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Monday, December 7, 2009 Mortgage Industry and Economic News: New Rules on Carrying Back Losses Will Help Real Estate, Others; North Bay Business Journal
The American Recovery and Reinvestment Act of 2009 granted companies with less than $15 million in gross receipts a five-year net operating loss carryback for the previous tax year. Now, the Worker, Homeownership and Business Assistance Act of 2009 brings all businesses into the fold and also allows the loss to be applied to either their 2008 or 2009 tax returns. For realtors, home builders, construction businesses and mortgage brokers, this means they can go back to either 2004 or 2005 when the market was thriving. The Federal Housing Administration mortgage insurance program is a critical part of the American housing fabric and has never been more important than it is in today’s market, NAR President Vicki Cox Golder told a congressional panel recently. Testifying before the House Committee on Financial Services, Golder said that the FHA program is fiscally sound with responsible underwriting, and needs enhancements not radical reform. She urged Congress and the administration to tread lightly before making changes to a program that has a profound impact on economic recovery and serves the nation’s families. The unemployment rate edged down to 10.0 percent in November from 10.2 percent. Nonfarm payroll employment essentially remained unchanged, showing a loss of 11,000 for the month, compared to an upwardly revised decrease of 111,000 the prior month. In the prior three months, payroll job losses had averaged 135,000 a month. This was the lowest decline in employment since an increase of 120,000 in December 2007. Lending Reform Bill Rattles State's Mortgage Brokers; New Orleans City Business
Small- to-mid-sized mortgage firms nationwide are calling on Senate Banking Committee Chairman Christopher Dodd, D-Conn., to rewrite the Restoring American Financial Stability Act, arguing that its risk retention requirements would force them out of business. The request was formalized in a Nov. 23 letter to Dodd and ranking member Richard Shelby, R-Ala.. The lobbying groups and other opponents warn that the legislation will inflate borrowing costs, limit access to affordable mortgage options and undermine efforts to stabilize the housing sector. Office Sector Debt Looms as Threat to U.S. Recovery; Financial Post
Fears linger that the U.S. economy soon will be sacked by the huge debt dogging the nation's commercial realty market, with delinquency rates on property loans having doubled in the last year to 7 percent as demand for space wanes and more firms seek Chapter 11. The Federal Reserve calculates that total outstanding debt in the sector is $3.4 trillion, of which $1.4 trillion must be repaid or refinanced by Dec. 31, 2012. If refinancing becomes problematic on a large scale, the result could be multiple defaults and a drag on economic recovery. PricewaterhouseCoopers LLP consultant Jonathon Miller expects U.S. property valuations on average to plunge as much as 50 percent from their 2007 peak, adding, "We expect [commercial real estate] will hit bottom sometime next year, well after other asset sectors." SUBSCRIPTIONS: Estimated TARP Cost Is Cut by $200 Billion; Wall Street JournalThe Obama administration plans to lower the estimated cost of the financial stimulus package to $141 billion over the next 10 years from an earlier projection of $341 billion. Congress authorized $700 billion for the Troubled Asset Relief Program, but the Treasury says big banks have been quickly repaying the money and the government has been spending less on programs to boost the financial sector. The government has invested $204 billion in 690 firms and expects total repayments to reach as much as $175 billion by the end of 2010. Big Step in Bid to Build a Covered-Bond Market; American Banker
House Financial Services Committee Chairman Barney Frank, D-Mass., says the broad reform bill recently passed by his panel could incorporate a provision to create a covered-bond market by the time it reaches a final vote before the full chamber. Covered bonds, unlike mortgage-backed securities, involve assets that remain on the issuer's balance sheet; and experts say a covered-bond market could free up capital so that banks could write jumbo mortgages and other loans that do not qualify for backing by Fannie Mae, Freddie Mac or Ginnie Mae. |
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