1. The Federal Reserve not raising interest rates
Where would the economy be if rates were even 100 – 200bps higher? Sure it was Greenspan’s extended policy of Fed easing that inflated housing prices and created a market thirsty for yield that spawned the subprime industry. Let’s hope it works again!

2. The FHA
As the GSEs tightened their respective credit boxes, and the private label market dried up, millions of borrowers that were otherwise unfinanceable/unrefinanceable found a savior in the FHA program. Less apparent to the residential industry and public at large has been that FHA has been the primary liquidity source for multifamily and healthcare loans. As we’ve discovered time and time again during the crisis, what’s good public policy and for the economy at large might not be the most prudent risk management policy for a fund or department.

3. The fact that every homebuilder in the country isn’t bankrupt
During the last widespread real estate market collapse which occurred in the late 80’s it seemed as though builders either went out of business or stayed in business only through the grace of bankruptcy courts. Given that most national builders become speculators and land banks during the recent housing bubble, it is miraculous that there hasn’t been a complete washout of the industry. Granted, it’s a little bit like congratulating a drunk for not having an accident on their way home from the bar – nevertheless, it is an impressive feat.

4. Stock market rallies

Unemployment over 10%, 15% of homeowners delinquent or in some state of foreclosure, personal income is down, savings rate is up, household net worth down by 30+% in the last two years…I smell a rally in the stock market!

5. Gold!!!

Sorry, but I loaded up on the stuff in April 2007. The conversation with my broker went something like this – “when I’m sitting on my granite countertops with a half empty beer between my legs, shotgun draped across my lap, and my windows boarded up – I need to know that something in my life is real. Fiat currency is dead.” Being right has never felt so wrong.

6. Extended Tax Credit
There is little doubt that housing tax credit, along with record low interest rates, drove first time homeowners from the sidelines and helped stabilize some markets. Again, public policy does not necessarily make for prudent risk management for an insurance fund like the FHA. Consider that were it not for the Seller Funded Down Payment Assistance loans, the FHA insurance fund’s reserves would be well above the 2% watermark (less than.50% today). Bottom line, underwriting 101 requires borrowers to have skin in the game.

7. TARP and the repayment of TARP

While not exactly implemented as intended, the TARP Capital Purchase Program and its homeownership preservation efforts have been discretely successful. Notwithstanding, Detroit’s participation, the returns on the financial institutions that have repaid the monies or bought back warrants have been legitimate and somewhat surprising. There are some big wild cards in Citi and AIG, of course. Also, the homeownership preservation initiatives are being successfully implemented with the help of Fannie Mae and Freddie Mac. The long term sustainability of loan modifications en masse and the ever increasing culture of deniability is another matter.

8. Extended High Cost Loan Limits
Everybody’s problems are relative. The seemingly never ending financial burdens of modern day life is not unique to an economic class. A homeowner that loses their job and can’t pay their $600k mortgage is just as bad off as a homeowner that loses their job and can’t pay their $150k mortgage. The public policy and macroeconomic justifications for helping “homeowners” by way of government subsidized financing should be universal. However, the private sectors reluctance to step in and buy or insure “jumbo” mortgages at or near the risk premiums assessed by the GSEs or FHA goes to show you that the government subsidy ignores the products intrinsic risks.

9. The resilience of the CRE market
The proverbial second shoe of the housing crises has yet to drop. Serious delinquency rates (90 days past due) are 2.88% for CRE versus nearly 5% for residential loans. It’s estimated that CRE values are off 25-50% since origination, and value is directly proportionate to the liquidity of the financing market.  Trillions of dollars in CRE loans will need to be rolled over in the next 5-7 years. Many community and regional banks’ solvency rests squarely on the performance and value of those loans. Whether or when the shoe drops will likely be answered more clearly in 2010.

10. GSE reform…
It’s coming, right? I understand and commend Treasury for the preemptive action it took in September 2008. But it doesn’t strike me as though much strategic planning has been done since then. The GSEs are on the hook for nearly $400B of nonperforming loans. They have required nearly $100B of taxpayer capital while in conservatorship. By mid next year the Fed is expected to have bought approximately $1.25T of GSE mortgage backed securities. And don’t expect the mortgage insurance companies to shoulder much of the government’s financial burden as they are struggling with their own solvency issues. What will be the mission and business model be for the GSEs in the future? Will they become public insurance/packaging utilities, a clearing house for the secondary market, a bad bank(s), etc. ???