by Calculated Risk on 2/27/2009 12:07:00 AM

From the WSJ: Citi, U.S. Reach Deal on Government Stake

... expected to be announced Friday morning ... the Treasury has agreed to convert some of its current holdings of preferred Citigroup shares into common stock ... The government will convert its stake only to the extent that Citigroup can persuade private investors such as sovereign wealth funds do so as well ... The Treasury will match private investors' conversions dollar-for-dollar up to $25 billion.

The size of the government's new stake will hinge on how many preferred shares private investors agree to convert into common stock. The Treasury's stake is expected to rise to up to 40% of Citigroup, the people said.

MarketWatch has some details.

by Calculated Risk on 2/26/2009 08:34:00 PM

Another summary post and open thread (for discussion).

New home sales in January 2009 (309 thousand SAAR) were 10.2% lower than last month, and were 48% lower than January 2008 (597 million SAAR). See link for graphs of sales and inventory.

There was some discussion that the seasonal adjustment might be distorting the sales number. The following graph of the January sales numbers (no adjustment) shows this decline in sales wasn't a seasonal issue.

Click on graph for larger image in new window.

This shows the Census Bureau reported sales for every January since 1963. The label is the sales for the month (in thousands).

Clearly January 2009 was the worst ever - and this wasn't adjusted for changes in population either, and the U.S. population has grown substantially since 1963.

Initial unemployment claims hit 667,000 last week (highest since 1982) and continued claims were over 5 million for the first time ever. The numbers aren't quite as bad when adjusted by covered employment (see graphs)

Here was an analysis on the impact of falling rents: What If Rents Cliff Dive?

Fannie Mae reported a loss of $25.2 billion, the U.S. may backstop AIG CDS losses (likely to be announced Sunday or Monday morning), and oh yeah, we are still waiting for the Citi deal!

Scroll down for more ... and there will probably be more tonight. Best to all.

by Calculated Risk on 2/26/2009 07:19:00 PM

Jon Lansner at the O.C. Register has more including responses from the NAR and the NAHB: Obama plans mortgage-deduction cut (ht John and Tom)

From the WSJ: $318 Billion Tax Hit Proposed

The tax increases would ... [reduce] the value of such longstanding deductions as mortgage interest ... for people in the highest tax brackets. Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.

The changes would be phased in gradually over the next few years. For the 2009 tax year, the 33% tax bracket starts with couples with taxable earnings of $208,850, when adjusted for personal exemptions and various deductible expenses. A taxpayer in the top bracket paying $1,000 of mortgage interest, for example, would see a tax break worth $350 reduced to $280.

The mortgage interest deduction is capped to $1 million in mortgage debt.

by Calculated Risk on 2/26/2009 06:11:00 PM

From Fannie Mae:

Fannie Mae reported a loss of $25.2 billion ... in the fourth quarter of 2008, compared with a third-quarter 2008 loss of $29.0 billion ...

On February 25, 2009, the Director of FHFA submitted a request for $15.2 billion from the U.S. Department of the Treasury on our behalf under the terms of the Senior Preferred Stock Purchase Agreement in order to eliminate our net worth deficit as of December 31, 2008. FHFA has requested that Treasury provide the funds on or prior to March 31, 2009.
...
We expect the market conditions that contributed to our net loss for each quarter of 2008 to continue and possibly worsen in 2009, which is likely to cause further reductions in our net worth.

The confessional is very busy ...

by Calculated Risk on 2/26/2009 05:58:00 PM

From Reuters: S&P may cut $140 bln of prime jumbo mortgage deals (ht Brian)

Standard & Poor's said on Thursday it may downgrade 3,279 prime tranches of jumbo residential mortgage-backed deals with a market value of around $140 billion, after increasing its loss expectations for deals issued in 2006 and 2007.

More details from S&P (no link):

Standard & Poor's Ratings Services today placed its ratings on 3,279 classes from 209 U.S. first-lien prime jumbo residential mortgage-backed securities (RMBS) transactions issued in 2006 and 2007 on CreditWatch with negative implications. The affected classes totaled approximately $172.02 billion of original par amount, and have a current principal balance of $139.96 billion.
...
The CreditWatch placements reflect an increase in projected losses for prime jumbo transactions from these vintage years ... Our revised loss projections reflect an increase in our loss severity assumption to 40% from 30% for prime jumbo transactions issued in 2006 and 2007. This change is based on our belief that the influence of continued foreclosures, distressed sales, an increase in carrying costs for properties in inventory, costs associated with foreclosures, and more declines in home sales will depress prices further and lead loss severities higher than we had previously assumed. Additionally, there has been a persistent rise in the level of delinquencies among the prime mortgage loans supporting these transactions. ...

We anticipate reviewing and resolving these CreditWatch actions over the next several weeks.

Just more downgrades coming ...