The Norris Group Blog

Today’s News Synopsis:

Economists are criticizing Gov. Schwarzenegger’s $10,000 homebuyer tax credt and claiming it to be a waste of money. According to Amherst Securities Group, default and prepayment rates on mortgage-backed-securities remained consistent from October through November. Colony Capital Acquisitions bought 1,200 commercial mortgages from the FDIC. Multiple appraisal institutions filed complaints to the Department of the Interior regarding the absence of a qualified Chief Appraiser.

In The News:

Sacramento Bee – “Home Front: Some economists not buying proposed homebuyer tax credit” (1-8-10)

“Gov. Arnold Schwarzenegger’s proposed new $10,000 homebuyer tax credit is thrilling the real estate universe, but don’t think it’s a done deal. Opponents, who include economists and advocacy groups, are weighing in. Their point: it’s a poor use of money in a state that’s whacking community college budgets and health programs for poor kids”

Washington Post – “FDIC considers plan to penalize banks whose pay practices encourage risky moves” (1-8-10)

“The Federal Deposit Insurance Corp. is considering financial penalties for banks whose pay practices encourage reckless behavior, potentially opening a new front in the federal government’s effort to reshape the way bankers are paid, according to people familiar with the matter. Officials at the FDIC and other federal agencies are concerned that some banks reward executives for increasing revenues and profits in the short term even if those executives also are increasing the company’s risk of losses in the long term.”

Housing Wire – “Settling the Chinese Drywall Fight” (1-8-10)

“Homeowners and builders are facing difficulties seeking recourse from manufacturers of a toxic drywall that’s been alleged to emit sulfur fumes, causing damage to heating, ventilation and air conditioning (HVAC) components and health problems ranging from watery eyes to respiratory issues. The problem? It’s difficult for plaintiffs to serve foreign manufacturers in US courts. In this case, the problem with the manufacturers of Chinese drywall is exactly what you’d expect: the manufacturers are in China.”

Housing Wire – “Redefault Rates ‘Tragic’, Says Amherst” (1-8-10)

“According to Amherst Securities Group, default and prepayment rates on non-agency, private-label mortgage-backed securities (MBS) were constant in November. However, re-performance rates, where payments return to less than two months delinquent, were down and re-default rates ‘tragic’ in November, according to market commentary provided by the firm.”

Housing Wire – “Carlton Selling $307M Distressed Asset Portfolio” (1-8-10)

“Carlton Advisory Services is selling a portfolio of non-performing loans and real estate owned (REO) assets worth a combined $307m. The portfolio includes office, industrial, retail, multi-family, assisted-living facility, and self-storage assets located across 24 states. The New York-based firm said its services were retained by the commercial mortgage-backed securitization (CMBS) trusts that currently hold the assets.”

Housing Wire – “FDIC Sells Equity Stake in $1bn Portfolio of Distressed CRE Loans” (1-8-10)

“Colony Capital Acquisitions won the bidding process on a sale of equity interest in 1,200 commercial mortgages the Federal Deposit Insurance Corp. (FDIC) seized from depository institutions that failed within the past 18 months. FDIC created a limited liability company, called a multibank structured transaction, to hold commercial real estate assets from 22 failed bank receiverships. As winner of the bidding process, Los Angeles-based Colony Capital purchases a 40% ownership interest in the company.”

Housing Wire – “Call for Chief Appraiser Gains Momentum” (1-8-10)

“A handful of appraiser organizations joined together Thursday to send a letter to the US Department of the Interior, urging the hire of a chief appraiser. The groups – the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers and the National Association of Independent Fee Appraisers – noted a December report (download here) from the Interior Department’s Inspector General directs the filling of such a position, which has not been filled by qualified executive in almost three years.”

Housing Wire – “Fed’s MBS Purchases Slow and Spreads Hold, For Now” (1-8-10)

“The Federal Reserve Bank of New York bought $12bn of mortgage-backed securities (MBS) from mortgage giants Freddie Mac (FRE: 1.45 -3.33%), Fannie Mae (FNM: 1.15 -2.54%) and Ginnie Mae in the week ending January 8.”

Bloomberg - “Fed Won’t Raise Until After Jobless Rate Peaks, Crescenzi Says” (1-8-10)

“The Federal Reserve won’t raise its target rate for overnight loans between banks until many months after unemployment peaks, according to Pacific Investment Management Co.’s Tony Crescenzi.”

Bloomberg - “U.S. Office Vacancies Climb to 15-Year High on Employment Cuts” (1-8-10)

“Office vacancies in the U.S. surged to a 15-year high in the fourth quarter and rents fell the most on record as the deepest recession in more than half a century slashed demand for commercial space, according to Reis Inc. The vacancy rate climbed to 17 percent from 14.5 percent a year earlier, the New York-based research company said. Effective rents, the amount tenants actually pay landlords, dropped 8.9 percent, the biggest year-over-year decline since Reis began tracking the data in 1980.”

Inman - “Economy: Bad is the new good” (1-8-10)

“A renewed, two-group consensus drove the jump: The economy is in a solid recovery, or even if it isn’t, immense Treasury borrowing will force rates higher. Both groups agree that the Fed should stop its assistance, either because the economy no longer needs it, or because even if the economy does need help, to continue assistance would produce inflation. I think this consensus is mistaken. There is no meaningful recovery under way, and the Fed has already pulled up short. More data like today’s will add to policymaking tension, force the administration’s hand, and soon have the Fed back to buying mortgages, Treasurys or both.”

Inman - “Confidence slips among agents, brokers” (1-8-10)

“Confidence among real estate agents and brokers dipped in December after a heady rise in November, according to a monthly survey conducted by real estate tech company Point2 Technologies.”

Looking Back:

One year ago, Fannie Mae and Freddie Mac decided to halt all foreclosure sales and evictions until January 9, 2009.  A panel of economists predicted that home sales would not increase, despite the Federal Reserve’s attempts to lower interest rates.  Consumer borrower dropped by $7.8 billion last November.