by Calculated Risk on 7/01/2019 08:27:00 AM

Black Knight released their Mortgage Monitor report for May today. According to Black Knight, 3.36% of mortgages were delinquent in May, down from 3.64% in May 2018. Black Knight also reported that 0.49% of mortgages were in the foreclosure process, down from 0.59% a year ago.

This gives a total of 3.85% delinquent or in foreclosure.

Press Release: Black Knight Mortgage Monitor: In May, Adjustable-Rate Mortgage Prepayments Highest Since 2007; Prepays on 2018 Vintage Loans Up Three Times Over Past Four Months

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. This month, the company took an in-depth look at the resurgence in mortgage prepayments spurred by lower interest rates and seasonal increases in home sale activity. As Black Knight Data & Analytics President Ben Graboske explained, prepayments are up across the board, but some cohorts are seeing greater levels of activity than others.

“Overall, prepayment activity – largely driven by home sales and mortgage refinances – has more than doubled over the past four months,” said Graboske. “It’s now at the highest levels we’ve seen since the fall of 2016, when rates began their steep upward climb. While we’ve observed increases across nearly every investor type, product type, credit score bucket and vintage, some changes stand out. For instance, prepayments among fixed-rate loans have hewed close to the overall market average, rising by more than two times over the past four months. However, ARM prepayment rates have now jumped to their highest level since 2007 as borrowers have sought to shed the uncertainty of their adjustable-rate products for the security of a low, fixed interest rate over the long haul.”

“Likewise, while all loan vintages have seen prepayment activity increase, they are all dwarfed by 2018. Prepays among the 2018 vintages have jumped by more than 300% over the past four months and are now nearly 50% higher than 2014, the next highest vintage. As of June 27, there were 1.5 million refinance candidates from the 2018 vintage alone, accounting for one of every six such candidates in the market, matching the total from the 2013-2017 vintages combined. All in all, some 8.2 million homeowners with mortgages could now both benefit from and likely qualify for a refinance, including more than 35% of those who took out their mortgages just last year. Early estimates suggest closed refinances rose by more than 30% from April 2019, with May’s volumes estimated to be three times higher than the 10-year low seen in November 2018. Given that interest rates have fallen further from May to June – and that we’ve yet to see the calendar year peak in terms of housing turnover related-prepayments – we may very well continue to see rising prepayment activity again in June’s mortgage data.”
emphasis added

Click on graph for larger image.

Here is a graph from the Mortgage Monitor that shows the National delinquency rate over time.

From Black Knight:

• After a slow start to the year, the national delinquency rate has now set record lows in each of the past two months

• As we've previously reported, delinquencies fell by less than 6% over the span of Q1 2019, the lowest first quarter improvement on record

• At 3.36%, delinquencies are more than 20% (-0.88%) below their pre-recession (20002005) average

The second graph shows the early delinquency rates:

• Early-stage delinquency rates have been on the rise since mid-2017, with a sharp increase in such delinquencies on purchase loans beginning in early 2018

• The 6-month delinquency rate of recent originations is the highest it’s been since 2010, while the same metric shows the 6-month delinquency rate among purchase loans it at its highest level since mid-2012

• Examining more recent originations (those from June to November 2018, specifically) we see that 6-month delinquency rates among purchase loans are, on average, 50% above the year prior, suggesting this trend may strengthen

• That said, early-stage delinquencies are still well below pre-recession averages, but the sharp rise is worth keeping an eye on

There is much more in the mortgage monitor.

by Calculated Risk on 6/30/2019 08:30:00 PM

Weekend:
• Schedule for Week of June 30, 2019

Monday:
• At 10:00 AM: ISM Manufacturing Index for June. The consensus is for the ISM to be at 51.2, down from 52.1 in May.

• At 10:00 AM: Construction Spending for May. The consensus is for a 0.1% increase in construction spending.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 23 and DOW futures are up 206 (fair value).

Oil prices were up over the last week with WTI futures at $59.74 per barrel and Brent at $66.01 barrel.  A year ago, WTI was at $74, and Brent was at $77 - so oil prices are down about 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.70 per gallon. A year ago prices were at $2.85 per gallon, so gasoline prices are down about 6% year-over-year.

by Calculated Risk on 6/30/2019 08:11:00 AM

Note: Surferdude808 compiles an unofficial list of Problem Banks compiled only from public sources. DISCLAIMER: This is an unofficial list, the information is from public sources and while deemed to be reliable is not guaranteed. No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein and same is subject to errors and omissions. This is not intended as investment advice. Please contact CR with any errors.

Here is the unofficial problem bank list for June 2019.

Here are the monthly changes and a few comments from surferdude808:

Update on the Unofficial Problem Bank List for June 2019. During the month, the list increased by three to 76 institutions after a removal and three additions. Assets changed by a nominal $322 million to $55 billion. A year ago, the list held 92 institutions with assets of $60 billion.

This month, the action against First Southern Bank (f/k/a The Patterson Bank), Patterson, GA ($123 million) was terminated. Additions this month included The Farmers Bank, Carnegie, OK ($121 million); Home Bank of Arkansas, Portland, AR ($76 million); and State Bank, Green River, WY ($29 million). Also, thanks to a reader that identified an institution not included within the list – CornerstoneBank, Atlanta, GA ($219 million), that has been operating under a Consent Order since 2012.

With the conclusion of the second quarter, we bring an updated transition matrix to detail how banks are transitioning off the Unofficial Problem Bank List. Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, 1,747 institutions have appeared on a weekly or monthly list since the start of publication. Only 4.2 percent of the banks that have appeared on a list remain today as 1,671 institutions have transitioned through the list. Departure methods include 984 action terminations, 406 failures, 262 mergers, and 19 voluntary liquidations. Of the 389 institutions on the first published list, only 6 or 1.5 percent, are still designated as being in a troubled status more than nine years later. The 406 failures represent 23.3 percent of the 1,747 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

Unofficial Problem Bank List
Change Summary
		Number of Institutions	Assets ($Thousands)
Start (8/7/2009)		389	276,313,429
Subtractions
	Action Terminated	179	(68,279,301)
	Unassisted Merger	41	(10,072,112)
	Voluntary Liquidation	5	(10,672,586)
	Failures	158	(186,397,337)
	Asset Change		345,554
Still on List at 6/30/2019		6	1,237,647
Additions after 8/7/2009		70	53,790,865
End (6/30/2019)		76	55,028,512
Intraperiod Removals1
	Action Terminated	805	325,312,142
	Unassisted Merger	221	82,691,403
	Voluntary Liquidation	14	2,558,186
	Failures	248	125,152,210
	Total	1,288	535,731,941
1Institution not on 8/7/2009 or 6/30/2019 list but appeared on a weekly list.

by Calculated Risk on 6/29/2019 08:11:00 AM

The key report scheduled for this week is the June employment report.

Other key reports include the June ISM Manufacturing and non-manufacturing surveys, June Vehicle Sales and the Trade Deficit for May.

----- Monday, July 1st -----
10:00 AM: ISM Manufacturing Index for June. The consensus is for the ISM to be at 51.2, down from 52.1 in May.

Here is a long term graph of the ISM manufacturing index.

The employment index was at 53.7% in May, and the new orders index was at 52.7%.

10:00 AM: Construction Spending for May. The consensus is for a 0.1% increase in construction spending.

----- Tuesday, July 2nd -----
All day: Light vehicle sales for June from the BEA. The consensus is for light vehicle sales to be 17.0 million SAAR in June, down from 17.3 million in May (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the sales rate for last month.

----- Wednesday, July 3rd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 150,000 payroll jobs added in June, up from 27,000 added in May.

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 220 thousand initial claims, down from 227 thousand last week.

8:30 AM: Trade Balance report for May from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $53.2 billion.  The U.S. trade deficit was at $50.8 Billion the previous month.

10:00 AM: the ISM non-Manufacturing Index for June.   The consensus is for a reading of 55.9, down from 56.9.

----- Thursday, July 4th -----
All US markets will be closed in observance of Independence Day.

----- Friday, July 5th -----
8:30 AM: Employment Report for June.   The consensus is for 165,000 jobs added, and for the unemployment rate to be unchanged at 3.6%.

There were 75,000 jobs added in May, and the unemployment rate was at 3.6%.

This graph shows the year-over-year change in total non-farm employment since 1968.

In May, the year-over-year change was 2.350 million jobs.

by Calculated Risk on 6/28/2019 04:13:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate decreased to 0.70% in May, from 0.72% in April. The serious delinquency rate is down from 1.03% in May 2018.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

This is the lowest serious delinquency rate for Fannie Mae since July 2007.

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (3% of portfolio), 2.57% are seriously delinquent. For loans made in 2005 through 2008 (4% of portfolio), 4.36% are seriously delinquent, For recent loans, originated in 2009 through 2018 (93% of portfolio), only 0.32% are seriously delinquent. So Fannie is still working through a few poor performing loans from the bubble years.

The increase late last year in the delinquency rate was due to the hurricanes - there were no worries about the overall market.

I expect the serious delinquency rate will probably decline to 0.4 to 0.6 percent or so to a cycle bottom.

Note: Freddie Mac reported earlier.

by Calculated Risk on 6/28/2019 01:39:00 PM

From the Chicago PMI: Chicago Business Barometer – Declines to 49.7 in June

The MNI Chicago Business Barometer decreased by 4.5 points to 49.7 in June from 54.2 in May, marking the first sub-50 reading since January 2017.

Business confidence dipped significantly in Q2, with the Barometer averaging 52.2, down 13% on the previous quarter and almost 16% lower than Q2 2018.
...
“The Barometer entered contraction territory, having remained above 50 for over two years. With customers rethinking their purchases, demand tumbled, and consequently firms pulled back production, weakening overall business sentiment,” said Shaily Mittal, Senior Economist at MNI.

"In coming months, our survey will provide further evidence as to whether the diminished business confidence is temporary amid tariffs woes or more structural calling for some counter measures,” she added.
emphasis added

This was below the consensus forecast of 53.6.

by Calculated Risk on 6/28/2019 11:32:00 AM

From Goldman Sachs:

The May core PCE price index increased 0.19% month-over-month, close to expectations, but the year-over-year exceeded consensus by a tenth reflecting the price revisions in yesterday’s GDP report. Personal spending increased by 0.4% and was revised higher in April, and the personal saving rate remained flat at 6.1%. We left our Q2 GDP tracking estimate unchanged at +1.5% (qoq ar). [June 28 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 1.3% for 2019:Q2 and 1.2% for 2019:Q3. [June 28 estimate].

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2019 is 1.5 percent on June 28, down from 1.9 percent on June 26. After this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis (BEA), the nowcast of second-quarter real personal consumption expenditures growth decreased from 3.9 percent to 3.7 percent. [June 28 estimate]

CR Note: These estimates suggest real GDP growth will be around 1.5% annualized in Q2.

by Calculated Risk on 6/28/2019 11:09:00 AM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for May 2019. Over the past three months, the indexes increased in 45 states, decreased in four states, and remained stable in one, for a three-month diffusion index of 82. In the past month, the indexes increased in 41 states, decreased in five states, and remained stable in four, for a one-month diffusion index of 72.
emphasis added

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all or mostly green during most of the recent expansion.

The map is mostly green on a three month basis, but there are some red states.

Source: Philly Fed.

Note: For complaints about red / green issues, please contact the Philly Fed.

And here is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In May, 43 states had increasing activity (including minor increases).

by Calculated Risk on 6/28/2019 08:39:00 AM

The BEA released the Personal Income and Outlays report for May:

Personal income increased $88.6 billion (0.5 percent) in May according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $72.6 billion (0.5 percent) and personal consumption expenditures (PCE) increased $59.7 billion (0.4 percent).

Real DPI increased 0.3 percent in May, and real PCE increased 0.2 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The May PCE price index increased 1.5 percent year-over-year and the May PCE price index, excluding food and energy, increased 1.6 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through May 2019 (2012 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was above expectations,  and the increase in PCE was at expectations.

Note that core PCE inflation was slightly above expectations.

Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 5.4% annual rate in Q2 2019. (using the mid-month method, PCE was increasing at 4.3%). This suggests strong PCE growth in Q2.

by Calculated Risk on 6/27/2019 06:25:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays, May 2019. The consensus is for a 0.3% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 9:45 AM, Chicago Purchasing Managers Index for June.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for June). The consensus is for a reading of 97.9.