From the Institute for Supply Management: a href=”http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942″June 2009 Manufacturing ISM Report On Business®/a blockquoteEconomic activity in the manufacturing sector strongfailed to grow in June for the 17th consecutive month/strong, while the overall economy grew for the second consecutive month following seven months of decline, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.br /br /The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “strongManufacturing continues to contract at a slower rate/strong, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June. Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent. Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries, as the Customers’ Inventories Index remained below 50 percent for the third consecutive month. The Prices Index was unchanged from May, indicating that the supply/demand balance is improving. Overall, a slow recovery for manufacturing is forming based on the current trends in the ISM data.”br /span style=”font-size:78%;”emphasis added/span/blockquoteAs noted, any reading below 50 shows contraction, although the pace of contraction has slowed.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-389628728205441237?l=www.calculatedriskblog.com’//div
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From the Office of the Comptroller of the Currency and the Office of Thrift Supervision: a href=”http://www.occ.gov/ftp/release/2009-77.htm”OCC and OTS Release Mortgage Metrics Report for First Quarter 2009/a blockquoteThis OCC and OTS Mortgage Metrics Report for the first quarter of 2009 provides performance data on first lien residential mortgages serviced by national banks and federally regulated thrifts. The report provides a comprehensive picture of mortgage servicing activities of most of the industry’s largest mortgage servicers, covering approximately 64 percent of all mortgages outstanding in the United States and incorporating information on all types of mortgages serviced, including subprime mortgages. The report covers more than 34 million loans totaling more than $6 trillion in principal balances and provides information on their performance from the beginning of 2008 through the end of the first quarter of 2009.br /br /Negative trends continued for mortgage data for the first quarter of 2009, but with some hopeful signs on the modification front. Continued economic pressures, including rising levels of unemployment and a continuing decline in property values, resulted in an increased number of seriously delinquent mortgages and newly initiated foreclosure actions. The first quarter data also showed a relatively greater increase in seriously delinquent prime mortgages compared with other risk categories and a higher number of foreclosures in process across all risk categories as a variety of moratoria on foreclosures expired during the first quarter of 2009. /blockquoteMuch of the report focuses on modifications and recidivism, but this report also shows far more seriously delinquent prime loans than subprime loans (by number, not percentage).br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1200,height=750,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://3.bp.blogspot.com/_pMscxxELHEg/SkpJ4NOu9nI/AAAAAAAAFsg/jmNVj9gILGA/s1600-h/SeriouslyDelinquentQ1.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Seriously Delinquent Loans” src=”http://3.bp.blogspot.com/_pMscxxELHEg/SkpJ4NOu9nI/AAAAAAAAFsg/jmNVj9gILGA/s320/SeriouslyDelinquentQ1.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on graph for larger image./span/b/ibr /br /We’re all subprime now!br /br /Note: span style=”font-size:78%;”"Approximately 14 percent of loans in the data were not accompanied by credit scores and are classified as “other.” This group includes a mix of prime, Alt-A, and subprime. In large part, the loans were result of acquisitions of loan portfolios from third parties where borrower credit scores at the origination of the loans were not available.”/spanbr /br /This report covers about two-thirds of all mortgages. There are far more prime loans than subprime loans - and the percentage of delinquent prime loans is much lower than for subprime loans. However, there are now significantly more prime loans than subprime loans seriously delinquent. And prime loans tend to be larger than subprime loans, so the losses from each prime loan will probably be higher.br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1200,height=750,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://3.bp.blogspot.com/_pMscxxELHEg/SkoyR9VndJI/AAAAAAAAFsY/kGJ-EpJqPt0/s1600-h/ForeclosureActivityQ12009.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Seriously Foreclosure Activity” src=”http://3.bp.blogspot.com/_pMscxxELHEg/SkoyR9VndJI/AAAAAAAAFsY/kGJ-EpJqPt0/s320/ForeclosureActivityQ12009.jpg” border=”0″ //abr /The second graph shows foreclosure activity.br /br /Newly initiated foreclosures picked up in Q1. br /br /Completed foreclosures declined (because of the foreclosure moratorium), and foreclosures in process surged to 844 thousand.br /br /Note that short sales are essentially irrelevant.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-910075085931826870?l=www.calculatedriskblog.com’//div
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Given all the recent attacks, I’d be remiss if I didn’t write something about Bernanke, but first …br /br /I’ve been a regular critic of Ben Bernanke. I thought he missed the housing and credit bubble when he was a member of the Fed Board of Governors from 2002 to 2005. And I frequently ridiculed his comments when he was Chairman of the President Bush’s Council of Economic Advisers from June 2005 to January 2006.br /br /In 2005, I posted these a href=”http://www.calculatedriskblog.com/2005/07/bernanke-on-housing-market-forces-not.html”comments from Bernanke/a and disagreed strongly: blockquote”While speculative behavior appears to be surfacing in some local markets, strong economic fundamentals are contributing importantly to the housing boom,” …br /br /Those fundamentals, Bernanke said, include low mortgage rates, rising employment and incomes, a growing population and a limited supply of homes or land in some areas. br /br /”For example, states exhibiting higher rates of job growth also tend to have experienced greater appreciation in house prices,”/blockquote And after Bernanke wrote a commentary in the WSJ: a href=”http://online.wsj.com/article/0,,SB112243400468097103,00.html?mod=opinion%5Fmain%5Fcommentaries”The Goldilocks Economy/a, I called it “bunkum” and I a href=”http://www.calculatedriskblog.com/2005/07/bernankes-bunkum.html”argued/a Bernanke was channeling Calvin Coolidge: blockquoteThe entire commentary is bunkum. But instead of correcting each of Bernanke’s false assertions, I’ve found the template for his talking points: blockquoteemNo Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquillity and contentment, harmonious relations between management and wage earner, freedom from industrial strife, and the highest record of years of prosperity./embr /Calvin Coolidge, State of the Union Address, December 4, 1928/blockquoteBernanke is now channeling Coolidge’s monument to economic shortsightedness./blockquote And I disagreed again in July 2005 when Bernanke said: blockquoteTop White House economic adviser Ben Bernanke said on Friday strong U.S. housing prices reflect a healthy economy and he doubts there will be a national decline in prices.br /br /”House prices have gone up a lot,” Bernanke said in an interview on CNBC television. “It seems pretty clear, though, that there are a lot of strong fundamentals underlying that.br /br /”The economy is strong. Jobs have been strong, incomes have been strong, mortgage rates have been very low,” the chairman of the White House Council of Economic Advisers said.br /br /The pace of housing prices may slow at some point, Bernanke said, but they are unlikely to drop on a national basis.br /br /”strongWe’ve never had a decline in housing prices on a nationwide basis/strong,” he said, “strongWhat I think is more likely is that house prices will slow, maybe stabilize/strong … I don’t think it’s going to drive the economy too far from its full-employment path, though.” /blockquote And we can’t forget Bernanke’s “contained” to subprime a href=”http://www.federalreserve.gov/newsevents/testimony/Bernanke20070328a.htm”comments in March 2007/a? blockquoteAlthough the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes. At this juncture, however, the impact on the broader economy and financial markets of strongthe problems in the subprime market seems likely to be contained/strong./blockquote That became a running joke.br /br /With that lengthy prelude, I’ve felt once Bernanke started to understand the problem, he was very effective at providing liquidity for the markets. The financial system faced both a liquidity and a solvency crisis, and it is the Fed’s role to provide appropriate liquidity (we can disagree on what is appropriate). I don’t think it is the Fed’s role to a href=”http://www.calculatedriskblog.com/2009/06/ny-fed-and-aig-deal.html”run an insurance company/a - but I think that is as much the failure of Paulson’s Treasury as overreach by the Fed.br /br /And given all the recent attacks on Bernanke - many of them very personal - I’d like to reprint some of Jim Hamilton’s comments: a href=”http://www.econbrowser.com/archives/2009/06/on_grilling_the.html”On grilling the Fed Chair/a blockquoteIt is one thing to have different views from those of the Fed Chair on particular decisions that have been made– I certainly have plenty of areas of disagreement of my own. But it is another matter to question Bernanke’s intellect or personal integrity. As someone who’s known him for 25 years, I would place him above 99.9% of those recently in power in Washington on the integrity dimension, not to mention IQ. His actions over the past two years have been guided by one and only one motive, that being to minimize the harm caused to ordinary people by the financial turmoil. Whether you agree or disagree with all the steps he’s taken, let’s start with an understanding that that’s been his overriding goal./blockquote I agree with Professor Hamilton.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-7327315296658170033?l=www.calculatedriskblog.com’//div
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Here is an interesting new paper on homeowners with negative equity walking away: a href=”http://www.financialtrustindex.org/images/Guiso_Sapienza_Zingales_StrategicDefault.pdf”Moral and Social Constraints to Strategic Default on Mortgages/a by Guiso, Sapienza and Zingales. (ht Bob_in_MA)br /br /The WSJ Real Time Economics has a summary: a href=”http://blogs.wsj.com/economics/2009/06/26/when-is-it-cheaper-to-ditch-a-home-than-pay/”When Is It Cheaper to Ditch a Home Than Pay?/a blockquoteThe researchers found that homeowners start to default once their negative equity passes 10% of the home’s value. After that, they “walk away massively” after decreases of 15%. About 17% of households would default — even if they could pay the mortgage — when the equity shortfall hits 50% of the house’s value, they found.br /…br /“Our research showed there is a multiplication effect, where the social pressure not to default is weakened when homeowners live in areas of high frequency of foreclosures or know others who defaulted strategically,” Zingales said. “The predisposition to default increases with the number of foreclosures in the same ZIP code.”/blockquoteWalking away (what the researchers call a “strategic default” and the mortgage industry call a “ruthless default”) is when the borrower decides to stop paying a mortgage even though they can still afford the payment. This has always been difficult to quantify. Whenever a lender calls a delinquent homeowner - if they can reach the homeowner - the homeowner always tells the lender some sob story about why they can’t pay their mortgage (lost job, medical, rate reset, etc.). As the researchers note: blockquoteIt is difficult to study the strategic default decision, because it is de facto an unobservable event. While we do observe defaults, we cannot observe whether a default is strategic. strongStrategic defaulters have all the incentives to disguise themselves as people who cannot afford to pay and so they will appear as non strategic defaulters in all the data/strong.br /span style=”font-size:78%;”emphasis added/span/blockquoteSo the researchers conducted a survey to attempt to quantify the percent of strategic defaults. This has drawbacks - the questions are hypothetical and there are no actual monetary consequences - but the results seem somewhat reasonable.br /br /emNote: the researchers use Zillow for negative equity numbers, and I think those are a href=”http://www.calculatedriskblog.com/2009/05/homeowners-underwater.html”overstated/a. I prefer the research of Mark Zandi at economy.com or a href=”http://www.loanperformance.com/loanperformance_hpi.aspx#NegEqReport”estimates/a from First American CoreLogic./embr /br /I think one of the key points in the research are changing social norms - the more people a homeowner knows that he believes “walked away” the more open the homeowner will be to mailing in their keys. This is what I a href=”http://www.calculatedriskblog.com/2007/12/bofa-attitudes-changing-towards-default.html”wrote/a in 2007: blockquoteOne of the greatest fears for lenders (and investors in mortgage backed securities) is that it will become socially acceptable for upside down middle class Americans to walk away from their homes./blockquoteThis research suggests that this is happening in significant numbers.br /br /This has led many people to suggest principle reductions (as opposed to payment modifications) is the only solution. Tom Petruno at the LA Times has more on this: a href=”http://www.latimes.com/business/la-fi-petruno27-2009jun27,0,2308676.column”Is it time for underwater homeowners to be given a get-out-of-debt-free card?/a blockquoteGovernment and private-lender attempts to stem the home foreclosure crisis so far have mostly focused on loan modifications or refinancing — giving borrowers a temporary or permanent reduction in their monthly payments.br /br /But some housing experts say the next wave of help will have to address the core problem for many homeowners: negative equity.br /br /This camp believes that there is no alternative but outright forgiveness of a substantial chunk of mortgage debt for many people who are underwater in their homes and at risk of foreclosure./blockquoteAnd a final note, the researchers also touch on the recourse vs. non-recourse issue: blockquoteWhile only few states have mandatory non-recourse mortgages (i.e., do not allow creditors to pursue borrowers who walk away from their mortgages for the difference between the amount of the mortgage and the resale value of the house), the cost of legal procedures is sufficiently high that most lenders are unwilling to sue a defaulted borrower unless he has significant wealth besides the home./blockquoteAnd that fits with an email Tanta sent me in 2007 on recourse loans: blockquoteBack in my day working for a servicer, we never went after a borrower unless we thought the borrower defrauded us, willfully junked the property, or something like that. If it was just a nasty RE downturn, it rarely even made economic sense to do judicial FCs just to get a judgment the borrower was unlikely to able to pay. You could save so much time and money doing a non-judicial FC (if the state allowed it) that it was worth skipping the deficiency./blockquotediv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-7692730768394635565?l=www.calculatedriskblog.com’//div
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The FDIC has been very busy issuing Cease and Desist orders this year. Through May, the FDIC has issued 104 Cease and Desist orders and this does not include any orders by the OCC or OTS. (ht Terry) br /br /Most of these oreders are very similar - here is an excerpt: blockquoteIT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns, cease and desist from the following unsafe and unsound banking practices, as more fully set forth in the FDIC’s Report of Visitation …:br /br /a) operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;br /(b) operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank;br /(c) strongoperating with a large volume of poor quality loans/strong;br /(d) engaging in unsatisfactory lending and collection practices;br /(e) operating in such a manner as to produce operating losses; andbr /(f) operating with inadequate provisions for liquidity.br /span style=”font-size:78%;”emphasis added/span/blockquoteAll of these institutions are ordered to make changes - and some do, and then the cease and desist order is terminated (15 orders have been teriminated). The remaining are BFF candidates.br /br /Here are the FDIC press releases this year:br /a href=”http://www.fdic.gov/news/news/press/2009/pr09099.html”May Cease and Desist Orders/a (23)br /br /a href=”http://www.fdic.gov/news/news/press/2009/pr09079.html”April Cease and Desist Orders/a (24)br /br /a href=”http://www.fdic.gov/news/news/press/2009/pr09056.html”March Cease and Desist Orders/a (23)br /br /a href=”http://www.fdic.gov/news/news/press/2009/pr09049.html”February Cease and Desist Orders/a (21)br /br /a href=”http://www.fdic.gov/news/news/press/2009/pr09029.html”January Cease and Desist Orders/a (13)div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-3390559662098312794?l=www.calculatedriskblog.com’//div
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A few stories too … a major auto supplier is near bankruptcy …br /br /From Dow Jones: a href=”http://online.wsj.com/article/BT-CO-20090625-713177.html”Lear Corp. Working On Prepackaged Bankruptcy - Sources/a blockquoteLear Corp. (LEA), a maker of automotive seats and interior electronics, is working on a pre-packaged bankruptcy five days before it must make a $38 million interest payment on two of its bonds … If the prepackaged bankruptcy deal falls apart, Lear could file for a traditonal-style bankruptcy next week … The company has also lined up debtor-in-possession financing with its lenders …/blockquoteFrom MarketWatch: a href=”http://www.marketwatch.com/story/fitch-downgrades-california-to-a-minus”Fitch downgrades California to A-minus/a blockquoteFitch Ratings downgraded the California’s general obligation credit rating on Thursday to A-minus from A, based on the magnitude of the state’s financial challenges and persistent weakening economy./blockquotea onclick=”window.open(this.href, ‘_blank’, ‘width=950,height=700,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://dshort.com/charts/bears/four-bears-large.gif”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”Stock Market Crashes” src=”http://dshort.com/charts/bears/four-bears-tn.gif” //a span style=”font-size:85%;”ibClick on graph for larger image in new window./b/ibr //spanbr /This graph is from Doug Short of a href=”http://dshort.com/”dshort.com/a (financial planner): “Four Bad Bears”.br /br /Note that the Great Depression crash is based on the DOW; the three others are for the Samp;P 500.br /br /And Jillayne Schlicke (of a href=”http://www.ceforward.com”CEForward.com/a) brings us a few sample questions provided by the National Mortgage Licensing System for the new national loan originator exam: a href=”http://www.raincityguide.com/2009/06/24/will-the-new-national-loan-originator-exam-be-too-easy/”Will the New National Loan Originator Exam be Too Easy?/a. Here are the first two of six questions she posted: blockquoteIf an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s monthly income?br /(A) $2,163.20br /(B) $2,343.47br /(C) $2,379.52br /(D) $2,487.68br /br /The requirement for private mortgage insurance is generally discounted when the loan-to-value ratio falls below:br /(A) 20%br /(B) 50%br /(C) 80%br /(D) 90%/blockquote Take the test.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-398829885201578904?l=www.calculatedriskblog.com’//div
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The DOL reports on weekly a href=”http://www.workforcesecurity.doleta.gov/press/2009/062509.asp”unemployment insurance claims/a: blockquoteIn the week ending June 20, the advance figure for seasonally adjusted initial claims was 627,000, an increase of 15,000 from the previous week’s revised figure of 612,000. The 4-week moving average was 617,250, an increase of 500 from the previous week’s revised average of 616,750. br /…br /The advance number for seasonally adjusted insured unemployment during the week ending June 13 was 6,738,000, an increase of 29,000 from the preceding week’s revised level of 6,709,000. The 4-week moving average was 6,759,750, a decrease of 3,250 from the preceding week’s revised average of 6,763,000./blockquote a onclick=”window.open(this.href, ‘_blank’, ‘width=1130,height=740,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://3.bp.blogspot.com/_pMscxxELHEg/SkNv85te37I/AAAAAAAAFp4/ukIxscITXIA/s1600-h/WeeklyClaimsJune25.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: left; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Weekly Unemployment Claims” src=”http://3.bp.blogspot.com/_pMscxxELHEg/SkNv85te37I/AAAAAAAAFp4/ukIxscITXIA/s320/WeeklyClaimsJune25.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on graph for larger image in new window./span/b/ibr /br /This graph shows weekly claims and continued claims since 1971.br /br /Continued claims decreased to 6.74 million. This is 5.0% of covered employment. br /br /strongNote:/strong continued claims peaked at 5.4% of covered employment in 1982 and 7.0% in 1975. br /br /The four-week average of weekly unemployment claims increased this week by 500, and is now 41,500 below the peak of 10 weeks ago. There is a reasonable chance that claims have peaked for this cycle.br /br /However the level of initial claims (over 627 thousand) is still very high, indicating significant weakness in the job market. br /br /There was plenty of discussion about the decline in continuing claims last week. A few comments:br /br /li My view is the most useful number in the weekly claims report is the number of seasonally adjusted initial claims (with a 4-week moving average because it is so noisy). This has declined from the peak of 10 weeks ago, but is still very high. This suggests that the peak of job losses might be behind us, but also that there are still significant job losses occurring. We will probably see monthly job losses reported by the BLS until the weekly initial claims numbers declines close to 400 thousand.br /br /li The continuing claims number can decline for several reasons: 1) some pickup in hiring, 2) standard unemployment benefits may be expiring, and 3) the estimate might be revised. The continued claims estimate for last week was revised up some - so that explains part of it. Also, as people move off the standard 26 week unemployment benefits, they are no longer included in continued claims (for the most part). These people are still receiving extended benefits, but that is tracked elsewhere.br /br /If we look back 26 weeks from last week, there was a huge jump in NSA initial claims (from 536 thousand to 760 thousand) or 224 thousand in one week back in December. Any of those people who are still unemployed (and many probably are) were moving off the standard unemployment benefits to extended benefits and are no longer counted in the continued claims. That probably counts for most of the decline last week. But it is also important to remember they are still receiving unemployment benefits (extended benefits).br /br /When looking at this report, I’d focus on the 4-week moving average of initial claims, not continued claims.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-864841541253754956?l=www.calculatedriskblog.com’//div
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From the WaPo: a href=”http://www.washingtonpost.com/wp-dyn/content/article/2009/06/23/AR2009062303500.html”Not Paying the Mortgage, Yet Stuck With the Keys/a (ht Bob_in_MA) blockquoteA growing number of American homeowners are falling into financial limbo: They’re badly behind on payments, but their banks have not yet foreclosed. br /br /The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation’s housing markets. It masks the full extent of the foreclosure crisis …br / br /”I have even begged them for a foreclosure,” delinquent mortgage-holder Charlotte Jensen said. When she realized she couldn’t save her Glen Allen home last year, she filed for bankruptcy, packed up her family and moved out. Nearly a year later, Bank of America has yet to take back the home. br /…br /Some of the backlog reflects the inability of lenders to keep up with the swelling rolls of delinquent properties. br /br /… some of the backlog also reflects an intentional slowdown in the pace of foreclosures as government and industry step up efforts to help borrowers who want to save their homes. Fannie Mae and Freddie Mac, the government-run mortgage financing companies, put a temporary moratorium on foreclosures late last year and many of the country’s largest lenders followed suit. br /…br /”What we’re seeing more and more right now are cases of a lender threatening foreclosure and the foreclosure sale is canceled at the last minute,” said Jeanne Hovenden, a Richmond bankruptcy attorney, who handled Jensen’s case. “It’s more like the lenders don’t want to own any more real estate and are using foreclosures as a pressure tactic.” br /…br /Jensen visits her home weekly to ensure it hasn’t been vandalized or taken over by squatters. She pays landscapers to keep the lawn mowed. br /…br /For the Jensens, the delay has extended a painful period. “There was a sense of responsibility that until someone says we no longer own that property, we wanted to make sure it’s handed off correctly,” Jensen said. “We could have walked away like everyone else and said, ‘We don’t care.’ But we loved our neighbors and our neighborhood. We hold ourselves responsible.” /blockquote There is much more in the article.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-5201193160747387097?l=www.calculatedriskblog.com’//div
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From MarketWatch: a href=”http://www.marketwatch.com/story/sp-downgrades-prime-jumbo-mbs”SP downgrades prime jumbo mortgage securities/a blockquoteSP said it lowered ratings on 102 classes from 33 U.S. prime jumbo residential mortgage-backed securities that were issued from 1998 to 2004. The rating agency also affirmed ratings on 669 classes from 32 of the downgraded deals, as well as 34 other deals. br /br /”The downgrades reflect our opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given our current projected losses,” SP said in a statement. /blockquote From 1998?div class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-3469242687754988751?l=www.calculatedriskblog.com’//div
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Just so you know … I used to make fun of the Harvard reports.br /br /Here is the Harvard a href=”http://www.jchs.harvard.edu/publications/markets/son2005/son2005_executive_summary.pdf”State of the Nation’s Housing 2005/a report (ht curious) blockquoteThe unprecedented length and strength of the boom has, however, fanned fears that the rate of construction far exceeds long run demand. Although averaging more than 1.9 million units annually since 2000, stronghousing starts and manufactured home placements appear to be roughly in line with household demand/strong. As evidence, the inventory of new homes for sale relative to the pace of home sales is near its lowest level ever. Given this small backlog, strongnew home sales would have to retreat by more than a third—and stay there for a year or more—to create anywhere near a buyer’s market/strong.br /br /Moreover, the US mortgage finance system is now well integrated into global capital markets and offers an ever-growing array of products. strongThis gives borrowers more flexibility to shift to loans tied to lower adjustable rates in the event of an interest-rate rise./strong Although adjustable loans do increase the risk of payment shock at the end of the fixed-rate period, borrowers are increasingly choosing hybrid loans that allow them to lock in favorable rates for several years.br /br /With homes appreciating so rapidly over the last few years, there is concern that house price bubbles have formed in many markets. Clearly, ratios of house prices to median household incomes are up sharply and now stand at a 25-year high in more than half of evaluated metro areas. br /…br /Whether the hottest housing markets are now headed for a sharp correction is another question. The current economic recovery may give house prices in these locations the room to cool down rather than crash if higher interest rates slow the sizzling pacebr /of house price appreciation. Moreover, in several metropolitan areas where house prices have appreciated the fastest, strongnatural or regulatory-driven supply constraints may have resulted in permanently higher prices/strong.br /…br /For now, though, stronghouse prices should keep rising/strong as long as job and income growth continue to offset the recent jump in short term interest rates. House prices would come under greater pressure, however, if the economy stumbles and jobs are lost./blockquote There were plenty of warnings and caveats in the 2005 report (covers through 2004), but for the most part they missed the housing bubble and the coming crash. br /br /And from the a href=”http://www.jchs.harvard.edu/publications/markets/son2006/son2006_executive_summary.pdf”2006 report/a (covers 2005): blockquote[T]he housing sector continues to benefit from solid job and household growth, recovering rental markets, and strong home price appreciation. As long as these positive forces remain in place, strongthe current slowdown should be moderate/strong.br /br /Over the longer term, household growth is expected to accelerate from about 12.6 million over the past ten years to 14.6 million over the next ten. When combined with projected income gains and a rising tide of wealth, strengthening strongdemand should lift housing production and investment to new highs/strong.br /…br /strongFortunately, most homeowners have sizable equity stakes to protect them from selling at a loss even if they find themselves unable to make their mortgage payments./strong As measured in 2004—before the latest house price surge—only three percent of owners had equity of less than five percent, and fully 87 percent had a cushion of at least 20 percent.br /…br /The greatest threat to housing markets is a precipitous drop in house prices. Fortunately, sharp price declines of five percent or more seldom occur in the absence of severe overbuilding, dramatic employment losses, or a combination of the two. The fact that these conditions did not exist and that interest rates were so low explains why the housing boom was able to continue without interruption when the recession hit in 2001. strongWith building levels still in check and the economy expanding, large house price declines appear unlikely for now./strongbr /…br /Despite the current cool-down, the long-term outlook for housing is bright. New Joint Center for Housing Studies projections—reflecting more realistic, although arguably still conservative, estimates about future immigration—put household growth in the next decade fully 2.0 million above the 12.6 million of the past decade. strongOn the strength of this growth alone, housing production should set new records./strong/blockquotediv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/10004977-6222525486479486531?l=www.calculatedriskblog.com’//div
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