Common Sense, REO's, Mothballing Builders & Banks
The Nattering One has been tracking REO's closely and wrote on the same Wells Fargo REO, again.
Last time Wells Fargo countered at 670K from 705K asking, then 10 days later dropped their asking price to 650K.
This time the Nattering One bumped up 25K, Wells counter, full price 650K.
The property pencils out or breaks even on fair market rental (PITI + maintenance with 20% down, fixed 30 year) with NO ROI at around 400K. What gives? Lets see...
From the WSJ: As the glut of unsold home remains stubbornly high and housing demand slides, home builders face a dilemma: to sell, or not to sell?
"Lennar Corp., for one, has joined the "not to sell" camp at its development in Orange County, Calif.
The Miami company plans to finish building 259 homes -- the first phase of a 1,100-unit development in Irvine --
but it has decided not to sell any of them until the constrained mortgage market and swollen housing inventory improves."
Say what? I would not want to be a Lennar stockholder, as they will be waiting for quite some time.
Now compare Lennars position to this developer in Oregon, who auctioned 141 homes for $65 Million in one day.
His already rented homes and homes in Bend did not sell. Of the homes that did sell, 96% of the homes sold below auction reserve, the reserve being his cost.
Wells Fargo CEO John Stumpf: "Wells Fargo is not immune to the slowdown in housing, home equity losses are likely to increase in the fourth quarter and remain elevated through 2008.
The current housing market is the worst since the Great Depression. It's hard to say what inning we are in.
I don't think we are in the ninth inning. If we are, it's going to be an extra inning game."
WELLS FARGO 10K AS OF SEPT 30th 2007
Total non performing or non accruing loans UP 50%: $3.183 Billion vs $2.1 Billion a year ago.
Total loans 90 days delinquent and still accruing UP 52%: $5.526 Billion vs $3.664 Billion a year ago.
I can't wait to see the Q4 10Q Wells files in early Feb.
In Q3, Wells said: "only 0.77% of their $83 billion in home equity loans and its $67 billion portfolio of first mortgage home loans faced only 0.11% or 11 basis points of losses during Q3."
CEO John Stumpf cited "disciplined underwriting."
10 days later Wells filed the actual 10Q and wrote down $1.4 billion in home equity loan losses...
which equaled 1.5% or double the reported amount. So much for the disciplined underwriting.
Then Wells tried to liquidate another $12 billion or 14% of their $83.4 billion home equity portfolio.
Don't think they had any success, but we will give them the benefit of the doubt for now.
$60 billion of the remaining $71.5 billion are SECOND liens, and we all know what happens to 2nd TD's in an REO, they get NOTHING.
My dissection of Wells Q3 10Q filing in Nov. revealed they are hiding at least $10 billion in non performing loans through chicanery or deceptive book keeping.
Thus fooling their stock holders and depositors into thinking Wells is actually on solid ground...
when in fact they can't borrow money fast enough to meet their rising reserve requirements and dwindling equity.
Wells, on anything but solid ground, is sinking in quicksand by sitting on an ever growing inventory of REOs.
The number of Wells Fargo REO listings in California alone, as of Sept 5th, roughly 3800. Nov 27th 5380; UP 41% in just 2 months.
Today 12/28/07, 5820, ANOTHER 10% increase in just 30 days.
5820 x California median sales price at market peak of 484K = $2.816 Billion in non performing California loans.
The Nattering One muses... At least the developer liquidating in Oregon has some common sense as he took his big dump and wont suffer from further constipation.
He wont have any carrying costs or further losses like these other mothballing mental midgets,
Wells and other bank REO departments would be well advised to serve their shareholders by cutting their losses while the going is still "good"...
and stop listening to self serving real estate agents or investors posing as loss mitigators.
These unethical slime bags, just one step above used car sales men, are sandbagging the banks into thinking their REO properties are still worth what was lent on them at peak market.
Many of these self serving agents are stringing the banks along with bad advise, hoping they or a friend...
can finally pick up the property at a discount and flip it later to a "pocket" buyer who has been duped into thinking their getting "a deal".
Local realtors have a vested interest in not seeing the market crash, as they hold many of these overpriced properties.
A common tactic from the past that is currently being employed by the realtors and banks:
Straw man listings that show pending at full price (markets hot), then suddenly disappear, only to reappear later as active, not sold.
The property is owned by a realtor or bank, the "offer" comes from a straw man, who has no intent to purchase.
The realtors use this pending full price offer as a carrot and whipping stick to con unsuspecting buyers into catching falling knive's...
because the market has "turned" and "values" are looking up.
This tactic is also used in hot markets and is referred to as appraisal kerosene, because in a "hot" market, volumes and closing times increase.
So appraisors justify using pending sales to extract a more timely and accurate current "value" rather than waiting for closing.
We are not claiming that the realtor involved in my transaction or ALL realtors engage in these practices...
but I can't wait to see the dead carcasses of the ones that are, flying out from under the wheels of "price reversion to the mean".
The banks, builders and realtors can mothball and play all the games they want. This is a fait accompli, a trainwreck in progress that cannot be slowed or stopped.
They will have to pay the piper just like everyone else who danced at Uncle Al's drunken liquidity orgy.
As bank and broker stocks continue to decline, CEO's will get fired and more bailouts will come from foreign interests or solvent financial institutions.
As the worst is yet to come, continuing to short Lennar, the builders and the banks will continue to be very profitable.
Their stock valuations, like the stock and real estate markets are NOWHERE near bottom.
Last time Wells Fargo countered at 670K from 705K asking, then 10 days later dropped their asking price to 650K.
This time the Nattering One bumped up 25K, Wells counter, full price 650K.
The property pencils out or breaks even on fair market rental (PITI + maintenance with 20% down, fixed 30 year) with NO ROI at around 400K. What gives? Lets see...
From the WSJ: As the glut of unsold home remains stubbornly high and housing demand slides, home builders face a dilemma: to sell, or not to sell?
"Lennar Corp., for one, has joined the "not to sell" camp at its development in Orange County, Calif.
The Miami company plans to finish building 259 homes -- the first phase of a 1,100-unit development in Irvine --
but it has decided not to sell any of them until the constrained mortgage market and swollen housing inventory improves."
Say what? I would not want to be a Lennar stockholder, as they will be waiting for quite some time.
Now compare Lennars position to this developer in Oregon, who auctioned 141 homes for $65 Million in one day.
His already rented homes and homes in Bend did not sell. Of the homes that did sell, 96% of the homes sold below auction reserve, the reserve being his cost.
Wells Fargo CEO John Stumpf: "Wells Fargo is not immune to the slowdown in housing, home equity losses are likely to increase in the fourth quarter and remain elevated through 2008.
The current housing market is the worst since the Great Depression. It's hard to say what inning we are in.
I don't think we are in the ninth inning. If we are, it's going to be an extra inning game."
WELLS FARGO 10K AS OF SEPT 30th 2007
Total non performing or non accruing loans UP 50%: $3.183 Billion vs $2.1 Billion a year ago.
Total loans 90 days delinquent and still accruing UP 52%: $5.526 Billion vs $3.664 Billion a year ago.
I can't wait to see the Q4 10Q Wells files in early Feb.
In Q3, Wells said: "only 0.77% of their $83 billion in home equity loans and its $67 billion portfolio of first mortgage home loans faced only 0.11% or 11 basis points of losses during Q3."
CEO John Stumpf cited "disciplined underwriting."
10 days later Wells filed the actual 10Q and wrote down $1.4 billion in home equity loan losses...
which equaled 1.5% or double the reported amount. So much for the disciplined underwriting.
Then Wells tried to liquidate another $12 billion or 14% of their $83.4 billion home equity portfolio.
Don't think they had any success, but we will give them the benefit of the doubt for now.
$60 billion of the remaining $71.5 billion are SECOND liens, and we all know what happens to 2nd TD's in an REO, they get NOTHING.
My dissection of Wells Q3 10Q filing in Nov. revealed they are hiding at least $10 billion in non performing loans through chicanery or deceptive book keeping.
Thus fooling their stock holders and depositors into thinking Wells is actually on solid ground...
when in fact they can't borrow money fast enough to meet their rising reserve requirements and dwindling equity.
Wells, on anything but solid ground, is sinking in quicksand by sitting on an ever growing inventory of REOs.
The number of Wells Fargo REO listings in California alone, as of Sept 5th, roughly 3800. Nov 27th 5380; UP 41% in just 2 months.
Today 12/28/07, 5820, ANOTHER 10% increase in just 30 days.
5820 x California median sales price at market peak of 484K = $2.816 Billion in non performing California loans.
The Nattering One muses... At least the developer liquidating in Oregon has some common sense as he took his big dump and wont suffer from further constipation.
He wont have any carrying costs or further losses like these other mothballing mental midgets,
Wells and other bank REO departments would be well advised to serve their shareholders by cutting their losses while the going is still "good"...
and stop listening to self serving real estate agents or investors posing as loss mitigators.
These unethical slime bags, just one step above used car sales men, are sandbagging the banks into thinking their REO properties are still worth what was lent on them at peak market.
Many of these self serving agents are stringing the banks along with bad advise, hoping they or a friend...
can finally pick up the property at a discount and flip it later to a "pocket" buyer who has been duped into thinking their getting "a deal".
Local realtors have a vested interest in not seeing the market crash, as they hold many of these overpriced properties.
A common tactic from the past that is currently being employed by the realtors and banks:
Straw man listings that show pending at full price (markets hot), then suddenly disappear, only to reappear later as active, not sold.
The property is owned by a realtor or bank, the "offer" comes from a straw man, who has no intent to purchase.
The realtors use this pending full price offer as a carrot and whipping stick to con unsuspecting buyers into catching falling knive's...
because the market has "turned" and "values" are looking up.
This tactic is also used in hot markets and is referred to as appraisal kerosene, because in a "hot" market, volumes and closing times increase.
So appraisors justify using pending sales to extract a more timely and accurate current "value" rather than waiting for closing.
We are not claiming that the realtor involved in my transaction or ALL realtors engage in these practices...
but I can't wait to see the dead carcasses of the ones that are, flying out from under the wheels of "price reversion to the mean".
The banks, builders and realtors can mothball and play all the games they want. This is a fait accompli, a trainwreck in progress that cannot be slowed or stopped.
They will have to pay the piper just like everyone else who danced at Uncle Al's drunken liquidity orgy.
As bank and broker stocks continue to decline, CEO's will get fired and more bailouts will come from foreign interests or solvent financial institutions.
As the worst is yet to come, continuing to short Lennar, the builders and the banks will continue to be very profitable.
Their stock valuations, like the stock and real estate markets are NOWHERE near bottom.
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