Economic Focus

IS HOUSING FOLLOWING A SCRIPT?

Housing is following a script, according to Celia Chen, housing economist at S&Ps economy.com. Ms. Chen sees the script as follows: - The recent state foreclosure settlement will help avoid up to 1 million defaults, relieving pressure on house prices. - Reducing the principal of mortgage loans will help keep some distressed borrowers from defaulting. - As fewer foreclosed homes come on the market, house prices will stabilize. - In the six to nine months it will take to implement the settlement, house prices will continue to fall. - The settlement coupled with the Home Affordable Mortgage Program will prevent between 500,000 and 1 million mortgage defaults, a number large enough to bring down the share of distress sales, thus stabilizing home prices. - The settlement calls for Banks to pay out up to $25B, of which; $10B in principal write downs; $7B to support distress borrowers and short sales; $3B toward refinancing borrowers under water; $1.5B for foreclosed households; and $3.5B to fund state housing programs. - While the number of distressed homeowners helped is only a small share of the estimate3d 14.6 million who are under water, it will slow the flow of foreclosed, vacant properties into the market. This should allow house prices to stabilize as house prices are greatly affected by the share of property transactions involving distress sales.
RELEASE DATE Mon 02/20 1:00 pm et Tue 02/21 10:00 am et Tue 02/21 1:00 pm et Wed 02/22 7:00 am et Wed 02/22 1:00 am et Thu 02/23 8:30 am et Thu 02/23 1:00 pm et Fri 02/24 9:55 am et Fri 02/24 10:00 am et
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for the week of February 20, 2012 Volume 16, Issue 06

Key Economic Reports Released This Week
ECONOMIC INDICATORS RELEASED BY Dept. of the Treasury National Association of Realtors Dept. of the Treasury Mortgage Bankers Association of America Dept. of the Treasury Bur. of Labor Statistics Department of Labor Dept. of the Treasury University of Michigan Bureau of the Census Dept. of Commerce CONSENSUS SURVEY1 N/A 4.65M $35.0B offering N/A $35.0B offering 355k $29.0B offering 73.0% 315k Wt. INFLUENCE ON INTEREST RATES

Weekly Bill Auction Existing Home Sales for January 12 2-Year Note Auction MBA Mtg Apps Survey for week ending 02/17 5-Year Note Auction Jobless Claims for week ending 02/18 7-Year Note Auction Consumer Sentiment for February 12 final New Home Sales for January 12

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If strong demand If weak demand If above consensus If below consensus If strong demand If weak demand
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If strong demand If weak demand If above consensus If below consensus If strong demand If weak demand If above consensus If below consensus If above consensus If below consensus

Survey courtesy of Insight Economics, LLC

* Low Importance ** Moderate Importance *** Important **** Very Important

- The states likely to most benefit from principal reductions include Nevada, Arizona, California, Florida, Ohio and Michigan. These states sustained the worst price declines and consequently are burdened by the highest share of negative equity and distressed mortgages. - According to the MBA, the foreclosures started rate has remained 1% for the last three quarters; while RealtyTracs monthly filing data are just starting to show a pickup. This will drive the distress sale share of total sales higher for several quarters, driving national house prices down another 3%.

depth of the housing correction. As long as house prices are declining, the housing market is at risk of slipping back, igniting another recession.

Jessica Lombardo Loan Officer Hi-Tech Mortgage 2184 McCulloch Boulevard, # A Lake Havasu City, AZ 86403 jessica@hi-techmortgage.com Office: 866.768.5626 Cell: 916.548.8533 Fax: 916.372.2518

- Signs of healing are welcome but remain very

tentative and modest particularly in light of the