Delinquency rates up
According a report from California-based real estate market consulting firm Foresight Analytics, total delinquencies for first-lien residential mortgages grew to an estimated 11% during Q309. The final figures for the third quarter are not due until the end of November, but Foresight’s report bases its data on earnings reports and call report filings from banks. Residential delinquencies increased from 10.2% in Q209 and from 6.4% from the second quarter of 2008, according to the report. The delinquency rate rose approximately 1% every quarter since the Q108, except for a quick blip in Q408. “We have been expecting the rate of increase to slow, but clearly this has not yet occurred,” said the report.
Nonaccrual rates for residential mortgages also jumped to 4.7% in Q309 from 3.8% in the previous quarter, and delinquencies in commercial mortgages also ballooned for the quarter. The rate hiked to 4.7% in Q309 from 4.1% in the previous quarter and more than doubled the 2.1% rate a year ago, according to the report. “The delinquency rate has been increasing at an accelerated rate since Lehman Brothers’ collapse in September 2008 and the ensuing severe credit crunch and economic downturn.” The delinquency rate in commercial loans is still well below the 8% delinquency rate in the third quarter of 1991, but the rate still worries analysts in light of a weak economy, constricted credit availability and a large number of commercial mortgages coming due the next few years.
First Time Homebuyer Credit Extension
The $8,000 first-time homebuyer tax credit is set to be extended until April 30, 2010. The Obama Administration has urged Congress to pass legislation to extend the program from its original December 1, 2009 deadline. In addition, legislation may provide a tax credit for some current homeowners. NAMB will continue to monitor legislation and will inform members when the extension is formally enacted.
Interest rates up
Freddie Mac’s weekly survey said the 30-year fixed-rate mortgage (FRM) interest rate inched up last week to 5.03% for the week ending Oct. 29, up from 5% in the previous week. A yevar ago, the rate was 6.46%. A separate survey of large US banks and thrifts conducted by Bankrate.com put the 30-year FRM at 5.35% with an average 0.37 point. That’s an increase of 1 basis point from the previous week. One year ago, their estimated rate was 6.77%. Freddie Mac said the 15-year FRM rate was 4.46% with an average 0.6 point, up from 4.43% last week, and Bankrate.com said the 15-year FRM was 4.74%, up 2bps from last week. Anyway, to make a number filled story short, interest rates are up. Bankrate.com goes further and says that sales have increased, prices are down and supply is starting to decline. Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School of Business, said in the Bankrate.com survey that the housing market is not at a false bott om. “These are strong numbers, but not surprisingly strong numbers,” Wachter said. “The fundamentals are in place for a recovery — however, a slow recovery.”
White House claims jobs saved and created
According to a report released by the Obama administration, its stimulus program has created or saved 650,000 state and local jobs. Maybe this time things will be different, but last time the White House released a job creation report it turned out so full of overstatement and errors that among other things, it reported an award to a French vaccine maker as 100 times the actual amount. The numbers in this report, like last report, are drawn from tens of thousands of self- reportings from state and local recipients as well as private companies. The White House claims to have created or saved at least 650,000 state and local jobs, but says the actual number of jobs created so far is likely closer to 1 million, since its report on stimulus job creation only focused on $150 billion of the $339 billion in American Recovery and Reinvestment Act funds spent so far. "We're solidly on track to create or save 3.5 million jobs by the time this program winds down," administration eco nomist Jared Bernstein told CNN on Friday. "There's a lot more ammunition in that Recovery Act. The stimulus package is absolutely working, both in GDP terms and in terms of saving or creating jobs." Yup. The White House maintains that the funding saved the country from slipping into a depression and fueled the 3.5% growth in the economy in the third quarter. Republicans point to the rising unemployment rate, now at a 26-year high of 9.8%, as a sign that the recovery act is a failure.
Consumer spending down
The Commerce Department says consumer spending plunged in September by the largest amount in nine months, and incomes, the fuel for future spending, were flat. Spending dropped 0.5 percent in September, and economists worry that the recovery could falter in coming months if households cut back on spending to cope with rising unemployment, heavy debt loads and tight credit conditions. Some economists believe that consumer spending will slow sharply in the current quarter, lowering GDP growth to perhaps 1.5 percent.
Analysts said the risk of a double-dip recession cannot be ruled out over the next year. The 0.5 percent drop in consumer spending in September followed a 1.4 percent surge in August which was propelled by the big jump in car sales that month as consumers rushed to take advantage of the clunkers' incentives. Last month's drop in spending resulted in a boost in the savings rate to 3.3 percent of after-tax incomes, up from 2.8 percent in August. Many analysts believe households will keep striving to increase savings in the months ahead, which would hold back spending in the months ahead, weakening the recovery.
31% of consumers say access to mortgages is harder
Financial services information provider Bank Administration Institute (BAI) measures consumer views across five areas: financial stress and the economy, access to credit, fees and disclosure, managing personal finances and consumer trust. The index’s findings indicate that one-third of consumers feel their financial situation has deteriorated in recent months, but few expect conditions to grow even worse.
Of those surveyed, 31% indicated that access to mortgages is worse now than six months ago, while only 5% said it improved. The projections indicate that 12% of respondents expected access to improve in another six months, while 15% expect access to worsen. “In today’s fast-changing scenario, consumer opinion counts more than ever before and technology has made the consumer highly empowered,” said Haragopal Mangipudi, global head at Finacle. “Presented with diverse and ever-dynamic consumer segments, banks need to anticipate changing requirements and fine-tune business strategy.”
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