Housing Doom Housing Bubble Blog

This one’s a little different for the rather staid HousingDoom.   You just can’t make this stuff up: [Thanks L!]

NEW ROCHELLE The downturn in the housing market appears to have driven two Westchester homeowners to desperate and illegal measures.

New Rochelle Police raided a 3-bedroom home on North Avenue Friday night arresting four alleged prostitutes and the homeowners.

The house, they say, had been turned into a brothel complete with heavy shades over all the windows and a red ribbon placed out by the sidewalk to indicate they were open for business.

Richard Werner and Heather Mezzenga are charged with promoting prostitution. The two are both mortgage brokers who moved out of the house roughly two years ago so they could begin renovating a home on Mountain Road in Pleasantville.

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The collapse of First Magnus is close to home for us, literally being down the road in Tucson.  The losses aren’t just here in AZ however.  On August 18 MSNBC reported:

Tucson, AZ - Job losses from the collapse of Tucson-based mortgage lender First Magnus Financial Corp. total nearly 6,000 nationwide, according to a required notice the company filed with state officials on Friday.

The lender effectively shut down its business and laid off about 99 percent of its total workers. In Tucson, First Magnus laid off about 700 of its approximately 800-person work force when it abruptly stopped writing loans on Thursday.

It’s been tough enough for employees who had a job one day, but not the next.  First Magnus’ demise however, has not only left former employees without a job, but their final paychecks and health insurance as well.

The following email from a former First Magnus employee was forwarded to us from our friends at Implode-o-Meter:

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From the OFHEO this morning:

On August 10, 2007, OFHEO directed Fannie Mae and Freddie Mac to apply the principles and practices of the Statement on Subprime Mortgage Lending to their purchases of subprime loans in the regular flow of business, including bulk purchases.  This action is consistent with the July 13, 2007, announcement by OFHEO recognizing the compliance by the Enterprises with the Interagency Guidance on Nontraditional Mortgage Product Risks.  These directives are effective for all mortgages sold to the Enterprises with an application date on or after September 13, 2007.

 

OFHEO also directed that, not later than September 13, 2007, nontraditional and subprime loans purchased by Fannie Mae and Freddie Mac as part of private-label securities transactions, comply with the Interagency Guidance on Nontraditional Mortgage Product Risks and the Statement on Subprime Mortgage Lending.  This application to the Enterprises’ investments in private-label securities would ensure that mortgages financed by the Enterprises through such investments conform to the underwriting provisions of those guidances.  Further, OFHEO directed that the Enterprises adopt such business practices and take such quality control steps as necessary to ensure the orderly and effective implementation of these guidances to the purchase of private-label securities.

 

Fannie Mae and Freddie Mac expressed their full support for these actions. Fannie Mae announced their compliance with the Statement on Subprime Mortgage Lending directive on August 15, 2007, in a Lender Letter.  Freddie Mac announced their compliance with the directives in communications to their dealers and sellers on September 7, 2007.  The Enterprises have also pledged their continued support of subprime borrowers.  Freddie Mac has said that it will purchase $20 billion of subprime loans and Fannie Mae “tens of billions” of subprime loans over the next several years.

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It’s just as well Mozilo waited until after the Dow had finished calmly shedding about 250 points before admitting to the impending bloodbath in Countrywide.  The traders will have had more than 60 hours to get their heart rates under control, and perhaps M&A Monday combined with equity bargain hunters can dredge up a rebound.

Will Ben and his merry crew hold their fire until the scheduled FOMC meeting?  Will liquidity return to the bond markets?  We don’t know, but we’re confident there’s some Doom reader out there somewhere who does.

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Feeling lucky? "The lottery of London’s £70bn rollover week".[1]

"As we reveal today [Sunday Sept 9th], an estimated £70bn worth of European commercial paper that has not yet been caught up in the crisis is due to expire between September 11 and 19. Ordinarily, this would present little problem. Companies borrowing money by issuing commercial paper normally expect to "roll over" the loan from one period the next. Just in case the lenders decide not to play ball, most borrowers arrange a backstop funding facility with a major bank."

Our new credit contraction word is Rollover! This is what the next ten days looks like …

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