8 replies to this topic

[jawndissedi]

Only 8 months this company seemed to have a bright future. Yesterday, it went out of business. Less than a month earlier, another leading subprime lender suffered the same fate. New Century Financial, the 2nd largest subprime lender whose CEO suddenly retired at age 59 and a company that I recomended here as a short when it was >40, closed the year at a 52-week low.



What's the problem in subprime lender-land? Consider the following statement from a mortgage broker who deals with these outfits every day:

"I know a lot of people that went to MLN thinking it was the promised land. It doesn't take enormous brain power to figure out that any lender that is undercutting their competition on rate by .75 to 1.50 bps, letting borrowers go 100% stated at 600 and using the first page of the bank statements as full doc is eventually going to get their @ss handed to them. Subprime people are exactly that, subprime and their credit sucks for a reason: they don't pay on time. I think the industry is finally figuring out that they need to go back to treating these borrowers with higher rates and more money down."

Keep your eyes on WFC, WM and CFC. All of them have major subprime exposure, and all of them have a long way to fall.

Edited by jawndissedi, 30 December 2006 - 02:51 PM.

[jawndissedi]

"Yanno" there is a lot more to the USA than California, and the folks at RealtyTrac have been keeping an eye on it for us:

IRVINE, CA - RealtyTrac™ released its November 2006 U.S. Foreclosure Market Report, which shows that 120,334 properties nationwide entered some stage of foreclosure during the month, an increase of 4 percent from the previous month and an increase of 68 percent from November 2005. The report also shows a national foreclosure rate of one new foreclosure filing for every 961 U.S. households, the highest monthly foreclosure rate reported so far this year.

"Defaults, auctions and bank repossessions all trended higher in November, bringing the year-to-date foreclosure total to almost 1.2 million -- up 43 percent from the same 11-month period of 2005," said James J. Saccacio. "With home price appreciation slowing, and even declining in some areas of the country, homebuyers who stretched themselves financially to purchase a property don't have much equity to work with if they experience even a small bump in their mortgage rate or disruption in their income. However, the recent dip in interest rates, combined with relatively low unemployment in most areas of the country, should keep foreclosures from accelerating to the point where they impact the entire housing market."

Nevada beats out Colorado for highest foreclosure rate

After eight consecutive months with Colorado posting the nation's highest foreclosure rate, Nevada's foreclosure rate jumped to the top spot thanks to a 12 percent increase in foreclosure activity from the previous month. Nevada reported 2,506 properties entering some stage of foreclosure during the month, nearly triple the number reported in November 2005 and a foreclosure rate of one new foreclosure filing for every 346 households -- 2.8 times the national average.

Colorado foreclosure activity decreased nearly 10 percent from the previous month, helping the state's foreclosure rate -- one new foreclosure filing for every 362 households -- drop to second highest among the states. The state reported 5,051 properties entering some stage of foreclosure, still up 88 percent from November 2005.

With one new foreclosure filing for every 439 households, Georgia documented the nation's third highest state foreclosure rate for the second month in a row. The state reported 7,056 properties entering some stage of foreclosure, a 2 percent increase from the previous month and a nearly 60 percent increase from November 2005.

Other states with foreclosure rates among the nation's 10 highest were Ohio, Texas, Michigan, California, New Jersey, Indiana and Tennessee.

California reports highest number of foreclosures for third straight month

More than 19,000 California properties entered some stage of foreclosure during November, the most of any state for the third straight month and an increase of more than 19 percent from the previous month. The state's foreclosure rate of one new foreclosure filing for every 635 households rose to 1.5 times the national average and jumped to seventh highest among the states after being 12th highest the previous month. California foreclosure activity has more than tripled from a year ago.

Texas foreclosure activity jumped more than 40 percent in November after posting a decline in October. The increase pushed the state's foreclosure total to 13,664, the second highest total of any state. The state's foreclosure rate of one new foreclosure filing for every 589 households was 1.6 times the national average and fifth highest in the nation.

Despite an 18 percent month-to-month decrease in foreclosure activity, Florida reported the third highest foreclosure total in November. The state reported 9,362 properties entering some stage of foreclosure, up more than 5 percent from November 2005 and a foreclosure rate of one new foreclosure filing for every 780 households -- 12th highest among the states.

Ohio, Michigan, Georgia, Illinois, New Jersey, Colorado and New York rounded out the 10 states with the most new foreclosure filings in November.

Highest metro foreclosure rates in Colorado, Michigan and California

For the fourth month in a row, Greeley, Colo., posted the highest foreclosure rate among the nation's 200-plus largest metropolitan areas. The Greeley metro area (Weld County) documented 428 properties entering some stage of foreclosure, an increase of 13 percent from the previous month and a foreclosure rate of one new foreclosure filing for every 155 households -- more than six times the national average.

Despite a 21 percent decrease in foreclosure activity, the Detroit metropolitan area (Wayne County) registered the nation's second highest metro foreclosure rate for the second month in a row. The metro area reported 3,333 properties entering some stage of foreclosure, a foreclosure rate of one new foreclosure filing for every 248 households.

With one new foreclosure filing for every 250 households, Riverside/San Bernardino, Calif., documented the nation's third highest MSA foreclosure rate in November. The two-county metro area reported 4,747 properties entering some stage of foreclosure during the month, an increase of more than 57 percent from the previous month and 3.8 times the national average.

Gettin' mighty close to blue grass country, "doncha" think?

[pdx5]

jd, thanks for posting this information. No one knows for sure if housing has seen the bottom yet, but IMO more shrinkage still lies ahead.

[greenie]

Other states with foreclosure rates among the nation's 10 highest were Ohio, Texas, Michigan, California, New Jersey, Indiana and Tennessee.

Being from India, I am not very familiar with other parts of this country. Where are the above states and what kind of people live there? Only other state I know of is Ohio, where people do all shopping online and dream of buying the state of California (online?) after housing prices go down here

[jawndissedi]

. . . what kind of people live there?

Just regular folks who are as susceptible to the beguilements of easy money as anyone else. What surprises me about some of these "red state" residents is their latent assumption that the Fed (or some other govt. agency) will "do something" to help them if things get out of hand. Maybe they should pay a visit to New Orleans's 9th Ward to get a sense of what happens when the gubbermint rides to your rescue . . .

[jawndissedi]

Top subprime lenders as of Q2 2006. Got puts? 1. Wells Fargo 2. HSBC 3. New Century 4. Countrywide 5. Freemont 6. Option One 7. Ameriquest 8. WMC 9. Washington Mutual 10. CitiFinancial 11. First Franklin 12. GMAC 13. Accredited Home 14. BNC 15. ChaseHome Financ 16. Novastar 17. Ownit 18. Aegis 19. MLN 20. EMC 21. ResMae 22. FirstNLC 23. Decision One 24. Encore 25. Fieldstone

[endisnear]

Top subprime lenders as of Q2 2006. Got puts?

1. Wells Fargo
2. HSBC
3. New Century
4. Countrywide
5. Freemont
6. Option One
7. Ameriquest
8. WMC
9. Washington Mutual
10. CitiFinancial
11. First Franklin
12. GMAC
13. Accredited Home
14. BNC
15. ChaseHome Financ
16. Novastar
17. Ownit
18. Aegis
19. MLN
20. EMC
21. ResMae
22. FirstNLC
23. Decision One
24. Encore
25. Fieldstone

I wrote about my stint as an independent loan officer. I wrote loans through 10 lenders on this list from what I can remember. New Cen was my first choice every time followed by countrywide.

The loans they wrote will lead to their demise. I knew two guys in early 20s who were forging docs to get loans approved and they were making between 20 and 30k/month at Ameriquest at a retail branch. Everyone up to the regional mgr knew they were doing, but tured a blind eye. Both were promoted to mgrs and soon afterwards, FBI raided their offices and they were arrested.

everyone (about 30people were fired) Several offices in Houston were shut down as well while investigation ensued. Within a month after arrest, they were both working for New Century doing the exact same thing. Lost track of them after that. True story.


Short them at will. You haven't seen anything yet I can assure you.

[kaiser soze]

The fly in the ointment is that everybody knows about the problems of the sub-prime lenders and shorting them is a very crowded trade. Here's member of the same list with short interest (in millions of shares) and days to cover (as of Dec 15) Wells Fargo 26 3.3 New Century 11.5 8.7 Countrywide 28.3 6.9 Freemont 6.8 9.0 WM 24 7.5 Novastar 11.3 14

Edited by kaiser soze, 31 December 2006 - 07:07 PM.

[endisnear]

The fly in the ointment is that everybody knows about the problems of the sub-prime lenders and shorting them is a very crowded trade. Here's member of the same list with short interest (in millions of shares) and days to cover (as of Dec 15)

Wells Fargo 26 3.3
New Century 11.5 8.7
Countrywide 28.3 6.9
Freemont 6.8 9.0
WM 24 7.5
Novastar 11.3 14

I know..I don't short em but shorted some homebuilders last week..

When lenders bite the dust b/c of new BK law kicks J6P's in the teeth, and foreclosures are 7-8x the rate they are today, real estate prices will collapse nationwide..

I live in TX and its one of the worst in terms of forclosure rates...and RE is among the cheapest in the country....my 200k house here in Houston would be 3-4x in CA....Predatory lending was bad here...

Only 8 months this company seemed to have a bright future. Yesterday, it went out of business. Less than a month earlier, another leading subprime lender suffered the same fate. New Century Financial, the 2nd largest subprime lender whose CEO suddenly retired at age 59 and a company that I recomended here as a short when it was >40, closed the year at a 52-week low.



What's the problem in subprime lender-land? Consider the following statement from a mortgage broker who deals with these outfits every day:

"I know a lot of people that went to MLN thinking it was the promised land. It doesn't take enormous brain power to figure out that any lender that is undercutting their competition on rate by .75 to 1.50 bps, letting borrowers go 100% stated at 600 and using the first page of the bank statements as full doc is eventually going to get their @ss handed to them. Subprime people are exactly that, subprime and their credit sucks for a reason: they don't pay on time. I think the industry is finally figuring out that they need to go back to treating these borrowers with higher rates and more money down."

Keep your eyes on WFC, WM and CFC. All of them have major subprime exposure, and all of them have a long way to fall.

Ameriquest would do stated loans with typed letter stating how much they owe....I'd just say, "Mr Soon2be4closed, I need you to type me a letter saying you make 80k as a construction worker and the loan is yours." Can't remember what the credit requiments were but it was 600 or less.
We'd do these loans if debt ratio was too high with real income..