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Many of you have already heard that Calculated Risk’s co-host, Tanta, passed away yesterday.

http://calculatedrisk.blogspot.com/2008/11/sad-news-tanta-passes-away.html

She once asked the CR audience for some current data on neg-ams, which I had so I sent it along.  She replied with a warm thank you, and left me thinking that, for someone who has 75,000 daily readers, she sure is as kind and humble as she seems on the blog.

It’s moments like that which restore my confidence in what we are doing here – trying to help each other figure it all out along the way.

Thanks for the inspiration Tanta!

from marketwatch.com

LADERA RANCH, CA, Nov 24, 2008 (MARKET WIRE via COMTEX) — G8 Capital announces today that it has closed its 10th portfolio acquisition from a top-five U.S. financial institution. The portfolio consisted of 88 California REO properties. G8 Capital helps financial institutions and other holders of REO assets or non-performing loans get fair value for their assets through very quick closings.

G8 Capital expects to close two more REO portfolio acquisitions before the end of the year, putting the firm on track to acquire more than $150 million in portfolio acquisitions over the past 12 months. The firm has acquired portfolios from some of the nation’s largest financial institutions and investment banks, as well as smaller regional/community banks. G8 Capital anticipates acquiring more than $500 million in REO and non-performing loan portfolios next year.

G8 Capital has seen a substantial increase in seller activity following Treasury Secretary Henry Paulsen’s announcement to abandon the Troubled Assets Relief Program (TARP) program to purchase distressed assets.

“Activity from sellers has increased more than threefold following the Treasury’s announcement last week, with many sellers expressing a desire to close transactions before year end,” said Daryl Schwartz, Vice President of Acquisitions for G8 Capital.

This would be the week to blitz REO listings with offers!

Welcome to the day after Thanksgiving!

A reader sent in this report from Goldman Sachs – it refers primarily to the subprime loans issued in 2006 ($600 billion):

ABX Performance Update
·       Delinquencies and losses – delinquencies increase again this month for all ABX indices, although there are further signs of moderation for the 06 indices. Losses continue to rise, due to liquidations from the bulging foreclosure and REO pipelines.

Recent Trends in the Non-Agency Mortgage Market*
·       Loan modifications on the rise
·       Modification activity is steadily on the rise at about $5B per month, $4B of which are subprime loans. So far, about $35B subprime loans have been modified, accounting for 6% of the outstanding balance.

1       To date most modifications have taken the form of a rate reduction. While only 27bps of outstanding subprime mortgages have received principal reduction, it is often very significant, typically providing 20-30% equity relief to the borrowers.

2       Principal modifications appear more effective than rate reductions in keeping borrowers perform.
3       Modifications are least effective for subprime borrowers, 70% of whom relapse into delinquency within 12 months after modification. Alt-A and Option ARM borrowers perform relatively stable, with a 20% delinquency rate (D30+ ) after modification.

·       Liquidation trends – how much discount do you get from distressed home sales?
·       REO properties offer roughly a 25% discount below the market prices implied by the Case-Shiller HPI index, while short sales prices are only about 8% lower.

1       Liquidation discounts vary greatly by states. Distressed sale in Ohio is about 50% lower than market price. For California, the discount is less than 20%.

*: all based on Loan Performance data, for non-agency securitized mortgages only.

My thoughts:

When they say 27bps, they mean 0.27% of the $600 billion, or about $1.62 billion in loans that have had a principal reduction.  That’s about 4,000 loans at an average of $400,000 each.  These are national stats, yet 4,000 loans probably doesn’t even cover the amount of subprime loans funded in SD County in 2006, let alone the nation.  Yet in their #2 they note that the principal reductions appear to be more effective in keeping borrowers paying.  In their #3 they note that 70% of those subprime borrowers who only get a rate reduction end up non-performing within 12 months.  Which really means a lot less than 12 months, because they have to be counting loan mods completed in 2008.

End Result?  The principal reductions are the only effective way to modify a subprime loan, and for the mortgage industry to fully engage, the government is going to be under pressure to share the pain.  Hence, the $600 billion gift issued by the Fed right before the holiday.

REOs vs. Short Sales – They assert that REOs are selling at 25% discounts, and with a short sale you only get 8% off.  I think that in 2009 we’re going to see more agents listing their short sales with the dramatic way-below-market list price.  With the agonizing long wait to complete a short sale, the ultra-low list price is becoming the trend to entice buyers to hang around, but over that time there are more offers that keep coming in to thwart any potential “below-market” sales price.  I’d expect that from now buyers are going to want to have less and less to do with short sales, which could lower their eventual sales prices.

May your stuffing be tasty
May your turkey plump,
May your potatoes and gravy
Have never a lump.
May your yams be delicious
And your pies take the prize,
And may your Thanksgiving dinner
Stay off your thighs!

Happy Thanksgiving Everyone!

from sddt.com

Five ships and more than 5,500 sailors of Carrier Strike Group 7 returned to their homeport of San Diego Nov. 25 after a six-month deployment to the 7th Fleet and 5th Fleet areas of responsibility.

The strike group flagship, the Nimitz-class nuclear aircraft carrier USS Ronald Reagan, the guided-missile cruiser USS Chancellorsville, the guided-missile destroyers USS Decatur and USS Gridley and the guided-missile frigate USS Thach arrived to meet thousands of family members waiting on the pier.

The deployment was the third-ever for the Ronald Reagan strike group, which performed combat operations in support of coalition troops in Afghanistan, as well as carrying out a humanitarian assistance/disaster relief mission in the Philippines in response to Typhoon Fengshen in June and July.

“There is no question that Ronald Reagan Carrier Strike Group had a very successful deployment,” said Commander, Carrier Strike Group 7, Rear Adm. Scott Hebner.

“The talented and dedicated sailors of this group demonstrated tremendous operational flexibility and performed at the highest levels of excellence across the warfare spectrum and core capabilities of the Maritime Strategy.

U.S. Navy photo by Mass Communication Specialist 3rd Class David A. Brandenburg/Released

“They were warriors, ambassadors, partners and humanitarians. They represent all that is good in our country and I’m profoundly honored to sail with this impressive strike group.”

The deployment ceased being routine when Mother Nature unleashed its wrath on the Philippines. Typhoon Fengshen struck the nation hard, particularly on the island of Panay, leaving 540 dead and destroying more than 100,000 homes.

The Ronald Reagan strike group, which was enjoying its first port call of the deployment in Hong Kong, left port a day early to avoid the storm, and after receiving an order from President George W. Bush, immediately steamed to the Philippines to help.

Arriving on station in only 36 hours, helicopters from all six ships, including the guided-missile destroyer USS Howard, proceeded to fly eight consecutive days delivering more than 519,000 pounds of fresh water, rice and medical supplies.

After visits to Korea, Japan and Malaysia, the Ronald Reagan strike group transferred to 5th Fleet.  Ronald Reagan, Chancellorsville and Reagan’s embarked Carrier Air Wing 14 took up station in the Gulf of Oman as Commander, Task Force 50 and immediately began support of coalition forces on the ground in southern Afghanistan, flying more than 1,150 sorties in support of Operation Enduring Freedom.

While Ronald Reagan and its air wing helped provide security on the ground in Afghanistan, other strike group ships provided maritime security in the region.  Decatur and Thach joined Task Force 152 in the Central Arabian Gulf, while Gridley and Howard patrolled the Arabian Sea and Gulf of Aden as part of Task Force 150.  CSG-7 ships also strengthened maritime partnerships by participating in the bilateral Exercise Malabar ’08 with the Navy of India, as well as South East Asia Cooperation Against Terrorism with the navies of Brunei, Singapore and the Republic of the Philippines.

The deployment was the third for Ronald Reagan, the U.S. Navy’s newest and largest aircraft carrier, which was commissioned in 2003.  The squadrons of CVW-14 supported many missions during the six month deployment and include the “Redcocks” of VFA-22, “Fist of the Fleet” of VFA-25, “Stingers” of VFA-113, “Eagles” of VFA-115, “Black Eagles” of Airborne Early Warning Squadron 113, “Cougars” of Tactical Electronic Warfare Squadron 139, “Black Knights” of Helicopter Anti-Submarine Squadron 4 and the “Providers” of Carrier Logistics Support 30.

www.battle-fleet.com/pw/his/USS_Ronald_Reagan.htm

There are 144,000 Americans stationed in Iraq, and over 48,000 in Afghanistan.  While we enjoy the freedom their service provides us, they are being put to the test in every conceivable way.

Let’s reach out, shall we?

I introduced ‘Aunt Nancy’ last year, a lady who out of the goodness of her heart has organized an effort to send packages to soldiers around the holidays.  By simply emailing her, she will assign you a specific soldier, and you can send them a ‘relief package’ to enjoy for the holidays.

Here is her message:

Jim,

Thanks for your offer to help spread the word for my last minute plea for getting Christmas to our troops!  As you know, I’ve been at this for over 5 years now.  There is no organization here, just me and my laptop, connecting people  to our troops in Iraq, Afghanistan, Germany (wounded military), and now even a few sailors out at sea.

Your blog readers know what a lean year it has been for everyone, and our troops are feeling it too.  Their families are struggling to be able to send much, and well, my little project has had about a 75% drop in participation this holiday season.   If anyone would like to help by filling up and mailing a Christmas stocking or two, that would be awesome!  We are also looking for candy canes, cookies, candy, and decorations.  Even just more Christmas card greetings would add some cheer!

Usually packages need to be shipped by Thanksgiving, and that surprises people.  Fortunately, I just received two Army units stationed right at the Baghdad International Airport bases and that is where the mail arrives.  They can get PRIORITY MAIL delivered in 10 to 14 days!  That gives us a chance to still mail decorations in time for them to hang them up and enjoy them for a week.

In any case, even a couple of extra cards would be nice.  Some people bring a box of cards to Thanksgiving dinner and have all the family sign them.  Scout and school groups often make cards.  Whatever!  A note here, there continues to be an email forwarded around saying “send a card to ANY SOLDIER” etc.  Please let people know that those cards get thrown away.  They must be addressed to a specific soldier.  I can help with that!

My blog has several postings about the different projects I’m organizing.  No troop addresses are ever listed online.  Just send me an email request!  Thanks again for your effort Jim.

Nancy’s email is  nancy@auntnancyusa.com

and her blog is http://auntnancyusa.blogspot.com/

Email Nancy today, and she’ll give you a soldier’s name and address for you to send a holiday treat!  Thank You!

D Max posed these thoughts:

I don’t have a guess but I do have a few questions:

When is the last time in history when October sales were higher than June sales? The sales trend, as far back as I have been able to research, is fairly predictable. Do you have any theories what is causing this unusual sales pattern? Are the banks in SoCal starting to lend money again? Are foreigners purchasing these properties? Where are these buyers coming from and is this pool of buyers bottomless or is it drying up?

Let’s compare the sales history between June and October:

Normally there is drop-off in sales in the fourth quarter, and almost all of these October counts are substantially less than June (1997 was unusual). Add into this mix that the interest-only loans started being pushed in 2001, and the neg-ams really got going in 2003, and you’ll see that by 2003 we hit warp speed; even though prices were going up substantially, sales were still smoking.

Typically there had been some price drop in the fourth quarter too, but between 2000-2005 the prices kept going up, even though sales declined.

In 2008, with the price trend in a steep descent, the October sales has bucked the normal trend of fewer sales – normally a double-digit decline turned into a 14% increase!

To answer D Max’s questions, I think it’s purely a result of buyers finding some homes priced well enough that they are buying. The lending has gotten tighter, but I wouldn’t call it tight – yet. More to come on that later.

Had an interesting experience at this Lennar new-home sales office yesterday.

The sales agent remembered my buyer from a previous visit, and immediately says we don’t qualify for broker participation.  My client had never signed in before, but about six months ago had stopped in and asked some pointed questions about their pricing and lack of sales.

Apparently this guy didn’t forget, and took great joy in running us off.

This from a company who has LOST more money in 2007 and 2008 than they made in 2002-2006!

Lennar’s third quarter results:

http://www.123jump.com/earnings-calls/Lennar-Earnings-Call-Third-Quarter-2008/30078/1

Has everyone seen this already?

http://majman.net/fly_loader.html

Warning, can be addictive.