Treasury Announces a $25B Return Through its MBS (Mortgage Backes Securities) Portfolio

Here’s a note from DS News

Treasury Announces a $25B Return Through its MBS Portfolio

By: Esther Cho 03/19/2012

Through $225 billion in mortgage backed securities (MBS) investments, the U.S. Department of the Treasury announced a return of $25 billion for taxpayers through its portfolio.

The Treasury invested in the MBS between 2008 and 2009 through the Housing and Economic Recovery Act of 2008. The purchases were made to preserve access to mortgage credit during the financial crises. Overall, total cash returns yielded $250 billion through sales, principal, and interest.

“The successful sale of these securities marks another important milestone in the wind down of the government’s emergency financial crisis response efforts,” said Assistant Secretary for Financial Markets Mary Miller. “This program helped support the housing market during a critical moment for our nation’s economy and delivered a substantial profit for taxpayers.”

In March 2011, the Treasury announced it would begin the gradual sale of the purchased securities, all of which have been sold off now.

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Will home prices fall 20% more?

It’s the Job’s, stupid!

Here’s another prognostication that housing may tank by another 20% in the near future.  Who’s to say for sure?  If you think about it, it’s not too difficult to logic your way through the malaise.  Of course like a good spy thriller novel the deeper you go the more twists and turns and strange bedfellows your sure to uncover.  The simple 35,000 foot view is jobs.  You could say “it’s the economy, stupid” as James Carville cleverly coined the term for president Clinton’s campaign and you’d be right.

It’s pretty disingenuous to include housing because this is like trying to define a term using itself.  Think about it.  In a healthy functional market housing is robust and obtainable by many when there is easy affordable access to capital, think mortgage loans (the typical solution for most).  Banks only give loans when they have a reasonable assurance they will get paid back therefore they require most borrowers to have jobs.  And not just a job but generally to be employed by someone other than themselves, kind of an “arms length” stream of income where they are not directly responsible for it’s source (yes, I know this is another whole can of worms we could debate forever…).  So then, no job’s, no loan’s.  No loan’s, no buyers for homes.  No buyers for homes, not for lack of want but for lack of access, lousy economy.  And it just feeds on itself.

Even more ironic is the fact that the financial markets created the noose that is strangling the economy & themselves.  In their hunger for more wealth at any cost the insatiable demand for more mortgage notes they could use to create obscure and confusing derivatives they then sold to everyone.  This ballooned and then started tipping over like rows of domino’s as their buyers: pension funds, city & state governments, then even other governments joined the party.  We’re all experiencing the hangover now.  And it’s likely no where near over yet.  The world economies are all intertwined.  The Euro, Greece, Japan, China, etc. they all have an effect on our economic health.

All this to say it’s important to step back and look at the big picture and think for yourself.  Read between the lines and sound bites and exercise your grey matter.  Then you’ll have a better understanding and appreciation for all the moving parts that make this country and any economy what it is.  Here’s a few morsels to feed your appetite for knowledge, research these subjects:  Shadow Inventory, the Real Unemployment Rate (don’t take what economists and the government spit out at face value), the Federal Reserve, Money Supply, Fiat Currency, Inflation, robo-signing, and Collateralized Debt Obligations.  That’s more than enough to keep you busy for some time.   On a positive note I’d like to remind you the government has declared the recession ended in 2009, so all is well !

Here is the rest of the story via MSN Money:

Will home prices fall 20% more?

Despite some encouraging signs, there’s ample reason to believe the housing market will take another hit as banks resume foreclosures.

By Anthony Mirhaydari

Ask the average guy on the street about things like European Central Bank support for Greece or the intricacies of the deficit debate in Washington, and watch his eyes glaze over.

You might hear something like “those euro-socialists deserve it” or “politicians can’t get anything done” — but the topic will quickly shift to something more aligned to the national interest. Even if it’s the Rush Limbaugh contraceptives furor.

For most Americans, there are only two economic data points that matter: the unemployment rate and the strength of the housing market. Both have been showing signs of life, with the jobless rate dropping to 8.3% while home sales, builder confidence and home inventory-for-sale have all improved.

Time to pop the confetti and buy a few Miami condos?

Not quite. Unfortunately, both areas have been misleadingly positive. I gave you my take on the job market in a recent blog post, “Why the job market still stinks.” Now, I want to warn you about housing.

The truth is, a combination of factors is set to push national home prices down an additional 10% or so before a hard bottom is found. And if Europe’s debt mess and fiscal bickering in Washington result in another recession, the drop could be double that.

Here’s why.

Next leg down has already started

The problem with much of the recent enthusiasm is that it’s been based on rising home-sales data, which when put in percentage terms by headline writers, makes the gains seem dramatic. Take last month’s report on existing-home sales. On a month-over-month basis, sales were up 4.3%; great news!

But at 4.6 million units annually, the sales rate is pitiful compared with the 7.3 million sales peak hit in 2005.

Also bolstering sentiment has been a drop in the supply of housing available for sale. At 6.2 months of supply, the market has returned to “normalcy.”

Again, this is misleading. Because of the “robo-signing” foreclosure scandal, the big banks have dramatically slowed the rate at which they push delinquent homeowners through the foreclosure process. Until they iron out the wrinkles, they would rather let deadbeats get a free ride than compound what was already a public-relations nightmare.

The specifics? Data from RealtyTrac show that the number of foreclosure filings has dropped from the 2008-2010 running rate of around 100,000 per month to closer to 60,000 per month now. Because of this, the time between a borrower going 60 days delinquent on a mortgage and liquidation of the property has increased to nearly three years — up from just five months in 2004.

With the five largest banks and the government reaching a settlement in February, all those postponed foreclosure filings are about to move forward — unleashing a wave of distressed properties into a weak market. Gluskin Sheff chief economist David Rosenberg notes that when this complete “shadow inventory” of homes is properly accounted for, that number for months of supply on sale in the housing market will jump from 6.2 into the double digits.

Even narrowing the inventory to just homes that are vacant with a “for sale” sign in the yard, there are still around 3 million excess residential housing units on the market. That means that even if builders stop all activity and no new homes come to market, it would take nearly eight months to clear them out.

No wonder prices are weakening again. According to Standard & Poor’s Case-Shiller Home Price Index, prices have fallen eight months in a row and have reached new post-bubble lows, with prices returning to levels not seen since late 2002. In other words, although the recession officially ended in 2009, the housing market continues to weaken.

Hardly a reason for optimism. And yet the iShares Dow Jones US Home Construction ETF (ITB +2.11%), has nearly doubled off of its October low.

(Before you accuse me of acting like Chicken Little, a bit of disclosure: I recently bought a home. So while the market might still be unsafe for speculators and condo flippers, I do think they are attractive deals out there for long-term owner-occupants.)

Reality is setting in, however. Economists up and down Wall Street are marking down their growth forecasts as data on things like durable goods and factory activity disappoint. And now, the ITB exchange-traded fund is in the midst of a new downtrend, nearly 8% off its high as it drops below its lower Bollinger band — a sign of intense selling pressure last seen during the August market meltdown.

– you can read the full story using the link above, at the beginning.

To your health and success,

Larry

 

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