Source: The Wall Street Journal
In April, the Obama administration formally rolled out a new program, called Home Affordable Foreclosure Alternatives, that was designed to spur more short sales, where banks allow homeowners to sell their homes for less than the mortgage debt outstanding.
Like other foreclosure-prevention initiatives, this one appears to be off to a slow start — just 342 sales have been completed through September.
HAFA was designed as a cousin to the Obama administration’s Home Affordable Modification Program, HAMP, whose woes have been well documented. HAFA works like this: Servicers are supposed to consider short sales for borrowers who aren’t able to receive a HAMP modification. Because some 700,000 HAMP applicants have been ejected from that program, there’s a potentially large pool of borrowers who might be evaluated for HAFA.
Initially announced in May 2009, HAFA was also designed to help reduce wait times by streamlining the short sale process through standardized documents and approaches for short sales. Under the program, the government offers incentive payments to mortgage-servicing companies, investors and even the borrowers that accept a short sale under prescribed guidelines.
For example, second-lien mortgages receive 6% of the unpaid loan balance in a short sale, up to a maximum of $6,000, but they must agree to relinquish all claims against a borrower. (Our story on Saturday illustrated why seconds pose problems in short sales.) The program also provides $3,000 in “move-out assistance” to borrowers.
Many real-estate agents say banks have largely ignored the program and that they are applying it unevenly. “Banks are initiating the HAFA transaction and then after three weeks they say, ‘Naw, sorry, you didn’t qualify,’” says Greg Markov, a Phoenix real-estate agent. “That three weeks is a huge pain. You wasted all this time.”
Industry officials, meanwhile, say that HAFA has been hindered by extensive documentation requirements and restrictive qualification guidelines. A homeowner that’s already relocated isn’t HAFA eligible, for example, and neither are borrowers that apply within 60 days of a foreclosure date.
The program is also voluntary, which may limit participation from second-lien holders and mortgage insurance companies that see a financial reason to avoid a short sale that requires them to forgo the opportunity to seek deficiencies against borrowers.
“It looks good on paper, but you can’t make anyone participate,” says Kevin Kauffman, a Phoenix real-estate agent who says he’s closed 150 short sales but has yet to complete one through HAFA.
Still, the Treasury and other supporters say they’re optimistic that results will pick up. Because short sales take several months to close, it’s perhaps unrealistic to expect huge numbers of deals that would close within five months. Moreover, Fannie Mae and Freddie Mac didn’t issue their own participation rules until August.
“It does take a little bit of time to see results on these,” says Dave Sunlin, Bank of America’s senior vice president for short sales and bank-owned property sales. “The concept on paper is there.”
URL to original article: http://www.housingwire.com/2010/11/29/what-happened-to-the-government%e2%80%99s-short-sales-program
Tuesday, November 30, 2010
John Taylor: Foreclosures are the mortal enemy to economic recovery
Source: CNBC
The foreclosure crisis still divides us into two camps. There are those who believe that foreclosing rapidly on homes subject to defaulted mortgages is vital to clearing the market. Others believe we should do everything we can to keep people in their homes, urging loan modifications to forestall foreclosures.
John Taylor, President and CEO of the National Community Reinvestment Coalition, falls solidly in the latter camp. Taylor would like to see widespread mortgage modifications that would allow homeowners in danger of defaulting to keep their homes. Taylor is on the board of directors of the Rainbow/PUSH Coalition and the Leadership Conference for Civil Rights. He has also served on the Consumer Advisory Council of the Federal Reserve Bank Board, The Fannie Mae Housing Impact Division as well as The Freddie Mac Housing Advisory Board. He is extremely passionate on why his idea is the right choice to help turn around the real estate market.
LL: There has been so much overleveraging in the real estate industry and lower interest rates can only help so much, what needs to get done with this new Congress looking at Financial Reform with Fannie and Freddie because they have not been address yet.
JT: You are absolutely right. It's kind of like pumping plasma into a patient while the patient is still bleeding. We need to stanch the foreclosure crisis first. So the government has to get serious about this problem. The Administration’s voluntary approach to foreclosure prevention has probably done as much as it can possibly do, and even by their standards has not done enough.
They have to step up the pressure now to achieve better results. The Federal Housing Administration (FHA) and Fannie and Freddie are the only securitizers in town now until the private market comes back; , they ought to be able to get banks and servicers willing to cooperate and modify these loans heading to foreclosure.
It must be done. Because it is absolutely going to slow down any type of economic recovery if we have the eleven million more foreclosures projected by Wall Street analysts; if they go through, it’s going to triple the number of foreclosures we’ve experienced. How is that going to help the economy? So you have to put on the table the idea of taking as many of these troubled loans as possible and putting the homeowners in sustainable, modified loans, that are based on their ability to pay. Banks should have made these kinds of loans, which the homeowner could actually pay back, in the first place.
LL: But what about the millions of people who purchased homes they could afford? Why should people be allowed to stay in homes they had no business buying in the first place, because they were way out of their price tag?
JT: Was it a massive, malfeasant, greedy, lending industry that caused the problem or was it stupid consumers who should have known better? I think the evidence overwhelmingly supports the former conclusion. But that doesn't matter anymore; we don’t have time for that debate. The question now is what do we do to stop the foreclosures that are killing our economy by a thousand cuts, a hundred fold, every month.
Foreclosures are the mortal enemy to economic recovery. We can keep on pumping money into the system to create liquidity for banks and in the market, but it’s simply not going to succeed until they plug the hole at the bottom of the well!
So what has the Administration done to stem foreclosures? They have put in place a voluntary program, which has done roughly half a million permanent modifications since the program began, but there's been three and a half million foreclosures during the same time period and seven million foreclosure filings.
That kind of performance earns merits a failing grade by any one's standards.
So what do federal officials need to do? They need to stop carrying their hat in hand when dealing with Wall Street; The government can pound these guys, and they have all the leverage they need by merit of the fact that the banks can't do business without them. I hear people critical about the government’s role in the private lending sector; but without the government we don't have a housing market right now. Without the government there is no Fed window and bond issuance and the liquidity they create. Without the government there is no securitization. Wall Street isn't doing these things; there is almost no private label securitization happening.
You know, all these banks are sitting on loans heading into foreclosure because the banks that hold the second liens are refusing to modify; the banks that hold the second liens are expecting the first lien holders will take the entire hit, and they’ll get paid out at 100%. Well these banks holding the second liens need to be taken to task, because they are holding up a lot of modifications.
Also, what are Fannie and Freddie waiting for? The government holds tremendous regulatory authority over them; but government officials says they can’t tell them what to do, even though the government says no not really, Fannie and Freddie that they are just in conservatorship. and we can’t tell them what to do. That's just not true. The government is in the position to tell Fannie and Freddie to refinance hundreds of thousands of loans tomorrow, but Fannie and Freddie and the administration are looking at their bottom line so they are charging extra fees above the private market on anything that has any type of risk in it. Fannie and Freddie have not reduced the principal on one single mortgage.
They have done half of what the banks are doing.We said from the beginning, to Secretary Paulson and then Geithner, that the foreclosure crisis can’t be resolved by the voluntary participation of the banks.
You can't keep on sweetening the pie and expect them to do the right thing. The truth of the matter is that when push comes to shove the banks have no choice because the government has the ability to say to banks that if they want to do business with the government, including the Federal Reserve, FHA and the GSEs, they must cooperate and restructure these loans. If that had been done, some investors would have had to take some losses; but they are losing now at a very slow rate, prolonging the problem.
The government should use the money they earned from TARP and purchase hundreds of thousands of loans at a discount—at a discount because they are not worth what they once were—and then recycle them into good, permanent, sustainable loans. Where people lost their jobs and can't afford their homes, other solutions are necessary. And abandoned properties should be foreclosed on and the properties should be put back on the market.
But we’re not seeing practical solutions to the foreclosure crisis pursued. It seems to me people are just throwing up their arms, letting everything go down and saying if we don't get through all these foreclosures we will never see a bottom. I think its a terrible way to get through all this, and it will undermine our economy for years to come.
LL: What you are proposing is extremely unpopular. How do you convince Americans this is the way to go to help the industry heal?
JT: People have a right to be mad, but they shouldn’t be mad at 17 million plus homeowners that have either gone into foreclosure or are heading there. Seventeen million homeowners can’t all be stupid and greedy and wrong. The behavior of the industry is what changed; the financial services sector tricked and trapped these people, without the proper oversight to rein in their irresponsible lending practices.
Should people have known better? Yes. But the industry was rigged to push through these loans and convince people they could afford to do it. But again, it’s too late to rehash these tired debates. If we do not respond to the foreclosure crisis now, we can guarantee the pain that will be felt by most of the people in this country. Families facing foreclosure don’t want a handout, they just want reasonable help. In fact, most of the people that got bad loans, perhaps 90 percent of them, are still paying on that sub-prime loan. Some of them have just simply fallen behind.
If we don't do restructure their loans and keep people in their homes, property values will drop and everyone will be impacted who owns a home. We need to share the pain now, because otherwise it will affect us more broadly. Many people might think well, gee, if these homeowners had been smart they should have gotten the loan I got. Well that loan was not available to them because the system was rigged to push people into higher cost loans. Why? Because brokers and lenders got their fees and earnings that were connected to convincing people to take out more expensive mortgages with predatory terms and conditions. That's what was wrong.
You can sit there and say the people should have known better, and call that the moral hazard. Or, you can recognize the real moral hazard here was allowing an industry to prepay upon a substantial portion of the home-owning public, to give them loans with terms and conditions the lenders knew were not sustainable.
The moral dilemma then is do you put the burden on the people affected, while the banks are allowed to continue with their business? With the exception of investment products, when other other consumer product goes bad, the burden is put on the manufacturer, not the consumer.
LL: Do you think the new congress will create good regulation laws?
JT: The conservatives basically want to get rid of Fannie and Freddie, they don't want the competition for the private market. The Democrats are acting too timid.
Congress has not shown that they are willing to push for all lenders to make responsible, sustainable loans to working-class people, and I’m not hopeful that this will change in the next Congress. People need loans for businesses, housing, other purposes, but they must be fair and sustainable loans, otherwise we get into trouble again. Expanding the Community Reinvestment Act would accomplish this goal, but too many members of Congress are too may be beholden to Wall Street to make that happen.
LL: Do you think these two far extremely will be able to meet in the middle?
JT: I think in the end, Fannie and Freddie will be different then they are today.
They'll have considerably less market share. We ought to preserve their role in as a securitizer of affordable housing loans, but that remains to be seen. Hopefully that core aspect of Fannie and Freddie’s purpose will remain intact.
LL: Where are we in the Fannie and Freddie put-back Tsunami?
JT: This is a very astute question, and I'm really surprised more reporters are not focusing on this. This is the real issue that will force everyone to come to the table and I think that's a good thing. Fannie and Freddie are sending back bad loans; where they believe there was widespread fraud and abuse in the origination process. The GSEs have reps and warrants to be able to force the lenders to verify if they followed underwriting guidelines. If you acted fraudulently, then you ought to be responsible for any mortgage that is going bad.
That's the way it’s supposed to work. That's also a protection for the taxpayers and investors.
This is the same process that private label securitizers use. The private labels can also turn around and do the same thing, and there the problems are even more severe, because the private labels encouraged and purchased massive amounts of the no-document, low-document, verbally guarantee loans. These were the standards they created and accepted. So it’s difficult for them to go back to the lenders and say “you’re responsible for this now.”
And there are other complicit parties. When things started to go sour, I went to one of the credit agencies, S&P, and they showed me one of the forms they used in their rating process. The lenders had to describe the nature of these loans, and on this particular document showed the y loans with low-documentation, no-documentation, piggyback second loans, Yield Spread Premiums, long prepayment penalties, balloon payments; in short, they had all those things that got everybody into trouble. It was all codified by the investment banks and the rating agencies. The problem was that the investors didn't know about this.
LL: What inning are we in in this put-back tsunami?
JT: To use your baseball metaphor, we are in the second inning of a nine-inning game, where all the pitchers are striking people out and no one is getting any hits. We can play this game out for another six to seven years with millions of foreclosures piling up and watch property values continue to deteriorate and unemployment go up, or we can grab the bull by the horn and get serious about this.
The federal government must mandate that the private sector modify certain loans such that they match the borrowers ability-to-pay. Voluntary compliance simply has not and will not work. These new loans should match the incomes of the borrowers so that a responsible borrower has a sustainable loan. Those who have lost their jobs should be given a reasonable period to find suitable employment, and if unsuccessful, have the time to pursue other housing options.
URL to original article: http://www.housingwire.com/2010/11/29/john-taylor-foreclosures-are-the-mortal-enemy-to-economic-recovery
The foreclosure crisis still divides us into two camps. There are those who believe that foreclosing rapidly on homes subject to defaulted mortgages is vital to clearing the market. Others believe we should do everything we can to keep people in their homes, urging loan modifications to forestall foreclosures.
John Taylor, President and CEO of the National Community Reinvestment Coalition, falls solidly in the latter camp. Taylor would like to see widespread mortgage modifications that would allow homeowners in danger of defaulting to keep their homes. Taylor is on the board of directors of the Rainbow/PUSH Coalition and the Leadership Conference for Civil Rights. He has also served on the Consumer Advisory Council of the Federal Reserve Bank Board, The Fannie Mae Housing Impact Division as well as The Freddie Mac Housing Advisory Board. He is extremely passionate on why his idea is the right choice to help turn around the real estate market.
LL: There has been so much overleveraging in the real estate industry and lower interest rates can only help so much, what needs to get done with this new Congress looking at Financial Reform with Fannie and Freddie because they have not been address yet.
JT: You are absolutely right. It's kind of like pumping plasma into a patient while the patient is still bleeding. We need to stanch the foreclosure crisis first. So the government has to get serious about this problem. The Administration’s voluntary approach to foreclosure prevention has probably done as much as it can possibly do, and even by their standards has not done enough.
They have to step up the pressure now to achieve better results. The Federal Housing Administration (FHA) and Fannie and Freddie are the only securitizers in town now until the private market comes back; , they ought to be able to get banks and servicers willing to cooperate and modify these loans heading to foreclosure.
It must be done. Because it is absolutely going to slow down any type of economic recovery if we have the eleven million more foreclosures projected by Wall Street analysts; if they go through, it’s going to triple the number of foreclosures we’ve experienced. How is that going to help the economy? So you have to put on the table the idea of taking as many of these troubled loans as possible and putting the homeowners in sustainable, modified loans, that are based on their ability to pay. Banks should have made these kinds of loans, which the homeowner could actually pay back, in the first place.
LL: But what about the millions of people who purchased homes they could afford? Why should people be allowed to stay in homes they had no business buying in the first place, because they were way out of their price tag?
JT: Was it a massive, malfeasant, greedy, lending industry that caused the problem or was it stupid consumers who should have known better? I think the evidence overwhelmingly supports the former conclusion. But that doesn't matter anymore; we don’t have time for that debate. The question now is what do we do to stop the foreclosures that are killing our economy by a thousand cuts, a hundred fold, every month.
Foreclosures are the mortal enemy to economic recovery. We can keep on pumping money into the system to create liquidity for banks and in the market, but it’s simply not going to succeed until they plug the hole at the bottom of the well!
So what has the Administration done to stem foreclosures? They have put in place a voluntary program, which has done roughly half a million permanent modifications since the program began, but there's been three and a half million foreclosures during the same time period and seven million foreclosure filings.
That kind of performance earns merits a failing grade by any one's standards.
So what do federal officials need to do? They need to stop carrying their hat in hand when dealing with Wall Street; The government can pound these guys, and they have all the leverage they need by merit of the fact that the banks can't do business without them. I hear people critical about the government’s role in the private lending sector; but without the government we don't have a housing market right now. Without the government there is no Fed window and bond issuance and the liquidity they create. Without the government there is no securitization. Wall Street isn't doing these things; there is almost no private label securitization happening.
You know, all these banks are sitting on loans heading into foreclosure because the banks that hold the second liens are refusing to modify; the banks that hold the second liens are expecting the first lien holders will take the entire hit, and they’ll get paid out at 100%. Well these banks holding the second liens need to be taken to task, because they are holding up a lot of modifications.
Also, what are Fannie and Freddie waiting for? The government holds tremendous regulatory authority over them; but government officials says they can’t tell them what to do, even though the government says no not really, Fannie and Freddie that they are just in conservatorship. and we can’t tell them what to do. That's just not true. The government is in the position to tell Fannie and Freddie to refinance hundreds of thousands of loans tomorrow, but Fannie and Freddie and the administration are looking at their bottom line so they are charging extra fees above the private market on anything that has any type of risk in it. Fannie and Freddie have not reduced the principal on one single mortgage.
They have done half of what the banks are doing.We said from the beginning, to Secretary Paulson and then Geithner, that the foreclosure crisis can’t be resolved by the voluntary participation of the banks.
You can't keep on sweetening the pie and expect them to do the right thing. The truth of the matter is that when push comes to shove the banks have no choice because the government has the ability to say to banks that if they want to do business with the government, including the Federal Reserve, FHA and the GSEs, they must cooperate and restructure these loans. If that had been done, some investors would have had to take some losses; but they are losing now at a very slow rate, prolonging the problem.
The government should use the money they earned from TARP and purchase hundreds of thousands of loans at a discount—at a discount because they are not worth what they once were—and then recycle them into good, permanent, sustainable loans. Where people lost their jobs and can't afford their homes, other solutions are necessary. And abandoned properties should be foreclosed on and the properties should be put back on the market.
But we’re not seeing practical solutions to the foreclosure crisis pursued. It seems to me people are just throwing up their arms, letting everything go down and saying if we don't get through all these foreclosures we will never see a bottom. I think its a terrible way to get through all this, and it will undermine our economy for years to come.
LL: What you are proposing is extremely unpopular. How do you convince Americans this is the way to go to help the industry heal?
JT: People have a right to be mad, but they shouldn’t be mad at 17 million plus homeowners that have either gone into foreclosure or are heading there. Seventeen million homeowners can’t all be stupid and greedy and wrong. The behavior of the industry is what changed; the financial services sector tricked and trapped these people, without the proper oversight to rein in their irresponsible lending practices.
Should people have known better? Yes. But the industry was rigged to push through these loans and convince people they could afford to do it. But again, it’s too late to rehash these tired debates. If we do not respond to the foreclosure crisis now, we can guarantee the pain that will be felt by most of the people in this country. Families facing foreclosure don’t want a handout, they just want reasonable help. In fact, most of the people that got bad loans, perhaps 90 percent of them, are still paying on that sub-prime loan. Some of them have just simply fallen behind.
If we don't do restructure their loans and keep people in their homes, property values will drop and everyone will be impacted who owns a home. We need to share the pain now, because otherwise it will affect us more broadly. Many people might think well, gee, if these homeowners had been smart they should have gotten the loan I got. Well that loan was not available to them because the system was rigged to push people into higher cost loans. Why? Because brokers and lenders got their fees and earnings that were connected to convincing people to take out more expensive mortgages with predatory terms and conditions. That's what was wrong.
You can sit there and say the people should have known better, and call that the moral hazard. Or, you can recognize the real moral hazard here was allowing an industry to prepay upon a substantial portion of the home-owning public, to give them loans with terms and conditions the lenders knew were not sustainable.
The moral dilemma then is do you put the burden on the people affected, while the banks are allowed to continue with their business? With the exception of investment products, when other other consumer product goes bad, the burden is put on the manufacturer, not the consumer.
LL: Do you think the new congress will create good regulation laws?
JT: The conservatives basically want to get rid of Fannie and Freddie, they don't want the competition for the private market. The Democrats are acting too timid.
Congress has not shown that they are willing to push for all lenders to make responsible, sustainable loans to working-class people, and I’m not hopeful that this will change in the next Congress. People need loans for businesses, housing, other purposes, but they must be fair and sustainable loans, otherwise we get into trouble again. Expanding the Community Reinvestment Act would accomplish this goal, but too many members of Congress are too may be beholden to Wall Street to make that happen.
LL: Do you think these two far extremely will be able to meet in the middle?
JT: I think in the end, Fannie and Freddie will be different then they are today.
They'll have considerably less market share. We ought to preserve their role in as a securitizer of affordable housing loans, but that remains to be seen. Hopefully that core aspect of Fannie and Freddie’s purpose will remain intact.
LL: Where are we in the Fannie and Freddie put-back Tsunami?
JT: This is a very astute question, and I'm really surprised more reporters are not focusing on this. This is the real issue that will force everyone to come to the table and I think that's a good thing. Fannie and Freddie are sending back bad loans; where they believe there was widespread fraud and abuse in the origination process. The GSEs have reps and warrants to be able to force the lenders to verify if they followed underwriting guidelines. If you acted fraudulently, then you ought to be responsible for any mortgage that is going bad.
That's the way it’s supposed to work. That's also a protection for the taxpayers and investors.
This is the same process that private label securitizers use. The private labels can also turn around and do the same thing, and there the problems are even more severe, because the private labels encouraged and purchased massive amounts of the no-document, low-document, verbally guarantee loans. These were the standards they created and accepted. So it’s difficult for them to go back to the lenders and say “you’re responsible for this now.”
And there are other complicit parties. When things started to go sour, I went to one of the credit agencies, S&P, and they showed me one of the forms they used in their rating process. The lenders had to describe the nature of these loans, and on this particular document showed the y loans with low-documentation, no-documentation, piggyback second loans, Yield Spread Premiums, long prepayment penalties, balloon payments; in short, they had all those things that got everybody into trouble. It was all codified by the investment banks and the rating agencies. The problem was that the investors didn't know about this.
LL: What inning are we in in this put-back tsunami?
JT: To use your baseball metaphor, we are in the second inning of a nine-inning game, where all the pitchers are striking people out and no one is getting any hits. We can play this game out for another six to seven years with millions of foreclosures piling up and watch property values continue to deteriorate and unemployment go up, or we can grab the bull by the horn and get serious about this.
The federal government must mandate that the private sector modify certain loans such that they match the borrowers ability-to-pay. Voluntary compliance simply has not and will not work. These new loans should match the incomes of the borrowers so that a responsible borrower has a sustainable loan. Those who have lost their jobs should be given a reasonable period to find suitable employment, and if unsuccessful, have the time to pursue other housing options.
URL to original article: http://www.housingwire.com/2010/11/29/john-taylor-foreclosures-are-the-mortal-enemy-to-economic-recovery
Monday, November 29, 2010
Nation has 8.6-month glut of new homes on market, Census Bureau says
by CHRISTINE RICCIARDI
New home sales dropped to an annualized rate of 283,000 in October, leaving 202,000 new homes (8.6 months worth) on the market, according to a report released Wednesday by the Census Bureau and the Department of Housing and Urban Development.
New home sales are down 8.1% from September and 28.5% from October 2009.
The National Association of Realtors reported Tuesday that existing home sales trended down in October also, dipping 2.2% compared to September.
Collectively in 2010, the annualized rate of new home sales is 273,000. This is down 14% from 2009.
The West region saw the steepest decline in new homes sales compared to the year- ago period, down 46.9%, followed by the Midwest (down 27.8%), the South (down 23%) and the Northeast (down 12.1%).
The median sales price for a new home in October was $194,900, down 14% from $226,300 in September and down 9% from $215,100 one year ago. In October, the average sales price also decreased, down to $248,200 from $269,700 in September and $263,800 in October 2009.
URL to original article: http://www.housingwire.com/2010/11/24/nation-has-8-6-month-glut-of-new-homes-on-market-census-bureau-says
New home sales dropped to an annualized rate of 283,000 in October, leaving 202,000 new homes (8.6 months worth) on the market, according to a report released Wednesday by the Census Bureau and the Department of Housing and Urban Development.
New home sales are down 8.1% from September and 28.5% from October 2009.
The National Association of Realtors reported Tuesday that existing home sales trended down in October also, dipping 2.2% compared to September.
Collectively in 2010, the annualized rate of new home sales is 273,000. This is down 14% from 2009.
The West region saw the steepest decline in new homes sales compared to the year- ago period, down 46.9%, followed by the Midwest (down 27.8%), the South (down 23%) and the Northeast (down 12.1%).
The median sales price for a new home in October was $194,900, down 14% from $226,300 in September and down 9% from $215,100 one year ago. In October, the average sales price also decreased, down to $248,200 from $269,700 in September and $263,800 in October 2009.
URL to original article: http://www.housingwire.com/2010/11/24/nation-has-8-6-month-glut-of-new-homes-on-market-census-bureau-says
Wednesday, November 24, 2010
Delinquent borrowers would rather rent: Fannie Mae survey
by CHRISTINE RICCIARDI
Half of homeowners who are delinquent on their mortgages would rather rent than buy a home, according to Fannie Mae's third quarter national housing survey.
This is the first time the rental preference has exceeded the percentage of people who would rather buy. Fifty percent said they would rather rent, up 10% from January, while 45% said they would buy a home, down 11% since January.
According to the quarterly survey, 68% of Americans think it's a good time to buy a home, down 2% from the last survey conducted in June, while 29% of Americans think it's a bad time to buy a home, up 3% from June. Eighty-five percent of respondents said they think it is a bad time to sell a home, up 2% from June.
“Consumer attitudes toward buying a home are more negative since last quarter,” said Doug Duncan, vice president and chief economist at Fannie Mae. “Our survey shows that Americans’ declining optimism about housing and their personal finances is reinforcing increasingly realistic attitudes toward owning and renting.”
Americans believe rental prices will increase more than home price by a ratio of 4 to 1, according to Fannie Mae, but that won't deter the attractiveness of the market.
Fannie Mae found that an almost equal number of Americans expect home prices to increase in the next year as think prices will decrease, with 25% thinking they will increase (down 6% from the last quarter) and 22% believing they will decrease (up 4%).
Fannie Mae said in its economic outlook that home sales are expected to bottom out during the fourth quarter.
URL to original article: http://www.housingwire.com/2010/11/23/delinquent-borrowers-would-rather-rent-fannie-mae-survey
Half of homeowners who are delinquent on their mortgages would rather rent than buy a home, according to Fannie Mae's third quarter national housing survey.
This is the first time the rental preference has exceeded the percentage of people who would rather buy. Fifty percent said they would rather rent, up 10% from January, while 45% said they would buy a home, down 11% since January.
According to the quarterly survey, 68% of Americans think it's a good time to buy a home, down 2% from the last survey conducted in June, while 29% of Americans think it's a bad time to buy a home, up 3% from June. Eighty-five percent of respondents said they think it is a bad time to sell a home, up 2% from June.
“Consumer attitudes toward buying a home are more negative since last quarter,” said Doug Duncan, vice president and chief economist at Fannie Mae. “Our survey shows that Americans’ declining optimism about housing and their personal finances is reinforcing increasingly realistic attitudes toward owning and renting.”
Americans believe rental prices will increase more than home price by a ratio of 4 to 1, according to Fannie Mae, but that won't deter the attractiveness of the market.
Fannie Mae found that an almost equal number of Americans expect home prices to increase in the next year as think prices will decrease, with 25% thinking they will increase (down 6% from the last quarter) and 22% believing they will decrease (up 4%).
Fannie Mae said in its economic outlook that home sales are expected to bottom out during the fourth quarter.
URL to original article: http://www.housingwire.com/2010/11/23/delinquent-borrowers-would-rather-rent-fannie-mae-survey
Bank earnings skyrocket in 3Q as FDIC problem list nears 17-year high
by JASON PHILYAW
Third-quarter earnings at institutions insured by the Federal Deposit Insurance Corp. continue to get stronger even as the number of banks on the regulator's problem list nears the highest level in 17 years.
The FDIC said banks it insures earned $14.5 billion for the three months ended Sept. 30, up substantially from $2 billion a year earlier and the fifth-straight quarter of earnings growth. While more than three-fifths of banks reported increased third-quarter earnings, almost one-fifth reported a loss, according to the FDIC.
"The banking industry is indeed regaining its footing in spite of the still fragile economy," according to James Chessen, chief economist of the American Bankers Association. "Asset quality has improved, loan losses have declined, and banks continue to increase their capital levels. As economic conditions improve, banks will be in a strong position to look for new lending opportunities and meet loan demands in their communities."
Meanwhile, there are now 860 banks on the FDIC problem list, up from 829 in the second quarter and 55% higher than 552 a year ago. The regulator said the level of troubled banks is the highest since March 1993 when there were 928. Some 41 banking institutions were shuttered by the FDIC during the third quarter and another 22 have closed since, pushing the total of bank failures to 149 this year. For all of 2009, 140 banks failed.
The deposit insurance fund, which protects depositors upon a bank's failure, improved for the third-consecutive quarter and now stands at a negative $8 billion, which is narrower than the negative $15.2 billion a year ago. The FDIC said assessment revenues and a reduction in the contingent loss reserve helped the DIF. The reserve, which covers costs of expected failures, declined to $21.3 billion from $27.5 billion.
"While we expect demands on cash to continue, our projections indicate that our current resources are more than enough to resolve anticipated failures and meet outstanding obligations for banks that have already failed," FDIC Chairman Sheila Bair said.
She said lower provisions for loan losses, which fell for the first time in four years, are helping bank earnings and fueling the recovery for the industry. Most banks increased loan loss provisions in the third quarter, but reductions at large banks resulted in an overall decline. An 8.1% increase in net interest income to $8.1 billion, and gains on securities and other assets of $7.3 billion also boosted the bottom line for the quarter.
"Credit performance has been improving, and we remain cautiously optimistic about the outlook," Bair said. "At this point in the credit cycle it is too early for institutions to be reducing reserves without strong evidence of sustainable, improving loan performance and reduced loss rates. When it comes to the adequacy of reserves, institutions should always err on the side of caution."
And many banks may be stockpiling reserves in anticipation of new capital requirements mandated in Basel 3.
"Banks added another $18.4 billion in equity capital in the third quarter and total industry capital is now over $1.5 trillion," according to ABA's Chessen. "When added to the more than $240 billion in reserves banks have set aside to cover losses, this makes for a total buffer of roughly $1.74 trillion against losses."
"In addition, the industry capital-to-assets ratio – a key measure of financial strength – continues to improve and is at the highest level since the 1920s. In fact, 95.7% of banks – holding 99% of the industry’s assets – are classified as ‘well capitalized,’ which is the highest regulatory designation possible," Chessen said.
The FDIC said the amount of loans and leases 90-days or more past due during the third quarter fell for a second-consecutive quarter. And the level of charge offs for uncollectible loans fell nearly 16% for the quarter to $42.9 billion from about $51 billion a year earlier. This is the second quarter in a row that net charge-offs posted a year-over-year decline.
URL to original article: http://www.housingwire.com/2010/11/23/bank-earnings-rose-in-3q-as-fdic-problem-list-nears-17-year-high
Third-quarter earnings at institutions insured by the Federal Deposit Insurance Corp. continue to get stronger even as the number of banks on the regulator's problem list nears the highest level in 17 years.
The FDIC said banks it insures earned $14.5 billion for the three months ended Sept. 30, up substantially from $2 billion a year earlier and the fifth-straight quarter of earnings growth. While more than three-fifths of banks reported increased third-quarter earnings, almost one-fifth reported a loss, according to the FDIC.
"The banking industry is indeed regaining its footing in spite of the still fragile economy," according to James Chessen, chief economist of the American Bankers Association. "Asset quality has improved, loan losses have declined, and banks continue to increase their capital levels. As economic conditions improve, banks will be in a strong position to look for new lending opportunities and meet loan demands in their communities."
Meanwhile, there are now 860 banks on the FDIC problem list, up from 829 in the second quarter and 55% higher than 552 a year ago. The regulator said the level of troubled banks is the highest since March 1993 when there were 928. Some 41 banking institutions were shuttered by the FDIC during the third quarter and another 22 have closed since, pushing the total of bank failures to 149 this year. For all of 2009, 140 banks failed.
The deposit insurance fund, which protects depositors upon a bank's failure, improved for the third-consecutive quarter and now stands at a negative $8 billion, which is narrower than the negative $15.2 billion a year ago. The FDIC said assessment revenues and a reduction in the contingent loss reserve helped the DIF. The reserve, which covers costs of expected failures, declined to $21.3 billion from $27.5 billion.
"While we expect demands on cash to continue, our projections indicate that our current resources are more than enough to resolve anticipated failures and meet outstanding obligations for banks that have already failed," FDIC Chairman Sheila Bair said.
She said lower provisions for loan losses, which fell for the first time in four years, are helping bank earnings and fueling the recovery for the industry. Most banks increased loan loss provisions in the third quarter, but reductions at large banks resulted in an overall decline. An 8.1% increase in net interest income to $8.1 billion, and gains on securities and other assets of $7.3 billion also boosted the bottom line for the quarter.
"Credit performance has been improving, and we remain cautiously optimistic about the outlook," Bair said. "At this point in the credit cycle it is too early for institutions to be reducing reserves without strong evidence of sustainable, improving loan performance and reduced loss rates. When it comes to the adequacy of reserves, institutions should always err on the side of caution."
And many banks may be stockpiling reserves in anticipation of new capital requirements mandated in Basel 3.
"Banks added another $18.4 billion in equity capital in the third quarter and total industry capital is now over $1.5 trillion," according to ABA's Chessen. "When added to the more than $240 billion in reserves banks have set aside to cover losses, this makes for a total buffer of roughly $1.74 trillion against losses."
"In addition, the industry capital-to-assets ratio – a key measure of financial strength – continues to improve and is at the highest level since the 1920s. In fact, 95.7% of banks – holding 99% of the industry’s assets – are classified as ‘well capitalized,’ which is the highest regulatory designation possible," Chessen said.
The FDIC said the amount of loans and leases 90-days or more past due during the third quarter fell for a second-consecutive quarter. And the level of charge offs for uncollectible loans fell nearly 16% for the quarter to $42.9 billion from about $51 billion a year earlier. This is the second quarter in a row that net charge-offs posted a year-over-year decline.
URL to original article: http://www.housingwire.com/2010/11/23/bank-earnings-rose-in-3q-as-fdic-problem-list-nears-17-year-high
Tuesday, November 23, 2010
Jumbo loan limits remain the same in 2011
by CHRISTINE RICCIARDI
The loan limits on jumbo conforming loans will remain unchanged for the first nine months of 2011 the Federal Housing Finance Administration said Friday. The agency recently enacted a congressional continuing resolution to maintain the limits.
The maximum jumbo loan limit is generally $417,000, but can go as high as $729,750. Loan limits vary by county and are the greatest in "high-cost" areas, meaning the top 20 major metropolitan areas across the U.S.
President and founder of Total Mortgage Services John Walsh told HousingWire in a recent interview he believes that the loan limit should extended to its fullest in every city.
"My thought is you should expand that increased conforming loan limit countrywide because a lot of people fall between $417,000 and $729,750," Walsh said. "It would put a lot more people in the purchase market that wouldn't necessarily qualify under the jumbo program."
A full list of conforming jumbo loan limits can be found here.
URL to original article: http://www.housingwire.com/2010/11/19/jumbo-loan-limits-remain-the-same-in-2011
The loan limits on jumbo conforming loans will remain unchanged for the first nine months of 2011 the Federal Housing Finance Administration said Friday. The agency recently enacted a congressional continuing resolution to maintain the limits.
The maximum jumbo loan limit is generally $417,000, but can go as high as $729,750. Loan limits vary by county and are the greatest in "high-cost" areas, meaning the top 20 major metropolitan areas across the U.S.
President and founder of Total Mortgage Services John Walsh told HousingWire in a recent interview he believes that the loan limit should extended to its fullest in every city.
"My thought is you should expand that increased conforming loan limit countrywide because a lot of people fall between $417,000 and $729,750," Walsh said. "It would put a lot more people in the purchase market that wouldn't necessarily qualify under the jumbo program."
A full list of conforming jumbo loan limits can be found here.
URL to original article: http://www.housingwire.com/2010/11/19/jumbo-loan-limits-remain-the-same-in-2011
Monday, November 22, 2010
LPS: Foreclosure inventories rise in October while yearly delinquency rate drops
by KERRY CURRY
Lender Processing Services (LPS: 30.97 -0.06%) said the delinquency rate in October was 9.29% for loans that were 30 or more days overdue.
The rate was flat with the September delinquency rate of 9.27%, but year-over-year, the delinquency rate is down 8.4%, said LPS, a data and analytics firm in the mortgage finance and residential real estate industries.
The current inventory of pre-sale foreclosures is 3.92% of the housing market, up 2.1% over September and up 5.2% over the year-ago figure.
The data comes from a "first look" at month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.
LPS said 4.95 million properties have loans that are 30 or more days past due, but not in foreclosure while 2.24 million properties have mortgages that are 90 or more days delinquent. Last month, the number of 90+ delinquencies stood at 2.3 million.
Nearly 2.1 million homes are in pre-sale foreclosure inventory, while the total number of properties that are 30 or more days delinquent or in foreclosure stands at more than 7.04 million, similar to last month’s figures.
States with highest percentage of noncurrent loans were Florida, Nevada, Mississippi, Georgia, Louisiana and New Jersey. States with the lowest percentage of noncurrent loans were Montana, Wyoming, Alaska, South Dakota and North Dakota. Noncurrent totals combine foreclosures and delinquencies as a percent of active loans in that state.
LPS will provide a more in-depth review of this data in its monthly Mortgage Monitor report, due out on Nov. 22.
URL to original article: http://www.housingwire.com/2010/11/16/lps-foreclosure-inventories-rise-in-october-while-yearly-delinquency-rate-drops
Lender Processing Services (LPS: 30.97 -0.06%) said the delinquency rate in October was 9.29% for loans that were 30 or more days overdue.
The rate was flat with the September delinquency rate of 9.27%, but year-over-year, the delinquency rate is down 8.4%, said LPS, a data and analytics firm in the mortgage finance and residential real estate industries.
The current inventory of pre-sale foreclosures is 3.92% of the housing market, up 2.1% over September and up 5.2% over the year-ago figure.
The data comes from a "first look" at month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.
LPS said 4.95 million properties have loans that are 30 or more days past due, but not in foreclosure while 2.24 million properties have mortgages that are 90 or more days delinquent. Last month, the number of 90+ delinquencies stood at 2.3 million.
Nearly 2.1 million homes are in pre-sale foreclosure inventory, while the total number of properties that are 30 or more days delinquent or in foreclosure stands at more than 7.04 million, similar to last month’s figures.
States with highest percentage of noncurrent loans were Florida, Nevada, Mississippi, Georgia, Louisiana and New Jersey. States with the lowest percentage of noncurrent loans were Montana, Wyoming, Alaska, South Dakota and North Dakota. Noncurrent totals combine foreclosures and delinquencies as a percent of active loans in that state.
LPS will provide a more in-depth review of this data in its monthly Mortgage Monitor report, due out on Nov. 22.
URL to original article: http://www.housingwire.com/2010/11/16/lps-foreclosure-inventories-rise-in-october-while-yearly-delinquency-rate-drops
Thursday, November 18, 2010
LPS: Foreclosure inventories rise in October while yearly delinquency rate drops
by KERRY CURRY
Lender Processing Services (LPS: 30.60 -3.53%) said the delinquency rate in October was 9.29% for loans that were 30 or more days overdue.
The rate was flat with the September delinquency rate of 9.27%, but year-over-year, the delinquency rate is down 8.4%, said LPS, a data and analytics firm in the mortgage finance and residential real estate industries.
The current inventory of pre-sale foreclosures is 3.92% of the housing market, up 2.1% over September and up 5.2% over the year-ago figure.
The data comes from a "first look" at month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.
LPS said 4.95 million properties have loans that are 30 or more days past due, but not in foreclosure while 2.24 million properties have mortgages that are 90 or more days delinquent. Last month, the number of 90+ delinquencies stood at 2.3 million.
Nearly 2.1 million homes are in pre-sale foreclosure inventory, while the total number of properties that are 30 or more days delinquent or in foreclosure stands at more than 7.04 million, similar to last month’s figures.
States with highest percentage of noncurrent loans were Florida, Nevada, Mississippi, Georgia, Louisiana and New Jersey. States with the lowest percentage of noncurrent loans were Montana, Wyoming, Alaska, South Dakota and North Dakota. Noncurrent totals combine foreclosures and delinquencies as a percent of active loans in that state.
LPS will provide a more in-depth review of this data in its monthly Mortgage Monitor report, due out on Nov. 22.
URL to original article: http://www.housingwire.com/2010/11/16/lps-foreclosure-inventories-rise-in-october-while-yearly-delinquency-rate-drops
Lender Processing Services (LPS: 30.60 -3.53%) said the delinquency rate in October was 9.29% for loans that were 30 or more days overdue.
The rate was flat with the September delinquency rate of 9.27%, but year-over-year, the delinquency rate is down 8.4%, said LPS, a data and analytics firm in the mortgage finance and residential real estate industries.
The current inventory of pre-sale foreclosures is 3.92% of the housing market, up 2.1% over September and up 5.2% over the year-ago figure.
The data comes from a "first look" at month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.
LPS said 4.95 million properties have loans that are 30 or more days past due, but not in foreclosure while 2.24 million properties have mortgages that are 90 or more days delinquent. Last month, the number of 90+ delinquencies stood at 2.3 million.
Nearly 2.1 million homes are in pre-sale foreclosure inventory, while the total number of properties that are 30 or more days delinquent or in foreclosure stands at more than 7.04 million, similar to last month’s figures.
States with highest percentage of noncurrent loans were Florida, Nevada, Mississippi, Georgia, Louisiana and New Jersey. States with the lowest percentage of noncurrent loans were Montana, Wyoming, Alaska, South Dakota and North Dakota. Noncurrent totals combine foreclosures and delinquencies as a percent of active loans in that state.
LPS will provide a more in-depth review of this data in its monthly Mortgage Monitor report, due out on Nov. 22.
URL to original article: http://www.housingwire.com/2010/11/16/lps-foreclosure-inventories-rise-in-october-while-yearly-delinquency-rate-drops
Weekly jobless claims up 2,000 to 439,000
by JASON PHILYAW
Initial jobless claims edged up slightly last week to 439,000, coming in below most analysts' estimates. And the four-week moving average is now at the lowest level since September 2008.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Nov. 13 increased by 2,000 from the previous week's figure of 437,000, which was revised upward a few thousand.
Analysts surveyed by Econoday expected claims to rise to 445,000 with a range of estimates from 430,000 to 457,000. A Briefing.com survey put the number of jobless claims at 440,000, and economists polled by MarketWatch expected 445,000.
The four-week moving average declined by 4,000 to 443,000 claims from a revised average of 447,000, according to the Labor Department data. The seasonally adjusted insured unemployment rate was 3.4%, down slightly from a revised 3.5%.
The number of continuing claims filed during the week of Nov. 6 fell 48,000 to 4.3 million, which is the lowest since November 2008. More than 8.8 million were receiving some sort of benefits at Oct. 30, according to the Labor Department.
Url to original article: http://www.housingwire.com/2010/11/18/weekly-jobless-claims-up-2000-to-439000
Initial jobless claims edged up slightly last week to 439,000, coming in below most analysts' estimates. And the four-week moving average is now at the lowest level since September 2008.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Nov. 13 increased by 2,000 from the previous week's figure of 437,000, which was revised upward a few thousand.
Analysts surveyed by Econoday expected claims to rise to 445,000 with a range of estimates from 430,000 to 457,000. A Briefing.com survey put the number of jobless claims at 440,000, and economists polled by MarketWatch expected 445,000.
The four-week moving average declined by 4,000 to 443,000 claims from a revised average of 447,000, according to the Labor Department data. The seasonally adjusted insured unemployment rate was 3.4%, down slightly from a revised 3.5%.
The number of continuing claims filed during the week of Nov. 6 fell 48,000 to 4.3 million, which is the lowest since November 2008. More than 8.8 million were receiving some sort of benefits at Oct. 30, according to the Labor Department.
Url to original article: http://www.housingwire.com/2010/11/18/weekly-jobless-claims-up-2000-to-439000
Wednesday, November 17, 2010
The age of deleveraging
Source: Investors Insight
Before we get into this week’s outstanding Outside the Box, I want to comment on QE2 and the efforts by some Republican economists to urge legislators to get involved to stop it (see the front page of Monday’s Wall Street Journal). That pushes my comfort zone a little too much.
First, I am not a fan of QE2. Never have been. If it had been my call, I would have punted and told the guys in the Capital that the ball was in their court to get their fiscal house in order, because that is the main source of the problem. But Bernanke and the Fed felt they had to “do something,” to demonstrate they got the seriousness of the situation. If the only policy tool you have left is the hammer of printing money, then the world looks like a nail.
Second, I doubt it works. It might be interesting to see what would happen (theoretically) if they decided to print $3-4 trillion. Now that would have a (probably very negative) impact. But it would show up on the radar screen. I think $600 billion just gets soaked up in bank balance sheets, sloughed off to world emerging markets (that don’t want it) and other hot spots, with some drifting into the stock market. But does it increase real final demand, which is what the Keynesians are so seemingly desperate for? I doubt it. And I just don’t see the transmission mechanism for QE2 to produce new employment of any statistical significance.
Third, targeting the middle of the yield curve is about as benign a way as you can do it, as far as QE goes. It certainly is not bringing down mortgage rates (so far). This is not exactly shock and awe QE.
Now, if the real plan, which no one can mention in polite circles at G-20 meetings, is to weaken the dollar, then QE2 just might work at doing that. But do we want it to? Do we want our input prices to go higher? A weaker dollar cuts both ways. And Germany seems to be able to work with either a strong or a weak euro. Are they that much better than us? Really? I sincerely hope we can take Bernanke at his word that this policy is not meant to weaken the dollar. Currency manipulation is not what we need from the world’s reserve currency, nor will we hold that status much longer if we embark down that path.
Back to the Republican sortie against QE2. As long as it stays on a debate level, or even as a resolution, then fine. There is considerable room for debate, and some very serious economists on both sides of the issue. This is new territory and deserves to be debated vigorously. This is, after all, affecting the public. Fed policy is too important to be talked about only inside a conference room with a few appointed governors and economists.
But I do not want to see anything that would reduce the independence of the Fed from the political process (any more than it already has been reduced). I don’t want Republicans dictating Fed policy. Or Democrats. Or the President, beyond his power to appoint. That is the path to becoming a banana republic.
If We the People want to change Fed policy, then we need to realize it is important who we elect as president, because he appoints the chairman and the governors. Ideas matter and have consequences. How many times do presidential candidates get asked about their views on monetary policy in national debates? Are you a proponent of Keynes? Or Friedman? Fisher? von Mises? Which of these four dead white guys have you read and studied? These elections of ours are more than taxes and health care. The Senators who sit on the committees have the right to review appointees, though few understand the real issues regarding the Fed, I am afraid. (Wouldn’t it be fun to have Rand Paul on that committee? He could tag team with his dad in the House. Just a thought.)
Final thought. Maybe the reason for a less than shock and awe QE is that the Fed can get to the end of it and say, “Look, we tried. But the money just went back onto our balance sheet. Printing more doesn’t seem to be advisable.” (Especially if the public pushback gives them some cover.) Then they can back off and let Congress know that they have no intention of monetizing their fiscal profligacy and that Congress must get its house in order before the bond markets react negatively.
And then again I may be wrong. Maybe QE2 does do something. No one really knows because this is truly uncharted territory. We’ll find out in the coming months. And this Friday, in my weekly letter, we’ll look at the prospects for the economy going forward. I get back home tonight and will be home for two weeks. I am looking forward to catching up on my reading.
Now, for this week’s OTB I offer a review of Gary Shilling’s brand new book, The Age of Deleveraging: Investment strategies for a decade of slow growth and deflation.
Gary has long been a proponent of the idea that we are in for a period of deflation, and was writing as far back as the ’90s about the coming deflation. I am already into the book and am enjoying his wonderful prose, but must admit I skipped ahead to see his predictions, some of which are in the review below. You can buy the book at http://www.amazon.com/deleveraging.
URL to original article: http://www.housingwire.com/2010/11/16/the-age-of-deleveraging
Before we get into this week’s outstanding Outside the Box, I want to comment on QE2 and the efforts by some Republican economists to urge legislators to get involved to stop it (see the front page of Monday’s Wall Street Journal). That pushes my comfort zone a little too much.
First, I am not a fan of QE2. Never have been. If it had been my call, I would have punted and told the guys in the Capital that the ball was in their court to get their fiscal house in order, because that is the main source of the problem. But Bernanke and the Fed felt they had to “do something,” to demonstrate they got the seriousness of the situation. If the only policy tool you have left is the hammer of printing money, then the world looks like a nail.
Second, I doubt it works. It might be interesting to see what would happen (theoretically) if they decided to print $3-4 trillion. Now that would have a (probably very negative) impact. But it would show up on the radar screen. I think $600 billion just gets soaked up in bank balance sheets, sloughed off to world emerging markets (that don’t want it) and other hot spots, with some drifting into the stock market. But does it increase real final demand, which is what the Keynesians are so seemingly desperate for? I doubt it. And I just don’t see the transmission mechanism for QE2 to produce new employment of any statistical significance.
Third, targeting the middle of the yield curve is about as benign a way as you can do it, as far as QE goes. It certainly is not bringing down mortgage rates (so far). This is not exactly shock and awe QE.
Now, if the real plan, which no one can mention in polite circles at G-20 meetings, is to weaken the dollar, then QE2 just might work at doing that. But do we want it to? Do we want our input prices to go higher? A weaker dollar cuts both ways. And Germany seems to be able to work with either a strong or a weak euro. Are they that much better than us? Really? I sincerely hope we can take Bernanke at his word that this policy is not meant to weaken the dollar. Currency manipulation is not what we need from the world’s reserve currency, nor will we hold that status much longer if we embark down that path.
Back to the Republican sortie against QE2. As long as it stays on a debate level, or even as a resolution, then fine. There is considerable room for debate, and some very serious economists on both sides of the issue. This is new territory and deserves to be debated vigorously. This is, after all, affecting the public. Fed policy is too important to be talked about only inside a conference room with a few appointed governors and economists.
But I do not want to see anything that would reduce the independence of the Fed from the political process (any more than it already has been reduced). I don’t want Republicans dictating Fed policy. Or Democrats. Or the President, beyond his power to appoint. That is the path to becoming a banana republic.
If We the People want to change Fed policy, then we need to realize it is important who we elect as president, because he appoints the chairman and the governors. Ideas matter and have consequences. How many times do presidential candidates get asked about their views on monetary policy in national debates? Are you a proponent of Keynes? Or Friedman? Fisher? von Mises? Which of these four dead white guys have you read and studied? These elections of ours are more than taxes and health care. The Senators who sit on the committees have the right to review appointees, though few understand the real issues regarding the Fed, I am afraid. (Wouldn’t it be fun to have Rand Paul on that committee? He could tag team with his dad in the House. Just a thought.)
Final thought. Maybe the reason for a less than shock and awe QE is that the Fed can get to the end of it and say, “Look, we tried. But the money just went back onto our balance sheet. Printing more doesn’t seem to be advisable.” (Especially if the public pushback gives them some cover.) Then they can back off and let Congress know that they have no intention of monetizing their fiscal profligacy and that Congress must get its house in order before the bond markets react negatively.
And then again I may be wrong. Maybe QE2 does do something. No one really knows because this is truly uncharted territory. We’ll find out in the coming months. And this Friday, in my weekly letter, we’ll look at the prospects for the economy going forward. I get back home tonight and will be home for two weeks. I am looking forward to catching up on my reading.
Now, for this week’s OTB I offer a review of Gary Shilling’s brand new book, The Age of Deleveraging: Investment strategies for a decade of slow growth and deflation.
Gary has long been a proponent of the idea that we are in for a period of deflation, and was writing as far back as the ’90s about the coming deflation. I am already into the book and am enjoying his wonderful prose, but must admit I skipped ahead to see his predictions, some of which are in the review below. You can buy the book at http://www.amazon.com/deleveraging.
URL to original article: http://www.housingwire.com/2010/11/16/the-age-of-deleveraging
Thursday, November 11, 2010
Process issues force foreclosures down 4% in October: RealtyTrac
by JON PRIOR
Foreclosure filings dropped 4% in October from the previous month and remained flat with last year as effects from the documentation problems and moratoriums begin to show, according to RealtyTrac.
In October, 332, 172 properties received either a default notice, a scheduled auction or repossession, marking the 20th consecutive month over 300,000. Repossessions in particular, though, fell 9% in October as major lenders halted proceedings in the month to sort out improperly signed affidavits in many states.
"The numbers probably would have been higher except for the fallout from the recent 'robo-signing' controversy — which is the most likely reason for the 9 percent monthly drop in REOs we saw from September to October and which may result in further decreases in November," RealtyTrac CEO James Saccacio said.
Nevada, again, led all states with the highest foreclosure with one in 79 properties receiving a filing in October, nearly five times the national average. The more than 14,000 properties to receive a filing increased 3% from a year ago.
Florida foreclosures increased from 2009 for the second-straight month. One in every 155 homes received a filing in October. Arizona was third with one in every 165 homes receiving a filing.
On a volume basis, the 66,475 foreclosures in California accounted for 20% of the entire nation's filings. It is down 22% from a year ago, though.
Las Vegas, Fort Meyers, Fla., and Modesto, Calif. continue to lead the country as the top-three metro areas with the highest foreclosure rates. In Vegas, one in every 70 homes received a filing, a 1% increase from a year ago.
URL to original article: http://www.housingwire.com/2010/11/10/process-issues-force-foreclosures-down-4-in-october-realtytrac
Foreclosure filings dropped 4% in October from the previous month and remained flat with last year as effects from the documentation problems and moratoriums begin to show, according to RealtyTrac.
In October, 332, 172 properties received either a default notice, a scheduled auction or repossession, marking the 20th consecutive month over 300,000. Repossessions in particular, though, fell 9% in October as major lenders halted proceedings in the month to sort out improperly signed affidavits in many states.
"The numbers probably would have been higher except for the fallout from the recent 'robo-signing' controversy — which is the most likely reason for the 9 percent monthly drop in REOs we saw from September to October and which may result in further decreases in November," RealtyTrac CEO James Saccacio said.
Nevada, again, led all states with the highest foreclosure with one in 79 properties receiving a filing in October, nearly five times the national average. The more than 14,000 properties to receive a filing increased 3% from a year ago.
Florida foreclosures increased from 2009 for the second-straight month. One in every 155 homes received a filing in October. Arizona was third with one in every 165 homes receiving a filing.
On a volume basis, the 66,475 foreclosures in California accounted for 20% of the entire nation's filings. It is down 22% from a year ago, though.
Las Vegas, Fort Meyers, Fla., and Modesto, Calif. continue to lead the country as the top-three metro areas with the highest foreclosure rates. In Vegas, one in every 70 homes received a filing, a 1% increase from a year ago.
URL to original article: http://www.housingwire.com/2010/11/10/process-issues-force-foreclosures-down-4-in-october-realtytrac
Wednesday, November 10, 2010
Zillow 30-year FRMs hit new low at 4.07%
by CHRISTINE RICCIARDI
The 30-year, fixed-mortgage rate decreased after a stable two weeks, to new record low at 4.07%, according to the Zillow Mortgage Marketplace weekly update.
Zillow said the current 15-year, fixed average rate is 3.51% and the rate for a 5-1 adjustable rate mortgage is 2.91%. That type of mortgage maintains a steady rate for five years and then is adjusted annually thereafter.
Regionally, 30-year rates vary, but the majority of states witnessed a deflation. New York's average rate fell 30 basis points to 3.98% last week, down from 4.28%. Rates in Florida fell substantially also, down to 4.02% from 4.13% the previous week, California's rate decreased to 4.04% from 4.15%, and Texas saw its average rate disintegrate to 4.11% from 4.17%.
Pennsylvania's current rate of 4.08% is down from 4.11% last week. Colorado's average rate for a 30-year fixed mortgage shrunk to 4.10% from 4.14% at Nov. 2.
Washington's 30-year FRM increased to 4.12%.
Zillow bases its averages on real-time mortgage quotes from lenders registered with the company. The national average comes from thousands of daily quotes by anonymous borrowers through the Seattle-based company's website.
URL to original article: http://www.housingwire.com/2010/11/09/zillow-30-year-frms-hit-new-low-at-4-07
The 30-year, fixed-mortgage rate decreased after a stable two weeks, to new record low at 4.07%, according to the Zillow Mortgage Marketplace weekly update.
Zillow said the current 15-year, fixed average rate is 3.51% and the rate for a 5-1 adjustable rate mortgage is 2.91%. That type of mortgage maintains a steady rate for five years and then is adjusted annually thereafter.
Regionally, 30-year rates vary, but the majority of states witnessed a deflation. New York's average rate fell 30 basis points to 3.98% last week, down from 4.28%. Rates in Florida fell substantially also, down to 4.02% from 4.13% the previous week, California's rate decreased to 4.04% from 4.15%, and Texas saw its average rate disintegrate to 4.11% from 4.17%.
Pennsylvania's current rate of 4.08% is down from 4.11% last week. Colorado's average rate for a 30-year fixed mortgage shrunk to 4.10% from 4.14% at Nov. 2.
Washington's 30-year FRM increased to 4.12%.
Zillow bases its averages on real-time mortgage quotes from lenders registered with the company. The national average comes from thousands of daily quotes by anonymous borrowers through the Seattle-based company's website.
URL to original article: http://www.housingwire.com/2010/11/09/zillow-30-year-frms-hit-new-low-at-4-07
Housing prices decline as mortgage defaults rise for first time this year
by JASON PHILYAW
Housing prices continue to show the steepest declines in the markets most affected by the bubble burst of three years ago, according to the real estate data provider Altos Research. And prices may have further to go still, as one mortgage analytics firm reports that mortgage delinquencies increase for first time this year.
The firm's Altos 10-city composite price index fell 1.6% for October, and is off about 3.1% the past three months with Phoenix, Miami and California cities continuing to be hit the hardest.
The average national house price is now $458,518, down about 1.6% from the prior month and once again at the lowest level ever recorded by Altos. The average home price in San Diego fell 3.28% last month, while Salt Lake City prices were off by 3.27% and Phoenix prices dropped 3.11%.
The company said there has been some stability in its national composite index of late, although inventory is down nationwide and the impact of the shadow inventory looms large.
Amherst Securities said new default rates last month picked up for the first time in a year, "echoing fears of renewed home price depreciation."
The price declines of the past few months are in line with Altos Research expectations, though weekly declines in prices are slowing.
"December’s report should indicate less dramatic price declines, with a few bubbly exceptions," the firm said.
According to Amherst, $8 billion in mortgage borrowers passed the two months or greater delinquency in October for the first time. This is an increase of 3.2% from $7.8 billion from the month prior.
The financial services firms estimates it will take 48 months to clear the inventory of distressed properties.
URL to original article: http://www.housingwire.com/2010/11/08/housing-prices-decline-as-mortgage-defaults-rise-for-first-time-this-year
Housing prices continue to show the steepest declines in the markets most affected by the bubble burst of three years ago, according to the real estate data provider Altos Research. And prices may have further to go still, as one mortgage analytics firm reports that mortgage delinquencies increase for first time this year.
The firm's Altos 10-city composite price index fell 1.6% for October, and is off about 3.1% the past three months with Phoenix, Miami and California cities continuing to be hit the hardest.
The average national house price is now $458,518, down about 1.6% from the prior month and once again at the lowest level ever recorded by Altos. The average home price in San Diego fell 3.28% last month, while Salt Lake City prices were off by 3.27% and Phoenix prices dropped 3.11%.
The company said there has been some stability in its national composite index of late, although inventory is down nationwide and the impact of the shadow inventory looms large.
Amherst Securities said new default rates last month picked up for the first time in a year, "echoing fears of renewed home price depreciation."
The price declines of the past few months are in line with Altos Research expectations, though weekly declines in prices are slowing.
"December’s report should indicate less dramatic price declines, with a few bubbly exceptions," the firm said.
According to Amherst, $8 billion in mortgage borrowers passed the two months or greater delinquency in October for the first time. This is an increase of 3.2% from $7.8 billion from the month prior.
The financial services firms estimates it will take 48 months to clear the inventory of distressed properties.
URL to original article: http://www.housingwire.com/2010/11/08/housing-prices-decline-as-mortgage-defaults-rise-for-first-time-this-year
Tuesday, November 9, 2010
Clear Capital: home prices drop 5% in three months
by JON PRIOR
National home prices fell 5% for the three months ending in October, while double-dip disparity still rages on a micro-market level, according to the Clear Capital Home Price Index.
The data joins a chorus of bad news, both on Altos Research's falling home prices and an unexpected rise in mortgage defaults for first time this year according to an Amherst Securities report.
Home prices dropped only 0.2% in the three months prior to September, but a major two-month decline through October had not been seen since early 2009. While prices in October remain 7.7% above 2009, they have dropped 6.8% from the year's peak in mid-August. Clear Capital said six of the largest local markets are officially in a double-dip.
Even so, Alex Villacorta, Clear Capital's senior statistician said, prices are very dynamic at the local level.
"For example, all six major metropolitan areas in California are out-performing both national and West region numbers in terms of yearly gains," Villacorta said. "Conversely, four of the top markets in Florida are either in or very near double-dip territory, even though national prices remain nearly eight percent above 2009 lows."
Prices dropped 3.1% in the West through October, 4.7% in the South, and 2.2% in the Northeast. In the Midwest, though, prices dropped 8.7%.
Atlanta, New Orleans and two Ohio markets — Columbus and Dayton — experienced quarterly price declines more than double the national rate.
URL to original article: http://www.housingwire.com/2010/11/08/clear-capital-home-prices-drop-5-in-last-three-months
National home prices fell 5% for the three months ending in October, while double-dip disparity still rages on a micro-market level, according to the Clear Capital Home Price Index.
The data joins a chorus of bad news, both on Altos Research's falling home prices and an unexpected rise in mortgage defaults for first time this year according to an Amherst Securities report.
Home prices dropped only 0.2% in the three months prior to September, but a major two-month decline through October had not been seen since early 2009. While prices in October remain 7.7% above 2009, they have dropped 6.8% from the year's peak in mid-August. Clear Capital said six of the largest local markets are officially in a double-dip.
Even so, Alex Villacorta, Clear Capital's senior statistician said, prices are very dynamic at the local level.
"For example, all six major metropolitan areas in California are out-performing both national and West region numbers in terms of yearly gains," Villacorta said. "Conversely, four of the top markets in Florida are either in or very near double-dip territory, even though national prices remain nearly eight percent above 2009 lows."
Prices dropped 3.1% in the West through October, 4.7% in the South, and 2.2% in the Northeast. In the Midwest, though, prices dropped 8.7%.
Atlanta, New Orleans and two Ohio markets — Columbus and Dayton — experienced quarterly price declines more than double the national rate.
URL to original article: http://www.housingwire.com/2010/11/08/clear-capital-home-prices-drop-5-in-last-three-months
Obama fires high unemployment warning on 60 minutes
Source: The Washington Post
Without additional government action to spur hiring, President Obama said Sunday that he fears the U.S. economy could enter a "new normal" in which corporate profits are high but the number of new jobs is too low to reduce the nation's 9.6 percent unemployment rate to pre-recession levels.
"What is a danger is that we stay stuck in a new normal where unemployment rates stay high," he said in an interview aired Sunday night on CBS's "60 Minutes." "People who have jobs see their incomes go up. Businesses make big profits. But they've learned to do more with less. And so they don't hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost."
The sit-down interview, Obama's first since Republicans gave him what he called a "shellacking" in last week's congressional midterm elections, focused heavily on the fragile economy and its starring role in the reversal of Democrats' political fortunes. He lamented his inability to make more headway in creating jobs, conceding that "I do get discouraged."
URL to original article: http://www.housingwire.com/2010/11/08/obama-fires-high-unemployment-warning-on-60-minutes
Without additional government action to spur hiring, President Obama said Sunday that he fears the U.S. economy could enter a "new normal" in which corporate profits are high but the number of new jobs is too low to reduce the nation's 9.6 percent unemployment rate to pre-recession levels.
"What is a danger is that we stay stuck in a new normal where unemployment rates stay high," he said in an interview aired Sunday night on CBS's "60 Minutes." "People who have jobs see their incomes go up. Businesses make big profits. But they've learned to do more with less. And so they don't hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost."
The sit-down interview, Obama's first since Republicans gave him what he called a "shellacking" in last week's congressional midterm elections, focused heavily on the fragile economy and its starring role in the reversal of Democrats' political fortunes. He lamented his inability to make more headway in creating jobs, conceding that "I do get discouraged."
URL to original article: http://www.housingwire.com/2010/11/08/obama-fires-high-unemployment-warning-on-60-minutes
Obama fires high unemployment warning on 60 minutes
Source: The Washington Post
Without additional government action to spur hiring, President Obama said Sunday that he fears the U.S. economy could enter a "new normal" in which corporate profits are high but the number of new jobs is too low to reduce the nation's 9.6 percent unemployment rate to pre-recession levels.
"What is a danger is that we stay stuck in a new normal where unemployment rates stay high," he said in an interview aired Sunday night on CBS's "60 Minutes." "People who have jobs see their incomes go up. Businesses make big profits. But they've learned to do more with less. And so they don't hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost."
The sit-down interview, Obama's first since Republicans gave him what he called a "shellacking" in last week's congressional midterm elections, focused heavily on the fragile economy and its starring role in the reversal of Democrats' political fortunes. He lamented his inability to make more headway in creating jobs, conceding that "I do get discouraged."
URL to original article: http://www.housingwire.com/2010/11/08/obama-fires-high-unemployment-warning-on-60-minutes
Without additional government action to spur hiring, President Obama said Sunday that he fears the U.S. economy could enter a "new normal" in which corporate profits are high but the number of new jobs is too low to reduce the nation's 9.6 percent unemployment rate to pre-recession levels.
"What is a danger is that we stay stuck in a new normal where unemployment rates stay high," he said in an interview aired Sunday night on CBS's "60 Minutes." "People who have jobs see their incomes go up. Businesses make big profits. But they've learned to do more with less. And so they don't hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost."
The sit-down interview, Obama's first since Republicans gave him what he called a "shellacking" in last week's congressional midterm elections, focused heavily on the fragile economy and its starring role in the reversal of Democrats' political fortunes. He lamented his inability to make more headway in creating jobs, conceding that "I do get discouraged."
URL to original article: http://www.housingwire.com/2010/11/08/obama-fires-high-unemployment-warning-on-60-minutes
Monday, November 8, 2010
Real estate needs to fall so it can then rise and boost the economy?
Source: Seeking Alpha
That seems to be the argument in a Washington Post column by David M. Smirk. I'm not kidding, here is the essence of the argument laid out in the 3rd and 4th paragraph of the piece:
A more compelling theory [than inadequate stimulus] is that global assets remain overvalued. Specifically, the price of real estate debt and sovereign debt on bank balance sheets, propped up by government actions, remains too high. The economy can't gain traction until these prices reflect realistic valuations.
Asset prices are important because America has never had a recovery without residential housing leading the way. Real estate values are still high by historic standards. The value of all real estate is roughly $18 trillion, with mortgage debt about $10 trillion. The ratio of mortgage debt to GDP value is 56 percent. In the 1960s and 1970s, the ratio was 29 percent. In the late 1990s it was only 38 percent.
Smirk is right that real estate is still over-valued, but it is hard to understand how a decline in real estate prices will boost the economy. What matters for a residential housing lead recovery is the need for residential housing. This results from excess demand for housing. We have record levels of vacant housing in the country right now. We will have to see quite a drop in housing prices in order to fully absorb the existing supply.
This gets back to the mortgage debt part of the story which has nothing to do with current real estate values, but rather with their past values. Of course the mortgage debt to GDP ratio is too high, that is what happens when you have a housing bubble. People borrow against inflated housing values. Unfortunately, the Washington Post did not have room for columns from people making this point in the years from 2002-2006 when the housing bubble was growing.
It is not clear how Smirk thinks that a drop in housing prices helps this picture. This will worsen the debt burden of homeowners, leaving them with less wealth thereby further reducing consumption. The decline in house prices must happen (we can't sustain bubble-inflated prices indefinitely), but it makes the immediate economic situation worse, not better.
In the real world, this recovery cannot be led by housing construction because this is not the traditional sort of recession. The normal recession comes about because the Fed raises interest rates to slow the economy. This leads to a plunge in housing construction creating pent-up demand. When the Fed decides to take its foot off the brakes and get the economy going again, it just lowers interest rates, triggers the pent-up demand for housing and the economy takes off.
This recession was the result of the collapse of a housing bubble which led to a huge excess supply of housing. Interest rates are also just about as low as they can possibly be, taking away the option of further declines by simple Fed actions.
Apparently Smirk and the Post failed to notice the difference between this recession and prior downturns. Therefore we get this attack on Obama and Paul Krugman that is incoherent in just about every way.
URL to original article: http://www.housingwire.com/2010/11/08/real-estate-needs-to-fall-so-it-can-then-rise-and-boost-the-economy
That seems to be the argument in a Washington Post column by David M. Smirk. I'm not kidding, here is the essence of the argument laid out in the 3rd and 4th paragraph of the piece:
A more compelling theory [than inadequate stimulus] is that global assets remain overvalued. Specifically, the price of real estate debt and sovereign debt on bank balance sheets, propped up by government actions, remains too high. The economy can't gain traction until these prices reflect realistic valuations.
Asset prices are important because America has never had a recovery without residential housing leading the way. Real estate values are still high by historic standards. The value of all real estate is roughly $18 trillion, with mortgage debt about $10 trillion. The ratio of mortgage debt to GDP value is 56 percent. In the 1960s and 1970s, the ratio was 29 percent. In the late 1990s it was only 38 percent.
Smirk is right that real estate is still over-valued, but it is hard to understand how a decline in real estate prices will boost the economy. What matters for a residential housing lead recovery is the need for residential housing. This results from excess demand for housing. We have record levels of vacant housing in the country right now. We will have to see quite a drop in housing prices in order to fully absorb the existing supply.
This gets back to the mortgage debt part of the story which has nothing to do with current real estate values, but rather with their past values. Of course the mortgage debt to GDP ratio is too high, that is what happens when you have a housing bubble. People borrow against inflated housing values. Unfortunately, the Washington Post did not have room for columns from people making this point in the years from 2002-2006 when the housing bubble was growing.
It is not clear how Smirk thinks that a drop in housing prices helps this picture. This will worsen the debt burden of homeowners, leaving them with less wealth thereby further reducing consumption. The decline in house prices must happen (we can't sustain bubble-inflated prices indefinitely), but it makes the immediate economic situation worse, not better.
In the real world, this recovery cannot be led by housing construction because this is not the traditional sort of recession. The normal recession comes about because the Fed raises interest rates to slow the economy. This leads to a plunge in housing construction creating pent-up demand. When the Fed decides to take its foot off the brakes and get the economy going again, it just lowers interest rates, triggers the pent-up demand for housing and the economy takes off.
This recession was the result of the collapse of a housing bubble which led to a huge excess supply of housing. Interest rates are also just about as low as they can possibly be, taking away the option of further declines by simple Fed actions.
Apparently Smirk and the Post failed to notice the difference between this recession and prior downturns. Therefore we get this attack on Obama and Paul Krugman that is incoherent in just about every way.
URL to original article: http://www.housingwire.com/2010/11/08/real-estate-needs-to-fall-so-it-can-then-rise-and-boost-the-economy
Fannie, Freddie overhaul could cost $685 billion
Source: The Wall Street Journal
The total cost to rescue and then overhaul mortgage giants Fannie Mae and Freddie Mac could reach $685 billion, according to estimates published Thursday by Standard & Poor's.
Fannie and Freddie have already cost taxpayers nearly $134 billion, but S&P analysts said Thursday that the government could ultimately be forced to inject $280 billion into the firms because of a slowdown in the housing market.
Fed's Hoenig: Commercial, Investment Banking Should Be Separate. Access thousands of business sources not available on the free web. Learn More .Any entities that might replace Fannie and Freddie would need new start-up funding that would go beyond the money already committed.
A consensus of academics, industry officials and investors has coalesced around the idea of using the government to provide explicit guarantees for securities backed by mortgages that meet certain standards. Tough questions loom over how those guarantees would be structured and priced and what entities would provide them.
Analysts estimate that it would cost an additional $400 billion to sufficiently capitalize any entities that would take the place of Fannie and Freddie. Those capital levels could be lower, at around $225 billion, if the government were to retain ownership in any surviving entity.
"As it stands now, we believe that addressing the [companies'] problems is likely to be an expensive repair job for U.S. taxpayers," wrote S&P analysts Daniel Teclaw and Vandana Sharma.
While mortgage delinquencies have eased in recent quarters, analysts warned that high unemployment, a weak economy, and a sluggish housing market could prompt costs to rise "substantially" over the next year. "It's no secret that a better economy would help ease the [firms'] predicament," the report said.
The S&P loss estimates are higher than those made last month by the firms' federal regulator. The Federal Housing Finance Agency said that the taxpayer tab for the companies is on pace to reach $154 billion under the current home-price forecast. If the economy enters a double-dip recession and home prices fall more than 20%, the cost to taxpayers could reach $259 billion.
The government took over the troubled housing-finance giants two years ago through a legal process known as conservatorship. The Treasury has promised to inject unlimited sums through 2012 and nearly $300 billion after that in order to maintain a positive net worth and to avoid triggering liquidation.
URL to original article: http://www.housingwire.com/2010/11/05/fannie-freddie-overhaul-could-cost-685-billion
The total cost to rescue and then overhaul mortgage giants Fannie Mae and Freddie Mac could reach $685 billion, according to estimates published Thursday by Standard & Poor's.
Fannie and Freddie have already cost taxpayers nearly $134 billion, but S&P analysts said Thursday that the government could ultimately be forced to inject $280 billion into the firms because of a slowdown in the housing market.
Fed's Hoenig: Commercial, Investment Banking Should Be Separate. Access thousands of business sources not available on the free web. Learn More .Any entities that might replace Fannie and Freddie would need new start-up funding that would go beyond the money already committed.
A consensus of academics, industry officials and investors has coalesced around the idea of using the government to provide explicit guarantees for securities backed by mortgages that meet certain standards. Tough questions loom over how those guarantees would be structured and priced and what entities would provide them.
Analysts estimate that it would cost an additional $400 billion to sufficiently capitalize any entities that would take the place of Fannie and Freddie. Those capital levels could be lower, at around $225 billion, if the government were to retain ownership in any surviving entity.
"As it stands now, we believe that addressing the [companies'] problems is likely to be an expensive repair job for U.S. taxpayers," wrote S&P analysts Daniel Teclaw and Vandana Sharma.
While mortgage delinquencies have eased in recent quarters, analysts warned that high unemployment, a weak economy, and a sluggish housing market could prompt costs to rise "substantially" over the next year. "It's no secret that a better economy would help ease the [firms'] predicament," the report said.
The S&P loss estimates are higher than those made last month by the firms' federal regulator. The Federal Housing Finance Agency said that the taxpayer tab for the companies is on pace to reach $154 billion under the current home-price forecast. If the economy enters a double-dip recession and home prices fall more than 20%, the cost to taxpayers could reach $259 billion.
The government took over the troubled housing-finance giants two years ago through a legal process known as conservatorship. The Treasury has promised to inject unlimited sums through 2012 and nearly $300 billion after that in order to maintain a positive net worth and to avoid triggering liquidation.
URL to original article: http://www.housingwire.com/2010/11/05/fannie-freddie-overhaul-could-cost-685-billion
Thursday, November 4, 2010
Weekly jobless claims rose 4.5% to 457,000
by JASON PHILYAW
Initial jobless claims rose 4.5% last week to 457,000, which is well above analysts' estimates and at the highest rate since the end of last year.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Oct. 30 increased by 20,000 from the previous week's figure of 437,000, which was revised upward a few thousand.
Analysts surveyed by Econoday expected claims to rise to 443,000 with a range of estimates from 430,000 to 450,000. A Briefing.com survey put the number of jobless claims at 450,000, and economists polled by MarketWatch expected 445,000 claims.
The four-week moving average rose to 456,000 claims from a downwardly revised average of 454,000 for the prior week, according to the Labor Department data. The seasonally adjusted insured unemployment rate was 3.4%, down slightly from a revised 3.5%.
The Labor Department is set to report employment figures for October on Friday. Analysts predict increases in both nonfarm payrolls and private-sector employment, and an unemployment figure of 9.6% or 9.7%.
URL to original article: http://www.housingwire.com/2010/11/04/weekly-jobless-claims-rose-4-5-to-457000
Initial jobless claims rose 4.5% last week to 457,000, which is well above analysts' estimates and at the highest rate since the end of last year.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Oct. 30 increased by 20,000 from the previous week's figure of 437,000, which was revised upward a few thousand.
Analysts surveyed by Econoday expected claims to rise to 443,000 with a range of estimates from 430,000 to 450,000. A Briefing.com survey put the number of jobless claims at 450,000, and economists polled by MarketWatch expected 445,000 claims.
The four-week moving average rose to 456,000 claims from a downwardly revised average of 454,000 for the prior week, according to the Labor Department data. The seasonally adjusted insured unemployment rate was 3.4%, down slightly from a revised 3.5%.
The Labor Department is set to report employment figures for October on Friday. Analysts predict increases in both nonfarm payrolls and private-sector employment, and an unemployment figure of 9.6% or 9.7%.
URL to original article: http://www.housingwire.com/2010/11/04/weekly-jobless-claims-rose-4-5-to-457000
We've voted. What's next for the economy?
Source: Pimco
•With the two chambers of Congress split between Democrats and Republicans, the
conventional wisdom likely to be repeated over the next few weeks is that political gridlock is good for the economy. While often true, that is not the case today.
•Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities.
•The economy needs political courage that transcends expediency in favor of long-term solutions on issues including housing reform, medium-term budget rules, pro-growth tax reforms, investments in physical and technological infrastructure, job retraining, greater support for education and scientific research, and better nets to protect the most vulnerable segments of society.
This article was originally published in The Washington Post on November 3, 2010.
With the two chambers of Congress split between Democrats and Republicans, the conventional wisdom likely to be repeated over the next few weeks is that political gridlock is good for the economy. While often true, that is not the case today.
Such thinking is based on the view that political gridlock inhibits or paralyzes economically unproductive government actions. With government out of the way, it follows that the private sector can allocate capital to the most productive uses.
But this view is most applicable to a private sector that is in good shape – businesses and households with robust balance sheets, positive cash flow and access to credit. In such a world, the path of least resistance translates into higher economic growth and jobs.
Today, many large companies and rich households are in a good position to move forward. They have the means to spend and hire. Yet they lack the willingness to do either, as illustrated by massive cash holdings and widespread efforts to reduce risk in balance sheets and investment portfolios.
Many of these companies and households explain the divergence between their will and their wallet by pointing to regulatory and tax uncertainty, the absence of a clear macroeconomic vision and the notion that the Obama administration is "anti-business." They have a point in complaining about what economists call unhelpful "regime uncertainty." Moreover, many believe that political gridlock is preferable to what they perceive as misguided government activism of the past two years. Yet this ignores a glaring reality.
For too many segments of our society, the ability to spend and hire is constrained not by questions of willingness but, rather, by stubbornly high unemployment, annihilative debts and, in some cases, concerns about losing one's home. As a whole, the United States is still overcoming the legacy of years of over-leverage and misplaced confidence that consumption can be financed by borrowing rather than earnings. The resulting debt overhangs act as strong headwinds to growth and employment generation.
This world speaks to a different characterization of private-sector activity – rather than able and willing to move forward unhindered if the government simply gets out of the way, this is a private sector that faces too many headwinds. In these circumstances, high economic growth and job creation require not only that the private sector moves forward but also that it attains critical mass, or what Larry Summers, the departing head of the National Economic Council, called "escape velocity."
While certain sectors of the economy are in control of their destinies, the private sector as a whole is not in a position to do this. It needs help to overcome the consequences of the "great age" of leverage, debt and credit entitlement, and the related surge in structural unemployment. The urgency to do so increases in the rapidly evolving global economy, as the United States sheds a bit more of its economic and political edge to other countries daily.
Simply put, these realities make it necessary for Washington to resist two years of gridlock and policy paralysis. Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities. The economy needs political courage that transcends expediency in favor of long-term solutions on issues including housing reform, medium-term budget rules, pro-growth tax reforms, investments in physical and technological infrastructure, job retraining, greater support for education and scientific research and better nets to protect the most vulnerable segments of society.
Success requires an element of policy experimentation as well as confidence that mid-course policy corrections will be identified and undertaken on a timely basis. And such efforts must be wrapped in an encompassing economic vision that acts as a magnet of conversion nationally, counters growing international frictions and facilitates much-needed global economic coordination.
This is not an easy list. It will be difficult to translate today's political extremes into a common vision, analysis and narrative. Yet the longer it takes to do this, the greater the effort needed to restore our tradition of unmatched economic dynamism, buoyant job creation and global leadership.
URL to original article: http://www.housingwire.com/2010/11/03/weve-voted-whats-next-for-the-economy
•With the two chambers of Congress split between Democrats and Republicans, the
conventional wisdom likely to be repeated over the next few weeks is that political gridlock is good for the economy. While often true, that is not the case today.
•Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities.
•The economy needs political courage that transcends expediency in favor of long-term solutions on issues including housing reform, medium-term budget rules, pro-growth tax reforms, investments in physical and technological infrastructure, job retraining, greater support for education and scientific research, and better nets to protect the most vulnerable segments of society.
This article was originally published in The Washington Post on November 3, 2010.
With the two chambers of Congress split between Democrats and Republicans, the conventional wisdom likely to be repeated over the next few weeks is that political gridlock is good for the economy. While often true, that is not the case today.
Such thinking is based on the view that political gridlock inhibits or paralyzes economically unproductive government actions. With government out of the way, it follows that the private sector can allocate capital to the most productive uses.
But this view is most applicable to a private sector that is in good shape – businesses and households with robust balance sheets, positive cash flow and access to credit. In such a world, the path of least resistance translates into higher economic growth and jobs.
Today, many large companies and rich households are in a good position to move forward. They have the means to spend and hire. Yet they lack the willingness to do either, as illustrated by massive cash holdings and widespread efforts to reduce risk in balance sheets and investment portfolios.
Many of these companies and households explain the divergence between their will and their wallet by pointing to regulatory and tax uncertainty, the absence of a clear macroeconomic vision and the notion that the Obama administration is "anti-business." They have a point in complaining about what economists call unhelpful "regime uncertainty." Moreover, many believe that political gridlock is preferable to what they perceive as misguided government activism of the past two years. Yet this ignores a glaring reality.
For too many segments of our society, the ability to spend and hire is constrained not by questions of willingness but, rather, by stubbornly high unemployment, annihilative debts and, in some cases, concerns about losing one's home. As a whole, the United States is still overcoming the legacy of years of over-leverage and misplaced confidence that consumption can be financed by borrowing rather than earnings. The resulting debt overhangs act as strong headwinds to growth and employment generation.
This world speaks to a different characterization of private-sector activity – rather than able and willing to move forward unhindered if the government simply gets out of the way, this is a private sector that faces too many headwinds. In these circumstances, high economic growth and job creation require not only that the private sector moves forward but also that it attains critical mass, or what Larry Summers, the departing head of the National Economic Council, called "escape velocity."
While certain sectors of the economy are in control of their destinies, the private sector as a whole is not in a position to do this. It needs help to overcome the consequences of the "great age" of leverage, debt and credit entitlement, and the related surge in structural unemployment. The urgency to do so increases in the rapidly evolving global economy, as the United States sheds a bit more of its economic and political edge to other countries daily.
Simply put, these realities make it necessary for Washington to resist two years of gridlock and policy paralysis. Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities. The economy needs political courage that transcends expediency in favor of long-term solutions on issues including housing reform, medium-term budget rules, pro-growth tax reforms, investments in physical and technological infrastructure, job retraining, greater support for education and scientific research and better nets to protect the most vulnerable segments of society.
Success requires an element of policy experimentation as well as confidence that mid-course policy corrections will be identified and undertaken on a timely basis. And such efforts must be wrapped in an encompassing economic vision that acts as a magnet of conversion nationally, counters growing international frictions and facilitates much-needed global economic coordination.
This is not an easy list. It will be difficult to translate today's political extremes into a common vision, analysis and narrative. Yet the longer it takes to do this, the greater the effort needed to restore our tradition of unmatched economic dynamism, buoyant job creation and global leadership.
URL to original article: http://www.housingwire.com/2010/11/03/weve-voted-whats-next-for-the-economy
Obama & Frank: double dips and Washington exit strategies
Source: Reuters Blog
The official version of reality in use this week at the White House says that the U.S. economy is recovering, slowly but surely, and unemployment is falling. The same perspective says that residential real estate markets are stabilizing and banks are starting to lend more aggressively. None of these statements are true, but there are quite a few people in the White House who believe them nonetheless.
My view is a bit different, namely that unemployment is likely to remain at current levels during the balance of 2010. The sharp reduction in credit available to the real economy and the overhang in the mortgage markets are not likely to improve anytime soon. I spoke about the economic outlook with Larry Kudlow and James Glassman on CNBC last Friday: “Double Dip Fears Mount.”
While the public sector of the U.S. economy received a great deal of assistance due to various forms of stimulus, the private sector never recovered from the first “dip” during 2008 and much of 2009. Virtually all of the Fed’s assistance from zero interest rate policy has gone to the banks or the U.S. Treasury, with no help for American households and workers. This means higher unemployment and lower economic activity in coming months or even years.
“When the FOMC tries to boost the economy and credit creation, none of the benefit is working its way to investors or consumers,” we wrote last week in The Institutional Risk Analyst (“Zombie Love: Do Fannie and Freddie Provide Any Benefit to the U.S. Economy?”). “Because the Fed and the White House are allowing the banking sector to heal its collective wounds via zero interest rate policy from the Fed, the banking system is not passing along any of the benefit of Fed easy money. Thus while the banks absorb all of the subsidies from the Fed and Treasury, U.S. households, businesses and private investors are slowly destroyed.”
“Policy makers in Washington know all of this, of course,” we continued. “Nobody in the Obama White House or the Fed dares to admit in public that the ‘quantitative easing’ by the FOMC is pretty much useless in terms of helping the real, private economy.”
No surprise, then, that Wall Street economists are gradually pushing down their “growth” estimates for the U.S. economy for the balance of 2010 and beyond. This grudging admission of the truth is mirrored in shrinking analyst estimates for revenue for sectors from banking to retailing to autos. With growth receding, there is no surprise in reports that investors are fleeing equities, as the New York Times reported on Sunday.
The financial crisis of 2008 and the aftermath raise fundamental questions about money, debt and value in a way that Americans have not seen in over a century. The response to the crisis by the Fed, focused entirely on Wall Street, begs the question of whether Main Street can survive. The falling expectations for the economy are translating into truly horrible poll numbers for Democrats and the Obama Administration, but also for all incumbents. The rate of turnover in the Congress this year could be one of the highest in the post-WWII era.
If the Democrats in Congress take a trouncing as is widely expected, then President Obama may decide not to run for another term. While that possibility may seem far-fetched, my sources in Washington say that President Obama may seek to become the first American Secretary General of the United Nations.
According to this admittedly speculative scenario, President Obama will choose not to run again so he can take a shot at the UN post. Obama knows that he never could win the position after two terms.
The other interesting twist that some see emerging after the November election due to the poor economic outlook involves the newly created Consumer Financial Protection Bureau, or CFPB. The chair of the Congressional Oversight Panel, Harvard Law Professor and bankruptcy expert Elizabeth Warren, is one of the leading candidates for the job, but the banking industry naturally is opposed.
It is becoming clear that the Obama Administration may not pick a candidate for the CFPB job until after the November election in order to dodge this very political issue. By holding the voting on the new agency head until after the election, members of both parties will be able to extract maximum contributions from the banking lobby. But I hear that the choice may have already been made.
It may surprise some observers that House Financial Services Committee Chairman Barney Frank may want the CFPB job for himself. Frank reportedly has already expressed interest to the White House. Sad to say, Chairman Frank probably has seniority over Chairman Warren.
“Barney did some heavy lifting,” says a source on the committee who is close to Frank. “He might want a different gig, especially if he loses the chairman’s seat in November. Frank would not want to hang around in Congress as part of the minority. Being the first CFPB emperor, however, could be a more interesting gig than, say, eventually being made head of HUD of the FHA.”
You heard it here first.
URL to original article: http://www.housingwire.com/2010/11/03/obama-frank-double-dips-and-washington-exit-strategies
The official version of reality in use this week at the White House says that the U.S. economy is recovering, slowly but surely, and unemployment is falling. The same perspective says that residential real estate markets are stabilizing and banks are starting to lend more aggressively. None of these statements are true, but there are quite a few people in the White House who believe them nonetheless.
My view is a bit different, namely that unemployment is likely to remain at current levels during the balance of 2010. The sharp reduction in credit available to the real economy and the overhang in the mortgage markets are not likely to improve anytime soon. I spoke about the economic outlook with Larry Kudlow and James Glassman on CNBC last Friday: “Double Dip Fears Mount.”
While the public sector of the U.S. economy received a great deal of assistance due to various forms of stimulus, the private sector never recovered from the first “dip” during 2008 and much of 2009. Virtually all of the Fed’s assistance from zero interest rate policy has gone to the banks or the U.S. Treasury, with no help for American households and workers. This means higher unemployment and lower economic activity in coming months or even years.
“When the FOMC tries to boost the economy and credit creation, none of the benefit is working its way to investors or consumers,” we wrote last week in The Institutional Risk Analyst (“Zombie Love: Do Fannie and Freddie Provide Any Benefit to the U.S. Economy?”). “Because the Fed and the White House are allowing the banking sector to heal its collective wounds via zero interest rate policy from the Fed, the banking system is not passing along any of the benefit of Fed easy money. Thus while the banks absorb all of the subsidies from the Fed and Treasury, U.S. households, businesses and private investors are slowly destroyed.”
“Policy makers in Washington know all of this, of course,” we continued. “Nobody in the Obama White House or the Fed dares to admit in public that the ‘quantitative easing’ by the FOMC is pretty much useless in terms of helping the real, private economy.”
No surprise, then, that Wall Street economists are gradually pushing down their “growth” estimates for the U.S. economy for the balance of 2010 and beyond. This grudging admission of the truth is mirrored in shrinking analyst estimates for revenue for sectors from banking to retailing to autos. With growth receding, there is no surprise in reports that investors are fleeing equities, as the New York Times reported on Sunday.
The financial crisis of 2008 and the aftermath raise fundamental questions about money, debt and value in a way that Americans have not seen in over a century. The response to the crisis by the Fed, focused entirely on Wall Street, begs the question of whether Main Street can survive. The falling expectations for the economy are translating into truly horrible poll numbers for Democrats and the Obama Administration, but also for all incumbents. The rate of turnover in the Congress this year could be one of the highest in the post-WWII era.
If the Democrats in Congress take a trouncing as is widely expected, then President Obama may decide not to run for another term. While that possibility may seem far-fetched, my sources in Washington say that President Obama may seek to become the first American Secretary General of the United Nations.
According to this admittedly speculative scenario, President Obama will choose not to run again so he can take a shot at the UN post. Obama knows that he never could win the position after two terms.
The other interesting twist that some see emerging after the November election due to the poor economic outlook involves the newly created Consumer Financial Protection Bureau, or CFPB. The chair of the Congressional Oversight Panel, Harvard Law Professor and bankruptcy expert Elizabeth Warren, is one of the leading candidates for the job, but the banking industry naturally is opposed.
It is becoming clear that the Obama Administration may not pick a candidate for the CFPB job until after the November election in order to dodge this very political issue. By holding the voting on the new agency head until after the election, members of both parties will be able to extract maximum contributions from the banking lobby. But I hear that the choice may have already been made.
It may surprise some observers that House Financial Services Committee Chairman Barney Frank may want the CFPB job for himself. Frank reportedly has already expressed interest to the White House. Sad to say, Chairman Frank probably has seniority over Chairman Warren.
“Barney did some heavy lifting,” says a source on the committee who is close to Frank. “He might want a different gig, especially if he loses the chairman’s seat in November. Frank would not want to hang around in Congress as part of the minority. Being the first CFPB emperor, however, could be a more interesting gig than, say, eventually being made head of HUD of the FHA.”
You heard it here first.
URL to original article: http://www.housingwire.com/2010/11/03/obama-frank-double-dips-and-washington-exit-strategies
Wednesday, November 3, 2010
Fannie Mae, Freddie Mac mortgage delinquencies continue to fall
by JON PRIOR
The percentage delinquent mortgages held by Fannie Mae and Freddie Mac continued the fall experienced in nearly every month this year.
The 30-plus day delinquent mortgage rate on Fannie Mae's book fell to 4.7% in August, the latest month of available data, down 12 basis points from the previous month, according to its monthly summary. For Fannie, it's the sixth straight month of declines.
Freddie Mac's 90-plus day delinquency rate reached 3.8% in September, down 3 basis points from the previous month, according to its summary. It's the fourth straight month of declines for Freddie and would have been the seventh were it not for a singular, unchanged rate in May at 4.06%.
But from a year ago, delinquency rates for both government-sponsored enterprises remain elevated. Fannie's delinquency rate is still up 25 bps from 4.45% in August 2009. The Freddie delinquency rate is 37 bps from the 3.43% reported in September 2009.
Credit Suisse analysts estimate the total losses at Fannie and Freddie will eventually reach $321 billion. If home prices drop further from their estimate and delinquencies and foreclosure mount again, that number could reach as high as $448 billion.
URL to original article: http://www.housingwire.com/2010/11/02/fannie-freddie-mortgage-delinquencies-continue-to-fall
The percentage delinquent mortgages held by Fannie Mae and Freddie Mac continued the fall experienced in nearly every month this year.
The 30-plus day delinquent mortgage rate on Fannie Mae's book fell to 4.7% in August, the latest month of available data, down 12 basis points from the previous month, according to its monthly summary. For Fannie, it's the sixth straight month of declines.
Freddie Mac's 90-plus day delinquency rate reached 3.8% in September, down 3 basis points from the previous month, according to its summary. It's the fourth straight month of declines for Freddie and would have been the seventh were it not for a singular, unchanged rate in May at 4.06%.
But from a year ago, delinquency rates for both government-sponsored enterprises remain elevated. Fannie's delinquency rate is still up 25 bps from 4.45% in August 2009. The Freddie delinquency rate is 37 bps from the 3.43% reported in September 2009.
Credit Suisse analysts estimate the total losses at Fannie and Freddie will eventually reach $321 billion. If home prices drop further from their estimate and delinquencies and foreclosure mount again, that number could reach as high as $448 billion.
URL to original article: http://www.housingwire.com/2010/11/02/fannie-freddie-mortgage-delinquencies-continue-to-fall
Tuesday, November 2, 2010
Obama administration sings new tune on foreclosures
Source: CNN Money
A year ago, officials focused on stemming the foreclosure tide. Now they are touting the need for foreclosures to rebuild the housing market.
Last week Phyllis Caldwell, head of the Treasury Department's Homeownership Preservation Office, told a congressional panel that "an important part of ensuring longer-term stability in the market is to enable properties to be resold to families who can afford to purchase them."
And White House Press Secretary Robert Gibbs last month told reporters that without sales of homes in distressed areas the "recovery in the housing market stops. It's frozen."
"That obviously can have -- we believe and others believe -- a very negative and detrimental impact to our economic recovery efforts and the housing markets in states that have been hardest hit," Gibbs said.
But when Obama unveiled his signature foreclosure prevention program in February 2009, he said loan modifications were a key way to prevent the housing crisis from deepening. His initiative called for reducing distressed borrowers' monthly payments to 31% of their pre-tax income.
"We're not just helping homeowners at risk of falling over the edge; we're preventing their neighbors from being pulled over that edge too -- as defaults and foreclosures contribute to sinking home values, and failing local businesses, and lost jobs," the president said.
The shift in rhetoric signals the Obama administration is recognizing that its loan modification program is foundering, experts said. Also, it is acknowledging that banks must address their swelling ranks of delinquent loans.
To be sure, the administration is still concerned with helping homeowners avoid foreclosure. Officials have rolled out a series of initiatives in 2010 aimed at assisting the unemployed and the underwater who owe more than their houses are worth.
And, they have called for reviews into the institutions' foreclosure policies and procedures, stressing that servicers must comply with the law.
But they also now acknowledge more vocally that foreclosures must continue for a normal housing market to return. And that, in part, is why the administration is not supporting a nationwide foreclosure freeze despite the paperwork scandal that is roiling the mortgage industry.
The administration says there has been no change in either policy or rhetoric surrounding foreclosures and the housing market. The loan modification program was never meant to save every homeowner and officials always acknowledged the role of foreclosures in the market's recovery, according to a Treasury spokeswoman.
"We have always thought some foreclosures needed to happen for there to be a full housing recovery," said the spokeswoman, Andrea Risotto.
But, experts say, the new tone eminating from the White House also recognizes that the modification program is not living up to its initial goals of helping up to 4 million people avoid foreclosure. Some 496,000 distressed borrowers have received long-term modifications through September.
"What they have now realized is there are a lot of borrowers who can't be saved and have to be moved through the foreclosure process," said Laurie Goodman, senior managing director with Amherst Securities.
And they must break this news to Americans.
Officials are "trying to soften everybody up" to the fact that foreclosures are necessary, said Guy Cecela, publisher of Inside Mortgage Finance, an industry newsletter.
The new talking points, however, won't likely result in a change in policy, said Anthony Sanders, a real estate finance professor at George Mason University. Administration officials will continue to support foreclosure alternatives because they are more palatable.
"As long as politics are involved, they'll keep doing it," said Sanders.
URL to original article: http://www.housingwire.com/2010/11/02/obama-administration-sings-new-tune-on-foreclosures
A year ago, officials focused on stemming the foreclosure tide. Now they are touting the need for foreclosures to rebuild the housing market.
Last week Phyllis Caldwell, head of the Treasury Department's Homeownership Preservation Office, told a congressional panel that "an important part of ensuring longer-term stability in the market is to enable properties to be resold to families who can afford to purchase them."
And White House Press Secretary Robert Gibbs last month told reporters that without sales of homes in distressed areas the "recovery in the housing market stops. It's frozen."
"That obviously can have -- we believe and others believe -- a very negative and detrimental impact to our economic recovery efforts and the housing markets in states that have been hardest hit," Gibbs said.
But when Obama unveiled his signature foreclosure prevention program in February 2009, he said loan modifications were a key way to prevent the housing crisis from deepening. His initiative called for reducing distressed borrowers' monthly payments to 31% of their pre-tax income.
"We're not just helping homeowners at risk of falling over the edge; we're preventing their neighbors from being pulled over that edge too -- as defaults and foreclosures contribute to sinking home values, and failing local businesses, and lost jobs," the president said.
The shift in rhetoric signals the Obama administration is recognizing that its loan modification program is foundering, experts said. Also, it is acknowledging that banks must address their swelling ranks of delinquent loans.
To be sure, the administration is still concerned with helping homeowners avoid foreclosure. Officials have rolled out a series of initiatives in 2010 aimed at assisting the unemployed and the underwater who owe more than their houses are worth.
And, they have called for reviews into the institutions' foreclosure policies and procedures, stressing that servicers must comply with the law.
But they also now acknowledge more vocally that foreclosures must continue for a normal housing market to return. And that, in part, is why the administration is not supporting a nationwide foreclosure freeze despite the paperwork scandal that is roiling the mortgage industry.
The administration says there has been no change in either policy or rhetoric surrounding foreclosures and the housing market. The loan modification program was never meant to save every homeowner and officials always acknowledged the role of foreclosures in the market's recovery, according to a Treasury spokeswoman.
"We have always thought some foreclosures needed to happen for there to be a full housing recovery," said the spokeswoman, Andrea Risotto.
But, experts say, the new tone eminating from the White House also recognizes that the modification program is not living up to its initial goals of helping up to 4 million people avoid foreclosure. Some 496,000 distressed borrowers have received long-term modifications through September.
"What they have now realized is there are a lot of borrowers who can't be saved and have to be moved through the foreclosure process," said Laurie Goodman, senior managing director with Amherst Securities.
And they must break this news to Americans.
Officials are "trying to soften everybody up" to the fact that foreclosures are necessary, said Guy Cecela, publisher of Inside Mortgage Finance, an industry newsletter.
The new talking points, however, won't likely result in a change in policy, said Anthony Sanders, a real estate finance professor at George Mason University. Administration officials will continue to support foreclosure alternatives because they are more palatable.
"As long as politics are involved, they'll keep doing it," said Sanders.
URL to original article: http://www.housingwire.com/2010/11/02/obama-administration-sings-new-tune-on-foreclosures
Foreclosure shadow inventory will take more than 40 months to clear: Fitch
by JON PRIOR
The shadow inventory of delinquent loans, foreclosures, and REOs stands at 7 million homes, which would take the market more than 40 months to clear, more than three years, according to Fitch Ratings.
And as major banks fix recent problems in the foreclosure process, that number will only grow. Liquidation and resolution timelines were extended because of the affidavit issues. Consumer advocacy groups and state attorneys general offices filed lawsuits, and regulators launched investigations.
All of it, Fitch said, simply prolonged the housing correction underway and will bring about further house price declines and losses on residential mortgage-backed securities.
Fitch analysts looked at the distressed loan inventory in the private-label RMBS market to get the estimate. While those loans represent 25% of the entire mortgage market, trends and issues can be extrapolated to the rest, analysts said.
Before the trouble, the total number of troubled loans peaked in early 2010, driven by fewer delinquencies as well as some stabilization in the economy, but when banks began going back over misfiled affidavits the recovery was put on hold.
For the 23 judicial states like Florida, the recovery will take longer while problem inventories in states such as California will be resolved quicker.
As of September, the average liquidated distressed mortgage took 18 months from the last payment to resale, according to Fitch, the highest number on record. While servicers have shifted their strategy from quick liquidation times to putting more emphasis on modifications, the effectiveness of loan modifications in terms of reducing the eventual total number of liquidations has generally been disappointing.
"To date, the majority of modified loans have re-defaulted after one year," according to Fitch.
Analysts did say it is still unclear how long the foreclosure delay will last, but even before the problems came to light, Fitch believed prices would drop another 10% with the majority of the recovery coming at the end of 2012.
URL to original article: http://www.housingwire.com/2010/11/01/shadow-inventory-of-foreclosures-to-take-40-months-to-clear-and-growing-fitchMonday, November 1, 2010
Biggest Week of Year for Markets Could Bring More Volatility
Source: CNBC
The mid-term election and the Fed's November meeting should clear away some uncertainties hanging over markets but may also lead to a new period of heightened volatility.
The coming week is likely to go down as the biggest of the year for markets, in terms of potential course setting events. Besides the Tuesday election and Wednesday Fed meeting, the week is capped Friday by the important October jobs report, and there are dozens of major earnings reports in between. Traders will also be watching for new developments in Friday's security scare, related to a plot to send explosives in cargo, bound from Yemen to the U.S.
Stocks were barely changed in the past week as the markets meandered ahead of the election and the Fed meeting. Republicans are widely seen taking control of the House of Representatives, while Democrats are expected to retain control of the Senate. The expectations of gridlock has so far been taken as a positive by investors.
The outcome of the Fed meeting has in some ways been much more debated and has created more anxiety for markets, as the promise of a new round of quantitative easing has driven down the dollar, pumping up stocks and commodities prices around the globe. Economists expect the Fed to announce a new program of easing that would include the purchase of about $500 billion in Treasury securities.
"There's a good chance we sell off on the news, unless we get bigger than general expectations. Expectations are you are going to see gridlock in Washington, and there are some people who expect something relatively large from the Fed. I think the Fed is working hard to show it's there for the economy but not to put out as much as people are talking about. People have been talking about $500 billion, a trillion," said Stuart Freeman, chief strategist at Wells Fargo Advisers.
"The Fed will be trying to figure out just what the market wants and just what the economy needs. I don't think it wants to negatively surprise the market, but also just not do what market wants," Freeman said. "I think the next week could give us a lot of volatility."
The very idea of QE, while greeted by markets, is not necessarily viewed as a positive by all analysts, and skeptics believe it could be ineffective and difficult to unwind. In theory, the asset purchases are expected to put more money into the system, reflate assets and help drive down lending rates.
"It's not necessarily going to create jobs and it may create some asset bubbles. Generally, it's going to help at the margin," Freeman said.
"The only thing I can count on for next week is it's going to be volatile...short-term players are going to get chopped up, but the longer term players can be patient and wait for the dust to settle," said Marc Chandler, chief foreign exchange strategist at Brown Brothers Harriman. The dollar was barely changed against the euro this past week, but was down 2 percent for the month of October. It lost 3.6 percent against the yen in October.
Chandler said investors hold differing views on Fed easing. One is that the economy is in bad shape, and the Fed needs to help resuscitate it.. "Another is we've got some green shoots sprouting and they want to put a little more fertilizer on it," he said.
"Of course, everybody is talking about the two big things - the election and the QE2 - but I think the economic data is going to be interesting. Probably we'll have the biggest rise in auto sales since the cash for clunkers program last year, and on Friday, we should see the first increase in nonfarm payrolls since May," he said. Auto sales are reported Wednesday.
Whither Stocks
The Dow finished the week 14 points lower at 11,118, and the S&P 500 was flat at 1183. The Nasdaq was up 1.1 percent for the week at 2507, rising with tech stocks.
Freeman said he would not be surprised to see stocks retreat back to the 1100 to 1140 range on the S&P, which was his year end target, before moving higher. "There's always a possibility you could have a 4 to 10 percent pullback. We've had them before. We just had a 13 percent bounce up. If we have a pull back, I would say it's a buying opportunity because we do think we'll have growth next year," he said.
Ed Keon, managing director and portfolio manager at Quantitative Management Associations, said he thinks the stock market is looking past the election and Fed. "At the end of the day, the stock market is about earnings and valuations and what you're paying for those earnings, and the earnings pickup has been terrific, and while stocks are not super cheap, according to historic standards, they are super cheap compared to bonds," he said.
Freeman said Friday's terror scare, as yet unwinding, may be an influence Monday, depending how the story unfolds. "It's difficult to say for Monday. The market's really waiting for some big things that could have an impact on the economy and this is something that is certainly ongoing risk, but as of right now, it's not something that caused a problem for the economy or the market, but it certainly does put a little bit of a dark cloud on the opening," he said Friday evening.
Econorama
Besides Friday's jobs report, it is a fairly busy week for economic reports. Some traders are already speculating the jobs report could have a more optimistic tone than prior reports. Economists expect about 80,000 new private payrolls.
ISM manufacturing data is reported Monday, as is construction spending and personal income. The ADP employment report is reported Wednesday, and weekly jobless claims are reported Thursday. ISM non manufacturing is released Wednesday, as are factory orders. Productivity and costs are Thursday, and pending home sales and consumer credit are released Friday. Retailers release monthly sales Thursday.
Fed Chairman Ben Bernanke speaks to college students in Jacksonville, Fla. Friday, and again to an Atlanta Fed conference in Jekyll Island, Ga. Saturday Nine Fed presidents will attend the meeting, which starts on Friday. Atlanta Fed President Dennis Lockhart and Minneapolis Fed President Narayana Kocherlakota both speak at the conference, and other Fed officials will moderate panels. Former Fed Chairman Alan Greenspan also speaks there Saturday.
Earnings Central
Earnings reports are expected from more than 85 S&P 500 companies, including companies from the media sector, as well as consumer products, health care, energy, insurance and industrials.
URL to original article: http://www.housingwire.com/2010/11/01/biggest-week-of-year-for-markets-could-bring-more-volatility
The mid-term election and the Fed's November meeting should clear away some uncertainties hanging over markets but may also lead to a new period of heightened volatility.
The coming week is likely to go down as the biggest of the year for markets, in terms of potential course setting events. Besides the Tuesday election and Wednesday Fed meeting, the week is capped Friday by the important October jobs report, and there are dozens of major earnings reports in between. Traders will also be watching for new developments in Friday's security scare, related to a plot to send explosives in cargo, bound from Yemen to the U.S.
Stocks were barely changed in the past week as the markets meandered ahead of the election and the Fed meeting. Republicans are widely seen taking control of the House of Representatives, while Democrats are expected to retain control of the Senate. The expectations of gridlock has so far been taken as a positive by investors.
The outcome of the Fed meeting has in some ways been much more debated and has created more anxiety for markets, as the promise of a new round of quantitative easing has driven down the dollar, pumping up stocks and commodities prices around the globe. Economists expect the Fed to announce a new program of easing that would include the purchase of about $500 billion in Treasury securities.
"There's a good chance we sell off on the news, unless we get bigger than general expectations. Expectations are you are going to see gridlock in Washington, and there are some people who expect something relatively large from the Fed. I think the Fed is working hard to show it's there for the economy but not to put out as much as people are talking about. People have been talking about $500 billion, a trillion," said Stuart Freeman, chief strategist at Wells Fargo Advisers.
"The Fed will be trying to figure out just what the market wants and just what the economy needs. I don't think it wants to negatively surprise the market, but also just not do what market wants," Freeman said. "I think the next week could give us a lot of volatility."
The very idea of QE, while greeted by markets, is not necessarily viewed as a positive by all analysts, and skeptics believe it could be ineffective and difficult to unwind. In theory, the asset purchases are expected to put more money into the system, reflate assets and help drive down lending rates.
"It's not necessarily going to create jobs and it may create some asset bubbles. Generally, it's going to help at the margin," Freeman said.
"The only thing I can count on for next week is it's going to be volatile...short-term players are going to get chopped up, but the longer term players can be patient and wait for the dust to settle," said Marc Chandler, chief foreign exchange strategist at Brown Brothers Harriman. The dollar was barely changed against the euro this past week, but was down 2 percent for the month of October. It lost 3.6 percent against the yen in October.
Chandler said investors hold differing views on Fed easing. One is that the economy is in bad shape, and the Fed needs to help resuscitate it.. "Another is we've got some green shoots sprouting and they want to put a little more fertilizer on it," he said.
"Of course, everybody is talking about the two big things - the election and the QE2 - but I think the economic data is going to be interesting. Probably we'll have the biggest rise in auto sales since the cash for clunkers program last year, and on Friday, we should see the first increase in nonfarm payrolls since May," he said. Auto sales are reported Wednesday.
Whither Stocks
The Dow finished the week 14 points lower at 11,118, and the S&P 500 was flat at 1183. The Nasdaq was up 1.1 percent for the week at 2507, rising with tech stocks.
Freeman said he would not be surprised to see stocks retreat back to the 1100 to 1140 range on the S&P, which was his year end target, before moving higher. "There's always a possibility you could have a 4 to 10 percent pullback. We've had them before. We just had a 13 percent bounce up. If we have a pull back, I would say it's a buying opportunity because we do think we'll have growth next year," he said.
Ed Keon, managing director and portfolio manager at Quantitative Management Associations, said he thinks the stock market is looking past the election and Fed. "At the end of the day, the stock market is about earnings and valuations and what you're paying for those earnings, and the earnings pickup has been terrific, and while stocks are not super cheap, according to historic standards, they are super cheap compared to bonds," he said.
Freeman said Friday's terror scare, as yet unwinding, may be an influence Monday, depending how the story unfolds. "It's difficult to say for Monday. The market's really waiting for some big things that could have an impact on the economy and this is something that is certainly ongoing risk, but as of right now, it's not something that caused a problem for the economy or the market, but it certainly does put a little bit of a dark cloud on the opening," he said Friday evening.
Econorama
Besides Friday's jobs report, it is a fairly busy week for economic reports. Some traders are already speculating the jobs report could have a more optimistic tone than prior reports. Economists expect about 80,000 new private payrolls.
ISM manufacturing data is reported Monday, as is construction spending and personal income. The ADP employment report is reported Wednesday, and weekly jobless claims are reported Thursday. ISM non manufacturing is released Wednesday, as are factory orders. Productivity and costs are Thursday, and pending home sales and consumer credit are released Friday. Retailers release monthly sales Thursday.
Fed Chairman Ben Bernanke speaks to college students in Jacksonville, Fla. Friday, and again to an Atlanta Fed conference in Jekyll Island, Ga. Saturday Nine Fed presidents will attend the meeting, which starts on Friday. Atlanta Fed President Dennis Lockhart and Minneapolis Fed President Narayana Kocherlakota both speak at the conference, and other Fed officials will moderate panels. Former Fed Chairman Alan Greenspan also speaks there Saturday.
Earnings Central
Earnings reports are expected from more than 85 S&P 500 companies, including companies from the media sector, as well as consumer products, health care, energy, insurance and industrials.
URL to original article: http://www.housingwire.com/2010/11/01/biggest-week-of-year-for-markets-could-bring-more-volatility
Vegas home sales down 15% in September: DataQuick
by JON PRIOR
Las Vegas home sales fell 15% in September from a year ago but held flatter than normal on a monthly basis, according San Diego-based real estate data provider MDA DataQuick.
There were 4,276 new and resold home sales in Las Vegas for September, down 0.2% from August. Monthly sales did fall nearly as far as the 22.2% drop from June to July as investor demand, low mortgage rates and late-closing Summer transactions leveled countered the expiration of the homebuyer tax credit.
Sales of newly built homes increased 4% from a year ago, while existing home sales dropped 19.3%.
"Beyond the lost tax credits, the housing market has been undermined by a weak economic recovery, a lack of significant job growth and potential homebuyers’ concerns about job security," according to DataQuick.
Workouts on prevalent developments in the area are being sought. MGM Resorts International and Dubai World, an investment bank backed by the Dubai government, are trying to refinance the $1.8 billion loan on the CityCenter development they own located on the Vegas Strip, Bloomberg reported Thursday.
"Moreover, without the tax credit deadlines, only super-low mortgage rates are pressuring would-be buyers to purchase sooner rather than later."
The median price on for a new or resale home in Las Vegas stood at $130,000, flat from a year ago and the month before. But it's a 58.3% drop from the $312,000 median peak in November 2006.
Vegas, which holds the highest foreclosure rate of any metro area in the country, according to RealtyTrac, had 2,687 homes lost to foreclosure in September, down 15% from last year but up 9% from August.
The peak came in February 2009, when lenders foreclosed on 3,718 homes.
URL to original article: http://www.housingwire.com/2010/10/29/vegas-home-sales-down-15-in-september-dataquick
Las Vegas home sales fell 15% in September from a year ago but held flatter than normal on a monthly basis, according San Diego-based real estate data provider MDA DataQuick.
There were 4,276 new and resold home sales in Las Vegas for September, down 0.2% from August. Monthly sales did fall nearly as far as the 22.2% drop from June to July as investor demand, low mortgage rates and late-closing Summer transactions leveled countered the expiration of the homebuyer tax credit.
Sales of newly built homes increased 4% from a year ago, while existing home sales dropped 19.3%.
"Beyond the lost tax credits, the housing market has been undermined by a weak economic recovery, a lack of significant job growth and potential homebuyers’ concerns about job security," according to DataQuick.
Workouts on prevalent developments in the area are being sought. MGM Resorts International and Dubai World, an investment bank backed by the Dubai government, are trying to refinance the $1.8 billion loan on the CityCenter development they own located on the Vegas Strip, Bloomberg reported Thursday.
"Moreover, without the tax credit deadlines, only super-low mortgage rates are pressuring would-be buyers to purchase sooner rather than later."
The median price on for a new or resale home in Las Vegas stood at $130,000, flat from a year ago and the month before. But it's a 58.3% drop from the $312,000 median peak in November 2006.
Vegas, which holds the highest foreclosure rate of any metro area in the country, according to RealtyTrac, had 2,687 homes lost to foreclosure in September, down 15% from last year but up 9% from August.
The peak came in February 2009, when lenders foreclosed on 3,718 homes.
URL to original article: http://www.housingwire.com/2010/10/29/vegas-home-sales-down-15-in-september-dataquick
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