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Fed says Fannie, Freddie could save housing

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Federal Reserve Board writes to Congress

In a letter to Congress, the Federal Reserve Board, led by Chairman Ben Bernanke recommended a variety of steps the lawmakers could take to help housing recover, most notably, noting that Fannie Mae and Freddie Mac could serve to aide the recovery of housing by providing less expensive mortgages to a broader pool of homeowners. Strong political opposition is expected immediately, especially in light of the paper being addressed to leaders like Barney Frank, Ranking Member of the House Committee on Financial Services who two years ago proposed abolishing Fannie and Freddie.

The timing of the recommendation has raised eyebrows as a growing number of politicians on both sides of the aisle are pushing to entirely shut down the two organizations after being seized by the government in 2008 to save them from failing. Recently, Fannie Mae posted losses of $5.1 billion last quarter and requested $7.8 billion more in taxpayer support from the Treasury Department whileFreddie Mac posted losses of $4.4 billion last quarter and requested $6 billion more, which most leaders say is unacceptable.

Goals of the recommendations

All of the Fed’s recommendations aim to make lending loosen up to a reasonable level and reduce the inventory of vacant homes. The Fed wrote, “Looking forward, continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery. Of course, some of the weakness is related to poor labor market conditions, which will take time to be resolved.”

Repeating Obama’s 2011 proposal, the Fed said bank-owned properties should be come rentals and also recommended allowing Fannie and Freddie to refinance loans they have not guaranteed which could allow an additional 1 million to 2.5 million borrowers to refinance through the Home Affordable Refinance Program which President Obama revitalized via an executive order despite the failure of the first phase of the program. The Fed also proposed that Fannie and Freddie handle default differently, a proposal that could go into effect without requiring Congressional approval.

“It is particularly telling that the white paper calls for regulators to evaluate their options on a more macro level rather than simply base evaluations on short term gains or losses,” Senate Banking Committee Chairman Tim Johnson said in a statement, according to Reuters.

White paper from the Fed:

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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30 Comments

30 Comments

  1. Roland Estrada

    January 5, 2012 at 12:38 am

    How convenient for them to say that. And in an election year no less. What a bunch of DBs!!

  2. Brad Officer - Jacksonville REALTOR

    January 5, 2012 at 7:54 am

    Wow. The white paper is spot on with current conditions and raises all the issues that we in the field debate daily. I'm one never for any government intervention, but with short sales it seems to be 9 out 10 times I'm dealing with the gov as the investor.

    The problem is rarely with finding a legitimate buyer with financing for all the properties, the problem is getting the bank or servicer, MI, and the investor to agree to taking the short sales.

  3. Roland Estrada

    January 6, 2012 at 2:04 am

    I’ve had a couple of days to stew about this. Every time this issue comes up I have to go back and review that the problem starts and ends in Washington. The banks are to blame to the extent that they were allowed to go to extremes in their financial dealings. And, I’ll say I'm not a big fan of the banking and financial services sector.

    I made a comment in a previous post that Ronald Reagan once said – The scariest thing a citizen can here is “ We’re the government and we’re here to help.” Another apt saying is – the road to hell is paved with good intentions. Our government, in a grandiose moment of political pandering, declared that home ownership needed to go up.

    The problem is that it didn’t happen organically. It was cobbled together in a way that created a monster even Doctor Frankenstein couldn’t conjure up. Then we were told the banks are to big to fail. Not true. For the last few years we have been led to believe the housing market is to big to fail in one fell swoop. So for the last few years the housing market has been in some bizarre “Weekend At Bernie’s” state of being – dead and very few people willing to bury it and start over.

    Now, back to the banks. The problem with the bailout is that the feds should have had some really heavy-handed but temporary conditions. The banks were shored up but nothing was done to insure that the investors behind the loans would be made to knuckle under and make real and quick advances on loan modifications and short sales.

    And so her we stand, pitifully grateful as we stand in line for our “Government Cheese”.

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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Economic News

Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.

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Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

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Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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