Mortgage Applications Decline

Mortgage applications declined 1.2 percent last week compared to the previous week on an adjusted basis, according the Mortgage Bankers Association weekly survey.

On an unadjusted basis, purchased applications declined 2.3 percent and they were 36.8 percent lower than they were the same week a year ago.

The decline in purchase applications was driven by a 4.4 percent decrease in applications for government-backed mortgages, according to the MBA. Conventional purchase applications actually increased 1 percent.

Most mortgage rates were at their lowest point since mid-May:

* 30-year fixed-rate mortgages decreased to 4.75 percent from 4.82 percent.
* 15-year fixed-rate mortgages decreased to 4.19 percent from 4.23 percent.
* 1-year ARMs decreased to 7.05 percent from 7.07 percent.

Source: Mortgage Bankers Association (06/23/2010)

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Geithner: Bailout Costs Should Be Recouped

Treasury Secretary Timothy Geithner told the Congressional Oversight Panel on Tuesday that taxpayers were likely to get most of their investments back from bailouts in the banking, insurance, and automotive businesses.

Geithner said that banks have repaid about $21 billion, 75 percent of the bailout money they received. He said General Motors and Chrysler will repay the nearly $60 billion that they received. But he acknowledged that insurer American International Group Inc. is unlikely to be able to repay the entire $182 billion it received.

Geithner blamed banks and other loan servicers for the apparent failure of mortgage modification programs, which received about $75 billion in tax incentives to reduce borrowers’ monthly payments. “Servicers have done a terrible job of making sure they have done everything they can” to help struggling home owners, Geithner said.

Source: Associated Press, Marcy Gordon (06/22/2010)

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Forecasters Split on 2010 Housing Market

Economic forecasters appear to be split on the outlook for residential real estate values.

The news this week regarding new- and-used home sales in May seems to support the views of bears like Dean Baker, co-director of the Center for Economic and Policy Research. Baker projects that home prices will decline 12 percent in 2010.

Meanwhile, Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, predicts a gain of 2.5 percent.

Terry Loebs, managing director of MacroMarkets, which creates securities that allow investors to hedge their housing bets, says, “The width of that spread is a byproduct of uncertainty in the market.”

Source: Bloomberg, Kathleen M. Howley (06/24/2010)

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Housing Woes Threaten Economy

Economists said May’s decline in home sales may weaken an already tepid economic recovery.

New-home sales tumbled 33 percent last month, the biggest drop on record, according to the U.S. Commerce Department.

“If there is a sharp decline not only in housing sales but in housing prices, that could threaten a recovery,” says Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia.

“A tepid economic recovery — that’s what we’re going to get, because housing is only very slowly going to return to normal,” says Edward Leamer, an economist at the University of California, Los Angeles, and director of the UCLA/Anderson Business Forecast. “We’ve had a medicated market because of the tax credit and the meds have been removed, so it’s going to be difficult to sell homes in the next few months.”

“This is a recession that was induced by housing, and housing is not going to carry us out like it has done in the past,” says Diane Swonk, chief economist of Chicago-based Mesirow Financial Holdings Inc.

Source: Bloomberg, Kathleen M. Howley (06/23/2010)

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HAMP Modifications Rising

The U.S. Treasury and Department of Housing and Urban Development released a monthly “housing scorecard” Monday and declared that housing is on the mend. The report, though, also showed more loan modifications canceled than approved.

More than 340,000 households had received long-term reductions in mortgage payments under the Home Affordable Modification Program (HAMP) by the end of May and are making on-time payments. More than 429,696 trials had been canceled, up from 277,640 in April. About 468,000 households were still in a trial phase, with 190,000 stuck there for at least six months because banks are moving slowly.

Source: Associated Press, Alan Zibel (06/21/2010)

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Minorities Most Likely to Have Subprime Loans

Foreclosures are hitting minorities the hardest, a study by the Center for Responsible Lending reported last week.

Of borrowers who received loans between 2005 and 2008, 8 percent of both African-American and Hispanic borrowers have lost their homes to foreclosures, compared to 4.5 percent of non-Hispanic whites, the study said.

Of total home owners, 17 percent of Hispanics have lost their homes or are at imminent risk of doing so; 11 percent of African-Americans are in a similar position. About 7 percent of non-Hispanic whites have lost their homes or are about to.

The center blamed the disparity on subprime loans, saying that minorities – even those with similar incomes as whites – were offered subprime loans more frequently.

Source: CNNMoney, Tami Luhby (06/21/2010)

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Buyers Face Purchasing Delays

Lawrence Yun, NAR chief economist, said he expects one more month of elevated home sales. “We are witnessing the ongoing effects of the home buyer tax credit, which we’ll also see in June real estate closings,” he said. “However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales.

“In addition, many potential sales are being delayed by an interruption in the National Flood Insurance Program. Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance.”

As the leading advocate for homeownership issues, NAR is supporting Senate amendments to extend the home buyer tax credit closing deadline through September 30 for contracts written by April 30, and to renew the flood insurance program. “Sales and related local economic activity would have been higher without delays in the closing process or flood insurance issues,” Yun noted.

NAR

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Housing inventory Falling

A parallel NAR practitioner survey shows first-time buyers purchased 46 percent of homes in May, down from 49 percent in April. Investors accounted for 14 percent of transactions in May compared with 15 percent in April; the remaining sales were to repeat buyers. All-cash sales were at 25 percent in May, edging down from a 26 percent share in April.

Total housing inventory at the end of May fell 3.4 percent to 3.89 million existing homes available for sale, which represents an 8.3-month supply at the current sales pace, compared with an 8.4-month supply in April. Raw unsold inventory is 1.1 percent above a year ago, but is still 14.9 percent below the record of 4.58 million in July 2008.
Single-family home sales declined 1.6 percent to a seasonally adjusted annual rate of 4.98 million in May from a pace of 5.06 million in April, but are 17.5 percent above the 4.24 million level in May 2009. The median existing single-family home price was $179,400 in May, which is 2.7 percent above a year ago.

Single-family median existing-home prices were higher in 16 out of 20 metropolitan statistical areas reported in May from a year ago. In addition, existing single-family home sales rose in 18 of the 20 areas from May 2009.

Existing condominium and co-op sales fell 6.8 percent to a seasonally adjusted annual rate of 680,000 in May from 730,000 in April, but are 32.6 percent above the 513,000-unit pace in May 2009. The median existing condo price was $181,300 in May, up 3.4 percent from a year ago.

NAR

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Continued Strong Pace for Existing-Home Sales

Existing-home sales remained at elevated levels in May on buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates, according to the National Association of REALTORS®. Gains in the West and South were offset by a decline in the Northeast; the Midwest was steady.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2 percent from an upwardly revised surge of 5.79 million units in April. May closings are 19.2 percent above the 4.75 million-unit level in May 2009; April sales were revised to show an 8.0 percent monthly gain.

NAR

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States Craft Programs for Stressed Owners

Arizona, Florida, and Michigan have proposed using federal funds to pay down loan balances for struggling borrowers and to subsidize mortgage payments for those who remain out of work.

The plans are in response to a foreclosure-prevention effort championed by the White House, which allocated $1.5 billion for Arizona, California, Florida, Michigan, and Nevada. The Treasury Department is the reviewing proposals, which will be finalized next month.

Source: Wall Street Journal, Nick Timiraos (04/27/10)

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