Homes Compass

House Price Declining Values Slows In Senond Quarter

admin — Tue, 26 Aug 2008 14:55:09 +0000

WASHINGTON, DC – U.S. home prices fell in the second quarter of 2008 according to OFHEO’s seasonally-adjusted purchase-only house price index. The index, which is based on data from home sales, was 1.4 percent lower on a seasonally-adjusted basis in the second quarter than in the first quarter. This decline was less steep than the 1.7 percent decline in the prior quarter. Over the past year, prices fell 4.8 percent between the second quarter of 2007 and the second quarter of 2008. The decline is the largest in the purchase-only index’s 17-year history, but is much smaller than those of other indexes.

OFHEO’s all-transactions House Price Index (HPI) fell 1.4 percent in the latest quarter and was down 1.7 percent over the four-quarter period.

The figures were released today by OFHEO Director James B. Lockhart, as part of the quarterly report analyzing housing price appreciation trends.

“Tighter credit conditions and relatively high inventory levels led to some sharp price declines in the second quarter,” said Lockhart. “However, the majority of Metropolitan Statistical Areas (MSAs) posted positive four-quarter growth.”

The monthly index, which is a purchase-only measure of price changes, was flat between May and June on a seasonally-adjusted basis, but was down 5.0 percent since the April 2007 peak. In June, seasonally-adjusted prices in thePacific Census Division were 17.6 percent off their early 2007 peak, making it the worst performing Division. By contrast, June prices in the West South Central Division reached a new high.

While the national purchase-only house price index fell 4.8 percent between the second quarters of 2007 and 2008, prices of other goods and services increased 5.3 percent. Accordingly, the inflation-adjusted price of homes fell approximately 10.1 percent over the latest year.

“The most overbuilt areas of the country–including California, Nevada, Arizona, and Florida–contrast greatly with most other states, where prices are declining more moderately or even increasing,” said OFHEO Chief Economist Patrick Lawler. “Nationally, the substantial declines in the weakest markets have driven seasonally adjusted prices down to late-2005 levels.”

Read the entire report here

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Government Sponsored Enterprise Ratings Downgraded

admin — Mon, 25 Aug 2008 20:34:34 +0000

The preferred stock ratings of Freddie Mac and Fannie Mae have been downgraded from A1 to BAA3 by Moody’s Investors Service. Additionally, Fannie and Freddie’s Bank Financial Strength Ratings has been downgraded from B minus to D plus.

The downgraded ratings remain on review for possible further downgrade. Moody’s said the downgrades of the financial strength ratings reflect its view that the government sponsored enterprise’s flexibility to manage volatility in their mortgage risk exposures is “constricted” because they now have “limited access to common and preferred equity capital at economically attractive terms.”

The downgrades of the preferred stock ratings reflect a greater risk of dividend omission stemming from two issues.

First, the Government Sponsored Enterprises mortgage portfolio performance is “worse and more volatile than Moody’s expected”, which could lead them to breach the capital requirements governing their ability to pay a preferred dividend. Second, there is uncertainty about how the preferred stock would be treated if the Treasury provides either GSE with support, Moody’s said.

Moody’s also affirmed the GSE’s AAA senior long term debt and Prime-1 short term debt ratings with stable outlooks, while their AA2 subordinated debt ratings were affirmed, but the outlook was changed from stable to negative.

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Federal Open Market Committee Holds At 2%

admin — Tue, 05 Aug 2008 19:01:18 +0000

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.

Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.

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Loan Limits Slated To Be $625,000

admin — Tue, 22 Jul 2008 16:31:52 +0000

House and Senate negotiators have reached an agreement on loan limits, and it appears that the maximum amount for the Government Sponsored Enterprise (GSE)Fannie Mae, Freddie Mac, and Federal Housing Administration FHA loans will be $625,000.

Negotiations on a massive housing bill are getting serious, with the House of Representatives scheduled to vote on the legislation tomorrow.

In markets where housing prices exceed the $417,000 conforming loan limit, the maximum loan amount of Fannie Mae and Freddie Mac loans would be determined by multiplying the median home price by 115%, up to a maximum of $625,000, sources say.

The same holds true for FHA loans, except that the multiplier kicks in at $271,050, or 65% of the conforming loan limit. If the median home price is $300,000, the maximum FHA loan amount in that area would be $345,000 ($300,000 x 115%).

House Financial Services Committee Chairman Barney Fran, D-Mass., told The Washington Post that the House has agreed to accept Senate provisions that ban seller funded downpayment assistance on FHA loans and impose a 12-month moratorium on the charging of risk-based premiums by the FHA.

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This Week In Mortgage News

admin — Tue, 22 Jul 2008 04:04:57 +0000

This week will be interesting for the bond market and mortgage rates. There are five remaining economic reports scheduled for release, but only one of them is considered to be of high importance to the markets. With data being posted all but one day of the week, we may see some noticeable fluctuations from day to day in mortgage pricing. Generally speaking, despite the lack of a data-packed calendar, I would still maintain constant contact with your mortgage professional.

Interest rates remained volatile last week as worries about inflation continued to influence the mortgage market. Comments from the Federal Reserve indicated that the current rate of inflation is above desired levels. When the Fed is concerned about inflation, they tend to raise interest rates. We recommend locking now before they go up.

Inflation data continues to hammer headlines and our wallets. News this week demonstrated what we have all been feeling; prices are higher at the pump, the grocery store and anywhere else you use your debit card. Interest rates trade off of bond prices and bonds HATE inflation. Coupled with this is concern about a declining economy which could hold rates back a bit, but the overall trend is higher for those seeking a mortgage in coming months.

Volatility being what it is these days, mortgage rates bounce around a lot. Upward pressure for rates one day gives way to downward pressure the next, only to succumb to upward pressure again.

The see saw between concerns about growth and fears about inflation tilted toward the inflation side again this week, after Fed Chairman Ben Bernanke addressed Congress in the semi-annual report on monetary policy. While detailing the challenges facing the economy, Bernanke noted that inflation was above desired levels and that upside risks for higher prices have “intensified” lately. A Fed seeing higher inflation usually can be expected to react with an upward move to the Fed Funds and Discount Rates at some point in the not-too-distant future. In fact, the Federal Reserve Open Market Committee explicitly noted at its last meeting that “with increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase in the funds rate.”

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Federal Banking and Thrift Agencies Issue Final Guidance on Supervisory Review Process

admin — Tue, 15 Jul 2008 18:58:59 +0000

The federal banking and thrift agencies today issued final guidance outlining the supervisory review process for banking organizations implementing the new advanced capital adequacy framework known as Basel II. The final guidance relating to supervisory review is aimed at helping banking organizations meet certain qualification requirements in the advanced approaches rule, which took effect April 1.

The advanced approaches rule consists of three pillars: minimum risk-based capital requirements (Pillar 1); supervisory review of capital adequacy (Pillar 2); and market discipline through enhanced public disclosures (Pillar 3). The final Pillar 2 guidance details the agencies’ standards for ensuring that each institution subject to the advanced approaches rule has a rigorous process for assessing its overall capital adequacy in relation to its risk profile and a comprehensive strategy for maintaining appropriate capital levels.

Although the guidance does not differ significantly from the proposed Pillar 2 guidance issued in February 2007, the agencies made some enhancements based on comments received and in consideration of key lessons from the events of the past year. The Pillar 2 guidance is being issued by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The effective date of the Pillar 2 guidance is 30 days following its publication in the Federal Register, which is expected shortly. The final Pillar 2 guidance is attached.

2008 Banking and Consumer Regulatory Policy

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Federal Reserve Issues Rule Amending Regulation Z (Truth in Lending)

admin — Mon, 14 Jul 2008 15:41:47 +0000

The Federal Reserve Board on Monday approved a final rule for home mortgage loans to better protect consumers and facilitate responsible lending. The rule prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices. The final rule also establishes advertising standards and requires certain mortgage disclosures to be given to consumers earlier in the transaction.

The final rule, which amends Regulation Z (Truth in Lending) and was adopted under the Home Ownership and Equity Protection Act (HOEPA) , largely follows a proposal released by the Board in December 2007, with enhancements that address ensuing public comments, consumer testing, and further analysis.

“The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership,” said Federal Reserve Chairman Ben Bernanke . “Importantly, the new rules will apply to all mortgage lenders, not just those supervised and examined by the Federal Reserve. Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers,” the Chairman said.

The final rule adds four key protections for a newly defined category of “higher-priced mortgage loans” secured by a consumer’s principal dwelling. For loans in this category, these protections will:

* Prohibit a lender from making a loan without regard to borrowers’ ability to repay the loan from income and assets other than the home’s value. A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a “pattern or practice.”
* Require creditors to verify the income and assets they rely upon to determine repayment ability.
* Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
* Require creditors to establish escrow accounts for property taxes and homeowner’s insurance for all first-lien mortgage loans.

“These changes have made for better rules that will go far in protecting consumers from unfair practices and restoring confidence in our mortgage system,” said Governor Randall S. Kroszner.

In addition to the rules governing higher-priced loans, the rules adopt the following protections for loans secured by a consumer’s principal dwelling, regardless of whether the loan is higher-priced:

* Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home’s value.
* Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. In addition, servicers are required to credit consumers’ loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.
* Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer’s principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans. Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer’s credit history.

For all mortgages, the rule also sets additional advertising standards. Advertising rules now require additional information about rates, monthly payments, and other loan features. The final rule bans seven deceptive or misleading advertising practices, including representing that a rate or payment is “fixed” when it can change.

The rule’s definition of “higher-priced mortgage loans” will capture virtually all loans in the subprime market, but generally exclude loans in the prime market. To provide an index, the Federal Reserve Board will publish the “average prime offer rate,” based on a survey currently published by Freddie Mac . A loan is higher-priced if it is a first-lien mortgage and has an annual percentage rate that is 1.5 percentage points or more above this index, or 3.5 percentage points if it is a subordinate-lien mortgage. This definition overcomes certain technical problems with the original proposal, but the expected market coverage is similar.

One element of the original proposal has been withdrawn. The Federal Reserve Board had proposed for public comment certain requirements pertaining to so-called “yield-spread premiums.” During the intervening period, the Board engaged in consumer testing that cast significant doubt on the effectiveness of the proposed rule. As part of its ongoing review of closed-end loan rules under Regulation Z, however, the Board will consider alternative approaches.

In finalizing the rule, the Board carefully considered information obtained from testimony, public hearings, consumer testing, and over 4,500 comment letters submitted during the comment period. “Listening carefully to the commenters, collecting and analyzing data, and undertaking consumer testing, has led to more effective and improved final rules,” Governor Kroszner said.

The new rules take effect on October 1, 2009. The single exception is the escrow requirement, which will be phased in during 2010 to allow lenders to establish new systems as needed.

In a related move, the Board is publishing for public comment a proposal to revise the definition of “higher-priced mortgage loan” under Regulation C (Home Mortgage Disclosure), which requires lenders to report price information for such loans, to conform to the definition the Board is adopting under Regulation Z.

The Federal Register notices are attached.

Statement of Chairman Ben S. Bernanke

Statement of Governor Randall S. Kroszner

Highlights of Final Rule Amending Home Mortgage Provisions of Regulation Z (Truth in Lending)

Draft Federal Register Notice (1.2 MB PDF)

Open Board Meeting Materials

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IndyMac Federal Bank Receives Government Support

admin — Mon, 14 Jul 2008 13:45:07 +0000

IndyMac will cover 50% of uninsured deposits as IndyMac Federal Bank.

The government is stepping in to support IndyMac. Having just changed its name from IndyMac Bancorp after it was seized Friday. The FDIC has assumed control saying it will cover 50% of uninsured deposits and fully insure all up to $100,000, which is normal.

John Bovenzi, the FDIC COO says there’s probably no bank in the country that has access to greater capital and liquidity than Indymac Federal Bank. He also states the FDIC expects to sell it in the next 90 days.

Because Charles Schumer has loose lips, IndyMac Bancorp became the second biggest federally insured financial company to be taken over by regulators.

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FDIC Says Deposits in Failed IndyMac Bancorp Are ‘Safe’

admin — Mon, 14 Jul 2008 13:01:32 +0000

Two days after the Federal Deposit Insurance Company took over California based IndyMac Bancorp Inc, officials say the bank will reopen Monday morning (Today) for business as usual.

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Charles Schumer Is Politically Irresponsible

admin — Mon, 14 Jul 2008 03:24:18 +0000

Build it and they will come….Mr. "Senate Banking Committee"

We have all heard this and very similar statements. Lets take a look at the strategies Charles Schumer is utilizing to help our economy.

Our credit markets are in turmoil, it is harder to get a mortgage, it is more difficult to get credit cards, homes are depreciating in value, jobs are being out sourced to other countries, in fact, even the banks are having a hard time believing in each other. This is probably even the correct psychology seeing how the capitalistic markets trusted each other too much in years past.

So now that we cannot access money no matter what direction we turn.

But wait, look up in the sky, it a bird…no, is it a plane…NO, it is a big mouth named Charles Schumer. A man with "credibility"? A responsible man"? I think not. Or would you think it was a good economic move for our country "In the following 11 business days (since Schumers irresponsible remarks), depositors withdrew more than $1.3 billion from their accounts," the OTS said in a statement announcing the California-based lender’s takeover on Friday.

How can a man that carries the clout of, Senate Banking Committee, chairman of Congress’ Joint Economic Committee and the third-ranking Democrat in the Senate say such horrendous things? What did he think would happen when he stated, now remember he is an authority and on the Senate Banking Committee, "IndyMac was one of the most poorly run and reckless of all the banks," he said. "It was a spin off from the old Countrywide, and like Countrywide, it did all kinds of profligate activities that it never should have. Both IndyMac and Countrywide helped cause the housing crisis we’re now in" . See this article too. CNN

Despite the fact that most of the staff at Consumer Mortgage Reports may agree with his statement, as irresponsible as they were, this was completely uncalled for and the impact of his statement has set the financial recovery back 6 months or more. His statements have lead to the loss of 7,200 jobs, his remarks have put a major damper on the stocks of IndyMac and everyone who had owned them!

Someone else does not agree with Schumer, John Bovenzi, the FDIC COO says, "there’s probably no bank in the country that has access to greater capital and liquidity than Indymac Federal Bank".

Here is a nonrelated news clip from today, Jul. 14, 2008, with someone who obviously disagrees with Schumer.

Schumer, this is your idea of leadership? Take down the boat to teach them a lesson? Did you pick up your philosophies from Adolph Hitler.

If you did your research, IndyMac and all the other lenders have tightened up their guidelines and they could have recovered without these costs put on the American public. It has been said that you would like everyone making $10.00/hour. Well now lets get rid any good paying jobs that are left in America by flapping your mouth like it is Hurricane Katrina.

"And now they are doing what the Bush administration always does: Blame the fire on the person who calls 911.", Schumer states…so where was it your position to call the fire department?

…and if your words do not carry weight, then we request you step down. Quit. Resign. If you claim your words are meaningless, then you are not a leader of the United States!

A little FYI for those who oppose. Indymac and Countrywide were not the only problems. As much as we all love making money, the REAL problem was the excessive greed from Wall Street. If Wall street did not buy all those risky loans NO BANK could sell them!

Oh by the way Mr Senate Banking Committee, chairman of Congress’ Joint Economic Committee and the third-ranking Democrat in the Senate, where you are the Senate Banking Committee when all this Wall Street crap was going on a few years ago? How many of these banking institutions that are now slamming, how much have they given you for your political campaigns? How many banking lobbyists are in your back pocket?

No wonder more and more people are coming out and speaking against your continual irresponsibility. Once again, where was your influence the last few years Mr Senate Banking Committee?

Wise up!

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Homes Compass

House Price Declining Values Slows In Senond Quarter

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