 33 percent.

http://www.nytimes.com/2008/07/19/business/economy/19econ.html

UNCLE BEN IN HOT SEAT. SURRENDERS TO BUSHONOMICS

Gordon Gecko (boilerroom) — 2008-07-18T18:44:44Z

JITTERY investors and anxious politicians have often relied on Federal Reserve chairmen to conjure up something to steady their nerves. But when Ben Bernanke gave his twice-yearly monetary testimony to Congress this week he had little to offer but unvarnished and uncomfortable truths. There were "significant downside risks" to the economy's outlook, he said, and the chances that high inflation would persist had "intensified". Mr Bernanke did not specify which was the bigger threat: recession or inflation. This lack of a clear policy bias invited the conclusion that, for the time being at least, the Fed thinks it cannot safely move interest rates in either direction.

With financial markets buffeted by renewed fears about the credit drought and a deepening housing slump, Mr Bernanke could hardly boast of the economy's soundness. To make matters worse, figures released on Wednesday July 16th showed that year-on-year inflation rose in June to 5.0% (see chart), the highest rate since 1991. Paltry pay rises, as well as job losses, mean employment income is probably growing by less than 3%, well below the inflation rate. Falling real income, slumping share and house prices and tighter credit all cast a cloud over consumer spending. Firms worried about future demand will be more cautious too about shelling out for costly capital projects, even if they could raise the finance.

Despite these unsettling prospects, the Fed's rate-setters bumped up their forecasts for GDP growth in 2008, to 1.0-1.6%, prompted by stronger data on consumer and business spending between April and June. Private-sector analysts are revising up their forecasts too. The first estimate of second-quarter GDP, to be released on July 31st, is likely to show that the economy grew at an annualised rate of around 2%, twice as fast as in the first quarter.

The Fed's trouble is that, although the economy has avoided recession so far, it may not do so for much longer. Indeed Mr Bernanke acknowledged that some of the demand that the Fed had hoped for later this year may have already come and gone. So the economy's first-half resilience may be of more concern than comfort.

The brightest hope for America's economy is its foreign sales. Net trade added more than one percentage point to GDP growth in the year to the first quarter. The weak dollar is still helping American firms to take advantage of the strong demand in other parts of the world. But even here, the future is looking bleaker. Rising global inflation, spurred in part by countries with dollar pegs mimicking the Fed's rate cuts, is now prompting central banks in many emerging economies to tighten monetary policy. That will curb demand for imports. America's richer trading partners are struggling too.

The good news in the first half may even make the Fed's job harder. If consumers have already used up much of their tax rebates and credit lines, spending is likely to flag soon. A first-half recession followed by a sluggish recovery—the standard forecast until recently—could well have enabled the Fed to raise rates in the autumn. But with the worst news on the economy yet to come, Mr Bernanke can only keep his fingers crossed that inflation does not become ingrained.

http://www.economist.com/finance/displayStory.cfm?story_id=11750673&source=features_box3

Jon Stewart on George glass-half-full Bush, Gus, and Deepok Kopra

Gordon Gecko (boilerroom) — 2008-07-18T00:35:23Z

US Stocks Retreat, Dollar Slumps as Fannie, Freddie Tumble

Gordon Gecko (boilerroom) — 2008-07-15T11:30:28Z

Humpty Dumpty sat on a subprime
Hampty came down and broke his crown
Dumpty came tumbling after ...

not funny :) :(

via News for Freddie Mac - Google Finance on 7/15/08

US Stocks Retreat, Dollar Slumps as Fannie, Freddie Tumble
Bloomberg - 48 minutes ago

July 15 ( Bloomberg ) - - US stocks fell and the dollar dropped to a record low against the euro as investors lost confidence in the government's rescue of Fannie Mae and Freddie Mac and Federal ...

US Stocks Drop, Led by Financials; Fannie, Freddie Tumble - Bloomberg

Downgrade Hits Wachovia Shares

Gordon Gecko (boilerroom) — 2008-07-15T11:28:42Z

Wachovia is next in line. Run on the bank is imminent??

via TheStreet.com by txxxx@xxxcom (Lauren LaCapra) on 7/15/08

Oppenheimer analyst Meredith Whitney lowers teh bank stock to to underperform from perform, citing eroded capital levels.

The CAPS Screen: Avoid These 5 Financial Time Bombs

Gordon Gecko (boilerroom) — 2008-07-15T11:28:03Z

via Fool.com: The Motley Fool on 7/15/08

Tread carefully if you're thinking of investing in these stocks.