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MORTGAGE INDUSTRY CRATERING UNDER FRAUD REVELATIONS American Chronicle: MORTGAGE INDUSTRY CRATERING UNDER FRAUD REVELATIONS Quote:
The inevitable is happening. After millions of fraudulent loan applications being processed, closed and then resold to unwary and unsuspecting foreign investors through U.S. government sponsored institutions such as Fannie Mae and Freddie Mac, and other major financial houses including banks, S&L’s and large publicly traded mortgage companies, foreign central banks are shying away from fueling further liquidity in the U.S. housing market which has impacted the value of the dollar while Europe and Britain raise or maintain their interest rates respectively to prevent global financial panic.
The Feds new chairman, Ben Bernanke is caught between a rock and a hard place. He is not instilling much foreign confidence with his recent remarks that the bottom of the housing market is near, echoed by Realtors, Builders and inside the industry paid economists and analysts.
Bernanke justifiably keeps harping on inflation fears but a raise in interest rates would only accelerate the collapsing mortgage industry in America. It may be the slipperiest slope facing the banking industry in American history.
Inflation fears are well founded as the dollar has lost over 15% of its purchasing power in 2006 against the Yen, Euro and British Pound, and 99.9999% since the Fed was incorporated in 1913.
A devalued dollar creates enormous inflation which is skewed by false government statistics on the jobless rate and other false economic news echoed by heads of publicly traded homebuilders whose nightmares are just beginning to see the light of day.
Public statements made by people whose vested conflicts of interest contradict facts surrounding the current shrinking demand for new homes, rising inventories, fewer new home permits, huge increases in initial default notices, rising mortgage company failures and over 110,000 homes around the nation currently in foreclosure with no end in sight.
One analyst predicts that by the end of 2007 there will be over a million foreclosures and unsold housing inventory on the market and an increasing wave of new personal bankruptcies setting new all time records.
British, Japanese, European and Chinese bankers are not standing around scratching their heads as news of Fannie Mae’s $6 billion restatement of earnings was recently announced. They already knew it was coming, they just didn’t know exactly when.
They have been quietly selling off dollar reserves for the past year knowing that America’s economy was being fueled by an artificially inflated housing boom led by Greenspans’ watch which ended last February.
We won’t know how bad Fannie Mae is doing for several more years, a fact that is obfuscated by relaxed rules being made in its’ favor – under New York Stock Exchange financial reporting rules Fannie should have been delisted several years ago - but now won’t have its’ 2005 results until September 2007 according to its Chairman Daniel Mudd.
London based Hong Kong Shanghai Banks’ (HSBC) Finance Director Douglas Flint, who works for the third largest bank in the world, says “data coming in shows signs of weakening in loan portfolios in North America”.
That means that banks will need to increase their reserve capital requirements in 2007, adding further tightening to lending conditions, which in turn will domino the real estate market, spilling over into commercial transactions.
HSBC generated 31% of its global profits from home loans last year but is experiencing 65% of its’ bad loans this year from the same market. The actual numbers will not arrive for another 30 to 60 days as almost every bank in the country has experienced major drops in loan originations and increased defaults but won’t report their total financial results until January of 2007.
H&R Block has put its’ Option One mortgage unit up for sale with no real buyers in sight because it is hemorrhaging from a 40% drop in sales, a $39 million second quarter loss, and has shuttered a dozen offices around the nation.
This past week, once high flying Ownit Mortgage Solutions announced it has completely closed down all its operations, putting more than 700 people out of work, and costing investors more than $50 million in equity.
Ownit, headquartered in California, was jointly owned by Merrill Lynch and a private equity group led by Bill Dallas, once boasted of how it was one of the 15th largest lenders to homedebtors (anyone with a mortgage doesn’t really own their homes so they should not be falsely labeled “homeowners”) grew at an unusually high rate of 800% during just two years when its loan originations increased from $1 billion a year to over $8 billion in 2005.
In 2005, Bill Dallas was quoted as saying, "Underwriting guidelines developed in the 1950s don't address the needs of today's homebuyers and brokers, loans that met the needs of Ozzie and Harriet were not intended to fill the needs of Desperate Housewives."
Calls from the media and regulators to Dallas’ offices in Agoura Hills, California were being referred to his lawyers as 50,000 square feet of office space at the company headquarters may soon be found empty.
Another company in Texas, Sebring Capital Partners, shut its doors this week and more than 350 people are out of work there. The number of people in the real estate industry, including home construction, real estate lenders and brokers, who are seeing their incomes evaporate has quadrupled in the last nine months. Most of those people have mortgages.
Atlanta-based NetBank last month closed its subprime lending unit and transferred most of its employees to another company. Key Corp. is trying to sell its subprime Champion Mortgage business without much success.
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