Market Matters

California's vanishing distressed housing market Source: The Record Searchlight The CALIFORNIA ASSOCIATION OF REALTORS® reports that California's distressed housing market is a shadow of what it was at the height of the Great Recession. In January 2009, nearly seven of every 10 homes sold in California were a short sale or foreclosure. This January, that number had shrunk to 15.6 percent. Read the full story

Plan for Mortgage Giants Takes Shape Source: Wall Street Journal Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) have reached an agreement on winding down the government-sponsored enterprises Fannie Mae and Freddie Mac. The bipartisan proposal would replace the U.S.-owned mortgage financiers with government bond insurance that would kick in only after private capital suffered losses of at least 10 percent. Fannie Mae and Freddie Mac currently own or guarantee 60 percent of all U.S. home loans. Kevin Brown, the president of the CALIFORNIA ASSOCIATION OF REALTORS®, commented, “Whether it's called Fannie and Freddie or reconstituted as something else, it's clear we need a government guarantee.” Making sense of the story Under the proposal, a new agency called the Federal Mortgage Insurance Corp. (FMIC) would charge fees to issue a government guarantee on bonds. This guarantee would only be issued after investors suffer losses of at least 10 percent. The agreement would aim to promote a smooth and stable transition from the old system to the new system by providing specific benchmarks and timelines to guide the FMIC and market participants. The FMIC would be modeled in part after the FDIC, including its regulatory authority. The senators’ plan would require strong underwriting standards that mirror the definition of “qualified mortgage,” and set down payment requirement at 5 percent (except for first-time homebuyers at 3.5 percent). Affordable housing goals would be eliminated and instead, housing-related funds would be established to ensure housing is available for all types of borrowers and renters. These funds would be financed through a user fee on lenders that seek FMIC backing. Current conforming loan limits will be maintained under the agreement so that mortgage credit continues to be available in high-cost areas. The plan also states that the new system will monitor consumer and market access to credit, and provide market based incentives and transparency to serve underserved areas. Read the full story