JUMBO Lenders + Borrowers Feel The Pinch

While the media continues to focus on the collapse of the U.S. subprime mortgage market, it is also worth noting the recent decline in lending activity and rise of delinquencies for the highest end of homeowner loans - JUMBO mortgage loans. According to LPS Applied Analytics, a mortgage data service based out of Jacksonville, Florida, about 2.6% of the homeowners who took out JUMBO mortgage loans during 2008 are ALREADY at least 60 days delinquent...while this rate pales in comparison to the current 20% delinquency rate affecting 2008 subprime borrowers, it is still significant because this is the fastest pace of Jumbo delinquencies in at least the last 15 years, when LPS began tracking the data.


* The national average for a 30 year fixed rate jumbo mortgage was 6.57% this week compared with 5.34% for a prime conforming loan. According to BanxQuote CEO Norbert Mehl, the spread between Jumbos and primes had been only about 20 basis points (0.2%) "for several decades"...however, since August 2007 + the collapse of the subprime mortgage market, the spread has consistently stayed in between 100 and 200 basis points (1.0%-2.0%)


* A prime conforming loan is a mortgage available to borrowers with top credit scores that is eligible for sale to either Fannie Mae or Freddie Mac...currently the Fannie-Freddie cap is set at $417,000 in most places and up to $729,750 in areas with higher home prices


* JUMBO lending activity slowed in the 4th quarter of 2008 to $11 Billion, or 4% of the mortgage market (vs. 14% in 2007)...the lowest quarterly amount since Inside Mortgage Finance started tracking data back in 1990


* Top 5 U.S. Jumbo mortgage lenders are: Chase Home Finance LLC., Bank of America (BAC), Washington Mutual (aka the artist formerly known as WM), Wells Fargo (WFC) and Citigroup (C)...the Top 5 Jumbo lenders originated a combined $55.3 Billion in jumbo loans during 2008, they lent just $4.3 Billion (less than 8%) of that total during the 4th qtr of 2008


* According to LPS Applied Analytics, the average credit score for a 2008 jumbo loan was 762


* President Barack Obama's Homeowner Affordability and Stability Plan, announced this week, has NO provision to help JUMBO mortgage borrowers


bloomberg.com/apps/news?pid=newsarchive&sid=ab4hyMC6aJf0


Data Courtesy: Bloomberg

CRAMER - Obama's $800B Stimulus Is A FRAUD

Stock market commentator Jim Cramer is EXTREMELY negative ('bearish') on the final version of the $789 Billion U.S. economic stimulus package that is making its way through Washington. According to Cramer, host of CNBC's popular stock market-themed television show Mad Money, Congress and President Obama both deserve an 'F' for the passage of this 'total fraud' of a plan. Perhaps more significantly, Mr. Cramer sees NO actionable stock trades as a result of this package (as a humble fan of CATERPILLAR/CAT, I find this point particularly discouraging). Please find his sobering take below courtesy of TheStreet.com :

Data Courtesy: TheStreet.com

The U.S.'s $9 TRILLION Bailout 'Plan'

Through February 10th, 2009, the U.S. government has pledged a total of about $8.8 TRILLION towards fixing the country's ailing financial system. Of this $8.8 Trillion committed, 'only' about $2 Trillion has been actually spent thus far.

* Please check out the details courtesy of the insightful New York Times link below:

nytimes.com/interactive/business/20090205-bailout-totals

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1.) The Government as Investor:

$4.6 Trillion

Spent: $921 billion

Includes direct investments in financial institutions, purchases of high-grade corporate debt and purchases of mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

2.) The Government as Lender:

$2.4 Trillion

Spent: $666 billion

A significant expansion of the government's traditional overnight lending to banks, including extending terms to as many as 90 days and allowing borrowing by other financial institutions.

3.) The Government as Insurer:

$1.8 Trillion

Spent: $252 billion

Includes insuring debt issued by financial institutions and guaranteeing poorly performing assets owned by banks and Fannie Mae and Freddie Mac.

Data Courtesy: New York Times

Whitney Believes U.S. Bad Bank = Bad Idea

Oppenheimer & Co. financial industry analyst Meredith Whitney is widely recognized on Wall Street as being one of the first individuals to accurately identify and predict the size and scope of the current economic woes facing the U.S.'s financial system. Mrs. Whitney correctly predicted and warned clients (via documented letters of research) of the oncoming financial industry meltdown back in October 2007, a full six months prior to the March 2008 collapse of (the artist formerly known as) Bear Sterns. As a result, her forward-looking financial system and policy thoughts are now officially REQUIRED viewing material...these come courtesy a Bloomberg TV interview aired recently on February 4th, 2009:



In addition to her insightful thoughts on the U.S. government's 'BAD BANK' proposal, Mrs. Whitney also advises investors to continue staying away from investing in the common stock of U.S. banks. Per about 8 minutes into the interview, Mrs. Whitney states: "...What we do know is that the existing banks need more capital for a number of reasons. If you are an existing shareholder, if you are an equity shareholder, then you are at the absolute bottom of the totem pole. Your risk is at the highest...Investors should NOT even consider owning banks at this point on an equity basis because you don't know what you're getting (owning) but you do know that with any change that occurs (due to government intervention), you are at the bottom of the totem pole. So your interests will be considered absolutely last by the government and in many cases, your interests will be 'crammed down'."


Data Courtesy: Bloomberg + Youtube

GROSS - Stimulus Bill Needs To Start With 'T'

During a February 5th, 2009 interview with Bloomberg TV, PIMCO managing director Bill Gross firmly expressed his belief that the U.S. government should be spending TRILLIONS, as opposed to just hundreds of billions, of dollars on stimulating the U.S economy in order to avert a 'mini Depression'.

Please find the complete 20 minute interview below:


* Bill Gross (about 9 minutes into the interview): "I don't think (the current proposed $800 Billion U.S. economic stimulus plan) is enough..there's debate back and forth and $700 and $800 Billion sounds like a lot of money (but) the problem is that there has been trillions of dollars of credit, bank capital and spending power extracted from this economy over the past 6 to 12 months...you can look at it from the standpoint of the wealth effect, you can look at it from the standpoint of lending of banks, or the shadow system, or all of that in combination, but the fact is that this economy requires support from the government, a check from the government in some form or fashion in the trillions as opposed to the hundreds of billions...I think President Obama was right, there's a potential catastrophe if Washington continues to focus on a hundred or two hundred billion dollars, we need something in the trillions."


Data Courtesy: Bloomberg + Youtube