The document discusses the potential impacts of new mortgage regulations on the housing market. It suggests that regulations from Dodd-Frank and Basel III could reduce the number of mortgage loans by up to 20%, leading to 600,000 fewer home sales. Borrowers who do not meet the criteria for a qualified residential mortgage may have difficulty obtaining loans or pay higher interest rates. Overall, the new rules aim to make the mortgage market safer but may also constrain credit availability and drive up costs for some borrowers.

2. Return on Investment
MSN Money.com, Case Shiller

3. Pending Home Sales
105
100
95
90
85
80
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
NAR 11/2012

4. Pending Home Sales
105
100 = Historically Healthy Level
100
95
October 2011 – October 2012
90
85
October 2010 – October 2011
80
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
NAR 11/2012

5. Single Family Sales (year-over-year)
NAR 11/2012

6. Condo & Co-op Sales (year-over-year)
NAR 11/2012

7. $1M+ Home Sales (year-over-year)
NAR 11/2012

8. New Home Sales
Calculated Risk 12/1/2012

9. New Construction
Calculated Risk 12/1/2012

11. Household Formations
Average Annual Formations in Thousands
1,400
1,200 1,250
1,150
1,000
800
600 650
400
200
0
During Boom Years 2008-2011 Last 12 Months
Census Bureau 11/2012

12. Mortgage Rates – 30 Year Fixed
5.25
5
4.75
4.5
4.25
4
3.75
3.5
3.25 1/01/2011 Today
Federal Reserve

13. 10.00
12.00
14.00
16.00
18.00
0.00
2.00
4.00
6.00
8.00
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
30 Year Mortgage Rates
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Freddie Mac

14. Month’s Inventory of Homes for Sale
10.0
9.0
8.0
7.0
6.0
5.0
4.0
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
NAR 11/2012

15. S&P Case-Shiller Home Price Indices
S&P Case Shiller 11/2012

16. S&P Case-Shiller Home Price Indices
4.0% 3.6%
3.0%
Year-over-Year Change in Prices
2.0%
2.0%
1.1%
1.0% 0.6%
Jan Feb Mar Apr May
0.0%
Jun Jul Aug Sept
-1.0% -0.5%
-2.0% -1.7%
-3.0% -2.5%
-4.0% -3.5%
-3.9%
-5.0%
S&P Case Shiller 11/2012

17. Single Family Prices (year-over-year)
NAR 11/2012

18. Condo & Co-op Prices (year-over-year)
NAR 11/2012

19. FHFA Regional Home Prices (year-over-year)
FHFA 3Q HPI Report

20. FHFA State Home Prices (year-over-year)
FHFA 11/2012

21. Impact of Foreclosures on Prices
Clear Capital 11/8/2012

22. Percentage of Distressed Property Sales
35%
35%
30%
25%
24%
20%
Jan Feb Mar Apr May Jun Jul Aug Sept Oct
NAR 10/2012

23. Home Prices in the Short Term
“The monthly Case-Shiller house
price indexes will show month-to-
month declines soon, probably
starting with the October report to
be released in late December. The
CoreLogic Index has already started
to decline on a month-to-month
basis. This is not a sign of
impending doom or another collapse
in house prices - it is just the normal
seasonal pattern.”
Calculated Risk 12/1/2012

24. Home Prices in the Short Term
“We project a small, short-term
price decline for many markets
that recently experienced
double-digit appreciation.”
David Stiff, Chief Economist of Fiserv
Fiserv 11/28/2012

25. Home Prices in the Short Term
150.00
2010-11
2011-12
2012-13
145.00
PRO
JEC
T ED
140.00
135.00
130.00
n
g
pt
ct
n
b
ay
ly
ov
ec
ar
ril
Ju
Au
Ja
Fe
Ju
Ap
O
Se
M
N
D
M
S&P Case Shiller 11/2012

26. Cost vs. Price

27. ‘CFPB’
“Like a neighborhood
cop on the beat,
the Consumer Financial
Protection Bureau (CFPB)
supervises banks, credit
unions, and other financial
companies, and we will
enforce Federal consumer
financial laws.”
CFPB Website

28. The ‘Perfect Storm’ of Regulation
The Qualified Mortgage (QM) rule - part of the Dodd-Frank Wall
Street Reform Act - gives a borrower the right to sue if they received a
loan that courts deemed the borrower did not have the ability to repay.
The Qualified Residential Mortgage (QRM) requires lenders to keep
a 5 percent capital cushion on certain loans they make so that if a
loan goes belly up, a lender has some skin in the game, too.
Basel III will mandate how much capital banks have to keep on hand
for all their mortgage-related business.
All the uncertainty surrounding the ultimate form these important
regulations will take has kept banks hesitant to lend.
US News & World Report 11/7/2012

29. FHA Mortgages
“There are concerns that
impending new rules in
the mortgage market,
dictated by Dodd-Frank
financial reform, will
make the overall loan
market more expensive
and drive more borrowers
to the FHA.”
Diana Olick
CNBC11/16/2012

30. FHA Mortgages
“The FHA is now facing billions of dollars of
losses on loans originated between 2007
and 2009. To help bolster its finances, the
agency recently announced a series of
measures including higher annual insurance
premiums and a change to rules that
allowed insurance premiums to lapse.
Typical borrowers have to pay an up-front
insurance premium of 1.75% of the loan
amount and, starting in 2013, a higher
annual premium of 1.35% of the balance, up
from 1.25%, says Keith Gumbinger, vice
president at HSH.com.”
Wall Street Journal 11/24/2012

31. Impact of New Regulations
“We find using conservative
economic assumptions that
the bottom line effects of
proposed Dodd-Frank and
Basel III regulations may
include up to 20 percent
fewer loans, resulting in
600,000 fewer
home sales.”
American Forum 10/2012

32. Impact of New Regulations
“Borrowers who fail to meet the basic criteria for a qualified
residential mortgage will have a harder time finding a loan,
when compared to borrowers who do meet those criteria.
They might end up paying a higher interest rate, as well…
Financial analysts from J.P. Morgan Securities have
estimated that borrowers might pay up to three
percentage points more for loans
that are subject to risk-retention.*”
*loans that don’t meet the definition
of a qualified residential mortgage
QualifiedResidentialMortgage.org 11/2012

33. Resources
Slide Slide Title Link
Pending Home Sales, Single Family Sales,
3,4,5,6 http://www.realtor.org
Condo & Co-op Sales, $1M+ Home Sales
8,9 New Home Sales, New Construction www.calculatedriskblog.com
PAID SUBSCRIPTION -
10 Older Households More Likely to Own
http://www.economy.com/dismal/pro/article.asp?cid=235444
11 Household Formations http://online.wsj.com/article/SB10001424052970204707104578095223920995426.html
12 Mortgage Rates http://www.freddiemac.com/pmms
14 Month’s Inventory of Homes for Sale http://www.realtor.org
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldocu
15 S&P Case-Shiller Home Prices Indices
17 Single Family Prices www.realtor.org
18 Condo & Co-Op Prices www.realtor.org
20 FHFA State Home Prices http://www.fhfa.gov/webfiles/24216/q22012hpi.pdf
KEEPINGCURRENTMATTERS.COM

34. Resources
Slide Slide Title Link
21 Impact on Foreclosures on Prices http://www.clearcapital.com/company/MarketReport.cfm?month=November&year=2012
22 Percentage of Distressed Property Sales http://www.realtor.org
23 Home Prices in the Short Term www.calculatedriskblog.com
24 Home Prices in the Short Term http://investors.fiserv.com/releasedetail.cfm?ReleaseID=723656
http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?
25 Home Prices in the Short Term
indexId=spusa-cashpidff--p-us----
27 CFPB http://www.consumerfinance.gov
http://www.usnews.com/news/blogs/home-front/2012/11/07/5-housing-issues-hanging-in-the-
28 The ‘Perfect Storm’ of Regulation
balance-going-into-obamas-2nd-term
29 FHA Mortgages http://www.cnbc.com/id/49856477/To_Stem_Losses_FHA_Mortgages_Get_More_Expensive
30 FHA Mortgages http://online.wsj.com/article/SB10001424127887323353204578128810214676692.html
31 Impact of New Regulations http://americanactionforum.org/sites/default/files/Regulation_and_Housing.pdf
32 Impact of New Regulations http://www.qualifiedresidentialmortgage.org/criteria.php
KEEPINGCURRENTMATTERS.COM

35. You get
to decide.