California Home Mortgage

The Federal Reserve Bank periodically conducts a survey among
senior loan officers at major banks on current lending practices. There are
generally around 70 U.S. and foreign banks with U.S. branches that respond to
the survey, and as responses are opinions and thus more anecdotal than quantitative
and the universe of respondents is small, not all results can be reported numerically. 

The January survey reported that about 15 percent of
respondents said standards for nontraditional mortgages were tightened by their
institution, the second month in a row that small increases were noted.  Standards for prime closed-end residential
real estate loans and home equity loans were little changed, on balance, for
the entire quarter.

According to a Federal Reserve statistical release on assets
and liabilities of commercial banks, aggregate holdings of closed-end
residential mortgages increased steadily in the second half of 2010.  Several “special questions” are asked
in each survey, and for the January report senior loan officers were asked to
assess the contribution of various possible factors to this increase.

About 45 percent of respondents indicated that their banks
had experienced such growth and the majority noted the “relative attractiveness
of the risk-adjusted returns on these loans compared with assets” and
reported a willingness to expand their balance sheets accordingly.  About one-third reported they had originated
a larger volume of loans that were ineligible for sale to the GSEs or FHA.  A smaller number attributed the growth to
reductions in charge-offs or pay downs or to a slowdown in processing the loans
out to the secondary market.  Only two
banks attributed any part of the portfolio growth to loan repurchases.   About 35 percent of respondents on net said
they expected that their bank’s holdings of such loans would continue to increase.

“Approve/ineligible loans are generally backed by borrowers who have
demonstrated the willingness and ability to stay current on their debts,
but for one reason or another they just don’t qualify for an agency loan” said MND’s managing editor Adam Quinones. He added,
“This type of loan paper would be a great source of collateral to
jumpstart the non-agency secondary mortgage market. We suggested this
might be a good idea last year when Fannie Mae announced their Loan Quality Initiative“.

…(read more)

The Federal Reserve Bank periodically conducts a survey among
senior loan officers at major banks on current lending practices. There are
generally around 70 U.S. and foreign banks with U.S. branches that respond to
the survey, and as responses are opinions and thus more anecdotal than quantitative
and the universe of respondents is small, not all results can be reported numerically. 

The January survey reported that about 15 percent of
respondents said standards for nontraditional mortgages were tightened by their
institution, the second month in a row that small increases were noted.  Standards for prime closed-end residential
real estate loans and home equity loans were little changed, on balance, for
the entire quarter.

According to a Federal Reserve statistical release on assets
and liabilities of commercial banks, aggregate holdings of closed-end
residential mortgages increased steadily in the second half of 2010.  Several “special questions” are asked
in each survey, and for the January report senior loan officers were asked to
assess the contribution of various possible factors to this increase.

About 45 percent of respondents indicated that their banks
had experienced such growth and the majority noted the “relative attractiveness
of the risk-adjusted returns on these loans compared with assets” and
reported a willingness to expand their balance sheets accordingly.  About one-third reported they had originated
a larger volume of loans that were ineligible for sale to the GSEs or FHA.  A smaller number attributed the growth to
reductions in charge-offs or pay downs or to a slowdown in processing the loans
out to the secondary market.  Only two
banks attributed any part of the portfolio growth to loan repurchases.   About 35 percent of respondents on net said
they expected that their bank’s holdings of such loans would continue to increase.

“Approve/ineligible loans are generally backed by borrowers who have
demonstrated the willingness and ability to stay current on their debts,
but for one reason or another they just don’t qualify for an agency loan” said MND’s managing editor Adam Quinones. He added,
“This type of loan paper would be a great source of collateral to
jumpstart the non-agency secondary mortgage market. We suggested this
might be a good idea last year when Fannie Mae announced their Loan Quality Initiative“.

…(read more)

This week we discussed the outlook for home prices and shared
perspective on whether or not now is a good time to buy. This is the
best guidance we could offer on the subject….

“Location location
location” said MND’s Managing Editor Adam Quinones when asked whether or
not he would buy a home in this market.  “Certain parts of the country
are outperforming others. I would do much research on local markets
after deciding on the region I wanted to live in though.  Then I would
avoid areas with an accumulation of similarly structured housing units. 
For example I would not purchase a townhouse or condo unless I was able
to do so at a deep discount,  I would be looking for a single-family
home in an established neighborhoods with a proven school system. 
Otherwise, the deal would have to be too sweet to pass up to get my
attention.  There are opportunities to be taken advantage of, you just
have to do your homework.”

Reuters was kind enough to poll economists for us on their updated home price outlook. Here are the results….

…(read more)

In a press release and a conference call on Wednesday officers of the Mortgage Bankers Association (MBA) outlined the association’s r egulatory and legislative priorities for the coming year. The Dodd-Frank Financial Reform Act, the release said, established a blueprint for the most significant overhaul of the financial services industry since the Great Depression and is a major focus of MBA activities. John Courson, president and CEO, said that Dodd-Frank set out a skeleton for reform and now regulators with input from stakeholders such as MBA are putting meat on the bones. Michael Berman, MBA chairman, said that there will probably be some 200 regulations emerging out of the Dodd-Frank Financial Reform Act, about 100 of which will be of direct concern to MBA members. At the same time other…(read more)

It looks increasingly more likely that the country may experience the dreaded “double-dip” in housing prices according to the S&P/Case-Shiller Home Price Indices released today. The indices reflect data through November and show a deceleration in the annual growth of home prices nationally and in 17 of the 20 metropolitan statistical areas (MSAs) that create its indices. S&P/Case-Shiller analyzes its national sample of 20 MSAs individually and uses them to construct a 10- and a 20-City Composite Index. Both indices fell in November from October levels by 0.4 percent and 1.6 percent respectively and prices fell in 19 of the MSAs; only San Diego eked out a negligible 0.1 percent gain. The report states that “since May 2010, the housing market has experienced an unambiguous deceleration…(read more)

The American Enterprise Institute has come forward with its proposal for reforming the housing finance system which advocates taking the government totally out of the picture and implementing a system reliant on credit quality to attract investors. In a White Paper titled Taking the Government Out of Housing Finance: Principles for Reforming the Housing Finance Market , authors Peter J. Wallison, Alex J. Pollock, and Edward J. Pinto fault the Dodd-Frank Act for ignoring government housing policies which “caused the recent financial crisis it was supposed to address.” The report dismisses the assumption that institutional investors will not buy mortgage backed securities (MBS) unless they are issued by a government sponsored enterprise, government agency, or backed with a government guarantee…(read more)

Two university researchers are proposing a new type of mortgage which they contend would reduce the economic incentive to default on loan obligations while not increasing the cost to either the lender or the borrower. The concept of an “adjustable balance mortgage” is presented in a forthcoming article in Real Estate Economics by Brent Ambrose, Smeal Professor of Real Estate and director of the Institute for Real Estate Studies at the Penn State Smeal College of Business, and Richard Buttimer, a professor in the Belk College of Business at the University of North Carolina at Charlotte. Historically, the study says, mortgage default was assumed to result from either a moral failure or cash flow problems that prevented the borrower from repaying his debt. More recent theory is that the preponderance…(read more)

The National Association of Realtors today released Existing Home Sales data for December 2010 Existing Home Sales report on the number of completed real estate sales transactions on single-family homes, townhomes, condominiums and co-ops. The methodology in calculating existing-home sales statistics is really quite simple. Each month the National Association of Realtor® receives data on existing-home sales from local associations/boards and multiple listing services (MLS) nationwide. The monthly EHS economic indicator is based on a representative sample of 160 Boards/MLSs. NAR captures 30-40% of all existing-home sale transactions with its monthly survey. HERE is the methodology for the data collection Excerpts from the Release… Existing-home sales rose sharply in December, when sales…(read more)

The U.S. Census Bureau and the Department of Housing and Urban Development have released New Residential Construction statistics for December 2010. Housing Starts data estimates how much new residential real estate construction occurred in the previous month. New construction means digging has begun. Adding rooms or renovating old ones does not count, the builder must be constructing a new home (can be on old foundation if re-building). Although the report offers up single family housing, 2-4 unit housing, and 5-unit and above housing data, single family housing is by far the most important as it accounts for 70-80% of total home building (which might be shifting more toward multi-family in the years ahead). Building Permits data provides an estimate on the number of homes planning on being…(read more)

The U.S. Census Bureau and the Department of Housing and Urban Development have released New Residential Construction statistics for December 2010. Housing Starts data estimates how much new residential real estate construction occurred in the previous month. New construction means digging has begun. Adding rooms or renovating old ones does not count, the builder must be constructing a new home (can be on old foundation if re-building). Although the report offers up single family housing, 2-4 unit housing, and 5-unit and above housing data, single family housing is by far the most important as it accounts for 70-80% of total home building (which might be shifting more toward multi-family in the years ahead). Building Permits data provides an estimate on the number of homes planning on being…(read more)