Say Bye Bye
 

Say bye bye to CITI and WAMU...with Wachovia a possible third...they will be shadows of their former selves if they are not bought up. CITI sold its German retail bank unit today to the Frogs...for $7B in cash.

Come to think of it, this is the last hurrah of the USA as the dominate financial power in the world...we have blown our wad...The USA is for sale....NICE GOING BOOMERS....

I maybe being a bit pessimistic here? But it sure don't look too good.

Anyway..if Obama becomes Prez, he and Congress are going to try and get blood out of a Turnip to fund their social programs,,,,only problem is there will be no money left and they won't be able to do a dam thing. If they should try and push they will turn this country into a down on its heels has been of a nation that will take decades to recover if ever. So let us all chant...we want socialism, we want socialism, we want socialism....

Jamie Dimon said last week that he is not worried about Morgan Stanley being profitable if the Dems get in, there are plenty of places to invest money in the world. So say bye bye to Morgan Stanley tooo....

And to think when I was worried about this a year and a half ago I was pooh-poohed as a pessimist. . .

God I hate being right all the time.

We'll just open the prisons and send 'em to Cuba ;p

I think whether one decides to be a pessimist or an optimist, they will always be right because this is what will decide their outcome. External conditions are irrelevant to ones failure or success, and external conditions are only the mirror of global thoughts. Thought directs matter and circumstances, not the other way round.

Aurel

tabs, why do you think WAMU is in that much trouble? --From my experience they have been one of the more responsible lenders.

Engineering experience? I'm assuming that tabby doesnt think they are going under... just going away. wamu was nearly bought out by JP Morgan last month for 8 a share. Sitting at 5 now?

Wamu has an unusually high percentage of mortgages in its loan portfolio compared to its peers.

Honestly...During the Great Depression it didn't matter how much of an optimist you were, you were still fked.

I have always been one to let myself feel the negative feelings...perversely by letting yourself go where you need to be is ultimately an optismistic stance.

There are times when you should feel depressed...the death or illness of a loved one for example SHOULD make you depressed. If you don't feel that way something ain't right in Denmark folks.

For a very close family member or friend....at least a year...to let yourself work it out.


Now here is what people don't realize..if you don't let yourself be...and feel all those nasty feelings..guess what you never resolve the issue and I can guarntee you it will come back and haunt you in some way.

Or maybe I should say it another way...it will resolve itself one way or another, maybe decades later.

Anyway I got off topic..

In this case "responsible [mortgage] lender" is analogous to "petty thief" or "recreational drug user" or "small-time bank robber" as opposed to "professional thief", "hardcore meth-head" or "big-time bank robber". They're in no way innocent.

All these guys got in on the party and guzzled down the poisoned Kool-Aid. The extent to which the various players get sick (or die) depends on how much they had AND how good their immune system is. But they're all going to at least get sick and some are unquestionably going to die. . . Which ones is anybody's guess right now.

WAMU will have a Mushroom cloud over their HQ here shortly with all those Pay Option Arms they own. Someone on the inside said as much as 50% of their portfolio were those things.

Then, there is the acquisition of their subprime division "Long Beach Mortgage Co" but they turned that company into a hoorhouse for subprime loans.

They used to rubber stamp anything- I sent all my not a chance in hell loans there.


Appraisal looked like it was 10% too high? - Exception granted (big one)

Payment too high for approval - Exception granted (big one)

They basically bought anything as long as the property was OK and you weren't more that a little off of meeting the requirements.

F WAMU - they are the primary reason today I have to deal with Appraisal reform. thanks to them being in bed with that skanky appraisal company there is a chance I cannot order my own appraisal-

FNMA et. al are passing rules that require the lending bank (not the loan originator) not have any contact with the appraiser whatsoever. The appraisal must be ordered by the lender themselves. This is a resulf of hte deal they struck with Cuomo in NY over the appraisal scandal.

Before you all start cheering keep this in mind:

1) - If I don't know for a fact if your value is there before I order it, there is a possibility that it may not come in high enough to make the deal work as quoted. Means YOU the borrower get stuck paying for an appraisal that didn't go anywhere. I'm not paying it, nor will any other originator. You can bet that.

2)- it also means the bank now has the right to declare that "the value is too high" and as a result, charge you a higher rate, and no one can challenge it. This happens already with more than a few lenders - Some UW sees that they can lower what your house is worth, make you pay more and me make less, then when they sell it, they get "full value" and they get to keep all the cash.

Remember, the banks broker ouot these loans to FNMA like I broker loans to you.

3)- since you have to buy it, it makes the ability to shop much more burdensome if the deal goes sour. You don't like what the bank says after they get the appraisal? too bad, go somewhere else and pay for another, I guess.

WAMU has never been a good neighbor or a responsible lender in that sense, I hope they fry like Chicken. One of the earliest lessons I learned 13 years ago in this biz was "WAMU HATES BROKERS..." They hate clients too.

rjp

spoken like a true realist http://forums.pelicanparts.com/uploa...1215802438.gif

So what's this all mean for us poor renters? Houses are going to get cheap, but you better be able to pay cash?

Sorry, US currency is no longer worth the paper its printed on. Gold, chickens or barrels of rum are now acceptable payment options.

Renting is a damn fine place to be right now.

They sure as hell aren't going to be raising my rent anytime soon. Heh heh heh. I've been seeing prices plummet all around my area.

Purchase prices are going to continue to plummet, yes. And financing is going to be virtually impossible to obtain for the foreseeable future. The time to buy will be when things are horrible, at the bottom, foreclosures and shuttered-up houses all over the place and when a few daring lenders start to poke their heads out of their underground bomb shelters and actually begin to lend again. Once that happens, it'll be the time to buy. Unless you're fortunate enough to have hundreds of thousands of dollars in cash right now.

But I don't see that happening for at least 12-24 more months.

Only in a perfect world.

Save up 3%, make sure you credit has been PERFECT (don't make any new bad debt- old bad debt is OK still) for the last 12 mos, and then have at it.

If you are a Veteran, you can probably do zero down still.

rjp

Yeah, it had nothing to do with the PEOPLE. You know, the ones who entered into a legal and binding contract to pay back a loan? The ones who are deciding they don't want to live up to their obligations because it's inconvenient? F them. They they are ones to blame. If the no-morals scum would just keep paying their mortgage that they agreed to instead of walking away, we wouldn't have a problem, would we?

I don't disagree with you at all. I'd say 99%+ of the blame for this falls squarely on the shoulders of the borrowers, but there was plenty of bad behavior all around.

I'm certainly not letting the lenders off the hook though - they were stupid enough to originate these loans and they are going to be the ones that croak as a result.

I completely agree with you in principle that "if people just met their obligations, there wouldn't be a problem", but to ass-u-me that everyone is going to do that - particularly the most historically indiscriminate members of society using "liar loans" and with lousy credit histories - is just looking at the world through rose-colored glasses. Enter the concept of "risk management" which was completely absent from mortgage origination the last five years.

Frankly I think bringing back the debtors' prisons might not be such a bad idea in this country. If that's what it takes to get people to think twice before using debt as "funny money", maybe the ends would justify the means. . .

How about Indymac?

On a side note, Schumer should be impeached!

bingo! I find it absolutely amazing as to how few people are actually willing to say this. it all comes down to personal responsibility. did you (and I don't mean you personally, of course) actually bother to read your contract? if you did and couldn't understand it, did you consult an attorney? if no, then you had no business in entering a legal contract, much less trying to get the taxpayer to bail you out now

Sorry guys but some of us are doing very well thank you! Except for my house payment, I owe no one anything, period and just this last week my house has stopped its free fall in value and I expect it to rebound by late August and start going up again in value.

On the other hand there are people like my current copilot. He is 40-ish years old, single but living with someone full time. Worked at his current job for almost 4 years now.

We had a discussion about things today and he is not happy here as he feels that he is getting cheated. He wants to be in the left seat but has no-where near the experience needed to make the move on an aircraft like this yet. I am helping him as I can, but he is not ready to fly every other leg from the right seat, not to mention move over to taking over the left seat. He is making (am guessing here) around $100k a year doing this job. Thats the good news.

Bad news is that he owns a house in SoCal that he has been in for around 2 years. He paid about $450k for it and its now down to $350k in value. He owed over $400k for the house at the time of purchase as he has an ARM loan (2 years to go on it) and the bank has been offering him "less than interest only" payments on the house, which he has done every month. He owed $405k on it when he bought the house and now its up to $418k this month. I asked him why he did not want to convert it to a regular 30 year loan and he said that he could not afford to. Why I asked?

Well, he has a payment on his brand new pick-up, his brand new motorcycle payment, a house payment on a place he splits with another family member back where they grew up ($800 a month) so in the end he has $4000 in payments to make every month when almost everything is added in the mix. If that is not enough, he has just made an agreement to buy an airplane for $30k or so.

Notice that I said "almost everything" in the above statement? My jaw dropped when he then went on to tell me that he had around $100,000 owed to credit cards as well!

Guys, I have no idea how this gent is going to get and keep his head above water. His girlfriend works but she makes minimal wages as a sect so she cannot help a lot. This has just blown me away how someone can get this far under and still does not see that they are in trouble, real trouble financially. He has no savings what so ever and if things start getting really difficult in the economy he is sunk.

I think you've been saying this (that houses in your area have stopped going down) for several months now . . .

LOL, that's so true. Gotta give it to the Arizonan Pelicans for the Eternal Optimists in Real Estate Award.

Your friend is toast. He will never, ever qualify for a loan to replace the one he has now. Going to fixed will just mean he will pay what he's supposed to, which admittedly he can't afford.

Sorry but he has no outs- unless he talks BIll Gates into paying cash for his home.

rjp

I don't feel sorry for your friend. His problems have absolutely NOTHING to due with inflation, $150 oil, the housing downturn or anything other than his own irresponsibility.

There is no reason somebody making 100K a year can't make payments on a 400K home..even with a maturing ARM. He needs to sell his bike, his interest in the 2nd home, sell the interest in the plane and probably put a few other capital items on ebay. With the capital raised he could pay off his credit cards and live a comfortable life.

You are correct. I have been watching it go down by $10k a month for the last 18 months now. Six weeks ago it went to $7500, four weeks ago to $5k a month and now its down to $3000 two weeks ago. In the next week or so it will hit bottom and start going back up if things continue like this.

Are you having difficulty understanding this? Another Pelican who is a realtor agreed with my readings in my area and posted proof that the N. Phoenix area has started to rebound.

Sorry if your house is not on its way back to being profitable but hassling me about mine does no one any good.

Agreed with you and Randy on this. He has done this to himself and is actually digging the hole even deeper with each month. He does not realize that he can stop this spiral downwards and just keeps buying and buying things that he does not need, but since he can make payments on it, he does it.

Its people like this who are causing problems like we have in this country, and lending institutions who continue to lend to them!

for a good laugh, tell him to take the minimum payment asked on each credit card, then multiply it by 12.

Then, subtract that number APR from the of the credit card in question. The difference is what is applied to principal expressed as a percentage of your payment monthly.

rjp

Randy,

What he is doing is that he is applying for new credit cards every few months that have a 3-4% interest rate, then bouncing balances around from card to card to try to keep things low.

What he does not realize is that eventually no one will give him a new card and his FICO has to be very low by his doing this. Whats going to happen when these balloon up to 18-21% and he cannot get anymore cards to transfer balances to ?

He is not thinking ahead (or not thinking at all) but its not my problem...

BK 13 my friend, BK 13.

rjp

Joe, you're a smart guy on some things but on this housing thing you're simply, 100% dead wrong. Look around out there. Seriously. If you honestly think housing prices in Phoenix (or anywhere else) are "rebounding" or "about to rebound", I've got a bridge to sell you. And I'll even throw in some oceanfront property in Nebraska. You're absolutely delusional if you think you're going to see sustained appreciation anytime soon. Turn down that Thorazine drip. . .

Granted you are in a particularly good situation because you're close to retirement, you don't have a lot of debt and it sounds like you've been pretty responsible with most of your financial decisions - so even a 30% decline likely wouldn't matter too much to you unless you were planning on selling soon. But to come on here and act so polyanna-ish and smug about it is very out of character. I don't like being a pessimist, but I definitely prefer to be a realist and the reality right now is that housing is GOING to decline. Almost universally. The exceptions are going to be VERY rare. Not 1-in-10, not even 1-in-1,000, more like 1-in-100,000. If you're fortunate enough to have one of those, go buy yourself a lotto ticket because you are a very, very lucky guy. There's simply no way on God's green earth you're going to see sustained appreciation. Not a chance. As a pilot I figured you'd have decent overall situational awareness skills, but on this issue they seem completely absent. . .

I wish the best for you - I really do - but I hope you're not setting yourself up for very, very bitter disappointment by having your head in the sand on this one. I honestly hope you're in a position where it doesn't really matter and you can just hold onto the place for a while even if you get whacked with a substantial value decline.

The declines are definitely coming - and they are NOT regional. They are being driven by drying-up financing which is dessicating the pool of potential buyers (destroying demand). Destroy demand, what happens to price? C'mon - this is Econ. 101. Here's a good article on the subject:

http://patrick.net/housing/contrib/fdic.html

Again, I'm not saying this stuff to be a pessimist - I'm saying it so that (hopefully) you don't get burned. All I can do is point to the weather radar and show you the big red blotch right in front of us. If you choose to fly into it, that's your business.

My best friend's brother (I've known him for 35 years) bought a house about 4 years ago for $545k. It's worth maybe $400k now. He got one of those interest only ARMs that can't be re-financed for 5 years without penalty and has a big balloon payment after 10.
He was making about $20 an hour at the time and the only was he could make the $3200 a month payment was to rent out both of the other two bedrooms AND rent out the haphazardly converted garage.
Since then he lost his job (his fault. he had an attitude and threatened to quit over something, they said there's the door). He got another job making less which he also lost because he thinks he's too good to work for that low of an amount. He hasn't found another job yet and isn't looking that hard because he still has $5k left from the $100k inheritance he got from his grandfather's death. He spent a good portion of that on a large fishing boat and a ford diesel truck to pull it. It's helped him stay just ahead of his payments so far but has pissed the rest away so all that will soon end.

At the time he was buying this house his friends all said "DON'T DO IT!" "YOU CAN'T AFFORD IT!"
We said it loud. We said it often. We explained why he shouldn't do it, why he couldn't afford it, why he would lose the house and all the bad stuff that will come from it. I personally told him that he better not come knocking on my door asking to sleep on my couch or asking me to bail him out when he loses the house. his response? "I DON'T CARE, I'M BUYING IT!"

Now there is no doubt he will lose that house. Soon. He even admits it. There is no doubt he will be flat broke without a place to live. did I mention he has a wife and a kid?
What pisses me off is that we (taxpayers) are going to have to cover his a$$ and clean up his mess. We'll have to pay for his stupidity. We'll have to pay for his irresponsibility.
We'll have to pay to clean up his mess because he's too lazy, to dumb, and doesn't care about the difference between right and wrong. He should be the one to be punished, not everyone else.
If I were in charge (and you're glad I'm not) I'd pass a law that said you could not walk away from a mortgage unless you filed BK, and I would make it much harder and much more painful to file BK.
I'd say that if you agreed to pay back a loan (any loan), then by God you were going to pay it back. If you couldn't afford it I'd make it a 40 year loan, or 50, or 100 but one way or the other you would have to pay it back. That would stop this mess and punish the ones who are really responsible for creating it.

No more of this ridiculous liberal BS about blaming the mortgage providers. All they did was giver the borrowers exactly what they were begging for. It's not their responsibility to babysit the consumer. They have parents for that if they are too immature to exist on their own.
Now, on the other hand: if the people running the mortgage companies were irresponsible enough to run them into the ground because of incompetency, then they need to be punished also. If you take a job running a company you darned sure better know what you are doing or don't take the job.
All those executives who work for a failed or failing company should be stripped of all personal assets. Every penny. Make them freaking homeless. There's a difference between giving consumers what they want even if it's a bad idea and running a company into the ground. Punish them with a big stick.
That would send a message, subtle as it may be ;)

How are you assessing the value of the house? What I mean is, specifically how are you determining its value so precisely at any given time?

Your acquaintance and Joe's pilot acquaintance are obviously headed for BK.

But why do you say the taxpayer is going to pay to clean up their messes?

Are you thinking of the housing bill currently pending in Congress? That bill will not do a thing for your acquaintance, he won't come close to qualifying. The bill was not designed to help people in his position. Same for Joe's acquaintance.

Thanks. I've been watching the stock too; but my question had been whether WAMU had been so bad in all of this that recovering was impossible. --Randy P. cleared up a whole lot of the why they are in trouble. (thanks Randy)

So, the Q still is; will WAMU pull out of this? ...tabs crystal ball seems to say 'no.' ..anyone else? :)

on WAMU -nope. no one wants to service that portfolio.

On Joe's deal, who cares if he plans to keep it? It is what it is...

Having three friends who are realtors helps, and keeping an eye on the comps in the area as well as Zillow. Mix all that together and its a SWAG. Houses are going on the market and being sold in my area and new houses are already being built in this area, so its not depressed like it was 12-18 months ago.

Am not selling anytime soon so its not a big issue to me but our part of town is one of two areas that are turning around faster than the rest of the city and country as a whole.

Joe

In my neighborhood, couple houses sold for way over asking price. So still good in my area.

So far so good, cause some pockets of areas in the SF bay area are still holding up.

OK, a WAG (Wild-Ass Guess), I can see.

What I didn't see, was how you could track the value as precisely as your original post seemed to imply.

Two questions for the "experts"............ Am I in danger banking at Wa Mu? & Are there any healthy banks out there??

Don