by Calculated Risk on 9/05/2008 09:15:00 PM

From the FDIC: Nevada State Bank Acquires the Insured Deposits of Silver State Bank, Henderson, Nevada

Silver State Bank, Henderson, Nevada, was closed today by the Nevada Financial Institutions Division, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. To protect the depositors, the FDIC entered into a Purchase and Assumption Agreement with Nevada State Bank, Las Vegas, Nevada, to assume the Insured Deposits of Silver State Bank.
...
As of June 30, 2008, Silver State Bank had total assets of $2.0 billion and total deposits of $1.7 billion. Nevada State Bank agreed to purchase the insured deposits for a premium of 1.3 percent. At the time of closing, there were approximately $20 million in uninsured deposits held in approximately 500 accounts that potentially exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.

Silver State Bank also had approximately $700 million in brokered deposits that are not part of today's transaction.
...
The transaction is the least costly resolution option, and the FDIC estimates that the cost to its Deposit Insurance Fund is between $450 and $550 million. Silver State Bank is the second bank to fail in Nevada in 2008. First National Bank of Nevada, Reno failed on July 25, 2008. This year, a total of eleven FDIC-insured institutions have been closed.

Another one bites the dust.

by Calculated Risk on 9/05/2008 06:33:00 PM

Yes, Fannie and Freddie is the big story today (and this weekend). And DSL and BKUNA are interesting too.

But Housing Wire has more on the MBA Foreclosure and Delinquency data released today: MBA: Prime ARMs Set Tone for Troubled Mortgages in Q2

Jay Brinkmann, the MBA’s newly-named chief economist, managed to irk more than a few servicing managers we spoke with by suggesting that the woes in the two most troubled U.S. states throughout the housing mess were masking improvements elsewhere — and then using two states that have seen foreclosures artificially lowered by recent legislation to make his point.

“Massachusetts showed a very large drop in foreclosure starts, perhaps signaling a bottom,” Brinkmann said in the group’s press statement.
...
There’s one big problem with his logic: during Q2, both Massachusetts and Maryland in particular saw highly-publicized changes in notice requirements that significantly extended the borrower default notice period from 30 to 90 days in each state. ...

“Of course foreclosure starts have slowed since [the two states] extended demand letters,” said one servicing manager, who asked not to be identified by name. ...

A senior vice president at a large subprime servicer, who asked not to be named, said that the suggestion of a market bottom in Massachusetts was “just plain ludicrous.”

“We’re already starting to see a sharp increase within the state as the effect of the new notice period wears off,” he said.

Of course the bigger MBA story was the shift towards Prime ARM foreclosures.

by Calculated Risk on 9/05/2008 05:12:00 PM

Press Release: BankUnited FSB Receives Notification from the Office of Thrift Supervision

BankUnited Financial Corporation (NASDAQ:BKUNA - News), parent company of BankUnited FSB, announced that it received notification today that the Office of Thrift Supervision has reclassified the Bank’s regulatory capital status from well-capitalized to adequately capitalized although the Bank’s capital ratios exceed the statutory threshold for well-capitalized institutions. As a result, the Bank is subject to restrictions on accepting brokered deposits.

Just last week, in a SEC 10-Q filing, BankUnited expressed concern that the OTS might impose additional restrictions on BankUnited, and that these restrictions might have "a material adverse effect on BankUnited’s financial position and operations".

by Calculated Risk on 9/05/2008 05:06:00 PM

From the WSJ: Regulators Tell Downey Financial To Raise Capital, Hire CEO

The Office of Thrift Supervision ... has issued a cease-and-desist order that formally requires the [Downey] to raise capital, name a new chief executive, and take other actions aimed at shoring up its operations, these people said.
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The bank has $13.4 billion of assets, with 169 branches in California and five in Arizona. It is the nation's 10th-largest thrift as measured by assets.

Looks grim for Downey.

by Calculated Risk on 9/05/2008 04:55:00 PM

From the WSJ: Treasury Is Close to Finalizing Plan to Backstop Fannie, Freddie

Precise details of Treasury's plan couldn't be learned. The plan is expected to involve a creative use of Treasury's new authority to make a capital injection into the beleaguered giants.
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An announcement could come as early as this weekend.

Another Sunday announcement (like for Bear Stearns)?

by Calculated Risk on 9/05/2008 01:45:00 PM

“Subprime ARM loans accounted for 36 percent of all foreclosures started and prime ARMs, which include option ARMs, represented 23 percent. However, the increase in prime ARMs foreclosure starts was greater than the combined increase in fixed-rate and ARM subprime loans. Thus the foreclosure start numbers will likely be increasingly dominated increasingly by prime ARM loans."
Jay Brinkmann, MBA’s Chief Economist, Sept 5, 2008

Here is the MBA press release: Delinquencies and Foreclosures Increase in Latest MBA National Delinquency Survey

Click on graph for larger image.

This graphs shows the seasonally adjusted rate of all loans entering the foreclosure process each quarter.

This includes all loans, and the graph masks the underlying shift from foreclosures being dominated by subprime loans to foreclosures being dominated by Prime ARMs. See Tanta's: Subprime and Alt-A: The End of One Crisis and the Beginning of Another

This is one of the key housing themes for the next year or more.

by Calculated Risk on 9/05/2008 10:17:00 AM

From MarketWatch: Homes in foreclosure process set another record

The rate of mortgages entering foreclosure hit another record high in the second quarter, as did the percentage of loans somewhere in the foreclosure process, the Mortgage Bankers Association reported on Friday.

The delinquency rate, which measures mortgages that aren't in foreclosure but have at least one overdue payment, also was the highest ever recorded in the MBA's quarterly survey.
...
The percentage of loans that entered the foreclosure process in the second quarter was 1.08%, up from 1.01% in the first quarter and 0.59% a year ago. Meanwhile, 2.75% of loans in the survey were somewhere in the foreclosure process, up from 2.47% last quarter and 1.4% in the second quarter of 2007.

The delinquency rate was 6.41% of all loans outstanding, according to the survey. The rate was 6.35% in the first quarter, and 5.12% a year ago.

Update: There are problems everywhere (as I've pointed out numerous times), but there are several states that stand out (California and Florida top the list). A key question is subprime vs. Alt-A and Prime delinquencies - I don't have an answer yet.

by Calculated Risk on 9/05/2008 08:40:00 AM

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 84,000 in August.

The unemployment rate has risen to 6.1 percent.

Year over year employment is now negative (fewer American were employed in Aug 2008 than in Aug 2007). This is a very weak report - more to come.

by Anonymous on 9/05/2008 08:24:00 AM

Well, actually, it appears we've all been fraudulently induced for a long time but just didn't catch on until recently. Dear reader East Northport Slob sent me the link to this Village Voice article, which you think when you start reading it is just another one of those "lenders hose up foreclosure paperwork" things we've been reading for a long time, but then suddenly gives you this:

Catherine Austin Fitts, former Assistant Secretary of Housing and Urban Development, adds a new twist: She believes that borrowers can fight foreclosure because "most mortgages issued in this country from 1996 on were fraudulently induced."

Fitts said in cases of fraudulently induced loans lenders "knew they were issuing mortgages that were not affordable to the borrower," and the borrower "may not owe the money back because they essentially failed to disclose something about [the borrowers]' financial situation that they knew and the borrower didn't."

I'm sure we all have the same questions here: Who the hell is Catherine Austin Fitts? Why 1996? And how do you fraudulently induce people to sign a mortgage by failing to disclose to people some fact about their own financial situation?

I don't think I can help you with the last two, but I did some checking with Dr. Google on the first one. Let's let Ms. Fitts introduce herself:

In 1989, I was serving as Assistant Secretary of Housing. The housing bubble of the 1990’s had burst, and foreclosures were rising.

The "housing bubble of the 1990's" burst in 1989? Is there a wrinkle in the time-space continuum? Is The Truth Out There?

The mortgage insurance funds of the Federal Housing Administration (FHA) were experiencing dramatic losses. We were losing $11 mm a year in the single-family fund. All funds had lost $2 billion in the southwest region the year before.

My staff and I did an analysis of what had caused the losses. What were the actions that we could take?

Fraud aside, the single biggest cause of losses in the FHA portfolio was a falling Popsicle Index – an index that we coined as a rule of thumb to express the health of the living equity within a place.

The Popsicle Index is the percent of people who believe that a child can leave their home, go to the nearest place to buy a popsicle, and come home alone safely. It’s an expression of the sense of intimacy and well being in a place.

Not surprisingly, there is a correlation between the financial equity or wealth in a place and the living equity or human and natural wealth. Where the people, living things and land are happy, businesses thrive, and the value of real estate is good.

This seems to imply that if we could just cheer up our shrubberies, real estate values would improve substantially. I confess to wondering what could cause a "bubble" under this conception of things, but this may be because I'm still stuck in the wrong paradigm:

The Popsicle Index is the % of people who believe a child can leave their home, go to the nearest place to buy a popsicle or snack, and come home alone safely. For example, if you feel that 50% of your neighbors believe a child in your neighborhood would be safe, then your Popsicle Index is 50%. The Popsicle Index is based on gut level feelings of the people who have intimate knowledge of a place, rather than facts and figures.

I'm pretty sure that I feel that at least 50% of my neighbors believe that granite countertops are like a retirement account you can put hot pans on, but certain ugly facts and figures keep intruding on the conversation. Or, well, maybe not, given that since 1996 most of us weren't told the facts and figures about our financial situation in order to fraudulently induce us to buy homes with borrowed money. Or something like that.

Frankly, the Village Voice reporter should have hung up the phone here and gone out for a Popsicle. In fact, I suggest we all go out for a Popsicle. I for one feel safer out on the streets than indoors reading the news some days.

by Calculated Risk on 9/05/2008 12:06:00 AM

Some people asked for photos of my hike along a portion of the John Muir Trail. This photo is of Cathedral Lake, about 18 miles from Yosemite Valley. It is quite a climb to this point - about 5,700' of elevation gain from Yosemite Valley over Cathedral Pass.

Click on photo for larger image in new window.

Unfortunately one of my friends had to drop out at Tuolumne Meadows, and I wasn't able to continue (minor foot injury) after reaching Red's Meadow near Mammoth the second day.

It was still great fun. Hopefully I'll have more photos of my next trip.

For those wanting more, here are some photos I posted from my Yellowstone trip in 2005.