Hypotheekcrisis USA is herhaling van late 1990 ´s volgens Warren Buffett

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Damn, weer een crisis die ik niet heb opgemerkt.

Blijkt dat wat nu op wereldschaal speelt, in de late 90-er jaren al eens
speelde in de USA.
In de markt voor pre-fab huizen.
Géén aanbetalingen, hypotheken die ´gebundeld´ werden.
Onmogelijk hoge maandelijkse aflossingen voor de mensen die deze huizen
aangesmeerd kregen.

Komt redelijk bekend voor :(

Groet / Cees

http://www.marketwatch.com/news/story/Buffett-says-manufactured-home-debacle/story.aspx?

Buffett's 'canary in the coal mine'
Investor says manufactured-home lending mess predicted housing crisis

By John Spence, MarketWatch
Last update: 3:16 p.m. EST March 2, 2009
BOSTON (MarketWatch) -- Warren Buffett's ruminations on the battered
economy grabbed most of the financial headlines to start the week, but in
his annual letter to Berkshire Hathaway shareholders, the folksy investor
also offered some thoughts on the public-policy debate raging over how to
fix the housing and mortgage markets.

Buffett devoted a section of his highly anticipated missive to the
experience and lessons of Clayton Homes -- the family-run, manufactured
home builder that Berkshire Hathaway acquired in 2003 -- during a mortgage
crisis that shook the industry in the late 1990s. The debacle "should have
served as a canary-in-the-coal-mine warning for the far-larger
conventional housing market," he said.

Manufactured homes -- also known as prefabricated, or modular homes -- are
dwellings that are constructed at a factory and then delivered. Maryville,
Tenn.-based Clayton has been building manufactured homes since the 1930s;
about a third of its borrowers have subprime credit scores. The builder
delivered about 27,500 units last year and has the largest market share,
but overall sales in the industry have fallen since they peaked in 1998.

 "At that time, much of the industry employed sales practices that were
atrocious," Buffett wrote in his letter to shareholders, released over
the weekend.

"To begin with, the need for meaningful down payments was frequently
ignored. Sometimes fakery was involved," he said, pointing to lucrative
commissions for salespersons if the loans were approved. "Moreover,
impossible-to-meet monthly payments were being agreed to by borrowers who
signed up because they had nothing to lose."

The fallout from this earlier lending spree doesn't bode well for U.S.
home sales if the scenario repeats itself on a larger scale.

'Eerie rerun'
Buffett explained that manufactured-home mortgages were typically bundled
and peddled by Wall Street to investors. This "securitization" of
mortgages contributed the late 1990s "fiasco" in manufactured housing.
Conseco, which filed for bankruptcy in 2002, had large exposure to
manufactured-home mortgages that went bad. Conseco bought Green Tree
Financial Corp. -- which specialized in manufactured-housing mortgages and
was later called Conseco Finance -- in 1998, when sales of mobile homes
were booming, thanks in part to loose lending standards.
Investors, the government and rating agencies "learned exactly nothing
from the manufactured-home debacle," wrote Buffett, who often uses
narratives when dispensing his wisdom.
"Instead, in an eerie rerun of that disaster, the same mistakes were
repeated with conventional homes in the 2004-07 period: Lenders happily
made loans that borrowers couldn't repay out of their incomes, and
borrowers just as happily signed up to meet those payments," he said.
"Both parties counted on 'house-price appreciation' to make this otherwise
impossible arrangement work."
He said the consequences are now making their way "through every corner of
our economy."
Beyond FICO scores
However, Buffett reported that most of Clayton's nearly 200,000 borrowers
are continuing to pay off their mortgages despite the housing bust, even
though their credit ratings are below the national average.
At the end of 2008, the delinquency rate on loans Clayton originated was
3.6%, up "only modestly" from 2.9% in 2006 and 2.9% in 2004. Clayton also
was able to sidestep much of the carnage during the manufactured-home
crisis in part because of its conservative lending practices.
The percentage of U.S. mortgage holders who were behind in their payments
stood at about 7% of loans outstanding in the third quarter, according to
the Mortgage Bankers Association. The fourth-quarter figures are scheduled
to be released on Thursday. The Wall Street Journal recently reported that
about 6.9% of prime "jumbo" loans were at least 90 days delinquent in
December.
"Why are our borrowers -- characteristically people with modest incomes
and far-from-great credit scores -- performing so well?" Buffett asked in
his letter. He said the answer involves the basics of lending.
"Our borrowers simply looked at how full-bore mortgage payments would
compare with their actual -- not hoped-for -- income and then decided
whether they could live with that commitment," Buffett added. "Simply put,
they took out a mortgage with the intention of paying it off, whatever the
course of home prices."
The borrowers didn't depend on refinancing, weren't enticed by teaser
rates and didn't assume eternally rising house prices. "Jimmy Stewart
would have loved these folks," he wrote.
Despite Clayton's relatively low delinquency rate, Buffett said some
borrowers will run into trouble as unemployment rates rise, and that they
generally don't have a big savings cushion. "But our problems will not be
driven to any extent by the trend of home prices."
'Home ownership is a wonderful thing'
Buffett called for tougher underwriting standards and income verification,
and said that the housing crisis offers important messages for home
buyers, banks, brokers and regulators. "Home purchases should involve an
honest-to-God down payment of at least 10% and monthly payments that can
be comfortably handled by the borrower's income."
In most cases, homes go into foreclosure simply because the borrowers
can't keep up with the monthly payment, not because they owe more than the
house is worth due to falling prices, he said.
"Home ownership is a wonderful thing. My family and I have enjoyed my
present home for 50 years, with more to come," he commented. "But
enjoyment and utility should be the primary motives for purchase, not
profit or refi possibilities. And the home purchased ought to fit the
income of the purchaser."
Buffett still lives in the house in Omaha he paid $31,500 for in the late
1950s.
"Putting people into homes, though a desirable goal, shouldn't be our
country's primary objective," he wrote. "Keeping them in their homes
should be the ambition." End of Story
John Spence is a reporter for MarketWatch in Boston.

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