As Congress finally acts, analysts are still pouring over the impacts of the debt-ceiling package — but a general belt-tightening is assured. The compromise includes spending cuts of $900 billion over 10 years on discretionary items — primarily education, housing and transportation programs.
In Galveston, conservatives still fight the rebuilding of public housing on the island; a ploy to displace it inland and out of the city was narrowly defeated.
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Some Bankers Never Learn
By Gretchen Morgenson New York Times July 30, 2011
You’d think the mortgage bust would qualify as a teachable moment.
But some people refuse to learn from mistakes — a list that apparently includes certain mortgage bankers. Their industry is fighting a new rule that might prevent a repeat of the lending binge that helped drive our economy off a cliff.
In case you just arrived from another planet: America’s mortgage mania was fueled by home loans with poisonous features that made them virtually impossible to repay. It was fun while it lasted, at least for the financial types who profited by making dubious loans and selling them to investors.
But the Dodd-Frank financial overhaul last year barred lenders from making home loans before determining that people could probably repay them.
(It’s depressing that we have to legislate common sense, but, hey, that’s the world we live in.)
Dodd-Frank also required regulators to define the characteristics of loans that would most likely be repaid. The idea was to ensure that banks had skin in the game when they bundled risky mortgages into securities.
The proposal was this: If a mortgage security contains only high-quality loans, the banks can sell the entire offering. If the investments included riskier mortgages, the underwriters must keep 5 percent of the issue on their own books.
Basically, Wall Street would have to eat a bit of its own cooking.
For homeowners, a lot riding on political fight over nation’s debt ceiling
By Candice Choi Associated Press July 31, 2011
Homeowners have a lot at stake in the political showdown over the country’s debt ceiling.
One of the major concerns to arise from the negotiations for many is the fate of a valued tax break. The benefit, which allows taxpayers to deduct their mortgage interest payments, is used by 35 million households.
Now lawmakers have proposed limiting the deduction as part of an agreement to raise the government’s borrowing limit to avoid a default after the Tuesday deadline. But that’s not the only concern for homeowners and prospective buyers as the negotiations heat up in Washington.
Even if lawmakers strike a deal by the deadline, there’s still a chance the government’s credit rating could be downgraded. That raises the prospect of higher mortgage rates, meaning those who’ve been holding tight for home prices to fall further may feel that time is running out to take advantage of low rates.
The average rate on the 30-year fixed loan is 4.52 percent. That’s only slightly above this year’s low of 4.49 percent. But the rate could head higher if the government doesn’t hold on to its sterling AAA debt rating.
Whether you’re a homeowner or thinking of buying, here’s what you should know:
What will happen to mortgage terms if the government defaults on its debt?
Some borrowers could find it more difficult to get approved for a mortgage. This might happen if banks become more cautious and slow their lending to each other, as they did during the height of the economic collapse in 2008, notes Greg McBride, a senior analyst with Bankrate.com, a publisher of financial data.
Home Sales Contracts Rise, But Market Still Weak
Associated Press July 28, 2011
The number of people who signed contracts to buy homes rose for a second month in June. But the gain was not enough to signal a rebound in the weak housing market.
The National Association of Realtors reported Wednesday that its index of sales agreements for previously occupied homes rose 2.4 percent in June to a reading of 90.9. A reading of 100 is considered healthy by economists. The last time the index reached that level was in April 2010, the final month when buyers could qualify for a federal tax credit.
Contract signings are typically a reliable indicator of where the housing market is headed. That’s because there’s usually a one- to two-month lag between a sales contract and a completed deal.
But the Realtors group says a growing number of buyers have cancelled contracts ahead of closings after appraisals showed the homes were worth less than they bid. A sale isn’t final until a mortgage is closed.
What goes down
How to survive a five-year slump
The Economist July 21, 2011
WILKINS MICAWBER is an unlikely management thinker. But the hopeful maxim of Dickens’s perennial debtor that “something will turn up” nourishes American housebuilders. The industry has endured a horrible five years. Housing starts rallied a little in June but are still at historic lows (see chart). Prices continue to fall, although there is huge variation between regions. The overall S&P 500 index is above its mark of five years ago; the homebuilders index is 60% below.
Eventually, perhaps soon, the market must obey Mr Micawber’s dictum. Prices have dipped below fair value, according to The Economist’s price-to-rents ratio. Homes are now affordable. The rate of household formation, suppressed for years as people have put off renting or buying their own homes, will bounce back: few sane people want to live with their parents until they’re 40. A big bounce is unlikely: credit for mortgages is hard to get and consumer confidence fragile. But rental markets are tightening and builders are already talking about inflection points. Not long ago “there was no light at the end of the tunnel,” says Vince Foley of Barclays Capital. “Now there’s light, it’s just that the tunnel is very long.”
Full story at: http://www.economist.com/node/18988954
Exclusive: Facing criticism, MERS cuts role in foreclosures
By Scot J. Paltrow Reuters July 27, 2011
MERS, the electronic mortgage registry that faces multiple investigations for its role in thousands of problematic foreclosure cases, changed its rules to lower its profile in court-supervised foreclosures.
MERS, a unit of Merscorp Inc. of Reston, Virginia, owns the computerized registry, Mortgage Electronic Registration Systems. Mortgage loan giants Fannie Mae and Freddie Mac and several of the largest U.S. banks established MERS in 1995 to circumvent the costly and cumbersome process of transferring ownership of mortgages and recording the changes with county clerks.
In rule changes announced to MERS members on July 21, the company forbade members to file any more foreclosure actions in MERS’s name.
It also required mortgage servicers to obtain mortgage assignments and record them with county clerks before beginning foreclosures.
Housing occupancy declines, but rentals up in some spots
By Haya El Nasser USA Today July 27, 2011
Empty housing has been on the rise since the recession and real estate bust, but occupancy is starting to pick up in some places — largely because of soaring rental demand.
Neighborhoods from Tacoma, Wash., to New York’s Bronx borough and parts of Albuquerque are showing an uptick in occupied housing, according to an analysis of U.S. Postal Service data.
“There are quite a lot of variations in how metropolitan areas are weathering the current economic conditions,” says Justin Hollander, urban planning professor at Tufts University who led the research conducted with the Lincoln Institute of Land Policy.
Hollander studied data on mail delivery to residences in nearly 30,000 ZIP codes in the contiguous 48 states during the housing boom and collapse. When a unit is vacant, the Postal Service scratches the address off its delivery list.
Occupied housing has declined in about a third of ZIP codes since 2009. From 2000 to 2006, before the recession hit, there were 26% fewer postal areas that experienced an increase in vacant homes.
Detroit survival plan would cut services to some residents, but not all
It’s part of an effort to recast Detroit, which lost a quarter of its population last decade. Some experts say entire swaths of the city should be shut down, but the plan does not go that far.
By Mark Guarino Christian Science Monitor July 27, 2011
Chicago — Taking a first step to adjust to its dramatic population loss during the past decade, Detroit unveiled a plan Wednesday that would see different parts the city receive different levels of service based on how like they are to grow and thrive in the future.
While Mayor Dave Bing said no community would go without essentials including police, fire, emergency services, and trash collection, the healthier parts of the city would have services – such as economic development and tree trimming – that more-blighted areas would not.
The announcement represents the first action by Mayor Bing’s Detroit Works Project, a task force launched nearly 14 months ago to create a long-term plan for the city. With the Detroit population now at 713,777 – more than 1 million less than it was in 1950 and 25 percent less than it was a decade ago – there is widespread agreement that the city needs to take dramatic steps to regain even part of its past prosperity.
GHA plan shifts funds to building units
By Amanda Casanova Galveston County Daily News July 28, 2011
GALVESTON — The Galveston Housing Authority plans to ask the city council to redirect funding from a restricted $25 million allocation to a plan to rebuild public housing units on scattered sites. Previously, the housing authority had asked that some of the $25 million be used for soft costs, such as environmental studies and architectural fees, for predevelopment work at the scattered sites and a proposed mixed-income community. The change comes after the housing authority, the organization in charge of rebuilding 569 public housing units destroyed in Hurricane Ike, learned that a restriction on Community Development Block Grants prevented the city from turning over $3.5 million of the restricted $25 million allocation for soft costs associated with the rebuild of the 569 units. Today, the housing authority will present a budget to city council detailing proposed expenses for at least 50 scattered sites on the island. The housing authority will return to the council in two weeks to seek approval on the release of funds for the scattered sites.
Full story at: http://galvestondailynews.com/story/246930
Island public housing resolution fails by 1 vote
By John DeLapp Galveston County Daily News July 29, 2011
GALVESTON — A controversial resolution calling for the Galveston City Council to endorse a regional approach to public housing narrowly failed Thursday night. Voting for the resolution were Elizabeth Beeton, Steve Greenberg and Rusty Legg. Voting against were Mayor Joe Jaworski and Dianna Puccetti. Chris Gonzales and Mayor Pro Tem Linda Colbert abstained, making the vote 3-2-2. Motions need four votes to pass. The resolution asked the council to take a regional approach to the location of new and replacement public housing rather than a concentration of public housing on the island. But, some of the phrasing quickly drew challenges.
Full story at: http://galvestondailynews.com/story/247162
Agencies scramble as post-Ike assistance ends
By Laura Elder Galveston County Daily News July 31, 2011
A $40 million federal program ends Sept. 30 that has for more than a year helped supply food, medicine, rent and utility assistance and other services to county residents who lost their jobs or homes to Hurricane Ike. But the need remains, leaving social service agencies scrambling to find new funding sources. Despite some delays in allocating a Social Service Block Grant awarded to storm-damaged counties, the program has been a rare success story with tangible results in a county where other federal recovery programs have moved at a glacial speed. The grants, doled out to dozens of area agencies, created hundreds of jobs, allowed some social service agencies to grow and expand their reach, kept thousands of families fed, and helped to pay for prescription medication, hygiene products and housing needs, including debris removal, roof repairs, rental assistance and replacement of furniture and appliances. But some agencies say the program will end at a crucial time in the county’s recovery. Catholic Charities, a lead agency in the program, received $10 million in social service grants, some of which it distributed to 18 smaller agencies. It also received $5 million in collaboration with Lutheran Social Services. ‘Need Still Significant’ Catholic Charities has helped thousands of families throughout the county pay rent and utility bills or to make storm repairs to their homes. But what the organization worries about is what will become of those displaced families when their Ike-damaged houses are demolished and rebuilt or repaired through a program paid for by $259 million in Community Development Block Grants — $99 million for the county and $160 million for the island. The housing program has been excruciatingly slow. Through the program, which began two years ago, the county has completed 100 houses; the island has completed 46.
Full story at: http://galvestondailynews.com/story/247770
Midland housing granted $1.3 million in state funds
By Kathleen Thurber Midland Reporter July 31, 2011
The Texas Department of Housing and Community Affairs and Rep. Tom Craddick announced Friday $1.3 million in financing for a rental property in Midland meant to provide affordable housing.
TDHCA awarded the funds in housing credits to private developers constructing a 96-unit apartment complex known as Playa Del Pueblo. The project is being worked on by the Midland Community Development Corp. and the San Antonio-based NRP Group.
The property will serve tenants earning no more than 60 percent of the median family income, which in Midland is an income of $37,800 for a family of four, according to a TDHCA release. The complex is planned for a plot at Terrell Street and Interstate 20.
“I am pleased to learn that the Playa Del Pueblo Apartments received this funding award from TDHCA,” Craddick said, in a statement. “Tax credits play an important role in providing housing options for low-income residents, and this development is certain to have a positive impact on Midland.”
The award was one of 38 TDHCA made through the 2011 Housing Tax Credit Program allocation, the state’s primary means of directing private capital toward the creation or retention of affordable rental housing. This U.S. Treasury program allocates credits to the states according to a formula currently set at $2.15 per capita.