submits: Last week I posted a supporting my suspicions that investors are putting bad loans back to the banks at an increasing rate. I used JP Morgan () as a specific example - A few commenters on syndicated sites appeared to have really underestimated the significance of this development. In the article, it is alleged that Freddie () and Fannie () are forcing banks to eat up to $30 billion in soured mortgages under the warranties and representations clauses of the sales contract. To highlight the significance of this development, let me remind all that Fannie and Freddie are benchmarks for mortgage lending in the US.

An interesting article in American Banker this morning touches on the confounding question of how and why 2nd liens continue to perform as well as they have performed. The full article can be found . "According to Lender Processing Services Inc., the 30-to-89-day delinquency rate on home equity loans held by depositories slid from a peak of 1.78% at the end of 2008 to 1.32% on Dec. 31. For first mortgages, the rate also declined over the same period but less steeply, hovering around 3%The differences are starker in the noncurrent rate, which captures loans 90 days overdue or in nonaccrual status. They've flatlined below 2% for home equity while soaring above 9% for firsts. (Of course the article fails to point out the fact that many 2nd liens are strictly written off at 150 or 180 days delinquent which could contribute to this ‘stark’ difference.)

This is a follow up on the previous post on . (the previous post had excerpts from the NY Times, and WSJ ) Just to be clear on what subordinate lien holders will receive under a HAFA short sales - from Treasury's Short Sale Agreement: Subordinate Liens. We will allow up to three percent (3%) of the unpaid principal balance of each subordinate lien in order of priority, not to exceed a total of $3,000, to be deducted from the gross sale proceeds to pay subordinate lien holders to release their liens. We require each subordinate lien holder to release you from personal liability for the loans in order for the sale to qualify for this program, but we do not take any responsibility for ensuring that the lien holders do not seek to enforce personal liability against you. Therefore, we recommend that you take steps to satisfy yourself that the subordinate lien holders release you from personal liability. So on a $50,000 2nd lien, the holder of the lien will be offered up to $1,500 to sign off on the deal and release the borrower from personal liability. The HAFA program will reimburse the 1st lien holder one third of that amount, or up to $500. Investor Reimbursement for Subordinate Lien Releases. The investor will be paid a maximum of $1,000 for allowing a total of up to $3,000 in short-sale proceeds to be distributed to subordinate lien holders, or for allowing payment of up to $3,000 to subordinate lien holders. This reimbursement will be earned on a one-for-three matching basis. For each three dollars an investor pays to secure release of a subordinate lien, the investor will be entitled to one dollar of reimbursement. To receive an incentive, subordinate lien holders must release their liens and waive all future claims against the borrower.... I expect that most 1st lien holders will be willing to pay this amount to the 2nd lien holder. But would a $50,000 2nd lien holder be willing to sign off for only $1,500? It really depends on the financial situation of the borrower...

Thirty states and the District of Columbia recorded unemployment rate increases in January from a month earlier, while states registered rate decreases, the Labor Department said. But in a sign the job market is inching toward recovery 31 states added jobs in the first month of the year. In January, the overall U.S. unemployment rate fell to 9.7% from 10% a month earlier, while the nation’s economy shed 26,000 jobs. The job losses continued in February amid strong weather effects, but the jobless rate remained at 9.7%. Michigan continued to have the highest unemployment rate in the nation, though the state posted a month-over-month decline of 0.2 percentage point. Mississippi notched the biggest gain in its jobless rate, increasing 0.4 percentage point to 10.9%. Unemployment Rate, by State State December 2009 Jobless Rate January 2010 Jobless Rate Month-to-Month Change Alabama 10.9% 11.1% 0.2 Alaska 8.6% 8.5% -0.1 Arizona 9.2% 9.2% 0 Arkansas 7.6% 7.6% 0 California 12.3% 12.5% 0.2 Colorado 7.3% 7.4% 0.1 Connecticut 8.8% 9% 0.2 Delaware 8.8% 9% 0.2 District of Columbia 11.9% 12% 0.1 Florida 11.7% 11.9% 0.2 Georgia 10.3% 10.4% 0.1 Hawaii 6.8% 6.9% 0.1 Idaho 9.1% 9.3% 0.2 Illinois 11% 11.3% 0.3 Indiana 9.7% 9.7% 0 Iowa 6.5% 6.6% 0.1 Kansas 6.5% 6.4% -0.1 Kentucky 10.6% 10.7% 0.1 Louisiana 7.3% 7.4% 0.1 Maine 8.1% 8.2% 0.1 Maryland 7.4% 7.5% 0.1 Massachusetts 9.3% 9.5% 0.2 Michigan 14.5% 14.3% -0.2 Minnesota 7.4% 7.3% -0.1 Mississippi 10.5% 10.9% 0.4 Missouri 9.6% 9.5% -0.1 Montana 6.7% 6.8% 0.1 Nebraska 4.6% 4.6% 0 Nevada 13% 13% 0 New Hampshire 6.9% 7% 0.1 New Jersey 10% 9.9% -0.1 New Mexico 8.2% 8.5% 0.3 New York 8.9% 8.8% -0.1 North Carolina 10.9% 11.1% 0.2 North Dakota 4.3% 4.2% -0.1 Ohio 10.8% 10.8% 0 Oklahoma 6.8% 6.7% -0.1 Oregon 10.6% 10.7% 0.1 Pennsylvania 8.8% 8.8% 0 Rhode Island 12.7% 12.7% 0 South Carolina 12.4% 12.6% 0.2 South Dakota 4.7% 4.8% 0.1 Tennessee 10.7% 10.7% 0 Texas 8.2% 8.2% 0 Utah 6.6% 6.8% 0.2 Vermont 6.7% 6.7% 0 Virginia 6.8% 6.9% 0.1 Washington...

While some people struggle to keep their mortgage payments current, others are living in their houses for free. Not only are they not making mortgage payments but they are being offered incentives when they don't.

submits: Safety Insurance Group Inc. () the second largest private passenger insurer in Massachusetts, earnings in-line with analysts expectations of $0.93 (see conference call transcript ). The results are better than a quick glance conveys as the headline numbers appear disappointing due to the one off settlement with the Massachusetts Attorney General’s office. Price to book is still under one, but has narrowed to 0.94. Earnings improvement YoY continues to suggest stabilization of business, though analysts are still predicting YoY earnings deterioration. 1.3M shares bought back at around the lows of the year.

A couple of articles about vacant or near vacant high rise condo towers in Florida ... From the News-Press: (ht several) Victor Vangelakos is the only buyer to take possession of his unit in the 32-story Tower 1 of the Oasis high-rise project in downtown Fort Myers. Apparently the original plan was to build 5 towers with a total of 1,079 units. That is about 216 units per tower, and all but one unit are vacant in Tower 1. Tower 2 appears to have few lights on too. And from the WSJ on the 850-unit Everglades project in Miami: Only 109 or about 13% of the Everglades' 850 units have sold, according to CondoVultures.com. However, as of last month, the developer has rented about 260, or about 30%, of the units, in what it calls a "deferred purchase program." That sounds like another 480 vacant units. Many of these high rise condo towers are part of the "shadow inventory" because the units do not show up on either the new home sales or existing home sales reports (unless they are listed in the MLS). For some areas - like South Florida and Las Vegas - this is a significant part of the inventory.

Young people are worried about losing their jobs and paying their bills, but they’re still holding out hope that conditions will improve. Some 60% of 18- to 29-year-olds said they were worried about paying their bills and meeting other obligations in this economy as fear of job loss still looms large, by Harvard’s Institute of Politics shows. Nearly half, 46%, said they’re concerned about losing their jobs. An even larger share – 67% — said they feared that family members or friends might lose their jobs. And 58% said they were personally concerned about being able to afford housing. Those college students surveyed also said they were worried about being able to stay in school. Of the young adults that were enrolled in four-year colleges, 45% said they were concerned about their ability to stay in college. Another 34% said they weren’t concerned. They were even more pessimistic about the state of the labor market once they graduate. Just 14% of those college students said it would be easy to find a permanent job after graduation, whereas 85% said it would be difficult. That’s down from nearly a third who said finding a job would be easy in the spring of 2008. Lodged among their long list of concerns, though, were hints of optimism. The majority, 52%, said their personal financial situation was good, compared to the 45% who said it was bad. An even larger 57% said their parents’ financial situation was also good. Nearly half, 46%, also said they expect to be better off financially than their parents. Just one in 10 expect to be worse off. They were divided on how soon the economy would turn around. Nearly a quarter of young people said the economy would get worse in the next year. Another 38% said it would stay the same and 36% said it would get better. The survey was conducted between Jan. 29 and Feb. 22. It covered 3,117 young adults and has a margin of error of plus or minus 2.3 percentage points.

Charging up the car in the garage might seem like something from the Jetsons cartoon, but builder KB Home is making that a reality Tuesday. The company now offers the option to pre-wire homes to accommodate electric-vehicle charging stations, the latest option from a builder known for plenty of choices. This isn’t exactly a granite countertop, but, in a , Chief Executive Jeffrey Mezger says the company is thinking about how home owners will live “in the future.” KB Home says it’s leading the way with this offering: The National Association of Home Builders reports it appears to be the first builder to add such a standard option. Of course, should this prove popular, it is likely other builders will quickly follow. calls the move “another step in a broader – albeit piecemeal – effort to create ‘recharging infrastructure’ in major cities across the U.S. to make [electric vehicles] and plug-in hybrids more practical for daily use.” The price of KB Home’s option is $250. Follow Dawn on Twitter