TheMReport — News and strategies for the evolving mortgage marketplace.
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WHAT'S NEXT Housing Marches Forward If you listen to some housing analysts, Americans may as well have popped a bottle of bubbly in March. A Capital Economics report sized up the housing market as one finally on the way to a "healing" period, while Equifax and Moody's Analytics found consumer spending on the mend and suggested that an end to the downturn may finally be under way. We ask: Is it time to stop and smell a rosy recovery? NOW Fannie Mae released a National Housing Survey that found more Americans feeling upbeat about the direction of the economy. It said 35 percent of Americans now believe the economy is on the right track, an increase from 19 percent in November—up from several months of down- ward-facing trends. Fixed-rate mortgages remained at or near record- breaking lows, standing up a housing market at all-time highs for affordability. The culprit: Europe. Debt crises and low growth overseas continues to send investors in droves to the safe haven of U.S. Treasury debt, widening yields and keeping rates low. Fannie Mae posted $2.4 billion in quarterly losses, less than $5.1 billion seen quarter-over-quarter but unhelpful to annual declines from last year. The Federal Housing Finance Agency (FHFA) said that it would request another $4.6 billion in taxpayer funds to shore up the GSE. VS. NEXT Expect the housing outlook to stray cautiously in the right direction. A Capital Economics report released the same week as the Fannie Mae survey said that housing had entered a "healing" period. Analysts also warned that disorderly defaults in the euro zone could derail America's economic locomotive. Although mortgage rates certainly do something for the housing market, experts say affordability isn't enough, especially in a tight lending environ- ment. An earlier Capital Economics report said that more homebuyers have entered the market to make all-cash transactions, bypassing banks entirely. The numbers ruffled feathers for more than a few policymakers—and watchdogs—who feel that now is the time to transition Fannie Mae and Freddie Mac off Joe Taxpayer's dime. Watch for more proposals, such as the one from the FHFA, which calls for a gradual transition to a new secondary market. The National Association of Home Builders (NAHB) unveiled a roadmap for the secondary market in the form of a white paper. In it, the trade group called for a phase-out of the GSEs, more reliance on existing state and federal entities, and private funds to backstop mortgage-backed securities. Just as interest perked up for housing affordabil- ity, the Federal Housing Administration (FHA) enacted provisions from the short-term payroll tax cut extension from December by raising certain mortgage insurance premiums. Brokers and origi- nators balked in interviews with us. The NAHB proposal arrived just a few weeks after the FHFA offered its own vision for a new, GSE-free secondary market. Cries for reform con- tinue to mount as Fannie Mae and Freddie Mac lose more money, with some saying that their ex- istence makes the next crisis more likely, not less. Experts say the FHA's premium hikes may be too little, too late, and come at the wrong time. Joseph Gyourko, a professor at the University of Pennsylvania, said that the FHA will need $50 billion to $100 billion in Treasury funds before it's over. Others say that this could roll onto home- owners. THE M REPORT | 19