by Calculated Risk on 1/06/2009 01:56:00 PM

United Community Banks, Inc. warned today:

The estimate for the fourth quarter loan loss provision is $85 million, with an expected $74 million in charge-offs ...

In Q3, the loan loss provision was $76 million with $56 million in net charge-offs. So Q4 was worse.

But this is funny (hat tip Brian): Back on their Oct 23rd conference call, UCBI told investors:

Charge-offs will continue to be elevated as we work through our problem credit, but we certainly don't see a recurrence of the third quarter charge-off level in the immediate future.
emphasis added

Oops. I guess the next quarter was not the "immediate future".

by Calculated Risk on 1/06/2009 12:37:00 PM

From the Boston Globe: Jumbo mortgage loan rates put damper on refinancing (hat tip Soylent Green Is People). The article notes the difference between conforming loans (below $417K), "conforming jumbo loans" (by MSA), and jumbo loans:

Last year, Congress raised jumbo limits when it allowed Fannie Mae and Freddie Mac to buy or guarantee higher-balance loans. In Massachusetts, the limit increased to $523,750, from $417,000, with jumbo loans being above the higher amount, and conforming jumbos between the two figures.

The Federal Housing Finance Agency recently recalculated the loan limits for 2009, as required by law, based on recent home sales.

That resulted in the jumbo limit for the Boston area being lowered to $465,750, meaning some borrowers who would have qualified for lower rates in December are now back in the jumbo category.
...
On Friday ... one lender was offering a 5.25 interest rate for conventional loans, 5.75 percent for conforming jumbos, and 8 percent for jumbos.

Apparently Barney Frank wants to increase the conforming jumbo limit:

US Representative Barney Frank, Democrat of Massachusetts, said Friday that he wants jumbo limits to be raised again - to the previous level, if not higher.

Frank, chairman of the House Committee on Financial Services, pledged to include a provision for this in the economic stimulus bill Congress is expected to take up with President-elect Barack Obama. He also wants to change the way the loan limits are calculated to reflect real market conditions.

"Even if you accept the principal we shouldn't be financing luxury housing; what's a luxury house in Nebraska is an average house in Quincy," Frank said. "I'm lobbying hard to get at least last year's level to be put back where it was."
emphasis added

by Calculated Risk on 1/06/2009 10:01:00 AM

From the NAR: Economic Slump Weakens Pending Home Sales

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 4.0 percent to 82.3 from a downwardly revised reading of 85.7 in October, and is 5.3 percent below November 2007 when it was 86.9. The current index is the lowest since the series began in 2001.

I'll just repeat my comment from last month:

Existing home sales have been boosted by all the distress sales in low priced areas. Over time, as foreclosure activity shifts to middle and upper income areas, existing home sales will probably decline (the opposite of the NAR view - what a surprise!)

Existing home sales are reported at the close of escrow, pending home sales are reported when contracts are signed. The Pending Home Sales index leads existing home sales by about 45 days, so this suggests existing home sales will decline from December 2008 to January 2009.

For some graphs comparing existing home sales to pending home sales, see: Do Existing Home Sales track Pending Home Sales? The answer is yes - they do track pretty well.

by Calculated Risk on 1/06/2009 09:16:00 AM

From Reuters: Lawmakers set new mortgage bankruptcy bill

Legislation designed to stem foreclosures by allowing bankruptcy judges to erase some mortgage debt will be introduced by Congressional Democrats on Tuesday, and hopes are high that it will pass after a similar plan failed last year.
...
The legislation would change allow bankruptcy judges to modify home loans in the same way that they currently may modify other unsettled obligations, such as credit card debt.

For a discussion of the cram-down issues, see Tanta's:

Just Say Yes To Cram Downs Oct, 2007

Here are a couple more posts from Tanta on cram-downs:

House Considers Cram Downs Sept, 2007

MBA and Cram-Downs Feb, 2008

by Calculated Risk on 1/05/2009 10:30:00 PM

A 90 second video from Jim the Realtor on a foreclosures in Carlsbad, California. A couple of homes on this street sold for $1 million not long ago ...

by Calculated Risk on 1/05/2009 04:50:00 PM

The yield on 3 month treasuries has increased to 0.08%. I suppose this is an improvement (better than zero).

The three month LIBOR has decreased to 1.42%. The three-month LIBOR rate peaked (for this cycle) at 4.81875% on Oct. 10. (improved)

The London interbank offered rate, or Libor, for three-month dollar loans may hold near the lowest level in 4 1/2 years as central banks inject money into economies and financial companies to combat the credit squeeze.

The rate was at 1.42 percent...

Imagine all those adjusted rate mortgage loans tied to treasuries or even the 3 month LIBOR? The rates are looking pretty good!

The TED spread is at 1.34, sharply lower. (improved)

The TED spread was stuck above 2.0 for some time, but has been steadily moving lower over the last few weeks. The peak was 4.63 on Oct 10th. I'd like to see the spread move back down to 1.0 or lower. A normal spread is around 0.5.

The A2P2 spread has plunged to 1.92%. This peaked at 5.86 after Thanksgiving. (better).

This is the spread between high and low quality 30 day nonfinancial commercial paper. Right now quality 30 day nonfinancial paper is yielding close to zero. This may be holiday related, but this is significant decline.

The two year swap spread from Bloomberg: 77.75. (Improved). This spread peaked at near 165 in early October, so there has been significant progress, and the swap is finally well below100.

It appears the Fed is finally getting some rates down ... the A2P2 spread decline is worth watching.

by Calculated Risk on 1/05/2009 03:31:00 PM

From MarketWatch: Chrysler U.S. December sales drop 53%

Chrysler LLC said Monday that U.S. December sales fell 53% to 89,813 vehicles from 191,423 a year ago.

Chrysler sales were off 47% in November (from Nov 2007).

by Calculated Risk on 1/05/2009 02:21:00 PM

A December to remember ...

From the WSJ: U.S. Auto Sales Continue to Skid

Ford Motor Co. posted a 32% drop in U.S. light-vehicle sales for December while Toyota Motor Co. reported a 37% fall and Honda Motor Co. had a 35% decline, closing out the auto industry's worst year in more than 15 years.

From MarketWatch: GM December U.S. light vehicle sales down 31% to 220,030

General Motors Corp. on Monday reported a 31% drop in December U.S. light vehicle sales to 220,030 cars and trucks from 319,837 in December 2007.

Chrysler is always last to report ...

by Calculated Risk on 1/05/2009 01:10:00 PM

From MarketWatch: Ford U.S. December sales down 32.4% to 139,067 units

Ford Motor Co. on Monday reported a 32.4% drop in December U.S. sales to 139,067 vehicles from 205,685 in December 2007.

This is about the same year-over-year decline for Ford as in November.

GM, Toyota and Chrysler report later today.

by Calculated Risk on 1/05/2009 12:17:00 PM

From the LA Times: Hoteliers see too much room at the inn

Fortunes of the once-highflying hotel industry fell hard at the end of 2008 and the prospects for 2009 look grim as anxious Americans cut travel spending and leave plenty of room at the inn.

Hotel operators have seen room reservations fall drastically as business travelers and vacationers cut down on trips. In 2009, U.S. hotels will suffer one of the greatest annual declines in occupancy and revenue in history, according to analysts.
...
Indeed, U.S. hotels have entered one of the deepest and longest recessions in the history of the country's lodging industry, according to a December report by PKF Hospitality Research. The report predicts a nearly 8% drop this year in revenue per available room, a key industry measurement of performance typically calculated by multiplying a hotel's average daily room rate by its occupancy rate.

That would be the fifth-largest drop in revenue per available room since 1930. The largest recent drop was in 2001, when the measurement slipped 10.3%.

The article also quotes well known hospitality attorney Jim Butler (someone I know and spoke with last May about the coming hotel bust):

"September was definitely a point of departure, when hotel revenues around the country began a free fall," said Los Angeles attorney Jim Butler, a hotel specialist and industry blogger. "Since Labor Day, business has been falling off a cliff."

More cliff diving ...

For anyone interested, Jim writes a blog on hotel legal issues: Hotel Law Blog