Home » Posts tagged 'mortgages'

Tag Archives: mortgages

It’s odd to see it occur while almost every market reports record home sales.

Canada’s real estate markets are booming, but lenders are preparing for mortgage losses. Bank of Canada (BoC) data shows the allowance for credit losses due to mortgages reached a record high in Q3 2020. The record was reached with the biggest surge in the annual rate of growth since the Great Recession.

Today’s data point is the allowance for credit losses, specifically for mortgages. You might have already guessed what this is – the amount banks set aside in the event of non-payment. When lenders expect a loan has become unrecoverable, they have to add more money to this pile. We’re going to be looking at the aggregate amount across all lenders.

The amount set aside for losses has climbed to a new record high, and is growing unusually fast. Allowances reached $3.9 billion in Q3 2020, up 22.01% from the previous quarter. This represents an increase of 54.11% when compared to the same quarter last year. It’s not just a record high for dollars, but also the highest rate of growth in over a decade.

Biggest Growth Loss Allowances Since Great Recession

Mortgage loss allowances at Canadian lenders grew at the fastest pace since the Great Recession. There’s been consistent growth since 2018, but the annual rate of growth has been tapering. That is, until the most recently reported quarters. Both Q2 and Q3 in 2020, showed a very large surge in growth. It was Q3’s annual growth that was the largest print since 2009 though.

…click on the above link to read the rest of the article…

It Starts: Mortgage Delinquencies Suddenly Soar at Record Pace

July 15, 2020

It Starts: Mortgage Delinquencies Suddenly Soar at Record Pace

And this is just for April, the very beginning of the Pandemic’s impact on housing.

OK, it’s actually worse. Mortgages that are in forbearance and have not missed a payment before going into forbearance don’t count as delinquent. They’re reported as “current.” And 8.2% of all mortgages in the US – or 4.1 million loans – are currently in forbearance, according to the Mortgage Bankers Association. But if they did not miss a payment before entering forbearance, they don’t count in the suddenly spiking delinquency data.

The onslaught of delinquencies came suddenly in April, according to CoreLogic, a property data and analytics company (owner of the Case-Shiller Home Price Index), which released its monthly Loan Performance Insights today. And it came after 27 months in a row of declining delinquency rates. These delinquency rates move in stages – and the early stages are now getting hit:

Transition from “Current” to 30-days past due: In April, the share of all mortgages that were past due, but less than 30 days, soared to 3.4% of all mortgages, the highest in the data going back to 1999. This was up from 0.7% in April last year. During the Housing Bust, this rate peaked in November 2008 at 2% (chart via CoreLogic):

From 30 to 59 days past due: The rate of these early delinquencies soared to 4.2% of all mortgages, the highest in the data going back to 1999. This was up from 1.7% in April last year.

From 60 to 89 days past due: As of April, this stage had not yet been impacted, with the rate remaining relatively low at 0.7% (up from 0.6% in April last year). This stage will jump in the report to be released a month from now when today’s 30-to-59-day delinquencies, that haven’t been cured by then, move into this stage.

…click on the above link to read the rest of the article…

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

January 18, 2019

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

The borrower is the servant of the lender, and one of the primary ways that the elite keep the rest of us subjugated is through the $244,000,000,000,000 mountain of global debt that has been accumulated. Every single day, the benefits of our labor are going to enrich somebody else. A portion of the taxes that are deducted from your paycheck is used to pay interest on government debt. A portion of the profits that your company makes probably goes to servicing some form of business debt. And most Americans are continuously making payments on their mortgages, their auto loans, their credit card balances and their student loan debts. But most people never stop to think about who is becoming exceedingly wealthy on the other end of these transactions. Needless to say, it isn’t the 46 percent of the global population that is living on less than $5.50 a day.

The world has never seen anything like this mountain of debt ever before, and one of the central themes of The Economic Collapse Blog is that all of this debt will ultimately destroy our society. According to the Institute of International Finance, the total amount of global debt is now “more than three times the size of the global economy”…

The world’s debt pile is hovering near a record at $244 trillion, which is more than three times the size of the global economy, according to an analysis by the Institute of International Finance.

The global debt-to-GDP ratio exceeded 318 percent in the third quarter of last year, despite a stronger pace of economic growth, according to a report by the Washington-based IIF released on Tuesday.

…click on the above link to read the rest of the article…

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

January 16, 2019

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

The world’s debt pile is hovering near a record at $244 trillion, which is more than three times the size of the global economy, according to an analysis by the Institute of International Finance.

The global debt-to-GDP ratio exceeded 318 percent in the third quarter of last year, despite a stronger pace of economic growth, according to a report by the Washington-based IIF released on Tuesday.

…click on the above link to read the rest of the article…

“Severe Collapse” of Home Prices Might Trigger a “Financial-Institution Crisis” in Australia: OECD Frets about the Bank

December 12, 2018

“Severe Collapse” of Home Prices Might Trigger a “Financial-Institution Crisis” in Australia: OECD Frets about the Bank

“The authorities should prepare contingency plans.” The big four banks are too exposed to mortgages. Even if the banks don’t topple, the economy will get hit hard.

In its latest report on Australia, the OECD focuses to a disturbing extend on housing, household debt, what the current housing downturn might do to the otherwise healthy economy, and what the risks are that this housing downturn will lead to a financial crisis for the big four Australian banks, an eventuality that it says “authorities” should make “contingency plans” for.

The big four banks are huge in relation to the Australian stock market and the overall economy: Their combined market capitalization, at A$341 billion, even after today’s sell-off following the OECD report – accounts for 26% of Australia’s total stock market capitalization.

How they dominate the stock market showed up on Monday after the release of the report:

Common Wealth Bank of Australia (CBA): -2.98%
Westpac (WBC): -3.38%
Australia and New Zealand Banking Group (ANZ): -4.09%
National Australia Bank (NAB): -2.54%

The overall ASX stock index on Monday dropped 2.27%.

These big four are heavily owned by Australian pension funds, retail investors, and the like and form a big part of the retirement nest egg of the nation. So a banking crisis that involves the Big Four matters on all fronts – and the OECD report even pointed out that a collapse in the share prices of the Big Four would itself impact the overall economy negatively.

The report (PDF) starts by explaining just how strong the economy is in Australia:

With 27 years of positive economic growth, Australia has demonstrated a remarkable capacity to sustain steady increases in material living standards and absorb economic shocks.

…click on the above link to read the rest of the article…

Spain’s Supreme Court Flip-Flops on Mortgage Ruling After Just 1 Day Amid Bank Stocks Bloodbath, Legal Shitstorm Erupts

October 20, 2018

Spain’s Supreme Court Flip-Flops on Mortgage Ruling After Just 1 Day Amid Bank Stocks Bloodbath, Legal Shitstorm Erupts

Plunging bank stocks got the Court’s attention, or something.

That was fast: Spain’s Supreme Court on Friday flip-flopped on its own ruling announced on Thursday that had sent bank stocks plunging.

It started like this: Thursday morning, Spain’s Supreme Court did something nobody was expecting. It ruled that the country’s banks must pay stamp duty on mortgage loans, which would set them back billions of euros in legal fees and compensation while heaping further pressure on their lending business. News of the ruling sent many of the banks’ shares tumbling to new lows for the year while also heaping pressure on Spain’s ten-year bonds.

“The Supreme Court states that the person who must pay the stamp duty in the public deeds of loans with mortgage guarantees is the lender, not the one who receives the loan,” the court said in a document. The court ruling on Thursday, which overturned a previous ruling in the banks’ favor earlier this year, was final, the Supreme Court said on Thursday.

But by lunchtime Friday, the court had decided to suspend the ruling in light of the acute “economic and social impact” it was having — meaning the banks were in trouble!

The chart shows the shares of Bankia, which is 90% state-owned. Following the Thursday announcement, the already beaten down shares plunged 10% at one point. The Friday flip-flop repaired some but not all of the damage:

It’s impossible to tell just how much the total compensation bill would have come to, since stamp duty varies across Spain’s regions. As many as 8 million mortgage customers would have been affected by the court ruling, said the Spanish consumer association Adicae.

…click on the above link to read the rest of the article…

Even Mortgage Lenders Are Repeating Their 2006 Mistakes

September 9, 2018

Even Mortgage Lenders Are Repeating Their 2006 Mistakes

You’d think the previous decade’s housing bust would still be fresh in the minds of mortgage lenders, if no one else. But apparently not.

One of the drivers of that bubble was the emergence of private label mortgage “originators” who, as the name implies, simply created mortgages and then sold them off to securitizers, who bundled them into the toxic bonds that nearly brought down the global financial system.

The originators weren’t banks in the commonly understood sense. That is, they didn’t build long-term relationships with customers and so didn’t need to care whether a borrower could actually pay back a loan. With zero skin in the game, they were willing to write mortgages for anyone with a paycheck and a heartbeat. And frequently the paycheck was optional.

In retrospect, that was both stupid and reckless. But here we are a scant decade later, and the industry is headed back towards those same practices. Today’s Wall Street Journal, for instance, profiles a formerly-miniscule private label mortgage originator that now has a bigger market share than Bank of America or Citigroup:

The New Mortgage Kings: They’re Not Banks

One afternoon this spring, a dozen or so employees lined up in front of Freedom Mortgage’s office in Mount Laurel, N.J., to get their picture taken. Clutching helium balloons shaped like dollar signs, they were being honored for the number of mortgages they had sold.

Freedom is nowhere near the size of behemoths like Citigroup or Bank of America; yet last year it originated more mortgages than either of them, some $51.1 billion, according to industry research group Inside Mortgage Finance. It is now the 11th-largest mortgage lender in the U.S., up from No. 78 in 2012.

…click on the above link to read the rest of the article…

Next Mortgage Default Tsunami Isn’t Going to Drown Big Banks but “Shadow Banks”

June 17, 2018

Next Mortgage Default Tsunami Isn’t Going to Drown Big Banks but “Shadow Banks”

As banks pull back from mortgage lending amid inflated prices and rising rates, “shadow banks” become very aggressive.

In the first quarter 2018, banks and non-bank mortgage lenders – the “shadow banks” – originated 1.81 million loans for residential properties (1 to 4 units). In the diversified US mortgage industry, the top 10 banks and “shadow banks” alone originated 260,570 mortgages, or 14.4% of the total, amounting to $75 billion. We’ll get to those top 10 in a moment.

Banks are institutions that take deposits and use those deposits to fund part of their lending activities. They’re watched over by federal and state bank regulators, from the Fed on down. Since the Financial Crisis and the bailouts, they were forced to increase their capital cushions, which are now large.

Non-bank lenders do not take deposits, and thus have to fund their lending in other ways, including by borrowing from big banks and issuing bonds. They’re not regulated by bank regulators, and their capital cushions are minimal. During the last mortgage crisis, the non-bank mortgage lenders were the first to collapse – and none were bailed out.

So let’s see.

Of those 1.81 million mortgages originated in Q1 by all banks and non-banks, according to property data provider, ATTOM Data Solutions:

666,000 were purchase mortgages, up 2% from a year ago
800,000 were refinance mortgages (refis), down 11% from a year ago due to rising interest rates.
348,000 were Home Equity Lines of Credit (HELOCs), up 14% from a year ago

HELOCs, which allow homeowners to use their perceived home equity as an ATM, are once again booming: $67 billion were taken out in Q1, though that’s still less than half of peak-HELOC in Q2 2006, when over $140 billion were taken out.

The Top 10 Mortgage Lenders in Q1 2018

…click on the above link to read the rest of the article…

Collapse of NZ “Guarantor” Puts $300M Deposits for 10K Homes at Risk

March 8, 2018

Collapse of NZ “Guarantor” Puts $300M Deposits for 10K Homes at Risk

Guaranteeing things is an excellent business until it fails suddenly and completely.

In the Great Financial Crisis guarantors were wiped out. It’s happening now down under where 10,000 Property Buyers are Caught in the Collapse of Deposit Power.

A leading national property finance company has collapsed potentially leaving an estimated 10,000 residential, commercial and property investors in the lurch about the fate of nearly $300 million worth of deposits.

Deposit Power, which provided interim finance to property buyers, has closed its doors after the collapse of New Zealand’s CBL’s insurance, which was an issuer and guarantor of deposit bonds.

Sale Complications

Worried mortgage brokers, who recommended the products to clients, are seeking advice on whether clients need to buy other cover, or secure additional or replacement financial risk bonds. It could mean unspecified risks, uncertainty and deal delays for tens of thousands of counter parties, financiers and their representatives, including lawyers and other brokers.

Mortgage brokers, who act as an intermediary between borrowers and lenders, are being warned the status of existing loan guarantees is unknown, pending applications will not be processed and no payments have been taken.

Investors calling the Sydney-based office are being answered by a recorded message the company is facing “external issues” and that it is unable to process any deals.

Deposit Power’s bonds were sold to individuals, first time buyers, retirees, self-employed borrowers, trusts, corporate entities, or self managed super funds purchasing commercial or residential property. It was established in 2012 and regulated by the Australian Securities and Investments Commission.

They were also heavily marketed to first time and off the plan property investors. A deposit guarantee is an alternative method of placing a deposit on a property.

CBL in Interim Liquidation

…click on the above link to read the rest of the article…

Here’s How Regulators Are Inadvertently Laying The Groundwork For The Next Housing Crisis

February 24, 2018

Here’s How Regulators Are Inadvertently Laying The Groundwork For The Next Housing Crisis

Only a few weeks ago, we pointed out a remarkable development in the US mortgage market that has significant implications not only for mortgage borrowers, but perhaps the broader economy as a whole: Wells Fargo, formerly America’s foremost mortgage lender, had seen its share of the market eclipsed by Quicken Loans – the Detroit-based, nonbank lending behemoth that pioneered applying for mortgages on the Internet with its now-famous Rocket Mortgage (readers will remember RM’s celebrity-packed SuperBowl spot).

Many factors (aside from Wells’ own criminality, which recently drew a strong, but ultimately meaningless, rebuke from the Fed) have contributed to this shift, as Bloomberg points out.

But as it turns out, the rising dominance of nonbank lenders like Quicken could portend a massive, bad-debt fueled binge reminiscent of the circumstances that led up to the housing crisis. That is to say, a wave of bad debt could create a cascading wave of defaults with repercussions far beyond the housing market.

Considering all the restrictions that Dodd-Frank and other post-crisis regulations slapped on mortgage lenders, one might wonder how this might be possible.

Of course, as Bloomberg explains, instead of making the market safer, regulators are inadvertently enabling the rise of lenders like Quicken who aren’t bound by many of the rules that restrict banks’ mortgage-lending practices. As a result, Quicken Loans is effectively free from many of the regulations that have forced some of the biggest mortgage lenders into a period of retrenchment…

Make no mistake, regulators have done plenty to rein in the mortgage business since the 2000s. New rules require that lenders carefully assess borrowers’ ability to pay, and that mortgage servicers — which process payments and manage other relations with borrowers — give troubled customers plenty of opportunity to renegotiate their debts before resorting to foreclosure.

…click on the above link to read the rest of the article…

Household Debt Rises By $572 Billion, Ends 2017 At All Time High

February 13, 2018

Household Debt Rises By $572 Billion, Ends 2017 At All Time High

After we first reported last week that US credit card, student and auto debt all hit record highs in December of 2017…

… it should not come as a surprise that according to the just released latest quarterly household debt and credit report by the NY Fed, Americans’ debt rose to a new record high in the fourth quarter on the back of an increase in virtually every form of debt: from mortgage, to auto, student and credit card debt (although HELOCs posted a tiny decline).

Aggregate household debt increased for the 14th straight quarter, rising by $193 billion (1.5%) to a new all time high, and as of December 31, 2017, total household indebtedness was $13.15 trillion, an increase of $572 billion from a year ago – the fifth consecutive year of increases – equivalent to 67% of US GDP, versus a high of around 87% in early 2009. After years of deleveraging in the wake of the 2007-09 recession, household debt has risen more than 18% since the trough hit in the spring of 2013.

Some more big picture trends:

Mortgage balances, the largest component of household debt, increased by $139 billion during the quarter to $8.88 trillion from Q3 2017.
Balances on home equity lines of credit (HELOC) have been slowly declining; they dropped by another $4 billion and now stand at $444 billion.
Non-housing balances, which have been increasing steadily for nearly 6 years overall, saw a $58 billion increase in the fourth quarter.
Auto loans grew by $8 billion to $1.22 trillion
Credit card balances increased by $26 billion to $834 billion
Student loans saw a $21 billion increase to $1.38 trillion

There were some red flags of caution: confirming recent negative data from Wells Fargo, and suggesting that the housing recovery is stalling, mortgage originations were at $452 billion, down from $479 billion in the third quarter.

…click on the above link to read the rest of the article…

What Will Rising Mortgage Rates Do to Housing Bubble 2?

January 20, 2018

What Will Rising Mortgage Rates Do to Housing Bubble 2?

Oops, they’re already rising.

The US government bond market has further soured this week, with Treasuries selling off across the spectrum. When bond prices fall, yields rise. For example, the two-year Treasury yield rose to 2.06% on Friday, the highest since September 2008.

In the chart, note the determined spike of 79 basis points since September 8, 2017. That was the month when the Fed announced the highly telegraphed details of its QE Unwind.

September as month of the QE-Unwind announcement keeps cropping up. All kinds of things began to happen, at first quietly, without drawing much attention. But then the trajectory just kept going.

The three-year yield, which had gone nowhere for the first eight months of 2017, rose to 2.20% on Friday, the highest since October 1, 2008. It has spiked 82 basis points since September 8:

The ten-year yield – the benchmark for financial markets that most influences US mortgage rates – jumped to 2.66% late Friday.

This is particularly interesting because the 10-year yield had declined from March 2017 into August despite the Fed’s three rate hikes last year, and rising short-term yields.

At 2.66%, the 10-year yield has reached its highest level since April 2014, when the “Taper Tantrum” was winding down. That Taper Tantrum was the bond market’s way of saying “we’re shocked and appalled,” when Chairman Bernanke dropped hints the Fed might eventually begin tapering what the market had called “QE Infinity.”

The 10-year yield has now doubled since the historic intraday low on July 7, 2016 of 1.32% (it closed that day at 1.37%, a historic closing low):

Friday capped four weeks of pain in the Treasury market. But it has not impacted yet the corporate bond market, and the spread in yields between Treasuries and corporate bonds, and particularly junk bonds, has further narrowed. And it has not yet impacted the stock market, and there has been no adjustment in the market’s risk pricing yet.

…click on the above link to read the rest of the article…

The Ticking Time Bomb That Will Wipe Out Virtually Every Pension Fund In America

March 31, 2017

The Ticking Time Bomb That Will Wipe Out Virtually Every Pension Fund In America

Are millions of Americans about to see the big, juicy pensions that they were counting on to fund their golden years go up in flames in the biggest financial disaster in U.S. history? When Bloomberg published an editorial entitled “Pension Crisis Too Big for Markets to Ignore“, it simply confirmed what a lot of people already knew to be true. Pension funds all over America are woefully underfunded, and they have been pouring mind boggling amounts of money into very risky investments such as Internet stocks and commercial mortgages. Just like with subprime mortgages in 2008, this is a crisis that everyone can see coming well in advance, and yet nothing is being done about it.

On a day to day basis, Americans generally don’t think very much about pensions. Most of those that have been promised pensions simply have faith that they will be there when they need them.

Unfortunately, the truth is that pension plans all over the country are severely underfunded, and this has already resulted in local fiascos such as the one that we just witnessed in Dallas.

But what happened in Dallas is just the very small tip of a very large iceberg. According to Bloomberg, unfunded pension obligations on a national basis “have risen to $1.9 trillion from $292 billion since 2007″…

As was the case with the subprime crisis, the writing appears to be on the wall. And yet calamity has yet to strike. How so? Call it the triumvirate of conspirators – the actuaries, accountants and their accomplices in office. Throw in the law of big numbers, very big numbers, and you get to a disaster in a seemingly permanent state of making. Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007.

And of course that $1.9 trillion number is not actually the real number.

…click on the above link to read the rest of the article…

Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble

March 5, 2017

Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble

Wage Growth vs. Housing Price Growth

By Nick Kamran, an American living in Oslo, Letters from Norway:

Historically, central banks throughout Europe had one mandate: price stability. They did not worry about employment or economic growth, only currency integrity. Setting interest rates to contain inflation ensured that a Krone or a Euro would purchase tomorrow what it could today. Nevertheless, since the ebbing of the 2008 financial crisis, The ECB, of which Finland is a member, officially added full employment and economic growth to their mandate. The Norwegian, Swedish, and Danish Central Bank’s followed suit, stating that they would consider “other factors” than inflation when basing an interest rate decision.

Hence, instead of remaining impartial — leaving it to lawmakers, markets, and the public to deal with the prevailing interest rate — the central banks became involved in policy making. Adding employment and economic growth to their mandate equates to the National Institute of Standards changing the definition of the meter to help an engineering firm, working on a major bridge project, meet budgetary and timeline constraints. In addition to creating a dilemma, the additional mandates made central banks appear politically biased.

The Conundrum

In an attempt to balance, what central bankers perceive as two opposing forces, inflation and unemployment, they chose economic stability over maintaining price stability. The other option, raising rates would have led to greater short-term unemployment. The central banks pushed benchmark rates all the way down, nearing zero in Norway (.5% – Key Policy Rate ) and Denmark (.05% – Discount Rate), hitting it in Finland (ECB at 0% – Refi Rate) and going negative in Sweden (-.5% – Repo Rate).

…click on the above link to read the rest of the article…

Next Shoe to Drop on Spanish Banks

April 11, 2016

Next Shoe to Drop on Spanish Banks

“The mortgage ‘floor clauses’ are a fraud.”

Thursday, April 7, 2016, could go down in history as a great day for Spanish mortgage holders and a very grim one for many Spanish banks, thanks to a new ruling that the so-called mortgage floor-clauses that were unleashed across the whole financial sector in 2009 are abusive (but not illegal) and lack transparency.

These floor clauses set a minimum interest rate — typically of between 3% and 4.5% — for variable-rate mortgages, even if the Euribor drops far below that figure. In other words, the mortgages are only really variable in one direction: upwards!

Following the latest ruling, the banks named in the suit must reimburse clients all the money they’ve surreptitiously overcharged them since May 2013. And if they want to continue applying floor clauses in the future, the banks must do so in an open and transparent manner, which pretty much defeats the purpose, since if banks were completely up front about the inclusion of floor clauses in their contracts and what that actually means to the mortgage holder, no one in their right mind would accept them.

Thursday’s ruling comes on the heels of a similar sentence by Spain’s Supreme Court in October 2013. But whereas the Supreme Court ruling applied to just three banks, the new one applies to almost all of them. It is also the first time that such a large class action suit, with over 15,000 claimants, has been successful. It is now broadly assumed — meaning by everyone except the banks and their lawyers — that the ruling has set a legal precedent that should now apply to all of the 2.5 million mortgage holders affected by the abusive (but not illegal) practice.

…click on the above link to read the rest of the article…

Tag Archives: mortgages

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Post navigation

Latest Posts