HAMP a failure, defaults on the rise
According to a federal report released Friday, only 36,695 homeowners received long-term mortgage modifications in July under the Obama administration's Home Affordable Modification Program, known as HAMP. This brings the total to 434,717 borrowers who have successfully made it out of the trial phase. A month ago, 51,205 delinquent borrowers were given long-term assistance, but the number of people falling out of the program is on the rise. Some 12,912 homeowners had their permanent modifications canceled in July, 272 of whom paid off their loans. "While there has been some stabilization in the housing market, it remains clear that we have more work ahead," said Raphael Bostic, assistant housing secretary. "We know that we must continue to provide support to underwater borrowers, unemployed homeowners, and to the nation's hardest hit neighborhoods." Foreclosure prevention programs have taken on renewed importance with the housing market on shaky ground again. A spike in foreclosures, combined with weak housing sales, could send home prices plummeting again. In July, foreclosures were up 3.6% from the month before but down 9.7% from the year earlier period, according to RealtyTrac. The latest report comes two weeks after the government had to revise its June redefault figures sharply higher, after analysts called the initial numbers misleading. The revision showed that nearly 20% of homeowners were at least two months delinquent nine months after receiving a permanent modification. The initial figure showed that 7.7% had fallen behind. The government did not provide redefault statistics for July in the current report. Officials said the data would be released quarterly. Analysts at Barclay's Capital said last month said 60% of homeowners may ultimately redefault.
New rules for credit cards
New rules designed to protect credit card users from "unreasonable late payment and other penalty fees" came into force yesterday. According to the Federal Reserve, which approved the regulations, the rules block credit card companies from charging more than $25 for late payments except in extreme circumstances, prevent them from charging customers for not using their cards, and requires them to reconsider rate increases imposed since January 1, 2009. "The industry has moved swiftly to implement all of these changes and the final piece of the puzzle is now in place," said Kenneth Clayton of the American Bankers Association. Some banking groups have concerns. Financial Services Roundtable's senior lobbyist Scott Talbott warned that the Fed's cap on penalty fees will limit the industry's ability to offset the risk that credit cardholders don't pay their bills. "The restrictions in the rules the Fed issued will decrease the ability of the credit card industry to price for risk and the net effect will be a decrease in [credit] availability," Talbott said.
Olick - Government spin
"I don't envy the folks over at Treasury and HUD who, month after month, are forced to report lackluster statistics on the Administration's mortgage bailout and find something positive to say about them. Unfortunately they painted themselves into a corner by inventing a "Housing Scorecard" this summer, which only forces them to report more troubling numbers. Dr. Raphael Bostic, an assistant secretary at HUD, cited three reasons that we should feel good about housing. 1. "More stability in terms of prices than we've seen before the Administration initiatives were started" and "improving expectations offering some hope that we are moving to a more positive environment." 2. Historically low interest rates that "will be an important incentive and tool for people to access housing and home ownership in a very affordable way." 3. A lot of things the Administration has done outside of the mortgage bailout "have touched a significantly larger number of people than the number of people who have gone into foreclosure." Numbers 2 and 3 are fair enough, but I, and another reporter on the call who got to ask the question first, took issue with Number 1. Yes, home prices are not in freefall, as they were before the current administration took office, but I'm not sure where they're seeing "improving expectations." All I'm seeing are reports of double dips in home sales and prices, and increasing concern that the struggling job market will push more borrowers into foreclosure. When asked about that, Dr. Bostic replied only to the first part, about prices being better now than two or three years ago. He declined to answer the question: Where exactly are you seeing data that things are improving now? Administration officials seem to want to point to all the other programs and incentives out there that have and are stabilizing the housing market. It's not just HAMP (Home Affordable Modification Program), they argue, but the FHA, the Hope Now industry program, the home buyer tax credits, and the government-induced low interest rates that are saving housing, they claim. Still, the reason everyone focuses on HAMP and criticizes its results is that HAMP is the direct bailout that we the taxpayers are paying for…"
AIG repays $4 billion
American International Group's (AIG) aircraft leasing unit, ILFC, repaid nearly $4 billion of U.S. loans after raising new debt from investors. The repayment reduced the principal balance under a Federal Reserve Bank of New York loan to just over $15 billion, its lowest level since the March 2009 restructuring of government aid. A previous low of $17 billion was reached in December after AIG gave the Fed preferred interest in two special purpose vehicles created to hold its foreign life insurance business, the source said, declining to be named as the development is not yet public. International Lease Finance Corp raised $4.4 billion with new debt sales earlier in August. Chief Executive Robert Benmosche told Reuters in an interview the funds would be used to pay down the Fed's loans that AIG had taken to prop up the unit.
41% price drop in commercial real estate
National property prices on commercial real estate dropped 9.1% in June from last year, according to Moody's commercial property price index. The rate declined 0.9% over the first half of 2010, and while prices remain 4.2% above the current recession low of October, they are down 41.4% from the peak in October 2007. Moody's bases the index on the dollar volume of repeat sales transactions in commercial real estate. Analysts reported $2.1bn of these transactions in June, up from $1.5bn in May and $800m in April. Moody's managing director Nick Levidy said the increase in sales could mean prices have fallen far enough to meet new demand. "The increase in dollar volume in each of the past two months, taken together with this month's 43% increase in the number of repeat sale transactions, may be an early indication that buyers and sellers are starting to agree on market-clearing prices," Levidy said. "If this is in fact occurring, we would expect transaction volumes to rise steadily and price volatility to ebb in the months to come." Analytics firm Realpoint found delinquency rates on these loans that have been securitized, CMBS, reached 7.79% in July, more than two times the 3.15% reported a year ago. It's also more than 27 times the recorded low point, a 0.28% delinquency rate in June 2007. The delinquent unpaid balance for CMBS loans reached $60.8bn in July. While it did increase $387.9m from the previous month, it's nearly 90% below the previous six-monthly average of $3.14bn in increases. Commercial loans that were either 90-plus days delinquent, in foreclosure, or REO grew in the aggregate for the 31st consecutive month, reaching $49bn in July. That figure is nearly triple the year ago and up 9% from the previous month. Realpoint said the delinquency rate could reach between 9% and 10% by the end of the year with the potential to reach 11% under more heavily stressed scenarios
