MOSCOW (Reuters) - Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets. "You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York. "It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops. "Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history," Rogers said. "This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse." read more here

Today Switzerland Central Bank increased base interest rate.

Congrats to all revolvers who got realestate loans in CHF!!!

read more here


ECB raises interest rates to 2.75% (from 2.5%)


Mortgage fraud in USA

Nick said - This explains the spam mails lately...


2007-03-07 18:17:50

WASHINGTON (AP) - The number of mortgage fraud cases investigated by the FBI almost doubled the past three years, reflecting a problem that is 'pervasive and growing,' the bureau said Wednesday in its annual report on financial crimes.

The bureau said its mortgage fraud cases increased from 436 in 2003 to 818 in 2006, and acknowledged that its case load likely represents a small piece of the problem.

The FBI said mortgage fraud is difficult to track for a variety of reasons. For starters, the industry is not required to report fraud. Moreover, the sale of mortgage loans on secondary markets can 'conceal or distort the fraud,' thereby reducing the number of cases reported.

'The true level of mortgage fraud is largely unknown,' the agency's report said.

The bureau said fighting mortgage fraud is a priority due to the impact of mortgage lending and housing on the broader economy.

Recently, shares of companies that lend to subprime borrowers -- people with blemished credit histories -- have been battered as delinquencies and foreclosures increase in the subprime mortgage market. Britain's HSBC Holdings PLC, the world's third-largest bank, said earlier this week that its bad-debt charges increasd 36 percent in 2006.

The bureau's report said mortgage fraud comes in two broad varieties: 'fraud for profit,' which is largely committed by industry insiders and involves practices such as falsely inflating property values, and 'fraud for housing,' which is committed by borrowers and involves actions such as acquiring a house under false pretenses.

The bureau said it is cooperating with trade associations representing mortgage bankers and the government-sponsored companies that purchase mortgages, Fannie Mae and Freddie Mac, to raise awareness of mortgage fraud.

The mortgage fraud statistics were contained in the bureau's 2006 'Financial Crimes Report to the Public,' which also summarizes the FBI's actions against other types of financial frauds, such as corporate, securities, health care, insurance and mass marketing fraud.

Shares of Freddie Mac dropped 21 cents to $61.90, while shares of Fannie Mae fell 34 cents to $54.49, both on the New York Stock Exchange.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Provided by AFX News Ltd.

You tube realestate advertizements

Nikolay said : This is actualy very good idea for expensive houses advertisement. --------------------------------------------------------------------- CNNMoney.com The 'YouTubing' of real estate marketing Friday March 2, 10:22 am ET

By Les Christie, CNNMoney.com staff writer

Nearly 80 percent of home buyers start their search on the Internet - soon they'll have more to look at. On its Web site, the Peninsula on Indian River Bay development in Delaware has begun using high-quality, television news-style presentation to sell homes. On the site, viewers take interactive tours of the property, led by two on-line hosts, through different site "channels."

According to Roland Varesko, president of Ecendent Interactive, the production company that put together Peninsula's site, nobody is doing this on as grand a scale as the Peninsula. "It's like having your own TV show," he says.

But the trend is sure to spread. Even now, the economics are such that a development of 50 to 100 homes could afford a Web site like Peninsula's, according to Varesko. And big real estate brokers, such as Century 21, Coldwell Banker (both part of Realogy) and Re/Max, are quickly ramping up.

"I believe streaming videos on Web sites is the wave of the future," says Charlie Young, vice president for marketing for broker Coldwell Banker.

Sites are already getting souped-up. "A year ago," Young says, "we were telling all our brokers about the need to put more [still] photos on their Web sites." Today, if your site doesn't offer virtual tours, mapping technology, neighborhood guides and a video library of buying and selling tips, it's nowhere.

Young connects the whole trend to the YouTube phenomenon, where seemingly everyone in America is making and posting their own videos. Putting together even an elaborate site like Peninsula's is not expensive. The project's developer, Larry Goldstein, says it cost only about $50,000.

As a matter of fact, compared to more traditional forms of marketing, such as newspaper advertising, the site is a bargain and more efficient. "Our market is so broad," says Goldstein, "from New York City through New Jersey, Philadelphia and the D.C. area, so how do you pick and choose where to put your ad money?"

Such salesmanship is also a way of differentiating your development from the competition. "Before, everything was focused on the transaction," Young says. "Today, it's all about how to engage the consumer. Consumers control the up-front process and have all the information and tools they need to do a large part of the real estate agents' jobs themselves."

The Peninsula Web site is hosted by a genial pair of professional spokespersons, one male and one female. They lead users through a virtual tour of the development's offerings, including its neighborhoods, home styles, nearby beaches and features and amenities, including a Jack Nicklaus designed golf course. Using video makes the site much more arresting.

"The main point of the site is to be video driven," says Varesko, "It's more inviting, more engaging for users."

"It's been very successful for us," says Goldstein, who is able to gauge the interest by the e-mail feedback of viewers.

Latest home prices

How much home a million bucks buys

A $5 million home of one's own

Carry trade

NMMM note: Looks like carry trade is wide spread in Eastern Europe. This explains some offers for loans in CHF with very low interest in Bulgaria. --------------------------------------------------------------- Published: February 15 2007 02:00 Last updated: February 15 2007 02:00

House buyers in eastern Europe have recently developed a taste for exotic home finance. Bankers say a significant slice of new mortgages in Hungary are being issued in Swiss francs. Meanwhile, households in Latvia and Romania have developed so much enthusiasm for borrowing in yen that the trend has provoked surprise - and unease - from central bankers half a world away in Tokyo.

The obvious attraction is the interest rate. Switzerland and Japan have among the lowest money market rates worldwide, giving investors a discount on their mortgages worth as much as 5 percentage points a year.

Home buyers may not be aware that in taking out such an attractive loan they are becoming global "carry traders", rubbing shoulders with hedge fund managers and bond dealers who have made tremendous profits borrowing in currencies where interest rates are low and investing in those where they are high.

But life for a carry trader is becoming increasingly fraught with risk, exposed to everything from Japanese inflation to the course of the New Zealand dollar, not to mention that Latvian mortgage market. If the yen or the Swiss franc rallied suddenly, if US interest rates fell, or any number of arcane and impossible to predict events occurred somewhere in the world, the carry trade - which is estimated to be operating at unprecedented volumes - could unwind, with drastic consequences.

That could then spark a huge rally in the yen or Swiss franc, leaving everyone who borrowed cheaply in these currencies owing far more than they had bargained for and potentiallyfacing hefty losses on their investments.

But right now, at least, many countries - and investors - appear to be reaping benefits from this practice. To take one out-of-the-way corner of global finance, the amount of bonds denominated in New Zealand dollars by European and Asian issuers has almost quadrupled in the past couple of years to record highs. This NZ$55bn (US$38bn, ?19bn, €29bn) mountain of so-called "eurokiwi" and "uridashi" bonds towers over the country's NZ$39bn gross domestic product - a pattern that is unusual in global markets.

The reason is not hard to find: during recent years, New Zealand's interest rates have been some of the highest in the industrialised world, at around 7 per cent. The difference between this and yen interest rates of 0.25 per cent means large profits for carry traders, which include both Japanese households and global hedge funds.

The fact that investors are buying New Zealand-denominated bonds has kept the value of its currency relatively stable in recent years - even though the country has a large current account deficit, which would normally cause foreign exchange jitters. Conversely, because investors are selling yen assets, Japanese exporters enjoy the benefits of a weakening currency. Indeed, on a trade-weighted basis, the yen is at a 21-year low.

In the global financial markets as a whole, the carry trade has been a key factor behind the high levels of liquidity that have enabled investors around the world to purchase assets ranging from simple equities to emerging market instruments and complex credit products.

The problem is that activity involving the carry trade has recently become so feverish that it is creating some striking distortions in the financial system - of which the New Zealand bond eruption is just one. While it is fiendishly difficult to track the precise scale of activity - since much of this trading takes place in private markets - fears are growing that if investors suddenly decide to unwind this carry trade for any reason, the reverberations could be painful.

After all, the last time carry trades built up in this way in the financial system, back in 1997 and early 1998, they later unwound in a dramatic fashion after the Russian financial crisis of mid-1998. That pushed the yen up by nearly one-quarter against the dollar in a few weeks - eventually contributing to the implosion of Long Term Capital Management, the US hedge fund.

This historical parallel has already made some observers uneasy about the risks besetting New Zealand. "If investors turn bearish on carry trades, then the New Zealand dollar will clearly crack," warn people such as Mansoor Mohi-Uddin, chief foreign exchange strategist at UBS, who estimates that foreigners own nearly 70 per cent of New Zealand government bonds - up from about half in 2003.

All this could have implications for global markets too. At last weekend's meeting of leaders of the Group of Seven industrialised nations in Germany, finance ministers warned traders that they needed to take account of the "risks" of a Japanese recovery - an oblique warning against an excessive use of the carry trade.

"Regulators are increasingly expressing their concern that the very high level of speculation in the so-called yen carry trade has the potential to produce widespread financial market instability and, in extremis, systemic risk," says Albert Edwards, analyst at Dresdner Kleinwort. Or as Hans Redeker, head of currency strategy at BNP Paribas, adds: "Now, as in 1997, low-yielding currencies have been used as the global cash machine, pushing liquidity into asset markets. In 1997 the Asian crisis markedthe end of this development.This year we suggest that emerging market assets and equity markets could set the turning point, sparking carry tradeliquidation."

Traders are divided about just how large the danger of this scenario really is - not least because it is impossible to measure exactly how the carry trade is being used and, thus, which investors are running the largest risks. As the yen and Swiss franc are the most popular currencies for finding cheap loans, however, some clues to activity can be gleaned by watching the bets that investors make about the future direction of currencies.

The Chicago Mercantile Exchange, for example, produces data showing how investors are positioned in their currency bets. This reveals that the market is betting on future yen and Swiss franc weakness to a record degree - while also assuming that currencies such as the Australian dollar and the pound sterling will rise. A separate estimate by Barclays Capital, which compares yen and Swiss franc borrowing to activity in the Australian and New Zealand dollars, suggests that the trade is now more lopsided than at any point since 1998.

"The magnitude of Japan-funded carry is reaching scary levels, in our opinion," Barclays says, adding that "even if the macro environment remains benign for carry trades, we cannot rule out the possibility of a sudden unwinding of positions that simply feeds on itself." More specifically, as investors take bigger bets, some may be so overstretched that they will be forced to exit their positions at the first sign of any jolt - simply because they cannot afford losses.

Moreover, there are plenty of factors that might conceivably produce market jolts. If the Japanese central bank started to raise interest rates, this could undermine some investor enthusiasm for carry trades. Similarly, if the yen rallied suddenly, that could reduce profits from the carry trade - which might force investors to cut their positions (such as a "short" bet on the yen, which assumed the yen would weaken). That could in effect prompt the yen to rise even further - creating a vicious circle, of the sort that developed in 1998.

While the yen has traded only in a narrow band in recent weeks, some political voices are now pressing for it to rise. Politicians in France, for example, want currency readjustment because European manufacturers that compete directly with Japanese rivals are losing ground.

Policy mistakes by central banks could also trigger a rise in volatility, which would undermine the logic of the carry trade: UBS, for example, warns that if investors fear that the US Federal Reserve has become lax in fighting inflation, risk aversion will rise - as it did back in 1998.

What no one knows, however, is when an unwinding might happen or how dangerous it might be. Despite the dangers lurking under the surface, the current logic of global markets means that borrowing in this manner is still profitable - and thus too tempting for some investors to ignore.

"It is true that a rise in volatility could make carry trades significantly less attractive," says JPMorgan. "But at the moment we do not envisage sources of macroeconomic surprise . . . which could create a sustained upward move in market volatility in the next few months."

After all, as optimists point out, the gap between borrowing costs in Japan and countries such as New Zealand is so large that it will not be erased by one or two rate movements.

Moreover, it is far from clear that pressures for a sustained rise in the yen are really in place: economic data from Japan remain patchy and most policy-makers are reluctant to trigger a rapid readjustment of exchange rates right now. Last week's G7 meeting, for example, gave no hint that global monetary policy chiefs will intervene in currency markets to strengthen the yen.

Another important factor exists that might reduce the chance of an imminent explosion: the use of hedging strategies. In recent years, the level of volatility in global currency markets has been low. So it has been cheap for investors to buy derivatives that protect them from a sudden swing in the yen (in much the same way that the cost of home insurance falls in areas where burglaries have declined).

This has apparently prompted many hedge funds to use a twin-track strategy: they have been borrowing in yen to fund their global investments, knowing they will profit if the yen weakens, but they have also bought protection against any Japanese currency rebound.

That might lessen the chance of a storm erupting if the carry trade unwinds. After all, what made the 1998 turmoil particularly vicious was that when the yen started to rally, it inflicted such pain on the hedge funds that they were forced to unwind their carry trades - triggering further yen rises.

"People are much better placed now than they were back in 1998," says the European head of a global investment bank. "They learnt lessons."

Copyright The Financial Times Limited 2007