by Calculated Risk on 1/14/2010 11:33:00 AM

Update: Why are so many examples "mortgage brokers"? But the part about extensions not doing favors for homeowners is correct.

From Paul Kiel at ProPublica: Homeowners Say Banks Not Following Rules for Loan Modifications

A few excerpts:

Reynolds was a prime candidate for a loan adjustment and was among the earliest homeowners to receive a trial modification.

His mortgage brokerage business had followed the market downward, and as a result, he’d fallen three months behind on his interest-only mortgage. ...

Soon after the loan program was announced last February, Reynolds applied. He received an application in late April and was accepted, making his first payment of about $2,400 (down from $3,300) in May. He made six more payments. ... [In late November, he received an answer: He was denied a permanent loan modification.

The reason? A Chase employee explained to Reynolds that they’d determined his financial difficulties weren’t permanent. In his application, he’d written that he believed that the government’s rescue efforts would “save the U.S. housing market” and that his business “will once again be profitable.” The Chase employee told him that statement indicated his hardship was only temporary.
...
Chase spokeswoman Christine Holevas told ProPublica that Reynolds had been denied "because the skill and ability is still there to earn the income." Since he’d "stated in his letter that business would be picking up," it was "not considered a permanent hardship," Holevas said.
emphasis added

Just an anecdote, but one of many. And on the length of the trial period:

[T]rial modifications routinely last more than six months, homeowners and housing advocates say.

There are a number of adverse consequences of a trial period’s dragging on, said the consumer law center’s Thompson. Because a homeowner is not making a full payment, the balance of the mortgage grows during the trial period. The servicer reports the shortfall to credit reporting agencies, so the homeowner’s credit score can drop. And most importantly, says Thompson, the homeowner isn’t saving money in case the modification fails and the home is foreclosed. "Keeping someone in a trial modification really does not do them a favor," she said.

The trial period was extended last year from 3 months to 5 months, probably because of the low conversion rate to permanent status, and then extended again in late December to at least the end of January. This isn't doing any favors for the homeowners that will eventually be rejected.

As I've noted before, HAMP is a fine modification program for the people that qualify and aren't deep underwater on their homes - AND actually get a permanent modification! (added) However the program was oversold - I doubt this program will "reach up to 3 to 4 million at-risk homeowners" as Treasury originally projected. So too many homeowners were allowed in the trial programs without sufficient pre-screening - and the program was started before servicers were really ready.

by Calculated Risk on 1/14/2010 08:55:00 AM

On a monthly basis, retail sales decreased 0.3% from November to December (seasonally adjusted), and sales were up 5.4% from December 2008 (easy comparison).

Click on graph for larger image in new window.

This graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline).

This shows that retail sales fell off a cliff in late 2008, and appear to have bottomed, but at a much lower level.

The red line shows retail sales ex-gasoline and shows there has been only a little increase in final demand.

The second graph shows the year-over-year change in retail sales since 1993.

Retail sales increased by 5.4% on a YoY basis. The year-over-year comparisons are much easier now since retail sales collapsed in October 2008. Retail sales bottomed in December 2008.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $353.0 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 5.4 percent (±0.5%) above December 2008. Total sales for the 12 months of 2009 were down 6.2 percent (±0.2%) from 2008. Total sales for the October through December 2009 period were up 1.9 percent (±0.3%) from the same period a year ago. The October to November 2009 percent change was revised from +1.3 percent (±0.5%) to +1.8 percent (±0.2%).

It appears retail sales might have bottomed, and there has been little pickup in final demand.

by Calculated Risk on 1/14/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 9, the advance figure for seasonally adjusted initial claims was 444,000, an increase of 11,000 from the previous week's revised figure of 433,000. The 4-week moving average was 440,750, a decrease of 9,000 from the previous week's revised average of 449,750.
...
The advance number for seasonally adjusted insured unemployment during the week ending Jan. 2 was 4,596,000, a decrease of 211,000 from the preceding week's revised level of 4,807,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 9,000 to 440,750. This is the lowest level since August 2008.

The decline in the 4-week average is good news, although the level is still relatively high and suggests continued job losses, or at best, minimal job gains. The current level is still mostly above the level of the previous two "jobless" recoveries.

by Calculated Risk on 1/14/2010 12:43:00 AM

Press Release: RealtyTrac® year-end report shows record 2.8 million U.S. Properties with foreclosure filings in 2009 (ht Ann)

RealtyTrac® ... today released its Year-End 2009 Foreclosure Market Report™, which shows a total of 3,957,643 foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions — were reported on 2,824,674 U.S. properties in 2009, a 21 percent increase in total properties from 2008 and a 120 percent increase in total properties from 2007. The report also shows that 2.21 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.

Foreclosure filings were reported on 349,519 U.S. properties in December, a 14 percent jump from the previous month and a 15 percent increase from December 2008 — when a similar monthly jump in foreclosure activity occurred. Despite the increase in December, foreclosure activity in the fourth quarter decreased 7 percent from the third quarter, although it was still up 18 percent from the fourth quarter of 2008.

“As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans,” said James J. Saccacio, chief executive officer of RealtyTrac
emphasis added

AP is reporting that RealtyTrac expects 3 to 3.5 million foreclosures in 2010.

There should be a pickup in foreclosure activity in February when the trial modifications end, however I think the themes in 2010 will be short sales (although NODs¹ count as filings) and higher priced foreclosures (but fewer in that range) - so the total filings in 2010 might be a little lower than RealtyTrac expects - but it will definitely be a busy year.

¹NODs: Notice of Default

by Calculated Risk on 1/13/2010 10:04:00 PM

From Jon Stewart at the Daily Show (click here if embed doesn't load) (ht MrM)

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Clusterf#@k to the Poor House - Wall Street Bonuses
www.thedailyshow.com
Daily Show Full Episodes Political Humor Health Care Crisis

by Calculated Risk on 1/13/2010 07:05:00 PM

From Bloomberg: California’s Credit Cut by S&P Amid Budget Deficit

California’s credit rating on $64 billion of general obligation bonds was cut by Standard & Poor’s today as [California] faces strains over a $20 billion budget deficit.

... the rating was lowered one level to A-, the seventh-highest investment grade. ... the company has a negative outlook on California debt, a sign its standing may decline further. ... S&P’s cut brings its rating on California closer to that of Moody’s Investors Service and Fitch Ratings. Moody’s rates the state Baa1 and Fitch at BBB.

More from Tom Petruno at the LA Times: California's debt rating cut to A-minus by S & P on budget woes

S&P worries that the state could face a cash crunch in March, before it receives the income tax payments due in April.

"There could be days in March when they go into a negative cash position," said Gabriel Petek, an S&P analyst in San Francisco.

Although Petek said he didn't believe California would be in jeopardy of missing any payments due on its debt, he said the government might again pay other obligations with IOUs, or the state might again require a short-term loan from Wall Street.

Possibly more IOU fun for California!

by Calculated Risk on 1/13/2010 03:25:00 PM

From The Times: Britain's recession the steepest for 88 years

Britain's economy fell last year at the sharpest rate since 1921, despite hopes that it finally emerged from recession in the last three months of the year, according to a respected economics forecaster.

The National Institute of Economic and Social Research (NIESR) said today that its latest estimate showed that GDP rose by a modest 0.3 per cent in the final three months of 2009 compared with the third quarter.

That means that, for the year as a whole, the economy contracted by 4.8 per cent, a bigger fall than in any year of the Great Depression and the biggest contraction for 88 years.

Wow. The largest one year decline since 1921. Of course, during the Depression, there were a number of bad years in a row.

And from Statistischen Bundesamtes Deutschland: Germany experiencing serious recession in 2009 (ht Uwe)

Click on graph for larger image in new window.

The German economy shrank in 2009 for the first time in six years. With –5.0%, the decline in the price-adjusted gross domestic product (GDP) was larger than ever since World War II. This is shown by first calculations of the Federal Statistical Office (Destatis). The economic slump occurred mainly in the winter half-year of 2008/2009. Over the year, there were signs that the economic development would slightly stabilise on the new, lower level.

by Calculated Risk on 1/13/2010 01:00:00 PM

From the Association of American Railroads: Rail Time Indicators. AAR reports that "2009 saw total carload traffic on U.S. railroads at its lowest levels since at least 1988, when the AAR’s data series began."

Click on graph for larger image in new window.

This graph shows U.S. average weekly rail carloads. It is important to note that excluding coal, traffic is up 6.9% from December 2008, and traffic increased in 12 of the 19 major commodity categories.

Housing: In addition to the decline in coal, two key building materials were also down YoY from December 2008: Forest products and Nonmetallic minerals & prod. (like crushed stone, gravel, sand). This fits with the recent data on housing starts, new home sales, and the NAHB home builder index that shows residential investment is flat and non-residential investment is declining sharply.

From AAR:

• Good riddance to 2009. U.S. freight railroads completed a very difficult year by originating 1,241,293 carloads in December, an average of 248,259 carloads per week. That’s down 4.1% from December 2008’s average of 258,915 carloads per week and down 17.6% from December 2007’s average of 301,466.

• Rail traffic always falls sharply in late December due to the holidays. This year, unusually heavy early-season snow in parts of the country also negatively affected rail traffic.

• Total U.S. rail carloads in December 2009 were 53,281 lower than in December 2008, mainly because of coal. Coal was down 96,022 carloads in December 2009 from December 2008. That’s equal to 19,200 fewer coal carloads, or around 175 110-car coal trains, per week. Rail carloads excluding coal were 42,741 (6.9%) higher in December 2009 than in December 2008.

• It’s useful to compare current rail traffic levels to the collapsed levels of a yearago. To use a boxing analogy, doing so shows if rail carloads have gotten up off the mat after nearly getting knocked out. And, in fact, for many commodities that seems to be happening. 12 of the 19 major commodity categories tracked by the AAR saw higher carloads in December 2009 than in December 2008.
emphasis added

The AAR report has a number of other graphs for various sectors like autos and housing.

by Calculated Risk on 1/13/2010 11:17:00 AM

One of the ways California made it through 2009 was by cutting aid to cities, and that has led to severe cutbacks in local spending. I've been seeing more and more article like these ...

Riverside County: Massive county layoffs likely, chief exec says

Anaheim: City cuts 11 jobs, slashes tourism funds

And this will probably be a problem nationwide, from Reuters: Shortfalls for US cities could reach $56 bln-report

U.S. cities will face a collective budget shortfall of at least $56 billion over the next two years, with the current recession not seen hitting bottom until 2011, according to a report on Wednesday.
...
States are also threatening to cut another lifeline for cities -- direct aid transfers. As they attempt to reconcile their own battered budgets, states are saying they can send less money to cities. California, for one, has already taken back aid it had granted.

by Calculated Risk on 1/13/2010 08:39:00 AM

The MBA reports: Mortgage Refinance Applications Increase While Purchase Applications Remain Flat

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending January 8, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 14.3 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index increased 21.8 percent from last week’s holiday adjusted index ... The seasonally adjusted Purchase Index increased 0.8 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.13 percent from 5.18 percent, with points decreasing to 1.17 from 1.28 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four week moving average is now at the lowest level since July 1997.