@FreddieMac’s Earning Surprise
Freddie Mac’ shares were up in after-hours trading after reporting net income of $1 billion for the second quarter, down from the same period last year, but still not too shabby.
“That’s getting back to the hIgh side of their historical average”, says the Collingwood Group Chairman Tim Rood, a former Fannie Mae executive. “When you consider all of the revenue stripping activities imposed on them and on their sibling, Fannie Mae, plus the added burdens of implementing and monitoring government loss mitigation and foreclosure prevention activities, it’s a remarkable feat that the GSEs remain so profitable.”
Freddie will pay a dividend of $933 million to the U.S. Treasury next month. This means Freddie will have paid $99.1 billion in dividends, exceeding its government bailout of $71 billion.
Fannie Mae will report its earnings tomorrow (Thursday).
The Collingwood Group’s Rood says, “Despite their warts, you would be hard pressed to find government agencies/organizations that provide meaning public value and are self sufficient much less immensely profitable.“
The government rescued Freddie and larger sibling Fannie Mae at the height of the financial crisis in September 2008, after they suffered huge losses from risky mortgages in the housing market bust.
Mortgage Rates Match Record Low on Brexit
The national average 30-year fixed home mortgage rate in the U.S. fell to 3.36% Friday, matching the record low first reached in December 2012, according to Bankrate.com. Would-be home-buyers and homeowners looking to refinance existing mortgages at lower rates have benefited from a drop in Treasury yields since U.K. voters decided in June to leave the European Union. A comparable Freddie Mac mortgage gauge watched by the industry is near a record low, at 3.48%.
Home Prices Through the Roof (…but you knew that!)
The CoreLogic Home Price Indexvfor June 2016 shows home prices are up both year over year and month over month.
Home prices nationwide, including distressed sales, increased year over year by 5.7 percent in June 2016 compared with June 2015 and increased month over month by 1.1 percent in June 2016 compared with May 2016,* according to the CoreLogic HPI.
The CoreLogic Forecast indicates that home prices will increase by 5.3 percent on a year-over-year basis from June 2016 to June 2017, and on a month-over-month basis home prices are expected to increase 0.6 percent from June 2016 to July 2016.
New York Fed Warns of Troubling Student Debt
Student debt may be contributing to wealth inequality.
The increase in borrowing to pay for school combined with slow repayment rates could be widening the gap between the haves and the have-nots, researchers at the Federal Reserve Bank of New York wrote in a blog post Monday. The warning is based on a new analysis from the New York Fed, also published in the blog post, which finds that student debt is a major factor among U.S. households with negative wealth — or more debt than assets.
Student loans constitute 40% of the total debt of households with a net worth of between negative $12,600 and negative $46,300. For households whose balance sheets are even more negative, student debt accounts for 47% of their total debts. Student debt makes up just 10% of total debts for households with positive wealth, the New York Fed researchers found.
California is on Fire, Destroying Homes
Southern California is on fire again. The Sand fire in the Santa Clarita Valley mountains north of Los Angeles has burned 38,873 acres, destroyed at least 18 homes and taken one life. Smoke from the fire created what the LA Times referred to as an “apocalyptic haze” around Los Angeles County and a scorch mark it left behind was clearly visible in images from NASA’s Landsat satellite. On Tuesday, the acting governor of California, Tom Torlakson, declared a state of emergency in the county, declaring that the fire is “likely to be beyond the control of the services, personnel, equipment and facilities of any single local government.”
read more: http://fivethirtyeight.com/features/cities-in-southern-california-cant-escape-the-fire-at-their-door/?ex_cid=538twitter
San Fran High-Rise Sinking
A luxury high-rise building in downtown San Francisco is tilting and sinking, possibly paving the way for a costly legal battle.
The Millennium Tower located at 301 Mission Street, was built in 2008, and boasts condos ranging from $1.6 million to $10 million, the San Francisco Chronicle reports.
Since completion, the 58-story building has sunk 16 inches and tilted two inches to the northwest, according to an independent consultant, the Chronicle reports.
While it’s normal for buildings to settle, the high-rise’s builders predicted the tower would only settle six inches over the course of its lifetime, according to a statement from the Transbay Joint Powers Authority.
read more: http://www.usatoday.com/story/money/nation-now/2016/08/02/contractors-luxury-high-rise-millenium-towers-partners-builders-sinking-tilting-settlement-legal/87945938/
Rising Sea Levels Could Cost Homeowners $1-Trillion
When talking about housing, “underwater” usually means you owe more on a mortgage than the home is worth. But “underwater” takes on a more literal meaning as rising sea levels could soak homeowners for $882-billion, according to a new report from Zillow. The research takes is based on that in the journal Nature, which in March found sea levels could rise more than 6 feet by the end of the century. Florida could lose close to 1 million homes. That comes out to $400 billion in value—a figure that doesn’t include losses to commercial buildings. Under the worst case scenario, New York City could lose about 32-thousand homes at $27-billion in value and Newport Beach, California could lose $1-billion in property.
>Still ahead this week
Fannie Mae release quarterly earnings (before the opening bell)
Challenger Job-Cut Report 7:30 AM ET
Jobless Claims 8:30 AM ET
Jobs Report: Employment Situation 8:30 AM ET
When the media needs an EXPERT it turns to The Collingwood Group, Shouldn’t Your Business?
Clinton’s campaign released an ad with audio that the presumptive Republican nominee recorded in 2006 for his now-defunct Trump University venture. Trump, a billionaire real estate developer, in remarks on a “bubble burst,” said: “I sort of hope that happens because then people like me would go in and buy” property and “make a lot of money.”
But the Collingwood Group Chairman Tim Rood told Fox Business Network’s Neil Cavuto it’s much ado about nothing:
Watch it here: >>>>>https://youtu.be/ZI1gqro5iXc
CFPB: A Look Back at Five Years
The fifth anniversary can be a large milestone and something to really celebrate, but for the fifth anniversary of The Consumer Financial Protection Bureau (CFPB), which came on Thursday, July 21, the celebration may be premature. Some critics even wonder whether the Bureau as it stands now will be around to celebrate next year.
From the Bureau’s initiation, the stated purpose of the CFPB has been protecting consumers in the financial marketplace. According to a recent post from the Bureau, “Since we opened our doors, we’ve focused on making the financial marketplace work for consumers. We’ve listened to your complaints about problems with your financial companies, created new consumer protections for financial products and services, and held bad actors accountable for breaking the law.”
Tom Booker, Managing Director of The Collingwood Group, said, “At the five year mark, the cost to originate has sky rocketed to over $7,000 per loan, the products available to mortgage lenders that address, high debt to income ratios, imperfect credit and difficult to document incomes are difficult to access for most consumers. The compensation schemes for brokers which needed attention, have created a disincentive to loan originators, the front line for borrowers to work on difficult loans to get approved.”
Booker continues on to describe how his balanced assessment is that the law of unintended consequences best describes the impact on the mortgage business at this juncture. He doesn’t believe the goal was to raise costs, to discourage loan offers, or impede access to loan products that could allow more credit worthy Americans access to home ownership. He says that the CFPB has the best of intentions, but not with the intended direction or outcome thus far.
Republican Platform Softens Stance on Winding Down Fannie, Freddie
The official platform of the Republican Party has softened language calling for the end of Fannie Mae and Freddie Mac, while continuing to demand reform.
The platform that party officials approved at this week’s Republican National Convention in Cleveland states that, “The utility of both agencies should be reconsidered.” That contrasts with the 2012 version of the platform, which stated, “Both Fannie Mae and Freddie Mac should be wound down in size and scope.”
It’s unclear what the significance of the change is or why it was made. Top Republican leaders, including House Financial Services Committee Chairman Jeb Hensarling, haverepeatedly called for the end of the government-sponsored enterprises. There is no sign that they have eased up on that view. Additionally, Indiana Gov. Mike Pence, the Republican vice presidential nominee, is a close ally to Hensarling and has previously endorsed privatizing Fannie and Freddie.
Still, because Republican presidential nominee Donald Trump has not weighed in on the issue, the change in the platform has opened the door to speculation.
“I think they wanted to set a marker out that there are some things that need to be changed [with the GSEs] but they’re not necessarily shutting them down,” said Brian Montgomery, a former Federal Housing Administration commissioner during the George W. Bush administration and the current vice chairman of Washington, D.C., consulting firm The Collingwood Group. “I’m just thinking or speculating that they realize that it’s much easier said than done.”
Montgomery added historically, party platforms don’t necessarily have much impact on voters’ decisions, “but maybe they should.”
A Republican administration and Congress would do away with “the jumble of subsidies and controls that complicate and distort home-buying” at the two GSEs, according to the 2016 platform.
read more: http://www.nationalmortgagenews.com/news/compliance-regulation/republican-platform-softens-stance-on-winding-down-fannie-freddie-1082759-1.html
Cleveland Panel Features Collingwood’s Brian Montgomery
The nation’s housing market emerged as a study in contrast during a Tuesday discussion in downtown Cleveland, as economists and experts highlighted the hurdles of buying a home, building wealth and pushing for thoughtful policy amid political fracturing.
Politico, a news organization, hosted the panel as part of a series of programming tied to the Republican National Convention. The company is holding court in the former Huntington Building at East Ninth Street and Euclid Avenue, where banquet space on the 21st floor now teems with vintage political posters, gadgets and writers clattering away on laptops.
Nela Richardson, chief economist for Redfin, likened the housing market to an onion with a healthy exterior and decomposition closer to its core. Homes are selling at a striking clip, aided by technology that puts a wealth of property information at buyers’ fingertips.
Dig deeper, though, and there still aren’t enough houses on the market. Prices have rebounded from the recession, hitting new highs in some cities. But many Americans still are underwater – burdened with mortgage debt that outweighs the value of their homes.
With low homeownership rates and stagnant incomes, apartment dwellers often are spending too much of their paychecks – 30 percent or more – on rent. Yet housing doesn’t seem to be part of the national political conversation as the major parties crown their candidates.
“Housing has lost its place in our rhetoric about wealth creation,” said Richardson, who works in Washington, D.C., for the Seattle-based real estate database and brokerage company.
She was joined by Mark Calabria, director of financial regulation studies at the CATO Institute, a think tank; Brian Montgomery, a business consultant and former assistant secretary of the U.S Department of Housing and Urban Development; and Jim Rokakis, who oversees the urban-focused arm of the Western Reserve Land Conservancy here in Cleveland.
read more: http://www.cleveland.com/business/index.ssf/2016/07/clevelands_once-battered_still.html
MReport: How Will the Presidential Election Affect Housing?
As the 58th presidential election draw closer, many in the mortgage industry are wondering who will win and how the new president will impact housing.
….Vice Chairman of The Collingwood Group, Brian Montgomery, sat down with MReport to provide his take on the how the presidency will affect housing, particularity if Republican nominee Donald J. Trump or Democratic candidate Sen. Bernie Sanders (I-Vermont) wins the election.
“I don’t disagree with the report. However, I was taken aback by the extra negativity toward Trump, and I began to wonder how they came to that conclusion,” Montgomery stated. “I think the problem with Trump is that it is still unknown what he would do for housing. I think that’s where the hesitation comes in. There is uncertainty in the unknown. There is a little of the unknown among all the candidates.”
read more: http://www.themreport.com/news/government/05-18-2016/will-presidential-election-affect-housing
St. Louis Post-Dispatch: SixThirty Accelerator Program Adds Cybersecurity Funding
Add cybersecurity to the list of fields where St. Louis is trying to build new businesses using an accelerator model.
With the creation of SixThirty Cyber, which plans to invest $10 million over the next five years, the St. Louis area has at least six business accelerator funds. Based on a survey the Brookings Institution published in February, the only U.S. cities with more are San Francisco, New York, Boston, Chicago and San Jose, Calif.
Accelerator programs vary in size and focus, but they all invest in early-stage firms and put them through a period of intensive mentoring. According to the Brookings study, an accelerator can help a community by concentrating entrepreneurial energy and “generating vibrancy around innovation.”
If that’s true, St. Louis is more vibrant than most places. The five existing accelerators have financed more than 120 companies in sectors ranging from technology to agriculture to sports.
SixThirty Cyber is a second fund from the organizers of SixThirty, which was launched in 2013 to focus on financial technology startups. The idea then was to capitalize on St. Louis’ strengths by connecting entrepreneurs with such large firms as MasterCard and Wells Fargo Advisors.
Jay DeLong, managing partner of the new fund, said SixThirty was seeing a growing number of applications from firms specializing in information security.
The fund will select five firms for its first class, which begins in September; it will invest between $100,000 and $200,000 in each and put the founders through a 14-week training and mentoring program. Most of the sessions will be in St. Louis but some may be at the Washington offices of Collingwood Group, a consulting firm that is partnering with SixThirty Cyber.
read more: http://www.govtech.com/dc/articles/St-Louis-Mos-SixThirty-Accelerator-Program-Adds-Cybersecurity-Funding.html
Have a prosperous day ahead!