Archive for September, 2010
The federal judge reviewing a proposed Citigroup Inc settlement with the U.S. Securities and Exchange Commission expressed concern that the accord does not do enough to ensure that the bank's disclosures to investors will be adequate.
The high pace of residential mortgage defaults has flooded the shadow inventory market with $460 billion in outstanding principal balance, according to Standard & Poor's second-quarter report on housing liquidation timelines.
This vast bucket of homes more than 90-days delinquent, in foreclosure, or REO represent one-third of the non-agency residential mortgage-backed securities market and will negatively pressure housing prices until the backlog clears in more than three years' time.
"Our estimate for the months to clear the shadow inventory for the U.S. as a whole increased about 18% between [the fourth quarter] and the end of [the second quarter]," according to Diana Westerback, S&P global surveillance analyst.
The shadow inventory estimate is increasing as the rate of liquidation is decreasing. Monthly cure/modification rates increased by almost 25% in the last two quarters (chart below):
The shadow inventory is largest in Los Angeles with an outstanding original balance of $182.8 billion. New York follows with $122.1 billion, and then San Francisco with $82.3 billion.
In the top 20 MSAs, Cleveland, Charlotte and Portland have the lowest amount of shadow inventory outstanding balance.
Write to Jacob Gaffney.
Barring a major surprise, the Fed is expected to launch a second round of quantitative easing – moves to increase money in the economy, such as purchasing treasuries or other assets – in November or December. Since the fed funds rates is already almost zero, it can’t cut interest rates further.
The FOMC’s opinion that inflation is already lower than what it would like suggests its tolerance for deflation risk is so low that the Fed will “provide additional accommodation” unless there is a major shif in the upcoming data. And there is very little data coming out before the November meeting that appears likely to shift the inflation outlook, according to Michael Cloherty, head of U.S. Rates Strategy at RBC Captial Markets in New York.
There is only one CPI report before the Fed meeting and even if we see a slight uptick in the year-over-year reading, he said it probably won’t meet the threshold required to keep the Fed on hold.
More homes moved from delinquency into foreclosure in August, as the inventory of homes 30-plus days and 90-plus days delinquent decreased and foreclosure starts rose to the highest level since January, according to Lender Processing Services.
HousingWire reported the initial results of the report last week. The firm's final monthly mortgage monitor was released today.
The majority of foreclosure inventory included prime loans, which increased 106.4% over an 18-month period in the agency sector, 102.4% in the non-agency sector, and 107% in the non-agency jumbo sector.
According to CoreLogic (CLGX: 14.56 +0.62%), there are about 40 million prime loans in the marketplace, 6.2% of which were 60-days delinquent in June and 3% of which were 90-days delinquent.
CoreLogic analyst Mark Fleming said the percentage of delinquent loans in the prime space have been masked because the volume is so huge.
LPS reported 282,528 foreclosure starts last month, up 1% from July and 3.8% higher than the year earlier. The year-to-date foreclosure rate is now 20.4% higher than 2009. Thirty-day delinquent inventory fell to 9.22%, the lowest level in over a year. The percentage was 9.3% in July and 9.7% a year ago. The inventory of 90-day delinquent loans decreased to 8.22%, down from 8.3% in July. The percentage was 8% a year earlier.
Despite the spike in overall foreclosure starts, the number of starts within agency loans decreased in August for the first time in three months, to less than 140,000. Agencies also have accelerated foreclosures in late-stage delinquencies, six-month delinquencies decreasing to 60,000 from 65,000. Six-month delinquency volume is the highest on agency portfolio. Three-month delinquencies account for more than 30,000 loans and two-month delinquent loans have risen for three month to almost 20,000 loans.
Write to Christine Ricciardi.
Are you delinquent on your first mortgage but still making monthly payments on your home equity credit line or second mortgage?
If so, a finance and real estate professor from DePaul University has some controversial advice for you: Stop paying on your second immediately.
Rebel Cole believes you are simply throwing good money after bad. If you are seriously delinquent on the first mortgage, you're likely headed for foreclosure unless both of your lenders agree on a modification or principal reduction plan. But since you continue to make payments on the second, the bank that holds that revenue-producing note may have minimal motivation to participate in a workout, he believes. Cole estimates that between 1 million and 3 million homeowners are in this position nationwide – so it's a big problem.
We've all heard horror stories about foreclosure, but none is sure to be as terrifying as "Foreclosure," a new film set to debut in 2011.
The story takes place in an abandoned neighborhood, where the financial crisis has tightened its grip and squeezed out all homeowners. One house is still occupied, and not just by human beings.
The slogan for the movie is "Ghosts don't move out," and the family living in the neighborhood is tormented by the haunting.
Now, I know what you're thinking. Dealing with the government, a tenant, a landlord, a broker, an agent, a maintenance man…all these things are way more difficult than a few ghosts. Heck, if people are scared of your house, no one will come service you hi-touch style.
But I wouldn't be too sure. What if your house were haunted by a former debt collector? Ocwen Loan Servicing? Chevon Bacchus? EEK!! The main characters in "Drag me to Hell" had the opposite problem: they refused a plea for a third mortgage payment extension from an elderly borrower who happens to be a witch. It seems like ghosts will fight on either side of the foreclosure battle.
I tried to find the "Foreclosure" movie trailer, but was unsuccessful. Perhaps it's in the modification process.
Write to Christine Ricciardi.
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