Fannie Mae and Freddie Mac Serious Delinquency Rates decline in August

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 4.03% in August. This is down from 4.08% in July, and down from 4.75% in August of 2010. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate declined to 3.49% in August from 3.51% in July. This is down from 3.83% in August 2010. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are loans that are "three monthly payments or more past due or in foreclosure".

Fannie Freddie Seriously Delinquent RateClick on graph for larger image in graph gallery.

Some of the rapid increase in 2009 was probably because of foreclosure moratoriums, and also because loans in trial mods were considered delinquent until the modifications were made permanent.

The serious delinquency rate has been falling as Fannie and Freddie work through the backlog of delinquent loans. The normal serious delinquency rate is under 1%, and at this pace of decline, the delinquency rate will be back to "normal" in four or five years!


Boiler Room

No, I’m not referring to that most excellent movie with Giovanni Ribisi, which along with ‘Wall Street’ (the first one – the second sucked) is a must-see for any aspiring trader – especially if you’re thinking of joining one of the big name firms.

Rather I am referring to that great smoldering city in the South also known as Houston, Texas. And that’s exactly where I’m heading this Sunday – scheduled to return on Tuesday the 4th.

And let me proactively dispel any rumors that I am not going to there to meet Brittany Booker, a.k.a. Miss Houston 2012. There is NO truth to those allegations whatsoever! Glad we cleared that up, right….

While I’m gone Scott, Volar, and Fearless are running the show, thus I leave you in most capable hands. However I cannot guarantee grammatical accuracy and proper punctuation as at least two of them are on the official black list of Oxford University Press. No, Volar I’m referring to those other two…. Scott, Fearless – I’m talking about Volar of course….

Subscribers – I will periodically check my messages but will be extremely busy over there (no, not with Ms. Booker). So if you have any questions, issues, or problems then please contact me before Saturday night and I’ll sort you out. During the two days I’m gone I will sporadically check in to make sure the three musketeers are holding the fort ;-)

Cheers,


Weekend Reflection Points

The lead article in the current AER is available here (gated, apparently, though the link isn't working; h/t Tom Bozzo [on FB] and Brad DeLong; I was using the paper copy). The most interesting part so far: the authors only considered the documented costs of air pollution—not land, not water—in deriving the (embarrassingly negative) ROI figures for coal and oil.

As Cousin Lucia and Tom Zeller, Jr., note today, the cost of water pollution makes oil power plants an even worse option.

In such a context, Europe in general and Germany (the top maker of solar panels until China recently passed them) in particular rubs in our faces that they're winning on the alternative-energy sources front (h/t Barry Ritholtz):

The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.

Rather than an anomaly, the event marked the 31st hour this year when power companies lost money on their electricity in the intraday market because of a torrent of supply from wind and solar parks. The phenomenon was unheard of five years ago.


Meanwhile, back in the U.S., it is no secret that Brad and Robert Waldmann are on one (affirmative) side of the TARP-was-a-success argument, and I'm on the other.* But even the Success crowd may pause to wonder if the short-term "profit" was a good long-term strategy:
Some large U.S. banks would have stronger capital bases to better deal with today's market stresses had regulators not relaxed bailout repayment criteria in late 2009, a new government audit showed on Friday.

Bank of America (BAC.N) Citigroup (C.N), Wells Fargo (WFC.N) and PNC Financial (PNC.N) were allowed exit the Troubled Asset Relief Program without raising as much equity capital as initially prescribed by the Federal Reserve, the TARP Special Inspector General said in the report.

Following bank stress tests earlier in 2009, the Fed gave several banks guidance that they must raise $1 in common equity for every $2 in TARP bailout funds repaid -- a formula meant to enable them to withstand future stresses.

But this standard -- which was never previously made public -- was quickly relaxed, allowing Bank of America, Citi and Wells Fargo to repay taxpayers nearly simultaneously in December 2009,** raising a combined $49.1 billion in equity capital.

Enforcement of the $1 in equity for every $2 repaid guidance would have required $57.5 billion in equity capital to be raised by the three institutions. PNC was later allowed to exit TARP under similar relaxed guidance. [emphasis mine]


The most recent SIGTARP report (28 July 2011), uses the word "Bailout" only once in its 304 pages—and that's in the title of testimony by Sheila Bair, "“Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation on The Changing Role of the FDIC before the Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs; Committee on Oversight and Government Reform, U.S. House Of Representatives.”

Noted for the record: Patch uses the same article (with minor customization) in multiple locales, highlighting it as a "local" piece. I defer to Felix as to whether this is in keeping with the rest of their "business model."

As Dan Becker can tell you, the small business "ownership society" is not for the faint of heart. Nor, as anyone who thinks about it for more than three seconds can tell you, is it a primary driver of employment growth. Yet when the most visible and successful Management Consultancy in the United States thinks about growth, its two primary points are "take monies from the government" and "expand small businesses." But give them credit for recognizing a point that is often obscured by H1-B trolls technology firm leaders such as Meg Whitman:
[I]t’s not just the young who can help fill the skills gap; older, experienced workers can play a part, too. In the US aerospace sector, 60 percent of the workforce is over 45. A practical response would be for governments to remove barriers—particularly those related to the provision of health care and to benefits rules—that prevent older workers from staying in the workforce longer. Germany and the Netherlands raised the participation rate of the 55-to-64 age group by 21 and 24 percentage points, respectively, between 1990 and 2009. In the Netherlands, there were significant changes to pensions and welfare benefits to improve incentives to work longer, coupled with initiatives to change public perceptions, improve employability, and reduce discrimination against older workers. [emphasis mine]


It's nice to see McKinsey endorsing Medicare For All.

*As a general rule, the Econ-first analysts are affirmatives, the finance-grounded ones are negative. If you have to think about why that would be: one group makes its living finding $100 bills on the sidewalk that the other one swears cannot exist. As the Mark Thomas of the world would note, the issue of priors might need to be addressed.

**The reason December 2009 is important is that it meant that monies that otherwise would have to have been used to shore up capital were instead paid out as bonuses by the now-uncontrolled banks, or, in Reuterspeak, "keen to escape executive compensation restrictions associated with the bailout funds."

Succinct Summation of Week’s Events (9.30.11)

Positives:

1) Only a few more countries left to approve EFSF, moment of truth soon arriving for Greek bondholders past the debt exchange currently being done
2) Greece takes another step in getting next tranche with property tax hike
3) Chicago PMI surprises to upside likely led by auto sector
4) Final Sept UoM confidence rises almost 3 pts from depressed Aug level, one yr inflation expectations fall to lowest since Dec as gasoline prices drop to cheapest since Mar
5) Aug Durable Goods better than feared, core cap ex component up 1.1%
6) Initial Claims fall below 400k BUT seasonal adjustment issues make it faulty
7) Aug Pending Home Sales fall 1.2% but a touch less than estimated
8) Refi apps rise 11.2% to most since Nov
9) China HSBC final mfr’g index at 49.9, a bit better than preliminary reading of 49.4 and flat with Aug

Negatives:

1) Germans will fight tooth and nail a further leveraging of the EFSF
2) Greece hikes property taxes, step closer to economic ruin and bankruptcy
3) Euro zone Economic Confidence falls to lowest since Dec ’09
4) German IFO at lowest since Jan but slightly better than expected, Aug Retail Sales down 2.9% m/o/m
5) Shanghai index falls to lowest since July ’10
6) US New Home Sales fall to lowest since Feb
7) Within confidence data, those that said jobs were Hard to Get rose to most since 1983
8) REAL Income growth down .3% and REAL Spending flat in Aug
9) IR earnings guidance a canary in the old earnings mine?


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Buying an individual stock

For the first time in a long time, I bought an individual stock in a global opportunistic portfolio focused on ETF's - but it's not for lack of discipline. The portfolio we discuss in this newsletter is an opportunistic portfolio, and sometimes the opportunities are in individual names.Viewing the remainder of this article requires a Subscription

Pulling The Trigger

I got a Friday afternoon setup in the spoos for everyone – the setup is too juicy.

I just can’t help myself – although the odds favor the other direction right now there is MINIMAL risk in taking this trade with a stop just a few ticks away:

Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed (non-recurring) or Zero Data Feed (recurring) or ES Gold (non-recurring) or ES Gold (recurring) or geronimo/ES (recurring) to view this content.

Again, this is a low probability but high return setup. If a miracle happens and we bounce here then it’ll ensue a short squeeze. Suffice to say that I will be out of this trade one way or the other by 4:14pm EDT.

Alright folks ZERO EMOTION here, okay? Either we get stopped out by a few ticks (highest probability scenario) or we make a bundle. So put that trade in, set your stop and then just forget about it until the session closes.

Cheers,

Mole


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