The National Association of Realtors released their numbers for February Existing Home Sales yesterday, but any correlation between the NAR’s analysis and the data is purely coincidental. According to Lawrence Yun, chief economist of the NAR:
WASHINGTON, March 24, 2008 - Sales of existing homes increased in February and remain within a fairly stable range, according […]
Arthur, who has $434,000 in commercial paper that’s been frozen since August, plans to reject the proposal because he’s not willing to give up his right to sue to recover his money sooner. Under the agreement reached Monday, the 30- to 90-day debt will be converted to new notes maturing as late as 2017.
“I’m going to sue,” said Arthur, 52, who invested proceeds from the sale of his Alberta farm on the advice of broker Canaccord Capital Inc. “I want all my money back; you can’t sell somebody something and then not deliver on the product.”
About 1,400 Canaccord clients collectively hold $269 million of the frozen commercial paper in their accounts, according to the brokerage. Its chief operating officer Mark Maybank said yesterday in a telephone interview it is working on a “relief program” for clients.
“We don’t have the ability or the capital base to buy it out directly from our clients,” he said, from Ixtapa, Mexico.
“I’m optimistic that we’re going to be able to post a successful restructuring, identify market participants, potential buyers that we can work with to address the needs of our clients.”
Investors like Arthur, who include a university student, energy executives and a retired flight attendant, have the power to scuttle Canada’s biggest debt restructuring if they vote against the proposal.
The plan requires the support of a majority of noteholders, who must forego their right to legal action.
Noteholders will be asked to vote on the restructuring of asset-backed paper on April 25 in Toronto, the committee in charge of the restructuring said late yesterday. Each holder will have one vote.
Under Canadian bankruptcy rules, the more than 1,500 individuals and at least 100 corporations and money managers who own the commercial paper.
“We want to avoid having the noteholders endure more anguish than is necessary,” said Toronto lawyer Purdy Crawford, who spent almost seven months crafting the pact and now plans to meet investors in five cities to sell it. “The alternative to this plan is the liquidation of some or all of the conduits, which as I’ve said would lead to substantial losses.”
A defeat of the planmay lead to a collapse of $32 billion in asset-backed paper, which is also held by some of the biggest pension funds and lenders such as the National Bank of Canada.
Some individual investors say the Crawford plan leaves them with two unappealing options: recover most of their money when the notes mature within nine years.
Or they can try to sell the debt once trading begins, assuming the plan is approved. The debt may trade at 60 cents to 80 cents on the dollar because of the decline in credit markets, according to analysts.
Murray Candlish, 51, a retired hog farmer in Daysland, Alta., says he can’t wait nine years to get his $350,000 investment back.
“We trusted these people to put our savings into something that was safe”.
After being laid off from her job as an events planner at an upscale resort, Jo Ann Bauer struggled financially. She worked at several lower-paying jobs, relocated to a new city and even declared bankruptcy.
Then in December, she finally accepted her parents’ invitation to move into their home — at age 52. “I’m back living in the bedroom that I grew up in,” she said.
Taking shelter with parents isn’t uncommon for young people in their 20s, especially when the job market is poor. But now the slumping economy and the credit crunch are forcing some children to do so later in life — even in middle age.
Financial planners report receiving many calls from parents seeking advice about taking in their grown children following divorces and layoffs.
Kim Foss Erickson, a financial planner in Roseville, Calif., north of Sacramento, said she has never seen older children, even those in their 50s, depending so much on their parents as in the last six months.
“This is not like, ‘OK, my son just graduated from college and needs to move back in’ type of thing,” she said. “These are 40- and 50-year-old children of my clients that they’re helping out.”
Parents “jeopardize their financial freedom by continuing to subsidize their children,” said Karin Maloney Stifler, a financial planner in Hudson, Ohio, and a board member of the Financial Planning Association. “We have a hard time saying no as a culture to our children, and they keep asking for more.”
Bauer’s parents won’t take rent money or let her help much with groceries. She’s trying to save several hundred dollars a month for a house while working as a meetings coordinator.
Editor:
This story will be repeated in countless Familes.
Sadly, we have many Boomers and Echo Boomers that are totally broke and will never be able to grab a high paying job - again.
The difference in this downturn, as opposed to other ‘Depressions’, is that folks have no savings, they have maxed credit cards, their home is losing value so fast that they can’t get any more lines of credit - food prices are skyrocketing, taxes are going parabolic, services are being cut, jobs are being slashed, student loans are harder to get, retail is stalling, and the endless War in Iraq is costing TRILLIONS of dollars.
Happy Days are here again.
Mortgage insurers, whose backing is required for borrowers who can’t afford the traditional 20% down payment on a home, have already flagged nearly a quarter of the nation’s ZIP codes where they refuse to insure some home loans.
That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J.
The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada — which have seen the highest foreclosure rates and the worst price declines — are blackballed on some mortgage insurers’ lists.
Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.
For new home buyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune.
“We’re in the midst of an epic, broad, sweeping change in the mortgage industry,” said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.
The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.
Lenders’ growing leeriness threatens to dampen sellers’ already soggy prospects for the spring home-buying season — and that means more pain for the already battered housing sector and the broader economy.
In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won’t insure certain types of home loans — those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3%.
Editor:
This is a TRAGIC blunder that will only hasten the demise of the U.S. economy.
JUST as people need some breathing room - the oxygen is shut off.
All those people that actually WANT to buy a home, could now be out of the market - and lending even more losses and NON-SALES to the horrid numbers we already have.
The unemployment stats are about to go through the ROOF, as job creation is going to drop off a cliff.
The impact on NYC - and the downturn in the Financial Industry will kill off thousands of jobs.
Just the lost jobs at Bear Stearns will be a crippling hit to the Big Apple’s bottom line.
31% of GDP of NYC is dependent on the paper shufflers in the Financial Sector.
Citigroup said Thursday it will use its $7.3 billion in unsecured U.S. bank credit facilities to repay debt maturing this year.
The funds will also be used to provide financing to its core commercial franchises, it said. CIT will continue to actively seek additional funds and explore and execute on the sale of non-strategic assets and business lines.
“Our decision today is a result of the protracted disruption in the capital markets as well as recent actions by the rating agencies,” said Chief Executive Jeffrey M. Peek.
More….
The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday.
In a rare move to calm investors’ nerves, British financial authorities stepped forward on Wednesday to quench a string of “unfounded rumors” that had sent some financial stocks in London into a tailspin.
The Financial Services Authority said it had started an investigation into whether some traders spread rumors about British financial institutions over the last few days and might have profited from the decline in the stocks’ share prices. Separately, the Bank of England, which almost never makes public statements about specific lenders, denied rumors that it met or scheduled to meet with executives at a British bank to discuss potential liquidity problems.
The twin moves come days after the U.S. central bank’s extraordinary rescue of Bear Stearns and illustrates the lengths authorities are going to on both sides of the Atlantic to prevent a crisis of confidence in the financial sector from spiraling out of control. A day after Wall Street soared in response to a Federal Reserve interest rate cut, markets in Europe and the United States fell again, with the Dow Jones industrial average down 1.6 percent in afternoon trading.
“It reveals how nervous the authorities are that rumors can actually bring serious problems to a financial institution,” said Alistair Milne, senior lecturer at Cass Business School in London.
( Editor - check out Naked Shorting and other nasty practices - some really hard edged trading going on, methinks).
Trading rooms were buzzing with rumors Wednesday morning that HBOS, the largest mortgage lender in Britain, was in trouble. The speculation had wiped about £3 billion, or $6 billion, off its market value before the Edinburgh-based lender could deny them, saying it had “ready access” to funding.
The pound was badly hit on Wednesday following rumours that HBOS could be in financial difficulty as well as speculation that the Bank of England may cut interest rates next month rather than in May.
Bank of England policymakers voted 7-2 to freeze interest rates at 5.25 percent earlier this month, minutes of their meeting showed.
The BoE’s nine-member Monetary Policy Committee (MPC) opted to leave its key lending rate unchanged at the meeting on March 5-6 after a quarter-point reduction the previous month.
The minutes, alongside market turmoil and continued credit constraints, mean the BoE is likely to come under increased pressure to cut rates sooner rather than later.
Also weighing on the pound were labour market data which showed a smaller-than-expected drop in jobless numbers.
“The greatly increased risk of a 25 basis point base rate cut to 5.0 percent next month following today’s dovish minutes, and softer-than-expected unemployment and earnings, is helping underpin euro/sterling” said Robert Howard, analyst at Thomson IFR Markets.
The New Mexico-based firm defaulted on $610m (£307m) in margin calls from lenders earlier this month and has been teetering on the brink of becoming the next American financial company to fall victim of the global credit crunch.
It has struck a conditional deal with five creditors for a further $5.8bn of financing - but the agreement depends on Thornburg raising $948m from other sources over the next seven days.
The five banks holding the keys to Thornburg’s future are Royal Bank of Scotland, Citigroup, Credit Suisse, UBS and the troubled institution Bear Stearns.
Thornburg’s chief executive, Larry Goldstone, said the conditional agreement illustrated a “high degree of confidence” from lenders in “the superiority of our origination franchise, the quality of our assets and the strength of our management team”.
Thornburg, which has 20,000 clients, specialises in so-called jumbo mortgages for large homes at the higher end of the market. These have come under threat as the sub-prime mortgage crisis has spread to the broader property market.
Founded in 1993, Thornburg’s shares were trading at $28 a year ago. They plunged in August on liquidity concerns which the company initially appeared to have survived. But problems re-emerged this month when Thornburg re-stated a fourth-quarter profit as a loss, taking a $676m charge to cover a fall in the value of its portfolio.
Thornburg’s shares sank by $1.26 to $1.72 on Wednesday. Chairman Garrett Thornburg is being hit personally in the pocket - he has spent more than $14m on shares over the last year.
The company follows a series of other American mortgage providers which have run into difficulty. The country’s biggest home loans firm, Countrywide Financial, was taken over by Bank of America in January.
“Commodities have been the one bright spot for Canada,” said Steve Butler, director of foreign-exchange trading at Scotia Capital Inc. “The drop in commodities has spurred some people to rethink their positions and we have seen some pretty aggressive selling of the Canadian dollar today. Personally, I am surprised we did not weaken sooner.”
The loonie, which fell substantially in the last hours of North American equity trading, finished the volatile session at 98.49 cents, down 2.19 cents from $1.0068 on Tuesday.
The sharp drop came as the price of crude oil plunged nearly $5 a barrel to $104.48 while gold futures plummeted $59 an ounce, their biggest drop on record according to Bloomberg, to below $1,000 an ounce.
Canada’s benchmark equity index sank 427 points amid steep losses in the metal, mining, material, gold and energy sectors.
The job cuts, which account for about a third of its staff, will be made by 2011 under plans to turn around the ailing bank’s fortunes.
The Newcastle bank was nationalised in February after the credit crisis forced it to seek a Bank of England lifeline, to fund its mortgage loan book.
Northern Rock must pay back the Bank of England loans worth about £25bn.
The bank needs European regulators to approve its rescue plan, and the EU Commission has began examining details of Northern Rock’s proposals.
Under EU rules, public support can be allowed to stop firms from going bankrupt, but long-term government aid that is seen to undermine competition is not allowed.
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