Market Studies

According to the latest monthly housing scorecard from the Obama administration, the housing market has officially bottomed out, although ""recovery remains fragile."" With prices rising for 12 consecutive months as of October and sales on the rise as well, HUD's senior advisor on housing finance, Michael Berman said, ""[O]ur housing market is continuing to show important signs of recovery."" The government's Making Home Affordable Program has achieved more than 1.5 million loss mitigations and early delinquency interventions, according to the December report.

Redfin's Price Tracker, a monthly report on prices, sales, and inventory across 19 U.S. markets, is based on local multiple listing services. According to the data for December, all three of the indicators tracked took a plunge during the holidays. According to Redfin, listings were down 11.5 percent from November and 33 percent from December 2011. The lack of selection proved to have a hindering effect on sales, which declined 4.1 percent from November to reach the lowest level in 10 months, Redfin reports.

Wells Fargo pulled in a record net profit of $5.1 billion in the final quarter of 2012, up 24 percent from the same period in 2011, according to the bank's quarterly filings. Total profits for 2012 were $18.9 billion, up 19 percent from the year before. Net mortgage servicing rights (MSRs) results were $220 million, up from $142 million in the prior quarter. In addition, losses for mortgage loan repurchases dropped to $379 million from $462 million in Q3.

President Obama opened a big hole in his White House by tapping Jack Lew to replace Timothy Geithner as Secretary of the Treasury, leaving empty for the moment the role of Chief of Staff. Meanwhile, it may take a while before the impact of the long-awaited Consumer Financial Protection Bureau's rules on qualified mortgages will be felt. The CFPB heard the pleas of lenders and housing advocates to avoid taking steps to slow the incipient housing recovery.

The delinquency rate for commercial mortgage-backed securities (CMBS) managed to slip below 8 percent before the close of 2012, while the multifamily sector led with the biggest decline for the year, Fitch Ratings reported Friday. In December, the U.S. CMBS delinquency rate declined to 7.99 percent after falling 18 basis points (bps) from 8.17 percent in November, according to Fitch's index.

After issuing a finalized qualified mortgage (QM) rule on Thursday, the Consumer Financial Protection Bureau (CFPB) also released its guidance on rules to protect consumers of high-cost mortgages. For borrowers with high-cost mortgages, the bureau's final rule bans potentially risky features such as balloon payments (with some exceptions) and penalties for borrowers who pay off loans early. The rule also bans and limits certain fees and practices, such as fees for modifying loans and fees for requesting a payoff statement.

Following Bank of America's announcement of a $306 billion sale of mortgage servicing rights (MSRs) Monday and amid talk of more MSR sales from the bank Thursday, Fitch suggests BofA may not be alone in its strategy of unloading MSRs. ""We believe that other banks with large MSR assets may also begin to complete sales or pursue other strategies to limit their size on bank balance sheets,"" Fitch said this week. Fitch specifically points to Wells Fargo and JP Morgan as banks likely to fall in line with BofA's approach.

According to Freddie Mac's Primary Mortgage Market Survey, the average rate on a 30-year fixed-rate mortgage (FRM) was 3.40 (0.7 point) percent for the week ending January 10, up somewhat significantly from 3.34 percent in 2013's first survey. The 15-year fixed average also climbed--though not as drastically--reaching 2.66 percent (0.7 ppoint). The 15-year FRM averaged 2.64 percent previously.

One of the biggest provisions of the QM rule is the newly set Ability-to-Repay rule, which demands that all new mortgages comply with basic requirements to protect consumers from taking on loans they can't repay. The rule does away with so-called ""no doc"" and ""low doc"" mortgages, requiring that all of a borrower's pertinent financial information must be supplied and verified. The Ability-to-Repay rule also stipulates that lenders base their evaluation of a consumer's ability to pay on long-term views, discounting ""teaser"" or ""starter"" rates typically used in the introductory period.

FICO released a survey of bank risk management professionals to gather projections on where credit will be heading in the next 6 months. The study, which was conducted by the Professional Risk Managers' International Association (PRMIA), found a little more than half of risk professionals (53 percent) expect mortgage credit to meet or exceed consumer demand into the first half of 2013. In the Q4 survey, 68.6 percent of professionals also said they believe the level of 90-plus mortgage delinquencies will decrease or stay the same, representing a 7.1 decline from the previous quarter.