Over Engineered Government Housing Aid Still Playing Catch Up

It’s easy to throw melons from the cheap seats but I will resist the temptation to harshly critique the programs put in place by both the Obama and Bush administrations to assist distressed homeowners and stop the bleeding in home values. However, a helpful lesson can be taken away from this experience… “Real life has more variables than the small set he has chosen to estimate.” -Nasim Taleb, Black Swan. What I mean by that is government sponsored and engineered programs like Help or Homeowners, HomeSaver, HAMP, HARP, etc, etc have struggled to stay ahead of an unprecedented amount of unknowns in the housing market. Consequently, these programs have ended up fighting yesterday’s wars. Initiatives first focused on delinquent borrowers, then negative equity, then unemployment…(read more)

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First Round of Pilot Rental Initiative Completed with 2,500 Homes Sold

The first round of winners has been
selected to purchase foreclosed real estate from Freddie Mac and Fannie
Mae.  The Federal Housing Finance Agency
(FHFA) announced today that 2,500 single family homes had been awarded to successful
bidders under a pilot initiative to convert real estate acquired by the two
government sponsored enterprises (GSE) through foreclosure into rental property. 

Successful candidates for purchasing properties
from the GSE’s real estate portfolio (REO) had undergone several steps in a
qualification process before being permitted to bid on the houses which they had
to agree to hold and rent for a period of time before reselling. 

The properties were offered in sale
pools which were geographically concentrated in various locations across the
United States.  The GSEs, FHFA and other federal
agencies involved, Departments of Treasury, Housing and Urban Development,
Federal Deposit Insurance Corporation and the Federal Reserve, had several
goals
for the program.  They hoped to
relieve the GSEs of the costs and administrative burdens of managing thousands
of foreclosed properties, alleviate the blight imposed on communities by large
number of vacant and possibly deteriorating properties, increase the rental
stock, while at the same time not flooding the market with distressed
properties.

 FHFA described the response to the pilot
initiative as “robust with strong qualified bidder interest.”  Some 4,000 responses were received to the
initial “Request for Information” issued by the program sponsors last February,
however beyond announcing that the awards had been made FHFA released no
information on the names or even the numbers of successful bidders.

“FHFA
undertook this initiative to help stabilize communities and home values in
areas hard-hit by the foreclosure crisis,” said Edward J. DeMarco, Acting
Director of FHFA. “As conservator of Fannie Mae and Freddie Mac, we believe
this pilot program will assist us in achieving our objectives and help to
maximize the benefit to taxpayers. We are pleased with the response from the
market and look forward to closing transactions in the near future.”

…(read more)

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Freddie Mac: Data Starting to Paint Picture of 2012

Freddie Mac said that first quarter 2011 economic data that has begun to emerge from various sources are, even though some is preliminary, beginning to create an impression of what the year may hold.  Data on economic growth indicates that the quarter had slower growth than the one that preceded it but was still up from three of the previous four quarters.  The slower growth primarily reflected less inventory accumulation and a dip in residential construction.

According to the corporation’s Economic and Housing Market Outlook for May, personal consumption grew at a 15.3 percent annual basis and residential fixed investment added 0.4 to the quarter’s 2.2 percent economic growth.   This factor, which primarily reflects new housing construction and home remodeling, has been up for four straight quarters

The Freddie Mac House Price Index (FMHPI) for the first quarter suggested that home values might finally be at or near the bottom in many markets, rising at least 0.5 percent in 13 states over fourth quarter results and remaining essentially unchanged in nine more.  Still 28 states saw further declines of at least 0.5 percent. Freddie Mac’s economists point to record low mortgage rates as a reason to hope for a sales pickup in 2012.

The high degree of affordability shown by the FMHPI also bodes well for further declines in delinquencies beyond those shown for both 60 and 90 day delinquency rates released by the Mortgage Bankers Association (MBA) earlier in the month. 

The forecast said that, despite some signs that the housing market may have bottomed, homeownership rates continued to decline during the first quarter, dropping 0.5 percentage points to 65.5 according to the U.S. Census Bureau.  This was a level last seen in 1997.  Freddie Mac says that some additional slippage in this rate is likely as long as so many homes remain in foreclosure.

The economists pointed to another important first quarter metric – Freddie Mac’s refinancing activity report which showed most homeowners who refinanced took out the same or lower sized loans and about one-third shortened the terms of their mortgages.  Refinances through the enhanced Home Affordable Refinance Program (HARP 2.0) picked up during the quarter and represented 20 percent of all Freddie Mac refinances, the highest share since HARP’s inception.

Taken together, the forecast says, “The first-quarter data releases provide an encouraging sign for both the macro-economy and the housing recovery. While not uniformly positive, for the most part the data trend in the right direction.”

…(read more)

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