Home prices rise - Case-Shiller

The Standard & Poor's/Case-Shiller home price index of 20 major cities climbed 1 percent from July to a seasonally adjusted reading of 144.5. While prices are down 11.4 percent from August a year ago, the annual declines have slowed since February. It shows a widespread turnaround with prices rising month-over-month in 15 metro areas since June. "If the increases are consistent across the markets, this is key," said Susan Wachter, Wharton School real estate professor, before the index was released. "Then we're seeing the formation of a bottom." However, rising unemployment and more foreclosures could stifle the rebound. Another unknown is whether a temporary federal tax credit for first-time buyers will be extended to help boost sales. The real estate industry is lobbying Congress to extend the credit past the Nov. 30 deadline. Top Democrats in the Senate are pressing a plan that would prolong the credit but gradually phase it out over the next year.

Dodd tries to buy votes

Senate Banking Committee Chairman Chris Dodd, a Democrat, in what amounts to cynical vote buying, proposed an immediate interest rate freeze on existing balances for the estimated 700 million credit cards in circulation. Dodd is in trouble with voters after being tied to a sweetheart loan scandal earlier this year. Spokeswoman Kirstin Brost said the bill was not a political maneuver and only reinforced Dodd's views that more consumer protections were needed. "At a time when families are struggling to make ends meet, jacked-up rates can quickly create crushing debt," Dodd said in a statement. "People need to be responsible with their money, but they shouldn't be taken to the cleaners by outrageous rates." Banks say that capping interest rates would cut their profits and force them to lend less money, which would reduce spending and worsen the economy. Congress has already passed legislation that puts new rules for credit card lenders into effect come mid-February. The law , signed by President Barack Obama in May, limits when and how banks hike rates. It does not set a cap on the amount of interest lenders can charge. Dodd’s bill is unlikely to go anywhere.

Fannie Mae announces relief for investors

Fannie Mae announced that its new Payment Reduction Plan (PRP) will provide forbearance for borrowers who are ineligible for the Home Affordable Modification Program (HAMP). The mortgage principal and interest payments will be reduced by up to 30% for borrowers qualified for PRP, which replaces Fannie’s HomeSaver Forbearance program. PRP reduces the payments by 30% rather than the previous 50% under HomeSaver Forbearance, because permanent solutions are closer to 30%, Faith said. Faith added that non-owner-occupied properties became eligible under PRP, and owners will receive new options and support for their investment properties and second homes – even though they do not fit under the HAMP umbrella. The US Treasury Department provides capped incentives to servicers for the modification of eligible loans on the verge of foreclosure through HAMP. The PRP will grant transitional support for borrowers who do not qualify for HAMP while more permanent mortgage solutions ar e determined, according to Brian Faith, a vice president at Fannie Mae.

NABE – more jobs gained than lost

U.S. companies are planning to hire and invest more in the near future, according to a survey released yesterday by the National Association for Business Economics (NABE). The survey of 78 NABE members also showed that more companies increased capital spending during the third quarter of 2009 than cut spending, for the first time since October 2008. "NABE's October 2009 Industry Survey provides new evidence that the U.S. recovery is underway," said William Strauss, a senior economist at the Federal Reserve Bank of Chicago. NABE said job losses "appear to be slowly abating" with the percentage of firms cutting payrolls falling to 31% in the quarter from 36%. The percentage of firms adding jobs doubled from an all-time low of 6% to 12% in October. Unemployment stands at a 26-year high of 9.8% in the United States. Economists surveyed by Briefing.com expect another 175,000 jobs were lost in October after employers shed 263,000 jobs in September.

Reverse mortgages have hidden dangers

Panelists at the Information Management Network’s 15th annual ABS East gathering in Miami Beach conference said that in the last two years reverse mortgages have moved beyond the needs-based senior and now see a significant mix of borrowers tapping into the market. This year alone, the percentage of owners with homes valued at above $400,000 is increasing to up to 39% of the reverse mortgage claims in some markets. The panel also said the market is set to grow dramatically, with predictions that the next leg of growth in structured finance will come by way of reverse mortgage resecuritizations, despite warnings that the product is particularly vulnerable to misuse and even fraud.

Annual reverse mortgage volume has topped 110,000 units and $17bn, with top banks like Wells Fargo and Bank of America and large insurance companies like Genworth and MetLife leading the way. Despite a slowdown in originations due to the recession, reverse mortgage originations are continuing at a record pace. “In the reverse mortgage market, seniors face some of the same aggressive lending practices that were common in the subprime lending boom,” said Tara Twomey, an NCLC attorney and author of the report. “Well-funded marketing campaigns and perverse incentives to brokers are targeting seniors’ home equity and using reverse mortgages as their tools.”
 

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