Say Cheese - A Snapshot of Where We Are Today

We've all read plenty of articles discussing where we were, what happened and who is to blame. Every pundit has predictions as to where we are going and when we will get there. But as Stephen Covey, Tony Robbins and the rest of the "life lessons" crew would say, we must live in, and understand, the present. Here is a snapshot of where we are today.

Deficit

The U.S. government ended its 2009 fiscal year with a deficit of $1.4 trillion according to the Congressional Budget Office. This is the largest since 1945.  

FHA

FHA volume has soared over the past two years. Second quarter 2009 volume alone was $90B. This is up 67 percent from second quarter 2008. But, along with high volumes has also come growing delinquencies. From August 2008 to August 2009, the FHA 90+ day delinquency rate has risen from 6.6 percent to 8.1 percent. 

As a result, the FHA's capital ratio has deteriorated to a point where it is expected to drop below the 2 percent congressionally mandated minimum. This increase in delinquencies has prompted several credit tightening measures, such as proposing higher net worth requirements and pushing broker approval and resulting liability to the lenders. In addition, the FHA issued mortgagee letters, adopting Home Valuation Code of Conduct language for appraiser independence, tightening streamlined refinance guidelines and reducing the validity period for appraisals from 12 months to as little as 120 days.

Housing

Home sales, across all regions, have been holding above year-ago levels. For example, existing home sales in the West have recently been running more than 30 percent higher than sales during the fourth quarter of 2007. Home prices, based on several measures, have also shown signs that they bottomed out earlier this year. According to both FHFA (formerly OFHEO) and Case-Shiller's National Index, home prices have actually increased in their most recent three-month reports.

Available home inventory has also come down to a more balanced level. On average, 8.2 months supply of existing single-family homes and 6.9 months supply of new homes existed in August. According to the California Association of Realtors, inventory in that state has fallen below the "balanced" six months since March of this year. A stronger demand for housing coupled with a lower supply of homes available for sale has potential to keep home prices on an upward trend.

Of course, this is just a snapshot and there are certain local areas where home values have not stabilized and there is some concern among certain pundits that this "recovery" will be short lived and values may drop gain in the near future.

Home Valuation Code of Conduct (HVCC)

The HVCC went into effect May 1, 2009, after an extensive public comments period. The code's main purpose is to protect the appraiser and the quality of the appraisal from undue influence and conflicts of interest. Representatives Travis Childers (D-MS) and Gary Miller (R-CA) co-sponsored legislation, HR 3044, that would institute an 18-month moratorium on the Home Valuation Code of Conduct (HVCC).

Making Home Affordable (formerly known as Homeowner Affordability and Stability Plan)

Since the Home Affordable Modification Program has been instituted, 500,000 loan modification trials have begun. In addition, approximately 85,000 homeowners have refinanced and taken advantage of the substantial benefits offered by the Home Affordable refinance Program (HARP) program.

Private Mortgage Insurance (Genworth-specific)

Genworth announced guideline expansion that took effect on Sept. 21. Click here to learn more.

TARP

October 3, 2009, marked the one-year anniversary of the Troubled Asset Relief Program (TARP). The program was originally intended to purchase so-called "toxic-assets" and take them off banks' balance sheets. It was established as part of the Emergency Economic Stabilization Act of 2008.

The Capital Purchase Program (CPP) allowed the Treasury to spend up to $250 billion purchasing bank equity shares, in order to increase liquidity in the banking sector. So far, the program has spent $134 billion (net of roughly $80 billion in buy-backs and dividends) purchasing stocks from 684 banking institutions.

TARP purchased $40 billion in preferred shares of Bank of America and Citigroup - outside of the CPP. Additionally, the TARP program participated in a multi-agency guarantee of more than $400 billion in assets owned by Citigroup and Bank of America, covering 90 percent of all losses after the first $29 billion and $10 billion, respectively. 

Systemically Important and Failing Institutions Program - $70 billion to support AIG through equity purchases and a capital infusion.

TARP put $80 billion toward loans and equity purchase to General Motors and Chrysler and also provided $5 billion in loans for GM and Chrysler auto-suppliers.

The Treasury has said it will provide up to $80 billion in credit protection for the Fed's Term Asset-Backed Securities Loan Facility. It has offered $20 billion to date.

Through the Public Private Investment Program, the Treasury, in conjunction with the Fed and FDIC, plans to provide up to $100 billion in TARP funds to help lure private investors to purchase toxic and illiquid assets. $10 billion has been allocated so far.

Unemployment

The national unemployment rate is 9.8 percent.