by Calculated Risk on 3/04/2009 06:19:00 PM

I'm back from my civic duty, and starting to read the newly released details of the Mortgage Modification Plan. The second mortgage sections are interesting.

This first reference to 2nd liens seems to be part of Home Affordable Refinance Program (Part I of the plan).

From the Making Home Affordable, Updated Detailed Program Description Fact Sheet

Second Liens: While eligible loan modifications will not require any participation by second lien holders, the program will include additional incentives to extinguish second liens on loans modified under the program, in order to reduce the overall indebtedness of the borrower and improve loan performance. Servicers will be eligible to receive compensation when they contact second lien holders and extinguish valid junior liens (according to a schedule to be specified by the Treasury Department, depending in part on combined loan to value). Servicers will be reimbursed for the release according to the specified schedule, and will also receive an extra $250 for obtaining a release of a valid second lien.

So the 2nd lien holder will have a choice: do nothing, or take some unspecified compensation to extinguish the 2nd.

Then there is this section that seems to be in Part II: Home Affordable Modification Program Housing Counselor Q&As:

What if the borrower has a second mortgage and would like to apply for a Home Affordable Modification?

Under the Home Affordable Modification program, junior lien holders will be required to subordinate to the modified loan. However, through the Home Affordable Modification an incentive payment of up to $1,000 is available to pay off junior lien holders. Servicers are eligible to receive an additional $500 incentive payment for efforts made to extinguish second liens on loans modified under this program.

Is that saying they will pay the 2nd holder up to $1000 under Part II?

Note: Part I is the section allowing homeowner with Fannie and Freddie held mortgages to refinance upto 105% LTV. This section makes sense since this lowers Fannie and Freddie's risk on loans they already own or guarantee. Under Part II the lender must bring the total monthly payments on mortgages to 38% of the borrowers gross income, and then the U.S. will match dollar for dollar from 38% down to 31% debt-to-income ratio for the borrower.

by Calculated Risk on 3/04/2009 05:00:00 PM

From the LA Times: As projects grind to a halt, home sites turn to wasteland

By day, it's far too quiet at the site of a planned housing and retail development on a former Navy base in Oakland.

At night, neighbors can hear the thieves come out.

They rip out copper wire, haul away pipes and take anything else they can steal from dozens of buildings on the site, abandoned after Irvine developer SunCal Cos. fell victim to the economy.

It's a scene not uncommon throughout California...

"I hear hacking and see scary bonfires in the middle of the night," said Don Johnson, a retired Coast Guard employee who lives near the defunct Oak Knoll Naval Medical Center in Oakland.

Nearly 250 residential developments with a combined total of 9,389 houses and condominiums have been halted in California, according to research firm Hanley Wood Market Intelligence. The units, worth close to $3.5 billion, were in various stages of development.

Some of these units have been mothballed (with fences and guards), others essentially abandoned. This is just more supply waiting for the market to improve.

by Calculated Risk on 3/04/2009 03:59:00 PM

The Fed may say the economy has weakened (see Beige Book), but the markets rebounded today ...

Dow up 2.2%

S&P 500 up 2.4%

NASDAQ up 2.5%

Back to full posting later today ...

by Calculated Risk on 3/04/2009 03:00:00 PM

Beige book:

Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February. Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies "remained weak." The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions. Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010.

And on real estate:

Residential real estate markets remained in the doldrums in most areas, with only scattered, very tentative signs of stabilization reported. The pace of sales remained very low in most areas and declined further in some; most Districts reported small declines, but New York cited a sales drop of 60 to 65 percent in Manhattan compared with twelve months earlier. By contrast, Cleveland, Richmond, Dallas, and San Francisco each reported a rising or better-than-expected sales pace for existing or new homes in some areas, attributed largely to falling prices and improved financing terms for some types of home mortgages. House prices continued to decline, reportedly at double-digit paces in some areas, with little or no signs of a deceleration evident. Builders in various Districts generally remain pessimistic regarding recovery prospects this year, and consequently the pace of new home construction declined further in most areas.

Demand for commercial, industrial, and retail space fell further during the reporting period, with some evidence of more rapid deterioration than in preceding periods. Vacancy rates rose and lease rates declined on a widespread basis; New York noted that commercial real estate markets "weakened noticeably," while Atlanta described reports on commercial real estate that were "decidedly more negative" than in previous periods. Construction activity has declined commensurately, and assorted reports suggest that market participants expect this weakness to continue at least through the end of 2009. Cleveland noted that public works projects have shown stability of late, although they declined in the San Francisco District as a result of the budgetary struggles of some state and local governments there. Credit constraints and uncertainty were reported to be a drag on commercial construction and leasing activity in the Philadelphia, Chicago, Dallas, and San Francisco Districts.
emphasis added

Grim outlook, especially for CRE. (sorry for slow post, I'm on jury duty!)

by Calculated Risk on 3/04/2009 11:49:00 AM

I don't have much confidence in the ADP numbers, but here they are anyway ...

From CNBC: ADP Shows Record Job Losses; Planned Layoffs Down

ADP said on Wednesday that private employers cut 697,000 jobs in February versus a revised 614,000 jobs lost in January.

The January job cuts were originally reported at 522,000.

It was the biggest job loss since the report's launch in 2001 ...

And on the Challenger layoff report:

[P]lanned layoffs at U.S. firms fell 23 percent in February from January's seven-year peak, but remained well above long term averages as the protracted U.S. recession took a heavy toll on employment, ...

"The decline in job cuts last month offers some hope that January was the peak and we will now see layoffs begin to fall or at least stabilize," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, in a statement.

But he said monthly job cuts may remain above 100,000 in the first half of the year and possibly for the rest of 2009.

The consensus for the BLS report on Friday is about 650,000 fewer jobs, but I've seen some forecast much higher (in the 850,000 range). We can be pretty sure the number will be very ugly.