Korollos Shalaby's Blog: 2013

Sunday, February 24, 2013

Housing Market Gaining Momentum in U.S.

By Korollos Shalaby

Sales of existing homes in the U.S. rose in November at the fastest pace in three years, a sign that the recovery in the housing market is gaining momentum.

The National Association of Realtors (NAR) said Thursday that sales of previously owned homes rose 5.9% last month to a seasonally adjusted annual rate of 5.04 million units.

That was the fastest pace since November 2009, when there was an expiring federal tax credit for home buyers. Sales exceeded by far the estimates of analysts polled by Reuters, of 4.87 million units.

The U.S. housing market collapsed during the recession of 2007-2009 and has not yet fully recovered, but continued job creation has helped the housing sector this year, when it is expected to contribute to economic growth for the first time since 2005.

NAR economist Lawrence Yun said the storm that Sandy, which hit the U.S. east coast in late October and hurt the regional economy for weeks, only had a slightly negative impact on home sales.

The NAR estimates that some purchases delayed by Sandy added a slight boost to sales in the coming months, Yun said.

Nationally, the average price for a resale home was $ 180.600 in November, 10.1% more than the previous year, as fewer people sold their homes by necessity compared to the same period of 2011.

The national inventory of existing homes for sale fell 3.8% in November to 2.03 million, the lowest level since December 2001. At the current sales pace, the inventory would run out in 4.8 months, the lowest rate since September 2005.

The volume of housing loans in the U.S. fell 10% last year and recorded its lowest level since 1995, highlighting the problems faced by the government to recover a real estate sector that continues to face problems.

The Board of Examiners of the Federal Financial Institutions, a group of U.S. regulators, released data on Tuesday that showed that in 2011it materialized 7.1 million home loans, a decrease from the 7.9 million loans last year.

The data, which include mortgage loans, refinancing and home improvement loans, showed that for the purchase of a home, as well as for refinancing, fell.

Loans for refinancing homes fell 13% in the year, while new mortgages fell 5%, the council said in a statement. However, the Federal Reserve, one of the regulators involved in the collection of data, emphasized that refinancing activity surged by year-end to lower interest rates.

The analysis highlights the work that the federal government has to do to life the still depressed housing market, which has become an obstacle to economic recovery from the recession 2007-2009. The U.S. government currently holds a guarantor of much of the new mortgages in a backup that has grown strongly since the collapse of the housing bubble helped spark the recession.

The Government also seeks to help owners refinance their homes at lower interest rates.

The Fed has tried to help the industry by reducing interest rates. Last week, the U.S. central bank unveiled a plan to purchase Treasuries intended to reduce costs for home buyers and other borrowers.

However, the Fed said Tuesday that a key measure of loan conditions were tightened last year, showing that banks demanded higher credit scores to qualify for a loan.

Korollos Shalaby is a nationally acknowledged mortgage expert with over 6 years experience as a loss mitigation expert and mortgage finance consultant. He has owned several companies and has been at the forefront of all lending and banking practices since 2006.

Mary Jo White Appointed To Head SEC

By Korollos Shalaby

President Barack Obama proposed Thursday that Mary Jo White be the head of the country's Securities and Exchange Commission (SEC), replacing Elisse Walter.

Walter took office in December after his predecessor Mary Schapiro left the institution. White's nomination shows the president's desire to have a strict officer watching Wall Street. White, the former U.S. attorney for the Southern District of New York known for having tried to known terrorists and mafia figures, would become the third woman consecutive to wield powerful posts in the SEC.

"We need to pursue irresponsible behavior in the financial industry so that taxpayers do not pay the price," Obama said in announcing the nomination. "I am absolutely confident that Mary Jo has the experience and determination to deal with these complex issues and to protect the American people in a way that is smart and in a way that is fair," he added.

His election quickly brought praise from Wall Street reform supporters who claim that White aptly handled the agency that plays a key role in overseeing the U.S. financial markets.

White is a candidate that does not generate more controversy, although she does not have extensive experience with securities policies and recently worked privately defending Wall Street figures, including former chief executive of Bank of America, Ken Lewis.

"I see her as a lawyer with a good reputation who has spent a significant amount of time as a partner in Debevoise representing companies and individuals in high profile issues related to values," said Cheryl Scarboro, former head of the unit of the Act Foreign Corrupt Practices SEC and now a partner in the law firm Simpson Thacher & Bartlett.

New York Senator Charles Schumer, a Democrat who sits on the powerful Senate Banking Committee, praised White's reputation as a tough prosecutor and anticipated to be "easily confirmed." A quick confirmation of White might help the SEC to accelerate its implementation of dozens of regulations required by law to reform Dodd-Frank Wall Street 2010.

Obama also nominated Richard Cordray to continue as head of the Bureau of Consumer Financial Protection, the U.S. agency that monitors consumer products like mortgages and student loans. Both appointments must be confirmed by the Senate. During the reign of White as a prosecutor, U.S. prosecutors won the conviction of about 35 Muslim militants accused of plotting against Americans.

It is unclear whether White's past work defending clients on Wall Street will generate problems during his confirmation process in the Senate. When asked whether the Government intended to problems Cordray is confirmed in the renomination to his office, the White House spokesman, Jay Carney, said he expected no objections "substantial" against him.

"He is the right person for the job," Carney said. He added that previous obstacles to Cordray's nomination had been based on "political considerations" of lawmakers who opposed the creation of financial protection agency.

Geithner Has No Desire to Lead the Fed When Bernanke Retires

By Korollos Shalaby

The U.S. Treasury Secretary Timothy Geithner said Wednesday that "there is no chance" that he will be proposed as chairman of the Federal Reserve (Fed) and argued that the U.S. economy is in a more "resilient" state after the 2008 crisis.

"No chance. I have great respect for the institution, but that will be the privilege of another person," Geithner said in an interview with the website Politico on his last day in front of the Treasury.

The U.S. economic recovery is entering the final stretch, though unemployment remains high and will only gradually decrease, said the outgoing Treasury secretary there, Timothy Geithner.

"I believe in recovery. If this were basketball, we're starting the fourth quarter," Geithner said in an interview with the Wall Street Journal.

Some media had mentioned the name of Treasury Secretary Geithner as president of the Federal Reserve (Fed), when Ben Bernanke’s term expires in 2014. Geithner, 51, said his future plans include returning to New York to be with his family and traveling with his wife, after three and a half years as head of the Treasury Secretary.

The U.S. economy is in an advanced chapter of its "recovery", said Geithner, which is currently at 7.8%. "That's the inevitable, terrible and tragic legacy of a financial crisis of this nature," he said.

However, he said there is still a "very substantial space" in fiscal policy to reduce the rate of unemployment. "It would be easier if it were accompanied by a long-term plan to reduce future deficits," he said, referring to the ongoing negotiations in Congress to agree on a new budget.

Finally, he used to take stock of his years as Secretary of the Treasury, in which the Congress had to bailout the financial industry and automotive industry. Geithner is a member of the economic team that worked with Obama in the White House to help stabilize the economy.

"I have worked with a president whom I admire deeply," he said. President Obama has already announced his election to succeed his former Geithner's chief of staff, Jack Lew, whose nomination must be approved by Congress.

The United States went further in debt than others to balance the nation's income and cut the risk of leverage in the financial system, "and had the large adjustment in the housing sector," Geithner said.

The recovery in Europe is in a nascent stage much but the continent has done "really important things, like remove market risk of a catastrophic collapse."

Last summer, the European Central Bank (ECB) agreed to do everything necessary to protect the euro and backed up that promise with a bond purchase program if a country needed him after requesting a bailout.

IMF Urges Obama to Address Foreclosure Crisis

By Korollos Shalaby

The problems of the administration of President Barack Obama to address the foreclosure crisis show the slow housing debt is recovered from deep recessions, the International Monetary Fund (IMF) said in a report .

The agency cited the failure of government flagship program to prevent such liens, in a report released Tuesday on household debt.

The IMF said that fewer than 1 million mortgages have been changed in the United States under the Home Affordable Modification Program, HAMP, against the Government's initial target of between three and four million.

Nearly 8 million Americans are facing foreclosure since the bubble burst in residential construction.

The report noted that the HAMP offered limited incentives to banks and tightened the criteria for application to the program. He said, moreover, it did not reduce monthly mortgage payments to make them affordable enough in many cases - only 11% of permanent modifications included decreases in the amount mortgaged.

The IMF stressed that the government tried to improve other assistance programs in February to increase the number of people eligible and increase the incentives for banks to offer reductions.

However, the IMF warned that millions of American's remain at risk of losing their homes and governmental procedures have not reached the magnitude of the measures taken during the Great Depression.

"Some 2.5 million properties are subject to foreclosure and another 1.5 million are in default. Figures are amazing," said Daniel Leigh, lead author of the IMF report, in a press conference. "There remains a need to do something."

One of the main reasons for the low number of mortgage reductions is that Fannie Mae and Freddie Mac, which fund half of U.S. mortgages, have not reduced the value of debts in cases where homeowners at risk of foreclosure .

Edward DeMarco, the federal regulator that oversees the accounts of Fannie Mae and Freddie Mac, the mortgage banks seized by the federal government, opposed the idea of reducing the amount of the mortgage on the grounds that it would jeopardize the taxpayer funds, despite pressure from lawmakers and the White House.

On Tuesday, DeMarco said his agency would consider the idea.

In other news, Goldman Sachs Group Inc and Morgan Stanley will pay $ 557 million in cash and other assistance to troubled borrowers to conclude a case-by-case foreclosure required by U.S. regulators.

The U.S. Federal Reserve said Wednesday that the two banks will pay $ 232 million to eligible borrowers and 325 million in credits modifications and forgiveness.

The agreement is similar to the 8,500 million dollars that materialized the Fed, the Office of the Comptroller of the Currency and other banking service 10 January 7.

The Fed had ordered Goldman and Morgan Stanley to revise foreclosures conducted by mortgage services business both acquired investment banks before the subprime mortgage crisis.

Home Mortgage Applications are up for the Beginning of the Year

By Korollos Shalaby

Applications for home mortgages in the United States rose for the third straight week, driven by increased demand for refinancing, according to data released on Wednesday by a trade group.

The Mortgage Bankers Association (MBA) said its seasonally adjusted index of mortgage application activity, which includes both refinancing loans to buy homes, increased by 7 percent in the week ending on 18 January.

The seasonally adjusted index of refinancing applications increased the MBA 7.7 percent, while the gauge of loan requests for home purchase, the principal measure of property purchases, gained 2.5 percent.

The refinance share of total activity regarding mortgages remained stable at 82 percent of applications. Mortgage rates 30-year fixed averaged 3.62 percent were up 1 basis point over the previous week.

The survey covers over 75 percent of residential mortgage applications U.S. retailers, according to the MBA. Although the government has taken steps to try to protect the most disadvantaged of the threat of eviction, the prospects, today, are bleak. A study by property consultant Alteba, this year and early next year said that another 160,000 families could lose their home.

Unemployment is, once again, the greatest threat to these households. If the situation does not improve, the delinquent can settle the debt in about two years.

And as explained Miguel Angel Bernal, professor at the Institute of Economic Studies (IEB), "during the years 2010 and 2011 there was a significant rise in unemployment which will now notice evictions." In 2009, the unemployment rate was 17.36%. In 2010 it passed the psychological barrier of 20% -20.1% and in 2011 stood at 21.3 percent.

In the meantime, sales of new U.S. homes fell in December, while the median home price rose and the sector still appears to be the bright spot in the country's economic recovery, a report showed Friday.

The Commerce Department said sales fell 7.3% in December to an annual rate of 369,000 units, less than the 385.000 units estimated by analysts.

Government data on new home sales are subject to substantial revisions. In fact, the Commerce Department raised its estimate for sales to November by 22,000, to 398.000, the highest reading since April 2010.

The property sector has been a strong point in the economy over the past year and is expected to help offset the economic damage of taxation hikes this year.

The average price for a new home rose to $ 248.900 $ 245.600 in December from November, according to figures that are not adjusted according to seasonal fluctuations. The price hike is considered a sign of improved health in the housing market.

Economists believe that housing construction contributed to economic growth last year for the first time since 2005. Friday's report showed that in 2012, 367.000 new homes were sold, the most since 2009.

Still, that number is about a third of the record sales of 2005, before the collapse of the housing market contributed to the recession of 2007-2009.

Bernanke: Overly Strict Lending Hampering Housing Progress

By Korollos Shalaby

The U.S. housing market has improved, but is still "far from out of difficulties," said the Federal Reserve chairman, Ben Bernanke, on Thursday, noting that overly strict lending standards are part of the problem.

The Fed, which has put the focus on mortgage bonds during the last round of asset purchases, continues doing what it can to support the housing market, he added.

A bubble in the U.S. housing market triggered the financial crisis from 2007 to 2009 along with a brutal recession that continues to weigh on the world economy. Data from the last few months, however, have shown that the sector is reviving.

"While there are good reasons to be excited about the recent direction of the housing market, we should not be satisfied with the progress we have seen so far," Bernanke said in remarks prepared for an event.

The Fed chairman noted that tougher standards for giving credit were an appropriate response to the maximum price of houses and the crisis that followed.

"However, at this point it is possible that the pendulum has gone too far and now extremely stringent loan conditions are preventing deserve credit borrowers from purchasing homes, which therefore slows the recovery of the housing sector and prevents economic recovery, "he said.

Earlier this year, the Fed suggested that other authorities in Washington were considering steps to free up credit and boost the real estate sector.

But critics on Capitol Hill said that the Central Bank should remain attached to monetary policy.

In his speech, Bernanke avoided talking about policy measures that could be taken and detailed official initiatives already being implemented.

Housing prices have risen across the country this year and there are also positive signs in residential investment trusts, sales, demand and construction.

The property sector usually provides strong signals on the output of a recession in the U.S. economy, but the huge losses of assets have lagged the market this time.

An index of pending sales of existing homes in the U.S. rose more than expected in October, a sign that the recovery in the housing market rose in the fourth quarter despite a huge storm and concerns over a looming tax increase , a report showed on Thursday.

The National Association of Realtors (NAR) said its index of pending sales, based on contracts signed in October, increased 5.2%, to 104.8.

Economists polled by Reuters had expected a rise of 0.8%.

"We have had very good accessibility to housing for some time, but now we are seeing a greater impact constantly creating jobs," said NAR chief economist Lawrence Yun.

Yun said the data shows some impact of the massive storm Sandy that hit the U.S. East Coast in late October.

European Banks Repay Debts as Economic Systems Recover

By Korollos Shalaby

Many banks will return 137.159 million euros (184.3 million U.S. dollars) of emergency loans received during the financial crisis to the European Central Bank, in a sign that at least some parts of the European banking system has recovered.

The ECB lent more than a trillion euros to banks-hundred to three years in financing operations between December 2011 and February 2012, a plan that the council president, Mario Draghi, said that it "avoided a great, massive credit crunch. "

The ECB said Friday that 278 banks had decided to repay the loans at the first opportunity, on January 30, but did not name them in particular.

A total of 523 banks had used the first of two programs of long-term loans, known as (LTRO), a little over a year.

The German debt prices fell, while bank shares and the euro rose on news of the advance payment, which exceeded the forecast of 100,000 million euros in a Reuters poll of traders.

Banks can return the money in advance on a weekly basis from now. The repayment of the second LTRO begins on February 27.

“I expect the pace to slow considerably in the next week," said Nordea analyst Jan von Gerich. "Some slightly stronger banks returned the money as soon as possible, while taking money weaker in the second LTRO," he added.

"Do not believe the returns will return to a level where interest rates start to rise," he said.

Strong prepayment will be good news for some ECB officials who were concerned about the increased risks that the central bank had in its balance sheet with loans.

German Chancellor Angela Merkel said at the World Economic Forum in Davos, Switzerland, on Thursday: "it will be important for Europe that gave ample liquidity to banks last year collected again."

Banks generally took the funds for three reasons: as insurance in case of a worsening of the euro zone crisis as a means to finance purchases of government bonds with higher returns and to fund their loan books if they had problems accessing the cheap credit.

Banks in Spain and Italy were among those who poured money into government bonds of their own countries, whose yields were at record levels, but have since declined strongly as a result of loans from the ECB and its promise to buy bonds of nations in trouble.

They seemed less likely to repay the money at the first opportunity, preferring instead to stick with the bonds on which they have reaped huge profits with relief euro zone crisis.

The prepayment of these loans is a distinction for banks looking to impress investors and rating agencies and distance themselves from their troubled rivals. However, the risk of doing so would force them to make an extra effort.

Coeuré Benoit, in charge of market operations at the ECB's executive committee, tried to alleviate those concerns last week to minimize the possibility that banks will return a very large amount of emergency loans.

Partisan Battles May Hamper Fiscal Compromise

By Korollos Shalaby

Fiscal experts have argued that the political class in the United States will have to put aside their differences to put together a fiscal deal that will not jeopardize the weak global growth before it reaches the debt ceiling.

The decision to cut spending will not be easy and will have a negative effect politically for Republicans or Democrats. But progress is not feasible if the political elite hold the nations fiscal talks hostage.

The decision taken to solve the fiscal problem and the debt ceiling "contravene the interests of parties, whatever, going to the root of the problem and trying to solve it really will be a politically unpopular decision and you just want to stay within of the power game, so it's so complex, "notes the director of the Center for Economic Analysis ITESM, Leticia Armenta.

On Wednesday the U.S. House of Representatives approved an extension of the federal debt capacity until May 19, placing the bill promoted by Republicans on the fast track to get ahead in the Senate, led by Democrats, it to avoid a default by the U.S. government.

Two key opportunities make these negotiations. Unless the U.S. Congress acts before March 2, the so-called economic kidnapping trigger spending cuts by about $ 1 trillion in defense and elsewhere, something no one wants in the Congress, mentions a report by Jeanne Sahadi, from CNNMoney.com.

If no action is taken for the March 27, federal funding will run out completely and be paralyzed government operations until lawmakers can find a way to agree on spending and taxes for the next year or at least for the coming months, the report said.

The risk that the U.S. economy is hostage to politicians is real, as is the case in other countries. Delays or doubts about whether the talks will be sucessful are likely to inhibit flows of capital from banks and other financial institutions.

"At the end of the day the game and lay politicians do not always go hand in hand with better growth prospects," he adds.

According to the CI Banco analyst Mario Copca the fact that the U.S. economy has not fallen into an abyss tax on 1 January and has postponed the debt ceiling until 19 May, the market has interpreted as something good and expects American politicians to reach an agreement later.

"Regularly economies become hostages of politicians, but this year both in Mexico and in the U.S.," said Copca.

In the U.S., some decisions have been postponed, adds. There are no agreements between Democrats and Republicans, and "no absolute majority for approval of plans and that's the problem."

Copca believes that the market has reacted well, but will face more risks when approaching the negotiations and reach an agreement.

"So (the politicians) prefer to kick the ball a little more and hold it to see if extra reach agreement reduces the fear that they will not achieve a consensus and that this could result in a more [problems] for the economy. While in the U.S. are less prone to such events, the political class is the same throughout the world. "

Partisan Battles May Hamper Fiscal Compromise

By Korollos Shalaby

"At the end of the day the game and lay politicians do not always go hand in hand with better growth prospects," he adds.

"Regularly economies become hostages of politicians, but this year both in Mexico and in the U.S.," said Copca.

In the U.S., some decisions have been postponed, adds. There are no agreements between Democrats and Republicans, and "no absolute majority for approval of plans and that's the problem."

Copca believes that the market has reacted well, but will face more risks when approaching the negotiations and reach an agreement.

Fed Critics Question Usefulness of Quantitative Easing

By Korollos Shalaby

Critics of the Fed have long warned that quantitative easing could result in dangerously bloated balance sheets at the Central Bank, but it has never been clear why the internal finances of the Fed should have such an effect.

Now, the president of the Dallas Fed, Richard Fisher, argues that the health of the Fed's balance sheet could affect the health of the federal government, and even the regulatory role of the Federal Reserve.

Under three rounds of quantitative easing and various other market support programs, the Fed has purchased a whopping $ 2 trillion in Treasuries and mortgage bonds since the financial crisis hit in 2008. At that time, the Central Bank accounted for 900 million in bonds and securities on its balance sheet. Those bonds had accumulated over the years in "open market operations" which is the buying and selling when the Fed makes its policy changes.

Fisher's two favorite subjects are the virtues of his adopted state tax and fiscal sins of the legislature in Washington DC, which ran as a Democratic Senate candidate in 1994. He also mocks California's finances in a story that imagines the governor of California, Jerry Brown, spending millions on environmental impact studies after a confrontation he had with a coyote earlier, we know that the governor of Texas, Rick Perry shot a coyote on a morning walk. ("Bullet Cost: 25 cents. Cost to taxpayers: zero)."

Fisher, who currently has no vote in the Open Market Committee of the Federal Reserve, has long argued that further bond buying is useless until Congress balances the budget. He insists that QE is not achieving its stated goal of reducing the unemployment rate. Other critics, such as bond investor Jeffrey Gundlach, echoed his claims that quantitative easing has crashed into the law of diminishing returns.

Fisher goes further, saying that QE is not only useless, but is potentially toxic.

"The question is how far we are willing to go and how big will the balance sheet that we will be able to leverage before we run the risk of not only (damage) the financial welfare of the Fed, but also the country", Fisher said during a question and answer session after his speech at the Chamber of Commerce in Gainesville.

Basically, if the Fed maintains its mortgage and Treasury bonds as yields rise, it will have to adjust its portfolio with the markets. To remain solvent after a certain level, the central bank should stop sending cash to the Treasury. In 2010, the Congressional Budget Office (CBO) warned that the federal government could become increasingly dependent on remittances generated by the Fed's balance sheet.

Insurance Costs Associated With Purchasing a Mortgage

By Korollos Shalaby

Given all the turmoil in the past few years in the housing market, being able to enter a bank to negotiate a mortgage and leave with only the mortgage may seem like mission impossible. The fact of the matter is that many mortgages that are sold in our country are associated with certain insurance contracts that can be more expensive than the cost of the loan.

It is worth knowing what type of insurance types the bank may require at the time of signing a mortgage and which of them are required by law.

I will briefly describe each of the insurance that may be associated with a mortgage loan:

1. Damage Insurance

According to mortgage law, this is the only compulsory insurance the bank may require when a mortgage has fire insurance or liability insurance. In this case, the bank itself should compel an individual to purchase insurance of this type on the mortgaged property.

The client can buy this insurance and any other provided that, in the case of property insurance, there is a mortgage option clause where it appears as the beneficiary. In this case, the bank has granted that the loan shall be secured by the appraised value of the home.

The insurance coverage for this damage is only on the property, that is, on the house, without having to include the contents of the same and the amount is calculated on the basis of the value contained in the appraisal. The requirement of this insurance is determined both by providing security to the owner of the house, as a financial institution to be this good guarantee of repayment.

2. Multi-risk home insurance

It is advisable to distinguish between damage or fire insurance and the only home insurance and comprehensive insurance contracts which in any case is required by law. This home insurance, unlike liability insurance, covers not only the home but also the content of the home such as computers and jewelry.

It also has Liability coverage that covers repairs and compensation that the insured has to pay to third parties for damages they may cause. The Organization of Consumers and Users (OCU) recommends that you hire a home insurance with liability coverage of at least EUR 300,000.

The multi-risk home insurance also offers legal-defense if the insured has to claim damages others have caused on their property, and covers pets.

3. Life Insurance

As is the case with multi-risk home insurance, there is no legislative requirement that obliges the mortgage holder to a life insurance contract; however, many financial institutions require their employment at the time of signing the loan. This insurance covers the risk of death of the holder of the loan. That is, if the owner dies the insurer is responsible for paying off the principal outstanding.

Although insurance is recommended, it is important to assess their cost is very high and can share expensive mortgage very significantly. In addition, the life insurance premium increases with the advancing age of the insured.

What to Consider When Purchasing a New Home

By Korollos Shalaby

Having a home is one of the most common financial goals among Americans, but if you do not have a strategy for managing your mortgage, the purchase of a property can tear apart your personal finances.

During 2012, mortgage lending has grown 30% in number of loans and 20% in value of financings, which indicates that the end of the year will have been placed 580.000 credits for house purchases, according to the latest report from the mortgage industry conducted by BBVA Bancomer.

Americans still have some misconceptions about the dynamics, conditions and life of the loans, said Enrique Margain Pitman, a mortgage lender.

"This is a good time to apply for home refinancing and not only by macroeconomic stability but for the benefits currently offered as fixed monthly payments or acquaintances, interest rates (from 10.00%) and terms ranging from 10, 15 to 20 years," he says.

Here are some tips you can take into account when assessing whether you are ready for funding:

1. Credit or cash: There are still people who do not like the idea of using financing to be made of durable goods and prefer to save up to cover the cost of your home, but as it is a considerable investment it best to analyze the situation carefully.

"If you have the total cost of the home that interests you and on the other hand you have the opportunity to participate in any investment that gives you a higher return than the interest charged to the bank then it is better idea to invest, this route will allow even liquidate the credit in advance, "says Octavio Novelo, director of real estate consulting site Chilanga.com House.

2. The house itself: One of the most common mistakes that novice buyers comment is acquiring the property for them enough to give them credit, because often it is social housing to outskirts of the big cities where the owner cannot live because he works away.

"A house that stands alone deteriorates rapidly and involves considerable expense, people who have homes far from their workplaces must pay rent on a place closer to their offices or lose several hours a day in transport, many people choose by paying off debts and take home as a 'vacation home' or 'weekend', but in the long run the risk of having abandoned houses, "explains Sandra Hendrix, commercial director of Coldwell Banker Real Estate Consultancy.

3. The new trend: With the growth in urbanization levels life in big cities is becoming smaller homes, developers now are favoring vertical housing.

"When you have a home of 38 meters, a single home can be compared to an apartment of 48 square meters with two bedrooms, we are committed to making homes sitting vertical broader, it is difficult to convince customers and vendors that is the new way of life, because there is still a price differential between the ground floor apartments, first class, which are the most requested, and floors that can be higher, "says Germán Ahumada board president of Consorcio Ara .

Friday, February 8, 2013

FHFA Attempts to Recover Billions from Mortgage Loses

By Korollos Shalaby

The Federal Housing Finance Agency (FHFA), which oversees mortgage giants Fannie Mae and Freddie Mac, filed lawsuits last Friday against 17 financial institutions, in an attempt to recover billions of dollars in losses associated with high-risk mortgage investments.

The lawsuits were filed against several major Wall Street firms, including Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase. The FHFA claims these institutions misrepresented the quality of mortgage loan based investments.

"Based on our study, the FHFA argues that mortgages had different and more risky characteristics to those established in the descriptions given to market and sell these assets," the agency said in a news release.

The distortions included overestimate the ability of debtors to pay their mortgages, the number of loans on owner-occupied properties, and the amount of the debt of these houses in relation to their value.

According to the demands, in the middle of the last decade Fannie Mae and Freddie Mac bought from the aforementioned financial institutions more than 196,000 million (MDD) of these mortgage related assets.

These packages of securitized mortgages were an attractive investment during the 'bubble' estate, fueling the growth in mortgage loans and inflating the price of housing. But when the market collapsed and owners incurred massively in default, the value of these assets plummeted. Fannie Mae and Freddie Mac, which were among the biggest buyers of such assets, were also caught in the spiral.

Bank of America said that Fannie Mae and Freddie Mac said they understand the risk of investing in risky assets, and that these companies continued buying them, even after their regulator warned them that they had the necessary risk management. "Despite this, companies are now looking to other market participants to take responsibility for their losses," said Bank of America.

Fannie Mae and Freddie Mac, which the federal government assumed custody during the economic crisis of 2008, are the main sources of financing the U.S. housing market. They are dedicated to buy mortgages from lenders to keep in their books or turn them through securitization or insurance in assets. Companies also bought mortgage-backed assets issued by other institutions.

The FHFA, which is in charge of protecting the assets of the mortgage lenders on behalf of taxpayers, continues to seek damages. The exact extent of the damage will be determined in court.

According to Guy Cecala, CEO of real estate magazine Inside Mortgage Finance, legal action would acquire "large", it casts doubt on the quality of mortgage securities sold to all investors, not just Fannie Mae and Freddie Mac "The FHFA is really questioning whether most of the mortgages securitized and sold during the housing market boom violated securities law" says.

Government agencies and private investors are stepping up their actions against financial firms that securitized mortgages.

Last July, the FHFA sued UBS for the same type of deception in mortgage-backed assets. Last month, the company filed a complaint like AIG by 10.000 million against Bank of America. In May, the attorney general's office in Manhattan United States sued Deutsche Bank, arguing that his division MortgageIT made tens of thousands of toxic loans and then misled the Federal Housing Authority to ensure that.

Bank of America reached an agreement in June to 8.500 million from a group of investors for the poor quality of investments secured by mortgages.

Also, the attorney general of the country is trying to negotiate an agreement with mortgage servicers for irregularities in their foreclosure practices.

In the latest legal action, charges were filed against the following institutions: Ally Financial, Bank of America, Barclays Bank, Citigroup, Countrywide Financial, Credit Suisse Holdings, Deutsche Bank, First Horizon National, General Electric, Goldman Sachs, HSBC North America, JPMorgan Chase, Merrill Lynch / First Franklin Financial, Morgan Stanley, Nomura Holding America and the Royal Bank of Scotland.

Korollos Shalaby is a nationally acknowledged mortgage expert with over 6 years experience as a loss mitigation expert and mortgage finance consultant. He has owned several companies and has been at the forefront of all lending and banking practices since 2006.

Fed’s Efforts to Revitalize Economy Bolstered by Strong Housing Market

By Korollos Shalaby

The Federal Reserve’s efforts to revitalize the United States’ economy are being bolstered by an increasingly robust housing market.

With interest rates remaining near record lows and home values on the rise, homeowners and banks are beginning to see their financial situations improve. According to Bank of America Corp. and Deutsche Bank AG, this is making it easier for financial institutions to give out more lines of credit.

“We’re in the very early stages of a reinforcing cycle,” said Michelle Meyer, a New York-based senior economist at Bank of America, the second-biggest U.S. lender by assets. “The Fed has been quite impactful.”

Meyer has predicted that monthly housing starts could reach upwards of 1 million by the end of 2013, as opposed to 894,000 from last October. According to Deutsche Bank’s Joseph LaVorgna, Residential construction may also continue to improve the housing market. It has been projected that construction may add to the nation’s GDP for the first time since 2005. And if the current trend continues, construction may account for around 1 percent of the U.S.’s GDP by the next year.

“The one thing missing from this economic recovery was a healthy contribution from housing, and we might finally be on the cusp of that,” said LaVorgna, chief U.S. economist for Deutsche Bank in New York, who predicts the GDP may grow about 2.5 percent in 2013. “Housing is going to be integral to the economy. We’re assuming it continues to do some of the heavy lifting.”

In its effort to continue to improve the housing sector, the Fed indicated last September that it would buy nearly 40 billion of mortgage backed securities to stabilize the market. This so called “quantitative easing” has had its critics though it has certainly shown some signs of success.

Borrowing costs were driven down to all-time lows thanks in part to the central bank’s decision to continue to purchase large volumes of housing debt. Now, the average rate for a 30-year fixed mortgage is 3.32 percent. This is only slightly higher than the all time low of 3.31 during the previous week.

Home prices in the U.S. continued to rise from the previous year and saw the largest increase since June of 2006, according to the data provider CoreLogic Inc.

The sales for new and existing dwellings combined rose to 5.16 million for October, which was 40 percent higher than June of 2010.

Many economists are optimistic at the pace of progress, though it is equally true that this optimism has been largely tempered for quite some time with the knowledge that things could go very wrong very quickly.

“Monetary policy is working,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas SA in New York. “What we’ve seen is a very robust housing recovery this year, particularly in prices. It’s kind of an accelerator for other sectors of the economy, consumption in particular.”

With a deficit fight still looming large in Washington, it’s hard to predict what impact if any it will have on housing.

Korollos Shalaby is a nationally acknowledged mortgage expert with over 6 years experience as a loss mitigation expert and mortgage finance consultant. He has owned several companies and has been at the forefront of all lending and banking practices since 2006.

European and Japanese Economic Woes May Jeopardize Global Recovery

By Korollos Shalaby

A slower recovery than expected in the euro zone and the recession in Japan will weigh on global growth this year. But a rebound in 2014 should provide the fastest expansion since 2010, said the International Monetary Fund (IMF).

The IMF revised down its GDP forecast for 2013 to 3.5% in the year from 3.6% last October. The outlook for 2014 was clearer, as the economy is expected to grow 4.1%, only if there is sustained recovery in the euro area, the agency said.

The last time the world economy showed healthy growth rates above 4% was in 2010, when production reached 5.1% growth after overcoming the global financial crisis.

The IMF said the activity in the advanced economies is likely to remain weak this year, at 1.4%, before strengthening to 2.2% in 2014. In October, it had projected for developed economies to grow 1.5% in 2013.

"Policy measures have reduced the acute risks in the euro area and the United States," the IMF said in an update of its World Economic Outlook.

But they warned that these risks remain, especially if there is a setback in the recovery of the euro area due to a lack of reform, and whether there are "excessive" budget cuts in the United States.

The agency predicted the U.S. economy will grow 2% in 2013, a decrease of 0.1 percentage points from the October forecast.

They said the atmosphere in the financial markets and real estate will support consumer spending in 2013 and that the Company still consider spending cuts about to go on the first of January this year as part of the "tax gap." They noted that the United States must have a credible plan for fiscal consolidation.

The IMF expects the U.S. economy to accelerate its pace and grow 3% in 2014. For the euro area, the agency estimates a contraction of 0.2% in 2013 and only until the following year, the currency bloc will grow 1%.

January forecast was lowered by 0.3 percentage points to which unveiled last October. The agency said the downgrade is because there is still uncertainty despite recent progress. They cut their forecast for the euro zone despite the response of European authorities to reduce the cost paid by countries financed.

Key leaders within the IMF still fear that the European crisis still poses a risk to the global economy, especially if key financial reforms are not set in place.

Korollos Shalaby is a nationally acknowledged mortgage expert with over 6 years experience as a loss mitigation expert and mortgage finance consultant. He has owned several companies and has been at the forefront of all lending and banking practices since 2006.

Banks Pay 2.2 Billion in Agreement Reached on Foreclosures By Korollos Shalaby

Five U.S. banks have provided 2.2 billion in mortgage relief to customers under an agreement reached on charges related to foreclosures, according to a report released Monday.

The report said that Bank of America Corp improved their clients preferential mortgage modifications.

Bank of America awarded 889.2 million dollars in modifications that reduced customer loan balances, after not having given anything in August. Total JPMorgan Chase & Co payouts amounted to 903.1 million dollars in modifications, the largest amount among the five banks.

The report released by Joseph Smith, the former commissioner of the State Bank of North Carolina who serves as auditor of the agreement, said the five banks together have provided relief to customers totaling around 2.2 billion, from 10.6 million in August.

The banks reached an agreement in February with state and federal authorities to resolve accusations of foreclosures deemed to be incorrect and misleading.

The agreement implies that banks provide about 20 billion dollars in aid to customers with different actions, such as reducing the balance of loans and borrowers refinance troubled loans for customers whose homes are worth less than the value of their mortgages.

Bank of America was the bank that was to provide more aid equivalent to 11.8 billion in total relief to customers, followed by JPMorgan with 6 billion.

The other banks are Wells Fargo & Co (2.5 billion dollars in relief), Citigroup Inc (1,100 million) and Ally Financial Inc (587.8 million dollars).

"The relief that banks have reported is encouraging," Smith said in a statement, noting that the obligations of the banks still must be reviewed and accredited.

This comes at the same time that applications for home mortgages in the United States rose for the third straight week, driven by increased demand for refinancing, according to data realeased Wednesday.

The Mortgage Bankers Association (MBA) said its seasonally adjusted index of mortgage application activity, which includes both refinancing loans to buy homes, increased by 7% in the week of Jan. 18.

The seasonally adjusted index of refinancing applications increased 7.7% MBA, while the gauge of loan requests for home purchase, the principal measure of property purchases, gained 2.5%.

The refinance share of total activity regarding mortgages remained stable at 82% of applications. Mortgage rates for a 30-year fixed mortgage averaged 3.62%, were up 1 basis point over the previous week. The survey covers over 75% of residential mortgage applications U.S. retailers, according to MBA.

Korollos Shalaby is a nationally acknowledged mortgage expert with over 6 years experience as a loss mitigation expert and mortgage finance consultant. He has owned several companies and has been at the forefront of all lending and banking practices since 2006.

How to Bring Your A-Game When Buying A New Home

By Korollos Shalaby

In legal terms, buying a new property might seem like a simple process, but there are important aspects to consider, especially if it is a presale. Here are some things you might want to consider when you are buying a new home.

1. Essentials. You have to know the name and corporate name of the builder or developer and, where applicable, their legal representative. Try to get a feel for the reputation of the company.

2. References. Call the developer and ask that they give you references. Ideally, you can talk to customers who already inhabit the buildings. Discuss your experiences with the developer.

3. Ground conditions. Verify that is not mortgaged and inspect the land where the building will be. Verify the legal situation of the house with the Public Registry of the Property.

4. Advanced Work. If the developer is not known or has no references, it's better to not buy in presale. You may want to get another option that gives you security, though you may have to pay a higher down payment or wait a little longer for delivery, but your peace of mind is priceless.

5. The "fine print". Look over the format of the contract that you will be signing. Look into the penalties for cancelling the contract. However, it is always advisable to have a lawyer advise you.

6. Checklist. Besides the contract of sale, there must be a contract between the developer and the customer, which will detail the date of completion of construction and characteristics of it.
Make sure the contract contains:
• Square meters and floor plans. You must also specify whether the property will feature a balcony, private garden, and so on.
• Parking spaces (location and size of them).
• Finishes (closets, carpet, flooring, bathroom furniture and kitchen).
• Amenities. What are its features and delivery dates.

7. Legal details. What are the individualized property taxes that you will be paying for the house?

8. Services. Confirm that the house has adequate infrastructure to supply electricity, water, sewer, roads, a vehicular internal connection to the urban road network and other equipment works. Licenses, authorizations and permits should be by your respective consultant.

9. Ready. If a home is ready for delivery, in addition to the above, make sure that the distribution of the property measures and finishes are those agreed in the contract. Check that the furnishings, fixtures, hydraulics and gas are in perfect condition.

10. Zero debts. Check that the developer has not left debts of light or water. Request recent bills paid.

While buying a home through the presale offers a flexible and advantages, you should always exercise caution to protect your capital. Do not be dazzled by the first pretty house shocking or a model home being shown by a good salesman. Visit several places, question and compare.

Korollos Shalaby is a nationally acknowledged mortgage expert with over 6 years experience as a loss mitigation expert and mortgage finance consultant. He has owned several companies and has been at the forefront of all lending and banking practices since 2006.