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Friday,
Sept. 5
Posted
2 p.m. EDT
LATE
PAYMENTS:
People are falling behind on
mortgage payments and losing
their houses in ever-increasing
numbers. Not much of a surprise,
but the Mortgage Bankers Association
has the latest numbers.
For homes with
mortgages, almost 1 in 11 owners
were late with their payments
or in the foreclosure process
at the end of June, the MBA
says. A year ago, the comparable
number was about 1 in 15.
We're talking
about two combined rates here.
First, there's the seasonally
adjusted delinquency rate, which
is the percentage of mortgages
that are at least 30 days past
due. The delinquency rate excludes
loans that are in the process
of foreclosure. The MBA also
tracks the foreclosure inventory
rate, which is the percentage
of mortgaged homes in foreclosure.
At the end of
the second quarter this year,
the delinquency rate nationwide
was 6.41 percent, and the foreclosure
inventory rate was 2.75 percent.
Together, that means 9.16 percent
of mortgages were at least 30
days late or in foreclosure,
or about 1 in 11.
A year ago, the
delinquency rate was 5.12 percent,
the foreclosure inventory rate
was 1.4 percent, and they added
up to 6.52 percent combined,
or around 1 in 15 houses (more
precisely, 3 in 46).
So: 3 in 46 mortgages
were late or in foreclosure
a year ago; 3 in 33 this year.
This is the worst it's been
in the MBA's 40-year history
of collecting these data, says
Jay Brinkmann, the mortgage
bankers' chief economist.
This is the national
picture, and Brinkmann says
it's heavily influenced by the
real estate crashes in California
and Florida, where disproportionate
numbers of people in those states
bought houses at the top of
the market, using option ARMs.
A lot of these buyers were what
Brinkmann calls investors and
what I call speculators. Brinkmann
doesn't expect a turnaround
in the national numbers until
there's a turnaround in California
and Florida. I hope he's patient,
because he's got a long wait
ahead of him. I live in Florida,
and I expect prices here to
keep falling until late 2010
or sometime in 2011. Then I
think they'll level off for
five or six years. As for California,
your guess is as good as mine.
What about the
impact of foreclosures on home
prices. "I think the issue
is a little reversed,"
Brinkmann says. "Home prices
have a bigger impact on foreclosure
rates. That's what's driving
delinquency and foreclosure."
Look at it as
a vicious spiral. Falling home
prices trap people into mortgages
that they can't refinance because
they owe more than their homes
are worth. So they end up in
foreclosure, and another empty
house ends up on a glutted market
where there are many more sellers
than buyers. That sends home
prices down even more, trapping
more people into mortages that
they can't refinance.
The situation
results in gallows humor. I've
talked with a couple of mortgage
professionals this week who
bitterly joke that earthquakes
in California and hurricanes
in Florida might ease the housing
market's plight by destroying
excess houses.
Post
11 a.m. EDT
GONNA
LEAVE A MARK:
You want to read something crass?
Something crude and insensitive?
Here we go:
Today's awful
employment
report is nice news for
mortgage shoppers. Lots of people
lost their jobs, and mortgage
rates will fall, most likely.
First, the headline
number: The unemployment rate
jumped from 5.7 percent in July
to 6.1 percent in August. It's
the second time this year that
we've had a big jump. The unemployment
rate went from 5 percent to
5.5 percent from April to May.
The bond market
pays more attention to the nonfarm
job numbers than to the unemployment
rate. The economy shed 84,000
nonfarm jobs in August, according
to the Labor Department. That's
worse than the consensus forecast
among economists of a loss of
75,000 jobs. On the other hand,
the consensus was 12 percent
off. No biggie.
It's the revisions
to the previous months that
are moving the bond and mortgage
markets. The Labor Department
estimated that the economy had
shed 51,000 jobs in June; now
that number has been revised
to a loss of 100,000 jobs. The
July job loss was revised from
a loss of 51,000 jobs to a loss
of 60,000 jobs.
In other words,
the Labor Department initially
had estimated a loss of a total
of 102,000 jobs in June and
July, and now that loss is estimated
at 160,000 jobs. And today's
estimate of job losses exceeded
the consensus forecast by 9,000.
Since Monday,
the rate on the 30-year fixed
has dropped about 20 basis points.
I make that estimate based on
the yields of mortgage-backed
securities, as well as Freddie
Mac's required net yields. On
Wednesday, Bankrate's weekly
survey had the 30-year fixed
averaging 6.55 percent; today,
it's probably more like 6.35 percent
to 6.4 percent.
My advice? If
your banker or broker quotes
a rate that you like, that you
can live with, go ahead and
lock it. Don't be surprised
if rates drop afterward; that's
a definite possibility. But
rates could jump back up, too.
I think these employment numbers
are injecting volatility back
into the bond market, making
mortgage rates rise and fall
quickly.
Now, as
you ponder the above paragraph,
please understand where I'm
coming from. When it comes to
personal financial decisions,
I'm conservative. I think it's
better to accept a good deal
than to miss it by holding out
for a better deal. But that's
not the mindset of a lot of
readers. A lot of you embrace
risk more readily than I do.
If you're the risk-taking type,
go ahead and keep floating your
mortgage rate if you want. The
lock-float question is not clear-cut.
I'm quicker to lock than some
other people, and I'm often
wrong.
Tuesday,
Sept. 2
Posted
4 p.m. EDT
RATE
VIEW:
There has been little movement
in mortgage bond yields and
mortgage rates in the past week.
In last week's Bankrate survey,
the 30-year fixed averaged 6.6
percent. That's about where
it would stand if we did our
survey today. It's conducted
every Wednesday.
By the way, sorry
it's been so long since I posted.
Strep throat.
PRICE
FIXING?: I wrote an article
last week asking why
mortgage rates haven't declined,
and it was an unexpected hit.
Got tons of page views. Evidently,
a lot of people have been wondering
why mortgage rates haven't gone
down -- indeed, have risen slightly
-- since the Fed started cutting
short-term rates, and while
the 10-year Treasury yield has
been falling.
A reader named
Mary writes that the article
was too short:
I am a reader
and I have no financial expertise.
This ALL TOO BRIEF sentence
highlights what I think is
the real reason mortgage rates
are not dropping, however,
you do not elaborate on it
at all. This is the only reference
to this possibility:
"To
me, it says the banks are
holding more of the profits
on these mortgages to make
up for the losses that they've
experienced over the last
several years," says
[Bob] Moulton, of Americana
Mortgage."
What SHOULD
be written is something like
this, and at more depth:
What could really
be happening is TODAY'S mortgage
seekers, while being more
qualified than has been required
in 10 years, are being asked
to pay the difference between
Fed subsidized Treasury rates
and their loan rates to make
up for losses that the institutions
have sustained. In actuality,
this amounts to price gouging
that is being expressed in
a new form that is historically
different than ever before.
In being gouged, the borrower
is going to be penalized for
the life of the loan, for
the excesses of the loan market.
In truth, this amounts to
not only a government (citizen
financed) sponsored bailout
to the institutions on the
face, but an additional rate
penalty (bailout) by the citizens
who are actually seeking loans.
This is why rates are mysteriously
not dropping as they should.
How about Bankrate
being a little more honest?
I suppose that could anger
those advertisers? The general
public which you profess to
serve, who does not have a
sophisticated understanding
of the market and who looks
to experts to make sense of
things. This is supposed to
give them a fighting chance
and some help. I realize that
calling a spade a spade won't
make the rates magically drop,
but it would correctly explain
what is happening and why.
Who knows, maybe some truth
and shining a light might
pay off in reforms.
Mary says she
has no financial expertise,
but she certainly has good insight
about what she calls a new form
of price gouging.
When I talk to
mortgage people, they tend to
discount the notion that lenders
are keeping rates high to make
up for past losses. They say
the industry is competitive.
They're right. I don't think
the lenders -- the Banks of
America, the Washington Mutuals
-- are keeping rates high deliberately.
Not directly, anyway.
But the lenders
depend, directly or indirectly,
on Fannie Mae and Freddie Mac.
This year, those two companies
have imposed fees and restrictions
to boost their top lines. Both
companies strive to increase
their income to repel government
takeover. Right now, they hold
a duopoly. It's Fannie and Freddie
who impose the pricing power
on lenders.
The Treasury Department
doesn't want to take over Fannie
or Freddie. The Treasury and the
Federal Reserve will countenance
price gouging from Fannie and
Freddie, at least temporarily,
if it lessens the chance of
a government takeover.
I'll take another
bite at this apple in the coming
weeks.
NO
STATS: Paul Muolo, executive
editor of National Mortgage
News, has been asking about
the effectiveness of the Hope
Now Alliance, the congress of
mortgage servicers and debt
counselors that encourages delinquent
homeowners to seek help.
Muolo asked the
head of Hope Now how much mortgage
debt has been forgiven in the
workouts it has sponsored. She
didn't know. How many delinquent
loans have been refinanced into
FHA-insured mortgages? She didn't
know. How many loans have been
refinanced through Hope Now,
but went delinquent again? She
didn't know.
Your tax dollars
at work.
THEN
AGAIN...: Here's a
better example of tax dollars
at work: The Fed has published
a consumer's
guide to mortgage refinancing.
It's pretty good. I think the
articles in Bankrate are more
helpful, but vive la difference.
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