Will Banks Tighten Lending Even More?
Banks have faced mounting legal trouble and increased regulations following the 2008 financial crisis, which has sparked a tightening in lending that has kept many home buyers on the sidelines. But lending may even soon get tighter, some recent reports say.
Late Friday, the Federal Housing Finance Agency (FHFA) filed a lawsuit against 17 of the nation’s largest banks over about $200 billion in mortgage losses that severely battered Fannie Me and Freddie Mac, which FHFA oversees.
Paul Miller with FBR Capital Markets argues in a report that FHFA’s lawsuit likely will drain capital from the banking system and could further delay a housing market recovery, keeping many borrowers out of the market.
Lending at Its Lowest Point in 14 Years
The Mortgage Bankers Association recently reported that lending had reached its lowest point since 1997, due partially to the tightening of lending standards in response to the 2008 financial crisis.
A recent study by the Institute of International Finance says that new regulations imposed on financial institutions in response to the downturn is hurting the global economy by restricting banks’ ability to make loans, and in turn hurting the private sector’s ability to expand and hire. As part of the new rules, banks are required to have more cash relative to debt.
This presents a bit of a conundrum: Many observers say the financial crisis could have been avoided altogether if banks had stronger regulations in the first place, and that the crisis was triggered by weak oversight of mortgage lending standards and subprime loans issued in floods to risky borrowers. However, some economists say banks’ overly stringent standards today are keeping too many borrowers out.
Source: “Bank Group Warns of Rules’ Costs,” The Wall Street Journal (Sept. 6, 2011) and“Big Banks Could Tighten Lending Following FHFA Lawsuit: FBR Capital,” HousingWire (Sept. 6, 2011)
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U.S. to Lenders: No Moratorium, But Fix Mess
The Federal Housing Finance Agency has responded to the foreclosure document crisis with a policy statement ordering lenders to ensure that paperwork is properly reviewed and signed.
For documents that do not meet the standards, lenders must collaborate with local lawyers to resolve any problems.
The policy statement dovetails with the Obama administration’s opposition to a nationwide foreclosure freeze due to concern that it would jeopardize the economy.
Source: Washington Post (10/14/10)
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GSEs Eye Standards Shift for Appraisals
Recently enacted Wall St. reforms require the Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, to come up with appraisal standards to replace the Home Valuation Code of Conduct by Oct. 21.
The law retains the basic intent of HVCC, which is for lenders to keep an arm’s length distance between them and the appraiser, and it continues to allow appraisal decisions to be left in the hands of appraisal management companies, if lenders so choose.
But it attempts to prevent abuses by, among other things, blocking AMCs from negotiating fees with appraisers. Lenders and AMCs must pay appraisers at the market rate.
Source: American Banker, Brian Collins (09/22/10).
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FHA Looking for Deceptive Lenders
The Federal Housing Finance Agency is investigating lenders who sold losing securities to Fannie Mae and Freddie Mac.
The agency has issued 64 subpoenas for loan files and other documents in order to determine whether sellers of the securities made false statements or left out key information. The FHFA said in a statement that it is “prepared to take appropriate action to ensure compliance, if necessary.”
So far, Fannie and Freddie have lost $145 billion in tax-payer dollars shoring up shaky mortgages.
Source: Associated Press, Alan Zibel (07/12/2010)
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Fannie, Freddie Cautioned on Energy Loans
A new federal program that encourages municipalities to lend homeowners money to add energy-efficient features to their properties has gotten a thumbs down from the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac,
The program called Property Assessed Clean Energy or PACE allows local governments to sell municipal bonds and let homeowners use special property-tax assessments to pay off the cost of improvements over 15 to 20 years.
FHFA has raised concerns that these are first-lien loans, which subordinates first mortgages. It told Fannie and Freddie to avoid financing homes with this kind of debt. PACE supporters say the program is no different from property-tax assessments to pay for sewers and road improvements.
U.S. Reps. Henry Waxman (D., Calif.) and Barney Frank (D., Mass.) have called on government agencies to modify the program so neither taxpayers nor mortgage investors are likely to lose money.
Source: The Wall Street Journal, Nick Timiraos (07/07/2010)
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HVCC: Bad or Badly Implemented?
The Home Valuation Code of Conduct (HVCC) is getting a bad rap for causing what real estate professionals say is a rise in inaccurate appraisals, Alfred Pollard told a packed room of REALTORS® Friday in a risk management-regulatory issues joint forum at the 2009 NAR Conference & Expo in San Diego.
Pollard, the general counsel for the Federal Housing Finance Agency (FHFA), said HVCC was released at a time when the economy was in a massive contraction—what he called a systemic event—and that this broader picture has to be taken into consideration when talking about valuation trends. “Concerns [over valuations] might not be 100-percent tied to this code,” he said.
FHFA oversees Fannie Mae and Freddie Mac, which earlier this year adopted HVCC and applied it nationwide in an agreement with the New York attorney general. HVCC expires in late 2010 but the two secondary-mortgage-market companies can retain all or parts of HVCC going forward. Full Details….
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HVCC: Bad or Badly Implemented?
The Home Valuation Code of Conduct (HVCC) is getting a bad rap for causing what real estate professionals say is a rise in inaccurate appraisals, Alfred Pollard told a packed room of REALTORS® Friday in a risk management-regulatory issues joint forum at the 2009 NAR Conference & Expo in San Diego. Pollard, the general counsel [...]
Home Sale Prices Fall in August
U.S. home prices dipped 0.3 percent in August from July and fell 3.6 percent from a year earlier, according to the Federal Housing Finance Agency. This was the first decrease in seven months.
Mortgage rates are lower and first-time buyers are taking advantage of a government tax credit, but foreclosures continue to soar, due largely to the job market. “The state of the housing market is going to be dependent on employment,” says Mortgage Bankers Association chief economist Jay Brinkmann.
Source: Boston Globe (10/23/09)
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Federal Index Shows Home Prices Rising
U.S. home prices rose 0.3 percent in July compared to June, the Federal Housing Finance Agency said Tuesday.
The index is 4.2 percent below what it was in 2008 and 10.5 percent off its peak in April 2007.
The index excludes most expensive homes from its calculations, so prices appear to have declined less than they have by other measures.
The report “supports other evidence that the three-year long decline in prices has come to halt,” Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients.
Other economists were less positive. “We think house price indexes are likely to edge somewhat lower in the fall when foreclosures become a larger share of home sales,” Barclays Capital economist Nicholas Tenev wrote in a note to his clients.
Source: The Associated Press, Alan Zibel
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