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Kulakowski 201005PMC

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2010PMC on homeowners strategically defaulting (or not yet doing so).
42
Separating Fact from Fiction: Public Perception & Mortgage Crisis Susan Kulakowski
Transcript
Page 1: Kulakowski 201005PMC

Separating Fact from Fiction:!

Public Perception & Mortgage Crisis!

Susan Kulakowski!

Page 2: Kulakowski 201005PMC

Presented at the!

2010 Predictive Methods Conference!

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

Page 3: Kulakowski 201005PMC

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 !

Page 4: Kulakowski 201005PMC

“Subprime Mortgages”!

0!

5!

10!

15!

20!

25!

Jan-

04!

Jul-

04!

Jan-

05!

Jul-

05!

Jan-

06!

Jul-

06!

Jan-

07!

Jul-

07!

Jan-

08!

Jul-

08!

Jan-

09!

Jul-

09!

Jan-

10!

  March 2007 peak!

  Relative to “Financial Crisis”!

  Source: Google Trends!

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

Page 5: Kulakowski 201005PMC

“Financial Crisis”!

0!

5!

10!

15!

20!

25!

Jan-

04!

Jul-

04!

Jan-

05!

Jul-

05!

Jan-

06!

Jul-

06!

Jan-

07!

Jul-

07!

Jan-

08!

Jul-

08!

Jan-

09!

Jul-

09!

Jan-

10!

  Sept. 2008 peak!

  Source: Google Trends!

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

Page 6: Kulakowski 201005PMC

“Bail Out”!

0!

10!

20!

30!

40!

50!

60!

70!

80!

90!

Jan-

04!

Jul-

04!

Jan-

05!

Jul-

05!

Jan-

06!

Jul-

06!

Jan-

07!

Jul-

07!

Jan-

08!

Jul-

08!

Jan-

09!

Jul-

09!

Jan-

10!

  Sept. 2008 peak!

  Source: Google Trends!

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

Page 7: Kulakowski 201005PMC

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

0!50!

100!150!200!250!300!

Jan-

08!

Mar

-08!

May

-08!

Jul-

08!

Sep-

08!

Nov-

08!

Jan-

09!

Mar

-09!

May

-09!

Jul-

09!

Sep-

09!

Nov-

09!

AIG! Lehman! WAMU!

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

Page 8: Kulakowski 201005PMC

The various crises, 2007 to present, held our

attention for a moment.!

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

Page 9: Kulakowski 201005PMC

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!

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

Page 10: Kulakowski 201005PMC

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

about our own homes…!

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

Page 11: Kulakowski 201005PMC

Total Mortgages, Homeowners & Households!

51.6!

75.5!

110.0!

Mortgages!Homeowners!Households!

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

Page 12: Kulakowski 201005PMC

Estimates of Underwater Mortgages!

51.6!

11.0!17.5!

25.0!

Mortgages!

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

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

Page 13: Kulakowski 201005PMC

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 !

Page 14: Kulakowski 201005PMC

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

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

to

Jan-

10!

to

Jan-

09!

to

Jan-

08!

to

Jan-

07!

to

Jan-

06!

to

Jan-

05!

to

Jan-

04!

to

Jan-

03!

to

Jan-

02!

to

Jan-

01!

to

Jan-

00!

Median!

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

Page 15: Kulakowski 201005PMC

Whether 20% of mortgages are

underwater—or 50%—we’re in trouble.!

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

Page 16: Kulakowski 201005PMC

Which brings up the question of…!

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

Page 17: Kulakowski 201005PMC

Moral Hazard!

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

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

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

Page 18: Kulakowski 201005PMC

Your Options!

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

Page 19: Kulakowski 201005PMC

Your Options!With an on-line calculator provided!

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

Page 20: Kulakowski 201005PMC

Good news for lenders:!Not many homeowners

just walk away.!

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

Page 21: Kulakowski 201005PMC

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!

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

Page 22: Kulakowski 201005PMC

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,

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

Page 23: Kulakowski 201005PMC

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

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

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

Page 24: Kulakowski 201005PMC

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.)!

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

Page 25: Kulakowski 201005PMC

Why aren’t more homeowners walking?!

  Individually!

  They feel ashamed and afraid!

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

Page 26: Kulakowski 201005PMC

Why aren’t more homeowners walking?!

  By the way…!

  The financially sound decision may be to strategically default.!

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

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

Page 27: Kulakowski 201005PMC

Why aren’t more homeowners walking?!

  Structurally!

  Disparity between knowledge of lenders/servicers and borrowers!

  Disparity between resources of lenders/servicers and borrowers!

  Credit bureaus as enforcers!

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

Page 28: Kulakowski 201005PMC

But homeowners do default…!

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

Page 29: Kulakowski 201005PMC

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

Source: White!

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

Page 30: Kulakowski 201005PMC

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!

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

Page 31: Kulakowski 201005PMC

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.!

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

Page 32: Kulakowski 201005PMC

Unemployment Rate!(BLS, seasonally adjusted) !

0%!

3%!

6%!

9%!

12%!

Jan-

04!

May

-04!

Sep-

04!

Jan-

05!

May

-05!

Sep-

05!

Jan-

06!

May

-06!

Sep-

06!

Jan-

07!

May

-07!

Sep-

07!

Jan-

08!

May

-08!

Sep-

08!

Jan-

09!

May

-09!

Sep-

09!

Jan-

10!

U3 Rate: Actively Seeking Employment!

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

Page 33: Kulakowski 201005PMC

Bad news for lenders:!The number of

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

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

Page 34: Kulakowski 201005PMC

Unemployment Rates!(BLS, seasonally adjusted) !

0%!

5%!

10%!

15%!

20%!

Jan-

04!

May

-04!

Sep-

04!

Jan-

05!

May

-05!

Sep-

05!

Jan-

06!

May

-06!

Sep-

06!

Jan-

07!

May

-07!

Sep-

07!

Jan-

08!

May

-08!

Sep-

08!

Jan-

09!

May

-09!

Sep-

09!

Jan-

10!

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

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

Page 35: Kulakowski 201005PMC

The unemployment rate has our sustained

attention.!

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

Page 36: Kulakowski 201005PMC

Unemployment Rates & Google Trends !

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

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

Jan-

04!

Jun-

04!

Nov-

04!

Apr-

05!

Sep-

05!

Feb-

06!

Jul-

06!

Dec-

06!

May

-07!

Oct

-07!

Mar

-08!

Aug-

08!

Jan-

09!

Jun-

09!

Nov-

09!

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

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

Page 37: Kulakowski 201005PMC

Be afraid, not of homeowners just walking

away.!

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

Page 38: Kulakowski 201005PMC

Be afraid of !falling home prices.!

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

Page 39: Kulakowski 201005PMC

Be afraid of !continuing job losses.!

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

Page 40: Kulakowski 201005PMC

Be very afraid of falling home prices coupled with

continuing job losses.!

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

Page 41: Kulakowski 201005PMC

Together, they may force many more homeowners

to walk.!

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

Page 42: Kulakowski 201005PMC

Contact!

[email protected] !www.linkedin.com/in/skulakowski !


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