Kulakowski 201005PMC

transcript

Separating Fact from Fiction:!

Public Perception & Mortgage Crisis!

Susan Kulakowski!

Presented at the!

2010 Predictive Methods Conference!

Wednesday, May 19, 2010!Laguna Nigel, CA!

About Google Trends!

  Shows search volume over time by geographic region.!

  Measures volume relative to a single search term.!

  Provides a graph, Search Volume Index, and exportable data.!

www.linkedin.com/in/skulakowski | 2010PMC !

“Subprime Mortgages”!

  March 2007 peak!

  Relative to “Financial Crisis”!

  Source: Google Trends!

“Financial Crisis”!

  Sept. 2008 peak!

“Bail Out”!

  Sept. 2008 peak!

The Big Names in 2008 !(notice the change of scale)!

100!150!200!250!300!

AIG! Lehman! WAMU!

The various crises, 2007 to present, held our

attention for a moment.!

We have the attention span of gnats.*!

*As of April, 2010, SourceWatch estimates $4.6 trillion bailout funds disbursed with $1.99 trillion still outstanding.!http://www.sourcewatch.org!

Maybe we’re not worried about Wall Street bonuses but worried

about our own homes…!

Total Mortgages, Homeowners & Households!

110.0!

Mortgages!Homeowners!Households!

Source: DB!(millions)!www.linkedin.com/in/skulakowski | 2010PMC !

Estimates of Underwater Mortgages!

11.0!17.5!

Mortgages!

CoreLogic ('08Q4)!Eco.com ('10Q1)!DB ('11Q1)!

Source: DB!(millions)!www.linkedin.com/in/skulakowski | 2010PMC !

Estimates of Underwater Mortgages!

$11,030!

$2,351!$3,741!

$5,344!

Fed Reserve 2008!CoreLogic ('08Q4)!Eco.com ('10Q1)!DB ('11Q1)!

Source: DB!($billions)!www.linkedin.com/in/skulakowski | 2010PMC !

Range of 12mo Change in S&P/CS Indices!

-45%!-30%!-15%!0%!15%!30%!45%!60%!

Median!

Source: S&P/CSI!www.linkedin.com/in/skulakowski | 2010PMC !

Whether 20% of mortgages are

underwater—or 50%—we’re in trouble.!

Which brings up the question of…!

Moral Hazard!

If you are facing or considering foreclosure, you're not alone.!

You Have Options… !Source: www.YouWalkAway.com!

Your Options!

Source: www.YouWalkAway.com!www.linkedin.com/in/skulakowski | 2010PMC !

Your Options!With an on-line calculator provided!

Source: www.YouWalkAway.com!www.linkedin.com/in/skulakowski | 2010PMC !

Good news for lenders:!Not many homeowners

just walk away.!

Underwater and Not Walking Away: Shame, Fear and the Social Management of the

Housing Crisis !Brent T. White!

University of Arizona!James E. Rogers College of Law!

According to White… !Indeed, though more than 34% of U.S. homeowners were underwater on their mortgages by the end of the third quarter of 2009,

the strategic default rate was only 2.5% to 3.5%.

based on analysis of Mortgage Bankers Association and RealtyTrak data, mid-2009.!

Why aren’t more homeowners walking?!

  Individually!

  They can’t do the math!

  (If they could do the math, perhaps they wouldn’t have taken the mortgage in the first place.)!

  Individually!

  They feel ashamed and afraid!

  By the way…!

  The financially sound decision may be to strategically default.!

  For-profit firms, protecting shareholders, evaluate this option all the time.!

  Structurally!

  Disparity between knowledge of lenders/servicers and borrowers!

  Disparity between resources of lenders/servicers and borrowers!

  Credit bureaus as enforcers!

But homeowners do default…!

…the default rate much more closely resembl[es] the unemployment rate than the percent underwater…

Source: White!

Delinquencies track Unemployment!

%Under-water

Seriously Delinq’t

Unemploy-ment

Merced, CA

85 18.99 17.5

Las Vegas-Paradise

81 15.33 11.3

Port St. Lucie, FL

79 17.30 14.1

Source: White!White’s paper includes additional MSAs!

Bad news for lenders:!Homeowners default when

they lose jobs.*!*According to BLS, there were 15 million unemployed workers looking for work in

March 2010.!

Unemployment Rate!(BLS, seasonally adjusted) !

U3 Rate: Actively Seeking Employment!

Bad news for lenders:!The number of

“marginally attached” and part-time workers is growing at a faster rate.!

Unemployment Rates!(BLS, seasonally adjusted) !

U3 Unemployment Rate!U6 (inc. "marginally attached" and part-time workers)!

The unemployment rate has our sustained

attention.!

Unemployment Rates & Google Trends !

0!50!100!150!200!250!

0%!5%!10%!15%!20%!

U3 Unemployment Rate!U6 (inc. "marginally attached" and part-time workers)!Unemployment Google Trends!

Be afraid, not of homeowners just walking

away.!

Be afraid of !falling home prices.!

Be afraid of !continuing job losses.!

Be very afraid of falling home prices coupled with

continuing job losses.!

Together, they may force many more homeowners

to walk.!

Contact!

susan.kulakowski@me.com !www.linkedin.com/in/skulakowski !

Kulakowski 201005PMC

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