Federal Home Loan Banks Act As A Lender Of Last Resort......

You already know what is coming when you read this statement from FHLB ......

Jeder der diese Zielsetzung der FHLB liest weiß was kommen muß........

The mission of the Federal Home Loan Banks is to improve access to housing for all Americans by providing FHLBank members with lowcost mortgage funding and by supporting community development.

Everytime you think the fallout from the housing debt will hit the banks another "vehicle/institution" shows up that acts as a lender of last resort. Maybe the Bank of England should use this as a blueprint to solve their "problems". Stories like this remind me why i´m bullish on gold.......

Immer wenn man glaubt alles gesehen zu haben kommt der nächste Hammer und man fragt sich ob das wirklich stimmen kann. Schon praktisch wenn man sich bei Problemen praktisch unbegrenzt zu AAA Konditionen unabhängig vom Risiko mit Liquidität eindecken kann. Evtl. sollte die Bank of England dieses Modell zur Lösung Ihrer Probleme übernehmen. Solche Nachrichten bestätigen mich Tag für Tag in meinem bullishen Ausblick für Gold......

U.S. Tosses Lifeline to Lenders Using Home Loan Banks
Oct. 30 (Bloomberg) -- Banks shut out of the market for short-term loans are finding salvation in a government lending program set up to revive housing during the Great Depression.

Countrywide Financial Corp., Washington Mutual Inc., Hudson City Bancorp Inc. and hundreds of other lenders borrowed a record $163 billion from the 12 Federal Home Loan Banks in August and September as interest rates on asset-backed commercial paper rose as high as 5.6 percent. The government-sponsored companies were able to make loans at about 4.9 percent, saving the private banks about $1 billion in annual interest.

To meet the sudden demand, the institutions sold $143 billion of short-term debt in August and September, according to the FHLBs' Office of Finance. The sales pushed outstanding debt up 21 percent to a record $1.15 trillion, an amount that may become a burden to U.S. taxpayers because almost half comes due before 2009.

> The graph for 2007 is only including September. If this pace continues the numbers should be even more shocking.........

> Bedenkt bitte das diese Grafik nur die Zahlen bis einschließlich September beinhaltet. Leicht auszurechnen wie das am Ende des Jahres aussieht.......

The government is ``taking a lot of risks through the Federal Home Loan Banks that are unnecessary,'' according to Peter Wallison, a fellow at the American Enterprise Institute, a Washington-based organization that analyzes public policy, and general counsel at the Treasury Department from 1981 until 1985.

The home loan banks, known as FHLBs, are increasing risks to taxpayers by assuming the role as a lender of last resort, said Wallison. That's the job of the Federal Reserve, he said.

System Shock
A loss of confidence in the companies could prompt investors to dump FHLB debt, potentially causing the collapse of one or more banks, according to Wallison and lawmakers including Representative Richard Baker of Louisiana. If others were unable to meet the liabilities, taxpayers would be on the hook, they said.

The FHLBs are cooperatives created by President Herbert Hoover in 1932 to spur mortgage lending. The system's 8,100 owners and customers range from New York-based Citigroup Inc., the largest U.S. bank, to the single-branch Custer Federal Savings & Loan in Broken Bow, Nebraska. Their government ties support top AAA ratings from Standard & Poor's and Moody's Investors Service.

Bigger Than Government
They borrow in the bond market and lend the money to their members. Federal Home Loan Bank obligations, when combined with the $1.5 trillion debt and $4.7 trillion in bond guarantees of Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, are 46 percent more than the $5.04 trillion of Treasury debt held by the public.

Lenders turned to the FHLB as two main sources of funding, short-term IOUs backed by mortgages and mortgage-bond sales, began to dry up in August. That's when losses on securities tied to subprime home loans began to spread throughout the credit markets and investors retreated to the relative safety of Treasuries and their equivalents.

Asset-backed commercial paper outstanding fell 25 percent to $883.7 billion as of last week from $1.18 trillion on Aug. 8, data compiled by the Fed show.

Sales of mortgage bonds, excluding those issued by Fannie Mae and Freddie Mac have tumbled by 66 percent to a monthly average of $39 billion from $115 billion in 2006, according to Friedman Billings Ramsey Group Inc., a securities firm in Arlington, Virginia.

`Only Game'
The home loan banks ``were the only game in town for a lot of borrowers,'' said Jim Vogel, head of agency debt research at FTN Financial a securities firm in Memphis, Tennessee. They are ``like an old watch your grandfather left you years ago, and you pull it out of the drawer and find it's the only timepiece you have.''

In July, lenders could raise funds by issuing one-month asset-backed commercial paper that yielded 1.8 basis points less on average than the one-month London interbank offered rate. A basis point is 0.01 percentage point.

In September, the asset-backed commercial paper, when it was available, cost as much as 51 basis points more than Libor. At the same time, the Federal Home Loan Bank of New York offered one-month funds at an average of 48 basis points below Libor, making their loans more attractive.

The FHLB's outstanding discount notes rose to a record $311 billion in the first three quarters, the most since 2001, according to data compiled by Zurich-based Credit Suisse Group.

Government Ties
FHLB loans probably will continue to grow in the next few months, though at a slower rate than during August and September, said Margaret Kerins, an agency debt strategist at RBS Greenwich Capital in Greenwich, Connecticut.

``Each day we seem to have new financial institutions announcing losses and so this probably isn't over,'' she said.

The home loan banks can lend at below-market rates because their government charter enables them to borrow more cheaply than other financial institutions. The ties to the government suggest the U.S. will bail them out in times of trouble.

The system sold $3 billion of two-year notes on Oct. 26 at a yield of 4.26 percent, or 46 basis points more than Treasuries of similar maturity. Stamford, Connecticut-based General Electric Co., also rated AAA, has $1 billion of notes due a month later that yield 4.6 percent.

Syndicated Global Bond Distribution
For bullet issues –September 1, 2006
thru October 5, 2007

> I would like to see which central bank is buying....

> Ich würde gerne wissen welche Zentralbank da kauft......

Some lawmakers said they are concerned the FHLBs are taking on too much debt after they were unable to account properly for their own risks.

Stricter Oversight?
Five of the banks, including the Atlanta and Pittsburgh branches, restated earnings from 2001 through 2004, while the Chicago and Topeka branches corrected mistakes from 2001 through 2003. All of them fixed accounting errors for financial contracts used to protect against swings in interest rates.

The mistakes at the home loan banks, as well as those at Fannie Mae and Freddie Mac, prompted Republican lawmakers to spend the past four years pushing for legislation to create a tougher regulator for the government-chartered enterprises. While the House passed legislation in May, the Senate Banking Committee has yet to do so.

The failure to create new laws ``is predicting disaster,'' Baker, a Republican on the financial services panel, said in an interview. The FHLBs ``have the potential for adverse economic impact if not properly administered,'' he said.

No Losses
The banks require borrowers to put up mortgages, mortgage bonds and other assets as collateral. None has experienced ``a credit loss on an advance to a member, ever,'' Ronald Rosenfeld, chairman of the Federal Housing Finance Board, the Washington- based regulator of the FHLBs, said in an e-mail.

The New York bank looks at detailed data on each asset when deciding how much to extend against it and doesn't accept delinquent loans or non-AAA rated bonds as collateral, Paul Heroux, its head of member services said in an interview.

``The home loan banks are extremely low-risk institutions,'' Allan Mendelowitz, one of five directors of the Federal Housing Finance Board, said in an interview. ``There is probably no contingent risk to the taxpayer.''

Investors said the same about mortgage securities, which had home loans as collateral and were given top AAA ratings by S&P and Moody's. Then defaults soared for loans to people with poor credit and some securities fell as much as 80 cents on the dollar.

A collapse would create ``tremendous pressure to have the taxpayer bear the cost of a bailout,'' said Representative Ed Royce, a Republican from California on the House Financial Services Committee.

Maturing Debt
The FHLBs have $276 billion of bonds maturing in 2008 and $174 billion in 2009, according to data compiled by Bloomberg. The system last week began to refinance about $144 billion of its so-called discount notes sold in August and September with maturities ranging from eight to 12 weeks, FTN's Vogel said.

Borrowing from the system during that period was probably a record for a two-month span, Vogel said. The FHLBs disclose their borrowing at the end of each quarter.

Calabasas, California-based Countrywide, the largest U.S. mortgage lender, almost doubled borrowings from the Federal Home Loan Bank of Atlanta to $51 billion during the quarter, the company said in a statement last week.

Countrywide began to use the FHLBs in August as analysts at New York-based Merrill Lynch & Co. raised the possibility that the company could go bankrupt after it had trouble raising funds in the commercial paper market. Countrywide later sold a $2 billion stake to Charlotte, North Carolina-based Bank of America Corp., the second-biggest in the U.S. after Citigroup.

Out of Business?
``You don't want to use the phrase `going out of business' in the press, but they would be in a much, much worse liquidity position if they didn't have the Federal Home Loan Bank system sitting out there,'' said Paul Miller, an analyst at Friedman Billings Ramsey Group Inc., a securities firm in Arlington, Virginia.

Washington Mutual, the largest U.S. savings and loan, boosted its borrowing from the FHLBs by $31 billion, the company said this month.

The Seattle-based lender's ``funding flexibility'' put it in ``a much stronger position to withstand the market disruptions of the third quarter,'' Chief Financial Officer Thomas Casey said on a Oct. 17 conference call with investors. Washington Mutual spokeswoman Libby Hutchinson declined to comment further.

Paramus, New Jersey-based Hudson City Bancorp, the third- largest thrift in the U.S., borrowed $800 million from the FHLBs in the third quarter, 25 percent more than a year earlier, said Chief Executive Officer Ronald Hermance.

``Even AAA rated credits were having a tough time issuing paper,'' Hermance said. ``It took everybody back to the Federal Home Loan Banks.''

Countrywide Shares Fall After Report Lender Needs More Capital

What a difference a few month made..... Mozillo deserves every Schadenfreude that is out there.....Make sure you don´t miss this Video "Cramer praising Countrywide and Mozillo" just a few month ago. The quotes from Cramer and Mozilla are just priceless! A classic!

Welch ein Unterschied doch ein paar Monate ausmachen......Der CEO Mozillo verdient alle nur erdenklichen Schadenfreude ..... Ich kann jedem dieses erst ein paar Monate alte Interview mit dem Interview mit dem CEO empfehlen. Es ist nicht zu fassen das diese Zitate und Aussagen erst 6 Monate alt sind.... LOL!

Thanks to Stock Mania

Countrywide Shares Fall After Report Lender Needs More Capital
Sept. 11 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, fell almost 5 percent in early trading after the New York Post reported that a second multibillion-dollar bailout ( should be investment) of the company is being negotiated.

``Countrywide is in desperate need of cash right now to continue funding mortgages, and the credit markets are still largely closed to them,'' the newspaper said, quoting a source familiar with the company.

> Maybe they shouldn´t have waste their borrowed money buying back stocks just a few month ago.....

> Es wäre wohl besser gewesen während der letzten Monate nicht mit geborgtem Geld eigenen Aktien zurückzukaufen......

Countrywide .... Genius At Work......
Countrywide conference call review october 2006

"Additionally, as previously announced, management is executing a capital optimization plan and the Board of Directors has authorized a share repurchase program of up to $2.5 billion. In connection with this program, the Company intends to repurchase $1 billion to $2 billion of its common stock in the fourth quarter financed through the issuance of high equity-content debt securities."

from May 2007!
Countrywide Financial Corporation Announces Agreement to Sell $2 Billion of Series A Floating Rate Convertible Senior Debentures Due 2037 and $2 Billion of Series B Floating Rate Convertible Senior Debentures Due 2037

Countrywide Financial will use a portion of the net proceeds from this offering to fund repurchases of up to 23 million shares of its common stock simultaneously with this offering and expects to use the remainder for general corporate purposes.

> Needless to say that during that time Mozillo has sold lots of shares.....

> Überflüssig zu erwähnen das der CEO während dieser Zeit Tonnen von Aktien abgeladen hat.....

Thanks to The Mess That Greenspan Made

Goldman Sachs Group Inc. and the law firm Wachtell Lipton Rosen & Katz are working with Calabasas, California-based Countrywide to negotiate a cash infusion similar to the $2 billion package Bank of America Corp. agreed to provide last month, the newspaper said. Possible lenders include JPMorgan Chase & Co. and Citigroup Inc., according to the Post.

Countrywide said last week it would eliminate as many as 12,000 jobs, or 20 percent of its workforce, after investors stopped buying loans and lenders alarmed by rising subprime defaults refused to provide capital to mortgage companies.

Countrywide was at $16.36 in early trading, down 4.9 percent from the close yesterday on the New York Stock Exchange. The shares have lost almost 60 percent of their value this year.

Countrywide was forced to tap $11.5 billion of emergency financing last month to replace hard-to-sell commercial paper.

Disclosure: Short KBW Mortgage Finance Index (including CFC)

Not So Smart "In an era of easy money, the pros forgot that the party can't last forever "

What a difference 6 month made..... It was in early February when Business Week ran this cover story It's A Low, Low, Low, Low-Rate World .

Looks like the "Cover Story Indicator" has worked once more.....

Was doch 6 Monate für einen Unterschied ausmachen.....Anfang Februar hat Business Week noch die folgende Titelgeschichte It's A Low, Low, Low, Low-Rate World gebracht.

Es sieht so aus als wenn der "Cover Story Indicator" mal wieder ganze Arbeit geleistet hat.
Not So Smart / In an era of easy money, the pros forgot that the party can't last forever

The boasting and bluster that marked the just-ended era of easy money varied depending on the speaker and his stake in the boom. But the underlying message was consistent: This time it's different. When it came to the hazards associated with borrowing, the old rules no longer applied.

The titans of home loans announced they had perfected software that could spit out interest rates and fee structures for even the least reliable of borrowers. The algorithms, they claimed, couldn't fail. With similar bravado, buyout firms bid up private equity deals, arguing that investors had an insatiable appetite for the increasingly risky and mammoth loans used to fund them. "I don't think it's a bubble," David M. Rubenstein of Carlyle Group told the Financial Times in an interview last December. "I think really what's happening now is that people are beginning to use a different investment technique, and this investment technique, private equity, adds real value."

> This chart from Bespoke shows how well timed the "Low, Low......Rate World" cover was.....

> Dieser Chart von Bespoke zeigt wie gut die Titelgeschichte "Low, Low, ..Rate World" abgepaßt war.

Hedge funds were all too happy to enable the leverage arms race. They, too, borrowed to the max so they could gorge on the debt that financed the housing and buyout booms. "The consumer has to be an idiot to take on those loans," John Devaney, chief executive of United Capital Asset Management, said in May, referring to dicey adjustable-rate mortgages. But since there were plenty of "idiots" out there, and legions of lenders eager to serve them, Devaney and other hedge fund managers eagerly devoured the securities confected by investment banks from batches of dubious home loans. This securitization, the argument went, would spread the risk far beyond banks and mortgage companies. In March, Devaney bragged that mortgage-backed securities were one of his "best-performing investments.

"It didn't work out that way. In June, Devaney's Horizon funds booked a loss of more than 30%, according to Hedge Fund Alert. Shortly after, United Capital suspended redemption requests by investors trying to pull out. Devaney did not return calls for comment.

> maybe he is the guy on the cover.......:-)

> ist wahrscheinlich der Typ auf dem Cover :-)

Making sense of this mess is daunting. One good place to start: the ways various financial players indulged in layer upon layer of leverage, much of it far from transparent. Mortgage lenders threw out common sense underwriting standards. Wall Street sliced and diced the loans, creating the illusion that risk somehow disappeared in the process. Hedge funds then multiplied the leverage by borrowing copiously to buy securities based on the rearranged mortgages. In their version of the game, private equity firms used loads of debt to launch unprecedented buyouts.

bigger / größer

> Looks "contained"´to me....

> Sieht für mich ziemlich "contained" aus......

What some of the smartest guys in each of these fields seemed to forget is that new paradigms can crumble suddenly. Many miscalculated how long the period of easy credit would persist.

Mortgage companies argued their algorithms provided near-perfect precision. "We have a wealth of information we didn't have before," Joe Anderson, then a senior Countrywide executive, said in a 2005 interview with BusinessWeek. "We understand the data and can price that risk."

PRIVATE EQUITY: `A GOLDEN AGE'
As recently as April, buyout legend Henry Kravis proclaimed a "golden age" of private equity. Perhaps he should have called it a golden age of CLOs—collataralized loan obligations.

Like mortgage lenders, the giants of private equity have relied on complicated investment pools to fund their binge. CLOs are cousins of collateralized debt obligations. Managers of the investment pools buy groups of risky, junk-rated loans from banks that have financed buyouts by Kravis and his competitors. The CLOs package the loans, then divide them into risk levels. While the individual loans carry low credit ratings, three-fourths of the securities marketed by CLOs magically boast AAA marks. (That's because some investors give up extra yield in exchange for better protection against losses.)

The financial alchemy has allowed private equity firms to attract a whole new base of investors, including pension funds and insurance companies that never would have bought those risky loans outright. U.S. CLOs raised $100 billion in 2006, quadruple the amount two years earlier.

Buyout firms have generally fronted 30% of the equity in recent deals, vs. just 15% two decades ago. But that doesn't mean firms have been more cautious. Steeled by the seemingly insatiable demand for CLOs, they became bolder and bolder in the deals they pursued. After Kohlberg Kravis Roberts & Co. and Texas Pacific Group's $44 billion bid for Texas energy giantTXU in February, analysts began putting odds on imagined future megabillion-dollar targets like Home Depot Inc. (HD )

As private equity firms bid up the prices for ever-larger LBOs, the transactions began getting riskier. A key measure of leverage, a company's total debt divided by operating earnings, skyrocketed from 4.7 in 2004 to 7.0 in the second quarter of 2007, according to Standard & Poor's (MHP ) LCD. Meanwhile, the ability of companies to cover the interest payments of that debt dropped sharply; the ratio of profits to interest fell from 3.4 to 1.8 in that period.

> It is getting worse if you consider that profit margins are close to record highs and the economy is now tanking.... So there is almost no room for error.....

> Das ganze wird noch dramtischer wenn man berücksichtigt das die Firmen momentan noch Gewinnmargen nahe der historischen Hochs haben und die Wirtscahft sich gleichzeitig abschwächt bzw. wie in den USA sogar abschmiert.... Nicht viel Raum für Fehler......

At the same time, loan terms got looser. For example, in the buyouts of Freescale Semiconductor and retailer Claire's Stores (CLE ), LBO firms peddled bonds that allowed the companies to postpone interest payments until the bonds matured—a previously unheard of feature. Such stipulations applied to 10% of all junk bonds sold in 2007, vs. virtually none 18 months earlier, according to Lehman.

The red-hot demand for even the junkiest of loans allowed many firms to delude themselves into thinking they could endlessly pursue deals. In the three months through July 31, firms announced $254 billion in buyouts, as much as in 2004 and 2005 combined, according to Thomson Financial (TOC ). One credit crunch later, the market for LBO financing has evaporated. Investors won't buy the loans at current prices, leaving banks on the hook for $300 billion in loans to buyout artists.

So far, no big deals have collapsed. The hope is that the credit environment will improve in the fall, and stalled deals will move through the LBO pipeline. But there may be more pain ahead.

HEDGE FUNDS: STEALTH DEBT
Hedge funds helped power the mortgage and buyout booms by hungrily consuming securitized subprime debt and loans used to fund buyouts. By borrowing much of the money they invest, in some transactions up to 90%, hedge funds add another potentially dangerous layer of indebtedness to already highly leveraged markets. Because hedge fund disclosure is limited, huge pockets of leverage are barely visible. This stealth debt helped cause the problems in the subprime market to spread far beyond the housing sector.

One example: the hundreds of billions of dollars in so-called repurchase lines of credit, or repo loans, that Wall Street banks have lent to hedge funds. Disclosure of these esoteric agreements is murky at best, so their precise value can't be quantified. Another tool that pumps up leverage by untold billions is the total return swap. These arrangements allow a hedge fund to capture the gains of a security without having to buy it outright and with only limited collateral.

For some funds, extreme leverage became an acute problem when the mortgage crunch caused banks to doubt the value of the subprime bonds and CDOs the funds held. Banks pulled their lines of credit, forcing funds to come up with the full value of those assets. That caused dire consequences because, in some instances, the funds paid as little as 10 cents on the dollar and now had to come up with the remaining 90 cents. Many funds, including ones from Goldman, Sachs & Co. (GS ) and Renaissance Technologies, were forced to sell better-performing bonds, stocks, and commodities to pay back nervous bankers. ....

Related links from Business Week to the cover story

Main Street Is Fed Up

Bruce Wasserstein: "Expect Lots More Embarrassment"

It's Out Of Bernanke's Reach

The Fed Blinked.....Let The Bailout Begin.....Got GOLD :-)

Golden times ahead.... Things must be really ugly ( read Bank Run on CFC )...... First higher than usual repos, then taking MBS as collateral for the repos, now the discount rate cut, next week...... Havn´t found the word "CONTAINED" in the release :-)

Goldene Zeiten .... Die Dinge dürften wirklich nicht zum Besten stehen ( siehe Bank Run on CFC ) ...... Zuerst die erhöhte Aktivität der Repos, dann die ungewöhnliche Maßnahme auch ABS als Sicherheit zu akzeptieren, nun die Senkung des Discountsatzes, nächste Woche.... Konnte das Wort "CONTAINED" nicht in dem veröffentlichten Text finden.... :-)

Thanks to Wall Street Follies

Fed Cuts Discount Rate to 5.75% to Ease Credit Crunch
The Federal Reserve unexpectedly cut the discount rate and said it's prepared to take further action to ``mitigate'' damage to the economy from the rout in global credit markets.

The central bank reduced the rate at which the Fed makes direct loans to banks by 0.5 percentage point to 5.75 percent. Policy makers kept their benchmark federal funds rate target unchanged at 5.25 percent. Today's action is the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.

``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth,'' the FOMC said in a statement released in Washington. ``The downside risks have increased appreciably.''

The committee is ``prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets,'' the statement said. The Fed's Board of Governors released a separate statement announcing the discount- rate cut

Adding Funds
Until today, the Fed had been injecting extra funds into the banking system to meet rising demand for cash. That didn't help companies much in getting access to capital. The amount of commercial paper outstanding, a key financing tool, has fallen the most since the 2001 terror attacks.

The Fed said in cutting the discount rate, it was approving requests from the boards of directors of the New York and San Francisco district banks. Among the New York Fed's directors are JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, Lehman CEO Richard Fuld and General Electric Co. CEO Jeffrey Immelt.

Thanks again to Wall Street Follies

Via the WSJ Explaining the Discount Window
The discount window is a channel for banks and thrifts to borrow directly from the Fed rather than in the markets. Until a few years ago, the discount rate was set below the fed funds rate and loans were subject to numerous conditions. Banks were reluctant to access the window because it was associated with a stigma usually reserved for distressed banks. A few years ago the Fed overhauled the discount window to try and alleviate that stigma; the rate was then set one percentage point above the funds rate and subject to far fewer conditions. In spite of that, discount window borrowing has remained paltry. Discount lending averaged just $11 million in the week ended Aug. 15. Although that was up from $1 million in the prior week it was puny compared to the billions of dollars the Fed has regularly injected into the financial system through open market operations.

Fed officials hope that reducing the penalty rate associated with the window and lengthening the term of loans to 30 days from one further lifts the stigma and gives it a tool to supplement open market operations for reliquefying markets. Open market operations, under which the Fed buys and sells securities to adjust the supply of bank reserves and keep the federal funds rate on target, primarily operate through a network of primary dealers, some of whom are large banks. Thus, they have only indirect impact as a supply of funds for the thousands of banks that are not active in the money market. The discount window however is available to any bank or thrift, and the terms are easier than for fed funds loans. For example, banks may submit mortgage loans, including subprime loans that aren’t impaired, as collateral, and many probably will.

> The yield on the 10 year just spiked 9 points......

> Die Rendite der 10 Jahresanleihen ist gerade um 9 Punkte gen Norden gesprungen

Disclosure: Long Gold, Goldmines (HUI), NAK , Short KBW Mortgage Finance Index (including Countrywide), Homebuilder (Index), WCI, REITs (Index)

Rams Home Loans Fails to Refinance A$6 Billion Debt

I have to repeat what i wrote in "Honey, I shrunk the company"

"And this happened despite no exposure to the US subprime market and a 100% mortgage insurance for their loans..... "

Ich muß wiederholen was ich bereits in "Honey, I shrunk the company" geschrieben habe

"Bemerkenswert ist das dieser Verfall stattgefunden hat obwohl kein Bezug zu Subprime besteht und die Hypotheken zusätzlich abgesichert sind.

RAMS Website

If you are buying your first home, refinancing, self-employed; you
have no deposit, want to purchase an investment property or if you simply want to cut years off your loan and manage your money better - there's a RAMS home loan to suit you.

I can see lots of No DOC , 100 percent financing and zero downs at "All our Products"

Aug. 16 (Bloomberg) -- Australia's Rams Home Loans Group Ltd. failed to refinance A$6.17 billion ($5 billion) of short-term debt as buyers shun credit markets on concern that subprime losses will deepen.

The Sydney-based lender slumped as much as 59 percent on the Australian Stock Exchange. The shares fell to 80 cents at 12:27 p.m. in Sydney, compared with A$2.50 paid by investors before the stock listed on July 27. Rams has lost two-thirds of its market value this week.

Countrywide Financial Corp., the biggest U.S. mortgage issuer, dropped the most since the 1987 stock-market crash after Merrill Lynch & Co. raised the possibility of bankruptcy while Canada's Coventree Inc. sought emergency funding after investors declined to buy its debt.

``Lenders globally who rely on commercial paper for funding will be hurt as the liquidity taps are turned off,'' said Craig Saalamann, credit strategist at JPMorgan Chase & Co. in Sydney.

The longer it takes Rams to refinance, the more it will cost the company. The yield on its short-term debt has jumped to 25 basis points more than the London interbank offered rate, or libor, it said. The debt yielded less than libor about two weeks ago.
Rams got temporary funding of A$1 billion from two of its providers, it said in the statement.

Countrywide Financial would be in ``effective insolvency'' if creditors force it to sell assets at depressed prices or investors lose confidence in its ability to raise cash, Kenneth Bruce, a Merrill analyst in San Francisco, said in a research note yesterday.
> Oh boy..... This was his comment just a week ago....

> Mal wieder spaßiges von der Analystenfront..... Hier sein Kommentar von vor einer Woche....

Less than a week ago, Bruce had reiterated his buy rating on Countrywide

> Maybe he should read Paper-Money or every other Blog (Blogroll) to upgrade his analyzing skills and get a view outside his Wall Street office....

> Er sollte evtl. mal Paper-Money oder einen anderen Blog (Blogroll) besuchen um seinen Blick etwas zu schärfen und mal den Blick für das wahre Leben ausserhalb seines Wall Street Büro´s zu bekommen.....
Thanks to Bespoke

Emergency Financing
Coventree found buyers for C$600 million ($558 million) of asset-backed commercial paper after earlier failing to sell about C$950 million of the securities. This forced as many as 17 commercial paper funds in Canada to seek emergency financing from banks.

American Home Mortgage Investment Corp. and New Century Financial Corp. have already filed for bankruptcy.

Rams included a debt-market crisis among a list of potential risks in a June 27 document for prospective investors ahead of its A$695 million share sale.

UBS AG managed and underwrote the offering, when Rams forecast a 35 percent gain in 2008 net income to A$58.6 million.


> Good that eveybody tells us the markets are cheap based on future earnings projections..... :-)

> Nur gut das man jeden Tag zu hören bekommt das die Märkte günstig bewertet sind wenn man die zukünftigen Gewinne als Maßstab nimmt.... :-)

Disclosure : Short KBW Mortgage Finance Index (including Countrywide)

Countrywide Says `Unprecedented Disruptions' May Hurt Profit

Why is anybody surprised? Just read Countrywide .... Genius At Work...... to understand that this management is almost criminal and was mainly acting only to the benefit of themselves to unload their stock options. Here is a must see example via Mish of how unethical (to put it mildly) this guy is. Needles to say that Cramer praised Countrywide just a few month ago......

Wer ist hier überrascht ? Es langt sich Countrywide .... Genius At Work...... durchzulesen um zu verstehen das bei diesem Management der Laden den Bach runtergeht. Hier wurde in erster Linie darauf geachtet das Aktienoptionen versilbert werden konnten. Hier ein Beispiel das mehr als alles andere zeigt wie kriminell speziell der CEO agiert. Es ist überflüssig zu erwähnen das Guru Cramer die Aktie noch vor ein paar Monaten als "die Aktie" im US Hypothekenmarkt gepriesen hat

Aug. 10 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, said it faces ``unprecedented disruptions'' that may crimp profit, suggesting a credit crunch that started with the U.S. subprime market will spread.

Countrywide won't be able to sell as many of its loans as expected because investor demand has dried up, the Calabasas, California-based company said in a filing with the U.S. Securities and Exchange Commission. It also said it may have difficulty obtaining financing from creditors. Shares of the company fell as much as 13 percent in after-hours trading.

``The secondary market and funding liquidity situation is rapidly evolving, and the potential impact on the company is unknown,'' Countrywide said.

Shares of Countrywide, which have lost a third of their value this year, fell to $25 in late trading from $28.66 at yesterday's close in New York Stock Exchange composite trading.

``We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,'' Countrywide Chief Executive Officer Angelo Mozilo said during a conference call with investors last month.

> Here are some thought on the real estate market 1929 vs 2007

> Der amerikanische Immobilienmarkt damals (1929) und heute (2007)

Countrywide's allowance for credit losses was $531.1 million as of June 30, almost double the amount on Dec. 31, it said in the filing.

More Consolidation
Countrywide again assured investors that it has enough cash to cope with a credit crunch and said it may benefit as the industry's capacity shrinks. The company said earlier this week that it had access to $186.5 billion at mid-year.

> Not a o good sign when you have to do that.....

> Kein gutes Zeichen wenn man diesen Schritt gehen muß....

Still, Countrywide said it was no longer trying to sell $1 billion of subprime mortgage loans and would instead hold them as investments ``for the foreseeable future.'' The loans now have a value of about $800 million, Countrywide said.

Now he must address an increase in missed payments for prime loans, or those granted to borrowers with good credit histories. The company set aside $292.9 million for loan losses in the second quarter, compared with $61.9 million a year earlier, as it earmarked $181 million for prime home-equity loans.

> Time to take a look at all the houses that are weighing on the Countrywide balance sheet.... If they will survive they should considering to become a REIT :-)

> Zeit sich mal die Immobilien anzusehen die momentan die Bilanz belasten......Sollte Countrywide diese Krise überstehen in Erwägung ziehen als REIT zu firmieren :-)

Thanks to Dimitris and his excellent Countrywide Foreclosures Blog

Countrywide accounts for almost a fifth of all mortgages made in the U.S. The company revised its forecast of new loans to $420 billion to $500 billion this year, from $450 billion to $550 billion predicted in April. It extended $123.1 billion in new loans during the second quarter, 15 percent more than a year earlier.

Disclosure: Short KBW Mortgage Finance Index (including Countrywide)

Plenty Of Houses On The Balance Sheet.....

How severe the picture for some banks already is shows the Countrywide Foreclosures Blog from Dimitris. If this trend continues they should consider to become a REIT ...... :-)

Wie ernst die Lage inzwischen bei einigen Banken ist wird hier wunderbar von am Beispiel von Countrywide von meinem Bloggerkollegen Dimitris aufgezeigt. Wenn dieser Trend anhält sollten die ernsthaft in Überlegung zeiehn sich ein einen REIT umzuwandeln ......... :-)

Taken from the WSJ Housing Market WeakensAs Mortgage Industry Takes Cure

Moody's Economy.com has estimated that 2.5 million homeowners will default on their mortgage loans this year and next. Some will be able to keep their homes, through "loan modification" agreements that reduce payments or through various refinance packages offered by lenders and state rescue programs. But about 1.7 million of them will lose their homes to foreclosure, the research firm projects.

> Help is underway.....

Democrats Campaign on Mortgage and Trade Issues

In a speech scheduled for this morning in New Hampshire, Mrs. Clinton is to propose providing $2 billion in federal money to help “at risk” homeowners avoid foreclosures and to assist state and local governments build rental properties and other housing for families in need.

The U.S. housing boom over the past decade turned about five million renters into homeowners. But many of the loans that made that possible have proved unsustainable. Dr. Wheaton expects about two-thirds of those people to go back to renting.

Disclosure: Short KBW Mortgage Finance Index (including Countrywide)

Countrywide .... Genius At Work......

Why took it so long for anybody to adjust to reality ? I wonder what the buyers of these Bonds are thinking right now...

Warum es solange gedauert hat bis jemand die Realität anerkennt ist mit ein Rätsel. Das filt im besonderen für die Käufer dieser Bonds......

Countrywide conference call review october 2006
"Additionally, as previously announced, management is executing a capital optimization plan and the Board of Directors has authorized a share repurchase program of up to $2.5 billion. In connection with this program, the Company intends to repurchase $1 billion to $2 billion of its common stock in the fourth quarter financed through the issuance of high equity-content debt securities."

from May 2007!
Countrywide Financial Corporation Announces Agreement to Sell $2 Billion of Series A Floating Rate Convertible Senior Debentures Due 2037 and $2 Billion of Series B Floating Rate Convertible Senior Debentures Due 2037
Countrywide Financial will use a portion of the net proceeds from this offering to fund repurchases of up to 23 million shares of its common stock simultaneously with this offering and expects to use the remainder for general corporate purposes.

But as long the rating agency´s (taken from end of 2006) are either dumb or/and blind..... In 2007 no press release that the ratings have changed

Aber solange die Grahlshüter des Rating weiter auf beiden Augen blind sind...Die Daten sind von Ende 2006 (bisher hat es in 2007 keine Pressemitteilung über eine Änderung gegeben)

Needless to say that the management has unloaded "gazillions" of shares in the meantime.....

Überflüssig zu sagen das während der selben Zeit das Management Tonnen von Aktien auf den Marktgeschmissen hat.....



Transcript conference call via Seeking Alpha
Slide presentation conference call pdf
Countrywide Foreclosures Blog
Countrywide CEO with Cramer on Mad Money (both) prasing the stock at 38-40$

Stock just closed over 30$....

> I recommend to watch the slide show with lots of good charts

> Kann jedem die Slide Präsentation inklusiver netter Charts empfehlen

Example from the call/presentation
Let's turn to page 3. The graphs on page 3 show delinquency over a range of cumulative home price appreciation rates. For each graph, the x or horizontal axis represents the amount of cumulative home price appreciation for the first 24 months of the loan's life. The y or vertical axis for each of these charts represents the serious delinquency rate for each bucket or range of cumulative home price appreciation on the x-axis. The serious delinquency measure used here is an over-90-day delinquency using the MBA standard and expressed as a percentage of the starting count of loans.The higher the appreciation rate, the lower the serious delinquency.

> Really? They are very smart....

> Wirklich? Die haben echt was auf dem Kasten.....

The ones with more leverage, tend to have high serious delinquency rates across the spectrum of home price appreciation rates

> As i said, experts at work......

> Wie bereits gesagt, echte Experten bei der Arbeit

Odds ratio, which can be thought of as a risk multiplier.

Let's use the FICO chart on the top left of page 4 as an example. We use a FICO of 800 as a base; so we will set that FICO to a value of 1. If we look at the blue line, which represents prime first liens, we can see how the odds ratio increases as the FICO declines. A prime loan with FICOs in the low 500s is going to be over 30 times more likely to be seriously delinquent than a prime loan with an 800 FICO, holding all other variables constant.

On the bottom of page 4, we show odds ratios for documentation types with full doc being the baseline of 1. Let me explain the various doc types that we are showing here. A streamline is a streamlined refinance. Preferred is a low documentation approach offered by a number of institutions; Countrywide's is called Fast & Easy, where borrowers who meet certain criteria are allowed documentation waivers. A SIVA is a stated income verified asset program; it's sometimes called reduced doc. A NIVA is a no income verified asset program. The primary difference between SIVA and NIVA is that the borrower states but does not document their income for a SIVA loan, but neither states nor documents their income for a NIVA loan. Assets are verified for both SIVA and NIVA.

A SISA loan is a stated income stated asset; the borrower is stating but not documenting their income and assets. A NINA is a no income no asset loan; the borrower is neither stating nor documenting their income or assets. The takeaway from this chart is that documentation matters.

The less documentation, the higher the serious delinquency, all else equal.

> Shocking news......
Let's turn to page 8. Page 8 shows total delinquency for our servicing portfolio using both the MBA and OTS standards. We introduced in this topic on the last call and I wanted to spend a little more time this morning on it again. While we normally use the MBA standard for corporate purposes, many other institutions use the OTS standard. Because most mortgage loans are due on the first day of the month, there can be a large difference between the two delinquency measures; and you can see that here on this page.

Just so I can reflect on this as you people think of your questions. The other is that the Fed knowing that well over 50, 60, 70% of the loans made in 2003, '04, '05, and '06 were indexed variable-rate loans, indexed one way or another to the Fed funds rate, increased the Fed funds rate 17 times. 17 consecutive times, with most of the product out there being variable-rate product

> Translation " Fed bail us out...."

> Peinlich! So hört sich ein bitten und flehen um Hilfe der Fed an.....

Disclosure: Short KBW Mortgage Finance Index (including Countrywide)

On the Block in California / NYT

with so much ( and rising) inventory on the market, tightening credit, higher rates, slowing economy, just the beginning of the big unwinding of the bubble i think the buyers are to early in buying in this kind of auction. but nevertheless compared to just 12-18 month ago when buyers camped outside to get one of the contracts , bidding wars or had to win in a lottery to get into real estate quite an improvement and a significant reversal in sentiment..... :-)

mit unmengen von immobilien auf halde (die zudem ständig weiter ansteigt), verknappung der kreditmöglichkeit, höheren zinsen, einer schwächeren wirtschaft und gearde erst dem beginn des platzes der blase sind diese auktionen sicher in zukunft deutlich billiger zu haben. nichtsdestotrotz isr das eine komplette kehrtwende von dem verhalten von 12-18 monaten als zum teil vor neuen baugebieten gecampt wurde, es ein wettbieten gab oder gar lotterien veranstaltet wurden um überhaupt an objekte zu kommen...... :-)
ON a foggy Sunday morning last month, the parking lots around the convention center here were filling fast.

The volume of the traffic downtown was not unusual. What was unusual was that the men directing the traffic were wearing tuxedoes.

The crowd — about 1,200 people looking for deep discounts in real estate — was decidedly less formal, in jeans and Dockers, shorts and sandals. The casual dress code concealed the fact that many were serious buyers carrying millions of dollars collectively into the hall in cash and cashier’s checks.

Some were investors, like Dendy and Rita Villegas of San Diego, who were looking to pick up an inexpensive house to rent out. Some were first-time buyers, like Rodolfo and Veronica Gonzalez of Fontana, who were hoping to save $200,000 or so off the asking price of a family home.

They converged on an event the likes of which Californians have not seen in a decade: a large-scale auction of foreclosed homes.

On this occasion in Riverside, two lenders had put 100 properties on the block. By the end of the day, 93 had sold. Most of those properties were in fast-growing exurban and desert communities in Riverside and San Bernardino Counties east of Los Angeles.

this chart is taken from the

Dimitris´excellent Countrywide Forclosure Blog http://tinyurl.com/22vw96

>make sure you click on the link to see the total disaster that countrywide is facing nationwide with almost $ 1.75 billion in housing inventory on their books......

>empfehle auf den link zu klicken um im detial zu lesen wie sich die inzwischen $ 1.75 billion an immobilien in den büchern zusammensetzen....

The company that held the auction had been dormant for a decade. But in recent months, when mortgages started going bad and foreclosures multiplied, several lenders contacted the company’s officers and asked if they could get back into the business of auctioning properties.

“We went into hibernation, and we’re back!” said Robert Friedman, the chairman of the Real Estate Disposition Corporation, which is based in Irvine.

The company sold more than 265 properties in San Diego, Los Angeles and Riverside during two weekends in May, and it is planning to hold auctions in Sacramento, Modesto, the Bay Area and Atlanta this summer. > they might have to upgrade the future size of the the convention centers

> evtl. sollten schon einmal vorsorglich gräßere hallen gebucht werden

Mr. Friedman described his trade as a “countercyclical business,” and he said that the banks unloading the properties preferred not to be identified.

In some cases, he said, the institutions sold the properties for less money than they were owed.

“It’s not a happy occasion,” he said. “They’d rather take a little loss quickly, rather than waiting and seeing.”

However unhappy the occasion may have been for lenders, the auction company put on a driving, shrieking, high-spirited event. All that was missing was the preacher and the tent.....

Opposite the hall, a ballroom held 41 loan officers and 25 escrow officers. Before the bidding started, a jubilant soundtrack poured from the speakers. The rotation included “Jumpin’ Jack Flash,” the happiest songs of Earth Wind and Fire, and a modern version of “I’m a Believer.”

here is an example how not to bid.....hier ein beispiel wie man es besser nicht machen sollte....

"The time to buy real estate is when the market is soft,” he said. “Today’s the day. Don’t regret not buying at this auction.”

>see opening comments...siehe einleitenden kommentar...

Foreclosures have surged in Southern California in the last year, particularly in outlying areas.

In seven counties, lending institutions foreclosed on 6,007 properties in the first quarter of 2007, up from 721 properties in the first quarter of 2006

In Riverside and San Bernardino Counties, lenders foreclosed on 255 homes in the first quarter of 2006. That number grew to 2,369 in the first quarter of 2007, according to DataQuick. ..

.... Buyers have no opportunity to inspect the properties and must pay in full, in cash. The sellers do not have to guarantee that the title is clear of liens and additional mortgages.

The recent real estate auction in Riverside eliminated many of those problems.

The company presented every property for public inspection for three days, and it guaranteed title insurance as well. In addition, the company arranged for a lender to finance the deals, so that buyers did not have to pay cash for the full price.

Buyers paid the auction company a fee of 5 percent of the sale price for the first house, and 15 percent of the sale price on additional houses.....

>15 must be a typo, i think it could be 1.5 percent

>die 15 prozent müssen ein tippfehler sein, denke es soll 1,5% heissen.

Dendy and Rita Villegas drove two hours from San Diego with their 7-month-old daughter for the chance to bid on a house in Murrieta, about 80 miles southeast of downtown Los Angeles. They are real estate agents, and Mr. Villegas is also a home inspector. He said that the house they wanted looked better than the other bank-owned houses on its street, but that it needed a lot of work.

“It looked like whoever had lived there just got up and left,” he said. The walls were dirty, the floor was damaged and the pool equipment wasn’t working.

When the property came up for bidding, Mr. Villegas was quick to raise his card. He was prepared to go as high as $300,000.

Within seconds, the auctioneer, at blood-boiling pace, ran the price up to $350,000. Ultimately, the four-bedroom, 1,828-square-foot house went for $400,000 to another bidder. The auction catalog said it had been previously valued at $425,000.

Throughout the bidding, the loudspeakers shrieked at rock-concert levels. The young men in tuxedoes — called “ring men” by the auction company — ran up and down the aisles in a sweat, spotting bids, flashing the totals on their fingers.

At pauses in the bidding, the auctioneer would shout encouragement. “What the heck?” he would say. “It’s only money!” At the front table, a chorus of young women clapped and cheered with each surge in the price.....

Even so, the concern among many bidders at the event was that even if the properties sold for 20 or 30 percent less than their value at the peak of the market, the price might still be too high.
Jim and Betty Botley of Chino attended the event with their Realtor, Maurice Merchant. They were looking to spend what Ms. Botley defined as “$300,000, and that’s it.”

The house they wanted went for an auction price of $550,000. The Botleys thought it would have needed $50,000 to $100,000 for renovation. After the repairs, auction fee and closing costs, they couldn’t see how anyone got a deal.

“We learned a lot today,” Mr. Botley said. “You can probably buy them cheaper on the market than buying here.”

>one thing is for sure...this cartoon is now outdated......

>dieser cartoon dürfte damit veraltet sein......

disclosure: short cfc and several other lender