by Calculated Risk on 6/29/2011 06:01:00 PM

From Maryann Haggerty at the NY Times: The Post-Foreclosure Wait (ht Ann)

Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

“The key is to avoid the foreclosure,” said Andrew Wilson, a spokesman for Fannie Mae. “That is what will help you be eligible for the shorter period.”

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances.

Mortgage broker "Soylent Green is People" sent me this short summary last month (with many more details):

"Pre-Foreclosure" = Short Sale.

VA - immediate, providing you've got 12 months clean credit.
FHA - 3 years.
Conventional 4 years.

Foreclosure:

VA - 2 years, providing you've got 12 months clean credit AND the loan that was foreclosed was not a VA
FHA - 3 years, providing that the foreclosed loan was not an FHA mortgage
Conventional - 7 years.

Soylent Green is People thinks we will start seeing "bounce back buyers" later this year and in 2012.

by Calculated Risk on 6/29/2011 03:38:00 PM

This will never happen ...

A quote from Reuters: Exclusive: S&P to deeply cut U.S. ratings if debt payment missed

"If the U.S. government misses a payment, it goes to D," [Standard & Poor's managing director John Chambers told Reuters]. "That would happen right after August 4, when the bills mature, because they don't have a grace period."

That would be the first default in U.S. history.

Reuters quotes Chambers as saying that he views the likelihood of a U.S. default as "extremely low," and that he expects a last minute agreement.

Of course there will be a last minute agreement; the debt ceiling is all about political posing.

Here is what I wrote in early May:

Congress will probably push this to the brink, but they will raise the debt ceiling before the country defaults. The first rule for most politicians is to get re-elected, and the easiest way to guarantee losing in 2012 is to throw the country back into recession. If that happened, I believe the voters would correctly blame the leaders of Congress, and I think Congress knows that too. Therefore it won't happen. I'm not worried and neither are investors.

by Calculated Risk on 6/29/2011 12:45:00 PM

LPS Applied Analytics released their May Mortgage Performance data. From LPS:

The May Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that the number of mortgages that are 90 or more days delinquent, combined with the foreclosure inventory at the end of May, totaled 4,084,557. With foreclosure sales at 78,676 at month end, the volume of serious delinquencies and foreclosures over-shadowed the number of foreclosure sales by 50:1. In fact, there are still significantly fewer foreclosure sales than there were before foreclosure moratoria were put into place, and foreclosure sales are declining.

New problem loans, defined as loans that were current six months ago and were 60 or more days delinquent at the end of May, are now less than half the peak levels seen in 2009, and are currently at 1.27%. Overall, when compared to historical norms, delinquencies are almost double and foreclosures are eight times higher.

Negative equity also remains a concern, with nearly 30% of current loans in a negative equity position. The equity impact on new seriously delinquent loans is significant, with loans significantly under-water defaulting up to 10 times as much as loans with equity.

According to LPS, 7.96% of mortgages were delinquent in May, down slightly from 7.97% in April, and down from 9.74% in May 2010.

LPS reports that 4.11% of mortgages were in the foreclosure process, down from 4.14% in April. This gives a total of 12.07% delinquent or in foreclosure. It breaks down as:

• 2.27 million loans less than 90 days delinquent.
• 1.92 million loans 90+ days delinquent.
• 2.16 million loans in foreclosure process.

For a total of 6.35 million loans delinquent or in foreclosure in May.

Click on graph for larger image in graph gallery.

This graph shows the total delinquent and in-foreclosure rates since 1995.

The total delinquent rate has fallen to 7.96% from the peak in January 2010 of 10.97%. A normal rate is probably in the 4% to 5% range, so there is still a long way to go.

However the in-foreclosure rate at 4.11% is barely below the peak rate of 4.21% in March 2011. There are still a large number of loans in this category (about 2.16 million).

This graph provided by LPS Applied Analytics shows the aging for the in-foreclosure bucket.

About 34% of those 2.16 million loans in the foreclosure process have not made a payment in over 2 years. Another 35% have not made a payment in over a year (but less than 2 years).

The good news is there has been some improvement in the early stages, however there are still 4.08 million loans seriously delinquent or in the foreclosure process.

by Calculated Risk on 6/29/2011 10:00:00 AM

• From the NAR: Pending Home Sales Turn Around in May

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April [from 81.9] and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
...
This is the first time since April 2010 that contract activity was above year-ago levels ...

This was very close to Tom Lawler's forecast.

• From the WSJ: Greece Secures Austerity Vote

Greece's Parliament has passed a ... five-year austerity plan ... additional €28.4 billion ($40.81 billion) in spending cuts and new taxes [that] was set as a condition for another international bailout to keep Greece from defaulting on its debt.
...
Greece faces another critical test Thursday, when parliament is set to hold an article-by-article vote on the legislation implementing the austerity plan and a promised €50 billion privatization program.

Another vote tomorrow ...

by Calculated Risk on 6/29/2011 07:26:00 AM

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 2.6 percent from the previous week. The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46 percent from 4.57 percent, with points increasing to 1.19 from 0.91 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year rate recorded in the survey since the middle of November 2010.

The following graph shows the MBA Purchase Index and four week moving average since 1990.

Click on graph for larger image in graph gallery.

The four week average of purchase activity is at about 1997 levels - and mostly moving sideways. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through the next month or two.