News Channel Mortgage

Are you checking out Blown Mortgage News? I’m at the Blog World and New Media Expo this weekend, but I’m still posting links I like to the Blown Mortgage News section.

Here’s some of the latest:

• Privatizing Profits and Socializing Losses: How the Rich are Staying Rich
• Money-Market Funds Get $50 Billion Backstop From U.S.
• Bailout rage: “Socialism in America … Welcome to the Third World!”

Not a member? Sign up - it’s easy. And start posting links you think are valuable to the conversation about the mortgage mess.

Remember, once the first 50 users are signed up I’ll be raffling off a $50 Amazon gift card. Visit and sign up now!

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Gang, I’m happy to announce Blown Mortgage News, a user-generated link blog of the latest mortgage and real estate news and information.  You can access the new news site at http://news.blownmortgage.com.

The Premise

•  I can’t cover all the news these days, but want you to know about it.
• You have access to great sources of information that can make us all smarter.
• You have stuff you want me to cover, now you have a say.

How it Works

• Sign up for a free account from Reddit, the social news site.
• Submit your links.
• Vote links and stories up and down 
• I review the top vote-getters and write my take on them

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AIG continues to get hammered as they face continued credit rating downgrades. The stock is off another 15% today.  The recent downgrades mean that the battered company may need an additional $14.5 billion in collateral to meet its obligations.  Additionally, the $20 billion promised to the company by the NY Deptartment of Insurance won’t be available until a “broader deal” is secured to prop up the company.

This reminds me of a post we did about the mortgage bond insurers (referring to AMBAC and MBIA) back in the day and this choice quote from none other than Warren Buffett:

As Warren Buffett says about the problems with bond insurers’ business models:

“We see a Baa credit enhanced to a Aaa credit by someone guaranteeing it for a 10-15 basis point charge. Yet, the spread in the market yield might be 100 basis points. Well, that doesn’t strike us as smart. … I would say that at some point, you can get into a lot of trouble at 140-to-1 insuring credits.”

That some point is now, Warren.

From Market Watch:

In a filing to the Securities and Exchange Commission last month, AIG spelled out precisely what those downgrades would mean: Counterparties could ask for another $14.5 billion in collateral. It also gives them the right to terminate contracts, though AIG at the time said it’s “unlikely” contracts would be terminated given the profits they would forfeit.

The downgrades also may trigger an exodus of clients, with some customers canceling policies. That may require AIG, a component of the Dow Jones Industrial Average, to return any unearned premiums covering the rest of 2008.

As with Lehman Brothers, the federal government has been reluctant to come to its rescue. However, the Federal Reserve has asked Goldman Sachs to lead a lending facility for AIG of between $70 billion and $75 billion, according to two people familiar with the situation.

Standard & Poor’s lowered its rating on AIG to A- from AA-, and Moody’s Investors Service cut its rating to A2 from Aa3. Fitch Ratings and AM Best also downgraded AIG.

“The main reason for the rating actions is the combination of reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses,” said Standard & Poor’s credit analyst Rodney A. Clark in a statement.

S&P said the move by the New York Department of Insurance to permit some of AIG’s regulated insurance subsidiaries to provide the parent with $20 billion of liquid investments wasn’t enough.

American International Group Inc., the largest U.S. insurer by assets, hasn’t gotten access to a $20 billion lifeline announced yesterday by New York Governor David Paterson.

“They don’t have that $20 billion” yet, said David Neustadt, a spokesman for New York Insurance Superintendent Eric Dinallo, in an interview today. “It would be part of a broader deal. If there’s no broader deal, then it doesn’t happen.”

And we’re not even done yet!!!

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AP An executive of a collapsed subprime mortgage lender jumped to his death from a bridge Friday, shortly after his wife’s body was found inside their New Jersey home, authorities said. The deaths of Walter Buczynski, 59, and his wife, Marci, 37 — the parents of two boys — were being investigated as a murder-suicide, according to [...]

Aurora Loan Services’ parent company, Lehman Brothers, announced today that it will substantially reduce its resources and capacity in the U.S. residential mortgage origination space in light of the dislocation in the mortgage markets. As a result, Lehman Brothers is suspending all Wholesale and Correspondent mortgage originations at Aurora. Aurora will continue to originate loans through [...]

And we thought the only thing “shady” loan officers and brokers needed to worry about were more regulations and finding a job. Now, it looks like some disgruntled clients may be looking for a pay back and it’s not just money they are looking for, it may mean murder. Read more…

THE Dow soared 200 points in a Christmas rush on Friday that belied emerging details that US banking, mortgage companies and credit rating faced collapse while the nation’s mortgage insurance industry plunged into chaos. Nearly 180,000 US local councils were placed on credit watch, with the credit agency Fitch releasing another $US5.3 billion in credit downgrades [...]

WASHINGTON, Dec 17 (Reuters) - A program unveiled by U.S. President George W. Bush in August that is trying to save tens of thousands of homeowners from foreclosure has aided just 266 borrowers so far, according to government data released on Monday. The initiative, which helps high-risk or low-income borrowers win better loan terms by insuring [...]

SAN FRANCISCO (MarketWatch) — Securitization, hailed as the greatest financial innovation of the 20th century, isn’t getting such rave reviews anymore after this summer’s subprime mortgage crisis exposed some weaknesses. With global credit markets still in crisis, experts have already begun debating the benefits and the drawbacks of the process. Read more…