Mortgage Crisis Spirals
(My comment: Belief in promises of “easy” money cause problems all over the world. Eventually, there is always a price to pay. Meanwhile, the current crisis presents buying opportunities to those who have saved and wisely invested.)
Mortgage Crisis Spirals, and Casualties Mount
from today’s New York Times
By JULIE CRESWELL and VIKAS BAJAJ
Published: March 5, 2007
Even in affluent Orange County, Calif., the growing wealth of executives and brokers in the booming mortgage industry was hard to miss.
For Kal Elsayed, a former executive at New Century Financial, a large lender based in Irvine, driving a red convertible Ferrari to work at a company that provided home loans to people with low incomes and weak credit might have appeared ostentatious, he now acknowledges. But, he says, that was nothing compared with the private jets that executives at other companies had.
“You just lost touch with reality after a while because that’s just how people were living,” said Mr. Elsayed, 42, who spent nine years at New Century before leaving to start his own mortgage firm in 2005. “We made so much money you couldn’t believe it. And you didn’t have to do anything. You just had to show up.”
Just as the technology boom of the late 1990s turned twenty-something programmers into dot-com billionaires, and leveraged buyouts a decade earlier turned Wall Street bankers into Masters of the Universe, the explosive growth in subprime lending turned mortgage bankers and brokers into multimillionaires seemingly overnight.
Now an escalating crisis in the market, which seemed to reach a new crescendo late last week, is threatening a wide band of people. Foremost are the poor and minority homeowners who used easy credit to buy houses that are turning out to be too expensive for them now that mortgage rates are going up, but the pain is also being felt widely throughout the business world.
Large companies that bought subprime lenders during the boom, like H&R Block and HSBC, are now scrambling to sell them or scale back their exposure. Many investors are also likely to suffer: Wall Street firms made billions in fees, commissions and trading revenue from packaging and selling subprime mortgages to them as bonds.
New Century has emerged as a poster child for the lenders that rode that boom to the top and are now in free fall. The company disclosed on Friday that federal prosecutors and securities regulators were investigating stock sales and accounting errors. The latter could jeopardize billions of dollars in financing for the company, which issued $39.4 billion in subprime loans in the first nine months of last year.
Weakening home prices and rising default rates have rocked the subprime business. But for those who cashed out before the market turned, the ride up was particularly sweet. The three founders of New Century, for example, together made more than $40.5 million in profits from selling shares in the company from 2004 to 2006, according to an analysis by Thomson Financial. They collected millions of dollars more in dividends, salaries, bonuses and perks.
The company said in a statement yesterday that the founders were “still significant shareholders,” noting that they collectively owned about 7 percent of the company at the end of last year.
New Century’s stock price, which seemed to mirror the trajectory of the subprime business, peaked at nearly $66 a share in December of 2004 and traded in the $40s most of last year; on Friday, it was trading at $11 a share after the market closed. In a series of sales from August to November, two of the company’s founders sold shares for an average price of about $40 a share, for a total profit of $21.4 million.
It is not known whether the stock sales by the founders are among the sales being examined by federal investigators. Some of them had been part of scheduled stock sales that are often used by executives to diversify their portfolios. But some of the sales occurred on the same day that the executives entered the plans. A New Century spokeswoman, Laura Oberhelman, said that executives declined further comment.
You can read the rest of the article by clicking here.
Hawally Monster in Custody?
Today’s Kuwait Times, page 2, under National News/Crime:
Children Report Kidnapper
Children on spotting a police patrol asked for help after informing them that two Arabs tried to kidnap them. Police chased the expats and arrested them, and referred them to the relevant authorities. After conducting initial investigations and taking their blood samples, the blood group of one of the men matched that of the Hawally monster.
That’s not exactly a DNA match, but it does help narrow the field. Does the man look like the Hawally victim’s descriptions of their attacker?
Three other things – one, police were patrolling a neighborhood. That’s very cool. Second, the children trust the policement enough to ask for their help. That is also very cool. Third, BIG Hoorah for the parents of the children who reported these two losers and got them off the streets, for teaching their children well.
And meanwhile, even if the Hawally monster is caught, there seem to be a lot of other creeps out there who feel entitled to force sex upon the weak, the small, and the unwilling. Keep your eyes open out there.
Women in Pakistan
Last but not least from today’s Kuwait Times are two articles from recent news in Pakistan, both involving women and the men who (seem to) own them:
Police Seek Pakistanis Pressing Woman to Hand Over Her Daughter
Karachi: Police are seeking ten men, including several tribal elders, accused of pressuring a Pakistani woman to hand over her teenage daughter as payment for a 16 year old poker debt, officials said yesterday.
In the latest case highlighting how conservative customs threaten women’s rights in Pakistan, Nooran Umrani alleges that despite paying off her late husband’s debt of 10,000 Pakistani rupees, she was threatened with harm if she failed to hand over her daughter, Rasheeda. The 17 year old was to be surrendered as a bride for the son of Lal Haider, the man who won the card game years before, Umrani told reporters . . . Police said yesterday that the mother and daughter were in their protection and that an investigation was opened against Haider, his son, and eight others. . .
Nooran said her husband was a gambler who ran up the debt at a poker game when Rasheeda was 1 year old. He promised Haider that he would get Rasheeda in lieu of payment when she grew up, Nooran said. . . .
President General Pervez Musharraf has vowed to give women more rights in line with his policy to project Pakistan as a moderate, progressive Islamic nation. In December, Musharraf signed into law a bill that makes it easier to prosecute rape cases in the courts, and the country’s ruling party recently introduced a bill to outlaw forced marriages, including under tribal custom in which woman are married off in order to settle disputes.
My comment: The debt was paid. And what was the father thinking?? giving away his daughter to cover his debts? I can’t wrap my mind around it.
Pakistani Sells Wife’s Kidney to Buy Tractor
Karachi: Pakistani police have arrested two men after a village woman complained that her husband and relatives had sold one of her kidneys in order to buy a tractor, police said yesterday. Although her kidney had been removed 18 months earlier, the woman named Safia only learnt it was missing after seeking treatment for a urinary tract problem in January. “She had said she was three months pregnant when her husband, Shakeel Ahmed beat her and then took her to the hospital for treatment,” said Mohammad Akram, duty officer at Noushera Jadeed police station in Punjab province. “But at the hospital, her husband, in connivance with three other people, sold her kidney to buy the tractor,” he said. Unlike many other parts of the world, including neighboring India, there is no law in Pakistan banning the trade in organs. Poverty-ridden Pakistanis living in rural areas sell their kidneys to pay off debts or raise money for their families. Sick but wealthy Pakistanis, and foreigners from the Gulf, Britain and Canada flock to private hospitals in Pakistan for kidney transplants, made possible by these donors.
My comment: Seems his wife is just another revenue-raising resource to Shakeel Ahmed. If asked, she might have even agreed, but it would be nice to be asked, not to discover it 18 months later. The news article says he was arrested. I wonder if he committed a crime under Pakistani law?
On a Lighter Note: Exhibitionist Held
God bless the reporters of crime news in the Kuwait Times, in the midst of all that horror, they occasionally find an article that is almost purely hilarious:
Exhibitionist Held
Farwaniya police arrested an Arab expatriate after he put on an artificial male organ on his own to seduce female passers-by. The organ, which was too huge to be true, drew shocked gasps, not only from females but also from all around. The expat however shrank when he saw the police and was subdued after a hot chase.
My comment: *Dying laughing.* From beginning to end. The title. *Gasping for breath* he “shrank” *howling* and was subdued after a “hot” chase. Kill me now! This reporter is too funny!
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