by Calculated Risk on 3/06/2007 11:45:00 PM

For a variety of reasons, I've decided to take advertising for Calculated
Risk. I've really enjoyed being advertising free. Lately I've found myself spending more time with this blog, and I've also been spending a few more dollars on phone calls, subscriptions and research. So I've been on the fence.

However, over the last couple of weeks, some CR readers have sent me links to two sites scraping CR posts, and presenting it as their own content - and then running ads. This has pushed me over the fence!

When I asked Tanta for her opinion, she responded:

"I hate advertising. I also hate doing the dishes."

To minimize the intrusion, I'll only be adding side-bar and RSS advertising (no animated pop-overs or sound). I might also be adding some side-bar banner ads if anyone wants to advertise directly with this site.

Thanks to everyone that visits this blog, and a special thanks to all the wonderful commenters.

by Calculated Risk on 3/06/2007 05:15:00 PM

Reuters reports: Subprime guidance may hit 60% of Countrywide ARMs

Sixty percent of Countrywide's customers seeking hybrid adjustable-rate mortgages, or ARMs, such as "2-28" loans would fail to qualify under the guidance that urges lenders weigh the borrower's ability to repay at the highest possible rate during the life of the loan, Countrywide CFO Eric Sieracki said at a Raymond James Financial Inc. conference in Orlando, Florida.

It is not clear from the article what percentage of Countrywide borrowers use hybrid ARMs.

Click on graph for larger image.

UPDATE: Here is the Countrywide presentation (hat tip: Cal)

And an audio recording.

The graph is from page 24 of the presentation.

by Calculated Risk on 3/06/2007 04:40:00 PM

Dallas Fed Executive Vice President and Director of Research, Harvey Rosenblum, spoke in Chile yesterday at the Global Interdependence Center. The text of Rosenblum's speech isn't available, but here are the slides he presented: Changing Risks in the Global Economy

Click on graph for larger image.

The first slide shows the increase in percentage of S&P rated junk bonds from 1980 to 2006. Another slide shows that credit spreads are quite low for junk bonds (see presentation, page 5)


This slides shows the firming credit standards for business loans. I expect standards to continue to tighten, especially for CRE and C&D loans.

See this Fed chart for CRE loan delinquency rates. Delinquency rates are rising for CRE loans - up to 1.28% in Q4 2006 from 1.12% in Q3 2006 - but they are still fairly low.


This third slides shows credit standards for consumer loans through 2006 The graph shows rapid tightening for mortgage loans at the end of 2006. However this graph stops before the significant tightening that started in February of 2007.

Right now the only credit crunch is sector-specific - mostly subprime mortgage loans. However credit standards for business loans are starting to tighten too.

by Calculated Risk on 3/06/2007 11:31:00 AM

Citigroup analysts have consistently been some of the most bullish on housing. So I was eagerly awaiting their first research note after the subprime implosion. Citigroup released a research note this morning and boldly stated that they are: "Bullish on Housing". There is no mention of subprime lending issues in the report, except in one chart. I find it hard to believe demand for housing will stabilize with the problems in the subprime sector (see Subprime: The impact on Existing Home Sales in 2007).

by Calculated Risk on 3/05/2007 04:24:00 PM

From MarketWatch (hat tip: yal): Builder CFO doesn't see spring turnaround for housing

Home sales haven't rebounded dramatically so far this spring selling season, which suggests a hoped-for recovery in the housing market won't play out as soon as some had expected, Toll Brothers Inc.'s chief financial offer said Monday. ... [CFO Joel Rassman] said headlines on the subprime market "make customers nervous" and added the housing market could feel significant impact in the next month, such as foreclosures and more speculators quitting the market.

Subprime is not directly "a big part of Toll's market", but real estate works like a sequence of chain reactions. If a subprime borrower can't purchase a starter home, the seller can't buy a move-up home, and that seller can't buy a Toll Brothers McMansion.

For the potential impact of the subprime implosion on the housing market, see Subprime: The impact on Existing Home Sales in 2007