My New Blog

Today you cannot read a newspaper or watch television without hearing about the mortgage industry. We hear daily about the tightening of the Subprime market, liquidity problems, issues with the rating of securities, decline of originations and the reaction of Wall Street and the stock market.

We are taking this opportunity to provide an update regarding our position and how we are managing through this environment. As industry veterans, we expected to see a correction in the market and remain optimistic that we will see a settling in the near future. Although painful, it’s the right thing needed to obtain the proper balance and correction to the industry.

As you are well aware, the liquidity of the Non-Agency products (Jumbo, Alt A, Home Equity and Subprime) has virtually dried up. As a result of this illiquidity, many Lenders have eliminated some, and in some cases, all of their products from their offerings, and many others have closed their doors.

By choosing an investor through Veridian Financial, you have the satisfaction of knowing that the security and success of your business, and/or your investment is our primary concern and that our company will remain stable through this market shift. We have based our culture on the characteristics of dependability and reliability and our leading position in the market is indicative of our reputation and your trust. We value your business and the opportunity to help you through these times.

We are truly at a historical crossroads in the mortgage industry. Even in the face of doubt, one thing remains certain, Veridian Financial is here for you today, and we will be here for you tomorrow.

AP

By Jeannine Aversa, AP Economics Writer

New-Homes Sales Tumble in August to Lowest Level in 7 Years

WASHINGTON (AP) -- 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.

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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 pace was less than previously estimated and it occurred before the credit crisis and its repercussions across the broad spectrum of the economy had taken hold.

The median sales price in August fell by 7.5 percent from a year earlier to $225,700. That was the biggest drop in percentage terms in nearly 37 years. The median price is the middle point at which half sell for more and half for less. The average sales price dropped by 8 percent in August from a year earlier to $292,000. That was the biggest decline in 17 years.

Sales fell in the South and the West in August compared with July. Sales, however, rose in the Northeast and Midwest.

The new-homes sales report, combined with other recent economic reports showing a sharp drop in demand for big-ticket manufactured goods in August, suggested the economy lost momentum as it headed into the fall.

On Wall Street, investors looked to the weak home sales report as justification for another rate cut by the Federal Reserve. The Dow Jones industrial average was up around 20 points in morning trading.

Another report issued by Commerce showed the economy staged a rebound in the spring before a credit crisis raised new fears about longer-term business health.

The economy's 3.8 percent growth rate in the April-to-June quarter was the strongest showing in just over a year. Although the new reading for the second quarter was slightly less robust than a previous estimate of a 4 percent growth rate, it nonetheless marked a substantial improvement over the feeble 0.6 percent growth rate registered in the prior quarter.

Gross domestic product is the value of all goods and services produced within the United States and is considered the best barometer of the country's economic health.

The increase in the rate of growth, though, is likely to be fleeting. A deepening housing slump and a painful credit crunch since the spring has darkened the mood of individuals and businesses alike. That has led analysts to predict that economic growth has slowed considerably in the quarter that ends Sunday.

The National Association for Business Economics says it believes growth in the third quarter -- the period from July through September -- slowed to a pace of around 2.4 percent. It predicts the growth rate in the final three months of this year will be around 2.5 percent. Others think growth will turn out to be weaker than those projections.

Fears that the troubled housing market and credit problems could short-circuit the six-year-old economic expansion have shaken Wall Street. The biggest worry is that people and businesses will cut back on their spending and investment, throwing the economy into a tailspin.

Former Federal Reserve chief Alan Greenspan, in an interview with The Associated Press last week, said the odds of a recession are now higher than one-in-three but are still under 50 percent.

To help protect the economy from the ill effects of the housing slump and credit crunch, the Federal Reserve last week slashed a key interest rate. The hope is that lower rates will induce more spending and investment and thus energize overall economic activity. Analysts believe another rate cut will come in late October.

Critical to the economy's outlook is the health of the jobs market.

In another report, fewer people signed up for unemployment benefits last week, raising hopes that the recent weakness in the jobs market won't be long lasting.

The second-quarter's bounce-back came even amid the continuing strain of a housing slump. Builders slashed spending on housing projects by 11.8 percent, on an annualized basis, in the spring. Other businesses, though, boosted investment and spending in the second quarter on such things as equipment and software and construction of new plants, office buildings and other things.

Company profits also gained ground in the spring. One measure showed that after-tax profits rose by 5.2 percent in the second quarter, up from a 1.5 percent gain in the first quarter.

But a credit crunch, which took a turn for the worse in the third quarter, could put pressure on companies and lessen their appetite to invest. Sales of big-ticket manufactured goods plunged in August.

The free flow of credit is important to the smooth functioning of the national economy. If credit becomes too difficult to get, it can put a damper on peoples' ability to buy big-ticket items such as homes, cars and appliances. And it can crimp businesses' capital investment and hiring.

The worst housing slump in 16 years is being painfully felt. Higher interest rates squeezed homeowners, especially "subprime" borrowers with blemished credit or low incomes. Foreclosures set records and late payments spiked. Lenders were forced out of business. Hedge funds and other investors in subprime-related mortgage securities got clobbered.

All that has caused stocks on Wall Street to careen wildly in the past few months.

President Bush, meanwhile, is continuing to get low marks for his economic stewardship. Just 37 percent approve of his handling of the economy in September, down from 41 percent in August, according to an AP-Ipsos poll.

AP
Monday September 24, 11:57 am ET

Shares of Mortgage Lenders Mixed in Wake of Interest-Rate Cut, Wall Street's Earnings

NEW YORK (AP) -- Shares of mortgage lenders were mixed Monday as the market tried to digest last week's interest-rate cut and Wall Street's earnings reports.

The Federal Reserve last week cut its target for interest rates to 4.75 percent from 5.25 percent, which many market watchers expected to lure buyers back into troubled mortgage financing markets.

The interest-rate cut coincided with earnings reports from Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., Morgan Stanley and Bear Stearns Cos. Goldman Sachs and Morgan Stanley topped estimates, while Bear Stearns and Lehman Brothers missed.

In midday trading, shares of Countrywide Financial Corp. lost 11 cents to $19.50. Shares of IndyMac Bancorp lost 85 cents, or 3.6 percent, to $22.55. Shares of NovaStar Financial Inc. gained 54 cents, or 6.2 percent, to $9.21. Shares of Thornburg Mortgage Inc. fell 26 cents, or 2 percent, to $13.12.

AP

Wednesday September 19, 6:28 pm ET
By Martin Crutsinger, AP Economics Writer

Consumer Prices Post Rare Decline While Housing Drops to Slowest Pace in 12 Years

WASHINGTON (AP) -- Consumer prices posted a rare decline in August while the battered housing industry saw construction fall to the slowest pace in 12 years.

The new economic reports Wednesday were seen as justification for the Federal Reserve's bolder-than-expected cut in interest rates to try to ward off a recession. Analysts said the waning inflation pressures gave the Fed the room to cut interest rates while the continued severe downturn in housing gave the central bank a reason to move.

The Labor Department reported that consumer prices dipped by 0.1 percent in August. It was the first decline since a 0.4 percent drop in October 2006 and reflected a big drop in gasoline and other energy prices.

Meanwhile, the Commerce Department reported that construction of new homes fell by 2.6 percent last month to a seasonally adjusted annual rate of 1.331 million units. That was the slowest pace since June 1995 and put construction activity 19.1 percent below the level of a year ago.

The Fed on Tuesday cut its target for the federal funds rate, which governs the rates paid on millions of consumer and business loans, by a half-point to 4.75 percent, double the quarter-point reduction that had been expected.

The Fed in its statement said that "some inflation risks remain," but by making the bolder half-point cut in its federal funds rate, it was signaling that it clearly believed the threat of a recession outweighed concerns about inflation.

Investors liked Wednesday's benign inflation reading, believing it gave the Fed room to cut rates further. The Dow Jones industrial average rose by 76.17 points to close at 13,815.56. That gain followed a 336-point surge on Tuesday, the biggest one-day point gain in nearly five years, as investors reacted to the Fed's rate cut.

Analysts predicted housing construction would fall further in coming months, reflecting the recent turmoil in financial markets as investors lost their appetite for securities backed by mortgages because of rising mortgage delinquencies.

"There is a continuing major downslide," said David Seiders, chief economist for the National Association of Home Builders. "We know from our own surveys that August was a really rough month in the mortgage market and the housing market."

The organization's survey of builder sentiment fell to 20, tying a record low set in January 1991 during the last severe housing downturn.

Seiders said even with the Fed's cut in interest rates he did not expect to see new home sales stop falling until early next year with construction starts not stabilizing until the middle of next year.

The problem, he said, was that the rising mortgage foreclosures are dumping more homes on an already glutted market at a time when potential buyers are having difficulty getting mortgages because lenders are tightening standards. Mortgage foreclosures are expected to rise even further as an estimated 2 million adjustable rate mortgages with low teaser rates reset to much higher monthly payments over the next two years.

Yale University economist Robert Shiller testified to the Joint Economic Committee on Wednesday that the current real estate downturn could end up being the most severe since the Great Depression and could drag the country into a recession.

But other analysts said they believed that the Fed had acted in time, as long as it cuts rates further in coming months, to avert a full-blown recession.

The decline in housing construction in August reflected big drops in the Northeast, where building activity fell by 37.7 percent, and West, where it was down 18.4 percent. Construction rose by 11.4 percent in the South and 4.2 percent in the Midwest.

Applications for building permits, considered a good sign of future activity, fell 5.9 percent to an annual rate of 1.307 million units, signaling more weakness in coming months.

The inflation report showed that core inflation, which excludes food and energy, remained well contained in August, edging up by 0.2 percent as clothing prices fell for the fifth month out of the past six. However, medical costs and airline ticket prices both showed big increases.

The 0.1 percent fall in overall prices reflected a hefty 3.2 percent drop in energy costs. It was the third straight decline in energy and the biggest drop since last October. The price of gasoline fell by 4.9 percent, an improvement that is expected to be reversed in coming months, given that oil prices earlier this week hit record highs above $80 per barrel.

Food costs posted another big increase in August, rising by 0.4 percent, as higher costs for dairy products and fruit offset prices declines for vegetables and pork. So far this year, food prices have been rising at an annual rate of 5.6 percent, far above a 2.1 percent increase for all of 2006. The acceleration has been blamed in part on increased demand for ethanol, which has driven up prices for corn and other agricultural products.

Overall inflation through August is rising at an annual rate of 3.7 percent, up from a 2.5 percent increase for all of 2006 with energy and food being blamed for much of the acceleration.

Core inflation, which the Fed closely monitors, is better behaved this year, rising at an annual rate of 2.3 percent through August, down from an increase of 2.6 percent for all of 2006.

Subprime Mortgage Woes Push New Home Foreclosures to a Record High

WASHINGTON (AP) -- The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.

The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.

The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.

Doug Duncan, the MBA's chief economist, said the worsening performance was driven by two factors -- heavy job losses in the Midwest states of Ohio, Michigan and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona.

The Midwest has been hit hard by a heavy loss of jobs in manufacturing, especially in autos and related industries.

"The percent of mortgages in Ohio that are 90 days or more past due or in foreclosure is still more than twice the national average and 1 percent of all the mortgages in Michigan had foreclosure actions started on them during the last quarter," Duncan said.

He said there were also significant problems in the neighboring states of Indiana, Illinois, Kentucky, Tennessee and Pennsylvania.

Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford.

During a five-year housing boom, the prices in these areas surged, creating what many analysts have described as a speculative bubble as investors bid up the price of homes hoping to quickly resell them for a profit.

Now with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.

Another big problem is that an estimated 2 million adjustable rate mortgages are scheduled to reset this year at sharply higher interest rates, which will cause monthly payments in some cases to double or even triple, a problem that is especially severe in the market for subprime mortgages, loans offered to borrowers with weak credit histories.

By Martin Crutsinger, AP Economics Writer

Thursday September 6, 2:58 pm ET