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FHA announces significant policy changes
The Federal Housing Administration (FHA) insures about 30 percent of new loans, and its health is vital for the housing market. But as foreclosures have risen, the government agency has seen its losses rise and its reserves sink below the minimum level required by Congress. According to the Mortgage Bankers Association (MBA) more than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans. In addition, some unscrupulous operators have shifted their business to the FHA after the subprime business went bust. Last week, the FHA served subpoenas on 15 mortgage companies with suspiciously high default rates for FHA loans, part of a broad crackdown on dubious lenders. To address the problems, the FHA announced policy changes designed to more revenue into the agency, while at the same time keeping loans available. The changes include: 1) homebuyers will Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge. Borrowers will still be able to wrap these fees into the total amount borrowed. 2) homebuyers will need a credit score of at least 580 to qualify. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.
Mortgage demand up for third week as rates drop
Borrowers are rushing to take advantage of low borrowing costs and other incentives while they last. The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending January 15, 2010. The Market Composite Index increased 9.1 percent on a seasonally adjusted basis from one week earlier, and on an unadjusted basis it increased 10.4 percent compared with the previous week and decreased 52.3 percent compared with the same week one year earlier. The Refinance Index increased 10.7 percent from the previous week and the seasonally adjusted Purchase Index increased 4.4 percent from one week earlier. The unadjusted Purchase Index increased 9.8 compared with the previous week and was 19.1 percent lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 1.0 percent. The four week moving average is up 1.1 percent for the seasonally adjusted Purchase Index, while this average is down 2.4 percent for the Refinance Index. The refinance share of mortgage activity increased to 71.7 percent of total applications from 71.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.1 percent from 4.0 percent of total applications from the previous week. Average 30-year mortgage rates dropped to 5 percent last week, and it's still before the deadline to take advantage of the government's extended and expanded federal tax credit. Despite these lures to buyers, the fallout from unemployment, underemployment and the ongoing sale of foreclosure properties continue to keep many potential buyers out of the market, and housing is unlikely to gain much traction until these barriers start to fall.
Brown win a major upset for Obama's agenda
Republican Scott Brown won a bitter U.S. Senate race in Massachusetts yesterday against Democratic state Attorney General Martha Coakley, sending shudders of fear through Democrats facing tough races in November's congressional elections. Massachusetts last elected a Republican to the Senate in 1972, and 62 percent of the state's vote in the 2008 presidential election went to Obama -- if the Democrats have lost in a heavily Democratic state like Massachusetts, they are on track for a nationwide drubbing in the November elections. Just as important, the Massachusetts result dealt a stunning blow to President Barack Obama's current legislative agenda and cast doubt on the fate of his sweeping healthcare overhaul, by robbing Democrats of the crucial 60th Senate vote they need to overcome Republican procedural hurdles. Brown, a Massachusetts state senator, had promised to be the pivotal 41st Republican vote against the healthcare overhaul in the 100-member Senate. "People don't want this trillion-dollar healthcare plan that is being forced on the American people," Brown told cheering supporters at a Boston hotel who chanted "41" and "Seat him now." He said voters were rejecting the closed-door deals that were driving the healthcare debate and he took satisfaction in proving the experts -- and Democrats -- wrong. "They thought that they owned this seat. They thought that they couldn't lose," Brown said. "You all set them straight." Independent, moderate voters swung heavily in favor of the Republican Brown, backing a widely held belief that they are shrinking away from the extremely liberal agenda Obama and the Democratic Congress have been pursuing.
BOA reports loss
Losses at Bank of America (BOA) were $5.2 billion in the fourth quarter, as its results were squeezed by the company's decision to return bailout money owed to the government. The nation's biggest bank said Wednesday that repaying funds from TARP, or the Troubled Asset Relief Program, hurt profits by $4 billion during the quarter. Not including the one-time charge, the company would still have reported a loss of $194 million. Bank of America's latest results were worse than Wall Street was anticipating. The company said it lost 60 cents a share while analysts were expecting a loss of 52 cents a share, according to Thomson Reuters. Bank of America's results were also worse when compared to a year ago. The Charlotte, N.C.-based lender lost $2.4 billion, or 48 cents a share, in the fourth quarter of 2008. Brian Moynihan, the bank's newly-installed CEO, characterized the company's latest results as "disappointing". Moynihan replaced Ken Lewis, who agreed to step down following a wave of criticism from shareholders about the bank's controversial purchase of investment bank Merrill Lynch at the height of the financial crisis, earlier this year. Moynihan did note that there were some encouraging signs during the quarter, namely stabilizing credit trends within some of its consumer-related businesses. Losses in Bank of America's homebuilder loan portfolio, for example, declined from the third quarter. Overall net charge-offs, or debts the company believes it will never be able to collect, also fell, while the company set aside less money for bad loans during the quarter.
Housing starts fall
The Commerce Department said housing starts fell 4 percent to a seasonally adjusted annual rate of 557,000 units. Analysts polled by Reuters had expected housing starts to rise to 580,000 units. November's housing starts were revised upwards to 580,000 units from the previously reported 574,000 units. Groundbreaking activity dropped a record 38.8 percent to an all-time low of 553,000 units for the whole of 2009. Starts for single-family homes fell 6.9 percent last month to an annual rate of 456,000 units after rising 4.0 percent in November. Groundbreaking for the volatile multifamily segment rose 12.2 percent to a 101,000 unit annual pace, after surging 69.8 percent in November. New building permits, which give a sense of future home construction, rose 10.9 percent to 653,000 units last month, the highest since October 2008. That compared to analysts' forecasts for 590,000 units. For the whole of 2009, permits dropped 36.9 percent, the department said. The inventory of total houses under construction dropped 3.8 percent to a record low of 511,000 units last month, while the total number of permits authorized but not yet started rose 8.4 percent to 95,800 units.
Obama's popularity plummeting
According to a new NBC News/Wall Street Journal poll, President Obama and his Democratic Party have declined considerably in popularity in the year since he took office, weighed down by public discontent over the economy and the health care debate in Congress. The telephone poll of 1,002 adults, conducted Jan 10-14 with an error margin of 3.1 percentage points, showed both the economy and proposed health care legislation as heavy political burdens for the party in power. 55% of Americans disapprove of Obama's handling of health care reform. Nearly half call Obama's health care initiative "a bad idea" that would constitute "a step backward." A majority worries that the proposed legislation before Congress would impair their quality of care and choice of doctors. Eight in 10 Americans call themselves dissatisfied with the economy; six in 10 call job creation a top priority for Washington, twice as many as name health care. Though two-thirds say Obama inherited rather than caused economic problems, a 49% plurality disapprove the president's handling of the issue. The survey showed that just 48% of Americans approve of Obama's performance in office, while 43% disapprove. That result is down sharply from the 56% approval and 31% disapproval that Obama received last February, shortly after his inauguration. 38% of Americans express positive views of the Democratic Party, compared to 41% with negative views; last February those views were positive by a 49%-31% margin. The result of this storm of discontent: voters split evenly, 41% to 41%, on which party they want to control Congress after November's mid-term elections. In April, Democrats held the advantage by a 48%-39% margin.
Above Post Written by: Chris Mclaughlin with Short Sale Riches.com
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