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Wednesday, February 27, 2008

Housing/Subprime Roundup — Feb. 27, 2008

Items of interest:

Mortgage applications fall to 2008 low: MBA -- Applications for home mortgages plunged to their lowest level this year, as rising long-term interest rates curbed incentives to refinance, an industry group's data showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity dropped 19.2 percent to 665.1 in the week ended February 22.

It marked the third straight week of a decline in the index, pushing home loan demand down to the lowest level in 2008.

The MBA's seasonally adjusted index of refinancing applications plunged 30.4 percent to 2,458.9 last week, its lowest since December. The decline came as the average 30-year fixed mortgage rate climbed to 6.27 percent from 6.09 percent in the previous week.

The 30-year rate has risen 0.78 percentage point since mid-January amid concerns short-term interest rate cuts by the Federal Reserve will spark faster inflation. [...]

MarketWatch: Refinancing applications down 30.4% last week
Toll Brothers posts loss, frets about recession talk -- Builder's quarterly write-down at low end of forecast; sees market 'glimmers'

Luxury home builder Toll Brothers on Wednesday swung to a fiscal first-quarter loss and said "ceaseless talk" about a recession is dampening the mood of consumers. [...]
Wall Street Journal:
Investment Firms Buy Mortgage Loans -- People behind on their mortgage payments may soon find themselves owing money to investment firms.

A growing number of money managers, from BlackRock Inc. to Och-Ziff Capital Management Group LLC, are looking to profit from buying whole residential mortgages, mainly ones where borrowers have stopped making payments.

The idea is to buy the loans at steep discounts and force payments by rejiggering the terms of the loans, or resell them for a profit. In case of a foreclosure, buyers are hoping to take control of the underlying real estate.

The growing interest in buying what are known as whole mortgage loans is a new phenomenon. Asset managers have long been happy to gain exposure to this asset class through the securitization process, where loans are repackaged into bonds. But with the securitization business at a standstill, opportunities to buy loans directly have grown.

BlackRock Chief Executive Officer Laurence Fink announced plans earlier in the year to raise $1 billion for investing in distressed residential mortgages, while Fortress Investment Group LLC officials told investors late last year that its hedge-fund side has been purchasing whole residential-loan portfolios. [...]
A March 2005 survey released by The National Association of Realtors indicated that 23 percent of all residential real-estate transactions in the United States in 2004 went to investors, rather than to buyers looking for a place to live.
comment: Given all the talk about inflation, don't rising prices at some point cushion the fall in housing prices. Houses after all are made of basic commodities: wood, copper, steel, cement, oil-based plastics, etc. Homes have been touted as an inflation hedge, how has that changed?

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