Why The Housing Market Isn’t Stabilizing Yet

Market-wise, after some improvement yesterday, today rates are stable and slightly lower. The 10-yr is back below 4.0%, which is nice to see after many were forecasting that once it went above 4.0% last week we were bound to quickly see 4.50%. Mortgage prices are roughly unchanged. Yesterday the improvement in rates came from the ol’ “flight to quality” bid due to renewed concerns about the health of the US financial system drove stocks down. S&P cut its debt rating on a number of investment banks (including Merrill, Lehman, and Morgan Stanley). Today’s only release is the April factory orders report and is expected to fall slightly by 0.1% following the previous month’s 1.3% gain.

Last week BofA/Countrywide announced David Sambol’s departure, yesterday Wachovia nudged out Ken Thompson, and then later Bloomberg reported Washington Mutual said Chief Executive Officer Kerry Killinger will step down as chairman following investor complaints for an 80% decline in market value in the past year. Independent director Stephen Frank will become chairman on July 1. Washington Mutual said then it could lose as much as $19 billion in the next three to four years on home loans depending on U.S. economic conditions. Killinger will stay on as CEO.

Are things stabilizing in “home ownership land”? Maybe not. Mortgage Insurance Companies of America reported that in April, 73,880 homeowners with privately insured mortgages fell more than 60 days late on payments, compared with 39,584 who got back on track. According to RealtyTrac, in April, foreclosure filings surged 65 percent and bank seizures more than doubled in April compared with a year earlier as rates on adjustable mortgages increased, In April, a record 183,000 homeowners were able to work out new borrowing terms with lenders and avoid foreclosure filings, according to the Hope Now Alliance. The same month, foreclosure filings were reported on more than 243,000 properties, a 65 percent increase compared with April 2007, said Irvine, California-based data provider RealtyTrac. One in every 519 U.S. households is in some stage of the foreclosure process, RealtyTrac said.

Toll Brothers Inc. swung to a fiscal second-quarter loss from a year-earlier profit on 30% lower revenue, and its chief executive reiterated a call on Congress to enact tax incentives to encourage people to buy homes.

According to an article in the Wall Street Journal, Lehman Brothers is considering raising $3-4 billion in new capital for the second time in as many months. The paper reports Lehman could sell $3 billion to $4 billion in common stock, just two months after the firm raised $4 billion in a heavily oversubscribed sale of preferred stock.

Has Wells Fargo come out with a firm policy, finally, after Fannie announced theirs? Wells sent out an update yesterday addressing the “Conforming Conventional At Risk Markets Policy”, clarifying their changes from May 16 and May 23rd for both standard conforming and High Balance Conforming conventional loans. On delegated loans, “Wells Fargo Funding will accept delegated conforming conventional loans that meet agency guidelines for maximum financing in declining markets. Sellers are no longer required to apply Well Fargo’s At Risk Markets policy to these loans. For transactions in declining markets where mortgage insurance is required, Sellers are responsible for placing mortgage insurance prior to delivery to Wells Fargo Funding.” And for self insurance, Wells sent out a different set of restrictions dealing with LTV/CLTV’s based on market classifications. Confusing? Perhaps. Speaking of which…

Two cows are standing next to each other in a field.
Daisy says to Dolly, “I was artificially inseminated this morning.”
“I don’t believe you,” says Dolly.
“It’s true; no bull!” exclaims Daisy.