by Calculated Risk on 10/06/2014 07:15:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for August today. According to BKFS, 5.90% of mortgages were delinquent in August, up from 5.64% in July. BKFS reports that 1.80% of mortgages were in the foreclosure process, down from 2.66% in August 2013.

This gives a total of 7.70% delinquent or in foreclosure. It breaks down as:

• 1,852,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,143,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 913,000 loans in foreclosure process.

For a total of ​​3,908,000 loans delinquent or in foreclosure in August. This is down from 4,465,000 in August 2013.

Click on graph for larger image.

This graph from BKFS shows percent of loans delinquent and in the foreclosure process over time.

Delinquencies and foreclosures are generally moving down - and might be back to normal levels in a couple of years. 

The second graph from BKFS shows the mortgage performance by vintage.

From Black Knight:

Looking at the weighted average loan age among the active mortgage population, Black Knight found that while loan age varies among different credit score groups, in general the average loan age has been rising steadily. According to Kostya Gradushy, Black Knight’s manager of Research and Analytics, the weighted average loan age has reached its highest point ever.

“In terms of the entire active mortgage population, average loan age has been rising steadily for at least the last nine years,” said Gradushy. “The high volume of originations in 2013 resulted in a temporary slowdown. However, the average loan age since then has hit its highest level ever at 54 months. Reviewing the data at a more granular level, we see that the age of loans with credit scores of 750 and above has remained relatively constant for the last five years. However, lower credit score loans – particularly those with scores below 700 – have seen dramatic increases in average age.”

“We also looked again at mortgage performance and found delinquencies in 2012-2014 vintage loans lower than any of the prior seven years. In fact, even among borrowers with lower credit scores, these vintages are outperforming all previous vintages. This holds true for FHA mortgages as well, where we found that early-stage delinquencies were lower than in all pre-2012 vintages.”
emphasis added

There is much more in the mortgage monitor.

by Calculated Risk on 10/05/2014 08:50:00 PM

An interesting post from Tim Duy: Is There a Wage Growth Puzzle?

The unemployment and wage growth dynamics to date are actually very similar to what we have seen in the past. Low wage growth to date is not the "smoking gun" of proof of the importance of underemployment measures. There very well may have been much more labor market healing that many are willing to accept, even many FOMC members. The implications for monetary policy are straightforward - it suggests the risk leans toward tighter than anticipated policy.

My current view is that NAIRU (non-accelerating inflation rate of unemployment) is lower than most FOMC participants think.  My view is NAIRU is closer to 4% than 6%, whereas the central tendency for FOMC participants is in the 5.2% to 5.5% range with some thinking NAIRU is as high as 6%.

 I think there are demographic reasons for the low NAIRU (the last time we saw the working age population increase this slowly, inflation didn't start to increase until the unemployment rate fell to around 4%).  If I'm correct about NAIRU (and no one knows for sure), the unemployment rate could fall much further without a significant pickup in inflation. Also I think the risks for the FOMC of moving too quickly (inflation too low) far outweigh the risk of moving too slowly (too much inflation).

Monday:
• Early, Early: Black Knight Mortgage Monitor report for August.

• At 10:00 AM ET, the Fed will release the new monthly Labor Market Conditions Index (LMCI).

Weekend:
• Schedule for Week of October 5th

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 3 and DOW futures are also up 17 (fair value).

Oil prices were down over the last week with WTI futures at $89.56 per barrel and Brent at $91.90 per barrel.  A year ago, WTI was at $103, and Brent was at $109 - so prices are down close to 15% year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.30 per gallon (down about 5 cents from a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 10/05/2014 11:54:00 AM

By request, here is an update on an earlier post through the September employment report.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, so a different comparison might be to look at the percentage change.   Of course the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Currently Obama's 2nd term is on pace for the third best term for these Presidents.

Reagan's 2nd term saw about the same job growth as during Carter's term.  Note: There was a severe recession at the beginning of Reagan's first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter's term (gas prices increased sharply and there was an oil embargo).

Term	Private Sector Jobs Added (000s)
Carter	9,041
Reagan 1	5,360
Reagan 2	9,357
GHW Bush	1,510
Clinton 1	10,885
Clinton 2	10,070
GW Bush 1	-841
GW Bush 2	379
Obama 1	1,998
Obama 2	4,1291
120 months into 2nd term: 9,910 pace.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). President George H.W. Bush only served one term, and President Obama is in the second year of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 841,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 462,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,955,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,998,000 more private sector jobs at the end of Mr. Obama's first term.  Twenty months into Mr. Obama's second term, there are now 6,127,000 more private sector jobs than when he initially took office.

 A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 668,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level.  This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama's first term, and increased the most during Reagan's 2nd term.

Term	Public Sector Jobs Added (000s)
Carter	1,304
Reagan 1	-24
Reagan 2	1,438
GHW Bush	1,127
Clinton 1	692
Clinton 2	1,242
GW Bush 1	900
GW Bush 2	844
Obama 1	-713
Obama 2	451
120 months into 2nd term, 108 pace

Looking forward, I expect the economy to continue to expand for the next few years, so I don't expect a sharp decline in private employment as happened at the end of Mr. Bush's 2nd term (In 2005 and 2006 I was warning of a coming recession due to the bursting of the housing bubble).

A big question is if the public sector layoffs have ended.  The cutbacks are clearly over at the state and local levels in the aggregate, and it appears cutbacks at the Federal level have slowed.  Right now I'm expecting some increase in public employment during Obama's 2nd term, but nothing like what happened during Reagan's second term.

by Calculated Risk on 10/04/2014 01:11:00 PM

This will be a very light week for economic data although there will be plenty of Fed speeches (not listed).

Perhaps the most interesting releases this week will be the Fed's new Labor Market Conditions Index on Monday, and the Treasury Budget for September (end of fiscal year) on Friday.

----- Monday, October 6th -----
Early: Black Knight Mortgage Monitor report for August.

At 10:00 AM ET: The Fed will release the new monthly Labor Market Conditions Index (LMCI).

----- Tuesday, October 7th -----
10:00 AM: Job Openings and Labor Turnover Survey for August from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased slightly in July to 4.673 million from 4.675 million in June.

The number of job openings (yellow) were up 22% year-over-year. Quits were up 9% year-over-year.

3:00 PM: Consumer Credit for August from the Federal Reserve.  The consensus is for credit to increase $20.5 billion.

----- Wednesday, October 8th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: FOMC Minutes for the September 16-17, 2014.

----- Thursday, October 9th -----
Early: Trulia Price Rent Monitors for September. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 293 thousand from 287 thousand.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for August. The consensus is for a 0.3% increase in inventories.

----- Friday, October 10th -----
2:00 PM ET: The Monthly Treasury Budget Statement for September.

----- Saturday, October 11th -----
5:00 PM ET, Speech by Fed Vice Chairman Stanley Fischer, The Federal Reserve and the Global Economy, at the 2014 International Monetary Fund Annual Meetings: Per Jacobsson Lecture, Washington, D.C. The speech can be viewed live at the IMF website.

by Calculated Risk on 10/04/2014 08:15:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Oct 3, 2014.

Changes and comments from surferdude808:

Quiet week for changes to the Unofficial Problem Bank List as there were only two removals. After the changes, the list holds 430 institutions with assets of $136.1 billion. A year ago, the list held 685 institutions with assets of $238.7 billion.

Actions were terminated against Patriot National Bank, Stamford, CT ($552 million Ticker: PNBK) and New Millennium Bank, New Brunswick, NJ ($183 million Ticker: NMNB).

With the passage of the third quarter this week, it is time for the quarterly update to the transition matrix. Full details are available in the accompanying table and a graphic depicting trends in how institutions have arrived and departed the list. Since publication of the Unofficial Problem Bank List started in August 2009, a total of 1,673 institutions have appeared on the list. Since year-end 2012, new entrants have slowed as only 67 institutions have been added since then while 473 institutions have been removed. The pace of action terminations did slow during the latest quarter. At the start of the third quarter, there were 468 institution on the list and there were 27 action termination resulting in a removal rate of 5.8 percent, which well under the 11.9 percent rate for the previous quarter. A high termination rate is easier to achieve as the number of institutions starting each quarter has declined consistently from 1,001 at 2011q3 to the 468 at the start of 2014q3.

At the end of the third quarter, only 432 or 25.8 percent of the banks that have been on the list at some point remain. Action terminations of 646 account for 52 percent of the 1,241 institutions removed. Although failure have slowed over the past two year, they do account for a significant number of institutions that have left the list. Since publication, 383 of the institutions that have appeared on the list have failed accounting for nearly 31 percent of removals. Should another institution on the current list not fail, then nearly 23 percent of the 1,673 institutions that made an appearance on the list would have failed. A 23 percent default rate would be more than double the rate often cited by media reports on the failure rate of banks on the FDIC's official list. Of the $659.9 billion in assets removed from the list, the largest volume of $296.1 billion is from failure while terminations still trail at $270.8 billion.

Unofficial Problem Bank List
Change Summary
		Number of Institutions	Assets ($Thousands)
Start (8/7/2009)		389	276,313,429
Subtractions
	Action Terminated	141	(55,759,559)
	Unassisted Merger	34	(7,152,867)
	Voluntary Liquidation	4	(10,584,114)
	Failures	154	(184,269,578)
	Asset Change		(5,371,544)
Still on List at 9/30/2014		56	13,175,767
Additions after 8/7/2009		376	123,623,785
End (9/30/2014)		432	136,799,552
Intraperiod Deletions1
	Action Terminated	505	215,076,758
	Unassisted Merger	164	72,821,593
	Voluntary Liquidation	10	2,324,142
	Failures	229	111,876,012
	Total	908	402,098,505
1Institution not on 8/7/2009 or 9/30/2014 list but appeared on a weekly list.