July 2012

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WHAT'S NEXT A Mixed Bag for Housing Fewer-than-expected gains in jobs in early June routed signs of a slow-but-steady recovery for the housing industry and U.S. economy. Even with the eurozone crisis fueling investor interest in Treasury debt—and record-low interest rates—some wonder whether a summertime slowdown is around the corner. Follow along as we sort out the mess. NOW The economy flattened expectations by adding just 69,000 jobs in May, down from 115,000 in April, according to the Labor Department. The gasping jobs report led unemployment to inch up to 8.2 percent, making easy campaign fodder for presumptive Republican presidential nominee Mitt Romney. Interest rates for mortgage rates sank to new, record-breaking lows in May as fears of an economic crisis in Europe drove investors to U.S. Treasury debt. Freddie Mac found the 30-year fixed-rate mortgage reaching 3.75 percent, just as the 15-year loan fell under 3 percent, both all-time lows. The Supreme Court handed a victory in May to Quicken Loans Inc., ruling in favor of the lender in a suit by homeowners alleging that it illegally charged them with unearned discount fees. The case shook up the playing field for housing trade groups and advocates concerned with precedent. VS. NEXT Analysts interpreted the underwhelming jobs news to mean that President Barack Obama's hold this year may not be as firm as believed— and that housing may have a lot do with it. Some suggested that a summertime slowdown may be in the works despite higher homebuilder confidence. It's a mixed bag for low interest rates. Coupled with new refinancing measures, analysts say the low rates create all-time highs for housing affordability. Economists describe a Pyrrhic victory for housing, pointing to the long-term threats posed by the euro crisis to both the global economy and U.S. exports. By rejecting a longstanding HUD policy on provisions under the Real Estate Settlement Procedures Act, the high court also sided with an interpretation that favors some leeway for so- called unearned fees. Analysts say the precedent coming down the pipe will shape the legal landscape for years to come. The Mortgage Bankers Association (MBA) made a change of face in May by suggesting that mortgage originations could reach $1.28 trillion this year on a $200 billion wave of refinance applications. The trade group chalked up the revision to record-low interest rates as the euro crisis deepens. The MBA also downplayed any role for the Home Affordable Refinance Program, which lawmakers and the Obama administration continue to trumpet. Expect homeowners to continue refinancing as interest rates continue their descent into record-low territory. Mortgage insurers wrote $7.1 billion in newly originated primary mortgage insurance in April. The big three—including Genworth Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp., and Radian Guaranty Inc.—reported that 30,575 borrowers tried to buy or refinance homes in April. The private mortgage industry continues to rebound—albeit slowly—from a crisis that forced the entire field of companies to hemorrhage. The big three show signs of recovery despite fallout from The PMI Group's bankruptcy last fall, suggesting that defaults may finally start winding down. THE M REPORT | 19

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