Home-Account.com

Federal Deposit Insurance Corp. Chairman Sheila Bair said banks involved in the U.S. Public-Private Investment Program won’t bid on their own assets to clean-up their balance sheets, which would effectively be an accounting dodge.

“There should be no confusion: Banks will not be able to bid on their own assets,” Bair said today at a Washington news conference.

The FDIC is helping the Treasury Department set up and run the PPIP, which will use $75 billion to $100 billion of Troubled Asset Relief Program funds to entice private investors to buy as much as $1 trillion in distressed mortgage-backed securities and other assets.

Banking groups and the Clearing House Association LLC, a group of 10 lenders including JPMorgan Chase & Co. and Bank of America Corp., are pressing the FDIC to let them use the program to buy their own troubled assets, the Wall Street Journal reported today.

Meanwhile, it seems that enthusiasm may be waning entirely for the proposed PPIP sales, which may be called-off altogether for lack of seller interest. Pressure for the banks to sell the assets has evaporated with changes in the mark-to-market accounting rules and the demonstrated ability of big banks lately to raise capital in the private markets.

It remains to be seen how much interest the fund managers who have applied to take part in the scheme actually bring to the program. While the government subsidies are attractive, fund managers may be leery of making too big a profit in a government program, or being involved at all.

“A significant and growing obstacle to private participation in government bailout plans is that many investors are wary of political backlash and the imposition of additional restrictive conditions post-investment,” wrote accounting firm PriceWaterhouseCoopers in an analysis published this week.

At a Congressional hearing last week, Columbia University economist Jeffrey Sachs urged the government to abandon PPIP. He contrasted the murky program with the much more desirable clarity of an FDIC seizure and resolution.

cringely Uncategorized bank bail-out, banks, FDIC, Obama Administration, PPIP, TARP

Sales of existing homes in the U.S. rose in April as foreclosure auctions and cheaper prices spurred bargain hunters, butt those who think this signals a market bottom would be wise to also notice that inventories of unsold homes have gone up, portending more price drops to come.

Sales were still down 3.5 percent compared with a year earlier.

Purchases increased 2.9 percent to an annual rate of 4.68 million from 4.55 million in March according to the National Association of Realtors. The median price was down 15 percent from a year earlier, the second-biggest drop on record.

The average price of a U.S. home fell 7.1 percent in the first quarter, slower than the fourth quarter’s 8.3 percent drop that was the largest on record, the Federal Housing Finance Agency said in Washington.

A pick-up in sales may eventually help trim the glut of unsold homes and eventually stem the slump in property values. But the number of houses on the market climbed 8.8 percent to 3.97 million in April. At the current sales pace, it would take 10.2 months to sell those homes, up from 9.6 months in March.

Distressed properties accounted for 45 percent of all existing-home sales, but this was down a bit from March, the NAR report showed. First-time buyers accounted for about 40 percent of April sales, also down from March.

Foreclosure filings in the U.S. rose to a record in April for the second consecutive month, Realtytrac Inc., a seller of foreclosure data, said May 13, as the jobless rate climbed to its highest in more than a quarter century. Foreclosure filings jumped 32 percent from a year earlier, the group said.

Recent increases in mortgage rates have hurt owners looking to lower monthly payments. Mortgage applications declined 14 percent last week, led by a plunge in refinancing, a report today from the Mortgage Bankers Association also showed. Still, the group’s purchase measure rose 1 percent, indicating rates are still low enough to spur sales.

Lower mortgage costs are also helping to make buying more affordable. Rates on 30-year fixed loans fell to 4.78 percent in April, the lowest level since Freddie Mac began keeping records in 1972. Federal Reserve purchases of mortgage securities have contributed to bringing down rates, economists said.

“The housing market is beginning to stabilize,” Fed Chairman Ben S. Bernanke said in congressional testimony on May 5. “We continue to expect economic activity to bottom out, then to turn up later this year.”

cringely News FHA, home sales, housing prices, mortgages, National Association of Realtors, News

Mortgage rates are still near historic lows yet hardly any applicants actually qualify for those rates due to a variety of additional points and fees that we’ve covered in this space before.  This effect is masked, to some extent, by the fact that these additional costs are generally NOT mentioned in the weekly report of average mortgage rates issued every Thursday by Freddie Mac.  Those rates — as low as 4.48 percent in the last report for a 15-year fixed mortgage — generally show just the core rate and not the various adders.  So you can have great credit and qualify for that 4.48 rate, but actually GETTING it is something else altogether.

There is also a fight brewing between the government, banks, and mortgage security holders over provisions in new legislation that would immunize loan servicers from lawsuits by investors in mortgage-backed securities.  The government wants to encourage loan modifications, allowing these to happen almost automatically in cases of bankruptcy, where they were traditionally not allowed.  To date all mortgage modification programs have been aimed mainly at those current on their loans which includes an entire class of homeowners who don’t really need loan modifications to stay in their homes.  So the government is doing the right thing, so to speak, but with typical governmental lack of finesse.

The banks hated this idea until they figured out that it would allow them to reconfigure $441 billion in second mortgages THEY hold.  Citibank was the first to see this logic.  So the banks can improve their positions as loan holders, can improve their positions as loan servicers, but of course the mortgage security investors hate this and the government sits in between.  The result of this conflict will only be more delay and confusion in the marketplace, neither of which is good for homeowners.  Sorry.

cringely Pulse freddie mac, mortgage modification, mortgage rates