Housing Doom Housing Bubble Blog

First it was this from S&P: [More here from HousingWire]

S&P, one of the three main credit-rating agencies that served as enablers of the subprime-mortgage boom, announced Tuesday that it would lower its ratings on 612 bonds, a small portion of the mortgage-backed securities it had given its seal of approval to.

Then at closing bell, there was this announcement from Moody’s:

Moody’s Investors Service said late Tuesday that it downgraded 399 residential mortgage-backed securities because of higher-than-expected delinquencies on the underlying home loans. The rating agency also said it put 32 other residential mortgage-backed securities (RMBS) under review for possible downgrades for the same reason. The RMBS were sold in 2006 and are backed mainly by first lien adjustable- and fixed-rate subprime mortgage loans, Moody’s added.

And if you  figure that’s the end of it, check out today’s ABX- here’s AAA and AA  [and this isn’t subprime folks].
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I won’t pretend to have the expertise of Tanta at Calculated Risk on the subject, but I do regularly check the ABX index to watch how it is performing.  Last night I pulled it up and thought I detected a new trend in the AA:

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Kara homes may exit Chapter 11, but with some big changes:

Less than a year after its Chapter 11 bankruptcy filing, beleaguered Kara Homes is planning its second act. Under a new proposal, the homebuilder will exit bankruptcy protection and emerge as a dramatically different entity, without its founder and without the Kara name, and with only a small fraction of its current properties.

Kara’s revised reorganization plan calls for the ouster of founder Zudi Karagjozi. Assuming ownership of the company would be Maplewood Homebuilders LLC, a new enterprise made up of hedge fund Plainfield Specialty Holdings II Inc. and Lakewood developer Glen Fishman. Maplewood would put most of Kara’s properties on the auction block. Kara, which owned more than 30 developments in various stages of construction when it filed for bankruptcy last year, would be reduced to just 11 core developments.

Unsecured creditors will not be seeing a lot back under this arrangement, although they will fare better than they would under a plan proposed last April:

Plainfield, which lent Kara $7 million to help keep afloat during bankruptcy, would invest $10 million in equity in the company. Kara attorney David Bruck says part of the money would be used to pay unsecured creditors an initial dividend of $2.25 million, or nine cents for each dollar they are owed. These creditors would also get a cut of additional funds from the prosecution of claims and the sale of assets.

Even with the reorganization plan, it remains to be seen if Kara can survive in the long run:

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