Archive for April 5th, 2011

US Mortgage Meltdown and Financial Crisis Stats to be Released Soon

The United States Senate is all set to reveal its findings from a probe into the US mortgage meltdown that triggered the international financial crisis in 2008. Experts are predicting that Goldman Sachs will take the bulk of the blame and will face more major embarrassment for its hand in the meltdown.

The high profile investigation was headed by the Senate’s Permanent Subcommittee on Investigations. During the course of their investigations the inquiry subpoenaed executives from multiple financial and mortgage institutions including Goldman’s Sachs.

According to sources familiar with the investigation, the Senate will release its findings along with emails from security firms that developed or sold mortgages that were subprime and also financial vehicles that include collaterized debt obligations (CDO).

Before the mortgage meltdown and the financial crisis Collaterized debt obligations were used to help firms hedge their bets with respect to the housing market. However when the bubble burst it took the CDO’s down with it. Overnight their values fell dramatically and they became junk.

Goldman is believed to be at the forefront of creating CDO’s in 2006 and 2007. The company has been accused of making huge bets against the housing market while also offloading bullish position to unsuspecting buyers who had no idea that the market could fall.

According to people with knowledge of the report, both Goldman and Deutsche Bank will be heavily criticized for their role in the mortgage meltdown. Both these firms have been accused of misleading investors about the market.

Also expected to be revealed in the findings is a nasty feud between Goldman Sachs and Morgan Stanley. Morgan Stanley was also a Wall Street Giant and they had a bitter dispute with Goldman Sachs about a deal involving a particular collaterized debt obligation. The particular CDO is believed to go by the name of Hudson Mezzanine Funding 2006-1.

While the report is expected to bring closure to some people who were on the wrong side of this crisis it is expected to bring to light new controversies and bad blood between firms.

KB Home Announces Increase in Losses Due To Slow Home Sales

Things just aren’t getting better in the housing market as KB Home announced on Tuesday that its loss for the first quarter of the current fiscal year had increased relative to last year. The company explained that this was due to the lower production on the part of homebuilders and fewer orders from buyers.
However the company did say it was glad by an increased activity in the housing market during the early parts of the spring season, which is renowned for home selling.

In statistics released on Tuesday the Los Angeles based KB Home announced a loss of $114.5million for the quarter that ended at the end of February. This comes out to a loss of $1.49 per share. A charge of $45.1 million is included in these figures. A year ago the same figures read as follows: the company suffered a loss of $54.7 million or $0.71 per share. This is way more than what experts had forecasted: a loss of $0.25 per share.

The widening of the first quarter loss was not the only bad news that the company gave to its investors, they also announced that revenue in the quarter had fallen by 25% and now stood at $196.9 million. It previously stood at $264 million and was far bellow the $225 million predicted by Wall Street Analysts.

The net home orders also saw a plunge in this quarter, with orders falling from 1,913 to 1,302. This was a plunge of more than 30%. While the number of homes delivered to KB Home from homebuilders fell below the thousand homes mark. The homebuilders delivered 949 homes in the quarter, a fall of 28 %.

The release of the new data did not go well with investors as KB Home stock prices fell in premarket trading. The share price fell by 8%, which turns out to be $0.99. In premarket trading the share price stood at $11.21.

KB Home operates in 12 states across the US and its target market comprises mostly of fresh buyers, move up buyers, and senior citizens.

Despite a bad start to the fiscal year the company is hoping for an increase in sales during the spring season.