Housing Double Dip revealed as New Sales plunge 17% m/m down 28% y/y to record low ~ Let the TBTF Games Begin!
Update at end of post
American Homeowners are Home Alone while Benny and the Feds continue to PROTECT TBTF BANKS as their ONE AND ONLY MANDATE.
New sales of single-family homes fell nearly 17% in February from a month earlier, coming in well below analysts’ estimates and at the lowest level recorded….
…February sales are down 28% from a year earlier….
And as we have been saying til we’re blue in the face, it is now NATIONWIDE:
In the Northeast in February, new homes sales cratered, falling 57% from January, according to the joint release from the Census Bureau and the Department of Housing and Urban Development.
Okay you say, how about prices? What is the delta, the RATE of change? It is ACCELERATING TO THE DOWNSIDE~lowest price since December 2003~
…The median sales price of new homes sold last month was $202,100, down nearly 14% from January, representing the largest monthly decline yet….
Tiny Tim and Bankster Ben have been in full save the banks, ‘extend and pretend’ on housing mode for THREE YEARS.
And where has that gotten the REAL ECONOMY~ The Main St economy? Absolutely nowhere.
Where has that gotten the TBTF? They will still fail if they take the losses they NEED to take, but they have lots of nice bonuses and dividends (Except for BofA which is the redhaired stepchild and is allowed to wither on the vine sans dividends) and Jamie Dimon was even able to produce a $20Billion line of credit for ATT to become Ma Bell, again.
The economy on Main St will NOT RECOVER until housing is addressed in a MEANINGFUL way that allows consumers to correct their balance sheets.
You know, the way the TBTF are allowed to. The way CRE is allowed to. The way every Wall St firm is allowed to, by RESTRUCTURING THE DEBT. HOLC or real mods, pick your poison.
Or we can keep IGNORING the real problem and let the banks who MADE THE STUPID LOANS be the ONLY ONES who get off with NO LOSSES TAKEN while the US consumer continues to struggle for years under the housing morass as Ben prints to infinity and beyond like a deranged Buzz Lightyear.
Update: Oh lookee here!! Chris Whalen says FAN FRED are hiding ANOTHER 100B in losses on their books! But TPTB and TBTF are claiming writing down homeowners principal will cost taxpayers? Bullshit. And don;t EVEN talk to me about moral hazard after the shxt the Fed is doing for the banks.
…Both investors and Congress need a lot more details about the purchases of defaulted loans by Fannie and Freddie. We need to know exactly how many dud loans have migrated back to the GSEs, what their loan loss reserve is, how much of that loan loss reserve is “covered” by the MIs and how much “capital” the MIs have against these exposures. The GSE are letting dead loans sit on their books in part to avoid recognizing the losses, an event that would drive many of the MIs into bankruptcy. If you look at how slow the process of final loss recognition by Fannie and Freddie is proceeding, then you’ll understand why the publicly disclosed loss rates reported by Fannie and Freddie have been falling.
Instead of demanding insurance payments, the GSEs are doing everything in their power to keep the MIs looking like going concerns so that they can count the MI “receivable” as a good asset. This is why the GSEs direct LTV based LLPAs to the MIs, to keep some cash flowing their way, and…
If there was a proper mark-to-market on the MIs (like all proper insurance/reinsurance businesses do), then the MIs would be massively insolvent. The GSEs would have to take another huge amount of capital from Treasury. Geithner and the GSEs are trying to avoid it, and to date are getting away with it….
like ZZ Top said~IT’S BAD, IT’S NATIONWIDE (& QE isnt doing JACK about it)
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…Eleven of the markets hit their lowest point since the housing bust, in 2006 and 2007: Atlanta, Charlotte, N.C., Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland, Ore., Seattle and Tampa, Fla.
The damage from the real estate bubble now spreads well beyond the Sun Belt, where new homes cropped up at a frantic pace during the mid-2000s. In many places, prices are expected to keep falling for at least the next six months….
Housing: MERS gets nailed – Judge rules MERS cannot transfer mortgage rights, “MERS’s position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best.”
Update 3: Case Caption for those inclined:
In re: FERREL L. AGARD, Debtor
Case No. 810-77338-reg
UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK
Update 1: Read this piece at NakedCapitalism for more background on the horror of MERS. It was a work around for the TooBigToFail as they didnt have time for pesky County Recorder’s offices and processes and fees in their rush to securitize the shxt out of the entire country. Rife for fraud and property theft is the system the TBTF and MERS have created. It must be ended or no property is safe IMO.
FINALLY!!! Look for sudden legislation to appear tucked in a bill..per Judge’s ruling:
“It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices.”
watch the Congress Critters carefully…especially those RE lovers like Isaakson..
…“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”…
…“MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process,” Grossman wrote. “The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”…
Judicial Branch saves US Private Property Rights, MASS Supreme Court throws out ‘securitized servicer foreclosures’ by Wells and US Bank in Ibanez, LaRace cases
Update: Full ruling here. And some appropriate theme music from Judas Priest~
Update 2: From the ruling:
Focusing first on the Ibanez mortgage, U.S. Bank argues that it was assigned the mortgage under the trust agreement described in the PPM, but it did not submit a copy of this trust agreement to the judge. The PPM, however, described the trust agreement as an agreement to be executed in the future, so it only furnished evidence of an intent to assign mortgages to U.S. Bank, not proof of their actual assignment. Even if there were an executed trust agreement with language of present assignment, U.S. Bank did not produce the schedule of loans and mortgages that was an exhibit to that agreement, so it failed to show that the Ibanez mortgage was among the mortgages to be assigned by that agreement. Finally, even if there were an executed trust agreement with the required schedule, U.S. Bank failed to furnish any evidence that the entity assigning the mortgage–Structured Asset Securities Corporation–ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale. [FN19] Thus, based on the documents submitted to the judge, Option One, not U.S. Bank, was the mortgage holder at the time of the foreclosure, and U.S. Bank did not have the authority to foreclose the mortgage.
Continues after the break:
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Deceleration in 18 of 20 cities in the MSAS Annual Growth Rate
In October only 4 cities rose, LA, San Diego, SF & D.C. saw gains in house prices
-6 cities hit all new lows since the collapse began in 2006
CR breaks out the data reflecting previosuly strong housing markets now succumbing to the collapse:
…six markets – Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to fall in 2006 and 2007…
Blitzer says the double dip is ‘almost here’ (from here in Phoenix I can tell you it has been here for a while, TPTB have just been hoping and praying it would ‘go away’ all by itself, NOT GONNA HAPPEN.
The US economy and the US consumer, and therefore, the global economy, which is dependent upon the US consumer, WILL NOT RECOVER until they FIX HOUSING. DO HOLC.
ONLY TOTAL SHILLS ARE STILL YAMMERING THAT THIS IS A BLIP AND HOUSING WILL FIND IT’S ‘TRUE BOTTOM’, THE SUPPLY IS 2 YRS AND GROWING WITH THE STRUCTURAL UE ISSUE, IT WILL JUST KEEP
Obama and Geithner have left the BANKS in charge of this, the GSEs and the TBTF keep shuffling paper back and forth for buybacks and assorted BS. GET REAL, THE TAXPAYERS ARE ON THE HOOK FOR ALL OF IT AND WE ALL KNOW IT, JUST BITE THE BULLET AND DO THE DAMNED WRITE DOWNS.
The TBTF seem to be incapable of doing what NEEDS to be done to allow the economy to recover, the CONSUMER needs to be deleveraged from their massive housing debt. JUST DO IT.
..The Standard & Poor’s/Case-Shiller composite index of 20 metropolitan areas declined 1.0 percent in October from September on a seasonally adjusted basis, a much steeper drop than the 0.6 percent fall expected by economists….
Housing: State AGs testify before Senate Banking Cmte on foreclosure fraud 2:30pm ET; securitization lobby strikes back at TARP COP report on failures
Update 7: Video added of Levitan explaining the losses must be taken, still, and the US taxpayer isnt taking them this time, no more bailouts, thus the TBTF need to eat the shxt they created. and added video of NACA calling out Lowman of Chase. Clips courtesy of CSPAN and FDL TV
Update 6: Perfect end to this, Diana Olick, via ZeroHedge, reports the AGs are gonna kill the investigation and cut a WEAK deal to have some pitiful fund for possible restitution to ‘wronged’ homeowners, and an attempt to end the two track system wherein banks keep foreclosure proceedings open, timeline evolving, while evaluating homeowners for mods. Like I said, WEAK. We need HOLC but we arent gonna get it. Lack of leadership.
My totally unprofessional advice: if you were reamed by servicers with fees and gouged with atty fees or forced placed insurance, or foreclosed on while in HAMP trial modification, or HAMP application process, then contact your STATE AG NOW. File a complaint with your state AG NOW.
Update 5: WSJ reports on modifications being the tool of choice for the AG settlement options and the legislators.
Update 4: Hmmm. CFO of Fannie resigns.
Update 3: Well it’s an oligarchy folks and the TBTF are in control. WASS. I disagree with David Dayen of FDL on practically everything, but he has been doing an excellent job following the foreclosure and housing crisis and the impact on the economy at large and we concur on this issue. He live blogged the hearing today here.
…Dodd says he held a summit on how to handle foreclosures with servicers in 2007. Servicers agreed to modifications, added resources to deal with the scale of delinquencies. Despite agreeing to that, the servicers simply failed to do any of this.
Dodd mentions people losing their homes without having mortgages. Banks were “too quick” to call robo-signing scandal a technical problem, seem emblematic of much deeper problems with servicing practices “putting homeowners at risk.” The current servicer business model “is broken” and not equipped to deal with the current crisis. Mentions financial disincentives to modification among servicers. Could be “extensive problems” throughout the servicing process. Quotes Sarah Bloom Raskin on all the servicer fraud. “Service-driven defaults,” mentions “forced-place insurance” scandal, failure to record transfer, failure to administer HAMP, failure to meet requirements of foreclosure process, and failure to manage trusts under pooling and servicing agreements.
Mentions COP report and systemic risk.
Dodd says he created Financial Stability Oversight Council to deal with exactly this issue. That’s a big deal; the FSOC doesn’t think this is a systemic risk.
Dodd says we need more robust loan modifications with real principal forgiveness, but should expedite foreclosures where the homes are vacant. Must put an end to this housing crisis….(go read the whole live blog!)
Chase claimed they never wrongfully foreclosed, at which point Bruce Marks of NACA jumped up with around 20 supporters and he yelled Perjury! and called the Chase Suit a liar, which the Chase suit clearly is. NACA has been unable to get JPMChase to throw any modification action their way so Marks is pixxed. BofA and others get a ‘pass’ from Marks and NACA because they play ball. If you want help from NACA you sign an agreement to go ‘protest; several times a year at their request.
Consumers are so screwed. Nary a peep from the much vaunted Consumer Protection Team led by the suddenly mute Elizabeth Warren.
The economy will not recover until the American consumer can deleverage and the TBTF MUST take a hit on the books a big hit to do that. It is the simple truth, let;s see how long they can pump $ to try to make the TBTF whole, they do not get it. UE will continue and more homeowners will default.
If the incentives which securitization skewed are not realigned and I would say restored, then there is NO PROFIT MOTIVE for the TBTF Servicers to make meaningful mods the way banks did time immemorial pre MSB bullshxt.
Bank of America is responding to the securitization fiasco by proclaiming they are in HAND TO HAND COMBAT with bondholders on putbacks of Countrywide loans that failed to comply with the PSAs. Fabulous.
To fix what the TBTF geniuses did by overleveraging the world on bad MBS loans they, the TBTF must take a hit, the GLOBAL taxpayers of the industrialized world have ALREADY taken HUGE hits, time to share the pain big boyz, write down losses on HELOCS, release the dead equity off the loans, let ALL refi to 3%
Give all GIs a home loan! There are answers but since they all involve the TBTF taking huge hits and decimating their bonus pools geithner and co cannot see them as options. Frakkers.
Update 2: The complete PDF of the Congressional Oversight Panel report on the mortgage securitization/foreclosure fraud fiasco.
Update: CSPAN now has the hearing listed as 3:15pm ET. Will be carried here
The Senate Banking Committee will hear testimony from the State AGS investigating what IS SYSTEMIC FORECLOSURE FRAUD AND A FAILURE OF THE SERVICING AND SECURITIZATION PROCESS today. Bankstas will be there to whine as well.
Tuesday, November 16, 2010
02:30 PM – 05:00 PM
538 Dirksen Senate Office Building
The witnesses will be: The Honorable Tom Miller, Attorney General, State of Iowa; Ms. Barbara J. Desoer, President, Bank of America Home Loans; Mr. David Lowman, CEO, Chase Home Lending; Mr. Adam J. Levitin, Associate Professor of Law, Georgetown University Law Center; and Ms. Diane Thompson, Counsel, National Consumer Law Center. Additional witnesses may be announced at a later date.
TBTF are still fraudulently foreclosing on Americans. Regardless of your feelings on this issue you should recognize the extreme danger to property rights and rule of law if the securitization fiasco via MERS is allowed to continue to bypass state courts. No one’s property will be safe if TBTF can manufacture documentation and take your property without due process. PEOPLE WITHOUT LOANS ARE LOSING HOMES ALREADY. HOLC FTW. Sept 28 2008 HRC in WSJ on HOLC here.
The Senate Banking Committee will hear testimony Tuesday from both sides of recent foreclosure problems at the major banks.
…Senate Banking Committee will hear testimony on the issue from Bank of America Home Loans President Barbara Desoer and JPMorgan Chase Home Lending CEO David Lowman. Speaking first will be Iowa AG Tom Miller, who is heading up the 50-state investigation.
Diane Thompson, counsel for the National Consumer Law Center, and Adam Levitin, an associate professor of law at Georgetown University will also testify.
Those listening in can expect Desoer and Lowman to elaborate on the amount of volume the banks are facing, and the others to demand action to sure up servicing operations…..
Oh cry me a fxckin river. The poor poor TooBigToFail shxtheads that took down the global economy are whining b/c they don’t have enough staff to foreclose?
I CALL BULLSHIT! They DELIBERATELY left peeps in homes to AVOID TOO MUCH INVENTORY DRAGGING DOWN PRICES.
They DELIBERATELY used HAMP as an EXTEND AND PRETEND vehicle to DRAIN FAMILY’S LAST RESOURCES only to turn around and deny the mod when the family had nothing left.
FXCK the TBTF. And Fxck the banksta backed Obamaites like Geithner who are selling Americans PROPERTY RIGHTS and RIGHTS TO DUE PROCESS down the river to avoid WRITING DOWN BAD PAPER, AND HELOCS.
The TBTF MADE THE LOANS, the TBTF DESIGNED THE ENTIRE SECURITIZATION PROCESS.
We, taxpayers, made them whole. They have failed to do jack shxt to help families.
Obama is an utter failure. Hillary would have done HOLC, This would be BEHIND US. We would be RECOVERING.
As we have said for THREE YEARS, there will be NO ECONOMIC RECOVERY if HOUSING is not addressed. DO THE DAMNED HOLC.
..”I’m concerned about Treasury making representations categorically that you don’t see a systemic risk,” Silvers told Treasury’s chief homeownership officer. “And let me walk you through exactly why.”
“That letter asks for $47 billion of mortgages — of mortgage- backed securities to be repurchased at par,” Silvers went on. “Do you know what those mortgages are currently carried at … the market value of those bonds today?”
Caldwell declined to comment.
“OK, fine. Let me tell you what the Fed says they’re worth. The Fed tells us they’re worth 50 cents on the dollar. So if the Fed’s request to Bank of America is honored, right, Bank of America, assuming they are carrying these bonds, assuming when they buy them back they mark them to market, Bank of America will take a $23 billion loss.
“The Federal Reserve further informs us that there is nothing particularly unique about that particular set of mortgage-backed securities — meaning they have not been chosen…because they’re particularly bad. They believe they are of a common quality with the rest of Bank of America’s underwritten mortgage-backed securities. There are $2 trillion [worth] of Bank of America’s underwritten mortgage-backed securities.
“Five such deals — five such requests, if honored to Bank of America…will amount to more than the current market capitalization of Bank of America, which is $115 billion.
“Now do you wish to retract your statement that there is no systemic risk in this situation? And the word is ‘risk’ — not ‘certainty’ — but ‘risk’? And I would urge you to do so, because these things can be embarrassing later.”…
From the report issued today:
…”Clear and uncontested property rights are the foundation of the housing market,” the report said. “If these rights fall into question, that foundation could collapse. Borrowers may be unable to determine whether they are sending their monthly payments to the right people. Judges may block any effort to foreclose, even in cases where borrowers have failed to make regular payments.”…
Better do HOLC now Bankstas NO MORE TAXPAYER BAILOUT $ FOR YOU!!!! FHA will take until 2014 to get to 2% MANDATED reserves!! Good Grief!! And ‘experts’ agree, HOUSING IS GOING DOWN AGAIN.
SIFMA the IDIOTS who designed the securitization process and who lobby for it madly have a typical it’s all lies! everything is fine! response courtesy the NYT acting as mouthpiece for Obama positions as always via Naked Capitalism:
It doesn’t matter when mortgage assignments and endorsements are recorded because the existence of the pooling and service agreement and purchase sale agreement is proof in itself that the loan was conveyed, said Stephen Ornstein, a partner in the Washington office of SNR Denton, a law firm that represents loan servicers and lenders.
“If the assignment is missing, you can create it by having the old assignee reassign it to you,” Ornstein said.
I’ve heard this argument before, and none of the five experts who advise New York state on trust matters (and virtually all mortgage securitizations use New York trusts) accept that point of view. New York trusts can accept assets only as stipulated in their governing agreement. The pooling and servicing agreement made very specific provisions as to how the notes (the borrower IOUs) were to be endorsed and further required that the process be completed by specific dates, typically no later than 90 days after the trust was closed, with only very limited exceptions. And the trustee, on behalf of the trust, was required to provide multiple certifications that all these steps had been taken.
Let’s put it another way: the industry position is that the underlying contract, the pooling and servicing agreement, can just be ignored if the industry screws up on a grand enough scale. Would any servicer tolerate this argument if someone, say Treasury, tried to cut their fees? Funny how the “sanctity of contract” argument is nowhere to be found when adherence to contracts might crimp industry profits….
The soopergeniuses in D.C. and on Wall St have tried everything EXCEPT meaningful mods, helping homeowners, principal writedowns-HOLC. Nothing is working. DO THE DAMNED HOLC ALREADY.
Housing Finance Kabuki: Moving from an ‘implicit’ to an ‘explicit’ government guarantee, taxpayers last in line and holding the bag (again)
10:39am EST- Geithner panel done, Donovan panel beginning.
ZeroHedge notes the ELEPHANT- if Gross wants to nationalize FAN FRED we have to take that second set of books into account…
In fact, Gross urged a move one step further, with the full nationalization of the GSEs – as the GSEs are nationalized now in all but writing, this would be logical. Alas, the fact that US Debt to GDP would jump from 90% to 140% may make this proposal a little difficult to implement.
It is incredibly obvious, to me anyway, that the plan is to convert all those foreclosures to GSE Section 8 rentals with taxpayer subsidized guarantees and payments. And to think all those people didn’t want to help the homeowners. HA!! Now we will help renters instead. PS I dont see Mark Zandi…..good, he has been WRONG, wrong on the spendulus, wrong on the recovery, wrong, wrong, wrong.
and Bill Gross keeps calling Geithner, Tim, which reminds me of Sen Tester calling Chairman Bernanke, Ben, during the last Humprhey Hawkins testimony. I find it very disconcerting. PRETEND you dont own these people mkay? sheesh.
Update 4: Bill Gross says let me address reality. It is an 11 trillion dollar market and a large place for private entities here is unrealistic.
Update 3: LiveStream from Treasury here, list of panelists at bottom of this post. Oh look it has occurred to Mark Morial-one of the panelists that this would create a ‘class of Section 8 renters’. Yep. Timmeh says, well Marc, if we maintain the FHA giving generous subsisdies to people who buy a more modest house would that address your concerns? Yes says Marc,
Pfft! Require housing counseling, etc. Oh here we go BACK TO CRA good grief. As long as everyone gets ‘theirs’ frak the taxpayers right people? Jeebus! Marc says as long as Main St and Back St get covered we are aall good. O..M…G… Main St is PAYING FOR ALL THIS SHXT!!!!!
The government should create an apartment real estate investment trust (REIT) to rent out foreclosed properties — a method that would avoid flooding the housing market with foreclosed properties, a real estate consultant said as President Obama’s “Future of Housing Finance Conference” kicked off Tuesday.
John Burns, CEO of John Burns Real Estate Consulting, said the government-created REIT would be self-sustaining via rental fees. The government-sponsored enterprises, Fannie Mae and Freddie Mac, would hire outside property-management firms to manage the rental properties, Burns said….
and another update from Jimmy P, Gross is throwing his CONSIDERABLE weight around (biggest bond playahs worldwide!)
Housing Conf. Bill Gross: Comes out for a Giant Refinancing Plan for America. 1 minute ago via web
Housing Conf. Pimco’s Bill Gross: Too many homeowners, houses – more renters; 1 giant GNMA replacing Fannie, Freddie; Need govt guarantee;
Update: Follow JimmyPethokoukis on Twitter for updates from the conference!!~
Housing Secretary Sean Donovan: Being a homeowner not the right option for everyone
ZeroHedge has a nice write up. Geithner is on record indicating the implicit guarantee needs to be explicit, and PIMCO’s Bill Gross is REALLY CLEAR they will NOT be buying any mortgage securities unless we move back to a 30% down model. Since the government will not ‘take the pain’, pain we taxpayers KNOW is ALREADY coming for US BTW, they need to reflate the bubble, so Bill gets what Bill wants, an explicit guarantee…guaranteed!
Tomorrow, a variety of luminaries, such as Bill Gross and Mark Zandi, will be panelists in a worthless and futile spectacle titled “Conference on the Future of Housing Finance ” which has the aim of doing something or another to extend and pretend the ticking timebomb that are the bankrupt GSEs. It will most certainly succeed in that regard. What it will definitely fail at, is to provide some resolution to the $7 trillion mortgage “holding” problem, which incidentally was the first domino to fall in 2008, which just so happened nearly took down western-style capitalism with it (and morbidly, it should have: the result would have been a system infinitely better).
Yet as we prepare for this hearing (and try to track down Mr. Gross’ testimony to validate his previous statement that absent an implicit government guarantee he would buy MBS/Agency securities only with 30% down), here is another view, this one from none other than Edward Pinto, who himself was an executive vice president and chief credit officer at Fannie Mae in the late 1980s. As Pinto says, echoing the previous high dB statements by Rick Santelli, “We’ll never get a rational mortgage system until the government’s affordable housing mandates are ended.” We couldn’t agree more….
From Pinto, the BAD news for taxpayers:
…A consensus is building around a three-part grand bargain:
• An explicit federal guarantee of a large portion of the mortgage-backed securities created to finance American’s home mortgages;
• A tax on these securities to fund low-income housing initiatives; and
• A requirement that issuers of securities meet affordable housing mandates.
This is a dead end for two reasons. First, while supporters of an explicit federal guarantee tell us it will never be called upon, Americans have read this book before and know how it ends….
Diana Farrell, NEC Deputy Director
Treasury Secretary Geithner
HUD Secretary Donovan
Barbara J. Desoer, President of Bank of America Home Loans
Ingrid Gould Ellen, Professor of Urban Planning and Public Policy at New York University’s Wagner Graduate School of Public Service and Co-Director of the Furman Center for Real Estate and Urban Policy
Bill Gross, Co-founder and Co-chief Investment Officer of PIMCO
Mike Heid, Co-president of Wells Fargo Home Mortgage
S.A. Ibrahim, Chief Executive Officer of Radian Group Inc.
Marc H. Morial, President and Chief Executive Officer of the National Urban League
Alex Pollock, Resident Fellow at the American Enterprise Institute
Lewis Ranieri, Chairman of Ranieri and Company, Inc.
Ellen Seidman, Executive Vice President for Mission and Strategy, at ShoreBank Corporation, and Chair of the Board of Directors at the Center for Financial Services Innovation
Michael A. Stegman, Director of Policy and Housing for the Program on Human and Community Development of the John D. and Catherine T. MacArthur Foundation
Susan Wachter, Richard B. Worley Professor of Financial Management, Professor of Real Estate, Finance and City and Regional Planning at the University of Pennsylvania’s Wharton School
Mark Zandi, Chief Economist of Moody’s Analytics
So is QE2, (the quantitative easing not the ship), on the way or is Ben blowing sunshine and/or smoke up our axxes again?
From Fed Chairman Ben Bernanke: Challenges for the Economy and State Governments
On the economy:
While the support to economic activity from stimulative fiscal policies and firms’ restocking of their inventories will diminish over time, rising demand from households and businesses should help sustain growth. In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions. In the business sector, investment in equipment and software has been increasing rapidly, in part as a result of the deferral of capital outlays during the downturn and the need of many businesses to replace aging equipment….
UHHH come again? Exsqueeze me? Increased consumer INCOME???? consumer spending?? Have you SEEN the savings rate and the PCE?
Memo to Ben: Wishin’ and hopin’ and thinkin’ and prayin’ is NOT an economic strategy! Give us Growth or tell the SOOPERGENIUSES in the WH to get the hell out of the way!
Ben continues~(…) To be sure, notable restraints on the recovery persist. The housing market has remained weak, with the overhang of vacant or foreclosed houses weighing on home prices and new construction. Similarly, poor economic fundamentals and tight credit are holding back investment in nonresidential structures, such as office buildings, hotels, and shopping malls.
Importantly, the slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending. After two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, an improvement but still a pace insufficient to reduce the unemployment rate materially. In all likelihood, significant time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009. Moreover, nearly half of the unemployed have been out of work for longer than six months….
Why yes!!!, that pesky LACK OF FRAKKIN JOBS is holding us back, just a WEE bit, mighty white of Ben to notice, pardon the pun, my days in the Bronx…
Let’s hope QE2 the MS way is coming (see excerpts and linky below), BTW guess who suggested this 1 pg refi for all??? JOHN MCCAIN IN 2008. yep.
The ONLY WAY IN HELL Ben’s forecast for ‘increased consumer spending and income!!!’ will materialize is if plans are in the works or about to be to launch the MS QE2 plan in which all Americans paying on time get an ‘instant 1 pg refi’ drop in their mortgages to market rates (which, following another buying binge by Fed would be 2.99% let’s say) in CONJUNCTION with cutting principle on the defaultees (this way the foreclosures will stop and the prices will stop dropping in housing) with the new rates for all! the larger group who pay on time wont be so pixxed since they get theirs too…
From the MS PDF-If it were possible to inject a significant amount of stimulus into the US household sector, and this stimulus had zero impact on the budget deficit, did not require an exit strategy, did not distort the markets, and took effect almost immediately, wouldn’t it seem like a slam dunk?
Such an option actually exists in the form of a change to
mortgage refinancing requirements. The Fed and
market forces have pushed mortgage rates to historic
lows, yet many homeowners are unable to take
advantage because they are blocked from refinancing.
This problem could be addressed if the Government
merely recognized its existing guarantee on the principal
value of a large part of the mortgage market – the
mortgages that are backed by Fannie, Freddie and
Ginnie – and acted to streamline the refi process.
There are 37 million mortgages outstanding whose
principal value is backed by the Federal government.
When these homeowners apply for a refinancing, the
application is subject to a standard underwriting process
that involves an LTV test (requiring a property appraisal),
an analysis of the borrower’s FICO score, and income
We estimate a potential average rate reduction of 125 bp on 50% of the outstanding volume of agency-backed mortgages. In the aggregate, the savings amounts to $46 billion per year. That’s more than the cost of the latest extension of unemployment benefits and more than taxpayers saved under the Make Work Pay tax
credits in the 2009 fiscal stimulus legislation.
The bottom line is that market conditions have created a
potential costless windfall that is not being used. There
is no need for a case-by-case analysis of a borrower’s
credit quality when the principal value of the mortgage is
already backed by the government.
…How Many Borrowers Could Be Impacted?
As seen in Exhibit 3, roughly half of all US households have a
mortgage. Of these 55 million households, 37 million have
mortgages whose principal value is already guaranteed by the
Federal government. Yet, when these homeowners apply for a
refinancing, the application is subject to a standard
underwriting process that involves an LTV test (requiring a
property appraisal), an analysis of the borrower’s FICO score,
and income verification. Obviously, the drop in home prices
during the past few years means that many borrowers will notmeet the LTV requirement – especially since there has been a significant tightening in the appraisal process according to press reports. Indeed, our housing analyst Oliver Chang estimates that more than one-third of all agency-backed mortgages outstanding now have an LTV above 80% (see Exhibit 2). Looking at the principal value of these mortgages, the proportion is even greater (a little above 40% of the total) because an outsized share are located in California, where property values are higher than the national average. There are probably an additional 10% or so of borrowers who don’t qualify for refinancing because of job loss or a low FICO score.
Thus, we believe that perhaps 50% of the outstanding principal value of agency mortgages may not be refi-able at present. As seen in Exhibit 4, this estimate is broadly consistent with actual versus predicted prepay9(ment speeds that currently prevail in the mortgage market. (go read the entire paper and how they propose this be addressed, seems a win/win to me)
but if they do not plan to do this then he is either totally disconnected or full of shxt and lying to us, neither is good…