Scotsman Guide - November 2008 Residential Edition

In the Past Month
News from the industry and abroad

By Tony Stasiek, editor

“You’ll like this,” I was told as I entered the living room.

President signs $700 billion
financial-bailout bill

WASHINGTON, D.C. — President George W. Bush signed into law the far-reaching rescue package for the U.S. financial markets passed by Congress on Oct 3.

There, paused on the TiVo, sat former President Clinton on the Sept. 23 episode of “The Daily Show.” The issues of the day: the economy, potential presidents and the mortgage industry. Not a good sign. In this day and age, even Comedy Central drags the office back into our living rooms.

Clinton was talking election. His sermon dealt with the Federal Reserve’s dot-com-era rate increases in 2001:

“The only thing that was then making money was housing,” Clinton said. “All this money was out there, and it all went into houses and construction. So we had to keep finding funny ways to have more houses, like the subprime mortgages or the derivatives.

“What if we had put a lot of this money into solar energy, into wind energy, into hydroelectric vehicles — making all of our cities as energy-efficient as possible? We would’ve created millions of jobs, raised incomes … and there would’ve been competition for investment.”

Imagine that. Crazy, right? As though a president, for all of the Oval Office’s powers, could redirect the economy on a whim. Or convince the roughly 50,000 mortgage professionals who entered the industry between ’01 and ’06, according to Wholesale Access, that they might be better off selling wind turbines than Alt-A loans (which, by the way, have departed Scotsman Guide’s matrix sets this month).

Then again, what if President Hoover hadn’t raised taxes in 1932? What if the deregulation binge that lasted from the

Reagan presidency through Clinton’s abated just a bit? What if _____ Iraq?

Bush said the plan, which allows the secretary of the U.S. Department of the Treasury to buy as much as $700 billion in troubled assets, will help the economy weather the financial crisis, CNNMoney.com reported.

“We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Bush said. “We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy.”

U.S. home prices mark
2 years of declines

WASHINGTON, D.C. — The home-price index for 20 U.S. metropolitan regions dropped 0.9 percent in July, according to a closely watched housing-price index.

The 20-city Standard and Poor’s/Case-Shiller home-price index fell in July for the 24th-straight month. Home prices fell in 14 of the 20 major U.S. cities it tracks, according to the report.

Compared to a year ago, home prices in the 20-city index dropped 16. 3 percent.

Although the president doesn’t pull the Fed’s strings or make consumers’ loan decisions, the commander in chief’s policies and actions are more than symbolic measures or comedy-writer fodder. Even if they don’t affect brokers directly, they could down the road. Quite a bit, in fact.

That’s why this month, we devote our Q&A feature to a side-by-side comparison of where Sen. John McCain (R-Ariz.) and Sen. Barack Obama (D-Ill.) stand on mortgage-industry issues. On Page 14, you can check out exactly what light each candidate has pledged to shine on issues from the economy to loan disclosures.

Also: Next month, keep an eye out for our special Local Markets package, updating the real estate and mortgage trends in 10 cities previously detailed in our Spotlight feature.

Illustration: Keith Negley

tony@scotsmanguide.com

Origination Tracker By Wholesale Access Mortgage Research and Consulting Inc.

Average volume for mortgage brokerages fell 6 percent in July, its third-consecutive monthly decline. Other changes were afoot with Federal Housing Administration (FHA) loans and loan-to-value (LTV) ratios. Shares of FHA/U.S. Department of Veterans Affairs loans have increased every month since February and now stand at 36. 9 percent of production, compared to 3.1 percent last year at this time. This seems to be way too high for what FHA was designed to handle. In fact, some wholesalers have said they are intentionally cutting back on funding FHA loans to keep the percentage of these loans in their portfolio around 30 percent. Meanwhile, the share of loans with an LTV of 80 percent or less jumped to 61.7 percent of production, while those with 95-percent-or-greater LTV declined to 10.1 percent.

This information is compiled monthly by independent research firm Wholesale Access and its partners from a survey of 500 mortgage brokers. For more information, visit wholesaleaccess.com.

Production by CLTV Segment

Source: Wholesale Access Mortgage Research and Consulting Inc.

Dow weathers worst one-day
tumble in its history

NEW YORK — Slumping U.S. markets went into a record-setting freefall on Sept. 29 as the House of Representatives rejected the first stab at a plan to stabilize the economy, which since passed.

After House members turned down plans to add liquidity to markets, stocks plummeted, with the Dow Jones industrial average falling 777.68 points in its worst one-day turn on record. During the previous weekend, numerous large financial institutions also had changed hands or filed for bankruptcy protection.

On Oct. 6, the Dow also closed below 10,000 points for the first time since October 2004.

Report: Foreclosure peak still
could come as defaults grow

IRVINE, Calif. — In August, more than 250,000 home loans were in default and 91,000 U.S. families lost their homes, Realty Trac reported.

According to CNN, 304,000 homes were in some phase of default, and foreclosure filings of all types grew 12 percent between July and August — an increase of 27 percent from August 2007.

The 27-percent year-over-year hike was more modest than other similar comparisons in previous months because the housing crisis was already under way in August 2007, a Realty Trac spokesman said.

“The foreclosure trend hasn’t peaked,” said Doug Robinson, a spokesman for foreclosure-prevention organization Neighborhood Works America. “It’s everybody’s problem.”