NovaStar nonsense / Greenberg

What a surprised....Not contained to 2006 vintages.....Shocking :-)

Make sure you see this post from Rodger Rafter including a must see chart about the past vintages from Nova!!!!

Was für eine Überraschung....Die Probleme betreffen also nicht nur die in 2006 verbrieften Hypotheken.....Schockierend :-)

Ihr müßt Euch zudem unbedingt unter dem o.g. Link den Post von Rodger Rafter zu den letzten Verbriefungen ansehen!!!!!!!

Takeover talk keeps swirling around NovaStar (nfi), probably yet another effort to keep investors from focusing on what really counts, including a continued deterioration in trust data across all vintages. From Stifel Nicolaus:

"While weakness in the 2006 vintage is widely expected, NFI data showed losses climbing well above our projections in all vintages from 2004 forward."

So much for subprime slime being just a little grime.

Big Investors Jumping Back Into Shaky Home Loans

nice to see that even the smart money is often dumb money......

schön zu sehen das selbst die großen oft genug danebenliegen......


The subprime mortgage business is in tatters: loan volume is plummeting, defaults are rising and some of the biggest lenders have cut back or shut down.

So what is the smart money — private equity, hedge funds and investment banks — doing? They are swooping in and taking over those battered businesses, seeing opportunity amid the wreckage.

>we will see down the road if this was "smart" money"....

>denke das wir erst in zukunft sagen können ob das wirklich alles so smart war

“There is a lot of money pent up,” said Steve Probst, national sales manager with Fairway Independent Mortgage, a lender based in Sun Prairie, Wis. “And a lot of people are betting that the market will snap back quickly.”

It is a risky proposition.
In many parts of the country, there is a glut of unsold homes. Defaults and foreclosures are rising, putting further pressure on home prices and mortgage lending. Some housing industry officials worry that the new infusion of capital may refuel aggressive and risky lending to people with poor credit, known as subprime borrowers, delaying a much needed winnowing of the business.

thanks to Northern Trust. more charts here from Barry Ritholtz http://tinyurl.com/3b5cle

Those dark clouds do not faze the new money in subprime. Among those making the biggest bets is Cerberus Capital Management, which first made its name investing in distressed debt. One of the country’s largest private equity firms, Cerberus has a record of making risky contrarian bets, including its recent agreement to take control of the troubled Chrysler Corporation for $7.4 billion.

Cerberus acquired control of the subprime lender Residential Capital last year, when it led an investment consortium that bought a 51 percent stake in G.M.A.C., the finance arm of General Motors. And in April, Cerberus, which also owns Aegis Mortgage, a subprime lender based in Houston, announced plans to acquire Option One, the troubled mortgage subsidiary of H&R Block.

Taken together, these acquisitions would make Cerberus the biggest subprime lender in the country, far ahead of large mortgage giants like Countrywide, Wells Fargo and others, according to first-quarter lending statistics from Inside Mortgage Finance.....

“They have certainly double-downed and have bought some extremely attractive operations — companies that have dominated their space,” said Brenda B. White, a managing director with Deloitte & Touche Corporate Finance. “But now they’re faced with executing on a plan, whatever that plan might be.”

>read this twice...what a statement...when you double down on something it is more a sign that they bought way to early. and everybody that bought subprime in 2006 was an not lets say it politely "not smart"....

>last euch das argument nochmal auf der zunge zergehen...wenn ich lese das einer "double down" geht heisst das für mich das hier im vorwege viel zu teuer gekauft worden ist. und wer wie in diesem fall in 2006 in den subprime markt eingestiegen ist der hat gelinde gesagt "nicht clever" gehandelt.

This year, when rising mortgage defaults and a credit squeeze on Wall Street have forced many subprime mortgage companies into bankruptcy, some analysts predict that the industry might shrink by a third or more. Many industry officials acknowledged that a shakeout was necessary to cull the industry of the lenders that led in making risky loans and forcing rivals to match them or lose business.

In the last several months, however, private equity firms and others have acquired, taken stakes in or provided fresh capital to companies that wrote nearly 20 percent of last year’s $600 billion in subprime loans. It is, analysts and industry officials suggest, an unusually quick and substantial bet on a distressed business that by most indications is in the early phases of a long-term retrenchment.

Yet trying to time the bottom of a sliding market has been tricky, even for smart-money investors like Cerberus.

For instance, rising defaults and the cost of buying back poorly performing loans from investors left Residential Capital with more than $1.5 billion in losses in the six months that ended in March and the losses are expected to continue. (In March, General Motors, which still owns 49 percent of G.M.A.C., was forced to put an additional $1 billion into the unit because of the division’s mortgage woes.)

Cerberus has insisted on a number of terms and conditions in its deal to buy Option One, suggesting that the firm has become more vigilant about not paying too much. ...

“The investment banks that were buying last year were buying at the high,” said Mr. Burns, who is now chief executive of Vantage Score, a company that provides credit scores that lenders use to evaluate borrowers. (Both Merrill and Morgan have said they are comfortable with what they paid for their subprime acquisitions.).....

“They’re taking enormous risks here in hoping that they’ll be able to stabilize these businesses, keep them going, and get the types of regulatory approval they need to originate and service mortgages,” said Rick Antonoff, a partner in the bankruptcy and restructuring practice at the law firm of Pillsbury Winthrop Shaw Pittman. “They have put a lot of capital in already, and it’s going to take additional capital to keep these businesses going for a while.”....

In April, Accredited Home Lender, a San Diego-based lender, raised $230 million in loans from Farallon Capital, an investment firm based in San Francisco. The mortgage company agreed to pay a 13 percent interest rate and penalties if it sought to pay off the debt ahead of time. The company also gave Farallon warrants that would allow it to increase its stake in Accredited to 19 percent, from 7 percent. The warrants allow Farallon to buy the company’s shares for $10 apiece, a discount to the stock’s $13.99 closing price yesterday.

>here the anti spin from Rodger Rafter ...they are often just throwing good money after bad money.

>oder oft genug wird auch einfach gutes geld schlechtem hinterhergeworfen.wie dies klasse beipsiel von Rodger Rafter beweist.

They announced today that a hedge fund (Farallon) will loan them $200 million at 13% interest for 5 years. That interest rate is already extremely high, given the state of the corporate debt market these days, but Farallon also gets 3.3 million warrants priced at $10 and "rights to purchase additional equity securities."

Farallon has an interest in keeping LEND afloat. They bought 1,975,000 shares during Q4 of 2006, most of that was probably above $30 as they hit 1,579,349 shares (a 6.3% stake) on November 2nd. http://tinyurl.com/ysrths

Another hedge fund, Second Curve Capital, that bought an 8.5 percent stake in Accredited in early February when the stock was trading at $25 to $30, has increased its stake in the company to 11.2 percent as the stock has fallen.

Citadel, an aspiring financial conglomerate based in Chicago, picked up the lending business of ResMae for just $22 million. Ellington Management, a hedge fund based in Greenwich, Conn., that specializes in mortgage-backed securities, has agreed to pay an undisclosed sum for the lending business of Fremont General, which has not made a subprime loan in almost three months and has cut 2,400 jobs in its lending business.....

“There is a lot of fear that expansion starts again because liquidity is coming in,” said Stephanie Christie, a senior vice president in charge of nonprime lending at Wells Fargo Home Mortgage. “The industry needs to be very serious about prudent underwriting and make sure we don’t go back to making bad loans.”...

disclosure: short KBW Mortgage Finance Index

to bad that nobody can short ceberus subrpime exposure.........

Nova Star Financial / riding the wave

aarons mortgage lender implode-o-meter is now at 45. i think he can add nfi very soon..... http://mortgageimplode.com/

aarons sterbeliste der untergegangenen institute ist aktuell bei 45. nfi könnte der nächste sein.

....But while problems at NovaStar, one of the nation’s top 20 mortgage issuers, seemed to crop up suddenly, they were evident enough from 2002 to 2004 that a big mortgage insurer and two Wall Street banks stopped doing business with the company.

NovaStar’s financial performance in those years was blinding. With Scott F. Hartman as co-founder, Mr. Anderson built NovaStar as a low-cost, low-overhead lender that relied on as many as 16,400 independent mortgage brokers across the nation. After issuing shares to the public in 1997 at a split-adjusted price of $9, the company had explosive growth. NovaStar made $2.5 billion in mortgage loans in 2002; by last year the annual figure had risen to $10.23 billion. The stock hit $70.32 in March 2004; it now trades at $5.

größer/bigger http://tinyurl.com/2z8y25

As the real estate boom accelerated, lending practices loosened significantly at many companies specializing in high-risk borrowers. NovaStar was no different. A flier sent by NovaStar to mortgage brokers in 2003 highlighting its easy credit terms also noted: “Did You Know NovaStar Offers: to Completely Ignore Consumer Credit!”

The combined loan-to-value ratio in its mortgages, a measure of risk that compares the size of the total loan on a property to the underlying collateral, averaged 81.2 percent in 1998. By 2006, that figure had jumped to 87 percent. A minimum loan-to-value of 80 percent is considered prudent.

Like other lenders, NovaStar also eased up on the required documentation of a borrower’s income during the boom. In 1998, some 35 percent of the company’s mortgages did not have full borrower documentation attached to them; last year, almost 53 percent did not

It is perhaps not surprising, then, that NovaStar’s early payment default rate for loans underwritten in 2006 reached 8.19 percent, up from 5.61 percent in 2000.

Until recently, though, few investors seemed concerned about NovaStar’s lending practices. Perhaps they were lulled by its earnings, which grew to $132 million in 2005 from $32 million in 2001.

In 2002, however, the PMI Group, a leading provider of mortgage insurance to issuers, terminated its relationship with NovaStar Home Mortgage

A Lehman Brothers unit, among Wall Street’s largest packagers of residential mortgage loans that it sells to investors, terminated its relationship with NovaStar Home Mortgage in 2003.

One loan involved a property in Ohio bought for $20,000 in August 2002 and sold two months later to NovaStar borrowers for $77,500. The average sales price in the neighborhood was $31,685 at the time.

The appraiser on that loan stated that the property was rented for $900 a month, but Aurora found that it generated $475 in monthly rent.

Last week, Fitch Ratings placed NovaStar’s Mortgage Servicing unit on alert for a possible downgrade. The company’s “ability to fund its ongoing servicing operation and maintain servicing quality could come under pressure,” Fitch said.

>last week for a possible downgrade.......wow! real professionials.....with a finger on the pulse of the industry they are analyzing....

>doch schon letzte woche.....für ein mögliches downgrade. was machen die eigentlich hauptberuflich?

the go-go atmosphere at NovaStar’s Kansas City headquarters is gone. Next to online job postings for loan officers are those seeking specialists in modification of problem loans and litigation.

read this link for more infos on nfi http://tinyurl.com/2h7udv

freddie and fannie

more evidence the risk premiums are a little bit out of control or as jeff saut would say he feels like more and more using the "Jessica Simpson model of investing" ....

i give you this number from the latest fannie mae filing for the year 2003!(watch under the fannie logo)!. http://ccbn.mobular.net/ccbn/7/595/644/ / pdf (they restated the numbers numerous times and have put up some number for 2004. i don´t remember how many billions they have found in accounting errors.......if you want to get angry you should read the link with the letter to shareholders with the smiling raines......page 3. since then they had to reduce their portfolio. but the proportion is still unbelievable) maybe their headquarter is located in ...........


ein beispiel mehr das in sachen risikoaufschlägen irgendetwas nicht ganz stimmig ist. jeff saut würde es wohl das "jessica simpson model of investing" nennen.........

ihr braucht euch dafür nur die datenreihe von fannie mae aus dem jahr 2003 ansehen. die haben danach die zahlen diverse male korrigieren müssen und wohl auch noch teilweise nummern für 2004 veröffentlicht. etliche mrd an buchhaltungsfehlern wurden gefunden. in den letzten jahren mußte fnm ihr portfolio reduzieren. die proportionen von eigenkaiptal und garantierten anleihen ist aber immer noch atemberaubend.




Outstanding MBS1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,166

1 Unpaid principal balance of MBS guaranteed by Fannie Mae and held by investors other than Fannie Mae.

größer/bigger page 1 http://www.fanniemae.com/ir/pdf/annualreport/2003/2003annualreport.pdf (pdf)

outstanding guaranteed mbs $ 1.300.000.000.000 trillion!

core capital 34.000.000 billion! (2003)

spread today 0,24 over us bonds!!!!!!!

relations at freddie are not much better/ die relationen bei freddie sind nicht viel besser

Feb. 19 (Bloomberg) -- Freddie Mac, the second-largest source of money for U.S. home loans, said ``strong, steady'' demand among Asian investors will support the mortgage-backed bond market.

``There's strong, steady demand for Freddie Mac securities in this area of the world,''

Investors in Asia hold $3.1 trillion, or about two-thirds, of the world's foreign reserves. They increased purchases of U.S. agency debt for a third year in 2006 as they shifted from Treasuries in search of higher yields and returns, (lets hope that this will continue..../ man kann nur hoffen das die das beibehalten....)

Freddie Mac notes returned 4.1 percent last year, the most since 2002, compared with 3.1 percent for Treasuries

that makes sense.....read this stat http://immobilienblasen.blogspot.com/2006/09/fannie-mae-could-be-hit-hard-by.html (much more infos!/jede menge mehr infos)

Fannie and Freddie bought 25.2% of the record $272.81 billion in subprime MBS sold in the first half of 2006, according to Inside Mortgage Finance Publications, a Bethesda, Md.-based publisher that covers the home loan industry.

In 2005, Fannie and Freddie purchased 35.3% of all subprime MBS, the publication estimated. The year before, the two purchased almost 44% of all subprime MBS sold.

Three big lenders, NovaStar Financial , Deutsche Bank and BNC Mortgage, part of Lehman Brothers , sold more than half of their subprime MBS to Fannie and Freddie this year, said Andrew Analore, editor at Inside Mortgage Finance (looks like things are doing well for nova(nfi) and the other subprime players ........./sieht so aus als wenn bei nova /nfi und den anderen im subprimesektor alles bestens läuft....http://immobilienblasen.blogspot.com/2007/02/novastar-noise-saga-continuesgreenberg.html

but no worry....../ aber keine angst......

Other experts noted that when Fannie purchases subprime MBS, it usually only buys triple-A-rated tranches. In the event of losses, the triple-A (chart above) bits are the last ones affected. Ed Groshans, an analyst at Fox-Pitt, Kelton, estimated that if losses in these pools of mortgages reached 10%, investors in the triple-A tranches would still get all their interest and principal back ( well at least the a tranches are starting to show some sign of stress lately........../ die einfach a papiere zeigen immerhin ernste anzeichen von problemen.......)

Higher interest rates will cause more people to go delinquent on their mortgages, but not enough to push losses on these pools over 6%," the analyst said.

At the end of June, the loan-to-value ratio on Fannie's book of business was 54%, he added. ( i doubt that this can be said about the data for the last 3 years of subprime purchases...kann wohl nicht für die letzten 3 jahre der subprimekäufe gelten)

chart single a

and the bbb- is already diving......und die unterste stufe ist bereits im freien fall

The extra yield, or spread, investors demand to own Freddie Mac's notes over similar-maturity U.S. notes narrowed to 24 basis points on Feb. 16 from 32 basis points six months ago,.... (with the underlying assets depreciating and the homeowner refinancing at a record pace "2006 Cash-out refinancing hits 16-yr peak in Q3-Freddie "http://immobilienblasen.blogspot.com/2006/11/refinancing-freedie-mac-1994-vs-2006.html. und in derselben zeit fallen die zugrundeliegenden immobilienwerte und die hauseigentümer refinanzieren immer höhere hypotheken) Buying Support
Freddie Mac sold 35 percent of its reference notes to investors in Asia in the 12 months ended Sept. 30, compared with about 16 percent in 2001,

``Continued interest will support that sort of level,'' in the coming months, said Cook.

Asian investors bought about $135 billion net of U.S. agency debt last year, compared with net purchases of around $66 billion in government notes and bonds, according to Treasury Department figures. Buying of agency debt increased from $118 billion in 2005.

``From the perspective of central banks, it would make sense to shift to non-Treasuries because they probably want any bit of spread,''

China holds $1.07 trillion of the world's $4.99 trillion foreign reserves, the largest holding of any country. The next biggest holder globally is Japan, with $875 billion.

Freddie Mac had $776.9 billion in debt outstanding on Dec. 31, according to the company. Congress created McLean-based Freddie Mac and Washington-based Fannie Mae, the biggest mortgage finance company, to expand homeownership by increasing financing, and to provide market stability. (that really has worked well......./ man sieht gerade wie toll das gelungen ist.....) and with their creative handling on delinquencies the market looks more stable than it is.... thanks to mish! dank der eigenartigen handhabung von kreditausfällen sieht das ganze besser aus als es wirklich ist....)

http://globaleconomicanalysis.blogspot.com/search?q=freddie

i´m really no expert on accounting etc and i´m sure that the (by far) majority of the mbs backed by fannie and freddie are well protected and safe. but the proportion of the numbers and the fact that fnm could not provide correct numbers in the past and the almost non existent spread combined with the unravelling of one of the greatest bubbles of all times makes me wonder.......

lets hope the asians/the oil exporters will buy and buy and buy.........(and not just a few billions...)

bin sicher nicht ansatzweise ein experte in sachen bilanzierung etc. und ich bin ebenfalls überzeugt davon das der mit abstand größte teil der mbs gut abgesichert ist. aber die gewaltige diskrepanz zwischen ek und garantierten mbs und die tatsache das jahrelang keine bilanzen erstellt werden konnten kombiniert mit nicht vorhandenen risikoaufschlägen und nebenbei dem einbruch der größten blase der letzten zeit können einen nachdenklich werden lassen...

wünschen wir uns das die asiaten und die ölexportierenden länder weiter fleißig kaufen und kaufen und kaufen........

Tremors at the Door / nyt on subprime

the full article (headline) from the nyt paints a tame pciture of whats really going on. i think this from fleckenstein, russ winter, itulip and aaron is much more accurate.
http://immobilienblasen.blogspot.com/2007/01/home-loan-house-of-cards-ready-to-fall.html
http://immobilienblasen.blogspot.com/2007/01/losing-ground-foreclosures-in-subprime.html

here is washington mutual as an example how bad the situation even with some of the bigger banks is
http://immobilienblasen.blogspot.com/2007/01/wamu-credit-qualityand-capitalized.html

der artikel (überschrift klicken) zeigt nur einen "geschönten" blick was wirklich gerade stattfindet. denke das iht mit den o.g. links ein besseres bild bekommt.


größer/bigger http://graphics10.nytimes.com/images/2007/01/26/business/26mortgage1.graphic.jpg