Associated Press: Forclosures FALL 4% in February

Note the fact that foreclosures went down a tad in February versus January is buried at the end of the article.

Number of US homes facing foreclosure jumps nearly 60 percent in February

by Alex Veiga

(AP) Nearly 60 percent more U.S. homes faced foreclosure in February than in the same month last year, with Nevada, California and Florida showing the highest foreclosure rates, a research firm said Wednesday.

AP


A total of 223,651 homes across the nation received at least one notice from lenders last month related to overdue payments, up 59.8 percent from 139,922 a year earlier, according to Irvine, Calif.-based RealtyTrac.

Nearly half of the homes on the most recent list had slipped into default for the first time.

Nevada had the nation’s highest foreclosure rate, with one in every 165 households receiving at least one foreclosure-related notice. It had 6,167 properties facing foreclosure, a 68 percent increase from a year earlier and up 1 percent from January, RealtyTrac said.

Most of the troubled properties were located in California, Florida, Texas, Michigan and Ohio — states where home prices have plunged as the housing boom went bust.

The overall U.S. foreclosure rate last month was one filing for every 557 homes.

February’s total represents a 4 percent dip from January, but the decline was just a seasonal blip, said Rick Sharga, RealtyTrac’s vice president of marketing.

“We seem to be settling in at a new plateau in terms of monthly activity, but it’s a much higher plateau than we were at a year ago,” he said.

Re: fed’s action

>
>     On Wed, Mar 12, 2008 at 8:40 PM, Davidson, Paul wrote
>
>     Warren:
>
>     Don’t you think it was a strange open market operation —
>     where the Fed was moving Treasuries from their balance
>     sheets to private balance sheets (even temporarily) —
>     while accepting as collateral the highest grade mortgage
>     backed securities? Usually open market operations involve
>     Treasuries going one way and bank deposits (not
>     collateral) going the other way.
>
>

Hi Paul,

It was a ‘securities lending operation’ and was probably done that way to be in compliance with existing Fed regulations regarding interaction with the dealer community.

The Fed probably already had authority to lend securities to the primary dealers from their portfolio, and either get cash in return or other securities rated AAA or better (govt, agency, etc). So they offered to loan their tsy secs and accepted the dealer’s securities as collateral for the transaction.

Note that the dealers remain as beneficial owner of the securities pledged to the Fed in return for the tsy secs, and so the Fed is not assuming that risk. The dealers do get tsy secs which they can then in turn use as collateral for loans in the market place at much lower rates than loans vs the collateral they gave the Fed.

So the end result is the dealers get to borrow at the lower rates.

No ‘money’ is added to the system by the Fed. The Fed just sets rates as is always the case.

However, this is not to say they didn’t have other reasons for doing it this way. They continue to display a very limited knowledge of monetary operations and it’s not always clear why they do what they do.

Best to Louise!

Warren

2008-03-12 US Economic Releases

2008-03-12 MBAVPRCH Index

MBAVPRCH Index

Survey n/a
Actual 368.8
Prior 363.1
Revised n/a

May be coming back after a winter weather lull.


2008-03-12 MBAVPRCH Index

MBAVREFI Index

Survey n/a
Actual 2448.2
Prior 2569.0
Revised n/a

Not all that much refinancing activity.


2008-03-12 Bloomberg Global Confidence

Bloomberg Global Confidence (Mar)

Survey n/a
Actual 13.08
Prior 14.34
Revised n/a

The whole world is watching CNBC.

Monetary ops

The larger point is that ANY assets banks are allowed to hold already have to be on the regulators approved list, and banks in any case can fund all their (legal) assets with with govt insured deposits.

So why should another arm of government, the Fed, not always provide funding for the same govt approved assets that the govt already provides funding for? Why did it take them so long to come up with the TAF and now with the security lending facility?

And even now only with partial measures?

Clearly they are still in the dark on the workings of monetary ops and reserve accounting?

You may recall my proposal back in August (long before that, actually):

Drop the discount rate to the FF rate and open it up to any bank legal assets.

This should have always been the case.

The Fed’s ‘job’ is to administer interest rates, and that’s how you do it.

It’s about price, not quantity. Fed operations don’t materially change any of the monetary aggregates, as many who should have known all along have been ‘discovering.’

Yes, in good times the system did function reasonably well, but the risk was always there that in a crisis it would break down.

My other proposals remains equally valid:

Let government agencies fund via the Fed Financing Bank (at Treasury rates). They exist for public purpose, shareholders remain at risk for default losses, and lower interest rates would get passed through to the housing markets.

The Treasury should open it’s lending facility and lend Treasury securities in unlimited size to primary dealers.

Lastly, this is a good time to get the Treasury out of the capital markets and limit them to the issuance of 3 month bills. This would lower long-term rates, which is the investment part of the curve.

Bloomberg: European banks may write down $81 billion more

While problems in the US financial sector pose risks for the real economy, systemic risk to the payments system is not an issue. The US banking system has credible deposit insurance, so it is unlikely there would be any kind of run on the banks by depositors, and operationally the Fed can easily deal with it if it did happen.

In the UK, Northern Rock did have a run, but in the UK the BOE is there to provide funding as needed.

Not so in the eurozone where the ECB is prohibited from this type of action, and it’s up to the national governments to write the checks, and a major run on their banks has the potential to bring down the national governments.

European Banks May Write Down $81 Billion More, Merrill Says

by Poppy Trowbridge

(Bloomberg) Europe’s 11 largest banks may make additional writedowns of as much as $81 billion linked to U.S. subprime mortgages and have to cut dividends and raise money by issuing new equity, Merrill Lynch & Co. said.

“Banks are still playing catch-up on writedowns” following declines in the Markit ABX, CMBX and other indexes tied to subprime mortgages, Stuart Graham, a London-based analyst at Merrill, wrote in a note to clients today. “No bank has so far admitted to selling these assets off.”

In addition to writedowns from underperforming assets, lower profit means Europe’s banks will have to ease a cash shortage in the industry of as much as $104 billion, Graham wrote.

“We have assumed the European banks take significant further writedowns on” subprime mortgages, asset-backed securities, collateralized debt obligations and other derivatives, Graham said.

HSBC Holdings Plc, Europe’s biggest bank, HBOS Plc, Britain’s largest mortgage lender, Barclays Plc and Edinburgh-based Royal Bank of Scotland Group Plc are among banks that may make writedowns, Graham said. As many as eight banks may need to reduce their dividends by 20 percent and raise $84 billion in new equity.

The companies may also sell assets to raise money, he added.

–Editor: Ben Vickers, Adrian Cox

2008-03-11 US Economic Releases

2008-03-11 Trade Balance TABLE

Trade Balance TABLE

2008-03-11 Exports YoY

Exports YoY

2008-03-11 Trade Balance

Trade Balance (Jan)

Survey -$59.5B
Actual -$58.2B
Prior -$58.8B
Revised -$57.9B

Exports up over 16.6% year over year (supports GDP) – looks like a banana republic!

Trade balance lower than expected with crude up to much. Should keep working it’s way lower all year as non residents work to reduce their rate of accumulation of USD financial assets.


IBD/TIPP Economic Optimism (Mar)

Survey 40.5
Actual 42.5
Prior 44.5
Revised n/a

Down, but a little bit better than expected.


2008-03-11 ABC Consumer Confidence

ABC Consumer Confidence (Mar 9)

Survey n/a
Actual -30
Prior -34
Revised n/a

Could that be a bounce back?  Haven’t seen one in so long can’t remember….

Fed policy changes Cont’d

(A response to a comment about Fed policy changes)

On Tue, Mar 11, 2008 at 9:46 AM, Mike wrote:

the dollar may be the buy of a lifetime here….

Right, especially if the Fed cuts less than expected next week, or not at all.

Vicious reversal of commodities, USD, short term rates, but bad day or two for stocks.

This expanded lending facility may also function to increase the supply of short Treasuries for money funds and narrow the Treasury/LIBOR spread and shut up the rocket scientists who say low rates on short term Treasuries are the market screaming for rate cuts.

Fed policy changes

The Fed continues to show a deficiency in understanding monetary operations with the latest moves. While steps in the right direction, a better understanding of monetary operations would have meant funding ANY member bank asset at the FF rate and establishing an unlimited term lending facility for Treasury securities.

Meanwhile they seem to be trying to minimize further rate cuts and instead trying to target areas of illiquidity as per Friday and today’s announcements. They may have reached their inflation tolerance with crude at $109, the dollar continuously falling, and inflation expectations elevating.

Somewhat more troubling is the eurozone seemingly wanting dollar lines from the Fed. Not sure why, but borrowing external currency isn’t ordinarily a good sign.

Re: Italy BOT auction has to be cut back to clear

>
>     On Tue, Mar 11, 2008 at 7:52 AM, Dave Vealey wrote:
>
>     1 yr bill auction in Italy looks to have failed to get enough bids for
>     paper. Avg yield was 3.80% and high yield was 4.50%….
>
>     DV
>

Not good! This is where the real systemic risk lies, as previously discussed.