MBA - Mortgage applications down

The Mortgage Bankers Association (MBA) released two Weekly Mortgage Applications Surveys - for the weeks ending December 25, 2009 and January 1, 2010. For the week ending December 25, 2009, the Market Composite Index decreased 22.8 percent on a seasonally adjusted basis from the prior week, and for the week ending January 1, 2010, it increased 0.5 percent on a seasonally adjusted basis. Both weeks’ results include an adjustment to account for the Christmas and New Year’s Day holidays. On an unadjusted basis, the Index decreased 46.9 percent the week before Christmas and increased 0.4 percent the week after. For the week ending December 25, 2009, the Refinance Index decreased 30.5 percent from the previous week and the seasonally adjusted Purchase Index decreased 4.0 percent from one week earlier, and the following week, it decreased 1.6 percent and the seasonally adjusted Purchase Index increased 3.6 percent. The unadjusted Purchase Index decreased 33.1 percent the week of Christmas and increased 5.0 percent the week following. This measure was respectively 26.2 percent and 28.2 percent lower than the same period a year ago. The refinance share of mortgage activity for the week ending January 1, 2010 is 68.2 percent, a decrease from 69.6 percent for the week ending December 25, 2009.

Jobless rate to creep up again?

National unemployment improved to a seasonally adjusted 10% in November from the 26-year high of 10.2% hit in October, but economists surveyed by Briefing.com expect the national rate to edge up to 10.1% again when the Labor Department releases its December jobs report Friday. The Labor Department said 17 of 372 metropolitan areas surveyed suffered unemployment rates of at least 15% last month, up from 15 metro areas in October. Three areas in Michigan posted jobless rates higher than 15%, including Detroit. The city wrecked by the collapse of the auto industry continued to lead the nation's areas of 1 million people or more with the highest unemployment rate in November at 15.4%. California's Inland Empire, including Riverside, San Bernardino and Ontario, ranked second to Detroit among larger areas with an unemployment rate of 14.2% in November. El Centro, Calif., held its place as the metropolitan area with the highest unemployment rate at 29.2%, down from an upwardly r evised 31.9% in October. The second highest rate was in Yuma, Ariz., at 21.1%, a drop from 23.3% in October. The three metro areas with the lowest unemployment rates in November were all in North Dakota, with Bismarck at 3.4%, followed by Fargo and Grand Forks at 3.7%. Large cities with the lowest jobless rates were New Orleans and the Washington, D.C. metro areas, each at 6.1%. Oklahoma City followed close behind with an unemployment rate of 6.4%. Overall, 143 cities in the Labor Department report had unemployment rates above the non-seasonally adjusted national figure of 9.4%, while 229 reported jobless rates below it.

DSNews.com - Principal Writedowns Minimize Risk of Redefault

According to a new study published by the Federal Reserve Bank of New York, servicers who lower distressed homeowners’ mortgage payments by reducing the principal balance, as opposed to just making interest rate adjustments, are much more likely to see the payments keep coming in and ward off a redefault. In other news, the sky is blue. I realize this study flogs the obvious, but it does give concrete figures to those folks who criticize the Obama administration's flailing efforts to help homeowners. According to the New York Fed’s economists, when a borrower’s monthly mortgage payment is cut by 25 percent by reducing the interest rate only, the borrower is 11 percent less likely to default within one year. But, if the monthly payment is lowered by the same 25 percent, this time by shaving 25 percent off of the outstanding loan balance, coupled with a small interest rate cut, the chances that the borrower will defaulting again within one year drops by nearly 27 per
cent. The report’s authors also concluded that borrowers who have a loan-to-value (LTV) ratio of 115 percent or higher – meaning they owe 15 percent or more than their homes are worth – pose a 51 percent higher risk of redefaulting after a modification. First American CoreLogic says that nearly 10.7 million, or 23 percent, of the residential mortgages in the United States had negative equity at the end of the third quarter of 2009, with the homeowner owing more on the home than it was worth. What this all means, of course, is that unless the government steps in and forces lenders to lose money, a flood of foreclosures is coming our way.

Suspending foreclosures

In what might be a sign of things to come, Ohio’s Cuyahoga County will suspend foreclosures on tax-delinquent, owner-occupied residential homes for six months from December 2009, according to an announcement from the county’s treasurer. Through the moratorium, county officials say they want to give borrowers more time to catch up on delinquent taxes. According to the announcement, the suspension will keep more homes off of a real estate market already weighted down by foreclosures, especially in Cleveland, Ohio, situated in Cuyahoga County along Lake Erie’s shores. “Things are not getting better, they’re getting worse,” said Jim Rokakis, the county’s treasurer. “Vacant, foreclosed properties not only impact the homeowner, they harm entire neighborhoods and communities. The situation we now find ourselves in is akin to the 1930s. This is our Dust Bowl. It is my hope that this measure will cause fewer homes to become vacant and alleviate some of the human mise ry being caused by the economy and the collapse of the market.” Moratoriums on foreclosure activity have been prominent among lenders as the volume of homeowners behind on their mortgage has continued to grow; many have suggested that such ‘foreclosure freezes’ merely postpone the inevitable. But Cuyahoga County’s tax-lien foreclosure moratorium is the first such effort by a county to halt foreclosures for borrowers not paying property taxes.

Moderate sales gains

According to figures released today by MasterCard Advisors' SpendingPulse suggest that Christmas shoppers bought a little more jewelry, electronics and boots, but skipped women's fashion. Analysts say discounters and wholesale club operators such as Costco Wholesale and TJX will emerge as the holiday winners, while many apparel stores are likely to suffer sales declines. The worst December performers are expected to be teen merchants, particularly pricier stores such as Abercrombie & Fitch as parents have cut spending even on their children. SpendingPulse had said on Dec. 28 that retail sales rose 3.6 percent from Nov. 1 through Dec. 24, compared with a 2.3 percent drop in the year-ago period. Adjusting for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent gain. Sectors that saw improved sales from Nov. 29 through Saturday, compared with a year ago, according to SpendingPulse: Online sales up 17.7 percent. 12.2 percent for the
year; Footwear, up 6.2 percent. Unchanged for the year; Electronics, up 7.3 percent in December. Down 0.5 percent for the year; Luxury sales, excluding jewelry, up 5.5 percent. Down 8 percent for the year; Jewelry, up 6.9 percent in December, down 4.1 percent for the year. High-end and low-end jewelry chains fared well, but mid-tier jewelry stores struggled; Clothing sales, down 1.8 percent from Nov. 29 through Saturday compared with a year ago. Down 6.7 percent for the year. Men's apparel sales rose 2.6 percent from Nov. 29 through Saturday. In contrast, women's apparel sales fell 2.8 percent.

ABA President Calls for End of ‘Too Big to Fail’ Policies

Edward Yingling, president and CEO of the American Bankers Association (ABA), voiced his group’s opposition to the proposed Consumer Financial Protection Agency (CFPA) in a letter to the leading members of the Senate Banking Committee - designed to protect financial institutions deemed “too big to fail.” Yingling said the ABA supports strengthening consumer protections, but said the CFPA was not the correct solution “because of the unworkable conflicts it will inevitably have with a bank’s prudential regulator, the increased regulatory costs and burdens on traditional banks, the sweeping new powers it is given…and the lack of sufficient focus on the shadow banking system,” he wrote. Instead, the ABA supports “an approach that requires more focus on consumer issues, greater coordination and more accountability by the regulators. We strongly support reform, but at the same time believe it should be focused on the causes of the financial crisis and preventing future crises and not impose heavy new regulatory burdens on traditional banks that did not cause the crisis,” he wrote.

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