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what's next Waiting to Exhale Recent developments in the housing sector are encouraging investors, but they are still marking time with bated breath for the industry to turn the corner. Now vs. next Homeowners are pleased with the recent news that the Home Affordable Refinance Program (HARP) has been extended for two years. The program offers borrowers with governmentbacked mortgages a chance to refinance at lower rates, giving more than 2.2 million borrowers an opportunity to get above water. Banks have been capitalizing on the success of the program, which began in 2009 and gained momentum in 2012. The industry wondered aloud how the market would rebound after HARP ended, but the recent news gave investors increased confidence, and as a result, the stock market rallied around the news. This is also good news for the refinance market, as some believe the end is near for mass refis. FBR Capital analyst Paul Miller said recently that smaller servicers are still playing catch-up to their larger counterparts. He estimates there are between $2 trillion and $2.5 trillion of mortgages that still have an economic incentive to refinance. President Obama's released the 2014 budget, and in it there may be room for a bailout of the Federal Housing Administration (FHA), which could require assistance of $943 million to reinforce its capital reserves. The agency came under fire for previously insuring risky loans before the crisis. "How we get to the negative $943 million is a combination of things. First, it looks at what revenue do we expect to come to the fund from new loans that we're making this year. And given that new loans that FHA's making are 'profitable,' if I can use that term . . . that's why we have over $14 billion in receipts this year for FHA and Ginnie Mae," said HUD Secretary Shaun Donovan. If the government decides that FHA needs a bailout, it will mark the first one in the agency's 79-year history. As with any bailout, there are those who staunchly oppose the agency's purported draw from the Treasury. Some members of Congress think the government is too involved with the housing industry. FHA commissioner Carol Galante acknowledged that the agency's potential draw "could be a little higher [or] could be a little lower" than the administration's projected number. However, the amount required—or the necessity of a bailout altogether—won't be determined until the end of this fiscal year, October 1. Fannie Mae recently announced its year-end earnings, and the mortgage behemoth recorded annual and quarterly profits. The GSE's Q4 2012 annual earnings report showed the company earned a quarterly net income of $7.6 billion and reported an annual net income of $17.2 billion throughout the year. "Solid business fundamentals such as improving performance of our book of business and improvements in the housing market led us to report the largest annual and quarterly net income in the company's history," said Susan McFarland, EVP and CFO for Fannie Mae. The record profits are a complete 180-degree turn from the previous year, when the GSE recorded losses of more than $16.9 billion. Analysts anticipate the agency can now start repaying the billions of dollars it received when it was under conservatorship at the height of the financial crisis. To date, Fannie Mae has returned $11.6 billion to the federal government, but still owes $80.4 billion. Both Wells Fargo and JPMorgan Chase reported earning record quarterly profits during the first few months of 2013. Wells Fargo reported net income of $5.2 billion, which is up from the $5.1 billion it earned quarter-over-quarter and up from $4.2 billion yearover-year. "Our company earned $5.2 billion in first-quarter 2013, the highest quarterly profit in our history—another milestone demonstrating how Wells Fargo's diversified business model continued to produce outstanding results," CFO Tim Sloan said. JPMorgan Chase posted net income of $6.5 billion. While profits increased at Wells Fargo, origination volume dropped. JPMorgan Chase, however, saw a 37 percent increase year-over-year in its origination volume. Analysts anticipate the growth will continue throughout the year. "We are seeing positive signs that the economy is healthy and getting stronger," said Chase chairman and CEO Jamie Dimon. "Housing prices continued to improve, and new home purchases are also starting to come back . . . . We are very pleased with our first-quarter results, are proud of our accomplishments, and remain optimistic about the future." Unemployment dropped to 7.6 percent, the lowest level since December 2008, but only 88,000 jobs were added at press time. The number fell largely because of the number of re-entrants into the labor force. In the first quarter of the year, the nation added an average of 168,000 jobs per month, down from 290,000 per month in the fourth quarter of 2012 and from an average of 262,000 per month in the first quarter from the third. Despite the improved jobs rate, the amount of jobs added was minimal—especially in the construction sector. Jobs in the professional business service sector increased, as well as did the number of health care and education jobs. Experts expect construction to rebound and spur job opportunities in the country. Freddie Mac noted that constructions accounts for 15 percent of all job gains in the last six months. The M Report | 17