Freddie Mac Annualized Defaults Hit Record High At 7.3%, Even As Lending Increases Once Again
With the US government now having taken over the functions of such pristine subprime lenders as New Century, with the provision that it not only is not checking borrowers' credit scores, income potential, or other "facts" that the mortgage lenders at least pretended to care about, but also giving away massive incentives to promote housing bubble V2, it was only a matter of time before the taxpayer's balance sheet would start looking like an Angelo Mozilo wet dream. Today, Freddie Mac released its September Monthly Volume Summary and, as expected, it is beginning to look just like the subprime debacle is among us, only this time all of America is on the hook thanks to a brilliant Fed and the even more brilliant geniuses in D.C.
In September, Freddie Mac's loan defaults set an annualized record, after hitting a stunning 7.3%. Even worse, the rate of decline among single-family loans increased substantially month over month, from 3.13% in August to 3.33% in September, (and 1.22% in the prior year, just after the GSE's ended up being nationalized: a 270% increase YoY). The rate of defaults has now climbed for 28 straight months.
Scariest is that even as the Fed itself is now a key mortgage lender thanks to $1.45 trillion in QE, Freddie's holdings actually expanded by $4.8 billion to $784.2 billion in September, after four months of declines.
Without the bankrupt GSEs and the increasingly more bankrupt Federal Reserve (which, yes, does have a few Heidelbergs stashed away in the basement so it can delay the day of reckoning for a few years), there would be absolutely no interest for anything even closely related to housing. So this is what a housing recovery is supposed to look like...
(4 votes)
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on Fri, 10/23/2009 - 09:59
#108170
Dunno if people saw this the other day.
http://www.businessinsider.com/20-year-old-buys-home-with-183000-fha-loa...
No wonder the stock market is coming back big time.Bubbles everywhere until the currency breaks and the US government goes bust.
on Fri, 10/23/2009 - 10:35
#108228
Amazing!!!! must read article. The lender and real estate agent should have their butts kicked. Oh never mind, it's a FHA loan, who cares if the buyer can actually pay!
on Fri, 10/23/2009 - 10:58
#108256
Agree, must read, thanks for posting.
on Fri, 10/23/2009 - 10:04
#108174
Relax dude, existing home sales (here insert appropriate fanfare, canned audience applause and shouts of approval, etc.) "surged to their highest level in over two years in September" (quoting the Omabunists, I mean Reuters).
So it's all good. All is well. We're on the mend.
Take another deep drag from the Hopium Hookah and you'll see it clearly.
on Fri, 10/23/2009 - 10:10
#108178
love those seasonal adjustments........http://www.businessinsider.com/wait-actually-existing-home-sales-really-sucked-2009-10The tax credit effectively extended the purchase season which is why sales were even this strong. But when you consider the hundreds of billions spent to prop up the housing market, which only resulted in 34k additional sales over last September (one of the worst years on record for housing) and fewer sales YoY in CA, sales were really not that great. When organic sales go away suddenly for the season, which will happen in the near-term whether the tax credit is extended or not, it sets sales and prices up for the largest swings lower we have seen since all this began two years ago.
on Fri, 10/23/2009 - 10:19
#108194
What a bummer, dudette. You're harshing my Hopium mellow.
Now I have to go watch CNBS to get another fix, maaaaaaaaaaaaaan.
on Fri, 10/23/2009 - 10:20
#108196
this propping up of the housing market is comical... if the same level of credit is not available---and it isn't---how the fuck do they expect to prop it... it's that simple, Timmay
on Fri, 10/23/2009 - 10:27
#108209
andy, you are applying rational thought to irrational actions.
i am curious about how this all plays out...... permutations and combinations of the eventual endgame.
on Fri, 10/23/2009 - 10:32
#108220
type zhlosr here and hit connect
on Fri, 10/23/2009 - 10:41
#108235
anyway, I thought it might be fun for you to see it... maybe not at work
on Fri, 10/23/2009 - 12:57
#108426
thx
on Fri, 10/23/2009 - 13:16
#108448
type lizzy36 not zhlosr (that was Marla giving shit to impersonators)
on Fri, 10/23/2009 - 10:55
#108251
fatwah on you dufresne for revealing the location of the secret layer
on Fri, 10/23/2009 - 10:59
#108259
that's how I got it from Miles!
on Fri, 10/23/2009 - 10:27
#108211
There are 3.63MM existing homes available for sale, a 7.8 month supply, according to today's release.
On the other hand, according to calculations by Laurie Goodman at Amherst Securities, there are 7.57MM defaulted first lien mortgages out there.
http://www.scribd.com/doc/20387039/Amherst-Mortgage-Insight-Report-Lauri...
LMAO!!! This is gonna end well.
on Fri, 10/23/2009 - 10:34
#108227
(Hopium buzz wearing off...)
Harumph! Wha'? Who? Oh, OK - time for the Friday weekend checklist...
Paycheck autodeposit? Check. (Whew!)
Bank cash withdrawl slip? Check.
Directions from bank to nearest outlet for low-markup bullion? Check.
All systems "GO". Have a great weekend!
on Fri, 10/23/2009 - 14:25
#108506
NO,there are 7+ mil in the pipeline that can be conservatively be expected to eventually default.
on Fri, 10/23/2009 - 14:53
#108540
A delinquency is a default. If you miss a payment on a loan, you have defaulted on the loan.
True, default does not necessarily equal foreclosure and subsequent liquidation, but at 10% unemployment and 30% peak to trough HPI declines, it is will over 90% of the time.
on Fri, 10/23/2009 - 10:14
#108188
This is the nth example of how the weight of all this poorly underwritten credit will eventually crush us all thanks to compounding. Bacteria reproduce exponentially in a closed jar and when the jar is half populated it's "only half full", lots of space, but in the next minute the jar is full and the environment supports no further reproduction. Oops! Who could have guessed?
on Fri, 10/23/2009 - 10:18
#108195
All this scary stuff will go away if I just get long Amazon.
on Fri, 10/23/2009 - 10:33
#108221
7.5M first lien mortgages are in default. Figure 200K per mortgage, 6% mortgage rate, 30 year am, equals $1200/mo, add in taxes and insurance which surely are not getting paid, plus upkeep which is being neglected, gets you to $1,400 a month, times 7.57M, equals 10.6B a month in after tax dollars that are being saved.
Buys a lot of Kindles.
on Fri, 10/23/2009 - 11:30
#108295
(sticking fingers in my ears) LALALALALALALA
I can't hear you.
on Fri, 10/23/2009 - 11:42
#108310
... and NetFlix.
on Fri, 10/23/2009 - 10:23
#108202
Look at the rate of change. Up 20bps after being up 18bps the month before, and 17bps the month before that. Talk about a juggernaught.
Maybe the third derivative is better?
And the "credit enhanced" (read mortgage insurance) portion. Wow.
though, according to one of the MIs, over 63% of those delinquencies will cure. LMAO!!!
"Our default to claim rates decreased from 46% at December 31, 2008 to 37% at June 30, 2009"
http://www.sec.gov/Archives/edgar/data/890926/000119312509170839/d10q.htm
on Fri, 10/23/2009 - 10:26
#108207
what are your thoughts on how the monthly P&I on the Fed owned mortgage portoflio are being deployed? Also, how is the decaying mortgage protfolio reconcile with the rising overall balance - ie where is the runoff going - is it being recycled back intot he mbs market to the extent the stuff performs
on Fri, 10/23/2009 - 10:30
#108219
Good question on the P&I. I guess they just kill the dollars? Don't know.
The portfolio is rising because they keep buying more.
http://www.newyorkfed.org/markets/mbs/
Only 18MM last week, and 16MM the week before, but of course they are going to slow down (only because issuance is slowing, as a % of issuance they haven't slowed at all).
on Fri, 10/23/2009 - 10:24
#108203
The ultimate game of hot potato. Or in this case, live grenade.
on Fri, 10/23/2009 - 10:34
#108225
I said this a long time ago(2005). FNM, FRE and FHA are for this country what the kolkhoz(es) were for USSR. A total disaster.
on Fri, 10/23/2009 - 10:37
#108231
Well, what would you expect them to do? If you're dependant on a ponzi-scheme and you lack real assets and capabilities, then you must keep the scheme going. If you're the ponzi scheme General Motors, you keep producing crappy cars nobody wants and pricing them aggressively enough to clear the lots. If you're the ponzi scheme Madoff, LLC, you find new investors. If you're the ponzi scheme USA, Inc., you reflate asset bubbles in an attempt to opiate the masses
on Fri, 10/23/2009 - 10:58
#108257
Keep squeezing that last remaining bit of juice outta the Ponzi lemon. We lost 2500 dow points in eight days last year (and that was WITH active PPT counteraction using their entire toolbox). It wasn't until we put foreclosure moratoriums, suspended honesty in accounting, monetized everything in sight, self purchased the long end of Treasuries, and backstopped to the tune of 2 years complete USA GDP that we got a nice little halt and 50% bounce.
Everyone with a thinking cap on knows that THIS IS IT. This is the big one. Instead of taking medicine so that our economy and place in the world might eventually recover, we chose the second course. Apply every palliative to eke out a few more years of life, after that nothing but Black Death.
There is NO WAY OUT, and since we've chosen this path there is no recovery.
War, Revolution, or complete isolation from global partners is the only outcome. Oh, and total immiseration of the citizenry.
on Sat, 10/24/2009 - 23:50
#109866
"Animals will be bred and slaughtered!!!"
on Fri, 10/23/2009 - 10:59
#108261
Don't worry! We have a money tree at the Fed...Countrywide didn't have one...those dummies...how come they never thought of that (is it because if they did it, it would be counterfitting)? You see, we can just print our way out of any mess without any consequences. It's totally legal for them...and there is nothing you little peons can do about it (hahahahahaha!).
It takes so F'ing long to build a great country and so quickly can a few greedy, selfish and/or stupid people to jack it all up.
Reset button.
on Fri, 10/23/2009 - 11:17
#108282
Recently I have been spending a lot of time on Reality Trac, I’ve hearing the underground media/ZH talk about the bank owned shadow inventory except I had no idea the magnitude of the shadow inventory. According to Reality Trac;
Detroit homes for sale by realtor/MLS 1827 of which 336 are bank own.
REO 8274, Trustee sale or NOD(Notice of Defaults) 2581
Las Vegas homes For sale by realtor/MLS 3731 of which 1094 are bank own, FSBO 532
REO 17019, Trustee Sale or NOD 13307
San Diego homes For sale by realtor/MLS 1583 of which 112 are REO, FSBO 315
REO 4006 Trustees sale or NOD 4655
The shadow inventory is a 3 to 5X multiple of total homes for sale in these above select cities. The trustee sale/home defaults are another 1.5 to 4X multiple. The banks under direction from the government are manipulating the supply side of housing keeping prices from completing falling. Eventually these house will come on the market, are they waiting for the dollar to collapse significantly more and inflation to be raging to prevent taking big losses. Why would builder even attempt to compete with this tidal wave of future home coming to market.
on Fri, 10/23/2009 - 11:30
#108294
this is a good read, breaks it down well.
http://www.scribd.com/doc/20387039/Amherst-Mortgage-Insight-Report-Lauri...
on Fri, 10/23/2009 - 11:18
#108283
how many days after the mid term elections will it take to announce the implosion of FHA:
A. one day
B. two days
C. when the dollar hits 47-49
on Fri, 10/23/2009 - 11:35
#108299
deadhead
Thanks for the reminder. I'd completely forgotten about the November elections in 2 weeks. Suddenly some outliers I'm watching are making a lot more sense to me.
I appreciate the idiot smack to my forehead. There's a tune bouncing around under my tin foil hat that goes something along the lines of "I can see clearer now, the rain is gone"
on Fri, 10/23/2009 - 12:48
#108404
Deadhead's referring to November 2010. I hope this doesn't get dragged out until then...
on Fri, 10/23/2009 - 14:00
#108491
I realize the official "mid-term" elections are next year but there are many off year elections in 2 weeks through out the country. They've been extremely low key to date and thus the reason I had forgotten about them.
Virginia, next door to the evil empire in DC, has one coming up with some key battles and it's always of interest to DC.
on Fri, 10/23/2009 - 11:40
#108307
Footnote 14 to the delinquency table is interesting.
"Delinquency rates presented in Table 6 exclude mortgage loans underlying Structured Transactions and PCs backed by Ginnie Mae Certificates"
"The delinquency rate for our single-family Structured Transactions was 8.50% at September 30, 2009."
"Structured Transactions securitized by: subordinated securities, including FHA/VA guarantees 22.28%; option ARM pass-through securities 15.64%; other pass-through securities 0.76%"
"The total single-family delinquency rate including our Structured Transactions was 3.43% at September 30, 2009"
on Fri, 10/23/2009 - 11:44
#108312
ROTFL...f--king brilliant Tyler!