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Mortgage Market Weekly:
(Edition January 21, 2009) Vol. 83
In This Week's "Good News":
Big Changes at Chase
Following up on Mortgage Market Weekly's announcement last week of the closure of Chase's wholesale lending division; the company just announced that it has expanded its loan modification program to include another $1.1 trillion in investor-owned mortgages it services.
The company said it believes it can legally modify such loans, even those held in securitizations, based on its review of investor agreements and its experience with investors and trustees to date.
In other words, it's become so bad that lenders are willing to try anything to mitigate losses on their soured mortgages. At least this may help stem the tide of property value losses being felt in so many of the nation's cities due to foreclosures in their respective neighborhoods and communities.
CEO of Retail Financial Services, Charles Scharf stated: "When homes are foreclosed, everybody suffers, so working aggressively to modify all loans -whether owned by Chase or owned by others - on terms that should work for the borrower, makes good sense for everyone".
He went on to state: "Our experience at Chase has shown that when mortgages are properly modified, using income verification and other appropriate criteria, they perform very well over time."
To date, Chase has said it has delayed foreclosure starts on over $22 billion in Chase-owned mortgages for more than 80,000 homeowners.
Additionally, it has opened two of its proposed 24 "Homeownership Centers," with the remainder expected to open by mid-March.
On the heels of last week's proposed layoffs in the wholesale lending division, Chase announced it has added 300 loan counselors to its team, pushing the total above 2,500 assigned to deal with the growing number of borrowers in arrears.
In This Week's "Take It How You Will" News:
More Write-downs for Citigroup
To the dismay of Citigroup shareholders, news recently release by Citigroup reported an $8.3 billion loss on write-downs. Citigroup Inc. posted a fourth-quarter loss (2008) of $8.3 billion as the company continued to reel from mortgage-related losses, reporting $4.6 billion in subprime write-downs and $12.2 billion in loss provisions while dramatically reducing its origination business.
The fourth quarter of 2007 marked the first of five consecutive losses at Citigroup, which reported an $18.7 billion loss for 2008 that starkly contrasts the $3.6 billion profit of the previous year.
Of note; shares of Citigroup have tumbled 48% this year and appears to be continuing to fall after its Q4 report to the showing profit levels at the lowest in 16 years.
Adding further dismay, there has also been an increase in reserve costs of $12.2 billion from the $7.3 billion a year ago.
As of December, 90-day delinquencies on residential loans were 4.73%, which has gone up from 3.85% third quarter 2008, and 2.22% a year ago.
The company's employee numbers stood at 323,000 at year's end, down by nearly 30,000 from three months earlier and more than 50,000 lower than the workforce reported one year earlier. It is expected that this head count will be reduced by another 23,000 in 2009.
In This Week's "Wait and See" News:
As predicted, Unemployment Numbers seem to be hampering any market rallies (late last week the U.S. unemployment rate hit 7.2%).
After the drop in the DOW Tuesday of 320 + points, some economists are expressing sentiment that the DOW may have found its stabilization range between 7,800 and 8,200 - if this is true, this may bode well for the stabilization of mortgage interest rates and consumer credit card interest rates.
Next week, expect Existing Home Sales numbers (Jan. 26th) and last week's Unemployment Numbers to greatly effect the Consumer Confidence Index number to be released on January 27th.
It is expected that New Home Sales numbers (Jan. 29th), may come in higher than expected, which will may be good for some metropolitan markets.
Next week's Economic Calendar:
Week of January 26 - January 30
|
Date |
ET |
Release |
For |
Actual |
Briefing.com |
Consensus |
Prior |
Revised From |
|
Jan 26 |
10:00 |
Existing Home Sales |
Dec |
|
NA |
4.45M |
4.49M |
|
|
Jan 26 |
10:00 |
Leading Economic Indicators Numbers |
Dec |
|
NA |
-0.1% |
-0.4% |
|
|
Jan 27 |
09:00 |
Consumer Confidence Number |
Jan |
|
NA |
38.0 |
38.0 |
|
|
Jan 27 |
09:00 |
S&P/CaseShiller Composite |
Nov |
|
NA |
NA |
-18.04% |
|
|
Jan 28 |
10:35 |
Crude Inventories |
01/23 |
|
NA |
NA |
NA |
|
|
Jan 28 |
14:15 |
FOMC Rate Decision |
Jan. 28 |
|
NA |
NA |
0-0.25 |
|
|
Jan 29 |
08:30 |
Durable Goods Orders |
Dec |
|
NA |
-1.5% |
-1.5% |
|
|
Jan 29 |
08:30 |
Initial Jobless Claims |
01/24 |
|
NA |
NA |
NA |
|
|
Jan 29 |
10:00 |
New Home Sales |
Dec |
|
NA |
410K |
407K |
|
|
Jan 30 |
08:30 |
Gross Domestic Product Numbers |
Q4 |
|
NA |
-5.0% |
-0.5% |
|
|
Jan 30 |
10:00 |
Employment Cost Index |
Q4 |
|
NA |
0.7% |
0.7% |
|
* Remember, typically, weaker than expected news is beneficial to a mortgage rate decrease and an increase in bond yields, and more positive than expected news will cause mortgage rates to increase and stocks to increase in value.
In This Week's "Not So Good Right Now" News:
Foreclosures up 81% in 2008
In its U.S. Foreclosure Market Report just released, RealtyTrac states that home foreclosureactivity increased dramatically in 2008 compared to the previous year.
There were 3,157,806 foreclosure filings - default notices, auction sale notices and bank repossessions in 2008, marking an 81% increase from 2007. According to the report, 1.84% of all U.S. housing units received at least one foreclosure filing during the year, an increase from 1.03% in 2007.
Here is how 2008 foreclosure numbers breakdown by State:
|
Rank |
State |
Total Foreclosure Filings |
Total Properties with Filings |
% chg. from 2007 |
% chg. from 2006 |
% Housing Units (foreclosure rate) |
|
1 |
Nevada |
123,989 |
77,693 |
125.74 |
529.5 |
7.29 |
|
2 |
Florida |
501,396 |
385,309 |
133.11 |
411.68 |
4.52 |
|
3 |
Arizona |
152,621 |
116,911 |
203.13 |
655.04 |
4.49 |
|
4 |
California |
837,665 |
523,624 |
109.86 |
497.91 |
3.97 |
|
5 |
Colorado |
66,795 |
50,396 |
27.9 |
61.41 |
2.41 |
|
6 |
Michigan |
145,365 |
106,058 |
21.61 |
107.89 |
2.35 |
|
7 |
Ohio |
146,099 |
113,570 |
26.22 |
155.4 |
2.25 |
|
8 |
Georgia |
116,225 |
85,254 |
44.36 |
117.07 |
2.2 |
|
9 |
Illinois |
115,063 |
99,488 |
54.7 |
126.01 |
1.91 |
|
10 |
News Jersey |
69,612 |
62,514 |
101.2 |
186.84 |
1.8 |
|
11 |
Indiana |
61,141 |
45,937 |
64.18 |
113.59 |
1.67 |
|
12 |
Tennessee |
51,496 |
44,153 |
70.38 |
127.87 |
1.65 |
|
13 |
Utah |
18,657 |
14,836 |
99.46 |
68.25 |
1.65 |
|
14 |
Massachusetts |
53,797 |
44,342 |
150 |
577.08 |
1.64 |
|
15 |
Connecticut |
25,510 |
21,925 |
84.87 |
570.49 |
1.53 |
|
16 |
Virginia |
67,695 |
49,011 |
200.55 |
1746.68* |
1.52 |
|
17 |
Rhode Island |
7,334 |
6,583 |
258.16* |
1525.43* |
1.46 |
|
18 |
Maryland |
41,582 |
32,338 |
71.29 |
945.18 |
1.41 |
|
19 |
Idaho |
11,272 |
8,512 |
133.85 |
302.08 |
1.38 |
|
20 |
Missouri |
42,054 |
31,254 |
33.04 |
139.11 |
1.19 |
|
21 |
Oregon |
25,049 |
18,001 |
112.75 |
168.67 |
1.13 |
|
22 |
New Hampshire |
8,018 |
6,636 |
436.03* |
5430.00* |
1.13 |
|
23 |
Arkansas |
16,611 |
14,277 |
122.87 |
198.06 |
1.12 |
|
24 |
Texas |
129,201 |
96,157 |
13.84 |
14.96 |
1.04 |
|
25 |
Washington |
32,271 |
26,058 |
71.61 |
116.64 |
0.97 |
|
26 |
Minnesota |
23,716 |
20,282 |
75.5 |
336.74 |
0.89 |
|
27 |
North Carolina |
41,750 |
33,819 |
16.21 |
153.14 |
0.84 |
|
28 |
Wisconsin |
25,164 |
19,695 |
62.33 |
249.02 |
0.78 |
|
29 |
Oklahoma |
16,059 |
12,465 |
50.98 |
32.86 |
0.78 |
|
30 |
South Carolina |
16,136 |
14,995 |
253.07* |
220.41* |
0.76 |
|
31 |
Alaska |
2,265 |
1,946 |
46.1 |
96.76 |
0.7 |
|
32 |
Pennsylvania |
42,949 |
37,210 |
127.18 |
68.88 |
0.68 |
|
33 |
Delaware |
2,998 |
2,516 |
151.85* |
701.27* |
0.66 |
|
34 |
Hawaii |
3,346 |
3,185 |
229.71 |
489.81 |
0.64 |
|
35 |
New York |
55,641 |
50,032 |
29.32 |
129.23 |
0.63 |
|
36 |
Kansa |
7,983 |
6,218 |
155.46 |
179.96 |
0.51 |
|
37 |
New Mexico |
4,543 |
3,727 |
24.48 |
38.29 |
0.44 |
|
38 |
Maine |
3,171 |
2,851 |
896.85* |
5602.00* |
0.41 |
|
39 |
Nebraska |
3,326 |
3,190 |
-12.27 |
25.84 |
0.41 |
|
40 |
Iowa |
6,405 |
5,385 |
31.25 |
135.77 |
0.41 |
|
41 |
Louisiana |
7,837 |
7,129 |
79.66 |
111.42 |
0.39 |
|
42 |
Kentucky |
8,820 |
7,244 |
41.9 |
45.46 |
0.38 |
|
43 |
Alabama |
8,436 |
7,764 |
39.34 |
184.19 |
0.37 |
|
44 |
Montana |
1,220 |
1,246 |
8.35 |
32.55 |
0.29 |
|
45 |
Wyoming |
921 |
677 |
90.17 |
165.49 |
0.28 |
|
46 |
Mississippi |
2,364 |
2,293 |
62.74 |
181.35 |
0.18 |
|
47 |
North Dakota |
391 |
371 |
48.4 |
148.99 |
0.12 |
|
48 |
South Dakota |
405 |
402 |
1575.00* |
793.33* |
0.11 |
|
49 |
West Virginia |
687 |
685 |
48.91 |
170.75 |
0.08 |
|
50 |
Vermont |
124 |
137 |
372.41* |
705.88* |
0.04 |
|
District of Columbia |
4,631 |
4,182 |
438.22* |
3245.60* |
1.48 |
|
-- |
U.S. |
3,157,806 |
2,330,483 |
81.24 |
224.8 |
1.84 |
|
*Actual increase may not be as high due to data collection changes or improvements |
|
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109% Loan-To-Value in 2009?
Let me start by explaining loan-to-value or (LTV) that most of you as real estate professionals, have heard (and many are aware of what it is, but indulge me for those readers who do not). The loan-to-value is established by taking the proposed mortgage balance (or existing mortgage balance), and dividing it by the appraised value (or current assigned market value based on sales in your neighborhood), i.e. a mortgage balance of $80,000 divided by the market value of the property of $100,000 = .80 or 80% LTV.
That being said, many homeowners in the western U.S. are already hitting levels in excess of 140% LTV, in essence they owe lenders 40% more than their property is worth.
For the rest of the U.S. it appears that most major metropolitan markets will be following suit, albeit not to that extreme level.
According to data analyzed Fannie Mae, the average residential LTV will increase to 109% by the end of 2009.
While speaking before the American Enterprise Institute in Washington last Friday, the chief risk officer for Fannie Mae Edward Pinto noted that the average loan-to-value for residential mortgages was 95 percent as of December 31, 2008.
That number being based on data that says the value of all homes in the U.S. is $18.1 trillion, of which $12.7 trillion have mortgages with a total of $12.1 trillion in mortgage debt.
Assuming home prices fall nationally by one percent each month this year (which is likely), the value of all homes in the U.S. will fall to $15.9 trillion and the value of homes with mortgages will drop to $11.1 trillion.
With mortgage debt at $12.1 trillion, the average LTV will rise to 109 percent, putting the average homeowner underwater on their mortgage, spelling disaster for banks and lenders looking to salvage bad mortgages.
Of course, Pinto noted that 70 percent of all mortgage debt is now held or guaranteed by the Federal government, so it'll probably be a big problem for taxpayers as well.
During his speech, Pinto noted that over the next four years, he sees 8.8 million or one in six mortgages, entering the foreclosure process.
Pinto also warned about the recent popularity of FHA lending, which has basically replaced subprime lending while yielding a similar serious delinquency rate.
Mortgage Rate Trends:
Today's Conforming Loan National Averages (Bank Rate Avg.):
30 year fixed: 5.20% Up
15 year fixed: 4.88% Up
5/1 ARM: 5.65% Down
30 year Jumbo: 6.81% Up
5/1 Jumbo ARM: 5.85 Down
* Keep in mind that these rates are national averages', rates may be lower in your region of the country. If you would like a ‘real time' quote, give me a call, or drop me an e-mail.
FHA and VA 30 year fixed rate loans increased significantly this week. Expect government 30 year fixed rate notes to be in the range of 5.00 to5.50 percent throughout the rest of the week, up from last weeks 4.75 to 5.00 percent range.
I, also, expect that Government interest rates (FHA and VA) will likely increase throughout this week and into early next month - this being, primarily, due to the significant increase in these mortgage products applications so far in the first quarter of 2009.
Rural housing rates are up slightly this week, currently in the 5.125 to 5.375% range for a 30 year fixed rate.
If you have a client that you are having trouble getting qualified, have any loan scenario questions, or questions or comments regarding any information contained in this news letter, please feel free to contact me.
Sincerely,
Richard Shreeve, Editor
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Direct: 480-332-4547
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The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors. * If you have received this e-mail by error, and would like to be removed from receiving further correspondences, please respond to this e-mail with "please remove" in the subject line. |
