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Showing posts with label mortgagecrisis. Show all posts
Showing posts with label mortgagecrisis. Show all posts
Home sales fall by 5.4% last month, prices rise only because mix of homes being sold changed

Home sales fall by 5.4% last month, prices rise only because mix of homes being sold changed

When is the housing market finally going to recovery? With interest rates at record lows, one would have thought that it would be booming right now. From the Associated Press:
Americans bought fewer homes in June than May, indicating the weak economy could make a modest housing recovery choppy.
The National Association of Realtors said Thursday that sales of previously occupied homes fell 5.4 percent in June to a seasonally adjusted annual rate of 4.37 million homes. That's the fewest since October.
Sales are up 4.5 percent from a year ago, evidence that the market is still recovering. But the annual sales pace is below the 6 million that economists consider healthy. The June drop in completed re-sales contrasts with more encouraging data that show gains in new residential construction, higher builder confidence and more signed contracts to buy previously owned homes.
"It is only one month and the rest of the housing indicators have all continued to show improvement," said Jennifer Lee, senior economist at BMO Capital Markets. "Let's hope this June decline is a blip."
The number of first-time buyers, critical to a housing recovery, made up just 32 percent of sales. That's down from 34 percent in May. In healthy markets, first-time buyers make up more than 40 percent of the market.
The median home price rose 5 percent to $189,400. That's mostly because sales of more expensive homes rose, while sales of cheaper homes fell, the Realtors group said. . . .
Banks pressured to buy sovereign debt: When will government realize the problems from forcing banks to make risky loans?

Banks pressured to buy sovereign debt: When will government realize the problems from forcing banks to make risky loans?

Government forces banks to lend money to risky borrowers.  Now they force banks to lend money to governments.  When will the government learn that forcing banks to take on more risk than they want causes problems?  From CNBC:

US and European regulators are essentially forcing banks to buy up their own government's debt—a move that could end up making the debt crisis even worse, a Citigroup analysis says.
Regulators are allowing banks to escape counting their country's debt against capital requirements and loosening other rules to create a steady market for government bonds, the study says.
While that helps governments issue more and more debt, the strategy could ultimately explode if the governments are unable to make the bond payments, leaving the banks with billions of toxic debt, says Citigroup strategist Hans Lorenzen.
"Captive bank demand can buy time and can help keep domestic yields low," Lorenzen wrote in an analysis for clients. "However, the distortions that build up over time can sow the seeds of an even bigger crisis, if the time bought isn't used very prudently." . . .
Housing prices continue to head down

Housing prices continue to head down

From the WSJ:

S&P/Case-Shiller reported that its indexes ended the first quarter of 2012 at new lows. The national composite, which covers the entire country and is only released on a quarterly basis, was down 1.9% from a year earlier and fell 2% in the first quarter compared with the fourth. The composite 20-city home price index, a key gauge of U.S. home prices, was essentially flat in March from the previous month and fell 2.6% from a year earlier. Eighteen cities posted monthly declines, with just Phoenix and Miami showing increases.
Thirteen of the 20 cities posted annual declines in March, but Phoenix, Minneapolis, Denver, Miami, Detroit, Dallas and Charlotte notched gains. . . . .
Home sales and prices continue falling

Home sales and prices continue falling

Seasonal adjustments are starting to have huge problems and produce misleading information. From the Washington Post:
. . . Without adjusting for seasonal differences, the survey of prices in 20 metropolitan areas fell to its lowest level since the housing market downturn began.
But analysts pointed to bright spots hidden in the data — and some ventured that the housing market may have finally found its low.
. . . . the existing inventory of new homes for sale had fallen sharply since a year ago. The inventory of homes, measured in the number of months they would take to sell, stood at 5.3, down from seven a year ago, according to an analysis by the High Frequency Economics consulting firm. Inventory is considered a key sign of future housing investment.
Through March, sales technically fell, to 328,000, but only because the sales figures reported by the Commerce Department in February were adjusted sharply upward, from 313,000 to 353,000. Without that adjustment, the March data would have registered a 4.8 percent increase. . . .
Housing prices continue to plummet

Housing prices continue to plummet

Washington DC is the one city that continues to consistently show increases in housing prices. From CNN Money:

The housing market started off the new year with a thud. Home prices dropped for the fifth consecutive month in January, reaching their lowest point since the end of 2002.
The average home sold in that month lost 0.8% of its value, compared with a month earlier, and prices were down 3.8% from 12 months earlier, according to the S&P/Case-Shiller home price index of 20 major markets.
Home prices have fallen a whopping 34.4% from the peak set in July, 2006.
"Despite some positive economic signs, home prices continued to drop," said David Blitzer, spokesman for S&P. "Eight cities -- Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa -- made new lows." . . .
"Dems push Fannie, Freddie regulator on mortgage write-downs"

"Dems push Fannie, Freddie regulator on mortgage write-downs"

Do Democrats have any idea what these types of policies will have on new loans being made? If you can have a loan you make marked down dramatically after you make it, why would you ever make that type of loan? From The Hill newspaper:

Congressional Democrats are expected to continue pushing a federal housing regulator to write down mortgage principal for government-backed loans if a settlement with banks doesn't help out enough homeowners.

The federal government is "very close" to an agreement with mortgage servicers that could help about a million homeowners, Housing and Urban Development Secretary Shaun Donovan said this week.

The deal, which also includes states' attorneys general, would require the nation's five largest banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial — to spend upward of $25 billion to help borrowers caught up in so-called robo-signing practices where servicers signed-off on foreclosure paperwork without properly reviewing documents. . . .

Newest Fox News piece: Obama Has Learned Nothing From the Mortgage Meltdown Mess

My newest piece at Fox News starts this way:

Just days before Christmas, the Obama administration gave Bank of America a big lump of coal, levying a hefty $335 million dollar fine on the company for discriminating against minorities in its lending practices. 

Supposedly Countrywide, a mortgage company bought by Bank of America in 2008, had not given out enough low interest rate loans to minorities from 2004 to 2008.

What the large fine reveals is that President Obama hasn’t learned anything from the recent financial crisis. 

What the president sees as discrimination in awarding a mortgage, lenders saw as wise business decisions. 

If a borrower can’t afford a down payment, Obama appears to view charging a higher interest rate as discrimination. Lenders also think that they shouldn’t treat borrowers whose sole source of income is welfare or unemployment insurance, the same as those applicants who have a job. But Obama, again, appears to view this as discrimination.

There is obviously a problem with no down payments: if the price of the house falls so that it is worth less than the loan, some people will default and walk away. Similarly, when unemployment insurance or welfare runs out, borrowers might find they can’t keep paying their mortgage.

The Equal Credit Opportunity Act the Obama administration used to impose this fine was exactly what helped cause the mortgage crisis by forcing lenders to make risky loans that they didn’t want to make. 
Yet, just last month, Obama put the blame for these risky loans going bad on banks for their “breathtaking greed” that “plunged our economy and the world into a crisis.”

Countrywide, a leading lender of subprime mortgages, was already issuing too many risky loans. Indeed, it was the poster child for doing what the government wanted. 
In 2002, Countrywide adopted its “No Income/No Asset Documentation Program.” Borrowers could get a loan with just 5 percent down. The big government mortgage bundlers, Fannie Mae and Freddie Mac, bought these mortgages and encouraged Countrywide to expand the program. By the first half of 2006, almost two-thirds of Countrywide’s subprime loans lacked any down payment. . . .


The Obama administration learned nothing from the financial crisis

The Obama administration learned nothing from the financial crisis

Remember how the pressure to give loans to individuals who couldn't afford them lead to the financial crisis (see here and here)? Failure to count welfare or unemployment payments as income is viewed as evidence of discrimination. Now the Obama administration forces Bank of America to pay record $335 million penalty for supposedly discriminating against minorities:

Bank of America Corp. will pay $335 million to settle allegations that its Countrywide Financial Corp. unit discriminated against black and Hispanic borrowers, in the largest residential fair-lending settlement in history.

The agreement, announced on Wednesday, involves more than 210,000 minority borrowers who were charged higher fees or who could have qualified for a prime mortgage, one offered to borrowers with the best credit histories, but instead were steered into a more costly subprime loan.

The case is the first by the Justice Department that accuses a lender of steering borrowers to more costly mortgages. The agreement also ends a separate discriminatory lending lawsuit filed by Illinois Attorney General Lisa Madigan in state court in June 2010.

Bank of America neither admitted nor denied the allegations in the settlement. The bank said it settled to resolve issues tied to Countrywide's practices before Bank of America's July 2008 purchase of the lender. The bank said it is "committed to fair and equal treatment of all our customers." . . .
The SEC sues Ex-Freddie, Fannie CEOs over Fraud

The SEC sues Ex-Freddie, Fannie CEOs over Fraud

Now even the SEC is accusing Fannie and Freddie of committing fraud.

The lawsuits filed today in Manhattan federal court were followed by an SEC statement that it had entered into “non- prosecution agreements” with each company. Fannie Mae, the government-sponsored enterprise which issues almost half of all mortgage-backed securities, and Freddie Mac, the McLean, Virginia-based mortgage-finance company, had “agreed to accept responsibility” for their conduct, the SEC said.
In the lawsuits, the SEC said Syron, Mudd and other executives understated exposure to subprime mortgage loans. From 2007 to 2008, Freddie Mac executives said the company’s exposure was from $2 billion to $6 billion when it was actually as high as $244 billion, according to one SEC complaint.
From 2006 to 2008, Washington-based Fannie Mae executives said the firm’s exposure to subprime mortgage and reduced- documentation loans was about $4.8 billion when it was almost 10 times greater, according to the regulator.
‘Told the World’
“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” Robert Khuzami, director of the SEC’s enforcement division, said today in a statement. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books.” . . .
The Federal Reserve's massive wealth transfer

The Federal Reserve's massive wealth transfer

The article neglects to mention that many banks were forced to take loans against their will. But it sure was a way to increase bank profits. From Bloomberg:

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue. . . .

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.” . . .
Is housing heading down again?

Is housing heading down again?

From CNN:

The besieged housing market has even further to fall before home prices really hit rock bottom.
According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv's chief economist.
Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst. . . .
"Mortgage default warnings surged in August"

"Mortgage default warnings surged in August"

Obama and Democrats could only hold up these mortgage foreclosures for so long. From the AP:

Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.

The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.

The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.

"This is really the first time we've seen a significant increase in the number of new foreclosure actions," said Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here." . . .

Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, a possible settlement of government probes into the industry's mortgage-lending practices, and lenders' reluctance to take back properties amid slowing home sales. . . .
If the government forces risky loans, can the government then claim that they didn't know the loans were risky?

If the government forces risky loans, can the government then claim that they didn't know the loans were risky?

So what about the government forcing banks to make these risky loans? How can the government claim ignorance that these loans were risky? Can these banks now sue the government?
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation. A foreclosed home in Arizona. The Federal Housing Finance Agency suits are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others. The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter. The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims. The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value. Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers. . . .
Obama's Mortgage Refinance Proposal

Obama's Mortgage Refinance Proposal

Obama is currently floating a mortgage refinance proposal. Here is a simple question: why aren't people refinancing their mortgages right now? Presumably there are cost to doing the refinancing that exceeds the benefits. In this proposal, who is going to eat those costs? The taxpayers? The mortgage lenders? From Fox News:



Sources in the housing and mortgage industry confirm that the refinancing proposal, which would cover government-backed mortgages, is one of several on the table as the administration tries to tackle the housing slump as well as the overall slack in the economy.

"As one would expect, we continue to look for ways to ease the burden on struggling homeowners and to help stabilize the market, whether that's through assessing new proposals or older ones worth re-considering as market conditions change," an administration official told Fox Business Network, while cautioning they have "no plans to announce any major new initiatives at this time."

The refinancing idea would help homeowners by saving them money on interest payments while potentially having a stimulus effect on the economy -- since the money they would have spent on mortgage interest would be available for other things.

Christopher Mayer, a professor of real estate finance and economics at Columbia University who pushed the idea, estimated it could save consumers $75 billion a year in interest. . . .




Here is another article indicating that the plan might be aimed at subsidizing "high risk borrowers."
Democrats making mortgage lending even riskier

Democrats making mortgage lending even riskier

Do these guys ever think about the long run consequences of their actions? With this new regulation, what will happen to lending in these blighted areas? Of course, redlining laws may prevent banks from not lending to these areas. The result then will be higher mortgage rates for everyone. That is one sure way to help increase housing prices, right? From the WSJ:



Chicago's City Council passed an ordinance late last month championed by Mr. Emanuel that changes the definition of a property's "owner" to include a "mortgagee" or his "assignee" and "agent." That means banks, mortgage servicers and anyone else with a financial interest in a vacant property could be held liable for its upkeep—even if they haven't foreclosed on the home and don't legally own the property title.



This is a classic case of treating the symptom and not the disease. Vacant and blighted properties depress neighboring home values, can serve as havens for squatters and criminals, and cost money to fix. Chicago spent more than $15 million last year on the problem. As Alderman Pat Dowell, who introduced the ordinance, told us in a telephone interview last week, that total "doesn't even include the costs for streets and sanitation, policing, evicting squatters out of these buildings, rent abatement, water issues" and more.



But the real culprit here isn't the banks. It's the federal and state regulatory interference that prevents the private market from working. Market-research firm RealtyTrac estimates it takes 504 days to foreclose on a property in Illinois, compared to the 318-day national average. Pile on a wobbly national economy and high unemployment and many borrowers can't afford to pay their mortgage. No wonder borrowers and lenders often give up and walk away. . . .
And who wants to be in the Mortgage Lending business?

And who wants to be in the Mortgage Lending business?

With huge numbers of foreclosures, mortgage companies have tried to find ways to expedite these cases. Instead of concentrating on whether mistakes have been made in foreclosures, government officials have gone after what they say is an improper process. The lenders dispute this, but Democrats think that they are doing everyone a great deal by delaying these mortgages being processed. Now the Federal officials are trying to hold up the mortgage lenders for tens of billions of dollars and still leave them open to these lawsuits. From the WSJ:



Efforts to reach a settlement that would end the long-running probe of foreclosure practices are snagged over whether banks will get broad legal immunity from state officials for mortgage-related claims.



Federal and state officials are seeking penalties of $20 billion to $25 billion from Bank of America Corp., J.P. Morgan Chase & Co. and other financial firms under investigation since last fall. The banks are pushing hard for a deal, but they have insisted on a wide-ranging legal release from state attorneys general. . . .



"The reason the banks would settle or pay anywhere near $20 billion to $25 billion is to get this behind them," said one person familiar with the banks' thinking. "There's no reason the banks would pay that amount of money and leave their flank exposed."



U.S. and state officials dismissed the push for broad immunity as a "nonstarter," according to a federal official involved in the talks, but they have countered with a narrower offer. It would cover robo-signing and other servicer-related conduct but leave banks open to potential legal action for wrongdoing in fair lending and securitization, according to people familiar with the situation. Attorneys general in California, Delaware, Massachusetts and New York have said they are investigating mortgage-securitization practices. . . .
Not surprisingly, the Nation magazine bungles the discussion on the Texas Housing market

Not surprisingly, the Nation magazine bungles the discussion on the Texas Housing market

Robert Scheer in The Nation claims:



From the first days of statehood in 1845, Texas has maintained the strictest laws on home mortgages in the nation. The Texas constitution’s blanket ban on home equity loans, born of outrage over previous land grabs by banks, has been eased substantially over the years, but a firm commitment that the total amount in loans on a house not exceed 80 percent of appraised value, and other consumer-friendly restrictions on mortgage lenders, saved Texas from the home mortgage disaster visited upon many other states. . . .




As a February 21, 2001 article in the American Banker notes, home equity loans have and are made in Texas. In 1998, Texas passed a law that "lifted a 150-year-old ban on home equity loans. . . . . In 1998 the state constitution was amended to allow home equity lending." Texas banks have been relatively small because of various past state regulations and these new loans were large made by out-of-state organizations.



Presumably this is the type of thing that Paul Krugman was misleadingly alluding to the other day in his attack on Texas.



The vast majority of companies making home equity loans in Texas are out-of-state banks and finance companies that are "big enough to absorb the risk," said Ann Graham, chief counsel and vice president of the Texas Bankers Association. . . .




Also, Texas was spared the worst of the housing crisis, partly because it turns out to have surprisingly strict regulation of mortgage lending. . . .


The reason that Texas didn't have a meltdown is largely because it didn't have the huge rise in housing prices preceding it and the reason that happened was because Texas has relatively few zoning regulations that restrict growth.
Obama the Socialist: The Government Becoming the Landlord for a lot of Americans

Obama the Socialist: The Government Becoming the Landlord for a lot of Americans

Who thinks that the government will do a good job renting out these homes? Once people move in will they be there forever even if they don't pay their rent? Will the government run this rental program the same way that it forced the mortgage market to operate? This Associated Press article asks none of the hard questions and basically tries to sell the new Obama program:



The Obama administration may turn thousands of government-owned foreclosures into rental properties to help boost falling home prices.



The Federal Housing Finance Agency said Wednesday it is seeking input from investors on how to rent homes owned by government-controlled mortgage companies Fannie Mae and Freddie Mac and the Federal Housing Administration.



The U.S. government rescued Fannie and Freddie in September 2008 and has funded them since the financial crisis. The mortgage giants own or guarantee about half of the nation's mortgages and nearly all new mortgages.



At the end of last month, the government owned roughly 248,000 foreclosed homes, officials said. About 70,000 of those are listed for sale. But officials expect the number of foreclosures to soar in the coming months.



Many foreclosures have been stalled so attorneys general and federal regulators can investigate whether lenders cut corners and improperly handled thousands of cases. Once a settlement is finalized, foreclosures are expected to pick up again and further depress home prices. . . .




More support for the government as landlord theory comes from other media. This is from Politico:



The administration says that the move will help increase private investment in the housing market, while increasing the availability of affordable housing.



“As we continue moving forward on housing finance reform, it’s critical that we support the process of repair and recovery in the housing market,” said Treasury Secretary Timothy Geithner. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets and support neighborhood and home price stability.” . . .



The counterargument appears to have won out here. While the political climate in Washington remains largely hostile to a bipartisan agreement on how to reform the GSEs, the Obama administration may be able to use Uncle Sam’s indirect ownership of a large portion of the housing mortgage inventory to address lingering problems with the housing market.




All this sounds awfully positive. Here is the problem: if renting out property made sense, the federal government is hardly the only entity that could do that.
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