Prime Mortgages Are Also Going Sour

At the end of the second quarter, 4.3% of all residential mortgages were in some part of the foreclosure process, up from 3.85% at the end of the first quarter and 2.75% a year ago. In addition, on a seasonally adjusted basis, 9.24% of all mortgages were delinquent (behind by at least one payment), up from 9.12% at the end of March, and just 6.41% at the end of June 2008.

Both were records since the Mortgage Bankers Association (MBA) started keeping track back in 1972. On a non-seasonally-adjusted basis, the delinquency rate was not quite as bad at 8.86%, but still a record.

That means that 13.16% of all residential mortgages (NSA basis) are in trouble. With about 51 million houses with mortgages in the country, that means 6.71 million bad mortgages out there. With the number of people out of work still rising, the problem is likely to continue to get worse for quite a while.

The chief economist for the MBA expects that foreclosures will not peak until the end of 2010. I suspect he might be a little bit on the optimistic side, but that projection is reasonable. If someone is also in a house where the value of the house is less than the amount of the mortgage, the probability that they will continue to pay the mortgage falls rapidly.

If they are also out of work while they are underwater, then continuing to pay their mortgage is simply not an economically rational thing to do. Far better to simply live rent- and mortgage-free until the sheriff shows up at the door. Given the overwhelming case-load, that can often be well over a year (though it varies greatly by location).

Once upon a time, people liked to think that the mortgage problems were contained to the subprime market. It was just a problem of irresponsible people on the wrong side of the tracks. That is clearly no longer the case.

While as a percentage, subprime mortgages are still much more likely to be delinquent or in foreclosure than are prime mortgages, there are far fewer subprime mortgages than prime mortgages. In absolute numbers, there are far more bad prime mortgages than bad subprime mortgages.

The graph below (from http://www.calculatedriskblog.com/) shows just how bad the loans are going sour on the people who had good credit when they took out the mortgages.

The percentage of prime loans in foreclosure jumped to 3.00% at the end of the second quarter vs. 2.49% at the end of March. The percentage delinquent rose to 6.41% from 6.06% at the end of March.

On a percentage basis, subprime loans continue to be an absolute horror show. At the end of the quarter more than one in four (25.35%) subprime loans were delinquent (up from 24.95% at the end of the first quarter) and 15.05% were somewhere in the foreclosure process, up from 14.34% the quarter before.

Thus, the combined troubled mortgage rate is now over 40% on subprime loans. This is of course bad news for the banks with big mortgage operations like Bank of America (BAC - Analyst Report), Wells Fargo (WFC - Analyst Report) and PNC Financial (PNC - Snapshot Report).



Regionally, California, Florida, Arizona and Nevada are still being hit the hardest, but other states are starting to catch up. Those four states had 44 percent of all of the nation’s new foreclosures during the second quarter of this year, down from 46 percent in the first quarter.

Foreclosures are less of a problem in the relatively unpopulated states. Very few people (relatively) are falling behind in North Dakota, Wyoming or Alaska as shown in the second graph (also from http://www.calculatedriskblog.com/).

Florida still has the worst mortgage performance, closely followed only by Nevada. In Florida, 12 percent of mortgages were somewhere in the process of foreclosure -- the highest in the nation -- and another 5 percent were at least 90 days past due as of the end of June. A total of 22.8 percent were delinquent at least one payment or in the process of foreclosure, which is almost twice the national percentage (excluding Florida).

In contrast, the next highest states are Nevada at 21.3 percent, Arizona at 16.3 percent and Michigan at 15.3 percent. California is still a problem by virtue of its sheer size, but on a percentage basis, and combining both levels of the problem, Mississippi and Indiana are now in marginally worse shape than is California.



Some of the delinquencies will get cured, but far from all of them. The farther the house is underwater, the less likely it is to get cured. Many more houses are going to end up in the hands of the banks, which will then dump them onto the market and further depress prices.

Housing is normally the locomotive that pulls the U.S. economy out of recessions. It is hard to see how that locomotive will work up a good head of steam with so many foreclosures blocking the tracks.

The first-time home buyer credit has helped to clear out some of the existing bank owned properties, but that program will end just after Thanksgiving. Unless the program is renewed, that source of buying is likely to dry up significantly. This could lead to another sharp down-leg for the housing market.

Shifting my metaphor, the economy’s vital signs have stabilized, but that is due to the powerful drugs that the "doctors" (Bernanke and Obama) have been giving it. Those drugs (printing money, super-low short-term interest rates and massive budget deficits) are known to have very serious long-term side effects -- ones that have been known to be fatal (Weimar style hyperinflation) if given in to big doses and for too long.

The doctors had no choice but to give them to the patient, since doing nothing would have also been fatal (we narrowly avoided a second Great Depression), but it is a huge question if the patient will be able to get up and about after he is taken off the meds.

Comments

[Suncatcher:]

I am very confused by the way the banks are behaving. I know someone that hasn't made a payment in 18 months on a house currently worth over 500K. The bank hasn't made a move. There are two houses within a block of me that are foreclosed on and the bank hasn't done a thing with them. Why aren't the banks behaving like a business that needs to move inventory?

Aug 20 07:36 PM

[markfl:]

An article from New Jersey last week helps explain at least part of the issue. "It sounded too good to be true: Statistics for the first six months of the year showed the [NJ] foreclosures were down despite a high unemployment rate.

Turns out, foreclosure notices were being filed so quickly, the courts could not keep up with the paperwork." www.nj.com/business/nj...


On Aug 20 07:36 PM Suncatcher wrote:

> I am very confused by the way the banks are behaving. I know someone
> that hasn't made a payment in 18 months on a house currently worth
> over 500K. The bank hasn't made a move. There are two houses within
> a block of me that are foreclosed on and the bank hasn't done a thing
> with them. Why aren't the banks behaving like a business that needs
> to move inventory?

Aug 20 08:05 PM

[whidbey:]

Why do you assume we have avoided a depression?

I suspect we have set ourselves up for something worse. That is, the present economy is not similar to the 1930s. We know that, and we know that homelessness could become the hallmark of this century. That plus debts we can not service: federal debts, personal debts, and the costs of just daily living could sky rocket when it becomes clear that we can not pay because we have too few jobs, and too few revenue dollars v. costs. This has the makings of a national debt wipe-out. The guy driving the bus does not even have a license, or road map. Hold on we are not home yet.

Aug 20 08:52 PM

[PalmGuy:]

To where would they move their inventory? It is simply not fungible.
I know several owners of severely underwater properties that are thinking seriously about walking away even though they have good credit and can afford to pay.
And while it might seem wise to revalue such loans to current market to keep a good, paying customer, the banks find it much easier kick them out and take an even greater loss.
Is this due to accounting?
In a boat with so many leaks I would want someone valuable bailing at every one of them. And we're all in that boat.

Aug 20 08:53 PM

[Dialectical...:]

I am certainly no expert, but I have read that there are financial reasons for banks to delay. As the property sits in foreclosure, it's value is still subjective. Once it is sold in a distressed sale the loss on the mortgage is fixed. Also, it costs money to bring the process to fruition. So processing a lot of foreclosures is costly in two ways -- the losses realized and the money to process the sale.

On Aug 20 07:36 PM Suncatcher wrote:

> I am very confused by the way the banks are behaving. I know someone
> that hasn't made a payment in 18 months on a house currently worth
> over 500K. The bank hasn't made a move. There are two houses within
> a block of me that are foreclosed on and the bank hasn't done a thing
> with them. Why aren't the banks behaving like a business that needs
> to move inventory?

Aug 20 09:26 PM

[The Economi...:]

The banks are simply holding them waiting for better economic times. Oh if they only dished out credit and the stimulus money, they might help their own cause.

Aug 20 10:44 PM

[ebworthen:]

I can tell you that after 22 years of never missing a mortgage payment, if I lose my job, I will miss mortgage payments.

I will put the place up for sale as I have close to 50% equity, but I will simply add to the glut. By that time I may not be ABLE to sell my house if we revisit and go below the March lows this Fall/Winter (which I believe we will).

They (Government, powers that be) have approached this from completely the opposite angle they should have.

Let the flippin banks fail; Lehman, Bear Stearns, Citibank, AIG.

"Oh we can't possibly do that!?!"

Really? The alternative reality we are entering is that households fail, the middle class fails, and instead of failing banks we will have the unraveling of our social fabric.

Ooops.

Aug 20 10:47 PM

[gabe borens...:]

So Americans are defaulting on the Prime Mortgages as well?
What does it mean for recovery? not really much.
Since unemployment is a lagging indicator,it is therefore quite clear that the initial stages of the economic recovery will have a marginal impact on the employment .
Until employment picture improves(shortly) ,mortgage issues will exist.
As the expansion gathers momentum the unemployment will decline geometrically .
We will see a noticeable improvement in the figures by the mid of the fourth qtr.
In the meantime ,carefully injected measured liquidity will continue to enhance economic momentum.
The fourth qtr growth will come in at 4.5%(GDP).
Inflation is not an issue as thisexpansion willnot be driven by demand pull forces.
Let's sit back and enjoy the stock market rally.
Periodically ,we will have to deal with market paranoia(volatility) driven by the gurus of the past who had failed to predict this rally.
Mortgage delinquencies ? they are about to decline

Aug 20 11:00 PM

[Maxe Paul:]

Because there is so much inventory at so low prices that it's cheaper to wait and HOPE for a recovery to dump them.

The only problem is HOPE is not a strategy.


On Aug 20 07:36 PM Suncatcher wrote:

> I am very confused by the way the banks are behaving. I know someone
> that hasn't made a payment in 18 months on a house currently worth
> over 500K. The bank hasn't made a move. There are two houses within
> a block of me that are foreclosed on and the bank hasn't done a thing
> with them. Why aren't the banks behaving like a business that needs
> to move inventory?

Aug 20 11:25 PM

[jstratt:]

I did hear one positive remark today.

Robert Shiller in arguing about bubbles stated that housing affordability is at the best rate in 40 years given prices and financing.

If true that would suggest to me that it is a very good time to buy a house and that we are bottoming or have bottomed.

Aug 20 11:58 PM

[RatWatcher:]

I think this is correct. It is simply the difference between a realized and unrealized loss. The TARP is buying time for values to recover. Unfortunately, the situation seems to be one in which values will remain low longer than banks can hold out. Watch out when the dam breaks.


On Aug 20 09:26 PM Dialectical Materialist wrote:

> I am certainly no expert, but I have read that there are financial
> reasons for banks to delay. As the property sits in foreclosure,
> it's value is still subjective. Once it is sold in a distressed
> sale the loss on the mortgage is fixed. Also, it costs money to
> bring the process to fruition. So processing a lot of foreclosures
> is costly in two ways -- the losses realized and the money to process
> the sale.
>
> On Aug 20 07:36 PM Suncatcher wrote:

Aug 21 12:06 AM

[AuGod!:]

Bottomed? I doubt it. But if the objective is more than to buy low and sell high, then there are "homes" for families to buy and in which to live and be happy. If that is still your American dream then go for it if you have money, stable employment and can ride out a further drop. Any perceived loss through tanking values may only be temporary and is, in any case, "unrealized" if you are not compelled to sell. To those who are in it purely for speculation expecting to flip a condo or home for a quick profit, I don't care what happens to you.

Aug 21 12:07 AM

[manya05:]

As pointed out above, a great article, but your last paragraph is inconsistent with the tone on the rest of the piece. You claim the current administration has averted a second great depression. Really? What makes you say that? is that the official line?

You point out there is a possible second leg down on the real estate market. The administration has ballooned the deficit and the debt to never-before-seen levels. They have allowed banks to declare fictitious values on their books. Unemployment is really high. How long can the government keep propping things up? what engine will pull the economy forward before the government has to give up its campaign of propping up? Do you see a sector ready to boom? Again, I think you are at least 3 years too early in declaring that we have averted Great Depression II.

Aug 21 02:51 AM

[MarkitWacha:]

In Dallas, where land is abundant, the prices are way below what it costs to build. Since real estate is dependent upon demand, and demand depends upon people, there is a possibility that accelerating citizenship applications could boost demand.

However, I predict that the GOP will take it in 2010, and they couldn't reform immigration the last time around. The US government continues to split up families in my part of the world.

The idiots in Washington are creating a whole lot of bad blood. Watch out.

Aug 21 02:51 AM

[johngonole:]

Two points to make from a person living in Florida. Houses are selling because of the short term 8000 first time buyer stimulus. Banks are in fact sitting on homes. Like the guy above I know a guy who technically allowed his construction loan to laspe without locking in a rate. The bank won't give him a mortgage because the value of the home has dropped. Yet they haven't moved to foreclose on him either. Another person I know was actually coached by his real estate agent into missing payments on purpose. He had lost his job and relocated. Renting of course. Instead of paying the difference (on the home now worth less) he was told to miss two or three payments so he could start the short sale process. I'm not surprised that Florida is in bad shape. Some counties are in worse shape than others. Population is actually leaving the state on a net basis which has never happened before. Builders are still building slowly. The math says that the malaise in Florida will continue.

I do believe that a second wave of foreclosures is in the works. I think the stock market quite frankly is being pumped. Ocassionaly we have a down day. On the days it drifts lower there is always a rally second half of day. Up days stay up but most of the days that start out down do not. I suspect the plunge protection team, govt, and Fed have figured out that this is the cheapest way to convince Americans that everything is going to be OK so please go back to your negative savings ways.

I read an article a few months ago here on seeking alpha positing that the unemployment rate would not be a lagging indicator this time. I think I agree. The housing crisis while not the whole economy is a huge part of the slow down. This part will not be fixed without stable employment.

My fear is that buy the time this is all over we will have even more people standing by their shovels for the government...I mean working for the govt.

Aug 21 03:30 AM

[Moon Kil Woong:]

Yes, our economy is addicted to huge debt and zirp rates. Our zombie banks are only alive because of it. The level of underwater homes are asounding as well. Although it is responsible to pay for what you buy, simply staying ethical and not walking away is simply becoming economically irrational and unentable for many, escpecially if you lose or are in fear of losing your job.

This will only get worse as interest rates rise. So I don't reccomend buying a house unless you can really afford top keep it long term anytime soon. Say when mortgage rates normalize at 6.5-7%.

As long term mortgage brokers tell only themselves, you are not investing if you buy a home when rates are low. You are just increasing your standard of living at the risk of losing money. You only make money as rates move from high interest to low interest. Thus a morgage gamble is essentially gaining the asset price increase windfall from falling rates, not because of land scarcity. It is not location location location. It is rates rates rates.

Aug 21 04:02 AM

[chap08:]

"Housing is normally the locomotive that pulls the U.S. economy out of recessions"

You can't have any evidence for saying that - because there isn't any. The evidence is that the rest of the economy drags housing out of the slump.

Aug 21 07:04 AM

[Andy1234:]

Has anyone pondered that this is the new economy.

We have been living in an inflated bubble.....possibly the economy will shrink and demand will not come back......70% of GDP being the consumer was not sustainable......and the new level will be a lot lower and a correction is immenant.

The free market is trying to destroy jobs in one side of the market....and I am sure reallocate jobs to another....or possibly not allocate any...but just destroy ones that should not exist. The government is choosing where and when to put money into this economy....which a free market is best at doing......once the money stops flowing from the government....whatever areas they were propping up will more than likely shrink/go away.

I have a feeling once the stimulous contract....and we see the market go down again.....more and more stimulous will be injected. I do fear that inflation will be very bad at some point....or this recession/depression be drawn out a very long time.

We need way less government, lower permenant taxes or no taxes in some areas....hell....do a flat sales tax and eliminate the entire IRS dept. I don't care what it is....government does not create wealth....physical products or services exported does....savings and investment does......government can only inflate and lower the standard of living through higher taxes. leaches.

Aug 21 08:43 AM

[t-bird:]

gabe borens.....Do not know what you have been drinking but I sure would like some!!! LOL! 4.5% 4th qtr. growth in GDP...That is one wager I would take in a skinny minute!!!

Aug 21 08:59 AM

[MichaelJ007:]

One point I'd like to make is that it is common to look at residential and commercial mortgages seperately and only symbioticly related. However, there is a more direct relationship as many housing units still remain on commercial mortgages and lines of credit (ie- condos, apartments, subdevelopments). When you take a step back and realize how oversupplied the housing inventory is you realize that this crisis is going to last for a long time. On the bright side, that place on the beach is gonna be dirt cheap for me in a few years.

Aug 21 09:29 AM

[Steve Owen:]

You may not be an expert, but you are certainly astute. Note that I am no expert on this either, but I have seen examples of it play out. Not only is book value a reason for not proceeding with the foreclosure, it is also, sometimes, a reason not to sell after foreclosure. At foreclosure, a bank gets the property appraised... it will stay on the books at that value for some time, until they sell, at which time they may realize additional loss. Another factor is that it is usually more profitable to the bank to go into foreclosure than it is to do a work-out... at least on paper. That is at least part of the reason why the government's plan to save troubled mortgagees is failing. I believe that if Schiller, NAR, and other prognosticators were completely honest about the shadow inventory the existing home sales stats would look much worse than they do.


On Aug 20 09:26 PM Dialectical Materialist wrote:

> I am certainly no expert, but I have read that there are financial
> reasons for banks to delay. As the property sits in foreclosure,
> it's value is still subjective. Once it is sold in a distressed
> sale the loss on the mortgage is fixed. Also, it costs money to
> bring the process to fruition. So processing a lot of foreclosures
> is costly in two ways -- the losses realized and the money to process
> the sale.
>
> On Aug 20 07:36 PM Suncatcher wrote:

Aug 21 09:31 AM

[Dusty:]

It is all in the Credit Suisse Mortgage Resets Charts. 'Subprime' is effectively over except for the crying and gnashing of teeth part.

The 'Alt-A' and 'Agency' and several other middle class and upper middle class kinds of adjustable real estate loans are only beginning to falter. 'Subprime' was almost a flash in the pan compared to what is just barely started in the Real Estate markets.

"Winter" this year should come early. If there is not a replay of 2008 this fall it is only because of the Federal programs that have pushed and stretched the financial environment like a chart drawn on the side of a rubber balloon. Nothing really changes, there is just a distortion in the lines. This will be a very long 'winter.'

This next phase of the Real Estate collapse will peak in February of 2012. By Christmas of 2013 most of us will be beginning to realize that it is under control but not 'over.' The most believable estimates I have seen say good stabilization by 2017 or maybe into 2018 and decent recovery so that there is a semblance of the new "Normal" by 2025.

That new "Normal" will encompass changes far beyond any ability to forecast or imagine because of the events about to happen in this Depression.

Aug 21 10:40 AM

[TeresaE:]

The prime defaults were already jumping way back in Q1 2008.

No one noticed.

Now, they are noticing, but ignoring reality.

Banks aren't foreclosing so that they can keep their books "stress test" good.

No foreclosure notice, no foreclosure reporting.

No modification, no loss to threaten their "booming" profits.

No kicking deadbeats into the cold, no bad press.

Simple really.

But, this game will catch up as those not paying their mortgages won't pay their taxes either.

Then the banks will be forced to either 1-pay the taxes and still let said deadbeat have free housing or 2-foreclose and pay before the state takes the property off their hands.

Hey, another thought. Wasn't it "spiking foreclosures" that sent us to the brink of the abyss last year? And if it was, why are MORE of them NOT bad news? Could we have been sold a bill of goods? Nah.

Final note. Last year it was reported that more mortgages are set to reset in '10/'11 than had reset up to that point.

Wonder how we will bail this mess out? Maybe health care will save us with free pills for all. bwaaahaaaahaaa.

Aug 21 11:09 AM

[Econ 101:]

ebworthen- EXACTLY! Those crooks should have been left to fail last fall by the other crooks in congress. Yes, we would have had a nasty depression. Yes, it woulod have been bad. But if the congress would remove their sticky fingers from the pie the rest of us might get some. This crisis is the result of congress (BOTH Dems & GOP) fixing the market for their friends so their friends kick back campoaign contributions (freddy and fannie among others).

Health care is the same. Regulations passed in the 1970s shifted the power to HMOs and big pharma at the expense of Drs. We need smaller government and smaller corporations.


On Aug 20 10:47 PM ebworthen wrote:

> Let the flippin banks fail; Lehman, Bear Stearns, Citibank, AIG.
>
> "Oh we can't possibly do that!?!"
>
> Really? The alternative reality we are entering is that households
> fail, the middle class fails, and instead of failing banks we will
> have the unraveling of our social fabric.

Aug 21 11:28 AM

[Econ 101:]

gabe borenstein-

if you really believe the economy will have 4.5% growth in the fourth qt then I have a deal for you. There is this bridge...

Seriously, the government and the SDS weathermen in charge of the numbers are gaming them. They arent true, it is just a game to distort reality. Havent you learned that "perception is reality"? And "a lie told often enough becomes truth?" These people admire Mao and his cultural revolution. They have wanted to be in charge for thirty years and have been planning the same for America.

On Aug 20 11:00 PM gabe borenstein wrote:

> So Americans are defaulting on the Prime Mortgages as well?
> What does it mean for recovery? not really much.
> Since unemployment is a lagging indicator,it is therefore quite clear
> that the initial stages of the economic recovery will have a marginal
> impact on the employment .
> Until employment picture improves(shortly) ,mortgage issues will
> exist.
> As the expansion gathers momentum the unemployment will decline geometrically
> .
> We will see a noticeable improvement in the figures by the mid of
> the fourth qtr.
> In the meantime ,carefully injected measured liquidity will continue
> to enhance economic momentum.
> The fourth qtr growth will come in at 4.5%(seekingalpha.com/symbo...).
>
> Inflation is not an issue as thisexpansion willnot be driven by demand
> pull forces.
> Let's sit back and enjoy the stock market rally.
> Periodically ,we will have to deal with market paranoia(volatility)
> driven by the gurus of the past who had failed to predict this rally.
>
> Mortgage delinquencies ? they are about to decline

Aug 21 11:37 AM

[Suncatcher:]

News Flash: A well placed official in my local homebuilders association says there is credible information from the Feds that they are on the verge of extending the first home tax credit and bumping up to 15K. Nothing formal yet. Maybe you first home buyers may want to wait a few and see if uncle sugar may not sweeten the deal. Should all of us "do the right thing" types stop our responsible behavour a see if we can't get a piece of the "free" action?

Aug 21 12:46 PM

[Old Rick:]

Dusty sez: "The 'Alt-A' and 'Agency' and several other middle class and upper middle class kinds of adjustable real estate loans are only beginning to falter. 'Subprime' was almost a flash in the pan compared to what is just barely started in the Real Estate markets. "
----------------------...
In addition to the home mortgage issues, Fitch made a statement (carried on SA headlines) 3 days ago that "Commercial Real Estate performance metrics were deteriorating at an unprecedented pace". Here is a link to the entire Fitch story (quick read): www.housingwire.com/20.../

Aug 21 12:49 PM

[Old Rick:]

suncatcher: "Should all of us "do the right thing" types stop our responsible behavour a see if we can't get a piece of the "free" action? "
----------------------...
And further $crew our kids and grandkids to the wall 10-20 years down the road. I sure HOPE we can CHANGE things in 2010!

Aug 21 12:52 PM

[greedcanbgood:]

Why would someone who is more than 25%, 35%, 40% or more underwater on their mortgage want to continue to pay on it? Better to take the voluntary reposession and subsequent hit to your credit score. Rent (home or apartment) for a few years and then get back in on a purchase.

Aug 21 12:53 PM

[User 471717:]

Imagine this.

I buy a brand new car today. I finance it with a 6 years loan. In 4 years, I go the the finance company and said "because the actual value of my car (4 years old) is half of what I paid for it, I want you to reduce my monthly payments by half"

Do you think that is right?
We are in this mess because people bought what they cant afford.
We cannot blame anyone else but ourselves of our own irresponsibility!!

Aug 21 01:51 PM

[patrickmx2:]

Prime loans will continue to fail as long as oil is over $50 and gas is over 1.80 in the US.

It has been too high for too long after it broke $50. Nothing moves without energy and sadly the economy is powered by it. Combined by the fact that you simply cannot count 10 items in your average home today that is under 5 years old and American made. Do the math people.

Aug 21 03:54 PM

[mbeckerp:]

Gabe,

Do you work for CNBC? What are you basing your conclusions on? Do you have information that the rest of don't or are you counting on the job fairies to restore the US economy to full employment. Also, would you like to comment on the commercial real estate market? How do you feel about rising defaults in CRE?


On Aug 20 11:00 PM gabe borenstein wrote:

> So Americans are defaulting on the Prime Mortgages as well?
> What does it mean for recovery? not really much.
> Since unemployment is a lagging indicator,it is therefore quite clear
> that the initial stages of the economic recovery will have a marginal
> impact on the employment .
> Until employment picture improves(shortly) ,mortgage issues will
> exist.
> As the expansion gathers momentum the unemployment will decline geometrically
> .
> We will see a noticeable improvement in the figures by the mid of
> the fourth qtr.
> In the meantime ,carefully injected measured liquidity will continue
> to enhance economic momentum.
> The fourth qtr growth will come in at 4.5%(seekingalpha.com/symbo...).
>
> Inflation is not an issue as thisexpansion willnot be driven by demand
> pull forces.
> Let's sit back and enjoy the stock market rally.
> Periodically ,we will have to deal with market paranoia(volatility)
> driven by the gurus of the past who had failed to predict this rally.
>
> Mortgage delinquencies ? they are about to decline

Aug 21 04:16 PM

[St Alphonso:]

If massive fraud ends OK this will be fine; however, it doesn't. Massive fraud ultimately ends in disaster. Massive fraud took place, is taking place this minute, and will take place tomorrow. We are defaulting on every kind of debt and this depression may still go as badly as the last. Since we didn't learn anything from S&L except how to cheat on a much grander scale, and how to corrupt the whole system so not only no one goes to jails, Capone is rewarded with a golden parachute. Never been a better time for white collar crime.


On Aug 20 11:00 PM gabe borenstein wrote:

> So Americans are defaulting on the Prime Mortgages as well?
> What does it mean for recovery? not really much.
> Since unemployment is a lagging indicator,it is therefore quite clear
> that the initial stages of the economic recovery will have a marginal
> impact on the employment .
> Until employment picture improves(shortly) ,mortgage issues will
> exist.
> As the expansion gathers momentum the unemployment will decline geometrically
> .
> We will see a noticeable improvement in the figures by the mid of
> the fourth qtr.
> In the meantime ,carefully injected measured liquidity will continue
> to enhance economic momentum.
> The fourth qtr growth will come in at 4.5%(seekingalpha.com/symbo...).
>
> Inflation is not an issue as thisexpansion willnot be driven by demand
> pull forces.
> Let's sit back and enjoy the stock market rally.
> Periodically ,we will have to deal with market paranoia(volatility)
> driven by the gurus of the past who had failed to predict this rally.
>
> Mortgage delinquencies ? they are about to decline

Aug 21 05:21 PM

[balois:]

Gabe Borenstein – my favorite!

His clairvoyant prophetic words of wisdom Sep 22 2008 “...As the economy recovers, the financial issues will be resolved...”

But, when necessary, Gabe doesn't shy away from being brutally honest either: Oct 02 2008 “...Article after article on this platform spews economic garbage full of criticism and no logical and constructive ideas...”

And just so that we dummies do not forget his logical and constructive ideas:

Aug 21, 2008
“...both agencies (note: FNM, FRE) appear to be financially sound and their reserves are more than sufficient to cover any realistic exposure. Let's see if there are any more fairy tales left...”

July 20, 2008
“...It is the irrational rumors and the panic disseminated by some market segment and pseudo economists at a well known financial news TV program that have created the debacle...”

July 25, 2008
“...While economic deceleration is unnerving ,we are not in a recession...”

July 28, 2008   
“...All of the question marks about the U.S Financial institutions or system are waste of time...”

June 23, 2008  
“...Over the next 18 months, the Euro will slide to .80$...” (note: hurry up - 12 months down and we are at 1.45$)

June 20, 2008
“...the financial institutions...had written off most of the potentially risky exposure...”

May 07 2008
“...Perceived risks of today are not reality in the period ahead...”.

April 25, 2008
“...The housing market will recover by the third quarter of this year...all derivatives...will stabilize and stage a major rally...All the unrealized losses will turn into mega realized profits..”

April 09, 2008
“...the FED'S actions ,especially the "rescue" of Bear Sterns...had convinced me that the worse is over...”

March 30, 2008
“...all of the bond insurers can finally sit back and relax ...The FED ...is guaranteeing every institutional component of our system...”

Amen

Aug 21 05:55 PM

[Igoveryfast:]

I love sarcasm as a medium of humor. Yours is perfect because it is backed up by facts to support your position. I think Borenstein is simply an ignorant shill, just like Larry Kudlow, Dennis Kneale and most of the Fast Money Traders on CNBC (where is Jeff Macke when you need him). I sure hope your posting generates a response from Borenstein, but I'm sure he'll just pontificate from his sugar fountan and not address any of the points you raise with his own words. Thank you for taking the time and having the discipline to cull Borensteins words for the rest of us. Very enlightening.


On Aug 21 05:55 PM balois wrote:

> Gabe Borenstein – my favorite!
>
> His clairvoyant prophetic words of wisdom Sep 22 2008 “...As the
> economy recovers, the financial issues will be resolved...”
>
> But, when necessary, Gabe doesn't shy away from being brutally honest
> either: Oct 02 2008 “...Article after article on this platform spews
> economic garbage full of criticism and no logical and constructive
> ideas...”
>
> And just so that we dummies do not forget his logical and constructive
> ideas:
>
> Aug 21, 2008
> “...both agencies (note: FNM, FRE) appear to be financially sound
> and their reserves are more than sufficient to cover any realistic
> exposure. Let's see if there are any more fairy tales left...” <br/>
>
> July 20, 2008
> “...It is the irrational rumors and the panic disseminated by some
> market segment and pseudo economists at a well known financial news
> TV program that have created the debacle...”
>
> July 25, 2008
> “...While economic deceleration is unnerving ,we are not in a recession...”
>
>
> July 28, 2008 &nbsp;&nbsp;
> “...All of the question marks about the U.S Financial institutions
> or system are waste of time...”
>
> June 23, 2008 &nbsp;
> “...Over the next 18 months, the Euro will slide to .80$...” (note:
> hurry up - 12 months down and we are at 1.45$)
>
> June 20, 2008
> “...the financial institutions...had written off most of the potentially
> risky exposure...”
>
> May 07 2008
> “...Perceived risks of today are not reality in the period ahead...”.
>
>
> April 25, 2008
> “...The housing market will recover by the third quarter of this
> year...all derivatives...will stabilize and stage a major rally...All
> the unrealized losses will turn into mega realized profits..”
>
> April 09, 2008
> “...the FED'S actions ,especially the "rescue" of Bear Sterns...had
> convinced me that the worse is over...”
>
> March 30, 2008
> “...all of the bond insurers can finally sit back and relax ...The
> FED ...is guaranteeing every institutional component of our system...”
>
>
> Amen

Aug 21 08:02 PM

[geewow:]

Banks don't act swiftly on mortgagees that stop paying because once the bank takes possession, that foreclosed or short selling home is a liability and sits on their books as a foreclosed home. The banks don't want that showing. They wait as long as they can.

Beranke's latest crow that the economy is improving is so weak I cannot believe that the stock market rallied on such crap. There is no proof!

Americans are saving hundreds of billions of their incomes. When Americans save, they spend less. By spending less, commercial real estate begins to collapse. When that occurs more people lose their jobs and homes go into foreclosure.

We should have Bernanke say next that summer will last 3 more months. The market will rally again.

eye-on-washington.blog...

Aug 21 08:25 PM

[BPYHO:]

IMO the banks are sitting on many houses b/c if they put all the forclosures on the market then it would drive down prices even further and encourage more owners to walk away from their properties since 80% of them would be underwater. Also, it would be harder to justify this rally and talk of green shoots if all Americans could see just how dire the situation is. By staggering their forclosures they are preventing even more saturation of the housing market...

On Aug 20 07:36 PM Suncatcher wrote:

> I am very confused by the way the banks are behaving. I know someone
> that hasn't made a payment in 18 months on a house currently worth
> over 500K. The bank hasn't made a move. There are two houses within
> a block of me that are foreclosed on and the bank hasn't done a thing
> with them. Why aren't the banks behaving like a business that needs
> to move inventory?

Aug 21 08:51 PM

[Dirk:]

Chap08, since I cant post a graph here, go to research.stlouisfed.or... and look at the relationship between housing starts and the end of recessions. One glance and you will see you dont know what you are talking about. Housing has historically lead us into and out of recesssions


On Aug 21 07:04 AM chap08 wrote:

> "Housing is normally the locomotive that pulls the U.S. economy out
> of recessions"
>
> You can't have any evidence for saying that - because there isn't
> any. The evidence is that the rest of the economy drags housing out
> of the slump.

Aug 21 09:19 PM

[Suncatcher:]

Balois, Thanks for shining a bright light on that track record. It took me 6 years to hold my head up after getting duped by the Y2K hysteria. Keep keeping 'em honest.


On Aug 21 05:55 PM balois wrote:

> Gabe Borenstein – my favorite!
>
> His clairvoyant prophetic words of wisdom Sep 22 2008 “...As the
> economy recovers, the financial issues will be resolved...”
>
> But, when necessary, Gabe doesn't shy away from being brutally honest
> either: Oct 02 2008 “...Article after article on this platform spews
> economic garbage full of criticism and no logical and constructive
> ideas...”
>
> And just so that we dummies do not forget his logical and constructive
> ideas:
>
> Aug 21, 2008
> “...both agencies (note: FNM, FRE) appear to be financially sound
> and their reserves are more than sufficient to cover any realistic
> exposure. Let's see if there are any more fairy tales left...” <br/>
>
> July 20, 2008
> “...It is the irrational rumors and the panic disseminated by some
> market segment and pseudo economists at a well known financial news
> TV program that have created the debacle...”
>
> July 25, 2008
> “...While economic deceleration is unnerving ,we are not in a recession...”
>
>
> July 28, 2008 &nbsp;&nbsp;
> “...All of the question marks about the U.S Financial institutions
> or system are waste of time...”
>
> June 23, 2008 &nbsp;
> “...Over the next 18 months, the Euro will slide to .80$...” (note:
> hurry up - 12 months down and we are at 1.45$)
>
> June 20, 2008
> “...the financial institutions...had written off most of the potentially
> risky exposure...”
>
> May 07 2008
> “...Perceived risks of today are not reality in the period ahead...”.
>
>
> April 25, 2008
> “...The housing market will recover by the third quarter of this
> year...all derivatives...will stabilize and stage a major rally...All
> the unrealized losses will turn into mega realized profits..”
>
> April 09, 2008
> “...the FED'S actions ,especially the "rescue" of Bear Sterns...had
> convinced me that the worse is over...”
>
> March 30, 2008
> “...all of the bond insurers can finally sit back and relax ...The
> FED ...is guaranteeing every institutional component of our system...”
>
>
> Amen

Aug 21 10:13 PM

[Obewan:]

By not seloing a distressed asset this is just another version of mark to fantasy accounting


On Aug 20 09:26 PM Dialectical Materialist wrote:

> I am certainly no expert, but I have read that there are financial
> reasons for banks to delay. As the property sits in foreclosure,
> it's value is still subjective. Once it is sold in a distressed sale
> the loss on the mortgage is fixed. Also, it costs money to bring
> the process to fruition. So processing a lot of foreclosures is costly
> in two ways -- the losses realized and the money to process the sale.
>
>
> On Aug 20 07:36 PM Suncatcher wrote:

Aug 24 10:04 PM