Here is some more data from the Office of the Comptroller of the Currency and the Office of Thrift Supervision: Modified Loan Performance ... [T]he percentage of loans that were 60 or more days delinquent or in the process of foreclosure rose steadily in the months subsequent to modification for all vintages for which data were available. Modifications made in third quarter 2008 showed the highest percentage of modifications that were 60 or more days past due following the modification. Modifications made during fourth quarter 2008 and first quarter 2009 performed better in the first three to six months after the modification than those made in the third quarter 2008. Note: This doesn't include HAMP yet because all of those modifications are still in the "trial period". That raises a question: If a borrower re-defaults during the trial, will they still be considered a "re-default"? Something to watch for if the re-default rate drops sharply next quarter - they might be excluding the trial period re-defaulters. Click on graph for larger image. This graph shows the cumulative re-default rate by quarter of modifications. About 25% to 30% of modifications fail in the first three months. For Q1 and Q2 2008, about 55% of borrowers have re-defaulted. Q3 2008 will probably be worse, and Q4 2008 and Q1 2009 about the same. Over time, I expect a very high re-default rate since many of these modifications are just "extend and pretend" (the missed payments and fees are added to the principal, and the rate is reduced for a few years), although about 10% of borrowers received a principal reduction in Q2 (more than double as in Q1).

Bulls are beside themselves about the recent performance of the Case Shiller house-price index: Prices have risen for three straight months! This happy (if short) string of data has given rise to the widespread belief that the housing bust is over, that buyers can safely return, that folks who want to sell their houses are smart to “rent for a year until the market has come back.” Keep dreaming, says David Levy, of the Jerome Levy Forecasting Center. House prices have plenty further to fall.

The U.S. Federal Reserve on Wednesday said it will appeal a court ruling that ordered it to identify borrowers using its emergency lending programs, and it requested an emergency stay of the ruling until the case is resolved. Fed Chairman Ben Bernanke has opposed giving out the names of borrowers. (Getty Images) The Fed said in a 25-page court brief that revealing the lending information would cause irreparable harm to the Fed and to depository institutions. Releasing certain reports about the Fed’s lending would seriously undermine its “ability to administer lending programs crucial to maintaining the health of the nation’s financial system,” Fed lawyers said in the brief. At issue is a New York federal judge’s Aug. 24 ruling that sided with Bloomberg News , which had filed a lawsuit seeking information about the Fed’s lending programs. U.S. District Court Judge Loretta Preska ordered the Fed to turn over documents and seek more information from the New York Fed, which is administering many of the programs launched in response to the financial crisis. News organizations and certain members of Congress have been seeking increased disclosure from the U.S. central bank as its balance sheet has ballooned during the financial crisis due to its efforts to stabilize the economy. Organizations have been seeking the names of firms borrowing from the Fed as well as specific information about collateral pledged for loans through facilities including the Fed’s discount window and primary-dealer credit facility. Fox News Network LLC made one such request and lost in front of a different federal judge in New York. Dow Jones & Co. made a similar request that was denied by the Fed. News Corp. owns Fox News and Dow Jones & Co., publisher of this newswire. The Fed historically hasn’t released the information, believing that disclosure would lead to negative speculation about a borrower’s financial health.

From the Office of the Comptroller of the Currency and the Office of Thrift Supervision: This OCC and OTS Mortgage Metrics Report for the second quarter of 2009 provides performance data on first lien residential mortgages serviced by national banks and federally regulated thrifts. The report covers all types of first lien mortgages serviced by most of the industry’s largest mortgage servicers, whose loans make up approximately 64 percent of all mortgages outstanding in the United States. The report covers nearly 34 million loans totaling almost $6 trillion in principal balances and provides information on their performance through the end of the second quarter of 2009 (June 30, 2009). The mortgage data reported for the second quarter of 2009 continued to reflect negative trends influenced by weakness in economic conditions including high unemployment and declining home prices in weak housing markets. As a result, the number of seriously delinquent mortgages and foreclosures in process continued to increase. However, a lull in newly initiated foreclosures occurred as servicers worked to implement the “Making Home Affordable” program during the second quarter. ... The percentage of current and performing mortgages in the portfolio decreased by 1.4 percent from the previous quarter to 88.6 percent of all mortgages in the portfolio. All categories of delinquencies increased from the previous quarter, with serious delinquencies—loans 60 or more days past due and loans to delinquent bankrupt borrowers—reaching 5.3 percent of all mortgages in the portfolio, an increase of 11.5 percent from the previous quarter. Foreclosures in process reached 2.9 percent of all mortgages, a 16.2 percent increase. ... In the second quarter, 15.2 percent of Payment Option ARMs were seriously delinquent , compared with 5.3 percent of all mortgages, and 10 percent were in the process of foreclosure, more than triple the 2.9 percent rate for all mortgages. ... Mortgages guaranteed by the U.S. government...

The FDIC is struggling mightily to stay solvent. Given that there are bank failures every Friday, it's no easy feat for the FDIC to stay ahead of the game. Please consider . The Federal Deposit Insurance Corp.’s plan to rebuild its reserves may cost Bank of America Corp. and three of the largest U.S. banks more than $10 billion. Bank of America, the biggest U.S. lender by deposits, may owe $3.5 billion under an FDIC proposal that banks prepay three years of premiums, based on the lowest assessment rate multiplied by the bank’s $900 billion in June 30 U.S. deposits. “This seems like a very hefty amount,” said Tim Yeager, a finance professor at the University of Arkansas and former economist at the Federal Reserve Bank of St. Louis. “The FDIC’s projections of future losses are pretty severe, and they are trying everything they can to avoid tapping the Treasury.” U.S. bank premiums range from 12 cents per $100 in deposits for the safest lenders to 45 cents for banks the U.S. considers risky, said Chris Cole, senior regulatory counsel for the Independent Community Bankers of America. The FDIC yesterday proposed asking banks to pay premiums for the fourth quarter and next three years on Dec. 30. The fees will raise $45 billion. Based on the current assessment and each bank’s deposits, Wells Fargo & Co.’s fee may be $3.2 billion based on its $814 billion in deposits, JPMorgan Chase & Co. may pay $2.4 billion and Citigroup Inc. $1.2 billion. The estimates exclude the FDIC’s plan to boost the assessment rate by 3 cents per $100 in deposits in 2011 or the agency’s assumption that bank deposits will increase by 5 percent annually. FDIC Is Bankrupt Last month I wrote . Although that is a realistically correct headline (Please see for a justification), I did overlook things FDIC did to temporarily stay in the game. Prepaid fees is yet another attempt to keep the game going. How much longer this can last is anyone's guess. Those prepaid fees are going to hurt bank...

From the WSJ: CIT is preparing a sweeping exchange offer that would eliminate 30% to 40% of its more than $30 billion in outstanding debt ... The plan would offer bondholders new debt secured by CIT assets, as well as nearly all of the equity in a restructured company. ... If not enough bondholders agreed to the plan, the company could seek to execute the restructuring in bankruptcy court, the person said. The result could potentially be one of the largest Chapter 11 bankruptcy-court filings in U.S. history. The writing was on the wall in July when CIT a $3 billion emergency loan secured by all of their assets. As I in July, the emergency loan just kicked the can down the road. Now it appears CIT is at the end of the road ...

submits: One place to start is the Federal Housing Administration, the nation’s insurer of nearly $750 billion in outstanding mortgages. The agency acknowledged this month that a new but still undisclosed HUD audit has found that FHA’s cash reserve fund is rapidly depleting and may drop below its Congressionally mandated 2% of insurance liabilities by the end of the year. At a 50 to 1 leverage ratio, the FHA will soon have a smaller capital cushion than did investment bank Bear Stearns on the eve of its crash. Its loan delinquency rate (more than 30 days late in payments) is now above 14%, or from two to three times higher than on conventional mortgages. Its cash reserve ratio has fallen by more than two-thirds in three years.

State tax revenues tumbled in the second quarter from year-earlier levels, as the recession pummeled consumers leading to lower income and sales taxes. Vermont was the only state that managed to eke out a gain from 2008. . The total level of taxes across the U.S. was 17% lower from a year earlier. Alaska posted the largest decline, but that was due to the state’s substantial drop in taxes related to energy, as Alaska doesn’t collect individual income taxes or sales taxes. See Conor Dougherty’s article in the Journal . Below is a sortable chart of tax revenue, by state, and changes in major components of tax receipts. Tax Revenue State Total 2009 tax revenue (in dollars) Change in total taxes from 2008 Change in sales taxes from 2008 Change in individual income taxes from 2008 U.S. Total 199,725,107 -17% -9% -27% Alabama 2,130,092 -13% -10% -24% Alaska 596,754 -87% N/A N/A Arizona 2,562,395 -27% -27% -44% Arkansas 2,103,330 -5% -8% -13% California 33,544,129 -14% -10% -33% Colorado 2,333,248 -24% -14% -30% Connecticut 3,618,740 -20% -9% -27% Delaware 773,047 -25% N/A -36% Florida 8,228,366 -12% -13% N/A Georgia 4,178,469 -17% -11% -19% Hawaii 1,145,002 -16% -8% -34% Idaho 922,192 -21% -14% -29% Illinois 7,697,097 -12% -10% -24% Indiana 4,106,673 -10% -5% -18% Iowa 1,827,461 -9% 6% -16% Kansas 1,911,819 -15% -2% -17% Kentucky 2,555,914 -8% -3% -17% Louisiana 2,613,195 -18% -11% -16% Maine 1,151,649 -15% -7% -27% Maryland 4,896,343 -17% -9% -27% Massachusetts 5,420,143 -19% -9% -27% Michigan 5,768,785 -7% 12% -23% Minnesota 5,009,478 -13% -5% -24% Mississippi 1,831,891 -9% -8% -10% Missouri 2,752,244 -17% -9% -25% Montana 729,607 -18% N/A -22% Nebraska 1,063,323 -13% -9% -15% Nevada 2,367,012 -6% -18% N/A New Hampshire 484,865 -10% N/A -31% New Jersey 9,359,609 -15% -9% -27% New Mexico 1,077,605 -31% -15% -59% New York 14,079,442 -22% -9% -31% North Carolina 5,380,022 -22% -8% -36% North Dakota 612,734 -16% -4% 12% Ohio 6,822,340 -15% -9% -25% Oklahoma 1,902,249 -22% -5...

WASHINGTON (Reuters) - The U.S. Federal Reserve on Tuesday proposed tough new credit card rules to protect consumers from potentially costly practices by lenders and moved to implement legislation enacted in May.

writes: Irrational exuberance in High Yield shows no sign of abating: the loan-HY bond spread is down to 2009 tights: a mere 326 bps for the represented universe of credits. Last week HY bonds averaged 710 bps, while loans were are 383 bps. For rational types, now is the time to consider some long loan-short bond basis packages, at a 1.0x:1.85x ratio. Also the negative loan-HY basis in Sealy continues, now at about 500 bps: either the data there is really faulty or somehow that relationship makes sense… in some parallel universe. Big movers in the prior week were Mediacom loans moving wider by 150 bps and Neiman Marcus bonds caught in another squeeze, pushing them tighter by 130 bps. Overall loans widened by 6 bps while bond tightened by 34 bps.

New York Fed purchases $3.545 billion in Treasury coupons

Written By: Stacey Sprain, Certified Ambassador Loan Processor (CALP) In last week’s article, I provided information concerning HUD’s new requirements for FHA Roster Appraisers that become effective October 1, 2009 as per . There are two other major issues of concern to all of us FHA originators and processors that are slated for October 1, 2009 as well. HUD’s was issued back in June relaying major changes to the process of condominium project review and warranty. Most importantly, that announcement communicated the complete removal of FHA spot loan condominium financing effective fort cases assigned on and after October 1st. Well, the good news is that I have “heard through the grapevine” that HUD will be putting this off and revising the details that were given in ML 2009-19 to push back the effective date until November. The bad news is that the details of changes aren’t yet clear so it puts us all on alert with no choice but to monitor HUD’s Mortgagee Letter website to watch for the posting of the bulletin. I did just notice something HUD has apparently changed out on the web in the past couple of days though. Last time I visited the condominium search site at (which was within the past few days) I noticed they’d already updated and created a dropdown box for lenders to select whether a project was approved by HUD (HRAP) or by lender (DELRAP) and now I see that dropdown box content has been revised to give two different choices – the HRAP/DELRAP has been grouped together as one dropdown choice with Pre-HRAP/DELRAP given as the second dropdown choice. What this could mean is a mystery to me but I’ve got my “eyes in the sky” as they say. I’m watching all my trigger sites to try and get some clues as to what the anticipated Mortgagee Letter revision might tell us. I would expect it should be posted any day now because something is definitely up! I’ve also been watching for HUD communication or announcement on another topic that I would expect should be announced any...

Written By: Stacey Sprain, Certified Ambassador Loan Processor (CALP) There is no question about it- fico scores and credit requirements have moved to the forefront of lending guidelines. And unfortunately, time and time again I’ve learned how little consumers really know and understand about credit. I personally think our government and our educators do a pretty crappy job of teaching consumers what is really important to know about their credit history and about credit reporting in general. But there are so many great tools out there that we have opportunity to share with our families, our friends, our neighbors and our communities. Today’s article will teach you how to find and utilize the tools I’ve made use of over the years. First off, I want every single one of you to do the following: Go to and request your free credit report from each of the three major credit bureaus. There is no charge for this service and in fact, it is your legal right. A federal law called the Fair Credit Reporting Act (FCRA) provides that every consumer is entitled to request and receive a copy of his/her free credit report at least once annually from each of the three major credit reporting companies. If you’ve never heard of this, refer to the Federal Trade Commission’s bulletin called which explains in further detail. When you play the role of consumer, it gives you an advantage out in the market because you’re able to take what you learn and use it to help educate others. This is what I did many years ago when I accidentally stumbled upon a lot of important credit information at the FTC website. I’ve used the information to help many borrowers monitor and repair their outdated, duplicated and erroneous credit reports at absolutely no cost to them. I’ve even used this process to keep my own credit report up-to-date and free of the errors that can cause fico score depletion. Beware of other credit companies that advertise and try to sell you “free” credit reports. The ONLY federally...

The recession has hit middle-income and poor families hardest, widening the economic gap between the richest and poorest Americans as rippling job layoffs ravaged household budgets.

From Reuters: Standard & Poor's on Monday cut its ratings on MBIA Inc and its structured finance insurance arm, MBIA Insurance Corp, citing an expectation the company will continue to take significant losses from insuring risky loans. ... The outlook for both companies is negative ... From S&P: We downgraded MBIA and the holding company because macroeconomic conditions continue to contribute to losses on the group's structured finance products. Losses on MBIA's 2005-2007 vintage direct RMBS and CDO of ABS could be higher than we had expected . However, the downgrade also reflects potentially increased losses in other asset classes, including but not limited to CMBS and--for other years prior to 2005--within RMBS . ... The negative outlook on MBIA and the holding company reflects our view that adverse loss development on the structured finance book could continue. In the next few years, liquidity will likely be adequate to meet debt-service and holding-company obligations (including operating expenses). However, increased losses and earnings volatility could still occur. ... Considering the runoff nature of the franchise, it is unlikely that we would raise the rating. Alternatively, if there were increased losses within the investment portfolio, potential reserve charges, or diminished liquidity, we could take a negative rating action. emphasis added There is still significant counterparty risk for the banks from both MBIA and Ambac.

submits: A quick reminder to make sure and read the on the Federal Reserve’s History over the past 15 years and the mortgage market. It’s great evidence that we had the regulation we needed to force non-bank lenders to comply with the regular banking market, but the regulators, the Federal Reserve in this case, weren’t willing to enforce consumer protection:

The system also led to confusion. When MERS was involved, borrowers who hoped to work out their loans couldn’t identify who they should turn to. As cases filed by MERS grew, lawyers representing troubled borrowers began questioning how an electronic registry with no ownership claims had the right to evict people. April Charney, a consumer lawyer [...]

It's time to ask ourselves a collective question; what have we learned from the economic chaos caused by a collapsing real estate market, which was itself caused by government intervention and easy credit? The answer is unfortunately, an emphatic nothing!

In order to avoid future delays when a home owner wants to sell, they should file proof with the county that the mortgage debt has been paid.

The stars have aligned to bring down mortgage rates to levels (even for jumbo mortgages) that may not be here for long.