Is Unemployment Rate Not Just A Lagging Indicator, This Time?
In prior recessions, garden-variety recessions that is, the headline unemployment rate was generally regarded as a lagging indicator, going higher after the damage to the economy had already been done, and like a rear-view mirror, telling us where we had been. But this recession hasn't been like other post-war recessions, and some say, this time, unemployment is also a leading indicator with potentially grim repercussions if ignored.
CNBC:
Housing's Newest Threat: More People Are Losing Their Jobs
I just received a troubling report from the FHFA, the overseer of Fannie Mae and Freddie Mac. It shows just how much job losses are exacerbating the housing crisis.
The report, which is a monthly event, gives the usual numbers on the Enterprises' homeowner assistance programs, but this time breaks out some new data to give us a better idea of why exactly so many loans are going into foreclosure.
FHFA reports that due to recent foreclosure "suspensions" that expired March 31 of this year, completed foreclosures and third party sales fell 77 percent in December from the prior three-month average and fell 79 percent in January.
No surprise there, and no surprise that at the same time, loans that were 60+ and 90+ days delinquent increased, overall by 47 percent. Now here's the bad part: Non-prime loan delinquencies increased by 23 percent. Prime loan delinquencies increased by 70 percent.
The prime loan delinquency increase is driven not by faulty loan products or falling home prices, but by job losses, plain and simple...
So whereas divorce and illness used to be the top reasons historically for foreclosure, now it's all about job losses and excessive debt. And neither of those are getting any better.
The subprime mortgage crisis is for the most part over. Most of the really bad subprime loans have already been lost. Now the second housing crisis is upon us. Too much debt, too little income...
Calculated Risk:
Capital One: Expect Charge-Off Rates Greater than 10%
Conference call notes (ht Brian):
Economic deterioration continued at a rapid pace during the first quarter driving increasing delinquency and charge off rates across most of our lending businesses. U.S. card charge off rate increased to 8.4% for the first quarter, above the 8.1% charge off rate expectation we articulated a quarter ago...
Credit Loss outlook
We expect further increases in U.S. card charge off rate through 2009 as the economy continues to weaken. It is likely that will our U.S. card charge off rate will increase at a faster pace than the broader economy as a result of the denominator effect and our implementation of OCC minimum payment requirements ... We expect monthly U.S. card charge off rates to cross 10% in the next couple of months.
Economic Outlook
I'll update our economic outlook. Unemployment and home prices have been and continue to be the economic variables with the greatest impact on our credit results. We now expect unemployment rate to increase to around 9.6% by the ends of 2009. Our prior assumption for home prices was for the Case Shiller 20 city index to fall by around 37% peak to trough. We now expect a modestly worse peak to trough decline of around 39% ...
CNN:
Unemployment: Big factor in home defaults
Report indicates unemployment is a major driver of missed mortgage payments,
and raises concerns that Presidential plan to modify loans may miss the mark.
Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Obama's plan to stem foreclosures by modifying loans.
Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.
Loan modifications are not necessarily a better deal for investors either, wrote Boston Fed economists Christopher Foote and Paul Willen, Atlanta Fed economist Kristopher Gerardi and Lorenz Goette, a professor at the University of Geneva...
CNBC:
Housing's Newest Threat: More People Are Losing Their Jobs
I just received a troubling report from the FHFA, the overseer of Fannie Mae and Freddie Mac. It shows just how much job losses are exacerbating the housing crisis.
The report, which is a monthly event, gives the usual numbers on the Enterprises' homeowner assistance programs, but this time breaks out some new data to give us a better idea of why exactly so many loans are going into foreclosure.
FHFA reports that due to recent foreclosure "suspensions" that expired March 31 of this year, completed foreclosures and third party sales fell 77 percent in December from the prior three-month average and fell 79 percent in January.
No surprise there, and no surprise that at the same time, loans that were 60+ and 90+ days delinquent increased, overall by 47 percent. Now here's the bad part: Non-prime loan delinquencies increased by 23 percent. Prime loan delinquencies increased by 70 percent.
The prime loan delinquency increase is driven not by faulty loan products or falling home prices, but by job losses, plain and simple...
So whereas divorce and illness used to be the top reasons historically for foreclosure, now it's all about job losses and excessive debt. And neither of those are getting any better.
The subprime mortgage crisis is for the most part over. Most of the really bad subprime loans have already been lost. Now the second housing crisis is upon us. Too much debt, too little income...
Calculated Risk:
Capital One: Expect Charge-Off Rates Greater than 10%
Conference call notes (ht Brian):
Economic deterioration continued at a rapid pace during the first quarter driving increasing delinquency and charge off rates across most of our lending businesses. U.S. card charge off rate increased to 8.4% for the first quarter, above the 8.1% charge off rate expectation we articulated a quarter ago...
Credit Loss outlook
We expect further increases in U.S. card charge off rate through 2009 as the economy continues to weaken. It is likely that will our U.S. card charge off rate will increase at a faster pace than the broader economy as a result of the denominator effect and our implementation of OCC minimum payment requirements ... We expect monthly U.S. card charge off rates to cross 10% in the next couple of months.
Economic Outlook
I'll update our economic outlook. Unemployment and home prices have been and continue to be the economic variables with the greatest impact on our credit results. We now expect unemployment rate to increase to around 9.6% by the ends of 2009. Our prior assumption for home prices was for the Case Shiller 20 city index to fall by around 37% peak to trough. We now expect a modestly worse peak to trough decline of around 39% ...
CNN:
Unemployment: Big factor in home defaults
Report indicates unemployment is a major driver of missed mortgage payments,
and raises concerns that Presidential plan to modify loans may miss the mark.
Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Obama's plan to stem foreclosures by modifying loans.
Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.
Loan modifications are not necessarily a better deal for investors either, wrote Boston Fed economists Christopher Foote and Paul Willen, Atlanta Fed economist Kristopher Gerardi and Lorenz Goette, a professor at the University of Geneva...