There were 65,000 completed foreclosures last month, down from 71,000 in January and slightly lower than the 66,000 finished in February of last year, CoreLogic Inc. said. January’s figures were revised up from an initially reported 69,000. A home has completed the foreclosure process when it has been seized by the lender or sold. The slow pace of foreclosures is one of the biggest challenges for the struggling housing market that has yet to recover from its collapse. In the 12 months through February, 862,000 foreclosures were finished. About 3.4 million foreclosures have been completed since the start of the financial crisis in September 2008, the report said. About 1.4 million homes, or 3.4% of all homes with a mortgage, were in foreclosure inventory as of February, down from 1.5 million, or 3.6% of homes, last year.
Though the pace of foreclosures slowed, the overall inventory fell because sales of properties seized by lenders rose last month, Mark Fleming, chief economist at CoreLogic, said in a statement. “With the spring buying season upon us, the inventory may decline further as the pace of distressed-asset sales rises along with the rest of the housing market,” said Fleming. The share of homeowners that are more than 90 days behind on their mortgage payments edged up to 7.3% from 7.2% in January but was down from 7.8% a year ago. The inventory of seized homes held by servicers grew faster in February than the pace of sales and the distressed clearing ratio rose to 0.73 from 0.66. A higher ratio shows a faster rate of home sales compared to completed foreclosures.
Natural gas prices dropping
The collapse in natural gas prices to decade lows amid record supplies have changed the dynamic of the energy industry. Natural gas is already displacing coal in power generation, driving coal’s share to the lowest level since the 1970s, and promises to drive it even lower. And there’s more talk now that it could replace some gasoline in transportation. But for now, natural gas is being overproduced across the country, as companies extract shale gas in 32 states and off shore. In just a few short years, the shale gas industry has turned the US from a potential importer of natural gas to a potential major exporter. This abundance of supply and an unusually warm winter combined to create a record amount of natural gas in storage for this time of year. The latest weekly inventory data is released today at 10:30 a.m. ET by the EIA. “We are right now at 2.38 trillion cubic feet. It’s a record for this time of year, and it’s 55% above the five-year average,” said John Kilduff of Again Capital. “April historically sees the start of natural gas injection, or the build in inventories, but this year it started in March,” Kilduff said. The injection period typically runs to Nov. 1, when gas starts to get drawn down for heating.
Housing close to bottom?
Yes, we’ve heard it before, but according to JPMorgan Chase CEO Jamie Dimon, the US housing market is very close to a bottom and there are already signs its improvement is giving a boost to the overall economy. “I believe we’re very close to the inflection point. People look at prices that are still coming down but all the other signs are flashing green,” Dimon said during a job fair in New York for hiring veterans. Housing is more affordable and “the shadow inventory everyone talks about is lower today than it was 12 months ago. It will be a lot lower 12 months from now,” he said. Distressed inventory “is actually coming down, not going up. Homes for sale are about half what they were four years ago. You could come up with a pretty bullish case. If the economy grows, housing gets better, quicker.” He said the US economy is “getting stronger all the time. It’s broad-based, companies are in great shape…Consumers are in great shape.”
So are the banks — JPMorgan was one of those that passed the Federal Reserve’s latest round of stress tests. The bank was so pleased by this it jumped the gun and announced it was raising its dividend and buying back shares before the official release of the test results. Dimon believes the threat of a double-dip recession is behind us. “No one can forecast the economy with certainty,” Dimon said, “but most of us in business [have] got growth plans that have nothing to do with the actual state of the economy. We’re going to always open new branches,” do more marketing, hire more people and work to bring in more customers.
Survey says we’re worse off than before
A CNBC survey found that just 28% of Americans say they are better off now than they were four years. Thirty-seven% said they were better off before President George H.W. Bush lost his re-election bid in 1992 to Bill Clinton. Fewer people deemed the economy in poor shape than was the case in the previous CNBC survey published in December. Only 36% of the 836 people in CNBC’s poll conducted between March 19 to 22 said the economy would be better in the next year. By comparison, an NBC/Wall Street Journal poll conducted from Feb. 29 through March 3 found that 40% believe the economy will improve during the next year, a three-point increase in that poll from January. Overall, respondents in the CNBC survey held a poor view of the economy — with worries about jobs, gasoline and housing prices, as well as the budget deficit, continuing to drag on confidence.
More than half (53%) in the All-America survey described the economy as poor, and 35% said fair. In addition, 52% of respondents say they are worse off than four years ago. “These are troublesome numbers for the president,” adds Campbell, noting that the better/worse combination is the poorest of six presidential election cycles dating to 1992. Only one in five suburban women voters felt better off, compared with 53% who felt worse off. The results were slightly better for independents (24% better, 57% worse), and blue-collar workers (28%/59%).
Olick – have refis run out?
“The average rate on the 30-year fixed mortgage is up about a half a percentage point since the middle of February, when they hit a record low. Mortgage refinances, however, dropped 24% in the same period of time. That’s a huge reaction to a small move from a record low. ‘Rates have been there (3.75%) for so long that most everybody who could benefit from lower rates has applied,’ says mortgage analyst Mark Hanson. ‘Now, when rates pop up over 4%, it chokes off refi activity, which is sad. 5% rates in the US are now prohibitively high.’ Again, a little perspective here. Mortgage rates, spurred by government intervention in the market, of course, are still incredibly low. The problem is that the refinance business has changed fundamentally. This from analyst Barry Eisbruck: ‘There used to be a product called cash out refinancing. Those quarterly refinancing numbers are amazing from 2003 vs. 2011. In 2003 you had 4.3T of total mortgage volume, 3T in cash out/refinancing and 1.3T in purchase origination. In 2011 it was around 1.3T of total mortgage volume, 75-80% of that was refinancing, so probably around 300-400B of purchase origination. These numbers are happening with record low rates and home prices at 1Q2003 levels.’
Here’s another strange point: In the fourth quarter of 2011, mortgages were cheaper than they’ve ever been, and yet refinancing was lower than the previous year, when rates were much higher. It all leads to the question: have refis run out? ‘The decline in the Refinance Index this week was driven largely by a 12.0% drop in government refinance activity, while conventional refinance applications fell by less, decreasing 3.4% from the previous week,’ according to today’s mortgage applications report from the Mortgage Bankers Association. That’s a problem, because government mortgages (largely FHA) are going to get even more expensive on April 1, when the FHA raises insurance premiums. There will still be some refis going through the government’s HARP2 program, which allows borrowers who have Fannie Mae and Freddie Mac loans to refinance, even if they owe more on their mortgages than their homes are currently worth (‘underwater’). Those borrowers have been priced out of the refi market until now, but the program has just kicked into gear, so that could provide a boost. For others, though, the return on a refi is getting ever smaller as rates go higher. Why do we care about refis? Because they put extra money in consumers’ pockets…money they generally spend, fueling the greater economy.”
GDP slow, joblessness slightly down
The US economy expanded a bit more slowly than expected in the fourth quarter while personal income grew at a much faster pace than previously thought, which should help underpin spending this quarter. At the same time, new US claims for unemployment benefits fell to a fresh four-year low last week, according to a government report that showed ongoing healing in the labor market. Gross domestic product increased at a 3.0% annual rate, the quickest pace since the second quarter of 2010, the Commerce Department said in its final estimate today, unrevised from last month’s estimate. That was below most economists’ expectations of 3.2%, though some had put the number at 3.0%, right on target for the final print. The economy grew at a 1.8% rate in the third quarter. However, personal income was $13.162 trillion at a seasonally adjusted annual rate, $3.3 billion more than previously reported. Disposable income was $10.6 billion more than previously thought, likely reflecting the strengthening labor market. Gross domestic income, which measures output from the income side, increased at a 4.4% rate — the fastest since the first quarter of 2010 — from a 2.6% rise in the third quarter. The department also said after-tax profits increased at a 1.1% rate, slowing from 2.7% the prior quarter. The slowdown in profits reflects the increase in wage costs as companies step up hiring.
WSJ – cutting loan balances
Fannie Mae and Freddie Mac aren’t granting reductions in homeowners’ loan balances, as has been widely noted of late. Nevertheless, some Americans who have gotten into trouble on their mortgages are actually seeing their loan balances cut, as a debate rages in Washington about whether doing so on a wider scale will be effective. More than 35,000 homeowners received principal reductions from their lender last year, the Office of the Comptroller of the Currency (OCC) said in a report yesterday. The total was up about 20% from about 29,000 in 2010. But it was still down 23% from nearly 46,000 in 2009, when banks started to write down loans acquired at a discount from failed institutions. Banks are mainly granting homeowners write-downs if they hold those loans on their balance sheet and tend to do so for loans that are significantly under water. They are not permitted to do so for loans that they have sold to Fannie Mae and Freddie Mac, the federally controlled mortgage investors. Principal reductions made up about 8.5% of all loan modifications completed in the fourth quarter, compared with 7.8% in the third quarter of last year and 2.7% in the fourth quarter of 2010, the regulator said.
The OCC’s quarterly “mortgage metrics” report covers 31.4 million loans worth $5.4 trillion, or 60% of US home loans. Of those mortgages, about 3.8 million, or 12% had missed at least one mortgage payment, and 1.3 million were in foreclosure as of the end of last year. Whether to encourage more loan reductions for troubled homeowners has been a matter of intense public interest. The Obama administration has stepped up pressure on the independent regulator for Fannie and Freddie to grant more reductions, offering new incentives to do so. The federal regulator, the Federal Housing Finance Agency, has been evaluating the incentives the administration has offered. But the agency’s acting director, Edward DeMarco, has resisted doing so, saying that it may not make economic sense for Fannie and Freddie and could encourage more borrowers to default.
In addition to Fannie and Freddie, other government agencies including the Federal Housing Administration and Veterans Administration do not grant principal write-downs. Fannie and Freddie do use a similar form of loan assistance, known as principal forbearance. That kind of program does not require lenders to forgive debt. Instead, lenders set aside a portion of the loan, not requiring any payments on it until the borrower sells the home or pays off the loan. Lenders’ use of this approach has grown significantly more than principal write-downs. They enacted nearly 103,000 principal forbearance plans enacted last year, up from about 94,000 in 2010 and 15,000 in 2009. In a letter sent to lawmakers in January, Mr. DeMarco indicated a preference for those forbearance plans, arguing that it “achieves marginally lower losses” for the taxpayer-backed company than principal forgiveness.
