by Calculated Risk on 7/23/2008 08:40:00 AM

The MBA released their weekly survey of mortgage applications and interest rates this morning: Mortgage Applications Decrease In Latest MBA Weekly Survey

The average contract interest rate for 30-year fixed-rate mortgages increased to 6.59 percent from 6.22 percent ...

The average contract interest rate for one-year ARMs remained unchanged at 7.16 percent ...

Note: this data is for the week ending July 18. Based on the WSJ and NYTimes reports last night, rates for 30 year fixed mortgages have increased more over the last few days.

Also note that purchase loan applications were off sharply.

by Calculated Risk on 7/23/2008 02:01:00 AM

Jon Stewart interviews Richard Bitner:

by Calculated Risk on 7/22/2008 11:44:00 PM

Bloomberg: U.S. Lawmakers Reach Deal on Fannie, Freddie Bill

WSJ: Lawmakers Reach Deal On Big Housing Package

Here is an interesting detail:

The Treasury would be barred from providing aid that would cause a breach in the federal debt ceiling under the agreement, a constraint aimed at limiting any taxpayer losses. The debt limit would be raised to $10.6 trillion from the current $9.815 trillion.

My guess of $10 trillion in U.S. debt by the end of Bush's 2nd term is looking better. That is one forecast I wish I had been wrong about.

by Calculated Risk on 7/22/2008 10:03:00 PM

UPDATE: from Vikas Bajaj at the NY Times: Woes Afflicting Mortgage Giants Raise Loan Rates

Ruth Simon and James Hagerty at the WSJ report: Mortgage Rates Near a Year High. According to the Journal - reporting data from HSH Associates - 30 year rates rose to an average of 6.71% last week, and jumbo rates have risen to an average 7.84%.

I usually track mortgage rates using Freddie Mac's weekly survey, and the MBA. The MBA reported for the week ending July 11th:

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.22 percent from 6.43 percent

And Freddie Mac reported 30 year rates were at 6.26% for the week ending July 17th. So rates must have really surged last week ...

This will have a negative impact on home sales, and on homeowners trying to refinance.

by Calculated Risk on 7/22/2008 07:38:00 PM

From Yahoo Tech Ticker: Roubini: More Than $1 Trillion Needed to Solve Housing Crisis

by Calculated Risk on 7/22/2008 06:55:00 PM

On Sunday I posted about some high end areas finally seeing sharp price declines: Housing: Cracks in the High End (check out the cartoon!)

Here are some more cracks ...

From AZCentral.com: Phoenix's mortgage problem spreading

Metropolitan Phoenix's foreclosure problem has spread. Many Valley neighborhoods closer in, particularly in south, west and central Phoenix, now have the highest foreclosure rates ...

Foreclosures across metro Phoenix number 16,647 for the first half of the year compared with 9,966 during all of 2007 and 1,070 in 2006.
...
"Foreclosures are a problem for almost every neighborhood of the Valley now," said Margie O'Campo de Castillo of Arizona Dream Realty.

by Calculated Risk on 7/22/2008 05:23:00 PM

Also on regional banks see the WSJ: Regional Banks Battered Amid Turmoil in Markets

Here are some comments from the Regions Financial conference call (hat tip Brian):

“Given the continuing deterioration in residential property values, especially in Florida , and a generally uncertain economic back drop, we expect credit costs to remain elevated. While we're not predicting the duration of this economic downturn, we think it is prudent to plan for no real improvements until 2010.”

And on home equity in Florida:

“Home equity credits caused over half the increase [in net charge offs] rising to an annualized 1.94% of outstanding lines and loans, up from 57 basis points last quarter. We are clearly experiencing greater deterioration in this portfolio than originally expected. Mostly due to Florida based credits which account for approximately $5.4 billion or one third of our total home equity portfolio. Of that balance, approximately 1.9 billion represents first liens. Second liens which total $3.5 billion or 22% of our home equity portfolio are the main sources of loss. In fact, the second quarter annualized loss rate on Florida 's second liens was 3.5 times the rate of first lien home equity loans and lines - 4.74% for second liens versus 1.37% for first liens in Florida. So to emphasize this point, 22% of our total home equity portfolio or $3.5 billion had a 4.7% net charge off rate. The remaining 78% had about a 1.1% net charge off rate. The problems in this portfolio are very concentrated.

... Customers who did not live in the properties but purchased them to be used as an investment home or second home were more prevalent in Florida than our other markets and have been especially problematic. As property values have dropped, so has the equity supporting these loans, exacerbating home equity write-offs. Significant income losses are also negatively affecting a growing number of borrowers’ ability to repay home equity loans.”

A comment from reader Brian: "Those second liens in Florida are starting to resemble credit cards with respect to their charge off rates, unfortunately the interest rates on the loans are not 18%!"

by Calculated Risk on 7/22/2008 04:14:00 PM

From WaMu: WaMu Reports Significant Build-Up of Reserves Contributing to Second Quarter Net Loss of $3.3 Billion

WaMu today announced a second quarter 2008 net loss of $3.33 billion as it significantly increased its loan loss reserves by $3.74 billion to $8.46 billion.
...
The increase in provision for loan losses reflected the further decline in house prices which increased expected loss severities, increased delinquencies, reduced availability of credit, and the weakening economy. Total net charge-offs in the loan portfolio rose to $2.17 billion from $1.37 billion in the prior quarter. Nonperforming assets grew to 3.62 percent of total assets at June 30 from 2.87 percent at the end of the first quarter.

by Calculated Risk on 7/22/2008 02:47:00 PM

Click on graph for larger image in new window.

This graph shows the number of Notice of Defaults (NODs) filed in California by year since 1992. The 2008 estimate is twice the first half rate.

From DataQuick: Another Increase in California Foreclosure Activity

Lenders started foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home values and the rampant spoilage of a batch of especially risky home loans made in late 2005 and 2006, a real estate information service reported.

Mortgage servicers recorded 121,341 "notices of default" during the April-through-June period. That was up 6.6 percent from a revised 113,809 for this year's first quarter, and up 124.9 percent from 53,943 in second-quarter 2007, according to DataQuick Information Systems.

Last quarter's number of defaults was the highest in DataQuick's statistics, which go back to 1992.
...
"The small increase in defaults from the first to the second quarter may indicate that we're nearing a plateau. We won't know until the end of the year, but it may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process. Of course, they may just be swamped and can't handle processing any more paperwork," said [John Walsh, DataQuick president].
...
Of the homeowners in default, an estimated 22 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes 'work- outs' difficult.
...
Foreclosure resales have emerged as a significant market factor, accounting for 40.0 percent of all California resale activity last quarter. A year ago it was 5.4 percent.

There are several key points:

This is a new record for NODs.

A very large percentage of NODs go through foreclosure. Only 22% "emerge from the foreclosure process". That is a historic low.

40% of all sales activity in California are foreclosure resales.

Instead of filing NODs, some lenders appear to be delaying while trying for a workout. "[I]t may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process. Of course, they may just be swamped and can't handle processing any more paperwork." I've heard both reasons from other sources.

by Calculated Risk on 7/22/2008 12:11:00 PM

Here is the letter from the CBO.

[M]any analysts and traders believe that there is a significant likelihood that conditions in the housing and financial markets could deteriorate more than already reflected on the GSEs’ balance sheets, and such continuing problems would increase the probability that this new authority would have to be used. Taking into account the probability of various possible outcomes, CBO estimates that the expected value of the federal budgetary cost from enacting this proposal would be $25 billion over fiscal years 2009 and 2010. That estimate accounts for both the possibility that federal funds would not have to be expended under the new authority and the possibility that the government would have to use that authority to provide assistance to the GSEs.

It's important to note the the CBO analysis is a probability-weighted average method; the cost could be zero, the cost could dwarf $25 billion.