You know trouble is brewing in the banking industry when one of Monopoly’s most famous addresses goes belly up.
That was the case last week when New York-based Park Avenue Bank, with assets of $520 million, was closed down by the Federal Reserve.
Maybe the bank’s closing isn’t a harbinger of more bad news (unless Boardwalk Bank in Linwood, N.J. closes as well).
A more genuine barometer for the mortgage markets this week is the news that foreclosures are up again. Actually, it’s a good news/bad news scenario. According to RealtyTrac, while foreclosures increased by 6% in February, on a year-to-year basis, it was the slowest decline in four years. Some more good news. Default notices, another housing industry measure monitored by RealtyTrac, are down 3% from a year ago.
So maybe the mortgage market is finally moving in the right direction.
On to other mortgage rate motivators. News this week shows that the foreclosure problem is really starting to localize. RealtyTrac reports that of the 300,000 foreclosures reported last month, four states accounted for more than 50% of the total U.S. foreclosure number. California (22%), Florida (17.5%), Michigan (6.5%) and Illinois (5.6%) are still saddled with major foreclosure issues. The rest of the country? Not so much.
A more stable foreclosure market should help stabilize the housing market, but it will also help push mortgage rates up as the economy improves.
The other timely trend to watch this week is news coming out of the Federal Reserve Board meeting Tuesday. Unless Ben Bernanke & crew hit the green beer a day early, expect them to further define the curtailing of its $1.3 trillion mortgage-backed security program. For weeks, the Fed has promised to end the program by March 31. But the agency did buy $10 billion more in mortgage securities just in the past week alone, and has $25 billion more in reserve to buy additional mortgage-backed paper. But after that, look for the Fed to get out of the mortgage security-buying business, with a probable uptick in mortgage results following close behind, as sellers sweeten the pot with higher rates to attract new investors.