by Calculated Risk on 7/11/2009 01:09:00 AM

CIT Group (no relation to Citigroup) is like GE Capital. They provide financing for almost 1 million businesses and had about 76 billion in assets as of March 31st.

From the WSJ: Major Lender Faces Crunch

CIT Group Inc ... is preparing for a possible bankruptcy filing ... CIT has retained the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, ...
...
CIT has a $1 billion payment due in mid-August and it is unclear the company "will be able to handle that," said this person. The company will give more guidance when it discusses second quarter earnings in two weeks.
...
A bankruptcy filing by CIT could affect thousands of small borrowers, from Dunkin' Donuts franchisees to restaurant owners and clothing retailers.

... the government has made it clear it doesn't see the company as a systemic risk to the financial system. The people familiar with the matter said the government feels that other lenders, such as J.P. Morgan Chase & Co. or Deutsche Bank AG, can handle many of the same loans that CIT specializes in, such as loans to small retailers or rail-car leasing firms.

Meanwhile, competitors like GE Capital Corp. and GMAC LLC have been able to sell debt with the backing of the government's top credit rating.

Apparently the government thinks CIT's competitors could pick up most or all of their business.

by Calculated Risk on 7/10/2009 10:12:00 PM

Just using Sacramento as an example ... I wish the NAR broke out the data like this!

Click on graph for larger image in new window.

The Sacramento Association of REALTORS® is now breaking out monthly resales by equity sales (normal resales), and distressed sales (Short sales and REO sales). Here is the June data.

They started breaking out REO sales last year, but this is the first monthly report with short sales.

Just over 70% of all resales (single family homes and condos) were distressed sales.

Total sales in June were off 7% compared to June 2008, and that breaks a string of YoY increases.

This is just a reminder - with 70% distressed sales, there will be few move-up buyers for the higher priced areas.

by Calculated Risk on 7/10/2009 07:16:00 PM

Spirited collapse
A corkscrewed, spiraling fall
Time to drown sorrows.
by Soylent Green is People

From the FDIC: Central Bank & Trust, Lander, Wyoming, Assumes All of the Deposits of Bank of Wyoming, Thermopolis, Wyoming

Bank of Wyoming, Thermopolis, Wyoming, was closed today by the State of Wyoming, Department of Audit, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver....

As of June 30, 2009, Bank of Wyoming had total assets of $70 million and total deposits of approximately $67 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $27 million. Central Bank & Trust's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. Bank of Wyoming is the 53rd FDIC-insured institution to fail in the nation this year, and the first in Wyoming. The last FDIC-insured institution to be closed in the state was Westland, FS & LA, Rawlins, on July 26, 1991.

It is Friday ...

by Calculated Risk on 7/10/2009 04:53:00 PM

From the San Francisco Business Times: Sellers owe balances after short sales (ht Michael, SocketSite)

The rising tide of “short sales” by troubled home owners facing foreclosure is prompting lenders to become more aggressive in their attempts to pursue former homeowners for their loan losses in a short sale. In a short sale, a house is sold, with a lender’s approval, for an amount that won’t pay off the mortgages on the property.

Often, the troubled home owner assumes the loss will be eaten by the lender. But Bank of America and Chase have quietly added language in their short-sale agreements that require the borrower to sign a promissory note for the shortfall.

A spokesman for the American Bankers Association said this week that he wasn’t aware of the practice, suggesting how little attention has been paid so far to collection of these notes from troubled borrowers.

BofA says its intention is to protect investors holding the mortgages.

This is nothing new. Zach Fox (when he was still at the NC Times) reported in April: Lawyers say lenders set stage to collect on 'short sales'

Lenders appear to be inserting language into short sale contracts that allow them to sue for any "deficiency," or the amount lost by a bank by selling a home for less than the mortgage ---- opening the door to collection agencies and court judgments that can run into the hundreds of thousands of dollars for some North County homeowners.
...
One real estate agent who specializes in short sales, Chris Mackey of Carmel Valley, said about 50 percent of the short sale contracts he has seen include the language before he requests its removal. Banks generally have removed the language, he said.

... the North County Times obtained a short sale contract issued by Countrywide Financial Corp ... The contract warned the homeowner, who owned a house in El Cajon, that Countrywide "may pursue a deficiency judgment for the difference in the payment received and the total balance due ... "

It sounds like the banks will remove the language if asked. I'd suggest having a lawyer review the contract, and make sure "all loans are extinguished and debts forgiven".

by Calculated Risk on 7/10/2009 03:52:00 PM

First the market ...

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

And the next two graphs are from the Cleveland Fed.

From Mike Bryan, a vice president and senior economist in the Atlanta Fed’s research department: Economic and financial data, neatly wrapped

We thought if these summaries are useful internally, then a wider audience will also find them valuable. So beginning today we will publish our Economic Highlights and Financial Highlights, exclusive of any proprietary data, on our Web site. We anticipate updating these digests weekly.

From the Financial Highlights on the Fed assets:

While the overall size of the Fed’s balance sheet has been shrinking slightly over the last two months, the composition of the balance sheet has changed.

There have been sizeable declines in short-term lending to financials and lending to nonbank credit markets.

Offsetting these declines have been increases in holdings of agency debt and mortgage backed securities (MBS) as well as increases in holdings of U.S. Treasury securities. Combined, these three categories have increased by about $460 billion since the week ended March 18.

The third graph shows the bank failures by asset size and state.

I'm looking forward to these highlights every week!

Now for this BFF (Bank Failure Friday) ...

by Calculated Risk on 7/10/2009 02:52:00 PM

From Robert Reich: When Will The Recovery Begin? Never. (ht Bob Dobbs)

The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops ...

Unfortunately, V-shapers are looking back at the wrong recessions. ...

That's where the more sober U-shapers come in. They predict a more gradual recovery ...

Personally, I don't buy into either camp. In a recession this deep, recovery ... depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery ...

Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.

Eventually the economy will start growing again ... but I think the "recovery" will be very sluggish.

Reich suggests the only market for cars will be replacements - but the replacement level (based on scrappage rates) is in the 12 to 13 million range. And that would be a significant increase from the current 9.7 million annual sales rate. That is still well below the peak, but recovery is from the bottom of the cliff - and is not measured from the previous peak.

by Calculated Risk on 7/10/2009 01:07:00 PM

Yesterday I posted this information with an incorrect email address for Cathy. She can be reached at: stickelc@live.com

CR note: This is from Tanta's sister Cathy. For new readers, to find out about Tanta, please see Tanta: In Memoriam. Also see The Compleat UberNerd for some of her incredible articles. I really enjoy my Mortgage Pig sweatshirt! Thanks to everyone for your support, CR

The Last of the Mortgage Pig Wear

Thank you all for your orders – we raised $3,700 and hopefully you have something unique to help you remember Tanta.

We ended up with some extra completed items and we still have a few “Slap It” and “Holidays” transfers left for T-shirts (“Convexity” is sold out). I’m offering these outside of EBay – no additional charge for shipping in the continental US. Simply send an EMAIL to stickelc@live.com with your request and I’ll send back a confirmation. Then mail a check or money order along with shipping instructions and we’ll get the item out to you. The proceeds will be donated to the Ovarian Cancer Research Fund.

Again – thanks for your support and all of the kind words.

Cathy Stickelmaier

Completed Items:
Black Full-Zip, Hooded Sweatshirt w/Tanta Vive in Pink & White – Size XL - $40
Men’s White Polo Shirt – Size L - $32
White Long Sleeved T-Shirt with Slap-It Transfer – size L - $18
White Hooded Sweatshirt with Holidays Transfer – Size 2X - $30
White Hooded Sweatshirt with Holidays Transfer – Size XL - $30
(2) Short Sleeved T-Shirt with Holidays Transfer – size S - $15 each
(2) White Hooded Sweatshirt with Slap It Transfer – size L - $30 each

Transfer Items – made to order while transfers last:
White Long Sleeved T-Shirt with Slap It Transfer – Sizes S to 2XL - $18
White Short Sleeved T-Shirt with Slap It Transfer – Sizes S to 2XL - $15
White Long Sleeved T-Shirt with Holidays Transfer – Sizes S to 2XL - $18
White Short Sleeved T-Shirt with Holidays Transfer – Sizes S to 2XL - $15

by Calculated Risk on 7/10/2009 10:54:00 AM

SEC data guy brings us some interesting data on SEC filings with companies expressing: "Substantial Doubt"

Below is a graph that shows the total number of distinct entities filing a 10-K or 10-Q over time. It also shows the number of distinct entities expressing "substantial doubt" for the first time in one of those filings

Click on graph for larger image in new window.

Note: Left scale doesn't start at zero, and the right scale is a 4 quarter average.

These are just initial expressions of "substantial doubt".

On a cumulative basis, a stunning number of filers are expressing concerns (more to come on this). For details, see SEC data guy's post.

by Calculated Risk on 7/10/2009 10:06:00 AM

From MarketWatch: July UMichigan consumer sentiment falls to 64.6

U.S. consumer sentiment fell sharply in early July, according to a survey released Friday by the University of Michigan and Reuters. Sentiment fell to 64.6 from 70.8 in June.

Click on graph for larger image in new window.

Consumer sentiment is a coincident indicator - it tells you what you pretty much already know.

And it tells us right now that consumer sentiment is still very weak.

by Calculated Risk on 7/10/2009 08:53:00 AM

Here is the press conference at 9 AM ET:

From the NY Times: With Sale of Its Good Assets, G.M. Tries for a Fresh Start

General Motors completed a major step in its turnaround on Friday and closed the sale of its good assets to a new, government-backed carmaker....

G.M.’s sale of its desirable assets, including brands like Chevrolet, Cadillac and GMC, to the new company — now named Vehicle Acquisition Company but soon to be renamed the General Motors Company — is meant to shed decades of buckling liabilities. The federal government will hold nearly 61 percent of the new company ...

The new company will be much smaller, with brands like Saturn, Hummer, Opel and Pontiac in the process of being sold or closed.

That was fast!