'Out of business overnight'

News item: Phoenix-based mortgage lender First Magnus files for bankruptcy protection, less than a week after suspending operations. First Magnus fired 99% of its 6,000 employees last Thursday.

''The company went out of business overnight,'' spokesman Gary Baraff said. ''Three weeks ago we were at the apex of the company's history. Everything was falling into place for us, and we had remarkable momentum across the country. It was shocking to everyone that essentially the secondary market collapsed.''

That's a big company to disappear that quickly.

Your thoughts? Comments? Insights?

Comments

[la guy]

"It was shocking to everyone that essentially the secondary market collapsed.''

Yeah, it's funny how an industry predicated on leveraging bad loans into even worse investments could just fall apart. Who'd of thunk it?

It seems to me that the current predicament was as inescapable as a bullet fired into the sky falling back to earth. Seriously how else could this have ended? Extending non-conforming loans to people who by any objective standard had absolutely no way to pay them back had to end in disaster. The only way this would have worked is if home prices had continued to increase in perpetuity and the loan industry could have kept churning the loans.

This was as shocking as an Anna Nicole Smith drug overdose.

[D]

It's seems to me that as prices fall interest rates will go up and your mortgage will basically be the same. Right?

[Jane Quatam]

If you think that was fast, just wait until you see how quickly General Motors disappears. The entire U.S. economy has been hollowed out by "industrialists & investors" - were all dead, were just waiting to fall over.
The numbers are cooked, the economy is a lie, a dream talked up by the happy talk people in the dept of propaganda at the MSM & the Government. Real wages are dropping, debt is increasing and Real Estate is the last pearl in a necklace of bubbles that is choking the life out of us. Illegal immigrants are dropping the bottom out of the home & job markets. Debt is destroying the middle class, soon America becomes Mexico, a 2 class society of huge inequities and desperate poverty, it will happen in our lifetimes - which boat will you be in?

[nls73m]

cmon jane quatam. take it easy. the sky is not falling.

[Tim K.]

I'd bet dollars to donuts that the executives at this company knew EXACTLY what was coming. The only reason they are saying, on record that this is a total surprise is because they now have to worry about lawsuits.

[AnnS]

And another one goes under. this AM on 822...

Accredited Home to Cut 1,600 Jobs and Halt Lending

http://www.nytimes.com/reuters/business/business-accreditedhome.html

[Ragnar]

What is really crazy about this is that many of those 6,000 people probably own homes, some with subprime loans. So not only will these people be stuck with mortgages they cannot pay, but they cannot get a new job in their industry because of all of the layoffs and cutbacks and they have to face an evershrinking pool of mortgage refinancing options. What a crummy spot in which to be!

[steveRB]

Jane Quatam -
Please get back on your meds. Things are bad but like roaches, the American consumer and economy will survive anything.

[Jane Quatam]

Hi folks,

Still think everything is peachy keen in dreamland? General Motors just took a 39 billion dollar write down - how many times can a company do that and still exist? I'd say they're awfully close to the line. How about the dollar? Falling like a rock, price of oil?

The fundamentals of the American economy are crap, even Bernake says "we may be in for a prolonged period of underwhelming growth" which is fed speak for recession/depression

How's the housing market? Bouncing right back? Record foreclosures in every state, and more to come.

Most of you are too young to know what real economic pain looks like, but thanks to Uncle Sam and his pals at the Fed we'll all get a reminder real soon now. Hope you got a few bucks stashed away and if you do, you better swap em for Euros or Gold or even Canadian Loonies.

I'll take my meds if you all take off your rosy colored glasses and realize our economic houses are on fire.

[Jane Quatam]

Just thought I'd pop by and leave a note on this history of the meltdown. It is now May 21st 2009 - General Motors stock is trading around $1 - GM is expected to to go bankrupt with the government buying up the pieces - this was deliberate in order to allow GM to cut the number of Dealerships. Unemployment is 13% in Michigan and 9.5% nationwide. Those are the official figures, of course the real figures are much worse. The banks are still insolvent, AIG is still failing and the British Debt was just downgraded by Standard & Poors. The world seems to be heading into a prolonged depression/recession - Fed Chairman Beranke says it may take 5 years or more for employment to turn around and things will never be the way they were.

Congress has appointed a blue ribbon panel to try to figure out what caused the economic meltdown, but they won't report back until Dec 2010.

All the Automakers are in bad shape, housing is sucking wind with continuing foreclosures, Commercial Real Estate is starting to collapse. One of the largest Mall owners has declared bankruptcy. States with 8% unemployment are considered to be "good places to be".

I wonder what Christmas will look like this year?

[Jane Quatam]

October 30, 2009 - update

Year to date update california unemployment rate 12.5%
national rate 9.8(official) actual more like 16%

so far over 106 banks have been seized and shuttered, the stock markets are overvalued and as wobbly as a drunken sailor. Up 200 then down 200 and all of it totally disconnected from the misery on mainstreet.

Real Estate continues to collapse, residential foreclosures are not expected to abate until 2014, commercial real estate is as soft as ice cream and expected to collapse into massive defaults.

Visiting the Inland Empire I see lots of newly built commercial buildings sitting empty and there isn't even an effort to keep up the landscaping, let alone sell or lease them.

Tough times for the next 5 years - lets hope we learn something from all this pain.