Bankruptcy Cases, Mortgage Applications Drop; Fannie Mae Reports Profit

Bankruptcy cases filed in federal courts for fiscal year 2012 were down 14 percent compared to last year. The improvements in the housing market are slowly dragging Fannie Mae to improvement, reporting a much higher net income. Mortgage applications have decreased due to recent weather effects.

Bankruptcy cases filed in federal courts for fiscal year 2012, which is the 12-month period ending September 30, 2012, totaled 1,261,140, down 14 percent from the 1,467,221 bankruptcy cases filed in FY 2011, according to the Administrative Office of the U.S. Courts on Wednesday. The decline tends to indicate a little less stress on the economy.

For the 12-month period ending September 30, 2012, business bankruptcy filings—those where the debtor is a corporation or partnership, or the debt is mostly related to the operation of a business—totaled 42,008. That represents a 16 percent drop from the number of business filings reported in the year-long period ending September 30, 2011.

Non-business bankruptcy filings also dropped during the same period. They totaled 1,219,132 in FY 2012, down 14 percent from the 1,417,326 non-business bankruptcy filings in September 2011.

Fannie Mae Reports Profit

The improvements in the housing market are slowly dragging at least one GSE to improvement: Fannie Mae reported on Wednesday that it realized net income of $1.8 billion in the third quarter of 2012, compared with a net loss of $5.1 billion in the third quarter of 2011. For the first nine months of 2012, the company has reported $9.7 billion in net income.

A number of factors led to the good quarter for Fannie Mae. Lower credit-related expenses resulting from an increase in actual and expected home prices, for one thing, along with higher sales prices on the company’s REO property, and a decline in fair value losses, also contributed to the improvement in the company’s financial results.

Still, the GSE is experiencing elevated levels of credit losses. “We expect our credit losses to remain high in 2012 relative to pre-housing crisis levels,” according to the company in its most recent 10-Q filing. “We expect delays in foreclosures to continue for the remainder of 2012, which delays our realization of credit losses.”

Mortgage Applications Dip Due to Storm

Even as a lesser storm promised to make life more miserable in the Northeast on Wednesday, the effects of Sandy are still being assessed. The Mortgage Bankers Association reported on Wednesday that the storm had a downward impact on total mortgage applications, with the organization’s refinance index down 5 percent last week compared to the week before the storm. The mortgage purchase index was likewise down 5 percent week-over-week.

“Last week’s storm had a significant impact on application volumes on the East Coast,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement. “Applications fell more than 60 percent compared to the prior week in New Jersey, almost 50 percent in New York and nearly 40 percent in Connecticut. Other East Coast states also saw declines over the week, while many states in other parts of the country had increases in application volumes.”

Wall Street seemed nervous on Wednesday after the results of the election were fully confirmed. Not, perhaps, because of the results per se, but because the dynamics of the federal government don’t seem to have changed. In any case, the Dow Jones Industrial Average shed 312.95 points, or 2.36 percent, the largest drop so far this year. The S&P 500 was down 2.37 percent and the Nasdaq lost 1.5 percent.