October Research has published there 2012 "State of the Industry". It is available for free at http://www.thetitlereport.com/TTR/IndustryReport2012.aspx . It contains sections about:
Real Estate
Gradual housing recovery expected, but sleeper issues creeping up
Title Insurance
Distressed market to define title insurance business in 2012
Homebuilders
Homebuilders in 2011: Bubble states hold down housing starts
Mortgage
Consumer confidence improves, but mortgage markets remain constricted
Appraisal
Appraisal industry battles continue into 2012
Settlement Services Law
Business-changing issues loom in 2012
RESPA
RESPA in 2012: The evolution of a titan
The Dodd-Frank Act
Dodd-Frank in 2012: big issues, little certainty
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January 18, 2012
Fannie Mae Predicts 'Moderate Growth' in 2012
The U.S. economy is projected to grow 2.3 percent for the year, according to Fannie Mae’s Economics & Mortgage Market Analysis Group.
Growth will be affected by “fiscal policy issues and political economic uncertainty,” according to Fannie Mae.
The upcoming presidential election, the healthcare debate, and the sovereign debt crisis in the euro zone are three wild cards causing concern for Americans.
Recent improvements in employment have elevated consumers from their “summer rut,” and the housing market is showing some positive indicators, though movement is slow.
“We’re entering 2012 with decent momentum, especially on the employment side,” said Doug Duncan, Fannie Mae’s chief economist.
However, Duncan suggests this momentum will fade over the first half of this year amid “policy changes and challenges that involve the global economy, the domestic economy, and the housing sector.”
Duncan predicts “a year of moderate growth edging away from the 2011 threat of a double dip.”
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From ALTA Advocacy Update by Michelle Korsmo, ALTA CEO (1/17/12) | Property Records Education Partners (PREP)
Housing Policy & Data
Rates for 30-year fixed-rate conventional mortgages fell 2 basis points to a new record low of 3.89% last week. The latest Beige Book from the Federal Reserve Banks continues to show a growing economic recovery led by consumer spending. However, the news was not all bright, as continued weakness in the housing market holds back a robust economic recovery. In the latest round in the Federal Reserve’s push for a broader mortgage refinancing program, a new study from the Federal Reserve Bank of New York shows that the economic benefit of home-loan refinancing to consumers far exceeds the effect of lost returns to investors who provide the residential financing. In the paper, the New York Fed argues that government or foreign investor (who own about 47% of securities backed by residential mortgages) spending on U.S. goods and services doesn’t depend “to any significant degree” on the income from their bonds. Meanwhile, another 8.3% of MBS are held by insurance and pension funds whose spending would spread out over a long period of time. However for distressed homeowners, 50 cents of every dollar saved in a mortgage payment is recycled back through the economy as additional spending.
In December banks filed their lowest number of foreclosures since November 2007. Foreclosures were down 35% in 2011, due to significant delays related to documentation and legal issues. However, these low numbers may only be temporary since there is a backlog of 3.5 million seriously delinquent mortgages. If banks get more aggressive on foreclosures, it could have a further dampening effect on home values. Analysts continue to get more bullish on home builders as evidence points to a resurgence in new construction in 2012. On Wednesday, Lennar Corp. reported that its fourth-quarter orders surged 20% from a year earlier, far surpassing analysts’ expectations. (Some analysts admitted they thought orders would decline.) Meanwhile, the latest National Association of Home Builders/First American Improving Markets Index shows that the number of areas showing improving market conditions jumped to 76 in January, up from 41 a month earlier. Could the market’s appetite for private label mortgage securities be returning? Redwood Trust Inc., the only company to issue so-called private label mortgage bonds since the housing market collapsed three years ago, sure hopes so as it prepares for its fourth such deal since 2008. The new issue of at least $405 million is larger than the two it sold in 2011. The market for privately issued residential mortgage-backed securities, which during the boom funded most of the U.S. housing market, has shrunk to $1.1 trillion outstanding from $2.4 trillion in 2007. Despite extremely stringent underwriting criteria (the mortgages have an average loan-to-value ratio of 62.8%, and average credit scores of 770), Redwood is adding large credit enhancements to warrant the necessary AAA rating.
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U.S. stocks rise with builder sentiment - Market Snapshot - MarketWatch
NEW YORK (MarketWatch) — U.S. stocks rose Wednesday, sending the S&P 500 Index to a close above 1,300 for the first time since July 28, on improved sentiment in housing and as Goldman Sachs Group Inc.’s earnings beat expectations.
“We started off on a positive footing because certain financial earnings weren’t as bad as investors had feared, but most of the uptick came from home-builders’ confidence reaching a level not seen since 2007,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
Newmark: Curb your enthusiasm
Mean Street host Evan Newmark urges bankers and traders on Wall Street to lower their expectations when it comes to earnings and prosperity. (Photo: AP)
“Now we have two areas, jobs and housing, which are critical foundations, and both are seeing signs of improvement. Plus, the euro /quotes/zigman/4867933/sampled EURUSD +0.01% is back above $1.28 — if you’re going to use a barometer for progress in the EU, the euro is as good as any,” Ablin added.
The Dow Jones Industrial Average /quotes/zigman/627449 DJIA +0.78% rose 96.88 points, or 0.8%, to 12,578.95.
The S&P 500 /quotes/zigman/3870025 SPX +1.11% added 14.37 points, or 1.1%, to 1,308.04, with the technology sector, and chip manufacturers in particular, gaining after circuit maker Linear Technology Corp. /quotes/zigman/74810/quotes/nls/lltc LLTC -0.06% said it expects revenue to rise as much as 8% in its third quarter. Read more on Linear Tech’s results leading rally in chip stocks.
Web portal Yahoo Inc. /quotes/zigman/59898/quotes/nls/yhoo YHOO -0.38% 3.2% rose on news that co-founder Jerry Yang is severing all ties to the company he co-founded. Read more about Yahoo.
Microsoft Corp. /quotes/zigman/20493/quotes/nls/msft MSFT +0.32% , International Business Machines Corp. /quotes/zigman/230066/quotes/nls/ibm IBM +0.59% , Intel Corp. /quotes/zigman/20392/quotes/nls/intc INTC +0.12% and General Electric Co. /quotes/zigman/227468/quotes/nls/ge GE +0.05% are among the heavyweights still on tap to report this week, and results from any “could give the market a lift or dampen it,” according to Fred Dickson, chief investment strategist at Davidson Cos. in Lake Oswego, Ore.
The Nasdaq Composite Index /quotes/zigman/123127 COMP +1.53% climbed 41.63 points, or 1.5%, to 2,769.71.
For every stock losing ground about four gained, with less than 800 million shares trading hands on the New York Stock Exchange. NYSE composite volume was about 4 billion.
Building blocks
Investor sentiment and the euro /quotes/zigman/4867933/sampled EURUSD +0.01% were bolstered by reports the Greek government might reach a deal with its private creditors over a debt swap in coming days. Also, the International Monetary Fund is proposing hiking its lending capability by as much as $500 billion. Read more on the IMF and also read WSJ article on Greek debt talks resuming.
Goldman Sachs /quotes/zigman/188479/quotes/nls/gs GS +0.18% shares jumped 6.8% after the investment bank reported results that beat Wall Street’s expectations, while Bank of New York Mellon Corp. /quotes/zigman/445224/quotes/nls/bk BK -0.05% shares slid after its earnings fell 26% Read analysis of Goldman earnings.
“Goldman Sachs broke a trend” of earnings disappointments from the banking sector, said Dickson.
Stock-index futures had retained modest gains after the government reported wholesale prices unexpectedly fell last month, data supportive of the Federal Reserve’s benign view on inflation. Read more on wholesale prices.
A measure of builder confidence in the housing sector rose for a fourth consecutive month in January to hit its highest level since mid-2007, with builder-related shares including PulteGroup Inc. /quotes/zigman/129784/quotes/nls/phm PHM -0.38% and Lennar Corp. /quotes/zigman/232035/quotes/nls/len LEN +0.22% advancing more than 4%. Read more on home builders.
Separately, figures from the Federal Reserve had U.S. industrial production rebounding last month, climbing 0.4% after a revised 0.3% drop in November. Read more on industrial output.
“Investors are weighing a combination of some reasonable economic data, and data we saw from overseas looked OK, so no bad European news,” remarked Davidson’s Dickson.
Add EURUSD to portfolio 
Kate Gibson is a reporter for MarketWatch, based in New York.
Nice to see some good news
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January 13, 2012
Voters Oppose Policies That Threaten American Homeownership
A group convened on the steps of the South Carolina State House Thursday to express their support of homeownership and their opposition to policy changes that might threaten American homeownership.
The group – consisting of Realtors, housing industry professionals, politicians, business leaders, and community leaders – assembled to encourage elected officials “to protect homeownership from threats including scaling back or eliminating the mortgage interest deduction, reducing access to affordable mortgages and loans for home buyers and small businesses, and the foreclosure crisis,” according to an announcement on the National Association of Home Builders’ (NAHB) website.
The outlook expressed at the rally mirrors widespread sentiment uncovered in a recent NAHB survey conducted earlier this month.
About three-fourths of American voters said it is “appropriate and reasonable” for the federal government to promote homeownership through tax incentives.
This view was shared by Democrats (84 percent), Republicans (71 percent), and Independents (71 percent) alike.
“Those running for office in November need to understand that voters will not look kindly on any candidates who seek to dismantle the nation’s long-term commitment to homeownership,” said Bob Nielson, president of NAHB.
In fact, while 73 percent of voters object to an elimination of the mortgage interest deduction, 68 percent claim they are less likely to vote for a candidate who proposes an elimination of the deduction, according to the NAHB survey. This assertion was consistent across party lines.
The majority of survey respondents also opposed revisions that would limit the reach of the mortgage interest tax deduction, including a reduction in the deduction amount, deduction limits for households earning more than $250,000 per year, exclusion of second homes and home equity loans, and reductions for homeowners with mortgages loans greater than $500,000.
“With the 2012 election season in full swing, candidates running for the White House and Congress would be wise to heed the will of the American voters, who have expressed broad support for government policies that encourage homeownership and oppose efforts to make it more difficult to get a home loan and to tamper with the mortgage interest deduction,” said Celinda Lake, president of Lake Research Partners, one of the firms that conducted the survey on behalf of NAHB.
While Americans continue to harbor concern for the mortgage interest tax deduction, another mortgage-related tax deduction recently slipped out of existence.
A mortgage insurance premium tax deduction expired at the start of the year, according to Bloomberg Businessweek.
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FICO Study Finds That Nearly Half Foresee Mortgage Delinquencies on the Rise | Mortgage News | Daily National and State Headlines
FICO’s quarterly survey of bank risk professionals found growing concern for the stability of the student loan market and deepening fears about the nation’s housing sector. The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), shows that bankers expect delinquencies on most types of consumer loans to rise, balances on credit cards to grow, and global economic forces to put increasing pressure on the U.S. economy. The survey included responses from 312 risk managers at banks throughout the U.S. in November 2011.
Regarding mortgages, 47 percent of respondents expected mortgage delinquencies to rise and 13 percent expected delinquencies to decrease. That is slightly more pessimistic than last quarter. When asked about credit cards, 45 percent expected delinquencies to rise while 21 percent expected a decline. That is also more pessimistic than last quarter and another sign of deteriorating confidence among bankers. In addition, 54 percent of respondents expected credit card balances to increase. These expected increases are likely due to higher spending by some consumers and financial stress for other consumers who are unable to pay down their balances.
Student loan debt now exceeds credit card debt in the U.S., with experts estimating that $750 billion in student loans are outstanding. In FICO’s survey, 67 percent of respondents expected delinquencies on these loans to rise. That is 19 percentage points higher than last quarter. Only eight percent of respondents expected a decline in delinquencies.
“Evidence is mounting that student loans could be the next trouble spot for lenders,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “A significant rise in defaults on student loans would impact lenders as well as taxpayers, who could be facing big losses due to these defaults. Our survey results underscore the ongoing challenges that millions of American households face as they try to cope with their debt during these uncertain times.”
Survey respondents were also asked about global issues that could put pressure on the U.S. economic recovery. When asked about the most likely trigger for a possible double dip in the U.S. economy, the Eurozone debt crisis was cited most often (38.8 percent), just edging out U.S. government policies (38.4 percent). Another 19 percent are most concerned about the lack of spending and investment by U.S. companies.
Survey respondents were also asked about the economic growth of China as it relates to the future strength of U.S. consumers. Sixty-five percent of respondents felt that the global influence of Chinese consumers would overtake that of U.S. consumers within 5-10 years. By contrast, 28 percent felt that U.S. consumers would continue to wield more influence for another 20 years or longer.
“Whether it’s debt trouble in Europe or economic growth in Asia, there are significant implications for the near-term and long-term strength and health of the U.S. economy,” said Jennings. “There are risks, challenges and opportunities all around us. To compete in this increasingly complex global environment, we’re seeing more U.S. companies embrace innovative analytic technologies to help them understand and navigate the global playing field.”
Auto lending had a fairly balanced outlook with 33 percent of respondents expecting an increase in delinquencies, 22 percent expecting a decrease, and 45 percent expecting no change in the level of delinquencies.
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FICO Study Finds That Nearly Half Foresee Mortgage Delinquencies on the Rise | Mortgage News | Daily National and State Headlines
FICO’s quarterly survey of bank risk professionals found growing concern for the stability of the student loan market and deepening fears about the nation’s housing sector. The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), shows that bankers expect delinquencies on most types of consumer loans to rise, balances on credit cards to grow, and global economic forces to put increasing pressure on the U.S. economy. The survey included responses from 312 risk managers at banks throughout the U.S. in November 2011.
Regarding mortgages, 47 percent of respondents expected mortgage delinquencies to rise and 13 percent expected delinquencies to decrease. That is slightly more pessimistic than last quarter. When asked about credit cards, 45 percent expected delinquencies to rise while 21 percent expected a decline. That is also more pessimistic than last quarter and another sign of deteriorating confidence among bankers. In addition, 54 percent of respondents expected credit card balances to increase. These expected increases are likely due to higher spending by some consumers and financial stress for other consumers who are unable to pay down their balances.
Student loan debt now exceeds credit card debt in the U.S., with experts estimating that $750 billion in student loans are outstanding. In FICO’s survey, 67 percent of respondents expected delinquencies on these loans to rise. That is 19 percentage points higher than last quarter. Only eight percent of respondents expected a decline in delinquencies.
“Evidence is mounting that student loans could be the next trouble spot for lenders,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “A significant rise in defaults on student loans would impact lenders as well as taxpayers, who could be facing big losses due to these defaults. Our survey results underscore the ongoing challenges that millions of American households face as they try to cope with their debt during these uncertain times.”
Survey respondents were also asked about global issues that could put pressure on the U.S. economic recovery. When asked about the most likely trigger for a possible double dip in the U.S. economy, the Eurozone debt crisis was cited most often (38.8 percent), just edging out U.S. government policies (38.4 percent). Another 19 percent are most concerned about the lack of spending and investment by U.S. companies.
Survey respondents were also asked about the economic growth of China as it relates to the future strength of U.S. consumers. Sixty-five percent of respondents felt that the global influence of Chinese consumers would overtake that of U.S. consumers within 5-10 years. By contrast, 28 percent felt that U.S. consumers would continue to wield more influence for another 20 years or longer.
“Whether it’s debt trouble in Europe or economic growth in Asia, there are significant implications for the near-term and long-term strength and health of the U.S. economy,” said Jennings. “There are risks, challenges and opportunities all around us. To compete in this increasingly complex global environment, we’re seeing more U.S. companies embrace innovative analytic technologies to help them understand and navigate the global playing field.”
Auto lending had a fairly balanced outlook with 33 percent of respondents expecting an increase in delinquencies, 22 percent expecting a decrease, and 45 percent expecting no change in the level of delinquencies.
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January 11, 2012
Fed Pushes Refinancing, But Obstacles Abound - Developments - WSJ
By Alan Zibel
- Associated Press
- Fed Chairman Ben Bernanke
Does the Federal Reserve have good ideas for the housing market? That’s been the question since the Fed published its paper on housing last week.
Critics see the Fed’s foray into housing policy as an irresponsible deviation from the central bank’s mission of managing interest-rate policy. Supporters of more aggressive action to stabilize the housing market argue that the Fed is playing a valuable role in pushing the Obama administration and regulators to do more.
All of this debate ignores something that’s become increasingly clear: Due to practical and political limitations, changes to the government’s response to the foreclosure crisis are likely to involve tweaks on the margins rather than a massive revamp.
The Fed’s paper delved into detail about ways the Obama administration could encourage more “underwater” homeowners who owe more on their loans than their properties are worth to refinance at today’s ultra-low rates. Here are some issues to consider:
So what did the Fed suggest on refinancing?
In their paper, Fed officials suggested ways to further revamp a program launched in February 2009 that allowed homeowners with mortgages backed by government controlled mortgage-finance companies Fannie Mae and Freddie Mac to refinance if their properties have sunk dramatically in value.
The initiative, called Home Affordable Refinance Program, or HARP, is already being expanded under changes rolled out in October that have been dubbed HARP 2.0.
Why aren’t those changes sufficient?
Fed officials have applauded the changes rolled out by the Obama administration and the Federal Housing Finance Agency but say more could be done to both improve HARP and reach borrowers who currently aren’t eligible for the program. They say the program could be expanded to help an additional 1 million to 2.5 million homeowners who don’t have loans backed by Fannie or Freddie.
Doing so, however, is tougher than it sounds. As the Fed paper notes, Congress would need to change the rules by which Fannie and Freddie operate — an unlikely proposition the current environment of hyper-partisan gridlock.
By law, Fannie and Freddie are barred from buying new loans in which borrowers owe more than 80% of their home’s current value — unless the borrower pays for mortgage insurance. The HARP program allows those loans to be refinanced because Fannie or Freddie already guarantee them and are on tap for losses if the borrower defaults. But Fannie and Freddie are unlikely to be able to take on new “underwater” loans that they did not already guarantee.
The Fed paper, however, argues that allowing these borrowers to refinance through HARP would aid the economy and housing market, and therefore benefit Fannie and Freddie. Allowing those homeowners to refinance could reduce borrower’s payments “potentially reducing pressure on the housing market,” the Fed paper said.
What would expanding refinancing further mean for Fannie and Freddie?
Doing so would require a “potentially large” expansion of Fannie and Freddie’s balance sheet. That’s likely to be a tough sell at a time when many policy makers want to deemphasize Fannie and Freddie. “This may be the most politically unpalatable of the recommendations,”” wrote Rob Rowan, an analyst with Fitch Ratings.
Furthermore, a massive refinancing proposal, which has long been rumored, is unlikely to come to pass, largely because it could dry up investment in the market for mortgage-backed securities, which needs to keep humming so Americans can obtain home loans.
What else did the Fed propose?
The Fed paper also suggested some more tweaks. Regulators further reduce fees that Fannie and Freddie charge for higher-risk borrowers who refinance (those fees were already cut in the October announcement).
Fannie and Freddie could also “more comprehensively” waive their right to send back defaulted bad loans to lenders if they are refinanced through HARP. The paper noted that Fannie has taken steps to streamline refinancing by reducing that “putback” risk for all loans — including borrowers who owe less than 80% of their home’s current value. Establishing the same requirements for Fannie and Freddie, the paper said, “could facilitate more refinancing among this group of borrowers.”
Brad German, a Freddie Mac spokesman, defended his company’s policy. “We believe we have struck a balance where we are providing a streamlined refinance opportunity for borrowers while also maintaining our rights as investors to enforce quality,” he said
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Nearly One Million Loan Mods Granted Through November | Mortgage News | Daily National and State Headlines
Tue, 2012-01-10 10:40 — NationalMortgag...HOPE NOW has released its November 2011 data showing that permanent loan modifications totaled almost 84,000 for the month, bringing the total for 2011 to approximately 969,000. Since HOPE NOW began tracking foreclosure prevention data in 2007, member mortgage servicers have completed 5.13 million total permanent loan modifications for homeowners nationwide. Additionally, HOPE NOW Executive Director Faith Schwartz announced the cities for homeowner outreach in the first quarter of 2012 that include expanded efforts to assist at-risk military homeowners as well.
“The mortgage industry and its partners have worked hard for homeowners nationwide," said Schwartz. "With almost one million loan modifications completed in the first 11 months of 2011 and over five million since 2007, it is clear that efforts to assist at-risk families via all available channels are bearing some fruit."
Homeowner events are already in the advanced stages of planning for Charlotte, N.C.; Miami, Fla.; Tampa, Fla.; Las Vegas; Sacramento, Calif. and Los Angeles in the first quarter of 2012.
"There are more alternatives to foreclosure than ever before for homeowners through federal programs, proprietary modifications, and state level initiatives such as Hardest Hit Funds," said Schwartz. "Mortgage servicers and non-profit, housing counselors are using all tools at their disposal to find options that fit each individual homeowner’s situation whenever possible. The emphasis continues to be on improving the customer experience through enhanced technology, single point of contact and leveraging all tools available to assist with foreclosure prevention, which in some cases includes graceful exits."
Since HOPE NOW began reporting data in 2007, the mortgage industry has completed 5.13 million loan modifications for homeowners. This includes approximately 4.22 million proprietary modifications and 909,953 completed under the Home Affordable Modification Program (HAMP). From January through November 2011, there were approximately 969,000 modifications, 639,000 proprietary and 330,303 completed under HAMP.
"As we move into the heart of the first quarter of 2012, HOPE NOW, its government, non-profit and state partners have already planned multiple face to face outreach events in key markets," said Schwartz. "Additionally, HOPE NOW has worked with several military partners to implement events geared towards a specialized segment of at-risk military homeowners who have a unique set of mortgage challenges."
Of the 84,000 loan modifications for the month of November, approximately 57,000 were proprietary and 26,877 were HAMP modifications. According to the survey data, the inventory of 60 day plus delinquencies is 2.77 million for November 2011, up from the 2.65 million reported in October. Foreclosure starts for November 2011 decreased from the previous month—166,000 compared to 209,000. Completed foreclosure sales increased for the month—71,000 compared to 64,000.
Key loan modification data points for November 2011:
All loan modifications
Total modifications were approximately 84,000:
►57,000 were proprietary.
►26,877 were completed under HAMP.Total permanent loan modifications for homeowners in 2011 are approximately 969,000:
►639,000 were proprietary
►330,303 were completed under HAMPProprietary loan modification characteristics (November 2011):
►Loan modifications with reduced principal and interest payments accounted for approximately 68 percent (39,000) of all proprietary modifications.
►Loan modifications with reduced principal and interest payments by 10 percent or greater accounted for approximately 66 percent (38,000) of all proprietary modifications.
►Fixed-rate modifications (initial fixed period of five years or more) accounted for approximately 83 percent (47,000) of all proprietary modifications.
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January 06, 2012
Five Issues for Housing in 2012 - Developments - WSJ
By Nick Timiraos
- Associated Press
Trying to figure out where the housing market is headed in 2012 offers a strong sense of déjà vu: The market feels just as it did at the beginning of 2011, when many pundits optimistically predicted that housing would finally hit bottom. The housing market didn’t deteriorate in 2011, but it didn’t firm up either amid an economic recovery that struggled to find its footing.
So what does 2012 hold? For one, the story will be local. While many housing markets rose together during the boom and fell together during the bust, they’re exiting the downturn at different speeds, and so it’s not very useful to talk about a “national” housing market.
With that caveat in mind, here’s a look at five key issues that will help determine whether prices stabilize and sales improve in the coming year:
1. Confidence and jobs: The housing market badly needs the economy to add more jobs to stimulate demand for home purchases and to prevent mortgage delinquencies from rising. The good news is that with prices down by 30% from their peak and mortgage rates at their lowest recorded levels, housing is more affordable than it has been in decades. But many would-be buyers are worried about buying today if prices are going to be lower tomorrow. Others don’t want to buy a house until they have more evidence that they’re not going to get laid off or see their hours cut back.
2. Foreclosures: Whether home prices hit a floor this year also relies on how banks manage a huge overhang of foreclosed homes that they haven’t yet taken back and resold. Banks and other mortgage investors own around 440,000 foreclosed properties, but there’s another 3.4 million loans in foreclosure or serious delinquency, according to estimates by Barclays Capital. Because banks are faster to cut prices to unload inventory than are mom-and-pop sellers, home values can fall further as the share of distressed sales rises.
This is one by reason why policymakers at the Federal Reserve and elsewhere are talking about converting some of those foreclosed homes into rental properties. Look for some pilot programs where government entities test the concept in 2012.
3. Rents: Apartment rents are rising as vacancy rates drop to levels that are already lower than the low point in 2006 during the previous economic cycle. If low mortgage rates aren’t enough to give urgency to would-be buyers, rent hikes could accelerate buyers’ decisions to take the plunge.
4. Mortgage credit and rates: Federal policymakers have taken extraordinary steps to keep mortgage rates low and federal-backed entities are responsible for backing nearly nine in 10 new mortgages. But it’s still hard for many buyers to get a loan because banks are demanding lots of documentation of borrowers’ incomes, and appraisals are tanking some deals. When appraisals come in below agreed upon sales prices, sellers must drop prices or buyers must put down more cash. Banks will need to put their legacy-loan problems behind them before there’s much easing in lending standards.
Other wildcards remain on the lending and rates front: will the Federal Reserve initiate another round of buying mortgage-backed securities—a step known to some as “quantitative easing”—to lift the economy? Will continued litigation and demands that banks buy back defaulted loans from mortgage titans Fannie Mae and Freddie Mac lead them to be more stingy with mortgage credit? And will other lenders move in to fill that void? Will the government do more to juice up refinancing programs? Will rates rise as the government attempts to draw back private capital by raising the fees that Fannie and Freddie charge to lenders?
5. Regulation: Many analysts don’t expect Congress to make major changes to Fannie Mae and Freddie Mac during the election year, but several major regulatory changes could significantly reshape the future of the lending landscape in 2012. Dodd-Frank Act lending rules that have yet to be spelled out by regulators will influence how banks price loans that are bundled and sold into securities. Another set of rules will determine how banks must satisfy provisions for them to determine that a borrower has the ability to repay a mortgage.
Meanwhile, the regulator that oversees Fannie and Freddie is revamping the way that mortgage companies are paid for collecting loan payments. This could lead to a broader shakeup in the mortgage industry that ultimately influences how much borrowers are charged for mortgages and how banks handle loans that fall into delinquency.
Readers, what issues do you think are most worth watching in the coming year?
Follow Nick @NickTimiraos
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