Sunday, May 12, 2013

the MBA & LPS on mortgage delinquencies & foreclosures, March consumer credit, & a new CO2 record..

it's been a pretty slow week, with neither major monthly economic reports nor widespread kerfuffles in the we figured, all the budget proposals floated earlier this year have gone nowhere, and it now appears that the republicans wont negotiate on any compromise until they have the democrats and the president and backed up against the debt case you forgot, the artificial federal debt limit is set to kick back into effect a week from now, on May 19th, after a three-month hiatus...according to the inane deal negotiated with the tea party contingent in late January, the debt ceiling was suspended until that date so the anti-everything crowd would not be on record as having raised it; then, on May 19th, the new debt ceiling will suddenly become whatever amount of script the Treasury has outstanding at that time, effectively forcing the government immediately into accounting legerdemain to run the show while the clock runs out...estimates were that would be by mid August, but with revenues now higher than expected, it could be stretched till early September or even October, around the same time the stop gap continuing resolution to fund government functions expires, September 30th, at the end of the fiscal year...

despite the slow week, we did have a once in a blue moon coincidence of the 1st quarter Mortgage Delinquency Survey from the Mortgage Bankers Association’(MBA) and the March Mortgage Monitor from LPS (pdf) that both look at the condition of US home mortgages as of the same last day of March date, giving us an opportunity to compare them in the same week... the MBA reported that their seasonally adjusted delinquency rate for mortgage loans on one-to-four-unit residential properties increased to 7.25% of all loans outstanding at the end of the 1st quarter, up from 7.09% at the end of the year; these are mortgages that are at least one payment past due, but yet not in the foreclosure process... however, the percentage of loans in the foreclosure process, also called the foreclosure inventory rate, decreased to 3.55% from the 4th quarter's 3.74% rate; meanwhile, new foreclosure actions were initiated on 0.70% of mortgages in the 1st quarter, the same percentage as were started in the 4th quarter of 2012...a year ago, the seasonally adjusted delinquency rate was 7.40% while the foreclosure inventory rate was 4.39%...MBA also gives the unadjusted rates, which we'll need to compare to the LPS report; at the end of the first quarter, 6.75% of home mortgages were at least one payment overdue but not in foreclosure; that's down from a 4th quarter delinquency rate of 7.51%...note that the net seasonal adjustment was 0.92% and swung the quarter over quarter change from a decrease to an increase; what that's showing us is the long standing tendency of homeowners to skip mortgage payments during the holiday shopping season and catch up again by the end of March...MBA also gives a "serious delinquency rate" by adding those homeowners in foreclosure to those more than 90 days past due on their housepayments at 6.39% as of the end of March, which is down from 6.78% at year end and down from 7.44% a year earlier; combined with those who have missed at least one mortgage payment, total delinquent mortgages at the end of march amounted to 10.30% of all mortgages on an unadjusted basis, so despite the ongoing improvement in the overall delinquency rate, there were still more than one in ten homeowners who were behind on housepayments at the end of March...two graphs are included below; the calculated risk bar graph on the left is sourced from this MBA report; it shows the seasonally adjusted percentage of mortgages past due in each quarter since 2005 by the length of time overdue, with the percent in foreclosure in red, those more than 3 months behind but not in foreclosure are shown in yellow, those between 60 and 89 days overdue are shown in blue, and those just a month behind are shown in a seasonally adjusted rate of 10.8% delinquent, there's been obvious improvement from the late 2009 & early 2010 delinquency rates over 14%, but we're still far from the normal rates around 5.5% in the middle of the last decade....the graph on the right from the MBA shows the percentage of loans in the foreclosure process by state (click to enlarge); the judicial states, where the banks must prove the right to foreclose in court, are indicated by the dark navy coloring, whereas the non-judicial states, where banks can seize homes without proof, are indicated in red; the largest foreclosure inventory rates are seen here to be in Florida at 11.43%, New Jersey at 9.00%, New York at 6.18%, and Illinois, where 5.89% of all mortgages are in foreclosure; those are all judicial states; obviously, with the banks having scrambled the property records both electronically through MERS and through securitization, it's made judicial foreclosure next to impossible (without fabricating documents after the fact), so large court backlogs have built up in judicial states; Nevada, the only non-judicial state with a foreclosure backlog over 5%, passed a law in 2011 making it a felony if a mortgage servicer made fraudulent representations concerning a title, and imposed fines up to $5,000 for falsifying documents, which brought foreclosures in that state to a standstill...
MBA Delinquency by Period MBA In-foreclosure by state
the Mortgage Monitor for March (pdf) from LPS (Lender Processing Services) is a similar report, released monthly, which we've been tracking for a few years as a proxy for the national mortgage crisis...consistent with the last time we compared these reports, the LPS delinquency data seems to be a bit lower than the MBA's; the March summary statistics and LPS 12 month history on are page 19 of the figures that correspond to MBA's unadjusted percentages, LPS reported that 6.59% of mortgages were delinquent in March, down from 6.80% in February and 7.17% at year end, the typical seasonal high...of March delinquencies, 1,842,000 homeowners were more than 30 days but less than 90 days behind on their mortgages, while 1,466,000 mortgages were 90 or more days delinquent but not yet in foreclosure; in addition, LPS counted 1,689,000 homes still in the foreclosure process (ie, notices had been served but the homes had not yet been seized); these amounted to 3.37% of all mortgages, down from 3.38% last month and 3.44% in December; combining mortgages over 90 days past due with those in foreclosure yields a serious delinquency rate of 6.29%; the average time of serious delinquency before foreclosure starts is now up to 492 days nationally, while the average days delinquent for those already in foreclosure is 834 days (see page 21)...LPS reported 121,012 new foreclosure starts in March, down 8.2% from February, and a 10.1% increase in foreclosure sales, which is an industry euphemism for home seizures, although they note that the passage of the Homeowner Bill of Rights in California appears to have slowed down the foreclosure sale process in that state considerably...since most of the data in the 32 page mortgage monitor is graphically presented, we''ll present a few below with explanations...

March LPS loan counts

March LPS foreclosure inventory rates

the bar graph to the left above from page 4 of the Mortgage Monitor is roughly the LPS analogue of the first MBA graphic above; each bar represents a month of data and shows the number of mortgages 30 days delinquent in blue, the number 60 to 89 days overdue in red, those more than 90 days delinquent but not in foreclosure in green, and the number of mortgages in the foreclosure process during that month in violet; the gauge for those counts in thousands is on the left addition, there is a blue line showing the count of active mortgages each month with the count in thousands on the right axis, and text on the graph gives active mortgage counts and number not current for 3 dates; January 2005, when the chart starts, January 2010, when the number of non-current mortgages peaked at 7,700,000, and the current counts of 50,200,000 active mortgages with 5 million not current...the graph to the right above from page 7 of the pdf shows the track of the national foreclosure inventory rate in black (now 3.37%), and the contrast between the percentage in the foreclosure process in judicial states tracked in blue (now 5.65%) and the percentage of those in the process in non judicial states tracked in red (now 1.72% of active mortgages...and last, from page 20 of the Mortgage Monitor, below we have the LPS states table showing the percentage delinquent, the percentage in foreclosure, the total non-current, and the year over year change in that non-current total for each state...again we see Florida with the greatest fraction in foreclosure at 11.1%, followed by New Jersey at 8.6% and New York at 6.2%...note that Hawaii shows 6% in foreclosure here, compared to less than 4 1/4% on the MBA's chart ...also note high delinquency rates in Mississippi at 12.5%, Alabama at 9.3%, and Louisiana at 9.1%

March LPS states

one regular release of this past week that we've been following was the G19 on Consumer Credit for March from the a credit expansion only half of what was forecast, aggregate seasonally adjusted consumer credit increased by just $7.97 billion to $2,807.5 billion, which works out to an annual rate of 3.4%, the smallest increase in eight months; the February credit increase was also revised a bit lower, to $18.14 card, or revolving debt, decreased for the first time this year by $1.71 billion, at a 2.4% annual rate, following a $452.7 million increase in February, while non-revolving credit, which is borrowing for such as cars, yachts, and college tuition, (but not real estate) rose by $9.68 billion in March, or a 5.9% annual rate...on an unadjusted basis, overall credit outstanding actually fell from $2,766.3 billion in February to $2,762.4 billion in March; the revolving credit portion fell from $810.7 billion to $802.0 billion, while the non-revolving component rose from $1,955.5 billion to $1,960.4 billion...the adjacent bar graph from ZeroHedge shows the seasonally adjusted monthly change in revolving credit outstanding in blue, the change in non-revolving credit in red, with the black line tracking the total change in credit you all know by now, the reason we've been following this report has been to track the expansion of the government funded student debt do that, we scroll down to the 2nd table in the release, under the heading "Consumer Credit Outstanding", for the actual unadjusted data; under the subheading "Major types of credit, by holder" we see loans made by the Federal government directly to consumers, all of which are for the end of March, these amounted to $560.8 billion, up from $556.9 billion in February and $452.6 at the end of the 1st quarter last year, a 19.3% although the rate of increase has slowed, student debt owed to the Federal government alone is still increasing at over $100 billion a year; students are now paying 3.4% interest on those loans, but because last year's extension of the interest rate break was only for a year, interest rates on Federally subsidized student loans are set to rise to 6.8% on July 1st...Elizabeth Warren introduced her first piece of legislation as a Senator this week to not only roll that back, but to lower it to 0.75%, the "same deal on interest rates the banks get"

finally, we would be remiss if we didnt at least make note of the milestone marker that atmospheric carbon dioxide concentrations hit on Friday morning (Thursday Hawaii time, where official readings are taken)...CO2 measurements at the mountaintop Mauna Loa Astronomical Observatory (chosen for it's remoteness from local influence) averaged 400.03 parts per million on Thursday, the first time that level has been breached in known history...the estimates of a previous time when CO2 might have reached that level would be in the pre-historic Pliocene, when jungles covered northern Canada and the north pole averaged 60 degrees and the sea level was around 125 feet higher than today...we have two charts below which will serve to explain graphically how this change in the atmosphere came about...on the left, we have a graph of the average monthly atmospheric concentrations of CO2 as per the readings taken at Mauna Loa; you'll note it is a jagged line; that's because each summer green vegetation removes carbon dioxide from the atmosphere, lowering it’s concentration down to a november minimum, when carbon dioxide again begins to increase, to end up at a annual higher high each May, when the growing season and photosynthesis again turn the levels down..the only pause in the continuous upslope was caused by the 1991 eruption of mount pinatubo, which belched millions of tons of sulfur dioxide into the atmosphere, which resulted in an increase in cloud cover cooling and a corresponding increase in the solubility of carbon dioxide in sea water...on the right, we have a graph of atmospheric CO2 levels as measured from data from air bubbles trapped in ice taken from ice cores drilled into the Antarctic ice sheet, where what's graphed on the left appears can see that over most of the last 800 thousand years, atmospheric carbon dioxide has roughly averaged between 180 and 280 parts per million, only once briefly touching 300 parts per million about 325,000 years it's quite obvious that at 400 ppm we're already living in an entirely different atmosphere than we or any of the plants and animals that we know have ever experienced, a new atmosphere which will persist for thousands of years even if new emissions are controlled... and the oceans, where much of the carbon dioxide we've emitted has ended up as carbonic acid, are already 30% more acidic than preindustrial times, and now acidifying 10 times faster today than 55 million years ago when a mass extinction of marine species occurred...
mlo_full_record (Scripps Institution of Oceanography)

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)


  1. thorough mortgage workup rj...MUCHAS GRACIAS

  2. i dont think anyone else covers those two reports together...actually, it's hard to find coverage of the monthly LPS report by itself...

    but someone must use them, else they wouldnt go thru the effort of the large monthly pdf...

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