FHFA Director Mel Watt Criticized For Not Going Far Enough On Affordable Housing … Yet

Poor Mel Watt. Affordable housing activists are angry with the FHFA Director because he isn’t going far enough on affordable housing.

Oct. 1 (Bloomberg) -By Clea Benson- After a speech to bankers in Raleigh, North Carolina last month, Melvin L. Watt, chief regulator of Fannie Mae and Freddie Mac, called on a man in the back of the hotel ballroom.

“Does the National Housing Trust Fund have the possibility of being capitalized?” the man asked, referring to a low-income
housing program that’s supposed to get a cut of revenues from the two mortgage-finance companies.

Watt, who has yet to approve funding of the trust, said he’s studying the issue. ‘He wants me to go way off script,’’ Watt told the group. “I can’t do that.”

Watt’s circumspect style and scant policy changes in his first nine months as director of the Federal Housing Finance Agency have drawn criticism from some of the same housing advocates who pushed President Barack Obama to appoint him. The National Low Income Housing Coalition and other groups said they expected Watt, the most powerful housing official in America, to move quickly to help troubled borrowers and lower-income families shut out of the two-year housing recovery. Instead, he is maneuvering cautiously, asking for public feedback on many issues — and earning accolades from the mortgage industry.

“Mel Watt has been a huge disappointment,” said Peter Dreier, a public policy professor at Occidental College in Los Angeles who wrote a paper arguing that the FHFA should allow debt reductions for borrowers with Fannie Mae and Freddie Mac mortgages. “No one I know in the housing community understands why he’s sitting on his hands.”

Because he is taking his job as regulator of Fannie Mae and Freddie Mac seriously and not acting impulsively?

Quite frankly, Mel Watt has been a pleasant surprise for me. He seems to be thoughtful and asking for opinions from different quarters. I was worried that he would do want Professor Dreier was hoping: open the floodgates for affordable housing … again.

But you see kids, this is a different world today than it was when President Bill Clinton started pushing homeownership in 1995. Real median household income is back to 1995 levels (and is stagnant where it was growing after 1995). Mortgage purchase applications are in witness protection thanks to too few households being able to meet DTI requirements


Notice that house prices are considerably higher now than in 1995, as in labor force participation. Same real median household income, much higher house prices.

I am pleased that Mr. Watt is taking him time .. and he may yet do all of the above that affordable housing advocates want. But lower credit standards to solve a stagnant income problem is a difficult problem to solve.

Mr. Watt, thank you for not going “far enough” without careful consideration. I know you want to expand affordable housing and homeownership, but thank you for thinking about how to do it in a SUSTAINABLE way.


ADP Jobs Grow By 215K (Too Bad Wages Aren’t Growing By Greater Than The Inflation Rate)

Mark Zandi from Moody’s Analytics said the following this morning about the latest jobs report:

“Job gains remain strong and steady,” said Mark Zandi, chief economist of Moody’s Analytics, which co-develops the report. “Especially encouraging most recently is the increasingly broad base nature of those gains,” he said in a press release. “Nearly all industries and companies of all sizes are adding consistently to payrolls.”

Of course, this is the same Mark Zandi who last month said “Don’t believe the jobs data.”

But if we look at ADP jobs added versus labor force participation, real median household income and average wage growth (YoY), we get a different picture.


If job gains remain as strong and steady as Zandi claims, why are mortgage purchase applications still in the toilet?


Or as the French say “La toilette.”


The DTI Zone: Mortgage Purchase Applications Flat, Down 11% From Last Year, Down 65% From Q2 2005 (Falling/Stagnant Incomes)

The good news this morning is that mortgage applications were flat and did not lose significant ground. Although the remainder of 2014 is likely to get progressively worse.

Mortgage applications decreased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 26, 2014.


The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 11 percent lower than the same week one year ago.


The seasonally adjusted Purchase Index remained unchanged from one week earlier. And remain 65% BELOW the peak in June 2005. We are in the #DTI, #LTI zone where not enough borrowers can qualify for a mortgage.


The Refinance Index decreased 0.3 percent from the previous week.


The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.33 percent from 4.39 percent, with points decreasing to 0.31 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

You have just crossed over into “The DTI Zone.”


Sorcerer’s Apprentice: Fed Excess Liquidity Overflowing To Foreign Banks (Not Helping Main Street USA)

According to the Wall Street Journal, banks based outside the U.S. have been unlikely beneficiaries of the Federal Reserve’s interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs.

Foreign firms have received nearly half of the $9.8 billion in interest the Fed has paid banks since the beginning of last year for the money, called reserves, they deposit at the U.S. central bank according to an analysis of Fed data by The Wall Street Journal. Those lenders control only about 17% of all bank assets in the U.S.

foreign banks WSJ


Of course, Fed policy has helped to stoke asset prices …


But not wages of anything else on Main Street.


At least The Fed is providing shelter for foreign banks. /sarc

This story reminds me of the Sorcerer’s Apprentice from the film Fantasia. Except that Ben Bernanke and Janet Yellen are Mickey Mouse.


Yellen trying to curtail quantitative easing.


Slowing: Home Prices in U.S. Rise at Slowest Pace in Almost Two Years (Back To 2006 Levels Of YoY Growth)

The S&P/Case-Shiller index of property values increased 6.75 percent from July 2013, the smallest 12-month gain since November 2012. And is now back to 2006 levels in terms of YoY growth.


Only San Francisco suffered a decline in home prices MoM. Las Vegas leads in terms of YoY growth.


Household income, wage growth, labor force participation, money velocity and mortgage purchase applications have all slowed since 2008, so why not housing prices (if investors pull out)?


Obama: “Are You Better Off Than 6 Years Ago?” Answer In Two Charts

In a 60 Minutes interview, President Barack Obama channeled President Ronald Reagan and asked “Are you better off than 6 years ago” referring to when President Obama was elected for the first time.

Here is the answer in two charts, Mr. President!

If you were able to take advantage of The Fed’s massive distortion of asset prices (such as the stock market and both residential and commercial real estate), you are better off!


But if you are one of the middle class, the answer is no.


If you are a minority, the answer is no.


But if you are in the top earner group, you are better off. All others? No.


OK, Rick Sharga noticed that it actually took me 4 charts, not two. So, just focus on the first two!!

And former Attorney General Eric Holder is far better off. He is now making $77 million with JPMorganChase.


Here is The March of The Federal Reserve!