We’ve been watching huge sums of money either go missing or disappear from balance sheets lately, whether because somebody is missing payments due them or because they held exposure to a failed firm (or one put into conservatorship, which, really, is the same thing). Of particular interest is the effect of Lehman Bros’ failure on the balance sheets of already-suffering firms.
American Banker caught this one, involving some of the corporate credit unions we’ve talked about before:
Southwest Corporate FCU said yesterday it wrote off $24.7 million of unsecured debt it held in Lehman Brothers Holdings, the second corporate in as many weeks to take a charge related to the bankrupt brokerage.
Melissa Wardell, chief financial officer for the $10 billion corporate, said Southwest... more»
Hey, buddy, can you spare a billion? I know, I know — bad joke. But last week, Freddie Mac asked the bankruptcy judge handling Lehman’s bankruptcy to investigate $1.2 billion in claims it says Lehman hasn’t yet paid. That’s not a small chunk of change, for one thing.
From Reuters, who reported on the story:
Freddie Mac, which was bailed out by the U.S. government last month, said it is missing $1.2 billion from two fund transactions conducted in August, according to court documents.
It said the money was due to be repaid to Freddie Mac on September 15, the day Lehman filed for bankruptcy protection in the largest U.S. bankruptcy filing in history.
Freddie Mac is seeking the return of the $1.2 billion plus interest.
Call it a hunch, but the largest bankruptcy in U.S.... more»
(The below is from an HW reader, now a VP at a bank in the Southeast, in response to our look at option ARM exposure at First Fed on Tuesday. He’s graciously given us permission to use his comments — and I think they’re telling of industry sentiment right about now.)
Anyone who could not see this one coming is blind. In 2005 New Century Financial purchased my employer, RBC Mortgage, from RBC. In February of 2007 that house of cards collapsed in 28 days. I began to research why. What I learned guided my path going forward.
My immediate boss at that time was geared up to take the rest of her crew and move to American Home Mortgage. Seeing that their servicing portfolio was 80+% Option ARMS I advised against the move. She followed my advise and thanked me profusely... more»
It’s a subject we’ve covered with some gusto in recent weeks here at HW — due in no small part to my own personal loss on Freddie Mac’s common stock — but it’s clear that the government’s rationale for taking over both GSEs has been anything but successful so far. This morning’s WaPo takes a good look at some of the same issues we’ve already covered, but are worth hammering home again:
Backed by taxpayers, the mortgage finance giants have spent billions in an attempt to push down loan rates and make it easier for people to borrow money to buy homes. But mortgage rates have gone up.
The Treasury Department has also started buying $10 billion in mortgage bonds issued by the companies, with the ultimate goal of ensuring that mortgage lenders... more»
Time and time again, we’ve seen the so-called “innocent borrower” — the borrower who had NO IDEA that their adjustable rate mortgage could adjust, had no idea that a 1.5 percent interest rate wasn’t what they’d be paying for 30 years, had no idea that their home could lose so much in value. Such borrowers are regularly trotted out for us to see, as proof of the need we have to put a stop to the foreclosures.
The latest example is one Luis Flores, per Bloomberg. Here’s the lede:
For almost a year, Luis Flores has been lobbying mortgage lender IndyMac Federal Bank FSB to cut his house payments. They have doubled since he refinanced his home loan in 2005 and he can’t afford them, Flores says.
“Every time I call them they say they can’t... more»
I was wondering when we’d start to see press reports on this: more than a few hedge fund managers aren’t likely to go quietly into that good night on this “modify all mortgages” mantra that’s been steadily emerging.
Via the NY Times:
… Greenwich Financial and Braddock Financial … hold securities backed by mortgages, and they argue that the terms of the underlying loans cannot be changed without their consent …
William Frey, the president of one of the funds, Greenwich Financial Services of Greenwich, Conn., said that he was acting to protect the firm’s investments. “Any investor in mortgage-backed securities has the right to insist that their contract be enforced,” he said.
In letters sent to banks and others, Greenwich Financial said that... more»
While we focused on Sheila Bair’s update to IndyMac Federal’s loan modification program, the FDIC chairman also let fly in Congressional testimony today with a few sentences that foreshadow what may be yet to come under TARP:
The statute grants authority to the Secretary of the Treasury to use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.
Loan guarantees could be used as an incentive for servicers to modify loans. Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards. By doing so, unaffordable loans could be converted into loans that are sustainable over the long term. The FDIC is working closely and creatively with Treasury to realize the... more»
As Henry Paulson and the rest of the Bush administration push forward with “the new kapitalism,” there are yet examples of a free market working, providing at least some fuel for the argument that says the market must eventually clear itself. The Washington Post took an in-depth look at Prince William County in Northern Virginia, one of the harder hit areas in the state during the housing crunch.
What they found is an area flush with investors looking to pick up deals amidst the wreckage, even in the midst of a historic credit crunch:
The epicenter of the boom is Prince William County, where enterprising investors are scavenging the wreckage of the housing bust at a furious pace. Last month, 1,116 homes were sold in the county, a 235 percent increase from the same period last year... more»
Via MarketWatch:
[Ryland] took pretax charges of $60.4 million for inventory valuation adjustments. New orders dropped 31.6%. The company said its inventory of unsold homes stood at 719 units at the end of September, down 12.6% from the end of 2007…
(At Pulte) Net new home orders for the quarter totaled 3,008 homes, a 34% decline from the same period a year ago.
Both builders booked heavy losses for the quarter, as a result; a 30 percent drop in new home orders from one year ago is the key here — it’s not as if Oct. 2007 was all peaches and cream for the builders, after all. So bad got worse.
Not surprisingly, housing starts fell to their second-lowest level in 50 years, the Commerce Dept. estimated last week. Builders have been paring back on starts throughout the downturn,... more»
You simply can’t make stuff like this up — we’d covered the rousing success of fund manager Andrew Lahde in March, and that story recently popped up as the most-searched story on HousingWire. Which led us to wonder why.
Now we know, courtesy of Bloomberg:
Andrew Lahde, the hedge-fund manager who quit after posting an 870 percent gain last year, said farewell to clients in a letter that thanks stupid traders for making him rich and ends with a plea to legalize marijuana …
“I was in this game for money,” Lahde, 37, wrote in a two-page letter today in which he said he had come to hate the hedge-fund business. “The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking. These people who... more»
