The Market Ticker began publication when I noticed a nasty little thing that Washington Mutual was doing - paying dividends from "capitalized interest" - that is, "funny money" promised to be paid in the future by homeowners who had negative-amortization loans. In California. With price-to-income ratios for homes that frequently were running 10x, or more than three times the maximum safe value. I screamed about this at the time, predicting that WaMu would ultimately blow sky high, and nobody in the regulatory apparatus did a damn thing about it. WaMu did in fact blow up and was "forcibly" folded into JP Morgan. According to sources currently working out these loans at Wells Fargo and confirmed by Dan Alpert of Westwood Capital, when selling tranches of commercial mortgage-backed securities below the super senior tranche, Wachovia promised to pay the buyer’s risk premium by writing credit default swap contracts against these subordinate bonds. Should the junior tranches eventually default, then the bank is on the hook. Uh huh. Ain't that nice? We'll write a CDS and make money twice! Better yet, we called that a "true sale" of the original securitization. Like hell. One senior member of Wells Fargo’s commercial loan group who deals directly with the quandary, who spoke on the condition of anonymity, said, “One third of this commercial portfolio we took on from Wachovia is impaired and needs to be completely rewritten. I’ve just hired five more guys and we can’t keep up with the volume of defaults. Southeast Florida and Tampa are serious trouble spots.” One third eh? Florida? SE Florida? Like Miami. where not long ago I looked up at the skyline to see multiple completed "condo developments" that had a half-dozen lights on (not including the doorman) at 10:00 PM - in a 40 story tower? Eek. There was $230 billion in that portfolio when Wells "acquired" Wachovia last year. Was it written down adequately? Good...

New York Fed purchases $25.5 billion net ($31.2 billion gross) in agency mortgage-backed securities

BOSTON (Reuters) - The U.S. federal government will keep about $1.2 billion in payments collected to backstop money market funds even after its insurance program ends on Friday, a U.S. Treasury official said.

WASHINGTON, D.C. - The Congressional Oversight Panel today announced that it will hold a field hearing to examine foreclosure mitigation efforts under the Troubled Asset Relief Program (TARP) on Thursday, September 24 at 10:00 a.m. in the Kirby Auditorium of the National Constitution Center in Philadelphia, Pennsylvania. The Panel is currently scheduled to hear from the following witnesses: Seth Wheeler , Senior Advisor, U.S. Department of the Treasury Edward L. Golding , Senior Vice President, Economics and Policy, Freddie Mac Eric Schuppenhauer , Senior Vice President and CFO/Program Executive for the Home Affordability and Stability Plan, Fannie Mae The Honorable Annette M. Rizzo , Judge, Philadelphia Court of Common Pleas and Co-Chair, Philadelphia Mortgage Foreclosure Steering Committee Eileen Fitzgerald , Chief Operating Officer, Neighborworks America Deborah Goldberg , Director, Hurricane Relief Project, National Fair Housing Alliance Irwin Trauss , Supervising Attorney, Consumer Housing Unit, Philadelphia Legal Assistance Dr. Paul Willen , Senior Economist and Policy Advisor, Research Department, Federal Reserve Bank of Boston Joe Ohayon , Vice President for Community and Client Relations, Wells Fargo Home Mortgage Bank of America (invited) Saxon Mortgage (invited) In establishing the Congressional Oversight Panel in the Emergency Economic Stabilization Act of 2008, Congress charged the Panel to examine, among other subjects, "the effectiveness of foreclosure mitigation efforts." The Philadelphia hearing will inform the Panel's forthcoming October oversight report, which will consider foreclosure mitigation programs under TARP, including the Making Home Affordable program. WHO: Members of the TARP Congressional Oversight Panel WHAT: Field Hearing on Foreclosure Mitigation WHEN: Thursday, September 24, 2009; 10:00 a.m. WHERE: Kirby Auditorium () The National Constitution Center Independence Mall 525 Arch Street Philadelphia, Pennsylvania 19106 The...

New York Fed announces $1.4 billion in Legacy CMBS TALF loans requested at September 17 facility

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Helluva month , September ‘08 was: > Source:

Economists and others weigh in on . In essence, housing starts have been steady since June, at a pace that exceeds the January low by about 100,000 units. Anyone who expected starts to zoom ever higher is probably disappointed, but we find these data generally encouraging, as a stable pace of construction at current levels seems to represent a happy medium. On one side, it is good that single-family starts (which fell by 3% in August after surging by over 35% in the prior four months) are not collapsing as the height of the homebuyers’ tax credit impact passes (the tax credit expires November 30, and buyers have to close on a completed home to be eligible, so July was just about the latest that a builder could start a home and be sure to be finished in time to close in November). At the same time, given the ongoing massive overhang of excess inventory of existing homes (associated to a substantial degree with the foreclosure wave), even though the inventory of new homes for sale is extremely low, it would not be healthy for builders to load up the pipeline with a flood of new construction –Stephen Stanley, RBS While this index (and single family starts) are well above the massively depressed levels recorded late last year and early this year, this has in all likelihood been a rebound from unsustainably weak results that was reinforced by a temporary boost to demand from the $8000 first time homebuyer tax incentive that applies to purchases that close before December 1. Gains from here on will probably be much more difficult to achieve, as poor labor market conditions, tight credit, overly leveraged household balance sheets, and still considerable inventory of new and existing homes all exert downside pressures. –Joshua Shapiro, MFR Inc. The big question ahead , of course, is whether the White House and Congress will agree to extend and perhaps even increase the $8,000 the tax credit that has helped spur home sales this year. Our expectation is that Washington will come...

From Bloomberg: An extension of the $8,000 U.S. homebuyer tax credit is gaining support in the Senate as bill sponsor John Isakson said he is rallying lawmakers to continue a program that helped boost home sales by more than 1 million. “I’m working the floor now to make everyone aware that the $8,000 credit sunsets on Nov. 30,” Isakson, a Georgia Republican, said in an interview today. The former real estate executive says he is “talking to everybody and anybody.” This is , and hopefully the bill will be scuttled. Meanwhile the usual suspects are lining up to support the bill: Realtors, bankers and homebuilders have joined in the push, starting a campaign that encourages Congress to extend the program for one year ... White House spokesman Robert Gibbs told reporters today that President Barack Obama’s economic team is looking at the tax credit and “evaluating the impact” on new home sales. “Through that evaluation we’ll come to something to give the president a recommendation,” Gibbs said. ... The bill has at least 15 co-sponsors including Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and senators Patty Murray, a Washington Democrat, and Joe Lieberman, a Connecticut independent. What is wrong with Connecticut?

submits: A few weeks ago we featured REITs as part of a post entitled: . Since the post it seems that the bears have become even more resolute of the bleak outlook for real estate stocks. We could not help but notice the following headline from Bloomberg: . Below is an excerpt from the article:

This is the Third of probably Five posts exploring leading indicators for job growth in the economy. So far I have examined initial jobless claims, which have until now been declining gradually, and which at their trend rate must decline at least 3 more months before they would get to the point where jobs would be created; and the ISM manufacturing employment data, which is very strong and suggests the jobs could be added to the economy next month, and even possibly now. In this, the third installment, I'm going to examine Industrial Production, and duration of Unemployment - the first of which gives a very brief leading signal, and the second of which appears to be of only limited value -- before I get to "the Holy Grail" in part IV. Industrial Production , which was just reported yesterday morning, is probably the single most important marker of the end of recessions. It tends to make a clean "v" in graphs right at the end of recessions. This is not a coincidence since the NBER makes use of it in their determination. As compared with payrolls, however, industrial production does have a slightly leading characteristic. It tends to peak a median +2 months before payrolls, and to trough at the end of recessions a median +1 month before payrolls. In particular, of the 10 troughs since World War 2, in 8 of them industrial production troughed within 2 months of the payrolls number. For example, here is the graph of the two series for the 1970s recessons: The most notable exception, of course, was 2002-3, when production troughed a full 20 months before payrolls, as shown here, along with our present recession/recovery: Without more, at best we can say that the odds are nevertheless quite good, historically, that the trough in jobs will be within 2 months of the trough in industrial production -- which would mean the economy should start to produce actual job growth this month ! Fortunately, there is some further guidance, because the only times that...

The Securities and Exchange Commission is establishing a Division of Risk, Strategy and Financial Innovation to help it identify potential potholes and developments in the financial markets.The division will have responsibility over three broad areas: risk and economic analysis, strategic research and financial innovation.

Americans plan to refrain from boosting their spending even after the biggest drop in consumption since 1980, signaling concern about the direction of the economy over the next six months.

Economists and others weigh in on . While the headline number was stronger than expected headline number, the continued moderation in core consume prices [that exclude food and energy], which has remained below the 2.0% year-to-year level for the ninth consecutive month suggests that the weak economy is continuing to play a crucial role in containing core consumer price pressures. With this in mind, we continue to maintain our view that the risks of deflation are all but dead, and do not expect inflation to be a threat of any sort for some time. –Millan L. B. Mulraine, TD Securities The steepest CPI declines are now behind us. Year-on-year inflation should be back in positive territory by the end of the year as gasoline price comparisons continue to become less favorable. But the core CPI is quiet, and there is so much slack in the economy that it should remain so. There was some upward pressure this month from airline fares and lodging away from home, perhaps reflecting some stabilization in demand for travel, but the overall core rate was very quiet. –Nigel Gault, IHS Global Insight The core was rescued by a 1.3% drop in new car prices, which the BLS says was “partly” due to the clunker incentive. Expect a rebound in Sep. In Aug, though, this more than offset a hefty 1.9% jump in used auto prices. This has been coming for a while, signaled by the huge rebound in auction prices. Further big increases are in the pipeline, and we think it would be sensible to expect occasional 0.2% gains in the core over the next few months as a result, even though the medium term trend is down. Elsewhere in Aug, rents very subdued again, thanks to soft wages. –Ian Shepherdson, High Frequency Economics The path going forward is likely to be one in which rising commodity prices and import prices do put some upward pressure on the overall inflation rate, with at least some of the price pressure showing up in the core indexes. This will have two important implications for the recovery. First...

Better late than never ... From Steve Liesman at CNBC: (ht Bill) The Federal Reserve is involved a broad review of commercial real estate exposures at the nation's largest regional banks, which Fed sources say is both the result of concern in that area but part of the "new normal" for how they will be supervising banks. ... People familiar with the examinations say the fed is "getting granular" looking, for example, at the differences in banks' concentration of construction loans vs. multifamily vs. motels and retail. Clearly the Fed has room for improvement. A review of bank failures (see: ) shows that the Fed recognized problems of excessive concentration and risk taking as early as 2003 - and the Fed did nothing. I think the Fed needs to explain how the new approach would have caught the problems at Riverside (as an example) in 2004 or so. Hopefully that is the point of this "new normal".

In light of my earlier , my friend Scott sends this along: > via

For anyone who argues the relevance of government stimulus on housing recovery, consider this: A third of all home buyers in the past several months have taken advantage of the $8000 home buyer tax credit.

First, a nice mention in Newsweek (thank you): (see slide 4 for a quote from Feb 2005, ht Matthew, Eric) On the end of the recession, from Bloomberg: “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time,” Bernanke said today at the Brookings Institution in Washington, responding to questions after a speech. Although I think the official recession has probably ended, it is worth remembering that one or two quarters of GDP growth doesn't necessarily mean the recession is over. Right in the middle of the '81/'82 recession, there was one quarter when GDP increase 4.9% (annualized). On recession dating: 1 The National Bureau of Economic Research (NBER) Business Cycle Dating Committee is the recognized group for calling dating recessions in the U.S. It is always difficult to tell when a recession has ended, especially with a jobless recovery (something I expect again). As an example, it took NBER over a year and half after the 2001 recession ended to of the cycle. And it took 21 months after the 1990-1991 recession ended for NBER to . From the 2003 of the end of the 2001 recession: The committee waited to make the determination of the trough date until it was confident that any future downturn in the economy would be considered a new recession and not a continuation of the recession that began in March 2001. The economy was still struggling in 2003 - especially employment - but the NBER committee members felt that any subsequent downturn would be considered a separate recession: The committee noted that the most recent data indicate that the broadest measure of economic activity-gross domestic product in constant dollars-has risen 4.0 percent from its low in the third quarter of 2001, and is 3.3 percent above its pre-recession peak in the fourth quarter of 2000. Two other indicators of economic activity that play an important role in the committee's decisions...

September 16, 2009 TG-289 Treasury Issues Debt Management Guidance on the Supplementary Financing Program Washington – The U.S. Department of Treasury today issued the following statement on the Supplementary Financing Program: "Treasury currently anticipates that the balance in the Treasury's Supplementary Financing Account will decrease in the coming weeks to $15 billion, as outstanding Supplementary Financing Program bills mature and are not rolled over. This action is being taken to preserve flexibility in the conduct of debt management policy." ###

Appraisers have had blinders on for way too long. It is time to open our eyes wide, keep an open mind and to truly think outside the “check” box. Most of us learned this crazy business by filling out a form. For me, it was actually preparing forms on the good old typewriter, and since clients didn’t accept White-out, if you made one mistake, you retyped the whole thing …. in my case, normally after almost completing the entire report. My education truly began when I started actually thinking, securing meaningful education and not merely form-filling thanks somewhat to George K. Cox, MAI, SRA. It’s time for all of us to step back, re-evaluate and employ a little common sense. Most preprinted forms utilize a Quantitative Appraisal Method while a Qualitative Method is more is line with how buyers really act. QUANTITATIVE METHOD Paired Data Analysis: A quantitative technique is normally used to identify and measure adjustments to the sale prices or rents of comparable properties. To apply this technique, sales or rental data on nearly identical properties are analyzed to isolate a single characteristic’s effect on value or rent. Where do you get these so called adjustments? I know, I know. Paired sales, right? Let me see them. Better yet, the next time you are in the hot seat be prepared to show your paired sales analysis to the court or your state regulatory board. I do believe it is possible to have a proper paired sales analysis and with regression analysis becoming more and more popular there is oftentimes support for your adjustments. However, I would bet that most appraisers do not have this data in their offices to support their adjustments. Think about it! How many home buyers have you ever seen pull out a legal pad or a 1004 form and make line item adjustments for every little difference. Wait! A bathroom is worth $2,000, a garage $5,000, a deck is $2,000, etc. By the way, why don’t these numbers ever change? Buyers don’t act this way. Has anyone ever seen a buyer...