Moody's macro website, Economy.com, predicts 60% of all mortgage defaults this year will be caused primarily by unemployment - up from 29% last year.
According to the NYT:
From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.
The "Knock Out Punch" for the housing market is just over the horizon and it will be worse than anything seen before in housing.
The market is already staggering and reeling, with prices down 30% since the 2006 highs.
The inventory of unsold homes, 10+ months worth, is actually understated as banks are reluctant to take possesion of more foreclosed houses and some are refraining from putting REO's on the market which will depress prices further.
About 30%, not 20% which is the official figure, of homes with mortgages are underwater, their mortgages total more than the home's value.
Clayton's reports 26% of Alt-A mortgages, given to those with slightly better credit than the subprime borrowers, are in some stage of default as of February.
Then there are the Option ARMS. These beauties were toxic loans given to prime borrowers. They allowed the borrower to select (options) from 4 different mortgage payments each month. The most popular option selected (80%), was not even enough to cover the interest payment for that month! Therefore the unpaid interest as well as the principal piled up onto the back end of the mortgage, increasing the balance due precisely when the value of the property was falling!
These two mortgage classes will begin their 3 and 5 year interest rage resets this summer, 2009. With the likelihood of higher interest rates, combined with the inability to refinance on top of the lower prices, record high inventory and double digit unemployment, the housing market is expected to get hit with the Mother of all Housing Collapses! I predict that more than 40% of all Alt-A's and Option ARMS will default. Stay tuned!
This is even before the resets to higher interest rates kicks in starting October this year.
Showing posts with label default. Show all posts
Showing posts with label default. Show all posts
Friday, June 5, 2009
Wednesday, April 22, 2009
New Housing Numbers!
From Housing Wire:
Residential: -
"All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. "
"However, prime loans 60+ days delinquent increased by 69.6% while non-prime loans increased by a significantly lesser 23%."
"Reasons for default: 34.1% of homeowners cited curtailment of income as the main cause of default, 19.8% reported excessive obligations, 8.1% said unemployment, 6.5% said illness and 3.5% cited marital difficulties, such as the loss of a spouse’s wages. "
C'MON GUYS! Can't you just be honest and admit it is UNEMPLOYMENT that is "THE REASON?"
How about the government's mortgage relief plans to help homeowners?
"In January 8,953 loan modifications were completed compared to 8,688 in December and the prior 3-month average of 7,926, the FHFA reported. This represents a 3 percent increase in loan modifications by Fannie Mae and Freddie Mac from December 2008 to January 2009."
WOW, 8,953 loan modifications out of 1,229,051 delinquent mortgages! Unfortunately, that will probably be the high water mark for loan mods. The government, quiet as it was kept, on April 9th agreed that bank's did not have to report the losses sustained in its residential mortgages!!!
These losses were the primary drivers behind the banks willingness to consider modifications, short sales, etc. That has been removed!
On the commercial side, we had a hush hush collapse of the 2nd Largest owner of shopping malls in the US! I did see the bankruptcy of General Growth Properties mentioned on CNBC (24 hr Infomercials for Wall St!) and a passing mention on MSNBC.
THE 2ND LARGEST OWNER OF SHOPPING MALLS DECLARED BANKRUPTCY and the stock market went up about 122 points!
Is this amazing or what? Do you really think we are getting the real picture of what is going on with the economy?
This is stunning news, but the worst is yet to come! There are 5 other behemoths in this category as well that will probably be gone by the end of the year!
My sources estimate that up to 30% of all commercial loans will go bad in this Depression!
What will that do to banks and especially insurance companies that are big lenders to commercial real estate? What will it do to the value of the CRMBS, the Commercial Real Estate Mortgage Backed Securities held by municipalities, benefit funds, retirement funds?
The one thing you can count on is that the Fake Reserve Bank, the Government, Wall St and the Mainstream Media will keep the bad news hidden from you, no matter what the cost!
Check out my Tuesday radio broadcast where I bring you up to speed on what is really happening in this economy: http://MyMoneyShow.com
Residential: -
"All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. "
"However, prime loans 60+ days delinquent increased by 69.6% while non-prime loans increased by a significantly lesser 23%."
"Reasons for default: 34.1% of homeowners cited curtailment of income as the main cause of default, 19.8% reported excessive obligations, 8.1% said unemployment, 6.5% said illness and 3.5% cited marital difficulties, such as the loss of a spouse’s wages. "
C'MON GUYS! Can't you just be honest and admit it is UNEMPLOYMENT that is "THE REASON?"
How about the government's mortgage relief plans to help homeowners?
"In January 8,953 loan modifications were completed compared to 8,688 in December and the prior 3-month average of 7,926, the FHFA reported. This represents a 3 percent increase in loan modifications by Fannie Mae and Freddie Mac from December 2008 to January 2009."
WOW, 8,953 loan modifications out of 1,229,051 delinquent mortgages! Unfortunately, that will probably be the high water mark for loan mods. The government, quiet as it was kept, on April 9th agreed that bank's did not have to report the losses sustained in its residential mortgages!!!
These losses were the primary drivers behind the banks willingness to consider modifications, short sales, etc. That has been removed!
On the commercial side, we had a hush hush collapse of the 2nd Largest owner of shopping malls in the US! I did see the bankruptcy of General Growth Properties mentioned on CNBC (24 hr Infomercials for Wall St!) and a passing mention on MSNBC.
THE 2ND LARGEST OWNER OF SHOPPING MALLS DECLARED BANKRUPTCY and the stock market went up about 122 points!
Is this amazing or what? Do you really think we are getting the real picture of what is going on with the economy?
This is stunning news, but the worst is yet to come! There are 5 other behemoths in this category as well that will probably be gone by the end of the year!
My sources estimate that up to 30% of all commercial loans will go bad in this Depression!
What will that do to banks and especially insurance companies that are big lenders to commercial real estate? What will it do to the value of the CRMBS, the Commercial Real Estate Mortgage Backed Securities held by municipalities, benefit funds, retirement funds?
The one thing you can count on is that the Fake Reserve Bank, the Government, Wall St and the Mainstream Media will keep the bad news hidden from you, no matter what the cost!
Check out my Tuesday radio broadcast where I bring you up to speed on what is really happening in this economy: http://MyMoneyShow.com
Wednesday, February 18, 2009
Obama Blinked!
Although the so called Bankruptcy Cramdown provision; the ability of BK judges to reduce the amount of loans on property in the course of the BK, is extended for the first time to first mortgages on principal residences; the fact that there is no general across the board principal reduction for home owners will keep the bill from solving the housing crisis.
Giving "Incentives" to unscrupulous lenders to cooperate and lower mortgage payments will not work. It hasn't worked in Hope or Hope for homeowner plans as we have seen.
There are simply too many considerations and limitations; who owns the mortgage or part of the mortgage? Who is servicing it? Do you know that some well known mortgage services eagerly purchase defaulting loans and make huge profits by adding fees and foreclosing on them? What are the mortgage owners or their investors contractual obligations toward modification or principal reduction, etc.
Only a Federal Law could cut through those considerations and force action by the lenders.
I believe Obama knows the answer is principal reductions on home mortgages down to 80-90% of CURRENT market value is the most powerful answer to the foreclosure crisis.
This would allow the 20% or so of all mortgage holders who are underwater, whose mortgage is more than the house is worth, to reset to payments they can afford. If these people are not relieved, they have ZERO incentive to sacrifice their life savings or retirement savings to keep paying their mortgage.
Perhaps in a few months Obama can say, we tried everything else and it did not work, so we are now going to force lenders to reduce principal on all loans to affordable levels. He probably felt it would be too radical and face too much opposition from the Know-Nothings, like Eric Cantor; and getting something passed now was better than getting nothing passed.
However, the hour is late, perhaps too late to put the housing monster back in its cage. It is already sucking up the scarce money homeowners need to service not only their mortgage but their credit cards, auto and student loans, which will cause massive defaults in those areas, hurting the banks even more.
There is even more carnage just over the horizon as I point out in an earlier posting.
There is already baked-in to the forecasts by Credit Suisse about 6 Million more foreclosure over the coming two years because of massive, Trillion dollar defaults in Alt-A and Option Arm loans.
Already 60% of Option Arms are underwater and more than 80% of borrowers are paying less than the interest owed on each payment, thereby Increasing the amount of principal owed with every payment!
Also, something I have not seen discussed is that even Prime loan defaults will probably skyrocket in the next 2-3 years. Historically their defaults peak 3-5 years after they are issued.
That means that the Trillions of dollars in prime loans written at the peak of the boom, 2005 and 2006 and therefore have suffered the sharpest home value drops,will enter peak default periods in 2008-2011. Already, Prime loans are entering default stage at a higher rate than sub prime in some areas!
Finally, the Know Nothings are crazy if they feel that an overall mortgage default rate of 10% is acceptable!
This is fully 10 Times the normal mortgage default rate! Many banks have about 50% of their capital in residential mortgages. A 10% default rate on their assets would reduce their lending capacity by 10-20x that amount. Such a blow to their lending and therefore earning ability would cripple them.
The Know Nothings are now, predictably, so consumed with the fear (they love to spread fear, remember the Yellow and Orange Alerts during the 2004 campaign?) that a homeowner who cheats, obviously a minority of all borrowers gets bailed out?
What about the banks and Wall St where All of the big banks and brokerage houses, rating agencies and others who created this mess in the first place? Aren't they being bailed out regardless? Oh, I forgot, the banks are too big to fail, but the homeowner is too small to bail.
In summation, I believe Obama's Home Rescue Plan is too little, too late, especially after the Know Nothings get finished savaging it. Will he get a second chance to make it better? Will it matter?
Giving "Incentives" to unscrupulous lenders to cooperate and lower mortgage payments will not work. It hasn't worked in Hope or Hope for homeowner plans as we have seen.
There are simply too many considerations and limitations; who owns the mortgage or part of the mortgage? Who is servicing it? Do you know that some well known mortgage services eagerly purchase defaulting loans and make huge profits by adding fees and foreclosing on them? What are the mortgage owners or their investors contractual obligations toward modification or principal reduction, etc.
Only a Federal Law could cut through those considerations and force action by the lenders.
I believe Obama knows the answer is principal reductions on home mortgages down to 80-90% of CURRENT market value is the most powerful answer to the foreclosure crisis.
This would allow the 20% or so of all mortgage holders who are underwater, whose mortgage is more than the house is worth, to reset to payments they can afford. If these people are not relieved, they have ZERO incentive to sacrifice their life savings or retirement savings to keep paying their mortgage.
Perhaps in a few months Obama can say, we tried everything else and it did not work, so we are now going to force lenders to reduce principal on all loans to affordable levels. He probably felt it would be too radical and face too much opposition from the Know-Nothings, like Eric Cantor; and getting something passed now was better than getting nothing passed.
However, the hour is late, perhaps too late to put the housing monster back in its cage. It is already sucking up the scarce money homeowners need to service not only their mortgage but their credit cards, auto and student loans, which will cause massive defaults in those areas, hurting the banks even more.
There is even more carnage just over the horizon as I point out in an earlier posting.
There is already baked-in to the forecasts by Credit Suisse about 6 Million more foreclosure over the coming two years because of massive, Trillion dollar defaults in Alt-A and Option Arm loans.
Already 60% of Option Arms are underwater and more than 80% of borrowers are paying less than the interest owed on each payment, thereby Increasing the amount of principal owed with every payment!
Also, something I have not seen discussed is that even Prime loan defaults will probably skyrocket in the next 2-3 years. Historically their defaults peak 3-5 years after they are issued.
That means that the Trillions of dollars in prime loans written at the peak of the boom, 2005 and 2006 and therefore have suffered the sharpest home value drops,will enter peak default periods in 2008-2011. Already, Prime loans are entering default stage at a higher rate than sub prime in some areas!
Finally, the Know Nothings are crazy if they feel that an overall mortgage default rate of 10% is acceptable!
This is fully 10 Times the normal mortgage default rate! Many banks have about 50% of their capital in residential mortgages. A 10% default rate on their assets would reduce their lending capacity by 10-20x that amount. Such a blow to their lending and therefore earning ability would cripple them.
The Know Nothings are now, predictably, so consumed with the fear (they love to spread fear, remember the Yellow and Orange Alerts during the 2004 campaign?) that a homeowner who cheats, obviously a minority of all borrowers gets bailed out?
What about the banks and Wall St where All of the big banks and brokerage houses, rating agencies and others who created this mess in the first place? Aren't they being bailed out regardless? Oh, I forgot, the banks are too big to fail, but the homeowner is too small to bail.
In summation, I believe Obama's Home Rescue Plan is too little, too late, especially after the Know Nothings get finished savaging it. Will he get a second chance to make it better? Will it matter?
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