by Calculated Risk on 3/22/2009 10:02:00 PM

From MarketWatch: Geithner to hold briefing Monday on toxic assets plan

The Treasury Department said in a press release that it will hold the briefing at 8:45 a.m. EDT on Monday.

Just wanted to get the time right ...

by Calculated Risk on 3/22/2009 07:54:00 PM

From Kevin Hall at McClatchy Newspapers: Treasury to deliver details of "toxic asset" treatment plan

Treasury Secretary Timothy Geithner will meet with reporters shortly before the 9:30 a.m. opening bell for trading on the New York Stock Exchange. ...

Geithner is expected to announce a plan in which Treasury will use $75-100 billion from last year's $700 billion Wall Street bailout. ...

Mark Zandi supports the plan, although I'm not sure what he means by "fair price" since the price will be above market prices (because of the low interest rate, non-recourse loans):

"This plan has a good chance of success; certainly much better than the plan Treasury put forward six weeks ago," said Mark Zandi, chief economist at Moody's Economy.com, a forecaster in West Chester, Pa. "This plan relies much less on private investors and much more on direct government purchases of banks' troubled assets. Only a handful or so of private investors need to participate in this plan to establish workable auctions for the assets and thus determine a fair price for the assets."
...
"The government can then come in and buy these assets on a large scale at these prices. (Roughly) $1 trillion is not enough; it probably needs to be twice that," said Zandi. "But if the plan works well enough, I think Congress will provide more money to solve the problem once and for all. This plan makes me more optimistic about the financial prospects for the financial system and the economy".

Brad DeLong also supports the plan, but thinks much more is needed:

Our guess is that we would need to take $4 trillion out of the market and off the supply that private financial intermediaries must hold in order to move financial asset prices to where they need to be in order to unfreeze credit markets ...

Krugman and Atrios disagree with DeLong.

It is pretty clear the administration opposes nationalizing insolvent large banks, and is instead willing to have taxpayers subsidize shareholders of the banks. So the question isn't "Is this the optimal solution?" (it isn't) but "Will it work?" Maybe, but at what cost?

Oh well, what's a few trillion between friends?

by Calculated Risk on 3/22/2009 12:10:00 PM

From Kenneth Harney at the LA Times: New supply of 'jumbo' financing in pipeline

Bank of America, the country's largest mortgage lender, is rolling out a large program to finance loans between about $730,000 and $1.5 million, with fixed 30-year rates starting in the upper 5% range.
...
The minimum down payment for an ING Direct jumbo is 25%; Bank of America quotes a minimum of 20%.
...
Bank of America's new program requires hefty liquid resources -- six months of principal, interest, property tax and insurance payments in reserve -- plus fully documented income, solid credit scores and a full appraisal.

The lenders are paying attention to the "Three C's": creditworthiness, capacity, and collateral, and requiring a serious downpayment that will keep the homeowners committed.

Currently jumbo rates are in the 6.5% range, and rates for these new programs are in the "upper 5% range" - still way above rates on conforming loans, but this will probably help in some markets. Here is an excerpt from DataQuick's report on the California Bay Area:

[U]se of so-called jumbo loans to finance high-end property remained at abnormally low levels. Before the credit crunch hit in August 2007, jumbo loans, then defined as over $417,000, represented 62 percent of Bay Area purchase loans, compared with just 17.5 percent last month.

The difficulties potential high-end buyers have had in obtaining jumbo loans helps explain why sales of existing single-family houses fell to record-low or near-record-low levels for a February in some higher-end communities. They included Orinda, Walnut Creek, San Rafael, San Francisco, Burlingame, San Mateo, Los Gatos, and Los Altos.

“A lot of Bay Area activity is basically on hold, waiting for the jumbo mortgage spigot to reopen.” said John Walsh, MDA DataQuick president.

I'm not sure this will "open the spigot", but it will probably help a little.

by Calculated Risk on 3/22/2009 11:12:00 AM

From Zach Fox at the North County Times: From half a million to under $100K

This two-bedroom, two-bath house was built in 1979 and has 1,230 square feet of living space.

Click on photo for larger image in new window.

Photo by Jamie Scott Lytle, North County Times Staff photographer


September 2005: $469,000

December 2008: $91,000 (foreclosure)

Why did someone pay $469,000 for this house in 2005? Amazing.

by Calculated Risk on 3/21/2009 10:24:00 PM

If you missed this, Zach Fox at the North County Times had an incredible story: HOUSING: Banks selling properties in bulk for cheap

For example, a unit of Citigroup, the troubled financial giant, sold a foreclosure in Temecula to an Arizona investment firm for $139,000 when comparable homes in the area were selling for $240,000 to $260,000.

The firm listed the home for $249,000, received multiple offers and the property has entered escrow, said Amber Schlieder, the real estate agent who handled the listing.

Citi just left $100,000 on the table.

I hear stories like this all the time.

Here is a short video from KCET with a couple more examples (these are short sales):



Clearly the banks are overwhelmed and the process is broken. Maybe there is an opportunity here for added transparency ...