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More bad news for debt holders

randallg99

Bronze Contributor
Aug 9, 2007
1,390
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not sure if this should have been posted on the real estate forum due to its nature, but the stock itself is at immediate risk... longer term devaluations face the real estate market itself. and the current super flight to saftey right now probably makes a great opportunity to buy reverse bond funds.... Treasuries must be trading at or close to their peaks...

anyway, it looks like another mortgage company is about to take a dirt nap and thats how the market will perceive it. But this is a small part of ANHs port so it looks like ANH should be fine (but kiss the subsidiary buh-bye) and what I am finding really amazing right now is that these companies had opportunities to exchange their callable or non-agency paper for a loss and move on...I think their margin calls have to be filled within 24 hours (Can anyone verify this?) which may be too fast for them to move due to lack of buyers, but arent these companies in touch with their warehouse facilities to make sure they dont get margin calls to avoid this very scenario??? some reason, these companies held on to their paper for dear life as if the captain wouldnt leave the ship all the while their counterparts are getting blown to bits and pieces and the handwriting is on the wall for all of them to see! Now that they are forced to sell the paper on an open market with few buyers, well... you know the rest...

I think the MBS Reits are all played out, so I started looking at regional banks. I would think some of the banks with high mortgage exposure in California and/or Florida are succeptible to the downturn and could face dire circumstances... wish I could forsee the future and speculate that shorting these regional banks with high levels of exposure would be a good trade now, but from what I am reading, the banks are regulated to avoid the kind of leverage the MBS`s have and have wider spreads on their mortgages. Anyone else have ideas on playing this mortgage downturn?

Also, this continuing blow-up episode has to have a serious impact on home builders and the real estate market as a whole.

here is the article-

Anworth Mortgage Asset Corporation Announces Company Updates
SANTA MONICA, Calif.--(BUSINESS WIRE)--Aug. 9, 2007--Anworth Mortgage Asset Corporation (NYSE:ANH) announced today that its wholly-owned subsidiary, Belvedere Trust Mortgage Corporation (or Belvedere Trust), has received a notice of default from two of its repurchase agreement lenders. Belvedere Trust has recently received additional, substantial margin requests from several of its repurchase agreement lenders, and will continue to explore all of its alternatives with respect to its sudden liquidity issues. It is likely that a substantial amount of Belvedere Trust's portfolio of MBS may need to be sold in an effort to satisfy the requests of its lenders. Given the substantial uncertainty in the secondary market for securities similar to those owned by Belvedere Trust, it is likely that any sale prices for its securities may be significantly below their estimated fair value as of June 30, 2007.

Anworth's exposure to its Belvedere Trust subsidiary consists of its initial investment of $100 million ($83 million net of the Accumulated Other Comprehensive Loss at June 30, 2007) and intercompany loans that total $42.8 million to date. At this time, Anworth does not expect its intercompany loan balance to increase substantially in the near future. Anworth is not a counterparty to Belvedere Trust's repurchase agreement borrowings and has not provided any guarantee with respect to those borrowings.

As discussed in the Company's news release of August 7, 2007, Anworth continues to hold a significant balance of Agency MBS which are not pledged to counterparties relative to its outstanding repurchase agreement borrowings. These unpledged assets continue to provide a valuable source of liquidity relative to Anworth's financing secured by its Agency MBS if necessary.

About Anworth Mortgage Asset Corporation

Anworth is a mortgage real estate investment trust (REIT) which invests in mortgage assets, including mortgage pass-through certificates, collateralized mortgage obligations, mortgage loans and other real estate securities. Anworth generates income for distribution to shareholders primarily based on the difference between the yield on its mortgage assets and the cost of its borrowings. Through its wholly-owned subsidiary, Belvedere Trust Mortgage Corporation, Anworth also invests in high quality jumbo adjustable-rate mortgages and finances these loans through securitizations.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
 

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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
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92
NJ
Don't try to catch a falling knife in the public big markets. Real estate deals with motivated sellers, if you can find them, and make reasonable terms, are usually good but trading the broad market is difficult.
:iagree:

good point regarding real estate... probably much easier naming terms and prices today as a buyer than as recently as a few months ago.

Also, regarding CountryWide, (CFC) - it appears they were having difficulty selling their pools and buyers were not biting... this is the justification for the news they made yesterday and this is probably the main reason for some of the smaller mortgage companies blowing up.... they were just unable to unload their paper to fund new deals...

now, onto the markets - I am at 50% cash and waiting... would like to see the dust settle before buying and may move to more cash today... I really dont like seeing France having to interject and close funds because they lost their shirts in US mortgage markets. This could really be a sign that the debacle that could spill over into Asia...

to make a perfect storm, China would dump their US treasury holdings which is probably perfect timing considering their prices yesterday. unfortunately, this is not an unrealistic scenario and could be the final nail in the coffin before Bombs-away Ben and govt intervenes
 
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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
somebody hit my portfolio with the ugly stick today. The lack of visibility in determining MBS true values is nearly impossible with so many off the balance sheets stuff... however, with the release of all liability associated with BT, it looks like ANH preferreds are going to be solid and getting them in the mid 19s is probably the deal of the century for the conservative yield seeker... hold off from buying the commons at this juncture is prudent as book value is still yet to be determined after the dust settles with Belvedere write off...

My metals and fertilizers are sucking wind and this aberation spilling over the rest of the markets isnt justified, but this keg powder of extra cash should come in handy on Monday and Tuesday.

I did buy some GMO today in 3 increments. just when I thought I had this market all figured out...
 
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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
Just wondering, are there restrictions on buying bonds and getting the interest? Couldn't you buy the GM bonds a day before the record date, get the interest and sell?

there has got to be a settlement date period similar to that of dividend payouts in stocks... I dont know the answer to the above because I dont trade treasuries or bonds. Since you asked, I tried looking online but have not found the answer.
 

MrDoctor

New Contributor
Aug 13, 2007
76
8
12
The Fed and ECB are there to save ya :).
As much as I don't want to see it happen, it will because of politics.

Bad news for debt holders:

Your CC rates will increase dramatically to make up for the money lost in the subprime mortgage business (due to economic factors, this is totally legal.)

Consumer spending on luxury items are down, credit card debt it at an all time high, meaning people are using credit to finance the necessities of life.

This is going to get good...
 
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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
to make a perfect storm, China would dump their US treasury holdings which is probably perfect timing considering their prices yesterday

this is starting look like a reality with each trading day and it wont be pretty watching everyone scramble for safety
 
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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
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the big laugh is that people like Cramer and Kudlow think this credit tightening period is nothing but a little speed bump we have to just ride over... but, man oh man lots of crap news today that should put a cork in their mouths... the writing is on the wall big time and it is probably RIGHT ABOUT NOW, THIS VERY INSTANT that the housing market has all but confirmed a recession. 1 OUT OF EVERY SEVEN SUBPRIME BORROWERS IS LATE ON PAYMENTS.

Lehman Brothers, National City Cut Jobs as More Home Loans Sour
2007-09-06 16:39 (New York)


By Yalman Onaran and Elizabeth Hester
Sept. 6 (Bloomberg) -- Lehman Brothers Holdings Inc.
eliminated 850 mortgage jobs, the firm's second cut in two weeks,
and National City Corp. reduced staff by 1,300 as a new report
said U.S. homeowners facing foreclosure rose to a record.
Lehman, the biggest underwriter of U.S. bonds backed by home
loans, and National City, Ohio's largest bank, announced the
dismissals less than a day after 900 people were cut by
Countrywide Financial Corp., the biggest U.S. mortgage firm. At
H&R Block Inc., shareholders elected dissident directors led by
hedge-fund manager Richard Breeden today after the company said
the sale of its money-losing subprime mortgage unit may collapse.
The pace of firings has picked up as home sales faltered and
investors who buy mortgages, concerned about rising defaults,
stopped bidding. Late payments by ``subprime'' borrowers with the
worst credit records surged to one out of every seven loans in
the second quarter, the Mortgage Bankers Association said today.
With bankers reluctant to finance home lenders, more than 100
have sought buyers or halted operations since the start of 2006.
``We found ourselves in the midst of a subprime meltdown,''
said H&R Block Chief Executive Officer Mark Ernst after today's
shareholder vote, in which Breeden assailed the company for not
getting out of mortgage lending faster. ``Do I wish that we had
found a way to exit the subprime business sooner? Absolutely. But
I can't do much about that today.''
The bulk of the firings at New York-based Lehman will be at
Aurora Loan Services LLC, the U.S. unit that makes so-called Alt-
A loans to borrowers whose credit ratings fall just short of
standards for regular prime mortgages. The firm also plans to
shut its Korean residential lending unit.

Poor Credit

Home loans to borrowers with poor credit histories helped
fuel the U.S. housing boom during this decade, as brokerages
including Lehman and Bear Stearns Cos. profited by packaging them
into bonds. Investors have shunned the securities as late
payments climbed to 14.82 percent of U.S. subprime mortgages
during the second quarter from 13.77 percent in the first
quarter, according to the Mortgage Bankers Association report.
National City, the ninth-largest U.S. bank, will take a $200
million pretax charge in the third quarter because of losses on
mortgages and costs to eliminate jobs. In addition to the 800
cuts disclosed today, the Cleveland-based company said 500 jobs
were eliminated in August, when the home-equity business was
combined with the mortgage division. The firm expects $10 million
in third-quarter charges related to that shift.
Lenders began the process of seizing properties that
represent 0.65 percent of U.S. mortgages in the second quarter,
an all-time high, the Mortgage Bankers Association said in a
report today. In the first quarter, the figure for foreclosures
was 0.58 percent.

Dodd's Legislation

Senate Banking Committee Chairman Christopher Dodd unveiled
legislation yesterday to strengthen protection for mortgage
borrowers, including banning lenders from steering borrowers into
subprime loans when they qualify for prime loans. He blamed the
rising foreclosures today on ``indefensible'' lending practices
during a conference call with reporters.
H&R Block, the nation's biggest tax preparer, has been
pressed by Breeden, a former chairman of the U.S. Securities and
Exchange Commission, to close Option One Mortgage Corp., rather
than waiting to complete a sale to Cerberus Capital Management LP
that may take until the end of this year.
While today's vote doesn't give Breeden a majority of the
11-member board, Ernst said at a press conference ``there's no
question that shareholders have voted for change.'' Option One,
which H&R Block bought in 1997, has generated more than $1
billion in losses for H&R Block in the past five quarters.

Countrywide Cuts

Countrywide said in an e-mailed statement late yesterday
that it cut 900 jobs as demand for home loans waned at the
Calabasas, California-based company.
``While as a matter of policy we don't comment on
speculation, any further changes to the Countrywide organization
will reflect our ongoing strategy to align our business to the
marketplace,'' the statement said.
Countrywide had to tap $11.5 billion of emergency financing
after a nationwide credit crunch cut off other sources of cash. A
$2 billion investment from Bank of America Corp. on Aug. 22
helped ease concern that the lender might file for bankruptcy.
Shares of Lehman fell 52 cents, or 1 percent, to $53.83 in
4:01 p.m. New York Stock Exchange composite trading. National
City lost 66 cents, or 2.4 percent, to $26.67 and H&R Block
dropped 19 cents, or 1 percent, to $19.99. Countrywide fell 33
cents, or 1.8 percent, to $18.48.

--With reporting by Bradley Keoun in New York and Kathleen M.
Howley in Boston. Editor: RBGreen
 
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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
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The more the Fed helps, the larger the fall out on the other end!

BINGO!!!!

but none of the bobble heads want to be known for being in charge during a recession.... and of course, elections are coming up!
 
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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
the decline of one the largest collaterized debt instruments in the world is an excruciating stress on debt markets and even the US$!!! and is now spilling into the economy first hand. While job layoffs were inevitable and forseen, the government puts out rosey reports using their rear view mirror... unfortunately, we still have a way to go as the real estate market is a (I say it again) long, daunting and tiring cycle and we are only approaching bottom (contrary to what some bobble heads are saying)... my opinion still stands that it will get much worse before it gets better. The markets will unfortunately countinue to discount the US$ thus reducing purchasing power and there really isnt much left the Fed can do finally meet its obligations.... dont wanna say it, but only 2 ways to get it done fast - eliminate spending/raise taxes....

anyway, Countrywide has all but admitted they are eliminating the most profitable part of their business... remember, its not the quality or number of closings of deals that hurt them... its the ability to get new money to create new deals that has stopped dead in its tracks which has forced Countrywide not be able to perform excessive amount of loans.

This in itself will prove to have lingering effects on RE mkts. Starter homes, once resilient to the market downturn a year ago are now suffering from slower rates of sales and higher inventories due to lack of `qualified` buyers (by subprime standards)...

for those who are qualified buyers and interested in real estate investing in the Single family market or duplexes can probably go around naming their own price these days...

here is CFCs press release earlier today..
CALABASAS, Calif., Sept. 7 /PRNewswire-FirstCall/ -- Countrywide Financial Corporation (NYSE: CFC - News) today announced a plan of action to address changing market conditions that positions the Company for continued growth and success. Central elements of this plan include:

-- Reductions in workforce which will occur in areas most impacted by
lower mortgage market origination volumes. The Company presently
estimates a total workforce reduction of 10,000 to 12,000 over the next
three months representing up to 20 percent of its current workforce.
Actual reductions could be lower should the interest rate environment
and related market volume outlook improve. Based on current interest
rate levels, Countrywide presently expects that total market
origination volumes will decline approximately 25 percent in 2008
compared to 2007 levels.

-- Migration of the Company's residential lending business into its
federally chartered thrift entity, Countrywide Bank, FSB, will
continue. This is expected to enhance and strengthen Countrywide's
business model by delivering greater and more stable liquidity, reduced
borrowing costs and greater operational efficiencies. By September 30,
2007, the Company expects that almost all residential loan production
will be originated within the Bank.

-- Product guideline revisions have been made to ensure that all loans
which the Company produces can be sold into the secondary market or are
high quality prime loans to be held in Countrywide Bank's investment
portfolio. This includes the Company's recent decision to no longer
originate any subprime loans other than those eligible for sale or
securitization under programs supported by Fannie Mae, Freddie Mac or
the FHA. In spite of these changes, it is important to emphasize that
Countrywide continues to offer among the broadest and most competitive
product menus in the industry.

-- Growth plans will continue in areas of opportunity. Countrywide's
retail and wholesale lending divisions plan to continue aggressively
pursuing the increased opportunities presenting themselves in the
current environment for profitable market share growth. Countrywide
Bank, in addition to housing the Company's mortgage banking activities,
will also focus on growing its residential and commercial loan
investment portfolio and expanding its financial centers and deposit
franchise. Countrywide's insurance segment will continue to grow both
its institutional and personal lines insurance businesses.


"We are taking decisive action to ensure that Countrywide continues to be well-positioned for further success," said Angelo Mozilo, Chairman and Chief Executive Officer. "As we carry out our plan, the Company's overarching focus is exactly where it has always been: to remain an industry leader in the U.S. residential lending business, to deliver value and world-class service to our customers and business partners, to enhance shareholder value, and to provide career opportunities for our people."

"Each employee at Countrywide is considered an important member of the Countrywide family," said David Sambol, President and Chief Operating Officer. "While workforce reductions are therefore always very difficult, these decisions are being made with the utmost attention and sensitivity to the impact they will have on our Company and our people."

About Countrywide

Founded in 1969, Countrywide Financial Corporation is a diversified financial services provider and a member of the S&P 500, Forbes 2000 and Fortune 500. Through its family of companies, Countrywide originates, purchases, securitizes, sells, and services residential and commercial loans; provides loan closing services such as credit reports, appraisals and flood determinations; offers banking services which include depository and home loan products; conducts fixed income securities underwriting and trading activities; provides property, life and casualty insurance; and manages a captive mortgage reinsurance company. For more information about the Company, visit Countrywide's website at http://www.countrywide.com.

This Press Release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management's beliefs, estimates, projections, and assumptions with respect to, among other things, the Company's future operations, business plans and strategies, as well as industry and market conditions, all of which are subject to change. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: increased cost of debt; reduced access to corporate debt markets; unforeseen cash or capital requirements; a reduction in secondary mortgage market investor demand; increased credit losses due to downward trends in the economy and in the real estate market; increases in the delinquency rates of borrowers; competitive and general economic conditions in each of our business segments such as slower or negative home price appreciation; changes in general business, economic, market and political conditions in the United States and abroad from those expected; reduction in government support of homeownership; the level and volatility of interest rates; changes in interest rate paths; changes in debt ratings; changes in generally accepted accounting principles or in the legal, regulatory and legislative environments in which Countrywide operates; the judgments and assumptions made by management regarding accounting estimates and related matters; the ability of management to effectively implement the Company's strategies; and other risks noted in documents filed by the Company with the Securities and Exchange Commission from time to time. Words like "believe," "expect," "anticipate," "promise," "plan," and other expressions or words of similar meanings, as well as future or conditional verbs such as "will," "would," "should," "could," or "may" are generally intended to identify forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein.
 

piranha526

Contributor
Aug 20, 2007
112
23
23
New Jersey
Yea, I agree, I was being sarcastic, as usual. Hard to detect it online though :(. So many people begging for lower rates? How is a 1% drop or even 2% drop in rates gonna help a person even if he made bad financial decisions? Geez...
Greatbear,
I knew you were being sarcastic - I just answered in general based on what you wrote. I know your style of writing form the RD boards. It is true of what you say about rate cuts.

Based on the crowd (wanting rate cuts), I just took short term positions in specific homebuilders. Great risk-to-reward even if the trades don't work.
 

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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
I hate to be the one that said I told ya so... but, I told ya so...

the mortgage markets are only going to get uglier and this will spill over into the housing market. I hate to be the pessemistic one on this board, but the handwriting is on the wall and it will get worse before it gets better . it will eventually get better, but I maintain the markets wont strengthen until after the 2008 presidential elections...

anyway, all market journals are reporting higher rates of defaults, more foreclosures and penniless mortgage values...

here is the latest of the madness- escrow money meant for real estate taxes is sitting idle according to the article, but rumors have it where Amer Home spent it... of course, it is only a rumor not mentioned in this article, but regardless, it is messy...

http://online.wsj.com/article/SB118955540976824460.html?mod=googlenews_wsj

Mortgage Lender's Bankruptcy
May Threaten Thousands of Homeowners
By PEG BRICKLEY
September 12, 2007; Page A15

Thousands of homeowners face an "imminent risk" of losing their homes because of clashes between American Home Mortgage Investment Corp. and its former financial backers, according to Freddie Mac, a government-chartered housing financier.

In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company's Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24.

Freddie Mac said 4,547 loans valued at nearly $797 million are at stake. It said it doesn't have the loan files necessary to pay insurance premiums and property taxes on them, however. "Therefore, there is the imminent risk that borrowers' insurance policies may lapse for nonpayment, subjecting the borrowers to a risk of loss of their mortgaged properties," Freddie Mac said.

Property-tax bills will go unpaid, Freddie Mac said, "resulting in increased tax liabilities and possible tax-foreclosure sales." It added it needs a court order allowing it to seize American Home's loan files "to avoid these serious consequences stemming from AHM's inability to service the Freddie Mac mortgage loans."

The wave of mortgage-lender bankruptcies in the past few months has disrupted loan-servicing arrangements and triggered court fights over who should get control of the files necessary to service the loans, court documents show.

American Home has resisted demands that it give up loan-servicing files, hoping to auction its loan-servicing business intact in an effort to raise money for creditors. Loan-servicing businesses have proven to be among the few valuable assets left in the wreckage of the failed lenders. Some of Wall Street's biggest investment banks are fighting for control of them.

For ordinary homeowners, however, the results could be dire, consumer lawyers say. "Companies receive the loan files that they are supposed to be servicing, but the payments don't catch up," said Jill Bowman, an attorney with James Hoyer Newcomer & Smiljanich, a Tampa, Fla., law firm that represents consumers in class-action suits against mortgage companies. "Payments are being deemed late, even when they're not, because they can't catch up with the paper." The result is additional insurance costs and accumulating late fees.

American Home, based in Melville, N.Y., and once one of the country's biggest mortgage lenders, serviced about $50 billion in mortgages. Its bankruptcy-court filing generated particular concern at Freddie Mac and Ginnie Mae, an agency that is part of the Department of Housing and Urban Development.

Just days before American Home's bankruptcy filing, Freddie Mac and Ginnie Mae terminated the company's loan-servicing rights. They also sent representatives to collect loan files from American Home's servicing facility in Irving, Texas.

In court documents, American Home said Ginnie Mae representatives "stood in a line in front of the doors and sat on the stairs, preventing AHM Servicing employees from entering the office." Freddie Mac said American Home "had its security personnel escort the Freddie Mac representatives out."

In addition to Freddie Mac and Ginnie Mae, several Wall Street banks are fighting to extract their loans from American Home's servicing operation. The list includes Morgan Stanley, Deutsche Bank AG, Credit Suisse Group and EMC Mortgage.

In an interview last week, Ginnie Mae's senior vice president, Theodore B. Foster, said Ginnie Mae had seized from American Home some of the insurance and tax payments collected from homeowners. "What's occurred is that we have the money, but AHM hasn't been able to or willing to pay the taxes and insurance, and they have the loan records," Mr. Foster said. "Therefore, we don't know who to pay, and we don't know how much."
 
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randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
The party ended for CFC.... 50 basis pts won't keep the nails from driving into the coffin.
 

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