Saturday, January 27, 2007

Sub Prime is Getting Crushed

Sub prime mortgages are experincing a record number of defaults, which is evidenced by the chart above. (Go here to see exactly what the chart represents.) In only the past two days, the index has found another leg down and it does not look like there is a bottom in sight. Lots of the easy money that was lent out the past three years is coming back to haunt the lenders now. This will translate into an increase in foreclosures and bank owned property sales across the country, if it hasn't already.


Anonymous Anonymous said...

Do the originators have any liability or were these mortgages just placed in lower-rated tranchs with investors keeping their fingers crossed?

Saturday, January 27, 2007 11:45:00 AM  
Anonymous Anonymous said...

Major banks do,t seem to thing there's a problem..
BofA and Countrywide in alliance talks

Both have held discussions about an alliance that would create the biggest mortgage lending group in the US, people close to the matter said.

Saturday, January 27, 2007 2:51:00 PM  
Anonymous Anonymous said...

Countrywide might think there's a problem if they are looking for a bigger partner to help them weather the storm.

Sunday, January 28, 2007 1:44:00 AM  
Blogger Smart Grid blogger said...

David Lereah vs. Peter Schiff video catfight on Neil Cavuto. Meow!!!

Blowhard homedebtors Neil Cavuto and David Lereah team up to take on Peter Schiff on whether there's a housing crash underway.

Peter talks about prices are ridiculously high, bid up in a speculative mania with lax lending standards, how renting is significantly cheaper than buying, and how Lereah and the NAR are acting like the dot-com stock touters in the '90s. He predicts a collapse of 50% to 70%.

The Corrupt David Lereah spouts about how the media is talking about a bust when it's not a bust, and how their $40 million ad campaign is to counter the bubblemeisters. Pleads that people shouldn't compare the real estate bubble to stocks in the '90s.

Hilarious video. Enjoy!

Tuesday, January 30, 2007 11:26:00 AM  
Blogger Smart Grid blogger said...

This comment has been removed by a blog administrator.

Tuesday, January 30, 2007 11:31:00 AM  
Anonymous Anonymous said...

I got this from my real estate adviser. It's funny now to see why Kara lies in the gutter.

'We work in a cyclical industry. There are three truths about cyclical industries that are important to remember. They are:

The factors influencing the cycle are beyond the control of any one individual or company.
Most companies in cyclical industries make a lot of money during the good times, and lose money during the bad times.
Nobody is to blame for a cyclical downturn. Being in a cyclical business is risky. You can't blame investors or mortgage companies because there are always companies willing to take risks during good times. You can't blame land buyers for paying top dollar at the top of the market because every year can be the top of the market in a cyclical industry.

Emerging from the Down Cycle
Companies that are most prepared for a downturn generally emerge as the strongest companies after the downturn. The most prepared companies are:

Less Aggressive: These companies made fewer significant capital investments just prior to the downturn than their competitors, or had the mechanisms in place (such as joint ventures or options) to renegotiate or abandon those investments if needed. They bought land but they did not bet the company with their land purchases.
Flush with Cash: These companies have access to their own cash or cash from multiple sources in multiple industries. Serious risk takers generate more cash during the good years and lose more cash during the lean years.
Efficient: These companies redeployed their cash flows during the good times into improving processes to be the most efficient company during the lean times. Businesses that think long-term generally prosper over the long-term, while those that are more short-term focused have the most difficulty during a down cycle.
Proactive: These companies proactively respond to the downturn by taking action. You can complain, you can pray, or you can do something proactive to make your company better.

Companies that do not emerge from a downturn are:

In Denial: These companies spend a great deal of time convincing themselves and their partners that the market will improve soon.
Cash-Poor: These companies have little access to cash but spend a lot of time trying to convince those with cash to invest in their companies.
Inefficient: These companies have a lot of process problems that their competitors do not have.
Lazy: These companies take little action.

No company is perfect. However, if you find yourself in the latter category above, you had better fix things fast.

What To Do
Look at your company's situation with a clean slate as if you were brought in from the outside to manage a crisis. We suggest that you do the following:

Assess the Situation Realistically: What is the most realistic scenario in today's market, particularly for your future communities? Optimistic cash flow projections are more likely to result in future problems than realistic cash flow projections.
Plan Potential Scenarios: Will there be opportunities created by others' failures? If the market doesn't recover soon, what will you do? What will you wish you would have done?
Make Informed Decisions: Is there someone who has an overly optimistic / pessimistic outlook on the market, and can you take advantage of that?
Think Long-Term Too: Do you have the financial ability to make poor short-term decisions that will pay off in the long-term, such as investing in a new market because the best management team is available today, or hiring "extra" great people to have superior expertise for the future. Balancing these long-term and short-term decisions is the struggle most leaders face today.

The worst thing you can do is to do nothing. Assess your situation and position yourself for great success.'

Wednesday, January 31, 2007 9:10:00 PM  
Anonymous Anonymous said...

for all you that believe that the bottom has arrived ....lets talk

Thursday, February 01, 2007 5:21:00 PM  
Anonymous Anonymous said...

jeez, without Kara crap and the prof goin on this blog is dying.

Thursday, February 01, 2007 9:44:00 PM  

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