Archive for December, 2010
With two secure incomes and money in the bank, Victoria and Stuart Glick have been shopping for a larger home since April, looking at more than 30 houses and making offers on three of them.
The process has proved frustrating: The Glicks, who live in Dana Point and want to buy in Laguna Niguel, have lost out to other bidders all three times. And now, rising mortgage rates have left Victoria feeling less sure that they will find the ideal trade-up from the 850-square-foot cottage where they live with their 9-year-old daughter, Sarah.
"It makes us nervous," Victoria said. "I don't know if we're going to wind up with that perfect house."
Budget shortfalls will restrict the U.S. Securities and Exchange Commission's work, its chairman said on Tuesday, limiting the SEC's ability to police credit rating agencies, ferret out fraud and write rules to supervise derivatives markets.
Cutbacks from Congress could delay rules to right the financial system after the 2007-09 economic crisis and put on hold reforms aimed at bolstering the integrity of stock markets after the May 6 "flash crash," Mary Schapiro said in an interview.
"We will have to take some more steps to cut back," Schapiro said. "At this stage it will impact our work."
When Mimi Ash arrived at her mountain chalet here for a weekend ski trip, she discovered that someone had broken into the home and changed the locks.
When she finally got into the house, it was empty. All of her possessions were gone: furniture, her son’s ski medals, winter clothes and family photos. Also missing was a wooden box, its top inscribed with the words “Together Forever,” that contained the ashes of her late husband, Robert.
The culprit, Ms. Ash soon learned, was not a burglar but her bank. According to a federal lawsuit filed in October by Ms. Ash, Bank of America had wrongfully foreclosed on her house and thrown out her belongings, without alerting Ms. Ash beforehand.
More than 500 representatives from 27 nations, including top regulators and central bankers, met dozens of times this year to hammer out 440 pages of new rules to govern the world’s banks.
What’s not in the documents published by the Basel Committee on Banking Supervision, and the escape hatches that are, may have more impact on how financial institutions will operate following a global credit crisis that led to $1.8 trillion in bank losses and writedowns.
The committee’s most significant achievement, members say, an agreement to increase the amount of capital banks need to hold, won’t go into full effect for eight years. Other measures that regulators had hoped would prevent future crises — liquidity standards, a capital surcharge on the biggest lenders and a global resolution mechanism for failing firms — were postponed, allowing banks to escape the toughest rules that would force them to change the way they do business.
It's the time of the year in mortgage finance to begin developing our resolutions. After a year that saw more and more money being pumped into the economy it's about time everyone started looking at stimulus options, no matter how small, that don't involve a taxpayer backstop.
Indeed, politicians seem to spend taxpayer dollars at will and after a challenging year, 2011 needs to find a period of austerity.
Considering that the government-sponsored enterprises and Ginnie Mae will dominate the mortgage finance space yet again next year, we need options to reduce the exposure the average American has to those bonds.
One way to convince investors to buy mortgage-backed securities, outside a government guarantee, is to implement mortgage prepayment penalties.
In a conversation with investor Wilbur Ross, he points out that the United States is unique with the combination of 30-year, fixed-rate mortgages that are repayable with no penalty at any time.
"It makes these instruments difficult to hedge and restricts private market interest. There are other countries with similar ownership levels without prepayment penalties. I don't think a single homeowner would be dissuaded from getting a home with prepayment penalties; they would be happy to pay at par," said Ross.
In Europe, lifting prepayment penalties also provides lift to the economy, although not anywhere to the extent of quantitative easing.
In 2007, the Bersani Decree in Italy eliminated prepayment penalties on certain mortgages and set off the highest rate of prepayments since 2000. Spreads on the bonds jumped 13 basis points to 14 bps to 40 bps on the back end.
It was a minor bump to the Italian economy, but a bump nonetheless.
In the United States, 2011 outlook reports from several large banks point to declining mortgage prepayment rates next year in an environment of steadily rising interest rates.
While the rates push out borrowers looking to refinance, the news will be well accepted within the mortgage bond investor circle.
"Prepayment burnout results in a pool becoming less sensitive to refinance incentives," explains an outlook report from the Royal Bank of Scotland.
MBS strategists at Bank of America Merrill Lynch, Chris Flanagan and Vikram Rao, say the fall in prepayments means it’s a good time to invest in mortgages as the related "extension has now been fully priced in" to the bonds.
And considering far fewer people will prepay, why not make it more of a guarantee by establishing penalties?
Reducing prepayment risk in MBS even further will only make the bonds a hotter commodity, thereby helping to keep liquidity flowing well into the New Year.
Jacob Gaffney is the editor of HousingWire.
Write to him.
Residential building grew modestly in November as the housing sector continued to recover from the drop-off of activity in late spring spurred by the expiration of the homebuyer tax credit.
Residential construction increased 3% from October to an annualized rate of $122.8 billion, according to a monthly report by McGraw-Hill Construction.
Single-family housing grew 4% during the month, "maintaining the very gradual upward movement that's been present since August," the report said. The November pace of single-family construction was still 13% below the average for the first quarter, when a more solid recovery seemed to be taking hold, according to the firm.
Multifamily housing slipped 4% in November after two consecutive months of improved activity, while McGraw-Hill's index of new construction starts dropped to 80 from 88 in October. A 100 on the index corresponds to construction conditions witnessed in 2000.
Robert Murray, vice president of economic affairs at McGraw-Hill Construction, said he expects construction patterns to remain volatile.
"Since early 2009, the construction start statistics have shown an up-and-down pattern, essentially leveling off within a set range following an extended three-year decline," Murray said. "The pullback in November after October’s slight gain shows that this up-and-down pattern continues, and there’s yet to be evidence that renewed expansion is taking hold."
During the first 11 months of the year, residential building is up 7% compared to the same period a year ago. Single-family building is up 7%, varying by region. Single-family building is up 11% in the Northeast, up 10% in the South Atlantic, up 8% in the Midwest, up 7% in the West and up 2% in the South Central U.S.
Multifamily housing is up 8% for the first 11 months of the year compared to 2009.
Write to Christine Ricciardi.
Sales of existing condominiums in Florida rose 11% in November, but existing-home sales for the single-family market dipped 15%, according to Florida Realtors.
The trade group for real estate agents said 5,411 condos sold, up from 4,860 units in November 2009.
Thirteen of Florida's metro areas reported higher existing condo sales in November. The statewide existing condo median sales price last month was $88,200; down 16% from $104,500 a year ago.
A total of 11,900 single-family existing homes sold statewide last month compared to 13,961 homes sold in November 2009. Florida's median existing-home sales price in November was $132,700; down 5% from $139,300 a year ago.
The National Association of Realtors on Wednesday predicted a gradual improvement in home sales in upcoming months, but said a temporary halt to foreclosures in Florida and other states delayed closings and impacted sales activity. MacroMarkets, meanwhile, said housing prices won't turn positive until 2012 while Veros said some 40% of major markets will see moderate rises in home prices next year.
Florida Realtors' sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
* Statewide figure includes data from the Naples Area Board of Realtors; it also includes data from the Marco Island Association of Realtors.
Write to Kerry Curry.
