by Calculated Risk on 8/22/2009 09:02:00 PM

Excerpt from Paul Krugman: Some call it recovery

The real problem here is that the standard language doesn’t make much allowance for the kind of gray zone we’re now in; that’s because in the pre-1990 era recessions tended to be V-shaped, so that jobs snapped back as soon as GDP turned around. I don’t think what we’re going through is good news — but GDP is almost surely rising, so the recession, as normally defined, is over.
...
But the economy is not recovering in the most crucial area, job creation ...

Excerpt from The Economist: U, V or W for recovery

The world economy has stopped shrinking. That’s the end of the good news

... a rebound based on stock adjustments is necessarily temporary, and one based on government stimulus alone will not last. Beyond those two factors there is little reason for cheer. America’s housing market may yet lurch down again as foreclosures rise, high unemployment takes its toll and a temporary home-buyers’ tax-credit ends (see article). Even if housing stabilises, consumer spending will stay weak as households pay down debt. In America and other post-bubble economies, a real V-shaped bounce seems fanciful.

It does appear the cliff diving is over, and that the U.S. economy will grow in the 3rd quarter. But there are still more problems ahead for consumer spending and housing (I think housing is still the key - and I'll discuss this soon).

An immaculate recovery seems remote.

by Calculated Risk on 8/22/2009 06:40:00 PM

Here is a followup story on the Inland Empire in California, from the NY Times: A Cul-de-Sac of Lost Dreams, and New Ones

This quote caught my eye:

"You have to think of it like a gold-mining town in a Clint Eastwood movie,” Mr. [John Husing, an economist whose expertise is Southern California] said. “Money comes to a place where there has never been any, and next there are tool stores, a saloon, a general store and so on. But the saloon doesn’t exist without the gold mine, and the gold mine here was construction.”

Exactly. And the gold mine closed a few years ago.

Here is how I saw it in 2006 for the Inland Empire:

As the housing bubble unwinds, housing related employment will fall; and fall dramatically in areas like the Inland Empire. The more an area is dependent on housing, the larger the negative impact on the local economy will be.

So I think some pundits have it backwards: Instead of a strong local economy keeping housing afloat, I think the bursting housing bubble will significantly impact housing dependent local economies.

by Calculated Risk on 8/22/2009 01:37:00 PM

From Felix Salmon at Reuters: Fed official: rates to be kept low past upturn (ht Anthony)

Financial markets have not fully understood that the U.S. Federal Reserve's pledge to keep interest rates exceptionally low for an extended period means they will stay low beyond when officials normally would raise them, a top Fed official said on Friday.

"I don't think markets have really digested what that means," St Louis Fed President James Bullard said in an interview.

The Fed's strategy is aimed at promoting a future rise in inflation, which should provide an immediate boost in activity in anticipation of a future boom, but that hasn't happened, Bullard said.

Bullard is repeating the FOMC statement:

The Committee ... continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Bullard thinks the markets haven't "digested what that means" - rates will be low for a long time - maybe through much or all of 2010.

Here is an interview with Bullard on a few other subjects, expects slow growth, discusses unwinding current policy.

by Calculated Risk on 8/22/2009 08:34:00 AM

As a companion to the Problem Bank List (unofficial), below is a list of failed banks since Jan 2007.

But first a few graphs ...

Click on graph for larger image in new window.

The graph shows the cumulative estimated losses to the FDIC Deposit Insurance Fund (DIF) and the quarterly assets of the DIF (as reported by the FDIC). Note that the FDIC takes reserves against future losses in the DIF, and collects fees and special assessments - so you can't just subtract estimated losses from assets to determine the assets remaining in the DIF.

The FDIC closed four more banks on Friday, and that brings the total FDIC bank failures to 81 in 2009. The following graph shows bank failures by week in 2009.

Note: Week 1 on graph ends Jan 9th.

The FDIC is seizing about 4 to 5 banks per week recently, and with over four months to go in 2009, this suggests close to 150 bank failures this year.

At the current pace there will be more failures in 2009 than in the early years of the S&L crisis. From 1982 thorough 1984 there were about 100 failures per year, and then the number of failures really increased as the 2nd graph shows.

The 2nd graph covers the entire FDIC period (annually since 1934).

For a graph that includes the 1920s and early '30s (before the FDIC was enacted) see the 3rd graph here.

Of course the number of banks isn't the only measure. Many banks today have more branches, and far more assets and deposits.

Failed Bank List

Deposits, assets and estimated losses are all in thousands of dollars.

Losses for failed banks in 2009 are the initial FDIC estimates. The percent losses are as a percent of assets.

See description below table for Class and Cert (and a link to FDIC ID system).

The table is wide - use scroll bars to see all information!

NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.)





Class: from FDIC

The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are:

N National chartered commercial bank supervised by the Office of the Comptroller of the Currency

SM State charter Fed member commercial bank supervised by the Federal Reserve

NM State charter Fed nonmember commercial bank supervised by the FDIC

SA State or federal charter savings association supervised by the Office of Thrift Supervision

SB State charter savings bank supervised by the FDIC

Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. You can click on the number and see "the last demographic and financial data filed by the selected institution".

by Calculated Risk on 8/21/2009 09:01:00 PM

From Bloomberg at Jackson Hole: (ht km4)

We are up to 81 bank failures this year, and 109 since the crisis started. With 391 banks on the unofficial problem bank list (and more to come), I think 300 is probably low. I'll take the over ...

by Calculated Risk on 8/21/2009 07:09:00 PM

A mushroom cloud forms
Deep in the heart of Texas
Guaranty is ash
by Soylent Green is People
From the FDIC: BBVA Compass, Birmingham, Alabama, Assumes All of the Deposits of Guaranty Bank, Austin, Texas

Guaranty Bank, Austin, TX was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of June 30, 2009, Guaranty Bank had total assets of approximately $13 billion and total deposits of approximately $12 billion. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3 billion. ... Guaranty Bank is the 81st FDIC-insured institution to fail in the nation this year, and the second in Texas. The last FDIC-insured institution closed in the state was Millennium State Bank of Texas, Dallas, July 2, 2009.

Added by request from Soylent Green is People:

by Calculated Risk on 8/21/2009 06:10:00 PM

Birmingham failure
Georgia, running out of banks?
South will sink again...
by Soylent Green is People
From the FDIC: United Bank, Zebulon, Georgia, Assumes All of the Deposits of First Coweta, Newnan, Georgia

First Coweta, Newnan, Georgia was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver....

As of July 31, 2009, First Coweta had total assets of $167 million and total deposits of approximately $155 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $48 million. ... First Coweta is the 79th FDIC-insured institution to fail in the nation this year, and the eighteenth in Georgia. The last FDIC-insured institution closed in the state was ebank, Atlanta, earlier today.

From the FDIC: IBERIABANK, Lafayette, Louisiana, Assumes All of the Deposits of CapitalSouth Bank, Birmingham, Alabama

CapitalSouth Bank, Birmingham, Alabama, was closed today by the Alabama State Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of June 30, 2009, CapitalSouth Bank had total assets of $617 million and total deposits of approximately $546 million....

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $151 million. ... CapitalSouth Bank is the 80th FDIC-insured institution to fail in the nation this year, and the second in Alabama. The last FDIC-insured institution closed in the state was Colonial Bank, Montgomery, on August 14, 2009.

by Calculated Risk on 8/21/2009 05:15:00 PM

Once Internet fave
Ebank has been pushed off-line
Now mere vapor ware.
by Soylent Green is People
From the FDIC: Stearns Bank, National Association, St. Cloud, Minnesota, Assumes All of the Deposits of ebank Atlanta, Georgia

ebank, Atlanta, Georgia, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of July 10, 2009, ebank had total assets of $143 million and total deposits of approximately $130 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $63 million. ... ebank is the 78th FDIC-insured institution to fail in the nation this year, and the seventeenth in Georgia. The last FDIC-insured institution closed in the state was Security Bank of Jones County, Gray, on July 24, 2009.

The costs to the DIF are esimtated at 44% of assets. Ouch.

It is Friday!

by Calculated Risk on 8/21/2009 04:00:00 PM

NEW Problem Bank List (Unofficial) Aug 21, 2009

Note: Market Graph at bottom ...

NOTE: the months line up with the lines on the following two graphs - sorry if that was confusing.

Click on graph for larger image in new window.

Here is another graph of inventory. This graph shows inventory since 2002 by year.

The dotted lines (2002 - 2004) are for the boom years. 2005 (dashed green) is the transition year at the end of the boom. And the solid colors are for the bust years.

The second graph shows months of supply for the same years.

Although inventory and months of supply are lower than in 2007 and 2008, the levels are still very high.

It is important to watch inventory levels very carefully. If you look at the 2005 inventory data, instead of staying flat for most of the year (like the previous bubble years), inventory continued to increase all year. That was one of the key signs that led me to call the top in the housing market!

Note: there is probably a substantial shadow inventory – foreclosures coming as shown by the MBA delinquency survey yesterday, and homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time. There are also reports of REOs being held off the market, so inventory is probably under reported.

The third graph shows the year-over-year change in existing home inventory.

My guess is prices will probably continue to fall until the months of supply reaches more normal levels (closer to 6 months compared to the current 9.4 months), and that will take some time.

However this general trend of declining year-over-year inventory levels is a positive for the housing market (while remembering the shadow inventory).


Here is the market graph from Doug Short, Doug Short matching up the market bottoms for four crashes (with an interim bottom for the Great Depression).

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 8/21/2009 02:30:00 PM

This is an unofficial list of Problem Banks. Note: Reports are Guaranty (Texas) will be seized this afternoon.

The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). The FDIC data is released monthly with a delay. The Fed and OTC data is more timely, and the OCC a little lagged. Credit: surferdude808.

Changes and comments from surferdude808:

While the number of institutions on the problem bank list only declined by a net one to 391 from 392 a week ago, there was a sizable decline in assets of $26b with the closures of Colonial Bank ($26.4b) and Community Bank of Nevada ($1.6b) on August 14th. Of the three other failures last Friday, two -- Union Bank, N.A., and Dwelling House S&L -- were under formal enforcement action while Community Bank of Arizona failed without being subject to a formal enforcement action or prompt corrective action order.

There are three additions during the week including the Savings Bank of Maine ($983.6m), Gardiner, ME; Royal Bank America ($735.2m), Narbeth, PA; and First Home Savings Bank ($241.7m), Mountain Grove, MO.

With the addition of a Maine based institution, 46 states and D.C. are represented on the problem list with only Alaska, Hawaii, New Hampshire, Vermont, and West Virginia not having an institution headquartered within their respective borders subject to formal enforcement action. Unlike the other five states, West Virginia did have a failure in 2008.

One other formal action issued during the week that may be from the twilight zone, the OTS issued a prompt corrective action order against Guaranty Bank on August 19th. With the numerous media reports circulating about the imminent closure of Guaranty Bank, what is the usefulness of a PCA order at the stage of the game?

DISCLAIMER: This is an unofficial list, the information is from public sources and while deemed to be reliable is not guaranteed. No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein and same is subject to errors and omissions. This is not intended as investment advice. Please contact CR with any errors.

See description below table for Class and Cert (and a link to FDIC ID system).

The table is wide - use scroll bars to see all information!

NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.)





Class: from FDIC

The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are:

N National chartered commercial bank supervised by the Office of the Comptroller of the Currency

SM State charter Fed member commercial bank supervised by the Federal Reserve

NM State charter Fed nonmember commercial bank supervised by the FDIC

SA State or federal charter savings association supervised by the Office of Thrift Supervision

SB State charter savings bank supervised by the FDIC

Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. Click on the number and the Institution Directory (ID) system "will provide the last demographic and financial data filed by the selected institution".

by Calculated Risk on 8/21/2009 01:19:00 PM

From DataQuick: Bay Area home sales hit 4-year high; median price up again

Bay Area home sales rose last month to the highest level for a July in four years as deals above $500,000 continued to accelerate. ...

The median’s $43,000 gain between June and July was mainly the result of a shift toward a greater portion of sales occurring in higher-priced neighborhoods. The trend has been fueled this summer by several factors, including: More distress in high-end areas, leading to more motivated sellers; more buyers sensing a bottom could be near; and increased availability of larger home loans, which had become more expensive and far more difficult to obtain after the credit crunch hit two years ago.
...
As high-end sales have taken off in recent months, sales of foreclosures in less-expensive inland areas have tapered off. Last month 34.2 percent of the Bay Area homes that resold were foreclosure resales – homes resold in July that had been foreclosed on in the prior 12 months. Last month’s foreclosure resale level was the lowest since it was 33.3 percent in July 2008. Foreclosure resales peaked at 52 percent of all Bay Area resales in February this year.
...
“Evidence is mounting that in some areas we’ve approached at least a soft bottom for home prices,” [John Walsh, MDA DataQuick president] said. “But we continue to view that possibility with an abundance of caution, given all of the uncertainty over future foreclosure inventories and ongoing job cuts. The market remains vulnerable.”

A total of 8,771 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 1.5 percent from 8,664 in June and up 15.6 percent from 7,586 in July 2008.

Although last month’s sales were the highest for the month of July in four years, and the highest for any month since August 2006, they were still 7.8 percent lower than the average of 9,512 homes sold during the month of July going back to 1988, when DataQuick’s statistics begin. July sales have varied between a low of 6,666 sales in 1995 and a peak of 14,258 in 2004.

... Foreclosure activity is off its recent peak but remains high by historical standards ...
emphasis added

As always, be very careful with the median home price. DataQuick does a good job of explaining how it is being distorted by the mix of homes sold.

Last year financing for higher priced homes was very difficult, so it is no surprise that with a combination of increasing distressed sales in the mid-to-high end areas, and more financing, sales have picked up some.

by Calculated Risk on 8/21/2009 12:56:00 PM

Although vehicle miles increased in June 2009 compared to June 2008, miles driven are still 3.3% below the peak for the month of June in 2007.

The Dept of Transportation reports on U.S. Traffic Volume Trends:

Travel on all roads and streets changed by +2.0% (4.9 billion vehicle miles) for June 2009 as compared with June 2008. Travel for the month is estimated to be 256.7 billion vehicle miles.

Cumulative Travel for 2009 changed by -0.4% (-6.1 billion vehicle miles).

Click on graph for larger image in new window.

The first graph shows the rolling 12 month of U.S. vehicles miles driven.

By this measure (used to remove seasonality) vehicle miles declined sharply and are now moving sideways.

The second graph shows the comparison of month to the same month in the previous year as reported by the DOT.

As the DOT noted, miles driven in June 2009 were 2.0% greater than in June 2008.

Year-over-year miles driven started to decline in December 2007, and really fell off a cliff in March 2008. This makes for an easier comparison for June 2009.

by Calculated Risk on 8/21/2009 10:00:00 AM

The NAR reports: Strong Gain in Existing-Home Sales Maintains Uptrend

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008.
...
Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, which was unchanged from June because of the strong sales gain.

Click on graph for larger image in new window.

The first graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in July 2009 (5.24 million SAAR) were 7.2% higher than last month, and were 5.0% lower than July 2008 (4.99 million SAAR).

Here is another way to look at existing homes sales: Monthly, Not Seasonally Adjusted (NSA):

This graph shows NSA monthly existing home sales for 2005 through 2009. As in June, sales (NSA) were slightly higher in July 2009 than in July 2008.

It's important to note that many of these transactions are either investors or first-time homebuyers. Also many of the sales are distressed sales (short sales or REOs).

The third graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 4.09 million in July. The all time record was 4.57 million homes for sale in July 2008. This is not seasonally adjusted.

Typically inventory peaks in July or August. This increase in inventory was a little more than usual.

Note: many REOs (bank owned properties) are included in the inventory because they are listed - but not all. Recently there have been stories about a substantial number of unlisted REOs and other shadow inventory - so this inventory number is probably low.

The fourth graph shows the 'months of supply' metric for the last six years.

Months of supply was steady at 9.4 months.

Sales increased, and inventory increased, so "months of supply" was steady. A normal market has under 6 months of supply, so this is still very high.

Note: New Home sales will be released next Wednesday.

by Calculated Risk on 8/21/2009 08:53:00 AM

Existing home sales for July will be released at 10 AM ET.

From CNBC: Existing Home Sales May Top 5 Million: ING Analysts

Existing home sales may have crossed the 5 million mark in July, as buyers are coming back to the market, analysts from ING bank said in a market research note Friday.
...
"The surge in the number of signed contracts… suggests existing home sales are about to cross the 5-million mark. There is a fair chance sales already crossed that barrier last month," the note said.
...
"Sales pushing above 5.1 million – the pre-Lehman level – would help to make a convincing case that this is not just a correction, but a real pick-up in activity," ING analysts wrote.

But no mention of the first-time home buyer frenzy? As I noted earlier:

First-time home buyer activity has boosted existing home sales, and will continue to boost existing home sales (reported at close of escrow) through November.

This level of first-time buyers is completely unsustainable - even if another tax credit is enacted. There was significant pent up demand from potential first-time buyers who were priced out of the market in 2004-2006, and then were afraid to buy as prices fell. But demand from these buyers will wane. (Like "cash-for-clunkers" demand waned).

This doesn't help the mid-to-high priced market because a large percentage of sales are distressed (REOs or short sales), and there is no seller to move up.

Expect a surge in existing home sales (and some new home sales) over the next few months. Expect all kinds of reports that the bottom has been reached. (Like the ING report via CNBC)

Expect the frenzy to end ...

Here is a repeat of a graph by buyer type in Q2 from the Campbell survey.

Click on graph for larger image in new window.

According to the Campbell survey first-time buyers accounted for 43% of sales in Q2 (investors another 29%).

Source: Summary Report--Real Estate Agents Report on Home Purchases and Mortgages, Campbell Communications, June 2009 (excerpted with permission)

by Calculated Risk on 8/20/2009 10:37:00 PM

It has been widely reported that the assets of Guaranty Bank (Texas) will be seized Friday by the FDIC and sold to Banco Bilbao Vizcaya Argentaria SA of Spain.

Meanwhile the OTS issued a Prompt Corrective Action (PCA) to Guaranty yesterday. Maybe they didn't get the memo ...

Also, from the WSJ: In New Phase of Crisis, Securities Sink Banks

Guaranty owns roughly $3.5 billion of securities backed by adjustable-rate mortgages, with two-thirds of the loans in foreclosure-wracked California, Florida and Arizona, according to the company's latest report. Delinquency rates on the holdings have soared as high as 40%, forcing write-downs last month that consumed all of the bank's capital.

Guaranty is one of thousands of banks that invested in such securities ...

It's not just their own bad loans (usually C&D and CRE) taking down the local and regional banks, but also bad investments in securities based on other bank's bad loans. From the article:

One banking lawyer who asked not to be identified describes the result as a "wonderful chain of stupidity."

I'm not sure it is so "wonderful" ...

by Calculated Risk on 8/20/2009 07:36:00 PM

The American Institute of Architects (AIA) releases the Architecture Billings Index (ABI) monthly, and the AIA chief economist Kermit Baker frequently mentions there is an "approximate nine to twelve month lag time between architecture billings and construction spending."

Click on graph for larger image in new window.

This graph compares the ABI with the quarterly data on nonresidential construction investment from the Bureau of Economic Analysis.

Although there is only data back to 1996, it appears that after the ABI falls consistently below 50 (contraction of billings on mostly commercial projects), then nonresidential structure investment declines on a YoY basis about one year later.

And YoY investment increases about one year after the ABI surpasses 50.

This suggests that nonresidential structure investment will decline through most of 2010, with no bottom in sight (since the ABI is still well below 50).

Right now I'm expecting another major slump in nonresidential structure investment towards the end of this year (following the ABI slump at the end of 2008), and for nonresidential structure investment to decline throughout 2010.

by Calculated Risk on 8/20/2009 04:12:00 PM

A little more information from the MBA Q2 delinquency report (and market graph below):

Click on graph for larger image in new window.

This graph shows the U.S. mortgage market by type. There are about 45 million loans included in the MBA survey, and that is about 85% of the U.S. market.

This is a general breakdown, and apparently Alt-A is included in Prime (it would be helpful to break that out).

The second graph shows the breakdown by type for loans that are either seriously delinquent (90+ days delinquent) or in the foreclosure process. There are about 3.6 million loans in this category.

Clearly subprime is disproportionately represented (much higher delinquency rate), but now over half the loans in this category are Prime - and the delinquency rate is growing faster for Prime. This is now a Prime foreclosure crisis.

For more, please see earlier posts:
MBA Forecasts Foreclosures to Peak at End of 2010 (several graphs)
MBA: Record 13.2 Percent of Mortgage Loans in Foreclosure or Delinquent in Q2


Instead of comparing the markets from the peak (See: the Four Bad Bears), Doug Short matched up the market bottoms for four crashes (with an interim bottom for the Great Depression).

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 8/20/2009 02:46:00 PM

From HotelNewsNow.com: STR reports US performance for week ending 15 August 2009

In year-over-year measurements, the industry’s occupancy fell 6.9 percent to end the week at 63.9 percent. Average daily rate dropped 9.9 percent to finish the week at US$96.70. Revenue per available room for the week decreased 16.2 percent to finish at US$61.80.

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 7.0% from the same period in 2008.

The average daily rate is down 9.9%, and RevPAR is off 16.2% from the same week last year.

Note: This is a multi-year slump. Although the occupancy rate was off 6.9 percent compared to last year, the occupancy rate is off about 11 percent compared to the same week in 2007.

As previously mentioned, the end of July and beginning of August is the peak leisure travel period. The peak occupancy rate for 2009 was probably four weeks ago at 67%. Also, business travel was off much more than leisure travel earlier this year, so the summer months are not as weak as other times of the year. September will be the real test for business travel.

by Calculated Risk on 8/20/2009 01:32:00 PM

First there has been some discussion of the status of the Deposit Insurance Fund (DIF).

Bloomberg has some details: FDIC May Add to Special Fees as Mounting Failures Drain Reserve

... The fund had $13 billion on March 31, the lowest since 1992 when it was $178.4 million, the FDIC said. The 56 bank collapses since March 31 cost an estimated $16 billion.

... the Federal Deposit Insurance Corp. to impose a special fee as soon as next month to boost reserves by $5.6 billion. ...

If the fund is drained, the FDIC also has the option of tapping a line of credit at the Treasury Department that Congress extended in May to $100 billion, with temporary borrowing authority of $500 billion through 2010.

This special assessment is on top of the Q2 "emergency fee of 5 cents for every $100 of assets". So the FDIC still has resources to pay all insurance claims.

And from the WSJ: FDIC to Soften Private-Equity Curbs

... The FDIC is expected to retreat from its July proposal that private-equity firms have a Tier 1 capital ratio of at least 15% in order to bid on failed banks, and instead require such investors to maintain ratios of at least 10% ...

The FDIC also is expected to ease parts of its proposal that would have required buyout firms to guarantee that they'd provide financial support to any of their banking subsidiaries. ... Buyout firms are still expected to complain about mandates that they hold on to bank charters for at least three years, which would constrain the firms from turning quick profits on the deals.

by Calculated Risk on 8/20/2009 11:21:00 AM

On the MBA conference call concerning the "Q2 2009 National Delinquency Survey", MBA Chief Economist Jay Brinkmann said this morning:

The problem is moving to prime loans, and fixed rate prime loans. Although the delinquency rate is lower for prime fixed rate than for other loans, these loans make up 65.5% of all loans - so the increase matters.

Brinkmann expects delinquencies to peak in mid-2010.

Brinkmann expects foreclosures to peak at the end of 2010.

Note: The MBA data shows about 5.8 million loans delinquent or in the foreclosure process nationwide. I believe the MBA surveys covers close to 90% of the mortgage market. Many of these loans will cure, but the foreclosure pipeline is still building.

A few graphs ...

Click on graph for larger image in new window.

The first graph shows the delinquency and in foreclosure rates for all prime loans.

Prime loans account for all 78% of all loans.

"We're all subprime now!" NOTE: Tanta first wrote this saying in 2007 in response to the 'contained to subprime' statements.

The second graph shows just fixed rate prime loans (about 65.5% of all loans).

Prime ARMs have a higher delinquency rate than Prime FRMs, but the foreclosure crisis has now spread to Prime fixed rate loans.

Note that even in the best of times (with rapidly rising home prices in 2005), just over 2% of prime FRMs were delinquent or in foreclosure. However the cure rate was much higher back then since a delinquent homeowner could just sell their home.

The third graph shows the delinquency and in foreclosure process rates for subprime loans.

Although the increases have slowed, about 40% of subprime loans are delinquent or in foreclosure.

The fourth graph shows the delinquency and foreclosure rates by state (add: and D.C. and Puerto Rico!).

The 'in foreclosure' rate can vary widely by state, because the process is fairly quick in some states, and very slow in other states (like Florida).

Although most of the delinquencies are in a few states - because of a combination of high delinquency rates and large populations - the crisis is widespread.

And a final comment: historically house prices do not bottom until after foreclosure activity peaks in a certain area. Since the subprime crisis delinquency rates might be peaking, it would not be surprising if prices are near a bottom in the low end areas. But in general I'd expect further declines in house prices - especially in mid-to-high end areas.