Shutdown could bruise housing recovery

11:00 AM bruise, could, housing, Recovery, shutdown No Comments

| By Morgan Brennan, Forbes

One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers' access to new home loans.

The government shutdown is here. Whether it's not being able to get a new Social Security card or visit a national park, Americans will immediately feel the effects. But there's one bright spot of the economy that stands to be affected as well: housing.

One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers' access to new home loans. After all, more than 90% of all loan activity is underwritten, insured, or owned by the government and its affiliated entities.

Initially at least, the mortgage market is likely to be only minimally impacted. New loans will continue to push through most government agency pipelines. What will change is how long the process takes, as many agencies expect to experience delays.

Mortgages purchased and securitized by Fannie Mae Fannie Mae and Freddie Mac Freddie Mac will be unaffected because their operations are paid for by fees charged to lenders. And the Department of Veterans Affairs will continue to guarantee mortgages for Americans that have served in the military since these loans are funded by user fees as well.

But if the government shutdown of 1995-1996 is any indicator, the process will take longer than usual. "Loan Guaranty certificates of eligibility and certificates of reasonable value were delayed," the VA warned in its September 25th contingency plan.

Where there has been mounting concern is the Federal Housing Administration, which currently endorses about 15% of the entire single-family mortgage market. Several media outlets recently reported that the FHA would be unable to endorse any single-family loans and that no staff would be available underwrite and approve new loans.

That prospect would be somewhat worrisome -- if it were actually true. The FHA's Office of Single Family Housing will indeed remain open for business, albeit with a smaller staff. "FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans," the report now states. In other words, other lenders' loans will continue to be insured and some in-house lending will continue to take place at a reduced rate.

The reason for that mix-up: the initial draft of the U.S. Department of Housing and Urban Development's contingency plan mistakenly stated that single-family loan operations would cease. The report was amended over the weekend.

The FHA's single-family loan operations are funded through multi-year appropriations, meaning their budget is not tied to the government's standoff over funding for the new fiscal year that starts in October. On the other hand, what will be more affected is the agency's Multifamily Housing Office, which is funded through yearly appropriations.

"Because we are able to endorse loans, we don't expect the impact on the housing market to be significant, as long as the shutdown is brief," continues the HUD report. "If the shutdown lasts and our commitment authority runs out, we do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market."

One government lender that will indeed suspend its home loan activity, however, is the Department of Agriculture. The USDA says that no new housing loans or guarantees will be issued through its Rural Development programs in a shutdown. The department also warns that such a scenario could cause "a setback in construction start-up," and if the shutdown lasts for an extended period, "a substantial reduction in housing available in rural areas relative to population."

"The government doesn't generally approve loans, they basically just insure them," says Don Frommeyer, president of the National Association of Mortgage Brokers and a vice president at Amtrust Mortgage Funding. "For the most part you aren't going to see much of a hit in the mortgage market unless it goes for a long period of time."

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Housing recovery blip: Foreclosures jump

3:30 AM Foreclosures, housing, Recovery No Comments

The housing market has shown some promising signs of late, but a fresh batch of foreclosure data offers a reminder that any recovery from the housing bust will likely be slow, spotty and painful.

RealtyTrac reported Thursday that foreclosure filings rose by 9 percent in May from a month earlier, to 205,990 total properties that were subject to default notices, scheduled auctions or bank repossessions.

The jump in foreclosure activity was likely because lenders are finally getting to a backlog of homes they might have started foreclosing on last year if they weren’t facing criticism for cutting corners and pushing foreclosures through too quickly and without adequate controls, said Daren Blomquist, a vice president with RealtyTrac.

He noted that the major increases came from properties that are just starting the foreclosure process.

Still, the figures for May are down 4 percent from a year ago. In addition, the report noted, recent sales data suggests that not all homes with foreclosure filings will result in the bank taking the property.

“Based on the rise in pre-foreclosure sales we’ve seen so far this year, a higher percentage of these new foreclosure starts will likely end up as short sales or auction sales to third parties rather than bank repossessions going forward,” Brandon Moore, RealtyTrac’s CEO, said in a statement.

That’s important because bank-owned homes tend to sell for less than homes in earlier stages of foreclosure.

RealtyTrac’s data shows that a home that is in pre-foreclosure sells for 21 percent less than a non-distressed home, on average. A bank-owned home sells for 33 percent less on average.

Blomquist cautioned that some of these houses entering the foreclosure process will end up being repossessed by the bank. In addition, the increase in foreclosure activity that is expected as banks work through their backlog could put a damper on housing prices once again, at least in some parts of the country.

“I actually think the stabilization in home prices and home sales is, in part, a result of the foreclosure inventory being artificially restricted over the past year and a half,” he said.

The National Association of Realtors reported last month that existing-home sales rose 3.4 percent from March to April and were up 10 percent from a year earlier.

Median home prices also were up about 10 percent in April from a year earlier. May data is due out next week.

Record-low mortgage rates also could be providing a boost for the housing market. Freddie Mac said last week that the average rate on a 30-year loan dropped to 3.67 percent.

Of course, with real estate it’s always all about location, and the foreclosure report showed that while some pockets of the country have seen some improvement others are still struggling. Georgia posted the highest foreclosure rate for the month, overtaking traditionally foreclosure-plagued states such as Florida, California, Nevada and Arizona.

Blomquist said while some cities seem to have broken the housing-bust cycle and at least stabilized, the data from Georgia illustrates the uneven nature of the market.

“Georgia is still caught in the downward spiral of decreasing home prices, and that in turn is helping to fuel more foreclosures,” he said.

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Reports show little evidence of housing rebound

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By John W. Schoen, Senior Producer
Hopes may be fading for a long-awaited spring rebound in the U.S. housing market.

Two widely watched benchmarks Tuesday signaled that the pace of sales softened and prices fell last month. And a prominent housing economist warned that the market may not stage a major turnaround “in our lifetimes.”

Falling home price were recorded in 20 cities tracked by the Standard & Poor's/Case-Shiller home price index. Prices in the 20 cities fell 3.5 percent year over year, moderating from the previous month's decline of 3.8 percent.

The composite index of 20 cities gained 0.2 percent in February on a seasonally adjusted basis, matching economists' forecasts. But overall, the trend of falling prices has yet to reverse course, according to Maureen Maitland, a Standard & Poor's vice president.

“Some of the annual rates of change are improving,” she told CNBC. “But they're still largely negative. There are very few markets that are seeing positive annual rates of change, and very few rose on a month-over-month basis. So I wouldn't say there were very many bright spots.”

Seven of the cities tracked by the index saw prices drop on a seasonally adjusted basis, while prices in two cities were unchanged. On an unadjusted basis, 16 of the areas slumped further.

Home prices continue to slip as demand remains weak. In a separate report, sales of new single-family home sales dropped in March to their lowest level in four months, but the reading still beat analysts' expectations as the government said sales in prior months were higher than initially thought.

The Commerce Department said sales slipped 7.1 percent in March to a seasonally adjusted annual rate of 328,000 units.

February's sales pace was revised higher to 353,000 units, the fastest pace since November 2009, from the previously reported 313,000 units. Sales for December and January were also revised higher.

Economists polled by Reuters had forecast sales at a 320,000-unit rate in March. The median price for a new home fell 1 percent to $234,500. However, compared to March 2011, the median price was up 6.3 percent.

The National Association of Realtors said Thursday that home resales fell in March, but prices inched higher from a year earlier.

Maitland said the latest data confirm that the housing market has yet to shake off lingering effects of the worst collapse since the 1930s.

“The housing market is still really very low,” she said. “Housing starts, home sales, our numbers are at cycle lows. They're really not showing any turn around at all.”

CNBC's David Faber discusse the Standard & Poor's/Case-Shiller home price data for February, with Maureen Maitland, S&P Indices vice president.

Yale economics professor Robert Shiller told Reuters Insider that a weak labor market, high gasoline prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on prices for the foreseeable future.

"I worry that we might not see a really major turnaround in our lifetimes," said Shiller, who co-created the Case-Shiller index.

He said suburban areas in particular might endure further price declines as high gas prices increase demand for "walkable cities."

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Fed officials push more impetus for housing

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ISELIN, New Jersey - two top Federal Reserve officials on Friday the case for more stimulus by the U.S. Central Bank to help the economic recovery, any zero position in the country filed weak housing market.

Policy makers need to further measures to kick start the housing and "frustratingly slow" economic recovery of the country to help and "unacceptably high" unemployment, William Dudley, President of the New York Federal Reserve Bank, said in a speech in New Jersey.

Monetary policy work should be to complement the measures by other U.S. Government politician, which together could help to stabilize House prices and turn the housing market within a year or two under good conditions, Dudley said.

In Hartford, Connecticut, the President of the Boston fed, Eric Rosengren, said that one way, housing support for the Central Bank, mortgage-backed securities, to buy more would be.

"Given of the low rate of inflation and weak labour markets, which probably hold both this year are, I believe the Federal Reserve should continue to be ways to promote a quicker recovery by stronger growth," Rosengren told a group of companies.

That talk of Dudley and Rosengren, both as part of the Fed "Pigeons" wing-more about strengthening the economy than trying the Inflation--can the tone for the Central Bank more activist wing this year and has included similar arguments. Dudley, as the President of the New York Fed holds a permanent vote on the Central Bank policy setting Committee; Rosengren is filmed in a voting seat in 2013.

The Fed has bought Government bonds and, to a lesser extent, mortgage-backed securities as part of the so-called quantitative easing effort in the last three years a total of $2.3 trillion in buying. In response to the worst recession for decades, the Fed lowered late in the year 2008 also interest rates to near zero. .

The purchase of mortgage-backed securities, was known as 063, drawing but controversial part of the first round of the relaxation in 2009, review by some officials for based a certain sector of the economy.

Dudley was found in the past that the Fed could potentially do more mortgage rates, decline to support the housing sector, was at the heart of the financial crisis and recession and has continue to hamper the recovery.

"I think it is also appropriate to assess whether we further (Directive) accommodation in a manner that produced more benefits than costs could offer regardless of whether measures are in the package or not," Dudley said of the New Jersey Bankers Association Economic Forum.

"Monetary policy and housing policies are much more added as substitutes."

The fed, keep meeting his next policy setting January 24-25, when a new Board of the four regional fed Bank President in voting will turn seats. Further measures could closely to prospects for the United States stubbornly high unemployment hinge.

The Labor Department on Friday reported that nonfarm payrolls 200,000 jobs in December the biggest gain in three months added to, and the unemployment rate fell to a near three-year low of 8.5 percent, provides the strongest evidence yet for an acceleration of economic activity.

Rosengren said of the news that while the increase in jobs better than seen recently, there still is not enough to return the country to full employment.

The dying housing market and the European debt crisis, which is on the European economy, still a threat to the U.S. recovery represent.

The Fed waded into the debate over what to do, mortgage with the two most important Government sent in a paper this week argued to Congress that Fannie Mae and Freddie Mac play a greater role could turn around finance companies in the housing market, if they to cheaper mortgages to a larger pool of House and apartment owners.

On Friday called Dudley white paper "a thoughtful analysis of the housing policy."

"Really comprehensive approach", he added, "long-term reform-including the reforms of Fannie Mae and Freddie Mac-housing management on a more stable basis for and the market for all future systemic shocks more effectively manage equip also."

Copyright 2012 Thomson Reuters.

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