Archive for the ‘Housing 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 February 18th, 2009 2:53 PM |
Fed chairman Ben Bernanke spoke at the National Press Club this afternoon and offered revisions for the Fed’s economic statistics for 2009. What do the numbers mean? Here’s a recap:
— the Fed expects GDP for 2009 to end up between -.5% to -1.3%, revised from -.2% to +1.1%. The Fed obviously is expecting a contraction in our economy for all of 2009 and further added it does not see much of a pickup in 2010.
— the Fed is setting a long term inflation target of 2% but does not expect to see a pickup in inflationary pressures for a protracted period.
— increasing its expectation for the unemployment rate in 4th quarter of 2009 to 8.5% to 8.8%.
— the Fed has seen no indication of stability in residential housing markets in January 2009.
— some Fed governors have increased concerns about defaults and foreclosures in the commercial real estate markets.
— the Fed believes long term growth potential for GDP is 2.5% to 2.7%.
— the Fed realizes that at some point it will need to contract the growth in its balance sheet to mitigate chances of increased inflation.
What does all this mean?
In summary, the Fed is publicly acknowledging that the economic recession will be longer, deeper, and more painful. They are also offering that they are determined not to let deflation or the threat of deflation impede the economy.
I see no reason to rush into adding risk assets (equities or speculative credits) on the heels of this report. It is actually very interesting to see that some high profile individuals and institutions have actually been selling assets:
T. Boone Pickens
Pickens Reduces Energy Investments, Holdings Fall 97%
Warren Buffet
Berkshire Reduces J&J Stake, Turns to Fixed-Income
Harvard University
Harvard Retreated From U.S. Stocks as Market Tumbled
LD
Posted in Banking Institutions, Ben Bernanke, Economy, Employment, General, Housing Crisis, Unemployment | 1 Comment »
Posted by Larry Doyle on January 13th, 2009 5:10 PM |
At the request of numerous readers, I am offering a transcript review of my interview this past Sunday evening with insurance and financial planning expert, Sean D’Arcy. Additionally, if you’d like to listen to this interview in its entirety, just click on the Play button below for the audio recording. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar. Archived programs are also available as a podcast from iTunes.
As a disclaimer, the opinions offered are Sean’s alone. The transcription is mine. I have no vested financial interest in Sean’s business or any of the views or companies mentioned. The purpose of providing this recap is strictly as a public service. To the extent that you find this material beneficial, my mission is accomplished. If you find this material helpful, please forward it along. If we grow our audience in the process that would be great!
Sean is a self-employed independent insurance and financial planning executive. He is a graduate of Columbia ’81.
LD: Sean, can you address how the insurance industry is regulated?
SD: The insurance industry is regulated by 50 separate state insurance offices. Each of those offices is responsible for the oversight of insurance business done within their state. Some states are very disciplined in this process, for example New York has very strong oversight. Other states are clearly lacking in the professional expertise to properly oversee insurance business within their state. Each state insurance commissioner is appointed by the respective governors. Each state insurance office is funded by a tax on the premiums written in that state. For example, New York imposes a 4% tax on each policy written in the state. An emergency fund is also put in place to address potential funding problems with individual companies.
(more…)
Posted in American Consumers, Current Affairs, Economic Stimulus, Economy, Housing Crisis, Insurance Industry | 4 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 7th, 2008 4:50 PM |
The highly anticipated October employment report came in as follows:
| unemployment rate |
6.5% up from 6.1% |
| non-farm payrolls |
-240k jobs vs consensus estimate of -200k |
| September revision |
a loss of 284k jobs from initial estimate of 159k! |
| Labor costs |
+3.5% year over year |
Jobs were lost in virtually every sector: manufacturing, construction, and especially the service sector, which had been the sector that provided job strength over the last few years.
In summary, there is nothing to like about this report and it is likely to get worse. Estimates on unemployment rate range from 7% to 9% by the middle of 2009.
Read more here on how the “Economy Sheds Jobs.”
Goldman Sachs, which had the most accurate call on the employment report, is now calling for a -3.5% GDP for 4th qtr 2008 and a -2% for 1st qtr 2009. (more…)
Tags: Buffett's investment in Goldman Sachs and GE, employment report review november 2008, review of employment report november 2008, review of markets 11/7/08
Posted in Credit Card companies, Current Affairs, Economy, Home Loan, Housing Crisis, Unemployment, Zbibniew Brzezinski | No Comments »
Posted by Larry Doyle on October 16th, 2008 6:00 AM |
I am happy to provide you with a full accounting of what occurred from the late ’90s to the present.
–The repeal of Glass-Stegall (GLBA) is a total non-event in the midst of the current economic turmoil. What this repeal did was allow commercial banks to get more deeply involved with investment banking activities. Thus, JP Morgan, Citigroup, Bank of America were able to utilize their significant balance sheets and capital bases to become a force on Wall Street. Fast forward ten years and it is those institutions that are now thankfully supporting and bailing out our system.
–Throughout the 90s and into the early part of this century, Freddie Mac and Fannie Mae were utilizing their significant lobbying power to gain an ever increasing portion of the overall U.S. mortgage market. They had the enormous advantage of being able to borrow at just marginally over U.S, government rates given the “implied” but not explicit backing of Uncle Sam. I mean, come on. That worst case scenario could never come to pass!!
While Freddie and Fannie were designed to provide liquidity to the market in the form of bundling mortgages into securities, charging a guarantee fee for return of principal to the investors in these MBS, and then selling the MBS into the private market, they decided to “grow their business”. Just how did they grow? Given their ability to borrow at very cheap rates they decided to effectively grow their own internal portfolios. This business model was nothing more than a massively levered hedge fund under the guise of “helping the homowner”. (more…)
Tags: advantages of Freddie Mac and Fannie Mae business model, collapse of Freddie Mac and Fannie Mae, costs and benefits of Freddie Mac and Fannie Mae, did Freddie Mac and Fannie Mae benefit homeowners?, Dodd, Fannie Mae and Ginnie Mae?, FM Watch, Frank support for Freddie Mac and Fannie Mae, Franklin Raines, Freddie Mac and Fannie Mae accounting problems, Freddie Mac and Fannie Mae difference from Ginnie Mae, Freddie Mac and Fannie Mae's downfall and decline, growth of Freddie Mac and Fannie Mae, how did freddie Mac and fannie Mae get so large, Jim Johnson of Fannie Mae, Leland Brendsel of Freddie Mac, private profit and social loss at freddie Mac and Fannie Maen, Schumer, Senator Richard Baker (R-LA), systemic risks with Freddie Mac and Fannie Mae, Tim Howard, Wall Street insider's view of Freddie and Fannie, what happened at Freddie Mac and Fannie Mae?, who challenged Freddie Mac and Fannie Maemc
Posted in American Consumers, Bank of America, Christopher Dodd, Current Affairs, Economy, Fannie Mae, Freddie Mac, Ginnie mae, Home Loan, Housing Crisis, JP Morgan | 3 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 »