kulakowski 201005pmc
DESCRIPTION
2010PMC on homeowners strategically defaulting (or not yet doing so).TRANSCRIPT
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Separating Fact from Fiction:!
Public Perception & Mortgage Crisis!
Susan Kulakowski!
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Presented at the!
2010 Predictive Methods Conference!
Wednesday, May 19, 2010!Laguna Nigel, CA!
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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 !
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“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 !
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“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 !
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“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 !
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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!
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The various crises, 2007 to present, held our
attention for a moment.!
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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!
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Maybe we’re not worried about Wall Street bonuses but worried
about our own homes…!
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Total Mortgages, Homeowners & Households!
51.6!
75.5!
110.0!
Mortgages!Homeowners!Households!
Source: DB!(millions)!www.linkedin.com/in/skulakowski | 2010PMC !
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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 !
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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 !
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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 !
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Whether 20% of mortgages are
underwater—or 50%—we’re in trouble.!
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Which brings up the question of…!
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Moral Hazard!
If you are facing or considering foreclosure, you're not alone.!
You Have Options… !Source: www.YouWalkAway.com!
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Your Options!
Source: www.YouWalkAway.com!www.linkedin.com/in/skulakowski | 2010PMC !
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Your Options!With an on-line calculator provided!
Source: www.YouWalkAway.com!www.linkedin.com/in/skulakowski | 2010PMC !
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Good news for lenders:!Not many homeowners
just walk away.!
www.linkedin.com/in/skulakowski | 2010PMC !
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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!
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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,
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the strategic default rate was only 2.5% to 3.5%.
based on analysis of Mortgage Bankers Association and RealtyTrak data, mid-2009.!
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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.)!
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Why aren’t more homeowners walking?!
Individually!
They feel ashamed and afraid!
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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.!
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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!
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But homeowners do default…!
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…the default rate much more closely resembl[es] the unemployment rate than the percent underwater…
Source: White!
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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!
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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.!
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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!
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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 !
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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)!
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The unemployment rate has our sustained
attention.!
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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!
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Be afraid, not of homeowners just walking
away.!
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Be afraid of !falling home prices.!
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Be afraid of !continuing job losses.!
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Be very afraid of falling home prices coupled with
continuing job losses.!
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Together, they may force many more homeowners
to walk.!
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