Mortgage Rate News

Citigroup Inc. got its fair share of hits, thanks to the mortgage market and credit market messes. Subprime mortgage writedowns, as well as other credit related writedowns, totaled more than $7 billion. So for quarterly earnings, Citi is reporting a $2.5 billion loss.

And this is good news.

New stock market conventional wisdom: “not that bad” is the new “good”

The news of Citi’s loss of “only” $2.5 billion is having a rather positive effect on the stock market. All around the world, stock exchanges are getting a bit of a boost as they contemplate the fact that Citi didn’t lose as much as analysts forecast the company to lose.

When mortgage lenders and others who deal with borrowers first started sustaining heavy losses as the mortgage and credit markets imploded, all sorts of dire warnings were made and all sorts of losses predicted. As a result of all the gloom and doom, snything that comes up “better than expected” or “not that bad” is considered a victory for that stock. And the stock market derives “confidence” that the worst of the crisis might be over. (Forgetting that this same thing happened last quarter, and things got worse.)

But, in the end, Citi needs to actually start making money. Posting gains and what-not. So BloggingStocks reports on the plans Citi has to do that thing the company was started for in the first place:

What will Citi do to start making money? It plans to cut $15 billion in costs in the next two to three years– It canned 6,000 people in the quarter — it will sell $400 billion in what CEO Vikram Pandit calls “legacy assets” and it will strive for 9% revenue growth.

Meanwhile, Citi has had some luck strengthening its capital base. It raised $13 billion in common and preferred stock during the second quarter which left it with a strong capital position — a Tier 1 capital ratio of 8.7% — well above its 7.5% target.

Tags: credit market, writedowns, home mortgage loan, mortgage loan blog,
subprime mortgage, subprime writedowns, loss Citi

When the subprime mortgage crash of last year triggered a series of events that led to the current slowing economy, many economists were united in saying that things were looking dire. Now that a year has passed, though, there are divisions appearing with regard to how much longer the economy will be in a funk, as well as what is likely to cause continuing problems in the economy.

Is the economic downturn almost over?

The subprime mortgage crash triggered a credit market crash that triggered an economic downturn (no one has officially called it a “recession” yet). Now, some economists are saying that the economic downturn is nearly over, and that, as we enter the second half of the year, things are on the road to recovery for the economy. Indeed, some say that while it will take some time to get over the recent downturn, the worst is over and that recovery is inevitable from here. Some economists believe that a nearly-full recovery may be seen by early 2009.

Or is there more economic downturn trouble ahead?

Other economists, though, are not so sanguine about recovery from the economic downturn. They point to mounting unemployment and rising prices for energy and food. Even though oil prices are down today, the overall trend is still higher, and food prices inflation continues mostly unabated. These higher prices, some economists contend, will only hinder the economy heading into the immediate future.

Here is what Mortgage New Daily reports about some economists’ outlook for the economic downturn:

While there is pressure for the Fed to combat inflation, the central bank remains constrained not only by broad-based, anemic growth, but by the fact that soaring energy prices are caused by increased global demand rather than by U.S. consumers.

Which outlook do you agree with? Is the economic downturn almost over? Or is it just beginning?

Tags: economists, economic downturn, home mortgage loan, mortgage loan blog,
mortgage, mortgage news, subprime mortgage crash

Enjoy this video of the Star Spangled Banner at the Bellagio.

Happy Independence Day!