...why we continue to write down the Long Term Portfolio? According to the PR, it's because of "liquidation of defaulted loans." Isn't this foreclosure era finished? I live in So California, and my real estate associates say the market is HOT, HOT, HOT!!! There are no properties available. Homes in my neighborhood alone have gone up over $100k since last year. So, when will these LTP write downs end? Please help me understand this.
I assume you guys are long this stock too. Have been for about a year now and getting fed up and ready to cut losses. Is there any reason not to at this point? Anyone have anything positive to say about the future? All I can come up with is that it can't get much worse and there were comments from one of the big banks earnings was that margins should stabilize in 2014.
I just read the 10Q, and I think we're dead money for 2 qtrs.
IMHO, originations will continue to be low in the 4th qtr, posting a small loss, servicing profits should increase a little in the 4th, and the long term portfolio will continue posting multimillion dollar losses. BUT, the big unknown is the warehouse lending biz. According to the 10Q, they have about $265 million to lend. Does anyone have an idea of what kind of return we should expect on these funds?
My general impression is that there ia massive conspiracy among the banks to not take losses on their defaulted loans. A lot of these homes are sitting unforeclosed in a limbo state, with the defaulter living for free in the property. And banks then foreclose in an orderly fashion over many years, so they can take their losses in a way that doesn't put them into negative book value. As things turned out, real estate turned, and when they liquidate the property they take it back and the bank then sells at breakeven or a profit. So it may be that the losses will roll through for quite a while.
Those losses have very little to do with how IMH is being valued. 95% of the collapse of this stock has to do with the fact that their operating earnings for mortgage lending went hugely negative.
They need to fully reserve for the losses at one time. When that happens they will start showing profits as real estate prices rise. Look at Fannie and Freddie. Look at Goldman Sachs.
Lots of companies take their losses at one time. Here's text from a blog about Goldman Sachs,
April 14, 2009, 6:55 am
The Case of the Missing Month
By FLOYD NORRIS
"Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s earnings statement, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ended in February.
The orphan month featured — surprise — lots of write-offs. The pretax loss was $1.3 billion, and the after-tax loss was $780 million."
Everyone will focus on positive earnings if they can somehow turn things around.