Commentary on Mortgage Lenders

The news media is now chock full of the "sexy" housing market crisis stories. All of a sudden the main stream media is spewing "doom and gloom" scenarios. Especially interesting is that CNBC has now jumped on the bandwagon of subprime and now ALT-A Option ARM concerns.

I just don't know why it's a surprise to anyone. The writing was on the wall months before this realization by the main stream media. Now, the story is too sexy for anyone to pass up and might I remind you that print media and broadcast media are all in it for the ratings to generate ad revenue. Disgusting!

There are whole slew of news out today regarding the Mortgage Fraud (as if that was even a surprise), Weakening (??) prime markets due to ALT-A exposure, and surprise, Countrywide is mentioned as one of the largest originators of ALT-A loans. But the most poignant read of the day belongs to Dr. Irwin Keller's article on Marketwatch.com. He questions why everyone is so SURPRISED at the weankening housing market and rising default on mortgages.

The whole system is beyond screwed up and like all bubbles, it must be paid in suffering and blood. Many people will have their lives ruined and turned upside down. The economy must pay for their "lax" ways and this time "IT IS NOT DIFFERENT". People never really change. That is why you can trade the stock markets because it is an analysis of the market behavior which is a reflection of human behavior. It is about greed, fear, and deception. Most people are by nature gullible, weak, and prone to panics. This game has been played for centuries as long as the US Equity market was born in the frontier days of early Wall Street, when Wall Street was aptly named because of wooden palisades to partition out the hostile Indians. Corruption is part of the game and you always have to "read between the lines" in this game.

As for lending industry related to housing, I hope that this "bubble" that they helped create will create new reforms in lending, prosecutions of those that perpetuated these Ponzi schemes, and the Wall Street Firms that continually misled the investors. I sincerely hope that the likes of Countrywide and IndyMacs of this world will get their due. These two have been very cagey about spinning their story to the wall street. Yet, as the truth that are coming out cannot be refuted anymore. They cannot be spun any other way. Sadly, I believe it is too late for many of those who invested on "dumb" advice from the Wall Street. No matter, I do not see how the large lenders that tried to "hide" behind that they were "prime" lenders can now adequately justify their position, when they pumped up their share prices by essentially "lying" to the public.

AHM is going down for the count. I believe NDE and CFC is not too far behind. I will have a sneaking suspicion that the only thing that these lenders can do now isn't about saving share holder value. It is about coming clean and doing the "honorable" thing. The spin is over. As Bill O'Reiley would say, this is now a "No Spin Zone".

No one can deny that majority of "prime" loans by these lending institutions, save for the big banks, relied heavily on Option-ARMS to pad their bottom line. When the CDO's and the debt that they carry is no longer worth more than what they paid for, it cannot be spun in any other way. The lenders have a choice of holding onto the depreciating asset and risk future catastrophic losses or liquidate for short term loss. Neither option is appealing and will be good for some form of pain in the near and long term future. Sadly, the only people that will lose in this game are the share holders who have entrusted the insiders on good stewardship. If you question that look at Angelo Mozilo's incessant selling. Perhaps the recent options granting probe will reveal something of value- why else would the company try to "squealch" the law suit before it became public? If they had nothing to hide why would they try so hard to put an end to it?

I see, contrary to popular belief, that some major news regarding NDE and CFC will be out sometime this week, as a form of damage control. I think these companies have gotten away for a while on Market ignorance. But no longer.