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  • Fri, Aug 21 2009
  • 1:21 PM » Existing Home Sales and First-Time Buyers
    Published Fri, Aug 21 2009 1:21 PM by Calculated Risk Blog
    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)
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 1:21 PM » Smackdown Week: Option ARM Resets
    Published Fri, Aug 21 2009 1:21 PM by
    A couple commentors mentioned upcoming option ARM resets as a reason to be more bearish on housing. I wanted to make some quick comments about that. First let me say that option ARM resets are a tricky thing. Most ARMs were underwritten in 2005 to early 2007. During 2005, 12-month LIBOR averaged...
    Click Here to Read the Full Article

  • 10:21 AM » Ben Bernanke: Reflections on a Year of Crisis
    Published Fri, Aug 21 2009 10:21 AM by Federal Reserve
    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.
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 9:28 AM » Guaranty Bank: OTS Closes the Barn Door
    Published Fri, Aug 21 2009 9:28 AM by Calculated Risk Blog
    It has been widely reported that the assets of Guaranty Bank (Texas) will be seized Friday by the FDIC and sold to Banco Bilbao Vizcaya Argentaria SA of Spain. Meanwhile the OTS a Prompt Corrective Action (PCA) to Guaranty yesterday. Maybe they didn't get the memo ... Also, from the WSJ: Guaranty owns roughly $3.5 billion of securities backed by adjustable-rate mortgages, with two-thirds of the loans in foreclosure-wracked California, Florida and Arizona, according to the company's latest report. Delinquency rates on the holdings have soared as high as 40%, forcing write-downs last month that consumed all of the bank's capital. Guaranty is one of thousands of banks that invested in such securities ... It's not just their own bad loans (usually C&D and CRE) taking down the local and regional banks, but also bad investments in securities based on other bank's bad loans. From the article: One banking lawyer who asked not to be identified describes the result as a "wonderful chain of stupidity." I'm not sure it is so "wonderful" ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:57 AM » U.S. Economy: Now Comes the Hard Part
    Published Fri, Aug 21 2009 8:57 AM by Seeking Alpha
    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.”
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:57 AM » Hidden Backlog of Foreclosures
    Published Fri, Aug 21 2009 8:57 AM by Google News
    When it comes to foreclosures, there is no such thing as a "safe state". Even states that did not engage in widespread use of liar loans and other silly mortgage lending practices are struggling with foreclosures. The issue is jobs, and unemployment is rising everywhere. Please consider . Amid record levels of home foreclosures nationwide, there are worrying signs that the foreclosure crisis could be spreading to parts of the country that had previously been relatively unscathed. Last month, for example, RealtyTrac, a private firm that tracks foreclosure data, recorded sharp spikes in foreclosures in states like Idaho, Oregon, Utah, and Illinois, where the prolonged recession is cited as the culprit. "It surprised us when we went from a state with a low level of subprime lending to a state with a high level of foreclosures," says Gerry Mildner, the director of the Center for Real Estate at Portland State University. "Most of our problems have to do with unemployment rather than with toxic loans. RealtyTrac's Sharga points to several other states that have seen alarming jumps in unemployment, including Kentucky, Alabama and North and South Carolina. "We won't know what the impact of these rises in unemployment will be until a year from now," says Sam Khater, a senior economist with First American CoreLogic, a private real estate data firm. What worries Khater more are states where sharply rising unemployment is coupled with many homeowners who already owe more than their houses are worth. He points to states like Ohio, Georgia and Illinois. Home prices in Illinois, for example, fell 14.8 percent in June compared with a year earlier. "Their price decline has been accelerating," he says. The actual foreclosure rates are hard to predict in part because a number of state governments, along with federal government-sponsored Fannie Mae and Freddie Mac, have instituted a range of delays and moratoriums on foreclosures. "The...
  • 8:26 AM » 1 in 8 US Mortgages Falling Behind
    Published Fri, Aug 21 2009 8:26 AM by The Big Picture
    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...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 8:26 AM » 1 In 3 Chance You’ll Have Negative Home Equity
    Published Fri, Aug 21 2009 8:26 AM by The Big Picture
    Foreclosure rates in the U.S. remain near record highs. More than 13% of American homeowners with a mortgage are either behind on their payments or in foreclosure. The latest report from the Mortgage Bankers Association, released today, shows the percentage of loans that entered the foreclosure process dipped slightly to 1.36%, down from an all-time high of 1.37% in the first quarter. However, that number may soon rise again as mortgage delinquency rates continued to climb in the second quarter. That news is no surprise to Karen Weaver of Deutsche Bank. She startled everyone a few weeks ago when she predicted that, by 2011, nearly half of American mortgage holders would be underwater (meaning that they’ll owe more on their mortgages than their houses were worth).
    Click Here to Read the Full Article

    Source: The Big Picture
  • 8:26 AM » Top 10 Cities Primed for Recovery
    Published Fri, Aug 21 2009 8:26 AM by
    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 [...]
  • 8:26 AM » Commercial Real Estate Needs Better Reporting
    Published Fri, Aug 21 2009 8:26 AM by Google News
    is mind-boggling. A recent survey by revealed some serious challenges the industry faces when comes to reporting: Based on responses from over 70 industry representatives, an overwhelming majority of real estate investment managers still relies on print and static electronic formats that provide decision makers with little or no analytical capabilities. In addition, data collection and reporting processes are heavily manual, resulting in major challenges related to the time and effort involved in creating reports as well as ensuring data accuracy, consistency, and completeness. I know my good friends in asset management are always writing monthly and quarterly reports. But an overwhelming majority investment managers still rely on print and static electronic formats ? That's disappointing, especially in today's environment, when owners and investors are putting more and more emphasis on managing assets in order to maximize returns and minimize risks. While the survey result is alarming, I can't help but think there are opportunities here. We should be able to do better. Let's crowdsource this. Leave a comment if you have any good ideas and suggestions. Related link:
  • 8:10 AM » CRE: ABI and Nonresidential Structure Investment
    Published Fri, Aug 21 2009 8:10 AM by Calculated Risk Blog
    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.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:10 AM » Colonial Assets Neither Pretty Nor Pleasant
    Published Fri, Aug 21 2009 8:10 AM by Seeking Alpha
    submits: Alexis Glick With Anti-TARP, BB&T CEO Kelly King On Colonial Bank, The FDIC & Sheila Bair
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • Thu, Aug 20 2009
  • 7:02 PM » N.Y. Times on Ordering Appraisals - " . . Lenders Now Control the Entire Process"
    Published Thu, Aug 20 2009 7:02 PM by Google News
    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:
  • 7:02 PM » Lloyd's of London filed a lawsuit against appraiser for misleading the company on his application for E&O coverage
    Published Thu, Aug 20 2009 7:02 PM by Google News
    According to the story by Courtenay Edelhart, Californian staff writer, . "Lloyd's of London filed a lawsuit against Newton, owner of San Joaquin Appraisals Inc., on June 16 alleging he misled the company on his application for errors and omissions coverage. The lawsuit seeks permission to rescind the policy, which it said was granted under false pretenses." "Jerome N. Lerch, attorney for Lloyd's of London, did not return calls Tuesday seeking comment." "There's more than an insurance policy at stake. If Lloyd's loses, it could be on the hook for millions of dollars because a defunct subprime lender is suing Newton and others over several appraisals done for Crisp, Cole & Associates, a now closed real estate company the FBI is investigating for mortgage fraud."
  • 4:58 PM » U.S. Mortgage Market and Seriously Delinquent Loans by Type
    Published Thu, Aug 20 2009 4:58 PM by Calculated Risk Blog
    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.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 4:58 PM » Place Not Your Hopes in Mortgage Servicers
    Published Thu, Aug 20 2009 4:58 PM by Seeking Alpha
    submits: has a spectacularly good post up at Baseline Scenario today about mortgage servicers. He gives a lot of examples of how incredibly bad and/or evil they are at anything to do with loan modification, and concludes: Servicers were never designed to do this kind of work; they don’t underwrite, and paying them $1,000 isn’t going to give them the experience needed for underwriting. It’s hard work that requires experience and dedication, skills that we don’t have currently…
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 4:54 PM » Freddie Mac Updates AMI Limits and Super Conforming Appraisal Requirements
    Published Thu, Aug 20 2009 4:54 PM by Freddie Mac
    With this Bulletin, Freddie Mac is making the following changes to their selling requirements: Providing guidance regarding 2009 area median income changes, Amending appraisal requirements for super conforming Mortgages, Updating the Guide to reflect that super conforming Mortgages may not be pooled in mini-Gold PC Pools, Updating Form 1077, Fannie Mae/Freddie Mac Uniform Underwriting and Transmittal Summary to include recently announced revised Project Classification codes for Mortgages delivered to Fannie Mae. We are also announcing a correction to Form 91, Income Analysis Form, and to Loan Prospector resubmission requirements announced in Bulletin 2009-18.
  • 1:17 PM » MBA Forecasts Foreclosures to Peak at End of 2010
    Published Thu, Aug 20 2009 1:17 PM by Calculated Risk Blog
    On the MBA conference call concerning the "Q2 2009 National Delinquency Survey", MBA Chief Economist Jay Brinkmann said this morning: The problem is moving to prime loans, and fixed rate prime loans. Although the delinquency rate is lower for prime fixed rate than for other loans, these loans make up 65.5% of all loans - so the increase matters. Brinkmann expects delinquencies to peak in mid-2010. Brinkmann expects foreclosures to peak at the end of 2010. Note: The MBA data shows about 5.8 million loans delinquent or in the foreclosure process nationwide. I believe the MBA surveys covers close to 90% of the mortgage market. Many of these loans will cure, but the foreclosure pipeline is still building. A few graphs ... Click on graph for larger image in new window. The first graph shows the delinquency and in foreclosure rates for all prime loans. Prime loans account for all 78% of all loans. "We're all subprime now!" NOTE: Tanta first wrote this saying in 2007 in response to the 'contained to subprime' statements. The second graph shows just fixed rate prime loans (about 65.5% of all loans). Prime ARMs have a higher delinquency rate than Prime FRMs, but the foreclosure crisis has now spread to Prime fixed rate loans. Note that even in the best of times (with rapidly rising home prices in 2005), just over 2% of prime FRMs were delinquent or in foreclosure. However the cure rate was much higher back then since a delinquent homeowner could just sell their home. The third graph shows the delinquency and in foreclosure process rates for subprime loans. Although the increases have slowed, about 40% of subprime loans are delinquent or in foreclosure. The fourth graph shows the delinquency and foreclosure rates by state (add: and D.C. and Puerto Rico!). The 'in foreclosure' rate can vary widely by state, because the process is fairly quick in some states, and very slow in other states (like Florida). Although most of the delinquencies...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 1:17 PM » Freddie Mac Rate Survey: Week Ending August 20, 2009
    Published Thu, Aug 20 2009 1:17 PM by Freddie Mac
    MORTGAGE RATES DOWN TO LOWEST LEVEL IN THREE MONTHS McLean, VA - Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.12 percent with an average 0.7 point for the week ending August 20, 2009, down from last week when it averaged 5.29 percent. Last year at this time, the 30-year FRM averaged 6.47 percent. The 15-year FRM this week averaged 4.56 percent with an average 0.7 point, down from last week when it averaged 4.68 percent. A year ago at this time, the 15-year FRM averaged 6.00 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.57 percent this week, with an average 0.6 point, down from last week when it averaged 4.75 percent. A year ago, the 5-year ARM averaged 5.99 percent. One-year Treasury-indexed ARMs averaged 4.69 percent this week with an average 0.5 point, down from last week when it averaged 4.72 percent. At this time last year, the 1-year ARM averaged 5.29 percent. (Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.) "U.S. Treasury bond yields fell nearly a quarter of a percentage point over the week, and other long-term yields followed suit," said Frank Nothaft, Freddie Mac vice president and chief economist. "Interest rates on 30-year and 15-year fixed-rate mortgages fell to the lowest level since the end of May, while initial rates on 5/1 hybrid ARMs declined to levels not seen since January 2005. "Low mortgage rates are helping to reinforce the housing market. New construction on one-family homes rose for the fifth consecutive month in July to an annualized pace of almost 500,000 homes, the most since October 2008. In addition, homebuilder views of housing market conditions for the remainder of the year rose for the second month in a row in August to the most positive reading since June 2008, according to the...
  • 12:47 PM » Has Mortgage Modification failed?
    Published Thu, Aug 20 2009 12:47 PM by Google News
    Obama’s mortgage modification plan, HAMP (Home Afforable Modification Program), isn’t working very well. Designed to help prevent foreclosures by incentivizing and giving legal protection to previously indifferent middle-men servicers it isn’t producing anywhere near the number of modifications that were anticipated. Is it likely to work in the future? My guess is no. Let’s discuss some reasons why. Servicers Gaming the System Over the past few months, more and more stories have come out about servicers finding ways to line their pockets while consumers and investors are getting shortchanged. The one that brought the gaming issue to everyone’s attention is . Here are my favorite three since then: JPMorgan Chase, one of the first mega banks to champion the national home loan modification effort, has struck a sour chord with some investors over the risk of moral hazard posed by certain loan modifications. Chase Mortgage, as servicer of several Washington Mutual option ARM securitizations it inherited last year in acquiring WAMU, has in several cases modified borrower loan payments to a rate that essentially equals its unusually high servicing fee, according to an analysis by Debtwire ABS. Simultaneously, Chase is cutting off the cash flow to the trust that owns the mortgage. In some cases, Chase is collecting more than half of a borrower’s monthly payment as its fee. Countrywide Home Loans (which is now part of Bank of America) has been the subject of proceedings in several bankruptcy courts because of the shoddy recordkeeping behind their claims in bankruptcy cases. Judge Marilyn Shea-Stonum of the U.S. Bankruptcy Court for the Northern District of Ohio recently sanctioned Countrywide for its conduct in these cases…The resulting opinion makes extensive reference to Credit Slips regular blogger Katie Porter and guest blogger Tara Twomey’s excellent Mortgage Study that documented the extent to which bankruptcy claims by mortgage servicers were often erroneous and not supported...
  • 12:46 PM » Vermont, Texas, and Subprime Loans
    Published Thu, Aug 20 2009 12:46 PM by Google News
    The Wall Street Journal has : …For the past five years, as home loans went to even Americans with poor credit and no proof of steady work, Ms. Todd couldn’t get a mortgage in spite of her good credit and low debt. Vermont banks told the self-employed landscaper that her income stream was unreliable. The 32-year-old changed careers, taking a permanent job as a teacher, to boost her chances. Vermont’s strict mortgage-lending laws largely prevented the state’s residents from signing the types of dubious home loans written in other markets across the country. Its 1990s legislation made mortgage lenders warn customers when their rates were relatively high, and put the brokers who arranged loans on the hook if their customers defaulted. Now, by at least one measure, the state has the lowest foreclosure rate in the U.S… These tendencies help explain how, in the 1990s, the state moved to rein in mortgage lenders based on just a few instances its chief regulator says raised red flags. According to Vermont’s Department of Banking, Insurance, Securities and Health Care Administration, one broker solicited customers through newspaper classified ads, charging up to $5,000 for referring customers to a lender. Another searched property records for owners’ tax liens, a town clerk reported, searching for what the department believes were people who could be desperate to borrow…. In laws passed between 1996 and 1998, Vermont required lenders to tell consumers when their rates were substantially higher than competitors’, with notices printed on “a colored sheet of paper, chartreuse or passion pink.” And in what officials believe is the first state law of its kind, Vermont declared that mortgage brokers’ fiduciary responsibility was to borrowers, not lenders. This left Vermont brokers partly on the hook for loans gone sour… Vermonters didn’t see the same sharp rise in home ownership that swept much of America in recent decades, which, despite the bust, buoyed economic growth. And while...
  • 12:46 PM » The Demand for Housing
    Published Thu, Aug 20 2009 12:46 PM by Google News
    Hello all, my name is and I’ll be guest-blogging here this week. I want to start off with a request for comments. I think this page has one of the smarter comments sections (that statement is completely self-serving, as I am a commenter here too), and I want to get all of your opinion on a question that I’ve been thinking about lately: Where did the increase in demand for housing and subprime loans come from? Think of our current story for the increase in subprime loans and the housing bubble: interest rates were kept too low following the attacks of 9/11 and/or there was a global savings glut. Financial deregulation allowed Wall Street to pour capital into mortgages while slicing and dicing them into investment vehicles, and politicians were happy to think the interests of Main Street (and its voters) and Wall Street (and its campaign donations) lined up perfectly. Fly-by-night unregulated subprime lenders steered borrowers into high-interest loans and/or community groups pressured banks to increase the amount of said loans, as well as restricted the increase in new houses in the most desirable areas through regulation and zoning. is the best book I’ve read recently about the way deregulation and political goals worked together to get Wall Street to pour money into dubious loans. Notice that almost all of these are changes are on the supply side: Someone now wants to offer you more of a mortgage than they did before. But why did we take these mortgages? We could say that supply creates its own demand, but I think that’s too much of a dodge when there are interesting phenomenon to investigate. Here are two standard ones: Perfectly Rational that there may not be a conflict here at all. When it comes to no-money-down liars loans, or leveraged investments more generally, the effect for consumers might be a “heads-you-win, tails-nothing-happens” coin flip. If someone offers you a giant mortgage, and the upside that your new house may become worth a lot more than the fees...
  • 12:46 PM » The Problem That Won’t Go Away
    Published Thu, Aug 20 2009 12:46 PM by Google News
    With everyone hoping for positive GDP growth in Q3 and Goldman Sachs analyst Jan Hatzius now predicting growth at an annual rate of three percent in the second half of the year, the banks, investors, and politicians are all hoping that that nasty problem of foreclosures would just go away already. Unfortunately for everyone – especially the people losing their houses – there’s no reason for it to go away. Unemployment is always a lagging indicator, and given the record low number of average hours worked, it will turn around especially slowly this time. Until then, people will continue to lose their jobs and wages will remain flat, and any small rebound in housing prices is unlikely to help more than a few people refinance their way out of unaffordable mortgages. So unless the other part of the equation – monthly payments – changes, the number of foreclosures should just continue to rise. provides this great chart from (see the CR post for definitions of the categories): The foreclosure problem has gotten a little more press recently as the Treasury Department attempts to follow through on its “name and shame” campaign to pressure mortgage servicers to modify more loans. There seem to be two main explanations for why more loans are not being modifyied. The recently reported that for the servicers at the center of the process, it is simply more profitable to make fees off of delinquent loans than to foreclose on them and give up that stream of fees. On this theory, the cash incentives being provided by the government are simply not big enough to change their financial incentives. The servicers prefer to argue that their hands are tied by the investors who own the mortgage-backed securities that have swallowed up the mortgages. On this theory, the Pooling and Servicing Agreements that govern these securitization trusts restrict the ability of servicers to modify mortgages. However, an article by Karen Weise in yesterday casts serious doubt on this claim. Weise follows a...
  • 12:30 PM » MBA: Record 13.2 Percent of Mortgage Loans in Foreclosure or Delinquent in Q2
    Published Thu, Aug 20 2009 12:30 PM by Calculated Risk Blog
    From the Mortgage Bankers Association (MBA): The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first quarter of 2009, and up 283 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. ... The delinquency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972. The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 4.30 percent, an increase of 45 basis points from the first quarter of 2009 and 155 basis points from one year ago. The combined percentage of loans in foreclosure and at least one payment past due was 13.16 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey. ... “While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase . As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five....” said Jay Brinkmann, MBA’s Chief Economist. emphasis added We're all subprime now! More to come ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:30 PM » Dysfunctional Marriage: Creditors vs. Debtors
    Published Thu, Aug 20 2009 12:30 PM by Seeking Alpha
    submits: Prompted by the recent interest in walking away from bad mortgages, asks We spent the last twenty years giving people a bad idea of how much debt it was safe to take on. Now we’re giving them odd notions about the best way to get out of that debt. Are we ever going to have a healthy relationship to credit? Or is this just part of the American soul?
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 10:15 AM » Delinquencies Continue to Climb, Foreclosures Flat in Latest MBA National Delinquency Survey
    Published Thu, Aug 20 2009 10:15 AM by
    The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first quarter of 2009, and up 283 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 64 basis points from 8.22 percent in the first quarter of 2009 to 8.86 percent this quarter.
  • 9:55 AM » Delinquencies as a Percentage of Total Loans
    Published Thu, Aug 20 2009 9:55 AM by Seeking Alpha
    submits: In today’s batch of economic statistics, there are the headliners: Initial Jobless Claims, Leading Indicators, and the Philadelphia Fed Business Outlook Survey. The statistic for the number of Delinquencies as a % of Total Loans is also due out this morning and while not a marquee stat, it is one that should be given more than a cursory review in the current environment. The number of foreclosures in the U.S. reached an all time record last month as 1 in every 355 houses received default or auction notices, or were seized by creditors. Realize too, that foreclosure, in its various forms, is the last stop on what is a longer and longer line of events as the government works desperately to keep people in their homes.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 7:51 AM » Housing: No Mood for a Recovery
    Published Thu, Aug 20 2009 7:51 AM by Seeking Alpha
    submits: Below is my latest column for The Huffington Post , entitled : Amid all their talk about a bottom in the housing market, the optimists are ignoring some key facts. For one thing, the costs of ownership . Prices relative to incomes and rents are . Mortgages are , despite all the taxpayer assistance lenders have received. Inventories are , a quarter of existing homeowners , and foreclosures .
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 7:49 AM » Manhattan Commercial Real Estate Office Sales Plunge 91%
    Published Thu, Aug 20 2009 7:49 AM by Google News
    In Manhattan, commercial real estate . Only three Manhattan office buildings worth more than $30 million were sold in the first half of year, as buyer and sellers failed to agree on pricing and credit stayed tight, according to a report by real estate services company CB Richard Ellis Group Inc(CBG). "Buyers are seeking distressed pricing," said the report released on Tuesday. "Owners do not want to sell at distressed pricing, and lenders have largely withdrawn from the market." "When the CMBS market shut down, that really shut off the financing mechanism that allowed a lot of these large transactions to get done," Enoch Lawrence, senior vice president, CBRE Capital Markets, said in a statement. The three sales compare with an average 32 seen in the first half of the past five years, the report said. Sales of office buildings valued at more than $30 million, fell to a total of $767.5 million in the first half of the year, 91 percent off the five-year average of $8.2 billion. Fed Extends TALF Program for Commercial Real Estate Given the preceding story, one should not be too surprised by this headline: . The Federal Reserve extended by three to six months an emergency program aimed at restarting credit markets, a move that may cushion the commercial real- estate industry from rising defaults and falling prices. The Term Asset-Backed Securities Loan Facility, with a capacity of as much as $1 trillion, will expire June 30 for newly issued commercial mortgage-backed securities, instead of Dec. 31, the Fed and U.S. Treasury said today in a statement in Washington. For other asset-backed securities and CMBS sold before Jan. 1, the plan was extended three months to March 31. Policy makers also left the door open to prolonging the program beyond the new expiration dates, saying they “will consider in the future whether unusual and exigent circumstances warrant a further extension.” Separately, the Fed is buying as much as $1.25 trillion of residential...
  • Wed, Aug 19 2009
  • 5:55 PM » The Magic of CRE SPE’s
    Published Wed, Aug 19 2009 5:55 PM by
    Many times, when an individual, or a large developer/operator purchases a commercial property, they buy it through a limited partnership or limited liability company. There are many reasons as to why they do this. Anonymity is one. Most wealthy people are private, and do not want to be bothered, whether it is by brokers or [...]
  • 5:55 PM » Bottoms Up: Is the Recession Really Over?
    Published Wed, Aug 19 2009 5:55 PM by
    Last week, the Wall Street Journal published an article citing a survey of 47 economists, the majority of whom said the recession is over and the economy had bottomed out. But the question remains: what does that mean? Several key indicators must be examined in even considering whether or not a recession has ended. However, [...]
  • 5:25 PM » Woman's House Mistakenly Auctioned by Bank
    Published Wed, Aug 19 2009 5:25 PM by
    You know times are tough when people are getting kicked out of their house when it’s not even for sale. That’s what happened to Anna Ramirez after she found all of her stuff out on the front lawn of her Homestead home last week and a strange man demanding she get out of his newly purchased house.
    Click Here to Read the Full Article

  • 3:51 PM » Moody’s: CRE Prices Off 36 Percent from Peak, Off 1% in June
    Published Wed, Aug 19 2009 3:51 PM by Calculated Risk Blog
    From Bloomberg: The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today. ... “It’s too soon to call the bottom,” said Connie Petruzziello, a Moody’s analyst and co-author of the commercial property price report. The Moody’s survey found a 4 percent increase in office prices in the second quarter compared with the previous three months ... Industrial properties ... fell 20 percent in the quarter, while apartments fell 16 percent and retail properties 8 percent. I think the office prices increase was an anomaly. Other CRE prices fell much faster. Here is a comparison of the and the Case-Shiller composite 20 index. Notes: Beware of the "Real" in the title - this index is not inflation adjusted - that is the name of the company (an unfortunate choice for a price index). Moody's CRE price index is a repeat sales index like Case-Shiller. Click on graph for larger image in new window. CRE prices only go back to December 2000. The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes). This shows residential leading CRE (although we usually talk about residential investment leading CRE investment , but in this case also for prices), and this also shows that prices tend to fall faster for CRE than for residential.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 1:36 PM » Who Really Understands Housing?
    Published Wed, Aug 19 2009 1:36 PM by Seeking Alpha
    submits: Yesterday we noted the about the impact of the stimulus package. This is a typical polling question. The issue is important, so you ask opinions to see whether people understand the problem or not. Since virtually no one understands macro-economics, and many others have a political agenda, the results are skewed. The policymaker faced with this information my face the Burkean Dilemma, , in choosing between what is right and what is popular.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 1:35 PM » Failed Bank List, Including Percent Losses
    Published Wed, Aug 19 2009 1:35 PM by Calculated Risk Blog
    As a companion to the , here is a list of failed banks since Jan 2007. Deposits, assets and estimated losses are all in thousands of dollars. Losses for failed banks in 2009 are the initial FDIC estimates. The percent losses are as a percent of assets. See description below table for Class and Cert (and a link to FDIC ID system). The table is wide - use scroll bars to see all information! NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.) Class: The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are: N National chartered commercial bank supervised by the Office of the Comptroller of the Currency SM State charter Fed member commercial bank supervised by the Federal Reserve NM State charter Fed nonmember commercial bank supervised by the FDIC SA State or federal charter savings association supervised by the Office of Thrift Supervision SB State charter savings bank supervised by the FDIC Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. You can click on the number and see "the last demographic and financial data filed by the selected institution".
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 1:34 PM » Mid-Sized Companies Laid Off Smallest Percentage of Workers
    Published Wed, Aug 19 2009 1:34 PM by WSJ
    In the depths of the recession, the largest and the tiniest private firms laid off the largest percentage of workers, the Labor Department said Wednesday. Companies that employed 1,000 or more workers were responsible for nearly 20.7% of job losses in the fourth quarter of 2008. Roughly 38% of workers are employed by the largest companies, data from earlier in 2008 shows. The smallest firms also shed a large number of workers. Some 14.5% of job loses in the same time frame originated from firms with one to four employees. Slightly more than 5% of workers are employed by the smallest firms. It was a mixed bag, though, as both giant and tiny firms also accounted for the highest percentage of job gains. The largest firms accounted for 18.2% of job gains, whereas the smallest firms spurred 16.8% of gains. Mid-sized companies reported the lowest percentage of layoffs in the fourth quarter. Those with 500 to 999 employees prompted 5% of the layoffs; firms with 250 to 499 employees accounted for 5.9% of layoffs. The Labor Department’s , which uses employment and wage data that employers submit to states, gauges employment trends across firm size, states and industries. It covers only the private sector. Its broadest scope doesn’t yield any surprises: the private sector added 6.7 million jobs at the end of 2008, but lost 8.5 million. The only industries that posted net job growth were health and education and utilities. Louisiana and North Dakota were the only states to experience net job growth in the fourth quarter as the other 48 reported net losses. As of June, both states had lower unemployment rates than the nation’s 9.4%. Louisiana’s was 6.8%. North Dakota’s was 4.2% — the lowest in the county.
  • 1:33 PM » Battered Consumers Remain Cautious
    Published Wed, Aug 19 2009 1:33 PM by WSJ
    The is casting a shadow over the strength and durability of the economic recovery. “We are much more cautious and much more aware of anything we buy,” said Jim Hussey , 50 years old, of Hawthorn Woods, Ill., who has five children ages 11 to 18. He and his wife decided to put off replacing their 2005 Denali SUV, which has 102,000 miles on it, until next year. They also won’t go away to Florida during the Christmas holiday, as they had last year. Buying a vacation and retirement property is now on the backburner. “We’re taking a wait-and-see attitude on any kind of major purchases,” he said. Mr. Hussey, who heads a small high-tech company, said he hasn’t cut back completely. The family still goes out to dinner, gives at church and took its annual two-week vacation this summer to a cabin in Wisconsin. But he added that he is putting more in savings and “adding to our cushion a bit.” Mr. Hussey said he thinks the Obama administration should be doing more to shore up the economy and consumer confidence, rather than focusing so much of its attention on health care. “There isn’t a lot of feel-good coming out of Washington,” he said. “They’re talking about health care but you kind of wish they would talk about the economy.” Elsewhere in Pittsburgh, Cathy Walbert , 71, remains caution even though she believes the economy is improving. Normally, this time of year she sees 50% off sales and starts buying small Christmas gifts, like candles. “I see those flyers and say to myself, I don’t really need that right now. I’ll just wait. I don’t want to spend money right now.” Her one extravagance: take-out food. She and her son have been refinishing their own floor to save money and redoing a pond in their yard. She buys take-out food so they don’t have stop working on the house to cook. “We’re trying to save money by doing the work ourselves, so I don’t mind bringing home food,” she says. She also is spending more money, reluctantly, on medical care. Her husband, who has heart problems...
  • 1:32 PM » Life after foreclosure
    Published Wed, Aug 19 2009 1:32 PM by CNN
  • 1:31 PM » IndyMac's mortgage struggle
    Published Wed, Aug 19 2009 1:31 PM by CNN
    Five months after securing a sweet deal to buy IndyMac Bank, the new owners say they are fulfilling their obligation to modify troubled home loans.
  • 1:31 PM » Tax Benefits of American Recovery and Reinvestment Act
    Published Wed, Aug 19 2009 1:31 PM by
    Visit's link to the IRS to see how individuals and businesses may receive certain tax benefits from the American Recovery and Reinvestment Act of 2009.
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