Decoding Compliance

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what's next The Analytical Advantage From the state of construction to intelligence from Capitol Hill leaders, emerging statistical trends in the mortgage marketplace provide a revealing glimpse into lending's near-term future. Now vs. Looking beyond supply production, the NAHB pointed to two key issues impacting housing's near-term future: tight credit for both builders and homebuyers and inaccurate appraisals. "I talk to many of our builder members who are expressing increasing frustration that they can't get access to construction loans to develop lots in markets where demand is on the upswing," said Rick Judson, chairman of the NAHB. "Not only is this keeping workers sidelined, it is frustrating potential homebuyers and slowing the recovery." With the vocabulary surrounding the housing market switching from "crisis" to "recovery," the National Association of Home Builders (NAHB) released new findings on the state of the housing and construction industries. Noting the declines in construction and building supply production during the housing crisis, the study cited a lack of manufacturing among chief inhibitors in the current marketplace. "Producers are reluctant to expand while credit remains tight, and the most recent result has been skyrocketing prices, said David Crow, chief economist for the NAHB. President Obama's former chief of staff, Jack Lew, was officially appointed secretary of the Treasury following approval by the Senate. Lew replaces Tim Geithner, who stepped down at the end of January. "I am pleased that the Senate took bipartisan action today to confirm Jack Lew . . . and I will continue to rely on his advice and sound judgment as we work to create good, middle-class jobs, provide more people with the skills those jobs require, and ensure every hardworking American can earn a decent living," noted Obama. next Jack Lew Facing political obstacles leading up to his confirmation, Lew is likely to encounter partisan roadblocks as Treasury secretary. Lew, a former managing director and COO of Citi Global Wealth Management, is already under the media's microscope, with Politico recently reporting that Republicans "don't view Lew as a man interested in hearing GOP concerns." The publication went on to add that Capitol Hill insiders have described Lew as "tone deaf" in understanding compromises that could unite both sides of the aisle. The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) faced a hard-hitting House subcommittee hearing over accusations that Treasury has not appropriately limited compensation for executives at companies bailed out by TARP. Special Inspector General Christy Romero decried the Special Master for failing to follow recommendations. "While taxpayers struggle to overcome the recent financial crisis and look to the government to put a lid on compensation for executive firms . . . Treasury continues to allow excessive executive pay," Romero stated. Patricia Geoghegan, acting Special Master, has approved executive packages that exceed previously established guidelines capping pay at or around $500,000. Providing a glimpse into reform efforts that could be implemented to address these issues, Romero countered, "Despite SIGTARP's previous warning that Treasury lacked robust criteria, policies, and procedures to ensure that Treasury's guidelines to curb excessive pay are met, Treasury made no meaningful reform to its processes." Commercial real estate (CRE) continue to improve, albeit at a slow pace, according to the National Association of Realtors (NAR). In its latest quarterly forecast, published by NAR's Research Division, national vacancy rates are projected to decline across all commercial sectors in the next year, with the multifamily market predicted to see the smallest decline in vacancy rates as space remains tight. Lawrence Yun, the group's chief economist, explained, "Rent increases have been higher in multifamily housing where supply is not matching strong demand, thereby allowing landlords to raise rents at faster rates." Making longer-term predictions for the CRE segment, NAR noted that vacancy rates in the apartment rental sector are forecast to ease from 4 percent in 2013's first quarter to 3.9 percent at the same time next year. The organization also projected that average apartment rents are expected to increase 4.6 percent this year and 4.7 percent in 2014 after rising 4.1 percent last year. Meanwhile, vacancy rates in the retail sector are forecast to slide from 10.7 percent in Q1 2013 to 10.4 percent in Q1 2014. A new report from DBRS asserted that states still reporting high incidences of fraud may see their home values drop. The latest findings from Interthinx's Mortgage Fraud Index showed risk fell 4.5 percent year-over-year in 2012's third quarter, sliding to the lowest level recorded in the past two years; the number of metropolitan statistical areas (MSAs) classified as "very high risk" declined nationally. While the overall drop in the index shows a promising trend for mortgage fraud, DBRS says the states reporting the most risk may have more than simply fraud to worry about. Calling out states that suffered the most during the housing crisis, DBRS stated that Nevada, California, Arizona, New Jersey, and Florida will continue to have high numbers of high-risk metros. "If properties in these MSAs continue to experience declines in value . . . . This may lead more cities and counties attempting to seek drastic options such as using eminent domain to seize and rehabilitate underwater mortgages, which is currently being considered in several states," DBRS explained. The M Report | 17

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