May’s consumer credit, trade deficit, & LPS mortgage monitor, RealtyTrac’s mid year foreclosure report, et al

the multi-year manipulation of the benchmark LIBOR interest rate by Barclays and at least 11 other major banks continued to attract the most attention in the blogosphere this past week; several attempts to explain the the implications the scandal for the public were interspersed with calls for prosecution of the banksters responsible, and a representative selection of links to those articles lead the main body of links below…probably the most damming revelation was probably that regulators on both sides of the atlantic knew that the interest rate was being falsely reported by the banks for the duration of the financial crisis and did nothing…tim geithner, who was then president of the NY Fed, sent an email to the mervyn king, governor of the bank of england, suggesting maybe something ought to be done, but it went no farther than that…& some are also still following the fallout from the supreme court rulings on obamacare; probably the most significant are those states, including texas and florida, who’ve announced that they will reject the Federal funds for Medicaid expansion and refuse to set up state insurance exchanges where mid-income families can buy insurance at a discount…even some democratic governors are leaning toward opting out; recall that 26 states joined florida in the lawsuit against the Medicaid expansion…a map of the states and where they stand on Medicaid was posted at the WaPo midweek..

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the past week was a relatively slow week for economic releases, at least those that attract widespread attention around the blogosphere…but there were several reports on distressed home mortgages, a problem that is arguably as serious a national crisis as unemployment….the first one we’ll look at is the monthly report on mortgage performance that you should all be familiar with by now, the May Mortgage Monitor from Lender Processing Services (LPS); this covers homeowners with loans in trouble in three general groupings; delinquent, meaning they’ve missed at least one housepayment, seriously delinquent, or those more than 90 days behind on their mortgage, & those that have entered the foreclosure process; the summary data of mortgages in trouble this month is contained on page 2 of the PDF, along with a year’s worth of monthly data…for May, LPS reported that the percentage of delinquencies increased to 7.20%, from 7.12% in april; 1,967,000 home loans were less than 90 days delinquent, & another 1,575,000 loans were over 90 days delinquent, they also reported that 2,027,000 homes, or 4.12% of those with a mortgage, were in the foreclosure process, which was a slight decrease from the 4.14% in foreclosure in April, but above the 4.11% who were in foreclosure last year… the 5,569,000 loans delinquent or in foreclosure in May gives us gives a total percentage of homeowners who were not paying on their mortgages of 11.32%, or approximately 1 in 9, an improvement from the 12.07% who were delinquent or in foreclosure a year ago…May also saw the first jump in foreclosure starts in 2 months, with 202,707 homes receiving their first notice, up from 181,584 in april and the most since january…that was triple the number of foreclosures completed in May; again, it’s the judicial states where the backlog continues to build; home seizures have increased at a faster rate in states where banks are not required to show proof of the note in court, as you see on the above chart from page 10 of the LPS pdf; for judicial states, 6.50% of all loans are in some stage of foreclosure, compared to the 2.46% rate in non-judicial states, where banks seize houses quicker…a similar chart on page 11 of the pdf will show that 52% of those homes in foreclosure in judicial states have been there more that two years, vs 30% of homes in non judicial states…looking further at the table of problem mortgages by state on page 4 of the pdf, we can see again that it’s the judicial states (red asterisks) that have the highest percentage of homes stuck in the pipeline; led by florida, with 13.7% of mortgages in foreclsure, new jersey with 7.6%, illinois with 6.8%, and new york, where 6.1% of home loans are in foreclosure…

the other major report on distressed housing came from RealtyTrac, an online foreclosure database, who was out with their midyear foreclosure market report…they report that during the first six months of the year, a total of 1,045,801 properties were in some stage of the foreclosure process, from default notices to auction sale notices and bank repossessions, and that 0.79 percent of all housing units, or one in 126, had at least one foreclosure filing in the first six months of the year…since this is only half the number reported by LPS, it seems evident that RealityTrac is only counting new actions; however, since this report includes june, it can give us better picture of the changes since the administration’s foreclosure fraud whitewash was put in place the first week of april: they report that during April-June period, 311,010 properties started the foreclosure process, a 9% increase from the previous quarter; in June, the number of U.S. homes entering the foreclosure process for the first time increased 12% on an year over year basis, the second YoY increase in a row…overall, first-half filings were up 2% from the second half of last year, but they were down 11% from the same period a year ago; a total of 31 states posted year-over-year increases in foreclosure starts in the second quarter; 17 were judicial foreclosure states and 14 were non-judicial foreclosure states, with the 18% increase in california foreclosure starts being the most for any state and pushing california into the top spot for foreclosure action for the first time in RealityTrac’s 7 1/2 year record…the states with the highest foreclosure rates in the first half were Nevada (1 in 57 homes), Arizona (1 in 58), and Georgia, where one in 63 homeowners had at least one foreclosure filing during the period…bank owned properties that sold in the second quarter took an average of 195 days to sell from the time they were foreclosed, up from 178 days in the first quarter, with properties in New York remaining bank owned the longest, at 430 days, followed by Arkansas at 357 days and New Jersey at 354 days…they also report a new record for average time for homes to remain in foreclosure nationally at 378 days, up from 370 days in the first quarter; although the average time to foreclose in the worst state, New York, decreased from 1,056 days in the first quarter to 1,001 days, & decreased 3 percent in New Jersey, the state with the second longest foreclosure process…the chart above from RealtyTrac, which will open for a larger view, shows how foreclosure timelines have generally increased in the largest states since the 1st quarter of 2007; new york in green and florida in red are judicial states; in california in blue and texas in violet, court action is unnecessary…

  in other housing releases, the FHA also reported on their government-guaranteed loans for the 1st quarter: those that were 90 days or more delinquent  jumped nearly 27% during the year ending March 31, and foreclosures increased nearly 17%FHA has been the lender of last resort throughout the crisis and made loans that private lenders shunned, so their loan portfolio, guaranteed by the taxpayers, is more risky than those reported by Fannie, Freddie or the banks..CoreLogic also reported on home with negative equity for the 1st quarter (pdf)…they showed that 11.4 million, or 23.7 percent, of all residential properties with a mortgage were in negative equity at the end of the first quarter, down from 12.1 million properties, or 25.2 percent, in the fourth quarter of 2011; an additional 2.3 million borrowers had less than 5 percent equity, which they refer to as near-negative equity, in the first quarter…

another monthly report that we usually look at that was released this past week was the Fed’s consumer credit report for May; you might recall this as being divided into two broad categories; revolving credit, ie, credit cards, and non-revolving credit, generally longer term borrowings for such items as cars, yachts, & education (& not including mortgages), and that generally our concern has been that the record jumps in borrowing were concentrated in an exploding amount of student debt that had been accumulating over the past several years…in that respect, May’s report is something of an outlier; the increase in student debt was modest, with a seasonally adjusted annual rate of $74.3 billion borrowed from the Federal government in May, as compared to the $73.4 billion annual rate of student borrowing in April, as part of a 6.5% increase in non-revolving credit…but consumer credit still grew to $1.703 trillion, a 8.04% annualized rate overall, the fastest pace in five months; the increase was driven by an 11.2% jump in revolving credit, from $862.2 billion in April to 870.2 billion in May, which was the largest one month jump in credit card debt since November 2007, which you can see as the blue portion of the bar on the graph of monthly consumer credit changes from zero hedge, which also shows changes in non-revolving credit in red and the net change as a black line…considering that May saw a 0.2% decline in retail sales, the worst in 2 years, this jump in credit card debt would seem to suggest that people are borrowing just to make ends meet, and that its would not be indicative of any major jump in confidence; in fact, the primary indexes of consumer confidence from the Conference Board & the U of Michigan both show confidence continuing to slide..

the only other major economic release was for the May trade deficit from the Dept of Commerce (48 pp pdf); they reported exports of $183.1 billion and imports of $231.8 billion, which resulted in a deficit of $48.7 billion, down from the $50.6 billion revised deficit in April; exports increased, even to europe, and imports decreased as oil averaged $107.91 per barrel in May, down from $109.94 per barrel in April….our trade deficit with China increased to $26 billion in May, up from $24.9 billion a year ago, so once again most of our trade deficit was due to imports from china and of oil…in a separate release  from the Labor Dept, import prices for June were reported to have dropped 2.7%, the steepest price decline since 2008 and the 3rd straight month overall import prices have declinedeven excluding fuel, import prices fell 0.3 percent, which was the most in almost two years…the Labor Dept also reported that wholesale price rose in June by 0.1%, with higher prices of food, light trucks and appliances offsetting the decline in energy costs…the Commerce Dept reported that May wholesale trade decreased by 0.8% in May from April, but was still up 5.7% on the year, unadjusted for price changes…wholesale inventories rose 0.3% to a seasonally adjusted $484.13 billion; oil inventories dropped 3.6%; durable inventories increased 0.6% led by a 1.3% increase in auto inventories, and inventories of non-durables decreased 0.2%

the early summer heat wave with its accompanying record high temperatures that we mentioned last week lifted in the east this past week, but it continues in the plains states & eastern rockies; as we expected, the first six months of this year are now in the record books as the hottest ever for the continental US; in addition, the 12 months ending June 30th also ranks as the hottest 12 month stretch in history, as June temperatures came in at an average 71.2°F for the contiguous 48 states, which was 2.0°F above the 100 year average…the more significant weather story, however, continues to be the worsening drought over the south and the important agricultural states, which has become severe enough for the US Dept of Agriculture to declare to declare a federal disaster area in more than 1,000 counties over 26 states, the largest agricultural disaster ever declared due to drought; the drought declaration covers almost every state in the southern half of the US, from  s.carolina to california, with parts of Colorado, Wyoming. Illinois, Indiana, Kansas and Nebraska also included… according to the weather service’s drought monitor, 61% of the US was listed as being in drought this week, up from the 56% of last week’s report….corn crops in particular have been hard hit; the USDA cut its corn crop forecast by 12%, from 166 bu/acre to 146 bu/acre this week, as corn growing regions in illinois and indiana in particular are experiencing drought conditions of “severe” and “extreme” intensity, as you can see in dark orange and red on the adjacent map, a larger 12 week animation of which is embedded below…with higher corn prices making refineries unprofitable, ethanol output fell to its lowest in 2 years…the USDA also cut its yield forecast for the soybean crop nearly 8%, from 43.9 bushels per acre to 40.5 bushels per acre…this will likely translate into higher prices for variety of foods from cereals to soft drinks and cooking oil, as well as for meat, dairy & poultry products, as producers pass their costs on…

(the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

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