Delinquency Rates Soar According to Bloomberg...

Bloomberg U.S. Mortgage Delinquency, Foreclosure Rates (Table)

2008-11-17 12:33:09.850 GMT

By Alex Tanzi

Nov. 17 (Bloomberg) -- The following table shows residential mortgage delinquency rates for U.S. loans as reported by the Bloomberg non-agency database comprised of over 45 million securitized loans.

*T

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10/31/08 09/30/08 08/31/08 10/31/07 10/31/06 =========================================================================

Bankruptcy 1.35% 1.28% 1.23% 0.77% 0.85%

of which Prime 0.60% 0.53% 0.50% 0.18% 0.13%

of which Alt-A 1.06% 0.93% 0.87% 0.35% 0.02%

of which Subprime 2.52% 2.44% 2.38% 1.60% 2.08%

Foreclosure 7.20% 7.10% 6.83% 3.37% 1.34%

of which Prime 3.34% 3.25% 3.03% 0.87% 0.22%

of which Alt-A 6.04% 5.82% 5.56% 1.73% 0.37%

of which Subprime 12.54% 12.39% 12.03% 6.66% 2.80%

Real Estate Owned 4.20% 4.13% 3.96% 1.64% 0.49%

of which Prime 1.66% 1.54% 1.42% 0.37% 0.07%

of which Alt-A 2.89% 2.76% 2.52% 0.70% 0.13%

of which Subprime 7.96% 7.90% 7.67% 3.37% 1.03%

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10/31/08 09/30/08 08/31/08 10/31/07 10/31/06 =========================================================================

Delinq. (30,60,90,REO&Fore) 20.87% 20.22% 19.27% 11.48% 6.09%

of which Prime 10.12% 9.57% 8.80% 3.96% 1.78%

of which Alt-A 18.96% 18.10% 16.74% 7.95% 3.48%

of which Subprime 35.14% 34.23% 33.16% 20.37% 10.85%

Delinquency (30 days) 3.59% 3.56% 3.28% 3.09% 1.97%

of which Prime 2.02% 2.04% 1.81% 1.48% 0.85%

of which Alt-A 4.09% 4.06% 3.64% 3.22% 1.93%

of which Subprime 5.31% 5.18% 4.91% 4.73% 3.15%

Delinquency (60 days) 2.07% 1.99% 1.86% 1.50% 0.73%

of which Prime 1.15% 1.09% 1.01% 0.56% 0.21%

of which Alt-A 2.22% 2.14% 1.93% 1.24% 0.45%

of which Subprime 3.15% 3.02% 2.85% 2.58% 1.37%

Delinquency (60+ days) 17.28% 16.66% 15.99% 8.05% 3.53%

of which Prime 8.09% 7.53% 6.98% 2.26% 0.70%

of which Alt-A 14.87% 14.04% 13.10% 4.68% 1.32%

of which Subprime 29.81% 29.03% 28.23% 15.47% 7.18%

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10/31/08 09/30/08 08/31/08 10/31/07 10/31/06 =========================================================================

Delinquency (90 days) 3.80% 3.44% 3.34% 1.50% 0.97%

of which Prime 1.95% 1.64% 1.52% 0.44% 0.19%

of which Alt-A 3.72% 3.32% 3.08% 1.00% 0.36%

of which Subprime 6.12% 5.68% 5.64% 2.80% 1.97%

Delinquency (90+ days) 15.20% 14.67% 14.13% 6.55% 2.80%

of which Prime 6.94% 6.44% 5.98% 1.70% 0.49%

of which Alt-A 12.65% 11.90% 11.16% 3.44% 0.86%

of which Subprime 26.64% 25.99% 25.36% 12.88% 5.81%

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SOURCE: Bloomberg non-agency database of 45 million securitized loans.

--Editors: Alex Tanzi

Homeowners Find Loan Modifications Slow, Difficult

SAN FRANCISCO (CBS 5) ― Ask anyone who has tried a loan modification, and chances are the process took months or wasn't successful.

The numbers say it all. HUD's loan modification program was supposed to help 400,000 borrowers. So far it's helped only 42. Countrywide's program was so ineffective the bank was sued.

Greg Jewell, a loan negotiator has figured out the only way to get heard is to go right to the top. He's bombarding bank executives. "That's the person I got a hold of Saturday," he explained to his client, Toni Dalrymple.

Dalrymple bought in Mountain House -- a town southwest of Stockton -- where the majority of homes are underwater. She paid $800,000 and it's now worth less than half that.

The clock is ticking. If she doesn't get payments reduced fast, she'll have to walk away. The delay is caused by a common problem for Bay Area residents. Many have big loans that were sliced up and sold to investors here and overseas.

"My mortgage loan was sold to another investor and there's a problem getting another investor to jump on board," said Dalrymple.

Glen Brown faces similar obstacles. The car salesman lost a third of his income, and went to his bank, Wells Fargo, to adjust his loan payments. The bank told him he wasn't eligible until he went late on payments. So he skipped two payments on purpose to get attention.

Five months later, "It was like a cat chasing his tail. There was always a roadblock. You never talk to the same person," said Brown.

Brown said that's because banks don't want to talk to the homeowner. The call centers are often filled with inexperienced operators. It's a complicated game that has taken him over a year to figure out.

FDIC lays out broad home loan modification plan

By Karey Wutkowski

WASHINGTON (Reuters) - The federal agency that insures most U.S. bank deposits unveiled a plan to prevent about 1.5 million home mortgage foreclosures by promising to share any losses with mortgage companies that agree to refinance certain home loans.

The agency, the Federal Deposit Insurance Corp, said on Friday the plan would cost the government about $24.4 billion, which could be paid from the U.S. Treasury's $700 billion bailout program for the financial industry.

So far, most of the money in the bailout program, the Troubled Asset Relief Program, or TARP, has been injected as capital into banks.

FDIC Chairman Sheila Bair, who spent weeks unsuccessfully lobbying Bush administration officials for the foreclosure prevention plan, unveiled her agency's proposal two days after Treasury Secretary Henry Paulson dismissed the idea of the government underwriting failing home loans.

Paulson told reporters on Wednesday, "That (foreclosure plan) is a subsidy, or spending, program. The TARP was investment, not spending."

The FDIC pushed forward with its plan, posting it on its website Friday morning (http://www.fdic.gov/consumers/loans/loanmod/index.html).

"Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow," the FDIC said. "It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures."

The FDIC said its plan would modify about 2.2 million mortgage loans by offering financial incentives to mortgage servicers. It would pay servicers $1,000 to cover expenses for each loan modified to the required standards, and would promise to share up to 50 percent of losses incurred if a modified loan defaults.

Eligible borrowers would include those who have missed at least two monthly payments on loans for homes they live in. Servicers would be expected to lower those borrowers' monthly payments to about 31 percent of the borrowers' monthly income.

The Treasury Department said on Friday that it was aggressively looking at ways to reduce skyrocketing home foreclosures under the TARP.

"We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a key part of working through the necessary housing correction and maintaining the strength of our communities," Treasury Interim Assistant Secretary Neel Kashkari said in testimony prepared for delivery to a U.S. House of Representatives committee.

Upside Down? Go Short!

http://www.sandiegoreader.com/news/2008/oct/08/city-light-1/

In San Diego’s hemorrhaging real estate industry, it’s better to be upside-down and rich than upside-down and poor. That may sound axiomatic — it’s always nicer to be rich than poor — but carriage-trade folks whose homes are underwater can work the system more easily than poor folks in the same sorry situation.
The key is the short sale, in which a lender agrees to discount a loan balance when a house is upside-down — that is, the home is worth less than the balance on the mortgage. In a short sale, the homeowner sells the asset for less than the outstanding balance of the mortgage on the property, and the bank is willing to accept the lower figure, often to avoid the expense and hassle of foreclosing and dumping the property on a glutted market.
A short sale can be a good deal for the seller because, generally speaking, one’s credit record is less damaged from a short sale than a foreclosure.
I checked HouseRebate.com for information on short sale and foreclosure homes that are currently for sale. I got information on average single-family home prices from DQNews.com. Generally, there are more short sales and foreclosures in the poorer areas than the richer ones. For example, in Encanto, there are 101 foreclosures and 191 short sales on the market. In the 92067 zip code of Rancho Santa Fe, there are zero foreclosures and 7 short sales. The ratio of short sales to foreclosures is higher in the affluent areas. On a relative basis, wealthier people are taking advantage of short sales more than poor and moderate-income people are.
On the surface, this would seem to be an anomaly. “Banks check out clients to be sure they need a short sale,” says John Smith of Old Mission Mortgage. “They are not going to let Donald Trump do a short sale. They do due diligence on the client. Possibly we [have had] some very unqualified borrowers in some big homes — people buying on speculation that they could flip [sell] the house in a year.” These flippers may or may not qualify for a short sale.
Here are some examples: listed are the name of the market, the median price of a single-family home there, and the ratio of short sales to foreclosures. Coronado, $1.3 million, 5 to 1; La Jolla, $1.8 million, 5.6 to 1; Scripps Ranch, $620,000, 4.4 to 1; Tierrasanta, $499,000, 9.3 to 1; Del Mar, $1.5 million, 2.8 to 1; and Carmel Valley, $865,000, 9 to 1.
By contrast, here are prices and ratios from representative lower-scale areas: National City, $212,000, 1.8 to 1; City Heights, $221,000, 2.25 to 1; Encanto, $245,000, 1.9 to 1; Logan Heights, $147,000, 2 to 1; Golden Hill, $178,000, 2.5 to 1; Paradise Hills, $260,000, 2.4 to 1; and Lemon Grove, $263,000, 2.1 to 1.
So why do the poorer people less often take advantage of the short sale? “Look at the socioeconomic base,” says Brian Yui, whose company runs the HouseRebate.com website. “People haven’t been informed about the short sale process.” Also, the foreclosure proceeding has its advantages. The family lives in the house for three or four months essentially rent-free. Then, before seizing the property, the bank pays the household $500 to $1000 to move out.
Banks take a long time to approve a short sale. “Most real estate agents steer away from short sales,” says Smith of Old Mission. “Banks are so hard to work with. However, agents get a bigger payday on a $1.5 million property than a $250,000 one.” So there is less aversion to a short sale in the upscale areas.
The affluent “have time to make a short sale,” says Sharon Hanley, market analyst for Oceanside’s New Housing Monitor. “They realize they are upside-down. Why sit here with a million-dollar loan when their house is worth $700,000? They are in a position where they can continue to make the payments” until the bank approves the deal. The opposite is true with people in poorer markets. “They were put into these crazy loans where payments are doubling and tripling.” There is urgency. Foreclosure is the easier route, and they can’t afford to worry about their credit rating.
Those blessed with prosperity “have more access to real estate attorneys or have better lender relationships,” says Peter Reeb, president of Reeb Development Consulting. “They are better able to negotiate on their own behalf.” The home may be the third or fourth or fifth they have bought through the years. “These people know how to better protect their assets, minimize losses,” while protecting their credit rating.
Agrees Peter Q. Davis, retired San Diego banker, “I would think…that those with higher home prices may have a better understanding of the tools available to them and a stronger desire to protect their credit ratings. A lot of times the high-end folks deal with friends or associates for their loans, and this could also affect their actions.”
“One reason short sales are more successful in upscale areas is that demand is higher,” says Stan Sexton of La Mesa’s New Horizons Realty. Sophisticated buyers “can afford a more expensive home and get 30 to 40 percent off.” Both buyers and sellers “are very sophisticated people with higher incomes; they know how to play the short sale game. People at the lower end are very strapped, unemployed or underemployed. Mexicans are leaving California for Mexico. They can’t get jobs here.”
Short sales can be complicated — one reason it takes banks so long to approve them. Sexton has one client with a $1.06 million mortgage. There is one offer on the property for $790,000, one for $810,000 and two for $800,000. But the bank is holding up the deal; there is a second mortgage on the property that must be unraveled. Sexton was showing property in EastLake on which the loan is $1.2 million and the bid is $639,000. “Can you imagine the amount of money these banks are eating in short sales? And they usually lose even more on a foreclosure.”
It may take eight weeks for a bank to approve a short sale, says Sexton. But the foreclosure “is approved very quickly,” he says. One reason the bank takes a long time on short sales is it doesn’t want to foster a sweetheart deal. The homeowner may sell the house to his brother-in-law at an excessively low price. Understandably, the bank wants to get all it can out of the transaction.
“Many people try the short sale first, then go into foreclosure,” says Yui. “The bank may decide [the offer] won’t qualify.”
However, a loan in the $1.5 million range “will get attention right away,” says Smith. “It’s in the bank’s interest to work with those [affluent] people” — as long as they are playing it straight.

40% Upside Down in Miami who bought in Last 5 Years

WSJ: 1 in 6 homeowners upside down, and growing
posted at 3:00 pm on October 8, 2008 by Ed Morrissey Send to a Friend printer-friendly
The Wall Street Journal paints a grim picture of the housing market today in its analysis of debt-to-equity ratios in the residential market. The rate of homeowners who owe more than their equity has increased to 16% after a 30% decline in housing values. That’s almost three times the rate in 2007 and four times the rate in 2006, and it’s likely to keep going higher:
About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody’s Economy.com.
The comparable figures were roughly 4% under water in 2006 and 6% last year, says the firm’s chief economist, Mark Zandi, who adds that “it is very possible that there will ultimately be more homeowners under water in this period than any time in our history.”
Among people who bought within the past five years, it’s worse: 29% are under water on their mortgages, according to an estimate by real-estate Web site Zillow.com.
The majority of homeowners still have equity, and even among those who don’t, many continue to make their mortgage payments on time. The financial-bailout legislation could at least “keep things from getting much worse” by helping banks avoid the need to tighten credit further, says Celia Chen, director of housing economics at Economy.com. Still, she expects housing credit to remain tight and home prices to decline in much of the country for another year or so.
The problem is more regional than national, at least at the extremes. Texas and North Carolina are experiencing a slight increase in home values, at least at the moment. The hardest-hit areas are Florida, Los Angeles, Las Vegas, and San Diego. Percentages of under-water homeowners who bought in the last 5 years go over 50% in San Diego and Las Vegas, and above 40% in Miami and Phoenix.
What will this mean? The WSJ warns that a consumer-spending freeze is coming that will slam the economy. Right now, lenders aren’t interested in selling car loans or credit on other big-ticket items, and people aren’t likely to buy them anyway. The decline in sales will result in plenty of lost jobs, which will in turn hit the residential housing market all over again. Ad sales will drop as consumer spending declines, meaning that many who rely on that for revenue will find themselves gasping for resources. And of course, as foreclosures mount, they will deepen the decline on home values.
On a brighter note, the decline has brought home prices much closer to their historical relationship to income. As that point approaches, housing prices should hit bottom and start rebounding, assuming that a massive load of foreclosures doesn’t create its own revaluation.
In looking at the WSJ’s map, in fact, the problem appears mostly concentrated in Florida and California, with hot spots in Green Bay, up the West Coast, and to a less intense extent on the northern East Coast. What does that mean politically? Does it mean that the fallout from the housing bubble can be quarantined to these regions? Interesting questions, with no real answers at the moment.

Is Washington Mutual The Next one to Fail?

Washington Mutual tumbles 30 percent to 17-year low

By Jonathan Stempel and Dena Aubin Wed Sep 10, 4:37 PM ET
NEW YORK (Reuters) - Washington Mutual Inc (WM.N) shares sank 30 percent to a 17-year low and the perceived risk of its debt soared on worries the largest U.S. savings and loan will not find a buyer or raise enough capital to combat soaring mortgage losses.
The stock closed down 98 cents at $2.32 on the New York Stock Exchange, and are down 44 percent in the last two days. It fell earlier to $2.30, the lowest since January 1991, according to Reuters data.
Analysts attributed the decline in part to anxiety that potential buyers might walk away because of a pending accounting rule requiring they value the assets of targets at market prices, and perhaps the need to raise capital.
They also pointed to Lehman Brothers Holdings Inc (LEH.N), which said earlier on Wednesday it plans to sell a majority stake in its asset management unit and spin off commercial real estate, and posted a $3.93 billion quarterly loss. The shares of Lehman, Wall Street's fourth-largest investment bank, fell 7 percent.
"Lehman failed to find anyone to invest capital. With Washington Mutual potentially needing some in the future, the market is taking the opportunity to punish that company," said Jaime Peters, a banking analyst at Morningstar Inc in Chicago.
Washington Mutual did not immediately return a call seeking comment.
Earlier this year, it raised $7.2 billion from investors, including private equity firm TPG Inc (TPG.UL).
On Monday, the thrift ousted the longtime chief executive, Kerry Killinger, and replaced him with Alan Fishman, the former chief of Brooklyn, New York's Independence Community Bank Corp.
Washington Mutual lost $3.33 billion in the second quarter, and said cumulative losses from subprime mortgages and other home loans could reach $19 billion through 2011. The thrift's shares have fallen 93 percent in the last year.
SHAKE-OUT
It costs $4.3 million up front plus $500,000 annually to protect $10 million of Washington Mutual debt against default for five years, Phoenix Partners Group said on Wednesday. The up-front payment increased from $3.2 million on Tuesday.
Wednesday's level suggests that investors see an 85 percent chance of default within five years, according to Tim Backshall, chief analyst at Credit Derivatives Research in Walnut Creek, California.
"The market's shaking out who's going to be able to survive over the next year, and this is just part of the shake out," said Mirko Mikelic, portfolio manager for Fifth Third Asset Management in Grand Rapids, Michigan.
On Tuesday, Standard & Poor's lowered its outlook to "negative" for its "BBB-minus" credit rating, which is one notch above "junk" status.
Washington Mutual this week announced an agreement with its chief U.S. regulator, the Office of Thrift Supervision (OTS), requiring improved risk management and compliance. It said the agreement doesn't require it to raise capital.
An OTS spokesman did not immediately return a call seeking comment. A Federal Deposit Insurance Corp spokesman said the agency does not comment on banks that are open and operating.
Morningstar's Peters said a falling stock price complicates Fishman's task to nurse Washington Mutual back to health.
"Fundamentally, nothing has changed at Washington Mutual since he was named CEO," Peters said. "He already has a very difficult task ahead of him. His primary task is to stabilize loan losses, and keep capital at a level that makes regulators happy."
(Additional reporting by Herbert Lash and Phil Wahba in New York, and John Poirier in Washington, D.C.)

U.S. Mortgage Foreclosures, Delinquencies Reach Highs

More Bad News:

Sept. 5 (Bloomberg) -- Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn't refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA's chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.

``People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can't sell and they can't afford the higher payments,'' Brinkmann said in an interview. The unadjusted rate for new foreclosures was 1.08 percent, also a record, he said.

The three-year-old housing slump has slowed growth of the world's largest economy, caused more than half a trillion dollars of losses at banks such as Citigroup Inc. and UBS AG, and crimped earnings for companies such as Home Depot Inc. and Lowe's Cos. that rely on home purchases to fuel demand.

Economic Growth

The drop in home sales and values, along with tighter credit conditions and higher energy costs, probably will ``weigh on economic growth over the next few quarters,'' Federal Reserve policy makers said Aug. 5 when they decided to hold their benchmark rate at 2 percent. The central bankers cut the rate seven times in the last year in an attempt to avert a U.S. recession.

The Fed probably will keep the rate level for the next few months, according to the price of Fed funds futures. There's an 81 percent chance of no change at the Sept. 16 meeting and a 75 percent chance of no action at the Oct. 29 meeting, they indicate.

Foreclosures started on prime mortgages rose to 0.67 percent from 0.54 percent and the foreclosure inventory increased to 1.42 percent from 1.22 percent, the report said. The share of seriously delinquent prime mortgages was 2.35 percent, up from 1.99 percent.

Prime Mortgages

The share of new foreclosures on prime ARMs was 1.82 percent, triple the 0.58 percent in the year-earlier quarter, and the total foreclosure inventory was 4.33 percent, up from 1.29 percent, the report said. The share of seriously delinquent prime ARMs was 6.78 percent, rising from 2.02 percent a year ago.

New foreclosures on subprime loans rose to 4.7 percent from 4.06 percent in the first quarter, according to the report. The total foreclosure inventory increased to 11.81 percent from 10.74 percent and the so-called seriously delinquent share of loans that are 90 days or more overdue rose to 17.85 from 16.42 percent.

The bankers' report cites percentages without providing the number of mortgages. The U.S. had $10.6 trillion of outstanding home loans at the end of March, according to a June 5 report by the Federal Reserve. Mortgage lending fell to $320.9 billion in the first quarter, down from $782.6 billion a year earlier, the Fed report said.

Existing home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent, according to the National Association of Realtors in Chicago.

Market Bottom

Tumbling prices and foreclosure sales by banks may be helping to form a bottom for the housing market, said Brian Bethune, chief U.S. financial economist at Global Insight Inc. in Lexington, Massachusetts.

``People who have been waiting on the sidelines -- and there have been quite a number of them -- are starting to see prices come down to the point where they perceive good value,'' Bethune said in an interview. ``Foreclosures do provide opportunities and induce some people to come back into the market.''

Sales of previously owned homes rose 3.1 percent in July to an annualized pace of 5 million, boosted by foreclosures that accounted for about a third of all transactions, the National Association of Realtors said in an Aug. 25 report.

The Mortgage Bankers report is based on a survey of 45.4 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.