KeNo's Housing and Economic Portal: Wednesday August 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

US house mortgage arrears mount - (www.ft.com) Mortgage delinquencies have risen in nearly all US congressional districts from the levels of the last election, highlighting the political pressure on US policymakers as they gather in Washington on Tuesday to tackle the housing crisis. Tim Geithner, Treasury secretary, and Shaun Donovan, housing secretary, are meeting investors, bankers and public policy experts to discuss housing finance. Investors continue to shun private-sector mortgages, with most new home loans now financed through Fannie Mae and Freddie Mac, the agencies taken over by the government in 2008. Investors on Monday signalled growing concerns about the US economy, pushing bond yields down to the lowest levels since the height of the crisis. Ten-year Treasury yields dropped 9 basis points to 2.60 per cent, the lowest level since March 2009. Seven-year Treasury yields fell to a record low of 1.98 per cent. Mortgage rates have also plunged to record lows but falling borrowing costs have failed to revive the US housing market. Indeed, the Washington deliberations, which will centre on what the level of government support for Fannie and Freddie should be, comes amid continuing pain for homeowners. In the average congressional district, serious mortgage delinquency rates – defined as borrowers more than three months behind on their payments – are 9.4 per cent, compared to 3.3 per cent at the time of the election in 2008, according to a study by Deutsche Bank.

2 Zombies to Tolerate for a While - (www.nytimes.com) Representative Barney Frank was furious. The Massachusetts Democrat had been watching a morning news program that had me on, and soon afterward he was calling my cellphone to fume about that morning’s discussion. The topic? Why it has taken the government so long to address the fate of the zombie mortgage giants, Fannie Mae and Freddie Mac. It is an issue that has been talked about a lot of late. On Tuesday, the Treasury secretary, Timothy F. Geithner, will convene a meeting of government officials and executives like Bill Gross of Pimco and Lewis Ranieri, the father of the mortgage-backed security, to delve into future housing policy and the role played by Fannie and Freddie. On the television program that had stirred Mr. Frank, “Morning Joe” on MSNBC, the prevailing view was that any effort toward a resolution of Fannie and Freddie — government-created mortgage companies that were taken over by the government as the financial crisis mounted — had been put on the back burner during the overhaul of financial regulation. The consensus was that neither Democrats nor Republicans wanted to touch an issue that would dredge up decisions made by both parties over the last decade that looked bad in light of the financial crisis. Fannie and Freddie was now the third rail of American politics. Mr. Frank was having none of that. “I take offense at the idea that we’ve done nothing,” he told me. Far from dragging its feet, he insisted, the government took the bold step of putting Fannie and Freddie into conservatorship in 2008. “There was no political fear to not do it.”

China Reduces Long-Term Treasuries by Record Amount - (www.bloomberg.com) China cut its holdings of Treasury notes and bonds by the most ever, raising speculation a plunge in U.S. yields that sent two-year rates to a record low has made government securities unattractive. The Asian nation’s holdings of long-term Treasuries fell by $21.2 billion in June to $839.7 billion, a U.S. government report showed yesterday. Total Chinese investment in U.S. debt declined 2.8 percent to $843.7 billion, the least in a year, following a 3.6 percent slide in May. China, America’s largest creditor, is cutting back after scrapping its currency peg in June, giving it less reason to buy dollars and invest them in Treasuries. China is also turning more bullish on Europe and Japan, purchasing bonds of both nations. The shift comes as President Barack Obama increases U.S. debt to record levels, counting on overseas investors to buy, as he borrows to sustain the U.S. economic expansion.

No quick fix for Fannie and Freddie seen from meeting - (www.reuters.com) The Obama administration called for "fundamental change" at Fannie Mae and Freddie Mac, but a long, politically explosive debate lies ahead on the future of the bailed-out mortgage finance giants and U.S. housing policy. U.S. Treasury Secretary Timothy Geithner on Tuesday raised basic questions with housing industry leaders about the U.S. government's long-standing role in subsidizing and supporting the $10.7 trillion housing market. "It is not tenable to leave in place the system we have today," Geithner said at a conference hosted by the Treasury Department almost two years after the government seized Fannie Mae and Freddie Mac to save them from collapse. Since then, the two firms have received nearly $150 billion in taxpayer bailout money and have been placed in conservatorship, sharply restricting their past activities. "We will not support returning Fannie and Freddie to the role they played before conservatorship, where they took market share from private competitors while enjoying the perception of government support," Geithner said.

Treasury mulls fix for Fannie, Freddie - (www.nypost.com) Government-owned mortgage behemoths Fannie Mae and Freddie Mac could be converted into giant co-ops co-owned by Wells Fargo, Citigroup, JPMorgan Chase and Bank of America under one plan to be discussed today at a government summit aimed at determining the future of the government-sponsored entities. The co-op is just one of the options that will be bandied about today as the US Treasury convenes to discuss the future of the companies that have become a roughly $150 billion headache to taxpayers and a nagging hangover from the market's epic housing bust. Placing Fannie and Freddie in the hands of big mortgage lenders and having the government charge lenders fees to provide guarantees on that debt is one of a handful of ideas that has been floated to fix a problem that continues to vex the economy even after President Obama signed into law sweeping changes in the financial regulatory landscape. Moderated by Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan, today's daylong summit in Washington represents a small step toward fixing the mortgage companies that guarantee nearly three quarters of the mortgages originated in the US.

For-profit higher-education providers resist regulatory action - (www.washingtonpost.com) The Washington Post Co. and other for-profit providers of higher education pushed back Monday against a government report last week that found many of their former students are not on track to repay their loans. Several industry stocks, including The Post Co.'s, fell after the release of the report related to a federal effort to tighten regulation of for-profit colleges. The Post Co. said in a statement Monday that the federal initiative "could have a materially adverse effect" on earnings of its Kaplan higher-education unit. Late Friday, the Education Department released data on student loan repayment rates that showed 28 percent of Kaplan University's former students are repaying the principal on their federal loans. That was lower than the 36 percent loan repayment rate posted by the for-profit sector overall and significantly lower than the averages of 54 percent for public colleges and 56 percent for private, nonprofit colleges, according to an analysis by the Institute for College Access and Success, based in Oakland, Calif. Borrowers who are not considered to be repaying, education officials said, include those in default or delinquency or situations in which they are not reducing the principal balance.