Archive for May, 2010
There are 2.5m households going through the foreclosure process right now and the number of homes with at least one missed mortgage payment sits at 5.4m, according to Capital Economics.
And even though the economic recovery is gaining momentum, more households are still falling behind on their mortgage.
By the end of 2011, an additional 3m homes will be in the foreclosure process, making the shadow inventory of potential REO properties at 5.5m. Some of these homes will inevitably avoid a foreclosure. But for many, the foreclosure process may be the only option and, eventually, those homes will get sold in the REO process.
Equity prices continue to fall, but there are some encouraging signs of recovery in the US housing market, notably increased housing starts and homebuilder confidence. On the other sign of the coin, mortgage applications are at a 13-year low.
“In any case, it is hard to describe the housing market as healthy when one in ten mortgages are in default,” economists Paul Ashworth and Paul Dales wrote.
Capital Economics maintains its projection that the housing market will experience a double-dip. Builders believe that the recent surge in demand — fueled by the now-expired homebuyer tax credit — will continue without the credit. However, the economists said, despite mortgage rates setting new record lows, application volume is dismal.
“This supports our long-held view that high unemployment, high indebtedness and tight credit will mean that without the tax credit the housing market will not be able to stand on its own two feet,” Ashworth and Dales wrote.
Adding to the problem is the increased number of homes in the foreclosures process. In Q409, the foreclosure inventory rate was 4.58%, but reached a new high at 4.63% — 2.5m foreclosures — in Q110.
The Capital Economics chart below tracks both foreclosure and mortgage delinquency rates (click to expand):
As more and more artificial interventions on the federal, state and municipal level slow down the foreclosure process, the pipeline is bulging. At the end of Q110, one in 10 mortgage holders — 5.4m households — missed at least one mortgage payment. Of that group, 2.7m are more than three months behind on payments.
While the economists note that a slight improvement in unemployment and steady economic growth would help reduce the foreclosure rate, those changes won’t address households too far gone in the foreclosure process to save.
If Capital Economics’ projections hold true, and by the end of 2011, the shadow inventory of foreclosures numbers 5.5m, an oversupply of inventory that would send home prices down again.
“To put that in perspective, that's more than the 4m homes currently up for sale,” the economists wrote. “Without a doubling in demand, a doubling of supply would deter homebuilders from constructing new homes and put more downward pressure on prices.”
Write to Austin Kilgore.
Citigroup sold certain mortgage derivative products without disclosing to investors that Morgan Stanley had helped select the underlying mortgage bonds while it was betting against them.
Citigroup had underwritten seven series of collateralized debt obligations called Jackson Segregated Portfolio in 2006, and the marketing documents for the $205m portfolio did not disclose who selected the underlying bonds.
Ambac Financial Group’s regulator won support from Dunkin Brands, Sonic Corp. and Hertz Corp. as he seeks to overcome objections from some of the insurer’s clients to his plan to rehabilitate the bond guarantor.
Executives of donut retailer Dunkin Brands, drive-in restaurateur Sonic and car-rental firm Hertz, which issued bonds insured by Ambac, filed affidavits in support of Wisconsin Insurance Commissioners Sean Dilweg’s motion in state court yesterday opposing the legal bids by two groups of bondholders.
Mall owner General Growth Properties on Thursday won a judge's approval for the final mortgage restructuring in its massive bankruptcy case, extending by four years the due date of a formerly contentious loan from lenders led by Citigroup.
US Bankruptcy Judge Allan Gropper approved the restructuring of a $95m mortgage on the Oakwood Center mall in the New Orleans suburb of Gretna, La.
Wells Fargo and LNR Property Corp. are each seeking to sell about $1bn of distressed US commercial real estate loans and assets, according to people briefed on the offerings.
Wells Fargo of San Francisco, the biggest US commercial real estate lender, is taking bids on $500m to $1bn of office and hotel mortgages and properties, said four people, who asked not to be identified because the sale is private.
California's housing market held steady in April, new data released Thursday showed, with home prices bouncing off their year-earlier lows but sales declining as the number of bank-owned properties dwindled.
The median price for all homes sold in the Golden State was $255,000, a 15.4% jump from the April 2009 bottom, when more than half of sales were foreclosures.
A former Emeryville resident has been sentenced in federal court in San Francisco to 15 years and eight months in prison and ordered to pay more than $9m in restitution for a mortgage fraud scheme.
Patricia Morgen, 63, who founded a real estate firm called Chicago Development and Planning, was sentenced Wednesday by US District Judge Charles Breyer.
Former Canadian cabinet minister Helena Guergis has been fined by the federal ethics commissioner for failing to report a mortgage used to purchase her new Ottawa home.
Booted from cabinet and the Conservative caucus by the prime minister over yet-unspecified allegations, Guergis must now pay a nominal fine for breaching rules that require public office holders to declare liabilities of more than CAN$10,000.
UK mortgage approvals fell in April to the lowest in almost a year as tighter credit conditions curbed demand from first-time buyers, preliminary data from the Bank of England showed.
The number of loans granted declined to 47,000 from 51,000 in March, according to a sample from the central bank’s panel of six major lenders released in London today. That’s the lowest since May 2009.
