Major real estate related collapses happily ignored by the markets

I have started to read Robert Prechter's Conquer the Crash. I had bought it a while ago but following Mike's advice from Sovereign Speculator, I decided to start it immediately. I will write about this book in a separate post. I just want to emphasize that I'm quite convinced now that the sentiment argument weights very much on short term movements.

While catching up since coming back from holidays, I have noticed that the current euphoria and major market bounce would have been predicted by Robert Prechter's methodology.

Following are some major bad news that have been happily discarded by the market, but which are none the less showing the extent of the current crisis and that now improvement is in sight (information gathered across many posts from Calculated Risk)

July 27 (Bloomberg) -- Almost $165 billion in U.S. commercial real estate loans will mature this year and need to be sold or refinanced as rents and occupancies fall, according to First American CoreLogic.

The U.S. South has the most maturing loans with 60,893 mortgages valued at $96 billion coming due on shops, offices, hotels, apartment buildings and land, Santa Ana, California- based First American said in a report. The West is second with 20,549 mortgages maturing for a value of $35 billion.

Commercial property owners are struggling to pay debt as the recession reduces demand and forces landlords to cut rent. U.S. apartment vacancies reached a 22-year high in the second quarter and office vacancies rose to the highest in four years, real estate data company Reis Inc. said earlier this month. Properties worth more than $108 billion were in default, foreclosure or bankruptcy as of July 8, according to data firm Real Capital Analytics Inc.

Aug. 11 (Bloomberg) -- Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb, Zillow.com said. [...]

The percentage of people owing more than their properties are worth may increase to almost half of U.S. mortgage holders before the housing recession ends, Deutsche Bank AG said Aug. 5.

About 25 million homes, or 48 percent of mortgaged properties, will be underwater as prices drop through the first quarter of 2011

Colonial BancGroup is a target of criminal investigations:

On August 6, 2009, The Colonial BancGroup, Inc. was informed by the U.S. Department of Justice that it is the target of a federal criminal investigation relating to the Company’s mortgage warehouse lending division and related alleged accounting irregularities. The Company has been informed that the alleged accounting irregularities relate to more than one year’s audited financial statements and regulatory financial reporting [...]

Taylor Bean, the third largest FHA loan originator in May, 12th largest U.S. mortgage lender, to cease operations, won't fund mortgages in pipeline (CR):

OCALA, FLORIDA – TAYLOR, BEAN & WHITAKER MORTGAGE CORP. (“TBW”) RECEIVED NOTIFICATION ON AUGUST 4, 2009 FROM THE U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FREDDIE MAC AND GINNIE MAE (THE “AGENCIES”) THAT IT WAS BEING TERMINATED AND/OR SUSPENDED AS AN APPROVED SELLER AND/OR SERVICER FOR EACH OF THOSE RESPECTIVE FEDERAL AGENCIES. TBW HAS UNSUCCESSFULLY SOUGHT TO HAVE THE TERMINATION/SUSPENSION DECISIONS OF EACH OF THOSE AGENCIES REVERSED. AS A RESULT OF THESE ACTIONS, TBW MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATELY. REGRETTABLY, TBW WILL NOT BE ABLE TO CLOSE OR FUND ANY MORTGAGE LOANS CURRENTLY PENDING IN ITS PIPELINE. TBW IS COOPERATING WITH EACH OF THE AGENCIES WITH RESPECT TO ITS SERVICING OPERATIONS AND EXPECTS TO CONTINUE TO SERVICE MORTGAGE LOANS AS IT RESTRUCTURES ITS BUSINESS IN THE WAKE OF THESE EVENTS. WE UNDERSTAND THAT THIS COULD HAVE A SIGNIFICANT IMPACT ON OUR VALUED EMPLOYEES, CUSTOMERS AND COUNTERPARTIES, AND ARE VERY DISAPPOINTED THAT A LESS DRASTIC OPTION IS UNAVAILABLE.

Freddy Mac says losses will be significant:

Aug. 10 (Bloomberg) -- Freddie Mac, the mortgage-finance company under government control being supported by taxpayers, said the collapse of lender Taylor, Bean & Whitaker Mortgage Corp. may cause it “significant” losses.

Taylor Bean, the 12th-largest U.S. mortgage originator, shuttered its lending business last week after being suspended by U.S. agencies and Freddie Mac. The Federal Housing Administration cited possible financial-statement fraud.

The Ocala, Florida-based lender accounted for about 5.2 percent of Freddie Mac’s single-family mortgage purchases last year, according to a Securities and Exchange Commission filing by the McLean, Virginia-based company on Aug. 7. Freddie Mac can force lenders to repurchase defaulted loans that weren’t of the credit quality they represented [...]

Fannie Mae reported a loss of $14.8 billion in Q2 and requests $10.7 billion from Treasury:

Fannie Mae reported a loss of $14.8 billion [...] in the second quarter of 2009, compared with a loss of $23.2 billion [...] in the first quarter of 2009. Second-quarter results were driven primarily by $18.8 billion of credit-related expenses, reflecting the ongoing impact of adverse conditions in the housing market, as well as the economic recession and rising unemployment. [...]

Taking into account unrealized gains on available-for-sale securities during the second quarter and an adjustment to our deferred tax assets due to the new accounting guidance, the loss resulted in a net worth deficit of $10.6 billion as of June 30, 2009. As a result, on August 6, 2009, the Director of the Federal Housing Finance Agency (FHFA), which has been acting as our conservator since September 6, 2008, submitted a request for $10.7 billion from the U.S. Department of the Treasury on our behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and the Treasury in order to eliminate our net worth deficit. FHFA has requested that Treasury provide the funds on or prior to September 30, 2009.