There have been a bunch of govvie programs that were supposed to help people who were in danger of losing their homes to foreclosure. Let’s see how they’re working.
HOPE for Homeowners, launched 10/1/08. Allows eligible borrowers to refi into an FHA loan and requires principle reductions on the loan. So far, they’ve refi’d 94 loans. But it’s only been a year.
Home Affordable Modification Program, launched 3/1/09. $75B from TARP to provide modifications for homeowners in default. So far, they’ve helped 1,174 borrowers.
That’s just two of the programs but none are doing any better.
Oh, and things are going to get substantially worse in the housing market and with banks over the next 12 months. Third quarter FDIC numbers will be out shortly and compiled by the end of Nov. It’s going to be really ugly. I’ll have a diary out in early December on the housing/mortgage market after the numbers are available. Here’s a snapshot from the second quarter that’s going to get substantially worse with the third quarter numbers:
1-4 Family Mortgages:
| Servicer | Total $$ Portfolio | 90+ Day Default $$ | 90+ Day Default % |
|---|---|---|---|
| Wells Fargo |
$235.5B |
$22.9B |
9.7% |
| JP Morgan/Chase |
$161.4B |
$13.4B |
8.3% |
The critical thing here is that 90+ day defaults cure at a fairly low rate, typically less than 50% and currently in California they are curing at less than 10%. In other words, those homes are headed for the bank’s inventory.
The numbers will get substantially worse through this time next year.
__________________________________________________________________________
see Bank Loan Performance for a comprehensive look at second quarter numbers. I would recommend having alcohol handy.
I wonder where those homeless folks are sleeping..
antisocial Thursday, October 22nd at 9:32PM EDT (link).
No you can’t - Moe Lane
——————————
The Emperor has no clothes!!!
——————————
Republicans who lost the Crap-and-Raid fight in the House -
Mary Bomo Mac (CA-45)
Mike Castle (DE)
Mark Kirk (IL-10)
Frank A. LoBiondo (NJ-02)
Chris Smith (NJ-04)
Leonard Lance (NJ-07)
John M. McHugh (NY-23)
Dave Reichert (WA-08)
If they're smart...
Erick Brockway Thursday, October 22nd at 9:53PM EDT (link)They stayed in the houses. I’m hearing more and more the mortgage holders aren’t even bothering to evict, too many backlogged.
Note to lefties;
“Don’t be afraid to see what you see.”
Ronald Reagan
Join the RedState Strike Force
Chip in to get rid of “Babs” (Yes ma’am) Boxer.
See comment below... nt
mbecker908 Thursday, October 22nd at 10:00PM EDT (link)Any thoughts on the plans to
redneck_hippie Thursday, October 22nd at 9:32PM EDT (link)extend the $7K credit for first time home buyers? Guess we can afford it because the congress would never spend money we could not pay for with taxes.
“We must not lose our faculty to dare, especially in dark days.” - Churchill in March, 1942.
Remember NY-23.
Well, first of all it's $8K.
mbecker908 Thursday, October 22nd at 9:59PM EDT (link)Secondly, it’s a major league stupid program.
Third, the problem isn’t in the “low end” of housing where the $8K provides some assistance to first time home buyers on homes that are typically in the lower end of the market.
There are a number of huge - and pretty well undefined - icebergs in the housing market. In no particular order:
Hint: DO NOT BELIEVE ANYTHING A REALTOR OR REALTY ORGANIZATION SAYS ABOUT THE MARKET.
You couldn't possibly be more right
billyd Thursday, October 22nd at 10:47PM EDT (link)When these ARM’s come due, the payments people can’t afford now are going to increase. And with it…. Defaults on Mortgages. It’s going to get really, really, really bad. The housing market peaked in 05, and with those 5 year ARM’s coming due in 10′…..
The question is… how bad with the new intrest rate be when those ARM’s come due? The way this administration is printing money, i would imagine that they’re going to have to jack the rates in order to get china to buy more debt.
November 2nd 2010. What are you doing today to improve your tomorrow?
You've missed the point. Not that you should have known better...
mbecker908 Friday, October 23rd at 12:01AM EDT (link)You’ve gotta be in the industry and a wonk to actually figure most of this stuff out.
Here’s the bomb. Virtually all of the Option ARMs and the Alt-A loans are high loan-to-value and most were reduced documentation loans on property that exceeds the FHA loan limits.
There is no such thing as a “reduced doc” loan anymore. So if the borrowers were self employed they likely will never be able to refinance. Second, the majority of the loans were in the markets where values have taken the biggest hits and where more hits are on the way. So you can pretty well kiss off jumbo conventional financing even if you can document your income and liquid assets.
Two great resources
wennejunk Friday, October 23rd at 7:12PM EDT (link)1. Dr Housing Bubble. has been tracking the housing situation in California since early 2007. Lots and lots and lots of data, charts and so on. The ‘Real Homes of Genius’ articles are eye-opening.
http://www.doctorhousingbubble.com/
2. Mish’s Global Economic Analysis. He occasionally circles the Ron Paul drain, but his other data on deflation and housing is very good.
http://globaleconomicanalysis.blogspot.com/
There are only two kinds of people in the end: those who say to God, ‘Thy will be done,’ and those to whom God says, in the end, ‘Thy will be done.’ -C. S. Lewis
So many stupid programs.
Socrates Thursday, October 22nd at 9:41PM EDT (link)They need to stop propping up housing prices with their tax credits and other junk. It’s just prolonging the depression.
–
Gone 2500 years, still not PC.
Unemployment Benefits Exhaustion
revivefederalism Friday, October 23rd at 4:52AM EDT (link)A lot of people lost their jobs, cut their new expenses, and are living with roommates or family while they collect unemployment benefits and look for work. They’re staying current on their credit card and auto payments for the time being, but their benefits will be running out soon, so I expect a new wave of defaults on this front. It should hit the housing market too. Does anyone in the mortgage industry have data on the percentage of loans currently owed by someone receiving unemployment benefits? It sure seems like it could be the next shoe to drop.
As an aside, WOW, 75B to help about 1100 homeowners! For that much money couldn’t we buy Versailles from France and house them there???
The Chateau Rochfoucauld,
Warrior Monday, October 26th at 7:22PM EDT (link)the Chateau Creully, the Trianon Palace and the Château de Chenonceau as well. Very funny — LOL
“Attorney General Holder’s decision to re-open the criminal investigation creates an atmosphere of continuous jeopardy for those whose cases the Department of Justice had previously declined to prosecute.”
—–signed by former [CIA] directors Michael Hayden, Porter Goss, George Tenet, John Deutch, R. James Woolsey, William Webster and James R. Schlesinger.
Read http://www.redstate.com/warrior/ for insightful commentary on today’s events…
What do you make of Fannie and Freddie numbers?
bk Friday, October 23rd at 6:37AM EDT (link)Isn’t the percentage of loans going through them WAY higher than before? If these two helped get us into the mess, sucked up a ton of bailout cash in housing disaster round 1, and now are at it bigger and better than ever, I can’t imagine that’s a good thing.
What does this say about where we are?
And also, interest rates so far have stayed low. I’m not sure how they are still so low the way Obama is printing money, but eventually that has to bust and Obamanomics will get us back to Carter-like interest rates. Is that going to be the point where the housing market really goes down the toilet, or will it have completely tanked even before then?
Yup. Don't forget Ginnie Mae Either!
revivefederalism Friday, October 23rd at 6:54AM EDT (link)The government agencies are crowding out the private market. Ginnie Mae is gearing up to become the next trillion dollar meltdown. It’s clear that these subsidies are distorting the free economy, but they’re not depressing housing prices. Stupid loans given at subsidized rates served to drive up home prices before, and it’s not any different this time. It’s unclear that high inflation would shaft home prices since they’re real assets, and thus fundamentally inflation protected, but we should be wary of high interest rates, a weak dollar, and rising costs down the road.
home prices vs mortgage payments
bk Friday, October 23rd at 7:22AM EDT (link)Higher interest rates might not affect home prices directly, but they’ll certainly impact home sales because they drive up the mortgage payment which is what really matters to the buyer. A $200K 30-yr note has PI of about $1,075 at 5%. At 7.5% that jumps up to almost $1,400, a couple dollars more than a $260K note at 5%.
And of course a big jump in interest rates would kill people with ARMs and people who’d like to refinance. It still amazes me that people these last few years have been buying ARMs. When I bought my first house in 1985 I did it because interest rates were still so high that you had to buy down the note and hope that in a few years they’d drop and you could refinance at a lower rate, which is exactly what happened. After a few years I refinanced to a 15-yr loan at a more reasonable rate. But when rates have been in the 5-6% or so neighborhood for several years, it seems stupid to me to get an ARM because it has nowhere to go but up. If you can’t afford a 5.5% fixed-rate loan then you shouldn’t be buying the house.
The "lower interest rates helps homeowners" meme
mbecker908 Friday, October 23rd at 8:57AM EDT (link)is bulls**t. It is an absolute, utter and complete lie.
Lower rates will tend, historically - like over the last 15 or so years, to push the market. However, the reality is this, people buy houses just like they buy cars: whassthemonthlypaymentman?
If you lower rates so that a family can reduce their mortgage payment on a $200,000 house, they buy a $300,000 house. People view their “ownership” of a house as “renting from the bank” and they don’t ever expect to actually pay it off. That’s why the refi boom of the 90s and 00s. House prices skyrocketed so people did one of two things: they wanted to treat their primary home as an “investment” so they sold the little one and bought a bigger one that would appreciate faster and “make them more money”, or they refi’d and took cash out to buy toys that depreciate like crazy.
Housing has become a commodity just like cars and computers. The underlying “problem” is that the primary residence stopped being the nest where you raise a family and became a line item on their personal balance sheet. In many cases, it became their retirement plan. Housing has been touted as the “ultimate safe investment” to people who don’t remember the ’70s and ’80s and never bothered to learn economic history while they were getting their worthless MBAs. If I had a dollar for every time I’ve heard a realtor tell some poor schnook that house values are going to keep going up at 10-15% because “hey, they’re not making any more land!” I could buy an island. A nice island.
Rant off. Now then, to address your point about refinancing an ARM, in fact the Option ARMS are running payment rates (not interest rates) of generally under 4%. They are typically designed to adjust to LIBOR +4 to 6. It’s not at all unusual to see an Option ARM payment rate jump anywhere from 4 to 8 points when the “fixed” period is over. Alt-A loans will jump 3-6 points. And we’re talking jumbo mortgages. I’ve seen payments jump nearly $3,000 a month. Boom.
How do you explain people getting ARMs these past few years?
bk Friday, October 23rd at 10:04AM EDT (link)Shaving off 1 or 2 percent for a couple years when there is such a huge risk of it going up is ludicrous to me. Are people
a) so stupid that they don’t realize what they are doing, or
b) so greedy that they want to get the biggest house they can and will worry about the future later, or
c) so desperate to “own” a home even if this is the only way they can afford it starting out, or
d) something else? (Lender are part of the problem too no doubt.)
Like I said earlier, when fixed mortgage rates were in the low teens like Jimmy Carter left us it’s one thing - you can see the potential reward of taking the ARM risk - but when you can get a fixed mortgage for 6% it’s not like it’s going to drop much from there so it’s all risk and no reward to get an ARM.
People got sold a bill of goods. Pure and simple.
mbecker908 Friday, October 23rd at 3:35PM EDT (link)Real estate has been - for at least the last 15+ years - been presented as the “risk free” investment. Prices will keep going up. You will be able to refinance and use your increased equity to pay any associated costs and you’ll probably be able to take cash out and buy a boat while you’re at it.
Are people that stupid? Yes.
Are they that greedy? Absolutely. Their primary residence is just a line on their personal balance sheet.
Are they desperate? No. See the first two.
Anything else? Not really. The real estate industry has sold the idea that prices will keep going up forever. The mortgage industry acted as enablers.
Keep in mind that people are buying a montly payment, not a house.
oh and by the way, what about the other part of my original question
bk Friday, October 23rd at 10:16AM EDT (link)Isn’t the government (i.e. we taxpayers) buying even more of this paper than when FM and FM screwed it up the last time around? How nervous does that make you feel about the next housing crash?
Maybe it means it will be more likely and/or worse of a fall, or maybe a big jump in interest rates will overshadow everything else so who cares about Fannie and Freddie. Disregarding the interest rate issue, it seems like the Dems are reverting back to some of what got us here to begin with. And much of their approach seems to be “let’s see if we can delay the inevitable by band-aiding it until after the 2010 elections”.
Not likely to "band-aid" until after the '10 elections.
mbecker908 Friday, October 23rd at 3:37PM EDT (link)You’ll see what I mean when we get hard numbers for the third quarter.
But those folks with $3000 mortage payments
GregInFla Saturday, October 24th at 9:01PM EDT (link)are rich people. Who cares about them? If you believe Obama, it certainly is not him.
– A true evolutionist would let endangered species die off. Anyone care to change sides?
Support Marco Rubio for US Senate.
Question about today's news
malbis Friday, October 23rd at 2:04PM EDT (link)First, great article and great information. Recommended. I look forward to reading your analysis in December.
Now, what about the news that came out today about Home sales being up over 9% in September? Is this spin, a new trend indicating something important, not relevant to this discussion, or what?
I’m finding it hard to believe that a lot of folks are out there suddenly deciding this is a good time to buy a house…
From the 1940 movie
Ghost Breakers, starring the late, great, Bob Hope and Paulette Goddard:
Scientist: “It’s worse than horrible, because a zombie has no will of his own. You see them some times, walking around blindly with dead eyes, following orders, not knowing what they do, not caring.”
Bob Hope: “You mean, like Democrats?”
As true today as it was then. Some things never change…
It's spin.
mbecker908 Friday, October 23rd at 3:42PM EDT (link)Keep in mind that these are the same people who spent the better part of 2003 - 2006 telling you that there was no housing bubble and that real estate was a safe investment because they’re not making more land.
They’re also running numbers off the all time lows of the market.
Real estate numbers are like polls. Don’t pay any attention to the headlines, read the internals.
One other thing of note, there are two distinct real estate markets in the US. There’s the high volume, high end markets (CA, FL, NV, AZ, + some metro areas) and there’s every place else. When I write, I’m basically focusing on the high end markets because they drive the economy as a whole. If you live in Topeka KS, most of what I talk about probably won’t apply to you except in very general terms.
With reference to the 9% housing increase in Sep...
mbecker908 Friday, October 23rd at 11:44PM EDT (link)think cash for clunkers. It was a one-time pop due to the probable expiration of the $8K rebate. Watch what happens in October and November.
Plus new REO supply has been held back. nt
Common_Cents Monday, October 26th at 1:12PM EDT (link)“Never interrupt your enemy when he’s making a mistake.” Napoleon - Well, unless he is ruining your country! Common Cents
A cult of personality arises when a country’s leader uses mass media to create a heroic public image, often through unquestioning flattery and praise.[1] Cults of personality are often found in dictatorships.
Personal anecdote
Darin_H Monday, October 26th at 2:40PM EDT (link)Note: No Data, just my observation of our neighborhood.
We closed on our house in St Augustine about a month ago. When we were looking a couple of months ago, there were a whole lot of houses for sale, for cheap. In the time it took to close (45 days, a ton of documentation even though our loan was through the same lender and for 30K less) plus a month, the amount of inventory has dropped significantly in this area.
DR Horton has actually started building houses again (other builder went bankrupt I think). I don’t know what will be going on w/r/t ARMs and foreclosures, but people who don’t *have* to sell their house, aren’t and the price has come down so much that it is enticing people, who can afford it, back into the market. That bodes well for burning off the excess inventory and prices stabilizing (seasonal fall?). Don’t know how long the market will take to come back though.
Of course the market is doing this and the government is just getting in the way (as usual).
___________________________________
Free Houses In Detroit: Auction Flops With $500. Minimum Bid
Ausonius Monday, October 26th at 3:03PM EDT (link)See:
http://news.yahoo.com/s/nm/20091025/us_nm/us_usa_housing_detroit
An excerpt, and note the editorializing from “Critics” on the limits of a free market solution.
“Despite a minimum bid of $500, less than a fifth of the Detroit land was sold after four days.
The county had no estimate of how much was raised by the auction, a second attempt to sell property that had failed to find buyers for the full amount of back taxes in September.
The unsold parcels add to an expanding ghost town within the once-vibrant town known worldwide as the Motor City.
Critics say the poor showing at the auction underscores the limits of using a market-based system to clean up property tax problems. They say the system has enriched a few but failed to deliver a way for Detroit to staunch its dwindling population and could worsen the vacancy crisis.”
Nobody wants to live in Detroit
Warrior Monday, October 26th at 7:36PM EDT (link)because the unions and the gubmint killed it’s only horse (the U.S. Auto Industry) and now these same people want to blame “the free market.”
It would be funny if it weren’t so sad…
“Attorney General Holder’s decision to re-open the criminal investigation creates an atmosphere of continuous jeopardy for those whose cases the Department of Justice had previously declined to prosecute.”
—–signed by former [CIA] directors Michael Hayden, Porter Goss, George Tenet, John Deutch, R. James Woolsey, William Webster and James R. Schlesinger.
Read http://www.redstate.com/warrior/ for insightful commentary on today’s events…
Having lived near Detroit
Flagstaff Tuesday, October 27th at 7:54PM EDT (link)for almost 30 years, I can tell you first hand that there is a lot more to it than that.
Detroit Public Schools were allowed to become places that nobody wanted their kids to attend. The city government was corrupt or inept or both. Public safety was nowhere near where it should have been.
When a city is considered unsafe and its schools are undesirable, it doesn’t matter much how many jobs are available there. People will want to move back in when the social problems are under control. Then the $500 houses will find buyers, and by then they’ll probably be worth only about $500, too.
Pluto, the Ninth Planet - Forever!
It's all part and parcel
Warrior Wednesday, October 28th at 11:25AM EDT (link)of the same mindset. Gubmint schools run by corrupt unions.
Local liberal gubmint feeding off the nearest host with no concern for the future and no self-control (read morality, integrity or honesty.)
It’s a distinction without a difference as far as I can tell…
“Attorney General Holder’s decision to re-open the criminal investigation creates an atmosphere of continuous jeopardy for those whose cases the Department of Justice had previously declined to prosecute.”
—–signed by former [CIA] directors Michael Hayden, Porter Goss, George Tenet, John Deutch, R. James Woolsey, William Webster and James R. Schlesinger.
Read http://www.redstate.com/warrior/ for insightful commentary on today’s events…
People who crap in their own nest
Achance Monday, October 26th at 7:41PM EDT (link)shouldn’t expect other people to want to buy or live in that nest. It’s a lesson some people just can’t seem to internalize.
In Vino Veritas
555 Art
Warrior Wednesday, October 28th at 11:27AM EDT (link)see mine above…
“Attorney General Holder’s decision to re-open the criminal investigation creates an atmosphere of continuous jeopardy for those whose cases the Department of Justice had previously declined to prosecute.”
—–signed by former [CIA] directors Michael Hayden, Porter Goss, George Tenet, John Deutch, R. James Woolsey, William Webster and James R. Schlesinger.
Read http://www.redstate.com/warrior/ for insightful commentary on today’s events…
Great Article
crosley Monday, October 26th at 4:12PM EDT (link)I’ve been following this, and I also live in AZ. I really think this is a ticking time bomb that can’t be fixed. I know so many people who can easily afford their mortgage, but are strategizing on how they can walk away. If the housing market takes another huge hit with a massive wave of foreclosures from ARMs expiring, it will create a domino effect where you could see a massive walkout of houses in these boom states.
One huge problem is the US is one of the few countries where the housing loan is structured that the worst the bank can do is take back the house if the loan isn’t paid, they can’t go after other assets. Some states are different, but if they changed this law alone, I think you would see a dramatic decrease in foreclosures.
What I want to know is, how do we deregulate the mortgage industry in a smart way. What the government is trying to do now is reinflate the housing bubble. I’m afraid this is going to be one of those unwritten entitlements (like agriculture subsidies) that never gets fixed.
If there is any doubt about who is to blame
Warrior Monday, October 26th at 7:39PM EDT (link)for the housing market crash, pick up a copy of Thomas Sowell’s “The Housing Boom and Bust” and keep it handy.
The next time you hear some moron blame “capitalism” or the “market” or “deregulation” for it, hit ‘em over the head with the book. Being leftist zombies, it probably wouldn’t do them any good to read it anyway…
“Attorney General Holder’s decision to re-open the criminal investigation creates an atmosphere of continuous jeopardy for those whose cases the Department of Justice had previously declined to prosecute.”
—–signed by former [CIA] directors Michael Hayden, Porter Goss, George Tenet, John Deutch, R. James Woolsey, William Webster and James R. Schlesinger.
Read http://www.redstate.com/warrior/ for insightful commentary on today’s events…
Let's not forget the funniest part...
revivefederalism Wednesday, October 28th at 11:54AM EDT (link)I can’t get over Representative Laura Richardson (D-CA) and her three foreclosed homes. Dukakis was right about one thing. The fish does rot from the head!