Monday, June 1, 2009

Links 06/01/2009

CalPERS likely to lose $922 million in sour land deal – The Sacramento Bee

In Silicon Valley, recession humbles high-tech sector – The Associated Press

Jones used to gross $12,000 a month as an indoor horticulturist for high tech companies, restaurants and car dealerships, although not Silicon Valley Auto Group. Then “everyone cut back all at once and we had to shut down,” he said. “It happened fast.”

Very fast. In fact, nowhere in the country has the bust arrived more abruptly.
The Associated Press Economic Stress Index, a month-by-month analysis of foreclosure, bankruptcy and unemployment rates in more than 3,000 U.S. counties, shows that last year, as the national economy tanked, high tech economic centers from California’s Silicon Valley to North Carolina’s Research Triangle were apparently “recession-proof” with increasing jobs and stable housing prices.

Last fall, everything changed. When previously invested funds petered out, there was no new capital. Bankruptcies, foreclosures and unemployment in high tech regions spiked, and are now at some of the highest levels in the country.

If the EU seems intent on a putsch then UKIP should give it a shove – Telegraph, Ambrose Evans-Pritchard

Bankrupt G.M. Says It Owes $172 Billion – The New York Times

Fate of NUMMI plant still uncertain – The Contra Costa Times

With both its corporate parents reeling from the global recession, the fate of the 25-year-old, pioneering New United Motor Manufacturing venture in Fremont remains shrouded in uncertainty.

The huge auto plant, a joint venture between General Motors and Toyota that produces hundreds of thousands of cars and trucks a year, says it has heard little from either company, even as GM prepares a likely bankruptcy filing today and Toyota comes off its worst year in more than half a century.

In late April, GM officials said that they would kill the Pontiac division, which could have a big effect on the plant, also known as NUMMI. Besides producing the Toyota Corolla and Tacoma pickup truck, NUMMI also makes the Pontiac Vibe.

Rents May Decline, but Probably Not By Much – Professor Piggington

It's true that today's economic downturn is worse than that of the 1990s. On the other hand, back then we didn't have a federal government that was engaging in previously unimaginable levels of effort to ensure that prices do not decline in any sustained manner. I'm going to say that makes for somewhat of a wash.

So San Diego rents are probably declining as I write this, and they may do so for a while yet. But when all is said and done, I venture to guess that they won't fall by a whole lot.

Twelve percent of mortgages now past due - foreclosure is clearly not the problem anymore – Foreclosure Truth

Mortgage-Bond Yields Climb, Suggesting Higher Home-Loan Rates – Bloomberg

Hedge funds take aim at Florida real estate – Tampa Bay Online

Chart of the day: Car ownership – Felix Salmon

Consumption Down, Saving Rate Increases in April – Calculated Risk

May Economic Summary in Graphs – Calculated Risk

Alt-A loans: Second wave of foreclosures ahead – The Santa Rosa Press Democrat

Today, there are 18,000 Alt-A mortgages in Sonoma County. They account for about 18 percent of the county’s 102,000 home mortgages — triple the U.S. average, according to First American CoreLogic, a real estate research company.

It is a far larger share of the county’s real estate holdings than subprime loans, which accounted for about 10 percent of local mortgages at their peak five years ago, according to First American CoreLogic.

Over the next three years, about two-thirds of the Alt-A borrowers in Sonoma County will see their payments jump sharply, according to First American CoreLogic. The trend will peak in the summer of 2011, the research firm projects.

The Fall of the Mall – The New York Times

Latest budget proposal eliminates CalWORKs, lets out inmates early – The Sacramento Bee

New 5 percent cut for state workers on the table – The Sacramento Bee

Click It or Ticket Insanity; 10% of Texans Have Arrest Warrants – Mish

Mortgage Market Locks Up – Mish

Bernanke thought it would be an easy task to keep down mortgage rates. So much for a $1.2 trillion commitment. What's next? A $2.4 trillion commitment? Fannie Mae, Freddie Mac, and the FHA are the lenders of only resort yet the Fed is still struggling to rig the market.

More Prime Foreclosures; More Re-Defaults – Mish

5-29 - ‘The Day After’ the Interest Rate Spike – The Field Check Group

Rates are all over the map as lenders assess the damage and price cautiously.  Now, it is a mad dash to only focus upon the loans that are locked and have a chance of funding. If the locked loans are not funded quickly and the interest rate complex continues to experience this extreme of volatility, serious losses can occur.

The letter below was just sent by a national bank’s wholesale department this afternoon. This is the mortgage operations nightmare I highlighted in Thursday’s report.  In a nutshell, they are kicking aside everything that is not locked or not a purchase in contract.

5-28 - Potential Consequences of 5.5% Mortgage Rates – The Field Check Group

Yesterday, the mortgage market was so volatile that banks and mortgage bankers across the nation issued multiple midday price changes for the worse, leading many to ultimately shut down the ability to lock loans around 1pm PST. This is not uncommon over the past five months, but not that common either. Lenders that maintained the ability to lock loans had rates UP as much as 75bps in a single day.  Jumbo GSE money — $417k - $729,750 — has been blown out completely with some lender’s at 8%. I have seen it all in the mortgage world — well, I thought I had.

A good friend in the center of all of the mortgage capital markets turmoil said to me yesterday “feels like they [the Fed] have lost the battle…pretty obvious from the start but kind of scary to live through it … today felt like LTCM with respect to liquidity.”

The consequences of 5.5% rates are enormous. Because of capacity issues and the long time line to actually fund a loan in this market, very few borrowers ever got the 4.25% to 4.75% perceived to be the prevailing rate range for everyone.

Mortgage Meltdown, More Pain To Come - Mish