What We're Reading: February 17

Throughout the week, the BPC Housing Commission will highlight news items that address critical developments in housing policy. Any views expressed in the content posted on this forum do not necessarily represent the views of the Commission, its co-chairs or the Bipartisan Policy Center. The Lead

Housing Starts Up On Surge In Apartments

The Associated Press

“Construction of single-family homes cooled off slightly in January after surging in the final month last year. But a rebound in volatile apartment construction kept builders busy and pushed housing starts to their highest level in more than three years. The Commerce Department said Thursday that builders broke ground on a seasonally adjusted annual rate of 699,000 homes in January. That’s up 1.5 percent from December and the highest level since October 2008. Construction began on 508,000 single-family homes last month. That’s a 1 percent drop from December and the first decline in four months. Still, December single-family homes were revised up strongly to show builders started 513,000 homes a 12 percent gain from November.” Read more here.

Reuters: Manufacturing, housing data flag underlying strength

Across the Country

Audit Uncovers Extensive Flaws in Foreclosures

By Gretchen Morgenson

The New York Times

“An audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation, according to a report released Wednesday. Anecdotal evidence indicating foreclosure abuse has been plentiful since the mortgage boom turned to bust in 2008. But the detailed and comprehensive nature of the San Francisco findings suggest how pervasive foreclosure irregularities may be across the nation. The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.” Read more here.

Can the Feds Save the Housing Market?

By Mark Bergen

The Atlantic

“Zeke Morris spends his days roaming the south side of Chicago managing foreclosures. As an agent working with real-estate owned (REO) properties, his job is to match these vacant houses with buyers. In some of his neighborhoods, investors are swooping in to nab the properties, renovating them to quickly turn them around or holding them tight in the hope of a market improvement. But in other neighborhoods, like Englewood and Bronzeville – areas brimming with foreclosed homes – they just aren’t. ‘It’s tough to get an investor to go there,’ Morris says. The Obama Administration wants to give these investors a good shove. At the beginning of the month, the Federal Housing Finance Agency took the first official step in a plan circulating since the fall: allowing investors to buy pools of foreclosed homes backed by the government and turn them into rental units.” Read more here.

Mom and pop investors propping up home-buying market

By Julie Schmit

USA Today

“Investor purchases are strengthening demand in a still-weak market for home sales. Through the first nine months of last year, investors bought more than 26% of single-family homes and condominiums sold in 167 U.S. markets, indicate data tracked by Burns. That’s up from 21% in 2007. Even the U.S. government wants to capitalize on a strong rental market. It recently started a pilot program for investors to buy and rent out foreclosed homes owned by government-backed mortgage giants Freddie Mac, Fannie Mae and the Federal Housing Administration. Together they own more than a quarter-million single-family homes. In a recent paper, the Federal Reserve noted that ‘small investors’ are buying foreclosed homes and converting them to rentals. It also said that larger investors were struggling to do so, in part because of tight financing and their inability to buy enough properties in the same area to make it worthwhile.” Read more here.

Next American City: NJ Tries Turning Foreclosed Homes into Affordable Housing

The Atlantic: The American Dream, Revised

2013 Budget

Federal budget 2013: HUD seeks funds for Project Rebuild to redevelop housing

By Brady Dennis

The Washington Post

“The Department of Housing and Urban Development’s 2013 budget offers a glimpse of nearly $5 billion the agency estimates would be slated for a program to help clean up the wreckage of the housing crisis — only Congress has yet to give it a stamp of approval. Project Rebuild, an effort to help local governments rehabilitate, redevelop or demolish vacant properties left behind by the housing crisis, was announced in September as part of President Obama’s proposed American Jobs Act. Modeled on the Neighborhood Stabilization Program, it is part of the administration’s broader efforts to keep struggling borrowers in their homes, create jobs in hard-hit communities and revitalize areas ravaged by foreclosures.” Read more here.

Obama budget: Price tag for Wall Street bailout goes up

By Jia Lynn Yang and Zachary A. Goldfarb

The Washington Post

“The costliest part of the government’s rescue during the financial crisis was the bailout of mortgage financiers Fannie Mae and Freddie Mac. The new fee doesn’t encompass that cost. The Obama budget projects Fannie and Freddie will receive $221 billion in total investments from the Treasury between 2009 and 2013 and pay dividends of $73 billion in exchange over the same period. The administration sees Fannie and Freddie making enough in 2013 to begin repaying their investments. By 2022, the administration estimates that the cost of the bailout of Fannie and Freddie will be $28 billion, but it added that it does not expect the companies to be around that long.” Read more here. Housing Finance News: HUD Releases 2013 Budget Proposal HousingWire: White House budget dismisses housing importance

Bernanke and Refinancing

Student Loans Near $1 Trillion Hurting Young Buyers: Mortgages

By Bob Willis

Bloomberg

“As outstanding student debt approaches $1 trillion, it’s one more reason record-low interest rates aren’t doing more to boost housing. The tighter lending standards that have emerged in the wake of the recession weigh particularly on younger, first-time home buyers, according to a Federal Reserve study sent to Congress on Jan. 4. These households tend to be younger, often have relatively new credit profiles, lower-than-average credit scores and fewer economic resources to make a large down payment, the report said. ‘Potential first-time homebuyers have been disproportionately affected by the very tight conditions in mortgage markets,’ Federal Reserve Chairman Ben S. Bernanke said at a homebuilders conference last week. ‘First-time homebuyers are typically an important source of incremental housing demand, so their smaller presence in the market affects house prices and construction quite broadly.’” Read more here.

Lack of lending to creditworthy borrowers restricting housing: Bernanke

By Justin T. Hilley

HousingWire

“Mortgage originators who are reluctant to extend credit to potential borrowers who meet underwriting standards set by Fannie Mae and Freddie Mac are hindering the nation’s economic turnaround. Fed Chairman Ben Bernanke, speaking Friday at the International Builders Show in Orlando, Fla., said the wave of creditworthy households that are finding it difficult to obtain mortgage credit or to refinance is resulting in actions taken by the Federal Reserve — such as lowering interest rates to record lows — is helping to prevent a boost to the housing industry. Fewer than half of lenders are offering mortgages to borrowers with a FICO score of less than 620 and a down payment of 10%, even though such loans are within the government-sponsored enterprises’ purchase parameters.” Read more here.

Obama’s refinancing plan contains elements that don’t need approval by Congress

By Kenneth R. Harney

The Washington Post

“Refinancings can be speeded up by key executive branch agencies, and the new program directs them to do so within the next few weeks wherever possible. For example, the Federal Housing Administration will be removing a major barrier for lenders to “streamline” refinancings for current, nondelinquent borrowers who want to take advantage of today’s low rates. The FHA no longer will count streamlined refis — where some standard underwriting requirements are waived — against lenders’ performance ratings on delinquencies. The fear of getting a poor rating is a powerful deterrent for many lenders against doing streamlined refis because they can lose their eligibility to do loans for the FHA altogether. Removing ratings as a barrier should help significant numbers of FHA borrowers get into a better deal.” Read more here.

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“9 percent of 29- to 34-year-olds got a first-time mortgage between 2009 and 2011, compared with 17 percent 10 years earlier.”

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CFPB outlines plans for mortgage servicers

By Ylan Q. Mui

The Washington Post

“The Consumer Financial Protection Bureau will revamp the billing statements sent to homeowners and the disclosures required for some complicated mortgages. It also is drafting new rules to prevent servicers from improperly charging consumers for homeowner’s insurance. The massive financial reform legislation passed in 2010 that established the CFPB also required it to take steps to retool the mortgage servicing industry. The plans outlined Monday will apply not only to servicers operated by banks but also to those run by other financial institutions that were previously not subject to federal supervision. The Mortgage Bankers Association, which represents servicers, said it supports the CFPB’s efforts to create more transparent disclosures and create a single set of standards across the industry.” Read more here.

Foreclosure Settlement

Pimco Says Foreclosure Deal Cheaper for Banks Than Pensions

By Jody Shenn

Bloomberg

“The government’s deal with banks over their foreclosure practices after 16 months of investigations is cheap for the loan servicers while costly for bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon… ‘This was a relatively cheap resolution for the banks,’ said Simon, the mortgage head at Pimco, which runs the world’s largest bond fund. ‘A lot of the principal reductions would have happened on their loans anyway, and they’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.’” Read more here.

Mortgage deal to provide FHA with $1 billion in cash

By Margaret Chadbourn

Reuters

“The Federal Housing Administration will receive about $1 billion from the Obama administration’s mortgage settlement with the country’s largest banks, officials said on Monday, which could help it avoid tapping a U.S. Treasury credit line. The cash reserves of the FHA, which insures about one-third of all U.S. mortgages, reached a record low of $2.6 billion last year. The White House said in President Barack Obama’s budget proposal on Monday that the agency’s capital reserves would run out in the coming year, forcing it to draw as much as $688 million from the Treasury.” Read more here.

HousingWire: Parsing the reality of the multistate AG settlement

Los Angeles Times: Faulty reasoning keeps Fannie and Freddie out of foreclosure deal

TIME: Is the $25 Billion Foreclosure Settlement a Stealth Bank Bailout?

Inman News: Top 10 US foreclosure hotspots: 9 in California

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INFOGRAPHIC: Housing’s Impact on the Economy