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Kulakowski 201005PMC
 

Kulakowski 201005PMC

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2010PMC on homeowners strategically defaulting (or not yet doing so).

2010PMC on homeowners strategically defaulting (or not yet doing so).

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    Kulakowski 201005PMC Kulakowski 201005PMC Presentation 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 25! Mortgages”! 20!   March 2007 15! peak! 10!   Relative to “Financial 5! Crisis”!   Source: 0! Google Trends! Jul-04! Jul-05! Jul-06! Jul-07! Jul-08! Jul-09! Jan-04! Jan-05! Jan-06! Jan-07! Jan-08! Jan-09! Jan-10! www.linkedin.com/in/skulakowski | 2010PMC!
    • “Financial 25! Crisis”! 20! 15!   Sept. 2008 10! peak!   Source: 5! Google Trends! 0! Jul-04! Jul-05! Jul-06! Jul-07! Jul-08! Jul-09! Jan-04! Jan-05! Jan-06! Jan-07! Jan-08! Jan-09! Jan-10! www.linkedin.com/in/skulakowski | 2010PMC!
    • 90! “Bail Out”! 80! 70! 60! 50!   Sept. 2008 40! peak! 30! 20!   Source: Google Trends! 10! 0! Jul-04! Jul-05! Jul-06! Jul-07! Jul-08! Jul-09! Jan-04! Jan-05! Jan-06! Jan-07! Jan-08! Jan-09! Jan-10! www.linkedin.com/in/skulakowski | 2010PMC!
    • The Big Names in 2008! (notice the change of scale)! 300! 250! 200! 150! 100! 50! 0! Mar-08! Jul-08! Nov-08! Mar-09! Jul-09! Nov-09! Jan-08! May-08! Sep-08! Jan-09! May-09! Sep-09! AIG! Lehman! WAMU! www.linkedin.com/in/skulakowski | 2010PMC!
    • The various crises, 2007 to present, held our attention for a moment.! www.linkedin.com/in/skulakowski | 2010PMC!
    • 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!
    • Maybe we’re not worried about Wall Street bonuses but worried about our own homes…! www.linkedin.com/in/skulakowski | 2010PMC!
    • Total Mortgages, Homeowners & Households! 110.0! 75.5! Mortgages! 51.6! Homeowners! Households! Source: DB! (millions)! www.linkedin.com/in/skulakowski | 2010PMC!
    • Estimates of Underwater Mortgages! 51.6! Mortgages! CoreLogic ('08Q4)! 25.0! Eco.com 17.5! ('10Q1)! 11.0! DB ('11Q1)! Source: DB! (millions)! www.linkedin.com/in/skulakowski | 2010PMC!
    • Estimates of Underwater Mortgages! $11,030! Fed Reserve 2008! CoreLogic ('08Q4)! $5,344! Eco.com $3,741! ('10Q1)! $2,351! DB ('11Q1)! Source: DB! ($billions)! www.linkedin.com/in/skulakowski | 2010PMC!
    • Range of 12mo Change in S&P/CS Indices! 60%! 45%! 30%! 15%! 0%! -15%! -30%! -45%! to Jan-01! to Jan-03! to Jan-05! to Jan-06! to Jan-09! to Jan-10! to Jan-00! to Jan-02! to Jan-04! to Jan-07! to Jan-08! Median! Source: S&P/CSI! www.linkedin.com/in/skulakowski | 2010PMC!
    • Whether 20% of mortgages are underwater—or 50%— we’re in trouble.! www.linkedin.com/in/skulakowski | 2010PMC!
    • Which brings up the question of…! www.linkedin.com/in/skulakowski | 2010PMC!
    • 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!
    • 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.! www.linkedin.com/in/skulakowski | 2010PMC!
    • 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!
    • 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!
    • 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!
    • 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!
    • Why aren’t more homeowners walking?!   Individually!   They feel ashamed and afraid! www.linkedin.com/in/skulakowski | 2010PMC!
    • 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!
    • 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!
    • But homeowners do default…! www.linkedin.com/in/skulakowski | 2010PMC!
    • …the default rate much more closely resembl[es] the unemployment rate than the percent underwater… Source: White! www.linkedin.com/in/skulakowski | 2010PMC!
    • Delinquencies track Unemployment! %Under- Seriously Unemploy- water Delinq’t ment Merced, 85 18.99 17.5 CA Las Vegas- 81 15.33 11.3 Paradise Port St. 79 17.30 14.1 Lucie, FL Source: White! White’s paper includes additional MSAs! www.linkedin.com/in/skulakowski | 2010PMC!
    • 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!
    • Unemployment Rate! (BLS, seasonally adjusted)! 12%! 9%! 6%! 3%! 0%! 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!
    • 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!
    • Unemployment Rates! (BLS, seasonally adjusted)! 20%! 15%! 10%! 5%! 0%! 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!
    • The unemployment rate has our sustained attention.! www.linkedin.com/in/skulakowski | 2010PMC!
    • Unemployment Rates & Google Trends! 20%! 250! 15%! 200! 150! 10%! 100! 5%! 50! 0%! 0! Nov-04! Dec-06! Nov-09! Jan-04! Jun-04! Sep-05! Feb-06! May-07! Oct-07! Aug-08! Jan-09! Jun-09! Apr-05! Jul-06! Mar-08! U3 Unemployment Rate! U6 (inc. "marginally attached" and part-time workers)! Unemployment Google Trends! www.linkedin.com/in/skulakowski | 2010PMC!
    • Be afraid, not of homeowners just walking away.! www.linkedin.com/in/skulakowski | 2010PMC!
    • Be afraid of ! falling home prices.! www.linkedin.com/in/skulakowski | 2010PMC!
    • Be afraid of ! continuing job losses.! www.linkedin.com/in/skulakowski | 2010PMC!
    • Be very afraid of falling home prices coupled with continuing job losses.! www.linkedin.com/in/skulakowski | 2010PMC!
    • Together, they may force many more homeowners to walk.! www.linkedin.com/in/skulakowski | 2010PMC!
    • Contact! susan.kulakowski@me.com! www.linkedin.com/in/skulakowski!