“There’s
so much inventory out there that the buyer can pick and choose,” said
Susan Sirles Fidler, a Realtor at Re/Max 10, Oak Lawn. But she cautioned, “The
stuff that’s almost free is almost free because it’s going to cost you an
arm and a leg to put it back together. It’s not buyer beware as much as buyer
be smart.”
found at chicagotribune.com.
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Lehman Brothers
Lehman Closes Subprime Subsidiary mortgage
unit BNC Mortgage, affecting the jobs of 1,200 employees in 23 cities and
resulting in a $25 million charge.
NEW YORK (Reuters) - Lehman Brothers Holdings on Wednesday said it is
shutting down subprime mortgage unit BNC Mortgage Corp., affecting the jobs of
1,200 employees in 23 cities and resulting in a $25 million charge.
Lehman Brothers, a U.S. investment bank with an extensive mortgage business,
said credit market conditions prompted it to slash its subprime resources and
capacity. Lehman will continue to originate mortgages in the United States
through its Aurora Loan Services LLC platform.
The bank said it will record $25 million in after-tax charges for severance,
real estate and technology costs and write down goodwill associated with the
unit, or $27 million.
Lehman Brothers Holdings Inc. is closing its "subprime"
mortgage business because of the tumult in the home lending industry, the bank
said Wednesday.
NEW YORK-
Associated Press 08.22.07 found at www.forbes.com
The Wall Street brokerage said it is shuttering its BNC Mortgage LLC
subsidiary, which issues home loans to people who cannot document their income
or have shaky credit histories.
Lehman will lay off 1,200 workers at 23 offices.
Closing
this business will cost $25 million in severance pay and real estate and
technology costs. Lehman Brothers (nyse: LEH
) will also record a $27 million accounting charge for writing down goodwill, or
the value of the Irvine, Calif.-based business that Lehman carried on its books
above the worth of the physical assets.
Lehman Brothers will continue to issue home loans through its Aurora Loan
Services LLC unit.
Mortgage lenders around the nation, especially subprime lenders, have been
closing down in the past month as deteriorating credit quality has drained the
cash available to the industry.
Shares of Lehman Brothers rose 18 cents to $57.72.
Lehman market cap is 28.40B, balance sheet shows 451B long term
investments, 280B short/current-long term debt, 124B long term debt,
80B payable and current liabilities, 28B receivable, 12B cash, 18B
equity, 15B net tangible assets. What is their leverage based on
this? Damn good question. I would say 451/(451 - (280 + 124 +
80 -
28 - 12)) = 451/7 = 64:1. Another way to calculate is as 451/15 =
30:1. Whatever the exact number, it is very high.
What happens to Lehman if their mortgage-backed portfolio drops by
5%? Let's see... 5% * 44% * 451B = 9.9B loss. That's a loss of
half
their equity or a third of their market cap, basically. What if the
drop is 10%? You get the picture.
But wait: actually, things may be much worse than that. When CDOs are
created, someone has to hold the lower (non-AAA, "toxic") tranches.
Everyone who was in on the game was certainly scrambling to dump those
on pension funds and the like, but given the sheer volume of new
mortgages and CDOs created until recently and the abruptness with
which the market seized up, they are now probably holding a
considerable amount of those on their books. Those tranches are the
ones that take any hit from defaults first - that's why the rest can
be "AAA" (yeah right). That of course also means that the lower
tranches are also completely wiped out by even a 5% loss. Another way
to think of it is that they are leveraged at a 20:1 or so to any
downside in the mortgage market. Now, what do you think happens to a
company which is holding lower tranches of CDOs as a sizeable portion
of their 451B, 30:1 leveraged portfolio? Which is now leveraged
essentially at a 30:1 *times* a 20:1 to any potential downside?
Yes, exactly: it starts with a B and and ends with a Y.
economic crisis
hyperinflation nation What when top economists like Mark Faber, Jim
Rogers or Peter Schiff tells they are 100% sure "hyperinflation is
coming" See these video, quite interesting material with usable tips to
prepare the us nation for the next economic crisis, don't protect your assets
when it's to late, go into agricultural, gold and silver ,etc..
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Is
it possible to buy a home with no credit ? The
foreclosure crisis has not hit hard enough. In the US it is still possible
to get $1.5 Million in Real Estate with No
Credit Checks: Controlling Real Estate without credit checks -- the painless way
to secure your dream home or first investment property seems guaranteed! Don't
forget to cover your back... Click
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News :
“There’s so much inventory out there that the buyer can pick and choose,” said Susan Sirles Fidler, a Realtor at Re/Max 10, Oak Lawn. But she cautioned, “The stuff that’s almost free is almost free because it’s going to cost you an arm and a leg to put it back together. It’s not buyer beware as much as buyer be smart.”
