From the Allentown Morning Call:
Heightened concern about the harsher-than-expected housing slump was a key factor in the Federal Reserve’s decision to hold interest rates steady last month.
Minutes of the Fed’s deliberations show that policy-makers revealed increased concern over the real estate bust — even as they were reiterating that their No. 1 aim was to make sure that inflation, which has been calming down, continued to recede.
The Fed held interest rates steady at the December session. But it also left the door open to a possible rate increase, if needed, to thwart inflation. However, one Fed member — who was not identified in the minutes of the meeting — thought the central bank should have held out the possibility of a rate cut as well.
…
At their December meeting, Fed policy-makers said economic growth had slowed over the course of 2006, partly reflecting a ”substantial cooling” of the housing market. That description went beyond the Fed’s previous assessment in late October and suggested a sharper slump in housing could be taking place.The policy-makers suggested that the economy was in for sluggish growth owing to the housing slump, but they didn’t indicate that the expansion was in danger of fizzling. Nonetheless, they said people needed to stay alert for any signs that weakness in the housing sector could seriously infect the rest of the economy.
”Several members judged that the subdued tone of some incoming indicators meant that the downside risks to economic growth in the near term had increased a little and become a bit more broadly based than previously thought,” the Fed minutes said.
December WARN notices are released:
http://www.state.nj.us/labor/warn/12-06warn.htm
COMPANY CITY LAYOFF BEGIN WORKERS
DATA COMMUNIQUE CARLSTADT 1/31/07 92
SCHERING-PLOUGH KENILWORTH 1/31/07 73
GE STRUCTURED SERVICES MT. LAUREL 1/31/07 56
SAKS, INC. LAWRENCEVILLE 3/30/07 47
HOFFMAN-LAROCHE NUTLEY 2/5/07 56
AUTOMATED DISTRIBUTION EDISON 2/4/07 399
BIOVAIL BRIDGEWATER 2/11/07 60
AFG INDUSTRIES CINNAMINSON 2/5/07 188
LAWRENCE ERLBAUM MAHWAH/NORWOOD 2/15/07 105
CHAMPION MORTGAGE PARSIPPANY 2/16/07 349
PBI MEDICAL CENTER PASSAIC 2/28/07 890
SODEXHO PASSAIC 2/28/07 142
from 1]
Champion is a mortgage refinance company and home equity lender specializing in programs that help customers with all types of credit including those with less-than-perfect credit.
http://www.championmortgage.com/marketing/ABOUTUS/justthefacts.asp
I was surprised to see Champion on the list, I don’t recall seeing anything about layoffs in the news since Fortress (hedge fund) purchased their origination platform. This is one of the reasons I check the WARN notices list, employers are required by law to give notice of plant closings or mass layoffs.
jb
http://player.clipsyndicate.com/player/play_clip/68193
bloomberg on subprime
It certainly does seem like we’re in the midst of a subprime credit crunch.
jb
From consumeraffairs.com:
Subprime Lender Implosion: Bad Omen For Housing Market
Subprime lenders have been both blessing and bane in the housing industry for many years, enabling lenders to rake in huge profits while saddling consumers with exorbitant loan terms and high interest rates.
Now, as the housing market slows to a crawl, many subprime lenders are collapsing faster than homes made of substandard materials, and the signs point to even more pain in the housing market as a result.
…
Now, with strapped homeowners falling behind in their payments in greater numbers, foreclosures on the rise, and interest rates at their highest level in two years, companies such as MLN found themselves unable to finance new loans.
The last few months have seen a flurry of subprime lenders shut their doors, declare bankruptcy, or engage in mass layoffs as the housing market freezes up.
…
The failures of subprime lenders are bad tidings for the housing market as a whole.
Just as low-income consumers feel the pain of gas or tax hikes first, subprime borrowers are the first to fall behind or default on their mortgage payments as interest rates rise.
…
Although economists and realtors continue to claim that the housing market slump has hit bottom, many still see delinquencies on the horizon, particularly as the ARMs reset to higher levels that consumers will not be able to keep up with.
From RISMedia:
Bankers Report More Mortgages Being Paid Late or Not at All
The number of people paying their mortgages late – or not paying them at all – picked up in recent months, a trend that is expected to continue well into next year.
The rise was sharpest among borrowers with troubled credit histories, and in particular, subprime borrowers who took out mortgages with interest rates that increase over the life of the loan.
The Mortgage Bankers Association [recently] said that a survey of more than 42 million mortgages found the rate of delinquencies rose to 4.7 percent from July through September, up from 4.4 percent in the second quarter, when the numbers were adjusted for seasonable variations.
The rate had fallen for two consecutive quarters.
Among subprime homeowners, designated as such because their questionable credit would otherwise disqualify them from obtaining a mortgage, delinquency rates were much higher. Subprime borrowers who had past-due payments rose to 12.6 percent, from 11.7% in the second quarter.
Subprime borrowers who took out adjustable-rate mortgages, which typically start at artificially low rates that increase over the life of the loan, were the most likely of all those surveyed to be in default. Among subprime adjustable mortgages, 13.2% were delinquent in the third quarter, compared with 12.2% in the second quarter.
I thought subprime crunch wouldn’t happen till the second half of this year. Well, i’ll take it.
It would appear that Benny and the Feds are in a pickle. Raise rates to bolster the dollar and thwart inflation or stay flat or reduce to help those struggling ARM borrowers. BTW if they go to reduce watch the dollar tank and prices for everything skyrocket because of the exchange rate changes.
NJ BEAR,
CHECK GLOBAL ECONOMIC ANALYSIS. GOOD READ ON PSYCHOLOGY TIED TO SUBPRIME LENDING AND OF COURSE EVERYTHING ELSE.
COULD BE HERE SOONER THEN EXPECTED.
NJ STILL HASNT IMPLEMENTED STATE GUIDANCE ON LENDING BUT I THINK WE’RE EXPECTED TO.
http://www.boston.com/business/articles/2007/01/04/scores_of_mortgage_borrowers_left_in_lurch/
Scores of mortgage borrowers left in lurch
Potentially hundreds of Massachusetts home buyers and other mortgage borrowers are being left in the lurch after Mortgage Lenders Network USA Inc. of Connecticut reneged on funding loans it promised to make, banking and government officials said yesterday.
Breaking News Alerts Mortgage brokers said some customers who appeared at their attorneys’ offices on Friday to close home-purchase or refinancing loans had no warning their transactions were no longer being funded, causing severe problems for buyers, sellers, and their agents expecting to complete normal transactions.
Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said yesterday that he received complaints from some 20 lenders or brokers and issued an “alert” to association members that Mortgage Lenders Network was no longer funding some loans.
>>
Some of the bulls on this board were claiming that the seller don’t care if the the buyer is subprime. I bet now they will!!!
Pat had posted a link to the article on a different thread yesterday.
1987- Computerized trading
2001- Dot Com
2007-2008- Subprime
I really felt that this would hit towards the end of 2007, early 2008. We are heading down the path of extinction for the subprime. Wall Street doesn’t even want it. They are telling the market that subprime is worse than junk bond status. However, it’s too late, the damage has been done.
Again, with the flippers gone, the real investors gone and the subprime almost gone, who’s left???
The damage in subprime is spreading faster than I’d have predicted. Who’s left? Prime borrowers with good credit and cash (or equity) on hand. All three of them.
NJ is taking its sweet time implementing the state guidance on lending. I wonder if they’re getting pressured from the real estate lobby to tone it down? Once the guidelines are implemented, they should only contribute to the growing credit crunch.
FOr layoffs, include Hertz Corporate Headquarters in Park Ridge, NJ starting tomorrow.
NJ is taking its sweet time implementing the state guidance on lending. I wonder if they’re getting pressured from the real estate lobby to tone it down?
My fear exactly.
jb
As of yesterday, Fed Funds Futures are putting a 60% chance of rates staying where they are until May.
http://www.clevelandfed.org/research/policy/fedfunds/Index.cfm
jb
We are cloes to NYC, that is all that matters, no need to worry about layoffs.
From the Courier Post:
Atlantic City delays casino smoking ban until April
In a surprise a move, city council today decided to postpone implementation of a casino smoking ban until April 15.
The vote was 9 to 0 to amend the ordinance, which originally called for the ban to be in effect within 30 days of approval.
Councilman G. Bruce Ward, a sponsor of the ordinance, said the revised date is an effort “to be reasonable” and to try and give the casino industry more time to readjust their marketing efforts and facilities as needed because of the ban.
…
The association, along with Local 54 of the UNITE HERE union and the local chamber of commerce, commissioned a study from PricewaterhouseCoopers in 2005 that examined the economic damage after Delaware approved a ban in 2003.
Extrapolating the study’s findings to Atlantic City, the firm concluded Atlantic City would take a 20 percent hit in revenue, leading to 3,400 layoffs and a two-year loss of $93 million in revenues for the state.
Corbo also cited the impact of a smoking ban in casinos in Ontario, Canada, which caused a 30 percent drop in revenues — and layoffs.
A smoking ban also puts Atlantic City at a competitive disadvantage as Pennsylvania and New York casinos ramp up casinos where smoking is allowed. Corbo hinted that the current growth spurt Atlantic City’s gaming industry enjoys could be stifled by any negative impact on economic stability.
The smoking thing needs to be implemented in PA.
I went to a “temporary” PA casino last week, and the smoke was debilitating. A majority of the slots were on the smoking floor. On the non-smoking floor, there were no available machines, and a long wait for an open seat.
We left after an hour, so they lost revenue. But maybe it’s no loss compared to what the smokers feed in.
I think we the “Concerned New Jerseans against dubious lending” should go out and do a signature campaign :)
http://bakersfieldbubble.blogspot.com/
email from Secured Funding.
Hello, I have just been informed that Secured Funding will discontinue and close the Wholesale Division effective today Wednesday 3, 2007. This means that you will need to look elsewhere to complete your loan.
Thanks for the opportunity for being your lender of choice for your second TD’s.All loans currently in process will need to have all PTD Conditions in our office in order for loan docs to be sent out. All loans must fund by January 12, 2007. Should you need to please contact Rhonda for loans in process her contact information is below for you.Have a Great New Year!”
Tony FernandoSecured Funding by thereishopeyet January 3, 2007 “
Interesting criticism of the Massachusetts Association of Realtors:
Mass. Realtor group twists truth on low home sales
It’s the same outfit that criticized talk of a “housing bubble” back when people were talking seriously about million-dollar “fixer-uppers” in toney towns like Newton.
Now the Massachusetts Association of Realtors has another news bulletin for you: The housing “correction” may soon be over.
That was fast.
With serious buyers scarce, that observation may be at odds with what many would-be home sellers are experiencing in the current market.
And it is also at odds with an even more telling measure: the Realtors’ own statistics.
The monthly sales numbers are grim enough to challenge the most optimistic person to find a shred of a silver lining.
Yet the tougher the numbers, the happier the talk in the trade group’s official press releases.
James,
In my car this morning NJ 101.5 was discussing the huge slowdown in the housing market. A lot of lies were told to Jim Gearhart with only some truth. The people who called in were real estate agents and mortgage brokers all saying how the market will come back in the spring that this is only a temporary downturn.
I am going to email Jim Gearhart about your blog and if anyone else can give him an email about your personal story or your view of the market that would be great. I’m hoping that this will become a more talked about topic on his show.
James it would be even better if you could get some airtime with him so that the truth can can told.
gearhart@nj1015.com
http://www.nj1015.com
Most of the big boys in the mortgage industry were already qualifying borrowers at a fully indexed rate. And when the FED issued guidance over the summer, the majority of the other lenders followed suit. There was already a self imposed following of the guidance within the industry. The States implementing similar guidance is merely a formality. It will only affect the last of the mortgage companies that were always playing at the boundaries.
The subprime crunch started early last year and companies have been struggling since then. Mortgage companies have been holding on a thread and for some…the tension is too great.
The affect on borrowers….those who barely qualified when they got a loan and purchased with a ARM and need to refi or pay at current mkt rates….the companies they can turn too are tighten their underwriting guides and they no longer qualify. That’s truly going to be pain.
So why are all these places closing?
Everyone there is commission and they all were making huge bags of cash in the last 4 years there should be plenty to keep the lights on and simply roll back operations by laying off some people or if they are all commison sales waiting for them to jump ship?
25] from my undestanding defaults are increasing forcing investors to sell the loan back to mortgage originators. Mortgage orginators don’t have the liquidity to buy them back.
R Patrick,
Two reasons:
1) Buybacks of nonperforming loans. How much cash did these companies hold in reserve for buybacks? Likely not a sufficient level.
2) Lack of funding to make new loans. You can’t make loans if your source of funding is cut off.
jb
Note: The above opinion isn’t even worth its face value of 2 cents.
jb
JB,
You hit it dead on, especially your #1 reason.
I would also add on… Mortgage companies bought into the hype that the market will come back and conducted business as usual. The funny thing is, these guys are millionaries, see empircal evidence (origination volumes, home sales are down) in front of them suggesting a slow down….but somehow believe they know it all. They waited too late to begin cutbacks and have been bleeding money all year.
my.earthlink.net/article/top?guid=20070104/459c89d0_3422_1334620070104-1931910624
Nation’s retailers report disappointing December sales
By ANNE D’INNOCENZIO (AP Business Writer)
From Associated Press
NEW YORK – An already disappointing holiday shopping season turned out to be even worse than expected for many of the nation’s retailers, who on Thursday reported tepid sales gains for December.
Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said retailers were forced to mark down heavily to bring in sales.
Declining gasoline prices and a steady job market should have helped merchants this holiday season, but Perkins believes the recent drop in home equity loans – a big source of buying over the past few years – depressed spending among middle-income shoppers.
Off Topic:
NEW YORK (Reuters) – U.S. retailers posted disappointing December sales on Thursday, hurt by warm weather…
Had it rained heavily or snowed sales would have been hurt as well.
It seems in order to have successful retail sales during the holidays it must be cold and dry.
Or maybe, just maybe the American consumer is finally slowing down due to financial pressures.
Nahhhhhhh
Rich
“Mortgage brokers said some customers who appeared at their attorneys’ offices on Friday to close home-purchase or refinancing loans had no warning their transactions were no longer being funded, causing severe problems for buyers, sellers, and their agents expecting to complete normal transactions.”
What a nightmare. Although buying a house at today’s prices is a worse nightmare.
These buyers were saved.
The FED crooks removed the M3 measure from circulation…
Expect that well oiled printing press to become red hot.(… also discrete helicopter drops)
33]
I read somwhere (CR?) that M3 has increased by 11% in the last 3 months.
To posts# 25-29.
SO are we going to see lawsuits filed agains personal assest of former lending companies owners:
alleging that they knew about high risk loans and in addition encouraged their employees to basically commit a fraud via stated income loans???
We all know that almost every subprime loan company did that on stated income loans – not only did not checked IRS records of their client but went as far as falsify numbers on those records (Federal Offense, by the way)
Since the lending companies enjoyed huge profits, it would be reasonable to assume that the owner racked up huge sums of money and closed the companies in order not to have to pay the money back…
lowball Says:
January 4th, 2007 at 12:08 pm
The FED crooks removed the M3 measure from circulation…
Expect that well oiled printing press to become red hot.(… also discrete helicopter drops)
M3 was stopped from reporting on march 26th of 2006…
So far it did not cause our salaries to go up….. So there is no wage inflation, which means domestic products are not inflating – only imported ones.
“So far it did not cause our salaries to go up….. So there is no wage inflation, which means domestic products are not inflating – only imported ones.”
Al,
M3 had included Eurodollar deposits and repurchase agreements.Have you seen the repo market lately??
“Under a repurchase agreement (“RP” or “repo”), the Fed buys government securities from a dealer who agrees to buy them back, typically within one to seven days; a reverse repo is the opposite.
That sounds relatively harmless until you realize that this means the Federal Reserve, an agency that can print money, is messing with the bond market on a daily basis. And when I say “daily basis”, I mean on a steadily increasing basis to the point that they have now become a dominant force in the bond market.”
http://www.dailykos.com/story/2005/11/11/16272/574
Wel Increased money supply is all nice an stuff but it is not realy realted to housing – at least not on the short term (1-2 years).
Untill all those money will trickle down to the average Joe who buy’s homes…
As long as salaries do not raise and everything getting more exensive less and less people would be ably to afford home.
Since there are significant # of homes in US it is not a rare commodity by any means, at least there is not 50% homeless population in US – or even worse – homeless people do not have a job so they can not buy a house, so they are actually driving demand for housing down :)…
So economically Housing prices (either it is rental or property) are linked to salaries. As far as salaries are stagnant or rasing at very slow rate (a lot slower than healthcare/food) people have less and less to spend:
first on luxiry items(here goes consumer spending),
entartainment (going out and eating and other service industry)
and ultimatelly on housing.
Medicare suffer last.
For some reason current situation in US is opposite: current squeeze is in housing and not in going out and shopping….
I guess people would much rather go buy that big screen TV and go out to a restarant that to keep the roof above their heads.
Or it can reflect Housing ATM – the ones who already have a house believe that housing will raise in price forever, and they can just keep refinancing their spending into a house.
Either way it is coming to an end.
These buyers were saved
I don’t believe they were, they were probaly hosed worse at the closing because that would not have gotten them out of purchasing if mortgage broker was able to fund otherway. They would have been convinced to take what they could get at that last minute, and refinance in 6 months.
KL