MBA - mortgage application down
Mortgage applications decreased 0.3% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending February
24, 2012. This week’s results are adjusted for the Presidents
Day holiday. The Market Composite Index, a measure of mortgage
loan application volume, decreased 0.3% on a seasonally adjusted
basis from one week earlier. On an unadjusted basis, the Index
decreased 9.4% compared with the previous week. The Refinance
Index decreased 2.2% from the previous week. The seasonally
adjusted Purchase Index increased 8.2% from one week earlier. The
unadjusted Purchase Index increased 0.9% compared with the
previous week and was 4.3% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market
Index is up 0.33%. The four week moving average is down 0.96%
for the seasonally adjusted Purchase Index, while this average is
up 0.64% for the Refinance Index.
The refinance share of mortgage activity decreased to 77.9% of
total applications from 80.1% the previous week. This is the
lowest refinance share since December 2, 2011, and the first time
the measure has fallen below 80% since December 9, 2011. The
adjustable-rate mortgage (ARM) share of activity decreased to
5.0% from 5.3% of total applications from the previous week.
“Mortgage rates remained near survey lows last week, but
refinance volume fell slightly,” said Michael Fratantoni, Vice
President of Research and Economics at the Mortgage Bankers
Association. Fratantoni continued, “According to survey
participants, more than 20% of refinance applications were for
HARP loans. The HARP share of total refinance applications has
increased over the past month. Purchase application volume
increased over the week, but remains within the narrow and anemic
range of activity we have seen since the expiration of the
homebuyer tax credit in May 2010.” In January 2012, among home
purchase applications, 86.4% were for fixed-rate 30-year loans,
6.5% for 15-year fixed loans and 5.4% for ARMs. The share of
purchase applications for “other” fixed-rate mortgages with
amortization schedules other than 15 and 30-year terms was 1.7%
of all purchase applications. The share of 15-year fixed and ARM
decreased from the previous month while the 30-year fixed and
“other” fixed category shares increased from last month.
Growth up 3%, inflation up
Gross domestic product expanded at a 3% annual rate, the quickest
pace since the second quarter of 2010, the Commerce Department
said in its second estimate. That was a step up from the 2.8%
pace it reported in January. Price indexes also swelled, with
the core personal consumption expenditures (PCE) index jumping
1.3%, against an advanced reading of 1.1%. Economists polled by
Reuters had expected fourth-quarter GDP would be unrevised at a
2.8% pace. The economy grew at a 1.8% pace in the third quarter.
While the rebuilding of inventories added a hefty 1.88 percentage
points to GDP in the last quarter, the pace of accumulation was
not as fast as previously reported. Business inventories
increased $54.3 billion, instead of $56.0 billion. Excluding
inventories, the economy grew at a 1.1% rate, rather than 0.8%.
That was still a sharp step-down from the prior period's 3.2%
pace. Although business overall business spending was revised
up, investment in equipment and software was lowered to a 4.8%
growth rate from 5.2%. Export growth estimates were also
lowered, but weaker imports led to a smaller trade gap.
In addition, consumer spending — which accounts for about 70%
of US economic activity — was a touch firmer than initially
thought. Consumer spending rose at a 2.1% rate instead of 2%.
Even spending on home building was firmer than previously
estimated and investment on nonresidential structures was
modestly weak. So far data ranging from employment to
manufacturing have shown underlying strength in the economy,
reducing the need for the Federal Reserve to ease monetary policy
further by launching a third round of asset purchases or
quantitative easing. But surging gasoline prices, which have
risen 12.6% or 42 cents since the start of the year and averaged
$3.78 a gallon in the week through Monday, are clouding the
outlook. High gasoline prices helped to almost snuff out growth
early last year. However, economists believe the impact on
households this time could be mitigated somewhat by weak costs
for natural gas and a strengthening labor market.
WSJ - Senators for short sales
The best that can be said about the latest Congressional attempt
to heal the housing market is that politicians have at least
diagnosed a real problem: a glut of homes for sale. Like other
proposed top-down fixes, however, the latest Beltway brainstorm
would likely hurt more than help. Republicans Lisa Murkowski and
Scott Brown and Democrat Sherrod Brown want to speed up short
sales, which occur when a lender agrees to let a homeowner pay
off a mortgage by selling a home at a price below the outstanding
loan balance. Their bill—introduced earlier this month—would
force lenders to approve or deny short-sale offers within 75 days
or face a $1,000 fine, plus attorneys' fees. The lender could ask
for an extension only once, for 21 days. Accelerating short
sales isn't a bad idea, in and of itself. Delinquent borrowers
can offload their mortgage and find another home they can afford,
or move to an area that's cheaper. Lenders don't have to endure a
lengthy foreclosure process and risk having the property sit
unoccupied for months, if not years. Borrowers who can afford the
home can snap them up at bargain prices.
But why do the Senators want to interfere in a market that is
working? CoreLogic recorded 293,574 short sales last year, up
from 273,100 in 2010 and 64,813 in 2007. That makes sense:
Lenders want to minimize their losses as best they can and are
working through their portfolio as quickly as possible. Setting
an arbitrary timeline for short sales makes for a good political
talking point, but it might have unintended consequences. Lenders
often have to coordinate with investors and second-lien holders
to approve the deal, which takes time. They also don't want to
rush, make a mistake and expose themselves to litigation for
sloppy paperwork, especially after the recent furor over alleged
"robo-signing" abuses. Fraud is another concern, though it's
hard to get firm estimates on the extent of the problem.
Risk consultancy Interthinx estimates about $1 billion was lost
annually in deals between 2007 and 2010 when buyers resold
property for more than 20% of the original sale value within six
weeks—a red flag for fraud in a market with falling or flat
home prices. Sometimes a broker's low-ball assessment done on a
house is fraudulent; sometimes a broker conceals from the lender
the fact that a willing buyer exists for the house at a higher
price. Big banks like Wells Fargo or Bank of America can devote
resources to fighting this kind of fraud but smaller lenders may
not have the same capabilities. Try as Congress might, there's
no quick fix to the oversupply of homes that's weighing down the
housing market. Increasing the regulatory burden on lenders will
only prolong the pain.
WSJ - home prices hit new lows
Home prices fell to fresh lows in December, but economists say
that a drop in the number of homes listed for sale could help
stabilize prices in parts of the country this year. Home prices
fell by 4% last year, according to the Standard &
Poor's/Case-Shiller index that tracks 20 metro areas. Prices
dropped by 1.1% for the three-month period ending in December
compared with the same period ending in November. That was
slightly better than November's reading, when prices were down
1.3% from October. Tuesday's report is the latest evidence that
the housing market still faces a cloudy outlook after a six-year
downturn. The inventory of homes for sale has contracted,
reducing competition among sellers, according to The Wall Street
Journal's quarterly survey of housing-market conditions in 28
metro areas.
But a large potential backlog of foreclosed properties hangs over
many housing markets. Other headwinds including tight
mortgage-lending standards that show few signs of easing. "These
are times of continued, great uncertainty about home prices,"
said Robert Shiller, the Yale University economist who co-founded
the index that bears his name. "We might be on the verge of a
home recovery, but then, maybe not." Others are becoming
somewhat optimistic. Thomas Lawler, an independent housing
economist in Leesburg, Va., said the S&P/Case-Shiller index
should hit a bottom this spring. He said many analysts have
overlooked positive developments, including a dearth of new
construction and the falling share of homes selling out of
foreclosure. "You don't hear very many people talk about the
actual housing stock, and how slow it's growing," he said, while
conceding that it is "absolutely true that organic demand has yet
to show any material rebound."
Even when prices stop falling, they aren't likely to rise for
years, leaving millions of homeowners stuck in properties worth
less than what they owe. "We're looking at an L-shaped recovery,"
said Stan Humphries, chief economist at real-estate website
Zillow, who predicts another 3.7% decline in home prices for the
coming year. In most of the country, home prices aren't falling
at anywhere near their jaw-dropping pace of 2008. But only two
markets showed an increase in home prices during the fourth
quarter. In Phoenix, home prices were up by 0.8%, while Miami
reported a smaller gain of 0.2%. Detroit was the only city to
post a year-over-year gain, rising by 0.5%. Home prices in
Atlanta, meanwhile, fell by 12.8% last year, while Chicago posted
a 6.5% decline. One surprising development in many housing
markets is that the supply of homes for sale has fallen to a
five-year low. While that normally would be a sign of health,
real-estate agents say a paucity of homes is holding back sales.
At the current sales rate, it would take about four months to
sell the supply of homes on the market in Denver, Washington,
D.C., and Orange County, Calif. That level is lower, at less than
three months, in Phoenix and San Francisco, and has dropped to
just 1.9 months in Sacramento, Calif. But several markets still
face supply-demand imbalances that could keep pressure on prices.
New York's Long Island had a 13-month supply of homes at the end
of the fourth quarter. Nashville and Charlotte, N.C., had a
12-month supply, and northern New Jersey had a nearly 11-month
supply. Those numbers will rise if banks sell more foreclosed
properties as they correct deficient mortgage-handling
practices.
Unemployment for 5 years
The US economic recovery is "frustratingly slow" and it could
take four to five years to ratchet the unemployment rate down to
about 6%, from more than 8% now, a top Federal Reserve official
said yesterday. The recovery is held back by the housing market
and Europe's debt crisis among other headwinds, but monetary
policy is now appropriately positioned to eventually achieve this
"maximum employment" level, said Cleveland Fed President Sandra
Pianalto. "We do not have a good deal of concrete history for
monetary policy to fit our current circumstances, but I am
confident the Federal Reserve is making the most of its tools to
move the economy in the right direction," the Fed official said
at an economic development meeting in Westfield Center, Ohio.
Pianalto, a voter this year on the Fed's policy-setting panel, is
a moderate dove in line with Chairman Ben Bernanke's core of
policymakers who have taken aggressive action to bring down
unemployment, which stands at 8.3% after rising above 9% last
year. The US central bank in late 2008 slashed interest rates to
near zero and has since bought $2.3 trillion in long-term
securities in an unprecedented drive to spur growth and revive
the economy after the worst recession in decades.
Olick - time to buy?
"Nobody wants to catch a falling knife. It is as simple as that.
If potential buyers see continued home price erosion, they will
stay parked on the sidelines. But as with everything else in this
unique and historic housing market, perhaps the usual logic
doesn’t apply. 'Housing is one of the great investments right
now. I tell people all the time when they come up to me, they
say, 'What should I do, Mr. Trump?' I say go buy a house,' said
Donald Trump earlier today on CNBC. 'It wouldn’t be an obvious
mistake to buy a house now,' hedged Robert Shiller, barely a few
hours later. Perhaps they were just jumping off Warren
Buffett’s declaration yesterday that if he had a way to manage
them, he would buy a couple of hundred thousand single family
homes and rent them out. Housing appears to be rated a 'buy'
these days, especially among investors, who see a ripe and rising
rental market and big potential for income. But is it the right
time yet for what I call 'organic' buyers to get in? By this I
mean people buying a home to actually live in it, raise a family
in it, let the dog run around in the back yard. If prices are
still falling, couldn’t an even better deal be waiting down the
road a bit?
No. House prices will continue to fall on a national basis at
least through 2012, but you have to look past national headlines
to your local market, which is likely already recovering nicely.
The trouble with the national numbers is that they are heavily
weighted toward the lower end of the market and to the distressed
end of the market. Around 73% of homes that sold in January were
priced below $250,000, according to the National Association of
Realtors. Forty-seven% of homes sold that same month were
considered 'distressed,' which is either a foreclosure or a short
sale (where the lender allows the borrower to sell for less than
the value of the mortgage). With all the activity in these areas,
no surprise that prices skew lower. The $250,000 to $500,000
price range may now be the sweet spot for the market. Sales in
January were up in this price range, and if you have good credit,
you are within GSE and FHA loan limits in most markets.
While FHA just raised its insurance premiums, which may hurt
much-needed first-time homebuyer demand, it is still one of the
best loan products out there today, especially for those with
lower down payments. You cannot time housing any more than you
can time the stock market. True, housing moves far more slowly,
but that works to its benefit, as prices don’t rise and fall on
daily news or even on major events. Sales have clearly bottomed
in housing, and prices always lag sales. They will lag longer
this time around, no question, but they will come back. Supply
and demand will eventually win out, even after an historic crash.
If you can’t get a good mortgage now, then perhaps it’s not
your time, but if you can, waiting may not buy you much."
US conducts criminal libor probe
The US Justice Department is conducting a criminal probe into
whether the world's biggest banks manipulated a global benchmark
rate that is at the heart of a wide range of loans and
derivatives, from trillions of dollars of mortgages and bonds to
interest rate swaps , a person familiar with the matter said.
While the Justice Department's inquiry into the setting of the
London interbank offered rate, or Libor, was known, the criminal
aspect of the probe was not. A criminal inquiry underscores the
serious nature of a worldwide investigation that includes
regulators and law-enforcement agencies in the United States,
Japan, Canada and the UK. Several major global banks, including
Citigroup, HSBC, Royal Bank of Scotland and UBS, have disclosed
that they have been approached by authorities investigating how
Libor is set. No bank or trader has been criminally charged in
the Libor probes. It wasn't clear which banks or traders the
Justice Department is targeting in its criminal probe.
Fannie loses $2.4 billion, asks for $4.6 billion
Fannie Mae lost $2.4 billion in the fourth quarter and asked the
federal government for another $4.6 billion in bailouts. Fannie
earned a $73 million profit the same period the year before. The
government-sponsored enterprise reported a $16.8 billion loss for
the entire year, widening 20% from the $14 billion in losses in
2010. Fannie paid $2.6 billion in dividends to the Treasury
Department in the fourth quarter. Since entering conservatorship
in 2008, Fannie received $116 billion in bailouts through the end
of 2011 and paid back roughly $19.8 billion. A $6.1 billion
increase in lost net fair value of its assets pushed a poorer
performance in 2011. Significant declines in interest rates over
the year pushed more losses on its risk management derivatives.
Combined with Freddie Mac and Ginnie Mae, the federal government
guaranteed more than 99% of mortgage-backed securities issued
between 2009 and 2011, accounting for more than 85% of all
single-family loans.
Fourth quarter revenues declined 8% to $4.5 billion from the year
before. Revenues for the year actually increased 17% to $20.4
billion. Fannie charged off $4.7 billion in credit losses,
increasing 40% from the same quarter in the prior year. The
higher losses came from a slight increase in foreclosures. The
mortgage giant repossessed more than 47,000 homes in the last
three months of 2011, up from nearly 46,000 one year prior. The
problem loans continue to rise from the books of business
originated between 2005 and 2008. These loans cost Fannie $140
billion since 2009. Its becoming a smaller portion of the entire
portfolio, though, shrinking to 31% at the end of 2011 from 39%
the year before. "Our new single-family book now accounts for
more than half of our overall single-family guaranty book of
business," said Fannie Mae CFO Susan McFarland.
Mortgage applications decreased 0.3% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending February
24, 2012. This week’s results are adjusted for the Presidents
Day holiday. The Market Composite Index, a measure of mortgage
loan application volume, decreased 0.3% on a seasonally adjusted
basis from one week earlier. On an unadjusted basis, the Index
decreased 9.4% compared with the previous week. The Refinance
Index decreased 2.2% from the previous week. The seasonally
adjusted Purchase Index increased 8.2% from one week earlier. The
unadjusted Purchase Index increased 0.9% compared with the
previous week and was 4.3% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market
Index is up 0.33%. The four week moving average is down 0.96%
for the seasonally adjusted Purchase Index, while this average is
up 0.64% for the Refinance Index.
The refinance share of mortgage activity decreased to 77.9% of
total applications from 80.1% the previous week. This is the
lowest refinance share since December 2, 2011, and the first time
the measure has fallen below 80% since December 9, 2011. The
adjustable-rate mortgage (ARM) share of activity decreased to
5.0% from 5.3% of total applications from the previous week.
“Mortgage rates remained near survey lows last week, but
refinance volume fell slightly,” said Michael Fratantoni, Vice
President of Research and Economics at the Mortgage Bankers
Association. Fratantoni continued, “According to survey
participants, more than 20% of refinance applications were for
HARP loans. The HARP share of total refinance applications has
increased over the past month. Purchase application volume
increased over the week, but remains within the narrow and anemic
range of activity we have seen since the expiration of the
homebuyer tax credit in May 2010.” In January 2012, among home
purchase applications, 86.4% were for fixed-rate 30-year loans,
6.5% for 15-year fixed loans and 5.4% for ARMs. The share of
purchase applications for “other” fixed-rate mortgages with
amortization schedules other than 15 and 30-year terms was 1.7%
of all purchase applications. The share of 15-year fixed and ARM
decreased from the previous month while the 30-year fixed and
“other” fixed category shares increased from last month.
Growth up 3%, inflation up
Gross domestic product expanded at a 3% annual rate, the quickest
pace since the second quarter of 2010, the Commerce Department
said in its second estimate. That was a step up from the 2.8%
pace it reported in January. Price indexes also swelled, with
the core personal consumption expenditures (PCE) index jumping
1.3%, against an advanced reading of 1.1%. Economists polled by
Reuters had expected fourth-quarter GDP would be unrevised at a
2.8% pace. The economy grew at a 1.8% pace in the third quarter.
While the rebuilding of inventories added a hefty 1.88 percentage
points to GDP in the last quarter, the pace of accumulation was
not as fast as previously reported. Business inventories
increased $54.3 billion, instead of $56.0 billion. Excluding
inventories, the economy grew at a 1.1% rate, rather than 0.8%.
That was still a sharp step-down from the prior period's 3.2%
pace. Although business overall business spending was revised
up, investment in equipment and software was lowered to a 4.8%
growth rate from 5.2%. Export growth estimates were also
lowered, but weaker imports led to a smaller trade gap.
In addition, consumer spending — which accounts for about 70%
of US economic activity — was a touch firmer than initially
thought. Consumer spending rose at a 2.1% rate instead of 2%.
Even spending on home building was firmer than previously
estimated and investment on nonresidential structures was
modestly weak. So far data ranging from employment to
manufacturing have shown underlying strength in the economy,
reducing the need for the Federal Reserve to ease monetary policy
further by launching a third round of asset purchases or
quantitative easing. But surging gasoline prices, which have
risen 12.6% or 42 cents since the start of the year and averaged
$3.78 a gallon in the week through Monday, are clouding the
outlook. High gasoline prices helped to almost snuff out growth
early last year. However, economists believe the impact on
households this time could be mitigated somewhat by weak costs
for natural gas and a strengthening labor market.
WSJ - Senators for short sales
The best that can be said about the latest Congressional attempt
to heal the housing market is that politicians have at least
diagnosed a real problem: a glut of homes for sale. Like other
proposed top-down fixes, however, the latest Beltway brainstorm
would likely hurt more than help. Republicans Lisa Murkowski and
Scott Brown and Democrat Sherrod Brown want to speed up short
sales, which occur when a lender agrees to let a homeowner pay
off a mortgage by selling a home at a price below the outstanding
loan balance. Their bill—introduced earlier this month—would
force lenders to approve or deny short-sale offers within 75 days
or face a $1,000 fine, plus attorneys' fees. The lender could ask
for an extension only once, for 21 days. Accelerating short
sales isn't a bad idea, in and of itself. Delinquent borrowers
can offload their mortgage and find another home they can afford,
or move to an area that's cheaper. Lenders don't have to endure a
lengthy foreclosure process and risk having the property sit
unoccupied for months, if not years. Borrowers who can afford the
home can snap them up at bargain prices.
But why do the Senators want to interfere in a market that is
working? CoreLogic recorded 293,574 short sales last year, up
from 273,100 in 2010 and 64,813 in 2007. That makes sense:
Lenders want to minimize their losses as best they can and are
working through their portfolio as quickly as possible. Setting
an arbitrary timeline for short sales makes for a good political
talking point, but it might have unintended consequences. Lenders
often have to coordinate with investors and second-lien holders
to approve the deal, which takes time. They also don't want to
rush, make a mistake and expose themselves to litigation for
sloppy paperwork, especially after the recent furor over alleged
"robo-signing" abuses. Fraud is another concern, though it's
hard to get firm estimates on the extent of the problem.
Risk consultancy Interthinx estimates about $1 billion was lost
annually in deals between 2007 and 2010 when buyers resold
property for more than 20% of the original sale value within six
weeks—a red flag for fraud in a market with falling or flat
home prices. Sometimes a broker's low-ball assessment done on a
house is fraudulent; sometimes a broker conceals from the lender
the fact that a willing buyer exists for the house at a higher
price. Big banks like Wells Fargo or Bank of America can devote
resources to fighting this kind of fraud but smaller lenders may
not have the same capabilities. Try as Congress might, there's
no quick fix to the oversupply of homes that's weighing down the
housing market. Increasing the regulatory burden on lenders will
only prolong the pain.
WSJ - home prices hit new lows
Home prices fell to fresh lows in December, but economists say
that a drop in the number of homes listed for sale could help
stabilize prices in parts of the country this year. Home prices
fell by 4% last year, according to the Standard &
Poor's/Case-Shiller index that tracks 20 metro areas. Prices
dropped by 1.1% for the three-month period ending in December
compared with the same period ending in November. That was
slightly better than November's reading, when prices were down
1.3% from October. Tuesday's report is the latest evidence that
the housing market still faces a cloudy outlook after a six-year
downturn. The inventory of homes for sale has contracted,
reducing competition among sellers, according to The Wall Street
Journal's quarterly survey of housing-market conditions in 28
metro areas.
But a large potential backlog of foreclosed properties hangs over
many housing markets. Other headwinds including tight
mortgage-lending standards that show few signs of easing. "These
are times of continued, great uncertainty about home prices,"
said Robert Shiller, the Yale University economist who co-founded
the index that bears his name. "We might be on the verge of a
home recovery, but then, maybe not." Others are becoming
somewhat optimistic. Thomas Lawler, an independent housing
economist in Leesburg, Va., said the S&P/Case-Shiller index
should hit a bottom this spring. He said many analysts have
overlooked positive developments, including a dearth of new
construction and the falling share of homes selling out of
foreclosure. "You don't hear very many people talk about the
actual housing stock, and how slow it's growing," he said, while
conceding that it is "absolutely true that organic demand has yet
to show any material rebound."
Even when prices stop falling, they aren't likely to rise for
years, leaving millions of homeowners stuck in properties worth
less than what they owe. "We're looking at an L-shaped recovery,"
said Stan Humphries, chief economist at real-estate website
Zillow, who predicts another 3.7% decline in home prices for the
coming year. In most of the country, home prices aren't falling
at anywhere near their jaw-dropping pace of 2008. But only two
markets showed an increase in home prices during the fourth
quarter. In Phoenix, home prices were up by 0.8%, while Miami
reported a smaller gain of 0.2%. Detroit was the only city to
post a year-over-year gain, rising by 0.5%. Home prices in
Atlanta, meanwhile, fell by 12.8% last year, while Chicago posted
a 6.5% decline. One surprising development in many housing
markets is that the supply of homes for sale has fallen to a
five-year low. While that normally would be a sign of health,
real-estate agents say a paucity of homes is holding back sales.
At the current sales rate, it would take about four months to
sell the supply of homes on the market in Denver, Washington,
D.C., and Orange County, Calif. That level is lower, at less than
three months, in Phoenix and San Francisco, and has dropped to
just 1.9 months in Sacramento, Calif. But several markets still
face supply-demand imbalances that could keep pressure on prices.
New York's Long Island had a 13-month supply of homes at the end
of the fourth quarter. Nashville and Charlotte, N.C., had a
12-month supply, and northern New Jersey had a nearly 11-month
supply. Those numbers will rise if banks sell more foreclosed
properties as they correct deficient mortgage-handling
practices.
Unemployment for 5 years
The US economic recovery is "frustratingly slow" and it could
take four to five years to ratchet the unemployment rate down to
about 6%, from more than 8% now, a top Federal Reserve official
said yesterday. The recovery is held back by the housing market
and Europe's debt crisis among other headwinds, but monetary
policy is now appropriately positioned to eventually achieve this
"maximum employment" level, said Cleveland Fed President Sandra
Pianalto. "We do not have a good deal of concrete history for
monetary policy to fit our current circumstances, but I am
confident the Federal Reserve is making the most of its tools to
move the economy in the right direction," the Fed official said
at an economic development meeting in Westfield Center, Ohio.
Pianalto, a voter this year on the Fed's policy-setting panel, is
a moderate dove in line with Chairman Ben Bernanke's core of
policymakers who have taken aggressive action to bring down
unemployment, which stands at 8.3% after rising above 9% last
year. The US central bank in late 2008 slashed interest rates to
near zero and has since bought $2.3 trillion in long-term
securities in an unprecedented drive to spur growth and revive
the economy after the worst recession in decades.
Olick - time to buy?
"Nobody wants to catch a falling knife. It is as simple as that.
If potential buyers see continued home price erosion, they will
stay parked on the sidelines. But as with everything else in this
unique and historic housing market, perhaps the usual logic
doesn’t apply. 'Housing is one of the great investments right
now. I tell people all the time when they come up to me, they
say, 'What should I do, Mr. Trump?' I say go buy a house,' said
Donald Trump earlier today on CNBC. 'It wouldn’t be an obvious
mistake to buy a house now,' hedged Robert Shiller, barely a few
hours later. Perhaps they were just jumping off Warren
Buffett’s declaration yesterday that if he had a way to manage
them, he would buy a couple of hundred thousand single family
homes and rent them out. Housing appears to be rated a 'buy'
these days, especially among investors, who see a ripe and rising
rental market and big potential for income. But is it the right
time yet for what I call 'organic' buyers to get in? By this I
mean people buying a home to actually live in it, raise a family
in it, let the dog run around in the back yard. If prices are
still falling, couldn’t an even better deal be waiting down the
road a bit?
No. House prices will continue to fall on a national basis at
least through 2012, but you have to look past national headlines
to your local market, which is likely already recovering nicely.
The trouble with the national numbers is that they are heavily
weighted toward the lower end of the market and to the distressed
end of the market. Around 73% of homes that sold in January were
priced below $250,000, according to the National Association of
Realtors. Forty-seven% of homes sold that same month were
considered 'distressed,' which is either a foreclosure or a short
sale (where the lender allows the borrower to sell for less than
the value of the mortgage). With all the activity in these areas,
no surprise that prices skew lower. The $250,000 to $500,000
price range may now be the sweet spot for the market. Sales in
January were up in this price range, and if you have good credit,
you are within GSE and FHA loan limits in most markets.
While FHA just raised its insurance premiums, which may hurt
much-needed first-time homebuyer demand, it is still one of the
best loan products out there today, especially for those with
lower down payments. You cannot time housing any more than you
can time the stock market. True, housing moves far more slowly,
but that works to its benefit, as prices don’t rise and fall on
daily news or even on major events. Sales have clearly bottomed
in housing, and prices always lag sales. They will lag longer
this time around, no question, but they will come back. Supply
and demand will eventually win out, even after an historic crash.
If you can’t get a good mortgage now, then perhaps it’s not
your time, but if you can, waiting may not buy you much."
US conducts criminal libor probe
The US Justice Department is conducting a criminal probe into
whether the world's biggest banks manipulated a global benchmark
rate that is at the heart of a wide range of loans and
derivatives, from trillions of dollars of mortgages and bonds to
interest rate swaps , a person familiar with the matter said.
While the Justice Department's inquiry into the setting of the
London interbank offered rate, or Libor, was known, the criminal
aspect of the probe was not. A criminal inquiry underscores the
serious nature of a worldwide investigation that includes
regulators and law-enforcement agencies in the United States,
Japan, Canada and the UK. Several major global banks, including
Citigroup, HSBC, Royal Bank of Scotland and UBS, have disclosed
that they have been approached by authorities investigating how
Libor is set. No bank or trader has been criminally charged in
the Libor probes. It wasn't clear which banks or traders the
Justice Department is targeting in its criminal probe.
Fannie loses $2.4 billion, asks for $4.6 billion
Fannie Mae lost $2.4 billion in the fourth quarter and asked the
federal government for another $4.6 billion in bailouts. Fannie
earned a $73 million profit the same period the year before. The
government-sponsored enterprise reported a $16.8 billion loss for
the entire year, widening 20% from the $14 billion in losses in
2010. Fannie paid $2.6 billion in dividends to the Treasury
Department in the fourth quarter. Since entering conservatorship
in 2008, Fannie received $116 billion in bailouts through the end
of 2011 and paid back roughly $19.8 billion. A $6.1 billion
increase in lost net fair value of its assets pushed a poorer
performance in 2011. Significant declines in interest rates over
the year pushed more losses on its risk management derivatives.
Combined with Freddie Mac and Ginnie Mae, the federal government
guaranteed more than 99% of mortgage-backed securities issued
between 2009 and 2011, accounting for more than 85% of all
single-family loans.
Fourth quarter revenues declined 8% to $4.5 billion from the year
before. Revenues for the year actually increased 17% to $20.4
billion. Fannie charged off $4.7 billion in credit losses,
increasing 40% from the same quarter in the prior year. The
higher losses came from a slight increase in foreclosures. The
mortgage giant repossessed more than 47,000 homes in the last
three months of 2011, up from nearly 46,000 one year prior. The
problem loans continue to rise from the books of business
originated between 2005 and 2008. These loans cost Fannie $140
billion since 2009. Its becoming a smaller portion of the entire
portfolio, though, shrinking to 31% at the end of 2011 from 39%
the year before. "Our new single-family book now accounts for
more than half of our overall single-family guaranty book of
business," said Fannie Mae CFO Susan McFarland.
