THE BASIS POINT

Rates Up On Greece Aid, 7 More Bank Failures, Highest Foreclosure States

7 More Bank Failures
The FDIC, seemingly in the news more and more, sent out an announcement with a listing of its recent enforcement decisions, including final orders or cease and desist orders. No one likes to see their employer on the list.

The FDIC also announced the “shuttering” of seven banks on Friday, with three in Puerto Rico. (I didn’t even know that the FDIC guaranteed deposits in Puerto Rico.) The three Puerto Rican banks closed were Eurobank, R-G Premier Bank, and Westernbank. Eurobank reopened as Oriental Bank and Trust, R-G Premier Bank as Scotiabank de Puerto Rico, and Westernbank as Banco Popular de Puerto Rico (remember eLoan?). Within our shores, CF Bancorp (MI) is gone, and replaced with First Michigan Bank. Champion Bank of Missouri has been incorporated BankLiberty, also of Missouri. BC National Banks is part of a purchase and assumption agreement with Community First Bank, also of Missouri. And Frontier Bank (WA) is now part of Union Bank, National Association (CA).

Greece Aid Package, Consumer Spending
April was a good month, and the US Treasury’s 10-year notes saw their first monthly gain since January. Much of this improvement was seen as a flight to quality given Greece’s fiscal crisis, although this morning it is reported that the 11 million people in Greece will be receiving $147 billion in aid. U.S. consumer spending increased as expected in March for a sixth straight month (+.6%, as expected) and Personal Income rose 0.3 percent following a 0.1 percent gain in February. With consumers increasingly tapping their savings to fund consumption, savings fell to 2.7%, an annual rate of $303.9 billion and the lowest level since September 2008. After this news we find the 10-yr yield at 3.70% and mortgage prices worse by .125-.250.

Ritz Carlton Tahoe Defaults
“All real estate is local” as they say. How is the Lake Tahoe market in California? Well, for starters, the new Ritz Carlton has received a notice of default. The NOD came about a month after its developer put almost $1 billion worth of other real estate development in that area (Northstar) into bankruptcy – over-building in a luxury market. Units are being sold at steep discounts, and the hotel property (not the Ritz company) is behind on almost $19 million in payments. PuttinontheRitz And speaking of foreclosures, celebrities are not immune.

CA, NV, FL, AZ Have Highest Foreclosures
What do California, Florida, Nevada, and Arizona have in common? All 20 of the large metropolitan areas with the highest rates of foreclosures during the first quarter were located in these states. RealtyTrac’s research showed that the four each had at least one metropolitan area with a population of 200,000 at the top of the 206 city list. California accounted for ten positions, Florida seven, Nevada two and Arizona one. On the “good news” side, however, 14 of the top 20 areas and eight of the top ten reported a decrease in foreclosure activity from the same quarter in 2009, mostly due to government intervention and other non-market influences.

Delinquencies Fall
Freddie’s single family serious delinquency rate fell in March, marking the first month-month decline since 2007. In many pools containing loans from 2005-2008 90-day delinquencies and 120-day delinquencies were down. Analysts will wait for Fannie’s numbers before declaring any kind of trend, but at least investors believe that this indicates a continuation of slow prepayments on higher-coupon Freddie securities (Golds).

Rates Steady and Low
Are mortgage rates really the problem in originating any loan? Probably not, as underwriting guidelines and a lack of equity continue to hinder brokers and agents. If you look at 30-yr rates now versus a week ago, or a month ago, they are about the same. Yes, they are about .250% higher than a year ago, but the impact of that is pretty minimal. What did the end of last week tell us about the economy? Real GDP grew during the first quarter, consumer confidence rose in April, and weekly first-time unemployment claims fell. On the flip side, Greece continues to be a huge credit problem which has ramifications for other countries, and here in the US our debt continues to grow as does overall unemployment (hovering around 10%).

Economic Preview For Week
This week shows quite a bit of news. We start today with Personal Income & Consumption (Spending) – see below, the ISM Manufacturing Index, and Construction Spending. Tomorrow we have Pending Home Sales, Wednesday the ISM Services number and ADP private-sector employment figures. Thursday is Initial Jobless Claims and some productivity and costs numbers. Friday is the biggest economic event with the employment report containing Non-farm Payroll, the Unemployment Rate, Hourly Earnings, etc.

ISM Shows Strength
The Institute for Supply Management’s (ISM) number out this morning has been showing signs of economic strength. Any reading above “50” is expansionary, and last month it was 59.6. Regional manufacturing surveys rose in April, suggesting headline ISM will remain in expansionary territory, and analysts are expecting something around 60 for April. Later this week the Non-farm Payroll data, which last month showed an actual increase of 162,000 jobs, is expected to show another increase of around 200,000 jobs. Census hiring is impacting the numbers, but most analysts believe that private sector hiring should do well.

Daily Humor
An elderly couple, having their 50th wedding anniversary dinner, starts reminiscing about their life together. The husband confesses that he had never cheated on her and asks: “Have you ever cheated on me?”

She confesses: “Yes I have. 3 times, but they were for your benefit.”

Taken back he asks, “For my benefit, how could that be?”

She replies, “Remember when we first started out and couldn’t make the mortgage payment? Well, I met with the banker and after that we weren’t behind.

“The second time, you had the heart attack and we couldn’t pay the hospital. Well I met with the doctor and after that we were behind.”

He says, “Well I see how that was for me, for us. I forgive you. And the third time?”

“Remember when you needed 29 votes to become the president of the realtor board?