Archive for November, 2010
Pacific Investment Management Co., which manages a global mutual fund, did not confirm reported plans of raising $1 billion to buy distressed loans from troubled banks.
Bloomberg reported Thursday the firm was gathering private capital to go after distressed mortgages and bonds. The amount of "problem banks" overseen by the Federal Deposit Insurance Corp. went from 775 to 829 in the second quarter.
Citing unnamed clients at Pimco, Bloomberg said the firm plans to work with a loan servicer to cure the mortgages with the borrower.
Grant Thornton, which offers tax and advisory services, said earlier in the year that problem banks mean opportunities for some.
"One thing appears certain – bank failures coupled with FDIC assistance will continue to present significant opportunities with clear and unique benefits for healthy banks and other investors," according to Grant Thornton. (Click on chart to expand.)
Jon Daurio, chief executive of Kondaur Capital Corp., which operates a competitive fund that buys up distressed loans from troubled banks, told HousingWire in May that the strategy all depends on valuation.
"There's no bad loan. There's only bad loan pricing," Daurio said.
Write to Jon Prior.
The SEC is all over the news today. It’s investigating Citigroup!
It’s examining Charles Schwab over the YieldPlus fiasco which we thought was settled but wasn’t! And, of course, in conjunction with Andrew Cuomo, it’s coming down on Steve Rattner like a ton of bricks:
The two lawsuits seek at least $26 million from Rattner and his immediate lifetime ban from the securities industry in New York…
“Steve Rattner was willing to do whatever it took to get his hands on pension fund money including paying kickbacks, orchestrating a movie deal, and funneling campaign contributions,” said Attorney General Cuomo. “Through these lawsuits, we will recover his ill gotten gains and hold Rattner accountable.”
Home sales will hit bottom by the end of the fourth quarter and trend upward in 2011, according to a recent Fannie Mae economic report. The firm said purchase activity will depend strongly labor conditions, but that it expects a modest yet solid recovery to manifest in 2011.
Total home sales are expected to decline by 8% for the year compared to 2009, and then increase by 3% in 2011.
According to the report, 2010 total sales are expected to hit 5,112 homes — 330 new homes and 4,782 existing homes. Distressed sales accounted for one-third of existing home sales in the third quarter.
Fannie Mae predicts that homes sales will reach 5,271 in 2011 (up 3%) and 5,704 in 2012 (up 8%).
Despite policy aimed at keeping homeowners in their homes, the homeownership rate in the third quarter of 2010 was at the lowest point since 1999, according to Fannie Mae. The rate remained flat from the second quarter at 66.9%. The report said the homeownership rate decreased steadily since its peak at 69.2% in 2004.
In accordance with this data, Fannie Mae reported that the homeowner vacancy rate remained at an elevated level in the third quarter at 2%. This measures the share of housing units that are typically owner-occupied but are vacant and for sale. The vacancy rate reached its peak in 2008 at 2.9%.
Vacancy rates in rental properties, in contrast, are declining, down to 10.3% in the third quarter from 10.6% in the second. The rate has been steadily improving since the fourth quarter of 2009 when the rate was 11.1%.
Fannie Mae cautions, however, that the rental vacancy rate is extremely volatile so it is hard to determine what the normal rate is.
Write to Christine Ricciardi.
Paul Solman speaks with Bethany McLean and Joe Nocera, authors of "All the Devils Are Here: The Hidden History of the Financial Crisis" about the villains of the financial crisis. It's part of his ongoing series, Making Sen$e of Financial News.
At the Museum of American Finance on Wall Street…Bethany McLean, famous for breaking the Enron story, is a contributing editor at "Vanity Fair" magazine, Joe Nocera, a columnist for The New York Times.
John Burns Real Estate Consulting said in a report Friday that government intervention is hurting the housing market, and the firm is growing more concerned that lawmakers will reduce the cap on mortgage interest rates that qualify for tax deductions "significantly."
While John Burns graded the overall indicators of the economy in positive territory, such as gross domestic product, personal income growth and even employment, housing continues to remain weak as demand is vacant and distressed sales will continue to pressure pricing.
Big policy shifts from Congress are in store for 2011, according to the report.
"While big curveballs could be thrown at the housing business, the most likely scenario is that government intervention will make homes slightly harder to sell over the next few years," according to the report.
When a commission was appointed by President Obama to overhaul the tax system and reduce the national debt, it came back earlier in November with an option to reduce the mortgage interest deduction, one of the primary incentives for owning a home. The Mortgage Bankers Association and the National Association of Realtors immediately recoiled at the idea, but John Burns said it was unlikely Congress would act until now.
"We have been saying that Congress won’t mess with the interest rate deduction, except maybe to drop the cap below $1,000,000," the report said. "We are becoming more concerned that the cap might be lowered significantly. A drastic decline in the cap, or a phased in decline, would impact the move-up builders and a minority of expensive states dramatically."
With other reform to the government-sponsored enterprises and mortgage underwriting standards up for review in 2011, John Burns highlighted the impact Congress can have on housing.
"There is plenty of short-term risk ahead. Focus on good locations where people want to live, and plan for having to sell homes to higher credit quality buyers. Stay more informed than ever because surprise announcements could impact consumer confidence and sales positively or negatively," the report said. "In turn, that could dramatically affect home buying sales, volume and pricing."
Write to Jon Prior.
