Federal Deposit Insurance Corp. Chairman Sheila Bair said banks involved in the U.S. Public-Private Investment Program won’t bid on their own assets to clean-up their balance sheets, which would effectively be an accounting dodge.

“There should be no confusion: Banks will not be able to bid on their own assets,” Bair said today at a Washington news conference.

The FDIC is helping the Treasury Department set up and run the PPIP, which will use $75 billion to $100 billion of Troubled Asset Relief Program funds to entice private investors to buy as much as $1 trillion in distressed mortgage-backed securities and other assets.

Banking groups and the Clearing House Association LLC, a group of 10 lenders including JPMorgan Chase & Co. and Bank of America Corp., are pressing the FDIC to let them use the program to buy their own troubled assets, the Wall Street Journal reported today.

Meanwhile, it seems that enthusiasm may be waning entirely for the proposed PPIP sales, which may be called-off altogether for lack of seller interest. Pressure for the banks to sell the assets has evaporated with changes in the mark-to-market accounting rules and the demonstrated ability of big banks lately to raise capital in the private markets.

It remains to be seen how much interest the fund managers who have applied to take part in the scheme actually bring to the program. While the government subsidies are attractive, fund managers may be leery of making too big a profit in a government program, or being involved at all.

“A significant and growing obstacle to private participation in government bailout plans is that many investors are wary of political backlash and the imposition of additional restrictive conditions post-investment,” wrote accounting firm PriceWaterhouseCoopers in an analysis published this week.

cringely Government News, News bank bail-out, banks, FDIC, Obama Administration, PPIP, TARP

Sales of existing homes in the U.S. rose in April as foreclosure auctions and cheaper prices spurred bargain hunters, butt those who think this signals a market bottom would be wise to also notice that inventories of unsold homes have gone up, portending more price drops to come.

Sales were still down 3.5 percent compared with a year earlier.

Purchases increased 2.9 percent to an annual rate of 4.68 million from 4.55 million in March according to the National Association of Realtors. The median price was down 15 percent from a year earlier, the second-biggest drop on record.

The average price of a U.S. home fell 7.1 percent in the first quarter, slower than the fourth quarter’s 8.3 percent drop that was the largest on record, the Federal Housing Finance Agency said in Washington.

A pick-up in sales may eventually help trim the glut of unsold homes and eventually stem the slump in property values. But the number of houses on the market climbed 8.8 percent to 3.97 million in April. At the current sales pace, it would take 10.2 months to sell those homes, up from 9.6 months in March.

Distressed properties accounted for 45 percent of all existing-home sales, but this was down a bit from March, the NAR report showed. First-time buyers accounted for about 40 percent of April sales, also down from March.

Foreclosure filings in the U.S. rose to a record in April for the second consecutive month, Realtytrac Inc., a seller of foreclosure data, said May 13, as the jobless rate climbed to its highest in more than a quarter century. Foreclosure filings jumped 32 percent from a year earlier, the group said.

Recent increases in mortgage rates have hurt owners looking to lower monthly payments. Mortgage applications declined 14 percent last week, led by a plunge in refinancing, a report today from the Mortgage Bankers Association also showed. Still, the group’s purchase measure rose 1 percent, indicating rates are still low enough to spur sales.

Lower mortgage costs are also helping to make buying more affordable. Rates on 30-year fixed loans fell to 4.78 percent in April, the lowest level since Freddie Mac began keeping records in 1972. Federal Reserve purchases of mortgage securities have contributed to bringing down rates, economists said.

“The housing market is beginning to stabilize,” Fed Chairman Ben S. Bernanke said in congressional testimony on May 5. “We continue to expect economic activity to bottom out, then to turn up later this year.”

cringely News FHA, home sales, housing prices, mortgages, National Association of Realtors, News

A federal board charged with sanctioning mortgage lenders who violate Federal Housing Administration policies is ineffective and slow, according to an inspector general’s report scheduled for release today. The report responds to concerns raised by Sen. Charles E. Grassley (R-Iowa), who questioned the FHA’s ability to police fraudulent lenders approved to do business with the agency.

Grassley’s concern was that some lenders may be using the same abusive tactics that contributed to the collapse of the subprime market and that the FHA may not have the resources or policies to stop them and protect itself against losses. The agency insures lenders against defaults.

The report by the Housing and Urban Development inspector general focused on the Mortgagee Review Board, created in 1989 to sanction problem lenders. It found that the board has ruled on only 94 cases since the beginning of October even though 12,641 lenders do business with the agency, raising questions about whether the system is set up to catch abuses. The board rules only on cases referred to it by HUD offices.

The board “will remain marginal as an effective sanctioning body unless its enforcement actions include a much larger caseload,” the report said.

Yesterday, after HUD received the report, the department announced that the board had recently taken action against more than 120 additional lenders: 102 had their FHA approval withdrawn, five agreed to make payments to the FHA totaling more than $500,000, and 24 were assessed fines or administrative costs totaling more than $1.2 million.

The inspector general’s report also concluded that the board’s sanctions have not been aggressive enough to deter bad behavior. The harshest penalties were rarely applied.

Since October, the board has placed three lenders on probation, temporarily suspended two others and barred four from working with the FHA.

In some cases, the penalties were crafted in a way that enabled lenders to dodge public disclosure rules.

cringely Government News, News FHA, government oversight, Obama Administration

According to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, the Federal Housing Administration will shortly allow its lenders to let first-time homebuyers use the recently enacted $8,000 tax credit as a down payment.

This represents an about-face from last fall’s decision under President George W. Bush to cut off down-payment assistance because those loans tended to default more than ones where the buyer put money into the deal.

More buyers are using FHA loans as lending has tightened for conventional loans, so the impact could be wide. FHA requires a down payment of 3.5 percent.

FHA-insured loans make up more than 17 percent, according to its most recent market share report.

It could take up to two months for the down-payment assistance plan to be available. It would work by giving buyers short-term bridge loans, effectively fronting the tax credit at the closing table, Donovan said.

cringely Government News, Library, News down payment, FHA, first time homebuyers

Were there “junk” fees in your mortgage closing statement?  According to a recent ruling by a Federal Judge in Alabama, certain closing fees charged by real estate (not mortgage) brokers generally called “ABC — Administrative Broker Commission — fees” are gratuitous charges that aren’t for specific services and are therefore illegal under Federal law.  Brokers throw-in the fees to, well, make more money on the deal — money that is not generally shared with the real estate agent who arranged the transaction.

Other judges in other federal jurisdictions have ruled differently about these fees, so the new ruling is far from definitive, but it has sent a shiver through the realtor industry as brokers worry that a lucrative extra line of revenue will be lost to them forever.

The decision by U.S. District Judge Virginia Emerson Hopkins found the ABC fees in violation of the Real Estate Settlement Procedures Act (RESPA), the government’s primary consumer-protection law in the home purchase and mortgage settlement arena. The law generally prohibits kickbacks and other compensation for referring settlement-related business without providing services to the consumer.

cringely Government News, Library, News ABC fees, funk fees, HUD, RESPA

The S&P Case-Shiller index data for February, 2009 show home prices continue to decline (20
city composite index is down 18.6% year-over-year), but the rate of decline did slow in most regions during the month. Home prices seem likely to fall further (future prices suggest another 10 percent or so this year for the 20 city index), but lower mortgage rates and improving consumer sentiment could help limit the declines, providing some additional support to the economy.

So here's the big question: if home prices have only another five percent or so to drop nationally, is it still worth waiting to buy? Clearly not if you are also selling in the same or a similar market, but it may still be worth waiting if you are a new buyer or new to the market and there seem to be a lot of available properties that meet your needs.

Another five percent drop in prices could have significant impact on your down payment. Instead of putting-down $7,500 (five percent on a $150,000 home for a $142,500 mortgage) you could put down that same $7,500 (5.45 percent on a $142,500 home for a $137,500 mortgage) and save thousands in interest over the life of the loan. For some purchasers, then, it may still be worth waiting, especially in distressed markets like Las Vegas and Miami.

The 20-city composite index showed a 2.2 percent decline from January (compared to a 2.8 percent decline in January and 2.55 percent decline in December). This index is now 30.7 percent lower than its peak level (July, 2006) and has fallen back to August, 2003 levels. While the year over-year-decline in for the 20-city composite at 18.6 percent is slightly lower than the 19 percent yr/yr decline reported in January, it is equal to December's, the second largest ever. Since 2000, the index has now increased at a compound annual rate of about 4.05 percent.

The 10-city composite index was 18.8 percent lower yr/yr and 2.1 percent lower sequentially. It is 31.6 percent below its peak levels reached in June 2006. Over the past 10 years, despite the recent decline, this index has still risen at a compound annual rate of about 6.2 percent.

All 20 metropolitan areas showed a sequential and year-over-year decline in February. But for 16 the January/February percent change was smaller than the December/January decline.

The worst year-over year decline in January was in Phoenix (-35.2 percent y/y, -50.8 percent from peak) followed by Las Vegas (-31.7 percent y/y, -48.4 percent from peak) and San Francisco (-31 percent y/y, -44.9 percent from peak).

Several markets showed modest year-over year declines, including Dallas (-4.5 percent y/y, -11.1 percent from peak), Denver (-5.7 percent y/y, -14.3 percent from peak) and Boston (-7.2 percent y/y, -18.5 percent from peak). Along with

the 10 and 20 city composite indices, only Charlotte, Washington DC, Cleveland, and New York
experienced greater declines from January to February than from December to January.

FHFA's (formerly OFHEO's) purchase-only house price index (non-seasonally adjusted) increased
1.13 percent in February, but declined 6.43 percent from a year ago. The year-over-year decline in February was lower than that in January and December.

Data from the National Association of Realtors on existing median home prices showed a 2.1 percent
increase in February and 4.2 percent increase in March. Year-over-year declines were 14.1 percent in February and 12.4 percent in March.

cringely Blog, News Case-Shiller, housing prices

Jumbo mortgages, those in excess of $417,000 or $729,000 depending on the market, practically disappeared with the burst of the housing bubble, but now they are coming back with major lenders like Bank of America and ING putting some real effort into the segment. But that doesn't mean people are actually buying homes that require jumbo mortgages, according to lenders. There is a jumbo REFI boom of sorts, but nobody seems to be buying big houses that aren't short sales or foreclosures.

Jumbo mortgages have stringent requirements, including hefty down payments. Buyers are still waiting to see if the real estate market has bottomed out, and few people these days want to commit to a big down payment if it means selling securities that are already down..

Rates for 30-year fixed-rate jumbo mortgages have dropped from an average of 7.28 percent a year ago to 6.44 percent last week, the lowest since April 2007, according to HSH Associates, which tracks consumer loan information. Rates for smaller 30-year mortgages were averaging 4.97 percent last week.

Jumbo mortgages are those too large to be backed by the federal government through Fannie Mae and Freddie Mac. Mortgages that are under those limits — $417,000 or $729,000 depending n the market — are so-called “conforming” loans.

Jumbo rates are also higher because the secondary market — where mortgages are sold to generate new funds — has dried up. Now, lenders need to keep loans on their own books, assuming the risk themselves.

Keith Gumbinger of HSH, which is based in New Jersey, said the difference between conforming and jumbo mortgage rates used to run around one-fourth of a percentage point, or 25 basis points. “So if a conforming rate was 5 percent, a jumbo would be around 5 1/4. Right now, that gap is extraordinarily wide. Last week, it was exactly 150 basis points.”

The Federal Reserve's influence to lower conforming mortgage rates has produced the larger gap, he said. “The gap remains extraordinarily wide, not because jumbos aren't doing their part. They are. But because other prices have been artificially influenced lower.”

He advised anyone looking for a mortgage or to refinance to shop around more than ever. “Some lenders are in a better position to make you a competitive loan than others. You've got to go out and scour around your marketplace. Shop it effectively.”

Some large lenders, including Bank of America, are starting to promote jumbo rates below 6 percent.

In time the combination of falling home prices and lower mortgage rates will improve the affordability of higher-end properties and sales will start to rise. The concern about waiting for the bottom is the only way you know you've hit bottom is when it is on the way up.

cringely Lender Updates, News, Uncategorized Bank of America, banks, housing prices, jumbo mortgages, LendersME, mortgage crisis, refinance

The US accounting industry agreed Thursday to revamp rules that had required banks to quickly recognize losses from the housing slump and had been blamed by some for worsening the financial crisis. The Financial Accounting Standards Board, which sets corporate accounting rules, voted to change the so-called “mark to market” accounting standard, a spokesman for the group said.

Controversy had been growing on the rules, also known as “fair value” standards, that require a quarterly markdown of assets that have fallen in value. The rules had been tightened after a series of corporate scandals including at energy firm Enron, which used unrealistic figures to inflate its worth. But some analysts say that by forcing banks to recognize losses immediately, the rules delivered a one-two punch to the system by requiring financial institutions to raise new capital to offset the loss, and squeezing a bank's ability to make new loans to boost economic activity.

US banks had been forced to write off over 800 billion dollars' worth of losses linked to the real estate meltdown in the past two years.

Critics have argued that because markets for mortgage-related securities have been frozen, banks should be able to hold the assets to allow them to recover without booking immediate losses.

Jon Ogg, analyst at 24/7 Wall Street, said the mark-to-market rule forced banks “to put up good capital in reserves to offset the new lower market value of bad assets. That in turns takes up capital that could be used for new loans, and as you have seen over the last year creates a situation where the banks have to raise additional capital from the market or go to Uncle Sam with hat in hand. When the markets are shut off or illiquid, this can create the feared death-spiral for lending institutions.”

The change would allow banks to hold some securities to give them more time to recover in conditions where financial markets are frozen, making it hard to find a true market price. Some economists have excoriated “mark to market” as a cause of the crisis, pointing out past periods such as the 1980s Latin America debt crisis where banks would have been wiped out if they had to book losses instead of holding them to await recovery.

cringely Government News, News FASB, financial crisis, LendersME, mark-to-market

Refinancing applications continue at a torrid pace, up another 3.7 percent last week driven by even lower rates, according to the Mortgage Bankers's ssociation, while new home mortgages remain almost nonexistent.

Loan rates hit a new low last week, the MBA said, although the decline from the previous week was slight: The average contract rate for 30-year loans dipped to 4.61% percent from 4.63 percent. The 30-year loan rate has tumbled from 5.07 percent in early January as the Federal Reserve has ramped up its efforts to push down mortgage costs by buying mortgage-backed securities in the open market.

Although refis have soared, the MBA index that measures loan applications for home purchases has risen only modestly in recent weeks, despite the plunge in loan rates. The purchase-loan index edged up less than 0.1 percent last week and is up just 14% since reaching an eight-year low the week of February 6, even though home affordability, as measured by a National Association of Realtors index, is at its highest level since the group created the index in 1981.

cringely Lender Updates, News housing prices, mortgage, refi, refinance

New mortgage-backed securities issued by non-governmetn operations plunged 68.3 percent in the first quarter of 2009 from the same period a year earlier as investors fled the market leaving the housing market almost entirely with government bond issuers.  Thomson Reuters said U.S. mortgage-backed securities issuance totaled $21.6 billion in the first quarter of 2009, down sharply from $68.2 billion in the same period a year earlier, a drop of 68.3 percent.

Issuance of bonds backed by companies other than Fannie Mae (FNM.P) (FNM.N), Freddie Mac (FRE.P) (FRE.N) and Ginnie Mae has virtually come to a halt as investors refuse to buy securities backed by loans whose payments are not guaranteed.

Bank of America (BAC.N) was the top underwriter of U.S. mortgage-backed securities in the first quarter of 2009, the survey showed.

Bank of America underwrote 13 issues of mortgage-backed bonds totaling $4.9 billion, a 22.7 percent market share.

Barclays Capital, the investment banking arm of UK lender Barclays (BARC.L), ranked second among U.S. MBS underwriters in that quarter, with a 17.6 percent market share. The company underwrote five issues totaling $3.8 billion.

Goldman Sachs & Co (GS.N) was third, with a 14.0 percent share. The firm underwrote five issues worth $3.0 billion.

cringely Government News, News Bank of America, financial crisis, Goldman Sachs, LendersME, mortgage crisis