Interest Rate Roundup

Friday, February 15, 2008

Losses, delinquencies, and foreclosures, oh my! Plus, fugly economic data

Forget lions, tigers, and bears. The news in mortgage-land this morning is about losses, delinquencies, and foreclosures. A few tidbits:

* Countrywide Financial reports data every month about the performance of the loans in its servicing portfolio. It's worth following the numbers because CFC's portfolio is so large -- roughly $1.48 trillion. In January, the delinquency rate (as a percentage of unpaid principal balances) surged to 7.47% from 4.32% a year earlier. That was also up from 7.2% in December. The rate of foreclosures pending almost doubled to 1.48% from 0.77% in the year-earlier period (and 0.70% in December 2007).

* The third-largest mortgage insurer in the U.S., Radian Group, announced a $618 million loss in the fourth quarter. The report follows MGIC's bad news from the other day. In the quarter, Radian's provision for losses jumped more than eight-fold to $688 million from $84 million a year earlier.

* Meanwhile, did you get a load of those economic stats out this morning? They were, to borrow a phrase from one of my friends "F-ugly." You can figure out what that means for yourself. January import prices soared 1.7%, more than three times the 0.5% rise that was expected. That pushed the year-over-year import inflation rate to 13.7% -- the highest ever recorded in the U.S. (the data goes back to 1982).

Was it all just oil? No. Import prices, ex-petroleum, rose 0.6% on the month. And if you strip out all fuels, you still get a 0.7% rise. That's good for a 3.6% ex-oil YOY inflation rate, the highest since October 2005, which itself was the highest since the mid-90s. Of particular note: China is going from a deflationary force to a potentially inflationary one. The price of imports from China surged 0.8% in January, up from 0.1% a month earlier and the biggest one-month gain back to January 2004, the earliest for which I have data.

On the growth side of the ledger, the Empire Manufacturing index plunged to -11.7 in February from 9 a month earlier. That was far worse than the 6.5 reading that economists polled by Bloomberg expected and the lowest since April 2003 (-16.5). The index tracking prices paid surged to 47.4 from 40.2 in January, while the index measuring new orders dropped to -11.9 from 0, and the index measuring employment fell to -2.1 from 2.4.

UPDATE: A few more economic reports have come out this a.m. Industrial production was up 0.1% in January, right in line with expectations. Capacity utilization held at 81.5%, slightly above the 81.3% that economists were looking for. The University of Michigan's consumer confidence index plunged to 69.6 in February, versus expectations for a drop to 76 from 78.4 in January. That's the lowest reading this indicator has registered since February 1992 (68.8)


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