Recession 2008-2009 Update

In this months issue we look at what is happening in the USA in response to the current 2008-2009 recession.

Housing | Banks | Corporate | Stimulus Package |

This Archive - September 30 2009

Housing

Good news with The Federal Deposit Insurance Corp. (FDIC) releasing a tool kit to help home owners at risk of losing their homes from being scooped up into rescue scam schemes.

Tool kit - provides information about the right contacts and documents needed to apply for home loan modifications.

Brochure - The Beware of Foreclosure Rescue and Loan Modification Scams brochure provides information on common schemes, such as the partial interest bankruptcy scams, where borrowers are asked to give one or more third parties a partial interest in the home, as the borrower makes payments on the delinquent mortgage. The holders one by one file for bankruptcy thus, delaying forclosure and effectively extending the payments to the scam operator.

Housing Stats

Sales rose 1.5 percent from July to a seasonally adjusted annual rate of 598,000 units.
Inventory of total houses under construction fell to a record low 595,000 units in August
Total number of permits authorized but not yet started also hit an all-time low of 99,000 units.
Confidence among U.S. home builders reached its highest level in 16 months in September

However, it is important to look at these positive indicators together with other economic drivers for housing, such as the The Labor Department report, whic showed the number of people still on jobless aid increased by 129,000 to 6.230 million in the week ending Sept 5.

Banks

Rising profitability - Mortgage bankers made an average profit of over $1,088 per loan originated in Q1 2009, compared to $148 per loan in Q3 2008.

85% posted pre-tax net financial profits in the first quarter 2009 [53% Q4 2008]

Average number of retail loans per retail sales employee rose to 10.4/month in Q1 2009 [5.3 -Q4 2008].

Net cost of loan fell to $1,725 per loan Q1 2009 [$2,324 Q4 2008. Note - this includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.

Source:Mortgage Bankers Association s (MBA) Quarterly Mortgage Bankers Performance Report

Net warehousing income [net interest spread] dropped to 6.60 basis points in the Q1 2009, [9.28 - Q4 2008].

Warehouse lenders account for ~40% of all residential mortgage loans in the US and ~ 55% of FHA loans. Warehouse lending capacity has declined by nearly 90%.

Corporate

55% of companies have reduced salaries/bonuses [but not AIG]. This is up from 21% in December 2008.

Seems Wall Street firms are adjusting their pay programs to get around new federal limits on compensation. Guess who will have the biggest legal bills...and the money just goes around in the same fat circle

Stimulus Package

The Financial Crisis Inquiry Commission held its first meeting. With the causes of the crisis recognised [deceptive mortgage lending, reckless debt securitization, irresponsible banker bonuses and unregulated over-the-counter derivatives markets] one hopes the focus of the committee will not be a witch hunt but instead influence future policy making to strengthen resistance against this ever happening again.

Modeled on the Pecora Commission of the 1930s, it is hoped that by exposing gross and wide spread misconduct will again lead to reform and policy to support stimulation of the economy and tougher regulation of financial markets.

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