by Calculated Risk on 7/08/2009 08:38:00 PM

Click on graph for larger image in new window.

Reis reports the strip mall vacancy rate hit 10% in Q2 2009, the vacancy rate since highest since 1992. And rents are cliff diving ...

From Reuters: U.S. mall vacancy rate soars, rent dives - report

During the second quarter, the vacancy rate at U.S. strip malls reached 10 percent, the highest level since 1992, [Reis] said. ... asking rent fell 1.7 percent from a year ago to $19.28 per square foot. Asking rent fell 0.7 percent from the prior quarter. It was the largest single-quarter decline since Reis began tracking quarterly figures in 1999. ... effective rent declined 3.2 percent year-over-year to $17.01 per square foot. Effective rent fell 1.1 percent from the prior quarter.

About 7.9 million square feet of space was returned to the market during the quarter. The amount was second only to the 8.1 million square feet in the first quarter. ... U.S. regional malls ... vacancy rate rose to 8.4 percent, the highest vacancy level since Reis began tracking regional malls in 2000. Asking rents for regional malls continued to deteriorate but at a faster rate, falling 1.4 percent in the second quarter, compared with 1.2 percent in the first. ...

"Right now it looks like all signs are pointing to rents and vacancies, big components of income, getting shot down," [Victor Calanog, director of research for Reis] Inc said. "Until we see stabilization and recovery take root in both consumer spending and business spending and hiring, we do not foresee a recovery in the retail sector until late 2012 at the earliest."

A record decline in rents. Record regional mall vacancies. And no recovery seen in the retail CRE sector "until 2012 at the earliest". Grim.

by Calculated Risk on 7/08/2009 07:18:00 PM

This is definitely "brazen" ...

From CNN: 25 charged in $100 million mortgage fraud

The D.A.'s office said the following banks were ripped off over a four-year period, ending in April: Countrywide, New Century Bank, Saxon Bank, Greenpoint Bank, ABC Bank, Bank of America, Wells Fargo and SunTrust. Some of the defendants were bank employees, according to the D.A.

"The conspirators caused the banks to front millions of dollars to finance purchases of the properties," read a statement from the D.A.'s office. "They then walked away with most of the cash, leaving behind over-valued properties and worthless mortgage papers."

The D.A.'s office described a "particularly brazen sham transaction" where one of the suspects, Stephen Martini, allegedly wrote up a bogus appraisal of $500,000 for a two-family home, but "in reality, the location was a vacant lot."

For more mortgage fraud, here is the Mortgage Fraud blog.

by Calculated Risk on 7/08/2009 04:50:00 PM

Press Release: Joint Statement by Secretary of the Treasury Timothy F. Geithner, Chairman of the Board of Governors of the Federal Reserve System Ben S. Bernanke, and Chairman of the Federal Deposit Insurance Corporation Sheila Bair

Today, the Treasury Department, the Federal Reserve, and the FDIC are pleased to describe the continued progress on implementing these programs including Treasury's launch of the Legacy Securities Public-Private Investment Program.

Financial market conditions have improved since the early part of this year, and many financial institutions have raised substantial amounts of capital as a buffer against weaker than expected economic conditions. While utilization of legacy asset programs will depend on how actual economic and financial market conditions evolve, the programs are capable of being quickly expanded if these conditions deteriorate. Thus, while the programs will initially be modest in size, we are prepared to expand the amount of resources committed to these programs.

Legacy Securities Program

The Legacy Securities program is designed to support market functioning and facilitate price discovery in the asset-backed securities markets, allowing banks and other financial institutions to re-deploy capital and extend new credit to households and businesses. Improved market function and increased price discovery should serve to reinforce the progress made by U.S. financial institutions in raising private capital in the wake of the Supervisory Capital Assessment Program (SCAP) completed in May 2009.

The Legacy Securities Program consists of two related parts, each of which is designed to draw private capital into these markets.

Legacy Securities Public-Private Investment Program ("PPIP")

Under this program, Treasury will invest up to $30 billion of equity and debt in PPIFs established with private sector fund managers and private investors for the purpose of purchasing legacy securities. Thus, Legacy Securities PPIP allows the Treasury to partner with leading investment management firms in a way that increases the flow of private capital into these markets while maintaining equity "upside" for US taxpayers.

Initially, the Legacy Securities PPIP will participate in the market for commercial mortgage-backed securities and non-agency residential mortgage-backed securities. To qualify, for purchase by a Legacy Securities PPIP, these securities must have been issued prior to 2009 and have originally been rated AAA -- or an equivalent rating by two or more nationally recognized statistical rating organizations -- without ratings enhancement and must be secured directly by the actual mortgage loans, leases, or other assets ("Eligible Assets").
...
Legacy Loan Program (this is the second program, and is essentially on hold)

There is a list of approved PPIP firms (no PIMCO!)

And some more info:
To view the Letter of Intent and Term Sheets, please visit link
To view the Conflict of Interest Rules, please visit link
To view the Legacy Securities FAQs, please visit link

by Calculated Risk on 7/08/2009 04:00:00 PM

First, a stick save for the market today (end of day rally) ...

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

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

From CNBC: AmEx CEO: Way Too Early To Call A Recovery

American Express Chief Executive Kenneth Chenault says he has seen signs of stabilization in the economy, but there have not been any signs of improvement yet.

He adds, he is hopeful for a recovery by the second half of 2010, but that is not how he is planning the company's business.

"I think it is way too early to say that we're in an economic recovery," Chenault says, in an interview with CNBC. "I think what is important is that at least what we are seeing is some stabilization. If we think about where things were last fall with the credit markets seizing up, it was a frightening situation. So stability, I think is important, and I think that's been very helpful."

by Calculated Risk on 7/08/2009 03:00:00 PM

From MarketWatch: May consumer credit down in fourth straight month

U.S. consumers reduced their debt in May for the fourth consecutive month, the Federal Reserve reported Wednesday. Total seasonally adjusted consumer debt fell $3.22 billion ... Consumer credit fell in eight of the past ten months. ... This is the longest string of declines in credit since 1991. Credit-card debt had the biggest drop in May, falling $2.86 billion, or 3.7% to $928 billion.

Click on graph for larger image in new window.

This graph shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 1.8% over the last 12 months. The record YoY decline was 1.9% in 1991 - and that record will be broken over the next couple of months.

Note: Consumer credit does not include real estate debt.