Author Archive: OCHN Contributor

The housing market and the mortgage market has stalled.   With the elimination of most of affordability products and mortgage rates that can't go too much lower price gains have stopped and lending has greatly decreased, see graph below from Confounded Interest. Now the housing industry is trying to recycle old ideas to stimulate lending activity and home prices.  However with Dodd-Frank most of those affordability products will not qualify as Qualified Mortgages.  This has reduce the ability of banks to inflate home values.  However, there some ways to expand lending by broadening scope of FHA and the GSEs beyond principal residences.  WHY THE FHA SHOULD BE OPENED TO INVESTORS FHA mortgages are supposed to be a vanishing species but the…[READ MORE]

Since the 1920's the suburbs have grow with after the invention of the car and demise of the family farm.  I like and loved growing up in the suburbs, but I wish there was little more open spaces and few more farms.  Core cities have some advantages, but you always have higher criminal activity and a lack of your private space unless you are rich. Because there was so much speculation construction  in 2000's the growth in the suburbs has slowed somewhat, this is just a pause until population growth catches up.  But, so some reason Sam Zell thinks nearly 100 years of growth is going to reserve itself. 'End of suburbia' may nearly be upon us: Sam Zell Young…[READ MORE]

There has been two big gifts to banks in the last month 1) Nearly 4% mortgage rates have returned increasing affordability and 2) The government shutdown.  The biggest feat ever performed in the housing market has been the ability of the Banks, Federal Reserve, and US Government to keep million of homes off the market after the bubble.  The flood of homes hitting would have pushed home prices far below rental parity.  But in the worst recession since the Great Depression a flood homes did not hit the market.  In fact, there has been a housing supply shortage and an inability of entry level homeowners to purchase a house to do competition from cash buyers.  This is how well inventory…[READ MORE]

The rumor came out that FHA would need a bailout and experts said nonsense.   Their "expert" opinion didn't even last 48 hours. FHA is mandated to maintain a reserve fund for the mortgages that they insurance.  Just as a reminder FHA is government backed insurance agency for low down payment loans for first time homes buyers. After the bubble popped and defaults started occurring, the reserve fund, which had more than enough money in 2007, started to run dry.  FHA needed many new borrowers that would pay mortgage insurance premiums which help to replenish the FHA reserve fund.  To accomplish this conforming limits were increased and credit scores qualifications were loosen to attract a larger pool of  borrowers.  Even if…[READ MORE]

It was a big news week with the unTaper, plus with the Debt ceilings battles and Obamacare fights.   There is now a lot of volatility in the market and of course the media has been following those stories.  What didn't make a big news splash was that San Francisco (and now Seattle) might be exploring eminent proposals just like the City of Richmond.   Richmond brought the issue back to the forefront after it was declared dead earlier in the year.  Now, with the  possibility of San Francisco it will make lenders even more nervous.  I just don't think it will be big in the news cycles until San Francisco or Seattle agrees to participate in this program. Et tu, San…[READ MORE]

It's not a secret that loanowners, especially if they have little or no equity, have been able to squat in their homes without paying their mortgages.  The FHFA through Fannie, Freddie, FHA has been encouraging the banks to refinance these loans through an alphabet soup of government sponsored programs.   In addition to these programs, Federal Reserve has pushed mortgage rates lower to encourage these defaulters to modified their loans instead of abandoning their homes in default.   The affect has been keeping these loanowners in their homes and thereby their homes off the market.  Without these efforts the banks have foreclosed on these defaulted mortgages and these homes would flood the market, pushing home prices lower.  The end result…[READ MORE]

This a debate that is still being argued from the beginning of the bubble and I wanted to revisit on this blog.  I really wonder if this debate would be ever settled.  Other subjects such inflation or even the gold are continually debated between blog commentators.  Readers have strong opinion on these subjects, so I doubt the CRA debate, a similarly controversial subject will be settled any time soon.  Of course unless some sort of evidence the pops up and ends the debate. The theory is that Community Reinvestment Act that was passed in 1970's under Carter evolved over time into a  force that allowed mortgage standards to be relaxed to all segments of the mortgage market.  This one act…[READ MORE]

When I hear the name Countrywide I associate it with other companies such as Enron, Worldcom, and Arthur Andersen.   The legacy of Countrywide is infamous for the political favors it purchased in Congress with it's Friends of Mozzila bribes and the allegedly fraudulent loans it underwrote and sold to investors.  Countywide did more than underwrite subprime loans to unqualified borrowers it also forged documents. So, when Countrywide was sinking, I was scratching my head when Bank of American decided to purchase Countrywide for $4 billion dollars.  Even back then Countrywide's reputation was already dubious even if you weren't a bank insider.  Five years later it might have cost Bank of America $40B dollars, or in a percentage calculation it's negative…[READ MORE]

First Blackrock and other hedge funds companies started to scale back or completely drop their large purchases of Single Family Residences. Actually, the very first investors of SFR's before the Blackrocks were people like IR that study the cash flow of these homes in the early days of the housing correction. Then after Blackrock this activity was picked up by small LLC type companies and cash buyers. In addition to these domestic investors, foreign investment has been a big factor for the previous 18 months. Now, this trend from foreign investors also seems to be reversing. Analysis: Higher prices sap foreign interest in U.S. real estate Reuters – Sun, Aug 18, 2013 12:03 AM EDT NEW YORK (Reuters) - Foreign…[READ MORE]

During the housing bubble there were plenty of private mortgage companies underwriting low down payment loans, but they stopped after the bubble burst. Then after the burst low down payment FHA loans grabbed huge share of the mortgage market.  The FHA standards were lowered and conforming limits increased which allowed a greater number of borrowers to put a very low down payment while purchasing a home.  In addition to FHA, Fannie and Freddie conventional loans after the bubble rarely wrote loans under 20%, however this trend has reversed in the past few months.  So, you have three entities writing low down payment loans.  Now, FHA is instituting new requirements on lenders that will probably restrict lending in the future. FHA…[READ MORE]

Monthly Housing Report

In Memoriam: Tony Bliss 1966-2012