Worldwide Banking Crisis Is Worst In 30 Years

[VegasVic]

U.S. Foreclosures Rise 65 Percent as Vacated Homes Add to Glut "More than 243,300 properties..."

By Dan Levy

May 14 (Bloomberg) -- U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier as rates on adjustable mortgages increased and vacated homes added to a glut of unsold homes, RealtyTrac Inc. said.

More than 243,300 properties, or one in every 519 households, were in some stage of foreclosure, the highest monthly total since RealtyTrac, a seller of default data, began statistics in January 2005. Nevada, California and Florida had the highest rates. Filings rose 4 percent from March.

Properties in foreclosure ``contribute to already bloated inventories of homes for sale, and put downward pressure on home values,'' RealtyTrac Chief Executive Officer James Saccacio said today in a statement.

The collapse of the U.S. housing market, the worst since the Great Depression, is contributing to the economic slowdown and may push the economy into a recession. Median prices for a single- family home fell 7.7 percent in the first quarter, the biggest drop in 29 years, the National Association of Realtors reported yesterday. There were 4.06 million U.S. homes for sale at the end of March, 40,000 more than the prior month, the Realtors association said in an April 22 report.

``Inventory levels have soared to unprecedented levels'' Brian Fabbri, chief North American economist for BNP Paribas, said in an interview. ``Builders and homeowners have to lower their prices significantly to sell that inventory out.''

Bank Seizures

Bank repossessions jumped 145 percent in April from a year earlier to 54,574, according to Irvine, California-based RealtyTrac. The company has database of more than 1.5 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank seizures.

Banks will seize about 60,000 properties a month through December, when about 1 million U.S. homes, or a quarter of all homes for sale, may be bank-owned, Rick Sharga, RealtyTrac's executive vice president of marketing, said in an interview.

``These are the properties that are causing the bloat in the inventory,'' he said.

Delinquencies on subprime mortgages will continue to rise and defaults on prime loans also may accelerate as people lose their jobs in a slowing economy, Fabbri said. About $460 billion of adjustable-rate loans were scheduled to reset this year, according to New York-based analysts at Citigroup Inc.

Congressional Action

Foreclosures are mounting even as the Bush Administration and Congress propose relief for homeowners. The Democrat-led U.S. House of Representatives approved a $300 billion plan May 8 that would allow the government to insure refinanced mortgages. Acting Housing and Urban Development Secretary Roy Bernardi said the next day he was willing to compromise on the proposal after Republican President George W. Bush threatened to veto it.

Nevada had the highest U.S. foreclosure rate for the 16th consecutive month. One of every 146 households was in some stage of foreclosure, 3.6 times the national rate, RealtyTrac said. Filings almost doubled from a year earlier to 7,276.

California had the second-highest rate, one for every 204 households, and the most filings for the 16th consecutive month at 64,683. Filings more than doubled from a year earlier and were down less than 1 percent from March.

Arizona had the third-highest rate, one for every 224 households. Filings almost tripled from a year earlier to 11,620.

Florida had the second most filings at 35,264 and the fourth- highest rate, one for every 242 households. Foreclosures increased 146 percent from a year earlier and rose almost 17 percent from March.

Ohio ranked third in filings at 11,680. Arizona, Texas, Michigan, Georgia, Illinois, Nevada and Maryland also ranked in top 10 states with the most filings, RealtyTrac said.

Foreclosure filings in New York were up 39 percent from a year ago and up 12 percent from March. The state ranked 29th with 5,696 filings.

In New Jersey, foreclosure filings ranked 15th at 5,143, up 65 percent from a year ago and up 15 percent from March. Connecticut foreclosures ranked 19th at 1,707, down 59 percent from a year ago and down 20 percent from March.

---Bloomberg

LaoPo

WOW, with all the huge % increase of foreclosures in the U.S. real estate market, one might think that 10 or 15% of Americans are affected by this crisis. Of course when you look a little closer at the facts and figures then you begin to realize that an extremely small percentage of homeowners in the U.S. are really affected. Lets take the state that far and away has the highest percentage of foreclosures in the U.S. (Nevada), by using the numbers that you quoted I see that 1 out of every 146 homes in Nevada is in "some stage of foreclosure", of course when they say "some stage of foreclosure" they are also counting folks that are still living in their homes and are 2-3 months late in payments and many of those homeowners will find a way of keeping their homes, but lets just figure they all lose their homes to forclosure. Nevada's foreclosure rate would then equate to a little more than 7/10 of 1%, and this by far is the highest rate of foreclosure in the states. Now given the fact that nearly 50% of all homes in the U.S. went into foreclosure during the 1930's you can see why comparisons of the curent credit crisis to the great depression is so ridiculous. By all means please continue giving us those sensational headlines though lao, I know your anti U.S. stance is kind of an obsessive-compulsive thing with you, so even if you wanted to present the salient facts of any situation in a sane and accurate manner, your bias would not allow you to do so. By the way just in case you missed it, housing starts were actually up last month in the U.S. and despite all those sensational articles that sell newspapers that you so frequently post here, the U.S. as of yet is not in a resession and its begining to look like it will not enter one

[NovaBlue05]

1 IN 519 properties. That's about 2/10 of 1%. The media, in their neverending efforts to paint the economy as collapsed as we approach the election, certainly does like trumpeting meaningless statistics such as "....The % of foreclosures is up 70%.....yada ...yada...". Great. If there was one last year and two this year, they would be up 100%.

Keep in mind that the 2/10 of 1% includes those who would have been in foreclosure whether the subprime thing happened or not and those account for at least half of the total. My home value has dropped but, thanks to the extremely overheated acceleration of values up until 2006, it is still well beyond what I had hoped when I bought the place 10 years ago.

Edited May 19, 2008 by NovaBlue05

[VegasVic]

1 IN 519 properties. That's about 2/10 of 1%. The media, in their neverending efforts to paint the economy as collapsed as we approach the election, certainly does like trumpeting meaningless statistics such as "....The % of foreclosures is up 70%.....yada ...yada...". Great. If there was one last year and two this year, they would be up 100%.

Keep in mind that the 2/10 of 1% includes those who would have been in foreclosure whether the subprime thing happened or not and those account for at least half of the total. My home value has dropped but, thanks to the extremely overheated acceleration of values up until 2006, it is still well beyond what I had hoped when I bought the place 10 years ago.

Spot on Nova Blue, and that is the same situation that the vast majority of homeowners in the U.S. find themselves in currently. The vast majority of homeowners in the states bought their homes prior to 2004, and even with the pullback in some areas of the U.S. they have realized a virtual windfall of appreciation in their home since 2004. The majority of the foreclosures are people who bought more home than they could afford, got inticed with "creative mortgage vehicles", or investors who bought multiple homes and couldn't find a seat when the music stopped. I don't mean to seem callus to those who are getting foreclosed upon, while for the most part it is likely their fault or at least 50% their fault, there is certainly enough blame to go around, from greedy and unethical loan brokers to large lenders who cooked up some of these wild products (i.e. Countrywide) to the money center banks on Wall street and the hedge funds who creatively packaged the CDO's and sold them off and watched silently as they got leveraged and releveraged. Its sad to think that this sort of thing was allowed to occur, but it all comes back to reponsibility and ethics, both of which seem to be sorely lacking on Wall Street, corporate America, and in certain segments of the U.S. population.

[VegasVic]

1 IN 519 properties. That's about 2/10 of 1%. The media, in their neverending efforts to paint the economy as collapsed as we approach the election, certainly does like trumpeting meaningless statistics such as "....The % of foreclosures is up 70%.....yada ...yada...". Great. If there was one last year and two this year, they would be up 100%.

Keep in mind that the 2/10 of 1% includes those who would have been in foreclosure whether the subprime thing happened or not and those account for at least half of the total. My home value has dropped but, thanks to the extremely overheated acceleration of values up until 2006, it is still well beyond what I had hoped when I bought the place 10 years ago.

Spot on Nova Blue, and that is the same situation that the vast majority of homeowners in the U.S. find themselves in currently. The vast majority of homeowners in the states bought their homes prior to 2004, and even with the pullback in some areas of the U.S. they have realized a virtual windfall of appreciation in their home since 2004. The majority of the foreclosures are people who bought more home than they could afford, got inticed with "creative mortgage vehicles", or investors who bought multiple homes and couldn't find a seat when the music stopped. I don't mean to seem callus to those who are getting foreclosed upon, while for the most part it is likely their fault or at least 50% their fault, there is certainly enough blame to go around, from greedy and unethical loan brokers to large lenders who cooked up some of these wild products (i.e. Countrywide) to the money center banks on Wall street and the hedge funds who creatively packaged the CDO's and sold them off and watched silently as they got leveraged and releveraged. Its sad to think that this sort of thing was allowed to occur, but it all comes back to reponsibility and ethics, both of which seem to be sorely lacking on Wall Street, corporate America, and in certain segments of the U.S. population.

It certainly doesn't help matters that the past two U.S. presidents consist of a draft dodger and someone who got juiced into the Air Natioal Guard.

[Pakboong]

1 IN 519 properties. That's about 2/10 of 1%. The media, in their neverending efforts to paint the economy as collapsed as we approach the election, certainly does like trumpeting meaningless statistics such as "....The % of foreclosures is up 70%.....yada ...yada...". Great. If there was one last year and two this year, they would be up 100%.

Keep in mind that the 2/10 of 1% includes those who would have been in foreclosure whether the subprime thing happened or not and those account for at least half of the total. My home value has dropped but, thanks to the extremely overheated acceleration of values up until 2006, it is still well beyond what I had hoped when I bought the place 10 years ago.

Spot on Nova Blue, and that is the same situation that the vast majority of homeowners in the U.S. find themselves in currently. The vast majority of homeowners in the states bought their homes prior to 2004, and even with the pullback in some areas of the U.S. they have realized a virtual windfall of appreciation in their home since 2004. The majority of the foreclosures are people who bought more home than they could afford, got inticed with "creative mortgage vehicles", or investors who bought multiple homes and couldn't find a seat when the music stopped. I don't mean to seem callus to those who are getting foreclosed upon, while for the most part it is likely their fault or at least 50% their fault, there is certainly enough blame to go around, from greedy and unethical loan brokers to large lenders who cooked up some of these wild products (i.e. Countrywide) to the money center banks on Wall street and the hedge funds who creatively packaged the CDO's and sold them off and watched silently as they got leveraged and releveraged. Its sad to think that this sort of thing was allowed to occur, but it all comes back to reponsibility and ethics, both of which seem to be sorely lacking on Wall Street, corporate America, and in certain segments of the U.S. population.

There is much evidence suggesting the housing crunch is not even half over. Those who have houses that have held there value or close to it, will still have trouble finding a buyer should they choose to sell. The credit crunch has spread itself beyond housing and is making it difficult for every person regardless of credit rating. With it all comes the simple fact that the world's largest consumer is no longer able to consume at any where near previous rates.

As I understand it, refinancing has slowed to a crawl and using your house as an ATM machine has slowed as well.

When it comes time for all that leveraged debt to be settled which in reality will never happen in any where near total, the world is in for quite a shock. There are few places in which to hide it. Some experts are talking a figure approaching $600 trillion. The investment banks have been throwing borrowed money at the more highly visible markets to prop things up for the last month or so. That money is running thin and the plan to get people back to the markets has not been that successful.

[LaoPo]

The worldwide finance/bank/subprime problems are far from over:

Hedge Fund Managers in Monaco Say Credit Crisis to Worsen

By Tom Cahill

June 20 (Bloomberg) -- The credit market contagion that led to record losses at some of the world's largest financial institutions may be far from over, according to hedge fund managers gathered in Monaco this week.

``These times will get worse before they get better,'' said Christophe Aurand, head of European operations for York Capital Management LLC, a $13 billion fund manager preparing to invest in distressed debt. He spoke at the GAIM International conference, Europe's largest annual hedge fund gathering.

More than 80 percent of the fund managers, investors and hedge fund service providers at the event said they expect the credit crisis will continue, a survey found. Almost a quarter said they expect the situation ``will deteriorate significantly.''

Banks worldwide have reported $397 billion of writedowns since the start of the U.S. subprime crisis last year. John Paulson, the founder of $33 billion hedge fund Paulson & Co. who made billions betting on a drop in the value of subprime loans last year, estimated banks are only about a third of the way through $1.3 trillion in writedowns and losses.

Zurich-based UBS AG, Switzerland's biggest bank, took more than $38 billion in writedowns, more than any other European bank. Citigroup Inc. Chief Financial Officer Gary Crittenden yesterday forecast ``substantial additional'' writedowns at the New York- based bank this quarter.

Worst Since Depression

``It's all bad news on the horizon,'' said Maria Boyazny, who oversees a $3 billion fund that invests in other hedge funds for Siguler Guff & Co. in New York. ``This correction is going to be a long one. It's a recipe for disaster for credit markets.''

Edward Altman, a professor at New York University's Stern School of Business who has tracked defaulted debt for nearly 40 years, said an impending wave of defaults could be the worst on record in the U.S., at 16 percent of corporate debt.

``It may be the worst recession since the Great Depression, that's not impossible,'' said Altman, who estimates default rates on U.S. corporate debt have tripled so far this year from record lows last year. ``There's a lot of negatives out there.''

The U.S. recession will be deeper and longer than the previous one because of the drop in home values, said Max Holmes, founder of Plainfield Asset Management, a $4.8 billion hedge fund in Greenwich, Connecticut. He bought distressed assets in the previous three U.S. recessions and lived in Houston during the region's real-estate bust in the 1980s.

``This is a major, major event, it's going to take a while to resolve itself,'' said Holmes, who reckons the U.S. slipped into recession in December. ``In the last recession the banking industry was healthy, this time it's very, very sick.''

$600 Billion

Even after banks have written off almost $400 billion in debt from the collapse of the U.S. subprime market, more markdowns probably are in store, the fund managers said.

``We have a lot more wood to chop,'' said Alberto Musalem Borrero, head of research for Tudor Investment Corp., the $18 billion hedge fund manager founded by Paul Tudor Jones. ``I wouldn't be surprised to see another $600 billion in losses.''

Bear Stearns Cos., which was listed as the host for a John Paulson address in early versions of the Monaco conference's program, was replaced by JPMorgan Chase & Co., which bought the fifth-largest Wall Street securities firm in a rescue facilitated by the U.S. Federal Reserve.

After the hedge fund industry had its worst start in nearly two decades, some managers said they are eager to load up on discounted debt and bonds. Altman reckons more than 200 funds have raised as much as $400 billion for distressed investing in the U.S., with a similar amount raised outside of the U.S.

``There's a Chinese proverb, where there's disaster there's an opportunity,'' said Boyazny of Siguler Guff.

---Bloomberg

LaoPo