The Day After The Bond Marked Tanked....Must Read Report From Mr. Mortgage / Field Check Group

I have said a few weeks ago Ben, You Have A Problem......".... The problem has not gotten smaller......Get ready for QE 2.0......... Version 1.0 worked wonders for at least two weeks.....No wonder Gold has a chance for a breakout ( via Zero Hedge ). I highly recommend to read the entire piece and visit Mark Hanson & his Field Check Group site on a regular basis. Excellent stuff!

Vor einigen Wochen habe ich bereits getitels Ben, You Have A Problem....... Sieht so aus als wenn aus dem großen ein wirklich großes Problem geworden ist.....Wenn man weiß wie beschränkt Bernanke in seinem Denken ist gilt es als abgemachte Sache das wir uns auf eine massive Ausweitung des Quantitve Easing ( Notenpresse ) gefasst machen können. Macht ja auch Sinn wenn man sieht wie "toll" der erste Versuch funktioniert hat...... Da verwundert es wenig das Gold kurz davor ist "auszubrechen" ( via Zero Hedge ). Empfehle den kompletten Report zu lesen und den regelmäßigen Besuch von Mark Hanson und seiner Field Check Group Seite. Hier gibt es ungelfilterte "Bodenberichte" von der Hypotheken und Immobilienfront.


bigger / größer Thanks to Karl Denninger

5-28 - Potential Consequences of 5.5% Mortgage Rates Mr. Mortgage / Field Check Group

Mortgage Rates - It Could be as Bad as You Can Imagine

With respect to yesterday’s in the mortgage market — yes, it is as bad as you can imagine. No call can be made on the near-term, however, until we see where this settles out over the next week of so. If rates do stay in the mid 5%’s, the mortgage and housing market will encounter a sizable stumble. The following is not speculation. This is what happens when rates surge up in a short period of time - I lived this nightmare many times.

Yesterday, the mortgage market was so volatile that banks and mortgage bankers across the nation issued multiple midday price changes for the worse, leading many to ultimately shut down the ability to lock loans around 1pm PST. This is not uncommon over the past five months, but not that common either. Lenders that maintained the ability to lock loans had rates UP as much as 75bps in a single day.

Jumbo GSE money — $417k - $729,750 — has been blown out completely with some lender’s at 8%.

I have seen it all in the mortgage world — well, I thought I had.

A good friend in the center of all of the mortgage capital markets turmoil said to me yesterday “feels like they [the Fed] have lost the battle…pretty obvious from the start but kind of scary to live through it … today felt like LTCM with respect to liquidity.”

The consequences of 5.5% rates are enormous. Because of capacity issues and the long time line to actually fund a loan in this market, very few borrowers ever got the 4.25% to 4.75% perceived to be the prevailing rate range for everyone.

A significant percentage of loan applications (refis particularly) in the pipeline are submitted to the lenders without a rate lock.

This is because consumers are incented by much better pricing to lock for a short period of time…12-30 day rate locks carry the best rates by a long shot. But to get this short-term rate lock, the loan has to be complete enough to draw loan documents, which has been taking 45-75 days over the past several months depending upon the lender’s time line.

Therefore, millions of refi applications presently in the pipeline, on which lenders already spent a considerably amount of time and money processing, will never fund.

Furthermore, many of these ‘applicants’ with loans in process were awaiting the magical 4.5% rate before they lock — a large percentage of these suddenly died yesterday. From the lows of a month ago to today, rates are up 20%.

To make matters worse, after 90-days much of the paperwork (much taken at the date of application) within the file becomes stale-dated and has to be re-done with new dates — if rates don’t come down quickly many will have to be canceled out of the lender’s system.

To add insult to near-mortal injury, unless this spike in rates corrects quickly, a large percentage of unlocked purchases and refis will have to be denied because at the higher interest rate level, borrowers do not qualify any longer. For the final groin kicker, a 5.5% rate just does not benefit nearly as many people as a 4.5%-5% rate does. Millions already have 5.25% to 5.75% fixed rates left over from 2002-2006. .....

With respect to banks, mortgage banks, servicers etc, under-hedging a potential sell-off with the Fed supposedly having everybody’s back was a common theme. Banks could lose their entire Q2 mortgage banking earnings and middle market mortgage banker may never recover or immediately have to close shop

Lastly, consider sentiment — this is a real killer. This massive rate spike may have invalidated hundreds of billions spent to control the mortgage market literally overnight.

This leaves the mortgage and housing market very vulnerable.

Mortgage loan officers around the country are having a very very bad day today explaining to their clients why their rate was not locked and how rates are going to come right back down. They are also taking calls from borrowers with locked loans to confirm that the loan is indeed locked, inquiring as to when it will be approved or fund, and to rush the process in order to fund the loan by end of the lock-in term. This creates a customer service log-jam that chews through lender capacity quickly making the loan process even longer. Loans with second mortgages that need to be subordinated, are in a world of their own. Essentially, everything becomes a rush. Subsequently, loan officers will not feel like getting too aggressive taking new loan applications at least for the next month unless this corrects quickly.

Press surrounding this event will be the talk of Main Street immediately and cast a serious doubt over the housing recovery story that has been the common theme for months. An overnight housing market sentiment killer wildcard is something that nobody was factoring in.

We have to see where all this settles over the next few days before making a near to mid-term call on the outright damage because at this point, Fed or Treasury shock and awe is almost certain — another common theme has been ‘if it doesn’t work throw much more money at it’.

Obviously they have been following this closely for the past few weeks, as conditions began to deteriorate, and have likely been waiting to see where the upper range was before shocking in order to get maximum benefit…that would be a humongous short squeeze in Bonds driving rates lower. The problem is…if they do shock her and it is sold into with the same fury that we have been seeing, there may not be an act two.

The bond and mortgage market got complacent with the ultimate in moral hazard’s — the Fed’s got my back. Complacency is a killer.

Where we stand in two weeks in unknowable......

Bank Or REIT..... :-)

I know that the headline is a little bit overstreched but i couldn´t resist.....When you now add Quelle Surprise! Banks Taking Big Losses on Real Estate Disposals via Naked Capitalism ( watch the chart! ) you know that the bottom for banking stocks and housing is nowhere near. .... Unless you are "Easy Al" Greenspan Calls a Housing Bottom (Again) Thanks Mark :-)!

Bin mir sehr wohl bewußt das die Überschrift natürlich übetrieben its. Da der Trend aber aif Sicht anhalten wird würde es mich nicht weiter wundern wenn die größten US Banken demnächst unter den größten Immobilienbesitzern auftauchen werden ( wenn auch ungewollt....) Wenn man jetzt noch dieses Posting von Naked Capitalism Quelle Surprise! Banks Taking Big Losses on Real Estate Disposals in die Betrachtung miteinbezieht ( bitte den Chart beachten ) ist es offensichtlich das der Boden der ja jetzt zum gefühlten zwanzigsten Male von sog. "Experten" ( hier ein extrem tarurigens und schauriges Beispiel Greenspan Calls a Housing Bottom (Again) ) ausgerufen worden ist für US Finanzwerte und den Immobilienmarkt noch lange nicht erreicht ist.

U.S. Foreclosures Increase 55%, Bank Seizures Rise to Record Bloomberg
Bank repossessions almost tripled in July and U.S. foreclosure filings increased 55 percent from a year earlier as falling prices cut homeowner equity, accelerating the housing decline, RealtyTrac Inc. said. ....

Bank seizures rose 184 percent, the most since reporting began in January 2005, the Irvine, California-based seller of foreclosure data said today in a statement

Bank seizures, known as real estate-owned or REO properties, are the ``fastest growing segment of foreclosure activity,'' James Saccacio, chief executive officer of RealtyTrac, said in the statement. The REO properties in the company's database represent about 17 percent of the inventory of existing homes reported in June by the National Association of Realtors, he said.

via FT Alphaville

RealtyTrac now has more than three quarters of a million properties in its active REO database, a number that represents approximately 17 percent of the inventory of existing homes for sale reported in June by the National Association of Realtors.

F.H.A. Faces $4.6 Billion in Losses

"Unexpected losses".......LOL!

"President Bush and leading Democrats in Congress are counting on the F.H.A., which is overseen by the Department of Housing and Urban Development, to help istressed borrowers refinance into stable, government-backed loans."

Got gold.....?

Yves from Naked Capitalsim has much more on this topic FHA Repudiates Housing Rescue Bill including this desperate comment to fend off the latest rescue packages from the FHA chief Brian Montgomery ( also hat tip to Housing Wire) .

Yves von Naked Capitalsim hat mehr deprimierende Details zu diesem verzweifelten Versuch der Politik das Unvermeindliche zu verhindern FHA Repudiates Housing Rescue Bill . Hier ein an Deutlichkeit nicht zu überbietender Hilfeschrei von FHA Boss Brian Montgomery ( Dank auch an Housing Wire) das die von der Politik geplanten Rettungsaktionen für den US Immobilienmarkt unweigerlich in ein Desaster führen werden ..... Unnötig zu erwähnen das letztendlich der Steuerzahler für diesen erneuten Irrsinn geradezustehen hat...... Unnötig ebenfalls zu betonen das sich die Politiker gerade in Wahlkampfzeiten am Ende sicher durchsetzen werden....

"Some of the proposed Congressional actions could actually weaken FHA and endanger the housing market by turning FHA into a less stable, less solvent, more bureaucratic entity.

There are some who want FHA to pick up all the potentially delinquent 2 million subprime loans.This is a worrisome idea.

FHA is designed to help stabilize the economy, operating within manageable, low-risk loans.It is not designed to become the federal lender of last resort, a mega-agency to subsidize bad loans."

He should have been so vocal a litlle bit earlier ( enjoy the rant from Mish )

Hier noch ein netter Rumumschlag von Mish

F.H.A. Faces $4.6 Billion in Losses NYT
WASHINGTON — The Federal Housing Administration expects to lose $4.6 billion because of unexpectedly high default rates on home loans, officials said Monday.

Brian D. Montgomery, the F.H.A. commissioner, attributed the unanticipated losses primarily to the agency’s seller-financed down payment mortgage program, which has suffered from high delinquency and foreclosure rates in recent years.

Housing officials said the agency was also hurt by poor performance in its traditional mortgage portfolio. Deteriorating economic conditions led some of its core clients — first-time buyers, minorities and lower-income owners — to default, they said.

The projected loss is the highest in the home loan program since 2004, and officials said the F.H.A. had to withdraw $4.6 billion from its $21 billion capital reserve fund in May to cover the costs. They said the agency, which is self-sustaining, would not need appropriations from Congress to remain solvent.

But Mr. Montgomery warned that the F.H.A. would have to renew its efforts to end the seller-financed down payment program, which accounted for 35 percent of its loans in 2007.

He said the mortgages had foreclosure rates three times those of traditional loans and would push the F.H.A. to the brink of insolvency.

“Let me repeat: F.H.A. is solvent,” Mr. Montgomery said on Monday in a speech at the National Press Club. “However, no insurance company can sustain that amount of additional costs year after year and still survive. Unless we take action to mitigate these losses, F.H.A. will soon either have to shut down or rely on appropriations to operate.”

F.H.A.’s projected loss, more than four times the shortfall attributed to the home program last year, raised concerns about the agency’s ability to lead the national effort to rescue homeowners facing foreclosure.

President Bush and leading Democrats in Congress are counting on the F.H.A., which is overseen by the Department of Housing and Urban Development, to help distressed borrowers refinance into stable, government-backed loans.

Officials say the agency will help 500,000 people refinance by the end of the year, but a vast majority of those have made their payments on time.

Howard Glaser, a mortgage industry consultant who served as HUD general counsel in the Clinton administration, sees the anticipated loss as a concern. “Congress is relying on F.H.A. to help stabilize the mortgage market, but it’s not clear that F.H.A. is as strong as it could be,” he said.

Mr. Montgomery said the agency planned to reopen the comment period on a proposed rule to the Federal Register that would ban the program. But the F.H.A. has tried to eliminate seller-financed down payment loans for years, and it remains unclear whether it will be successful now.

Under the program, a home seller arranges to cover the buyer’s down payment, using financial help from a nonprofit company, but typically adds that sum or more to the price of the house. The deal has been particularly attractive to financially struggling buyers and to owners in depressed markets, according to Congressional officials.

Critics say the practice puts overpriced houses in the hands of poor and minority homeowners who ultimately cannot cover the mortgage. In recent years, the Government Accountability Office and the Internal Revenue Service have both raised concerns about the program.

But with the subprime market collapsed and mortgage companies tightening lending criteria, seller down payment loans have become increasingly appealing both to sellers in slumping housing markets and to lower-income homebuyers unable to get conventional mortgages.

The program, which accounted for less than 2 percent of F.H.A.-insured loans in 2000, now accounts for more than a third of the agency’s portfolio. Housing officials said that 60 percent of F.H.A.’s anticipated loss was directly attributable to the seller-financed down payment program.

Supporters of the loans, who include some powerful members of Congress, counter that the program provides much-needed assistance to low-income and minority families who would otherwise be unable to buy homes.

Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, remains opposed to any F.H.A. rule that would eliminate the program, a spokesman said on Monday. Mr. Frank has said he would like to reform the program without killing it.

About 1 in 11 Mortgageholders Face Loan Problems

"Contained" :-) ...... No wonder the market was up yesterday......

Kein Wunder das der Markt gestern so freundlich war....... Jeder der denkt das die Krise im US Finanzsektor überstanden ist sollte sich die nachfolgende Grafik sehr genau ansehen. Finanztitel sollte man nach wie vor nicht mal mit der Kneifzange anfassen.

About 1 in 11 Mortgageholders Face Loan Problems NYT


grösser/bigger

US House Prices Falling Faster Than During The Great Depression

Unbelievable that 95 percent of so called "Experts" didn´t see this coming....... These are often the same that are now calling for the bottom and are declaring the recession that never was is already over......

Unfassbar das selbst im Jahr 2006/2007 95% der sogennaten Experten das Unheil nicht haben kommen sehen.... In der Regel sind das dieselben "..............." ( möchte höflich bleiben ) die den Boden gesehen haben und die nicht vorhanden gewesene Rezession als beendet erklären.....

Economist America's house prices are falling even faster than during the Great Depression

AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

Housing Meltdown / Business Week Cover Story

You gotta give them credit for being one of the first major media outlets that had predicted some kind of trouble brewing in the housing market. Here are some examples of their earlier track record. If you don´t want to digg through the entire 5 page long lead story i suggest to skip through the slide shows ( see one example below ). I think that most of the stuff isn´t really news to reader of this blog but it is at least a good and short summary.

Man muß Business Week mal ausdrücklich ein dickes Lob aussprechen. Sie waren einer der ersten bedeutenden großen Medieninstitutionen die zeitig auf das kommende Unheil hingewiesen haben. Zum Beweis kann man hier einige Beispiele einsehen. Wenn Ihr keine Muße habt Euch durch den langen Leitartikel zu kämpfen empfehle ich alternativ sich durch die Slideshows zu klicken. Exemplarisch habe ich weiter unten ein Beispiel herausgepickt. Obwohl das Meiste dürfte den Lesern des Blogs nicht wirklich neu erscheinen so ergeben sich doch eine schöne Zusammenfassung und wagen einen wie ich finde einigermaßen realistischen Ausblick.

Housing Meltdown / Why home prices could drop 25% more on average before the market finally hits bottom Full Business Week Cover Story

Analyzing the Housing Crisis Slide Show

The 25% Dissolution Slide Show

Housing Prices Shed Gains Slide Show

Coast To Coast
A 20% decline in home prices would wipe out all of the home equity of two-thirds of all people who bought houses in the last year, Zillow.com estimates. The bars show the percentage of recent buyers in each market whose home equity would be wiped out by a further 20% price decline.

The United States of Subprime / WSJ

Brilliant! This is a must read and the interactive map "subprime tidal wave" is a must see!

Brilliant! Der komplette Artikel ist zu Recht auf Seite 1 vom WSJ. Die interaktive Karte "Subprime Tidal Wave" ist ein echter Hingucker und sollte auf keinen Fall verpaßt werden!

I suggest to read the entire link

Ich empfehle den kompletten Link zu lesen.

The United States of Subprime
As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.

The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.

High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash.

To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.

Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations.

The Journal's findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. From investors hoping to strike it rich by speculating on condominiums to the working poor chasing the homeownership dream, subprime loans burrowed into the heart of the American financial system -- and now are bringing deepening woe.

The data also show that some of the worst excesses of the subprime binge continued well into 2006, suggesting that the pain could last through next year and beyond, especially if housing prices remain sluggish. Some borrowers may not run into trouble for years. ....