Stocks Advanced As Number Of Defaulting Homebuyers Rose By 50%
Consumer confidence is important, but what should we believe when one headline tells us that, “The banks have enough cash”, whilst another screams, “Mortgage delinquencies among the most creditworthy homeowners rose by 50% last month”.
After Treasury Secretary Timothy Geithner said, “the vast majority of the nation’s banks have enough capital”, U.S. stocks advanced the most in almost two weeks, and Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset said, “Geithner’s comments that most banks are OK got money coming back into stocks because that pretty much allays yesterday’s fears about stress tests and banks having to raise more capital”.
Even General Motors Corp. rose 2.4 percent to $1.70 after a government auditor said the Treasury will supply the automaker with $5 billion in additional aid.
Meanwhile, David Heupel, who helps manage $60 billion at Thrivent Financial for Lutherans said, “There are still signs of a tough economic environment, but companies that have really cut down their expenses are starting to see a little glimmer of life”.
The “tough economic environment” part of his comment would appear to be something of an understatement however, because the number of so-called prime borrowers who are at least sixty days behind on mortgages owned or guaranteed by Fannie Mae and Freddie Mac rose to 743,686 in January, from 497,131 in December, and that’s almost double the October total.
Fannie Mae and Freddie Mac who are the biggest U.S. mortgage-finance companies, either owning or guaranteeing 56% of all U.S. home loans, just announced that mortgage delinquencies among their “most creditworthy homeowners”, rose by 50% in just one month, and they blamed the fall on both drops in income and too much debt, with 34% of borrowers telling Fannie and Freddie that they were earning less money, and around 20% citing too much debt as their reason for missing their mortgage payments, with a further 8.1% blaming unemployment.