The November NAHB/Wells Fargo Housing Market Index sank by five points to 9, the lowest level recorded since its creation in 1985. A score of 50 or below indicates builder view sales conditions as in decline.

Two of three HMI component indices declined in November; the index gauging current sales conditions fell by six points to 8—a record low—while the index gauging traffic of prospective buyers fell by four points to 7, also a record low, NAHB said. The index gauging sales expectations in the next six months held firm in November from the previous month at its record low of 19.

“Today’s report shows that we are in a crisis,” said NAHB Chairman Sandy Dunn. “Tremendous economic uncertainties have driven consumers from the housing market, and it’s going to take some major incentives to bring them back.”

Every region posted declines in builder confidence in November, NAHB said, as the Northeast, South and West each registered five-point declines to 11, 11 and 6, respectively, while the Midwest registered a six-point decline to 7.

The NAHB/Wells Fargo Housing Opportunity Index released Monday noted that 56.1 percent of all new and existing homes sold were affordable to families earning the national median income of $61,500—a significant increase from the 40.4 percent of families who could afford homes at the peak of the housing boom, Dunn said.
 
“If there is a silver lining to this crisis, it would be that some housing markets have become more affordable with a larger inventory to choose from,” Dunn said.

According to Mortgage Bankers Association projections, median home prices for new and existing homes are expected to continue their decline this year, falling by 7-8 percent, while home prices predicted to decline more modestly in 2009.

MBA expects total existing home sales for 2008 to decline by nearly 12 percent from 2007 to 4.96 million units, with sales to pick up by 3 percent in 2009. New home sales will decline by 36 percent from 2007 to 500,000 units, with sales projected to decline another 12 percent in 2009, MBA said.

The two most affordable major housing markets in the country during the third quarter were Indianapolis, Ind., and Youngstown, Ohio. In each market, 91 percent of homes sold in the third quarter were affordable to families earning the areas’ median household incomes of $65,100 and $52,000, respectively, NAHB said.
 
Also near the top of the list for affordable major metropolitan areas were Grand Rapids-Wyoming, Mich.; Warren-Troy-Farmington Hills, Mich.; and Detroit-Livonia-Dearborn, Mich.
 
Meanwhile, NAHB cited the New York-White Plains-Wayne, N.Y.-N.J. housing market as the nation’s least affordable for the second consecutive quarter. In the New York market, 10.6 percent of the new and existing homes sold during the third quarter were affordable to those earning the area’s median family income of $63,000.

Other major metro areas at the bottom of the housing affordability chart included San Francisco-San Mateo-Redwood City, Calif.; Nassau-Suffolk, N.Y.; Los Angeles-Long Beach-Glendale, Calif.; and Miami-Miami Beach- Kendall, Fla.
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The Market Composite Index fell to 398.6, a decrease of 6.2 percent on a seasonally adjusted basis from 425.0 one week earlier. On an unadjusted basis, the Index decreased by 7.2 percent compared with the previous week and fell by 41.3 percent compared with the same week one year earlier. The four-week moving average decreased by 2.7 percent.

Despite the drop in overall application activity, the seasonally adjusted Refinance Index increased by 2.6 percent to 1281.2 from the previous week. The four-week moving average rose by 2.5 percent. The refinance share of mortgage activity increased to 49.9 percent of total applications from 45.1 percent the previous week.

The seasonally adjusted Purchase Index decreased by 12.6 percent to 248.5 from one week earlier. The Conventional Purchase Index decreased by 15.3 percent while the Government Purchase Index (largely FHA) decreased by 6.5 percent.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.16 percent from 6.24 percent, with points increasing to 1.24 from 1.17 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.87 percent from 5.90 percent, with points increasing to 1.24 from 1.12 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year adjustable-rate mortgages increased to 6.80 percent from 6.77 percent, with points increasing to 0.63 from 0.43 (including the origination fee) for 80 percent LTV loans. The ARM share of activity increased to 2.6 percent from 2.3 percent of total applications from the previous week.

The survey covers 50 percent of all U.S. retail residential mortgage originations and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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Significant developments within FHA reform continue to be a primary focus within our economy and on Capitol Hill. Learn how these and other occurrences affect the mortgage industry moving forward. Join experts from MBA and senior staff from HUD for updates on the latest FHA developments and how they affect your business. This LIVE Online Conference is an excellent opportunity to ask questions on how FHA will position itself under the new administration of President-Elect Barack Obama.

Topics and speakers for this program will be announced soon. Space is limited on this popular LIVE Online Conference, so be sure to register now to ensure your participation.

Cost: If you are interested in participating in this LIVE Online Conference, you must register. The fee is $175 per site for MBA members and $225 per site for nonmembers.

To register, visit http://www.campusmba.org/products/default.aspx?product_code=E2901716B/REGIS. You can also register by phone at (800) 348-8653.

About LIVE Online Conferences
Save money and time with MBA's LIVE Online Conferences, powered by CampusMBA, the education division of MBA. This interactive format enables participants to easily view presentations, download articles and analyses and interact with experts through their desktop or laptop computers. All that is needed to participate in this convenient and inexpensive format is a computer with an Internet connection and a phone. This saves both travel expenses and time away from the workplace.

Site Registrations: All LIVE Online Conference registrations are considered "site" registrations. Each site registration can have one or many participants. A site registration is equal to one connection. This means if you have multiple participants at one site, they must all be on the same phone line and internet connection. Additional phone lines or internet connections will require additional registrations. The person who registers for the program must participate on the site.

Limited Space: Due to limited number of seats on our online conference system, we are only able to present the full interactive program to the first 125 sites that connect on the day of the program. However, if you dial in after those allotted seats are full, you will still be able to participate in the audio portion of the program. All visual conference materials that will be used during the presentation will be available to all registered sites following the program.

To learn more about LIVE Online Conference Policies, visit http://www.campusmba.org/AboutCampusMBA/CampusMBAPolicies

Designation Credit: Participants receive one half point toward the Certified Mortgage Banker (CMB) designation. Learn how all participants at your site can earn CMB Points from this conference at (202) 557-2873.

To learn more about CampusMBA and its programs, visit www.campusmba.org.
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MBA invites proposals for presentations that address detailed and complex industry information on today’s changing environment. Proposals should be described with accuracy and detail. Proposals that include names of panelists who have already been identified and confirmed may be given greater consideration than proposals which do not include names of confirmed panelists.

MBA is particularly interested in proposals that highlight the following topics:

• Business
• Management
• Regulatory/legal issues
• Underwriting
• Technology

To download the Call for Proposals online application, visit http://data.mortgagebankers.org/cfp/survey.aspx?M2902066.

For more information, contact Norman Edwards at nedwards@mortgagebankers.org.
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The conference, Rise to the Challenge—Reporting Accurately in Volatile Markets, targets both residential and commercial/multifamily real estate finance professionals.

Upheaval in the mortgage markets, combined with changes in accounting and disclosure requirements, have created unprecedented financial reporting challenges for mortgage companies. MBA’s Accounting, Tax and Financial Analysis Conference 2008 offers a unique opportunity for mortgage finance professionals to share perspectives on the proper implementation of accounting and tax rules as well as prudent financial analysis and risk management. It also provides the opportunity to earn up to 16 CPE credits.

Register Now; Make Hotel Accommodations
Register online at www.mortgagebankers.org/conferences or call (800) 793-6222 (option 3) Monday–Friday, 9:00 a.m.–5:00 p.m. ET. You can also link directly to the registration form at http://www.mortgagebankers.org/files/conferences/pdf/M2902004_registrationform.pdf.

Accommodations are at the Mandalay Bay Resort and Casino, Las Vegas. Phone (702) 632-7777 or (877) 632-7800. Rates are $149/night standard.

For more information, visit the conference web site, http://events.mortgagebankers.org/accounting2008/default.html.
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Paulson and Bernanke said TARP’s implementation over the past six weeks has stabilized the economy and re-opened credit markets.

“We’re still in the early days,” Paulson said. “I think we’ve stabilized the system and prevented a collapse. We still have a lot of work to do in getting the economy going again.”

However, committee skepticism ran bipartisan, albeit for distinctly different reasons. Democrats, including committee Chairman Barney Frank, D-Mass., criticized Paulson for failing to authorize TARP funds to purchase mortgage assets—known by some as “toxic” mortgages. Other Democrats, including Rep. Paul Kanjorski, D-Pa., pressed Paulson to support a $25 billion carve-out of TARP funds to support the auto industry.

“The banks that were the recipients of the capital confusion have not used the funding entirely for re-lending, which many people here understood would be the purpose,” Frank said. “There is some unhappiness about how some of the banks have spent the money. There are also substantive concerns anecdotally that credit is still tight locally.”

Republicans, including ranking minority member Spencer Bachus, R-Ala., questioned why federal funds were being used in private markets and suggested that the federal government lacks an “exit strategy.”

“We continue to purchase assets—nearly $1 trillion worth—and many of us on the Republican side have been concerned since day one of the federal government’s reach in to the private markets,” Bachus said. “Putting capital into companies whose business models are inefficient do not help them address larger problems.”

TARP, conceived by the Bush Administration and passed by Congress through the Emergency Economic Stabilization Act, provides for Treasury to purchase as much as $700 billion in troubled assets directly from financial institutions. At present, Treasury has committed $250 billion to purchase preferred stock in various banking institutions.

However, last week Paulson announced (http://www.treas.gov/press/releases/hp1265.htm) plans to suspend the program authorized by EESA that would enable Treasury to purchase illiquid assets on bank balance sheets as originally planned. Instead, remaining funds would be spent stabilizing the financial system, supporting markets for securitizing credit and reducing incidences of foreclosures.

In his testimony (http://www.treas.gov/press/releases/hp1279.htm), Paulson defended the shift in focus, saying that Treasury requires flexibility in assessing how best to use the remaining TARP funds, “given the uncertainties around the deteriorating economic situation in the U.S. and globally and the continuing financial market stresses.”

“We have always said that the housing correction is at the root of the economic downturn and our financial market stress,” Paulson said. “And as the economy slows further, it threatens to prolong the housing correction, as well as the stress on our financial institutions and financial markets…If we have learned anything throughout this year we have learned that this financial crisis is unpredictable and difficult to counteract. So early last week, we concluded it was only prudent to reserve our TARP capacity, maintaining not only our flexibility, but that of the next administration.”

Paulson insisted that Treasury would continue efforts to use a variety of authorities to reduce avoidable foreclosures. “The government has made substantial progress on that front, through HUD programs, through the Federal Deposit Insurance Corp.'s program with IndyMac, through our support and leadership of the HOPE NOW Alliance and through the new GSE servicer guidelines announced last week that will set a new standard for the entire industry. While I understand the interest in spending TARP resources on other approaches, the efforts already underway will do more to prevent foreclosures than might have been achieved through very large purchases of mortgage-related securities through the TARP.”

Bernanke’s testimony (http://www.federalreserve.gov/newsevents/testimony/bernanke20081118a.htm) centered on TARP’s successes, which he conceded were difficult to quantify given the severity of the financial crisis.

“The value of the TARP in promoting financial stability has already been demonstrated,” Bernanke said. “The financial crisis intensified greatly in the latter part of September and spread to many countries that had not yet been touched by it, which led to grave concerns about the stability of the global financial system.”

TARP allowed Treasury to react quickly, Bernanke said. “These actions, together with similar measures in many other countries, appeared to stabilize the situation and to improve investor confidence in financial firms,” he said. “Notably, spreads on credit default swaps for large U.S. banking organizations, which had widened substantially over the previous few weeks, declined sharply on the day of the joint announcement. Going forward, the ability of the Treasury to use the TARP to inject capital into financial institutions and to take other steps to stabilize the financial system—including any actions that might be needed to prevent the disorderly failure of a systemically important financial institution—will be critical for restoring confidence and promoting the return of credit markets to more normal functioning.”

Frank and Democrats remained skeptical. “Public confidence is at its lowest point,” he said. “It is essential that we use some of these funds to use TARP to reduce foreclosures.” And Rep. Carolyn Maloney, D-N.Y., said TARP had accomplished nothing more than to “fund mergers and acquisitions.”

Paulson, who bore the brunt of committee questioning, insisted that TARP has enabled the economy to turn the corner. “We have done what was necessary as facts and conditions in the market and economy have changed, adjusting our strategy to most effectively address the urgent crisis and preserving the flexibility of the President-elect and the new Secretary of the Treasury to address the challenges in the economy and capital markets they will face in the coming months.”

Paulson, under further questioning from Democrats, dismissed suggestions to carve out $25 billion in TARP funding to assist auto manufacturers, saying “other ways” exist to support automakers.
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The committee, chaired by Sen. Richard Durbin, D-Ill., holds a hearing on Helping Families Save Their Homes: The Role of Bankruptcy Law beginning at 10:00 a.m. ET in room 216 of the Hart Senate Office Building.

Durbin has been a strong proponent of cram downs, which would allow bankruptcy judges to modify the terms of an existing first mortgage—a provision strongly opposed by MBA and other industry trade groups. The Senate rejected a cram-down provision earlier this year and failed to include such a provision in subsequent economic stability legislation.

Also scheduled to testify: Sheriff Thomas Dart of Cook County, Ill.; Michael Calhoun, president of the Center for Responsible Lending; Adam Levitin, professor at Georgetown University Law Center; and Christopher Mayer, senior vice dean and professor of real estate of the Graduate School of Business at Columbia University.
 
MBA NewsLink will provide coverage.
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