Friday August 20 Housing and Economic stories

Top Stories:

FED Freaks Over Lehman Credit Lines - Credit Suisse Denies Rumors - (www.ml-implode.com) Lehman Brothers may find themselves edging closer to disaster in today’s trading as word of nervous Federal Regulators supposedly making secret phone calls to follow up on”rumors” that Credit Suisse had withdrawn one of Lehman’s remaining lines of credit.

Lehman In Deep Trouble - (Mish at globaleconomicanalysis.blogspot.com) On August 4, in Deleveraging Risk High And Growing At Lehman I commented "There is virtually no chance that Lehman can avoid huge losses on those $65 billion in mortgage and real estate securities, I do not care what the alleged quality is compared to Merrill. There is simply little market for illiquid mortgage and real estate securities. Furthermore, the longer Lehman waits, the worse both will get, especially commercial real estate holdings. A $20 billion hit would not surprise me one bit." Lehman raised $4 billion in capital in common equity on June 10th at $28 a share and an additional $2 billion in preferred stock. See Lehman posts loss and plans to raise capital. Clearly Lehman did not have a clue as to how much capital it would need. The same thing can be said for Citigroup (C), Merrill Lynch (MER), Washington Mutual (WM), Wachovia (WB) and others. Every step of the way, these companies have announced the "final round" of capital raising effort only to have to go back to the well again and again.

Federal Reserve acted on Lehman rumor: report - (news.yahoo.com/s/nm) Fed seems to be doing anything within its power to prevent a full meltdown of Lehman Brothers. The Federal Reserve acted on rumors last month and called Credit Suisse Group (CSGN.VX) to see if it had pulled a credit line from Lehman Brothers Holdings Inc (LEH.N), The Wall Street Journal said citing people familiar with the matter. Credit Suisse told Fed officials that there was no truth to the rumor and it had no intention of pulling the line of credit, the paper cited the people as saying.

Lehman’s secret talks to sell 50% stake stall - (www.ft.com) Yes, investors and foreign countries have finally wised up to the garbage that Wall Street has been selling the past 10 years. Lehman Brothers, the beleaguered US investment bank, held secret talks to sell up to 50 per cent of its shares to South Korean or Chinese parties in the first week of August but failed to reach agreement with either. The South Koreans and Chinese walked away after concluding that Lehman was asking too high a price, said New York-based people familiar with the potential buyers. Lehman declined to comment. The talks reflect the growing pressure on Dick Fuld, Lehman’s chief executive, to raise capital ahead of the mid-September earnings report, which, analysts said, could include more writedowns of $4bn (£2bn), bringing the total so far to $12bn. Lehman shares have fallen nearly 85 per cent since early 2007 and its market value is now about $9.5bn.

Buffett spotlights nation's debt crisis - (money.cnn.com) Billionaire investor teams up with Wall Street luminaries to focus attention on America's ballooning budget deficit. The catastrophe looming in the documentary "I.O.U.S.A." isn't romantic like the doomed young love in "Titanic," but billionaires Warren Buffett and Pete Peterson warn it could break many more hearts. The disaster they warn of could be bigger than any we've ever seen - bigger than an iceberg, bigger even than the current mortgage crisis. If the U.S. doesn't do something, and fast, to tame the federal government's debts - now more than $50 trillion - the two Nebraska natives warn we will saddle coming generations with economic problems that will make this year's financial turbulence look like a trip to the debt counselor's office.

California mulls probing senator over IndyMac crash – (news.yahoo.com/s/nm) California's attorney general is reviewing a request by former employees of IndyMac Bancorp Inc (IDMC.PK) to investigate whether a New York senator triggered the bank's collapse by releasing confidential information. At issue is a much-publicized letter that Chuck Schumer, a Democrat, sent in June to the Federal Deposit Insurance Corp (FDIC) and Office of Thrift Supervision (OTS) questioning the company's ability to survive.

Why America Is Headed For A Depression - (market-ticker.denninger.net) America's GDP, or the total of all goods and services produced in this nation in a given year, is about $14 trillion dollars. America the nation currently has an outstanding debt of about $10 trillion dollars, and has more than doubled in the last ten years. But this number is not the real total, because it does not count all the "promises" (read: entitlements) that people have been told they will have. Those "promises" are Social Security, Medicare and Medicaid, in the main. They total, approximately $90 trillion dollars in current liability. What's worse, about 1/3rd of that was added with the "Medicare Part D" drug benefit, even though Congress was at the time fully aware that there was already $60 trillion or so sitting out there in unfunded liabilities. They did not care because the AARP, and you, screamed and demanded that Congress "do something." Oh they did something all right. They did the very same thing that you think you have a right to do - that is, spend more than you make.
That's right. You have a right as an American to have a 4,000 square foot house on an acre, even if you only cut hair for a living. If you can't get that loan honestly, you simply will make up an income and use some sort of "exotic" mortgage product to get it.
Your car broke down? Its beneath you to buy a used one, right? Just hit the home equity line and buy a new Suburban. $40,000. Cool. Oh, and charge the gas too. Your kid comes home from school complaining that one of his friends has an iPOD. To shut him up, you go buy him one - even though you don't have the $200 it costs. You just pull out the plastic and charge it. It will all be ok.

Money woes stall downtown plan - (www.boston.com) The $650 million redevelopment of the historic Filene's building - which Mayor Thomas M. Menino envisions as the new center of downtown Boston - is struggling because the developers have been unable to raise financing. An executive with knowledge of the project's financing said developers John B. Hynes III and Vornado Realty Trust have been battling an extremely tight credit market since they won city approvals to undertake the massive project almost one year ago.

Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns - (www.mortgagenewsdaily.com) - While the U.S is currently in the midst of the largest bout of home foreclosures in at least 30 years, at least one economist says two more 'waves' are likely on the way.
Patrick Newport, a housing economist at Global Insight, said the next round of foreclosures could come over the next several months as a result of continued job losses in the U.S. In addition to the nearly 660,000 U.S. jobs lost since December, Global Insight is currently forecasting another 600,000 jobs lost over the rest of 2008 and into the first quarter of 2009.

FDIC sets mortgage plan for distressed IndyMac borrowers - (www.usatoday.com) "Troubled home borrowers with loans from IndyMac Federal Bank will be able to switch to fixed-rate mortgages under a new plan from federal regulators, who seized the bank last month after it became the largest regulated thrift to fail."

Can the FDIC take over my bank? Please? - (www. blownmortgage.com) - If you’re in trouble with your mortgage I’m sure you’re rooting for an FDIC take-over. They seem to be far more willing to work with delinquent borrowers than traditional, private servicing companies. FDIC is reducing mortgage payments and interest rates for delinquent borrowers at the federally-controlled IndyMac Bank . FDIC spokesperson Shelia Bair said that the FDIC hopes to keep nearly 30,000 delinquent borrowers in their home with the changes.
Must be nice though. If you’re in trouble with your mortgage I’m sure you’re rooting for an FDIC take-over. They seem to be far more willing to work with delinquent borrowers than traditional, private servicing companies.

Bay Area Home Prices Plummet as Fire Sales Continue - (www.thetruthaboutmortgage.com) Bay area home sales achieved their first year-over-year gain since the beginning of 2005 as distressed properties boosted the numbers, Dataquick reported.
A total of 7,586 new and resale homes and condos sold during July in nine Bay Area counties, a 5.7 percent increase from June and a 2.2 percent increase from July 2007, but still the second slowest July since 1995.
Unfortunately, foreclosure resales made up a whopping 33 percent of all resales, up from 29.9 percent in June and 4.2 percent a year ago.
“So much of today’s market is driven by distress. Unless interpreted in that context, the stats give a rather distorted view of the overall market,” said John Walsh, DataQuick president.
“We know one-third of the Bay Area’s resales in July were homes fresh off foreclosure. Who knows how many more involved a desperate seller and a lender who accepted a short sale.”
All those fire sales, especially concentrated in less expensive inland areas of NorCal, led to a substantial median sales price drop during the month.

Foreclosures smack San Francisco area house prices down 29.3% - (www.sfgate.com) Cut-rate foreclosed homes being unloaded by banks wreaked havoc on the Bay Area's median price in July, sending it down nearly 30 percent to a level not seen in more than four years. A third of all existing homes sold in the nine-county region in July were foreclosed properties, the real estate research firm MDA DataQuick of San Diego reported Tuesday. A year earlier, just 4.2 percent of existing-home sales were foreclosed properties. The brisk business in bank-owned homes buoyed sales volume, especially in counties with a glut of foreclosures. "There is deep discounting in inland markets that have been slammed by foreclosures," said Andrew LePage, an MDA DataQuick analyst.

Fannie, Freddie Selloff Sends Shares to 18-Year Low - (www.ml-implode.com) - "Shares of Fannie Mae and Freddie Mac dove to their lowest levels in more than 18 years on mounting fears of a government bailout that would wipe out shareholders of the two U.S. housing finance giants."


Other Stories:

The Upside of Falling House Prices - (www.volokh.com)
Vacancies rise, putting downward pressure on rents - (latimesblogs.latimes.com)

The standard-of-living bubble - (money.cnn.com)
Foreigners push back on US debt - (optionarmageddon.ml-implode.com)
Federal foreclosure-purchase program may fall flat in California - (www.latimes.com)
Fannie, Freddie Shares Slump, Bonds Rise on Bailout Speculation - (www.bloomberg.com)
Freddie, Fannie stock slide picks up pace - (www.marketwatch.com)
Investors Say U.S. Bailout of Housing Fraud Giants Is Inevitable - (www.nytimes.com)
Les prix de l'immobilier devraient remonter fin 2011 - (www.lefigaro.fr)
Irish government must let property bubble burst - (www.irishtimes.com)
Market conditions worse than what data show - (www.msnbc.msn.com)
Mortgage application volume hits 8-year low - (news.yahoo.com)
The Outlook Remains Ugly - (www.seekingalpha.com)

Worst of financial crisis is still to come, ex-IMF chief Ken Rogoff warns - (www.telegraph.co.uk)
Sharp US money supply contraction points to Wall Street crunch ahead - (www.telegraph.co.uk)
Foreclosures likely skewing housing indicator - (www.msnbc.msn.com)
Goodyear to close 92 U.S. stores, cut jobs - (www.usatoday.com)

Commercial/Multifamily Mortgage Originations Off 63 Percent in Second Quarter - (www.ml-implode.com) - "Commercial and multifamily mortgage originations fell two percent from the first quarter and 63 percent year-over-year in the s...
Radio Free Wall Street - 8/20 - (www.ml-implode.com) - "Lee Adler, Russ Winter, and Aaron Krowne analyze the impact of key financial events on the financial markets and economy, tell ...
Mortgage Application Volume Dips Again - (www.ml-implode.com)
A Bottom in Housing? You've Got to Be Kidding! - (www.ml-implode.com)
In Face of Conflicting Economic Reports, Interest Rates Stand Pat - (www.ml-implode.com)
Federal foreclosure-purchase program may fall flat in California - (www.ml-implode.com)
Freddie, Fannie Nail-Biting Continues - (www.ml-implode.com)
Foreigners push back…. - (www.ml-implode.com)
Wachovia Unloads Troubled Loans - (www.ml-implode.com)

Fed Acted on Lehman Rumor - (online.wsj.com)
Weak economy propels record numbers at community colleges even higher; funding crunch feared - (www.chicagotribune.com)
Lifestyles of the rich may be changing in downturn - (www.chicagotribune.com)
Freddie pays highest risk premium - (www.ft.com)
Running out of road? Detroit’s big three face up to hard times - (www.ft.com)
Lehman’s secret talks fail to offload 50% stake - (www.ft.com)
Upscale malls reach out as shoppers cut back - (www.latimes.com)
I Spy More Road Kill on the Credit-Crunch Highway: Mark Gilbert - (www.bloomberg.com)
Faking the good life to get harder - (money.cnn.com)

U.K. holds few tools to revive a gloomy economy - (online.wsj.com)
Fannie, Freddie shares hit 18-year low on bailout fears - (www.reuters.com)
B of A, Goldman, Deutsche Bank Are Facing Greater Scrutiny In New York Auction-Rate Probe - (online.wsj.com)
FDIC Will Modify Mortgages for Some IndyMac Borrowers - (www.bloomberg.com)
Andor Hedge Fund Shutting Down - (online.wsj.com)