by Calculated Risk on 12/03/2009 08:36:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Nov. 28, the advance figure for seasonally adjusted initial claims was 457,000, a decrease of 5,000 from the previous week's revised figure of 462,000 [revised from 466,000]. The 4-week moving average was 481,250, a decrease of 14,250 from the previous week's revised average of 495,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending Nov. 21 was 5,465,000, an increase of 28,000 from the preceding week's revised level of 5,437,000. The 4-week moving average was 5,541,500, a decrease of 75,750 from the preceding week's revised average of 5,617,250.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 14,350 to 481,250. This is the lowest level since last November.

Although falling, the level is still high suggesting continuing job losses.

by Calculated Risk on 12/03/2009 12:00:00 AM

From the WSJ Real Time Economics: The Fed’s Market’s Guy Eyes Asset Sales and Rate Increases (ht Paul)

Brian Sack, who runs the markets group of the Federal Reserve Bank of New York, spoke to the Money Marketeers of New York University ...

Mr. Sack’s group estimates that the Fed’s purchases of $300 billion in long-term Treasury securities earlier this year helped to push yields on 10-year Treasury notes down by about half a percentage point. ... Purchases of mortgage backed securities, he says, pushed those rates down by a full percentage point.

This is significantly higher than my estimate of 35 to 50 bps and suggest mortgage rates might rise sharply next spring (the MBS purchase program is scheduled to conclude by the end of the first quarter of 2010).

Update: Apparently Sack's might have been referring to the decline from the peak of the panic (not clear from the brief excerpt). Of course the purchases started in January - months after the peak of the panic - and that isn't what people are interested in.

by Calculated Risk on 12/02/2009 08:59:00 PM

James Pethokoukis at Reuters provides excerpts from the most recent Goldman Sachs forecast and writes about the political implications, but the economic implications are also significant. From Goldman:

The key features of our 2011 outlook: (1) a strengthening in growth from 2.1% on average in 2010 to 2.4% in 2011, with real GDP rising at an above-potential 3½% pace in late 2011; (2) a peaking in unemployment in mid-2011 at about 10¾%; (3) extremely low inflation – close to zero on a core basis during 2011; and (4) a continuation of the Fed’s (near) zero interest rate policy (ZIRP) throughout 2011.

You read that right. 2011.

by Calculated Risk on 12/02/2009 05:55:00 PM

Update: Press Release from BofA: Bank of America to Repay Entire $45 Billion in TARP to U.S. Taxpayers

From CNBC: Bank of America Out of TARP, Says Gasparino (ht Mr. Mortgage)

CNBC’s Charlie Gasparino tells the desk that Bank of America is going to repay $45 billion and get out of the TARP program.

And they will raise capital over the next few days, he adds.

From the WSJ: Bank of America to Repay $45 Billion in TARP

The bank plans to raise about $20 billion in new capital ... a move required by federal regulators to ensure the bank has sufficient capital reserves and won't need to come back to the government for additional aid.

by Calculated Risk on 12/02/2009 04:01:00 PM

Here is Secretary Donovan's testimony (pdf). The following are the Next Steps for the FHA. Key points:

Focus on enforcement and lender accountability

Reduce the maximum seller concession from 6% to 3%.

Raise the minimum FICO score.

Increase the up-front cash for borrower (it isn't clear if this is an increase in the downpayment, currently a minimum of 3.5%, or requiring the borrower to pay more fees).

Increase FHA insurance premiums.

The proposed changes will be announced by the end of January.

[T]he first set of policy changes we are proposing will focus on enforcement and lender accountability. We will step up efforts to ensure lenders assume responsibility for any losses associated with loans not underwritten to FHA standards.

We will hold lenders accountable for their origination quality and compliance with FHA policies, increasing our review of mortgagee compliance with FHA program requirements.

And we intend to expand enforcement for new loans as well. That includes requiring lenders to indemnify the FHA fund for their own failures to meet FHA requirements, and holding lenders accountable nationally for any improper activities, as we are presently limited to sanctioning individual branches.

We will also develop a Lender Scorecard that will summarize the performance of lenders who do business with the FHA. This scorecard will be posted on our website to ensure transparency and accountability for lenders, borrowers and the market.

Of course, all these steps are designed to hold lenders accountable for their origination quality and compliance with FHA policies. And as always, Ginnie Mae securities that are backed by FHA-guaranteed loans will continue to be fully covered by the full faith and credit of the U.S. government.

In addition to stepping up enforcement and accountability, which will improve the performance of both the existing and future books of business, we are committed to a series of additional steps to increase the quality of our business going forward.

An initial measure is to reduce the maximum permissible seller concession from its current 6 percent level to 3 percent, which is in line with industry norms, and we will continue to consider additional reductions. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value.

Secondly, to protect the fund from the riskiest borrowers, we will for the time being also raise the minimum FICO score for new FHA borrowers.

We are currently analyzing what this floor should be, including the relationship between FICO scores and downpayments to determine whether we should increase FICO minimums in combination with changes to other underwriting criteria for lower downpayment loans.

Third, we have made the decision to exercise our authority to increase the up-front cash that a borrower has to bring to the table in an FHA-backed loan – to make sure that FHA borrowers have more “skin in the game” and a stronger equity position in their loans. There are several ways to accomplish this, and so we are currently analyzing various options to determine which is the most effective and consistent with our mission.

Finally, we are examining our mortgage insurance premium structure to determine whether an increase is needed and, if so, whether it should be the up-front premium, the annual premium or both. Our current up-front premium of 1.75 percent is below the statutory cap of 3 percent, while the annual premium is currently at the statutory maximum. To protect against future uncertainty in market conditions, we are requesting authority from Congress to raise annual premiums, as this is one of the most effective means of raising capital for the fund with the least impact per borrower.

Indeed, while most of these changes I’ve just described we can make on our own with no additional authority—and we expect to provide detail and public guidance for these changes by the end of January—in some cases, we will need Congress’ help. In addition to asking Congress to increase the current cap on the annual mortgage insurance premium for new borrowers, we are asking for additional authority for our proposals to hold all FHA lenders responsible for their fraud or misrepresentations by indemnifying the FHA fund. We will also be asking Congress to expand FHA’s ability to hold lenders accountable nationally for their performance as I mentioned earlier.