The tsunami of defaults and foreclosures continue to sweep across of the American real estate market. Those investors who jumped back into the market are about to get screwed.
The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.06 percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.44 percent in the fourth quarter of 2009 to 9.38 percent this quarter.
The percentage of loans on which foreclosure actions were started during the first quarter was 1.23 percent, up three basis points from last quarter but down 14 basis points from one year ago.
AP has cranked the 3 year default rate on government student loans and discovered a 21.1% default on for profit schools vs. a whopping 12% 3 year default rate from government student loans overall.
According to this Wikipedia article, 9% of all college students attend for profit schools. There is also an issue of transferring credits to a non-profit educational system, although some for profits have been accredited. A list of for profit schools is here.
World Markets are reacting to the news of Dubai World and it's pretty bad
The selling resumed on Friday in Asia, with the Hang Seng Index down 4.8% and the Nikkei 225 Average down 3.2%, their worst percentage fall since March. Markets were struggling to figure out what kind of exposure banks had to Dubai debt.
Shares of heavyweights Standard Chartered Bank and HSBC /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 62.07, 0.00, 0.00%) fell over 7% in Asian trading. The banks rank as the top two lenders respectively in the United Arab Emirates.
Gold dropped to 1140 from an all time high of 1192 earlier. The reasons are the need to raise cash and the dollar being safe haven and stopping the dollar shorts. Margin calls by the need to raise cash as well as the rising dollar making gold more expensive are also cited as reasons.
More will walk away, which will hamper the housing recovery, reinforce lenders' tight credit policies and drag on the economy's recovery, economists say.
"It's increasingly a more important factor driving the foreclosure crisis," says Mark Zandi, of Moody's Economy.com. "As we move forward, the job market will stabilize, and the big thing will be strategic defaults. People are going to determine it doesn't make financial sense to hold on to their homes. That's going to be a significant problem. Strategic defaults mean foreclosures could be high for a long time."
It's not just economists who are concerned about strategic defaults.
James West makes the case the USD collapse and, by extension, a bond default.
Critics argue that it just can't happen .... have they crunched the numbers?
Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.
Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.
Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009. The further out the maturities on notes, the more bearish the sentiment towards them. The only way to entice buyers is through the increase in yields.
Forbes is reporting that Russia, Romania and South Korea were downgraded in sovereign ratings, Romainia to junk.
Fitch lowered South Africa's ratings outlook as part of a wider review of 17 major investment-grade emerging economies that also resulted in Romania's sovereign ratings downgrade to 'junk' status and ratings cut for Bulgaria, Hungary and Kazakhstan.
The ratings agency, which also lowered its outlook for South Korea and Malaysia, said emerging Europe was the 'most vulnerable' to the deterioration in the global financial and economic environment due to the large current account deficits and high short-term debt levels of the region's countries
Bloomberg notes a sudden spike in insuring Russia's debt and the Ruble is devalued.
Credit-card charge-offs are "defying gravity" when compared with the problems in the mortgage market, according to Gregory Larkin, senior banking analyst for Innovest
CBS Market Watch has a story that Credit Card defaults, in other words people who cannot pay off their credit cards can exceed home mortgage defaults.
Recent comments