by Calculated Risk on 2/19/2010 04:36:00 PM

From WLWT.com: Frustrated Owner Bulldozes Home Ahead Of Foreclosure (ht Philip, Rob Dawg)

[Terry Hoskins] used a bulldozer two weeks ago to level the home he'd built, and the sprawling country home is now rubble, buried under a coating of snow.

"As far as what the bank is going to get, I plan on giving them back what was on this hill exactly (as) it was," Hoskins said. "I brought it out of the ground and I plan on putting it back in the ground."

Hoskins' business in Amelia is scheduled to go up for auction on March 2, and he told Fuller he's considering leveling that building, too.

There is a video at the link above and here are some photos.

From Diana Olick at CNBC: Housing Bailout Grows

Today President Obama stood in Nevada, ground zero for the foreclosure crisis, a state with 13 percent unemployment, and announced another pricey program to keep borrowers in their homes.

... This one gives $1.5 billion to the hardest hit states ... to "help address the problems facing the hardest hit housing markets." White House officials describe this as states that have "suffered an average home price drop of over 20 percent from the peak."

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner). His comments:

This chart is an offshoot of my Four Bad Bears. It shifts the point of alignment from the pre-bear highs to the bear bottom in the Oil Crisis and Tech Crash, the first major low in the 1929 Dow, and the March 9th closing low for our current Financial Crisis.

As the chart illustrates, the S&P 500 lows in 1974 and 2002 marked the beginnings of sustained recoveries. The Dow low in 1929 failed 11 months later.

by Calculated Risk on 2/19/2010 02:28:00 PM

In early 2008 there was sharp drop in U.S. vehicle miles driven. That was one of the key signs of demand destruction for oil that led me to predict oil prices would decline sharply in the 2nd half of 2008.

With oil prices at $77 per barrel, I've started looking for possible signs of demand destruction again (see: Oil Prices Push Above $81 per Barrel).

The Department of Transportation (DOT) reports that vehicle miles driven in December were unchanged from December 2008:

Travel on all roads and streets changed by 0.0% (-0.1 billion vehicle miles) for December 2009 as compared with December 2008. ... Cumulative Travel for 2009 changed by +0.2% (6.6 billion vehicle miles).

Click on graph for larger image in new window.

This graph shows the comparison of month to the same month in the previous year as reported by the DOT.

As the DOT noted, miles driven in Dovember 2009 were unchanged compared to December 2008, and miles driven have declined 1.0% compared to December 2007 - and are down 3.2% compared to December 2006. This is a multi-year decline.

So far there is no evidence of significant demand destruction for oil, however the lack of growth in miles driven is suggesting a sluggish recovery.

by Calculated Risk on 2/19/2010 12:11:00 PM

Much was made this morning about the decline in the 30 day delinquency "bucket" (percent of loans between 30 and 60 days delinquent). Hopefully this graph will put the problem in perspective ...

Click on graph for larger image in new window.

Loans 30 days delinquent are still elevated, and still above the levels in 2007 - and at about the level of early 2008 - when prices were falling sharply.

The 60 day bucket also declined in Q4, but it is still above the levels of 2008.

As MBA Chief Economist Jay Brinkmann noted, the 90 day and 'in foreclosure' rates are at record levels. Obviously the lenders have been slow to start foreclosure proceedings - and the 90+ day delinquent bucket is now very full. And lenders have been slow to actually foreclose - and the 'in foreclosure' bucket is at record levels.

What impacts prices are distress sales; homes coming out of the 'in foreclosure' bucket without being cured. Since the lenders slowed foreclosures to a trickle, prices have stabilized or even increased slightly in some areas.

But these record levels of long term delinquencies are why Brinkmann cautioned about house prices. This morning he pointed out on the conference call that there are a record 4.5 million homes seriously delinquent or in foreclosure. The loans on some of these homes will be cured - perhaps by HAMP modifications of by other lender modification programs - but many of these homes will go to foreclosure or be sold as short sales putting pressure on house prices.

by Calculated Risk on 2/19/2010 11:17:00 AM

On the MBA conference call concerning the "Q4 2009 National Delinquency Survey", MBA Chief Economist Jay Brinkmann said this morning:

A decline in 30 day delinquencies. "Solid indications of fewer new problems coming into the system".

Long term delinquencies are a serious problem. 90+ delinquency and foreclosure inventory are both at records.

Long term delinquencies are heavily a prime fixed rate loan problem (since prime fixed rate loans are about 2/3 of all mortgages). These are difficult loans to modify, because it is not a payment change issue, but more related to unemployment and loss of income.

Brinkmann says foreclosures will stay elevated for some time (several years). Brinkmann says we might see a gradual decline starting in the 2nd half of 2010.

In an answer to a question on house prices, Brinkmann noted that 4.5 million homes seriously delinquent or in foreclosure will impact house prices in the short term.

Does not think Option ARMs will be a "tidal wave" of defaults. (This is my view too)

Brinkmann expects a steady increase in mortgage rates beginning in April after the Fed's MBS program ends.

A few graphs ...

Click on graph for larger image in new window.

The first graph shows the delinquency and foreclosure rates for all prime loans.

This is a record rate of prime loans in delinquency and foreclosure (tied with Q3 2009).

Prime loans account for over 75% of all loans.

"We're all subprime now!"

NOTE: Tanta first wrote this saying in 2007 in response to the 'contained to subprime' statements.

The second graph shows just fixed rate prime loans (about 66% of all loans).

This is a new record for prime fixed rate loans.

Note that even in the best of times (with rapidly rising home prices in 2005), just over 2% of prime FRMs were delinquent or in foreclosure. However the cure rate was much higher back then since a delinquent homeowner could just sell their home.

The third graph shows the delinquency and in foreclosure process rates for subprime loans.

Although the total has declined, about 40% of subprime loans are still delinquent or in foreclosure.

Much was made about the decline in 30 day delinquencies, and this is potentially "good" news. But 1) the level is still very high (3.31%), and 2) a decline happened in Q4 2007 too - and then the rate started rising again, and 3) this is probably related to the slight increase in house prices in many areas.

by Calculated Risk on 2/19/2010 10:00:00 AM

The MBA reports 14.05 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q4 2009. This is a slight decrease from 14.11% (edit) in Q3 2009, and an increase from 13.5% in Q2 2009 (note: older data was revised).

From the MBA: Delinquencies, Foreclosure Starts Fall in Latest MBA National Delinquency Survey

The delinquency rate for mortgage loans on one-to-four unit residential properties fell to a seasonally adjusted rate of 9.47 percent of all loans outstanding as of the end of the fourth quarter of 2009, down 17 basis points from the third quarter of 2009, and up 159 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 50 basis points from 9.94 percent in the third quarter of 2009 to 10.44 percent this quarter.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.58 percent, an increase of 11 basis points from the third quarter of 2009 and 128 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 15.02 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.20 percent, down 22 basis points from last quarter and up 12 basis points from one year ago. The percentages of loans 90 days or more past due and loans in foreclosure set new record highs. The percentage of loans 30 days past due is still below the record set in the second quarter of 1985.

“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007, continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding, and culminated with a recession that saw 8.5 million people lose their jobs,” said Jay Brinkmann, MBA’s chief economist.

I'll have notes from the conference call and graphs soon.