Wednesday, March 6, 2013

Thursday March 7 Housing and Economic stories


TOP STORIES:

Fears at Fed of rate payouts to banks - (www.ft.com) US Federal Reserve officials fear a backlash from paying billions of dollars to commercial banks when the time comes to raise interest rates. The growth of the Fed’s balance sheet means it could pay $50bn-$75bn a year in interest on bank reserves at the same time as it makes losses and has to stop sending money to the Treasury. Officials at the US central bank fear it could create a public-relations nightmare after the Fed was lambasted for rescuing banks during the financial crisis. It is one factor prompting some inside the Fed to reconsider the eventual “exit strategy” from easy monetary policy. In an interview with the Financial Times, James Bullard, president of the St Louis Fed, said: “If you think of the profitability of the biggest banks, if you’re going to talk about paying them something of the order of $50bn – well that’s more than the entire profits of the largest banks.”

FHA; Is May 6, 2013 the Day of Reckoning for the New Housing Bubble? - (say-no-to-recourse-loans.blogspot.com) Changes to private mortgage insurance (PMI), are coming on April 1, 2013, and May 6, 2013. In April a minor adjustment to cost will take place. But the dagger in the hearts of subprime borrowers everywhere takes place on May 6. On that day, all mortgages with less than 10 percent down (all FHA 3 percent mortgages are included), will require PMI for the life of the loan. This lending website says this is a minor deal. Sorry, but it is a big deal. PMI has been required for 5 years. It will be required for the life of the loan for less than 10 percent down and 11 years for 10 percent to 19 percent. The question is, will this destroy the infant housing bubble? I have explained that the housing market is too risky now, with few people putting a stable down payment. With the new FHA rules, the risk to borrowers increases greatly. Lots of folks need the car payment for the car not for insurance that retains lenders as the only beneficiary. Private mortgage insurance, required on mortgages with less than 20 percent down, is expensive. And the cost can go up, leaving fewer buyers available to afford your house. Quite often, PMI costs as much as $1000 per year on each $100,000 dollars borrowed. So that works out at a 1 percent charge of over $160 per month on a $200,000 house.

Chinese cities curb housing loans - (www.cnbc.com) Several local governments in China have announced new measures to restrict financing to potential homebuyers, triggering market concerns about a fresh wave of tightening for the property sector. Word of the measures comes as home prices in major Chinese cities started rising again in the second half last year after declining since late 2011 as the central government's strict property-market controls took effect. Under the latest measures, the city of Dongguan in Guangzhou province, Jinhua in Zhejiang province and Kunshan in Jiangsu province have all tightened access to financing from their housing provident funds. Such funds are intended to support first-time home buyers and generally offer below-market rates for loans. The funds are often designed to supplement financing from commercial loans for home purchases.

Monte Paschi Accounts Questioned in Suit Opposing State Bailout  - (www.bloomberg.com) Banca Monte dei Paschi di Siena SpA may face as much as 1.5 billion euros ($2 billion) more losses after misrepresenting derivatives transactions, a consumer group challenging the lender’s bailout alleged in a court filing. Monte Paschi, the world’s oldest lender, is being probed by regulators and prosecutors after using derivatives to hide losses. In one transaction that wasn’t fully disclosed to shareholders, the bank made a money-losing bet on the country’s government bonds in a structured deal disguised as a loan, Bloomberg News first reported on Jan. 17. The bank may have to classify that bet as a credit default swap and record a trading loss as the value of Italian bonds fell after the deal was put in place, consumer group Codacons, based in Rome, said in the court filing.

Contrary to media spin, delinquencies are trending higher - (www.ochousingnews.com)  The mainstream media is obsessed with making people believe the housing market has bottomed. Even if it requires spinning negative news, they write as if they have a duty to bolster consumer confidence. I think market reporters have a duty to the truth, whatever that truth might be. To do less than that, to spin the news like a two-bit realtor, is a disservice to those who may rely on the news for important decisions about purchasing a house. I think much of the mainstream media’s coverage of the housing market is wrong, and when they resort to intentionally spinning bad news, it’s downright shameful.





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