Category — Financial Markets
NetBank; The First Bank Casulty of the Lending Crisis
While nearly 150 mortgage companies have shut down in the last 10 months because of soaring delinquencies and defaults, NetBank, seems to be the first FDIC insured bank casualty of the current credit crisis. In an futile attempt to avoid a shutdown, back in May 2007, NetBank shed parts of it lending lending business to Ever Bank and shutdown their third-party mortgage origination business. Taken over by Federal regulators, the Federal Deposit Insurance Corp. has been appointed as a receiver for the Alpharetta, Ga.-based NetBank and oversee the banks $2.5 Billion in assets. Online rival ING (NYSE:ING) will be taking over most of NetBanks operations.
This is important in the sense that NetBank is the first FDIC insured bank to cease lending operations and actually close altogether. Some mortgage banks have been claiming that because they are a bank and have deposits that they are not as susceptible to the Subprime mortgage defaults and bankruptcy because they have these deposits. NetBank proves that is not the case. Its been reported that the NetBank closure is the largest Savings and Loan closure since the end of the Savings and Loan Crisis of the late 1980’s, early 1990’s.
In other related news, just this morning Citigroup (NYSE: C) is reporting a 60 percent drop in earnings as it takes a $3 Billion write downs in under performing mortgage securities. Citigroup also moved out its earnings call 4 days from October 15th to October 19th. Watch this as this news could move Citigroup to a new 52 week low. More news to come on this.
October 1, 2007 No Comments
Consumer Confidence Numbers
Consumer confidence came out this morning. The figure at 105, down from 111.9 in July but up from August 2006. Of course the doom and gloom headlines to quote “Consumer Confidence Falls To Lowest Level in a Year”, I mean come on, expectations were for 104.5 so how come the headline does not say “consumer confidence comes in much better than expected.” Listen to the media as an investor and you will be sure to go broke. That I can GUARANTEE you!
What I can tell you is,,,,,,,, 105 is a far cry from a recession (so far), considering the consumer is 1/3 of GDP, wages are another component and wages are growing at 4% and corporate profits are expected to be in the low double digits so I think the chances of a recession are slim, unless the consumer confidence number falls another 35 points. What this does show is the resiliency of the American consumer in wake of the so called “subprime crisis” or mortgage meltdown or any other name the media has created. Gas prices are still high although a lot lower than the highs, food costs increasing and mortgage rates have ticked up a bit. So IMO, I think the number is strong considering the environment.
The biggest worry for the number is that it was not worse and may be a reason for the stock sell off. Obviously over the next month or so this number could be dramatically lower and with back to school coming we will see if the retail sales numbers are any indication. But as always the media plays a big role in consumer sentiment so we will see how they spin the recession talk and what effect this has on the number going into the coming months.
The 10 year note is trading off its highs up .25bps and less effected is the 6% mortgage backed securities trading up .6bps and seems to be hitting a ceiling of resistance at 100.16. Bond prices have been on a tear since the end of July and rates have came down nicely but may be running out of steam.
At 2pm ET today the Fed will release the Minutes from the August 7th meeting. It will be interesting to get the Fed’s views on the credit crunch, since it was just beginning to unfold at the time they met. The Fed Fund Futures are currently showing a 72% probability of a .25% cut at the September 18th meeting, with some predicting a chance of a .50% rate cut.
August 28, 2007 No Comments
Recession? Wadda Ya Talkin About?
Well Countrywide CEO, Chief Executive Angelo Mozilo, was on CNBC today and uttered the dreaded R word. Mr. Mozilo seems to think that the current housing market will throw the US economy into a recession. I guess anything is possible, though highly unlikely. Funny thing is you never know you are in a recession until you are out of one. “Recession” by definition, is two consecutive quarters of negative GDP growth. Yes, the housing is bad, yes many jobs will be lost within construction, real estate and mortgage divisions. Seems I heard around 40,000 jobs have been lost so far but really, a recession? When I hear this “R Word” I always want to ask them what a recession really means. Its so funny to hear these people that catch on to these “buzzwords” and talk like they know what they are talking about. I would have loved to say “well Mr. Countrywide CEO, tell me sir, how exactly would you define a recession?”
The only real losers in the game where and will be those that came to the party a little too late. [Read more →]
August 24, 2007 1 Comment
Credit Crisis Cripples Markets
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“Every crisis carries two elements, danger and opportunity. No matter the difficulty of the circumstances, no matter how dangerous the situation…. At the heart of each crisis lies a tremendous opportunity. Great Blessings lie ahead for the one who knows the secret of finding the opportunity within each crisis.” Haiku Designs |
There are currently dramatic and sweeping changes occurring within the mortgage industry. If you or any one you know needing a mortgage within the coming months, you need to read this!
Just last week there were two high profile lenders that shut their doors. One being the Wells Fargo subprime unit and more importantly American Home Mortgage and its wholesale counterpart, American Brokers Conduit. American Home Mortgage was no small potato. American Home Mortgage was the 10th largest lender in the U.S. and last year closed over $58 BILLION in loans. Its been reported, this shutdown left billions in UNFUNDED loans. Imagine a day, a week or an hour before closing and you get the call from a mortgage loan officer that the loan is not closing. [Read more →]
August 8, 2007 No Comments
Dow 13,000
Dow 13,000… Are we heading to a recession or is the Fed on track to tame inflation? The latter seems to be the thought of many. The GDP numbers came out on Friday and were way below expectations at 1.3%. But those who looked deeper in the numbers saw that wage inflation was lurking around in the ECI or Employment Cost Index. The Subprime market and gas prices have the consumers on edge. I am still on the side that feels rates will be lowered in the late fall or mid winter. With this in mind, I would still opt for short mortgage terms, ie. 1 to 3 years.
May 4, 2007 No Comments
