IndyMac Increases Credit Reserves 47 Percent to $1.39 Billion

This number from the top Alt-A originator ( 14 percent) gives a hint how ugly the situation has become beyond subprime.

That might give a hint how bad the situation for several other players is that have bought back shares hand over fist during the past years and are more involed in subprime, havn´t sold their originations etc......

bigger / größer via Calculated Risk

Forecasted Home price depreciation ranging between 6% and 10% is factored into our loss expectations that drive valuation and reserves – average HPI declines expected to be around 9%

Diese Zahlen von dem Top Alt-A Kreditgeber ( 14 %) geben ein paar klare Indizien das neben Subrpime auch andere Segmente massiv an Qualität verlieren.

Das läßt erahnen wie übel es für andere Institute aussehen muß die im Gegensatz zu IndyMac in den letzten Jahren haufenweise Aktien zurückgekauft havben und sinnlose wertvernichtende Übernahmen getätigt haben aussehen mag. Ganz zu schweigen von denen die Ihre Riskiken nicht weiterreichen konnten und noch stärker im Subprime Sektor engagiert waren.....

We Hold Direct Credit Risk On $19.02 Billion Of Total Single Family Loans Serviced In Our Whole Loans And In Non-Investment Grade And Residual Securities

> Watch the large percentage of homebuilder credit costs....

> Man beachte den gewaltigen Anteil der Rückstellungen für die Homebuilder.....

In the call they said that they had claer signs in 2005 that the market for builders has peaked, but they have ignored it. Now they are paying a high price. They have stopped making any loans to builders and have no intend to re-enter the market soon.

Im CC hat das Management zugegeben das bereits Ende 2005 ganz klare Anzeichen für Probpleme bei den Buildern zu erkennen waren. Dummerweise wurden diese ignoriert und es wirde munter weiter verliehen. Nun kommt die Rechnung. Immerhin haben Sie versprochen dieses Segment nicht weiter zu bedienen und bis auf weiteres keine neuen Kredite zu begeben.

IndyMac Bancorp Reports Third Quarter Loss of $202.7 Million, ($2.77) Per Share

• Total pre-tax credit costs were $407.7 million (versus $103.5 million in the second quarter of 2007), or a negative impact on earnings per share (“EPS”) of $3.40.
• Spread widening in the private-label (non-GSE) mortgage secondary market resulted in a loss of gain on sale and MBS securities revenue estimated at $167.2 million pre-tax for the third quarter, or a negative EPS impact of $1.39.
• After surviving the global liquidity crisis in 1998 as a REIT, we purchased a federally chartered thrift and put our entire business inside the thrift, with the result that we have no liquidity issues today, while many mortgage companies have gone bankrupt or recorded massive losses due to liquidity shortfalls.
• We protected and bolstered our capital by not repurchasing any shares since 2002 and, in fact, raised a substantial amount of capital in 2007.
• We held virtually no subprime, closed-end seconds or HELOCs for investment purposes ($112 million, or 0.3 percent of total assets at September 30, 2007).
• We were not a major subprime lender, ranking 32nd among subprime lenders (according to the National Mortgage News 2006 survey). Our subprime volume in 2006 was $2.7 billion, or 0.39 percent of the total subprime market.
• While we originated $43 billion of Option ARMs from 2005 through Q3-07, we sold all but $1.0 billion (held for investment) and $2.6 billion (held for sale), and we retained no non-investment grade or residual securities related to these loans.
• We laid off virtually all Alt-A 2005/2006 credit risk into the secondary market, retaining only $7.0 million in non-investment grade and residual securities from this production.
• We hold no investments in collateralized debt obligations (CDOs) or structured investment vehicles (SIVs) and only hold mortgage backed securities (93.5 percent of the investment grade MBS are rated AAA and AA, none of which have been downgraded).
• We made one of the only successful acquisitions this decade in the mortgage business – Financial Freedom, the largest reverse mortgage lender in the nation – while virtually all other significant acquisitions have produced very poor results.

> Almost all of the new liquidity is coming from the Federal Home Loan Banks ......

> Fast die ganze zusätzliche Liquidität kommt von Seiten der Federal Home Loan Banks ......

Our operating liquidity is at an all time high of $6.3 billion at 9/30/07, up 54% from $4.1 billion at 6/30/07, and we have no reverse repurchase borrowings or extendable assetbacked commercial paper…95% of our borrowings are deposits, FHLB advances and long-term debt

> the next slide shows a nice Level 3 aka "Mark-to-Make-Believe Gains" etc gain. Wonder why they havn´t used an assumption that would have cover the entire loss from the credit costs.......... Maybe they are conservatice.......

> Nebenbei bemerkt zeigt die nächste Grafik das auch hier mal wieder ein nicht ganz unerheblicher Level 3 aka Mark-to-Make-Believe Gains etc Gewinnbestandteil. Schon erfreulich das Sie nicht gleich eine Berechnungsgrundlage berechnet haben die gleich die gesamten Verluste im Zusammenhang mit den Kreditkosten abdeckt...... Evtl. ist IndyMac ja betont konservativ......

I want to highlight the IndyMac Presentation / pdf that is full of details about every aspect of the mortgage market

Ich möchste Euch in diesem Zusammenhang die IndyMac Präsentation / pdf ans Herz legen die vollgepackt mit Details zur aktuellen Verfassung der Hypothekenmärkte ist.

The United States of Subprime / WSJ

Brilliant! This is a must read and the interactive map "subprime tidal wave" is a must see!

Brilliant! Der komplette Artikel ist zu Recht auf Seite 1 vom WSJ. Die interaktive Karte "Subprime Tidal Wave" ist ein echter Hingucker und sollte auf keinen Fall verpaßt werden!

I suggest to read the entire link

Ich empfehle den kompletten Link zu lesen.

The United States of Subprime
As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.

The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.

High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash.

To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.

Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations.

The Journal's findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. From investors hoping to strike it rich by speculating on condominiums to the working poor chasing the homeownership dream, subprime loans burrowed into the heart of the American financial system -- and now are bringing deepening woe.

The data also show that some of the worst excesses of the subprime binge continued well into 2006, suggesting that the pain could last through next year and beyond, especially if housing prices remain sluggish. Some borrowers may not run into trouble for years. ....

Heatmap of House Price Risk / PMI

Click here to read the entire PMI report (pdf) or read the good summary The riskiest housing markets & Price risk for the top 50 U.S. markets from MSN.

Klickt Euch durch die o.g. Links um entweder den kompletten PDF Report oder die guten Zusammenfassungen zu lesen.

Hat tip to sevenofnine!

There's a 34.6% chance on average that home prices will drop in the nation's top 50 markets in the next couple of years

The map depicts in color the geographic distribution of house price risk for all 379 MSAs and the District of Columbia. Each MSA is assigned a risk rank and corresponding color.

Among the 50 largest MSAs, Riverside, CA, Phoenix, AZ, Las Vegas, NV, and West Palm Beach, FL rank highest on the index, with a 60 percent or greater chance that home prices will be lower in two years.

At the other end of the risk spectrum lies a group of MSAs, largely located in the central and southern part of the nation, whose risk scores are moderate to low.

"Heatmap Property Taxes"

click on the headline to read the realated story from the wsj. i recommend to read the the spot on summary from mish

http://tinyurl.com/2k53w4

klickt auf die überschrift um die geschichte des wsj zu lesen. ich empfehle aber eher die auf den punkt gebrachte zusammenfassung von mish

Interactive Heatmap Housing Over/Under-Valuation q4 2006

click on the headline to start the interactive map.

bitte auf die überschrift klicken um die interaktive karte zu starten

on top of that National City has put up a detailed report. please take into account that the downtrend has acclerated since q4, so the real picture is worse.....

zusätzlich gibt National City noch einen detailierten report heraus. . das realle bild dürfte somit noch schlechter aussehen (gerade wenn man bedenkt das sich die talfahrt seit jahreswende beschleunigt hat).

This study employs a statistical technique — pooled time series regression analysis — to evaluate single family house prices in 317 metro areas. These 317 areas collectively account for 77 of all existing single family housing units and 86 percent of all related real estate value, as of the fourth quarter of 2006. (link methodology http://tinyurl.com/2p2j3p pdf)

• For the period from Q1/1985 to Q4/2006, price-to-income ratios are statistically explained by four factors: household population density, mortgage interest rates, relative income levels and characteristics unique to the history of each metro area.

• The model accounts for 77 percent of the variation in house price-to-income ratios over time and across the 317 metro areas. Explanatory variables are statistically significant with high levels of confidence.

here the link to the report (pdf) http://tinyurl.com/yut9mh

here you can see how the s&p/case-shiller futures are heading south..... http://tinyurl.com/2f9oce

hier gibt es den link um die aktuellen s&p/case-shiller futures zu sehen... http://tinyurl.com/2f9oce

thanks to DaveDonhoff and the http://forum.themarkettraders.com/ !

delinquencies on the rise / wsj

click on the headline to see the yoy change/details

bitte auf die überschrift klicken um die jahresveränderungen zu sehen


The mortgage delinquency rate climbed to 2.87% in the first-quarter, up from a recent low of 2.03% in the fourth quarter of 2005. The rate is at its highest level since at least 2000. The rise in delinquencies has been steepest in Modesto, Stockton and Merced, Calif., and the Port. St. Lucie-Fort Pierce metro areas in Florida. On an absolute basis, delinquencies are highest in Detroit-Livonia-Dearborn, Mich. and Brownville-Harlingen, Texas

thanks to barry ritholtz http://bigpicture.typepad.com/



größer/bigger headline

An Inflation Heat Map / business week

click on the headline to read the full piece

bitte auf die überschrift klicken um den vollen bericht zu lesen

.....A look at recent and upcoming data shows the Fed has little wiggle room as it tries to figure the balance of risk between inflation and growth ......



>remember this map when the media and wall street is spinning that consumer price inflation is no problem (even with the creative and unique fed formula....see graph..). especially with the fed minutes out today......

>behaltet diese auflistung vor augen wqenn es demnächste wieder auf cnbc und wall street heisst das inflation kein them ist ( selbst unter zuhilfenahme der kreativen fedformel....) besonders wichtig da die fed minutes heute veröffentlicht werden....

thanks to http://www.wallstreetfollies.com/

got gold....?

The Housing Project Update / PIMCO

good take from pimco. please make sure you read the comments on the ofheo data that is used from pimco for their charts.

gute bestandsaufnahme von pimco. möchste euch noch besonders aie erläuterungen zu den ofheo daten hinweisen die ich eingefügt habe und die pimco in einigen bereichen (charts/text) zitiert.




In 2005, PIMCO forecasted home price appreciation (HPA) of 5% for 2006, with stronger gains in the first half of the year and smaller gains through the second half. The OFHEO (Office of Federal Housing Enterprise Oversight) home price index appreciated by 5.9% in 2006, with the largest gains occurring early in the year. This represented the smallest annual increase since 1999.
2006 marked an inflection point for the U.S. housing market. Although home prices continued to rise, the rate of increase slowed and some regions began to see price declines. The most drastic impact of the housing slowdown was felt in the subprime sector (mortgage loans to lower credit-quality borrowers) where mounting delinquencies and losses squeezed already-thin profit margins for mortgage lenders, forcing some to shut their doors. PIMCO believes that mortgage finance was critical to the rise in home prices since 2000, and also will be critical to the period ahead, which undoubtedly brings a correction of some sort. We want to answer the question: How much of a correction?

Housing Data
In 2005, PIMCO forecasted home price appreciation (HPA) of 5% for 2006, with stronger gains in the first half of the year and smaller gains through the second half. The OFHEO (Office of Federal Housing Enterprise Oversight) home price index appreciated by 5.9% in 2006, with the largest gains occurring early in the year. This represented the smallest annual increase since 1999. ( read more about the often misleading ofheo data http://tinyurl.com/37mszm / unter dem link mehr infos zu den nicht immer repräsentativen ofheo daten )

this are comments from paul in jax and deb on the ofheo data.

• OFHEO data is great, but remember this news is about six months old
• The OFHEO data is not terribly relevant for many high priced metro areas.
  The methodology uses only “TRANSACTIONS INVOLVING CONFORMING, CONVENTIONAL MORTGAGES PURCHASED OR SECURITIZED BY FANNIE MAE OR FREDDIE MAC”.
• How many transaction in Los Angeles or similarly high priced cities meet this criteria? I would guess only a small fraction.
• So they are basing this entire index on the sales at the VERY BOTTOM entry level into the market, and most likely transactions involving somewhat more qualified buyers who can actually get standard financing meeting GSE guidelines.
  

Despite the continued growth of the average housing price, there was substantial variation between different regions. Several states saw price declines in the 4th quarter: California, Hawaii, North Dakota, Nevada, and Nebraska. Michigan became the first state to see a year-over-year decline in several years, primarily due to employment weakness in the auto industry.

thanks to barry ritholtz http://bigpicture.typepad.com/

Most housing indicators turned lower in 2006. New and existing home sales both fell during the year. Sales of existing homes were down 7% for the year and 13% from their 2005 peak. The drop in new home sales was slightly more pronounced, plummeting by as much as 23% before recovering to finish the year 11% lower. The number of vacant homes for sale increased by over 34% and homebuilders are coming under increasing pressure to control the surging inventories. The housing supply has continued to increase early in 2007 and the number of vacant homes for sale now stands at over 2.1 million (2.7% of all homes).



New vs. Existing Home Sales
The new home sales and price data for 2006 was volatile and we believe the reason is important. In the early ’90s California housing recession, only one of the top 10 builders was a public company. Today, nine of the top 10 homebuilders are public companies. This is important because equity investors punish public companies for high inventory. We have long expected to see the builders cut prices to unload new homes, which they did in 2006. We also believe prices were softer than the reported data reflect because instead of cutting the sales price, a builder often will include several thousand dollars of upgrades, which aren’t reflected in the sales-price data.
Existing home sales are a more stable indicator of sales volume for the bulk of the housing stock. Unlike new homes, where the owner is a builder who is a highly motivated seller, an existing homeowner will most often stay in the home rather than discount the price heavily. As a result, many existing homes that don’t sell quickly simply are taken off the market.


What’s More Important: Volumes or Prices?
We believe the volume of homes sold holds more significance because it has considerable second-order effects on the economy. A slowdown in housing leads to a reduction in employment not only for builders and construction-related sectors, but also for mortgage lenders, appraisers, brokers, and realtors. More importantly, it triggers a substantial decline in consumption. Fewer homes being sold means that there are fewer people buying new furniture, electronics, and other goods and services that normally accompany a new home purchase.

Mortgage Lending: Subprime Finally Weakens
If mortgage lending was fuel for the housing bonfire since 2000, it was the firehose in late 2006 and early 2007. ......

There is no doubt that higher HPA in previous years has limited losses from riskier loans, but performance for the 2006 vintage deteriorated rapidly amidst the combination of a housing slowdown and increasingly liberal underwriting standards

make sure you read this brilliant piece from rodger rafter with even scarier charts than the above from pimco. http://tinyurl.com/2fqgva

ihr solltet euch unbedingt noch mehr charts von rodger rafter ansehen. bitte auf den link klicken http://tinyurl.com/2fqgva

Tale of Two Mortgage Markets: Prime vs. Subprime
The rapid growth of subprime lending since 2000 and the innovation it has brought to the mortgage market generate a lot of interesting and alarming headlines, but the prime market actually comprises the majority of US mortgage loans, and has been unaffected substantially by the housing slowdown.

What distinguishes a prime loan from a subprime loan? Ask 10 mortgage professionals and you’re likely to get 10 slightly different answers, as there isn’t a single standard definition. ....

but it in very important to know that the last years subprime and alt-a have exploded! that is the area where the danger is......so the overall number from pimco gives only one side of the story. the foreclosures are coming in the segment fast and furious.....

es ist allerdings sehr wichtig zu wissen, das der subprime und alt-a bereich in den letzen jahren explodiert sind. hier liegen die probleme. so die gesamtnummer gibt ein verzerrtes bild wieder. die zwangsvollstreckungen kommen genau aus diesem segment.

The prime market, on the other hand, is the traditional market that has served several generations of homeowners – typified by a 30-year or 15-year fixed rate, a 20% down payment, and a FICO or credit score above 700. The majority of these high-quality loans are sold into MBS (mortgage-backed securities) and guaranteed by one of the mortgage agencies – Ginnie Mae, Fannie Mae, or Freddie Mac. (Most subprime loans are not credit-eligible to be sold to the agencies.) Agency MBS have been unaffected by the housing slowdown.

Spreads on high quality MBS and AAA-rated ABS remain near historic tight levels, but lower-rated bonds have widened substantially. Investors increasingly are differentiating or tiering between originator/servicer quality, loan quality and many other aspects of mortgage credit – something PIMCO has been doing actively for some time. Mortgage credit analysis is granular, credit-intensive, and bond-specific. Generalities rarely apply.

The lenders that are most likely to emerge from the downturn are those with a significant, complementary prime mortgage business such as Countrywide, Wells Fargo, Chase, and Bank of America.

Outlook for 2007:
PIMCO expects the housing slowdown to continue in 2007 with a steeper decline in home sales than for home prices. New home prices should fall the most since they appreciated the most relative to existing housing during the run-up in prices. Attempts by homebuilders to reduce heavy inventories also will put downward pressure on new-home prices. The National Association of Realtors index, which tracks median home prices, should fall by 4-5% in 2007. The OFHEO index tracks repeat sales and PIMCO expects it to decline by over 1% this year (new home sales have little impact on this index).

The slowdown in housing should drag GDP down by approximately 1% over the next several quarters. Due to the multiplier effect that a slowdown has on consumption, it is likely that the impact on the economy will be even more substantial.

We expect the problems in the subprime market will result in continued consolidation of lenders, as the weaker players are not able to sustain loan production volumes or meet the tighter standards that are currently underway. Due to this consolidation, we expect to see subprime issuance decrease dramatically in 2007–2008. Much contraction has already taken place as year-to-date issuance has dropped nearly 10% compared to 2006 at this point in time. We envision a credit squeeze among low FICO, high loan-to-value and first-time homebuyers who are used to liberal credit standards.

It is likely that the poor performance we have seen in subprime loans will carry over to some degree into the most aggressively underwritten loans in the “Alt A” and possibly Jumbo prime markets.

We do not believe prime loans will be materially affected. The pronounced problems in the subprime market will not disappear as quickly as they emerged; instead we believe it will be a long process that will take perhaps years to correct.

PIMCO has often compared the housing market to a supertanker – a massive ship which takes 23 miles to come to a stop after being thrown into full reverse. (couldn´t resist..)

We believe we are in the middle of a downturn, not at the end, and that the problems created by expensive housing, overstretched consumer finance, and years of Fed tightening have yet to take their full toll on the US housing market.