Mortgage Writedowns, Tar Sands Loophole, SEC: Compliance

Fannie Mae (FNMA) and Freddie Mac (FMCC) won’t
forgive principal on delinquent mortgages they guarantee even as
the U.S. Treasury Department is offering incentive payments for
writedowns, the companies’ regulator said.

Months of analysis showed there would be no clear benefit
to taxpayers if the Federal Housing Finance Agency were to
change its longstanding policy barring the government-owned
mortgage-finance companies from loan modifications that include
debt writedowns, Edward J. DeMarco, the agency’s acting
director, said yesterday said at a briefing with reporters.

The decision comes after months of mounting pressure to
reverse the policy from activist groups and congressional
Democrats, who touted it as a way to keep more families from
losing their homes to foreclosure. FHFA has been in discussions
since January with Treasury officials, who offered Fannie Mae
and Freddie Mac as much as 63 cents for each dollar of principal
reduction, using unspent funds from the Troubled Asset Relief
Program.

Treasury Secretary Timothy F. Geithner criticized the
decision in a letter to DeMarco, saying the use of targeting
principal reductions would provide “much-needed help to a
significant number of troubled homeowners.”

DeMarco released a detailed analysis showing that under
most scenarios, even while there might be a net benefit to the
government-sponsored enterprises, taxpayers would lose money
because they would be funding the program through the Treasury.

Fannie Mae and Freddie Mac have completed 1.1 million loan
modifications since the end of 2008, and have engaged in more
than 1 million other transactions to avert foreclosures.

Special Section: Libor Probe

Deutsche Bank Says Internal Libor Probe Clears Management Board

Deutsche Bank AG (DBK), Germany’s largest lender, said an
internal probe has so far cleared current and former management
board members of wrongdoing amid a global investigation of
interest-rate manipulation.

“A limited number of employees, acting on their own
initiative, engaged in conduct that falls short of the Bank’s
standards, and action has been taken accordingly,” Paul
Achleitner
, the Frankfurt-based company’s supervisory board
chairman, said in a letter to employees yesterday. He didn’t
give further details about the employees or actions taken.

Russia Wants More Oversight of Ruonia, MosPrime After Libor Row

Russia’s central bank is in talks with the Federal
Financial Markets Service on increasing oversight over Russian
interbank rates Ruonia and MosPrime, said Bank Rossii Deputy
Chairman Sergey Shvetsov, adding that discussions center on
empowering the watchdog to regulate the interbank market.

While there are no signs of rate-rigging in Russia, the
regulators are monitoring the scandal surrounding the London
interbank offered rate, Shvetsov told reporters in Moscow
yesterday.

Deutsche Bank Says Facing Lawsuit Over Yen Libor, Derivatives

Deutsche Bank AG, one of at least a dozen banks being
probed over allegations of interest-rate rigging, is being sued
over claims it manipulated the Yen Libor rate and the price of
derivatives tied to the Euroyen benchmark.

The suit was filed in April in the U.S. by parties the bank
didn’t identify who allege Deutsche Bank was one of a group of
banks that rigged the Yen London interbank offered rate, the
Tokyo Interbank Offered Rate for yen held overseas and the price
of Euroyen-based derivatives, Frankfurt-based Deutsche Bank said
in a statement yesterday.

The suit is one of several potential class actions filed
against the bank in the U.S. The other suits relate to
allegations the bank manipulated U.S. dollar Libor and the
prices of derivatives tied to that rate.

Banks are the target of litigation as regulators probe
firms over clams they artificially understated their cost of
borrowing or allowed traders to manipulate interest rates and
profit from bets on interest-rate swaps.

Deutsche Bank reiterated yesterday that it’s co-operating
with regulators and said an internal investigation has so far
cleared current and former management board members of
wrongdoing.

UBS Chief Says Bank Isn’t Central to Libor Investigations

UBS AG (UBSN) Chief Executive Officer Sergio Ermotti said there is
no reason to single out the Swiss bank in the probes regulators
worldwide are conducting into the possible manipulation of
London interbank offered rates.

He made the remarks at a press conference in Zurich
yesterday in response to a question on reports that the bank may
have had a key role in rigging Libor.

UBS is among firms including Citigroup Inc. (C), Royal Bank of
Scotland Group Plc
and Deutsche Bank AG being investigated
worldwide for practices in setting Libor.

UBS said previously that it received conditional immunity
or leniency for cooperating with the U.S. Justice Department’s
and Swiss Competition Commission’s antitrust investigations into
submissions of yen Libor and the euro-yen Tokyo interbank
offered rate, or Tibor.

The Canadian Competition Bureau also granted the bank
conditional immunity in its investigation into yen Libor, while
the Swiss commission granted immunity on Swiss franc Libor and
certain transactions related to it.

Barclays Documents Seized in Italy in Euribor Fraud Probe

Barclays Plc (BARC) offices in Milan were searched by Italian
prosecutors who seized documents as part of a fraud and market-
manipulation probe into banks’ roles in setting the Euribor
benchmark interest rate.

Police obtained files dating from 2007 through 2012,
including e-mails, Michele Ruggiero, a prosecutor in the city of
Trani, said by phone yesterday. Officials for Barclays in London
declined to immediately comment.

Barclays, the U.K.’s second-largest bank, was fined a
record 290 million pounds ($455 million) in June for attempting
to rig the London interbank offered rate and Euribor, its
equivalent in euros, to appear healthier during the financial
crisis. U.K. fraud prosecutors July 30 said they will
investigate the manipulation of Libor and other interest rates
after deciding that existing British criminal law covers the
conduct involved.

Compliance Policy

Markey Urges Geithner to Close Tax Loophole for Tar Sands Oil

U.S. Representative Edward Markey, a Democrat from
Massachusetts, called on U.S. Treasury Secretary Timothy
Geithner
to close the tax loophole that could result in
“millions of dollars in lost revenues, revenues intended by
Congress to be made available for dealing with the aftermath of
oil spills.”

Markey made the request in a letter to Geithner in which he
cited the Internal Revenue Service as saying tar sands imported
into the U.S. aren’t subject to per-barrel excise tax. Such
taxes are the largest source of revenue to the Oil Spill
Liability Trust Fund, which was created to help in the aftermath
of oil spills.

The loophole may lead to as much as $48 million in lost
revenue this year based on current levels of tar sands imports,
and also puts taxpayers at risk for having to pay for oil
spills. Democrats released a report on the loophole yesterday.

Compliance Action

Bank of Spain Says Auditors Completed Analysis of Bank Assets

The Bank of Spain said audit firms completed a first stage
of an analysis of Spanish bank loans and foreclosed assets,
according to an in e-mailed statement yesterday by the bank.

The results were delivered to Spanish authorities
yesterday, according to schedule, the regulator said. Results
won’t be published because they are an intermediate phase in the
process.

Using the auditors’ results, Oliver Wyman will carry out a
second “bottom-up” stress test of individual banks to
determine their capital needs. Results of the second test are
due in the second half of September, the Bank of Spain said in
the e-mailed statement.

Finra Expels Canada Day-Trading Firm, Bars Chief Executive Beck

U.S. brokerage industry regulators expelled Biremis Corp.
and barred its chief executive officer for failing to implement
adequate safeguards to prevent money laundering and
“manipulative trading.”

Biremis, formerly known as Swift Trade Securities USA, and
CEO Peter Beck failed to create a supervisory system that would
comply with securities laws from June 2007 to June 2010, the
Financial Industry Regulatory Authority said yesterday in a
statement. Violations included layering, or placing non-bona-
fide trades to move the market in a way that leads to execution
of an order on the other side, Finra said.

The company, whose sole business was executing transactions
for day traders, failed to create safeguards against money
laundering required by the U.S. Bank Secrecy Act, Finra said.

Beck and Biremis agreed to the settlement without admitting
or denying wrongdoing, Finra said.

A telephone message left at a number for Biremis’s offices
in Kelowna, British Columbia, before normal business hours
wasn’t immediately returned.

VimpelCom Registers 50 Billion Rubles of Bonds With Regulator

OAO VimpelCom, a Russian mobile-phone company, registered
50 billion rubles ($1.6 billion) of domestic bonds with the
Federal Financial Markets Service, the regulator said in an e-
mailed statement yesterday.

Separately, Russia’s competition watchdog said parent
company VimpelCom Ltd. (VIP) shareholder Telenor ASA (TEL) agreed that the
chief executive officer of the Russian mobile operator should be
a Russian citizen.

VimpelCom Ltd. is considered a strategic Russian company
and therefore the CEO should be Russian, Igor Artemyev, head of
the Federal Anti-Monopoly Service, told reporters in Moscow
yesterday.

China Investigates Officials Over Tainted Capsules, Xinhua Says

Six government officials in eastern China are under
investigation for dereliction of duty involving the production
of contaminated medicine capsules, Xinhua News Agency said
yesterday, citing the provincial procuratorate.

An initial probe showed that lax supervision by six food
and drug administration officials in Zhejiang province caused
incidents where several companies had made drug capsules with
industrial gelatin, which contains excessive levels of chromium
and is illegal to use for making drug capsules, Xinhua reported.

Courts

SEC Loses Lawsuit Against Ex-Citigroup Official Brian Stoker

The U.S. Securities and Exchange Commission lost a jury
verdict in its lawsuit against former Citigroup Inc. official
Brian Stoker over a deal at the center of the bank’s proposed
$285 million settlement with regulators over subprime
residential mortgage securities.

The jury reached its verdict yesterday in Manhattan federal
court. The SEC had accused Stoker, the former director of
Citigroup’s collateralized debt obligation structuring group, of
violating securities law in putting together the assets
underlying a $1 billion CDO.

The SEC claimed New York-based Citigroup structured and
sold the CDO without telling investors that it helped pick about
half the underlying assets and was betting they would decline in
value by taking a short position.

The SEC was seeking to have Stoker disgorge profits from
the deal and pay a fine.

U.S. District Judge Jed Rakoff, who oversaw the trial, last
year rejected Citigroup’s $285 million settlement with the SEC
in which the bank wasn’t required to admit any liability. That
ruling is on appeal.

The case is U.S. Securities and Exchange Commission v.
Stoker, 11-cv-7388, U.S. District Court, Southern District of
New York (Manhattan).

Interviews/Hearings

Walter Says SEC Should Set Muni-Bond Disclosure Rules

U.S. Securities and Exchange Commission Commissioner Elisse
Walter speaks on a teleconference about regulation of the
$3.7 trillion municipal-bond market.

In a report released yesterday following a two-year review,
the SEC said Congress should let it set standards for what
information municipalities must disclose to investors and
require issuers to have audited financial statements.

For the audio, click here.

To contact the reporter on this story:
Carla Main in New Jersey at
cmain2@bloomberg.net.

To contact the editor responsible for this report:
Michael Hytha at mhytha@bloomberg.net.

Pending Freddie Mac Relief Refinance Changes to Help Lenders Refinance …


MCLEAN, Va., July 31, 2012 /PRNewswire via COMTEX/ —
Freddie Mac


/quotes/zigman/226335/quotes/nls/fmcc FMCC
-1.26%



announced plans to build on the success of its Relief Refinance Mortgage Program, which includes the Home Affordable Refinance Program (HARP 2.0), by aligning requirements for mortgages with loan-to-value ratios that are equal to or less than 80 percent with those for mortgages with LTV ratios greater than 80 percent.

The alignment will eliminate many of the lender’s selling representation and warranty responsibilities on the original loans being refinanced, regardless of the borrower’s loan-to- value ratio. Details are scheduled to be announced to lenders by mid-September so lenders can start taking applications as soon as possible thereafter for loans to be delivered as early as January 1, 2013.

Freddie Mac also said it is further evaluating the Relief Refinance program by specifically focusing on their Open Access offering and determining the best approach to maximize the program’s reach to eligible borrowers and assist lenders in managing capacity. Freddie Mac’s Relief Refinance – Open Access option enables eligible borrowers with Freddie Mac mortgages to apply for Relief Refinance mortgages, including HARP 2.0, through lenders other than their current servicer.

News Facts:

The pending Relief Refinance Mortgage changes are intended to eliminate operational complexities and streamline the program so lenders can make refinancing more accessible to borrowers with Freddie Mac owned- or guaranteed mortgages.

The HARP 2.0 component of the Relief Refinance program is targeted to borrowers with LTVs above 80 percent.

The program changes are based on lender feedback on HARP 2.0, the enhanced version of the original HARP program announced by FHFA in November 2011.

News Quote:

Attribute to Paul Mullings, Senior Vice President and Interim Head of Single Family at Freddie Mac.

“Once implemented the changes will give lenders a new measure of certainty and ease when they help borrowers with Freddie Mac owned- or guaranteed- mortgages take advantage of today’s historically low mortgage rates. This will help us build on the success of the HARP 2.0 and Relief Refinance Mortgage programs of helping more than 1.3 million Freddie Mac borrowers. Today’s announcement further underscores Freddie Mac’s vital role in making affordable mortgage financing available to America’s homeowners and future homebuyers.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today, Freddie Mac makes home possible for one in four homebuyers and is one of the largest sources of financing for multifamily housing. For more information visit
www.FreddieMac.com and Twitter: @FreddieMac.

SOURCE Freddie Mac

Copyright (C) 2012 PR Newswire. All rights reserved

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Fannie Mae, Freddie Mac barred from reducing principal on loans

A federal regulator is standing by its decision to bar Fannie Mae and Freddie Mac from reducing principal for borrowers at risk of foreclosure, resisting pressure from the Obama administration. The Federal Housing Finance Agency announced the decision Tuesday after months of considering the option.

fannie-mae-freddie-mac-signs.jpgA federal regulator said Tuesday it is standing by its decision to bar Fannie Mae and Freddie Mac from reducing principal for borrowers at risk of foreclosure.

The agency’s acting director, Edward DeMarco, has long opposed allowing Fannie and Freddie to offer principal reduction.

DeMarco said an extensive analysis by the FHFA found the potential benefit was too small compared with the costs and risks. The risks include as many as 19,000 borrowers strategically defaulting on their loans, according to the analysis.

About 1.4 million homeowners would be eligible for principal reductions from Fannie and Freddie.

The Obama administration immediately voiced its disappointment with the decision.

“I do not believe it is the best decision for the country,” Treasury Secretary Timothy Geithner said in a letter to DeMarco.

Geithner said allowing Fannie and Freddie to do “targeted” reductions of principal for troubled borrowers would provide much-needed help to a significant number of troubled homeowners. He said that would help repair the nation’s housing market and result in a net benefit to taxpayers.

The government rescued Fannie and Freddie in September 2008 to cover losses on soured mortgage loans. Since then the FHFA, which is independent of the administration, has controlled their financial decisions.

U.S. taxpayers have spent roughly $170 billion to rescue the companies. It could cost roughly $260 billion more to support them through 2014 after subtracting dividend payments, according to the government.

The Treasury Department said in January that it would cover part of the cost if Fannie and Freddie could reduce principal when they modify mortgages for troubled borrowers. The department said it would use unspent housing rescue money from the $700 billion Troubled Asset Relief Program, or TARP.

DeMarco acknowledged in a meeting with reporters that administration officials and others could disagree with the agency’s decision and interpret its analysis differently.

“Others could look at this and weigh these things differently,” he said.

Fannie Mae, Freddie Mac Won’t Cut Principal On Home Mortgages

WASHINGTON - OCTOBER 21:  The headquarters of ...

(Image credit: Getty Images via @daylife)

A cheap credit boom fueled a massive U.S. housing bubble that collapsed with devastating impact five years ago, but the conservator for Fannie Mae and Freddie Mac says letting the mortgage giants forgive principal borrowers owe is not the way to rehabilitate the market.

Edward DeMarco, acting director of the Federal Housing Finance Agency, says in a letter to Congress that the anticipated benefits of an Obama Administration program aimed at principle reduction as a means to keep struggling Americans in their homes “do not outweigh the costs and risks.”

The FHFA, which inherited oversight of Fannie and Freddie after the firms were put into conservatorship in 2008, will not let the government-sponsored enterprises participated in the Home Affordable Modification Program Principal Reduction Alternative (HAMP PRA).

Treasury Secretary Tim Geithner quickly responded with a letter of his own, expressing “concern” over DeMarco’s decision.

“I do not believe it is the best decision for the country, because, as we have discussed many times, the use of targeted principal reduction by the GSEs would provide much needed help to a significant number of troubled homeowners, help repair the nation’s housing market, and result in a net benefit to taxpayers,” Geithner wrote, calling the numbers used in FHFA’s analysis “selective.” Allowing Fannie and Freddie to participate in the principal reduction  could save the GSEs $3.6 billion versus standard modifications, Geithner says.

In DeMarco’s report, the FHFA finds that the program “did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today.” (Read the FHFA’s full report here.)

Of chief concern to DeMarco is the FHFA’s determination that even before considering the operational costs of putting HAMP PRA in place, the behavioral impact of such a program makes it a nonstarter. Those impacts include the risk that borrowers with the ability to pay their mortgage would become delinquent in an effort to take advantage of the program, a dynamic commonly known as moral hazard.

Should such a situation take root, it would actually increase losses for Fannie and Freddie, the opposite of the desired effect, the FHFA says, “thereby swamping any small but possible benefit.”

As to the cost, DeMarco says it could be $70-$90 million over a year or more, a price tag the Treasury Department has offered to cover, but that would come out of taxpayer coffers.

All told, FHFA believes the existing strategies to mitigate losses and benefit underwater borrowers come at a lower cost and similar efficacy as the HAMP PRA proposal. Borrowers with the ability and willingness to pay are eligible for Home Affordable Refinance Program (HARP), those without the ability to pay have opportunities for modifications and those with neither are eligible for alternatives to foreclosure including short sales and “deed-in-lieu of” transactions that allows them to exit their home without the credit-slamming impact of a foreclosure.

Is Housing Recovery Real? Not Everyone Is Convinced

by Yuki Noguchi, National Public Radio

Housing, the sector that led us into the recession, now looks to be one of the brighter spots in the economy. Homebuilding is at its highest level in nearly four years. More homes are selling, and at higher prices.

The question, of course, is whether this is a solid enough foundation to sustain a full housing recovery.

Lawrence Yun, the chief economist for the National Association of Realtors, says housing woes are largely behind us.

“It’s been a harsh downturn, but the downturn is over,” he says. “Now we’re beginning to turn the corner. [The] question is: How fast will we be turning that corner?”

He points to increased home sales, rising rents and low interest rates among several reasons why he’s certain the housing market is pointing in the right direction. And low inventories mean that price increases “will surely be sustainable,” he says.

Yun says it may be counterintuitive, but in places like Las Vegas, Phoenix and southern California, the number of homes for sale is at a fraction of where it should be in a normal market, and the competition among buyers is fierce.

And, he says, this housing recovery isn’t just regional. Across the country, demand for homes is driven by investors as well as millions of families who put off buying a home in recent years until the market started to improve.

“It’s a self-reinforcing process, where the increase in housing market activity begins to boost consumer confidence about homebuying,” Yun says.

Glenn Kelman, the CEO of online brokerage Redfin, says he shares in some of that confidence.

“We’ve been a bear, and now we’re a bull,” he says.

To be more accurate, he says his company is a small bull — a calf, maybe — on the market. That is in spite of the fact that some people believe there’s a vast backlog of foreclosed homes that are about to hit the market. Kelman’s not buying it.

“Every conspiracy theorist in real estate believes that there’s a huge chunk of inventory that the banks have just been holding back, waiting for our hopes to rise so that they can dash them again, and I just don’t believe it,” he says.

Kelman acknowledges there are still plenty of problems with the market. Namely, about half of Americans can’t qualify for a mortgage.

“I don’t think anyone believes we’re out of the woods yet, but I do think that there’s very little chance that the market is going to lose 10 percent, 20 percent and drag us back into the abyss,” Kelman says.

Gary Shilling, a financial analyst and well-known bear on housing, says the conventional wisdom — that the housing market is stable — is riddled with folly.

“You want to believe, yeah, yeah. Build it they will come,” he says with a laugh.

Shilling says he doesn’t buy the idea that millions of people have steady enough income to afford buying homes.

“Household formation is very much determined by economic circumstances,” he says. “And right now they’re very negative.”

In other words, just because somebody wants to move out doesn’t mean that they can.

“They’ve got to have the ability, they’ve got to have the motivation, they’ve got to have the cash, the job, all these other factors,” Shilling says.

Shilling is among analysts who believe there is a big inventory of foreclosed and delinquent homes lurking in the shadows.

In fact, last week RealtyTrac said that during the first half of this year, foreclosure activity was up in more than half of major markets. Shilling argues that when those properties hit the market, that will drive down home prices at least another 20 percent.

“Probably in the next few quarters, we’re going to see that the foreclosures pick up and that start to be dumped on the market and it’ll be a very different story,” he says.

He says there were similar blips of good data two years ago. Skepticism, he says, pays off.

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Broadcast Dates

Want Closings before Winter? The Leads You Get Now Will Be the Closings You Attend in the Fall

Realtor.com Business Beat—Summer’s the time most people kick back, relax and slow down a bit. That is, unless you’re a REALTOR®, when summer is the time to set your business up for the fall.

The National Association of REALTORS® 2011 “Survey of Home Buyers and Sellers” tells us that on average, consumers look at 12 homes over a span of 12 weeks before deciding on their purchase.

That means the leads you have now are going to be the closings you attend in September, October and November.

But don’t stress, because if you need to fill your pipeline with quality leads that can help you get the closings you need before winter, REALTOR.com® shares three lead-generating solutions that can help get buyer leads, one for seller leads, and one solution that can give you a nice mix of both.

• Find out how to get leads from local buyers specifically looking to connect with an agent
• Learn how to get exclusive local seller leads from the homepage of REALTOR.com®
• Discover a solution that helps you impress sellers while delivering more clicks and calls from interested buyers

Here’s how to learn more:

http://marketing.realtor.com/fall/?utm_source=RISMediautm_medium=textutm_content=3Bestutm_campaign=20120801

 

Is Housing Recovery Real? Not Everyone Is Convinced

A construction worker carries lumber while working on new homes in San Mateo, Calif., in March. Homebuilding is at its highest level in nearly four years.
Enlarge Justin Sullivan/Getty Images

A construction worker carries lumber while working on new homes in San Mateo, Calif., in March. Homebuilding is at its highest level in nearly four years.

A construction worker carries lumber while working on new homes in San Mateo, Calif., in March. Homebuilding is at its highest level in nearly four years.

Justin Sullivan/Getty Images

A construction worker carries lumber while working on new homes in San Mateo, Calif., in March. Homebuilding is at its highest level in nearly four years.

Housing, the sector that led us into the recession, now looks to be one of the brighter spots in the economy. Homebuilding is at its highest level in nearly four years. More homes are selling, and at higher prices.

The question, of course, is whether this is a solid enough foundation to sustain a full housing recovery.

Source: National Association of Realtors

Credit: Angela Wong / NPR

Lawrence Yun, the chief economist for the National Association of Realtors, says housing woes are largely behind us.

“It’s been a harsh downturn, but the downturn is over,” he says. “Now we’re beginning to turn the corner. [The] question is: How fast will we be turning that corner?”

He points to increased home sales, rising rents and low interest rates among several reasons why he’s certain the housing market is pointing in the right direction. And low inventories mean that price increases “will surely be sustainable,” he says.

Yun says it may be counterintuitive, but in places like Las Vegas, Phoenix and southern California, the number of homes for sale is at a fraction of where it should be in a normal market, and the competition among buyers is fierce.

And, he says, this housing recovery isn’t just regional. Across the country, demand for homes is driven by investors as well as millions of families who put off buying a home in recent years until the market started to improve.

“It’s a self-reinforcing process, where the increase in housing market activity begins to boost consumer confidence about homebuying,” Yun says.

Glenn Kelman, the CEO of online brokerage Redfin, says he shares in some of that confidence.

“We’ve been a bear, and now we’re a bull,” he says.

To be more accurate, he says his company is a small bull — a calf, maybe — on the market. That is in spite of the fact that some people believe there’s a vast backlog of foreclosed homes that are about to hit the market. Kelman’s not buying it.

“Every conspiracy theorist in real estate believes that there’s a huge chunk of inventory that the banks have just been holding back, waiting for our hopes to rise so that they can dash them again, and I just don’t believe it,” he says.

Every conspiracy theorist in real estate believes that there’s a huge chunk of inventory that the banks have just been holding back waiting for our hopes to rise so that they can dash them again, and I just don’t believe it.

Kelman acknowledges there are still plenty of problems with the market. Namely, about half of Americans can’t qualify for a mortgage.

“I don’t think anyone believes we’re out of the woods yet, but I do think that there’s very little chance that the market is going to lose 10 percent, 20 percent and drag us back into the abyss,” Kelman says.

Gary Shilling, a financial analyst and well-known bear on housing, says the conventional wisdom — that the housing market is stable — is riddled with folly.

“You want to believe, yeah, yeah. Build it they will come,” he says with a laugh.

Shilling says he doesn’t buy the idea that millions of people have steady enough income to afford buying homes.

Probably in the next few quarters we’re going to see that the foreclosures pick up and that start to be dumped on the market and it’ll be a very different story.

“Household formation is very much determined by economic circumstances,” he says. “And right now they’re very negative.”

In other words, just because somebody wants to move out doesn’t mean that they can.

“They’ve got to have the ability, they’ve got to have the motivation, they’ve got to have the cash, the job, all these other factors,” Shilling says.

Shilling is among analysts who believe there is a big inventory of foreclosed and delinquent homes lurking in the shadows.

In fact, last week RealtyTrac said that during the first half of this year, foreclosure activity was up in more than half of major markets. Shilling argues that when those properties hit the market, that will drive down home prices at least another 20 percent.

“Probably in the next few quarters, we’re going to see that the foreclosures pick up and that start to be dumped on the market and it’ll be a very different story,” he says.

He says there were similar blips of good data two years ago. Skepticism, he says, pays off.

Fannie Mae Releases June 2012 Monthly Summary


WASHINGTON, July 31, 2012 /PRNewswire via COMTEX/ —
Fannie Mae’s


/quotes/zigman/226360/quotes/nls/fnma FNMA
-2.48%



June 2012 Monthly Summary is now available. The monthly summary report contains information about Fannie Mae’s monthly and year-to-date activities for our gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures, serious delinquency rates, and loan modifications.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

SOURCE Fannie Mae

Copyright (C) 2012 PR Newswire. All rights reserved

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Fannie Mae's regulator says opposed to cutting mortgage principal to underwater borrowers


By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — The regulator for government-seized housing giants Fannie Mae and Freddie Mac said Tuesday he doesn’t want the firms to cut the amount underwater borrowers owe, drawing an immediate rebuke from Treasury Secretary Timothy Geithner.

Ed DeMarco, the acting chief of the regulator for Fannie and Freddie, the Federal Housing Finance Agency, said in a letter to the top Republican and Democrat on the Senate Banking Committee that “after much study,” he has concluded that Fannie and Freddie’s participation in the Obama administration’s program to cut the amount owed by underwater borrowers would “not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers.”

ECONOMY AND POLITICS


Congress reaches budget deal


Spending declines as


incomes rise in June

Consumer spending slips 0.1% in June for second straight month even as wages
rise a good 0.5%.

• Employment cost index up


• Home prices jump 2.2% in May

 


• Fewer foreclosures in June


• Fannie Mae: No principal cuts


• Fed will likely bide its time



U.S. economic calendar



Global economic calendar

Columns:

Nutting

Delamaide

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the @MktwEconomics twitter feed

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Fannie and Freddie already have cost taxpayers over $188 billion, DeMarco said.

Geithner criticized the decision.

“I am concerned by your continued opposition to allowing Fannie Mae and Freddie Mac to use targeted principal reduction in their loan modification programs,” Geithner wrote in a letter in response.

Roughly 56% of all U.S. mortgages are owned or guaranteed by Fannie and Freddie and about 11 million homeowners owe more than their properties are worth. Borrowers with negative equity are often referred to as “underwater” homeowners, because they owe more than their homes are worth.

Geithner, the White House and some Democratic lawmakers have been pushing DeMarco to cut the amount underwater borrowers owe for mortgages owned by the two firms, a process known as principal reduction.

Democrats contend that principal reduction would drive the economic recovery because it would give borrowers more money to spend and make it easier for those who have no home equity to sell their homes and move to another city to take a job.
Read about internal Fannie documents showing how the firm concluded that cuts to mortgages would help taxpayers

Geithner criticizes decision

Geithner said in his letter that allowing Fannie and Freddie participation in the White House principal-reduction program could help up to half a million homeowners and result in savings to the two mortgage giants of $3.6 billion when compared to other loan-modification programs. Geithner added that the Treasury’s estimate is based on FHFA’s own analysis which was provided to the Treasury.

“In view of the clear benefits that the use of principal reduction by [Fannie and Freddie] would have for homeowners, the housing market and taxpayers, I urge you to reconsider this decision,” Geithner said.

In his letter to Congress, DeMarco said that a key concern with principal reduction is whether borrowers who are current on their loans and have the ability to pay will “claim a hardship or actually become delinquent” to capture the benefits of the program.
Read about DeMarco defending not cutting Fannie, Freddie principal

“Even when considering alternatives that might reduce the impact of strategic modifiers and simplify the operational issues, the general result was that the benefits would accrue to few homeowners and would not outweigh the significant costs and challenges to implement a program,” said DeMarco.

DeMarco added that FHFA analysis shows that if 3,000 to 19,000 borrowers who are current on their mortgages decide to default in search of principal reduction, the result would offset any taxpayer benefits seen in a best-case scenario envisioned by the agency. He added that weakening the reliability of the mortgage contract would have “long-term” negative implications to mortgage-credit pricing.

DeMarco added that there are other improvements that can be used to limit losses at Fannie and Freddie and improve the operation of the housing finance market. He said that regulators could further streamline refinance opportunities and expand the short-sale process.

The Treasury in January expanded a program, known as the Home Affordable Modification Program, or HAMP, that seeks to help borrowers on the verge of foreclosure by tripling incentive payments to investors who cut the amount owed by borrowers for mortgages not owned by Fannie and Freddie.

The Treasury also sought to encourage Fannie and Freddie to participate in the program by offering incentives to reduce principal for mortgages owned by the two giants. In response, FHFA conducted another analysis and came to the conclusion Tuesday that mortgage cuts would be costly.
Read about the White House expanding foreclosure prevention program

A CoreLogic report from July 12 noted that negative equity and near negative-equity mortgages accounted for 28.5% of all U.S. mortgages in the first quarter of 2012, down from 30% in the fourth quarter of 2011.

Response to the decision on Capitol Hill was mixed, as expected.

“We are five years into the housing crisis, and FHFA remains paralyzed by the fear that somehow homeowners innocently trapped in the worst economy since the Great Depression are going to weasel out of paying every penny on their mortgage that they could,” said Rep. Brad Miller, Democrat of North Carolina.

However, Rep. Scott Garrett, Republican of New Jersey, said he praised DeMarco for his decision to “protect” U.S. taxpayers. “This thoughtful and analytical decision-making process should be used as model for the rest of Washington’s bureaucrats before they make decisions without properly considering the costs and benefits to the taxpayer,” Garrett said.

Fannie Mae regulator says no to principal cuts


By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — The regulator for government-seized housing giants Fannie Mae and Freddie Mac said Tuesday he doesn’t want the firms to cut the amount underwater borrowers owe, drawing an immediate rebuke from Treasury Secretary Timothy Geithner.

Ed DeMarco, the acting chief of the regulator for Fannie and Freddie, the Federal Housing Finance Agency, said in a letter to the top Republican and Democrat on the Senate Banking Committee that “after much study,” he has concluded that Fannie and Freddie’s participation in the Obama administration’s program to cut the amount owed by underwater borrowers would “not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers.”

ECONOMY AND POLITICS


Congress reaches budget deal


Spending declines as


incomes rise in June

Consumer spending slips 0.1% in June for second straight month even as wages
rise a good 0.5%.

• Employment cost index up


• Home prices jump 2.2% in May

 


• Fewer foreclosures in June


• Fannie Mae: No principal cuts


• Fed will likely bide its time



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Fannie and Freddie already have cost taxpayers over $188 billion, DeMarco said.

Geithner criticized the decision.

“I am concerned by your continued opposition to allowing Fannie Mae and Freddie Mac to use targeted principal reduction in their loan modification programs,” Geithner wrote in a letter in response.

Roughly 56% of all U.S. mortgages are owned or guaranteed by Fannie and Freddie and about 11 million homeowners owe more than their properties are worth. Borrowers with negative equity are often referred to as “underwater” homeowners, because they owe more than their homes are worth.

Geithner, the White House and some Democratic lawmakers have been pushing DeMarco to cut the amount underwater borrowers owe for mortgages owned by the two firms, a process known as principal reduction.

Democrats contend that principal reduction would drive the economic recovery because it would give borrowers more money to spend and make it easier for those who have no home equity to sell their homes and move to another city to take a job.
Read about internal Fannie documents showing how the firm concluded that cuts to mortgages would help taxpayers

Geithner criticizes decision

Geithner said in his letter that allowing Fannie and Freddie participation in the White House principal-reduction program could help up to half a million homeowners and result in savings to the two mortgage giants of $3.6 billion when compared to other loan-modification programs. Geithner added that the Treasury’s estimate is based on FHFA’s own analysis which was provided to the Treasury.

“In view of the clear benefits that the use of principal reduction by [Fannie and Freddie] would have for homeowners, the housing market and taxpayers, I urge you to reconsider this decision,” Geithner said.

In his letter to Congress, DeMarco said that a key concern with principal reduction is whether borrowers who are current on their loans and have the ability to pay will “claim a hardship or actually become delinquent” to capture the benefits of the program.
Read about DeMarco defending not cutting Fannie, Freddie principal

“Even when considering alternatives that might reduce the impact of strategic modifiers and simplify the operational issues, the general result was that the benefits would accrue to few homeowners and would not outweigh the significant costs and challenges to implement a program,” said DeMarco.

DeMarco added that FHFA analysis shows that if 3,000 to 19,000 borrowers who are current on their mortgages decide to default in search of principal reduction, the result would offset any taxpayer benefits seen in a best-case scenario envisioned by the agency. He added that weakening the reliability of the mortgage contract would have “long-term” negative implications to mortgage-credit pricing.

DeMarco added that there are other improvements that can be used to limit losses at Fannie and Freddie and improve the operation of the housing finance market. He said that regulators could further streamline refinance opportunities and expand the short-sale process.

The Treasury in January expanded a program, known as the Home Affordable Modification Program, or HAMP, that seeks to help borrowers on the verge of foreclosure by tripling incentive payments to investors who cut the amount owed by borrowers for mortgages not owned by Fannie and Freddie.

The Treasury also sought to encourage Fannie and Freddie to participate in the program by offering incentives to reduce principal for mortgages owned by the two giants. In response, FHFA conducted another analysis and came to the conclusion Tuesday that mortgage cuts would be costly.
Read about the White House expanding foreclosure prevention program

A CoreLogic report from July 12 noted that negative equity and near negative-equity mortgages accounted for 28.5% of all U.S. mortgages in the first quarter of 2012, down from 30% in the fourth quarter of 2011.

Response to the decision on Capitol Hill was mixed, as expected.

“We are five years into the housing crisis, and FHFA remains paralyzed by the fear that somehow homeowners innocently trapped in the worst economy since the Great Depression are going to weasel out of paying every penny on their mortgage that they could,” said Rep. Brad Miller, Democrat of North Carolina.

However, Rep. Scott Garrett, Republican of New Jersey, said he praised DeMarco for his decision to “protect” U.S. taxpayers. “This thoughtful and analytical decision-making process should be used as model for the rest of Washington’s bureaucrats before they make decisions without properly considering the costs and benefits to the taxpayer,” Garrett said.