The Federal Reserve has gotten a first-hand look at the kind of havoc residential and commercial real estate loans can wreak on a balance sheet in today's market. It can now fully appreciate the woes that lenders and mortgage investors have been facing since the downturn. That's because the Fed's New York bank now finds itself in the very same boat, after two monolithic financial bailouts in 2008 – Bear Stearns and American International Group (AIG) – saddled the federal institution's books with a heap of souring loans.
A study released Wednesday by the Mortgage Bankers Association (MBA) showed that an estimated 1.2 million households were lost from 2005 to 2008, despite the population increase of 3.4 million in the study area. MBA says this decline in households was likely a significant factor to the excess supply of apartments and single-family homes currently on the market. Given its strong tie to unemployment, it's expected that household formation won't return to normal levels until 2012.
The National Credit Union Association (NCUA) is planning to securitize more than $50 billion of what the organization has deemed to be "toxic assets that caused the meltdown." The NCUA, which serves the same regulatory and depository insurance role for credit unions as the FDIC does for banks, would be following in the fashion of its banking counterpart, turning to the secondary market to quickly dispose of poorly performing loans. The FDIC has successfully completed three such transactions over the past month.
PMI Mortgage Insurance Co. is tempering its expectations for the housing market. Although the industry is finally beginning to see some light through the debris of the national mortgage crisis, the California-based company says 2010 has gotten off to a slow start, putting the brakes on any projections for a swift recovery. PMI projects existing home sales to reach 5.50 million units by the end of the year, and prices to end 2010 at about the same level they started.
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