by Calculated Risk on 11/25/2009 11:42:00 PM

From the WaPo: Fannie Mae to tighten lending standards (ht Ann, Pat, Tim)

Starting Dec. 12, the automated system that Fannie Mae uses to approve loans will reject borrowers who have at least a 20 percent down payment but whose credit scores fall below 620 out of 850. Previously, the cut-off was 580.

Also, for borrowers with a 20 percent down payment, no more than 45 percent of their gross monthly income can go toward paying debts. Fannie declined to disclose the previous threshold, except to say that it was higher. ...

Brian Faith, a Fannie Mae spokesman, said ... Loans to people with credit scores below 620 fell seriously behind at a rate approximately nine times higher than other loans purchased in the same period ...

This change will only impact a small percentage of Fannie Mae loans. I'm surprised they still allow debt payments to be as high as 45% of gross income - that seems a little loose and leaves the borrowers house poor.

by Calculated Risk on 11/25/2009 10:14:00 PM

A short excerpt from the WSJ Developments: Think Twice About Cheering New Home Sales

Already, builders report weak November traffic. One private builder in Raleigh, N.C. - long considered a strong market because of tech and higher-education employers - reports no shoppers in the first week, according to John Burns Real Estate Consulting.

I've heard similar reports from real estate agents that the first two weeks of November were exceptionally weak, but that the phones started ringing again once the word spread that the tax credit had been extended.

I wouldn't be surprised by a dip in New home sales in November - although existing home sales will probably still be fairly strong from people buying in September (existing home sales are reported at the close of escrow).

by Calculated Risk on 11/25/2009 07:08:00 PM

Jim shows a property and interviews the investor. The investor recently bought the property for $590,000 on the court house steps, and sold it fairly quickly for $685,000.

by Calculated Risk on 11/25/2009 05:10:00 PM

From the U.S. Courts: Bankruptcy Filings Up 34 Percent over Last Fiscal Year

Bankruptcy cases filed in federal courts for fiscal year 2009 totaled 1,402,816, up 34.5 percent over the 1,042,993 filings reported for the 12-month period ending September 30, 2008, according to statistics released today by the Administrative Office of the U.S. Courts.

The federal Judiciary’s fiscal year is the 12-month period ending September 30. The bankruptcies reported today are for October 1, 2008 through September 30, 2009.
...
For the 12-month period ending September 30, 2009, business filings totaled 58,721, up 52 percent from the 38,651 business filings in the 12-month period ending September 30, 2008. Non-business filings totaled 1,344,095, up 34 percent from the 1,004,342 non-business bankruptcy filings in September 2008.

Click on graph for larger image in new window.

This graph shows the bankrutpcy filings over the last year per 1,000 population by states and territories.

Nevada makes sense with close to 70% of homeowners underwater. And Michigan is the state with the highest unemployment rate, and a large percentage of homeowners underwater. But I'm not sure why Tennessee is #2.

by Calculated Risk on 11/25/2009 03:26:00 PM

Here is more on the "distressing gap" between existing and new home sales.

The following graph shows the ratio of existing home sales divided by new home sales through October.

Click on graph for larger image in new window.

This ratio has increased again to a new all time high.

The ratio of existing to new home sales increased at first because of the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn't compete with the low prices of all the foreclosed properties.

The recent increase in the ratio was due primarily to the timing of the first time homebuyer tax credit (before the extension). New home sales are counted when the contract is signed, and usually before construction begins. So to close before the original Dec 1st deadline, the contract had to be signed early this Summer (that might explain the dip in the ratio earlier this year).

Existing home sales are counted when escrow closes, and escrow usually takes less than 60 days. So the recent surge in sales were boosted by buyers rushing to beat the tax credit. And this has pushed the ratio to a new record.

The second graph shows the same information with existing home sales (left axis), and new home sales (right axis). This is updated through the October data released this morning.

Although distressed sales will stay elevated for some time, I expect this gap to eventually close.

The ratio could decline because of an increase in new home sales, or a decrease in existing home sales - I expect a combination of both.