by Calculated Risk on 8/01/2008 04:20:00 PM

From MarketWatch: New York Attorney General Cuomo to sue Citi units: reports (hat tip crispy&cole)

Apparently the NY State AG plans to sue Citigroup alleging material misrepresentations regarding Auction Rate Securities (ARS) "including assuring customers that these securities were as liquid as cash".

I know people that claim they were told the same thing about ARS - "liquid as cash" - by other institutions. I've also been told that at least one institution is offering interest free loans to people with their money locked up in ARS.

by Anonymous on 8/01/2008 04:17:00 PM

OK, it's Friday afternoon. Snark away over this:

A landlord who was apparently upset at his tenants because they were behind on their rent crashed his Hummer into their home – his property – and then attempted to kick the door down, according to police.

by Calculated Risk on 8/01/2008 03:32:00 PM

For the last few years lenders have been bidding the amount they were owed at foreclosure sales on the court house steps. Since the lenders were usually owed far in excess of the current property value, almost all foreclosure sales went to the lender. This is a typical court house steps sale (just 37 seconds):



However, recently, some lenders have changed tactics and are now bidding less than what they are owed. Realtor Jim Klinge presents these recent examples:

2629 Wilson St., Carlsbad $647,785 owed, $394,273 opening bid (39% off) HSBC

2916 Rancho Brasado CSB $868,112 owed, $690,914 opening bid (20% off) U.S. Bank

7071 Cordgrass, Carlsbad $1,541,249 owed, $880,000 opening bid (43% off) WaMu

3570 CallePalmito, CSB $1,756,702 owed,$1,425,500 opening bid (19% off) Wachovia

Unfortunately the lenders aren't publishing these lower bids in advance, but this will definitely attract more investors to the court house steps! Jim writes:

[If] banks publicized their opening bids weeks in advance, they could build some momentum at the court house and blow out their inventory with very little in closing costs, and no liability.

This is definitely bringing out some investors (flippers). In the following video, Jim's client purchased this house for $444,125 and sold it for $525,000 in about one month. The lender was owed $631,523.

This property was purchased at the steps of the county court house on 6/19/08, put back on the market for sale the next day, and closed on 7/29/08 for $525,000.

This is a significant change in lender tactics.

by Calculated Risk on 8/01/2008 02:11:00 PM

Headline from the WSJ:

General Motors reports 26% decline in light-vehicle sales in the U.S. for July.

From the WSJ: Ford, Toyota Sales Slide

U.S. auto sales tumbled in July, kicking off the second half of a dismal year, with Ford Motor Co. posting a 15% drop and Toyota Motor Corp. recording an 12% decline.

"We expect the second half of 2008 will be more challenging than the first half as economic and credit conditions weaken," said Ford marketing executive Jim Farley.

Sales will probably be dismal in the 2nd half of 2008 as the recession deepens, and credit markets tighten. It won't help sales that all three U.S. automakers are cutting back or eliminating their lease programs.

by Calculated Risk on 8/01/2008 10:15:00 AM

Construction spending declined in June for residential, but increased slightly for non-residential private construction.

From the Census Bureau: June 2008 Construction at $1,081.9 Billion Annual Rate

Spending on private construction was at a seasonally adjusted annual rate of $780.6 billion, 0.4 percent below the revised May estimate of $783.9 billion.

Residential construction was at a seasonally adjusted annual rate of $372.5 billion in June, 1.8 percent (±1.3%) below the revised May estimate of $379.1 billion.

Nonresidential construction was at a seasonally adjusted annual rate of $408.1 billion in June, 0.8 percent above the revised May estimate of $404.8 billion.

Click on graph for larger image in new window.

The graph shows private residential and nonresidential construction spending since 1993. Private non-residential construction spending has now passed residential construction spending for the first time (since the Census Bureau started tracking spending).

Nonresidential spending has been strong as builders complete projects, but there is substantial evidence of a looming slowdown - less lending for new projects, less work for architects - and the expected slowdown in non-residential spending will happen in the 2nd half of 2008.

by Calculated Risk on 8/01/2008 09:24:00 AM

The BLS reported:

The unemployment rate rose to 5.7 percent, and nonfarm payroll employment continued to trend down in July (-51,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment continued to fall in construction, manufacturing, and several service-providing industries, while health care and mining continued to add jobs.

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

The unemployment rate has risen to 5.7 percent.

Year over year employment is now negative (fewer American employed in July 2008 than July 2007).

by Anonymous on 8/01/2008 09:19:00 AM

This is not helpful reporting:

Aug. 1 (Bloomberg) -- IndyMac Bancorp Inc., the second- largest U.S. independent mortgage lender before it was seized by federal bank regulators three weeks ago, filed to liquidate its remaining assets under bankruptcy protection.

IndyMac's liabilities are between $100 million and $500 million, according to the Chapter 7 filing yesterday in U.S. Bankruptcy Court in Los Angeles. The bank holding company said it has less than 50 creditors, which it didn't list.

IndyMac was seized by U.S. regulators on July 11 after a run by depositors left the mortgage lender strapped for cash. The Federal Deposit Insurance Corp. is running a successor institution, IndyMac Federal Bank, and regulators have said they intend to eventually sell the seized bank.

The FDIC ``has been in sole possession custody and control of all of the books and records of'' IndyMac Bancorp and the court filing was made without access to information that bankruptcy laws typically require, Chief Executive Officer Michael W. Perry said in court papers.

While banks are prohibited from filing for U.S. bankruptcy protection, bank holding companies aren't. Perry is Pasadena, California-based IndyMac Bancorp's sole remaining employee, according to the filing. The company has $50 million to $100 million in assets.

FDIC did not "seize" IndyMac Bancorp, it seized IndyMac Bank, F.S.B., which is owned by IndyMac Bancorp. Rather than continuing to write things that just sound contradictory, perhaps Bloomberg can help us understand the implications of this legally important distinction? I'm just askin' . . .

by Calculated Risk on 8/01/2008 09:14:00 AM

From the WSJ: GM Swings to $15.5 Billion Loss Amid Write-Downs, Sales Slump

General Motors Corp. recorded a stunning $15.5 billion second-quarter net loss, slammed by sinking auto sales, money lost on bad lease deals and costs tied to its North American restructuring.

by Calculated Risk on 7/31/2008 09:09:00 PM

From the Financial Times: Real estate sector fears huge increase in CMBS defaults (hat tip Raymond)

Defaults on [recent] commercial mortgage-backed securities ... will more than quadruple from their current levels under conditions in the US economy expected by the commercial real estate industry, according to a report from Fitch Ratings.
...
Borrowers would default on an average of 17.2 per cent of securitised commercial mortgages over 10 years if the US economy dips into a recession ... compared with current very low default rates of 4 per cent ...

[The problem is] inflated property values and weaker underwriting standards. .. in 2006 and 2007, as well as the weaker economy. Those bonds make up about 49 per cent of the outstanding CMBS market of more than $800bn.

Higher defaults and lower property values is one side of the commercial real estate (CRE) bust; this is the impact on existing CRE.

As discussed this morning, the CRE bust will also result in less new investment in non-residential structures, especially hotels, malls and office buildings (since those were the most overbuilt).

by Calculated Risk on 7/31/2008 06:09:00 PM

HousingWire has the story: Freddie Mac Pushes Out Foreclosure Timelines

Perhaps the boldest move by Freddie Mac on Thursday — and one that won’t get much press attention — was its decision to eliminate foreclosure timeline compensation altogether for servicers, effective immediately. In other words, servicers will no longer earn a bonus based on how quickly they can foreclose.

If that doesn’t scream “modify more loans,” then the GSE’s decision to double compensation for servicers in completing workouts certainly will. Freddie said it will now pay servicers $800 for a loan modification, $2,200 for a short payoff or make-whole preforeclosure sale, and $500 per repayment plan. Deeds-in-lieu of foreclosure didn’t get Freddie’s same endorsement, however, and will remain at the current incentive level of $250, the GSE said.

The decision to eliminate timeline compensation, however, was only part of a much broader program change rolled out by Freddie; the mortgage finance giant also said that it was increasing its allowable foreclosure timeline in 21 states to a whopping 300 days from last of date payment, and 150 days from initiation of foreclosure, effective on Friday.

There is much more.