Here is the ONLY thing that you should be concerned with right now with regard to your economic outlook. Delinquencies Double on Least Risky Mortgages
Delinquency rates on the least risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.
Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.
“I’m very concerned about the rise in delinquent mortgages and foreclosure actions,” Comptroller of the Currency John Dugan said in a statement released with the quarterly report. President Barack Obama’s plan to create “sustainable, payment- reducing modifications is a positive step that should show significant benefits in the coming months,” Dugan said.
Obama’s program, unveiled Feb. 18, aims to help as many as 4 million borrowers by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their homes are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007.
President Obama's loan modification plan, the one we fell out of our chairs laughing (and crying) when he said it was going to modify up to 4 million mortgages.....? Mr. Dugan says we should see significant benefits in the coming months. I challenge that. What's been going on the last 4 months? Bubkis. If they were even able to modify 50,000 loans under the program you would have heard about it every night on MSNBC every other hour. The truth is that if they were able to modify 500,000 mortgages in a year it would be a hell of a achievement. We've written a lot about this on the blog back in February when the plan was first announced. It takes people, all unified in mind and spirit sitting practically in the same room to accomplish these modifications and none of the major players are unified or in the same room.
Job losses are growing at a alarming rate. The BLS numbers do not tell half the story. The stock market and the government may not get it but the people who actually do things in this country, the ones who run companies are cutting headcount, cutting back hours, cutting back benefits and "retooling" for a future where consumer spending, 70% of our GDP is going to change dramatically for the foreseeable future. Everyone who comes through this disaster will be saving a lot more and spending a lot less. Additionally, they will be able to borrow a lot less. Americans disposable incomes will be going down and they will be saving more of that lower disposable income. That is reality.
You can't modify or refinance a loan when the borrower can't pay....anything. Maybe in 2006, but not now. Maybe the lower priced part of the housing market in the bust-boom states is starting to find a bottom. However, the middle to upper priced housing delinquency and default disaster is just getting started. In New York, those type houses are just starting to hit the market and the bid is not exactly "robust".
Things are gonna get real ugly.....again. Big bank second quarter earnings (the JPM's and BofA's and Goldman's etc..) are going to post big positive numbers due to underwriting (bonds and equities) and liquid trading volumes. I think we are going to see a muted reaction to these good numbers and that will be the sign that the party is over. The regional and smaller banks? They are going to get clobbered. Like a sick joke, every Friday after 4pm the FDIC announces the seizure of about 5 banks....EVERY FRIDAY. Soon that weekly number is going to be a lot more than 5. Like Richie said earlier, we are getting ready to play the financials from the short side in the third quarter.