by Calculated Risk on 6/02/2009 08:42:00 AM

NY Times Editorial: Foreclosures: No End in Sight

A continuing steep drop in home prices combined with rising unemployment is powering a new wave of foreclosures. Unfortunately, there’s little evidence, so far, that the Obama administration’s anti-foreclosure plan will be able to stop it.
...
One of the biggest problems is that the plan focuses almost entirely on lowering monthly payments. But overly onerous payments are only part of the problem. For 15.4 million “underwater” borrowers — those who owe more on their mortgages than their homes are worth — a lack of home equity puts them at risk of default, even if their monthly payments have been reduced. They have no cushion to fall back on in the event of a setback, like job loss or illness.
...
There will be no recovery until there is a halt in the relentless rise in foreclosures. Foreclosures threaten millions of families with financial ruin. By driving prices down, they sap the wealth of all homeowners. They exacerbate bank losses, putting pressure on the still fragile financial system. Lower monthly payments are a balm, but they are no substitute for home equity. And until more Americans can find a good job and a steady paycheck, the number of foreclosures will continue to rise.

In previous housing busts, foreclosures continued to rise until prices finally bottomed. And prices will fall - and foreclosures rise - for some time. There is no end in sight.

by Calculated Risk on 6/02/2009 12:22:00 AM

Here is an open thread for discussion.

The automakers will release May sales results Tuesday. There is a good chance that sales in May were below the February 9.3 million seasonally adjusted annual rate (SAAR). To find a lower sales month, we need to go back to December 1981: 9.05 million SAAR. May could be the lowest sales month since 1970 ...

U.S. futures are flat.

Futures from barchart.com

Bloomberg Futures.

CBOT mini-sized Dow

CME Globex Flash Quotes

And the Asian markets are almost up 1% or so.

Best to all.

by Calculated Risk on 6/01/2009 09:30:00 PM

Just some excerpts ...

From the WSJ: Filings Reveal Depth of Problems

General Motors Corp.'s $82.2 billion in assets and $172 billion in liabilities spell out the extent of its problems and sheer breadth of the 101-year-old giant's bankruptcy.

In a torrent of filings at the U.S. Bankruptcy Court in Manhattan, GM's mind-numbing scale is evident: It has 463 subsidiaries and has built 450 million cars and trucks over the years. It employs 235,000 people worldwide. This includes 91,000 in the United States, which it pays $476 million each month, and 493,000 retirees with various benefits. It spends $50 billion a year buying parts and services from 11,500 vendors in North America.

More details from Bloomberg: GM Files Bankruptcy to Spin Off More Competitive Firm

From the WSJ: GM to Announce Tentative Hummer Sale

General Motors Corp., fresh off filing for bankruptcy protection Monday, will start its second day of court proceedings by announcing the tentative sale of the Hummer brand ...

Auto sales for May will be announced tomorrow. The bankruptcy of Chrysler - and now GM - will probably depress auto sales further for a few months, although probably not by much.

by Calculated Risk on 6/01/2009 06:29:00 PM

From the LA Times: Property tax relief coming for more than 330,000 L.A. County homeowners

... The Los Angeles County assessor’s office this morning announced that it has finished an automatic review of assessments for 473,000 homes purchased between July 1, 2003 and June 30, 2008 -- which account for about 28% of homes countywide.

County officials reduced assessments on about 70% of properties reviewed. Homeowners getting a break should soon get a letter in the mail. The average property tax savings is $1,400 for owners of single family homes and $1,100 for condominium owners, county officials said.

Those receiving reductions included owners of 256,000 single family homes and 77,000 condo owners. The average reduction in value was $126,000 for single family homes; $96,000 for condos.

The reduction in assessments means a loss of $440 million in tax revenue, a 1% drop county officials anticipated in last month’s proposed budget, said Assessor Rick Auerbach.

According to the Case-Shiller home price index, prices in Los Angeles are back to the July 2003 level, and I'd think that just about every home purchased between July 2003 and July 2008 would be worth less today - not just 70%. Unfortunately for homeowners - and tax collectors - prices will probably fall further.

The good news is only 28% of all homes in Los Angeles county were purchased during the height of the bubble! Of course other homeowners probably used the Home ATM (cash out refinance or HELOC) and are underwater too.

by Calculated Risk on 6/01/2009 04:28:00 PM

Note: this is for the 19 largest banks.

The first repayments will be announced next week (the week of June 8th)

Banks must demonstrate the ability to access the debt markets without the aid of the FDIC (although it appears previous FDIC TLGP doesn't have to be repaid).

Banks must demonstrate the ability to access the equity markets.

From the Fed:

The Federal Reserve Board on Monday outlined the criteria it will use to evaluate applications to redeem U.S. Treasury capital from the 19 bank holding companies (BHC) that participated in the Supervisory Capital Assessment Program (SCAP).

Redemption approvals for an initial set of these large bank holding companies are expected to be announced during the week of June 8. Applications will be evaluated periodically thereafter. Any banking organization wishing to redeem U.S. Treasury capital must first obtain approval from its primary federal supervisor, which then forwards approved applications to the Treasury Department.

Any BHC seeking to redeem U.S. Treasury capital must demonstrate an ability to access the long-term debt markets without reliance on the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program (TLGP), and must successfully demonstrate access to public equity markets.

In addition, the Federal Reserve's review of a BHC's application to redeem U.S. Treasury capital will include consideration of the following:

•Whether a BHC can redeem its Treasury capital and remain in a position to continue to fulfill its role as an intermediary that facilitates lending to creditworthy households and businesses;
•Whether, after redeeming its Treasury capital, a BHC will be able to maintain capital levels that are consistent with supervisory expectations;
•Whether a BHC will be able to continue to serve as a source of financial and managerial strength and support to its subsidiary bank(s) after the redemption; and
•Whether a BHC and its bank subsidiaries will be able to meet its ongoing funding requirements and its obligations to counterparties while reducing reliance on government capital and the TLGP.

Finally, all BHCs must have a robust longer-term capital assessment and management process geared toward achieving and maintaining a prudent level and composition of capital commensurate with the BHC's business activities and firm-wide risk profile.
emphasis added