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ian said |
| 2 years 208 days ago |
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ian said |
| 2 years 209 days ago |
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ian said |
| 2 years 209 days ago |
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post by "AnotherCFCemployee"
AnotherCFCemployee Says:
August 11th, 2007 at 10:02 am
Turner,
Of course some of the REO is investor held. However, consider this. The servicing expenses are huge on investor held REO’s and since servicing is agreed upon at the sale of the loan, there is a loss of income associated with servicing each of these REO’s. So there is a direct out of pocket cost for CFC. The bigger issue is however the loans held by CFC and this is a huge problem.
You said CFC has reserves for 700 thousand loans, not I. Naturally they would not hold the reserves for loans that are the investors dime. CFC is invested very heavily in Option Arms in CA. CFC in its filings and reports do not show the reserves required for even 400 thousand CA option arms, let alone 700 thousand loans (wheter they be CA option arms or a 35000 loan in Detroit) — if they have the reserves, they are lying to investors.
There is no way to spin this — the CW Bank holds them and the CW Bank loses. They will come into play, this is unavoidable. Not to mention that CFC is already counting the neg am as income today — gotta love that fancy accounting” as my grandmother would have said
Those option arm loans that CW Bank decided to hold will be the dagger in CFC’s heart, IMHO
The borrowers that have these option arm loans (that CFC is the investor) will not refinance “if” the Fed cuts the rate because they will either have LTV issues, documentation issues (insignificant income to go full doc as will be required on the high LTV due to both recast and depreciation). If they are able to refinance them “if” the FED cuts the rate, they will choose not to as they will continue to enjoy that low easy payment and will not consider the much higer payment of the new loan. Losing that neg am payment option and choosing a higher payment isn’t going to happen — people will not refinance into a house payment thousands more than their current payment. There are also very hefty pre-payment penalties to be considered.
The people in those loans have and will have limited to no options — they can’t refi, they can’t sell — When they recast and very soon the day is coming when the recasts are due, the loss will be huge. Today they are an oozing wound, tomorrow they will be arterial — There is no way to plan for this today as the plan was by the lender and the borrower when these lonas were written that these people would be able to refinance them into the same type of loan as it was always suspected the value would go up. They are the yuppie reverse mortgage -lol — I like that, just made it up.
REO’s are a huge problem that will only get bigger. Now my question is what happens to all that money put on the books with that “fancy accounting” when the loans default and the neg am interest that was booked as income never comes to fruit.
I respect you Turner and I wish the best for you. You seem like one who thinks things through. Anyway to think this through?
Also Turner if you don’t mind, why would anyone keep money in CFC when it will take so long for it to return to market highs? Look at the big boy tech stocks, they still are not to the level they were at in 2001 before the tech bubble. Why not just count the losses today and place the money in a sector that isn’t hit — problem is, there really isn’t any safe sectors today.
The money the FED put in must be paid back, the FED will not just hold the MBS. These injections are short term. The credit crunch is worse. This housing greed will trigger a very large fall and when it happens and ordinary people learn why it happened — the greed, the recklessness, and the fraud of the mortgage business, it will not be good for CFC. CFC being such a large recognized lender will be the red headed posterchild that everyone blames for the loss of their investments, they will be the face of the enemy mortgage business — what do you think the value will be then?
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