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Thursday, May 27, 2010

Scrubbing The Woodwork Again

Everyone has their quirks, and I have known other women who alleviate tension by scrubbing. I suppose it's a desperate attempt to tidy up what cannot be tidied up.

What drove me to the 409 and that scrub bucket this time was April's FHA summary. You can get them all at this page. I have a strict reading schedule, and I am almost two weeks behind because I was having problems with my eyes recently.

I suppose one has to be in the business to comprehend just how ugly the FHA situation is, but I'm sure that most of you can grasp that an 8.5% serious delinquency (90 days +) is grim. And perhaps you too would enjoy the dark humor (go to the bottom of page 5 for April) involved in reading that their Oct 09 projection for fiscal 2010 was total claims of 213,000, just slightly higher than their 09 actual total of 207,957. As of April, FYTD actual claims are 153,540. compared to 09's FYTD of 110,085.

Since current serious delinquencies as of April are 527,504, compared to last year's April total of 293,275, let's say we ought to be looking at more like 340,000 claims. I guess last October they were still in an extreme fervor of Hope and Optimism. One feels like suggesting that they go ask Alice what the White Queen said:


Anyone who knows how FHA loans were being written last year can just guess where this is going. But if you want some data, go to page three and look at the April 2010/April 2009 stats for underwriting. Last year nearly 28% of FHA endorsements were manual underwriting (non-AUS), and that's where the really high Debt-To-Income ratios are. This year, less than 10%. So I would say that there is a hefty crop of last year's loans which will fail over the next few years.

And consider the consequences. The private mortgage market has been shot down. FHA claimed to Congress that it could recoup, and it recently raised its upfront fee. But clearly it needs to raise its monthly insurance charge. So basically we just did more of the same, didn't we? We built up a giant mess that future FHA borrowers will have to cover through no fault of their own, which will tend to disrupt the housing market.

And of course, with tighter standards (and broker/bank threats to put the loans back), the number of new loans is falling. In April 2009 there were 162,351 loans insured; this April there were 126,316 loans insured. But even cuter, last year's max claims for the month were 3.1 billion against this April's 1.4 billion - so the loans were much bigger on average in 2009. Shudder. Those jumbos. Those jumbos. Aiiiieeeee.

With regard to the last post:
A) From your comments it would appear that the sense of the average citizen stacks up very well against the sense of our government in the grips of Hope. After reading April's FHA report, I think even JFK would agree that sometimes we need to include Hope in the list of things we should fear.

B) To those who are so worried about social cohesion and justice, this sort of thing is where you should look. This is where the big waste is.

C) I want to explain some things about taxation in general, but the real sense of it lies in the economic concept of pricing, which I wanted to cover in a series of posts about money. I want to follow up on your excellent comments, but I am trying to figure out how to do so by covering the concepts I need to reference. As briefly as possible. Unfortunately, brevity is not my strength.

But first, I need to move on to Fannie data, which will probably have me building an ark and herding the borrowers in two by two. I'm not looking forward to this at all.

PS: Very worthwhile links:
Carl at No Oil For Pacifists writes about state laws that try to control grass-roots lobbying. They ought to be unconstitutional, but as a wild guess, that will depend on the composition of the particular court which hears the next case. Because in effect, this is the same logic controlling McCain-Feingold. Also, I expect further such laws from DC as a result of the federal politicians horror and disgust at the lessening benefit of incumbency.

Mark at Illusions of Prosperity wrote an excellent post about "black swans". The current tendency amongst the chattering class is to describe everything we ought to expect as a black swan. Mark points out the fallacy.

Shrinkwrapped noticed Mark's post and generalized about our current tendency to describe all events that are predictable-but-nasty as wildly unexpected. And I think he is right; to some extent our public culture has substituted what-we-want-reality-to-be for what-reality-really-is. The comments at both blogs are usually really good, but the one I thought the best was Gloria's at SW's:
Black Swan events would become more common if you live within an ideology. Those aspects of reality that are outside of the ideology's parameters would go unnoticed. They would go unnoticed until they became so strong/prevalent that even people thinking within the ideology would be forced to recognize their existence.
That captures it - people are describing predictable events as unpredictable because we have created an ideology that is largely based on ignoring things we do not want to see.

Comments:
...which will probably have me building an ark and herding the borrowers in two by two.

Heh. Thanks for the laugh.
 
I've been dwelling on the black crows on my blog. You are now bringing up the white rabbit?

What's the common theme?

We're slipping into The Matrix!

White Rabbit

Neo is told to follow the "White Rabbit" in The Matrix in one of many metaphysical "waking up" metaphors. Seconds later, his doorbell rings, and when he opens the door he finds a woman with a tattoo of a white rabbit on her shoulder. Later in the film right before he meets the oracle one can see Night of the Lepus playing on a nearby television, symbolizing Neo's decision to "follow the white rabbit" and to disturb the order of the Matrix.

The Matrix Explained

Why is the Oracle feeding black crows instead of pigeons?
 
I would suggest the book "The Bestiary" by Nicholas Christopher. What about all the mythical animals? What if they were not allowed on Noah's Ark?

Fun read.
 
Add in what is going on in the international arena, and we can all get ready to run for the hills. Or we can all just load up on Prozac and Valium and everything will be fine.
 
I've got to think that the oil spill has already tipped
the economic scales towards depression in the gulf
states. This is Obama's Katrina and 9-11 combined.
He got dealt a rough hand but he is in over his head.

Sporkfdd
 
Check out Taleb's views on black swans in the following video.

May 13, 2010
Today's Stock Market (Musical Tribute)

He's got all sorts of analogies on where we are right now, from cancer being treated with painkillers to turkeys meeting up with the butcher.

The turkey sees a black swan event.
The butcher does not.

It all depends on the point of view of the observer.
 
This comment has been removed by a blog administrator.
 
WH - Thank you! I may take you up on it. I have saved your email address, but I am going to delete your comment so that it is not sitting on the internet in case of abuse.
 
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