Looser underwriting standards, long thought to be the missing piece to a housing recovery, may be approaching.

It’s no secret that underwriting standards at banks made an about-face following the market scares of 2008, and that some agents have experienced difficulties selling homes in the new lending environment.

A new development, though, would undoubtedly be the loosening of underwriting standards at those same banks, a break that many have pegged as the ultimate sign of a housing turnaround; and according to new data from the Federal Reserve, that reality may not be too far from the present day.

As written by Jessica Wilkie, a Realtor based in Washington, D.C., the latest quarterly survey by the Fed of is member banks showed a big relative shift in lending behavior from banks.

Of the 53 banks the Fed surveyed, none reported that they tightened their lending standards for prime borrowers, a finding that, given past responses, is especially pronounced. Specifically, 50 of the banks said that standards were “basically unchanged,” in the words of the survey, while the other three reported standards that were “eased somewhat.”

“Looser mortgage lending standards should mean more home loan approvals for buyers, and fewer contract cancellations,” Wilkie wrote. “This can spur the housing market forward.”

Of course, Wilkie also notes that, even with the fourth-quarter stagnation in underwriting, lending standards still remain historically high, especially in regards to household income, overall assets ans credit scores. Just from a year ago, the minimum credit score requirements, downpayment requirements, and maximum LTV ratios are all higher. The Fed’s fourth quarter survey could be a turning point in lending, but a higher number of banks reporting “eased” standards remains the ultimate tell-tale sign of an improved lending environment.

And, interestingly, while banks are easing lending for U.S. mortgages, they are tightening lending on the international scene. The Wall Street Journal reported last week that in response to European debt scares, loans to European counterparts have declined from Fed member banks.

In total, 11 communities in and around Houston were among the 50 ranked communities, and The Woodlands, Cinco Ranch and Telfair developments were even in the top 10, with the former two making it all the way to the top five.

Master Planned Communities are large-scale developments that are specifically designed to appeal to a wide range of buyers through a diverse offering of products and features, which include multiple builders, diverse amenities and non-residential construction, such as schools and commercial properties.

Along with the three aforementioned communities, the other Houston developments in the survey were: Bridgeland, Riverstone, Shadow Creek Ranch, Sienna Plantation, Cross Creek Ranch, Westheimer Lakes, Summerwood and Firethrone.

The MPC survey, now in its second year, collects data from 136 different MCPs across the U.S., a representation of nearly 24,000 new home sales in 2011.

An article about the survey by Smart Houston Realtor credited the city’s strong economy for its impressive showing on the survey.

“The rankings shows the current market trend in U.S. and particularly around Houston area and how the new home sales have picked up in 2011 compared to previous years,” the article stated. “With a reasonably minimal unemployment rate, 2012 new home sales going to continue to climb up as per many Realtors and analyst predicts in Houston and also around Texas.”

The Treasury Department is planning a new construct for housing that does not include Fannie Mae and Freddie Mac.

U.S. Treasury Secretary Timothy Geithner announced on Thursday that the Obama administration is still hard at work on an extensive financial plan to overhaul Fannie Mae and Freddie Mac, the two government-sponsored entities that have received more than $151 billion in taxpayer funds since the market downturn in 2008.

Though Geithner stressed that such a plan is a “complicated process” that will not result in any legislation in 2012, he did say that the Treasury plans to release a detailed approach to the GSEs this spring, as he did in February 2011 when he proposed three options for reform for the two firms.

According to a Washington Post article, all three options retained the services of the Federal Housing Administration, but all three also proposed eliminating Fannie and Freddie, though the methods for such an action differed in each plan.

The end goal, regardless of method, is to reduce government presence in the mortgage market, Geithner said.

“Our plan will wind down the GSEs and bring private capital back into the market, reducing the government’s direct role in the housing market and better targeting our support towards first-time homebuyers and low- and moderate-income Americans,” Geithner said.

Since 2008, the government has taken a greater and greater role in the mortgage business, with 9 out of every 10 new loan bearing some form of government support or insurance.

According to a National Mortgage News piece, Geithner plans to work ranking members of the House and Senate banking committees to craft a plan for the GSEs.

“What we’re going to try to do is lay the foundation for consensus,” he said, adding, ”there has been some convergence on thinking about alternative models,” for a revised lending environment.

The FHFA has begun pre-qualifying rounds for its REO Initiative program.

Just three weeks after word leaked that the Treasury Department, in conjunction with the Federal Housing Finance Agency (FHFA), would be launching an REO conversion program to sell its 250,000 distressed properties to investors as rentals, the FHFA has already begun pre-qualifying rounds for investors.

Under the new plan, participating investors may pre-qualify to establish their eligibility to bid on transactions in both the pilot phase of the program and all subsequent phases.

Pre-qualification will require pilot investors to meet certain minimum criteria, including having the necessary finances to purchase the properties, possessing a sufficient base of experience and knowledge to handle the properties and signing a confidentiality agreement.

Edward J. DeMarco, the FHFA’s acting director, said in the agency’s press release that the conversion plan is an invaluable step for the housing market that is grounded in collaboration.

“This is an important step toward increasing private investment in foreclosed properties to
maximize value and stabilize communities,” DeMarco said. “I am grateful for the collaborative effort by the many stakeholders, including investors, nonprofit organizations, and state and local government officials, who have worked together on this initiative.”

The initiative will allow qualified investors to purchase pools of foreclosed properties under the requirement that they rent the purchased properties for a specified number of years. The ultimate goal of the plan is two-fold: to meet the surging demand for rentals, and, most importantly, to provide relief to housing communities wrecked by distressed home values.

The pilot phase will focus on selling pools of various types of assets, including rental properties, vacant properties and non-performing loans – all within the hardest-hit areas and close to market value. The first transaction will be announced in the near-term.

Developed in conjunction with the Treasury Department, Department of Housing and Urban Development, Federal Deposit Insurance Corporation, Federal Reserve, Fannie Mae and Freddie Mac, the initiative was also inspired by meetings with stakeholders and a review of more than 4,000 responses to a Request for Information (RFI) seeking input on options for selling single-family REO properties held by Fannie Mae, Freddie Mac, and the Federal Housing Administration.

CoreLogic's December HPI, as in November, highlights the extraordinary impact of distressed sales on home values.

CoreLogic yesterday released its Home Price Index (HPI) for December, a survey of not only the pricing data for December but of the entire 2011 home value landscape.

Including distressed sales, the HPI reports a 4.7 percent decline in prices in 2011 compared to 2010, marking the fifth straight year that values have ended the year on the downside. As with past HPIs, though, distressed properties were a big part of those declines; when excluding distressed sales, home values were down just 0.9 percent in 2011.

On a monthly basis, values were down 1.4 percent from November to December, but again, once distressed home are excluded, the picture changes dramatically, as prices actually increased by 0.2 percent under such conditions.

Though not as widely-cited as Standard & Poor’s Case-Shiller survey, the HPI is used by a number of institutes and analysts in their research, most notably the Federal Reserve.

Mark Fleming, the chief economist for CoreLogic, emphasized the divergence of prices in his comments on the index.

“While overall prices declined by almost 5 percent in 2011, non-distressed prices showed only a small decrease,” he said. “Until distressed sales in the market recede, we will see continued downward pressure on prices.”

Other highlights of the report included: Including distressed sales, the five states with the highest appreciation were: Montana at 4.4 percent, Vermont at 4.0 percent, South Dakota at 3.1 percent, Nebraska at 2.5 percent and New York at 1.7 percent. On the depreciation side, the highest were Illinois at -11.3 percent, Nevada at -10.6 percent, Georgia at -8.3 percent, Ohio at -7.7 percent and Minnesota at -7.5 percent.

Illinois’ case, though, serves as a particularly notable example of the impact of distressed sales. When such sales are excluded, the state with the highest depreciation were Nevada, Minnesota, Arizona, Delaware and Michigan; once distressed properties are excluded, Illinois does not even crack the top five.

Fannie Mae and Freddie Mac will take an increasingly smaller share of the budgetary pie, according to the latest CBO report.

The Congressional Budget Office (CBO) has dramatically reduced the projected costs of Fannie Mae and Freddie Mac to taxpayers in its latest estimations.

According to a HousingWire piece on the latest CBO Budget and Economic Outlook report, taxpayers can expect to spend another $27 billion between 2013 and 2022 shoring up the two GSEs, a $35 billion decrease from the CBO’s original projection of $62 billion.

The reason for the decrease, the CBO stated, was the increased fees Fannie and Freddie will be collecting as a result of December’s payroll tax cut bill, which funded a temporary extension of the tax cut by increasing insurance fees charged by the GSEs. Though fiscally sound, the measure – which will go into effect on April 1 – came under intense fire from real estate professionals, who alleged that the fee hike would rate interest rates by as much as 25 basis points.

The GSEs were granted $5 billion in funds in 2011 and $7 billion is expected for 2012, and because of the fee hikes, payments will decline further in the next decade to $2 and $3 million a year. In total, the Treasury Department has paid out $183 billion of bailouts funds, $32 billion of which has been paid back by the firms.

“Recent legislation set new fees for loans guaranteed by those entities, which CBO expects will reduce future subsidy costs,” the CBO stated in its report. “For that reason, as well as the expected stabilization of housing markets over the next several years, CBO anticipates that subsidy costs for new loans and guarantees will decline after 2012.”

President Obama offered more details about his refinancing plan for housing yesterday.

The Obama White House yesterday offered details of its mortgage refinancing plan, an initiative first announced during the president’s State of the Union Address, claiming it could save homeowners an average of $3,000 a year.

In short, the plan would allow the roughly 3.5 million underwater homeowners who are current on their mortgages to refinance their loans using today’s historically low interest rates. Though government plans with similar features have existed before, most notably the Home Affordable Modification Program, this new program would be open to owners of private, non-government loans.

As of this writing, 30-year FRMs are down to 3.87 percent, and 15-year FRMs are down to 3.14 percent.

“If you’re underwater through no fault of your own and can’t refinance, this plan changes that,” Obama said in a Wednesday speech in Falls Church, Va. quoted by CNNMoney.

The plan has several eligibility requirements. Borrowers cannot have entered delinquency in the last six months, and had no more than one late payment in the six months prior. Their credit scores must be 580 or better, and their mortgage balance cannot exceed the loan limits for Federal Housing Administration (FHA) loans which differ by state and county (they range from $271,050 all the way to $729,250).

The program will also offer a 20-year loan option for homeowners that will not reduce monthly payments but enable equity to build more quickly; to sweeten the deal, the FHA would cover the closing costs of the refinancing.

In addition, the plan would require lenders to take haircuts and write down deeply underwater mortgages with LTVs of 140 percent or higher, in order to reduce the chances of default.

The Obama administration has estimated that the plan will cost between $5 billion and $10 billion, and it is looking to finance its hefty price tag by charging a small tax on larger banks – an option that may prove challenging, considering the plan will require congressional approval.

Reactions to the President’s plan have been mixed. In a HousingWire piece summarizing the political response, David Stevens, the CEO of the Mortgage Bankers Association, was supportive of the plan.

“MBA agrees that a single national set of standards can help provide confidence and certainty in the real estate market for borrowers, lenders and servicers alike,” Stevens said. “I want to commend the administration for recognizing that more can be done get our housing market on track. The programs announced today will give lenders and other stakeholders additional tools to help borrowers and foster a renewed confidence in our real estate finance system.”

Leading Republican lawmakers, however, seem non-receptive to Obama’s proposal, if not hostile. In the same HousingWire piece, Rep. Spencer Bachus, a Republican from Alabama who chairs the House Financial Services Committee, said the program was more of the same from Obama.

“This is not a serious plan to help the nation’s housing market,” Bachus said. “This is just more of the same from an administration that offers expensive program after expensive program, none of which have worked to help struggling homeowners. President Obama is proposing to get out of the hole we’re in by digging deeper.”

Rep. Scott Garrett, a Republican from New Jersey who chairs the House GSE and Capital Markets subcommittee, was similarly dismissive in his comments in a National Mortgage News piece.

“Until the president gives up his crusade to increase the government’s interference in the housing market, home foreclosures will continue to rise, our economy will continue to falter and every American’s share of the national debt will continue to grow,” the chairman of  said.

And then there were some analysts that felt the President’s plan, though a positive step, did not go far enough, like Ethan Handelman, the vice president for policy and advocacy at the National Housing Conference.

“President Obama’s announcement today reinforces what we all know—we need coordinated action at many levels to restore housing markets, help struggling households, and support a broader economic recovery,” Handelman said. “More, however, is needed … The proposals announced today are a step in the right direction. More can be done, using shared appreciation mortgages, structured short sales, and other proven means to reduce outstanding debt, while improving returns to lenders and preventing painful and destabilizing foreclosures. If leaders of both parties come together now, they can take concrete steps to prevent foreclosures, stabilize neighborhoods, and secure safe, decent, and affordable housing for all in America.”

Construction spending was at its highest level since August in December. Flickr photo by vividBreeze.

Construction spending in the U.S. finished 2011 in a strong way, with December’s $816.4 billion annual rate the highest for spending in four months, according to the latest data from the U.S. Census Bureau.

A 1.5 percent increase from November, December’s totals were also 4.3 percent above December 2010. In the private sector, spending was 2.1 percent above November, increasing from $518.8 billion to $529.7 billion. That increase was mainly due to non-residential spending, which rose 3.3 percent, though residential did increase by 0.8 percent and was 1.1 percent above December 2010.

On the public side, overall spending was up by 0.5 percent from November. Highway construction rose by 1.8 percent, but education construction was down by 0.6 percent.

In a Bloomberg article on construction spending, Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, said the outlook on construction is looking up.

“There are certainly bright spots for the construction outlook,” she said, before the release of the report. “Multifamily construction will continue to improve, given the ongoing shift from owning to renting and the lack of supply in the market. It will still be a very slow healing process.”

December’s construction data also adds clarification for January’s Home Market Index from the National Association of Home Builders. A measure of homebuilder sentiment, the index rose four points in January to its highest level since June 2007.

In the Bloomberg piece, Donald Tomnitz, the chief executive officer of D.R. Horton Inc., gave voice to that newfound optimism.

“Although macroeconomic and housing conditions remain soft, we are cautiously optimistic for the remainder for 2012,” Tomnitz said. “Simply put, our business feels more positive.”

The CFPB has been burdened with foreclosure complaints since opening its windows in July.

The Consumer Financial Protection Bureau (CFPB) received 2,300 mortgage complaints in the month of December, and 38 percent of them pertained to loan modifications and foreclosures; and according to recent reports, those complaints do not go unanswered.

The CFPB has received in total almost 10,000 complaints since opening its hotline in July, on issues as diverse as payday loans, student loans, credit cards and other financial products, and the agency has stated that implicated companies responded to 88 percent of complaints, and nearly 50 percent received relief of some kind.

According to a semi-annual report from the CFPB that HousingWire cited in a recent article, of the 889 aforementioned mortgage complaints, 501 were regarding escrow accounts, loan servicing and making payments.

Coincidentally, the influx of foreclosure complaints corresponded with a partnership between the CFPB and the Special Inspector General of TARP, along with the Treasury Department, to target scams involving applicants for the Home Affordable Modification Program.

According to the HousingWire piece, CFPB Director Richard Cordray said in testimony before the Senate Banking Committee on Tuesday that his agency had already begun assessing the policies of several financial firms, though he did also say at an earlier hearing with Senate Republicans that he would straddle a fine line between enforcement and the functionality of the financial sector.

“I think it is irresponsible to think you can protect consumers while killing off institutions,” he had said.

Intent notwithstanding, from President Obama’s newly-announced Mortgage Task Force and the CFPB’s own inquiries into PHH Corp. and appraisal management firms, 2012 seems to be a year of reinvigorated investigation.

Home values seem to have fallen enough, but do real values that count inflation prove even more dire?

Home values continued their downward slide with Tuesday’s Case-Shiller Home Price Index, the survey of home values by Standard & Poor’s that is considered the definitive voice on home prices. With a monthly decline of 1.3 percent and a yearly fall of 3.7 percent, the index was a reminder of the still-tender nature of home values.

As disarming as those stats are, though, one detail about the Case-Shiller is that it uses nominal prices in its findings, not real prices that reflect the impact of inflation; therefore, with every month, the same question is asked by some analysts and economists – what do prices really look like?

One of those analysts has been Bill McBride of Calculated Risk, and every month, he filters the results of Case-Shiller through his own measurements to find real home values. And every month, his results are not very encouraging.

Real prices differ from nominal prices in that they reflect inflation. So rather than using the current market price, which would be nominal, a real value has been filtered through the Consumer Price Index, the BLS-produced measure of inflation. Because of that, real prices are always lower than nominal and, more times than not, a more accurate portrait of economic conditions.

Such is the case with McBride’s analysis of home values. Though the nominal Case-Shiller, as originally released by Standard & Poor’s, shows that home values have nearly fallen to new post-bubble lows, the real Case-Shiller produced by McBride shows an even more dramatic decline in prices.

“In real terms, the National index is back to Q1 1999 levels (and) the Composite 20 index is back to April 2000,” McBride writes about his graph charting the declines. “In real terms, all appreciation in the ’00s is gone.”

So all of the gains in housing values from not only the last decade, but nearly the entire year before that, have been reversed by the most recent downturn, and they may fall even further.

“In late 2010 I guessed that prices would decline another 5 percent to 10 percent on these national indexes (from October 2010 prices),” McBride writes. “So far prices have fallen another 4 percent to 5 percent on these indexes.”