IrvineMom,

That is too bad about your friend. Before this is all over, everyone in Orange County will be touched either directly or indirectly by the bust.

I wonder who is the main culprit for this mess.

It may take years to figure that one out. None of this would have occurred if Wall Street was not buying the paper. The circumstances and conditions leading to that will be difficult to elucidate.

The Subprime ones are filthy rich.  I was told subprime is where the money is. 

Doesn’t this remind you of the dot.com bubble? Twenty somethings getting billions of Wall Street dollars to create websites with no revenue and no real business plan. Looks pretty similar to me.

The subprime LOs are not saying a word about the mess.

Look for the perma-bulls to fall conspicuously quiet as well.

It’s the Foreclosures, Stupid!

Foreclosures May Hit 1.5 Million in U.S. Housing Bust

This is a great article. It does such a great job making the bearish case, it could have been pulled from a bubble blog.

Add another great article for the day. http://www.thestreet.com/_tscfoc/newsanalysis/investing/10343814.html Seven pages of what we already believe and slamming Cramer can it get any better?

Sub-primes prime the housing slump

The LA Times is also reporting on this mess. Notice they now acknowledge this was a bubble.

Easy money fueled the housing boom, but it may also prolong the slump.
March 12, 2007

CALIFORNIA’S HOUSING bubble and housing slump share a root cause: easy money. And the particular category of easy money that sustained the bubble for so long — so-called sub-prime mortgages, which are designed for borrowers with weak credit and little cash on hand — may also prolong the slump.

Generally, sub-prime mortgages carry higher fees and interest rates than prime loans. Often they feature adjustable rates and other options that keep payments low in the first few years of the loan. They make it easier for buyers to break into expensive markets such as Southern California; since 2003, 15% to 25% of the mortgages originated in California have been sub-prime.

But these loans have a dark side: The size of their payments can increase, sometimes steeply. When home prices are on the rise and credit is easily available, such spikes aren’t as problematic; if the payments are too much, a homeowner can always refinance or sell (at a profit).

Or at least a homeowner could during the bubble. In a downturn, those options evaporate — and many borrowers default.

In the fourth quarter of 2006, default notices rose to almost 40,000 — their highest level in eight years. The pain could spread if rising defaults beget stricter lending practices and demand for housing slips, driving prices still lower.

Whether the sub-prime mess will initiate such a downward spiral — or infect the real estate market more broadly — remains to be seen.

Freddie Mac, which owns about $184 billion in bonds backed by sub-prime mortgages, recently announced that it was raising qualification requirements for the loans in which it invests. And five federal financial regulatory agencies have urged lenders to better explain the risks of adjustable-rate loans.

Economists from industry groups say the sub-prime crisis doesn’t necessarily spell doom. Another view is that the housing market was in need of a correction and that a tightening of credit is just what the broker ordered. Either way, wobbles from large sub-prime lenders — which include Irvine-based New Century Financial Corp. and Santa Monica-based Fremont General Corp. — could put a damper on the local economy.

I know so many wholesale mortgage account excutives looking for jobs right now. The good ones (the minority) will find jobs but the bad ones (the majority fraudsters) will be out of luck. I think maybe being an ex-mortgage guy I should do a topic on this. Have you checked out quiggle me? His stories of BNC are spot on and he is holding some info back too. Also have you seen the dicussions on http://www.ripoffreport.com/reports/ripoff208052.htm for quick loan funding?   

Today the sh*t storm is really pooring down. LEND is down $7.50 a share because they received a $190 million margin call. They are scrambling for liquidity and are essentially in crisis mode. OC has record new home inventory, foreclosures are at the highest in years and dataquick median numbers show price decreases. Countrywide’s CEO Angelo Mozilo said that it is going to get worse before it gets better. He is worried that it will affect the rest of the economy. I always knew that this would happen but I didn’t think it would be happening so fast.

Accredited skidded $7.43, or 65.2 percent, to $3.97, its lowest close ever. New Century, now listed on the Pink Sheets, fell 81.5 cents, or 49.1 percent, to 84.5 cents.

And you guys thought I was bearish…

From Reuters:

Top investor sees U.S. property crash

http://news.yahoo.com/s/nm/20070314/bs_nm/subprime_california_dc;_ylt=Ah.C2KBOAp1vIj_duiF2iDrMWM0F
A nice little tribute to New Century and how it could effect other parts of the economy in OC.
I did a quick check on county records for the amount of NOD’s filed so far this month and it is on a rapid increase. I really wish they were set up so I could search the trustees sales.
 

New Century update:

https://lounge.newcentury.com/cms/pdfs/nc.com/broker_letter.pdf

I know many read the patrick.net news but when it comes from the Economist and everyone should take a look at it.
http://www.economist.com/blogs/freeexchange/2007/03/yes_they_can_go_down_too.cfm

Oh and by the way these same CDOs are what bankrupted OC in 96. Thanks Merrill Lynch. So why is OC doing business with them again?

Now I add another patrick.net find to add to the CDO problem.

http://www.marketwatch.com/news/story/subprime-mortgage-shakeout-cdos-may/story.aspx?guid={620D90CA-3A9E-4A21-9591-E772D59E5CF3}&ref=patrick.net&print=true&dist=printTop

Dudes….don’t worry about the subprimes…..Senator Dodd is coming to save the day. Yes, your government is going to ensure that those poor subprime borrowers can keep their homes….Only in America! The people pay taxes so the Senators can spend it to bail out the financially irresponsible…. Why would anyone act responsible in America?.... I’ve got to send an email to Senator Dodd about that new Lamborgini I want but I can not afford…. and there is that cute little 4 mil fixer on the coast that I will need subsidized….. and that vacation in the Bahamas I can’t afford… and there is that…...

Ranger Rick,

I think the goverment is only going to help the low-income homeowners and still going to punish the subprime lenders. Dont know how this will help the subprime defaults - only time will tell.

The mainstream media appears to be picking up on the problems. From the front page of MSN on 3/15/07

Community groups warn of default ‘tsunami’

How do you bail out low-income home owners who are over their heads… and still punish the sub-prime lenders?  Please don’t say, "with regulations…"

Layoffs at Ameriquest parent
Subprime fallout, Ameriquest cuts 3,000 jobs
This can’t be good for the local economy.

It isn’t clear to me whether all 3,000 jobs are in Orange? If so, it is pretty bad indeed for local economy. Hopefully things wont get much worse.

Good article from San Diego:

[url=“http://www.signonsandiego.com/uniontrib/20070318/news_lz1b18calbrea.html”]

No denying mortgage crisis likely will worsen[/url]

"
<body.content>
Most people, it is commonly said, go through five stages when dealing with doom: denial, anger, bargaining, depression and acceptance.
</body.content>

As far as San Diego bankruptcy attorney Mark Miller is concerned, many homeowners are only in the “denial” stage regarding the subprime lending crisis, although they may soon slip into “anger."

Shout.
Shout.
Let it on out.
Bubbles are the things we can do without.

People’s Choice Home Loan files for Chapter 11

Another employer in Irvine bites the dust.

NEW YORK (Reuters) - People’s Choice Home Loan Inc., a California-based mortgage lender to people with poor credit histories, filed for Chapter 11 bankruptcy protection on Tuesday, according to court papers.
The Irvine, California-based unit of People’s Choice Financial Corp., a real estate investment trust, became at least the fourth large U.S. subprime lender to seek protection from creditors in the last three months.
[removed][removed]
<xml src=“http://news.moneycentral.msn.com/relevance/relatednews.axd?articleid=6639132” id=“RAData”></xml>
It listed more than $100 million of both assets and debts in its filing with the U.S. Bankruptcy Court for the Central District of California.
Many subprime lenders have struggled from rising delinquencies and defaults, and more than two dozen have quit the industry in the last year.
People’s Choice and its lawyers did not immediately return calls and e-mails seeking comment.
Founded in 1999 by Neil Kornsweit, a former executive at subprime lender Aames Financial Corp., People’s Choice employs about 1,150 people nationwide, according to its Web site.
The company has retail offices in four states and wholesale offices in eight, and offered its first public securitization in April 2004, the site said.
People’s Choice listed Wachovia Corp.  as its largest unsecured creditor, but didn’t say what it owes the bank. Among other listed creditors are Residential Funding Corp., Credit Suisse and Bear Stearns Mortgage Capital Corp.
.
On March 14, People’s Choice Financial withdrew plans with U.S. securities regulators to register common stock, citing "various business and market reasons."
Subprime mortgage lenders that recently sought Chapter 11 protection include Mortgage Lenders Network USA Inc., Ownit Mortgage Solutions Inc. and ResMae Mortgage Corp.
Others, such as Irvine-based New Century Financial Corp.  and Santa Monica, California’s Fremont General Corp.  , have this month cut jobs or announced planned cuts.

Wells Fargo cuts 500 jobs in mortgage unit
"Most of the cutbacks, concentrated in South Carolina, Arizona and California, stem from Wells Fargo’s recent decision to make it more difficult for borrowers with blemished credit records to qualify for subprime mortgages."

RPT-Wells Fargo cuts another 121 subprime jobs
"Wells Fargo & Co., the fifth-largest U.S. bank, on Tuesday said it is eliminating 121 jobs in Tempe, Arizona, in a unit that offers mortgages to higher-risk borrowers.
The cuts are on top of 323 previously announced job cuts in the home loan unit, including 252 in Fort Mill, South Carolina, and 71 in Concord, California."

I know some here read Calculated Risk but since this focuses on mortgage fraud I thought that it would be a good addition here for those who don’t read Calculated Risk. I also think that it is great that Tanta shares the experience of how mortgage backed securities and the risk involved with the public. The few that I have met in the capital markets departments of lenders are not anywhere near as willing as Tanta to discuss what they do and the stuff they see.
http://calculatedrisk.blogspot.com/2007/03/unwinding-fraud-for-bubbles.html
I believe the M. Mouse signature is very true. I believe this because the company I worked for started to crack down on the "stated income" loans because they had to buy some of them back. One of the loans they had to buy back was a Blockbuster clerk who made $9k a month. Gee I wonder what the problem is here? Why the loan officer, underwriter, underwriting supervisor (who signs off on the deal), funder or the capital markets auditor thought this was reasonable and not think for a second that this would be a loan that no one would buy if they ever saw it. This is where Tanta’s third theory comes to reality in that a few bad apples shouldn’t spoil the basket but the mold just starts to spread.