Wicked Witch of the West: I’m Melting
In yesterday’s post the concept or Winterism of LIED was presented. Today’s focus is on the E or evaporate portion of the equation. Evaporate refers to the fuel (credit) needed to maintain Ponzi economies. It can also refer to the Ponzi economy itself. In effect when the fuel evaporates, the Ponzi economy itself melts, much like the Wicked Witch of the West.
A Ponzi economy melts, because the shortfall in income necessary to support fictitious capital becomes more and more evident, and glaringly obvious. And when incomes fall short, defaults occur, and fictitious assets prices collapse. Oh sure the Ministry of Truth can proclaim (lie) otherwise as they did in classic fashion yesterday when “reaffirming AAA” for MBIA and Ambac, but that does not change or redirect the truth of the situation. By the way Standard and Poors new corporate logo about says it all, announced in conjunction with their latest rating farce. The event to look for soon would be a complete failure and collapse of a monoline credit insurer, AAA rating and all. The word “ironic” will be the understatement of all time to describe this. That in turn will melt one of the Wicked Witches (rating agencies) right down to a pool of steaming goo along side the monoline outfit. For those who follow all this drama, that will be that special moment when the Fat Lady truly sings.
No place was the truth of the situation more clear than in the latest report on California housing prices. None of that size minus 8% stuff here, no sir’re Sherlock, try 22% on for size, that’s Big Ass Momma garb.
LOS ANGELES--(BUSINESS WIRE)–Home sales decreased 29.8 percent in January in California compared with the same period a year ago, while the median price of an existing home fell 21.9 percent, the CALIFORNIA ASSOCIATION OF REALTORS√Ç¬Æ (C.A.R.) reported today.
I have been reporting that about a fourth to a third of California sales are foreclosures. That’s a level that drives prices, and explains the big ass price drops. Now we have news that there are more foreclosures than sales in California.
For what one expert thought was the first time, the number of monthly foreclosures exceeded the number of monthly home sales in California in January, according to data compiled by two research companies. The data is a grim reflection of the worsening housing market, as the number of homeowners who can’t or won’t make their payments rises and the number of home buyers dwindles. ForeclosureRadar, a Discovery Bay real estate research firm, said 19,821 California homes went into foreclosure in January, representing about $8 billion in home loans. Meanwhile, DataQuick reported 19,145 home and condo sales in January
Still when I looked over the latest loan performance from Countrywide Financial’s servicing portfolio, I was surprised about the surge in delinquencies relative the actual foreclosures. On $1.48 trillion the difference between 7.47% and 1.48% or about 6% is around $90 billion in fresh foreclosure prospects going into a market that has already collapsed. This suggest that there is much, much more to come out of the pipeline, and that perhaps lenders are dragging their feet about the process?
The nation’s largest mortgage lender and servicer said loan delinquencies as a percentage of unpaid principal balance increased to 7.47 percent last month from 7.2 percent in December and 4.32 percent in January 2007. Loan servicers collect mortgage payments and distribute them to the owners of the mortgages. The Calabasas, Calif.-based lender services mortgages totaling about $1.48 trillion. Foreclosures pending as a percentage of unpaid principal balance increased to 1.48 percent in January, from 1.44 percent in December and 0.77 percent in January 2007.
Perhaps they are having trouble determining who owns the mortgages? Echoes of some third world country for sure.
Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven’t been able to prove they own the mortgages.
So all one really needs to do, is focus hard on Ponzi markets and ignore the Lies. Ponzi fuel melts when underlying collateral does, and the evidence illustrates that collateral is in free fall right now. And yes Dr. Holmes, that does not bode well for AAA ratings, or even A ratings. Nor does it bode well for cheap mortgage rates. If it wasn’t for foreign central bank blank check writing for agency paper, no telling how high mortgage rates would be at this juncture. The following shows a 31% decrease in refis for February, is AFTER the CAR data which was for January.
The 30-year fixed has risen more than three-quarters of a percentage point in four weeks. According to the Mortgage Bankers Association, refinances have decreased about 31 percent in three weeks.
Further evidence of evaporation is provided from the latest data on early 401k withdrawal. This is a clear sign of tremendous finance stress building.
Several of the biggest administrators of the popular retirement plans report double digit increases in so-called hardship withdrawals in recent months. At industry leader Fidelity Investments, withdrawals from 401(k)s surged 17 percent surge in December – the biggest jump on record, and a surge the company calls “dramatic.”
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