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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
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Monday Morning Cup of Coffee: ZIRP expected until 2015

December 9, 2013

Monday Morning Cup of Coffee is a quick look at the news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

The financial services industry continues to fight eminent domain proposals, but despite winning a few battles, the war is far from over. In fact, the idea of cities using the power of eminent domain to buy underwater home loans from investors to reduce the principal is catching on.

As the San Francisco Chronicle reports, the city of Newark, N.J., is the latest to study eminent domain as a solution for borrowers who remain in underwater status.

The paper cites Steven Gluckstern of Mortgage Resolution Partners – the firm drafting many of the eminent domain proposals – as saying several other California towns are now considering eminent domain proposals – El Monte, Baldwin Park and Pomona.

Standard & Poor’s Ratings Services just assigned preliminary ratings to Nationstar’s $154.3 million residential mortgage-backed securities securitization. The deal – known as Nationstar Mortgage Loan Trust 2013-A’s – includes a pool of loans with less risky characteristics, credit enhancements and solid reps and warranties, S&P noted.

Housing analysts are wondering if recent job gains will prompt the Fed to announce a tapering of its mortgage-backed securities and Treasury purchases; however, some analysts are saying it’s too soon to jump to conclusions.

In November, the economy gained 204,000 jobs, based on the Labor Department data. The unemployment rate also fell to 7%. But it may be too soon to expect a tapering announcement at the December Federal Open Market Committee meeting.

"Before we start calling for a change in policy at the December meeting, however, keep in mind the Fed has consistently called for clear, sustained momentum in the labor markets," said Sterne Agee chief economist, Lindsey Piegza. "The question we have to ask is, Are two consecutive months of +200k enough to establish a trend and definitively prove the labor markets are strong enough to withstand a rollback of QE?   We don’t believe so."

The Fed’s commitment to maintaining  a zero-interest rate policy managed to fuel borrowing in the mortgage finance space. But how long will it last? As CNBC reports, if by year-end everything is in place, the market will likely look for its first rate hike in 2015.

But as U.S. News reports, Federal Reserve Chairman Ben Bernanke has already spelled out what it will take to hike the federal funds rate again. He noted at a recent meeting of the National Economists Club that ZIRP will be in effect as long as inflation remains low, U.S. News reported.

No banks were closed by regulators in the past week, according to the Federal Deposit Insurance Corp. website.

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