by Calculated Risk on 5/09/2012 10:47:00 AM

This morning Fannie Mae reported results for Q1 2012.

Fannie Mae (FNMA/OTC) today reported net income of $2.7 billion in the first quarter of 2012, compared to a net loss of $6.5 billion in the first quarter of 2011 and a net loss of $2.4 billion in the fourth quarter of 2011. The significant improvement in the company’s financial results in the first quarter of 2012 was due primarily to lower credit-related expenses, resulting from a less significant decline in home prices, a decline in the company’s inventory of single-family realestate owned (“REO”) properties coupled with improved REO sales prices, and lower single-family serious delinquency rates. Fannie Mae does not require funding from Treasury for the first quarter of 2012.

Fannie reported that they acquired 47,700 REO in Q1 (Real Estate Owned via foreclosure or deed-in-lieu) and disposed of 52,071 REO. Fannie has sold more REO than they acquired for six consecutive quarters (acquisitions slowed because of the process issues, but dispositions picked up sharply in 2011).

This has been true for most lenders - they have been selling more REO than they have been acquiring - and the overall REO inventory has been falling.

The following graph shows Fannie REO inventory, acquisitions and dispositions over the last several years.

Click on graph for larger image.

When the red line is above the blue line, dispositions are higher than acquisitions, and REO inventory declines. REO inventory declined by 25% from Q1 2011, and is down 3.7% from last quarter.

A few comments from Fannie:

The ongoing weak economy, as well as high unemployment rates, continues to result in a high level of mortgage loans that transition from delinquent to REO status, either through foreclosure or deed-in-lieu of foreclosure. Our foreclosure rates remain high; however, foreclosure levels were lower than they would have been during the first quarter of 2012 due to delays in the processing of foreclosures caused by continuing foreclosure process issues encountered by our servicers and changing legislative, regulatory and judicial requirements. The delay in foreclosures, as well as an increase in the number of dispositions of REO properties, has resulted in a decrease in the inventory of foreclosed properties since December 31, 2010.

The second graph shows the combined REO inventory for Fannie, Freddie and the FHA (FHA through Feb 2012).

The combined REO inventory is down to 203 thousand in Q1 2012, down about 18% from Q1 2011.

The pace of REO aquisitions will probably increase following the mortgage servicer settlement (signed off on April 5th); and dispositions will probably increase too.

by Calculated Risk on 5/09/2012 08:35:00 AM

Form the MBA:Mortgage Applications Increase in Latest MBA Weekly Survey

Increases to the seasonally adjusted Market Composite and Purchase indices were driven by increases in their Conventional components. Application activity within the Government market decreased for both of these measures from last week. Likewise, the Refinance Index increased 1.3 percent from the previous week, driven by a 1.8 percent increase to the Conventional Refinance Index, while the Government Refinance Index decreased 2.3 percent. The seasonally adjusted Purchase Index increased 3.4 percent from one week earlier, spurred by a 5.4 percent increase in the seasonally adjusted Conventional Purchase Index.
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The refinance share of mortgage activity decreased to 72.1 percent of total applications from 72.6 percent the previous week. This is the lowest refinance share since April 6, 2012. The government purchase share decreased over the week from 37.0 percent to 35.8 percent of all purchase applications. This is the lowest government purchase share since March 27, 2009.
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The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.01 percent from 4.05 percent,with points decreasing to 0.41 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. This is the lowest 30-year fixed interest rate recorded in the history of the survey
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The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.29 percent from 3.31 percent, with points decreasing to 0.32 from 0.41 (including the origination fee) for 80 percent LTV loans. This is the lowest 15-year fixed interest rate recorded in the history of the survey.

by Calculated Risk on 5/08/2012 09:45:00 PM

There are two minor economic indicators scheduled for release tomorrow.

• The Mortgage Bankers Association (MBA) will release the mortgage aplications index.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for March will be released.

Last Friday I discussed the significant decline in government jobs over the last few years, and posted a graph comparing public sector job gains (and losses) for President George W. Bush's first term (following the stock market bust), and for President Obama's current term (following the housing bust and financial crisis). The Bush term was added for comparison purposes only, and there are many differences between the two periods.

A big difference between Mr. Bush's first term and Mr. Obama's presidency has been public sector employment. The public sector grew during Mr. Bush's term (up 900,000 jobs), but the public sector has declined since Obama took office (down 607,000 jobs). These job losses are at the state and local level, although the Federal government has been losing jobs over the last year. These job losses have been a significant drag on overall employment.

It appears the state and local public sector job losses are slowing, and it is likely that the decline in state and local public payrolls will end mid-year 2012. However the Federal government jobs losses will probably continue.

Here are two interesting posts on government workers:

• From the FT Alphaville: Fact of the day, US government workers edition

Government workers account for 9.1% of the working age population, equaling the lowest share on record. When this government employment share of the population was last witnessed in 1984, it was alleviated in part by a massive surge in government spending, with yearly real federal spending topping out at 10.6% in 1985. Yet such an offset seems unlikely in the quarters ahead, as major government spending increases in the current political climate are verboten.

That’s via Moody’s Analytics, and this is mostly a state and local government story, with federal government jobs staying roughly flat since the end of the recession when excluding temporary census hiring.

The only silver lining is that the decline might have bottomed ...

• From the WSJ: Unemployment Rate Without Government Cuts: 7.1%

The unemployment rate would be far lower if it hadn’t been for those [government] cuts: If there were as many people working in government as there were in December 2008, the unemployment rate in April would have been 7.1%, not 8.1%.

For the monthly economic question contest, here are two question for later this week (Thursday and Friday):

by Calculated Risk on 5/08/2012 06:55:00 PM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities. Prices, as of the February Case-Shiller report, were off 61.7% from the peak according, and off 8.6% over the last year.

Sales in 2011 were at record levels - even more than during the bubble - and it looks like 2012 will be an even stronger year, even with some new rules that slow the foreclosure process.

From the GLVAR: GLVAR reports local home prices increased for third straight month, as supply of homes for sale continues to shrink

Even with fewer homes to sell,[ GLVAR President Kolleen] Kelley said existing home sales remain ahead of the record pace set in 2011, when GLVAR reported that 48,186 existing properties were sold in Southern Nevada.
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According to GLVAR, the total number of local homes, condominiums and townhomes sold in April was 3,924. That’s down from 4,388 in March, but still up from 3,902 total sales in April 2011.
...
The local housing inventory, which was already tightening throughout 2011, began to contract more rapidly after Oct. 1, 2011, when a new state law known as AB284 took effect, requiring lenders to prove they have all the necessary documents in place before proceeding with a foreclosure. Since Oct. 1, Kelley said there has been a dramatic drop in the notices of default lenders file to begin the foreclosure process and in the number of bank-owned homes put on the market in Southern Nevada.
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The total number of homes listed for sale on GLVAR’s Multiple Listing Service again decreased from March to April, with a total of 17,884 single-family homes listed for sale at the end of the month. That’s down 1.7 percent from 18,200 single-family homes listed for sale at the end of March and down 20.3 percent from one year ago ... GLVAR reported a total of 3,836 condos and townhomes listed for sale on its MLS at the end of April. That’s down 1.7 percent from 3,901 condos and townhomes listed at the end of March, and down 27.8 percent from one year ago. As in past months, the number of available homes listed for sale without any sort of pending or contingent offer also dropped sharply compared to the previous month and year. By the end of April, GLVAR reported 4,162 single-family homes listed without any sort of offer. That’s down 15.1 percent from 4,901 such homes listed in March and down 63.4 percent from one year ago.

Some of the decline in inventory is related to the new rules, but the decline in active listing (not pending or contingent) is down 63.4% year-over-year for single family homes!

by Calculated Risk on 5/08/2012 03:47:00 PM

It appears no party will be able to form a coalition government, so there will be another election in June. A record large number of registered voters didn't vote in the recent election, and the outcome next month probably depends on if these people participate in June. The odds of Greece exiting the euro zone in the near term (and the euro) have clearly increased.

From the WSJ: New Election in Greece Looks Likely

Greece's political turmoil showed no signs of abating Tuesday as hopes faded that leading political parties can form a coalition government after Sunday's splintered election result, increasing the possibility that Greeks will be called back to the polls as early as next month.
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At stake is Greece's ability to implement next month agreed budget cuts and overhauls it must take in order to secure continued financing from its European partners and the International Monetary Fund. Failure to do so could delay—and potentially imperil—further aid promised to Greece as part of a €130 billion ($170 billion) bailout agreed only in March, rendering the country unable to meet its obligations.

From the NY Times: Greek Leftists Rule Out Coalition With Incumbents

Greece’s post-election political and economic chaos deepened on Tuesday, when the leader of a leftist anti-austerity party that gained in the balloting ruled out a coalition with the two formerly dominant parties that had backed hugely unpopular budget cuts.

The announcement raised further doubts about the country’s future in the euro zone, as well as fears about the stability of the common currency itself.

From the Athens News: Elections 2012: Live news blog, May 8

6.24pm An article making the rounds about the Eurozone surviving without Greece can be read here. Over the past couple of days, articles such as this one have been flooding media outlets. While it is nothing that we haven't read before, it makes you wonder if we're finally reaching the point when the Eurozone will find a formula and cut their losses.

From the Athens News: Eurozone can survive without Greece

Voters' rejection of pro-bailout political parties in Sunday's election has raised the chances of Greece leaving the euro, but this unprecedented step is seen as manageable rather than catastrophic for the currency bloc.

Some banks have raised estimates of the likelihood of Greece quitting the euro. But after a year of investors shedding bonds issued by highly indebted euro zone countries and big injections of central bank cash, they said the damage could be contained.