Archive for August, 2007

As the media focuses on all the companies that are laying off employees or filing bankruptcy themselves, we should be looking at the people most affected by this crisis.

The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.

There were 179,599 foreclosure filings reported during July, up from 92,845 during the same period a year-ago, Irvine-based RealtyTrac Inc. said Tuesday.

There were 164,644 foreclosure filings reported in June.

The national foreclosure rate in July was one filing for every 693 households, the firm said.

Many of the people who are now caught up in this mess, did not do so intentionally. In fact, many lenders “stretched” the rules just so they could put more people in houses and now that line they bent is trying to straighten itself out. It’s a shame so many people are getting caught on the wrong side of the line.

The subprime lending is spreading like wildfire throughout the housing sector…

Capital One Financial, the McLean-based financial services company, said it was closing a mortgage banking subsidiary and eliminating 1,900 jobs, joining a parade of firms that took steps yesterday to adjust to the widening credit crunch.

The string of announcements showed the depth of the trauma, as problems in the market for subprime, or risky, mortgages have spread and traditional sources of funding for lenders have dried up. Companies far and wide are going out of business or selling what they can to shore up their cash reserves.

Why don’t they all just get it over with and come out and announce what’s happening and get it over with?

We all knew the housing market was going to burp, it was just a matter of when.

If the pattern repeats itself. they will lay off employees today, close locations on Wednesday, and file bankruptcy sometime late Friday.

Countrywide Financial Corp, which is trimming costs amid turbulent credit markets, began laying off staff involved in originating loans, according to a report on Monday in the Wall Street Journal’s online edition, citing an internal e-mail.

The job cuts occurred in the company’s Full Spectrum lending unit, according to the Journal, which handles many home mortgages known as “Alt-A,” or loans rated between prime and subprime and generally given to borrowers who do not provide documentation of income.

…

Countrywide, the largest U.S. mortgage lender, employed a total of 54,655 staff at the end of 2006. It added close to 7,000 jobs between January and July, according to Chief Executive Angelo Mozilo last month, who said the company expected to add market share as weaker rivals fell away.

Is Countrywide another domino ready to fall, or will they be able to keep themselves above water?

Let’s hope our Monday is as good as theirs…

Japan’s TOPIX index jumped 3.5 percent on Monday morning, rebounding from its biggest one-week fall since the bursting of the country’s economic bubble in 1990, as investors snapped up shares across the board following a rally on Wall Street and fall in the yen.

Electronics giant Sony Corp (Charts)., automaker Toyota Motor Corp (Charts). and other blue-chip exporters were among the biggest gainers after the dollar recovered to about 114.3 yen from a 14-month low of 111.6 yen on Friday.

The recent strengthening of the yen has threatened to cut into profits made by exporters abroad and dent Japan’s economic growth. Investors were also encouraged by sharp gains on Wall Street after the U.S. Federal Reserve lowered discount rates to stabilize nervous credit markets.

After last week, any type of recovery would be nice.

Here we go again, I am sure the price of gas will spike to over $3.00 a gallon again…

Royal Dutch Shell (RDSa.L) said it was evacuating 300 more support workers from U.S. Gulf of Mexico facilities on Saturday due to Hurricane Dean.

“Since the beginning of the week, Shell has evacuated approximately 460 people, with approximately 300 scheduled to be evacuated today,” Shell said in a news release Saturday. “Evacuations are expected to continue through the weekend.”

Shell has shut down production on approximately 10,000 barrels of oil and 15 million cubic feet of natural gas per day in preparation for the storm’s possible entry into the U.S. Gulf, Shell said.

Of course, it could be worse… Someone could threaten Hugo Chavez again and then oil would hit $100 per barrel, right?

I wondered this morning, what was going on with the HomeBanc bankruptcy debacle. Now I know.

HomeBanc Corp. will ask a judge Monday to approve a settlement that will aid worried Georgia lawyers who have dug into their own pockets to fund mortgage deals caught in the pipeline when the lender collapsed.

About $28 million worth of Georgia home loans were headed to closing when Atlanta-based HomeBanc filed on Aug. 10 for Chapter 11 bankruptcy protection.

About 134 deals closed, however, as HomeBanc’s checks began bouncing in the escrow accounts of lawyers who handled the company’s real estate business. Dozens of Georgia lawyers were set to take a major hit, since they had already shelled out cash to pay off sellers and old mortgages from those escrow accounts.

Small law firms whose names wound up on HomeBanc’s roster of unsecured creditors faced real trouble, since those escrow accounts are sacrosanct repositories for client funds.

So what’s going to happen because of the bounced checks? Who is going to pay the price for defrauding people? Oh sure, they want to fix it now, but it doesn’t change the fact that they wrote bad checks. What if you or I wrote bad checks? Yeah, I don’t think we’d be getting any deal out of it, that’s for sure.

While the U.S. housing market is still sliding down, down, down, some stores in the retail market seem to be holding their own.

Mid-price department store powerhouses J.C. Penney Co. and Kohl’s Corp. turned in solid profits that beat analysts’ expectations, even as their middle class consumers struggle with high gasoline prices and a weak housing market. Kohl’s said earnings jumped 15.9 percent, and officials said the back-to-school season was off to a good start.

…

At Nordstrom Inc., a more upscale department store chain, earnings rose less than 1 percent as expenses related to the company’s credit card business cut into solid sales. Nordstrom officials said in a conference call that they are noticing more people starting to fall behind on credit card payments compared to a year ago.

JC Penney and Kohl’s may be doing good, but Macy’s Inc. reported a 77 percent plunge. What’s up at Macy’s?

Not only did HomeBanc suddenly lay off employees, close shop, and quickly file bankruptcy, but now, they’ve left numerous Georgia law firms holding bad checks. Something really stinks about this whole HomeBanc debacle if you ask me.

Dozens of Georgia real-estate lawyers are left holding millions of dollars worth of bad checks by HomeBanc’s sudden exit from the mortgage lending business.

HomeBanc filed for Chapter 11 bankruptcy in Wilmington, Delaware, last week — out of cash and out of a business that had flourished in its hometown of Atlanta.

Lawyers whose real-estate practices flourished along with HomeBanc had already begun worrying about the mortgage-funding checks from the big lender that they’d deposited in their escrow accounts.

In Georgia, real-estate deals are funded right at the closing table. Lawyers had written checks to sellers out of those escrow accounts.

The checks bounced, and HomeBanc names about two dozen Georgia law firms on its list of unsecured creditors. Those are the people who stand to get what’s left over after the failed mortgage company’s top lenders get paid.

It’s one thing to fall on hard times and require re-organization, it’s quite another to knowingly write bad checks and leave others holding the bag.

The fallout from a tainted pet food scandal hit Menu Foods Income Fund again on Tuesday, when its biggest customer said it would stop buying some of its products in the fourth quarter.

The unnamed customer, whose total purchases made up nearly 10.8 percent of Menu Food’s sales volume in 2006, said it would stop buying ‘loaf’ products from the company beginning October 1, Menu Foods said in a statement.

Oh, boo hoo! I think it’s ridiculous they even reported this in the news if they weren’t even going to name the customer that is telling Menu Foods to take a flying leap. What’s the point? They could have basically said, ‘Someone is no longer buying from us. That someone makes large purchases. It’s going to hurt our bottom line.”

Again, who cares? Their product poisoned

thousands

of dogs and cats across the country and they think we care that one of their biggest customers is leaving? What in the hell took that customer so long to decide to leave? The pets are already sick, or dead, so why leave now?

“Menu Foods is disappointed in the reaction of this customer to the pet food recall. The intentional tainting of product inputs from a third party supplier in China was a fraudulent act that victimized many pet food manufacturers, customers and consumers,” Paul Henderson, Menu’s president and chief executive, said in the statement.

This guy must have a screw loose. Is he really clueless about why customers may no longer trust their products? Maybe, just maybe, if they adopted new safety measures and actually tested the ingredients they import, people might place some faith in them. Save the sob story for people who actually care about your bottom line more than the pets.

Failed mortgage lender HomeBanc Corp., which filed for Chapter 11 bankruptcy last week, is being threatened with foreclosure by JP Morgan Chase Bank, the lead lender on $68 million worth of operating loans.

Court papers filed Sunday in a Delaware bankruptcy court say JP Morgan Chase, as agent for the syndicate of banks that funded HomeBanc’s operations, is demanding assurances it won’t get stuck for the money.

JP Morgan Chase wants an emergency hearing Tuesday on its bid for guarantees that Atlanta-based HomeBanc will be able to cover its secured debt. The bank wants to be able to foreclose on its collateral if no assurances are forthcoming.

The number one rule when filing for Chapter 11, is to have your secured lenders on your side so they work with you during the process. HomeBanc seemed to have forgotten this important step in the process.

Usually, secured lenders don’t have to wait long to cash out their holdings in a bankrupt company. Most failing companies try to have deals for Chapter 11 loans and, often, asset sales in hand before they file bankruptcy petitions, to reassure top-ranking creditors.

HomeBanc filed its Chapter 11 petition in Delaware close to midnight Thursday, with little notice to the secured lenders it needs to have on its side, no financing and, so far, only a plan to close the last $2 million of a series of sales to Countrywide Financial Corp.

Troubled companies aren’t allowed to use the collateral securing their top loans to fund a controlled Chapter 11 shutdown unless the lenders agree to let them.

Oops. I still find it hilarious that all these companies are “shell shocked” by the whole subprime lending fiasco. You can’t tell me that they couldn’t see this coming for a long time.