Polling Question 1: Should the first-time home buyer tax credit of $8,000 be extended past November 30, 2009?

Transcription

1 Polling Question 1: Should the first-time home buyer tax credit of $8, be extended past November 3,? 1. No 2. Yes, keep to $8, 3. Yes, increase to $15, and expand to all

2 Polling Question 2: Which mortgage loan modification program would help troubled homeowners the most and minimize delinquencies? 1. Interest rate reduction 2. Interest rate freeze 3. Capitalization 4. Term extension 5. Principal reduction

3 Non-farm employment California vs. United States Percent change from preceding year California U.S Sources: Bureau of Labor Statistics, IHS Global Insight

4 Labor market beginning to stabilize Non-farm employment, California Difference from previous month, thousands Percent change from preceding year Difference (L) Sources: Bureau of Labor Statistics, IHS Global Insight % change (R) -4-6

5 Employment by industry California Percent change from preceding year 2 1 Non-farm -1-2 Credit intermediation Construction Sources: Bureau of Labor Statistics, IHS Global Insight

6 Housing-related industries Employment, California Percent change from preceding year 1 5 Real estate agents/brokers Building materials Furniture* * Includes manufacturing, wholesale, and retail Sources: Bureau of Labor Statistics, IHS Global Insight.

7 Civilian unemployment rate California vs. United States Percent California U.S Sources: Bureau of Labor Statistics, Moody s Economy.com

8 Fed s accommodating policy Fed funds rate vs. 1-year bond yield Percent year T- note yield Federal funds rate Sources: Federal Reserve Board, IHS Global Insight.

9 Mortgage rates Fixed vs. ARM, United States Percent year fixed year ARM Sources: Mortgage Bankers Association, Moody s Economy.com. 24

10 TED spread*: liquidity has improved but Difference between 3 month Libor and 3 month Treasury bill rate Basis points *based on weekly average Sources: British Bankers' Association, Federal Reserve Board, Moody's Economy.com.

11 Homeownership rates California vs. United States Percent 7 68 California United States Sources: U.S. Census, Moody s Economy.com.

12 Housing Affordability rates United States Index Sources: Moody s Economy.com, National Association of Realtors.

13 Stimulus programs for first-time home buyers Federal and State, Federal Tax credit: $8, Deadline: November 3, California Tax credit: 5% of purchase price up to $1, Ended August 31, $1 million allocated 61,659 certificates issued Sources: California Franchise Tax Board, National Association of Realtors.

14 Delinquency rates All loans Percent change from preceding year 8 6 California 4 2 U.S Sources: Moody's Economy.com, Mortgage Bankers Association. 24

15 Delinquency rates Conventional subprime loans, Q2 -Q2 Least delinquent (14.6%-8.8%) Second tier (8.9%-15.3%) Third tier (15.4%-15.8%) Most delinquent (15.9%-36.1%) Sources: Moody's Economy.com, Mortgage Bankers Association.

16 Foreclosure rates* All loans Percent * Started during quarter California U.S Sources: Moody's Economy.com, Mortgage Bankers Association. 24

17 Foreclosure rates* on prime loans ARM loans Percent * Started during quarter California U.S Sources: Moody's Economy.com, Mortgage Bankers Association

18 Foreclosure rates* on subprime loans ARM loans Percent 1 8 * Started during quarter California 6 4 U.S Sources: Moody's Economy.com, Mortgage Bankers Association. 24

19 California s share of foreclosures As percent of U.S. total Percent Sources: Moody's Economy.com, Mortgage Bankers Association

20 Median sales price, existing single-family homes California vs. United States Percent change, year ago U.S California Sources: Moody s Economy.com, National Association of Realtors, California Association of Realtors.

21 Median sales price, existing single-family homes Ranked by metros with fastest declining prices, Q2 -Q2 Percent change Rank Metropolitan area Q2 8-Q2 9 Peak-Q2 9 1 Cape Coral-Fort Myers, FL Salinas, CA Santa Cruz-Watsonville, CA Riverside-San Bernardino-Ontario, CA Merced, CA Bradenton-Sarasota-Venice, FL Modesto, CA El Centro, CA Stockton, CA San Francisco-Oakland-Fremont, CA Sources: M oody's Economy.com, National Association of Realtors.

22 Median sales price, existing single-family homes California US$ thousands 6 Median price (L) Median price, % change (R) 5 Percent change from preceding year Sources: Moody s Economy.com, California Association of Realtors. 24-6

23 Median sales price, new single-family homes California vs. United States Percent change from preceding year California Sources: Moody's Economy.com, U.S. Census Bureau U.S.

24 Home prices at 23 levels S&P/Case-Shiller index Index Jan. 2=1, 3 month ending metro composite 1-metro composite Sources: Standard & Poor's and Fiserv, Inc., Moody s Economy.com.

25 U.S. cities with the most homes underwater Percent of homes with Rank Metro area negative equity 1 Las Vegas, NV Stockton, CA Modesto, CA Reno-Sparks, NV Vallejo-Fairfield, CA Merced, CA Port St. Lucie-Fort Pierce, FL Riverside-San Bernardino, CA Phoenix-Mesa-Scottsdale, AZ Orlando, FL El Centro, CA Yuba City, CA Bakersfield, CA Cape Coral-Fort Myers, FL Madera, CA 38.4 U.S Source: Zillow.com

26 Total loan workouts Repayment plans and modifications, United States Thousands of loans 6 Repayment plans Modifications Q1 7 Q2 7 Q3 7 Q4 7 Q1 8 Q2 8 Q3 8 Q4 8 Q1 9 Q2 9 Sources: HOPE NOW, Moody s Economy.com.

27 Loan terms made by modifications United States Percentage of modifications Loan terms Q1 Q2 Interest rate reduction Capitalization Term extension Principal reduction Interest rate freeze Other modifications Sources: Office of the Comptroller of the Currency, Office of Thrift Supervision.

28 Portion of loans 6+ days delinquent three months after modification Percent Q1 Q2 Q3 Date of modification Q4 Q1 Source: OCC and OTS Mortgage Metrics Report.

29 Total loan workouts Repayment plans and modifications, California Thousands of loans 1 Repayment plans Modifications Q1 7 Q2 7 Q3 7 Q4 7 Q1 8 Q2 8 Q3 8 Q4 8 Q1 9 Q2 9 Sources: HOPE NOW, Moody s Economy.com.

30 FHA insured home loans Share of total single-family purchase and refinanced loans Percent Source: Federal Reserve Board Bulletin, The HMDA Data: The Mortgage Market during a Turbulent Year.

31 Months supply of homes California vs. United States Number of months U.S. 5 California Sources: Moody's Economy.com, California Association of Realtors, National Association of Realtors.

32 Housing starts Single-family homes, California vs. United States Millions of units U.S. (L) California (R) Thousands of units Sources: U.S. Census Bureau, IHS Global Insight

33 CMBS issuance United States US$ billions No issuance: July 8-May Sources: Commercial Mortgage Alert, Commercial Mortgage Securities Association.

34 CMBS delinquencies Fixed rate, all loans 3+ days delinquent Percent Sources: Trepp LLC, Commercial Mortgage Securities Association.

35 Commercial real estate Delinquency and office vacancy rates, United States Percent Office vacancy rate (R) Delinquency rate (L) Percent Sources: CB Commercial, American Council of Life Insurers, Moody s Economy.com.

36 Charge-offs from loans secured by real estate California and U.S. domestic banks US$ billions 25 U.S California Source: Federal Deposit Insurance Corporation.

37 Charge-offs from loans secured by real estate California domestic banks US$ billions Construction and land development Nonresidential properties* Residential properties. * Includes multi-family properties Source: Federal Deposit Insurance Corporation.

38 Commercial real estate cap rates All sectors, United States Percent Sources: Moody's Economy.com, American Council of Life Insurers. 24

39 Commercial Property Price Index - Apartments United States Percent change from preceding year Source: Moody's/REAL Commercial Property Price Index.

40 Commercial Property Price Index By property type, United States Percent change from preceding year Retail Office Industrial Source: Moody's/REAL Commercial Property Price Index.

41 Valuation of nonresidential permits California US$ millions 4 Commercial buildings Industrial buildings Sources: Moody's Economy.com, Construction Industry Research Board. 24

42 Valuation of multifamily permits California Percent change from preceding year Sources: Moody's Economy.com, Construction Industry Research Board. 24

43 Office vacancy rates Comprising metro, downtown and suburban average Percent 25 2 San Jose 15 1 Los Angeles 5 San Francisco Sources: Moody's Economy.com, CB Commercial

44 Industrial vacancy rates By selected metro Percent 2 15 San Francisco Sacramento 1 5 Los Angeles Sources: Moody's Economy.com, CB Commercial

45 Recidivism rate on private label RMBS modifications 9% 8% Payment reduction matters but even with large payment reductions, the results are not good 3+ Day Delinquency Rate 7% 6% 5% 4% 3% 2% Payment Reduction (%) <= % 1-11% 11-2% 21-3% 1% 31-4% 41-5% > 5% % Source: Loan Performance, Amherst Securities. Months After Payment Reduction

46 Modification experience Principal reduction common in portfolio loans, uncommon elsewhere Percentages of Each Type of Modification by Investor in Second Quarter Mod Type Fannie Mae Freddie Mac Government Guaranteed Private Investor Portfolio Overall Capitalization 65.5% 89.1% 95.1% 73.8% 32.1% 64.3% Rate Reduction 43.6% 51.3% 77.% 63.6% 84.1% 7.1% Rate Freeze 16.6% 14.5% 5.9% 6.4% 5.5% 7.5% Term Extension 47.8% 77.6% 46.4% 13.1% 72.4% 46.% Principal Reduction.%.%.%.% 3.5% 1.% Principal Deferral.1%.%.% 4.7% 2.7% 2.5% Unknown 19.% 1.1% 4.5% 9.6% 3.2% 7.4% Source: OCC and OTS Mortgage Metrics Report, Second Quarter.

47 Modification experience Recidivism rate lowest in portfolio loans Three Months After Modification Source: OCC and OTS Mortgage Metrics Report, Second Quarter. Re Default Rates for Portfolio Loans and Loans Serviced for Others (6 or More Days Delinquent)* Six Months Nine Months After After Modification Modification 12 Months After Modification Investor Loan Type Fannie Mae 28.3% 44.1% 52.6% 57.% Freddie Mac 34.4% 4.2% 49.8% 52.4% Government Guaranteed 27.7% 49.8% 58.3% 59.1% Private 33.8% 46.4% 53.4% 57.2% Portfolio Loans 14.% 28.7% 38.7% 42.4% * Data include only loans implemented since first quarter that had time to age the indicated number of months as of June 3,. For example, only modifications implemented during first and second quarter have been in effect at least 12 months subsequent to the modification.

48 % 12.% 1.% Loan count (million) Overhang (%) Housing overhang: a growing problem Overhang (mm units) (left axis) Overhang (%) (right axis) 8.% 6.% 4.% 2.% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Sources: Loan Performance, Mortgage Bankers Association, Amherst Securities.

49 Housing overhang still looms Total number of homes in the United States with a mortgage: 55.9 million in US, 7.28 million in CA MBA Delinquency Survey Reports 44.7 million units in US, 5.83 million units in CA, they have ~8% coverage Probability of MBA Probability MBA Probability Liquidation Delinquency Weighted Delinquency Weighted (based on Category Survey % Liquidation (US) Survey % Liquidation (CA) estimated cure (Delinquency X (Delinquency X (seasonally adjusted) rates) (US) Probability of Default) (CA Only) Probability of Default) Foreclosure 1% 4.3% 4.3% 5.77% 5.77% 9+ Days 99.2% 3.88% 3.85% 5.4% 5.% 6 Days 95.6% 1.68% 1.61% 1.56% 1.49% 3 Days 72.4% 3.68% 2.66% 2.8% 2.3% Total Distressed 13.54% 12.42% 15.17% 14.29% Inventory Number of Defaults (in million, based on 55.9 million homes in US, 7.28 million in CA) This suggests that 12.42% of the 55.9 million units, or 6.94 million units are already in the delinquency pipeline and will eventually liquidate. Modification may lower the number somewhat, but the redefault rate on modifications are quite high. Sources: Loan Performance, Mortgage Bankers Association, Amherst Securities.

50 Mind the gap Cumulative NOD s and REO s, California Thousands Notice of defaults 1 8 Gap Sources: RealtyTrac, Goodwin Proctor. Real estate owned

51 California construction jobs Historic California Construction Employment vs. Unemployment Unemployment % in California Construction Employment in s 14% 12% Construction Jobs 1, % 8% % 4% 2% UNEMPLOYMENT % Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 5 Source: U.S. Bureau of Labor Statistics.

52 New California residential units constructed Annualized Residential Units Constructed (Units in s ) Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Source: California Department of Finance.

53 Value of new California residential units constructed ($ in billions) $7 Annualized Value of New Residential Units Constructed $6 $5 $4 $3 $2 $1 $ Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Source: California Department of Finance.

54 New Housing Finance Agency (HFA) initiatives State and local, October New Issue Bond Program (NIBP) Provide temporary financing to HFA s to issue new mortgage revenue bonds New lending for homeownership and rentals for working families Temporary Credit and Liquidity Program (TCLP) Provide replacement credit and liquidity facilities available to HFA s Source: Federal Housing Finance Agency.