TheMReport

August 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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THE LATEST SERVICING unit took a loss on a loan for former Fannie Mae CEO Daniel Mudd, advising staffers to conceal any "derogatory informa- tion" related to his loan in order to continue "any benefit we gen- erate," according to the report. Mudd later left the mortgage giant before it entered federal conservatorship in 2008. The report delineated a close For example, the mortgage relationship between Countrywide and Fannie Mae. In one instance, the GSE fronted 70 lobbyists for the House Financial Services Committee, helping kill four bills introduced by members to reform the mortgage companies. The companies also engaged the Senate Banking Committee with their lobbying muscle. According to the report, Dodd—who served as chairman and left Congress in 2010 after clearing an ethics investigation over any links to Countrywide's VIP unit—made a VIP referral for Mary Jane Collipriest, com- munications director for then- Sen. Robert Bennett (R-Utah). Speaking with MReport, Over-Optimistic Homebuyers Mark Calabria, a former Senate Banking Committee staffer, now with the Cato Institute, said that "it was generally known" that Countrywide "was running a very extensive lobbying campaign, VIP loans "a crucial feature of it." He tells us that the House and Senate committees "were a particular target." According to Calabria, he turned down a VIP loan from an unnamed lobbyist with Countrywide in 2005. A spokesperson for the House Financial Services Committee did not immediately return requests for comment. Richard Simon, a spokesman " with Could Inflate Next Bubble New research examines the relationship between inconsistent consumer sentiment and the industry's future. R enters and first-time homebuyers want more amenities in their first homes and generally feel a sense of optimism that outpaces the reality in a slowly recovering housing market—a disconnect that could set the stage for the next housing crisis. Those are the findings that real with Bank of America, which cooperated with the investigation, declined to comment, noting that the financial institution discon- tinued the VIP program when it bought Countrywide in 2008. CNN reported that other con- gressional offices named by the report had refuted findings with separate statements. It was not clear whether the report would lead to further investigations. estate company Trulia unveiled in an American Dream survey it released recently. Harris Interactive surveyed more than 4,000 adult respondents twice in May. Of 86 markets in the 100 largest metro areas, 61 percent, or nearly two-thirds, of Americans believe that home prices will rise over the next year, according to the company. Many of these believe that home prices will return to highs seen before the crisis in the next decade. Just how many? Fifty-eight percent. High hopes for home prices weren't the only warning signs for Trulia. While 62 percent of renters envi- sioned en-suite master bathrooms, for example, only 26 percent of first-time homeowners got their wishes. The same went for renters who wanted walk-in closets (56 percent) and gour- met kitchens (50 percent) and those for whom reality fell short (35 percent and 9 percent, respectively.) The same disconnect took place for renters who wanted pre-wired en- tertainment systems (31 percent), pools (24 percent), and hot tubs (22 percent) and had to face reality (7 percent, 10 percent, and 6 percent, respectively). "That's the kind of optimism that led us to the last bubble, and if that type of optimism persists, [it] could lead us to the next housing bubble years from now," Jed Kolko, chief economist with Trulia, said during a recent phone call. He said that markets where the bubble "wasn't very steep"—including Pittsburgh, Houston, and swaths of Texas—would likely escape another severe bust. Cities with slacking job demand and unstable prices— Detroit, Las Vegas, and Sacramento, among others—would more likely feel the burn from over-optimism by comparison. "It is very unlikely prices will return to those highs" in those cities in the next decade, he explained, and pent-up demand, fueled by unrealistic expecta- tions, could lead residential construc- tion back to an unsustainable peak. He added that construction remains the industry's laggard at the moment. Where's the housing recovery headed? If the signs mean anything— construction, foreclosures, delinquen- cies, home sales—"normal should come early in 2016." Still, he added, "there are many risks to the housing recovery. The eurozone crisis, big questions about the American budget and what that means for interest rates and the economy, and foreclosures that are still to come, in many local areas, are all potential threats to the housing recovery. These are all factors that could set us back. Concluded Kolko: "So the recov- ery, while it continues, is slow, with the risk of bumps, and that's the reality that consumer optimism right now is outpacing." THE M REPORT | 51 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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