Fiscal Cliff Bill Passes Congress; Serious Mortgage Delinquencies Dip

Congress finally passed the fiscal cliff bill yesterday morning. Serious mortgage delinquencies of more than 90 days past due declined in November. And Wall Street ended on a positive note yesterday.

In an exceedingly rare flurry of activity on a federal holiday (namely New Year’s Day 2013), Congress acted to forestall the fiscal cliff. First the Senate passed a bill in the wee hours of the morning by an unexpectedly lopsided 89-9 to deal with the matter. After that, a day of discussion (argument?) followed in the House of Representatives, mostly behind closed doors, by a majority that neither wanted to approve the Senate bill nor take blame for not approving something.

Before Christmas, the House Republican caucus couldn’t muster the votes necessary to pass their own version of a fiscal cliff bill (Plan B), which would have put the onus of finalizing the deal on the Democratically controlled Senate. So the Senate passed its version, which allows taxes to rise on couples making over $450,000 a year ($400,000 for individuals, but in any case about 1 percent of the population), extends unemployment benefits for about 2 million people, prevents a cut in Medicare reimbursements, and forestalls a spike in milk prices.

A couple of deadlines loomed large on Tuesday: first, how the markets might react on Wednesday. Arguably, rational investors were already anticipating a short period of uncertainty, but then again, investors are also known to be irrational at times. Another deadline was the fact that a new Congress will be sworn in on Thursday, consigning any unfinished business of the old Congress to the dustbin of history. So late on New Year’s Day, the House voted 257 to 167 to pass the Senate’s bill, with most of the chamber’s Democrats and some (fewer than half) of the Republican majority voting aye.

One thing the bill didn’t deal with in any comprehensive way was the meat-ax spending cuts that were part of the cliff. Rather, the measure puts off $24 billion worth of federal spending cuts for two months–which will probably set the stage for the next big donnybrook in Congress come March.

Serious Mortgage Delinquencies Down

Fannie Mae reported on Monday that single-family serious delinquency rate for mortgages it owns or guarantees–that is, mortgages more than 90 days past due–declined in November to 3.3 percent from 3.35 percent October. The rate is down from 4 percent in November 2011, and the current rate is also is the lowest one since March 2009, when serious delinquencies were rising fast, peaking at 5.59 percent in February 2010.

The other GSE, Freddie Mac, reported that its single-family serious delinquency rate declined in November to 3.25 percent from 3.31 percent in October. In November 2011, the rate was 3.57 percent. Like Fannie Mae’s rate, the current Freddie Mac rate is lower than it has been in quite a while, since August 2009, in fact. Freddie’s serious delinquency rate reached a peak in February 2010, when it stood at 4.2 percent.

Both of these metrics represent progress in the housing markets, but there’s still a ways to go in the recovery. “Normal” rates of serious delinquency, that is, the rates a decade or so before the Great Recession, persistently hovered below 1 percent.

Monday was a shortened trading day for Wall Street, ahead of the New Year’s Day holiday on Tuesday. Despite all the tentative news out of Washington, investors ended 2012 on a positive note, with the Dow Jones Industrial Average gaining 166.03 points, or 1.28 percent. The S&P 500 advanced 1.69 percent and the Nasdaq jumped exactly 2 percent.