Freddie to Pay Treasury $10.4B, Warns High Profits 'Not Sustainable'

Freddie Mac, the U.S.-owned mortgage financier, will return $10.4 billion to the Treasury Department next month, bringing total payments to about $10 billion above what it got in aid after the credit crisis

The McLean, Virginia-based company had net income of $8.6 billion for the quarter ended Dec. 31 and a profit of $48.7 billion for all of 2013, according to a regulatory filing Thursday, a profit largely driven by rising home prices. Freddie Mac, which was taken into federal conservatorship in 2008 along with the larger Fannie Mae, earned $11 billion in 2012 and earned net income of $30.5 billion in 3Q13.
"The level of earnings we have experienced in recent periods is not sustainable over the long term," the company said in the Securities and Exchange Commission filing. "While our provision for credit losses benefited significantly from strong home price appreciation, we are beginning to see moderation in home price growth."
Freddie Mac is required to pay Treasury all profits in return for $71 billion in taxpayer aid it received under conservatorship. The money counts as a return on the U.S. investment and not as repayment, and there is no existing mechanism for the company to exit government control.
Freddie Mac and Washington-based Fannie Mae have now sent Treasury a combined $202.9 billion, $15.4 billion more than the $187.5 billion in government aid they received. Fannie earned net income of $6.5 billion in 4Q13.
The companies' reversals of fortune have complicated the debate over their future as lawmakers in both houses of Congress work on measures to wind them down.
Stakeholders including Perry Capital LLC and Fairholme Funds Inc. have sued the U.S., challenging the arrangement under which the government takes all quarterly profits from Fannie Mae and Freddie Mac. The lawsuits claim that Treasury is expropriating the value of its investors' preferred shares.
Meanwhile, Bill Ackman’s hedge fund, Pershing Square Capital Management, took stakes in Fannie Mae and Freddie Mac in November, and said it may seek talks with management, shareholders and the government.
Fannie Mae and Freddie Mac, which were created by the federal government before becoming publicly traded companies, buy mortgages from lenders and package them into securities on which they guarantee payments of principal and interest.

Mortgage apps drop 8.5%, refi volume drops to 58%-Purchase applications fall below market trends

Mortgage applications fell 8.5% from a week prior continuing its downward trend for the week ended Feb. 21, the latest Mortgage Bankers Association report found.
As a whole, the refinance share of mortgage activity fell slightly to 58% of mortgage applications: the lowest level since September 2013.
Additionally, the refinance index fell 11% from the previous week, as the purchase index decreased 4% from one week earlier.
"Purchase applications were little changed on an unadjusted basis last week, but this is the time of a year we would expect a significant pickup in purchase activity, and we are not yet seeing it,” said Mike Fratantoni, MBA’s chief economist.
Meanwhile, the 30-year, fixed-rate mortgage with a conforming loan balance increased to 4.53% from 4.50%.
The 30-year, FRM with a jumbo loan balance increased to 4.47% from 4.45%.
The 30-year, FRM backed by the FHA reached 4.17%, a growth from 4.16% a week prior.
Furthermore, the 15-year, FRM escalated from 3.55% to 3.56%, and the 5/1 ARM dropped to 3.17% from 3.20%.

You won't believe what Fannie, Freddie are doing to sell REO-GSEs fire up generous incentive programs

Fannie Mae and Freddie Mac are offering limited-time incentives in a pair of programs for both real estate agents and homebuyers as the two government-sponsored enterprises are trying to sell some of their REO properties.
Freddie will offer a $1,000 bonus to selling agents and a separate $500 bonus to listing agents when they use the HomeSteps program to sell a Freddie owned property.
The HomeSteps program is being launched in 23 states for deals where the offer is made between Feb. 18 and April 15, with a closing date deadline of May 31.
Chris Boden, senior vice president of HomeSteps, said he expects the program to jumpstart a housing market slowdown being blamed on winter weather.
"HomeSteps' 2014 winter sales promotion is focused on firing up sales in 'cold weather' states and condominium deals everywhere. With mortgage rates still low and home inventories tightening, the 2014 HomeSteps Winter Sales Promotion is a great opportunity for families ready to buy and real estate agents ready to sell," Boden said.
Meanwhile, homebuyers may receive up to 3.5% in closing cost assistance when they purchase a HomePath property in 27 states for Fannie-owned properties.
During the FirstLook period, owner-occupant or public entity buyers are able to submit offers on HomePath properties, giving them the opportunity to purchase homes without competition from investors. Fannie Mae recently announced the extension of the FirstLook period from fifteen days to twenty days.
“This incentive will provide more opportunities for families to find a property to call home,” said Jay Ryan, Vice President of REO Sales.  “Our goal is to sell as many HomePath properties as possible to owner-occupants who will stabilize neighborhoods and help the housing recovery.”
To be eligible for the incentive, the initial offer must be submitted between February 14, 2014, and March 31, 2014, and close on or before May 31, 2014. The incentive will offer qualified buyers up to 3.5% of the final sales price to pay closing costs. In many cases, buyers could use these savings to buy down their interest rate through upfront points, resulting in additional savings over time.
Boden said that for the first time the HomeSteps Winter Sales Promotion offers homebuyers a choice of $500 incentives they can use towards condominium association dues, flood insurance premiums or the home warranty of their choice.
HomeSteps Winter Sales Promotion incentives are paid only when approved offers are received between February 18 and April 15, the home is sold as a primary or secondary residence and the closing settles on or before May 30, 2014. The promotion does not apply to investor purchases, auction sales, sealed-bid sales and bulk sales.
States where the 2014 HomeSteps Winter Sales Promotion is now active include Alabama, Connecticut, Colorado, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania, South Carolina, Tennessee, Utah, Virginia, Washington, and Wisconsin.

What did the Fed say that matters to the housing market?-Out: Unemployment rate threshold - In: Vague guidance threshold

The big takeaway from the minutes of the Federal Open Markets Committee January meeting for the housing industry is that tapering is likely to continue apace, and that the Federal Reserve is throwing out its previous goal post of 6.5% unemployment in favor of an ill-defined mandate for continued quantitative guidance.
Although the employment situation is dire, given record numbers of people dropping out of the workforce, the official unemployment rate breeched 6.6% in January. (Read story on the real unemployment rate here.)
Members of the FOMC said it would soon be appropriate for the committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed.
A range of views was expressed – some participants favored quantitative guidance along the lines of the existing thresholds, while others preferred a qualitative approach that would provide additional information regarding the factors that would guide the committee’s policy decisions.
Several participants argued that, in the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion at each FOMC meeting.
That said, a number of participants noted that if the economy deviated substantially from its expected path, the Committee should be prepared to respond with an appropriate adjustment to the trajectory of its purchases.
Several members favored continuing a scheduled tapering of $10 billion per FOMC meeting. In contrast, two participants favored a pause in tapering due to slack in the economy and low inflation.
A number of participants noted that recent economic news had reinforced their confidence in their projection of moderate economic growth over the medium run.

Mortgage servicers foreclosing on very different timelines-

A new white paper is highlighting the vast differences in foreclosure timelines at varying mortgage servicers.
Without naming names, the research, from data analytics firm Oversite, found that mortgage servicers vary in foreclosure speed by up to 192%.
Oversite also found after examining more than 50,000 foreclosure files:
• Cases with a Lack of Prosecution (LOP) filing had an average foreclosure timeline of 308 days longer than cases without similar filings.
• Cases with an Amended Complaint (AC) filing had an average foreclosure timeline of 439 days longer than cases without similar filings.
• Cases with a Bankruptcy Discharge (BK) filing had an average foreclosure timeline of 448 days longer than cases without similar filings.
“Our analysis shows that it is possible to quantify a number of factors impacting foreclosure timelines that can then be used to benchmark foreclosure management and more accurately estimate foreclosure timelines,” said Oversite CEO, James Albertelli.

4 signs the real estate market is in trouble

I wish I’d said this (and in a few weeks I will have, I’m sure) but Ramsey Su at Acting Man Blog did it first and in a way I’ve been searching for the words to explain.
Every week or so we get another indicator that’s supposed to tell us how the housing market is doing.
And every part of the industry trumpets whichever metric best serves its own purpose. Thus you have the Mortgage Bankers Association touting this “good news” about interest rates, while the National Association of Realtors touts how rising home prices are a great sign, and on and on.
But none of these measures – home sales, home starts, home prices, interest rates – tell the real tale.
Then along comes this boy named Su, who gets right to the heart of the matter:

The strength of the real estate market should not be measured by price appreciation, or the number of new and existing home sales. It should be measured by the support of underlying fundamentals and whether they can help to withstand economic cycles without policy makers having to go hog wild just to avoid a total collapse.

How healthy is the real estate market today?

He looks at some troubling measures we’ve noted at HousingWire – the decline of income growth, the bulk of Americans having subprime credit, and the fact that there’s nothing left in the Fed for another bailout if (when) things go pear-shaped again.

1. The Subprime Majority  

Recently, I came across a report by the Corporation for Enterprise Development (CFED) titled Assets and Opportunity Scorecard. Some of their findings are quite interesting. According to the CFED Scorecard, 56% of all consumers have sub-prime credit. Sub-prime is "earned". A consumer has to miss a few payments, or default on a loan or two to earn that status. These 56% cannot, or should not, be taking on more debt, especially a large debt like a mortgage.  They may also be struggling with a mortgage that they should not have taken out in the first place.  

And with so few companies willing to loosen credit standards, even the worthy subprime don’t have many options.

2. Liquid Asset Poor

CFED found that 44% of households in America are Liquid Asset Poor, defined as having saved less than three months of expenses. As one would expect, 78% of the lowest income households are asset poor, but 25% of middle class ($56k to $91k) households also have less than three months of expenses saved. 

How much of a down payment can you expect them to have on hand?

3. The Federal Reserve is Spent

QE1, 2 and 3 all involved the purchase of agency MBS. In January 2014, the FOMC announced that it will decrease debt purchases by another $10 billion, from the original $85 billion to $65 billion per month, $30 billion of which is supposed to be for agency MBS. That appears to be all talk. For the first six weeks of 2014, the Fed has already purchased $74.7 billion, or $54 billion per month. They are not only continuing the QE3 purchases, they are still replenishing the prepaid holdings from QE1 and QE2. Mortgage rates are not responding anymore. Though somewhat stabilized, the current rate (30yr) is still a full percent above the low recorded before QE3. 

Furthermore, Fed members are only kidding themselves if they think they can ever tighten monetary policy. The national debt is at $17.3 trillion and growing at about $700 billion this year. The cost of financing this debt, per the Treasury, was $415.7 billion in 2013, crudely estimated at an average rate of about 2.5%.  At the moment, the 3 months bill is at less than 0.2% interest, while the 10 year note is only at 2.75%. If the cost of financing this debt were to increase by just 1%, it would cost the Treasury $173 billion more a year. There is no way that the dovish Fed chair Yellen would even dream of doing that.

Therefore, the risk of monetary policy is not whether the Fed will tighten, but rather what it can do to repeat a 2008 style bailout. In other words, the Fed as a safety net is full of holes that are big enough for an elephant to pass through.

Finally, the government itself is tapped out.

4. Exhausted Government Intervention

The FHFA just announced that HARP has reached the 3 million mark. We are no closer to reforming Freddie and Fannie than when they were put under conservatorship over five years ago. Numerous state and local governments have deployed their own foreclosure prevention laws and ordinances. The Consumer Finance Protection Bureau has created a mountain of bureaucratic red tape, adding compliance costs to the mortgage industry while providing questionable benefits to the consumer. The  FHA is now pushing for lending to borrowers with credit scores as low as 580  only one year after major financial catastrophes such as foreclosure.

In conclusion, the reason I remain bearish on real estate is that when the noise is filtered out, the market has only survived by means of an unprecedented amount of intervention. This dependency is not only unhealthy, its stimulating effect is now fading. If real estate prices cease to appreciate, the market will suffer, same as it did when the sub-prime bubble burst in 2006/2007. The Fed has already gone all in and there is little left it can do. Washington can always create a new set of laws to further erode private property rights as we knew them. Ironically, price appreciation is also not the answer, as it will just widen the income equality gap, turning would-be home owners into rent slaves of Wall Street's fat cats. It may be best for the market to freeze for an extended period and let consumers catch their breath.

The question becomes – do Yellen and the rest of Washington have the stones to allow the short-term pain needed to bring back a little balance to the Force here, or will they charge once more at the windmills?

Is snow a good or bad forecast for housing?-February work days slip even further down

The weather continues to inhibit every aspect of life — especially in the Northeast. Since the snow is cutting back on the days available to work and produce mortgages in February, it is presenting a risk to the prepayments and mortgage-backed security production, according to a recent report from Bank of America Merrill Lynch (BAC).
February naturally already falls in at the low end for monthly day counts, but that in compilation with this week’s snowstorm, President’s Day weekend and another winter storm in the forecast, puts this month even lower in count.   
BofAML explained that it now looks like the risk to its February forecast for prepayment rates is to the downside, and it now has to consider that activity will get pushed out to March.
And it may not end there.
“Given some of the momentum effects observed with economic activity such as refinancing, we also need to consider the possibility that the weather-driven hit to momentum means downside risks may last longer than just in February,” the report stated.
However, it is not bad news for everyone. BofAML noted that it may be good news for MBS IO investors, who benefit on a levered basis from each month of slower than expected prepayments.
While it is hard to capture the full impact of the weather on the economy since every state deals with problems differently, the numbers show that after this week’s weak retail sales number for January that 1Q14 GDP growth is tracking at 1.4%, down from the 2.2% tracking figure for 4Q13.
“Our economists indicate we may not get a clean reading on the economy until March data are released in April. Note the words “may not.” In other words, it could take longer to get a clean reading. Nonetheless, they forecast weak growth of 2.0% in 1Q14 and a strong rebound to 3.3% in 2Q14,” the report added.
But not every part of the economy was fully affected the bad weather.
According to the Reuters/University of Michigan's, the consumer sentiment index improved the last two weeks of January, to a final January reading of 81.2 versus 80.4 at mid-month, but ended up a little bit short of December's final reading of 82.5.
“Although the unusually bad weather appears to have hit US employment, retail sales and industrial production, it hasn’t taken a major toll on consumer sentiment,” Capital Economic said.
“But the truth is that confidence has not been a reliable predictor of consumption for some years now, so this really doesn’t offer much comfort. We would place more weight on the trends in job and income growth. Once you strip out the effects of the bad weather, they remain fairly good,” continued Capital Economic.

4 things Barclays says you need to know about the future of housing-Home financing is still spinning its wheels despite home sales numbers

More than seven years have passed since home prices peaked and the mortgage credit crisis began to unfold in 2006, and Barclays (BCS) Securitized Products Research says real recovery isn’t in the cards yet in its “The Future of US Housing” report.
Barclays analysts, rather optimistically, say that since 2011-12, there has been a sustained recovery in the housing market.
Prices have risen by 20-25% since bottoming in first quarter 2012, although a lot of that activity hasn’t been because of individual homeowners but rather institutional and investor buyers.
After peaking during the crisis years, existing and new home sale inventories have also fallen below pre-crisis levels.
During this period, the US home-ownership rate has given back almost all of the gains made during the mortgage credit boom of the 2000s.
Home ownership has dropped from its peak of around 69% to the mid-60% area, which is the same level as we saw in the 1970s recession.
Barclays is optimistic on housing, in a way that other analysts aren’t.
Barclays concedes that despite what recovery we have seen, housing finance is still dependent on government.
“Although the housing market has rebounded after working through the excesses prevalent prior to 2008, mortgage finance has not,” the Barclays report states.
Analysts note that the share of government guaranteed mortgages (Federal Housing Administration, Fannie Mae, and Freddie Mac) has remained above 80%, while the private securitization market has remained mired in legacy issues, and increasing bank capital charges and rep and warranty put-back concerns have restricted the ability of private capital to compete with government-backed loans.
So what does Barclays say you need to know about the future of housing?
1) The housing market is rebounding, but housing finance has not
Even as the US housing market has rebounded sharply in the past three years, housing finance has not. The extent of government involvement in mortgage lending poses unacceptable risks to the taxpayer. Bank portfolio lending, private-label securitizations, covered bonds, and public/private partnership models offer alternatives to reduce reliance on the government guarantee, but they all come with their own limitations.
2) Corker-Warner is the only likely GSE reform on the horizon
Among existing legislative proposals, the Corker-Warner bill is the most promising, and will likely be the template for any final legislation. It requires the first-loss piece to be backed by private capital but also provides an explicit government backstop in extraordinary circumstances. We estimate that $400-450bn of private capital is needed to absorb the credit risk of all $4-4.5trn in government- guaranteed GSE mortgages, assuming a 10% first-loss piece. The private markets cannot raise this amount easily. In our view, a government retreat will need to be spread over at least 10-15 years, not the five years proposed by Corker-Warner.
3) Lending to lower-credit borrowers will get harder
In addition to legislation, new Qualified Mortgage (QM) rules will make lending to lower-credit borrowers more challenging. Overall, in a new housing finance system, we expect rates to rise only marginally for clean credit borrowers, who currently account for more than three-quarters of originations. But lower credit borrowers could see rates rise by 50bp or higher. Mortgage credit availability is unlikely to worsen from current levels, even with new lending rules.
4) The best likely reform is years away
Passage of housing finance legislation might take a few more years. The longer it takes to pass a bill, the greater the likelihood that some version of the status quo will prevail. But even if the status quo does prevail, the market is likely to move to a situation similar to that envisioned by the Corker-Warner bill, assuming recent involvement and extent of taxpayer protection (both higher with legislation). In sum, a smooth transition to a new housing finance system (with lower government involvement) is possible as long as the transition occurs over an extended period and with a government backstop. But if Congress insists on a purely private solution, or a compressed timeframe for transition, mortgage credit and the US housing market could be impaired.

RealtyTrac: Monthly foreclosure filings reverse course, rise 8%

Monthly foreclosure filings — including default notices, scheduled auctions and bank repossessions — reversed course and increased 8% to 124,419 in January from December, according to the latest report from RealtyTrac.
This marks the 40th consecutive month where foreclosure activity declined on an annual basis, with filings down 18% from January.
“The monthly increase in January foreclosure activity was somewhat expected after a holiday lull, but the sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust,” said Daren Blomquist, vice president at RealtyTrac.
“The foreclosure rebound pattern is not only showing up in judicial states like New Jersey, where foreclosure activity reached a 40-month high in January, but also some non-judicial states like California, where foreclosure starts jumped 57 percent from a year ago, following 17 consecutive months of annual decreases,” Blomquist added.
As a whole, 57,259 U.S. properties started the foreclosure process for the first time in January, rising 10% from December but still down 12% from last year: the 18th consecutive month where foreclosure starts have decreased annually.
Opposite of the national trend, this month’s foreclosure starts increased from a year ago in 22 states, including Maryland (up 126%), Connecticut (up 82%), New Jersey (up 79%), California (up 57%), and Pennsylvania (up 39%).
Scheduled foreclosure auctions jumped 13% in January compared to the previous month. However, it is still down 8% from a year ago, marking the 38th consecutive month where U.S. scheduled foreclosure auctions have decreased annually.

Mortgage apps reverse course, decrease 2%-Refinance share remains frozen

Mortgage applications slightly dropped after a light uptick last week and decreased 2% from a week prior, the latest Mortgage Bankers Association said.
Overall, the refinance share of mortgage activity remained frozen again at 62% of mortgage applications.
In addition, the refinance index declined .2% from the previous week, while the purchase index increased 1% from one week earlier.
The 30-year, fixed-rate mortgage with a conforming loan balance dropped to 4.45% from 4.47%, as the 30-year, FRM with a jumbo loan balance fell to 4.40% from 4.42%.
Furthermore, the 30-year, FRM backed by the FHA grew to 4.13%, compared to 4.12% last week.
Additionally, the 15-year, FRM dipped to 3.49% from 3.53%, and the 5/1 ARM decreased to 3.11% from 3.15%.
“Despite what appears to be a small drop in applications, we continue to see mortgage rates defy the effects of Fed tapering. Interest rates have fallen steadily since the beginning of the year, thanks in large part to weaker data on employment," Quicken Loans Vice President Bill Banfield said.
"These interest rate levels will likely lead to increased refinance and purchase activity over the coming weeks,” he added.

Home Prices Rose in Fewer U.S. Markets in Fourth Quarter

Prices for single-family homes rose in 73 percent of U.S. cities in the fourth quarter, fewer than in the previous three months, as surging values in the past two years started to reduce affordability.
The median transaction price for an existing home climbed from a year earlier in 119 of 164 metropolitan areas measured, the National Association of Realtors said in a report today. In the third quarter, 88 percent of markets had increases.
While tight inventories and improving employment are bolstering the housing recovery, home-price gains are poised to decelerate as an increase in mortgage rates from record lows cuts into affordability. Values have been rising faster than incomes, particularly in the West, the Realtors group said.
“The housing market is still on a recovery path and that recovery is not done,” Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York, said in an interview before today’s release. “At the same time, the pace of those increases should slow.”
The nationwide median price for an existing single-family home rose 10.1 percent in the fourth quarter from a year earlier to $196,900, the Realtors group said. The gain was 12.5 percent in the third quarter.

Biggest Jumps

The best-performing areas were Atlanta and Sacramento, California, where prices jumped 33 percent and 30 percent, respectively. They were followed by Las Vegas and Riverside, California, with more than 26 percent gains.
The areas with the biggest declines included Elmira, New York, where prices fell 12 percent from a year earlier. Following was the Champaign-Urbana area of Illinois, with an 11 percent drop.
About 26 percent of areas had double-digit gains in prices, down from 33 percent in the third quarter. Areas that had price declines after increases in the previous three months include Cleveland; Spokane, Washington; Newark, New Jersey; and El Paso, Texas.
The Realtors group’s affordability index -- a gauge of median prices, family incomes and mortgage rates -- fell to 175.8 in 2013 from a record high 196.6 in 2012. A measure of 100 means that the median-income household has enough income to qualify for a median-priced existing home. The higher the index, the stronger the household purchasing power.

Equity Gains

“The vast majority of homeowners have seen significant gains in equity over the past two years, which is helping the economy through increased consumer spending,” Lawrence Yun, chief economist of the Realtors group, said in the report. “At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago. This is beginning to hamper housing affordability.”
The most expensive housing market in the fourth quarter was San Jose, California, where the median single-family price was $775,000. It was followed by San Francisco; Honolulu; Anaheim-Santa Ana in California; and San Diego. The lowest-cost metropolitan area was Toledo, Ohio, with a median single-family price of $80,500, followed by Rockford, Illinois; Cumberland, Maryland; and Elmira, New York.

National Association of Realtors Chief Economist- Economy Not Great and Seeing Softness In Housing Market

Lawrence Yun, chief economist at the National Association of Realtors, caught HousingWire’s eye with his recent remarks at the Alabama Commercial Real Estate conference.
Yun gave a decidedly candid assessment of the state of the economy, housing and commercial real estate with a little more red meat, with a little less of the positive that normally comes out of the NAR press room.
HousingWire caught up with Yun Monday and asked him to expand on the central question of his remarks – “Why does it feel like we’re still in a recession?”
“Looking at the economy, last year was overall a sub-par performance with 2% GDP. That is below the historical norm of 3% and it’s been several years of under 3% growth,” he said.
Unemployment is a key factor here, he said.
“This recovery is not feeling right even though unemployment has been declining measurably – from 10% at its peak to 6.6%,” Yun said. “But if you look at the employment rate – not the unemployment rate – you look at how many in the adult population have jobs, and we have not made any progress since the depression began. We are only at 58% of the adult population working now, same as it was in the depth of the recession, and well below the historical trend of 63%.”
And then there is the consumer spending piece of the puzzle.
“Consumer spending has been so-so, muddling along,” he said. “It is implying that consumers are cautious and less confident about the economy.”
That can be seen in business spending, too.
“More importantly with business spending there is a mismatch of the historical relationship between business investment and corporate profit,” Yun said. “”Business investment should follow profit, and that’s not happening. Profit is up but businesses aren’t spending. It implies that businesses are less confident.”
Despite the lack of confidence and the hollow unemployment rate improvement, he still expects growth in 2014.
“Direction wise I see the economy is expanding. I expect 2.5% GDP growth this year. In the 4^th quarter growth was solid but that was one quarter. We need that rate to be consistent for four quarters,” Yun said.
Assuming that growth and concurrent job creation, Yun still sees challenges for housing sales going forward.
“Housing affordability is coming down. You have mortgage rates and prices rising in 2014 but it will take growth and job creation on the other side,” he said. “For the year as a whole I think it will be neutral on housing prices.”
Yun said he is already seeing softness in housing readings for the first quarter, and hopes the remainder of the year will be strong enough to balance it out.

D.R. Horton to return mineral rights to Florida homeowners

The attorney general of Florida, Pam Bondi, announced that homebuilder D.R. Horton (DHI) is sending letters to around 18,000 Florida homeowners to give them the option to receive their mineral rights.
This would include oil and gas exploration. It is not uncommon for homebuilders to retain mineral rights, in an exercise growing more and more contentious according to an in-depth feature on the topic in HousingWire magazine (paywall).
"By my office contacting and working with D.R. Horton, homeowners now have the option to receive their mineral rights, and I encourage affected homeowners to complete the certification form they will receive by February 28," stated Attorney General Pam Bondi.

D. R. Horton previously kept mineral rights from its Florida home sales. The rights were then conveyed to subsidiary, DRH Energy.
Bondi's office said it expects the Florida Legislature to one day provide more guidance on the mineral rights disclosure issue.

Status of the Tax Forgiveness Act

If you’re not aware, the Tax Exemption that saved people on huge tax consequences due to a short sale or foreclosure is gone.  This could definitely put a slow down on the real estate market.  The lack of this exemption could be the very thing that stops someone from going through with that short sale.  These taxes can be devastating to people.

Consider it.  If you do a short sale and you’re “short” $100,000 and you’re in a 30% tax bracket, there’s a nice $30,000 bill you weren’t prepared for.  Yikes.  Yeah, I’d be concerned if I was trying to sell right now and I didn’t have the equity to cover all my costs.  So what do we do?  Well, they can always reinstate the Act.  They can even make it retroactive.  But as of yet, there doesn’t seem to be anything happening.
So we’re recommending that you and your clients get involved and send a message up the Hill.  Find your Congress person and send them a little email telling them to reinstate the Act and make it retroactive.  If enough people do it, it will probably work.  With elections coming around it will probably be something one of them will spearhead and get moving.  Once it’s done we can get those short sales moving again.

Large Banks Hurt Most by Decline in Refis

Mortgage Bankers Association economists estimate that fourth-quarter originations declined by 27% from the prior quarter, but several large banks reported much higher quarterly declines in loan production.
Wells Fargo reported a 37% decline in 4Q mortgage originations as higher rates reduced the refinancing business. JPMorgan Chase reported a 42% quarter-over-quarter decline, Bank of America a 49% decline and U.S. Bancorp a 43% a decline, according to a new Keefe, Bruyette & Woods mortgage banking report.
It appears nonbank originators that rely more on purchase mortgage business probably countered some of the drop-off in loan production by the big banks.
“We believe that nonbanks likely grew market share so the decline for the industry as a whole should be somewhat more moderate than the 40% decline reported by the large originators,” the KBW analysts say.
The MBA estimates originations totaled $293 billion in the fourth quarter, down 27% from $401 billion in the third quarter.
Meanwhile, the large banks also reported higher fourth-quarter declines in loan applications than the 18% reported by the MBA.
“These declines were generally a little higher than our estimates and are on top of substantial declines in the third quarter as well,” the KBW report says.  “We expect lower applications to negatively impact 2014 mortgage banking results.”

Delinquent mortgages heal 4 years straight

The market continued to show significant, sustained improvement in the nation’s inventory of delinquent mortgages for the fourth consecutive year in a row in 2013, along with recording the second consecutive year of significant improvement for those in foreclosure, the latest Black Knight Financial Services report found.
“In many ways, 2013 marked an abatement to crisis conditions in the U.S. mortgage market,” said Herb Blecher, senior vice president of Black Knight Financial Services’ data & analytics division.
“Delinquencies neared pre-crisis levels, foreclosure inventory declined 30% over the year, new problem loan rates improved in both judicial and non-judicial foreclosure states, and foreclosure starts ended the year at the lowest level since April 2007,” Blecher added.
2013 was also the best year for property sales since 2007, with totals through November outnumbering the full year totals for each of the prior three years.
However, Blecher explained higher interest rates and seasonality pushed monthly originations to the lowest level since 2008, and the current interest rate environment seems to have also brought an end to the refinancing wave we’ve observed for the last several years.
Meanwhile, national home price levels increased 8.5% year-over-year through November 2013.
“We did see home prices in judicial states generally recovering at a slower pace than their non-judicial counterparts. A similar situation existed with regard to negative equity improvement, which also occurred more slowly in those areas with extended foreclosure processes,” Blecher said.
In addition, 75% of loans that are either seriously delinquent or in foreclosure are underwater, which has had a pronounced effect on reducing overall negative equity numbers.