OT: Wal-Mart growth down?

Expired

This bodes not well...

Love this. The end of insane lending creates the problem.

Explanation for the trends I have been blogging about - but done more neatly than I could.

J

90 to FC. That's how I roll!!

A really sensible post. The conclusion here is pretty bleak, however, because there seems to be a reinforcing cycle going on that's very destructive. The ultimate solution here isn't to lend less, it's to lend more. Only by actually lending can any institution make enough money to offset the price of its bad past decisions. And what I mean is not lending stupidly, but prudently and liberally. But lending is being cut back across the board, and not only in housing.

So the real solution to get housing to slow down its price descent is to have enough lending going on to spur demand, and therefore flatten out prices. This lending has to be, however, done the "old way". You know with real money down, decent credit and in areas that aren't still freefalling but somewhat slow. There are plenty of people out there that fit this slice and are waiting for signs of stability. So the mortgage spigot needs to be opened.

So in my mind the solution for the GSEs here, unlike what most are saying, seems to be BUY as many well-written loans as possible. The solution is the same for all entities in the securitization market. And the government, if it is doing anything at all, should toss resources as this end by providing money to enable this. There are two things that will happen: GSE numbers and revenue will get better because of the offsets, and it will put a floor under the housing market by fueling demand.

I know anecdotes aren't data, but what you've put up here makes perfect sense in what I've been seeing in my group of acquaintances who are in trouble with their loans. It appears that no matter the vintage, they're all coming to a day of reckoning now that money's tightened. The future doesn't look good for any of them. A couple will definitely lose their homes, others will wish they had.

It is possible to have a rising roll rate but a more stable delinquency rate: the loans you still have on the books get worse (roll to a more serious delinquency at a higher rate), but if at the same time a lot of loans that were mildly delinquent last month paid off this month, your total percentage of seriously delinquent loans can be unchanged or rise at a much slower rate than your roll rate.

one useful performance measure that corrects for some of these problems is cumulative first time 60+ DQs as a % of original balance, in which any loan that has ever touched 60 days DQ or worse goes into the numerator and stays there regardless of what happens to the loan subsequently. if you look at subprime performance, for instance, using this metric, the 2007 vintage tracks almost right on top of 2006 (just slightly worse).

Wow, Tanta. Every time you write, I learn. A lot. Merci beaucoup.

Ipodius,

Your "floor" occurs at the point where the average US household, whose wages are plummeting in the face of inflation, can eat, go the the doctor and pay their taxes in a timely fashion on the salary they are getting paid. Whatever is left over after the necessities goes to debt service, including the mortgage. Thats the way it works, and that's the way its going to work until the day we start calling each other comrade.

In other words, the "uncertainty" you're talking about comes from lousy fundamentals and structural economic issues, and no extension of credit, whether from government or private entities, can fix them.

I have trouble with all these reports, charts, graphs and testimonies.
To find the truth is like digging an ant out of quicksand with the regulators and banks. The last rumor I read is that bank earning statements are unreliable mainly due to under the reporting of loses.
I have come to believe that these financial institutions dealing in mortgage loans require to be regulated effectively because basically they are dishonest in their dealings. Consumer regulations must be passed to give the consumer the right to question, object or to contest any problems that cause the borrower concern with the institution that has his loans, deposits etc. The analogy here is that the consumer acts like a smoke detector in a house. Where there is smoke the detector sounds the alarm. With there is a financial transaction that is wrong or dishonest, it is the consumer that finds out first. Accordingly when the consumer has redress in the regulatory system with his bank, it can be tracked, much like the FDA tracks Voluntary Consumer Complaints looking for smoke. The Regulatory system in this country is too independent and self serving. The Congressional oversight is a joke. People know when they are being lied to or “spinned”. This meltdown will get worse. It will happen again and again. Our regulatory entities of government have under performed with the present financial crisis. These government entities do not appear to have the balance and checks to ascertain the credibility or integrity of the financial system. What is scary, is the Congress. These people went on vacation.
We have almost 4 million homeowners that are facing extremely serious situations affecting their very lives. There are another 2million projected for year end 2009. Congress displays an attitude that these foreclosure victims are nothing more than an aggravation.
The Congress is fat with money, power and all the perks. Rome is on fire. I think I hear a violin.
The information we are given is basically self serving for those who have something to hide.
Freddie Mac is like a soap opera. Pee Wee Paulson at Treasury tells us so many stories he could write a children’s bedtime story book. I seldom see, hear or read my Ohio Senators Sherrod Brown or George Voinovich regarding these problems in any form of the media.
The bottom line is all these people that write all these comments to all these blogs are venting their frustrations. The question is why tell me……tell the people you elected. Ladies and Gentlemen, we have a real problem, you need to standup, tell these elected prima donnas what you think, and more importantly put your name on it. We need to change the way we do business
in this country. We need to hold people accountable. The rich and famous went over the top this time.

Michael LittleBig

There is no point in trying to prevent the declines in housing prices. It cannot be done. The attempts being made to "save" housing are like standing under a safe falling from a 25 story building. Gravity always wins, trust me on this.

The only way forward is to allow prices to find their own level as expeditiously as possible. Only then can the process of lending and purchasing begin again, under "normal" conditions.

Of course the bailouts now being considered are largely for political purposes. They will not work. Indeed, they cannot work, because the problem is too expensive to fix. Let prices find their lows, and if we end 2009 with several less investment banks, then so be it...

We should be thinking about saving our currency and social security instead.

i want to make one more point about about the relationship between roll rates and serious delinquencies. i understand the point Tanta is making above about the impact of credit availability and the housing market on roll rates and delinquencies, but her example also highlights the fact that you literally have to look at every roll rate in order to determine the impact they have on serious delinquencies.

for instance, if the 60 to SDQ roll rate is increasing, you can't determine what impact that will have on SDQs without looking at all the roll rates that impact the 60D bucket, which in turn depends on the 30D roll rates, and so on and so forth. so even if there is a high 30 to prepay roll rate and a high 60 to prepay roll rate, if the 30 to 60 roll rate is flat, and the C to 30 rate is flat, SDQs are going to increase quickly. in order for the percentage of SDQs to be unchanged or increase much slower than the 60 to SDQ rate, you'd need the C to 30 rate to slow, or the 30 to 60 rate to slow, or the SDQ to liquidation rate to speed up (or any combination of the above).

in any event, i agree with Tanta's point.