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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.

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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

The S&P Case-Shiller index data for February, 2009 show home prices continue to decline (20
city composite index is down 18.6% year-over-year), but the rate of decline did slow in most regions during the month. Home prices seem likely to fall further (future prices suggest another 10 percent or so this year for the 20 city index), but lower mortgage rates and improving consumer sentiment could help limit the declines, providing some additional support to the economy.

So here’s the big question: if home prices have only another five percent or so to drop nationally, is it still worth waiting to buy?  Clearly not if you are also selling in the same or a similar market, but it may still be worth waiting if you are a new buyer or new to the market and there seem to be a lot of available properties that meet your needs.

Another five percent drop in prices could have significant impact on your down payment.  Instead of putting-down $7,500 (five percent on a $150,000 home for a $142,500 mortgage) you could put down that same $7,500 (5.45 percent on a $142,500 home for a $137,500 mortgage) and save thousands in interest over the life of the loan.  For some purchasers, then, it may still be worth waiting, especially in distressed markets like Las Vegas and Miami.

The 20-city composite index showed a 2.2 percent decline from January (compared to a 2.8 percent decline in January and 2.55 percent decline in December). This index is now 30.7 percent lower than its peak level (July, 2006) and has fallen back to August, 2003 levels. While the year over-year-decline in for the 20-city composite at 18.6 percent is slightly lower than the 19 percent yr/yr decline reported in January, it is equal to December’s, the second largest ever. Since 2000, the index has now increased at a compound annual rate of about 4.05 percent.

The 10-city composite index was 18.8 percent lower yr/yr and 2.1 percent lower sequentially. It is 31.6 percent below its peak levels reached in June 2006. Over the past 10 years, despite the recent decline, this index has still risen at a compound annual rate of about 6.2 percent.

All 20 metropolitan areas showed a sequential and year-over-year decline in February. But for 16 the January/February percent change was smaller than the December/January decline.

The worst year-over year decline in January was in Phoenix (-35.2 percent y/y, -50.8 percent from peak) followed by Las Vegas (-31.7 percent y/y, -48.4 percent from peak) and San Francisco (-31 percent y/y, -44.9 percent from peak).

Several markets showed modest year-over year declines, including Dallas (-4.5 percent y/y, -11.1 percent from peak), Denver (-5.7 percent y/y, -14.3 percent from peak) and Boston (-7.2 percent y/y, -18.5 percent from peak). Along with

the 10 and 20 city composite indices, only Charlotte, Washington DC, Cleveland, and New York
experienced greater declines from January to February than from December to January.

FHFA’s (formerly OFHEO’s) purchase-only house price index (non-seasonally adjusted) increased
1.13 percent in February, but declined 6.43 percent from a year ago. The year-over-year decline in February was lower than that in January and December.

Data from the National Association of Realtors on existing median home prices showed a 2.1 percent
increase in February and 4.2 percent increase in March. Year-over-year declines were 14.1 percent in February and 12.4 percent in March.

cringely Blog, News Case-Shiller, housing prices

There has never been a better time than now to refinance your mortgage – IF you can be approved. Thanks to the Fed, rates have been driven to record lows, though not as low as they appear given the number of rate add-ons dictated by new rules from Fannie Mae and Freddie Mac. The mortgage industry is finally getting in-gear for the refi boom, though approval rates are still in the 30-40 percent range, which is not good. Workouts are required in many cases and the system is still not in place to generate or monitor them. Also there is about to be a fight in Congress about restructuring the mortgage industry that may well lead to some playing of “chicken” in the market that will hurt consumers. So while in the long run things are improving, in the short run we all need a friend in the mortgage business more than ever. We all need Home-Account.

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