'Father' of Securitized Mortgage Market: First Time in History Median Home Sales Price is Likely to Decline
Lewis Ranieri, generally regarded as the "father" of the securitized mortgage market, told an audience at the Milken Institute Global Conference that, in 2007, for the first time in history the median home sales price in the United States is likely to decline.He also added that there will be many technical problems in working out problem mortgages, He said the vast majority of problem loans are securitized and that, in the past, problem loans were in individual portfolios. This time around, because of securitization, there are many, many holders of the securities with an interest in a mortgage. This will mean there will be many more parties that will have to agree to everything. In addition, he added, there are more lawyers and accountants in the picture to complicate matters.He used as an example from the past: when he restructured mortgages with homeowners, he would never send out a 1099 tax form. In current situations, he said, lawyers and accountants want him to send out 1099 tax forms to homeowners who have restructured their mortgages. He asked rhetorically, "You have just restructured a mortgage for people who haven't been able to make their former payments and now you want to send them a tax bill for restructuring?"He further stated there will be a "political reaction" and he feared that bad legislation could create problems for the entire mortgage sector that are now just limited to the sub-prime area. He fears, for example, that any legislation creating a moratorium on foreclosures would have a chilling effect on the issuance of home mortgages throughout the industry.
Thursday, April 26, 2007
Monday, March 12, 2007
Crisis in Mortgage Market
Crisis Looms in Market for Mortgages
By GRETCHEN MORGENSON , NYTimes
On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.
What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.
The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.
Now, as then, Wall Street firms and entrepreneurs made fortunes issuing questionable securities, in this case pools of home loans taken out by risky borrowers. Now, as then, bullish stock and credit analysts for some of those same Wall Street firms, which profited in the underwriting and rating of those investments, lulled investors with upbeat pronouncements even as loan defaults ballooned. Now, as then, regulators stood by as the mania churned, fed by lax standards and anything-goes lending.
Investment manias are nothing new, of course. But the demise of this one has been broadly viewed as troubling, as it involves the nation’s $6.5 trillion mortgage securities market, which is larger even than the United States treasury market.
By GRETCHEN MORGENSON , NYTimes
On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.
What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.
The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.
Now, as then, Wall Street firms and entrepreneurs made fortunes issuing questionable securities, in this case pools of home loans taken out by risky borrowers. Now, as then, bullish stock and credit analysts for some of those same Wall Street firms, which profited in the underwriting and rating of those investments, lulled investors with upbeat pronouncements even as loan defaults ballooned. Now, as then, regulators stood by as the mania churned, fed by lax standards and anything-goes lending.
Investment manias are nothing new, of course. But the demise of this one has been broadly viewed as troubling, as it involves the nation’s $6.5 trillion mortgage securities market, which is larger even than the United States treasury market.
Tuesday, March 06, 2007
Bernanke takes shot at Fannie and Freddie
Fed Chair Bernanke today urged Congress to increase regulation of Fannie Mae and Freddie Mac - to limit their holdings and limit the amount of their debt portfolios.
Talk about closing the barn door after the horse is gone! The message is clear. The Fed is worried. They even have Alan Greenspan running point - sounding the recession alarm.
Any significant stumble in the Fannie Mae or Freddie Mac portfolios (accelerating loan defaults, for example) will have a devastating result on the securities market. A failure by either or both could cause recession or worse.
As investors, this of course is good news. The hungrier the lenders get, the bigger the discounts. The ultimate investor dream is to return to the RTC days, buying properties in blocks for pennies on the dollar.
Patience, Investor. Patience.
Talk about closing the barn door after the horse is gone! The message is clear. The Fed is worried. They even have Alan Greenspan running point - sounding the recession alarm.
Any significant stumble in the Fannie Mae or Freddie Mac portfolios (accelerating loan defaults, for example) will have a devastating result on the securities market. A failure by either or both could cause recession or worse.
As investors, this of course is good news. The hungrier the lenders get, the bigger the discounts. The ultimate investor dream is to return to the RTC days, buying properties in blocks for pennies on the dollar.
Patience, Investor. Patience.
Wednesday, February 21, 2007
Subprime Lenders Take BIG HIT
Novastar, a REIT specializing in Subprime lending, has announced they are eliminating their dividend and are also contemplating giving up their REIT status. It turns out that maybe you can't get blood out of turnip after all!
Subprime lenders have grown way too fast and made too many bad loans. The subprime loan market is fraught with fraudulent practices, all with the attitude that an appreciating Real Estate market will forgive all sins.
The real question is... Will this impending collapse affect the Prime Lending industry or not. My guess is it will have a small effect. More important to the Prime Lenders is the state of the housing market. And that looks shaky at best.
All Trust Deed buyers beware - that 70 cents on the dollar note you are looking at is probably not a good deal!
Subprime lenders have grown way too fast and made too many bad loans. The subprime loan market is fraught with fraudulent practices, all with the attitude that an appreciating Real Estate market will forgive all sins.
The real question is... Will this impending collapse affect the Prime Lending industry or not. My guess is it will have a small effect. More important to the Prime Lenders is the state of the housing market. And that looks shaky at best.
All Trust Deed buyers beware - that 70 cents on the dollar note you are looking at is probably not a good deal!
Monday, September 04, 2006
How do I invest my IRA?
Click this link to see the top 50 questions and answers on how to invest your IRA!
http://www.thehilltopgroup.com/iraquestions.pdf
http://www.thehilltopgroup.com/iraquestions.pdf
IRA Investing in Real Estate!
Did you know the #1 untapped source for real estate investment funds is your IRA or 401K? Since 1974, a little know law has allowed retirement account holders to direct their IRA's to buy and sell real estate.
2 recent developments have brought this technique to the forefront. The first is President Bush's signing into law (August 2006) of mandantory retirement account offerings by all employers. The second is the formation of a national finance company named FirstIRAMortgage. FirstIRAMortgage will finance up to 80% LTV of the real estate purchase with the down payment coming from a self directed IRA.
For more information regarding investing in Real Estate with your IRA, call me today!
Richard Worcester ~ The Hilltop Group ~ Phone 888.787.0556 ~ email: info@thehilltopgroup.com .
2 recent developments have brought this technique to the forefront. The first is President Bush's signing into law (August 2006) of mandantory retirement account offerings by all employers. The second is the formation of a national finance company named FirstIRAMortgage. FirstIRAMortgage will finance up to 80% LTV of the real estate purchase with the down payment coming from a self directed IRA.
For more information regarding investing in Real Estate with your IRA, call me today!
Richard Worcester ~ The Hilltop Group ~ Phone 888.787.0556 ~ email: info@thehilltopgroup.com .
Wednesday, August 23, 2006
Trouble in the Florida Real Estate Investment Market?
Investors Coming Back to Haunt Florida Builders
Builders in Florida who grew accustomed during the industry's recent boom times to selling out their developments even before a shovel went into the ground are noticing a stark shift in the marketplace and could find themselves in trouble if they don't take steps to manage investors who are nearing closing day with neither the intention nor the means to close on those sales.
"Get control over those investors before they close," Robert J. Kanjian, president of Building Solutions LLC in West Palm Beach, warned builders attending the Southeast Building Conference earlier this month in Orlando, Fla. "Get your sales team's head out of the sand. What are investors going to do? Can they close? Today, you want the closing," he said, and builders facing a problem with investors can "get ahead of them on that deal" by using assignment options.
see article on HGTV Pro
Builders in Florida who grew accustomed during the industry's recent boom times to selling out their developments even before a shovel went into the ground are noticing a stark shift in the marketplace and could find themselves in trouble if they don't take steps to manage investors who are nearing closing day with neither the intention nor the means to close on those sales.
"Get control over those investors before they close," Robert J. Kanjian, president of Building Solutions LLC in West Palm Beach, warned builders attending the Southeast Building Conference earlier this month in Orlando, Fla. "Get your sales team's head out of the sand. What are investors going to do? Can they close? Today, you want the closing," he said, and builders facing a problem with investors can "get ahead of them on that deal" by using assignment options.
see article on HGTV Pro
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