Mortgage relief not likely As many as 2.4M could lose homes due to high payments; government says it can't help with bailout. Tom Petruno and E. Scott Reckard Los Angeles Times Borrowers, don't hold your breath for a bailout. As mortgage delinquencies soar, many consumer advocates and political leaders are calling on government to help what may ultimately be millions of homeowners facing foreclosure. But the federal and state aid proposals advanced so far suggest that most people struggling with onerous loan payments are unlikely to get government assistance. The Bush administration has ruled out a blanket program to help homeowners stave off foreclosure, reasoning that it's "not an appropriate role for the federal government," White House spokesman Tony Fratto said. By one estimate, as many as 2.4 million nationwide could lose their homes because they are unable to make payments on loans, or refinance them. The threat of a foreclosure wave, and the government's limited willingness or ability to respond, could put added pressure on lenders to renegotiate loans that might otherwise end in failure. Sub-prime loans made homeownership possible for millions of American whose credit rating or income made them ineligible for cheaper prime loans. But many of these borrowers cannot make their payments, leading to a surge in defaults and foreclosures. In Washington, Democratic Sens. Hillary Clinton of New York, Christopher Dodd of Connecticut and Barack Obama of Illinois -- all declared presidential candidates -- are among those demanding government action. "We cannot sit on the sidelines while increasing numbers of Americans lose their homes," Obama said in a recent letter to Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke. But none of the three Democrats has offered more than general ideas for aiding borrowers, and none has called for a massive federal assistance program. "Dodd has been extremely clear that he is not talking about any kind of bailout," said a spokesman in Washington.
Hallelujah! It's time to short the lenders and banks boys. The burden will be on their heads most likely. You could attempt to reason that they'll be liquidated like NEW and LEND, but neither of those is a hot commodity and with the shit these other firms are holding or sold, I don't think we'll see any private equity so eager to buy anything out...there's no telling how deep this thing goes and I'd say that private equity knows that if they want to scoop up a lending company on the cheap, there's plenty of 100% down room to go for the time being. This, kind of grossly, puts a smile on my face. Luckily I plan on turning a huge profit riding Puts on some of these pig companies much lower over the next 6-12 months.
I worked in an S&L in the 80's. This is what is likely to happen: 1)Borrowers say "wtf" and mail the keys to the home to the lender, then go rent for much less or buy cheaper. 2) When this happens in droves, some lenders will renegotiate rates on a mass basis 3) #2 is much less likely than the 80's due to the packaging of MBS 4) Investors in weak mortgage securities will lose money, all the way up to stuff that is maybe as high as an original S&P "A" rating, though I doubt it goes that high 5) Borrowers who are forclosed will get 1099's (or is it 1098's) for "relief of debt income." 6) There will be a lot of Chapter 13's Why should anybody other than investors who bought the securities and the homeowner take any responsibility ? These nuts drove my cost of buying a home way up. As my boss at the S&L once said (before it became all S and no L), "F'em, just F'em....and if you tell 'em I said that I'll kick your ass!" Most banks and CU's have good loans. Their proiftability will be impacted but already organizations like NCUA have put a stop to many stupid practices. Look at the conservatorship of Huron Valley Credit Union as an example. Their 11+% net worth wasn't enough to allow them to continue down a stupid path and NCUA got rid of the management. Freemont General was similarly cut off, maybe a little late.
I worked for US Home from 81-86 in New Orleans. This girl I knew mailed her keys in and never heard back. It never even showed up on her credit report. John
Best friend. What is the impact going to be on the economy and the lenders do you think? How deep will lenders be? It seems to me that the ones to blame will be lenders. They really did this themselves with no real encouragement, other than greed I guess. Cheers.
My take is to look for lenders that have a large amount of "long term assets" as these are likely loans. I've picked CFC for this reason an about a hundred other. CFC - Largest lender. 45% of their loans were Alt-A last year. CEO has sold $140M in shares in the last 14 months. Last week sometime, two board members resigned(one effective immediately!)and a Friday night PR. They hold about $144billion in loans it appears. Very sketchy. I think we might see an early retirement from their CEO too. The company also has a kind of foggy balance sheet...at least it's probably too complex for me to decipher. They do show about $44Billion in "Off balance sheet arrangements" that leads me to believe they have some notes that are payable soon. I was kind of fuzzy on understanding them. CTX - This is a builder...but they have $10 billion in "inventory" which likely means houses they can't sell as of now. Even if they're raw materials, they're not "dealers" so they'll likely take a hit on selling even raw materials. They'll have to write-down probably. DSL - Downey is a big bank. This lender's filings read like a dream for a short. They only really do stuff in CA. They mostly(90% I believe) do riskier Alt-A loans. They sell off their prime loans. The biggest problem with this stock is that like 30% of the float is short. I expect them to take a HUGE hit thought. NDE - Last but not least. Freddie was the king of Alt-A loans, CFC was second. $2.3 billion market cap, yet they hold about $28 billion in loans it appears. Their write-downs could easily double or triple their market cap if we see heavy defaults. One big reason I went short was because I think they'll get dragged down no matter what...but also because on Friday their Lead Counsel resigned. The company states he had been planning it for months. The curious part is that the counsel himself made no comment in the PR and also that no replacement was named making me think he jumped shit(sic). I think this whole world of stocks is going to get blunted with a big stick. Certain more than others. I'm only trading Puts on them...random intervals. I think there's a ridiculous amount of money to be made and leveraging with puts blows going short out of the water. There is really no upside to any of this at the moment...only a buyout /bailout could save most of these companies from diving deeper in price and I think reality is setting in that this is going to be bigger than previously acknowledged. This "no bailout" thing is big. Credit tightening will crush whatever hope these lenders had. Good luck.