patrick.net

"my husband's best friend's sister"

O...k? I don't want to start out on the wrong foot (but it sounds like ANOTHER "MEW-based" relationship) has bit the dust? Not to trivialize the human cost but where's Binky McBling when you need her!?

I suggest "DirtyScottsdale" for an insider's view of MEW run amok. It's a truly disgusting display of fake wealth (and a ton of other fake stuff). FWIW Ben Jones ran a piece amply exhibiting that financial institutions are no more savvy than the avg. FB. Seems an agent in Murrieta, CA that specializes in REO's advised the bank to sell and sell NOW at below CMV only to be ignored as the bank chased the market down. If it helps you out at all... these guys will starve too.

I can show you examples right here in Mill Valley of stubborn banks begrudgingly chasing the market down. There's one Deutsche Bank owned property that's been on the market for nearly 2 years: for a couple months as the FB's desperately prayed for a miracle at over $2mm, then bank-owned since. Last I looked it's down to $1.6 and change (and should easily be below $1.5 just based on comps on the same street).

Not surprising. I don't think the banks have needed a sophisticated system for dealing with foreclosures (for at least a decade). They've relied upon the real-estate brokers, flippers and RE investors to clear their inventory quickly at a reasonable price. As that system has broken down it will take them a while to develop in-house expertise on how to sell houses aggressively and minimize their losses. Remember, the people working for the bank selling the foreclosures are normal folks who probably own houses themselves and probably don't want to believe this is a major bubble pop.

>> FWIW Ben Jones ran a piece amply exhibiting that financial institutions are no more savvy than the avg.

Ben talks about 5% of subprime borrowers in foreclosure. I’m sure he ran out of room in his column to give us an update on all that inventory already foreclosed and sitting on the banks’ balance sheets -- green pools included. See for example

http://www.countrywide.com/purchase/f_reo.asp .

I don’t think Ben has been paying much attention to all the trouble in Alt-A land or even Countrywide’s statement that its prime loan delinquencies were 4.6% up from 1.8% a year earlier (must be statistically insignificant to an *cough* economist).

I wish he had the space in his column to explain how good it is for the economy to have people who are paying on time watch their home equity declining on two fronts: price declines and negative amortization.

Ben Stein is a "paid disinformant"

"-green pools included"

How thoughtful... Vegas must be lousy with them. PermaRenter, as "Fast and Furious" as Ben types his little fingers to the bone, there's just too much for any one of us to cover. While at a party on Saturday night I found myself at the center of some now very unwanted attention as the resident CBA (Certified Bubble Analyst (TM))

Frankly, as the contagion spreads, it's simply overwhelming. Speaking of which Erin Burnett's blouse looks like EBGuy's Momma Cass at "Monterey Pop". Or as mom used to say, "an explosion at a paint factory". What up gurl?

To the person who predicted the Iceland Krona is in for a fall.

How right you are! The Krona has lost almost 5% against the USD in the last month. If this keeps up, puffin might be within reach!

Check out the "Change in FICO Scoring System" article off the home page. Then check out the incredibly STUPID posts at www.STOPFICO08.com.

Seems dim-witted lenders are FINALLY getting wise to the "piggy back/AU's" (authorized users) pumping up their flailing FICO scores by HUNDREDS of points. After Semptember, say bye-bye! September (how fitting). I had no idea those with high FICO's were getting paid major $$$'s for letting family members and complete strangers show themselves as AU's!

Can this entire system possibly be "gamed" any further? What's worse than someone with a high FICO "casually" bringing it up in conversation? When they lend it out and further weaken the financial system by bracing up credit scores for those that couldn't get a pack of gum with a $200 down payment!

DinOR

I'm not sure what "MEW-based" means....

I know the woman who's story I was telling though. There's a lot going on there and the last thing she needs is the bank prolonging the problem. But the banks seems like they have their collective heads up their a**es. I agree with Randy, they don't seem to have a decent system for dealing with foreclosures. The house across the street from us has been vacant for months and the bank doesn't seem to be in any hurry to do anything. They are going to lose so much more money this way. It seems like a colossally stupid way to do business.

@SQT,

*astrid did a hysterical "USA Today" parody of a fictitious, just out of college couple living WAY... beyond their means. As long as they were able commit serial re-fi's (and take cash out) their "MEW-based relationship" was just fine!

When last we visited a now single "Binky McBling" she was waiting tables at TGIFriday's "and not looking NEARLY as 'hot' as she did back in school". The Onion got nothin' on this girl!

My warning about Money Market funds and ABCP (asset based commercial paper) was just in time.

Sentinel Management Seeks to Freeze Redemptions (Update1)

By Jenny Strasburg and Katherine Burton

Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., a Northbrook, Illinois-based money manager, has asked regulators for permission to halt investor withdrawals.

The firm contacted the Commodity Futures Trading Commission for approval to halt redemptions ``until we can honor them in an orderly fashion,'' according to an Aug. 13 letter to clients.

The firm managed $1.6 billion as of last month, according to a filing with the U.S. Securities and Exchange Commission. Sentinel's investments include short-term commercial paper, investment-grade bonds and Treasury notes, according to its Web site.

``Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade,'' according to the client letter, which does not specify which funds are affected. ``We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients.''

Eric Bloom, the firm's president and chief executive officer, didn't immediately return a call seeking comment. An assistant who declined to be named said the CFTC hasn't granted the firm's request yet.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6W7XECOfjPg&refer=home

www.sentgroup.com

Oddly it's "under construction" which could be a coincidence... I suppose...?

Brand Says:
I think in the next couple of months we will see continuous liquidity injections by the Fed

I am dog-sitting this morning for a cow-orker who had to go to a meeting in another building, and I just took the canine out for a bio break. As I watched it relieve itself on a tree trunk, the first thing that came to my mind was "Ah, look, a liquidity injection."

SP

SQT said:
Why would the bank do something that is likely to cost them more money in the long run? I would think it would make more sense to take an offer now and just get it off the books.

Maybe they repackaged the loan and no longer have it on _their_ books any more... Maybe they stand to make more fees by 'servicing' a non-performing loan and more fees for processing the foreclosure after a few months... Maybe there is a loan buy-back clause that kicks in when they sell-short...

I don't know for sure, but there is a lot of scope for divergence of interests between the bank and the bagholder, which may explain the bank's behavior.

SP

As I watched it relieve itself on a tree trunk, the first thing that came to my mind was “Ah, look, a liquidity injection.”

:)

You mean the dog dared to soil the ******plex?

SP

Yeah, I actually talked to the original lender on a foreclosure in our area. He has no idea who holds the paper on the house now and it's just sitting.........

Alright.. who wants to predict DOW back in the 12K's ??

Amidst all this talk of a credit crunch, I got some unsolicited email from my mortgage holder offering me a huge home equity loan at a 7% fixed rate. I can't imagine why I might want to do that, but it was amusing nonetheless.

So I don't think there is really so much of a credit crunch, as a crunch of well qualified borrowers.

Phil Says:
Alright.. who wants to predict DOW back in the 12K’s ??

pffft, I already called for Dow 10K a week or two ago. :-)

"in the 12Ks" is a gimme - the dow (13027) is sitting just about 28 points away from that right now.

SP

skibum Says:
You mean the dog dared to soil the ******plex?

Uh... it is biodegradable. Strictly speaking, it was a tree along the creek next door.

Anyways, I thought it was a pretty good metaphor for liquidity injection.

SP

Eventhough my ira is down a "chunk" I'm still enjoying this market.

I can just hear the hedge fund billionaire's conversations...."I was looking at a 172 foot yacht but with this market I'm thinking about the 146 footer instead." "Tell me about it, we've removed the entire fourth floor from our beach home plans."

(sumbitches)

SP,

I had some similar thoughts about Bernanke giving us all a liquidity injection up our collective behind, but I didn't want to (at the time) to get too grotesque.

146 is a good size for entry-level billionaires. That would be around 45 meter.

In the good old days, it would have been considered a megayacht. Now, shipyards have series-built (almost like assembly line) boats at this size.

There are multiple yachts in the 500-foot range (larger than a small cruise ship) being built as we speak.

Are you sure those people you overheard were actual billionaires, not mega-millionaires?

The Sentinel MMF story is not what it seems at first blush. CR and Tanta have a bit to say, and then details come out in comments (amid an unusual amount of noise):

http://calculatedrisk.blogspot.com/2007/08/sentinel-management-asks-to-halt.html

Jimbo,

I've maintained that for some time now. Exactly, that's why they're going to folks in your credit grade to see can they scare up some business? SAFE business!

Not that you're considering it but I think if you w-e-r-e to follow through with their offer you'd get very frustrated. See, they've all forgotten how this whole process is supposed to work? As in you'll be coaching them through it every step of the way. When I was asked for an appraisal (again) 2 days before the close and re-faxed my '05 return for like the 3rd time I was not having any fun.

need coffee.

http://calculatedrisk.blogspot.com/2007/08/sentinel-management-group-asks-to-halt.html

BTW, goober, are you in Florida?

@Peter P

Naw; just across the border in ga.....

need coffee.

Bloomberg keeps updating their story and I recommend it over trying to wade through CR at this point as it has everything you need to know (at least, from my POV). This is Jeff's original link that has been updated four times.

I seem to have lost the ability to use the a href tag proerly (the mind is going). Here is the link for the Sentinel story at Bloomberg.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6W7XECOfjPg&refer=home

“in the 12Ks” is a gimme - the dow (13027) is sitting just about 28 points away from that right now.

The Dow under 13000 will be a significant psychological milestone, as will falling negative for the year (12,400 or so?)

I moved all my bond funds today into cash because Vanguard was unable to tell me (or unwilling to tell me) in specific terms the amount that was either directly exposed or indirectly through "bond return matching derivatives" to subprime & friends.

I'm not concerned about money markets or CDs because of all the reasons people usually state, and more importantly because if those are allowed to fail -- even a tiny bit -- then all bets are off anyway. Money markets failing = perceived total banking failure = emergency Federal measures = anything you thought you did to hedge or protect is rendered irrelevant anyway.

Rumor has it from those in the biz that the credit lockup _very seriously_ has already or is in the process of interrupting residential transactions.

This confirms for me why "theotherside" came here a few days ago with a "now you'll get what you asked for...I hope you're ready to burn with everyone else" message. She's scared shitless that she's done for the year and well into next.

The following mortgages are basically gone, as in no longer available even if the literature, web sites and even pre-existing qualifications show them as an option: subprime (obviously), Alt-A (also obviously), bridge loans, seconds, and combos.

The last 3 are huge. Lots of prime borrowers use bridge loans (and can afford them). They are common when someone has to buy before they sell, during new construction situations, etc. Combos were common over a decade ago when we bought our first CA house in Redwood City. People just use them to avoid paying PMI (which has come back on the scene now). Even "stand alone" equity lines of credit are frozen, according to what I heard.

Basically only Fannie and Freddies are going through, which means only conforming loans, which means *nothing* in the SF Bay Area. You can't get a jumbo unless it's a reasonable LTV (which means you need $ which of course 95% who've bought a home in the past 3 years have not had).

The funniest (saddest) thing is the realtors are being told to use this to scare any buyers in process (those already loan locked but not closed yet) into closing by telling them if they don't buy now they'll never be able to with the new rules, and then they'll be priced out forever.

Even at long last, they have no decency. Funny, isn't this *exactly* the scare tactic "theotherside" was giving us a couple days ago. Too bad for her I found her script.

Randy H,

Wow - that's interesting. I assume you took a gander through the online prospectuses and found them vague? You've done your part in stoking the fears of fund managers of an accelerating stampede for the exits...From my own readings of several (Vanguard and Fid at least) funds, one would be quite surprised at how much exposure to MBS and other "asset-backed securities" run of the mill bond funds have.

I'm curious - any "reallocation" of your stock funds? I've definitely moved some out of mine into more cash/Treasury's.

Combos were common over a decade ago when we bought our first CA house in Redwood City. People just use them to avoid paying PMI (which has come back on the scene now). Even “stand alone” equity lines of credit are frozen, according to what I heard.

The reports in fact state that several major lenders have seen significantly increasing late payments and subsequently defaults on HELOCs for prime borrowers - I would think that prime borrowers in financial trouble tend to pay their primary mortgage and let the HELOC slide if need be.

With the subprime meltdown, hopefully it will become easier to make restaurant reservations. It is annoying to plan a dinner for weeks later.

"Too bad for her I found her script"

The last act of a desperate person. After years of working the "greed script" they've now perfected the "fear script". The fear that you won't be able to get a loan. Period. So when you pose it to the buyer that way, I guess the house, neighborhood, schools etc. don't matter! Sad.

What if a buyer has already gotten a Jumbo ARM loan without the teaser rate? Will their rate get a reset? I think that is the category that most $200K families are getting into for their primary residence.

skibum,

Would that actually work? Whether it's the lender in the first position or the second (or the third) wouldn't they just file a N.O.D anyway? Is it possible to stay current on their first and blow off the second yet still be able to stay in their home? Or are these somehow un-secured?

Rating Agencies are starting to get their share.

Moody's, S&P Lose Credibility on CPDOs They Rated

@ Randy,

I was quite surprised to learn that some of this toxic waste had found its way into money market funds. Vanguard is a class act generally so I would be real surprised if they have that problem. However, I formally thought Bear Stearns was a class act too. I guess once ACE left it was all down hill!

My income ETFs are getting killed even while NAV increases the share price drops. There is clearly blood in the street. Liquidations are happening regardless of the asset.

Paul,

FWIW some of the income ETF's (at least on the sell side) get knocked b/c retail brokers dump them after the DTC Tracking expires and they jump on board w/ the new "flavor of the month". It doesn't account for all the weakness but it certainly doesn't help.

With a lot of the "dividend capture" trading platforms out there they know they have 30-90 days to get back on board. The difference is... your income ETF's will recover, MBS won't.