Subprime lending MELTDOWN

Mommadeez4u

Bastard coated bastard w/ bastard filling
Mar 26, 2005
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Washington, DC
#1
One of the better articles I've read on what (to me anyway) is a confusing catastro-fuck of biblical proportions:

Mr. Mozilo Goes to Washington

by Kevin Duffy

On September 12, most of the country's largest mortgage lenders went hat in hand to DC to chat with Treasury Secretary Hank Paulson. The parade was led by Countrywide Financial CEO Angelo Mozilo, followed by high-level execs from Wells Fargo, Citi Mortgage, JP Morgan Chase, and HSBC. As CNBC’s Diana Olick blogged, there was a bit of turf defending and finger pointing amid the "let's do what's right" love-fest...

Unlike periods of financial turbulence I've witnessed over many years, this turbulence wasn't precipitated by problems in the real economy. This came about as a result of some bad lending practices. ~ Hank Paulson

Real estate values have clearly caused most of the problem. ~ Angelo Mozilo

After the meeting, Mozilo did what he does best – shmooze with the press. We parsed the interview and offer our own interpretation...

I don’t think there’s anybody doing more than Countrywide in terms of trying to help these people stay in their homes where that’s possible. So we just continue to work as diligently as we can to make certain every step is taken to preserve the integrity of homeownership. And we’ll continue doing that, and working with the government and any agency we can to make sure that we continue to do the right thing, and we get as much help as we can from the agencies – from Fannie, from Freddie, from FHA… I think everybody wants to do the right thing, and everybody’s on the same page.

Translation: We all just want to save our own bacon, even if it comes at taxpayer expense. Bringing the American dream to the less fortunate is the best way to cover our scam. Most people, especially reporters, fall for this all the time.

Countrywide’s doing fine. And we’re gonna continue to grow…

Translation: We're in deep doo doo.

It’s always been a prejudicial problem. You know, it’s a risk-based process that we have in this country. But my concern really is that with constraints now being placed on lending, particularly subprime, is the gap is going to widen dramatically between the have and have-nots. That’s my deep concern.

Translation: I have no problem playing the class envy card. Most are too ignorant of economics to realize there's no free lunch, especially when it comes to buying and maintaining a home.

In terms of increasing the Fannie/Freddie limits, increasing the FHA loan amounts, getting the cap off Fannie and Freddie… I’m for that because we need liquidity in the marketplace… And the government has to play that role right now, in creating liquidity, so I’m in support of it.

Translation: We have a $209 billion "distressed" loan portfolio against a mere $14 billion in equity. We’d love to have the GSEs take some of it off our hands.

I think when you have increasing values as we had – tremendous values similar to the tech boom – everybody wanted to own a piece of real estate to get into the game. And so the rapid increase in values was the problem, and with that came some lending practices that certainly, in retrospect, were not acceptable. And now you have those values receding and… now all the sins of the past are being exposed as a result of receding real estate values. We’ve got to get real estate values at least stabilized in order to keep these people in homes so they can finance themselves out of the problems that they have.

Translation: I'm tossing you a crumb of truth here, so listen up. After the boys at the Fed dropped interest rates through the floor earlier this decade, they inadvertently ignited a housing boom. Everyone and his brother thought real estate always went up and we simply let them place that bet on margin with hardly any money down. Our bad. I'd love to tap our underwater customers on the shoulder and get them to bring their equity up, but it's too late for that – you can't get blood from a turnip. So now we're left holding the bag and our lenders are tapping us on the shoulder. We're basically screwed, and the only thing that can save us is a new bull market in real estate.

Three weeks ago, Mozilo appeared on CNBC berating a Merrill Lynch analyst (and former employee) for having the nerve to issue a sell rating on his stock, calling it irresponsible and tantamount to yelling fire in a crowded theater.

Yesterday, it was revealed some employees are now suing the company because they held Countrywide stock in their 401(k)s while Mozilo and his lieutenants assured them the riskiest loans were sold off and those remaining on the books were adequately reserved. At the same time, insiders unceremoniously dumped $350 million of their shares over the past year or so.

On the same day, Countrywide issued a press release admitting mortgage loan fundings for August dropped 17% from a year earlier. President and Chief Operating Officer David Sambol, apparently a quick study under the tutelage of Mozilo, was stoic and reassuring:

Looking forward, the Company expects that it will be a long-term beneficiary of the current conditions and corrections in the mortgage industry, and we are confident that the actions which we have taken in response to the current environment will position us for profitable future growth and success.

How does anyone in his right mind believe any of the spin coming out of Countrywide these days?

Perhaps this comment posted to a blog critical of Angelo Mozilo’s antics sums it up best:

Mozilo is the last remaining Oompa-Loompa, thus his beautiful orange glow. Unfortunately he isn't quite as efficient as Willy Wonka was at running the chocolate factory.
 

Creasy Bear

gorgeousness and gorgeousity made flesh
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Mar 10, 2006
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#2
Anybody listen to Dave Ramsey?

XM165... 3PM to 7PM M thru F?

Dave has been warning people for the last two years that the ARM and subprime chickens were coming home to roost... well... now it's happening. Every day now he gets at least half a dozen desperate callers asking him how they can save their houses. In about 90% of the cases, the answer is... they can't.

Or how about all of those "flipper" shows on TV... Property Ladder, Flip this House, etc... All of those shows were from back in the "happy times" of two years ago, when the housing market was all sunshine and lollipops. When any idiot could buy a junk pile, slap a new coat of paint on it, and turn around and sell it for a $40K profit, and then act like they're financial geniuses.

It'll be fun to watch the new seasons of these shows coming up in the next few years. I'll bet over half of the deals will turn out to be financial train wrecks.

And we all know that nothing brings the funny like watching your fellow man face fiscal ruination.

Good times. :D
 

Schmed

I'm a corpse without a soul...
Nov 4, 2002
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#3
One of my company's clients, American Home Mortgage, went bust because of this, 7000 laid off.

It seems like 2000 all over again, but not .com bust, more like CMO, CDO and Hedge Fund bust. Get ready for the layoffs kids.

In terms of real estate, I am surprised many "Under Contract" signs in my neighborhood in East Northport, LI, some within 2 weeks of listing.
 

Creasy Bear

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#4
One of my company's clients, American Home Mortgage, went bust because of this, 7000 laid off.

It seems like 2000 all over again, but not .com bust, more like CMO, CDO and Hedge Fund bust. Get ready for the layoffs kids.

In terms of real estate, I am surprised many "Under Contract" signs in my neighborhood in East Northport, LI, some within 2 weeks of listing.
Did you see my post here?...

http://www.wackbag.com/showthread.php?t=73001&highlight=american
 

izzy izkowitz

Chris Hansen is my hero
May 23, 2007
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#5
I worked in the mortgage servicing business for a few years when the boom was really getting going. I would see these people that were making shit wages getting into house they had no business getting into but the predatory loan officers were selling them on option arm loans with a retarded teaser rate to get the monthly payments down. the company I worked for usually only had about a 3 month teaser and then the rate changed monthly. people couldn't understand how in one year they owed 20k more on the house than when they bought it because of the negative amortization. the loan officers were too scummy to thoroughly explain what these people were getting into and the the borrowers didn't know what questions to ask or in the real retarded cases they just thought they would be getting raises and shit that would be enough to cover down the road. Anytime someone asked me about an arm I asked them 1 question, do you plan on keeping your house for more than 6 months? if not, don't do an arm. and the flippers on tlc and shit, this season has already had several idiots that thought that since they watched the show 5 times and read a magazine that they can flip a house and make 100k and have failed miserably. that is funny shit to watch.
 

HummerTuesdays

Another girrrrl!!!
Apr 24, 2005
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#6
Anybody listen to Dave Ramsey?

XM165... 3PM to 7PM M thru F?

Dave has been warning people for the last two years that the ARM and subprime chickens were coming home to roost... well... now it's happening. Every day now he gets at least half a dozen desperate callers asking him how they can save their houses. In about 90% of the cases, the answer is... they can't.

Good times. :D
I agree. These rubes over-financed a house they couldn't afford in the first place, and the banks gave them the mortgages. Fuck the home owners that live beyond their means, and fuck the banks for allowing it.
 

abudabit

New Wackbag
Oct 10, 2004
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#7
Too bad it's not hitting here, I really want to buy in the heart of this town instead of the ghetto east side. Every place this is happening is somewhere I don't want to live. I saw that in Stockton, CA that 1/30 homes are hitting the auction block this year. Who the fuck would want to live in Stockton? If you're into meth it's a wonderful place to live.
 

Creasy Bear

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#8
I agree. These rubes over-financed a house they couldn't afford in the first place, and the banks gave them the mortgages. Fuck the home owners that live beyond their means, and fuck the banks for allowing it.
Whenever I hear some fucking shitweasel politician (i.e.- Hillary Rodham) talking about a federal bailout for these dumb ARM and subprime fucks, I want to go on a rampage. :mad4:

It makes me sick to my stomach just thinking about the possibility.