Government

With the increase in home and equity prices, Capital Economics suggests net household wealth may be on its way to rising above pre-recession levels later this year, which will lead to a boost to GDP. In a recent report, the firm forecasts the S&P 500 equity price index will end 2013 close to the current level of 1,500 and expects home prices to rise in the neighborhood of 5 percent. In turn, the growth in household wealth, the analytics firms says, could lift GDP by around 0.7 percent.

After spiking last week, fixed mortgage rates held their ground this week as the economy showed signs of stability, at least for the near future. According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 3.53 percent (0.8 point) for the week ending February 7, unchanged from last week. This time last year, the average FRM was 3.87 percent. Bankrate reported similar findings: The 30-year fixed average was 3.76 percent, down a single basis point from last week.

Coinciding with Wednesday's House committee hearing on the Federal Housing Administration (FHA), Keefe, Bruyette & Woods, a boutique investment firm, released its predictions of what actions the government is and is not likely to take to further assist the housing market. Generally speaking, ""any large program expansions which require congressional approval are, in our view, not likely to go far,"" said Brian Gardner, SVP of Washington research at Keefe, Bruyette & Woods.

The principal reduction debate resurfaced after 45 members of the House of Representatives sent a letter to President Obama, urging him to replace Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco with a permanent director. DeMarco was mainly criticized for his resistance to a loan modification pilot program that would ""examine whether a principal reduction program could reduce costs to taxpayers while helping borrowers stay in their homes.""

In Fannie Mae's housing survey for January, consumers maintained their expectation for growth in home and rent prices and also expressed more optimism toward the economy. The January 2013 survey found 41 percent of consumers believe homes prices will rise in the next 12 months, down from 43 percent in December, but up from 30 percent a year ago. As prices continue to climb, more consumers also said now is a good time to sell. The percentage rose to 23 percent in January, up from 21 percent in December and 11 percent a year ago.

First time claims for unemployment insurance continued to move sideways, dropping 5,000 to 366,000 for the week ended February 2, the Labor Department reported Thursday. Economists expected a larger decline to 360,000 from the prior week’s 330,000 initial claims.

As the Federal Housing Administration (FHA) currently holds a negative equity position of $16.3 billion with a capital reserve ratio of -1.44 percent, Congress called on industry experts to discuss FHA's role in the housing market and possible reforms for the future. The hearing took place Wednesday morning before the House Financial Services Committee. The overall sentiment from witnesses was that the FHA as it stands is flawed and in need of reform.

A judge in the Southern District of New York ruled Tuesday that Flagstar Bancorp will have to pay Assured Guaranty Municipal Corp. more than $90 million for defective mortgages packaged in residential mortgage-backed securities (RMBS). U.S. District Judge Jed Rakoff ruled that Flagstar must pay $90.1 million to Assured for misrepresenting loans in insured securities. Flagstar must also pay interest, attorneys' fees, and other costs to be determined.

Realtors in Florida are no stranger to the economic impact of foreclosures. So, it's no surprise that the Florida Realtors addressed the state's judicial foreclosure process in its list of five legislative priorities for 2013. ""Florida Realtors wants to ensure that any alternative procedures designed to speed up the foreclosure process in uncontested or meritless cases have safeguards that protect all parties,"" the group stated.

The Justice Department (DoJ) and Standard Poor's are at odds with others over civil fraud charges stemming from an alleged scheme to defraud investors in the lead-up to 2008's financial meltdown. The DoJ filed a civil lawsuit against S&P and its parent company, McGraw-Hill, Monday, alleging that S&P ""knowingly [issued] inflated credit ratings"" for collateralized debt obligations in the years before the crash, misrepresenting their creditworthiness and understating their risks.