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Tag: Wachovia (page 1 of 1)

October 24, 2008

Mortgage Market Week in Review

by

Mortgage Officer

Author website

Here we are on Friday again.  That means that it’s time to try to summarize what’s going on in the mortgage and finance world.   I’m going to talk about a couple of main things:  the economic fundamentals, some earnings reports and the “margin calls” that are going on in the equity markets.

The economic fundamentals that have come out in the last week or two have all been, shall we say, poor.   Not just in the United States, but England, Asia and other places, the economic reports all show pretty solid evidence that we are either in or heading into (depending on where you are) a recession and that it’s most likely not going to be a short recession but more likely the opposite – a long and painful one.   I’m not going to go into the details of the different reports because it would be too depressing.

Earnings Reports (or shall we say, loss reports?)   I’m going to do something a little different this time.   I’m going to give you the numbers and then later in the e-mail, I’ll tell you who they matched with.   Here’s the numbers:

-$81,000,000
-$700,000,000
-$23,900,000,000
+$4,370,000,000

(oh and these are all just for the most recent 90 days).

Here’s the choices for the companies who made them:

National City Bank
Microsoft
Fifth Third Bank
Wachovia
I’ll tell you a bit further down which one did which……

Now for a few thoughts about what’s going on in the equity markets and how that has an impact on the mortgage and real estate markets.   Here’s an overview of it:

1. The mortgage backed securities market is a highly leveraged market.

2. As approximately 5 to 7% (that’s right, it’s only 5 to 7% of all mortgages that are causing this problem) go bad, the value of the mortgage backed securities (also known as Collateralized Debt Obligations or CDO’s) fall dramatically.   Since they are highly leveraged, the investors have to come up with additional cash, typically lots of it.

3. That is, in an oversimplified nutshell, what is causing the significant sell offs in the stock market and the bond market at the Read more

October 3, 2008

Mortgage Market Week in Review

by

Mortgage Officer

Author website

Well, here we are on Friday again. Are you getting motion sickness from all of the news and rumors that are flying back and forth? Wow has it been another week to forget, hasn’t it?

Here are the topics we’re going to talk about today: The Bailout/Rescue Plan, some very weak economic reports, the credit markets and do bankers really trust each other?

First, there were several economic reports that came out. None of them were good. Here’s a rundown of them:

1. Jobs – the jobs report came out this morning and showed that 159,000 jobs were lost in September. While the number was lower than what the markets expected (they expected 200,000), it was a very weak report.

2. Factory orders came in down 4%. That’s not the direction we’d like them to go.

3. Car Sales fell off a cliff in September. Ford’s sales dropped 35%. Ouch.

4. A couple of reports on personal incomes, personal expenditures and the like came out and they weren’t good.

If these were the only issues that we had, we’d have our hands full and we’d see mortgage rates drop due to the increased weakness in the economy.

But that’s not all. The credit markets have taken a major hit in the last week. What’s happening with that? A couple of brief highlights:

1. Banks are very concerned about running out of money (capital). Wachovia (more on this later) and Washington Mutual have been “bought out” to keep them from going under. Other banks are concerned that the losses they are experiencing will not enable them to keep their capital ratios where they should be. Due to that, there is an increasing reluctance to lend to commercial customers and to lend to consumers. How bad is it? I’ve heard a variety of conflicting reports. What I can say from personal experience is that for people (consumers, not businesses) who have the following: 1) Some equity in the Read more

September 30, 2008

Tom’s Top Ten Reasons He Doesn’t Like the Bailout….

by

Mortgage Officer

Author website
  1. Because a government intervention the financial systems rarely works well.
  2. Because it fails to acknowledge the fundamental shift that is occurring in our society as we move from being “overleveraged” to using credit responsibly.
  3. Because Nancy Pelosi likes it.
  4. Because no one has been able to prove that by buying this garbage from the banks, it will do anything to actually help credit get done.
  5. Because Barney Frank likes it.
  6. Because JP Morgan and the FDIC were able to work out a very smooth transition when Washington Mutual closed down last week and it was done without any unusual interventions.
  7. Because the bailout refuses to consider that not all banks are equal.   Those who are most likely not going to make it would get the same government money as those who are perfectly healthy.    That’s just not right.
  8. Because Rep. Peter Hoekstra (R-Michigan) voted against it, and I have a lot of respect for Pete.
  9. Because the Main Stream Media is preaching an unbelievable amount of panic, distrust and fear and they are doing it with items that are not factual.
  10. Because the government hasn’t done a good job (because I don’t believe they can) in showing that there’s a connection between buying bad assets from the banks and helping Main St.
  11. Because Citigroup and the FDIC worked out a “take over” of Wachovia without any significant market disruptions and without any unusual bailout efforts.

Okay, so it was actually 11.   The point is, the bailout is not good for our country and not good for our economy.   Are banks going to fail?  Yep.   Do I hope that “my bank” isn’t one of them?  Yep.   But like Jeff Brown says, we know how the story ends up and we’ll all be fine.

Tom Vanderwell

June 3, 2008

And Wachovia Completes the Gang of Three

by

Real Estate Renaissance Man

Author website

Wachovia board members have forced CEO Ken Thompson to retire  and Realtors should be popping champagne corks all over the nation.  Why?  Because Wachovia is the final reckoning of the Gang of Three and this may very well signal the bottom of the market.  Disclaimer #1: I usually write posts and comments backed by statistics.  Barry Cunningham will attest to that.  But this post is going to be more along the lines of a common sense case study; a thought experiment.

The Gang of Three
When the press first started reporting on the “sub-prime” crisis (a misnomer in itself, but we’ll save that for another day), a number of us were pointing out the real problems and what was to come.  There were three lenders to worry about and Countrywide, by virtue of its size more than any particular wrong doing, was used as the example.  In my weekly speeches to Realtors, I began to refer to them as The Gang of Three: Countrywide, WaMu and Wachovia.  The initial problems at Countrywide can be seen as far back as May of last year.  The set-asides at Countrywide were woefully inadequate, in my opinion, and that seems to have been borne out.  WaMu went down the exact same path and now, finally, we see Wachovia doubling the losses they originally forecast.  Why are these three lenders leading the Lemming parade off the financial cliff?  What do all three lenders have in common? (Hint: it’s not sub-prime loans.)  The common thread here is Negative Amortization Loans (cue ominous music).  Disclaimer #2: I am on record as being VERY against Neg-Ams (I have never written one for a single client).  Do they have a purpose?  Yes.  A few of my colleagues have used them effectively.  But I would venture to guess 75% of the neg-am loans produced were at least a by-product of greed if not out right theft on the part of the originator.

There is not space here to go into why these loans are, generally speaking, so abused and that is not the point of this post.  The point is that these are the big three originators of neg-ams (Countrywide, WaMu and Wachovia through their very questionable puchase of Golden West Financial) and all three Read more

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