Korollos Shalaby's Blog

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.