Tag: Housing

Housing Recovering?

Recently the good news was that the home industry was coming out of the slide it has been in for a couple of years….at least that is what the pundits would have us believe but there is more to this story than the good news that has been reported.

U.S. mortgage applications slid last week even as mortgage rates edged lower, with requests for loans to buy homes declining for the first time since early July, an industry group said on Wednesday.The Mortgage Bankers Association’s applications index fell by a seasonally adjusted 2.2 percent in the week ended August 28, as demand for both purchase and refinance loans slipped.

Economic stimulus that has boosted consumer optimism, signs that home prices have neared a bottom, and federal programs such as a soon-expiring first-time home buyers tax credit have turned more fence-sitters into house purchasers, industry experts said.

The big question is what will happen to the housing market when the incentive to buy fades?   The first-time buyer’s market has been robust, but not the move-up market — or the market for existing homeowners looking to trade up to a larger home. It will take consistent news of rising home prices to lure the move-up buyer, most realtors agree.

According to Reuters:

The U.S. Mortgage Bankers Association will call on Congress to transform U.S. government-controlled mortgage lenders Fannie Mae, Freddie Mac into several smaller privately held companies that would issue mortgage securities with a government guarantee, the Wall Street Journal reported.The proposed framework, to be released Wednesday by the industry group, would give successor entities to Fannie Mae and Freddie Mac authority to create securities backed by certain types of mortgage, the paper said.

According to the paper, the new companies would guarantee the securities against defaults on underlying mortgages and pay fees into a federal insurance fund, which would guarantee interest and principal payments to bondholders if the companies were unable to make them.

The WSJ said the MBA’s plan called for government agencies, rather than the new companies, to assume the “mission” of promoting affordable housing that Congress has long assigned to Fannie and Freddie.

The new companies also would not be allowed to hold large amounts of mortgages and securities under the proposal, the paper said.

Okay, this smells like yet another attempt for these parasites to find another way to use the homeowners to further their rape of the economy.  Yes, they would be limited on what they could hold…but how long would it take for them to change that with a new president?  The regulation that could be put into place…could be dissolved with the appearance of new blood in the White House and Congress…it has happened before and it will most assuredly happen again.

The GOP Alternate Housing Plan

They, Repubs, hated Obama’s housing plan saying that it would not help and in turn they have offered their own housing plan.

Days after House Democrats advanced a bill to address foreclosures, House Republicans will present their own ideas on how to confront the housing crisis, Minority Whip Eric Cantor told USA TODAY this morning.

The GOP plan, which Cantor said would be released this week, will include changes to the tax code’s provisions on gifts and capital gains, including changes that would make it easier for owners to sell investment properties, he said. The proposal will also include an idea Republicans pitched as part of the stimulus debate to give any home buyer who puts 5% down an immediate tax credit

Republicans shift their focus to housing a week after Democrats passed a bill largely on their own that would allow bankruptcy judges to change the terms of mortgages on homes. Seven Republicans out of 174 voting supported the measure, now pending in the Senate.

Notice anything about the GOP proposal?  Read it careful and you will see that it is just a “Tax Cut”…seems that is ALL Repubs have in the game plan…the tired old mantra from the 80’s.

This is the best the GOP can do…..their Plan B is tax cuts….

Obama’s Housing Plan

The Obama administration released guidelines on its plan to stem the collapse of the housing market with its “Making Home Affordable” initiative, or Homeowner Affordability and Stability Plan (HASP). The plan claims to offer “assistance to as many as 7 to 9 million homeowners.”

Part of the program, costing $75 billion, pertains to private lenders, providing funds to them if they agree to renegotiate home loans. A separate $200 billion component will make funds available to Fannie Mae and Freddie Mac, the two federally-backed mortgage lending giants, so that they can modify a share of the home loans they control.

The newly-announced guidelines pertaining to private lenders make clear that the program’s primary aim is not to assist homeowners, but to further prop up the banks. The plan does not reduce the grossly overvalued debt homeowners owe banks. It will not affect homeowners “underwater” by more than 5 percent—that is, those who owe more than 5 percent more than their homes’ current market value.

Hurdles have been thrown up to prevent easy access to the program. In order to qualify, homeowners must submit an “affidavit of financial hardship,” in addition to payroll documents, tax forms, and extensive information about other debts and assets in order to prove that they have made “every possible effort” to pay their mortgages. Some participating households will be required to seek debt counseling through government-approved “community organizations,” funded by HASP.

According to Moody’s Economy.com about 27 percent of homeowners, or 14 million out of 52 million households, are underwater, owing more than their houses are worth. A survey by First American CoreLogic, the research wing of a major real estate and home title firm, has found that the number of underwater homeowners is likely to increase markedly in the coming months. If home values should fall by the relatively modest figure of 5 percent, another 2.16 million homes would go underwater, according to the report. Housing values have already fallen by 26 percent since 2006 as measured by Standard & Poor’s/Case-Shiller index.

This plan has little chance of helping the majority of the homeowners….it will however give those that may not need assistance help while condemning others to homelessness.  Your tax dollars at work.

Extension Of The No-Eviction

Government-controlled mortgage finance company Fannie Mae said Friday it is extending a halt to evictions on foreclosed properties through the end of this month as it implements pieces of the Obama administration’s plan to help struggling homeowners.

Fannie Mae’s extension comes two weeks after the company announced its moratorium on foreclosure-related evictions, which initially was to run through Friday.

Fannie Mae on Friday also issued foreclosure sale requirements in response to Obama’s Making Home Affordable program, intended to help 9 million struggling homeowners avoid foreclosure. A foreclosure sale may not occur on any Fannie Mae loan until the loan servicer verifies that the borrower is ineligible for loan-modification criteria set in Obama’s plan, and other foreclosure prevention alternatives have been exhausted, Fannie Mae said.

More than 2.3 million homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007, and analysts say that number could soar as high as 10 million in the coming years, depending on the severity of the recession.

How To Stabilze The Housing Market

These are ideas set forth by Jack Rasmus in Z Magazine.

Today’s housing asset price collapse is driven by rising housing supply, the largest cause of which has been rising foreclosures and defaults in the initial phase, but now increasingly determined as well by growing trends in negative equity and unemployment. One in ten homeowners is in foreclosure, delinquent, or in default. Housing supply has consistently risen faster than the demand that banks have been willing to stimulate despite the $3 trillion Treasury-Fed liquidity program. Bankers and lenders have been on a veritable “strike” in terms of lending.

An estimated 5-7 million foreclosures will occur over this cycle. Housing prices have fallen approximately 25 percent. The housing market is nowhere near bottom, and prices most likely will continue to fall by at least another 20 percent in 2009.

Treasury-Fed programs have not addressed this root cause of supply-driven housing price collapse, now spreading from subprime to near prime to prime mortgages, to credit and equity lines, as well now to commercial property loans. Treasury-Fed programs have instead focused on a symptom of the crisis—i.e., deteriorating bank balance sheets driven by the housing asset (and other asset) price collapse. Treating the symptom has not resolved the fundamental problem.

The following measures are thus designed to bypass the banks and lenders, which are now refusing all but token efforts at stimulating loan demand. The problem of collapsing housing asset prices is too central, too critical, and too important to recovery to leave to the whim of bankers and lenders more concerned with hoarding cash and loaning only at excessive rates.

First Measure: Reset mortgage rates for all loans originated 2002-2007.

Second Measure: Reset principle loan balances for all loans originated 2002-07

Third Measure: Create federal homeowner-business loan corporation (HSBLC) to provide direct lending to the homeowner-small business property markets.

Fourth Measure: One year moratorium on all foreclosures and default proceedings

Fifth Measure: Optional homeowners’ 40-year fixed loan extension

Sixth Measure: 15 percent homeowners’ investment tax credit

Seventh Measure: Restoration of Regulation Q

Regulation Q?  Uh huh! While not a direct homeowner item, an equally important provision generating consumption demand is the restoration of Regulation Q. Previously a provision, but repealed in the 1970s, Regulation Q in effect established maximum ceilings above which banks and other credit card lenders could not charge monthly interest. This new regulation would be indexed to the annual core inflation rate in the U.S. economy.

If The Brits Can Do It, Why Not The US?

Many people hit by the downturn will be able to defer part of their mortgage interest payments for up to two years under plans unveiled by Gordon Brown.

The plan is designed to give those who lose their jobs or suffer a big cut in income extended breathing space if they are facing repossession.

The scheme will cover mortgages worth up to £400,000, the BBC understands.

The lender and homeowner will agree on the proportion of payment to be deferred, but it could be up to 100%.

Mr Brown made the announcement during a House of Commons debate on the Queen’s Speech, which took place earlier.

The prime minister told MPs the eight major mortgage lenders had signed up to the plan, which will start early in the new year and is meant to cut the risk of homes being repossessed.

It comes amid predictions repossession numbers could rise to 75,000 next year.

The full details of the scheme have yet to emerge, but it is understood the government will underwrite interest payments, which will then have to be repaid in full at a date to be agreed with the lender.

The scheme could help a two-income family where one earner has become redundant, a homeowner who has suffered a significant loss of overtime or people who have had to take a lower-paid job, Downing Street said.

People could also convert a repayment mortgage into an interest-only loan to take advantage of the scheme, Mr Brown’s official spokesman said.

The plan is designed to boost the wider economy, with a government source describing repossession as “a small risk of something disastrous happening to you” which had a major effect on confidence.

Looks like the Brits are way ahead of the curve on helping its people, the US still is working on the premise that if Goldman survives then all is well.  Sorry to tell them, Irene, they are smoking crack.  Letg me see if I have this about right, Goldman is using the money to buy other companies and the Brits are helping their “Main Street”.  You decide which is working for the people that put them in office.

How About A Real Issue?

Lipstick?  Please people stop listening to this crap.  There is more to worry about than some damn silly lipstick comment.

In a stark indication that the crises gripping the US housing market and the financial sector are spreading throughout the economy, unemployment figures for August rose far more sharply than expected, hitting a five-year high.

The official unemployment rate rose to 6.1 percent last month, according to a report released Friday by the Bureau of Labor Statistics. In addition to the net loss of 84,000 jobs last month, the agency revised its figures for June and July, reporting the destruction of an additional 58,000 jobs, pointing to an entire summer dominated by layoffs and economic slump.

Meanwhile the so-called misery index, which adds the unemployment and inflation rates, hit 11.7 percent, the worst figure recorded since mid-1991, as high gas, food and utility prices continue to gouge workers’ paychecks even as layoffs mount.

At the same time, existing home sales fell to a 10-year low in the second quarter, while the median price of a single-family house plummeted by another 7.6 percent, the National Association of Realtors reported.

The increase in unemployment and the rising number of foreclosures are clearly trends that are feeding into one another in a vicious downward spiral. Workers having lost their jobs are finding it impossible to meet monthly mortgage payments, and the collapse of home values has wiped out credit for many, leading to falling consumption and new layoffs.

This is turning into a vicious cycle that needs to be addressed by the candidates and let the late night TV shows handle the lipstick thing.

Fannie And Freddie

Treasury Secretary Henry Paulson said in an interview with U.S. radio broadast on Monday that a plan to take control of Freddie Mac and Fannie Mae had been structured in a way to protect U.S. taxpayers.

He also said the move had been taken after the Treasury had found “major structural flaws” in the two agencies.

“We structured this very carefully to protect the taxpayers,” he told WAMU radio, monitored via internet in London. “And to the extent that taxpayers are going to put preferred stock into this entity it will be structured so that the first losses will be borne by the existing shareholders.”

Now ask yourself …who does this takeover really help?  They expect a 200 pt rise in the Dow….does that really help homeowners or speculators?  And at what cost to the taxpayer?  But did not Bush say that he would not bailout speculators?  Are not heavy investors in the markets, speculators, in a sense?

Homeowners Dig Deeper Hole

The WSJ is reporting:

The rate of U.S. home mortgages overdue or in foreclosure rose again in the second quarter as housing markets weakened, particularly in California and Florida, and more borrowers defaulted on so-called prime loans.

Among mortgages on one- to four-family homes, 9.16% were at least a month overdue or in the foreclosure process in the second quarter, according to the latest survey by the Mortgage Bankers Association, a trade group. That is up from 6.52% a year earlier and is the highest level since the MBA began such surveys 39 years ago.

foreclosure crisis, generally considered the worst since the Great Depression of the 1930s, began in late 2006 with a surge in defaults on subprime loans, those to people with weak credit records. As falling real-estate prices have left more people owing more than the current value of their homes, defaults have gradually spread to include more prime loans. Among the most troubled prime loans are option adjustable-rate mortgages, which let borrowers start out with very low monthly payments and pose much bigger ones after a few years.

For prime loans, 5.35% of loans were past due or in foreclosure in the latest quarter. For subprime, the rate was about 30%.

In the latest quarter, 2.75% of all loans were in the foreclosure process, up from 1.40% a year earlier.

Fannie And Freddie Prepare For A Bailout

As reported in the NY Times:

Financial conditions are continuing to worsen at Fannie Mae and Freddie Mac, leading some investors to prepare for a government bailout of the housing giants even as the Treasury Department and the companies say such government intervention will not be necessary.

“The markets are acting like a bailout is inevitable,” said Sean Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm. Mr. Egan said he believed the federal government would need to help pump about $20 billion into each company, possibly through a government guarantee rather than through a direct injection of capital.

Treasury officials have repeatedly emphasized that they do not plan to use the authority, recently granted by Congress, to pump billions of dollars into the firms. Company insiders have begun arguing that the recent stock declines are the work of duplicitous critics conspiring to undermine the firms. Executives at both firms say they are confident they can raise additional money from investors and that the companies are adequately capitalized, with capital in excess of what they are required to hold by their regulator. Government officials note that both companies continue to buy mortgages and that they are borrowing at rates far below what other banks and companies pay.

But as the companies’ fortunes decline, their options are narrowing. Fannie and Freddie are a critical part of the nation’s housing finance system, owning or guaranteeing nearly half of all home mortgages. They have lost more than $14 billion in the last year, however, and are expected to announce further losses later this year. Government officials, company insiders and investors all agree the firms will need to raise more money.

Hence, the smell of a government bailout is getting stronger with each market closing.