The Mortgage Lender Implode-O-Meter (main list & news)
Tracking the housing finance breakdown.

• MORTGAGE MELTDOWN
  ' The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.'
• Mortgage Market Off the Rails, Economy to Follow
  " The desire by Bush and Paulson to put the U.S. mortgage train back on the rails via price-fixing mortgage rates is understandable, but the results will be the same as for any price-fixing operation: economic activity will decline as capital is withdrawn from the markets."
• Hope Now Alliance: Press 1 for Subprime, Press 2 for Spanish. Looking at a Hypothetical Case.
  ' Early estimates from various sources state that this plan will currently help anywhere from 125,000 to 240,000 people. This plan doesn’t even begin to address the potentially more dangerous mortgage bubble of Option ARM mortgages that are set to hit in 2010 through 2011.'
• Criticism of the Bush/Paulson Mortgage Plan
  ' ``It'll be the biggest housing recession we've known,'' said Allen Sinai, chief global economist at New York-based Decision Economics Inc. ``Even if we figure this part of it out, we are not through it.'' '
• Florida Towns, Schools Pull $560.7 Million From Fund
  "Florida schools and towns pulled more than $1.7 billion from a state investment pool in the two days since a freeze on their accounts was lifted, as local governments remained wary of keeping money in a fund with subprime mortgage-tainted holdings."
• Countrywide Isn't Out of Woods Yet
  Great article; $$$, but here are some quotes: "I'd rather be breathing than dead," Countrywide's chief executive, Angelo Mozilo, quipped at a conference Monday in Washington. The company's stock and bond prices, however, suggest that investors see a serious risk that Countrywide eventually could seek bankruptcy protection or resort to huge sales of new stock that would slash the value of existing shares. ... "The market is really concerned about the possibility of default," says Steven Persky... He thinks the company is so big and important to the economy that regulators wouldn't let it fail. Still, he says, buying Countrywide bonds now would be "a dangerous game to play. Lots of people didn't believe Russia would default, but it did. On the other hand, in the U.S., when was the last time a large financial institution failed?" [Ed. note: famous last words.] The company's fate hinges on how much worse the housing slump gets. Falling house prices cut the value of collateral backing the $83.56 billion of loans held by Countrywide as investments. Some economists say a recovery may be several years away. "I don't know where we are in the cycle," Mr. Mozilo said at the conference. "I wish I did." Countrywide's savings bank holds $26.84 billion of option adjustable-rate mortgages, which allow borrowers to start with minimal payments and face far higher ones later, and $32.47 billion of second-lien "home equity" loans, potentially worthless in a default because the first-lien holder gets first dibs on the home. These two categories of high-risk loans account for three-quarters of the bank's loan holdings. Countrywide managed to halt a run on its savings bank in August by bringing in Bank of America as a big shareholder. But the company still has to offer premium rates on certificates of deposit to attract funds needed to support further lending. The high rates it must pay for funds will squeeze Countrywide's profit margins on loans. The company hasn't reported any purchases of shares by its senior executives in recent weeks, even though the stock recently touched an intraday low last month of $8.21. By contrast, executives of another big mortgage company with a drooping stock price, Fannie Mae, have bought shares over the past two weeks. [Ed. note: GSEs more confident about a bail-out, eh?] Countrywide needs to repay a total of $26.38 billion in borrowings over the 12 months ending Sept. 30, according to the latest quarterly filing. Countrywide officials have said they can meet these payments -- a point that Moody's Investors Service affirmed -- but may have to sell some mortgages or related securities to do so. Investors are so wary of mortgages that it is impossible to know how much of a discount Countrywide would have to offer to find buyers for these assets. [Ed. note: not so impossible -- just look at the $.11 on the dollar E-Trade had to offer for its similar mortgage portfolio holdings...] Investors will be looking for chances to force Countrywide to repurchase many of the loans it sold in recent years. Provisions of those sales require repurchases in some cases, such as when loans default early or otherwise don't live up to the "representations and warranties" provided by Countrywide at the time of the sale. ...
• UK interbank Libor rates fall only slightly, 3-month down to 6.61 pct
  "The cost of borrowing between banks in the UK fell in the short-term, but far less than the 25 basis points shaved off by the Bank of England yesterday. The London Interbank Offered Rate (Libor) was 6.61 pct on a three-month basis, down from yesterday, but only by four points."
• First Marblehead Cuts Dividend, Won't Package Loans
  "First Marblehead Corp., the third- largest securitizer of student loans, cut its dividend by more than half and said it won't package additional loans this quarter because of ``uneconomic terms'' in capital markets."
• Cramer's Golden Rule
  "So look out, he will entertain you and give a good tip in between times, but you can bet that whenever Jimmy&pals want to take profits he will tell you to get in and tell you to get out when he wants in. In or out long or short he will be the first to screw you. And that's Cramer's golden rule."
• American Securitization Forum Outlinines Procedures for Servicers to Follow in Streamlining Loan Modifications
  "Anyone that is on the front lines of the mortgage and foreclosure crisis and understands the guidelines set above by the American and Securtitzation forum is “NOW” fully aware that this plan will help “VERY FEW” homeowners."
• The rate cut gift that failed to dispel fear
  Lowering interest rates early has not restored confidence in a money market that is beyond control, writes Edmund Conway
• BOE's King Ridiculed as an Obstructing Civil Servant
  "Bank of England Governor Mervyn King acted like Humphrey Appleby, a fictitious civil servant who obscures and manipulates the truth, in his disclosures about the rescue of Northern Rock Plc, the Liberal Democrats said."
• Paulson's Plan Really a Bailout?
  "The biggest ramification is this. Those investors will have to decide whether or not to accept the new terms. If they accept lower interest payments because it is better than default, the value (price) of the CDO will go down to reflect the new present value of the payments. This is a big fact that I think everyone is missing: the price of CDOs will be marked down from current levels. Banks' desire to lend will go down as a result of this. As an illustration, the spread between libor and ECB funding rate (equivalent fed funds) rose again last night and is at a record 89 basis points."
• Analysis: American Securitization Forum Outlinines Procedures for Servicers to Follow in Streamlining Loan Modifications
  ``Alert - Borrowers in segment 3 will be stuck in the never ending grinding wheels of the servicers loss mitigation department and will most likely have (if they are lucky) a 1 in 100 chance of working some kind of loan workout or loan modification with their lender. In other words, much of the same ol, same ol.''
• Paulson Plan Could Put Deep Freeze on Securities
  "The Bush administration’s new plan to freeze rates on some subprime mortgages may ultimately have a chilling effect on the securities market, industry analysts said Friday."