Housing Outlook Takes a Grim Turn
January 9th, 2008Via: AP:
Shares of Countrywide Financial Corp., the nation’s largest mortgage lender, sank to an all-time low Tuesday as a major homebuilder offered a grim outlook for the industry and the Bush administration signaled it is growing more concerned about rising mortgage defaults.
KB Home reported a mammoth loss for the fourth quarter and said there are no indications that the housing market is stabilizing. The head of Fannie Mae, a government-sponsored mortgage lender, predicted the housing market would weaken through 2009 and said a turnaround wasn’t likely until 2010.
President Bush, meanwhile, conceded, “It’s going to take awhile to work through the downturn,” and Treasury Secretary Henry Paulson said he is concerned about the potential for additional home defaults.
Paulson said the administration is exploring expanding a deal it brokered with mortgage lenders last fall to include relief to people who borrowed at prime, conventional rates as well as those with subprime, adjustable-rate mortgages that were due to reset.
Countrywide stock fell in morning trading after The New York Times reported about accusations that the company had fabricated letters submitted in a court case involving a foreclosure in Pennsylvania.
By early afternoon, the New York Stock Exchange temporarily halted trading of Countrywide shares before the company issued a statement denying rumors that a bankruptcy filing was imminent.
“There is no substance to the rumor that Countrywide is planning to file for bankruptcy, and we are not aware of any basis for the rumor that any of the major rating agencies are contemplating negative action relative to the company,” the statement said.
When trading resumed, the shares rebounded somewhat, but then slid again. They finished with a decline of $2.17, or 28.4 percent, to $5.47 after falling to an all-time low of $5.05 earlier in the day.
A rating analysis issued by Egan-Jones Ratings Co. suggested Countrywide “is severely challenged and might falter if it does not receive an infusion of at last $4 billion within the next couple of weeks.”
The agency said the lender will need the funding to weather a steep decline in mortgage originations and its shift to less-profitable, non-subprime lending.
Uneasy investors were hard-pressed to find reassurance elsewhere.
“Paulson said the administration is exploring expanding a deal it brokered with mortgage lenders last fall to include relief to people who borrowed at prime, conventional rates as well as those with subprime, adjustable-rate mortgages that were due to reset.”
Since I find it hard to believe that these effers are really going to do anything for anyone, the promised “relief” has a suspicious look about it. Are they trying to encourage people who are in trouble to dig into their pockets, to beg, borrow or steal to scrape up just a few more payments in hopes of relief? One more payment? Just to wring a few last dollars out of this scam?
I’ve read some commentators who say that there is not a major US bank that is not insolvent, if they carried their liabilities on the books.
I’ll tell you one thing: My direct deposit paycheck has been late several times in the past three months. I think some banks can’t even make payroll out of available cash.
Anyone else having this problem?
Let us not forget that the first half of this year is going to be a period of time when a huge number of mortgages will have their rates go up according to their original terms, the peak months being February, March, and April.