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U.S. home prices decline signals still weak economy U.S. housing prices declined 1.3 per cent in October from the previous month, according to the S&P/ Case-Shiller index. This was a bigger decrease than economists anticipated. The home prices are still above the lows reached in the spring of 2009 but these new figures suggest the housing sector will drag down the rest of the U.S. economic recovery. “The double-dip is almost here,” David Blitzer, chairman of Standard & Poor’s index committee, told The Globe and Mail. “There is no good news in October’s report. Home prices across the country continue to fall. The trends we have seen over the past few months have not changed.” While some economists believe the worst is here and that the market will gradually improve in the new year, BNP Paribas in New York predicts prices will also slide in 2011 and 2011, to fall by five per cent from the current level. CMP
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Bank of America settles with Fannie and Freddie Fannie Mae and Freddie Mac, the U.S. government mortgage lenders, accepted US$2.8 billion from Bank of America to settle claims of the bank providing faulty loans. The cost to Bank of America was less significant than what some investors expected, according to the Washington Post, and the bank’s stock increased by 6.4 per cent on Monday, Jan. 3 after the news was released. The settlement helps Bank of America avoid “a doomsday scenario,” analyst Paul Miller of FBR Capital Markets told the Post, but Fannie Mae can still pursue additional claims against the bank whereas Freddie Mac has now closed any more potential claims. Fannie spokesperson Janis Smith called the deal a “fair and responsible resolution,” though others cite it as a “gift” to the bank because the losses will now be incurred on the government mortgage lenders. CMP
Average amount of equity among homeowners who have mortgages (CAAMP)
australia Australian government bans pre-payment penalties Australian Treasurer Wayne Swan announced changes to finance laws, banning unpopular mortgage fees and cracking down on price collusion between major banks in a bid to boost competition in the sector. Targeting Australia’s “big four” banks, the reforms ban exit fees (pre-payment penalties as they are known in Canada) on new home loans and allow the competition regulator to prosecute lenders for colluding on rates, after large hikes sparked an angry consumer backlash. An additional (AUS) $4 billion dollars would also be injected into the mortgage-backed securities market under the reforms, Swan said. “Building up competition in our banking system will ensure that interest rates are lower over time,” Swan told Australian newspapers. “It’s very important that we don’t let the big banks off the hook.” Government opposition said the policy to abolish exit fees was more likely to hurt smaller lenders and do little to foster banking competition, since smaller lenders tend to have bigger exit fees compared to the big four banks. Phil Naylor, CEO of the Mortgage and Finance Association of Australia told MortgageBrokerNews. ca’s sister website BrokerNews.com.au that Australia had missed a “golden opportunity” to develop an Australian version of the Canadian Mortgage Bonds systems, which Naylor said enables thriving and competitive non-bank lender sector to operate there. He labelled the government’s promise to boost securitization funds “a mere drop in the ocean,” which does not deal with the long run competitive funding needs of the non-bank sector. “The federal government’s investments pale to those made by the Canada Mortgage and Housing Corporation, which during the past three years has invested $300 billion in the National Housing Act Mortgage-backed Securities and Canadian Mortgage Bonds programs.” CMP