Rebel Traders – Analysis Without The Hype

Fitch ratings has released an update on Residential Mortgage Backed Securities.

Fitch: California prime jumbo RMBS delinquencies rise to 11.6%; Florida to 17%

California prime jumbo loan performance continued to weaken in February, with 60+ days delinquencies rising to 11.6% from 11.3% in January (and 4.7% in February 2009). During the first two months of 2010 Florida had the biggest jump (nearly 1%) of the five states with the highest volume of jumbo loans outstanding. New Jersey was second of the five states with an 80 basis points (bps) increase over the same period.

The five states with the highest volume of prime jumbo loans outstanding (California, New York, Florida, Virginia, and New Jersey) represent approximately two-thirds of total  delinquencies. Prime jumbo RMBS 60+ days delinquencies for these states at February 2010 compared to the prior month, and their approximate share of the estimated $376 billion market, are as follows:

–California: 11.6%, up from 11.3% (44% share of the market);
–New York: 6.3%, up from 6.1% (7% share);
–Florida: 17%, up from 16.6% (6% share);
–Virginia: 5.7%, up from 5.6% (5% share);
–New Jersey: 7.9%, up from 7.4% (4% share).

The Cash for Clunkers program that resulted in a temporary surge in automobile sales in the recent months has created a nasty side effect -  more delinquent payments.

Higher credit risk buyers who used the government’s cash-for-clunkers program last year to buy a new car had higher repossession and late payment rates than those who didn’t use the program, a research firm finds.[…]

Those motorists also had higher levels of buyers’ remorse, says the firm, CNW Research.

A mid-January analysis of those who purchased a new vehicle under the cash-for-clunkers program found the most dramatic differences among those in the lowest credit category:

Among subprime credit borrowers, those who used the clunkers program had a 4.8% repo rate, more than double the 2.2% who bought similar vehicles but didn’t use the government incentives.

Cash for clunkers was Congress’ and the Obama administration’s effort to spur the economy last year by offering up to $4,500 in incentives for buying a new fuel-efficient car. CNW adds that it isn’t as clear whether those in better credit categories also have higher repo or late payment records.

As for buyers’ remorse, almost 1 in 5 clunkers program participants
who took part in a survey this month said they regret buying a new vehicle under the program. Among those who didn’t use the program, the regret rate was slightly more than 1 in 20.

As a result, perhaps it’s no surprise that more subprime customers who took part in the program tend to be late with payments than those who did not. Many had expected the economy to rebound by now.

"Faced with a new monthly payment of $250 to $350 per month, many of the (clunkers program) users admit they didn’t think past the new car smell," CNW says in its January newsletter. "Most, however, anticipated the economy improving substantially between last July and today and felt that improvement would give them the financial boost necessary to at least offset some of the additional monthly payment." (USA Today)

Not only did the tax payers have to pay for the Cash for Clunkers program, but now the tax payers will be on the hook once again to back stop the additional losses that will be coming as a result of the failed program.

Some of the major banks issued their monthly ‘master trust’ data yesterday. This data reveals the the amount of money that is delinquent, and the amount being charged off. It is still a mind boggling amount of money that is delinquent. Consumers are fine? I don’t think so.

Citigroup Inc Reports Dec Master Trust; Net Charge offs 9.56% v 10.29% m/m

- 5-34 days $2.5B v $2.49B m/m
- 35-64 days $1.17B v $1.22B m/m
- 65-94 days $972M v $979.8M m/m
- 95-124 days $869M v $872.7M m/m

American Express Co Reports Dec Master Trust; Net write offs on managed basis 7.1% v 7.6% m/m

- Annualized default rate net of recoveries 6.9% v 7.5% m/m
- 30 days past due loans on owned basis 3.7% v 3.9% m/m
- 30 days past due loans on managed basis 3.7% v 3.9% m/m

JPMorgan Chase and Co Reports Dec Master Trust; Net charge offs 7.11% v 8.81% m/m

- Delinquencies 4.94% v 4.90% m/m
- 30-59 days 1.13% v 1.23% m/m
- 60-89 days 0.99% v 1.12% m/m
- 90+ days 2.82% v 2.55% m/m

Bank of America Corp Reports Dec Master Trust; Net Charge offs 13.53% v 13.00% m/m

- Delinquencies 7.44% v 7.69% m/m
- 30-59 days $1.62B v $1.78B m/m
- 60-89 days $1.44B v $1.48B m/m
- 90-119 days $1.25B v $1.33B m/m
- Total delinquencies $6.72B v $6.93B m/m

Discover Financial Services Reports Dec Master Trust: Net charge offs 8.68% v 8.98% m/m

- Delinquencies 5.49% v 5.68% m/m
- 30-59 days $529.7M v $545.6M m/m
- 60-89 days $432.6M v $456.8M m/m
- 90-119 days $401.3M v $402.9M m/m
- Total delinquency amount ending balance $2.08B v $2.09B m/m
- Gross charge offs 9.64% v 9.91% m/m

Capital One Financial Corp Reports Dec Master Trust; Net Charge Offs 10.14% v 9.6% in Nov m/m – filing

- US Card 30 day+ delinquency rate: 5.78% v 5.87% m/m
- International Net charge off rate: 9.58% v 9.50% m/m
- Auto finance metrics annualized net charge off rate: 5.68% v 3.67% m/m
- US Card managed receivables $60.3B v $60B m/m

Another one bites the dust… Capmark Investments LP files Chapter 11 bankruptcy, and updated commercial loan delinquency projections…

NEW YORK, Jan 15 (Reuters) – Capmark Investments LP, which said it manages more than $1.7 billion of equity real estate and mortgage-related investments, filed for bankruptcy protection on Friday, less than three months after its parent, Capmark Financial Group [CPFNG.UL], made its own filing.

The partnership once known as GMAC Institutional Advisors has more than $1 billion of assets and liabilities, according to its Chapter 11 petition filed with the U.S. bankruptcy court in Wilmington, Delaware.

Capmark Investments said it hired Lazard Freres & Co as its investment banker and financial adviser for the bankruptcy process. A spokesman for the partnership declined to comment.

Capmark Financial, a commercial real estate company, had sought protection from creditors on Oct. 25, wiping out the investments of several private equity firms including Kohlberg Kravis Roberts & Co [KKR.UL].

The company cited deteriorated financial and real estate market conditions and a lack of available capital for its filing, in which it reported $20.1 billion of assets and $21 billion of liabilities.[…] Source: Reuters

And while we are on the topic of mortgage related investments, take a look at the latest projections on commercial loan delinquencies issued today:

Moody’s: US CMBS loan delinquencies rise to 4.9%; 8%-9% rate expected by end of 2010. 

    Delinquencies on US CMBS loans in conduit/fusion deals ended 2009 at 4.9%, as measured by the Moody’s Delinquency Tracker (DQT). They began 2009 at 0.95% and therefore have increased five-fold during the year.

   Moody’s expects loan performance to deteriorate further in 2010 and projects that the DQT will reach 8%-9% by the end of the year. 

In the just released December Mortgage Monitor report, issued by Lender Processing Services, one in every 7.5 properties are behind on payments or are now in foreclosure.

Total delinquencies, excluding foreclosures, increased to a record high 9.97 percent, representing a month-over-month increase of 5.46 percent and a year-over-year increase of 21.29 percent. Loans rolling to a more delinquent status totaled 5.01 percent compared to 1.52 percent of loans that improved. Of loans that were current in December 2008, 4.37 percent were either 60 or more days delinquent or in foreclosure by the end of November 2009, a rate higher than any other year for the same period.

Foreclosure inventories also continued to climb to new highs with November’s foreclosure rate at 3.19% – a month-over-month increase of 1.46 percent and a year-over-year increase of 81.41 percent. Compared to 2005 levels, foreclosure inventories across all loans are now nearly seven times higher, while jumbo loan foreclosure inventories are nearly 100 times more than levels four years ago.[…] (Source: LPS)

Fannie Mae (FNM) and Freddie Mac (FRE) are among this nations most embarrassing organizations, and together they stand to loot the tax payers dry in mounting losses.

Let us begin with the latest news concerning mortgage delinquencies:

December 23 – Freddie (Mac) said November delinquencies on single-family residences rose to 3.72% from 3.54% in October and 1.52% a year earlier.

Freddie Mac Delinquencies

And on a much broader measure we have this:

December 22 -WASHINGTON — The U.S. housing market continued to deteriorate in the third quarter as even the most credit-worthy borrowers increasingly fell behind on their mortgages, highlighting the problems policy makers have faced in trying to address the problem.

A new report from the Office of Thrift Supervision and Office of the Comptroller of the Currency found that the percentage of current and performing mortgages dropped for the sixth consecutive quarter, as foreclosures in process topped 1 million mortgages at the end of September. The report covers roughly 34 million loans totaling $6 trillion in principal balances, or approximately 65% of the U.S. mortgage market.

The regulators said that serious delinquencies, loans that are at least 60 days past due, increased across all loan categories and climbed to 6.2% of the loans in the portfolio during the third quarter. The report said that just 67.7% of option adjustable-rate mortgages were considered current at the end of the third quarter, while 27.9% were either seriously delinquent or in the process of foreclosure.

The most troubling finding was that even borrowers considered “prime,” or the least risky, increasingly can’t pay their loans. The report said that 3.6% of prime mortgages were more than two months behind on payments, more than double from a year ago. (emphasis added)

To date, both Fannie Mae (FNM) and Freddie Mac (FRE) were put into conservatorship last year due to enormous losses, have been bailed out by the tax payer to the tune of $100 Billion dollars, and now with losses continuing to escalate the Obama administration is set to announce another infusion of tax payer funds into these black holes. It is being rumored that President Obama will make the announcement of “providing additional support to these critically important institutions” with the next week or two. And the amount of additional support bailouts is anticipated to be somewhere between $200 to $400 Billion.

What ever happened to ‘no more bailouts’ ?

And finally, because Fannie and Freddie are so critically important to restoring health to the housing and mortgage industries the CEO’s will enjoy a nice holiday pay package between $4 and $6 Million. An official announcement is expected on Christmas Eve.

And just how well of a job is the Obama administration doing at saving homeowners?

This reminds me of Hurricane Katrina :

“You’re doing a heck of a job Brownie”