by Calculated Risk on 10/23/2008 09:50:00 AM

Update: HousingWire has much more: Foreclosures Stalled by Local Legislation in September

“Much of the 12 percent decrease in September can be attributed to changes in state laws that have at least temporarily slowed down the pace at which lenders are moving forward with foreclosures,” said James J. Saccacio, chief executive officer of RealtyTrac.

“Most significantly, SB 1137 in California took effect in early September and requires lenders to make contact with borrowers at least 30 days before filing a Notice of Default. In September we saw California NODs drop 51 percent from the previous month, and that drop had a significant impact on the national numbers given that California accounts for close to one-third of the nation’s foreclosure activity each month.”

From Bloomberg: Foreclosure Filings Rose 71% in Third Quarter as Prices Fell

A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, the most since records began in January 2005, [RealtyTrac] said in a statement today. Filings rose 3 percent from the second quarter and fell 12 percent in September from August as state laws created to keep people in homes slowed the pace of defaults.

This is a record - but RealtyTrac has only been tracking foreclosure data since 2005. I prefer to use the California numbers from DataQuick to follow foreclosure activity because they have a longer data series. DataQuick will probably release data for Q3 any day now.

by Calculated Risk on 10/23/2008 09:34:00 AM

From the Dept of Labor:

In the week ending Oct. 18, the advance figure for seasonally adjusted initial claims was 478,000, an increase of 15,000 from the previous week's revised figure of 463,000. It is estimated that the effects of Hurricane Ike in Texas added approximately 12,000 claims to the total. The 4-week moving average was 480,250, a decrease of 4,500 from the previous week's revised average of 484,750.

Click on graph for larger image in new window.

This graph shows weekly claims and the four week moving average. The four week moving average is at 480,250.

Some of the recent increase in unemployment claims is a result of Hurricane Ike and should be temporary, but the four week moving average of weekly unemployment claims is at a recession level and continues to indicate significant weakness in the labor market.

by Calculated Risk on 10/22/2008 11:14:00 PM

For those interested, here are a few pictures from our trip to Bryce National Park.

Click on photo for larger image in new window.

Photo credit: Pattie A.

The first photo is from the Fairlyland trail in Bryce National Park. This is about an easy 8 mile loop walk through the hoodoos with incredible formations and colors. It is like being at Thunder Mountain in Disneyland!

The above photo shows more hoodoos at Bryce.

The photo on the right is of an ancient blogger enjoying the hoodoos on the Fairyland trail.

We arrived at Bryce around mid-morning and hiked until late in the day. For those traveling to Bryce and hoping for the best lighting, I suggest trying to arrive before sunrise and driving to Bryce point; the Silent City will probably be awesome in the early morning light.

by Calculated Risk on 10/22/2008 09:03:00 PM

From Reuters: Pulte loss narrows, says housing market worsened

Pulte said it would not forecast fourth-quarter results because of poor visibility in its industry and the wider economy.

"The homebuilding operating environment significantly worsened during the third quarter of 2008," Chief Executive Richard Dugas said in a statement. "Uncertainty and volatility in the capital markets, higher unemployment, and a weaker economy provided further downward pressure."
emphasis added

If Q3 was "significantly worse", how will they describe Q4? (with higher mortgage rates and the impact from the credit crisis).

by Calculated Risk on 10/22/2008 07:41:00 PM

From David Reilly at the WSJ Heard on the Street: Credit Card Losses May Scale New Peak

... A broader range of consumers now carry cards, and many run consistent credit balances to fund their lifestyles. This has led to successively higher peaks over the years in credit card charge-off rates.

The danger is that the current financial downturn results in a new, far-higher peak charge-off rate that leads to unexpectedly large losses at banks and other card issuers.

The Federal Reserve reported that the credit card charge-off rate was 5.47% at the end of Q2. As Reilly notes, third quarter data hasn't been released yet, but will certainly be higher based on reports from financial institutions:

American Express said on its earnings call Monday that its loss rate had increased to 6.1% in September, compared with 5.9% for the quarter overall, and that it expected losses to grow to the end of the year. J.P. Morgan, meanwhile, forecast that its credit card loss rate could climb to 7% by the end of 2009, compared with about 5% in the third quarter.

Click on graph for larger image.

This graph shows the consumer credit card charge-off rate by quarter starting with 1985.

Note the spike in 2005 was because of the change to the bankruptcy law (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005).

The record charge-off rate was 7.85% in Q1 2002 according to the Fed.

It seems reasonable to expect at or near record credit card charge-off rates during this recession.

by Calculated Risk on 10/22/2008 05:23:00 PM

From Bloomberg: Credit-Rating Companies `Sold Soul,' Employees Said

Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

Barry Ritholtz has some excerpts of an IM conversation between two S&P analysts:

Rahul Dilip Shah: btw: that deal is ridiculous

Shannon Mooney: I know right ... model def does not capture half of the risk

Rahul Dilip Shah: we should not be rating it

Shannon Mooney: we rate every deal

Shannon Mooney: it could be structured by cows and we would rate it

Here is the House Oversight Committee transcript from April 2007.

by Calculated Risk on 10/22/2008 02:41:00 PM

From the WSJ: U.S. Pension Benefit Guaranty Loses at Least $3 Billion

The U.S. Pension Benefit Guaranty Corporation [PBGC] lost at least $3 billion in stock investments in the 11 months through August ... It is likely that losses will be "substantially worse" after September results are reported, the committee said.
...
The committee says the losses came in the agency's "trust fund," which holds the assets of terminated plans that have been turned over to the PBGC.

And on Calpers:

[T]he California Public Employees' Retirement System ... said a decline of more than 20% in its assets since June 30 may lead to increased employer contributions to the fund of 2% to 4% starting in July 2010 and July 2011.

The PBGC problems might lead to a bailout and will likely lead to higher insurance premiums for pension plans. The Calpers problems are part of a larger looming pension deficit and retirement funding crisis.

At least retirees can rely on the equity in their homes ... (OK, sorry for the snark).

by Calculated Risk on 10/22/2008 02:28:00 PM

First on the LIBOR from Bloomberg: Libor for Dollars Slides After Fed Offers Cash to Mutual Funds

The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 29 basis points to 3.54 percent, the British Bankers' Association said. ... The Libor-OIS spread, a measure of cash scarcity, fell below 250 basis points for the first time since Sept. 30.

``The funding situation has improved and will probably continue to improve, but what will surprise is the length of time it will take,'' said Patrick Bennett, a currency strategist at Societe Generale SA in Hong Kong.

The yield on 3 month treasuries: 1.00%, down slightly from 1.09% (slightly worse)

A good sign would be if the daily volatility subsides, and the yield moves up closer to the Fed funds rate, or about 1.25%.

The TED spread: 2.50 down from 2.74 yesterday (BETTER)

The two year swap spread from Bloomberg: 107.25 slightly from 102.5 (slightly worse)

Activity in the Treasury's Supplementary Financing Program (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign.

Here is a list of SFP sales. No new announcements today, but this will take some time. No Progress.

The A2P2 spread is 4.45 Tuesday, up from 4.18 for Monday. Worse.

During a recession, this spread usually increases because the risk of default for lower quality paper increases. However the recent values (over 400 bps) are far in excess of normal. If the credit crisis eases, I'd expect a significant decline in this spread.

Industry contacts. I just spoke with one of my contacts, and they still cannot obtain a loan for an excellent acquisition. When this deal is completed that would be a good sign. No improvement yet.

This is a disappointment, and it looks like it will take some time for the credit markets to thaw. Meanwhile the economic and earning news is still grim ...

by Calculated Risk on 10/22/2008 12:16:00 PM

Roubini on the economy "the worst is still ahead of us", 9 min 45 sec:



More Roubini (starts at 4 minute mark) "most important key point is this not just a liquidity crisis, this is a credit and solvency crisis.", "next time bomb significant increase in default rates for corporates", 9 min 20 secs:



Roubini on stock market "keep things in cash", 3 min 45 secs:

by Calculated Risk on 10/22/2008 10:59:00 AM

From the LA Times: FDIC seeking office space in Southern California

The Federal Deposit Insurance Corp. plans soon to sign a major lease of office space in Orange County, probably in Irvine, where as many as 600 people would liquidate the assets of troubled banks and thrifts based in California and other Western states.

The agency needs 200,000 square feet of space and has looked at locations across Southern California, FDIC spokesman David Barr said.

"It's a temporary office -- three to five years is what we're looking at," Barr said Tuesday. "We hope to find the space within the next few weeks."

A little good news for office space - although not the best source for demand.