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» GSE REFORM BILL 'GAINING MOMENTUM' Sen. Mark R. Warner is seeing "tremendous momentum" toward GSE reform in Congress, he said during a discussion with Zillow chief economist Stan Humphries this week. He also expressed his optimism that the Housing Reform and Taxpayer Protection Act of 2013—a bill he helped co-sponsor—"actually has a chance" of passing. Fellow co-sponsor Sen. Bob Corker (R-Tennessee), who was also part of the discussion with Humphries, expressed similar sentiment, saying the bill is "gaining momentum." The major components of the bill include winding down Fannie Mae and Freddie Mac over a period of five years; placing private capital in a first-loss position in which they would absorb 10 percent of losses before a government bailout ensued; and creating a Federal Mortgage Insurance Corporation (FMIC) to ensure securitized loans. Corker and Warner said 10 percent risk retention by the private market is double what would have been necessary to prevent the bailout that took place in the recent housing crisis. Not only does the 10 percent provision likely preclude the need for a government bailout in the future, but also the private market "does a much better job than the government ever would pricing that risk," Warner said. Warner said the combination of the roles the GSEs have played in the housing market— securitizing loans, insuring those loans, and supporting low-income housing and first-time home buyers—"makes no long-term sense." Therefore, the Taxpayer Protection Act of 2013 splits these objectives up so that securitization is achieved in the private market, and the FMIC insures securities. Regional banks would gain access to the secondary market through the FMIC, and the FMIC would be owned by member institutions rather than the government. Corker added that any need for a bailout is also reduced by the bill's enhanced underwriting standards. When asked about the viability of a market with no government guarantee, Corker said, "Going to a completely privatized system today, to me, is not something that has one chance of passing." A government backstop encourages market liquidity, he said. Warner said the industry has given the bill "a seven or eight" on a scale of one to 10, and the bill already has 10 co-sponsors in congress. VISIT US ONLINE @ DSNEWS.COM CONSUMERS DOWN ON HOUSING LEADING UP TO SHUTDOWN Continuing the trend observed in August, Americans' enthusiasm for the housing market abated in September as the government's fiscal policy debate came back into the spotlight. While consumers were still "generally positive" on average about housing and the economy, attitudes over the last few months suggest optimism has hit a plateau, Fannie Mae said in releasing the findings of its September 2013 National Housing Survey. "Our September National Housing Survey results show that the improvements in consumer housing attitudes witnessed in recent months softened ahead of the government shutdown," said Doug Duncan, SVP and chief economist at Fannie Mae. "Americans' awareness of policy uncertainty leading up to the October 1st shutdown and the pending debt ceiling debate appears to have grown as indicated by an apparent cautionary holding pattern in overall consumer housing and personal finance sentiment." While September's survey results show attitudes leading up to the October shutdown, they do not necessarily reveal its full effects (or those of the debt ceiling debate), the GSE noted. Those results should be seen in the surveys for October and the following months. On the topic of home prices, 52 percent of those surveyed expect increases over the next year, down 3 percentage points from August. Those who say prices will go down fell to 6 percent, matching July's survey low. The average 12-month home price change forecast was 3.1 percent. Sixty-three percent of Americans said they believe mortgage rates will head upward in the next 12 months, a survey high. Respondents were slightly more encouraged about their chances of getting a loan, with 47 percent saying they think obtaining credit would be easy—a slight increase from August. Overall, 72 percent of consumers said now is a good time to buy a house—up one percentage point—while 38 percent said now is a good time to sell—up two percentage points. Feelings were mixed when it came to broader economic issues. Though more Americans seem to feel the economy is heading where it needs to be, many were less optimistic about their own personal finances. "Fifty-five percent of Americans continue to believe that the economy is on the right track, while 39 percent think the economy is on the wrong track," Duncan said. "This gap narrowed to 16 percentage points in September. The gap could widen, depending on the outcome of the debt ceiling negotiations." The share of respondents who said their household income is significantly higher than it was last year fell by 1 percentage point to 22 percent in September. At the same time, the share of those whose expenses are higher than they were a year ago rose by the same amount to 33 percent. Forty-two percent of those surveyed expect their financial situation to improve over the next year, a decrease of 2 percentage points from the previous month's survey. STAT INSIGHT 12% Share of August home sales that were distressed. Source: Wells Fargo Securities and National Association of Realtors 41

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