IndyMac Bank was shut down by regulators Friday as the mortgage crisis claimed one of its largest victims.

The Pasadena thrift, with $32 billion in assets, was a prolific lender during the housing boom, specializing in so-called alt-A loans that allowed buyers to borrow with little documentation of their finances. Losses are expected to mount among alt-A mortgages as more borrowers decide to walk away from residential investment property plunging in value.

IndyMac’s failure is the first bank failure in California since 2003 and is expected to cost the FDIC between $4 billion and $8 billion, based on the regulator’s preliminary estimates.

The bank will reopen Monday as IndyMac Federal Bank, run by the Federal Deposit Insurance Corp. At the time of the bank’s closing today, about 10,000 depositors had approximately $1 billion in total uninsured deposits. The bank held $19 billion in deposits at the time of its failure.

The FDIC will operate IndyMac Federal Bank by selling IndyMac’s assets at fire-sale prices.

More at Biz Journals

In another sign of the collapse of the market for new homes, builder Lennar Corp. has dumped a portfolio of 11,000 properties for 40 percent of their previously’stated book value.

Lennar (Charts, Fortune 500), the nation’s largest builder in terms of revenue, is selling the properties to a joint venture it has established with the real estate arm of Wall Street bank Morgan Stanley (Charts, Fortune 500). Morgan Stanley will own 80 percent of the joint venture, while Lennar will own 20 percent.

Lennar announced the deal late Friday as its fiscal fourth quarter came to a close. It is selling the properties for $525 million, even though it said their book value as of Sept. 30 stood at $1.3 billion. Lennar also will receive fees for continuing to manage the properties, which include mix of raw land as well as partially and fully developed homesites.

More at CNN Money

I heard on the news tonight that Miamii-Dade county had over 15,000 foreclosures in the past two months, and Broward County (Ft. Lauderdale) had over 12,000 in the same time period. Not good.

A wave of foreclosures in South Florida among borrowers with shaky credit will cause the property values of nearly 1.7 million homeowners to sink an average $13,000 in Miami-Dade County, and $6,400 in Broward, a new report says.

The report released Tuesday by the Center for Responsible Lending estimates the two counties will lose more than $17.2 billion in their tax base in the coming years resulting from some 35,000 expected foreclosures among subprime borrowers.

The state of Florida could lose $23.5 billion from its tax base, the economic spillover of an expected 98,000 foreclosures coming from subprime mortgages made in 2005 and 2006. Most of those loans came with adjustable interest rates that are now resetting, accelerating foreclosures, the center said.

More at the Miami Herald

Foreclosure rate: one in every 196 U.S. households. Pretty scary stuff!

But, hey, the White House and Congress are there to help. So far they’ve done nothing, but they’re there!

Foreclosures jump 30 percent in 3rd quarter

Congress, White House debate solutions to help people keep their homes

As Congress and the White House continue to work toward solutions to help embattled homeowners, home foreclosure filings took a big jump in the third quarter, according to the latest data from real estate Web site RealtyTrac.

Foreclosure actions were reported on more than 446,000 properties the three months ended Sept. 30, up 30 percent from the second quarter and double last year’s third quarter. That brings the overall foreclosure rate to one in every 196 U.S. households.
[...]

“Given the number of loans due to reset through the middle of 2008, and the continuing weakness in home sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets,” said James J. Saccacio, chief executive officer of RealtyTrac.

John W. Schoen, Senior Producer, MSNBC

MSNBC.com

By JEANNINE AVERSA
The Associated Press

WASHINGTON - New-homes sales tumbled in August to the lowest level in seven years, a stark sign that the credit crunch is aggravating an already painful housing slump.

Sales of new homes dropped by 8.3 percent in August from July, the Commerce Department reported Thursday, driving down sales to a seasonally adjusted annual rate of 795,000 units. That was the lowest level since June 2000, when sales clocked in at a pace of 793,000.

The home sales report came on the same day that the government reported a relatively brisk business growth rate in revised figures for the second quarter. But the 3.8 percent GDP figure was less than first estimated and it occurred before the credit crisis and its repercussions across the broad spectrum of the economy had taken hold.

read more HERE

There have been three in my neighborhood in the past few weeks. The house next door to ours, which is brand new, has been on the market for over a year. They’ve dropped the price over $50,000 and still can’t sell it. Between the prices dropping, and loans being harder to obtain, alot of people down here who were “flipping” are now going into foreclosure on properties they can’t dump. It’s not just the subprime loans that are going into foreclosure.

Late summer brought no relief from soaring foreclosures. The number of homes in some stage of default jumped 36 percent month-over-month in August, according to a regular monthly survey.

Delinquencies and defaults more than doubled year over year to 243,947, according to August figures released Tuesday by RealtyTrac, a marketer of foreclosed properties. RealtyTrac’s forecast is for total foreclosure filings to exceed 2 million this year.

“The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable rate loans are beginning to reset now,” James Saccacio, chief executive of RealtyTrac, said in a statement.

October is expected to be a peak month for hybrid adjustable rate mortgages (ARMs) to reset, with the interest rates on some $50 billion worth of loans poised to go up dramatically.

More at CNN

CBS NEWS.COM

Former Federal Reserve Chairman Alan Greenspan admits he “didn’t really get it” that the sub-prime lending trend was significant enough to hurt the economy until very late 2005, but still defends his lowering of interest rates from 2001 until 2004 that critics say caused the crisis in the first place.

Greenspan, who led the U.S. Federal Reserve Bank through 18 years and four presidents, speaks to 60 Minutes correspondent Lesley Stahl in his first major interview this Sunday, Sep. 16, at 7 p.m. ET/PT.

Greenspan says he knew about the questionable sub-prime lending tactics that gave loans to homebuyers and investors with low adjustable interest rates that could rise precipitously, but not the severe economic consequences they posed. “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late,” he tells Stahl. “I really didn’t get it until very late in 2005 and 2006.”

Even though one of the Federal Reserve governors raised a red flag on those lending practices, Greenspan says there was little he could do. “Well, it was nothing to look into, particularly because we knew there was a number of such practices going on, but it’s very difficult for banking regulators to deal with that,” says Greenspan.

read more HERE

By Jessica Holzer
The Hill.com

U.S. Treasury Secretary Henry Paulson on Tuesday voiced doubt about lifting the portfolio caps on Fannie Mae and Freddie Mac, calling such demands a “red herring” that would do nothing to ease the turmoil in the credit markets or help borrowers at risk of losing their homes.

He urged the Senate to start moving on legislation to reform Fannie and Freddie, known collectively as government sponsored enterprises (GSEs), and said he favored allowing them to take on more risk, but only in the context of reform.

“The Senate has got more work to do,” Paulson told a press gathering arranged by The Christian Science Monitor. “I think the Senate can get this done, and do it quickly, and we can all work together.”

Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), the heads of the Senate and House banking panels, have repeatedly called on the Bush administration to lift the temporary caps on the GSEs- portfolios to inject liquidity into the troubled mortgage market.

There is heated speculation among investors that the administration will comply, but President Bush has so far resisted the appeals

.

read more HERE

Patricia Clemons had a serious heart condition and she was living on a $1,094-a-month disability check when she answered a letter from a Florida mortgage broker in 2004. It promised what sounded like easy money and cash-back refinancing of her small home in St. Petersburg.

Financial planners warn against taking home loans whose monthly payments exceed 40 percent of income. Yet Clemons, 62, later learned that she’d signed up for a new loan whose costs exceeded 62 percent of her fixed income. To her horror, the loan from Advanced Funding didn’t even have an escrow account to include taxes and insurance in her monthly payment.

“When it came in the mail, it was telling me how much my mortgage was . . . and they were saying we can refinance you for this much, and it was only up a few more dollars,” Clemons said.

Weeks later, pressured by a loan officer, she signed the paperwork that began her nightmare. The ad that seemed too good to be true was.

“How did I qualify to pay $688 a month when I could barely pay $500? How could they take me up that far?” she asked in an interview, still angry. Add in insurance and taxes and her new monthly total was $813 - 74 percent of her monthly disability check.

Clemons became a victim of deceptive advertising that relied on bait-and’switch tactics. Fraudulent ads were used to hook many borrowers with weak credit histories such as Clemons.

More at McClatchy

President George W. Bush today will announce steps the administration says will help people with subprime mortgages keep their homes.

Bush will let the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, guarantee loans for delinquent borrowers, allowing them to avoid foreclosure and refinance at more favorable rates, according to an administration official, who spoke on condition of anonymity.

Tighter credit and higher borrowing costs threaten the housing market, which has been an engine of U.S. economic growth. Democrats in Congress and the party’s presidential candidates have criticized Bush for not taking action to prevent the spread of foreclosures.

“The Federal Reserve’s interest-rate reductions alone can’t fix the problem,” Peter Meister, an economist at BHF Bank AG in Frankfurt, said in a telephone interview. He called the Bush plan “positive” both for “the people concerned and the economy as a whole.”

More at Bloomberg

Foreclosure filings rose 9 percent from June to July and surged 93 percent over the same period last year, with Nevada, Georgia and Michigan accounting for the highest foreclosure rates nationwide, a research firm said Tuesday.

The filings include default notices, auction sale notices and bank repossessions. The figures are the latest measure of the ailing housing market, which has seen defaults and foreclosures soar as financially strapped borrowers have failed to make payments or find buyers.

In all, 179,599 foreclosure filings were reported during July, up from 92,845 in the year-ago month, according to Irvine-based RealtyTrac Inc.

A total of 164,644 foreclosure filings were reported in June.

The national foreclosure rate in July was one filing for every 693 households, the firm said.

“While 43 states experienced year-over-year increases in foreclosure activity, just five states - California, Florida, Michigan, Ohio and Georgia - accounted for more than half of the nation’s total foreclosure filings,” said RealtyTrac Chief Executive James J. Saccacio.

Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.

More at FoxNews (yah….Fox)

By Emily Kaiser - Analysis
from Reuters

WASHINGTON (Reuters) - Credit spreads and collateralized debt obligations may not mean much to the average U.S. consumer, but if market gyrations persist, Wall Street’s pain may come home to hurt Main Street.

Consumer spending, the driving force behind the U.S. economy, has slowed in the past few months, although it did prove remarkably resilient through a series of gasoline price spikes and the early stages of the housing market slump.

Easy credit terms have underpinned that spending, and this week’s wild ride in financial markets shows how deeply the global economy depends on that free-flowing cash too.

The problem is, the easy money is drying up.

First it was mortgage-related markets where credit tightened as home prices fell and subprime mortgage defaults hit a record high.

The root of the problem can be traced back to U.S. home loans made to people with poor credit histories. But it became a global market problem when the investment community bundled those loans and sliced them up into risky, riskier and riskiest pieces that were resold to investors such as hedge funds and banks.

read more HERE

United Press International

WASHINGTON, Aug. 8 (UPI) — The U.S. housing market likely will stay near its current level for the next few months, the latest National Association of Realtors forecast said Wednesday.

Sales of existing homes should experience a modest upturn toward the end of the year, Lawrence Yun, NAR senior economist, said in a news release.

The new-home market is expected to improve by the middle of 2008, Yun said.

Existing-home sales are forecast at 6.04 million in 2007 and 6.38 million next year, below the 6.48 million recorded in 2006, NAR reported. New-home sales are expected to total 852,000 this year and 848,000 in 2008, down from 1.05 million in 2006.

Housing starts likely will total 1.43 million in 2007 and 1.4 million in 2008, again below the 1.8 million units started in 2006, the Washington association said.

“With the population growing, the demand for homes isn’t going away — it’s just being delayed,” Yun said. “More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year.”

Gonna get much worse before it gets any better.

Foreclosure filings skyrocket

Filings jump 58% in first half of the year and could surpass 2 million this year as the housing market weakens, according to a report.

In too deep, homeowners use prayer, barricades to fight eviction. CNN’s Deborah Feyerick reports (May 18)

NEW YORK (Reuters) – U.S. home foreclosure filings rose 58 percent in the first six months of the year and could surpass 2 million this year as the housing market continues to deteriorate, a report said.

Foreclosure filings in the first half spiked from the same period last year to 925,986 as many overstretched borrowers have been caught between rising interest rates and falling home prices. The Federal Reserve has cited the faltering housing market as the biggest risk to economic growth.

The foreclosure filings were also up more than 30 percent from the previous six-month period, at a rate of one filing for every 134 U.S. households, said RealtyTrac, an online marketplace for foreclosure properties.

Foreclosure filings include default notices, auction sales notices and bank repossessions and they were reported on a total of 573,397 properties.

“Despite a slight drop in June, foreclosure activity shows no sign of slowing down,” James Saccacio, RealtyTrac chief executive officer, said in a statement Monday.

“If the current pace were to continue, foreclosure filings would surpass 2 million by the end of the year, which would represent a year-over-year increase of more than 65 percent,” Saccacio said.

California had the highest number of foreclosure filings in the first half of 2007, while Nevada posted the country’s highest foreclosure rate, with one filing for every 40 households.

CNNMoney.com

The problems in the U.S. subprime mortgage market could spiral out of control into a global financial crisis, economist Mark Zandi said Thursday.
With a “high level of angst” in the financial markets about who will take the losses from more than $1 trillion in risky mortgages, we could be just one hedge-fund collapse away from a global liquidity crisis, said Zandi, chief economist for Moody’s Economy.com.
A global meltdown is not likely, but the risks are growing, Zandi emphasized in a conference call with reporters following the release of a new study on subprime debt that concludes that the housing crisis could be deeper and last longer than investors now believe. Read the latest data on home sales.
And it could spread. “Mounting mortgage delinquencies and defaults now pose the most serious threat to the global financial system and economy,” Zandi said in his report.
“If there is a fault line in the global financial system, it runs through the U.S. housing and mortgage markets,” he said.
Zandi’s comments came as U.S. financial markets reeled from a growing credit crunch, centered not in the subprime arena, but in the leveraged corporate debt market.

More at MarketWatch