Fannie Mae cuts dividend; Sale of Option One implodes

When will housing hit bottom? When the news wires and newspapers are no longer full of developments like these:

--From CNBC: "Fannie Mae said after markets closed Tuesday that it will sell $7 billion of preferred stock and cut its dividend 30 percent to shore up its capital position through 2008." Wait, you say, didn't Fannie just issue a bunch of preferred stock? No, that was Freddie Mac, which sold $6 billion in preferred stock last month.

--From The Motley Fool: Lennar, the homebuilder, sold properties -- mainly undeveloped lots -- it had valued nine weeks ago at $1.3 billion for $525 million. The Fool: "... If the powers that be at Lennar (who are among the most capable in the industry) had even briefly thought that our nation's housing market was approaching that elusive 'bottom,' there's absolutely no way they'd have dumped properties in such volume at just $0.40 on the dollar."

--From the LATimes, signs of weakness in LA's commercial real estate market: "The global credit crunch that took hold of financial markets in the summer is now taking the steam out of commercial real estate."

--From Bloomberg: "H&R Block ...  shut its subprime home-lending unit and cut 620 jobs after a sale to Cerberus Capital Management LP unraveled."

Your thoughts? Comments? Insights? Email story tips to peter.viles@latimes.com.
Hat tip: Several of you, you know who you are, emailed or commented about the Lennar fire sale. Thanks.

Comments

[Laker]

I don't understand something here. If Lennar just got rid of the 11,000 lots (partially build) for $525 million - that comes to about $50,000 each unit/house/lot. That is way down from peak values even for empty lot. Means the house that will get build on it will not (or could not) be sold for $1M

[Jason Hoppe]

Check out the list on this website. I'm surprised it took this long for the Option One deal to fall through.

www.ml-implode.com

[yours truly, Johnny Dollar]

Just how sub-prime are these loans? I'm out at dawn on my Tuesday morning bicycle ride through Palm Springs (17 to 21 miles depending);
I often stop in a local fast-food "restaurant" for my five re-fills of iced tea.
I've been doing this ride for years...and years. I have gotten to know some
of this restaurant's employees on a first name basis. Fast forward: about
two years ago, two of the restaurant's employees tell me that got married.
That's great. Sometime last year, the new husband tells me that they are buying a house--a 4-bedroom, 2 story house in a neighborhood on the edge of Palm Springs. Only in America! That's great. Two fast food workers are able to buy a 4-bedroom house in Palm Springs (he does have a second part-time job at a supermarket). A few months pass, the husband tells me they are putting in a swimming pool; that's great; and have I seen his new sports car in the parking lot? I ask him where is the other new car that he was driving? "Oh, I still have it." That's great. Months go by (it is a long long time from May to December), he tells me that they have a baby; that's great.
So, yesterday, on my bicycle ride, I stop in at the fast food place; and I ask the new father how is his baby. "Oh, let me show you the pictures." He whips out his new ipod/iphone whatever bling bling; and he reels off some dozen pictures of the new tax deduction. Several minutes later, I am alone at a table; just me and my shadow (and my iced tea) when the new father comes over to me; and he quietly asks "What do you know about bankruptcy?" Now, I am no financial planner; though I play one on tv. He says that he has talked to several people; but, they speak English too fast; and the legal/money words they use he doesn't understand.
That's great. I get on my bicycle and pedal off into another Palm Springs' morning.
Just how sub-prime are these loans?

[yours truly, Johnny Dollar]

insult to injury......epilogue to the fast food employees in Palm Springs with the "four bedroom home, now with a pool, a baby, ipod bling bling, and two fast new cars" entry above......
they have no equity in the home; and 120 days behind on servicing some
$50+thousand. But, you already knew that.