Tom Lindmark submits: This is a pretty important bit of information from A slower cure rate among delinquent loans erased improvements in the number of loans rolling into delinquency status among US residential mortgage-backed securities (RMBS), according to Fitch Ratings .

A few comments on the first-time homebuyer tax credit: A couple of details: The tax credit is up to 10% of the purchase price, or $8 thousand maximum. "First-time" homebuyers are defined as anyone who hasn't owned a primarily residence for the last 3 years (not really "first-time"). The tax credit can be used as the downpayment, see Kenneth Harney's: This has led to a . Even though the program ends on November 30th, the buyer must close escrow before then - so the program will boost traffic through September and maybe into October. Existing home sales are reported in the month following the close of escrow . So the program should have a positive impact on reported numbers throughout most of the year. The odds are very high that the tax credit will be extended . My understanding is the NAR and NAHB are pulling out all the stops and the extension of this credit is their #1 priority. Also, since housing is the top economic priority for the Obama Administration, I think we will see an extension at the same size ($8K), maybe for another 6 months. This extension will probably not be a high priority until October . However, just like with the cash-for-clunkers program, I think the impact will wane over time. Anecdote: I've spoken with two younger guys (30 ish) who told me they had no down payment, but their wives are pushing them to buy a house NOW. They are using the tax credit and FHA to buy. I think that conversation is happening in many places. This suggests existing home sales will decline - perhaps significantly - after the frenzy subsides.

Taylor Bean filed for Chapter 11 protection three weeks after the company shuttered its mortgage lending operations.

Posted By: Existing home sales in a row, now to the highest pace in two years. Excellent news that buyers are getting off the fence, but they're only getting off at a certain price point. Topics: | | Sectors: | MEDIA:

The Week of August 15-21 - Abercrombie & Fitch may be losing its shirt(s) - A 1200 unit apartment portfolio on Long Island obtained a $77M refi. - The Fed Treasury Announced a TALF extension. - Stalin would never let this happen with $1.5 billion. - Here comes Chinese money…again…this time to buy U.S. mortgages through PPIP. -Headline Shocker: CRE [...]

Excerpt from Paul Krugman: The real problem here is that the standard language doesn’t make much allowance for the kind of gray zone we’re now in; that’s because in the pre-1990 era recessions tended to be V-shaped, so that jobs snapped back as soon as GDP turned around. I don’t think what we’re going through is good news — but GDP is almost surely rising, so the recession, as normally defined, is over. ... But the economy is not recovering in the most crucial area, job creation ... Excerpt from The Economist: The world economy has stopped shrinking. That’s the end of the good news ... a rebound based on stock adjustments is necessarily temporary, and one based on government stimulus alone will not last. Beyond those two factors there is little reason for cheer. America’s housing market may yet lurch down again as foreclosures rise, high unemployment takes its toll and a temporary home-buyers’ tax-credit ends (see ). Even if housing stabilises, consumer spending will stay weak as households pay down debt. In America and other post-bubble economies, a real V-shaped bounce seems fanciful. It does appear the cliff diving is over, and that the U.S. economy will grow in the 3rd quarter. But there are still more problems ahead for consumer spending and housing (I think housing is still the key - and I'll discuss this soon). An immaculate recovery seems remote.

We've discussed this all year, and this is happening in many low priced areas ... From Carolyn Said at the San Francisco Chronicle: "Since January, I've put in 10 bids (on foreclosed homes); some were up to $80,000 over asking price and were still turned down," said [first-time home buyer, Jay] Nielsen, 41, a medical assistant. Each time, the banks selected offers from investors with all-cash offers - even when those offers were lower than his, Nielsen said. "Cash is king right now," said Glen Bell of Keller Williams Realty in Berkeley. For foreclosed homes, "a cash offer that hits the target price will many times trump a higher-priced offer with a loan. The ability to close has become just as important to banks as price. The prospect of a property being tied up longer, still on their books and then falling out is costly." The result is that average consumers say they are being shut out because they can't compete against deep-pocketed investors snapping up homes to rent out or flip. ... All-cash sales are most common where prices are low and bank-owned properties account for the lion's share of listings. In foreclosure-ridden Pittsburg, for instance, 42.7 percent of home sales in the first three weeks of July had no record of a purchase loan, according to county data analyzed by MDA DataQuick. The median price for those transactions was $105,000. There is a right now for first-time homebuyers trying to take advantage of the $8,000 tax credit (see ) before the program expires at the end of November (must close escrow by then). Meanwhile cash-flow investors are buying properties in the same price range (the numbers don't work on higher priced homes). In some of these areas, the only buyers are first-time homebuyers frequently using the and investors. The sellers are banks or short sales. Not exactly signs of a healthy market.

Hickey and Walters () submit: Since spiking from 4.8% to nearly 5.8% in June, the national average 30-year fixed mortgage rate according to has stabilized in the 5.25% to 5.35% range. With the Fed Funds Rate at 0%-0.25%, potential home buyers would love to see mortgage rates decline more, while the banks lending the money would love to see spreads increase (bottom chart) so they could make more money.

Here's where the average American family can afford to purchase a median-priced home without breaking the bank.

A few additional thoughts on Housing: 1) The hottest markets are where foreclosures have driven prices down 50% or greater; 2) Inventory remains significantly elevated — its closer to 10 months than historic averages of 5-6 months; 3) Mortgage rates are at unusually low levels — despite this, sales remain generally soft; 4) Prices remain elevated by historic norms; 5) Big increase on the low end — Starter homes and Condos — are moving units; The middle and larger (jumbo mortgages) are a vast wasteland; But for the 16k increase in condo sales in the NorthEast, monthly sales would have been negative; 6) Indeed, on a NON-seasonally - adjusted basis, National existing home sales were up a mere 12k units. 7) Lots of “shadow” inventory is waiting to come on the market once prices improve; These were specs, vacation property, etc that got caught when the market collapsed — they are renting them out or they are vacant. Finally, have this last look at the details of sales and inventory over the past 13 months: Existing Homes Sales: Sales, Inventory, and Months Supply Originally published at and reproduced here with the author's permission.

A mushroom cloud forms Deep in the heart of Texas Guaranty is ash by Soylent Green is People BBVA Compass, Birmingham, Alabama, Assumes All of the Deposits of Guaranty Bank, Austin, Texas Guaranty Bank, Austin, TX was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ... As of June 30, 2009, Guaranty Bank had total assets of approximately $13 billion and total deposits of approximately $12 billion. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3 billion. ... Guaranty Bank is the 81st FDIC-insured institution to fail in the nation this year, and the second in Texas. The last FDIC-insured institution closed in the state was Millennium State Bank of Texas, Dallas, July 2, 2009.

A question for the practitioners out there. If you were a mortgage originator in the early 1990’s before Fannie and Freddie created their automated software and before the internet, how did you determine if a loan was a “conforming” loan that could be sold to Fannie or Freddie? There are two parts to this question. One, how did you interact with the borrower to discover information and second, how did you keep up with what Fannie and Freddie required. Anyone with practical experience can write me at russroberts at gmail etc or by clicking the link in the upper left hand corner of this page where it says to email me.

Existing home sales for July will be released at 10 AM ET. From CNBC: Existing home sales may have crossed the 5 million mark in July, as buyers are coming back to the market, analysts from ING bank said in a market research note Friday. ... "The surge in the number of signed contracts… suggests existing home sales are about to cross the 5-million mark. There is a fair chance sales already crossed that barrier last month," the note said. ... "Sales pushing above 5.1 million – the pre-Lehman level – would help to make a convincing case that this is not just a correction, but a real pick-up in activity," ING analysts wrote. But no mention of the ? As I noted earlier: First-time home buyer activity has boosted existing home sales, and will continue to boost existing home sales (reported at close of escrow) through November. This level of first-time buyers is completely unsustainable - even if another tax credit is enacted. There was significant pent up demand from potential first-time buyers who were priced out of the market in 2004-2006, and then were afraid to buy as prices fell. But demand from these buyers will wane. (Like "cash-for-clunkers" demand waned). This doesn't help the mid-to-high priced market because a large percentage of sales are distressed (REOs or short sales), and there is no seller to move up. Expect a surge in existing home sales (and some new home sales) over the next few months. Expect all kinds of reports that the bottom has been reached. (Like the ING report via CNBC) Expect the frenzy to end ... Here is a repeat of a graph by buyer type in Q2 from the Campbell survey. Click on graph for larger image in new window. According to the Campbell survey first-time buyers accounted for 43% of sales in Q2 (investors another 29%). Source: , Campbell Communications, June 2009 (excerpted with permission)

By the standards of recent decades, the economic environment at the time of this symposium one year ago was quite challenging. A year after the onset of the current crisis in August 2007, financial markets remained stressed, the economy was slowing, and inflation--driven by a global commodity boom--had risen significantly. What we could not fully appreciate when we last gathered here was that the economic and policy environment was about to become vastly more difficult. In the weeks that followed, several systemically critical financial institutions would either fail or come close to failure, activity in some key financial markets would virtually cease, and the global economy would enter a deep recession. My remarks this morning will focus on the extraordinary financial and economic events of the past year, as well as on the policy responses both in the United States and abroad.

submits: By Jeffrey Bronchick, CFA It would be nice to say that the financial markets have “normalized” and the debate over their future has neatly shifted to the disheveled morass of what now constitutes global economic activity. After all, the stock market is up, credit spreads have narrowed, tens of billions of dollars have been raised to ease any number of garden variety financial stresses and companies around the globe have become extraordinarily adept at using shades of green paint to construe earnings and revenue declines of 20% to 50% or more as “signs of a bottom.”

This is an astonishing number: “A survey found that one in eight U.S. households with mortgages was in foreclosure or behind on its mortgage payments during the second quarter, putting added pressure on programs aimed at preventing foreclosures.” As previously , subprime is no longer the main offender — Prime mortgages are becoming delinquent at an accelerating pace: “While foreclosure starts have slowed on the subprime loans that ignited the mortgage and banking crisis, loans extended to borrowers with good credit are deteriorating at a faster clip as falling home prices and mounting job losses weigh on more households. The Mortgage Bankers Association said its latest survey, released Thursday, showed that 13.2% of mortgages on homes with one to four units were at least a month overdue or in the foreclosure process in the April-to-June period, up from 12.1% in the first quarter and 9% a year earlier . . . Deteriorating prime loans are increasingly behind the steady rise in delinquencies and foreclosures . Among prime loans, 9% were past due or in foreclosure at the end of June, up from 5.35% one year ago. For subprime loans, those for borrowers with weak credit records or high debts relative to income, the rate was 39.5%, compared with 30% last year. Prime loans, however, accounted for 58% of foreclosure starts , up from 44% last year. Meanwhile, subprime mortgages accounted for 33% of foreclosure starts, down from 49%. Prime fixed-rate mortgages, usually considered among the safest of all loan types, accounted for one in three foreclosure starts, up from one in five.” (emphasis added) Note that this represents a significant shift — subprime was what drove the boom and eventual bust; the prime foreclosure issue is a function of the deep recession and job losses of the past 2 years. As the chart shows, Foreclosure rates vary dramatically by region: its 1 in 20 in NJ, but closer to 1 in 8 in Florida. > > Source : NICK TIMIRAOS WSJ, AUGUST 21, 2009 http://online...

10. Tulsa (projected vacancy rate in 2010: 19.2 percent, up 2.2 percentage points from 2008). The oil and gas sector was an albatross in the 1980s, when Tulsa suffered from a severe energy bust. But in recent years energy (along with healthcare, aerospace, and government) has helped sustain Tulsa’s economy. Employment and economic growth are [...]

The American Institute of Architects (AIA) the Architecture Billings Index (ABI) monthly, and the AIA chief economist Kermit Baker frequently mentions there is an "approximate nine to twelve month lag time between architecture billings and construction spending." Click on graph for larger image in new window. This graph compares the ABI with the quarterly data on nonresidential construction investment from the Bureau of Economic Analysis. Although there is only data back to 1996, it appears that after the ABI falls consistently below 50 (contraction of billings on mostly commercial projects), then nonresidential structure investment declines on a YoY basis about one year later. And YoY investment increases about one year after the ABI surpasses 50. This suggests that nonresidential structure investment will decline through most of 2010, with no bottom in sight (since the ABI is still well below 50). Right now I'm expecting another major slump in nonresidential structure investment towards the end of this year (following the ABI slump at the end of 2008), and for nonresidential structure investment to decline throughout 2010.

The New York Times story " " , by David Streitfeld, the author does an excellent job of taking its readers through the HVCC time-line and illuminating the current issues with appraisal ordering and pressure. Below are a few quotes from the Times story: “We’ve been begging for years for enforcement of existing state and federal laws regulating appraising,” said Mr. Kennedy, a leader in the appraisal community. “We thought we were finally going to get that. But the code is doing nothing except putting ethical appraisers out of business.” “The code is a formula for continued problems with fraud,” said David Callahan, a senior fellow with the public policy group Demos who has studied appraisals. “Appraisers have been asking for a long time for a reliable firewall between themselves and lenders, and are further from it than ever.” "The final version of the code gives much greater leeway to lenders. For instance, lenders can hire their own appraisers if they “recognize” that complaints will be forwarded to regulators." "The appraisal world was stunned. Dave Biggers, the chief executive of A La Mode, a maker of software for appraisers, said, “It’s like telling me I can steal as long as I ‘recognize’ that complaints will be directed to the police.” "Under the code, the role of deciding what is pressure is assigned to a new entity called the If appraiser complaints are deemed valid, the institute is supposed to forward them to regulators." "Seventeen months after it was announced, the institute has no staff and no appraiser complaint hotline. All that exists is a single Web page." Related Story:

A little more information from the MBA Q2 delinquency report (and market graph below): Click on graph for larger image in new window. This graph shows the U.S. mortgage market by type. There are about 45 million loans included in the MBA survey, and that is about 85% of the U.S. market. This is a general breakdown, and apparently Alt-A is included in Prime (it would be helpful to break that out). The second graph shows the breakdown by type for loans that are either seriously delinquent (90+ days delinquent) or in the foreclosure process. There are about 3.6 million loans in this category. Clearly subprime is disproportionately represented (much higher delinquency rate), but now over half the loans in this category are Prime - and the delinquency rate is growing faster for Prime. This is now a Prime foreclosure crisis. For more, please see earlier posts: (several graphs) Instead of comparing the markets from the peak (See: the ), matched up the market bottoms for four crashes (with an interim bottom for the Great Depression). Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.