RSS Feed by Calculated Risk on 5/23/2010 03:07:00 PM
Sunday, May 23, 2010
"Feeling like a foolish child"
I received so many positive emails after posting this Friday night; here it is again for those who missed it. Singer-songwriter Tim Miller captures the anger and despair of a victim of predatory lending in "Love, Your Broken Home" (some rough language). Click here for YouTube.
Weekly Summary and a Look Ahead
by Calculated Risk on 5/23/2010 12:12:00 PM
Three housing related reports will be released this week: existing home sales on Monday, Case-Shiller house prices on Tuesday, and new home sales on Wednesday.
On Monday, the April Chicago Fed National Activity Index will be released at 8:30 AM. This is a composite index of other data. At 10 AM the National Association for Realtors (NAR) will release the April existing home sales report. The consensus is for an increase to 5.6 million sales in April as a seasonally adjusted annual rate (SAAR). Also on Monday, the DOT will probably release the Vehicle Miles Driven for March. This has been showing declining Year-over-year miles driven.
On Tuesday, the March Case-Shiller house price index will be released at 9:00 AM. The consensus is for a slight decline in the house price index. At 10:00 AM, the Conference Board will release Consumer Confidence for May (consensus is for an increase to 59). Also on Tuesday, the FHFA house price index, and the Richmond Fed survey will be released.
On Wednesday, the April Durable Goods Orders will be released at 8:30 AM. The consensus is for a 1.5% increase. At 10 AM, the Census Bureau will release the April New Home sales report. The consensus is for an increase to 425K (SAAR) from 411K in March. Since new home sales are reported when a contract is signed, April was the last month that reported sales will be positively impacted by the tax credit.
On Thursday, the first revision of the Q1 GDP report will be released at 8:30 AM. The consensus is for an upward revision to 3.5% from the initially reported 3.2%. Also on Thursday, the closely watched initial weekly unemployment claims will be released. Consensus is for a decline to 450K from 471K last week.
And on Friday, the BEA will release the Personal Income and Outlayreport for April at 8:30 AM. Also on Friday the Chicago Purchasing Managers Index for May will be released. And of course the FDIC will probably have another busy Friday afternoon ...
There will be several Fed speeches this week, and a few other economic releases (trucking index, restaurant index).
And a summary of last week:
The MBA reported a record 14.69 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q1 2010 (seasonally adjusted).
Click on graph for larger image in new window.This graph shows the percent loans delinquent by duration. Loans 30 days delinquent increased to 3.45%, about the same level as in Q4 2008.
Delinquent loans in the 60 day bucket increased too, and are also close to the Q4 2008 level. This suggests that the pipeline is still filling up at a high rate, but slightly below the rates of early 2009.
The 90+ day and 'in foreclosure' rates are at record levels. Obviously the lenders have been slow to start foreclosure proceedings - and the 90+ day delinquent bucket is very full. Also lenders have been slow to actually foreclose - and the 'in foreclosure' bucket is at record levels.
The second graph shows the delinquency rate by state (red is seriously delinquent: 90+ days or in foreclosure, blue is delinquent less than 90 days).
Thirty four states and the District of Columbia have total delinquency rates over 10%. This is a widespread problem.
Total housing starts were at 672 thousand (SAAR) in April, up 5.8% from the revised March rate, and up 41% from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959). Single-family starts were at 593 thousand (SAAR) in April, up 10.2% from the revised February rate, and 65% above the record low in January 2009 (360 thousand).
Permits declined sharply suggesting that starts will decline next month.
This graph shows the builder confidence index from the National Association of Home Builders (NAHB).The housing market index (HMI) was at 22 in May. This is an increase from 19 in April. This is the highest level since August 2007 - and builders were seen as depressed then!
The record low was 8 set in January 2009. This is still very low ... Note: any number under 50 indicates that more builders view sales conditions as poor than good.
On a month-over-month basis, the national average home price index fell by 0.3 percent in March 2010 compared to February 2010.This graph shows the national LoanPerformance data since 1976. January 2000 = 100.
The index is up 1.7% over the last year, and off 30.5% from the peak.
Moody's reported that the Moody’s/REAL All Property Type Aggregate Index declined 0.5% in March. This is a repeat sales measure of commercial real estate prices.This is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index. CRE prices only go back to December 2000.
Commercial real estate values are now down 25% over the last year, and down 42% from the peak in August 2007.
The American Institute of Architects’ Architecture Billings Index increased to 48.5 in April from 46.1 in March. This index is a leading indicator for Commercial Real Estate (CRE) investment. Any reading below 50 indicates contraction.According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So there will probably be further declines in CRE investment through all of 2010, and probably into 2011.
Best wishes to all.
On Loan Mods and Credit Scores
by Calculated Risk on 5/23/2010 08:58:00 AM
From Carolyn Said at the San Francisco Chronicle: Loan modifications often damage credit scores
Struggling homeowners who get a loan modification to reduce their mortgage payments are often unaware that it can seriously ding their credit score.And on short sales:
...
"A lot of people don't understand that by making the payments due on their temporary loan mod they're reported as delinquent immediately," said Margot Saunders of the National Consumer Law Center in Washington. "It's a huge misunderstanding."
...
"A lot of lenders are reporting these modifications as paying under a partial payment plan. FICO regards that status as a serious delinquency," said Craig Watts, a spokesman for FICO ...
Watts said it is a "widespread myth" that short sales and deeds in lieu of foreclosure have less impact on credit scores than do foreclosures.There is much more in the article ...
"Generally speaking, when you can't pay your mortgage, in the eyes of the FICO score what matters is that you were not able to fill your obligation as you originally agreed and that failure is highly predictive of future risk," he said.
Saturday, May 22, 2010
Spain: Regulators seize CajaSur; U.K.: Bonfire of the Quangos?
by Calculated Risk on 5/22/2010 08:39:00 PM
Some news from Europe ...
From Bloomberg: Regulator Seizes CajaSur, Lender Hurt by Bad Loans
The Bank of Spain removed the managers of CajaSur ... a savings bank with assets of about 19 billion euros and 486 branches ... and put the bank under a provisional administrator.This is a fairly large bank. The 45 or so 'cajas' are local government owned banks that are focused domestically with about 70% of their portfolios exposed to the Spanish real estate market.
And in the U.K. it looks like the proposed austerity measures will lead to 100s of thousands of public job cuts, from the police to active duty front line soldiers. The ministers are promising a “bonfire of the quangos” (quasi-autonomous non-governmental organisation), but it sounds like this will go far beyond the NGOs ...
From the Times: 300,000 jobs in public sector face the axe
Detailed research by The Sunday Times shows that at least 300,000 workers, including civil servants and frontline staff, will lose their jobs over the next few years.
Some estimates suggest that the number of job losses could reach 700,000.
These will include tens of thousands of health service managers as well as many thousands of doctors and nurses ... Thousands of police officers and their civilian support staff ... 20,000 jobs will be lost at the Ministry of Defence ... including some frontline soldiers ...
Mothballed Condos Offered For Sale
by Calculated Risk on 5/22/2010 04:48:00 PM
In November 2007 Lennar mothballed a major condo project in Irvine called "Central Park West". I posted a short video of the project (poor quality) in 2008.
Jeff Collins at the O.C. Register has an update: Prices cut 25% on new ‘urban’ condos
What a difference three years makes.This is real shadow inventory coming back on the market ...
When homebuilder Lennar Corp. first launched home sales in its urban-styled Central Park West community in Irvine, prices started at $500,000 and ranged up to $2.9 million.
Fast forward to today’s “grand opening” for Central Park West’s four-story condo buildings — the project’s low-rises. Prices now start in the upper $300,000’s and range to over $1 million – at least 25 percent below the original pricing.
Sales at the sleek, industrial-chic Central Park West began in early 2007, but were halted abruptly by the fall of that year amid cascading home prices.
Credit Indicators
by Calculated Risk on 5/22/2010 12:44:00 PM
During the crisis these indicators showed the stress in the credit markets and it is probably worth revisiting them now.
Click on graph for larger image in new window.
This graph from Bloomberg, based on data from the British Bankers' Association, shows the three-month U.S. dollar London interbank offered rate, or Libor rose to 0.50% on Friday.
This is an important rates since trillions of financial products worldwide are tied to the Libor - including many adjustable mortgages in the U.S.
The rate has increased recently, but it is still very low.
The TED spread has also risen recently and is now at 34.47. This is a 5 year graph to show the recent increase is very small compared to the huge increases during the worst of the crisis.
Note: This is the difference between the interbank rate for three month loans and the three month Treasury. The peak was 463 on Oct 10th and a normal spread is below 50 bps.
Here is the A2P2 spread from the Federal Reserve. This is the spread between high and low quality 30 day nonfinancial commercial paper.
This has increased recently to 0.19, but the spread is still very low.
The last graph shows the Merrill Lynch Corporate Master Index OAS (Option adjusted spread) for the last few years.
This is a broad index of investment grade corporate debt:
The Merrill Lynch US Corporate Index tracks the performance of US dollar denominated investment grade corporate debt publicly issued in the US domestic market.This index has increased lately - but it still very low compared to the worst of the crisis.
So far we've only seen slightly wider credit spreads and just a hint of stress.
Fed's Dudley on the Economy
by Calculated Risk on 5/22/2010 09:01:00 AM
From NY Fed President William Dudley's commencement speech at New College of Florida:
[T]he recovery is not likely to be as robust as we would like for several reasons.A few comments:
First, households are still in the process of deleveraging. The housing boom created paper wealth that households borrowed against. This pushed the consumption share of nominal gross domestic product to a record high of about 70 percent. When the boom turned into a bust, those paper gains evaporated. In fact, many households now find that the value of their homes is less than the amount of their mortgage debt. This has created a difficult time for many families and has caused the hangover to last longer.
Second, the banking system is still under significant stress. This is particularly the case for small- and medium-sized banks that have significant exposure to commercial real estate loans. This stress means that banks have been slow to ease credit standards as the economy has moved from recession to recovery.
Third, some of the sources that have supported the nascent recovery are temporary. The big swing from inventory liquidation during the recession back to accumulation will soon end as inventory levels come back into better balance with sales. And fiscal stimulus from the federal government is subsiding and will soon reverse.
...
In this environment, finding a job will be tough, but when you hit the pavement remember that the job market is improving. Don't get discouraged.
First, the household "deleveraging" seemed to start last year, but consumers were back to spending more than they earned in Q1. Personal consumption expenditures (PCE) increased to over 71% of GDP in Q1 - higher than the 70% during the boom that Dudley mentioned. Some of this increase in PCE was due to government transfer payments (all of the increase in income in Q1 came from government transfer payments). I still think the personal saving rate will rise over the next year or two - and that will keep growth in PCE below the growth in income.
Second, I think the transitory inventory boost is about over. There were hints of this in the manufacturing surveys last week from the Federal Reserve Banks of Philadelphia and New York - and also in the Census Bureau's Manufacturing and Trade inventories report for March. Also, as Dudley notes, the boost from the stimulus "is subsiding and will soon reverse" (the peak stimulus spending is right now - in Q2 2010).
These are significant headwinds, and I think growth will slow in the 2nd half of 2010.
Friday, May 21, 2010
Unofficial Problem Bank list hits 737
by Calculated Risk on 5/21/2010 11:49:00 PM
This is an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for May 21, 2010.
Changes and comments from surferdude808:
As anticipated, the OCC released its actions for April 2010, which contributed to an increase in the number of institutions on the Unofficial Problem Bank List. The list includes 737 institutions with aggregate assets of $363.5 billion, up from 725 institutions with assets of $363.1 billion last week.
The FDIC released its industry profile this week and they reported 775 institutions with assets of $431 billion on the official problem bank list. With the industry release, we were able to update assets for the first quarter of 2010. For institutions on the unofficial list last week, their combined assets fell by $8.3 billion during the quarter.
Notable additions this week include City National Bank of Florida, Miami, FL ($4.6 billion); The National Republic Bank of Chicago, Chicago, IL ($1.3 billion); Butte Community Bank, Chico, CA ($523 million Ticker: CVLL). Other additions include the add back of Mountain West Bank, National Association, Helena, MT ($795 million Ticker: MTWF); and Pikes Peak National Bank, Colorado Springs, CO ($84 million), which were removed from the May 7th list when the OCC terminated their respective Supervisory Agreements. These agreements were replaced by stronger Consent Orders.
The only removal is the failed Pinehurst Bank. Other changes are for name changes with the Bank of Lenox, Lenox, GA now known as The Trust Bank; Goshen Community Bank, Goshen, IN now known as Indiana Community Bank; and Lehman Brothers Bank, FSB, Wilmington, DE now known as Aurora Bank FSB.
"Love, Your Broken Home"
by Calculated Risk on 5/21/2010 10:01:00 PM
Since Sheila is done for the day ... a new song by Tim Miller on the mortgage crisis: "Love, Your Broken Home" (language)
Link to YouTube version if this doesn't load.
Bank Failure #73: Pinehurst Bank, St. Paul, Minnesota
by Calculated Risk on 5/21/2010 06:08:00 PM
The bill could not help Pinehurst.
Ineffectual
by Soylent Green is People
From the FDIC Coulee Bank, La Crosse, Wisconsin, Assumes All of the Deposits of Pinehurst Bank, St. Paul, Minnesota
As of March 31, 2010, Pinehurst Bank had approximately $61.2 million in total assets and $58.3 million in total deposits.Busy week ... but Friday is here!
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $6.0 million.... Pinehurst Bank is the 73rd FDIC-insured institution to fail in the nation this year, and the sixth in Minnesota. The last FDIC-insured institution closed in the state was Access Bank, Champlin, on May 7, 2010.
