Posted on 10/29/2007 8:59:36 PM PDT by bruinbirdman
Angelo Mozilo, chief executive of Countrywide Financial, on Monday strongly criticised the US government’s response to the collapse of the subprime lending market, saying there had been “zero” effort to tackle the crisis.
“In terms of tangible effort from the federal government...there has been no programme, no federal effort, no legislative assistance – zero,” he said.
He criticised the US government’s refusal to lift caps on the size of loans that can be bought by Fannie Mae and Freddie Mac, the government-sponsored entities created to promote affordable housing.
Fannie Mae and Freddie Mac are prohibited from buying loans worth more than $417,000. Failure to increase this limit would continue to depress the property market and keep first-time buyers out of the housing market, particularly in California, where property is expensive, said Mr Mozilo.
“First-time buyers cannot buy a home now. Only the wealthy and privileged can afford to buy homes,” he said.
Mr Mozilo’s stock sales are being probed by the Securities and Exchange Commission as part of an examination of trading by executives at subprime lenders. He has sold more than $130m worth of Countrywide shares since beginning a stock-sale plan at the end of last year.
Quan Zhu, a former Countrywide vice-president, agreed to pay $108,840 to settle insider trading charges filed against him by the SEC, without admitting or denying the allegation, the commission said yesterday in a statement.
The SEC alleged that Mr Zhu traded in Countrywide stock “while aware of confidential negative earnings information”.
Speaking at the Milken Institute’s State of the State conference in Beverly Hills, Mr Mozilo blamed the subprime crisis on “easy, low-cost money” that drove up house prices and “exotic loans and diminished underwriting standards”.
“People stretched themselves,” he said, though he implied that the blame for the crisis should be shared.
“It takes a village to do this. As long as [house] values keep falling, the subprime situation will get worse.”
Jeff Mezger, chief executive of KB Home, said house prices would remain depressed. “We’re anticipating that it’s going to stay tough for quite some time.”
Countrywide, the largest US mortgage lender, last week announced a $1.2bn third-quarter loss, reflecting $2.9bn of mortgage-related writedowns, credit losses and restructuring charges.
But shares in the California-based lender rose sharply after it said it would return to profitability this quarter.
You mean they aren't going to live in the house 30 years? In that case it is a bad investment. No sympathy.
If the guy couldn't afford the house, no sympathy.
If the guy got the house with no down and no interest for two years and got gipped by the realator, he walks away and goes back to his rental. No sympathy.
The lender, the realator, or whoever else was involved, it was a business decision. No sympathy.
Uncle Sam? No sympathy.
yitbos
As long as [house] values keep falling, the subprime situation will get worse.”
Would someone explain that to me? I don’t get it.
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Very simple ,, if you bought a house at the limits of your paying ability on an ARM with anything less than 20% down and that ARM is set to reset higher in 0-24 months from now you are now “upside down” on the house as the valuations have dropped and you cannot refinance the full amount,,, since you cannot write a check for the difference in value you are unable to refinance... the rates go up 2%,3%,4% or more on the reset , your monthly payment jumps lets say 40% and you start missing payments and living off your credit cards until you file bankruptcy..
Cash is King, Baby. Always has been, always will be. :)
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Negative , in a high inflation environment cash is trash ,, much better to have assetts.
I believe we have been in a high inflation environment for the last few years , the gov’t stats don’t match my personal experiences AT ALL , the intentional inflating of the money supply and lowering of rates makes cash a bad thing ... not wealth mind you ,,, but cash itself ,,, buy something that will ride out inflation and wait for the right time ...
ping!
For the individual I’d agree. It does, however, have farther reaching effects that just the individuals directly involved.
I have always wondered why energy costs aren’t calculated in inflation numbers.
Not until the sellers capitulate to reality and sell at a lower price.
Once that process starts it spirals down fast.
This guys a criminal, and should be in Jail... its not governments responsibility to bail you out of the fallout from your greed and lies.
It is however their responsibility to prosecute and punish you for your crimes.
SEC, where the hell are you on CFC?????
My wife and I were talking about the housing situation this morning. The bigger the swing in values, the bigger the risk. People were literally making as much (or more) on the appreciation of their homes via refinancing as they were on their jobs. That is HUGE. Problem is, when things go the other way they can find themselves “upside down” on their home loan.
It’s one thing to be upside down on a car loan. It is quite another to find that your home is worth $100,000 less than you owe - and your loan is about to reset.
Big risk means big swings - in BOTH directions.
“Negative , in a high inflation environment cash is trash ,, much better to have assets.”
Nope. If the economy completely tanks...who’s going to pay you for your “assets?” What will they use for money? Buttons? Unless you’re considering gold and silver “assets” then you don’t have squat. Who could buy your home? Who could buy your boat or truck, mink coat or diamond ring? Who could buy your land when no one, not even the banks, have any ching?
I’d rather have a silver dollar in my pocket to buy a loaf of bread...or to buy a McMansion out from under a local Yuppie if need be. *SMIRK* ;)
Don’t worry about me. I know what I’m doing. ;)
You can trade or barter assetts ,, that silver coin you mentioned is a valuable metal ASSETT , that basement full of whatever commodity item you prefer is an assett, ownership of a company through stocks is an assett that floats with inflation as the companies debts are reduced by inflation and their assetts are inflated by inflation,, stocks are inflation neutral ,, however that wheelbarrow of $100 bills is kindling... I would rather own or control a few hundred tons of copper than have dollars that are sinking ... it’s true the dollar appears undervalued right now but I have seen currencies way out of whack before and I have never seen them reverse in a timely manner , they take years to reverse...
Well, then we’re just mincing words and are on the same page.
Capitalism Rocks! :)
I think this is more like the junk bond bubble of the 1980’s. By the time a mortgage note portfolio reaches the remortgage company level and available to major investment banks, normally it is safe to assume the portfolio has been vetted. Like junk bond bubble, many of these notes were suppose to be backed by the value of the real estate property. If the subprime causes the housing prices to drop below the value of the mortgage even for owners who have gotten a conventional mortgage, the portfolio value also takes a hit on the good notes. I don’t know if you remembered the junk bond bubble, where investors pooled their money to buy a good company, and then went to the bank to borrow money against the assets of the company to buy another company and repeat the process until the investors own a huge number of companies each financed by a loan against the company. It became a equity pyramid scheme which collapsed when one of the companies within the multi layered loan scheme suffered during an economic down turn. Like the subprime scheme, many investment banks and hedge funds owned these loan notes which became worthless or “junk” when the pyramid collapsed.
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