Announcement 09-05R, Reissuance of the Introduction of the Home Affordable Modification Program, HomeSaver Forbearance™, and New Workout Hierarchy, provided guidance to Fannie Mae-approved servicers on the adoption and implementation of the Home Affordable Modification Program (HAMP). This Announcement describes updates to the policies regarding reclassification and removal of MBS mortgage loans from MBS pools.

A bill to reform the financial industry is making its way around the House, its amendments intended to help quiet some of the outrage over the bailout, but they may come with unintended consequences, The New York Times's Andrew Ross Sorkin writes in his latest DealBook column.

The FDIC released the Q3 today. The FDIC listed 552 banks with $345.9 billion in assets as “problem” banks in Q3, up from 416 banks with $299.8 billion in assets in Q2, and 252 and $159.4 billion in assets in Q4 2008. Note: Not all problem banks will fail - and not all failures will be from the problem bank list - but this shows the problem is significant and still growing. The shows 513 problem banks - and will probably increase this week. Click on graph for larger image in new window. This graph shows the number of FDIC insured "problem" banks since 1990. The 552 problem banks reported at the end of Q3 is the highest since 1993. The second graph shows the assets of "problem" banks since 1990. The assets of problem banks are the highest since 1992. On the Deposit Insurance Fund: The Deposit Insurance Fund (DIF) decreased by $18.6 billion during the third quarter to a negative $8.2 billion (unaudited) primarily because of $21.7 billion in additional provisions for bank failures. Also, unrealized losses on available-for-sale securities, combined with operating expenses, reduced the fund by $1.1 billion. Accrued assessment income added $3.0 billion to the fund during the quarter, and interest earned, combined with realized gains from sale of securities and surcharges from the Temporary Liquidity Guarantee Program, added $1.2 billion. Fifty insured institutions with combined assets of $68.8 billion failed during the third quarter of 2009 , the largest number since the second quarter of 1990 when 65 insured institutions failed. Ninety-five insured institutions with combined assets of $104.7 billion failed during the first three quarters of 2009, at a currently estimated cost to the DIF of $25.0 billion. The DIF’s reserve ratio was negative 0.16 percent on September 30, 2009 , down from 0.22 percent on June 30, 2009, and 0.76 percent one year ago. The September 30, 2009, reserve ratio is the lowest reserve ratio for a combined bank and thrift insurance...

> Here’s a stat to wake you up this morning: 23% of all mortgage borrowers in the US are underwater: “The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery. Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif. These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn’t expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.” There are 5.3 million U.S. households with mortgages at least 20% higher than the home’s value. And it gets worse, depending upon the vintage of the mortgage. During the boom, appreciably worse: Of those who took out mortgages at the 2006 peak, more than 40% are under water. > Source: RUTH SIMON and JAMES R. HAGERTY WSJ, NOVEMBER 24, 2009 http://online.wsj.com/article/SB125903489722661849.html

Black Friday marks the unofficial start of the holiday shopping season, but retailers still aren’t sure how strong a showing consumers will make. New reports Monday didn’t paint an encouraging picture. The Conference Board released a survey of spending intentions that showed U.S. households expect to spend an average of $390 this season, down 7% from estimates of $418 last year. That number is especially distressing because consumers were unusually pessimistic last year as the financial crisis went into full swing just as holiday shopping was getting underway. “Job losses and uncertainty about the future are making for a very frugal shopper. Retailers will need to be quite creative to entice consumers to spend, both in stores and online this holiday season,” said Lynn Franco , director of the Conference Board Consumer Research Center . A separate report from retail-tracking firm NPD Group indicated consumers may not be flocking to the mall for Black Friday. Just 32% of respondents said that they expect to begin their holiday shopping on Thanksgiving weekend or earlier. But some analysts think expectations for the season are too low. “While much is made of the $13.2 trillion destruction in household net worth over the course of the credit collapse, the 65% rally in the S&P 500 has helped household net worth rebound, according to the most recent data, by $2 trillion,” said Dan Greenhaus of Miller Tabak + Co. “We have long detailed our belief that higher income individuals — who are much more secure in their employment this year than last — account for anywhere from 40-50% of spending in this country while simultaneously owning the vast majority of equities through IRAs, personal investment portfolios and 401(k) retirement accounts. As such, a rebound in the equity market goes a long way to helping boost sentiment and thus consumption levels among the upper income brackets.” And some are warning not to read too much into Black Friday sales. “Strong sales on Black Friday...

November 23, 2009: Fannie Mae and Freddie Mac Loan Mods Continue to Grow

From Bloomberg: (ht MrM) The central bank this month asked Bank of America Corp. and eight other banks to [submit repayment plans with a timetable]. ... Together the nine banks have received about $142 billion in TARP funds ... The banks in the stress test that have yet to repay TARP are Bank of America, PNC, Citigroup Inc., Fifth Third Bancorp, GMAC Inc., KeyCorp, Regions Financial Corp., SunTrust Banks Inc. and Wells Fargo & Co. I'd like to see the plans made public. I'd especially like to see Citi's, BofA's, and GMAC's plans. The Fed conducted the stress tests, but didn't the Treasury loan the money? Shouldn't the Treasury be asking for the repayment plans? Just asking ...

After the expected spike in existing home sales last month, I quoted legendary basketball coach John Wooden: "Never mistake activity for achievement." It is worth repeating this month. First, it is important to remember that existing home sales are for the economy. What matters for the economy are new home sales, housing starts and residential investment. And there has been little improvement in these key indicators. This really shows up on the following graph: Click on graph for larger image in new window. This graph shows existing home sales (left axis) through October, and new home sales (right axis) through September. The initial gap was caused by the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn't compete with the low prices of all the foreclosed properties. The recent spike in existing home sales was due primarily to the first time homebuyer tax credit. But what matters for the economy - and jobs - is new home sales, and new home sales are still very low because of huge overhang of existing home inventory and rental properties. Second, normally a decline in inventory and the months-of-supply would be considered a positive for the existing home market, however much of the apparent recent improvement in months-of-supply is related to the artificial - and likely short lived - boost in activity. It is not all bad news. The second graph shows the year-over-year change in existing home inventory. This inventory has been declining for some time, and is off almost 15% compared to last year. However the level of inventory is still high, and much of the recent inventory "improvement" has come at the expense of vacant rental units; the rental vacancy rate is now at a . The key to reducing the overall inventory is new household formation, and the key to new household formation is jobs. Encouraging renters to become owners accomplishes nothing in reducing the overall housing inventory...