'Challenging Environment' A 'Sign Of The Times'

Wall Street is sounding off on the housing bubble. "JMP Securities on Monday downgraded shares of a pair of homebuilders that operate in markets where the analysts see signs of a housing slowdown. The analysts said the sector 'may face some margin pressure in the second half of 2006 as pricing power decelerates and the use of incentives picks up.'" "JMP said both companies have exposure to areas where it sees slower home sales: Northern California, Phoenix and Florida." "JMP predicts a softer landing for the housing market than forecast by analysts who take a more negative view. 'We do not expect dramatic margin compression, as the bears believe, [because] we expect the builders will begin pushing back on their materials suppliers and subcontractors and will renegotiate land deals to more favorable terms.'" Inman News has this report on Ameriquest. "Ameriquest Mortgage Co. has finalized a $325 million settlement of allegations that it deceived borrowers, falsified loan documents and pressured appraisers to overstate home values, the Los Angeles Times reported Saturday. A task force of 49 states and the District of Columbia plans to announce today that the Orange County-based company and two affiliates, all specialists in higher-cost mortgages to borrowers unable to qualify for bank loans, agreed to overhaul their lending practices." "Industry experts told the Times the deal could in effect force rival lenders in the higher-cost loan market to adopt similar standards to avoid legal challenges from both regulators and consumers. These loans have been the fastest-growing segment of the mortgage market and now account for an estimate of approximately 20 percent of all such lending." "The settlement terms are designed to address a variety of allegedly improper lending practices detailed in a series of Los Angeles Times articles in the last year. In those Los Angeles Times stories, former and current employees alleged that top-down pressure to boost loan sales created a 'boiler room' atmosphere where workers forged documents, misled borrowers about rates and fees and inflated borrowers' incomes and home values to qualify them for loans they couldn't afford. Under the reported deal, hundreds of thousands of customers could be eligible for refunds." From Origination News. "Washington Mutual, Seattle, has reported that it earned just $47 million off its residential lending business in the fourth quarter, a 71% decline from the level of a year earlier. Compared with those of the third quarter, home lending profits fell by 75%. WaMu chairman and chief executive Kerry Killinger attributed the earnings dropoff to a 'challenging environment' in residential finance, including increased hedging costs and a flat yield curve." "The surprising thing about last week's announcement that Washington Mutual Inc. is moving 1,000 call-center jobs from Chatsworth to San Antonio, Texas, and Costa Rica is that it wasn't surprising. At least not to economic development officials. Dirt's cheaper in Texas than here. After Nissan USA moved its headquarters to Tennessee a few weeks ago, Jack Kyser, chief economist at the the Los Angeles Economic Development Corp, sent letters saying, 'Hey, we got a problem here,' to eight influential lawmakers, including Gov. Arnold Schwarzenegger. He got one response. It wasn't from Schwarzenegger. 'Basically, they act like they are in a bubble. They don't think anybody is competing from our job base,' Kyser said." And some headlines from NMN. "American Mortgage Network, the San Diego-based wholesaler better known as AmNet, has left the subprime business. Friedman Billings Ramsey has downgraded Fannie Mae's stock to "underperform" because the giant mortgage company could be stuck with higher capital requirements and slower portfolio growth for two years." "In what might be a sign of the times subprime giant Aegis Mortgage has tossed its correspondent division overboard. The privately held lender apparently bought its last loan in December."