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  • Fri, Dec 11 2009
  • 5:49 PM » DU 8.0 Implemented on Weekend of December 12, 2009
    Published Fri, Dec 11 2009 5:49 PM by Fannie Mae
    During the weekend of December 12, 2009, Fannie Mae will implement Desktop Underwriter® (DU®) Version 8.0. This release will include changes to the DU credit risk assessment and a number of eligibility guidelines. In addition, this release will support the policy changes described in the following Selling Guide Announcements, as well as other changes described below:
  • 3:31 PM » Geithner on Passage of H.R. 4173, the Wall Street Reform andConsumer Protection Act of 2009
    Published Fri, Dec 11 2009 3:31 PM by US Treasury
    The U.S. Department of the Treasury today released the following statement from Secretary Tim Geithner on the passage of H.R. 4173 – The Wall Street Reform and Consumer Protection Act of 2009: "I commend the House for H.R. 4173 – The Wall Street Reform and Consumer Protection Act of 2009. President Obama called on Congress to enact comprehensive reform of our Nation's financial regulatory system in response to last year's financial collapse. The President set forth clear objectives and principles for reform that were endorsed by Congressional leaders. House passage of this bill moves us an important step closer to meeting the President's objectives for reform. Comprehensive reform must establish clear rules of the road with strong enforcement for our nation's financial institutions and markets; end loopholes that allowed big Wall Street firms to escape supervision; make it clear that no firm is "too big to fail ;" and provide strong consumer and investor protections for American families. As with any legislation of this scale and complexity, the Administration looks forward to continuing its close work with Congress to strengthen key provisions as the legislation moves toward final passage. "
  • 2:56 PM » MBA Comment on Passage of Regulatory Reform
    Published Fri, Dec 11 2009 2:56 PM by
    Robert E. Story, Jr., CMB, Chairman of the Mortgage Bankers Association, today issued the following statement after the U.S. House of Representatives passed H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009. “Unfortunately, we are not in a position where we can support this bill as currently constituted. Throughout this process, we have worked with members of the House on both sides of the aisle to enhance their understanding of the possible negative implications this bill has for current and future homeowners, the lending industry and the mortgage market as a whole. “Regrettably, the House moved forward and passed a bill that could adversely impact borrowers and lenders alike. By not creating a uniform, national regulatory standard, the bill continues the conflicting and confusing patchwork of state and local laws that result in increased costs for borrowers. “And, the risk retention provisions in the bill could make unsustainable the business models of hundreds of non-depository, independent mortgage banking firms that offer up more than a quarter of the mortgages made in this country today. On top of that, depository institutions will have to restrain their lending to meet the new requirements. Eliminating that much lending capacity will surely increase costs and limit borrowing options for many qualified homebuyers. “We are, however, gratified that the House saw fit to vote down the bankruptcy cram down amendment that would have further increased costs for borrowers. “We will continue to work with members of Congress, especially in the Senate where debate on this issue is just getting underway, on these issues and others in an effort to produce financial modernization legislation that strengthens and improves the regulation of the United States financial infrastructure.”
  • 10:17 AM » Retail Sales increase in November
    Published Fri, Dec 11 2009 10:17 AM by Calculated Risk Blog
    On a monthly basis, retail sales increased 1.3% from October to November (seasonally adjusted), and sales are up 1.9% from November 2008. Click on graph for larger image in new window. This graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline). This shows that retail sales fell off a cliff in late 2008, and appear to have bottomed, but at a much lower level. The red line shows retail sales ex-gasoline and shows there has been only a little increase in final demand. The second graph shows the year-over-year change in retail sales since 1993. Retail sales increased by 1.9% on a YoY basis. The year-over-year comparisons are much easier now since retail sales collapsed in October 2008. Retail sales bottomed in December 2008. Here is the Census Bureau : The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $352.1 billion, an increase of 1.3 percent (±0.5%) from the previous month and 1.9 percent (±0.5%) above November 2008. Total sales for the September through November 2009 period were down 2.1 percent (±0.3%) from the same period a year ago. The September to October 2009 percent change was revised from +1.4 percent (±0.5%) to +1.1 percent (±0.2%). It appears retail sales have bottomed, and there might be a little pickup in final demand.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:17 AM » HAMP Questions
    Published Fri, Dec 11 2009 10:17 AM by Calculated Risk Blog
    If there were 143,276 cumulative HAMP trial modifications in June - and the maximum length of a trial was extended to five months - how come there were only 31,382 permanent mods and 30,650 disqualified modifications by the end of November? What happened to the other 82,244 modifications? Have they been extended? And of the 697,026 active trial modifications, are all the borrowers current? That data seems to be missing from this release (HAMP ) My understanding was the HAMP data would show how many trial modifications had started, and the redefault rate by month. That key data is still missing.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:02 AM » Yield Curve Steepest Since 1980; Hard Times Ahead in 2010
    Published Fri, Dec 11 2009 10:02 AM by Google News
    The bond market is starting to show signs of concern over budget deficits and the corresponding supply of treasuries. Please consider . Treasuries fell, with the gap in yields between 2- and 30-year securities reaching the widest margin since at least 1980, after a $13 billion offering of 30- year bonds drew lower-than-forecast demand. The so-called yield curve touched 372 basis points, the most in at least 29 years, as the bonds drew a yield of 4.52 percent. The so-called yield curve has widened from 191 basis points at the end of 2008, with the Fed anchoring its target rate at a record-low range of zero to 0.25 percent and the Treasury extending the average maturity of U.S. debt. Treasury officials on Nov. 4 announced a long-term target of six to seven years for the average maturity of Treasury debt and said the department wants to cut back on its issuance of bills and two- and three-year notes. The shift to longer- maturity debt has raised concern that investors will demand higher yields to offset the risk of inflation as government spending drives the deficit to a record $1.4 trillion. “The market is continuing to worry about the massive amount of Treasury issuance that’s going to hit the market well into next year,” said Ian Lyngen, senior government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “In the very short term, part of it is going to be supply accommodation.” Yield Curve As Of December 10 2009 Historical Yield Curve click on any chart in this post for sharper image Chart Symbols $IRX - The 3 month treasury - Brown $FVX - The 5 year treasury - Blue $TNX - The 10 year treasury - Orange $TYX - The 30 year treasury - Green A 2 year treasury symbol is not available. The above chart shows the dramatic steepening in the yield curve since January 2009. This steepening is reflective of several things: An economy presumed to be improving but not at a very good rate, the Fed holding down short-term rates, and the huge pending supply of treasuries...
  • 10:02 AM » Gallup: Spending Down Across Incomes; WSJ: Stores Face Discount Dilemma
    Published Fri, Dec 11 2009 10:02 AM by Google News
    Retailers hoping for strong sales after a rebound in the stock market and housing are out of luck according to the latest Gallup Poll on shopping habits. Please consider In a sign that the new normal in consumer spending continues unabated, upper-income Americans' self-reported average daily spending in stores, restaurants, gas stations, and online fell 14% in November, reverting to its relatively tight ($107 to $121) pre-October 2009 average monthly range. Middle- and lower-income consumer discretionary spending increased by 7% last month but remained in its tight 2009 average monthly range of $52 to $61. Still, consumer spending by both income groups continues to trail year-ago levels by 20%, even as those comparables have gotten easier to match -- possibly dashing hopes that upscale retailers and big-ticket-item sales will do better this year. Spending By Income Level Spending vs. Year Ago The hope was that the surge on Wall Street and the seeming stabilization of housing values had encouraged some upper-income consumers to abandon the 2009 spending new normal. November's results dashed these hopes, as upper-income consumers joined their middle- and lower-income counterparts in spending 20% less than they had during the financial crisis days of 2008 and returning to the relatively tight 2009 daily spending range for this group prior to October. Spending New Normal The year-over-year differences have declined somewhat during recent months, but much of this closure in the 2008-2009 spending gap is a result of the easier spending comparables from last year's financial crisis. On a national level, the spending new normal suggests slower economic growth than otherwise might be expected in the years ahead. While the spending "new normal" may not be good for the larger economy in the short-term, it may be seen as a strong positive for individual consumer households. Consumers, like their business and banking counterparts, would be well-served to de...
  • 10:02 AM » Top 10 Largest Real Estate Companies
    Published Fri, Dec 11 2009 10:02 AM by
    Fortune’s list of the 1,000 largest companies included 9 real estate centric companies this year. The list, which ranks companies by the size of their revenue from the previous year, was published in the summer. It will be interesting to see which of these companies stays on the list for 2010. We decided to put [...]
  • 10:02 AM » House poised to back financial rules overhaul
    Published Fri, Dec 11 2009 10:02 AM by Reuters
    WASHINGTON (Reuters) - The House of Representatives was expected to approve the biggest changes in financial regulation since the Great Depression on Friday, marking a win for the Obama administration.
  • 10:02 AM » Should FHA home loans be more expensive?
    Published Fri, Dec 11 2009 10:02 AM by CNN
    Should it be more expensive to get a mortgage insured by the Federal Housing Administration?
  • 10:02 AM » Fitch: U.S. CMBS Delinquencies Approaching 5% with 43bp Climb
    Published Fri, Dec 11 2009 10:02 AM by
    Fitch: U.S. CMBS Delinquencies Approaching 5% with 43bp Climb
    Click Here to Read the Full Article

  • 10:02 AM » U.S. Home Value Losses Stabilize in 2009; Homeowners Lose Nearly $500 Billion in Value, Down From $3.6 Trillion in 2008
    Published Fri, Dec 11 2009 10:02 AM by
    Nearly One in Three Markets See Gains in Home Values;
    Click Here to Read the Full Article

  • 10:02 AM » Ginnie Mae's growth gives fuel to risky lenders
    Published Fri, Dec 11 2009 10:02 AM by Washington Post
    The trouble signs surrounding Lend America had been building for years. A top executive was convicted of mortgage fraud but still helped run the company.
    Click Here to Read the Full Article

    Source: Washington Post
  • 10:02 AM » The Case for a V: Could 7% Growth Rates Return?
    Published Fri, Dec 11 2009 10:02 AM by WSJ
    This post was initially published on . The economy could be getting ready to roar. In fact, the roar could blast your eardrums — at least according to two obscure economic indicators. The short conclusion: growth rates in U.S. gross domestic product could surpass an annualized 7%. The two data points in question are the Weekly Leading Index from the New York-based Economic Cycle Research Institute , and the risk spreads on industrial corporate bonds. The readings on both metrics have some seriously bullish investment implications, in particular for retail stocks. First, let’s look at the bond yields. Based on an analysis of corporate bond yields going back 60 years, David Ranson , head of research at HC Wainwright Economics , writes in a recent research paper: “A forecast of 7 percent growth rates should be conservative.” In particular, he focused on the percentage difference between the yields for the highest-quality bonds (those rated-Aaa) and lower-quality ones (those rated Baa, the lowest rank within the investment-grade category.) Spreads indicate investor appetite for risky assets, explains Ranson. Higher spreads indicate lower appetite for risk, and vice versa. He observes that when those spreads narrow more than 0.4 percentage point, economic growth rates one and two quarters later exceed 7%. But, and here’s the kicker, “the magnitude of recent events is beyond the range of variation in the past sixty years,” he writes. In other words, we’ve had such a dramatic drop in yield spreads recently that the jump in GDP growth should be truly massive, so don’t rule out double-digit gains this quarter and next. The other indicator is the growth rate in ECRI’s Weekly Leading Index, which reached an all-time high in early October. That’s based on data going back to 1968. Lakshman Achuthan , managing director at ECRI, says growth in this recovery will be faster than in either of the last two expansions, but doesn’t put a number on it. ECRI has a great record of predicting...
  • 10:01 AM » Do You Have To Move To Detroit To Gain From Rising Home Prices?
    Published Fri, Dec 11 2009 10:01 AM by
    Felix provides some , and a dash of -probably deserved- snark, to of housing investment. I’ll try and respond, sans snark but with graphs. One of his main points, which he’s argued before and I’ve seen other commenters echo, is that if you buy a house and it’s value goes up it doesn’t matter unless you sell it and move far away, because in “an up market, it doesn’t matter much either. Yes, that gentrifying neighborhood is going up in value. But so’s the old-money neighborhood a mile away, and so’s everything else in a 20-mile radius” ; “you may or may not have any desire to sell in ten years’ time. And even if you do sell, there’s a very good chance that you’ll just end up buying another house elsewhere, which will be similarly more expensive. “ Similarly, Matt Yglesias “…no matter what happens to the price of your home, it’s very hard to actually take advantage of any gains you may make. Bubbles aside, property values in a given metro area really can separate from the national trend in a fundamental way. Over the past several decades, the Detroit area has become a much less attractive place to live relative to the national average and some other cities have become more attractive relative to others. So you can “make money” buy buying property in a city whose attractiveness increases relative to the average. But how are you going to realize these gains? By moving to Detroit?” The idea that the only way to get the financial value out of a house that has appreciated is by moving out of that city, because you’ll either have to rent or buy a similarly appreciated house, is wrong for several reasons. Yes, in general, submarket prices tend to follow the metro level trend, but it’s relative appreciation that matters, and there can be a large disparity on a submarket level within a metro area. For instance, the chart below shows median home price sales in Philadelphia submarkets from 1995 to 2007 from a study I worked on. As you can see, in 2001 the median prices in West Philly...
    Click Here to Read the Full Article

  • 10:01 AM » Do 200% APR Loans Make People Better Off?
    Published Fri, Dec 11 2009 10:01 AM by
    So what do working poor people do with 200% APR payday loans? Can they possibly make them better off? A paper* by Dean Karlan and Jonathan Zinman employs a clever randomization technique to estimate the effects on borrowers of receiving high APR cash loans in South Africa. They find that expanded access to credit significantly improves overall outcomes. Borrowers have higher employment, income, food consumption, and an index value of several measures of subjective well-being for the six-to-twelve months after the loan decision. Receiving a loan increased the likelihood of being employed by 20% for marginal borrowers. This is a stunning number. The authors argue that this may be because many of the loan applicants were borrowing to avoid losing their jobs. As seen in the table below, which I created using numbers from the paper, 19.4% used the loans for transportation costs. One can also imagine the 5.4% that went to healthcare may have helped people keep jobs as well; if they cannot get rid of an illness fast enough they may be fired for absence. The study did interestingly find a negative effect on a second measure of subjective well-being that captured stress and depression. Looking at the impacts over longer horizon, the study finds that in the 15-27 month period following the decision there is a positive impact upon whether or not the borrower has a credit score, and no effect on the actual credit score. They also report confidance intervals that rule out substantial negative effects, so that, at worst, the impact of the policy is zero. Finally, they find that the loans were profitable for the lender, although less profitable than normal. Consumer borrowing and credit access is an area of conflict between behavioralist and revealed preference approaches to economics. The revealed preference approach argues that it is good for consumers to be able to borrow at any rate of interest, because they will only borrow if it makes them better off, thus the option of even...
    Click Here to Read the Full Article

  • 10:01 AM » Housing Is An Investment
    Published Fri, Dec 11 2009 10:01 AM by
    I’m puzzled by and war on housing investment. Felix argues that: “Some people are looking to buy a home — that’s understandable, given that everybody needs shelter. And some people are looking to invest money with a long-term time horizon. And some people even fall into both categories at once. But that’s no reason to desperately try to conflate the two, and to describe yourself as being ‘in the market for a home as a long-term investment’…. homes aren’t investments, they’re places to live. If you can buy a nice house for less than you’d otherwise pay in rent, then go ahead and buy — no matter what the market looks like, or where mortgage rates are. On the other hand, if you’re looking for an “investment”, stick to securities. You can sell those much more easily when you need some money, and they won’t drive you into possible bankruptcy and homelessness if they go down rather than up.” Felix is arguing that housing should only be considered a consumption good, and you should only be willing to pay the net present value of the future stream expected rents. In fairness, Daniel at least concedes that housing is inherently an investment, whether you want to speculate or not. He does, however, ultimately agree with Felix that “If you’re looking to use capital in order to speculate on an investment to maximize return, then by all means do not buy a house now or ever”. Both seem to be suggesting that securities or other investments are perfect substitutes for housing investment, and even more than that they’re arguing that securities are always better investments. There are several reasons why housing as an investment is different than securities in a way that makes it an optimal investment for some people. I should note that I’m not arguing that now is the time to buy, or that I would even know when that was. I am simply arguing that sometimes owner-occupied housing investment is optimal as an investment and as consumption. It is also important to note that many of the benefits...
    Click Here to Read the Full Article

  • 9:29 AM » WaPo: New TARP Rules to Aid Small Businesses?
    Published Fri, Dec 11 2009 9:29 AM by Calculated Risk Blog
    From David Cho at the WaPo: (ht Mr. Ridgeback goes to Washington) The Obama administration is developing a major initiative to tackle ... unemployment by getting federal bailout funds into the hands of small businesses. The proposal involves spinning off a new entity from the Troubled Assets Relief Program that could give banks access to the government money without restrictions, such as limits on executive pay, as long as they use it to make loans to small businesses. ... No dollar figures have yet been attached to the new small-business lending effort, which is still in development, the sources said. ... [a "special-purpose vehicle"] would be financed by rescue funds and would lend to banks that provide small-business loans. In theory, this structure would free banks of the TARP conditions because they would be getting the money from a separate entity. They could also avoid being labeled as a TARP recipient. Another SIV proposal, this time to lend TARP money that isn't ... uh, TARP money? Why does this remind me of Hank Paulson? I'd definitely like to see the plan for the next stimulus package, instead of focusing on these contortions to get it funded.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:29 AM » Fed’s Flow of Funds Highlights (and Lowlights)
    Published Fri, Dec 11 2009 9:29 AM by The Big Picture
    The Fed’s report was released yesterday and, as usual, it contained a treasure trove of (somewhat stale) data that’s nevertheless fascinating. Herewith some observations: Household net worth rose by about $2.7 trillion in Q3. It now stands at about $53.4 trillion, the highest level in a year: click for giant charts > Our debt-to-income ratio, unfortunately, is still too elevated at 128%, and is only coming down very slowly. Continued improvement needs to be seen here, as we’re still about $1.5 trillion above the trendline, which is at 114% (forget about mean reversion — that’s about 77%). > Owners’ Equity as a Percent of Household Real Estate was revised (downward) to a first quarter trough of a staggering, almost unthinkable, 33.5%. It has rebounded in the subsequent two quarters to a merely hideously pathetic 38%. > The chart above ties in beautifully with a WSJ article (referenced in yesterday’s ), titled — the same day the Flow of Funds report was released: “People’s increasing willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: Even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery. Thanks to a rare confluence of factors — mortgages that far exceed home values and bargain-basement rents — a growing number of families are concluding that the new American dream home is a rental. Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That’s freeing up cash to use in other ways.” As a societal matter, is the appeal of home ownership — notwithstanding the various (mostly tax) advantages of owning (e.g. having mortgage interest deductions) over renting — going the way of the dodo ? Could one not infer as much from the steady decline in owners’ equity over the past many decades, as this metric has moved steadily downward from over 80% to under 40%? Are we destined...
    Click Here to Read the Full Article

    Source: The Big Picture
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