Archive for the ‘Mortgage Crisis’ Category
Posted by Larry Doyle on February 22nd, 2009 4:29 PM |
I worked in the mortgage business on Wall Street for 23 years. During that time period I had the good fortune of developing relationships with some of the finest minds in this sector. While I do not know Laurie Goodman personally, I can tell you that there is no one individual in the market today whom investors follow more closely when it comes to developments in this space. While Ms. Goodman does work in a business that is actively engaged with investors, I have always appreciated her perspectives as being untainted by bias and merely reflecting an extremely professional and honest outlook.
What does Ms. Goodman think about President Obama’s plans for housing? It would appear that there may be all sorts of unintended consequences and misaligned incentives in this proposal. Regrettably plans that are well intended often do not necessarily achieve their desired results. I strongly recommend you read Mortgage Plan Aids Liars About Income to gain a fuller appreciation of this proposal.
LD
Tags: Laurie Goodman
Posted in American Consumers, Banking Institutions, Business, Current Affairs, Economy, Families, Fannie Mae, FDIC, Freddie Mac, General, Housing Crisis, Mortgage Cram-Down, Mortgage Crisis, Mortgages, Obama Administration, Real Estate, Wall Street | No Comments »
Posted by Larry Doyle on February 20th, 2009 5:20 PM |
While there is tremendous volatility in the markets and commensurate anxiety as a result, there were some major stories and developments that got less play but deserved more.
Allow me to expound. Robert Shiller, a highly distinguished Economics Professor at Yale Univeristy and co-designer of the Case-Shiller Home Price Index spoke this morning on Bloomberg News. Shiller is the preeminent expert on trends and developments in housing. He made the following assessments:
1. Glad to see that Obama is making an effort to support housing but has serious concerns about the effort.
2. $75 billion allocated for loan modification is not nearly enough to make a truly meaningful impact. (remember there is another $200 billion allocated for Freddie and Fannie to refinance mortgages).
3. No plan or proposal for those holding Jumbo mortgages leaves a large part of the market without benefits. Those homes will likely hang over the market.
(more…)
Tags: Bloomberg News, Case-Shiller Index, Robert Shiller
Posted in American Consumers, Australia, Bad Bank, Bank Nationalization, Bank of America, Banking Institutions, Barack Obama, Christopher Dodd, Citigroup, Economic Stimulus, Fannie Mae, Freddie Mac, General, Housing Crisis, Mortgage Crisis, Mortgages, Nouril Roubini, Stimulus Plan, Tim Geithner | No Comments »
Posted by Larry Doyle on February 19th, 2009 6:00 AM |
President Barack Obama presented an overview of his plans to support the housing market yesterday. Obama highlighted the government would utilize the following methods to support those homeowners in default or close to foreclosure:
1. Support is only provided to those homeowners occupying the residence. No support for speculators or developers.
2. The government will increase the portfolios of Freddie Mac and Fannie Mae to purchase mortgages that are refinanced. These portfolios are currently sink holes swallowing billions in taxpayer funds given irresponsible management and pathetic risk management over the last 15 years.
3. The government will work with and incent mortgage servicers to rewrite mortgages to 31% of income for these homeowners. (more…)
Posted in Abortion, American Consumers, Barack Obama, Current Affairs, Economy, Fannie Mae, Franklin Raines, Freddie Mac, General, Housing Crisis, Jamie Dimon, JP Morgan, Mortgage Cram-Down, Mortgage Crisis, Mortgages, Real Estate | No Comments »
Posted by Larry Doyle on December 23rd, 2008 7:15 AM |
At “Central Station” the other day, a loyal reader thought it may be useful to write about the implications of defaulting on a mortgage. Certainly nobody wants to default on a mortgage, but given the dynamics of our current housing market and economy, delinquencies and defaults are simple realities.
In thinking through this topic, it struck me that it may be just as beneficial to address what to do before defaulting as it is to know what happens after defaulting.
First and foremost, given the economic environment there should be no sense of shame or embarrassment in a deteriorating financial condition. That said, as one of my earliest mentors taught me “people in finance typically do not have problems with losses but they have big problems with surprises.” How does that piece of wisdom apply to today’s deteriorating housing market and rising foreclosures?
(more…)
Tags: consumers should negotiate, consumers should shop for credit
Posted in American Consumers, Banking Institutions, Economy, Housing Crisis, Mortgage Crisis | 4 Comments »
Posted by Larry Doyle on November 12th, 2008 12:15 PM |
Despite billions and now trillions of dollars in capital injections and equity investments made by our government, private equity, and sovereign wealth funds, our economic turmoil is a long way from being over. I do find it interesting that despite numerous Wall Street titans having indicated to us at different points over the last year that we were in the 7th inning of this fiasco, now a recurring theme is that we should not expect any real economic recovery until 2010. Actually, maybe we were in the 7th inning but it was the 7th inning of the first game of a 4 game series.
Well, if we want to figure out where and when we are moving forward, I think it would be beneficial to know from where and when we came.
For those over 50 years of age, perhaps you remember when mortgage money dried up. Perhaps you also recall the days of putting down 20% before you even thought of buying a home. In any event, the growth of the secondary mortgage market in the mid 1980s was a result of some very sharp financial minds on Wall St. who engineered a product called a Collateralized Mortgage Obligation (CMO). (more…)
Tags: ABS model on Wall Street, and distribute business model, Asset securitization on Wall Street, Aurora Mortgage, bankruptcy of Lehman, Bear Stearns, breakdown of rating agnecy models on Wall Street, business model on Wall Street, CMO business model on Wall Street, Countrywide, development of CBOs, development of CDS, development of CLOs, development of credit derivatives, EMC Mortgage, fannie Mae and Wall Street model, First Franklin, Freddie Mac and Wall Street model, Hedge Funds, history of Wall Street business model, junk mortgages, Lehman Bros, Maryann Hurley, Merrill LYnch, NINA loans, originate, originate and distribute, originate to distribute, originate to distribute model, originate to distribute modeli, origination and distribution business, origination business model on Wall Street, Paulson comments on Wall Street, rating agency models, securitize, securitizing loans, the Wall street model, underwriting of loans on Wall Street, volumes of asset securitizations, Wall Street, Wall Street business model, Wall Street engineering, Wall Street engineers, Wall Street finance, Wall Street model, Wall Street model is broken, Wall Street model won't soon be fixed, Wall Street operating model is broken, Wall Street quants, Wall Street securitization model, Wall Street securitization process, Wall Street trading
Posted in American Consumers, Banking Institutions, Current Affairs, Economy, Housing Crisis, Mortgage Crisis | 13 Comments »
Posted by Larry Doyle on November 11th, 2008 2:30 PM |
I will admit that, given the current dynamics at work in the economy and the markets, I have become somewhat numbed as to the magnitude of some of the developments. Many of the highlights that I will offer from yesterday’s news would be enormous stories in and of themselves. Taken collectively, they do become overwhelming if we let them.
The markets are down 5-6% on the month. Given the stream of negative news, one might think that the market could be even lower. The fact that markets aren’t even lower is testament to the trillions of dollars that have been put to work by governments around the world.
Let’s review the major stories of November 10, 2008:
1. China implemented a $563bln economic stimulus plan primarily to further develop infrastructure in the country. That figure represents 1/5th of their total GDP. I was surprised to hear that, but it also indicates to me how much growth potential that country possesses. This package had an immediate impact on our equity markets this morning when our markets were up 3%. This package also supported commodities, especially copper which bounced about 5% on the day. Aside from infrastructure, China directed this stimulus package to an area that was badly damaged in a recent earthquake. Last but not least, China offered “tax deductions” on the purchase of certain hard assets. (Are you listening, Barack??)
This stimulus package though indicates to me that it is not likely that many of our domestic companies will likely be receiving capital injections from sovereign wealth funds. With oil at $60, oil producing countries (such as Dubai) may need to support the real estate developers and exporters in their own countries.
2. Fannie Mae reported a loss of $29bln (I’m not going to say earnings when companies lose money) which equates to $12.96 a share vs an expected loss of $1.40 a share. (How can Wall St. analysts maintain credibility when they miss a call by almost 1000%?).
It is amazing how Fannie can rack up losses like this when their own incentive bonuses are not on the line and when collectively Uncle Sam owns them. Aside from this loss, Fannie did announce that they expect losses to continue and to increase into 2009. This to me means they see foreclosures increasing over the next 6 months. More than likely Fannie will have a negative net worth by the end of 2008 requiring an increased capital injection by the U.S. taxpayer. Where does it end!!
Again, this model is broken. The American consumer who is able to get a mortgage is being subsidized at the expense of the taxpayers. Let the private market set the mortgage rates and if the housing market re-prices, so be it. Enough socialized housing finance. (more…)
Tags: China stimulus November 2008, economic and market review 11/10/08, Fannie MAe earnings November 2008
Posted in American Consumers, Banking Institutions, Barack Obama, China, Credit Card companies, Current Affairs, Dubai, Economic Stimulus, Economy, Meredith Whitney, Mortgage Crisis, Real Estate, Retail Business, Warren Buffet | No Comments »
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The Wall St. Model is Broken . . . and Won’t Soon be Fixed!!
Posted by Larry Doyle on November 12th, 2008 12:15 PM |
Despite billions and now trillions of dollars in capital injections and equity investments made by our government, private equity, and sovereign wealth funds, our economic turmoil is a long way from being over. I do find it interesting that despite numerous Wall Street titans having indicated to us at different points over the last year that we were in the 7th inning of this fiasco, now a recurring theme is that we should not expect any real economic recovery until 2010. Actually, maybe we were in the 7th inning but it was the 7th inning of the first game of a 4 game series.
Well, if we want to figure out where and when we are moving forward, I think it would be beneficial to know from where and when we came.
For those over 50 years of age, perhaps you remember when mortgage money dried up. Perhaps you also recall the days of putting down 20% before you even thought of buying a home. In any event, the growth of the secondary mortgage market in the mid 1980s was a result of some very sharp financial minds on Wall St. who engineered a product called a Collateralized Mortgage Obligation (CMO). (more…)
Tags: ABS model on Wall Street, and distribute business model, Asset securitization on Wall Street, Aurora Mortgage, bankruptcy of Lehman, Bear Stearns, breakdown of rating agnecy models on Wall Street, business model on Wall Street, CMO business model on Wall Street, Countrywide, development of CBOs, development of CDS, development of CLOs, development of credit derivatives, EMC Mortgage, fannie Mae and Wall Street model, First Franklin, Freddie Mac and Wall Street model, Hedge Funds, history of Wall Street business model, junk mortgages, Lehman Bros, Maryann Hurley, Merrill LYnch, NINA loans, originate, originate and distribute, originate to distribute, originate to distribute model, originate to distribute modeli, origination and distribution business, origination business model on Wall Street, Paulson comments on Wall Street, rating agency models, securitize, securitizing loans, the Wall street model, underwriting of loans on Wall Street, volumes of asset securitizations, Wall Street, Wall Street business model, Wall Street engineering, Wall Street engineers, Wall Street finance, Wall Street model, Wall Street model is broken, Wall Street model won't soon be fixed, Wall Street operating model is broken, Wall Street quants, Wall Street securitization model, Wall Street securitization process, Wall Street trading
Posted in American Consumers, Banking Institutions, Current Affairs, Economy, Housing Crisis, Mortgage Crisis | 13 Comments »