FHFA: House Prices Rose 1% in November

The Federal Housing Finance Agency’s (FHFA)
Home Price Index (HPI) rose 1.0 percent from October to November reflecting an
increase in U.S. housing prices on a seasonally adjusted basis. As can be seen
in the figure below, the there is little difference between seasonally adjusted
and unadjusted FHFA figures.  The estimated
figure for October was revised down from a -0.2 change as first reported to -0.7.
 The current index is 183.8 a drop of 1.8
percent from November 2010 when the index was at 187.3. 

The current HPI is 18.8 percent below
the peak it reached in April 2007 and indicates that prices have returned to
roughly the same range as existed in February 2004.

The HPI is calculated using purchase
prices of houses with mortgages that have been sold to or guaranteed by Freddie
Mac or Fannie Mac.  The index is based on
100 representing prices for homes in the first quarter of 1991.

The HPI rose for all regions
except the Middle Atlantic division (New York, New Jersey, Pennsylvania) which
fell 0.2 percent.  The biggest increase
was in the West South Central Division (Oklahoma, Arkansas, Texas, and Louisiana)
which rose 2.1 percent.  West South
Central and West North Central (North Dakota, South Dakota, Minnesota,
Nebraska, Iowa, Kansas, and Missouri) were the only regions to increase on a
year-over-year basis.

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Pending Home Sales Decline in December, Remain Above a Year Ago

Pending home sales fell off of the
19-month high reached in November according to figures released on Wednesday by
the National Association of Realtors® (NAR), but were still higher than one
year ago.  NAR’s Pending Home Sales Index
(PHSI) dropped from 100.1 in November to 96.6 in December, a decline of 3.5 percent.  December pending home sales were still 5.6
percent above the December 2010 index of 91.5.

The PHSI is a measure of signed
sales contracts for home purchases where the transaction has not closed.  It is considered a forward indicator as the
sale is usually finalized within one or two months of contract signing.  An index
of 100 is equal to the average level of contract activity during 2001.

Lawrence Yun, NAR chief economist, said the trend line remains
positive.  “Even with a modest decline, the preceding two months of
contract activity are the highest in the past four years outside of the
homebuyer tax credit period,” he said.  “Contract failures remain an
issue, reported by one-third of Realtors® over the past few months,
but home buyers are not giving up.”

Yun said some
buyers successfully complete the sale after a contract delay, while others stay
in the market after a contract failure and make another offer.  “Housing
affordability conditions are too good to pass up,” he said.  “Our hope is
lending conditions will gradually improve with sustained increases in closed
existing-home sales.”

On a regional
basis results were mixed with three regions showing increases on a year to year
basis but only one increasing during the December.

Pending Home Sales by Region

Region

Index in

December

Chg Nov to
Dec.

(%)

Chg Dec.
2010 to

Dec. 2011
(%)

Northeast

74.7

-3.1

-0.8

Midwest

95.3

+4.0

+13.3

South

101.1

-2.6

+4.9

West

107.9

-11.0

+3.7

U.S.

96.6

-3.5

+5.6

NAR also issued an economic forecast which predicts a healthy growth in
both real and nominal GPD over the next two years with real GDP growing in a historically
normal range of around 3 percent and the unemployment rate falling under 8
percent by 2013. 

Housing starts are expected to improve to around 750,000 in 2012 and
reach a million the next year – both figures well below the historically
typical 1.5 million.  Housing sales, both
new and existing, will remain relatively flat with new home sales reaching a
half million by the end of 2013.  
Existing home sales are estimated to have totaled 4.26 million in 2011
and will rise gradually to 4.45 million and 4.62 million in 2012 and 2013
respectively. 

Inventories are not projected into the future, but the supply of existing
homes is trending down and is now around 2.25 million.  The inventory of new homes has declined to a
nearly negligible level, however given the pace of sales, both inventories
represent about a six month supply.

NAR expects
median prices of both new and existing homes to rise only slightly from current
levels of$223,400 and $166,100 during 2012 but will rise more rapidly during
2013 to a median level of $235,800 and $172,600 by year end.

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Applications Fall 5% during Holiday Shortened Week

Mortgage applications were down during
the week ended January 20 according to the Weekly Mortgage Applications Survey
conducted by the Mortgage Bankers Association (MBA).  The Market Composite Index, a measure of
application volume fell 5 percent on a basis that was adjusted seasonally and
to account for the week shortened by the Martin Luther King holiday.  On a non-seasonally adjusted basis the
Composite fell 13.8 percent from the previous week which ended January 13.

The
seasonally adjusted Purchase Index was down 5.4 percent and the unadjusted
Purchase Index 9.7 percent.  The latter
was 6.5 percent lower than during the same week in 2011.  The index measuring applications for
refinancing was down 5.2 percent. 

The
four week moving averages for all indices remained positive.  The Composite Index was up 4.12 percent, the
Refinance Index increased 4.85 percent and the seasonally adjusted Purchase Index
rose 0.47 percent.

Refinancing
continued to represent the majority of mortgage activity, falling slightly from
82.2 percent of all applications the previous week to 81.3 percent.  Applications for adjustable rate mortgages
were at a 5.3 percent level compared to 5.6 percent a week earlier. 

Looking
back at the month of December, MBA found that refinancing borrowers applied for
30-year fixed-rate mortgages (FRM) in 56.6 percent of cases and 24.3 percent of
applications were for a 15-year FRM.   ARMs represented 5.3 percent of applications in
December.  The
share of refinance applications for “other” fixed-rate mortgages with
amortization schedules other than a 15 or a 30-year term was 13.8 percent of
all refinance applications.

Purchase Index vs 30 Yr Fixed

Click Here to View the Purchase Applications Chart

Refinance Index vs 30 Yr Fixed

Click Here to View the Refinance Applications Chart

The average contract interest rate for 30-year FRMs with
conforming loan balances of $417,500 or less increased to 4.11 percent from
4.06 percent with points down one basis point to 0.47 point.  The effective rate increased from the
previous week.  The rate for jumbo
30-year FRM with balances over $417,500 decreased from 4.40 percent with 0.37
point to 4.39 percent with 0.40 point. 
The effective rate also decreased. 
The rate for FHA-backed 30-year FRM rose to 3.97 percent from 3.91
percent while points were down from 0.59 to 0.57 point.  The effective rate increased.

The
average rate for 15-year FRM increased to 3.40 percent from 3.33
percent, with points increasing to 0.40
from 0.39 and the effective rate increased as well. The rate for the 5/1 hybrid ARM was
up one basis point to 2.91 percent with points decreasing to 0.41l from
0.45.  The effective rate increased.

All
rates quoted are for 80 percent loan-to-value mortgages and points include the
application fee.

 The
MBA survey covers over 75 percent of all U.S. retail residential mortgage
applications, and has been conducted weekly since 1990.  Respondents
include mortgage bankers, commercial banks and thrifts.  Base period and
value for all indexes is March 16, 1990=100.

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District Court Upholds MERS Rights to Assign and Foreclose

Mortgage Electronic Registration
Systems, Inc. better known as MERS won a significant victory in court on
Tuesday as the U.S. Court of Appeals for the 11th Judicial Circuit validated
its rights to assign a security deed and/or foreclose on secured property.  The decision upheld the decision of the U.S.
District Court for the Northern District of Georgia in Smith V. Saxon Mortgage.

The plaintiff in the original case had
contested the foreclosure of her home on the grounds that:

1).   The assignment of the security deed was
invalid because MERS, as nominee of a defunct lender could not assign the documents
of its own volition.

2.
    The “splitting” of the mortgage and
the note rendered the mortgage null and void and therefore notices of
foreclosure were invalid as not coming from a secured creditor.

In the original District Court opinion in March 2011, U.S. Magistrate Judge
Janet F. King pointed to the standard language in the Georgia security deed
signed by all borrowers at closing which grants MERS the power to act on behalf
of the current and future owners of the loan. 
.   “Unless the instrument
creating the power specifically provides to the contrary . . . an assignee
thereof . . . may exercise any power therein contained,” Judge King wrote.
“[T]he Security Deed . . . transfers rights to MERS, and MERS’ assigns may
exercise any power contained therein.”

The 11th District Court which has jurisdiction over federal cases
originating in the states of Alabama, Florida and Georgia, agreed with Judge
King’s recommendation.  “It is not
disputed that plaintiff executed the Security Deed which granted MERS the power
to sell the Property, if plaintiff was not able to comply with the terms of the
Note,” Senior U.S. District Judge William O’Kelley wrote. “Furthermore, the
Security Deed expressly states that it applies to MERS ‘[and] to the . . .
assigns of MERS.’ Pursuant to the terms of the Security Deed, MERS had
authority to assign the Security Deed.”

MERS issued the following statement in response to the District Court
decision. 

“A significant body of clear and specific federal case law is coming
together with this decision from the 11th Circuit Court of Appeals, along with
favorable rulings from the First, Fourth, Fifth, Eighth, Ninth, and Tenth circuit
appellate courts and U.S. District Courts in a number of states,” said Janis L.
Smith, MERSCORP’s vice president of corporate communications. “The 11th
Circuit’s ruling underscores the soundness of MERS’ business model by
solidifying the legality of MERS’ role in the security deed, explaining how
that role came about, and clarifying MERS’ power to act on behalf of the
lender.”

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Consumer Advocacy Group Weighs in on AG Settlement

Rumors have been circulating for some
time that the Obama Administration is pressuring the 50 state attorneys general,
the Justice Department and the Department of Housing and Urban Development to
settle with major banks over issues relating to errors in servicing and
foreclosure abuses including the robo-signing uproar.  The settlement has been controversial and several
attorneys general including those in California, Delaware, and New York have opted
out of the settlement and/or launched independent lawsuits of their own,
claiming the settlement is not sufficient to the offense.  The rumors have intensified over the last few
days based on a theory that the President hopes to announce the settlement
during his State of the Union Address tonight.

Today the Center for Responsible Lending
which has been an early and outspoken critic of mortgage lending came out in
favor of the settlement saying, while it isn’t perfect, it would represent an important
step forward in addressing foreclosure abuses

“The settlement would include key reforms to clean up unfair mortgage
servicing practices,” the statement from the Center said.  “It would also provide an important template
for ways banks can use principal reduction to reduce unnecessary foreclosures
and put the country back on a path to economic recovery.”

While the Center admits that not all
details of the settlement are available as yet, but based on current
information, the key reforms include:

  • The
    elimination of robo-signing as banks would agree to individually review
    foreclosure documents according to the law.
  • Adoption
    of practices that would improve communication with services and end servicer
    abuses including fairer treatment for homeowners who are late on mortgage
    payments.
  • More
    sustainable loan modifications including a requirement that banks “get serious”
    about reducing principal balances.
  • While
    the state AGs would be prohibited by the settlement from pursuing further
    actions against the banks, the Center said that nothing in the settlement would
    prevent homeowners from suing on an individual basis nor would the settlement
    shield the banks from prosecution for criminal activities or from claims based
    on mortgage securities violations, fair lending suits or claims against the
    Mortgage Electronic Registration System.
  • The
    settlement would be enforceable in court by an independent monitor.

The Center said that its research
indicates that the country is only about half-way through the mortgage crisis,
but the proposed settlement would wrap up a year-long investigation into
robo-signing and other abuses and is “crucial to containing the damaging
effects of foreclosures on our economy.” 
It stresses, however, that additional policy actions on multiple fronts
is a necessary addition to the settlement.

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