Where is the Recovery in Housing
Nearly 11% of mortgages modified under the government’s Home Affordable Modification Program, known as HAMP, have fallen two months behind in payments, according to a banking regulators’ report issued Friday. By contrast, just more than 22% of non-HAMP adjustments redefaulted. The reason for the gap is pretty clear, regulators said. HAMP modifications reduce a borrowers’ monthly payment by an average of $608, while bank modifications lower it only by $307. “There is a correlation between sustainability of payment and the reduction in the payment,” said Joe Evers, deputy comptroller at the Office of the Comptroller of the Currency, which put out the report along with the Office of Thrift Supervision.
Under HAMP, eligible borrowers can have their monthly payments lowered to 31% of their pre-tax income as long as its more profitable for the bank to modify the loan than to foreclose. The federal government pays servicers an incentive to participate in the program. Also, proprietary bank modifications are outpacing HAMP adjustments by more than 2-to-1. Many troubled homeowners are falling out of the government program and 44.5% of them are receiving bank modifications. Housing counselors have been wary of proprietary modifications, mainly because there is not a lot of information about them. They caution homeowners to make sure they understand the terms of the adjustment. A Chase spokesman said HAMP is always the first program the bank considers for troubled borrowers “because it lowers the payment more than most other programs.” If they don’t qualify for
HAMP, they are reviewed for a proprietary modification.
Tax bill comes under fire
Sen. Dick Durbin of Illinois and other Democrats plan to bring a tax bill called “Creating American Jobs and Ending Offshoring Act” up for a vote tomorrow, but the legislation has already come under attack from Republicans and business groups. The U.S. Chamber of Commerce called on lawmakers to oppose the bill, saying it would hurt the economy and lead to job cuts. Instead, the group urged lawmakers to extend all of the Bush tax cuts set to expire on Dec. 31 — an issue Congress is unlikely to resolve until after congressional elections on Nov. 2. Tax policy analysts say the bill is politically-motivated and doubt that it will have a meaningful impact on hiring. “I don’t think this package is going to be successful,” said Anne Mathias, a tax analyst at Concept Capital’s Washington Research Group. “Politically it makes sense, but economically I’m not sure it will work.” The bill would give U.S. employers a two-year break from payroll taxes on wages paid to new U.S. work
ers performing services in the United States, according to a summary of the legislation. To be eligible, businesses would have to certify that the U.S. employee is replacing an employee who had been performing similar duties overseas.
Experts said the amount of money companies could save as a result of the tax holiday may not be enough to offset the benefit hiring workers in cheaper labor markets. In addition, analysts said many questions remain about how the provision would work if the bill is passed. “How do you identify the jobs that have come home?” asked Roberton Williams, senior fellow at the Tax Policy Center. “How does the firm prove that a job has moved from overseas to home? How do they prove that the job wouldn’t have been created here anyway?” In addition, businesses would be blocked from taking any deduction, loss or credit for costs related to reducing or ending U.S. operations while expanding similar operations outside of the United States. Critics, like the Chamber of Commerce, say ending deferral would subject American companies to “double taxation” on the earnings of their foreign subsidies. “Limiting deferral would hinder the global competitiveness of these American companies, impede U
.S. economic growth, and ultimately result in the loss of jobs,” Bruce Josten, an executive vice president at the Chamber, wrote in a letter to Senators last week.
New home sales near lows
Sales of new homes were flat in August at a seasonally adjusted annual rate of 288,000, the second lowest level since the Commerce Department started tracking new home sales in 1963. Sales year-over-year are down 28.9%. Home sales were expected to jump to an annual rate of 291,000 in August, according to a consensus estimate of economists surveyed by Briefing.com. “It would have been nice to finally see a nice upward blip, but this is not surprising at all,” said Leif Thomsen, CEO of Mortgage Master. “Builders are unable to get financing for new homes in this economy, and buyers aren’t in a hurry to buy because they know nothing is really selling.” Reports earlier this week on existing home sales and new home construction indicated slightly improving housing market conditions. But until hiring picks up and more people start shopping for houses, a significant rebound is unlikely. The median price of new homes sold in July was $204,700, a 0.5% decline from July and down more t
han 1% from August 2009. At the end of August, 206,000 new homes were for sale. At the current sales pace, the government expects the supply to last 8.6 months. Sales soared in the West, rising 54.3% in August. The Northeast saw sales rise by 16.7%. Sales in the Midwest fell the most, by 26.1%, while sales in the South fell 10.8%.
