Monday, November 9, 2009
The picture isn't pleasing---You can see that as broad unemployment rate increased from less than 10% to 17.5% (in October, 2009)---The delinquency rate on home loans for Fannie & Freddie (which are typically Prime Loans) have increased by almost 6 - 8 Fold!
Let me repeat that---In Late 2006 and Early 2007, the prime mortgages were delinquent at merely ~0.5%. Now Freddie Mac has a 3.33% Delinquency Rate (September, 2009) and Fannie has a Delinquency Rate of 4.45%.
People should remember that in 2007, the economy & markets started tanking because sub-prime mortgages started going delinquent... Granted, those loans were going bust a significantly higher rate than the Freddie & Fannie notes---but also remember that Freddie & Fannie loan out significantly more money than what was ever given out to sub-prime borrowers... I don't have the data, but I'd venture to say that in order-of-magnitude--these loan delinquencies could be as bad or worse than the sub-prime crises.
Tuesday, August 18, 2009
Thursday, July 16, 2009
CNN which used data provided by realtyTrac broke down the data to show the 10 states where the most mortgage foreclosure activity is taking place. Here's the data:
- Nevada 1 in every 16 houses in foreclosure
- Arizona 1 in every 30
- Florida 1 in every 33
- California 1 in 34 houses
- Utah 1 in 69
- Georgia 1 in 70
- Michigan 1 in 74
- Illinois 1 in 76
- Idaho 1 in 79
- Colorado 1 in 80
- Ohio 1 in every 86
Saturday, July 11, 2009
Saturday, June 27, 2009
Freddie Mac recently published the data for its seriously delinquent mortgages through May-2009. And the results continue to worsen.
2.01% of "Non-Credit Enhanced Mortgages" are seriously delinquent--These are mortgages that would have had at least a 20% down payment.
And 5.45% of Credit enchanced Freddi Mac Mortgage loans are delinquent---Think of these as folks who couldn't pony up the 20% down payment and may be using PMI (private mortgage insurance) to get the safety that Freddie wants.
Overall (combining the above 2 catagories) 2.62% of F-Mac's mortgages are seriously behind in their payments... And to make matters worse for all those "green-shooters" out there, the second derivative of delinquencies increased in May. (That essentially means that the rate of increase in delinquencies in May has increased vs. what it was in April).
Tuesday, May 26, 2009
Crains Chicago today showed a chart that shows just how bad the Great Recession is impacting the rate of commercial mortgage delinquencies. At the end of Q1-2009, 3.6% of American Commercial mortgages were delinquent and 5.6% of Chicago area loans were behind in their payments---Both are almost 4 times worse than what was typical during 2006.
Of the Top-100 US Metro Areas, Foresight Analytics says that these 10 areas have the worst delinquency rates for the commercial mortgage market:
- Warren-Farmington Hills-Troy, Michigan 6.3%
- Miami, Florida -- 5.7%
- Chicago -- 5.6%
- Grand Rapids, Michigan 5.4%
- Milwaukee, Wisconsin 5.2%
- Indianopolis, IN -- 5.1%
- Jacksonville, FL 5.0%
- Sarasota, FL--4.9%
- Dayton, Ohio -- 4.5%
- Lake County, IL / Kenosha County, WI 4.4%
In the 1990's commercial mortgage delinquencies peaked around 9% and it's likely that as this recession lingers, unemployment climbs and vacancies rise--the rate of delinquencies will continue to escalate.
What I found quite interesting is that most of the "top-10" come from the Midwest and Florida---but as we all know the credit crunch has hurt consumers in California, Nevada, Arizona and Oregon as hard as the midwest---so I'm guessing in a few more quarters time you'll be seeing communities like Phoenix, LA, Las Vegas, and Portland creeping to the top of the list as well.
Friday, May 8, 2009
Click on Image for a bigger chart
Thursday, May 7, 2009
The hardest hit locations include Las Vegas, NV (~2/3rds of home owners are underwater), many parts of California (Stockton, Modesto, Merced, Riverside) and Phoenix and Florida.
According to zillow, around 22% of homeowners with a mortgage in the US have negative equity. This makes it much less likely that these home-owners would be able to refinance---and should a negative life event (health issue, divorce, loss of job) occur you count on increased mortgage delinquencies, defaults and foreclosures.
Wednesday, May 6, 2009
This is up from 17.6% of motgages being underwater in Q4-2008 and 14.3% in Q3-2008.
Tuesday, May 5, 2009
Every so often I like to post a light hearted item. Hat tip to Greg Mankiw for featuring this funny video of Merle Hazard and Bretton Woods singing a country song about if we're heading for inflation or deflation.
Either scenario is bad for the mortgage market---If there's inflation, mortgage rates will rise causing slower principal repayments and possibly lower property values in the short term (as the monthly payments increase b/c of higher interest rates). If there's deflation, consumers will postpone spending b/c their dollars will buy more stuff in 1 year than what it will buy them today.
Tuesday, April 28, 2009
According to data from JP Morgan Chase 60+ delinquency rates across all loan catagories continue to rise.
The latest statistics from March 31, 2009 show that mortgage delinquencies for Subprime loans reached ~40% in March, and Option ARM loans (sometimes called pick-a-payment) went north of 30%, and this group has the steepest rise in default rates. [You can count on the Option ARM loans to continue increase in defaults as the resets roll through during 2009 - 2011]
These segments were followed by Alt-A mortgages with almost 20% of loans being 60 days or more behind and Home Equity Lines of Credit (HELOC) hovering around 10%...
Another disturbing trend is the early uptick in Jumbo Prime loans that are past due.
On the other side of the chart is the recovery values by loan type...
As you'd expect HELOC loans have the worst recovery values---this is because they are typically not the first lien on the property---But another disturbing trend is that the recovery rates across all types of loans has been on serious downward spiral.
Friday, April 17, 2009
Saturday, April 4, 2009
It has been a couple of months since I've compared the serious delinquency rates at Fannie Mae and Freddy Mac with the unemployment rate and (U6) underemployment rate provided from the Bureau of Labor Statistics.
The news doesn't appear to be getting any better---The Fannie Mae delinquency rates on single family homes have incrased from 2.13% in November, 2008 to 2.77% in January, 2009 (The latest data-point available)---The delinquency rate at Freddie Mac has increased from 1.72% in December, 2008 to 2.13% in February 2009.
Given that the March Unemployment Rate is 8.5% and the U6 unemployment rate (which includes underemployed workers is 15.6%)---I estimate that you'll see Freddie's delinquency rates for March 2009 come in over 2.5% and Fannie's to be north of 3%... Keep in mind most of these mortgages were of significantly higher quality than your run of the mill sub-prime loan, Alt-A loan or Option Arm Loan---Those delinquency rates are significantly higher.
Wednesday, March 18, 2009
Case in point, 2 recent stories:
- The New York Times recently wrote a piece that details the process from walking away from your home and how to play chicken with your mortgage lender.
- Detroit City Councilman Kwame Kenyatta has walked away from his house---According to the story, the councilman paid $225,000 for the property in 2004 and now it's only worth 100,000...
Tuesday, March 17, 2009
Foreclosure has become so prevalent in our society even the writers at Fox's "The Simpsons" have decided to take on the issue. Marge & Homer have Countryfine auction off their house after blowing refinance money on Mardi Gras parties.
(Episode length ~ 22 minutes---but you get the gist in the first 10 minutes)
Thursday, March 12, 2009
Some states with the worst levels of foreclosure include:
- Nevada (1 in 70 houses in foreclosure)
- Arizona (1 in 147 houses in foreclosure)
- California (1 in 165 houses in foreclosure)
- Florida (1 in 188 houses in foreclosure)
Thursday, March 5, 2009
The story references a recent Mortgage Bankers Association report that cites 8.6% of all U.S. mortgages are delinquent in the U.S. (compared to 11.1% in Michigan) and 3.7% of Michigan's mortgages are in foreclosure.
The report also stated:
... five states – California, Florida, Nevada, Arizona and Michigan – continue to dominate the delinquency numbers. Yet five other states – Louisiana, New York, Georgia, Texas and Mississippi – had the sharpest increases last quarter in loans 90 days or more late, which are signs that the recession’s impact is spreading, he said.Times are tough in Michigan as demand for durable goods continues to decline and the state saw 11.6% unemployment in January, 2009.
Wednesday, March 4, 2009
This amounts to over 8 million residential properties that have negative equity.
The article goes on to state:
Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages.You can be sure that as long as states like California, Florida, Georgia, Michigan and Ohio continue to see unemployment rates rise, delinquency rates on mortgages will go up and with many of those home-owners in a negative equity situation on their loans, and significant amounts of resets yet to come---the collapse in housing prices will continue for a couple of more years.
You can read the rest of the article here
Monday, March 2, 2009
Click for a larger image
This is a Credit Suisse chart that shows the the oncoming mortgage resets for ARMs, Option ARMs, Subprime Loans, Alt-A Loans, Prime Mortgages and Agency Mortgages. And the outlook is grim---There is a significant amount of mortgage resets that are scheduled to occur in 2009, 2010, 2011 and 2012.
Currently in 2009 Mortgage rates are at all-time lows---but if your house is underwater, you can't refinance and will face a mortgage reset. Looking into the future, many people are seeing much higher rates in the outer years---So when the 2010 - 2012 resets occur, home-owners' monthly mortgage payments could take a quantum leap up.
As I've blogged about before, this housing bubble took years to climb in value---and it will likely take years to come to a bottom.
Sunday, March 1, 2009
Jumbo-loan defaults rise at fastest pace in 17 years
NEW YORK — Owners of luxury houses are falling behind on mortgage payments at the fastest pace in 17 years.
About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent within 10 months, according to LPS Applied Analytics, a mortgage data service in Jacksonville, Fla.
That big a proportion at that speed hasn’t been recorded since at least 1992, when LPS began tracking the market. It took 19 months for as large a proportion of borrowers from 2007 to be so overdue.
The jump in late payments on jumbo loans, although still lower than the 20 percent delinquency rate in subprime mortgages, signals that the borrowers with the most money and the best credit are hurting as the U.S. recession deepens in its second year. It also means these loans will be even more difficult to obtain and more expensive to pay off.
President Obama’s homeowner aid proposal has no provision to help jumbo-mortgage borrowers.
About 1.92 percent of homeowners with 2008 mortgages backed by Fannie Mae and Freddie Mac fell at least 60 days behind, LPS Applied Analytics said. Jumbo loans are bigger than what the two government-controlled agencies buy or guarantee.
Currently the Fannie-Freddie cap is $417,000 in most places and up to $729,750 in areas with higher home prices.
Saturday, February 28, 2009
Friday, February 27, 2009
The Delinquency Rate on Single Family homes in Q4-2008 was 6.29%---Up 107 basis points from Q3-2008's 5.22%. Clearly as unemployment continues to rise, delinquencies will continue to rise.
The Delinquency Rate on Commercial Mortgages rose from 4.74% in Q3-2008 to 5.36% in Q4-2008---Also a rate much higher than anything we have seen in the past decade.
Click for a Larger Image
What is interesting is when you look at the Charge-Off Rate for Single-family homes. Q4-2008 mortgage charge-off rate was only at 1.58%--compared to 1.46% in Q3-2008. I believe this is because many more banks started to try "work-outs" with the delinquent consumers and also wanted to "wait and see" what Obama's plan would be help out homeowners behind in their payments. I predict that Q1-2009 (Data to be released ~May 2009) will show continued slow growth in charge-offs, but sooner or later the banks will have to pay the piper and charge-off rates on single family home mortgages will spike up (Likely Q2 & Q3-2009).
The Charge-off Rate for commercial real estate was up from the 1.16% in Q3-2008 to 2.04% in Q4-2008. This is the highest rate since 1992, and could continue to climb as businesses fall on hard time and demand for office and retail space dwindles making the leverage taken out on such properties much more difficult to service, and much more likely to be charged-off.
Wednesday, February 25, 2009
Just this week,JP Morgan cut its dividend so that it could be prepared for a 40% Peak to trough drop in housing prices in the united states---But what if things get worse.
So I went to the trusty source of Wikipedia and found the following chart from the Economist in June 2005.
The article starts off hitting the nail on the head--stating, "The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops"
The Chart Compares Japan from 1980 - 2005, and an index of US, UK & Australia from 1995 - 2005. If you look at Japan---House prices dropped for at least 15 Years! (1990 - 2005)
It's also important to note 2 things (1) The UK & Australia had higher home appreciation from 1998 -2005 (2) The US Market continued to appreciate in 2005, 2006 and 2007.
Looking at this chart and better understanding what happened to Japan, I'd say Caveat Emptor--Buyer beware---Prices were being inflated for over 12 years in the US, UK and Australia, and it will likely take longer than just 2 years to make the National Association of Realtors correct in their premise that, Now is the best time to buy a home.
Monday, February 23, 2009
Below, I have attached Slide #2 from the presentation in which JP Morgan provides a "highly stressed environment" in which they model a:
- 2 Year Recession
- 10% Unemployment Rate
- 40% Decline in Housing Prices (Peak to trough)
Click for a Larger Image (Red highlight box, added for emphasis)
Should this "stress case" come to a reality, many more mortgages will be underwater and millions more homeowners will lose their income and possibly lose their homes---This will cause the mortgages and mortgage securities that JP Morgan holds to lose value a pressure their capital base.
What is also interesting is that for every recessionary period (highlighted in gray), the mortgage rate dropped.
Click for a Larger Image
What does this mean? If you haven't yet looked into refinancing your mortgage, you may wish to consider it---However, given that unemployment continues to rise I think it's safe to say that the recession will continue for a few more months (or quarters). So there's a chance that mortgage rates could drop further---But if you can refinance, definitely look into it--and be sure to get 3 or 4 quotes from competing mortgage lenders.
Thursday, February 19, 2009
If you or somebody you know gets confused by the financial alphabet soup that the media is constantly talking about, this video does an excellent job of explaining the mortgage mess in laymen's terms...
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
(10 min 50 sec)
Wednesday, February 18, 2009
As of 2/19/2009, 334 mortgage lending businesses have gone the way of the do-do and shuttered their doors since late 2006---never to write a mortgage again.
Crains Chicago published a pretty interesting story today that shows what the drop in home values have been since the peak (to Q3-2008) and what Moody's Economy.com estimates the total home value price drops will be.
Click the image for a larger image
According to Moody's:
- The United State's home prices will bottom in Q4-2009 after dropping 36%
- Miami's home prices will drop over 66% from the peak
- Phoenix home prices will drop 58% from the peak
- Las Vegas will drop 56% from the peak
- Los Angeles will drop 53% from the peak
- Washington DC will drop 38% from the peak
- New York City will drop 33% from the peak
- San Francisco will drop 27% from the peak
- Boston will drop 26% from the peak
- Chicago will drop 17% from the peak
These are big drops and mean that many many home owners will be underwater in their mortgages. This will be felt for many people who needed PMI and only put down a down payment of 5% or 10%---But in many areas (Miami, Phoenix, Vegas, California)---even conforming loans and jumbo loans that were issued in 2005, 2006 and early 2007 will be underwater.
Looking at data for 2006 - 2008, you can see the impact of a vicious feedback cycle. As people get delinquent in their mortgages, banks and other investors have to write assets down and constrict credit, this feeds into the economic contraction which causes more companies to scale back on headcount and hours worked--causing increases in the unemployment rate and underemployment rate.
Click for a Larger Image
In my opinion, as you look out into 2009 (and 2010) the economic contraction and credit crunch will continue to cost people their jobs--and this will cause an escalation in delinquent loans throughout 2009 and part of 2010---It will hit conforming loans, Alt-A loans, sub-prime and jumbo mortgages.
Expect Helicopter Ben to try and solve much of the problem by printing more money and trying to push long term rates near all-time lows.
For more information on underemployment click here: unempmloymentadvice.blogspot.com
Tuesday, February 17, 2009
Below you will see delinquency statistics for Freddie Mac (Green Lines) and Fannie Mae (Red Lines) from 2005 to 2008. Throughout 2005 and much of 2006, the difference in delinquency rates between the two firms was ~10 basis points. However, by the end of 2008 Fannie Mae was seeing significantly higher delinquency rates than Freddie Mac.
In November 2008, Fannie had delinquency rate that was 61 bps higher than Freddie for "Total Single Family" mortgages---And 228 bps worse for Fannie when you are only looking at single family mortgages with credit enhancements (i.e. Private Mortgage Insurance)
Click for a larger image
Click for a larger Image
The delinquency rates for Freddie Mac mortgages with Private Mortgage Insurance (PMI) or other credit enhancements was 3.79% in December 2008---Up over 200 basis points in 2008.
The chart below looks at conventional single-family mortgages that are three months ore more past-due or in foreclosure as a percent of the total number of conventional single family mortgages.
Click for a Larger Image
The figures for Credit Enhanced Fannie Mae mortgages is worse than average with a serious delinquency rate of 5.69% in November 2008 (and rising). (These are loans with Private Mortgage Insurance (PMI) or some other type of credit enhancement).
Monday, February 16, 2009
Wachovia bought out the bank near the peak of the market at $25 billion
"World of Trouble" (13 minutes)
Watch CBS Videos Online
Sunday, February 15, 2009
This makes it very difficult to sell your house, and consequently you can expect further increases in short-sales, foreclosures and property price declines in San Diego County.
Friday, February 13, 2009
If you plot the mortgage data (See chart below) you will see the quarterly flows of mortgage orignations for purchase (Blue bars) and Refinancing (Purple Bars)---You can see that in 1990 & 1994 there was very little refinancing--due to high interest rates, and then from 2001 - 2008 just about every quarter saw a greater amount of refinancing than purchase mortgage financing
Click for Larger Image
Whenever you look at quarterly data it can be a little lumpy, so I transformed the mortgage data to be a rolling 4 quarter average (i.e. the data shown below in Q4-1990 represents the average data for Q1, Q2, Q3, & Q4-1990).
What you will see is that amount of mortgage originations for purchases peaked at Q1-2006 and mortgage refinancing peaked in 2003.
Click for Larger Image
In my estimation, if the Obama stimulus package is successful in lowering mortgage rates during the first half of 2009, you may see an increase in refinancing and purchase mortgage originations---But much like a python swalling a pig---eventually (1) everyone who could refinance will have refinanced their mortgage and (2) market rates will creep back up---That coupled with fewer homes being sold and dropping real-estate prices will cause the purchase mortgage originations to be dropping in 2010 and 2011 as well.
What do you think?
Thursday, February 12, 2009
Mortgage debt for single family homes grew the most--from $58 Billion in 1952 to $14.5 Trillion in 2007--A 10% CAGR over 55 years!
Multi-family mortgages grew at a 8.1% CAGR over the past 55 years, while Commercial Mortgage debt outstanding grew at 9.8% CAGR and Farm land mortgage debt outstanding grew at a 5.2% CAGR over 55 years reaching $117 Billion in 2007.
Click on Image for Larger Image...
If you look at the last 20 years more closely---you'll see that the growth in home mortgages has grown at an even faster clip. The CAGR for home mortgage debt outstanding for single family homes from 1997 to 2007 was 11%
Click for a Larger Image
Click for a Larger Image
What you can see if you look at the annual growth rate in mortgage debt outstanding you'll see that over the last 55 years, the growth rate for single family home mortgage debt outstanding was teh most consistant and was never negative (Like Multifamily, Commercial, and Farm mortgage debt outstanding).
If you do a little "What-if"/"Scenario-Analysis"---And ask, "what if for the last 10 years (1997-2007) Household mortgage debt outstanding did not grow at the 9.2% CAGR which it did---but instead grew at the 6.6% CAGR seen in Commercial Mortgage Debt outstanding (1997 to 2007)---Well if that were the case, instead of having $11.1 Trillion of mortgage debt outstanding in 2007 for single family homes---it would have been $7.4 Trillion of mortgage debt outstanding for single family homes---That is a 34% difference!
Said another way---cheap mortgage debt thrown at millions of Americans households during the last decade likely has inflated home values by at least a third (as of 2007).
Tuesday, February 10, 2009
According to the US Census the home ownership rate ended 2008 at 67.5%... This rate had steadily increased since WWII and significantly higher than the 40% - 50% home ownership rate seen in the first half of the twentieth century.
Given the current credit crunch and the disappearance of sub-prime mortgages and the shadow banking providing easy mortgage financing in addition to banks and credit unions, it's safe to say that the home ownership statistics will be declining in the next few years.
I also think that it's important to note that compared to the depression, far more people are home-owners---And with the drastic drop in home prices experienced in the last year, coupled with drops of almost all asset values, household spending is definitely going to be crimped for several years to come due to the 'wealth-effect'
Friday, January 30, 2009
According to the the WSJ
Rising defaults by affluent homeowners are raising the specter of another cloud over banks and investors, which could get stuck with thousands of expensive homes.
About 6.9% of prime "jumbo" loans were at least 90 days delinquent in December, according to LPS Applied Analytics, a mortgage-data research firm. The rate was up sharply from 2.6% a year earlier. In comparison, delinquencies of non-jumbo prime loans that qualify for backing by government agencies climbed to 2.1% from 0.8% in December 2007.
Jumbo mortgages average about $750,000 and can run as high as $5 million or more. More borrowers with such loans are being hit by layoffs that are spreading through practically every sector and pay level of the U.S. economy.
On Tuesday, the Labor Department reported that the jobless rate rose in December in all 50 states, hitting at least 10% in Michigan and Rhode Island. States that suffered the biggest jumps in unemployment in the past year include California and Florida, where the largest number of jumbo loans were made.
Monday, January 26, 2009
By PETER EAVIS
Despite all the pain in the financial sector, bank executives' biggest fear has yet to materialize. Now, it is rearing its ugly head.
Bankers' worst nightmare is the unemployment rate climbing toward 10%, a level at which credit losses could balloon unpredictably because of high defaults among people with previously strong credit histories.
Right now, bank balance sheets don't appear in a position to deal with unemployment moving sharply higher from its current 7.2% rate.
Building up bad-loan reserves to deal with a 9% to 10% rate could produce enormous losses and pulverize capital when banks are trying to preserve the thin cushions they have. And fear of rising unemployment could deter lending when the government wants banks to expand credit. True, the Obama administration's stimulus plan could reduce unemployment expectations. But right now, banks are hoisting their joblessness forecasts.
Last week, consumer lender Capital One Financial increased its unemployment forecast to 8.7% by the end of 2009, from its previous expectation of 7% by midyear. And Capital One added that it is building more-severe unemployment scenarios into lending decisions.
Also last week, Kelly King, chief executive of regional bank BB&T, said unemployment of 8% to 8.5% is "kind of manageable," but 9% to 10% would "have a dramatic impact on our scenarios."
read the rest of the story here.
Thursday, January 15, 2009
Click on image for a larger view
The Top-10 worst states for foreclosure rates are:
- New Jersey--1.8%
Wednesday, January 14, 2009
If you haven't already, you should consider refinancing your existing property with a 30 year fixed, if you can.
Thursday, January 8, 2009
Click on Chart for larger image
As you can see, Hotels, Retail, and Multi-family commercial properties are really seeing a tremendous uptick in delinquency rate with Multi-family delinquencies crossing 2.5%.
Wednesday, January 7, 2009
The percentage of loans that are current are much higher for Fixed Rate Loans than for the Adjustable Rate Loans. 84% of Alt-A fixed rate loans in New Jersey were current in October 2008, while just 41% of Adjustable Rate Mortgages (ARMs) in New Jersey's sub-prime mortgage universe were current with their payments.
Click on chart for a larger picture
Tuesday, January 6, 2009
These figures are important because an investor is far more likely to walk away from a property that is underwater and not generating income than what would be expected from an owner-occupied property.
Monday, January 5, 2009
According to November 2008 data provided by the New York Fed, only 47% of sub-prime loans are current while 12% are in foreclosure and 14% are already real-estate owned (REO). Over 13% of the loans are over 90 days behind and well on their way into foreclosure while an additional 14% of loans are 1 or 2 months behind.
As California's unemployment rate continues to climb, odds are these numbers will continue to worsen.
But as I've blogged about earlier, more than half of the Alt-A Loans are from California & Florida... So how are those two states doing?
As of November, 2008 the Fed shows that 72% of California's $300 billion Alt-A portfolio is current with their payments while 5% (~$15 billion) is 30 - 59 days behind, 3% (~$10 Billion) is 60-89 days behind, and 8% (~$25 billion) is over 90 days behind... An additional 12% is either in Foreclosure or REO... So California is clearly worse off than the rest of the nation, but Florida is even worse:
In November, 2008 only about 2/3rds of the $64 Billion of outstanding Alt-A mortgages were current, with a whopping 17% in foreclosure and another ~15% over 30 days delinquent.
Additionally, New York accounted for 5% of Alt-A loans, while New Jersey, Virginia and Washington accounted for 3% each... The remaining 44 states accounted for the remaining 35% Alt-A mortgages.
story from Chicagobusiness.com
Home loan setback
As of Jan. 1, the Federal Housing Administration reduced the amount it will guarantee on mortgages in the Chicago area to $365,700 from $417,000. FHA-backed mortgages filled part of the gap left by private lenders retreating from the mortgage market as housing values plunged.
FHA loans accounted for about 30% of weekly mortgage applications nationwide during the last half of 2008, vs. about 10% during the same period in 2007, according to the Washington, D.C.-based Mortgage Bankers Assn.
Homes priced between $380,000 and $450,000 will no longer qualify for FHA guarantees, affecting neighborhoods across metropolitan Chicago, from northwest suburban Arlington Heights to Oak Park in the western suburbs to parts of Chicago's North Side. Sellers in that price range will face more pressure to cut their asking prices, exacerbating the decline in home values throughout the region.
"We need every possible tool we can use to bring first-time buyers into the market," says Kathe Doremus, senior mortgage loan consultant with Community Bank-Wheaton/Glen Ellyn, who says at least 70% of the mortgage loans her bank makes in the western suburbs are now FHA-backed. "All we have left is FHA, and we need every piece of it we can get."
FHA loan limits are dropping in cities across the country as home prices fall. The limit for each metropolitan area is based on prevailing market prices in that city. In the Chicago area, the median home price fell to $207,745 in November, a 16% drop from November 2007.
Lower FHA limits will squeeze sellers in many local communities. In Arlington Heights, for example, 63 of 134 homes on the market at prices between $350,000 and $450,000 will lose access to FHA backing, according to the Illinois Assn. of Mortgage Professionals.
Jorge Gomez, president of the association and a mortgage broker on the Northwest Side, estimates that 50% to 60% of mortgages he handled last year were FHA-backed last year, up from less than 10% in 2007. He worries that home sellers looking to expand the pool of potential buyers will lower prices to meet the new FHA threshold, establishing pricing benchmarks that will force values down for everyone. He says many of the homes in the Old Irving Park neighborhood where he lives are in the price range that has been affected.
"You're depressing an entire neighborhood now," he says.
All but ignored during the housing boom, FHA loans are popular now because they allow borrowers to make small down payments — as low as 3.5% of a home's value. Other lenders, including those offering mortgages backed by federal loan agencies Fannie Mae and Freddie Mac, require at least 5% down.
And, for some home types such as condominiums, mortgage insurance is particularly hard to get without an FHA guarantee. The lower limit will put a major damper on sales of affected condos, real estate professionals say.
"If we could just get some continuity (in lending) and get the ball rolling, I think we'd be OK," says David Hanna, president of the Chicagoland Assn. of Realtors. "This (FHA change) is just not going to help."
Specifically you can view what the market looked like for California, Florida, New York, Arizona, Nevada and Texas.
Jumbo mortgage loan rates put damper on refinancing
While plunging mortgage rates have spawned a frenzy of refinancing, borrowers with larger, so-called jumbo loans are still seeing interest rates in the 7 percent range, prompting many to abandon refinancing plans altogether or resort to creative transactions.
The high rates are particularly an issue in Greater Boston, where expensive housing forces many people into jumbo-loan territory, which is currently $465,750 and above. In 2006, more than 10 percent of borrowers in Massachusetts took out jumbo mortgages.
Borrowers with conventional mortgages - those at or below $417,000 - are getting rates as low as 5 percent, while the national average for a jumbo loan hovers around 7 percent.
There is a new, third category of mortgages between jumbo and conventional loans, created last year by Congress, called conforming jumbos, which now average about 5.6 percent, according to a provider of industry data, HSH Associates.
"I think it is crazy you can't get as good a rate," said Julia Blake, 36, who with her husband is looking to refinance the Cape they bought in Wellesley for $695,000 in 2007. "To me, a jumbo loan should be a luxury house, and in Wellesley it is not. You can't get anything less than $600,000."
Another Wellesley resident, Paul Barnhill, wants to refinance his adjustable-rate jumbo loan into a fixed-rate loan, but not at current rates.
"I would refinance in a heartbeat if I could get 5 percent," said Barnhill, 44.
Jumbo mortgage rates are higher because lenders who initiate the loans are having trouble selling them on the secondary market, where the resale of mortgages provides funds for new loans. The banks and investment groups that buy mortgages are reeling from the credit crisis and the subprime mortgage debacle, and are steering clear of any loans that smack of higher risk. The major players on the secondary market, government-sponsored Fannie Mae and Freddie Mac, do not purchase jumbo loans.
Industry groups are calling on the federal government to intervene. For example, the Federal Reserve Bank is purchasing huge amounts of mortgages and related securities, which industry officials said would result in even lower rates for conventional loans. The National Association of Realtors wants the Fed to do the same with jumbo loans.
"It's unfortunate that the jumbo interest rates are very high and the government is not being responsive to that," said Lawrence Yun, the trade group's chief economist. "It is not only hurting the Main Street, but it's a fairness issue. Why are people who are slightly over the loan limit being punished?"Last year, Congress raised jumbo limits when it allowed Fannie Mae and Freddie Mac to buy or guarantee higher-balance loans. In Massachusetts, the limit increased to $523,750, from $417,000, with jumbo loans being above the higher amount, and conforming jumbos between the two figures.
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Saturday, January 3, 2009
This forecast from December 11, 2008---will likely be updated now that the feds have agreed to buy mortgage related securities and the rates on the 30 year mortgage are at-or-near record lows. Consequently, I think the refinance estimates for 2009 may be on the low-side.
Friday, January 2, 2009
The rates on 30 year mortgages are close to crossing below 5% as we enter the start of 2009. And the spread between Jumbo loans and conforming loans continue to widen.
The WSJ has published an interesting article outlining how Mortgage rates on 30 year bonds could drop to 4.5% in 2009 as the government starts buying up mortgage securities.