FHA helps with faster loan qualifications

FHA helps with faster loan qualifications

Obama's "foreclosure mistake"

Yale University economist John Geanakoplos said Thursday the failure of President Barack Obama's administration to stem the foreclosure crisis has stymied efforts to restart the economy. "I think that's the biggest mistake of the Obama administration," Geanakoplos said, referring to the administration's failure to convince lenders to reduce the principal on underwater mortgages. "Writing-down interest, as the government did, just produced a bunch of people who re-defaulted anyway." Geanakoplos made his comments at a panel of economists at Yale Law School. He said reducing the principal on mortgages that exceed the value of homes would have made everyone better off by helping borrowers stay in their houses, helping lenders recoup as much money as possible, and helping housing prices recover. But instead, he said, the Federal Reserve has been stuck with the burden of reviving the housing market when it does not have the power to oversee debt in the economy. As a result, he said , the Fed's stimulus measures have been ineffective: "The rich are getting richer. The Fed wants them richer so that they’ll spend a little more money. That’s trickle-down economics." There have been roughly 8 million mortgage foreclosures since the housing crisis began, according to Geanakoplos.

Consumer confidence up

Consumer Confidence rose to 72.2 in October from 68.4 in September; the strongest level since February 2008. Looking beneath the headline, economists at RBS cited in a research note: "The results confirmed the improvement suggested by other October measures of consumer confidence. Though the fiscal cliff appears to be weighing on business sentiment, households have thus far been more resilient. The underlying details of the report were also generally favorable. On net, consumers' assessment of the current labor market ("jobs plentiful" less "jobs hard to get") improved by 3.5 points to -29.1, the best since November 2008. Their view of current business conditions ("good" less "bad") rose by 1.9 points to -16.5, the best since April 2008." Data from the retailers themselves confirms the improved sentiment. October is typically a breather month for spending, falling in between back-to-school and the holiday shopping seasons. Same-store sales, excluding Wal-Mart (WMT) rose 4.7% in October versus estimates of 4.3%, with luxury and discount stores posting stronger gains. Economist Chris Christopher of IHS Global Insight called the numbers a "positive signal for holiday sales." In a client note Christopher states: "The recent news on the consumer front has been favorable. The unemployment rate has fallen below 8.0%, personal income gains have been favorable, the housing marketing is looking brighter, pump prices started falling, and consumer mood is elevated. This is a good report. It serves as a positive signal that the holiday retail sales season is looking significantly brighter. We expect holiday retail sales to rise 4.5% above last year, not as strong as the past couple of years, but a solid showing."

FHA helps with faster loan qualifications

While mortgage giants Fannie Mae and Freddie Mac make people wait seven years after a foreclosure, the Federal Housing Authority (FHA) will approve loans after three years, providing the buyer has established good credit and the ability to pay the mortgage. "There's definitely a movement of folks who have had a foreclosure to re-emerge and re-engage in the market," said Dustin Hobbs of the California Mortgage Bankers Association. He said brokers have picked up on the trend. "It helps the housing market," said Guy Schwartz of CMG Financial, which handled the Davises' mortgage. The FHA, which is self-supporting, provides mortgage insurance for loans with low down payments and more flexible household income requirements. "An FHA loan is a good option for those who can qualify," said Paul Leonard, California director of the Center for Responsible Lending. And there couldn't be a better time to try, he said. "We are at near substantial price corrections," he noted. That and low in terest rates present "kind of a historic opportunity if people can qualify," he said. But it's not clear whether there's a flood or a trickle of new borrowers with foreclosures in their recent past. The FHA said it doesn't have data on how many of the loans it insures involve people who are buying homes after a foreclosure or short sale. Wells Fargo, the country's largest FHA loan originator and servicer, said it doesn't break out those loans. In the first six months of this year, Wells Fargo has made more than $73 billion in FHA-backed loans compared with $47 billion last year, spokesman Jim Hines said.

Unemployment up in final campaign week

The unemployment rate moved higher to 7.9%, setting the stage for a final push to the finish line in the heated presidential campaign. Economists had been expecting the report to show a net of 125,000 new jobs and a steadying of the unemployment rateat 7.8%. Nomura Securities predicted the rate would fall to 7.7%, but most expected no change. A broader measure of unemployment that includes discouraged workers and those employed part-time who would rather work full-time ticked lower to 14.6%. The labor force participation rate, a key metric that measures those working and looking for jobs, edged higher to 63.8% after wallowing around 31-year lows for the past several months. Unemployment for blacks showed the highest increase in the survey, surging to 14.3% from 13.4%. Also, the average duration of unemployment climbed to a 2012 high of 40.2 weeks. President Barack Obama has touted the more than 4 million jobs created since the 2009 economic nadir, while Repub lican challenger Mitt Romney has said pointed out that job creation has been slow and well behind the pace of previous recoveries. Friday's report comes a month after the Labor Department reported a drop in the unemployment rate below 8% that virtually no economists saw coming. There were 114,000 new jobs initially reported in September, but that number was revised up to 148,000 Friday. The September rate drop prompted criticism and charges that the government was manipulating the data to boost Obama's election fortunes.

Olick - homeowners to save on deductibles

"The fact that Hurricane Sandy was downgraded to a 'Post-Tropical Cyclone' before it made landfall on the East Coast will save homeowners potentially thousands of dollars in home insurance deductibles. New Jersey’s Department of Banking and Insurance Acting Commissioner Ken Kobylowski communicated that to the insurance industry Tuesday night and New York’s Governor Andrew Cuomo announced the same Thursday morning. 'Homeowners should not have to pay hurricane deductibles for damage caused by the storm and insurers should understand the Department of Financial Services will be monitoring how claims are handled,' Governor Cuomo said in a release. How is a hurricane deductible different from your basic homeowner policy deductible? It is based on a percentage of your property’s insured value, and it can be up to 5%. So let’s say your home is insured for $300,000. That’s a $15,000 deductible, which is likely far higher than your regula r deductible. The average homeowner deductible is between $500 and $1000. 'We have informed the insurance industry that hurricane deductibles are not triggered because Sandy did not have sustained hurricane-force winds when it made land in New York,' noted NY’s Superintendent of Financial Services Benjamin Lawsky in the release. 'We will be working with insurers to help them respond as quickly as possible to homeowners who need to file claims. And we will be sending our mobile command center to hard hit areas to help consumers with insurance questions and problems.' There is very specific language in homeowner insurance policies in terms of hurricane deductibles. Usually the storm has to reach specific wind speeds to trigger the deductible. A state governor couldn’t necessarily override that private contract. 'The way the insurers look at it is that this is a private contract between the insurer and the policy holder, and the policy as written is going to be enfo rced,' noted Michael Barry of the Insurance Information Institute. 'In this case Sandy does not appear to have reached the threshold to activate the hurricane deductible.' The insurance companies probably didn’t need Governor Cuomo’s directive as such, since they were already doing their own assessments immediately following the storm. 'We have done a review of the best available National Weather Service data and compared that to our language, and we have determined that the hurricane deductible will not apply in those states,' said State Farm spokesman Phil Supple. As for how much the difference in the deductibles will cost the nation’s insurance companies, that is impossible to calculate at this point, as the companies are still waiting to get in to the hardest hit areas and tally the damage. It is also, as Supple added, 'moot' to do any figuring, as they higher deductible clearly doesn’t apply.