Still Rising loan losses

This morning, Trans Union, the credit bureau, its quarterly report on loans in default, and it was not attractive. Nationally, 6.25% of all residential mortgages were at least 60 days past due in the third quarter, compared to 5.81% and 3.96% in the second quarter a year ago. This was the 11th consecutive quarter that the increases in mortgage delinquencies.
credit losses are the first step in a house eventually go into foreclosure, in order to initiate voice for flight again.Foreclosures were after examining the changes in the HEMP program, however, but few of them have come to the stadium to be a definitive change. And even if the loans are modified, there is a strong predisposition for the people once again find themselves in financial difficulties. Clearly people do not pay their mortgages is not good news for big banks like Bank of America (BAC - Analyst Report) and Wells Fargo (WFC - Analyst Reports) that lent the money.
If there is aSilver Lining in the data is that the increase seems to slow down. The third quarter increase of "only" 7.6% which is down from an increase of 11.3% in the second quarter and 14.0% in the first quarter. Of course, with the increase of the base, any further increase of one percentage point in a greater absolute number of loan defaults.
There are large regional differences in the rate of loan defaults. The states of the former bubble continue to suffer from head bogglingly highcredit losses - 14.5% of all mortgages in Nevada and 13.3% of all home owners in Florida are at least two months compared with their mortgages. That's almost one in seven in Nevada and in about two to fifteen in Florida.
In contrast, countries where few people live a very low credit losses. North Dakota was held the better, because it amounts to a series of economic indicators, at a rate of only 1.7%. South Dakota was not done all that much worse at 2.3% andVermont is the rate at only 2.6%.
However, the gap begins to close, and not in a good way. The faster growth in credit losses is now coming from areas where there is no housing bubble. The biggest jump came in Wyoming, where the suffering in the quarter jumped 17.9%, followed by Kansas at 17.4% and 16.0% in North Dakota. Yet, it would be a very long time for North Dakota to Nevada.
There are two important forces that people are defaulting on their leaderMortgages. It is a lack of desire to do so and the other is the lack of ability to do so. If your home is largely under water, so your mortgage is much more than the house is worth, it is not economically viable, and continue to pay the mortgage. After all, most of the non-recourse loans "that the worst thing that happens is that the house is closed to the media and go rent.
At one point there was a huge social stigma precluded, but sincemore frequently, reducing the stigma. Of course there are some non-economic costs to avoid paying just place to live in rent or a mortgage-payment-free for a while ', and in many areas of the country that has been changed in a year. Your children may be angry with you, why should they change schools and leave all your friends if you can not rent in the same school district. People develop emotional bonds to their homes. These factors could be worth $ 5,000 or$ 10,000. However, if the house is under water by $ 100,000, most people just say, little Billy, who make friends in his new school.
The second reason for credit losses is rising unemployment. Quite simply, without content, it is difficult to write the mortgage check. It is no coincidence that states like Nevada, Florida and California that have very high rates of mortgage default, also rank near the top in terms of unemployment - and the Dakota, and Vermont haveThe unemployment rate significantly below the national average. leaving for the mortgage default rate has reduced significantly, we need to see progress on both the front and jobs in the front of house prices.
The government has everything in its power to inflate the value of the houses again. E 'to give home buyers more money in the form of tax credits. After the recent enlargement, which is not even a first time home buyers benefit from the generosity of Uncle Sam. FromOf course, buyers do not leave the money to actually reduce the inventory of unsold homes bought there for everyone, another is on the market.
The Fed has artificially depressing mortgage default rates, $ 1250000000000 to buy mortgage-backed securities were. Without this program, the rates would be based on a 30-year fixed rate is probably at least a full percentage point higher. The federal government has assumed the role of subprime lendersthe FHA, which is used by only 3.5% down, and the tax credit for mortgage loans down payment. This is exactly the same kind of behavior that New Century Financial and Washington Mutual had no problems. It 's all about the power of the lobby has a good economic logic to prove.
This gift to the mediators of the country has finally come back to bite the country on the back, resulting in a massive - think Fannie Mae (FNM - Snapshot Report) - and Freddie Mac(FRE - Analyst Report) size Operation Rescue - the FHA.
The massive campaigns have had some effect, and the case Schiller index showed some improvement in house prices in recent months. In addition, house prices are much closer to normal, according to income and pensions than they were a few years ago, at the height of the bubble.
Note that I said "closer to normal," not "less than normal." In the absence of government support this extraordinary, there is scope for rates of employment fallWithout underestimating the historical relations. The fact that incomes are not growing much because of high unemployment and the reduction of the fee for the vacancy rates to record, does not help the situation.
This is a bit 'a dilemma, as new housing starts typically lead changes in unemployment. This can be seen in the first graph below (from http://www.calculatedriskblog.com/). In the chart, the unemployment rate is reversed to better the relationship between himand the rate of the accommodation and the delay in question. The dot.com crash induced recession of 2001, the only case in which the relationship appears to be unsustainable.
The good news is that it seems that we have seen the bottom for this cycle, housing starts in January. Based on the historical relationship means that we can begin to see an improvement in the unemployment rate by next spring.
The bad news is that new housing is now a classic case ofmal-investment. With a lot of vacant housing, is the last thing we need as a country with more housing units. has not started yet, the dramatic decline in housing starts has to sit a dent in the number of houses and apartments that are empty do. Thus, it seems unlikely that housing starts, let's go back to something like 1.1 million euro a year to see the historically normal country.
More likely, the bounce is stable around the level that marks the way for new housingstarts in the last cycles of about 600,000 € per year. Yes, this is a nice percentage gain than the minimum rate of less than 400,000, but that does not mean a strong recovery.

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