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Housing Study Says Worst Isn't Over as Local Markets Deal With Steep Drops
Wall Street Journal (06/24/08) P. D2 ; Hoak, Amy

The 2008 "State of the Nation's Housing" report from Harvard University's Joint Center for Housing Studies indicates that the current property slump will last longer than those in the past due to the credit crunch and high foreclosure rates. Center director Nicolas Retsinas says the downturn is "the most severe that we have seen" and that rising unemployment might be "the last shoe to drop, but a pretty heavy shoe." The report reveals that local housing markets have been hit hard by declines in resales, new-home sales, and residential construction.

Mayors Seek Solutions to Vacant-Home Crisis
Miami Herald (06/23/08) ; Hatcher, Monica

At a meeting of the U.S. Conference of Mayors in Miami on June 22, attendees from across the country expressed concern about increasing numbers of foreclosed homes sitting vacant, forcing cities to assume the costs of upkeep. Enterprise Community Partners reports that 44.5 million homes are adjacent to subprime foreclosures, and these homes will drop in value by about $5,000. In response, more cities are hoping to pass the costs of maintaining vacant, foreclosed properties on to lenders; and the Mortgage Bankers Association and Safeguard Properties have joined forces to make it easier for mayors to figure out who to contact at lending companies about code violations. Mayors are using creative means to prevent additional foreclosures, with Frank Otis of Pembroke Pines, Fla., indicating that the city could take over delinquent mortgages on renter-occupied properties: a strategy that could receive help from Congress if the Senate passes legislation that would give states and local governments some $4 billion to purchase and rehabilitate foreclosed homes.
(Web Link)

U.S. Housing Rebound to Be Prolonged: Harvard Study
Reuters (06/23/08) ; Adler, Lynn

A recent study from Harvard University's Joint Center for Housing Studies indicates that the residential property market could take longer than expected to recover, as it has been hit hard by home price declines, surging foreclosures, a drop in consumer spending, rising mortgage rates, tighter underwriting standards, and slower economic growth. According to center director Nicolas Retsinas, "Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets." The study states that substantial home price declines, a decrease in rents, a drop in interest rates, and significant income growth are needed for homes to be as affordable as they were eight years ago, prior to the housing boom.
(Web Link)

Lending Limbo: Can Any Borrowers Qualify In Today's Market?
Investor's Business Daily (06/20/08) P. A8 ; Doler, Kathleen

Despite legislative efforts to ease the home loan credit squeeze, mortgage professionals say the lending environment remains extremely tight--even for people with excellent credit scores--and shows no signs of relief. Particularly troublesome developments range from dried-up lending for second mortgages and home equity loans to higher down-payment requirements and condominium loan restrictions. While the self-employed and those with investment income are finding this lending marketplace especially hostile, even those who do provide documentation of income are being put under a microscope. Finally, mortgage insurers now have a greater say on down-payment requirements for some loans, even going so far as to reject certain loan packages put together and approved by lenders.
(Web Link)

Push for New Sub-Prime Mortgage Regulations Loses Steam
Los Angeles Times (06/19/08) ; Lifsher, Marc

California's Senate Banking, Finance and Insurance Committee has made a package of subprime lending bills more favorable for the mortgage industry. The key Senate committee stripped a ban on stated-income loans and less-than-interest-only loans from AB 1830 and also opposed language that would have limited prepayment penalties; and members also failed to support AB 2740, which would have regulated mortgage servicers on posting payments and handling escrow funds. However, the committee did support AB 529, which would force lenders to provide more advance notice of resetting rates for adjustable-rate mortgages. The committee's chairman, Sen. Michael Machado (D-Linden) argued that the package does not align state law with federal regulations and could ultimately make home loans less accessible for consumers.

Rates Improve for Some Loans on Pricey Homes
Wall Street Journal (06/19/08) P. D1 ; Simon, Ruth

Interest rates on jumbo conforming mortgages are finally on the decline, with HSH Associates noting that the 30-year fixed rate on these products now stands at 6.59 percent while similar loans with smaller balances carry an interest rate of 6.46 percent. Since the conforming loan limit was temporarily hiked by Congress, $244 million in such loans have been purchased by Fannie Mae and Freddie Mac; and $348 million in high-balance FHA loans--those greater than $362,790--have been securitized. Experts believe lower jumbo conforming loan rates could spur home sales on the East and West coasts, but they say falling home prices will make it tough for borrowers to refinance into such mortgages and that borrowers are finding it difficult to meet the high down payments on second homes required by Fannie Mae and Freddie Mac. The Mortgage Bankers Association reports that jumbo loans accounted for 6 percent of loan applications in May, down from more than 12 percent in March 2007.

Fading '08 Prospects for Housing, GSE Reform
American Banker (06/19/08) P. 1 ; Sloan, Steven; Kaper, Stacy

There are concerns that time is slipping away to pass legislation this year to stabilize home prices and revamp the government-sponsored enterprises. The measure has stalled in the Senate due to concerns that it does not include a way to pay for certain tax-related provisions and that Senate Banking Committee Chairman Christopher Dodd (D-Conn.) received reduced interest rates on two mortgages from Countrywide Financial--a lender that some lawmakers insist would receive over $2.5 billion in benefits upon the bill's passage. Additional concerns have been raised about a provision that would implement a foreclosure alternative for lenders and investors as a means of stabilizing home prices, with the organization FreedomWorks questioning the involvement of Countrywide and Bank of America in the drafting of the bill. Finally, House Financial Services Committee Chairman Barney Frank (D-Mass.) appears hesitant about the Senate version of the bill, which would immediately give the new GSE regulator authority; the House would allow new regulations to be spelled out over a period of six months before the watchdog takes control.

Wachovia to Clarify Loans Where You Pick Payment
Charlotte Observer (NC) (06/19/08) ; Rothacker, Rick

Mortgage brokers account for roughly 30 percent of Wachovia Corp.'s home loans, and the bank is now making contact with borrowers submitting applications for its Pick-A-Payment product through these brokers at the start of the process to ensure they understand how the mortgage works as well as the broker relationship as a way to improve customer service and reduce fraud risks. Wachovia used to contact borrowers in the middle of the application process, but home price declines have become a concern when giving borrowers monthly payment options because paying less than the principal or full interest boosts loan balances. According to Wachovia spokesman Don Vecchiarello, the bank continues to underwrite these mortgages because it has imposed stricter standards in recent months, ensuring that borrowers meet minimum credit scores, that employment information is verified, and that local housing market conditions are taken into consideration.
(Web Link)

More Loan Forgiveness Sought
Wall Street Journal (06/17/08) P. D3 ; Dale, Arden

Several organizations, including the National Fair Housing Alliance, are banding together to lobby lawmakers to expand the tax breaks offered under the Mortgage Forgiveness Debt Relief Act of 2007. In a letter to key members of the Senate Finance and the House Ways and Means committees, the consortium is requesting tax breaks for homeowners who obtain cash-out refinances to cover medical and education expenses, among other non-home costs. Supporters believe the move would help cash-strapped families avoid foreclosure by eliminating hefty tax bills, since current law taxes all forgiven debt except for that used to buy or upgrade a home. Forgiven debt for 2007, 200, and 2009 up to $2 million for joint filers and $1 million for individual filers is exempt from income taxes under the new act; however, some say the law does not go far enough. "It's ironic if on one hand the Fed is saying 'modify these loans by reducing principal,' and then we're going to hit the borrower with a large tax bill right when they're most vulnerable," says Chapman University law school professor Kurt Eggert.

Economists Predict More Pain Ahead But No Recession
Los Angeles Times (06/18/08) ; Vincent, Roger

The faltering housing market will continue to put pressure on the nation's economy in the months to come, but researchers at UCLA say a recession is unlikely. Despite being able to hold onto their jobs, many homeowners have been willing to sell houses at a loss that are no longer worth as much as what is owed lenders, says economist Edward Leamer, director of the quarterly UCLA Anderson Forecast. The economy is expected to see little or no growth through 2009, distressed home sales will continue, and market analysts will focus more on home prices as foreclosures decline. "The unprecedented speed of the price adjustment means that instead of several years of slow bleeding [like the 1990s] we have compressed the necessary adjustment into two years of intense housing pain," writes UCLA economist Ryan Ratcliff.

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