Washington Mutual Bailing on MBS?
Yet another major bank is bailing on Real Estate, here’s the latest from HousingWire:
A victim of the sustained collapse in the mortgage markets, WaMu Capital will reduce its headcount to between 10 and 20 people from 125. In September, the bank dismissed 100 traders, sales personnel and support staff.
The closure appears to have been coming for the past few weeks. Since early November, WaMu Capital was not providing repurchase agreements and in many cases, did not provide even basic bids and offers for bonds it had sold, according to hedge fund portfolio managers.
This exit will take even more banker capital out of the lending market. No big worry for those with a mortgage payoff plan, but a big problem for those who need new loans or want to refinance.
Toll Brothers Sees First Loss
Oh how the mighty have fallen…and keep falling. PhillyBurbs is reporting that Toll Brothers, the nation’s largest luxury home builder, has posted its first quarterly loss ever. Here’s the latest:
The $81.8 million loss was driven by $315 million in write-downs of property whose value had plummeted, the company said. A write-down is the downward adjustment in the accounting value of an asset.
“By many measures, fiscal 2007 was the most challenging of the 40 years that Toll Brothers has been in business,” said Robert Toll, CEO of the Horsham-based company. “1974 was perhaps rougher, but the difficult times only lasted one year.”
The loss translates to 52 cents a share. Without the write-downs, the company would have seen a profit of $118 million, or 72 cents a share. Still, the company beat analysts’ expectations of a 77-cent-per-share loss, and its shares rose 13 percent, or $2.70, to close at $23.42 on Thursday.
Yet another business taking huge writeoffs, it’s amazing just how fragile most real estate related companies are proving to be. Many home builders rely on profits to stay in business, and just one bad quarter can often mean bankruptcy.
Budgeting is important to avoid such a situation in one’s every day life. That’s why many use programs such as a mortgage payoff plan to budget their life’s finances, and ensure that even the bad quarters get weathered well.
Rabobank, a Citigroup SIV Dumps Half Its Assets
Reuters with the latest big business exiting from the housing market:
A structured investment vehicle (SIV) managed by Dutch bank Rabobank and Citigroup has sold almost half its assets, 4.5 billion euros ($6.6 billion), as the fund could not find sufficient refinancing, Rabobank said on Wednesday.
“The market has dried up. It is all related to what is happening in the United States,” a Rabobank spokesman said, confirming a report in Dutch daily Het Financieele Dagblad about the declining size of the fund, called Tango Finance.
The fund currently holds about 5.5 billion euros in assets, down from 10 billion euros in the summer, and could reduce its holdings further to reduce investment risks, the spokesman said.
“Basically, what Tango is doing now is called unwinding,” he said, adding that the market value of Tango’s currently held assets is about 97 to 98 percent of their nominal value.
This exit will lead to pricing declines in the real estate market as well as a further decline in demand for real estate related investments. Many homeowners will seek a mortgage payoff plan as a means of surviving such a decline with equity intact.
More Info About the US Mortgage Freeze Plan
Calculatedrisk has some nice insight on the new mortgage freeze plan:
And that, really, is a way to target the “freeze” to start rates that are already pretty high. I think some people are getting a bit misled by the idea of “teaser” rates here. As Bloomberg reports quite correctly, the loans being targeted have a start rate in the 7.00% to 8.00% range. (My back-of-the-envelope calculation is a weighted average of about 7.70%, with a weighted average first adjustment rate of just over 10.00%.) Nobody wants to come out and say that “Hope Now” is all about freezing just the highest initial ARM rates that there are, but that’s in fact what it’s about.
So asking, in essence, why we are “rewarding” people with the worst credit profiles is, really, missing the point. The point is that the cost of this goes directly to investors in asset-backed securities, and those investors are being asked to forgo 10% (the reset rate) and take 7.70% (the current or start rate). They are not being asked, say, to forgo 7.70% and take 5.70%, which is roughly what it would be if this “freeze” were extended to the significantly-over-660 crowd (Alt-A and prime ARMs).
That about nails it on the head. Those with bad credit are getting spoon fed, while those with good credit use their heads to plan a mortgage payoff plan. Life is certainly unfair.