TheMReport

August 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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WHAT'S NEXT Coupled with debt crises in Europe, limited growth continues to decelerate the nation's economy, leading some to wonder whether the malaise will turn into something worse. Follow along as we take a look at the fall. A pickup for the housing market somewhat slackened as employment slowed to a glacial pace this spring. Falling Back? NOW $35 billion—that's how much money homeowners would save annually if new modifications take place for the Home Affordable Refinance Program (HARP). The changes, featured in a Senate bill co-sponsored by Sens. Barbara Boxer and Robert Menendez, would also increase the number of homeowners who refinance under HARP by 13 million. Lawmakers took turns inquiring about the state of the appraisal industry at a hearing in June. Not surprisingly, Republicans cast the issue as one beset by overregulation. A report from the nonpartisan Government Accountability Office found that appraisal management companies now occupy roughly 80 percent of market share. Housing's on the up 'n' up, so what could be down? Interest rates for mortgage loans, more than anything. Trouble in Europe continues to fleece investors off overseas markets, driving them to the safe haven of U.S. Treasury debt and keeping interest rates at all-time lows. Experts say housing has never been more affordable. The U.S. economy lagged behind the economies of other industrialized countries in June, crawling forward by only 3 percent over the fourth quarter, according to the Labor Department. Sluggish movement in the economy hints at more trouble on the horizon as countries in Europe teeter on sovereign default. Amid all the news about an economic slowdown, new home sales showed promise in May, leaping to 369,000 to crest at the highest level since April 2010, according to the Census Bureau and HUD. The median price of a new single-family home fell for the third straight month, dropping to $234,500, the lowest level since February. VS. NEXT The rave over refinance continues for two reasons, experts tell us: It's an election year and the economy lingers in recession zone. And for those two reasons, among others, the Senate bill could become law, even in a season known for razor-sharp partisanship on Capitol Hill. But given historically low interest rates, homeowners will only rejoice. If anti-government conservatives take back the Senate this election, expect some of the rules to loosen up around the appraisal industry. The Dodd-Frank Act notoriously established a firewall between appraisers and lenders in the aftermath of the financial crisis, and Republicans, more than any other party, want to repeal the reform law. Expect mortgage rates to stay in record-low territory for a while. With Freddie Mac finding the 30-year loan at 3.66 percent in June, homeownership will remain in view of many first-time buyers and renters—a reality made possible only by crises in Europe and the inability of debt-saddled sovereign states to figure out their next step. Experts believe that Europe—and the way leaders there handle their own crises—holds the key to a sustained recovery worldwide. Slow growth in these countries threatens to upend jobs in the exports industry stateside, even while major financial institutions clamp down on credit to prevent exposure to the crisis, according to some. The reason for a pickup in new home sales? Look no further than the usual culprits, including historically low interest rates and home prices. Experts agree that economic trouble, here and overseas, boosts a climate for affordability, leaving many renters and first-time buyers with the opportunity to scoop up foreclosed properties and others. THE M REPORT | 19

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