Bush: 'An Extraordinary Period For America's Economy'

And if you watched the clip... be sure to read Roubini's latest for a better definition of 'extraordinary': Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks

"So this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the financial firms (not just banks but also other non bank financial institutions); with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money."

emphasis added

And a video clip below of Jim Rogers calling Paulson's Plan 'Welfare for the Rich':




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BIS Warns on Global Economy: A Deeper and More Protracted Downturn.

The BIS, also known as the Central Bank of Central Banks, is one of the most respected economic institutions. Prior to the start of the subprime crisis, I had posted an article where the BIS warned and in essence, predicted this current crisis. Now, the BIS is warning again. This time, with the threat of deflation!

BIS:

"The eventual global slowdown could prove to be much greater and longer lasting than would be required to keep inflation under control. This could potentially even lead to deflation, which would evidently be less welcome."

"In the aftermath of a long credit-driven boom, it would not be surprising to see turmoil in financial markets, slowing real growth and temporarily rising inflation."

The Fed also believes that inflationary pressures will eventually come down as growth slows. The only difference being that a rebound in growth seems unlikely as this recession could last well over a year. Professor Shiller is not kidding when he says more stimulus will be needed. See: One Rebate Isn't Enough - New York Times

Inflation will probably still be the main theme this month, as the oil bubble (a.k.a. "oil crisis") continues to dominate. The price of a barrel of oil could easily spike to $200 if the conflict with Iran escalates within the next few weeks. If this be the case, then Professor Roubini deserves some serious credit for making the call. See: Rising Risk of a Military Confrontation between Israel and Iran? - Nouriel Roubini

It seems quite possible that a coordinated effort among central banks could be in the cards. See: BIS slams central banks, warns of worse crunch to come - UK Telegraph


About BIS
The Bank for International Settlements (or BIS) is an international organization of central banks which exists to foster cooperation among central banks and other agencies in pursuit of monetary and financial stability. It carries out its work through subcommittees, the secretariats it hosts, and through its annual General Meeting of all members. The BIS also provides banking services, but only to central banks, or to international organizations like itself. Based in Basel, Switzerland, the BIS was established by the Hague agreement of 1930

BIS 78th Annual Report (30 June 2008)

Over One Million Homes In Foreclosure

A grim first quarter report from the Mortgage Bankers Association's shows the housing crisis is getting worse. Mortgage delinquencies rose in the first quarter to 6.35%.

From CNN:

The Mortgage Bankers Association's first quarter report showed that a record 2.5% of all home loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That's up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.

The report also showed that 448,000 homes, or about 1% of loans being serviced, began the foreclosure process during the first quarter. That's up from about 382,000 homes, or 0.83%, that entered foreclosure in the last three months of 2007.

This marks the sixth straight quarter in which a record percentage of loans went into foreclosure. The trend has led to widespread declines in home prices, as well as huge losses for banks and other financial firms that issued or invested in the loans.

Read full article >>


The problems in California and Florida are extraordinary and they are the main drivers of the national trend. The quarterly rate of foreclosure starts on subprime ARM loans in California was 9.24 percent. This rate, combined with Florida’s rate of 8.25 percent, drove up the national average foreclosure start rate to the point where 43 states were below the national average of 6.32 percent. California saw a total of approximately 109,000 foreclosure starts and Florida 77,000. The next highest states were Texas, Michigan and Ohio with between 24,000 and 20,000 each.


Here's a direct link to latest MBA National Delinquency Survey.

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It ‘Makes No Sense’ To Continue Paying The Mortgage When The Value Of Your Home Stops Going Up.

60 Minutes On The New Logic Behind Foreclosures.

Okay, I'm kidding but Stephanie Valdez is not. Matt and Stephanie Valdez are a couple who can afford to continue paying their mortgage payments but see no point in making them. Is it really worth it to continue making payments on an underwater mortgage and at 11% [usury] interest rate? “There is a certain cold logic to just walking away”, says Steve Kroft.

But Matt and Stephanie Valdez say they knew exactly what they were doing when they bought a small two-bedroom for $355,000. They could afford the initial payments and planned to refinance the mortgage before the interest rate jumped to 11 percent. But they couldn't do it because the value of the house had fallen below what they owed on the mortgage. They say they can afford the higher payments, but see no point in making them.

"The house keeps going down, payments keep going up. Where's the logic in that? And how can we fix it? I mean, that's what this whole thing's about for us is how can we fix this? And if we can't fix it, then what do we do?" Matt Valdez asks.

"Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense," Stephanie Valdez adds.

"That's what you agreed to do when you bought the house," Kroft points out.

"Fine. If the value is going up. But we're not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There's no way," Stephanie Valdez replies.

"You're saying, essentially, that you're going to stop making payments on it? You're just gonna let it go into foreclosure?" Kroft asks.

"You know, that's the only advice we've gotten so far is walk away from the home. We don't want to do that to our credit. Why can't our mortgage company work with us?" she says.

The full video does a nice job at explaining the whole ponzi scheme. Also from Mish's Global Economic Trend Analysis: Does 60 Minutes Legitimize Walking Away?

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Over 2,000 bank owned homes to be auctioned off in California starting this weekend (Jan 26 - Feb 24)

It appears that REDC (US Home Auctions) is going to be quite busy this month and earning some nice commissions (5% “Buyers Premium”). If you visit their site and click on an area, there is a detailed break down on all the homes being offered and an option to download them to an excel file. REDC also lists what the previous REO asking prices were. Adding up that column comes up to about $650 million worth of REO that "MUST BE SOLD" in one month (11 auctions). Lenders are now in liquidation mode as foreclosures continue to climb. (Dataquick: California Foreclosure Activity Still Rising)

While obvious that we still haven't hit the "bottom" yet as far as home prices are concerned, and according to a Merrill Lynch report, home prices will drop another 15 percent this year, and declines will continue in 2009. The unknown is just how serious will the upcoming recession be? The FED is in full battle now in fighting against a monstrous deflationary force caused from the collapse of the housing bubble.

Should I buy yet? It really depends on your area. Real estate is local to a greater extent, just make sure you get a good deal, and by that I mean a very good deal. If you can negotiate a good price and intend to live there, I'm guessing you should be okay (yes, i did say guessing). Mortgage rates are at a 2 year low and expected to come down even further. This will make a difference and will bring in a lot of people who were on the sidelines back into the market. Okay, I'm starting to sound like a Realtor(TM) now. Simply put, I don't believe you should put your life on hold waiting for the absolute bottom and in some areas it may not turn out as you expect.

Be sure to do your homework and figure out what a property would rent for and and compare that to what your monthly mortgage payments would be. Here's a calculator from the New York Times and another one from the Center for Economic and Policy Research (2005). If you are looking to buy and flip a house, then be sure to check out one of my favorite sites on flipping houses. Good Luck to all those attending the auctions and be very careful on how you bid.


Update: (And thanks Bubble Sitter for posting this)

“US Home Auctions allow SHILL BIDDING. The quote below is right out if their brochure (and this is the second time I have posted this quote on your web site):”

“On page 122 paragraph 3, I quote verbatim: ‘Except where prohibited by law, the Auctioneer may open bidding on any property by placing a bid on behalf of the Seller and may further bid on behalf of the Seller, up to the amount of the reserve price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders.’”

“Your advice to be very careful is right on the mark. US Home Auctions wants to get the bidding going and get people invested in time and effort, then PUMP THEM UP!”

“BE CAREFUL INDEED.”

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15,905 Homes Offered For Sale on Countrywide Financial's Website

Total REO Asking Price: $2,547,478,845
(As of 2/18/2008)

Source: http://www.countrywide.com/purchase/f_reo.asp

Click on state below for detailed listings.

State	Count	Total Asking Price($)	Average Asking Price($)
AK	36	7,955,499	220,986
AL	183	24,714,277	135,051
AR	72	6,566,077	91,196
AZ	956	136,108,198	142,373
CA	4,240	961,105,871	226,676
CO	241	45,855,294	190,271
CT	113	20,450,963	180,982
DC	34	6,545,590	192,517
DE	24	4,101,800	170,908
FL	1,459	193,116,117	132,362
GA	818	94,784,411	115,873
HI	57	20,347,800	356,979
IA	57	5,227,014	91,702
ID	82	20,267,900	247,170
IL	588	74,681,105	127,009
IN	263	18,277,998	69,498
KS	59	6,609,250	112,021
KY	105	8,930,485	85,052
LA	56	5,833,482	104,169
MA	210	34,256,084	163,124
MD	268	57,284,698	213,749
ME	39	3,122,190	80,056
MI	876	60,464,073	69,023
MN	425	61,016,587	143,568
MO	217	19,047,519	87,777
MS	97	10,641,054	109,702
MT	17	3,981,299	234,194
NC	277	38,019,489	137,254
ND	02	59,800	29,900
NE	23	2,196,800	95,513
NH	79	12,577,098	159,204
NJ	201	38,036,992	189,239
NM	38	5,502,099	144,792
NV	950	147,176,146	154,922
NY	203	45,590,398	224,583
OH	369	23,110,259	62,629
OK	108	9,780,890	90,564
OR	122	26,406,100	216,443
PA	174	18,132,394	104,209
RI	90	10,121,496	112,461
SC	139	21,198,270	152,506
SD	12	1,542,800	128,567
TN	262	25,615,547	97,769
TX	531	73,038,152	137,548
UT	63	20,237,900	321,237
VA	317	56,355,686	177,778
VT	05	661,501	132,300
WA	210	48,759,099	232,186
WI	103	8,488,799	82,416
WV	27	2,531,295	93,752
WY	08	1,047,200	130,900
Total	15,905	2,547,478,845	147,111

View more charts.

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11,453 Homes Offered For Sale on Countrywide Financial's Website

Total REO Asking Price: 1,845,595,537
(As of April 6, 2009)


Source: http://www.countrywide.com/purchase/f_reo.asp

Click on state below for detailed listings.

State	Count	Total Asking Price($)	Average Asking Price($)
AK	29	5,376,700	185,403
AL	162	22,914,886	141,450
AR	57	5,687,299	99,777
AZ	658	97,732,200	148,529
CA	2,694	637,381,149	236,593
CO	161	26,520,897	164,726
CT	90	15,674,666	174,163
DC	27	5,769,198	213,674
DE	22	3,490,800	158,673
FL	985	125,282,569	127,190
GA	533	64,780,416	121,539
HI	66	23,392,900	354,438
IA	33	2,595,500	78,652
ID	79	19,587,000	247,937
IL	432	53,450,741	123,729
IN	192	11,592,292	60,377
KS	39	3,943,000	101,103
KY	84	8,095,699	96,377
LA	47	6,065,393	129,051
MA	127	21,500,197	169,293
MD	219	44,804,972	204,589
ME	21	1,374,896	65,471
MI	688	48,810,794	70,946
MN	323	47,278,294	146,372
MO	133	11,883,100	89,347
MS	80	7,761,294	97,016
MT	16	5,410,400	338,150
NC	217	32,126,696	148,049
ND	04	489,600	122,400
NE	26	2,525,300	97,127
NH	34	5,565,599	163,694
NJ	160	32,604,992	203,781
NM	35	4,788,298	136,809
NV	809	120,744,634	149,252
NY	176	36,756,195	208,842
OH	256	16,796,590	65,612
OK	90	10,011,999	111,244
OR	107	21,609,317	201,956
PA	116	11,867,598	102,307
RI	63	6,692,201	106,225
SC	107	20,075,698	187,623
SD	09	947,099	105,233
TN	188	22,213,550	118,157
TX	443	59,721,445	134,811
UT	69	20,980,999	304,072
VA	281	47,952,881	170,651
VT	04	405,600	101,400
WA	159	33,147,199	208,473
WI	80	7,223,100	90,289
WV	19	1,799,095	94,689
WY	04	392,600	98,150
Total	11,453	1,845,595,537	148,537

Note: California Average REO Asking Prices have increased +4.2% from last month, and are down -41% from their peak of $400,000.

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Bank of America in talks to acquire Countrywide Financial

From the Wall Street Journal:

“Bank of America Corp. is in advanced talks to acquire struggling Countrywide Financial Corp., according to people familiar with the situation.”

“It isn't clear how quickly a deal might be struck, but two people familiar with the matter said it could occur very soon. It also is possible that an agreement could be delayed or fall apart altogether.”

“The market value of Countrywide has plunged to about $3 billion, which represents about two months' profit for Bank of America. The Charlotte, N.C., bank paid ...”

Read full article [WSJ subscription needed]


Countrywide has been struggling with the U.S. housing slump, and on Wednesday said foreclosures and late payments among home loans for which it collects payments rose to the highest levels on record in December.

"‘Somebody is going to have to absorb the massive losses in right-positioning Countrywide,’ said Sean Egan, managing director of credit-rating firm Egan-Jones Ratings Co. ‘It can be done, but the cost is going to be exorbitant. From Countrywide's perspective, it is their best chance for salvation.’"


Shares of Countrywide Financial (CFC) surged 51% to 7.77.

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20,255 Homes Offered For Sale on Countrywide Financial's Website

Total REO Asking Price: $3,270,467,911
(As of January 15, 2009)


Source: http://www.countrywide.com/purchase/f_reo.asp

Click on state below for detailed listings.

State	Count	Total Asking Price($)	Average Asking Price($)
AK	29	7,053,100	243,210
AL	222	31,587,987	142,288
AR	81	7,407,299	91,448
AZ	1,194	177,853,550	148,956
CA	5,595	1,258,408,604	224,917
CO	318	57,334,897	180,298
CT	146	26,356,293	180,523
DC	36	7,555,495	209,875
DE	21	3,518,099	167,529
FL	1,764	250,986,059	142,282
GA	1,061	121,468,800	114,485
HI	68	24,009,300	353,078
IA	70	6,349,101	90,701
ID	98	24,770,200	252,757
IL	773	103,479,869	133,868
IN	309	18,962,045	61,366
KS	71	7,417,800	104,476
KY	131	9,830,884	75,045
LA	71	7,410,797	104,377
MA	245	41,349,387	168,773
MD	297	67,720,914	228,017
ME	42	3,597,796	85,662
MI	1,147	75,918,719	66,189
MN	473	65,697,562	138,895
MO	307	28,433,998	92,619
MS	121	12,875,994	106,413
MT	25	5,404,500	216,180
NC	344	46,268,692	134,502
ND	02	137,800	68,900
NE	32	2,523,800	78,869
NH	116	19,004,796	163,834
NJ	250	49,741,987	198,968
NM	53	7,194,500	135,745
NV	1,174	194,092,405	165,326
NY	239	51,102,494	213,818
OH	483	27,411,686	56,753
OK	120	10,545,414	87,878
OR	154	32,842,700	213,264
PA	224	23,134,342	103,278
RI	112	13,282,194	118,591
SC	160	24,699,397	154,371
SD	10	1,094,000	109,400
TN	329	33,137,087	100,721
TX	742	97,021,370	130,757
UT	68	23,757,200	349,371
VA	460	83,483,501	181,486
VT	05	711,500	142,300
WA	240	56,847,300	236,864
WI	172	14,699,700	85,463
WV	40	3,665,097	91,627
WY	11	1,309,900	119,082
Total	20,255	3,270,467,911	148,341

View more charts.



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