by Calculated Risk on 8/12/2012 10:06:00 AM

The following graphs show the percent of loans delinquent by loan type based on the MBA National Delinquency Survey: Prime, Subprime, FHA and VA. First a table comparing the number of loans in Q2 2007 and Q2 2012 so readers can understand the shift in loan types.

Both the number of prime and subprime loans have declined over the last five years; the number of subprime loans is down by about 35%. Meanwhile the number of FHA loans has more than doubled and VA loans have increased sharply.

An interesting point: Each loan type improved in Q2 2012, but the total delinquency rate increased. The reason is the shift in loan types - from prime loans to more FHA and VA loans.

Note: There are about 42.5 million first-lien loans in the survey, and the MBA survey is about 88% of the total.

MBA National Delinquency Survey Loan Count
	Q2 2007	Q2 2012	Change	Q2 2012 Seriously Delinquent
Prime	33,916,830	30,120,941	-3,795,889	1,500,023
Subprime	6,204,535	4,031,216	-2,173,319	918,714
FHA	3,030,214	6,827,727	3,797,513	614,495
VA	1,096,450	1,526,913	430,463	70,696
Survey Total	44,248,029	42,506,797	-1,741,232	3,103,928

Click on graph for larger image.

First a repeat: This graph shows the percent of loans delinquent by days past due. Loans 30 days delinquent increased to 3.18% from 3.13% in Q1. This is at about 2007 levels and around the long term average.

Delinquent loans in the 60 day bucket increased to 1.22% in Q2, from 1.21% in Q1.

The 90 day bucket increased to 3.19% from 3.06%. This is still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 4.27% from 4.39% and is now at the lowest level since Q1 2010.

Note: Scale changes for each of the following graphs.

The second graph is for all prime loans.

This is the category with the most seriously delinquent loans. Back in early 2007 when Fed Chairman Ben Bernanke said "the problems in the subprime market seems likely to be contained", my former co-blogger Tanta responded "We are all subprime!" - she was correct.

Since there are far more prime loans than any other category (see table above), about half the loans seriously delinquent now are prime loans - even though the overall delinquency rate is lower than other loan types.

This graph is for subprime. This category gets most of the attention - mostly because of all the terrible loans made through the Wall Street "originate-to-distribute" model and sold as Private Label Securities (PLS). Not all PLS was subprime, but the worst of the worst loans were packaged in PLS.

Although the delinquency rate is still very high, the number of subprime loans has declined sharply.

This graph is for FHA loans. In Q2, there was a shift from 90+ days deliquent to in-foreclosure, but the overall percent of loans delinquent or in-foreclosure declined in Q2.

The improvement in late 2010 was a combination of the increase in number of loans (recent loans have lower delinquency rates) and eliminating Downpayment Assistance Programs (DAPs). These were programs that allowed the seller to give the buyer the downpayment through a 3rd party "charity" (for a fee of course). The buyer had no money in the house and the default rates were absolutely horrible.

The last graph is for VA loans. This is a fairly small but growing category (see table above).

There are still quite a few subprime loans that are in distress, but the real keys are prime loans and FHA loans.

by Calculated Risk on 8/11/2012 08:32:00 PM

Earlier:
• Summary for Week Ending Aug 10th
• Schedule for Week of Aug 12th

When the Q2 GDP report was released, I focused on the revisions and didn't post the usual graph showing the real GDP change since 1980. By request, here is an update.

The graph shows the annualized real quarterly change in GDP from 1980 through Q2 2012.


Click on graph for larger image.

For Q2, the BEA's advance estimate was 1.5%. Since Q3 2009, GDP has been positive every quarter and averaged about 2.2% real growth.

Another way to look at GDP is on a rolling year-over-year basis. See Tim Duy's graphs at US Baseline

Note: I've also update several graphs in the GDP graph gallery. See: GDP Graphs

by Calculated Risk on 8/11/2012 06:09:00 PM

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

Here is the unofficial problem bank list for Aug 10, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

Activity by the Federal Reserve was responsible for most of the changes to the Unofficial Problem Bank List this week. The list pushed back up to 900 institutions but assets dropped by $780 million to $348.6 billion after three additions and two removals. A year ago, the list held 988 institutions with assets of $411.3 billion.

The Federal Reserve terminated actions against LegacyTexas Bank, Plano, TX ($1.6 billion) and Coastal Community Bank, Everett, WA ($311 million). The additions were Beacon Federal, East Syracuse, NY ($1.0 billion Ticker: BFED); Asian Bank, Philadelphia, PA ($71 million); and The State Bank of Blue Mound, Blue Mound, IL ($37 million). The Federal Reserve issued a Prompt Corrective Action order against Gold Canyon Bank, Gold Canyon, AZ ($60 million).

Other news to report is the bankruptcy filing by Capitol Bancorp LTD (See Form 8-K) on August 9th. Back in the middle part of last decade, Capitol Bancorp owned/controlled more than 50 banks. After divestitures in an effort to prevent the collapse of the company, Capitol Bancorp is down to owning/controlling 15 banks, with 11 on the Unofficial Problem Bank List. The FDIC has issued cross-guaranty waivers in conjunction with several of the divestitures. This will bear watching to see if the bankruptcy filing results in any closings of the banks that Capitol Bancorp owns/controls.

Earlier:
• Summary for Week Ending Aug 10th
• Schedule for Week of Aug 12th

by Calculated Risk on 8/11/2012 01:05:00 PM

Earlier:
• Summary for Week Ending Aug 10th

This will be a very busy week for economic data. There are two key housing reports to be released this week: August homebuilder confidence on Wednesday, and July housing starts on Thursday.

Another key report is retail sales for July. For manufacturing, the August NY Fed (Empire state) and Philly Fed surveys, and the July Industrial Production and Capacity Utilization report will be released this week.

On prices, PPI for July will be released on Tuesday, and CPI will be released on Wednesday.

----- Monday, Aug 13th -----
No releases scheduled.

----- Tuesday, Aug 14th -----
7:30 AM ET: NFIB Small Business Optimism Index for July. The consensus is for a decrease to 91.3 in July from 91.4 in June.

8:30 AM: Producer Price Index for July. The consensus is for a 0.2% increase in producer prices (0.2% increase in core).

8:30 AM ET: Retail Sales for July.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales are up 21.2% from the bottom, and now 6.0% above the pre-recession peak (not inflation adjusted)

The consensus is for retail sales to increase 0.3% in July, and for retail sales ex-autos to increase 0.4%.

10:00 AM: Manufacturing and Trade: Inventories and Sales for June (Business inventories). The consensus is for 0.2% increase in inventories.

----- Wednesday, Aug 15th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

8:30 AM: Consumer Price Index for July. The consensus is for CPI to increase 0.2% in July and for core CPI to increase 0.2%.

8:30 AM: NY Fed Empire Manufacturing Survey for August. The consensus is for a reading of 7.0, down from 7.4 in July (above zero is expansion).

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for July.

This shows industrial production since 1967.

The consensus is for Industrial Production to increase 0.5% in July, and for Capacity Utilization to increase to 79.2%.

10:00 AM: The August NAHB homebuilder survey. The consensus is for a reading of 35, unchanged from 35 in July. Although this index has been increasing lately, any number below 50 still indicates that more builders view sales conditions as poor than good.

----- Thursday, Aug 16th -----
8:30 AM: Housing Starts for July.

Total housing starts were at 760 thousand (SAAR) in June, up 6.9% from the revised May rate of 711 thousand (SAAR).

The consensus is for total housing starts to decrease to 750,000 (SAAR) in July, down from 760,000 in June.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand from 361 thousand.

10:00 AM: Philly Fed Survey for August. The consensus is for a reading of -5.0, up from -12.9 last month (above zero indicates expansion).

----- Friday, Aug 17th -----
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for August). The consensus is for sentiment to decrease slightly to 72.0 from 72.3 in July.

10:00 AM: Conference Board Leading Indicators for August. The consensus is for a 0.2% increase in this index.

10:00 AM: Regional and State Employment and Unemployment (Monthly) for July 2012

by Calculated Risk on 8/11/2012 08:01:00 AM

Note: For amusement, here are the original Ryan plan projections. Enjoy. Note: I know numbers, and these are hilarious (look at the unemployment rate and residential investment). I saved these immediately after they were released because I expected them to be changed or deleted. They quickly disappeared.

The few economic releases this week were mostly a little more upbeat than we’ve seen recently.

The trade deficit declined in June as exports increased and oil prices declined. Also - so far - there is little evidence of the Eurozone problems significantly impacting US exports to the euro area. Another positive was the decline in initial weekly unemployment claims. The 4-week average of unemployment claims is near the low for the year, and might signal a little improvement in the labor market.

For housing, CoreLogic reported a 2.5% year-over-year increase in house prices, and both Fannie and Freddie credit the increase in house prices for their improved results. The slight increase in house prices, along with the ongoing, albeit sluggish recovery in housing is having a positive impact on the economy.

Here is the summary from Jan Hatzius, chief economist at Goldman Sachs:

“We expect a moderate pickup in US growth from the dreary 1%-1½% pace of the past few months. The data released this week, while sparse, were consistent with our view. Jobless claims logged a surprise decline, which looks potentially meaningful now that the seasonal adjustment distortions related to the summer auto shutdowns are behind us. The June wholesale inventory report showed much less accumulation than expected, which explains some of the recent weakness in the goods-producing sector and should be positive for the near-term production outlook. Combined with a narrowing of the June trade deficit, this boosted our Q3 GDP estimate to 2.2%, compared with 2.0% at the start of the week."

Here is a summary of last week in graphs:

• Trade Deficit declined in June to $42.9 Billion

Click on graph for larger image.

The Department of Commerce reported:
"[T]otal June exports of $185.0 billion and imports of $227.9 billion resulted in a goods and services deficit of $42.9 billion, down from $48.0 billion in May, revised. June exports were $1.7 billion more than May exports of $183.3 billion. June imports were $3.5 billion less than May imports of $231.4 billion."
The second graph shows the U.S. trade deficit, with and without petroleum, through June.

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.

Oil averaged $100.13 in June, down from $107.91 per barrel in May. The decline in oil prices contributed to the overall decline in the trade deficit. The trade deficit with China increased to $27.4 billion in June, up from $26.6 billion in June 2011. Once again most of the trade deficit is due to oil and China.

Exports to the euro area were $17.4 billion in June, up from $16.4 billion in June 2011; so the euro area recession didn't lead to less US exports to the euro area in June.

• MBA: Mortgage Delinquencies increased in Q2

The MBA reported that 11.85 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q2 2012 (delinquencies seasonally adjusted). This is up slightly from 11.79 percent in Q1 2012. This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent increased to 3.18% from 3.13% in Q1. This is at about 2007 levels and around the long term average.

Delinquent loans in the 60 day bucket increased to 1.22% in Q2, from 1.21% in Q1.

The 90 day bucket increased to 3.19% from 3.06%. This is still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 4.27% from 4.39% and is now at the lowest level since Q1 2010.

This graph is from the MBA and shows the percent of loans in the foreclosure process by state. Posted with permission.

The top states are Florida (13.70% in foreclosure down from 14.31% in Q1), New Jersey (7.65% down from 8.37%), Illinois (7.11% down from 7.46%), New York (6.47% up from 6.17%) and Nevada (the only non-judicial state in the top 13 at 6.09% down from 6.47%).

• Fannie, Freddie, FHA REO declined 18% Year-over-year

The combined Real Estate Owned (REO) by Fannie, Freddie and the FHA declined to 202,765 at the end of Q2 2012, down from 209,077 in Q1, and down 18% from 249,501 in Q2 2012. The peak for the combined REO of the F's was 295,307 in Q4 2010.

This graph shows the REO inventory for Fannie, Freddie and the FHA.

This is only a portion of the total REO. There is also REO for private-label MBS, FDIC-insured institutions, VA and more. REO has been declining for those categories too. Most analysts expect an increase in foreclosures, and the number of REO might increase over the next several quarters.

• BLS: Job Openings increased in June

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

Jobs openings increased in June to 3.762 million, up from 3.657 million in May. The number of job openings (yellow) has generally been trending up, and openings are up about 16% year-over-year compared to June 2011. This is the most job openings since mid-2008.

Quits decreased slightly in June, however quits are up about 9.5% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").
All current employment graphs
• CoreLogic: House Price Index increases in June, Up 2.5% Year-over-year

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 1.3% in May, and is up 2.5% over the last year.

The index is off 29% from the peak - and is up 7% from the post-bubble low set in February (the index is NSA, so some of the increase is seasonal).

The second graph is from CoreLogic. The year-over-year comparison has turned positive.

This is the fourth consecutive month with a year-over-year increase, and excluding the tax credit bump, these are the first year-over-year increases since 2006.

“Home prices are responding positively to reductions in both visible and shadow inventory over the past year,” said Mark Fleming, chief economist for CoreLogic. “This trend is a bright spot because the decline in shadow inventory translates to fewer distressed sales, which helps sustain price appreciation.”

• Weekly Initial Unemployment Claims decline to 361,000

The DOL reports:"In the week ending August 4, the advance figure for seasonally adjusted initial claims was 361,000, a decrease of 6,000 from the previous week's revised figure of 367,000. The 4-week moving average was 368,250, an increase of 2,250 from the previous week's revised average of 366,000."

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 368,250.

This was below the consensus forecast of 367,000 and is near the lowest level for the four week average this year.

All current Employment Graphs
• Other Economic Stories ...
• Fed: Some domestic banks "eased lending standards", seeing "stronger demand"
• Housing: Inventory down 23% year-over-year in early August
• The economic impact of a slight increase in house prices
• Trulia: Asking House Prices increased in July
• Freddie Mac: Increase in Home Prices contributes to Lower Credit Losses
• Fannie Mae reports $5.1 Billion Net Income, Improvement due to increase in house prices, REO sales prices

by Calculated Risk on 8/10/2012 09:20:00 PM

From the WSJ: Rising Health, Pension Costs Top the List as Municipalities Struggle to Recover From the Recession

Fiscal woes that have caused high-profile bankruptcies in California are surfacing across the country as municipalities struggle with uneven growth and escalating health and pension costs ...

Moody's Investors Service recently said that while municipal bankruptcies are likely to remain rare, it warned of a "a small but growing trend in fiscally troubled cities unwilling to pay their debt obligations."
...
Local government cuts are one factor slowing the broader economic recovery, offsetting stronger private-sector growth. State and local government spending and investment fell at a rate of 2.1% in the second quarter, according to the Commerce Department, the 11th consecutive quarterly drop. Local governments also have cut 66,000 jobs in the past year, mostly teachers and other school employees.

These state and local layoffs have been a significant drag on employment. I still think the layoffs will slow, but clearly many of these cities still have severe budget shortfalls.

by Calculated Risk on 8/10/2012 03:22:00 PM

In the previous post, I noted that I think the housing recovery will continue to be sluggish relative to previous housing recoveries. There are several reasons for this.

First, the causes of this downturn were different than in most cycles. Usually housing down cycles are related to the Fed fighting inflation, and then housing comes back strongly when the Fed starts to ease again. But in this cycle, the housing downturn was the result of the bursting of the housing bubble and the financial crisis.

As everyone now knows (or should know by now), recoveries following a financial crisis are sluggish. This is especially true for housing as all the excesses have to be worked down before the recovery will become robust. In some areas of the country, housing is starting to recover, and in other areas there are still a large number of excess vacant houses (although the number is being reduced just about everywhere).

There are also a large number of houses in the foreclosure process, especially in certain states with a judicial foreclosure process (like New Jersey). This means there will be competition for homebuilders from foreclosures for an extended period in these areas.

Contrast this to a typical recovery were most areas recover at the same time.

There are other factors too. Employment gains are sluggish following a financial crisis, there is still quite a bit of consumer deleveraging ongoing, and lending standards are still tight (in a typical recovery, lending standards are loosened pretty quickly).

For a great piece today on mortgage lending standards, see from Cardiff Garcia at FT Alphaville: Still waiting on looser lending standards (for mortgages)

Click on graph for larger image.

This graph compares the current housing recovery (single family starts) to previous recoveries. The bottom is set to 100 for each housing cycle.

Note: This doesn't even consider the depth of the current cycle (the deepest decline in housing starts since the Census Bureau started collecting data).

The only comparable sluggish recovery (first year) was the one that started in 1981, and that was sluggish because mortgage rates were around 17%. When mortgage rates fell to only 13%, housing took off.

With excess inventory, more foreclosures (especially in certain states), more consumer deleveraging, and tight lending standards, I expect this recovery to remains sluggish. The good news is - barring a significant policy mistake - this housing recovery will probably continue for several years (last for more years than usual).

by Calculated Risk on 8/10/2012 11:55:00 AM

Early this year when I wrote The Housing Bottom is Here and Housing: The Two Bottoms, I pointed out there are usually two bottoms for housing: the first for new home sales, housing starts and residential investment, and the second bottom is for house prices.

For the bottom in activity, I presented a graph of Single family housing starts, New Home Sales, and Residential Investment (RI) as a percent of GDP.

When I posted that graph, the bottom wasn't obvious to everyone. Now it should be, so here is an update to that graph.

Click on graph for larger image.

The arrows point to some of the earlier peaks and troughs for these three measures.

The purpose of this graph is to show that these three indicators generally reach peaks and troughs together. Note that Residential Investment is quarterly and single-family starts and new home sales are monthly.

For the current housing bust, the bottom was spread over a few years from 2009 into 2011. This was a long flat bottom - something a number of us predicted given the overhang of existing vacant housing units.

Now the question is: How strong will the recovery be? (I think it will be somewhat sluggish compared to previous recoveries).

Housing plays a key role for employment too. Here is an update to a graph I've been posting for a few years. This graph shows single family housing starts (through June) and the unemployment rate (inverted) also through July. Note: there are many other factors impacting unemployment, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

Housing starts (blue) increased a little in 2009 with the homebuyer tax credit - and then declined again - but mostly starts moved sideways for two and a half years and only started increasing last year. This was one of the reasons the unemployment rate has remained elevated.

Usually near the end of a recession, residential investment (RI) picks up as the Fed lowers interest rates. This leads to job creation and also additional household formation - and that leads to even more demand for housing units - and more jobs, and more households - a virtuous cycle that usually helps the economy recover.

However, following the recent recession with the huge overhang of existing housing units, this key sector didn't participate. Going forward I expect housing activity to increase and help push down the unemployment rate. Unfortunately I expect the housing recovery to be somewhat sluggish.

by Calculated Risk on 8/10/2012 09:13:00 AM

I rarely mention import prices, but this suggests less price pressure ... from the BLS: U.S. Import and Export Price Indexes - July 2012

U.S. import prices declined 0.6 percent in July, the U.S. Bureau of Labor Statistics reported today, after decreasing 2.4 percent in June and 1.5 percent in May. In each of the past three months, falling prices for both fuel and nonfuel imports contributed to the overall drop. In contrast, U.S. export prices rose 0.5 percent in July following a 1.7 percent decline the previous month. ... Prices of U.S. imports fell 0.6 percent in July, the fourth consecutive monthly decline for the index following a 1.4 percent increase in March. Import prices also fell over the past 12 months, declining 3.2 percent after increasing 13.7 percent between July 2010 and July 2011. ... The price index for import fuel decreased 1.2 percent in July following declines of 8.8 percent, 5.6 percent, and 0.9 percent, respectively, in the previous three months.

It wasn't just energy. On non-fuel prices:

Nonfuel prices also fell in July, declining 0.4 percent following a 0.3 percent decrease in June and a 0.1 percent drop in May. The July decline was the largest monthly drop since a 0.4 percent decrease in June 2010, and was driven by lower prices for nonfuel industrial supplies and materials and foods, feeds, and beverages. Despite the decline over the past three months, nonfuel import prices were unchanged for the year ended in July ...

There will be more on prices next week with the PPI for July released on Tuesday and the CPI on Wednesday.

by Calculated Risk on 8/09/2012 09:24:00 PM

This is a quarterly index from the the National Association of Home Builders (NAHB) and is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008, so all readings are very low. This is expected to be key a demographic over the next couple of decades - if the baby boomers can sell their current homes.

From the NAHB: Builder Confidence in the 55+ Housing Market Shows Improvement in the Second Quarter

Builder confidence in the 55+ housing market for single-family homes showed improvement in the second quarter of 2012 compared to the same period a year ago, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today. The index more than doubled year over year from a level of 13 to 29, which is the highest second-quarter reading since the inception of the index in 2008.

The 55+ single-family HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic). An index number below 50 indicates that more builders view conditions as poor than good. Although all index components remain below 50, they increased considerably from a year ago: Present sales more than doubled (from 12 to 30), while expected sales for the next six months increased 17 points to 35 and traffic of prospective buyers rose nine points to 22.
...
“We are seeing buyers slowly return to the 55+ housing market as home prices begin to improve” said NAHB Chief Economist David Crowe. “This helps unlock some of the pent-up demand from 55+ consumers who have been sitting on the sidelines until they are able to sell their current homes at a reasonable price.”

Click on graph for larger image.

This graph shows the NAHB 55+ HMI through Q2 2012. All of the readings are very low for this index, but there has been a fairly sharp increase over the last three quarters.

by Calculated Risk on 8/09/2012 04:15:00 PM

LPS released their Mortgage Monitor report for June today. According to LPS, 7.14% of mortgages were delinquent in June, up from 6.91% in May, and down from 7.71%% in June 2011.

LPS reports that 4.09% of mortgages were in the foreclosure process, down slightly from 4.17% in May, and down slightly from 4.13% in June 2011.

This gives a total of 11.23% delinquent or in foreclosure. It breaks down as:

• 2,012,000 loans less than 90 days delinquent.
• 1,590,000 loans 90+ days delinquent.
• 2,061,000 loans in foreclosure process.

For a total of 5,663,000 loans delinquent or in foreclosure in June. This is down from 6,114,000 in June 2011.

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

Click on graph for larger image.

The total delinquency rate has fallen to 7.14% from the peak in January 2010 of 10.97%. A normal rate is probably in the 4% to 5% range, so there is a long ways to go.

The in-foreclosure rate was at 4.09%. There are still a large number of loans in this category (about 2.06 million).

The second graph shows percent of loans in the foreclosure process by process (Judicial vs. non-judicial).

Foreclosure inventory in judicial states is 6.42%, far above the level in non-judicial states (2.41%). The national average is 4.09%. A key change is that foreclosure inventory is now declining in judicial states too. Foreclosure inventory in non-judicial states has been falling since late 2010.

The third graph shows GSE prepayment speed by current LTV.

From LPS:

The June Mortgage Monitor report ... shows that while overall mortgage prepayment activity remains stable, despite historically low rates, the federal government’s Home Affordable Refinance Program (HARP) has seen considerable activity since the beginning of 2012.

“For this month’s Mortgage Monitor, we looked at Fannie Mae and Freddie Mac [GSE] 30-year fixed-rate loans across a variety of loan-to-value ratios,” explained Herb Blecher, senior vice president, LPS Applied Analytics. “Since the beginning of this year, high loan-to-value refinances have increased significantly. As an example, 2006 vintage GSE loans with six percent interest rates and LTV ratios between 100 and 125 percent increased from a 10 percent annualized prepayment rate at the end of 2011 to more than 40 percent in June 2012. Our data also shows that this rise in loan activity extends beyond that subsection – the same type of increase holds true across other vintages with the same characteristics.”

by Calculated Risk on 8/09/2012 12:13:00 PM

A few comments from Jay Brinkmann, MBA’s Chief Economist and Senior Vice President for Research and Education, on the Q2 MBA National Delinquency Survey conference call.

• The 30 day delinquency rate is back to normal (at the long term average). (This means a normal amount of loans are going delinquent each month)

• This was a slight increase in overall delinquencies (Seasonally Adjusted), and he wouldn't read too much into the increase because the seasonal adjustment might be a little off right now.

• Foreclosure inventory continues to decline. In previous quarters the decline in non-judicial state inventory was offset by increases in judicial states. The change this quarter is the non-judicial states are also a decrease in foreclosure inventory.

• There was a sharp increase in FHA foreclosure starts, and this is probably a result of the mortgage settlement.

Click on graph for larger image in graph gallery.

This graph is from the MBA and shows the percent of loans in the foreclosure process by state. Posted with permission.

The top states are Florida (13.70% in foreclosure down from 14.31% in Q1), New Jersey (7.65% down from 8.37%), Illinois (7.11% down from 7.46%), New York (6.47% up from 6.17%) and Nevada (the only non-judicial state in the top 13 at 6.09% down from 6.47%).

As Jay Brinkmann noted, California (3.07% down from 3.29%) and Arizona (3.24% down from 3.57%) are now a percentage point below the national average.

The second graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent increased to 3.18% from 3.13% in Q1. This is at about 2007 levels and around the long term average.

Delinquent loans in the 60 day bucket increased to 1.22% in Q2, from 1.21% in Q1.

The 90 day bucket increased to 3.19% from 3.06%. This is still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 4.27% from 4.39% and is now at the lowest level since Q1 2010.

A final comment: I asked Jay Brinkmann if he thought the pace of improvement for the foreclosure inventory would pickup - or stay at this rate (about 6 to 7 years back to normal). Mr Brinkmann said that this is now more of a judicial state problem, with states like New York and New Jersey having very high levels of foreclosure inventory, and non-judicial states (except Nevada) in much better shape.

Note: "MBA’s National Delinquency Survey covers 42.5 million loans on one-to-four-unit residential properties, representing approximately 88 percent of all “first-lien” residential mortgage loans outstanding in the United States. This quarter’s loan count saw a decrease of about 337,000 loans from the previous quarter, and a decrease of 1,378,000 loans from one year ago. Loans surveyed were reported by approximately 120 lenders, including mortgage banks, commercial banks and thrifts."

by Calculated Risk on 8/09/2012 10:00:00 AM

The MBA reported that 11.85 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q2 2012 (delinquencies seasonally adjusted). This is up slightly from 11.79 percent in Q1 2012..

From the MBA: Mortgage Delinquencies Increase in Latest MBA Survey

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 7.58 percent of all loans outstanding as of the end of the second quarter of 2012, an increase of 18 basis points from the first quarter, but a decrease of 86 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

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 on which foreclosure actions were started during the second quarter was 0.96 percent, unchanged from last quarter and from one year ago. The percentage of loans in the foreclosure process at the end of the second quarter was 4.27 percent, down 12 basis points from the first quarter and 16 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.31 percent, a decrease of 13 basis points from last quarter and a decrease of 54 basis points from one year ago.
...
Jay Brinkmann, MBA’s Chief Economist said, “Mortgage delinquencies were up only slightly over the last quarter. Perhaps more important than the small size of the increase, however, is the fact that it reversed the trend of fairly steady drops in delinquencies we have seen over the last year. This is consistent with the slowdown in the economy during the first half of the year and our stubbornly high unemployment rate. Whether this is just a temporary blip or a sign of a true change in direction for mortgage performance will fundamentally depend on the direction of employment over the remainder of the year.”

Note: 7.58% (SA) and 4.27% equals 11.85%.

I'll have more later after the conference call this morning.

by Calculated Risk on 8/09/2012 09:09:00 AM

The Department of Commerce reported:

[T]otal June exports of $185.0 billion and imports of $227.9 billion resulted in a goods and services deficit of $42.9 billion, down from $48.0 billion in May, revised. June exports were $1.7 billion more than May exports of $183.3 billion. June imports were $3.5 billion less than May imports of $231.4 billion.

The trade deficit was below the consensus forecast of $47.5 billion.

The first graph shows the monthly U.S. exports and imports in dollars through June 2012.

Click on graph for larger image.

Exports increased in June and imports decreased. Exports are 11% above the pre-recession peak and up 7% compared to June 2011; imports are just below the pre-recession peak, and up about 2% compared to June 2011.

The second graph shows the U.S. trade deficit, with and without petroleum, through June.

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.

Oil averaged $100.13 in June, down from $107.91 per barrel in May. The decline in oil prices contributed to the overall decline in the trade deficit. The trade deficit with China increased to $27.4 billion in June, up from $26.6 billion in June 2011. Once again most of the trade deficit is due to oil and China.

Exports to the euro area were $17.4 billion in June, up from $16.4 billion in June 2011; so the euro area recession didn't lead to less US exports to the euro area in June.

by Calculated Risk on 8/09/2012 08:30:00 AM

The DOL reports:

In the week ending August 4, the advance figure for seasonally adjusted initial claims was 361,000, a decrease of 6,000 from the previous week's revised figure of 367,000. The 4-week moving average was 368,250, an increase of 2,250 from the previous week's revised average of 366,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.


Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 368,250.

This was below the consensus forecast of 367,000 and is near the lowest level for the four week average this year.

And here is a long term graph of weekly claims:

All current Employment Graphs

by Calculated Risk on 8/08/2012 09:19:00 PM

First, a little rent relief coming? From Brady Dennis and Amrita Jayakumar the WaPo: A renter’s respite: In Washington area, thousands of new units to open soon

Thousands of new rental units under construction are scheduled to open in the coming months, the first such wave of new building in the area since the financial crisis hit in 2008.

The coming surge — which includes a whopping 6,000 new units by the end of this year — will give prospective renters a slew of new options and could even halt the upward march of monthly rental payments ...

The projected number of new units would be more than double the number that went on the market in the Washington area during each of the past two years.

Thursday will be busy ...

• At 8:30 AM ET, the Trade Balance report for June will be released by the Census Bureau. The consensus is for the U.S. trade deficit to decrease to $47.5 billion in June, down from from $48.7 billion in May.

• Also at 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to increase slightly to 367 thousand from 365 thousand. This report has been showing some improvement recently, although it might have been distorted by the timing of auto plant shutdowns.

• At 10:00 AM, the Mortgage Bankers Association's (MBA) will release their 2nd Quarter 2012 National Delinquency Survey.

• Also at 10:00 AM, the Monthly Wholesale Trade: Sales and Inventories report for June will be released. The consensus is for a 0.3% increase in inventories.

Here are two more questions for the August economic contest (both on Thursday).

More game updates: The red line shows the relative number of picks for each option, and people can now login using twitter.

by Calculated Risk on 8/08/2012 04:53:00 PM

Sometimes it helps to state the obvious in advance ...

The Not Seasonally Adjusted (NSA) house price indexes will show month-to-month declines later this year. This should come as no surprise and will not be a sign of impending doom.

The key is to watch the year-over-year change and to compare to the NSA lows earlier this year. I think house prices have already bottomed, and will be up slightly year-over-year when prices reach the usual seasonal bottom in early 2013.

Click on graph for larger image.

This graph shows the month-to-month change in the CoreLogic and NSA Case-Shiller Composite 20 index over the last several years. There is a clear seasonal pattern. In recent years the seasonal pattern has been exaggerated by the large number of foreclosures - foreclosures tend to be fairly steady all year, but conventional sales are stronger in the spring and early summer, and weaker in the fall and winter. This leads to more downward pressure from foreclosures in the fall and winter.

Note: The CoreLogic index tends to lead Case-Shiller. Both are three month averages, but CoreLogic is weighted to the most recent month.

Right now I'm guessing both indexes will report negative month-to-month price changes for August or September (reported in October or November). Just something to be aware of ...

by Calculated Risk on 8/08/2012 02:23:00 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.

From the GLVAR: GLVAR reports sixth straight month of increasing local home prices,record number of short sales, housing supply bouncing back a bit

According to GLVAR, the total number of local homes, condominiums and townhomes sold in July was 3,572. That’s down from 3,945 in June and down from 4,037 total sales in July 2011.
...
Reversing a months-long trend, the total number of homes listed for sale on GLVAR’s Multiple Listing Service increased slightly from June to July, with a total of 16,944 single-family homes listed for sale at the end of the month. That’s up 0.1 percent from 16,930 single-family homes listed for sale at the end of June, but still down 24.5 percent from one year ago.

The number of available homes listed for sale without any sort of pending or contingent offer also rebounded compared to the previous month, but was still down considerably from last year. By the end of July, GLVAR reported 4,293 single-family homes listed without any sort of offer. That’s up 16.3 percent from 3,690 such homes listed in June, but down 60.9 percent from one year ago.
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40 percent of all existing local homes sold during July were short sales, which occur when a lender agrees to sell a home for less than what the borrower owes on the mortgage. That’s up from 34.2 percent in June and the highest short sale percentage GLVAR has ever recorded.

Continuing a trend of declining foreclosure sales in recent months, bank-owned homes accounted for 20.7 percent of all existing home sales in July, down from 27.8 percent in June.

A few key points:
• Even with the slight increase in inventory in July, inventory is still down sharply from a year ago (down 60.9 percent year-over-year for single family homes without contingent offers).

• The decline in sales from the record levels in 2011 (even more sales than during the bubble!) is because of the decline in foreclosures. Some of the recent decline in foreclosures is due to new foreclosure rules in Nevada, but there is also a shift to short sales.

• Short sales are almost double foreclosures now. The GLVAR reported 40 percent of sales were short sales, and only 20.7% foreclosures. We've seen a shift from foreclosures to short sales in most areas (not just in areas with new foreclosure laws).

• The percent distressed sales was extremely high at 60.7% in July (short sales and foreclosures), but that was down from 62% in June.

by Calculated Risk on 8/08/2012 12:02:00 PM

The combined Real Estate Owned (REO) by Fannie, Freddie and the FHA declined to 202,765 at the end of Q2 2012, down from 209,077 in Q1, and down 18% from 249,501 in Q2 2012. The peak for the combined REO of the F's was 295,307 in Q4 2010.

According to Fannie Mae, "foreclosures continue to proceed at a slow pace", even following the mortgage settlement:

Our foreclosure rates remain high; however, foreclosures continue to proceed at a slow pace caused by continuing foreclosure process issues encountered by our servicers and changing legislative, regulatory and judicial requirements. The delay in foreclosures, as well as a net increase in the number of dispositions over acquisitions of REO properties, has resulted in a decrease in the inventory of foreclosed properties since December 31, 2010.

The bulk sales program has had a minimal impact so far:

In February 2012, FHFA announced the pilot of an REO initiative that solicited bids from qualified investors to purchase approximately 2,500 foreclosed properties from us with the requirement to rent the purchased properties for a specified number of years. The pilot involves the sale of pools of foreclosed homes including both vacant properties and occupied rental properties. The first pilot transaction involves the sale of pools of properties located in geographically concentrated locations across the United States. The winning bidders have been chosen and transactions are expected to close in the third quarter of 2012. We do not yet know whether this initiative will have a material impact on our future REO sales and REO inventory levels.

Click on graph for larger image.

This graph shows the REO inventory for Fannie, Freddie and the FHA.

This is only a portion of the total REO. There is also REO for private-label MBS, FDIC-insured institutions, VA and more. REO has been declining for those categories too. Most analysts expect an increase in foreclosures, and the number of REO might increase over the next several quarters.

Although REO was down for Fannie and Freddie in Q2 from Q1, but REO increased for the FHA - this is something to watch.

by Calculated Risk on 8/08/2012 10:05:00 AM

From Fannie Mae: Fannie Mae Reports Net Income of $5.1 Billion for Second Quarter 2012

The company’s continued improvement in financial results in the second quarter of 2012 was almost entirely due to credit-related income, resulting primarily from an improvement in home prices, improved sales prices on the company’s real-estate owned (“REO”) properties, and a decline in the company’s single-family serious delinquency rate. The company’s comprehensive income of $5.4 billion in the second quarter of 2012 is sufficient to pay its second-quarter dividend of $2.9 billion to the Department of the Treasury.

These are key points - the improvement was due to 1) an increase in home prices, 2) improved sales prices of REO, and 3) decline in serious delinquency rate.

Here are some more details from the Fannie Mae's SEC filing 10-Q:

The significant improvement in our second quarter results was primarily due to recognition of a benefit for credit losses of $3.0 billion in the second quarter of 2012 compared with a provision for credit losses of $6.5 billion in the second quarter of 2011. This benefit for credit losses was due to a decrease in our total loss reserves driven primarily by an improvement in the profile of our single-family book of business resulting from an increase in actual home prices, including the sales prices of our REO properties. In addition, our single-family serious delinquency rate continued to decline, driven in large part by the quality and growth of our new single-family book of business, our modification efforts and current period foreclosures. Key factors impacting our credit-related results include:

• Home prices increased by 3.2% in the second quarter of 2012 compared with 1.2% in the second quarter of 2011. We historically see seasonal improvement in home prices in the second quarter; however, the home price increase in the second quarter of 2012 was larger than expected and the largest quarterly increase we have seen in the last few years. Higher home prices decrease the likelihood that loans will default and reduce the amount of credit loss on loans that do default.

• Sales prices on dispositions of our REO properties improved in the second quarter of 2012 as a result of strong demand. We received net proceeds from our REO sales equal to 59% of the loans’ unpaid principal balance in the second quarter of 2012, compared with 56% in the first quarter of 2012 and 54% in the second quarter of 2011.

• Our single-family serious delinquency rate declined to 3.53% as of June 30, 2012 from 3.67% as of March 31, 2012 and 4.08% as of June 30, 2011.

Click on graph for larger image.

This graph from the Fannie Mae Second-Quarter Credit Supplement shows the REO sales price divided by the Unpaid Principal Balance (UPB). Fannie is losing less on each REO due to a combination of slightly higher house prices and strong investor demand.

Also, Fannie Mae' REO inventory declined in Q2 to 109,266 houses, the lowest level since 2009. I'll have more REO soon.