Market Studies

Investors' growing appetite for the safety of U.S. Treasury bonds in the wake of European debt troubles and a stagnant economic recovery here in the U.S. have driven mortgage interest rates to their lowest level in over 50 years. Freddie Mac says both fixed- and adjustable-rate mortgages have reached all-time record lows, providing further incentive for homeowners looking to refinance. By the GSE's assessment, the 30-year rate is now averaging 4.15 percent and the 15-year rate is at 3.36 percent.

There were 3.65 million existing-homes available for sale at the end of July, according to the National Association of Realtors (NAR). That tally is down 1.7 percent from June, but the time it will take to clear the supply from the market has lengthened to 9.4 months because sales have slowed considerably over the summer months. NAR says sales of existing homes fell 3.5 percent in July to an annual rate of 4.67 million. Short sales and REOs accounted for 29 percent of last month's volume.

Lenders continue to battle the headwinds of high unemployment, a stalled economic recovery, and a backlog of bad loans from the heyday of the housing boom - all playing into a marketplace stressed with high levels of delinquencies and complex resolutions. But the underpinnings of a new age of creditworthy, financially savvy borrowers are beginning to take shape. The counseling agency CredAbility says its Consumer Distress Index has improved for three consecutive quarters.

Lender Processing Services (LPS) issued a report Tuesday which puts the number of mortgages that are delinquent or in foreclosure at 6,538,000. The company's assessment is based on mortgage performance statistics through the end of July, derived from its loan-level database of nearly 40 million mortgages. The grand total of past-due mortgages has risen by nearly 190,000 over the past two months. In June, LPS' tally of loans at least 30 days delinquent or in foreclosure was 6,452,000. In May it was 6,350,000.

After losses last month, Fitch Solutions reports a recovery among subprime credit-default swaps (CDS) in July. Subprime CDS prices increased 1 percent overall for the month. The largest increases in prices were among 2006 and 2007 vintages, which rose 6.1 percent and 10 percent, respectively. The rate of 90-day plus delinquencies reached a new low for the year - declining 1.4 percent to 10.8 percent. The share of subprime loans with balance modifications has increased by 120 percent over the last year.

The term 'underwater' has become common industry jargon in today's marketplace of depressed home values and high loan balances, and it's increasingly making its way into the everyday vocabulary of consumers. Twenty-six percent of mortgage borrowers now say they are underwater, according to a new survey conducted by Fannie Mae. The GSE also found that the idea of being in negative equity is more prevalent among minorities, and that underwater borrowers are more likely to know someone who has defaulted on their mortgage.

The Federal Reserve found a small increase in consumers' willingness to borrow and banks' willingness to lend, but a decline in loan balances, according to the second-quarter household debt report issued Monday by the central bank's New York arm. Mortgage debt and home equity lines of credit each decreased by about $20 billion during the second quarter of 2011. This represents a 0.2 percent drop for mortgage balances and a 3 percent drop for home equity loans.

TransUnion's mortgage performance barometer has recorded its largest drop in delinquencies since the end of the recession two years ago. The credit bureau says mortgage delinquencies improved 5.98 percent during the second quarter, with the rate of homeowners 60 or more days past due declining to 5.82 percent. TransUnion predicts delinquencies will continue to decline throughout the year, thanks to conservative lending policies that cater to consumers with higher credit scores.

Mortgage delinquencies remain elevated while other aspects of the consumer credit picture, such as bankcard performance, are improving, according to a new report from Experian. The credit bureau says instances of 60-day mortgage delinquencies have risen by 25 percent from 2007, prior to the recession, while 60-day credit card delinquencies have decreased 20 percent since that time. Portland shows the greatest increase in missed mortgage payments, almost double since 2007.

Ally Financial Inc. reported a profit for the second quarter of 2011, but its results were down from previous earnings. Net income for Q2 was $113 million, a decline from $146 million in the previous quarter and from $565 million one year ago. The company says reducing risk in its legacy mortgage portfolio has been among the top priorities. Ally's GMAC Mortgage has completed more than 700,000 loan workouts for defaulted homeowners since 2008. The mortgage unit says it modifies two loans for every one foreclosure.