Furniture for a Young Nation

Now at the Metropolitan Museum of Art, the first retrospective in 90 years for America’s most celebrated and original cabinetmaker of his era.

Furniture for a Young Nation

Now at the Metropolitan Museum of Art, the first retrospective in 90 years for America’s most celebrated and original cabinetmaker of his era.

Credit Defaults Increase, Led by Mortgage Markets

Bank cards were the only type of
consumer debt to see a decline in defaults during December according to data
released today by S&P Indices and Experian. 
The S&P Experian Consumer Credit Default Indices showed increased
defaults in both first and second mortgages and in auto loans.  Driven primarily by the increase in mortgage
defaults, the national composite index rose from 2.22 percent in November to
2.24 percent in December, the highest rate since April of 2011.  In December 2010 the Index stood at 3.01
percent.

The default rate for second mortgages increased
from 1.26 percent to 1.33 percent, auto loan defaults rose to 1.27 percent from
1.17 percent and first mortgage defaults increased to 2.19 percent from 2.17
percent.  The default rate for bank cards
however dropped from 4.91 percent to 4.60 percent.  All rates have improved from those of one
year earlier when the default rate for second mortgages was 1.74 percent; first
mortgages, 2.93 percent; auto loans, 1.69 percent; and bank cards, 6.73
percent.

“Led by the
mortgage markets, the second half of 2011 saw a slight reversal of the two-year
downward trend in consumer credit default rates,” says David M. Blitzer,
Managing Director and Chairman of the Index Committee for S&P Indices.
“First mortgage default rates rose for the fourth consecutive month, as did the
composite. Since August, first mortgage default rates have risen from 1.92% to
the 2.19%. The composite also rose those months, from 2.04% to 2.24%.  The
recent weakness seen in home prices is reflected in these data.  Bank card
default rates, on the other hand, were favorable, falling to 4.6% in December.
This is more than a full percentage point below the 5.64% we saw as recently as
July 2011.

S&P Experian data highlighted
five Metropolitan Statistical Areas (MSAs). 
Three of the five showed increases in default rates for the month: Miami
increased from 4.47 percent to 4.73 percent; Dallas from 1.38 percent to 1.56
percent, and Los Angeles to 2.54 percent from 2.53 percent.  Chicago was unchanged at 2.84 percent and New
York decreased from 2.21 percent n November to 2.13 percent in December. 

Blitzer said
of the MSA data, “Given what we know about the mortgage markets, it is likely
that these cities are seeing this recent weakness because their housing markets
have still not stabilized.”


 

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NAHB Says Improving Markets Fragile, Shift through Small Changes

The National Association of Home Builders (NAHB) list of
improving housing markets
continued to show sizeable shifts as small changes in
the metrics over the last month knocked some metropolitan areas off of the list
while others improved enough to be included. 
The June list however shrunk to 80 metropolitan areas from 100 in May.  The list includes 28 new names and there is
at least one metro area from each of 30 states and the District of Columbia.

NAHB defines an improving market as one which has shown
improvement from its respective troughs in housing permits, employment, and
house prices for at least six consecutive months.  Improvements are measured by data gathered from
the Census Bureau, Department of Labor Statistics, and Freddie Mac.   While 28
cities were added to the list and 52 areas made return appearances NAHB noted
that 48 fell off of the list.   

“Though today’s IMI reflects a decline in the number of improving markets from
May, the list continues to show significant geographic diversity, with 31
states represented and roughly one quarter of all U.S. metros included,”
said NAHB Chairman Barry Rutenberg.

“The shifting of some markets off the IMI in June underscores the fragile
nature of the housing recovery as well as the fact that many locations that
previously made the list had recorded only marginal house price gains, which
were easily wiped out by small downward changes,” noted NAHB Chief
Economist David Crowe. “However, the fact that multiple new areas are
showing up on the list each month is encouraging, and highlights the degree to
which local economic and job market conditions are what drive individual
housing markets.”

More detail on the NAHB list of improvement markets can be
found here.

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Mortgage Fraud Rates Show Some Purchase/Refi Correlation

Interthinx, a provider of comprehensive risk mitigation solutions, has released its 12th quarterly report and its Mortgage Fraud Index which measures four types of fraud common to the mortgage industry.  The composite index for the first quarter of 2012 which is derived from the four underlying indices, dropped to 139, its lowest point since the second quarter of 2009.  This represented a change of -4.3 percent from the fourth quarter of 2012 and -3.1 percent from one year ago.

Nevada returned to the role of “riskiest state” after being displaced by Arizona in the fourth quarter.  Arizona fell to second place followed by Florida, New Jersey, and California.

Much of the report centers on those metropolitan statistical areas (MSAs) with the highest fraud risk.  Two MSAs in Florida, Cape Coral and Miami occupy the first and second spots with composite risk scores of 248 and 241 respectively.  They are followed by Modesto and Chico, California and Las Vegas. 

The report notes significant movement among MSAs as to the levels of fraud, the types of fraud, and their relative positions in the rankings since the previous quarter.  For example, Stockton, California had been the riskiest city for three consecutive quarters but saw a 24 percent decrease from the fourth quarter of 2011 to drop to 7th place. 

The Property Valuation Fraud Index was 213, down 11.8 percent from the previous quarter and 4.7 percent from one year earlier.  Property Valuation Fraud is perpetrated by manipulating property values to create false equity which can be used for various purposes.  Florida led the nation in this type of fraud with five metropolitan areas (MSAs) in that state making in the top ten.  Cape Coral Florida had an index of 482, more than twice the national value, a major reason why it was also the riskiest MSA overall.  Las Vegas was second with an index of 440, but every MSA in the top ten had an index score of at least 401.  

The Identity Fraud Index was 140, down 2.2 percent from the fourth quarter of 2011 and 24.4 percent from the first quarter of 2011.  Identify fraud is frequently used in schemes to hide the identity of the offender and to obtain a credit profile that will meet lender guidelines.  The hot spot for this fraud was San Jose, California with an index of 293; Detroit was second and Ann Arbor, Michigan was in third place.

The Occupancy Fraud Index finished the quarter at 61, 23.2 percent lower than one year ago and down 2.1 percent from the previous quarter.  Offenders commit occupancy fraud by falsely claiming they intend to occupy the property they are purchasing in order to obtain a mortgage with a lower down payment or a lower interest rate.  Miami was the riskiest for this fraud, moving from second to first place even though its score of 104 was a decrease of 23.6 percent from the previous quarter.  Other MSAs appearing high on this list were Jacksonville, North Carolina; and Flint, Michigan.

The fourth type of fraud is measured by the Employment/Income Fraud Index.  This occurs when a mortgage applicant misrepresents income in order to meet underwriting guidelines.  Nationally this fraud risk has increased 18.1 percent over the last year and 4.5 percent from the fourth quarter of 2011.  Burlington, Vermont leads in this category of fraud risk with an index of 271, 80 points higher than San Diego which was in second place.  Eight out of the remaining nine MSAs in the top ten for this type of fraud are in California.

As interest rates declined the composition of loan applications in the Interthinx database have changed from a nearly 60:40 split between purchases and refinances in Q2 2011 to a 40:60 split in the first quarter of 2012.  The geographic changes that may have been caused by the composition shift were extremely granular in nature; however the type-specific risk indices did show some significant trends, especially in Identity and Occupancy Fraud Risk which saw decreases of 22 and 23 percent respectively and the Employment/Income category which increased 18 percent.  Both indices that decreased have lower values for refinances relative to purchases while the reverse is true for the Employment index.  Interthinx speculates that at least part of the major type-specific trends over the last year may be related to a change in loan composition. 

Interthinx maintains that its indices have proven to be reliable leading indicates of default and foreclosure activity therefore it advises that areas that bear watching going forward are Nevada and Arizona, the two riskiest MSAs in Florida, Cape Coral and Miami, and the New York Tri-State area where risk is rising in all three states, New York, New Jersey, and Connecticut.

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