Monday, February 8, 2010

That Recession Ever'body Keeps Sayin' Is Over? Donchew B'leev It!

We are ALL "Sub-primates" now!

Per The HousingWire:
Monday, February 8th, 2010, 9:50 am
The performance of US prime jumbo loan performance within residential mortgage-backed securities (RMBS) slipped again in January as serious delinquencies (60+ days past due) rose for the 32nd consecutive month and edged closer to 10%, according to the latest market commentary from Fitch Ratings.

Prime jumbo loan delinquencies began to rise in Q207 but accelerated since then. In 2009, the rate of delinquency nearly tripled during the year. The serious delinquencies rose to 9.6% in January from 9.2% in December.

“The new year has brought no relief from declining jumbo loan performance,” said Fitch managing director Vincent Barberio. “The trend line for delinquencies indicates the 10% level could be reached as early as next month.”

A jumbo mortgage has an initial principal amount above the $417,000 conventional loan limit set by Fannie Mae (FNM: 0.9847 +1.52%) and Freddie Mac (FRE: 1.16 0.00%). In higher-priced markets the limit is $729,750, and, in October, appropriations committees in both the House and Senate proposed an extension of the limit through 2010.

Fitch indicated delinquency rates on pre-2005 prime jumbo RMBS vintages are still lower than recent vintages. But seasoned RMBS pools have deteriorated over the last year, rising to 4.3% in serious delinquency from 1.8%. Of all prime jumbo senior RMBS classes issued before 2005, about 40% are under a negative rating outlook due to weak collateral performance, despite only 5% having experienced downgrades so far.
Meanwhile, per CalculatedRisk:
According to the BLS, there are a record 6.31 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.1% of the civilian workforce. (note: records started in 1948)

The number of long term unemployed is one of the key stories of this recession. Last year, David Leonhardt at the NY Times wrote an excellent piece about this: Wages Grow for Those With Jobs, New Figures Show
In the job market, at least, the recession’s pain has been unusually concentrated.
People who have lost their jobs are struggling terribly to find new ones. Since the downturn began in 2007, companies have been extremely reluctant to hire new workers, and few new companies have started. The economy and the job market are churning very slowly.
Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that’s been turned into a job search center. The fact that this recession is the worst in a generation means that there are many, many people in the gym. The fact that the economy is churning so slowly means that there is not much traffic into and out of the gym.

If you’re inside, you will have a hard time getting out. Yet if you’re lucky enough to be outside the gym, you will probably be able to stay there. The consequences of a job loss are terribly high, but — given that the unemployment rate is almost 10 percent — the odds of job loss are surprisingly low
People who lose jobs during this recession have less than a 50-50 chance of regaining their former financial position in 25 years.


jim said...

Can't say I feel much sympathy for the folks who gambled on half-million (or more likely $1.5 or $2.5 mil) crackerboard McMansions,as they weren't buying a home that they needed, but an extension of their inflated egos and a public statement of their self-perceived worth in the Great Scheme of Things... Getting bitch-slapped by reality sucks, but the real pity is that the folks who orchestrated this fiasco got a pass on their malfeasance, due to some rented high-level accomplices in the Federal government. The high-level terrorists of Wall Street and their Ivy-League madrassas of morally depraved economic dogma,along with the sycophantic punditry of discredited 'Libertarian' so-called 'think tanks' should be taken to task on this issue,as well.

Just for starters, 'economics' does not exist as a morally-neutral abstraction in number theory.

Until the Great Depression, it was called "Political Economics", which reflected it's social or 'political' component. Through the efforts of folks like Alan Greenspan, the role of economist went from a practicing manager of tangible assets to keeper of the 'classical liberal' faith in laissez-faire or "anything goes" Capitalism. They perpetrated the great myth of economics being a 'science' and disavowed any moral culpability for their policies, which they claimed only were only dealing with abstractions, and hence were 'morally neutral'.

On the face of this, it is a lie and a sham, for politics is entirely about the distribution of wealth in a society (the disbursement of the Commons), and economics is the practice and mechanism derived from those 'political' beliefs.

These actions don't exist in a moral vacuum, and real world consequences should apply to people whose self-serving choices wreak havoc on the welfare of the society at large. Unbridled Greed, and the wanton destruction of peoples' lives were classically considered 'evil', because they were destructive of society, as-a-whole. Manipulation of peoples' lives for personal gain, was also regarded as 'evil', because it violated the primary tenet of ethical behavior -reciprocity; or more commonly, The Golden Rule, and undermined the power of Law over the rule of Ego,or Force...much too destructive to the social fabric,or social contract, to be allowed.

Where I'm going with this is that should be more immediate penalties then depending on Karma to re-mediate the iniquities from some folks gaming the system. The idiots who will lose their McMansions(or pay multiple times their actual value) will be paying now. The corrupt members of the FIRE establishment (Finance,Insurance,& Real Estate) should also be paying at a level commensurate with their involvement,as only through a knowing collusion to defraud the buyers, would property values be allowed to be kited into the Stratosphere. Governmental bureaucrats and elected officials are not without blame in this as well, because they either were co-conspirators in the fraud, or negligent in the performance of their regulatory duties.

Woody (Tokin Librul/Rogue Scholar/ Helluvafella!) said...

thanks for taking the time to post such a long reply, jim...I don't disagree with any of it...