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  • Thu, Jul 2 2009
  • 2:28 PM » Geithner's Toxic Asset Plan Reborn
    Published Thu, Jul 02 2009 2:28 PM by Seeking Alpha
    Linus Wilson submits: that the TARP’s Public Private Investment Partnership’s ((PPIP)) asset managers are going to be announced on any day now. It will be a smaller affair with only $50 billion of assets to be bought not the $500 billion to $1 trillion originally planned. The FDIC has largely after it unsuccessfully floated the of banks buying their own assets. Further, smaller banks were rightly fearful that the FDIC's loan guarantees in the PPIP would raise deposit insurance premiums to help the mega banks. Thus, it is the Treasury alone that will be making the loans and putting up the equity alongside private investors that include Wilber Ross and Company.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 12:25 PM » Will REITs Lag Along with the Recession?
    Published Thu, Jul 02 2009 12:25 PM by Seeking Alpha
    submits: The first six months of 2009 have been a very good time for the high yield sector. They had fallen sharply in 2008, especially in Q4, when investors sold yield high yield securities to buy Treasuries. In 2009, they rebounded sharply as investors decided to accept risk in pursuit of double digit high yields. But REITs have not shared as much as other groups (MLPs and junk bond funds) in the gains for 2009. The Dow Jones REIT Index began the year at 151, but plunged to 101 at the end of the first quarter. In Q2, the best quarter for stocks in many years, REITs climbed back to 128. REITs had a good gain in early April, but since then have been trading sideways between 120-140. After peaking early in June at roughly 140, the index has been slipping and sliding (as have many stocks). The Alerian MLP Index has a similar price pattern, but its decline from the high and subsequent recovery was more mild.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 12:25 PM » Bad Appraisers or Flawed System?
    Published Thu, Jul 02 2009 12:25 PM by Seeking Alpha
    submits: During the past week, were released regarding appraisers relating to deals being killed because of bad appraisals. Several points in theses articles have a strong foundation for being valid. However, the word educated guess is an insult to those appraisers who are trained, experienced and act as professionals. With over 25 years of experience in the field of appraising, I have seen many educated guesses that were not worth the paper printed on and these appraisers cause the problem for the entire group. The old saying, "one rotten apple…" applies here as well.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 12:25 PM » Economists React: Jobs the ‘Achilles’ Heel’ of Recovery
    Published Thu, Jul 02 2009 12:25 PM by WSJ
    Economists and others weigh in on . This was a very ugly labor market report , and there is no amount of lipstick that can improve its image. Indeed, not only does it suggest that the pace of job losses in the U.S. remains very high, it bucks the trend of four consecutive months of improvement in the pace of job losses. Moreover, with conditions in the U.S. economy continuing to be very weak, there is little to suggest that a turnaround in U.S. labor market conditions is on the horizon. –Millan L. B. Mulraine, TD Securities Yes, the drop in payroll employment has moderated from the 700,000+ results reported over the winter when panic and paralysis was the order of the day. But, private sector job losses in excess of 400,000 this deep into a recession cannot be viewed as anything but terrible news. –Joshua Shapiro, MFR Inc. The headline payroll drop overstates underlying job losses because of the 49,000 decline in federal employment, which was largely due to the layoff of temporary census workers (which boosted payrolls in April)… Nonetheless, the rate of private sector job losses is slowing (the peak rate of job losses was the November–February period) and we expect that trend to continue… We are encouraged that both the narrow and broad measures of unemployment rose only marginally in June and this, along with the slowing in the rate of private sector job losses, further suggests that the recession is drawing to a close. –RDQ Economics The payroll number is very disappointing . We had hoped to see a third straight movement back towards the 200,000 or so implied by the level of jobless claims, but instead the gap widened again, suggesting gross hiring remains extremely weak. The deterioration from May was mostly in services… In short, labor market is still terrible; don’t be swayed by a small unemployment rate rise. Wages will soon be falling outright, a classic deflation signal. –Ian Shepherdson, High Frequency Economics Services and construction accounted for most...
  • 11:53 AM » Federal Hiring Boom Could Add 120,000 Jobs in Washington Region
    Published Thu, Jul 02 2009 11:53 AM by Washington Post
    Though the number of unemployed people is rising in the Washington area, Kimberly A. Holder of the Food and Drug Administration has an opposite problem: She's looking for people to fill hundreds of positions slated to open soon.
    Click Here to Read the Full Article

    Source: Washington Post
  • 11:38 AM » Credit Card Issuers Raising Rates, Fees Ahead of New Law
    Published Thu, Jul 02 2009 11:38 AM by Washington Post
    Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability do so, much to the irritation of Congress and consumer advocates.
    Click Here to Read the Full Article

    Source: Washington Post
  • 11:38 AM » Agencies publish final rules and guidelines to promote accurate reports about consumers
    Published Thu, Jul 02 2009 11:38 AM by Federal Reserve
    Agencies publish final rules and guidelines to promote accurate reports about consumers
    Click Here to Read the Full Article

    Source: Federal Reserve
  • Wed, Jul 1 2009
  • 6:55 PM » A Tale of Two Companies: Credit Market Conditions Stabilize for Some Firms and Worsen for Others
    Published Wed, Jul 01 2009 6:55 PM by Google News
    We recently surveyed CFOs of 540 companies in the US, and nearly 800 in Europe and Asia, to gauge the status of credit markets and the world economy. About one quarter of companies has been severely impacted by tight credit markets, and another third has been moderately affected. These financially constrained companies are in a troubling position because they for the most part have negative earnings and have seen their cash holdings shrink on average by about one-fifth over the past year. Finding credit is difficult for them, and when a loan can be secured, the interest rates and fees are high. If these financially constrained firms are losing money, their cash is disappearing, and they can not borrow on favorable terms, what can they do? More than 80 percent have had to postpone or cancel valuable investment projects due to credit tightness. Half have sold assets just to fund their remaining operations. When they do obtain funding, these companies draw heavily on their bank credit lines, rather than using lines as short-term funds or as a bridge as intended. For these companies, credit market conditions have worsened during 2009, despite the historic efforts of the central bankers and Treasury Department. Moreover, many of these firms indicate that they will need to borrow before year-end, though it is not clear whether lenders will be willing to provide them funds. But not all companies are in such dire straights. Among the 40 percent of companies that say they have been largely unaffected by the credit crisis—mainly those that have remained profitable and retained a good credit rating—four out of five have found stable or improved credit conditions during 2009. These stronger companies are able to borrow and the fees and rates they pay have not increased. These firms have been able to build up their cash reserves this year, and they are not leaning heavily on their available lines of credit. While these companies are cautious about their hiring and capital spending...
  • 6:53 PM » Federal Agencies Are Lone Bright Spot for Area Job Creation
    Published Wed, Jul 01 2009 6:53 PM by Washington Post
    Though the number of unemployed is rising in the Washington area, Kimberly A. Holder of the Food and Drug Administration has an opposite problem: She's looking for people to fill hundreds of positions slated to open soon.
    Click Here to Read the Full Article

    Source: Washington Post
  • 6:52 PM » Treasury toxic asset plan to be out Thursday
    Published Wed, Jul 01 2009 6:52 PM by Market Watch
    A public-private government program to take billions of dollars in so-called toxic mortgage securities and other assets off bank balance sheets is expected to be unveiled Thursday.
  • 6:52 PM » California IOU Update
    Published Wed, Jul 01 2009 6:52 PM by Calculated Risk Blog
    From the LA Times: Gov. Arnold Schwarzenegger this morning ordered state workers to take a third day off without pay each month ... If lawmakers and the governor do not agree on a plan to wipe out the deficit -- or at least part of it -- by the end of today, State Controller John Chiang will begin giving out IOUs in lieu of checks to pay debts owed by the state. "We have one more day," Senate President Pro Tem Darrell Steinberg (D-Sacramento) Here are the (known as Registered Warrants). A few points: 6. Will my financial institution honor a registered warrant? Recipients of registered warrants should contact their financial institution to determine whether they will honor the registered warrant before the redemption date. 7. What happens if my financial institution will not accept the registered warrant? You may decide to open an account at another financial institution that will accept registered warrants, or you will have to hold the warrant until it matures on October 1, 2009. ... 9. Who will receive registered warrants? The State in July will issue registered warrants, or IOUs, for all other payments, including those to private businesses, local governments, taxpayers receiving income tax refunds and owners of unclaimed property. Most banks will probably accept warrants from established customers ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 6:52 PM » USA
    Published Wed, Jul 01 2009 6:52 PM by The Big Picture
    > Another fascinating take from the new CIO of the USA. Track all of the United States spending, access the raw data and analysis at . is a re-launch of a prior attempt to put all this info online, I was surprised to see that the top 5 vendors are all defense contractors. I suspect that putting the nitty gritty details of the government’s spending won’t be too great for certain recipients. > Some other USA data series . . . 1. 2. Total Spending 3. Spending Overview by State and Year
    Click Here to Read the Full Article

    Source: The Big Picture
  • 4:03 PM » Freddie Mac Relief Refinance Mortgage Now Available With up to 125 Percent Loan-to-Value Ratios
    Published Wed, Jul 01 2009 4:03 PM by Freddie Mac
    McLean, VA – To help borrowers who have seen significant home price declines refinance their existing loans, the Obama Administration today announced the availability of loan-to-value (LTV) ratios up to 125 percent for Home Affordable Refinance mortgages, including Freddie Mac's Relief Refinance Mortgage.
  • 2:27 PM » Wage Deflation in Our Midst
    Published Wed, Jul 01 2009 2:27 PM by The Big Picture
    I am especially pleased to introduce today’s Think Tank guest, Economist David Rosenberg of Canada’s . For most of you, however, David needs no introduction: A 20 year veteran of the Street, David most recently was Merrill Lynch’s chief North American Economist, where he correctly warned about the Housing and Credit Collapse and Recession in advance. With Non-Farm Payroll scheduled to be released tomorrow, the timing is perfect to hear some thoughts from David about Employment . . . > > A survey conducted by YouGov for the Economist magazine found that 5% of respondents had taken a furlough this year and 15% had accepted a pay cut (see The Recession and Pay: The Quiet Americans on page 33 of this week’s edition). As wages deflate, workers are looking for ways to supplement their shrinking income base, for example, by moonlighting. Indeed, a poll undertaken by and cited in the USA Today found that one in every ten Americans took on an extra job over the last year; another one in five said they intend to do so in the coming year. These numbers are double for the 45 to 54 year olds who now see early retirement, once around the corner, as an elusive concept. Most pundits who crow about green shoots and about an inventory restocking in the third quarter giving way towards some sustainable economic expansion live in the old paradigm. They don’t realize, for whatever reason, that the deflationary aftershocks that follow a post-bubble credit collapse typically last for 5 to 10 years. Businesses understand better than the typical Wall Street or Bay Street economist and strategist that everything from order books, to output, to staffing have to now be restructured to adequately reflect a permanently lower level of leverage in the economy. Indeed, by our estimates, there is up to another $5 trillion of household debt that has to be eliminated in coming years and that process is going to require that consumers go on a semi-permanent spending diet. Companies...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 2:14 PM » FHFA Authorizes Fannie Mae and Freddie Mac to Expand Home Affordable Refinance Program to 125 Percent Loan-to-Value
    Published Wed, Jul 01 2009 2:14 PM by FHFA
    July 1, 2009: FHFA Authorizes Fannie Mae and Freddie Mac to Expand Home Affordable Refinance Program to 125 Percent Loan-to-Value
  • 2:13 PM » Report: As many as One in Five U.S. hotel may default
    Published Wed, Jul 01 2009 2:13 PM by Calculated Risk Blog
    I've already posted most of the data in this article ... so I'll just excerpt a quote. From Bloomberg: (ht mark, ghostfaceinvestah, brian) As many as one in five U.S. hotel may default on their loans by the end of 2010 as the recession forces companies to spend less on travel and perks, according to Kenneth Rosen, an economist at the University of California. The value of hotel properties in default or foreclosure almost doubled to $17.3 billion in the second quarter through June 24 from $9 billion at the end of the first quarter, data compiled by Real Capital Analytics Inc. show. The New York-based research firm, which began tracking distressed commercial property in November, expects hotel defaults to increase by as much as $2 billion next quarter, said analyst Jessica Ruderman. “Hotels without question will have the highest foreclosure rate of any commercial real-estate sector,” said Rosen ... The hotel segment was the most overbuilt of all CRE - and that is saying something with all the excess retail space!
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 2:12 PM » Is Mortgage Forgiveness the Answer?
    Published Wed, Jul 01 2009 2:12 PM by Realtor.Org
    Some housing experts say the next logical step for helping home owners with negative equity is loan forgiveness.
  • 2:12 PM » Long & Foster Exec Moves Closer to FHA Job
    Published Wed, Jul 01 2009 2:12 PM by Realtor.Org
    David H. Stevens, president of the Washington, D.C., real estate firm Long & Foster, is a step closer to being head of the Federal Housing Administration.
  • 2:12 PM » The Truest Picture of Excess Labor Supply
    Published Wed, Jul 01 2009 2:12 PM by The Big Picture
    Have a look at this single chart, Number of Unemployed per Number of Job Opening below. It is from David Rosenberg, and is pulled from a longer piece David . > THE TRUEST PICTURE OF EXCESS LABOUR SUPPLY > As titled above, Rosie describes this as “THE TRUEST PICTURE OF EXCESS LABOUR SUPPLY” in the United States today. Its hard to argue with that contention . . .
    Click Here to Read the Full Article

    Source: The Big Picture
  • 2:03 PM » Fannie Mae Bulletin: Home Affordable Refinance Eligibility Expanded to 125% LTV
    Published Wed, Jul 01 2009 2:03 PM by Fannie Mae
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  • 12:49 PM » Home Affordable Refinance Program Expanded to Include Borrowers 125 percent Underwater
    Published Wed, Jul 01 2009 12:49 PM by
    U.S. Housing and Urban Development Secretary Shaun Donovan today announced an expansion of the Obama Administration's Home Affordable Refinance Program to include participation by borrowers who are current but up to 125 percent underwater on their mortgage.
  • 12:40 PM » New York Fed purchases $2.999 billion in Treasury coupons
    Published Wed, Jul 01 2009 12:40 PM by NY Fed
    New York Fed purchases $2.999 billion in Treasury coupons
  • 12:39 PM » Voluntary and Involuntary Credit Card "Attitude Adjustments"
    Published Wed, Jul 01 2009 12:39 PM by Google News
    In the course of this recession, consumer attitudes towards spending have changed. So have banks' attitudes towards lending. In regards to consumer spending and credit cards, some consumers have had a voluntary attitude adjustment. Others have had an attitude adjustment thrust upon them. Several articles will show what I mean. JPMorgan Chase Raises Minimum Payments Please consider . JPMorgan Chase & Co., the biggest U.S. credit-card issuer, plans to raise the minimum payment on balances to 5 percent for some customers, less than a month before new federal curbs begin to take hold. The increase from 2 percent takes effect in August, the company said in a notice customers received this month. Customers who pay less than the minimum may be charged extra fees, the bank’s Web site says. New York-based JPMorgan has about 159 million cards in circulation, a regulatory filing shows, and spokeswoman Stephanie Jacobson said the new minimum applies to fewer than 1 percent of customers. By making some customers pay a 5 percent monthly minimum, Chase is minimizing its risk, said Bill Hardekopf, CEO of, a Birmingham, Alabama research firm. “Too many people got credit cards that should not have been approved for credit cards,” Hardekopf said today in an interview. “Chase is deeming those customers as high risk.” Citigroup Raises Rates on 13-15 Millions Cards Also note that . Citigroup Inc has increased interest rates on up to 15 million U.S. credit card accounts just months before curbs on such rises come into effect, the Financial Times reported citing people close to the situation. "These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit," Citigroup told the paper. Clearly banks have had a voluntary attitude adjustment. They are tired of taking losses on credit cards and are acting to stem losses and raise rates while they still can. My guess is that default rates...
  • 12:39 PM » Largest Cities Growing Faster Than Surrounding Suburbs
    Published Wed, Jul 01 2009 12:39 PM by WSJ
    In general, the suburbs continue to grow faster than cities, and probably will for some time. But the country’s ten largest cities are bucking that trend. Today’s notes how cities are growing faster in the recession, while suburbs are growing slower. As with most demographic changes this one is the result of a whole slew of factors, from yuppies who prefer a denser urban lifestyle to immigrants returning to city centers. Immigrants also tend to be younger, and have slightly higher birthrates, driving births in city centers. And then there is the recession and housing mess: Between underwater mortgages, lost jobs and uncertainty about the future, U.S. migration has slowed down at just about every level, including that mid-life move from the city to the burbs. The central-city population in U.S. metropolitan areas with more than one million people (excluding New Orleans, where recent growth rates reflect residents returning to the city following Hurricane Katrina) grew at an annual rate of 0.97% between July 2007 and July 2008, according to Brookings demographer William Frey . That compared with a growth rate of 0.90% in 2006-2007, and growth rates around 0.5% in the years between 2002 and 2005. It makes sense when you consider suburban boundaries continue to expand, and anyway most of America already lives, works — and reproduces — in the suburbs. Hard to stop a speeding train. But demographer Mark Mather at the Population Reference Bureau has . America’s ten largest cities are now growing faster than the areas outside them. That’s a significant change from only a few years ago, as his chart nicely illustrates. It’s worth noting that this was a trend that started before the recession. There’s an open question as to whether this will reverse in recovery (there’s an open question about how everything will look after the recovery). And contrary to the wishes of some, suburban living and car-based commuting will remain the preference of most Americans. But it’s safe to say...
  • 12:39 PM » Secondary Sources: Bank Balance Sheets, Home Prices, Greenspan
    Published Wed, Jul 01 2009 12:39 PM by WSJ
    A roundup of economic news from around the Web. On the Baseline Scenario, James Kwak looks at the changing face of Treasury plans. “The initial Paulson Plan last September focused on the left side; the idea was to buy toxic assets off of bank balance sheets. Then in October Treasury did an about-face and switched to the right side, recapitalizing banks by buying preferred stock from them (TARP). In November and January, Treasury and the Fed did combined bailouts of Citigroup and Bank of America, in which they both provided fresh capital and guaranteed certain assets against falls in value. In February and March, Treasury shifted all the way over to the left (asset) side with the PPIP, which was hailed (by its supporters, at least) as a way to cleanse bank balance sheets – something that had not been accomplished by TARP. Now, it seems, we are back to the right side; as long as banks can raise more capital, everything is fine, no matter how many toxic assets they may hold. One key to the financial crisis has been nervousness about toxic assets on bank balance sheets. It’s nice that people aren’t so nervous anymore. But as Raghuram Rajan said to Klein, ‘if we reenter the downturn, and the banks begin to look shakier – we’ll wish we had moved the assets when the market was calm and stable, rather than leaving them to create uncertainty and volatility at the center of the banking system.’” Writing for voxeu, Hugo Benítez-Silva , Selcuk Eren , Frank Heiland and Sergi Jiménez-Martín wonder how well individuals predict selling prices of their homes? “How did we get a housing bubble? This column describes how well households predict the market values of their homes. Most homeowners overestimate the value of their properties by 5% to 10%, primarily due to the large expected capital gains implicit in the self-reported home values. Overly optimistic expectations about the evolution of house prices may have planted the seed of the current mortgage crisis in the U.S.” Brad DeLong...
  • 9:38 AM » Bill Gross Investment Outlook July 2009:"Bon" or "Non" Appétit?
    Published Wed, Jul 01 2009 9:38 AM by AQ
    Investors who stuffed themselves on a constant diet of asset appreciation for the past quarter-century will now be enclosed in a cage featuring government-mandated, consumer-oriented fasting.
  • 9:03 AM » Unemployment Forecast: Too Much "Hope"
    Published Wed, Jul 01 2009 9:03 AM by Calculated Risk Blog
    From David Leonhardt at the NY Times: In the weeks just before President Obama took office, his economic advisers made a mistake. They got a little carried away with hope. ... Without the stimulus, they saw the unemployment rate — then 7.2 percent — rising above 8 percent in 2009 and peaking at 9 percent next year. With the stimulus, the advisers said, unemployment would probably peak at 8 percent late this year. We now know that this forecast was terribly optimistic. Here is the January forecast with the actual data ... Click on graph for larger image in new window. This graph compares the actual quarterly unemployment rate (in red) with the Obama economic forecast from January 10th: There are two possible explanations that the administration was so wrong. ... The first explanation is that the economy has deteriorated because the stimulus package failed. ... The second answer is that the economy has deteriorated in spite of the stimulus. Very little of the stimulus has been spent so far, so it is premature to say it failed. However Romer recently was in the Financial Times: Ms Romer said stimulus spending was “going to ramp up strongly through the summer and the fall”. “We always knew we were not going to get all that much fiscal impact during the first five to six months. The big impact starts to hit from about now onwards,” she said. Ms Romer said that stimulus money was being disbursed at almost exactly the rate forecast by the Office of Management and Budget. “It should make a material contribution to growth in the third quarter.” So we should see an impact in the 2nd half of 2009 ... and that starts now!
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:47 AM » Updated: Case-Shiller 100-Year Chart
    Published Wed, Jul 01 2009 8:47 AM by The Big Picture
    Regular TBP reader Steve Barry created ; We first ran this back in , and it was lifted and ran all over the internet (mostly without attribution). Here is Steve’s updated version: > > hat tip Steve Barry
    Click Here to Read the Full Article

    Source: The Big Picture
  • 8:47 AM » Investment Grade Bonds Return 9.2%, Junk Returns 29%; Has the "Hard Money" Been Made?
    Published Wed, Jul 01 2009 8:47 AM by Google News
    As long as the corporate bond market is healthy there is going to be a bid on equities. And in the first half of 2009, junk bonds have been running. Please consider . Nowhere is the recovery in financial markets more evident than in corporate bonds, where Lehman Brothers Holdings Inc.’s bankruptcy is becoming a distant memory. U.S. investment-grade company debt returned 9.2 percent in the first half of the year, outperforming Treasuries by 13.7 percentage points, the most on record, according to Merrill Lynch & Co. index data. Corporate bonds also did better than the Standard & Poor’s 500 Index of stocks, marking the first time since 2002 that the fixed-income securities outshined both Treasuries and equities. Yields on investment-grade company securities fell to within 3.31 percentage points of Treasuries yesterday, the least since Sept. 10, according to Merrill’s U.S. Corporate Master Index. Spreads widened to a record 6.56 percentage points on Dec. 5, and the securities lost 6.8 percent in 2008, the worst year on record, as the shock to financial markets from Lehman’s collapse Sept. 15 froze credit markets and sparked a run on Treasuries that caused bill rates to fall below zero. “Spreads on corporate debt were so out of whack coming into the year, implying default rates that indicated more than 20 percent of all speculative-grade companies would go bankrupt,” said Kevin Sherlock, co-head of loan and high-yield capital markets at Deutsche Bank in New York. “The risk appetite is far more aggressive now than it was three months ago. It’s about where we were last summer at pre-Lehman levels.” The biggest returns came in the riskiest securities. High- yield, high-risk bonds gained 29 percent, or 34 percentage points more than Treasuries, Merrill Lynch indexes show. While credit spreads are narrowing, defaults continue to rise. The U.S. speculative-grade default rate jumped to 8.1 percent in May, the highest since October 2002, and may reach 14.3 percent by the...
  • 8:47 AM » Home Loan Delinquencies Double on Prime Loans; Foreclosure Filings Top 300,000 3rd Straight Month
    Published Wed, Jul 01 2009 8:47 AM by Google News
    The Office of the Comptroller of the Currency says . Delinquency rates on the least-risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure. Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said. “I’m very concerned about the rise in delinquent mortgages and foreclosure actions,” Comptroller of the Currency John Dugan said in a statement with the report. President Barack Obama’s plan to create “sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,” Dugan said. Obama’s program, unveiled Feb. 18, aims to help as many as 4 million homeowners by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their houses are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007. Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report . Overall, mortgages 60 days or more past due rose 88 percent from last year, the report said. “Serious delinquencies are a leading indicator of increased foreclosure actions in the future,” the report said. The data shows 5.9 percent of the 21.8 million Fannie Mae and Freddie Mac loans serviced by national banks or thrifts were at least days 30 days late, in foreclosure or subject to bankruptcy, compared with 3.2 percent a year...
  • 8:32 AM » It’s The Second Half — So Where’s The Recovery?
    Published Wed, Jul 01 2009 8:32 AM by WSJ
    Most forecasters seem to expect growth to be weak for a few quarters, but then rebound back to trend in the second half of 2008… –Lehman Brothers research note, Dec. 12, 2007 What is shaping up as the deepest and longest recession since the 1930s will end in the second half of 2009. –Wells Fargo press release, Dec. 19, 2008 Calls for a “second-half” recovery have been a common theme of this recession — and so far, have only underscored the degree to which forecasters underestimated the magnitude of this downturn. Indeed, rather than the second-half recovery originally expected last year the credit crisis intensified, massive layoffs ensued, and by year-end the global economy was mired in its worst downturn since the Great Depression. Yet even as the extent of the damage became clear, many economists, chief executives and investors have maintained that this year, conditions will improve in the second half and the recession (which began in December 2007) will finally draw to an end. Today — July 1 — begins the second half of 2009. So is the recovery at hand? The signs of improvement certainly are: home sales and prices are slowing their free-fall, jobless claims remain below their late-March record highs, gauges of business investment have risen, consumer confidence is on the rebound, and financial markets have steadied. The idea that the U.S. could swing towards GDP growth in the third or fourth quarter no longer seems like a pipe dream. But last year held similar promise: after the collapse of investment bank Bear Stearns in mid-March and its quickie sale to J.P. Morgan , there was a period of relative calm through the early summer months. That optimism wound up being short-lived; it remains to be seen whether the second-half of 2009 will also prove to be a grim reality check.
  • Tue, Jun 30 2009
  • 5:23 PM » Modifications and Re-Default
    Published Tue, Jun 30 2009 5:23 PM by Calculated Risk Blog
    Earlier I posted some graphs on the surge in prime delinquecies from the See: Here is some info on types of modifications: While 185,156 mortgages were modified in the first quarter of 2009, 122,398 were “combination modifications” that changed more than one term of the loan. Of the modifications made in the first quarter of 2009, 70.2 percent included a capitalization of missed payments and fees, 63.2 percent included a reduction in interest rate, and 25.1 included an extended term. By comparison, 12.6 percent of the mortgages received modifications that froze the interest rate, 1.8 percent included a reduction of principal, and 1.1 percent included a deferral of principal. All modification actions during the quarter are indicated in the table below. Since nearly two-thirds of the modifications changed more than one loan term, the sum of the percentages in the table exceeds 100 percent. The types of actions taken have different effects on the borrower’s principal and interest payments and may, over time, have different effects on the long-term sustainability of the loan. Of the nearly two-thirds of modifications that were combination modifications that involved two or more changes to the terms of the loan, 83.4 percent of them included capitalization of missed payments and fees, 86.1 percent included reduced interest rates, 36.3 percent included extended maturities, 12.4 percent included interest rate freezes, 2.8 percent included principal reductions, and 1.6 percent included principal deferrals. Click on graph for larger image. In normal times, a capitalization of missed payments and fees is effective - because usually the homeowner fell behind for a short period because of a lost job or an emergency expense. However, in these times with many homeowners underwater (with negative equity), capitalization isn't very effective. A reduced interest rate or longer term might be helpful. And here are the re-default rates. This graph shows that about 30% of modified loans...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 5:23 PM » Loan Modifications Up During First Quarter
    Published Tue, Jun 30 2009 5:23 PM by Washington Post
    Lenders modified more troubled loans during the first quarter, according to a government report released today, but a growing number of borrowers are falling behind on their payments.
    Click Here to Read the Full Article

    Source: Washington Post
  • 5:23 PM » OCC and OTS Release Mortgage Metrics Report for First Quarter 2009
    Published Tue, Jun 30 2009 5:23 PM by US Treasury
    Delinquencies and foreclosures on first-lien mortgages continued to increase during the first quarter of this year, but loan modifications also increased and the trend continued toward more sustainable modifications with lower monthly payments, according to a report issued today by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS).
  • 4:37 PM » Explaining the FOMC
    Published Tue, Jun 30 2009 4:37 PM by WSJ
    The Federal Reserve ’s June policy meeting is now a week in the past, and Fed officials are starting to emerge to explain the central bank’s decision-making in more detail. James Bullard , president of the St. Louis Fed, was up today with a talk to Philadelphia’s Global Interdependence Center . Departing from the standard practice of Fed officials who like to read from prepared texts, Mr. Bullard gave a college-style lecture with a power point presentation. He also followed up with discussions with reporters. We’ll follow his lead and offer our take — in power point form — of three important messages: The Fed’s benchmark interest rate — the federal funds rate — is going to stay near zero for the “foreseeable future,” given the weak economy and low inflation. That ought to reinforce to investors who were expecting rate hikes by year end that it isn’t likely. Still, Mr. Bullard is wary of counting too much on the “slack” argument. This argument holds that high unemployment and excess manufacturing capacity push inflation rates down. While there is lots of slack in the economy, he says, inflation might not fall as much as some models suggest. Indeed, inflation expectations, what he considers a better inflation indicator, have bounced back from depressed levels earlier this year to modest levels around the Fed’s rough goal of 2%. The Fed’s ‘liquidity programs,” such as efforts to support the commercial paper market or money market mutual funds, are on track to end next year “if financial conditions continue to improve.” The Fed signaled this on Thursday when it said the liquidity programs would run out on Feb. 1, 2010. The central bank effectively punted on the third prong of its efforts to revive the economy — its purchases of mortgage backed securities, Fannie Mae and Freddie Mac debt and U.S. Treasury bonds. Some investors expected the Fed to make changes in the program to buy $1.75 trillion worth of this debt when it met last week. The Fed took no action. But that doesn...
  • 4:36 PM » Why CRA Loans Weren't Toxic Subprime Loans
    Published Tue, Jun 30 2009 4:36 PM by Seeking Alpha
    submits: at Rortybomb wades into the CRA debate with a very good point: toxic subprime loans bear almost no relation to CRA loans. 80% of the subprime mortgages expired in 30 months; they perpetually had to be refinanced. 75%+ of subprime mortages had a prepayment penalty. This is not at all what CRA loans looked like. CRA rooted for solid, longer-term mortgages.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 4:36 PM » Home Prices: Are We There Yet?
    Published Tue, Jun 30 2009 4:36 PM by CNBC
    Posted By: A lot of folks are parsing the latest S&P Case Shiller home price report out today, and debating whether some month-to-month increases are proof of home price stabilization nationwide. I frankly think it’s impossible to say anything nationwide, because a lot of different markets are reacting very differently. That may seem an incredibly prosaic thing to say, but I think an awful lot of smart folks often lose sight of that. Topics: | | Sectors: | MEDIA:
  • 4:36 PM » Crisis far from over: World Bank chief
    Published Tue, Jun 30 2009 4:36 PM by Reuters
    WASHINGTON (Reuters) - World Bank President Robert Zoellick said on Tuesday that financial markets are showing signs of stabilization, but warned that the global crisis was far from over in developing countries.
  • 2:48 PM » Greenspan Speaks
    Published Tue, Jun 30 2009 2:48 PM by Google News
    There comes a time when, however alluring is the limelight, and however strong your thrust for action, you’d better opt for a graceful exit. The exit of former Fed Chairman Alan Greenspan has been anything but graceful, made all the more frustrating by his stern refusal to leave. Greenspan’s latest foray into the stage comes in the form of an in the Financial Times last week, which is so full of blunders that I’m embarrassed on behalf of the FT for publishing it without first doing even a Wikipedia check. Worse… Greenspan’s thesis reveals either a mind that (for all its former greatness) can no longer think; or an ex-Fed Chairman who so misunderstood how the financial system works that it’s no wonder at all that we got into this mess! So the first blunder comes early on when Greenspan talks about what he sees as a virtuous circle of rising stock markets, leading to improved credit conditions, higher lending and the resumption of economic activity… which in turn supports higher stock prices and so on. While the idea that improved confidence can generate a virtuous circle has merits, what is questionable is Greenspan’s road to get there: The “newly created equity” in banks’ balance sheets as the prices of banks’ stocks go up. Well that’s plain wrong. Regulatory capital, which is what matters for a bank’s ability to increase its lending, is not marked to market but at the price paid up originally to purchase equity in a bank. (Regulatory capital also includes other stuff, like retained earnings, which again are not marked to market but at the price when they were booked). In other words, the increase in stock prices does NOT provide a “ capital buffer that supports the debt issued by financial and non-financial companies ” and does NOT “ supply banks with the new capital that would allow them to step up lending .” If there is one way higher stock prices help is if banks actually see it as an opportunity to raise new capital and expand their operations. Indeed, some banks...
  • 2:48 PM » Congress Gets Plan for Consumer Protection Agency
    Published Tue, Jun 30 2009 2:48 PM by
    The Obama administration sent Congress a detailed proposal on Tuesday to create a consumer protection agency responsible for financial products, a move that marks the first shot in a heated battle with banks and other financial institutions over how to regulate home mortgages, credit cards and other forms of lending.
    Click Here to Read the Full Article

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