What We're Reading: November 18

Throughout the week, the BPC Housing Commission will highlight news articles 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.

Refinancing Guidelines Reassure Investors

By Al Yoon

The Wall Street Journal

“Mortgage-backed securities issued by Fannie Mae and Freddie Mac jumped Wednesday, as investors grew more confident that new incentives to boost refinancing for borrowers stuck with high-interest-rate loans would have a limited impact. “Fannie Mae 6% mortgage-backed securities—backed by 6.5% home loans—rose 8/32 to 109 14/32, outpacing gains in Treasurys by about 7/32 after accounting for the change in interest rates, according to Credit Suisse’s Locus analytics. Prices fell late in the day, after Fitch Ratings warned about the European debt exposures of large U.S. banks, which are some of the biggest buyers of mortgage-back securities.” Read more here.

Freddie Mac to Securitize Previously Delinquent Mortgage Loans That Have Been Reinstated to Performing Status

Press Release

Freddie Mac

“Freddie Mac announced today that it will begin securitizing certain mortgage loans that previously were delinquent and that the company had purchased from its related Mortgage Participation Certificate (PC) pools. These mortgage loans have been reinstated to current, performing status and have not been modified. “Beginning in November 2011, these reinstated loans, which Freddie Mac holds in its mortgage-related investment portfolio, will be pooled into new Freddie Mac PCs with the new “R” prefix. Reinstated loans must be current at least four consecutive months at the time of securitization into pools with the “R” prefix.” Read more here.

What the Government Could Still Do to Help Housing

By Tara-Nicholle Nelson

Time

“Earlier this month, President Obama announced tweaks to the Home Affordable Refinance Program (or HARP), which was designed to help homeowners refinance underwater homes but so far had helped only 838,000 of the 5 million homeowners at whom it was aimed. Under the revisions, borrowers can have one missed payment within the last year and still qualify (but none in the past six months); the 25% cap on “negative equity” is gone (until now, upside-down mortgages could be refinanced only up to 125% of the home’s current value); and the program will be extended through the end of 2013.” Read more here.

Congress eyes help for big first-time homeowners

By Ronald D. Orol

MarketWatch

“Borrowers qualifying for FHA loans are eligible to buy homes with as little as 3.5% down-payments. If the provision is approved, some borrowers seeking to obtain larger mortgages in expensive cities such as Los Angeles or Washington D.C., may be able to buy larger homes and put significantly lower down-payments then they are currently required to for those homes.” Read more here.

The Housing Market Is Still in a Depression

By Daniel Indiviglio

The Atlantic

“In the fourth quarter of 2005, residential investment peaked at $783.5 billion. Residential investment bounced at the bottom of its trough at $321.1 billion in both the third quarter of 2010 and again in the first quarter of 2011. It has increased modestly since then. From peak to trough, residential investment was down a devastating 59%. If this doesn’t show a depression, I’m not sure what does.” Read more here.

F.H.A. Audit Sees Possible Bailout Need

By Annie Lowrey

The New York Times

“F.H.A. officials argue that the likelihood the 77-year-old agency will need its first taxpayer bailout is slim. ‘It would take very significant home price declines to create a situation in which the portfolio would require any additional support,’ said Carol Galante, acting commissioner. “There is no evidence or widespread prediction that home prices are going to decline to the kind of levels” requiring a bailout, she said. “The baseline plan included in the report does not foresee the F.H.A.’s going into the red. It presumes that home prices will stabilize in coming months and start to rise in 2012. In that case, the agency’s capital ratio will increase to 1 percent in 2012 and 2 percent, the legal minimum, in 2014.” Read more here.

Real Estate: Why home prices won’t bottom out

By John Wasik

Reuters

“The National Association of Realtors reported that ten real estate markets are ‘leading the nation toward a general recovery and stability of the housing sector,’ but myriad problems are going to weigh down the housing market for months to come. “The lingering malaise in the economy has triggered a new wave of defaults and foreclosures. After five straight quarterly drops, foreclosures nationwide shot up 14 percent from the second to third quarter this year, according to data released by Realtytrac, the foreclosure information service, in October.” Read more here.

CRL: Good-credit minorities received 3 times more subprime loans than whites

By Jon Prior

HousingWire

“The National Association of Realtors reported that ten real estate markets are ‘leading the nation toward a general recovery and stability of the housing sector,’ but myriad problems are going to weigh down the housing market for months to come. “The lingering malaise in the economy has triggered a new wave of defaults and foreclosures. After five straight quarterly drops, foreclosures nationwide shot up 14 percent from the second to third quarter this year, according to data released by Realtytrac, the foreclosure information service, in October.” Read more here.

Americans Still Stuck at Home

By William H. Frey

The Brookings Institution

“Census Bureau data released this week reveal that the rate of Americans moving reached another new postwar low in 2011. The mutually reinforcing constraints of a stalled housing market on the ability to move for employment bodes poorly for economic recovery, though the slowdown may also provide windfall population gains for some places that need them. “The new statistics indicate that just 11.6 percent of U.S. residents moved between 2010 and 2011, down from 12.5 percent the previous year, and the lowest rate since 1948. To put this in proper perspective: the 35.1 million people who changed residence last year is the lowest number since 1960, when the nation’s population was about 40 percent smaller.” Read more here.