U.S. Payrolls Increased 244,000 in April; Unemployment at 9%

By Timothy R. Homan

May 6 (Bloomberg) — The U.S. economy added more jobs than forecast in April, easing concern that higher fuel prices are slowing the economic recovery.

Payrolls increased by 244,000 workers last month, the biggest gain since May 2010, after a revised 221,000 gain the prior month, the Labor Department said today in Washington.

Economists projected an April rise of 185,000, according to the median estimate in a Bloomberg News survey. Employment excluding government jobs jumped the most in five years. The jobless rate rose to 9 percent, the first increase since November.

More jobs and rising wages may give households, whose spending accounts for 70 percent of the economy, the means to overcome the highest gasoline prices in almost three years.

Federal Reserve Chairman Ben S. Bernanke and some of his colleagues have signaled they plan to forge ahead through June with record monetary stimulus to bolster the expansion.

“The labor market has finally moved into sustainable- growth mode,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report. “We can expect growth numbers to be positive.”

Stock-index futures rose and Treasuries fell after the report. The contract on the Standard & Poor’s 500 Index expiring in June climbed 0.8 percent to 1,345.4 at 8:44 a.m. in New York.

The yield on the benchmark 10-year note increased to 3.22 percent from 3.15 percent.

Range of Estimates

Payroll estimates in the Bloomberg survey of 86 economists ranged from gains of 118,000 to 325,000. March was revised up from a previously reported gain of 216,000, and February payrolls increased 235,000 after a prior estimate of 194,000.

The unemployment rate was projected to hold at 8.8 percent, according to the survey median.

Private hiring, which excludes government agencies, rose by 268,000 in April, more than the 200,000 median forecast in the Bloomberg survey and the most since February 2006, after a 231,000 increase in March.

The separate survey of households showed the size of the labor force was little changed in April and employment shrank by 190,000. That pushed the share of the population in the labor force down to 58.4 percent from 58.5 percent a month earlier.

Government payrolls decreased by 24,000 last month. Local government employment dropped by 14,000.

Factory payrolls increased by 29,000 last month, more than the survey forecast of a 20,000 gain, after a 22,000 rise in March.

Service Employment

Employment at service-providers rose 200,000 in April after a 184,000 gain the prior month. The health care industry added 37,300 workers in April. Construction payrolls rose 5,000 and retail trade employment increased 57,100. The gain at retailers may have reflected the effects of an Easter holiday that occurred later this year than last, making seasonal adjustment difficult for Labor Department.

Some companies are adding workers. Norfolk Southern Corp.

is expanding payrolls as the fourth-biggest U.S. railroad benefits from an economic expansion that’s boosting shipping volumes. First-quarter profit excluding some items was $1 a share, topping the 90-cent average estimate from 27 analysts surveyed by Bloomberg.

“We still have a need for additional employees for the business that we’ve got out there,” Mark Manion, chief operating officer of Norfolk Southern, said in an April 27 teleconference. “There is a need to hire for our current business as well as hiring for the growth that’s anticipated in the first — this year and on into 2012.”

Bernanke on Jobs

While payrolls have grown each month since October, Bernanke said on April 27 that central bankers would like to see more strength in the U.S. job market, noting that a recovery has been “quite slow.”

“The labor market is improving gradually,” Bernanke said to reporters during the first-ever press conference following a Federal Open Market Committee meeting. “We would like to make sure that that is sustainable. The longer it goes on, the more confident we are.”

Economic growth slowed to a 1.8 percent annual rate in the first quarter after expanding at a 3.1 percent pace in the last three months of 2010, according to Commerce Department figures.

Regular fuel was $3.99 a gallon on May 4, the highest since July 2008, according to AAA, the nation’s biggest motoring organization. Food costs rose 0.8 percent in March, also the most since July 2008, consumer-price index data from the Labor Department showed last month.

Underemployment Rate

The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 15.9 percent from

15.7 percent, today’s report showed.

The report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more fell to 43.4 percent of all job-seekers from 45.5 percent a month earlier.

While companies stepped up hiring, earnings increased.

Average hourly earnings climbed to $22.95 in April, today’s report showed, while the average work week for all employees held at 34.3 hours.

Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since last summer, and concerns about global supplies of crude oil have contributed to a further increase in oil prices since the Committee met in March. Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Increases in the prices of energy and other commodities have pushed up inflation in recent months. The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations. The Committee continues to anticipate a gradual return to higher levels of resource utilization in a context of price stability.

 To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and will complete purchases of $600 billion of longer-term Treasury securities by the end of the current quarter. The Committee will regularly review the size and composition of its securities holdings in light of incoming information and is prepared to adjust those holdings as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

The other big change has to do with the loan limit of the high balance conforming loans. Currently the high balance conforming loan limit is $729,750. This limit is in existence due to a temporary extension which has been happening since the beginning of 2009. It is my belief that the current extension which runs until 9/30/11 will not be renewed. As a result, it is highly likely that the high balance conforming limit will go down to $625,500 as of 9/30/11.

I hope you find this information helpful. 

Thanks,

Gabe Bodner

Housing Finance Reform: Reduced Loan Limits, Larger Down Payments, Higher FHA MIP Fees

by Adam Quinones

 

 

 

The long-awaited report on the future of housing finance

The first thing to take away from this paper is the Administration’s intention to wind down Fannie and Freddie on a responsible timeline. That tells you this reform/winding down process will take many years and much debate. 5 to 7 years according to Treasury Secretary Tim Geithner.　 There’s nothing wrong with that though. Slow and steady works as long as lenders have funding liquidity in the process. The main goal is to get housing finance reform done right….the first time, this market can only take so much more stress, rewriting regs repeatedly would be detrimental to the overall housing recovery process.

There is a ton of discussion still to be had. For now, read on…

————————

WASHINGTON – Today, the Obama Administration delivered a report to Congress that provides a path forward for reforming America’s housing finance market.　 The Administration’s plan will wind down Fannie Mae and Freddie Mac and shrink the government’s current footprint in housing finance on a responsible timeline.　 The plan also lays out reforms to continue fixing the fundamental flaws in the mortgage market through stronger consumer protection, increased transparency for investors, improved underwriting standards, and other critical measures.　 Additionally, it will help provide targeted and transparent support to creditworthy but underserved families that want to own their own home, as well as affordable rental options.
　
“This is a plan for fundamental reform – to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it,” said Treasury Secretary Tim Geithner. “We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market.”
　
　”This report provides a strong plan to fix the fundamental flaws in the mortgage market and better target the government’s support for affordable homeownership and rental housing,” said Housing and Urban Development Secretary Shaun Donovan.　 “We must continue to take the necessary steps to ensure that Americans have access to quality housing they can afford.　 This involves rebalancing our housing priorities to support a range of affordable options, from promoting much-needed financing for quality, affordable rental homes to ensuring the availability of safe, and sustainable mortgage products for current and future homeowners.”
　
The Obama Administration’s reform plan will:


　
1. Wind Down Fannie Mae and Freddie Mac and Help Bring Private Capital Back to the Market.　 In the wake of the financial crisis, private capital retreated from the housing market and has not yet returned, leaving the government to guarantee more than nine out of every 10 new mortgages.　 That assistance has been essential to stabilizing the housing market.　 However, the Obama Administration believes that, under normal market conditions, the private sector – subject to stronger oversight and standards for consumer and investor protection – should be the primary source of mortgage credit and bear the burden for losses.
　
The report recommends using a combination of policy levers to wind down Fannie Mae and Freddie Mac, shrink the government’s footprint in housing finance, and help bring private capital back to the mortgage market.　 The Obama Administration is committed to proceeding with great care as we work toward the objective of ensuring that government support is withdrawn at a responsible pace that does not undermine the economic recovery.　

 

 

• Phasing in Increased Pricing at Fannie Mae and Freddie Mac to Make Room for Private Capital, Level the Playing Field.　 The Administration recommends ending unfair capital advantages that Fannie Mae and Freddie Mac previously enjoyed by requiring them to price their guarantees as though they were held to the same capital standards as private banks or financial institutions.　 This will help level the playing field for the private sector to take back market share.　 Although the pace of these increases will depend significantly on market conditions, the Administration recommends bringing Fannie Mae and Freddie Mac to a level even with the private market over the next several years.

 

 

• Reducing Conforming Loan Limits.　 To further reduce Fannie Mae and Freddie Mac’s presence in the market, the Administration recommends that Congress allow the temporary increase in those firms’ conforming loan limits (the maximum size of a loan those firms can guarantee) to reset as scheduled on October 1, 2011 to the levels set in the Housing and Economic Recovery Act (HERA). We will work with Congress on additional changes to conforming limits going forward.

 

 

• Phasing in 10 Percent Down Payment Requirement: To help further protect taxpayers, we recommend requiring larger down payments from borrowers.　 Going forward, we support gradually increasing required down payments so that any mortgage that Fannie Mae and Freddie Mac guarantee eventually has at least a 10 percent down payment.

 

 

• Winding Down Fannie Mae and Freddie Mac’s Investment Portfolios: The Administration’s plan calls for continuing to wind down Fannie Mae and Freddie Mac’s investment portfolio at an annual rate of no less than 10 percent per year.

 

 

• Returning Federal Housing Administration (FHA) to its Traditional Role.　 As Fannie Mae and Freddie Mac’s presence in the market shrinks, we will encourage program changes at FHA to ensure that the private sector – not FHA – picks up this new market share.　 The Administration recommends that Congress allow the present increase in FHA conforming loan limits to expire as scheduled on October 1, 2011, after which it will explore further reductions.　 The Administration will also put in place a 25 basis point increase in the price of FHA’s annual mortgage insurance premium, as detailed in the President’s 2012 Budget.

 

Throughout the transition, we remain committed to ensuring that Fannie Mae and Freddie Mac have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations.　 This assurance is essential to continued economic stability.　　　　　　　
　
We recognize the critically important role that Fannie Mae and Freddie Mac and their employees have played in the housing finance market while they have operated in conservatorship. We look forward to continuing to work with them to find ways to develop and implement the longer term reform solutions that the Administration determines together with Congress.
　
2. Fix the Fundamental Flaws in the Mortgage Market.　 The Obama Administration is committed to fixing the fundamental flaws in the housing finance chain.　 That process is already underway as we move to fundamentally transform the mortgage market through the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act’s) critical reforms.　 Implementing these key measures, as well as additional reforms outlined in this report, will help to strengthen the long-term health of the mortgage market for borrowers, lenders, and investors.

 

• Helping Consumers Avoid Unfair Practices and Make Informed Decisions About Mortgages: The Administration will continue to implement the Dodd-Frank Act’s reforms to strengthen anti-predatory lending protections, improve underwriting standards, require lenders to verify a borrowers’ ability to pay, and provide increased mortgage disclosures for consumers.

 

 

• Increasing Accountability and Transparency in the Securitization Process: The Administration is currently working on rules to require originators and securitizers to keep greater “skin in the game” and to align incentives across the securitization chain.　 Dodd-Frank charged the SEC with setting stricter disclosure requirements so that investors can more easily understand the underlying risks of securities, and establishing an Office of Credit Ratings to more effectively regulate the credit rating agencies.

 

 

• Creating a More Stable Mortgage Market: The Administration supports stronger capital standards to help ensure that banks can better withstand future downturns, declines in home prices and other sudden shocks, without jeopardizing the health of the economy.　 Additionally, the comprehensive reforms undertaken pursuant to the Dodd-Frank Act to constrain excessive risk in the financial system, including strengthened and coordinated oversight through the Financial Stability Oversight Council (FSOC), will help build a healthier and more stable mortgage market for the long term.

 

 

• Servicing and Foreclosure Processes: The Administration supports several immediate and near-term reforms to correct problems in mortgage servicing and foreclosure processing to better serve both homeowners and investors.　 These include putting in place national standards for mortgage servicing; reforming servicing compensation to help ensure servicers have proper incentives to invest the time and effort necessary to work with borrowers to avoid default or foreclosure; requiring that mortgage documents disclose the presence of second liens and define the process for modifying a second lien in the event the first lien becomes delinquent; and considering options for allowing primary mortgage holders to restrict, in certain circumstances, additional debt secured by the same property.

 

 

• Forming a New Task Force on Coordinating and Consolidating Existing Housing Finance Agencies: Following on the President’s call in the State of the Union to reform government to build a stronger future, the Administration will create a task force to explore ways in which the Department of Housing and Urban Development, the Department of Agriculture, and the Department of Veterans’ Affairs housing finance programs can be better coordinated, or even consolidated.

 

　
3. Better Target the Government’s Support for Affordable Housing.　 The Administration believes that we must continue to help ensure that Americans have access to quality housing they can afford.　 This does not mean, however, that our goal is for all Americans to become homeowners.　 Instead, we should make sure opportunities are available for all Americans who have the credit history, financial capacity, and desire to own a home have the opportunity to take that step.　　 At the same time, we should ensure that there are a range of affordable options for the millions of Americans who rent, whether they do so by choice or financial necessity.　 Moving forward, we must design access and affordability policies that are better targeted and focused on providing support that is financially sustainable for families and communities.　 The Administration recommends initially focusing our efforts on four primary areas:

 

• Reforming and Strengthening the FHA: We will continue to ensure that creditworthy borrowers who have incomes up to the median level for their area have access to affordable mortgages, but we will do so in a way that is healthy for FHA’s long-term finances, including considering options such as lowering the maximum loan-to-value ratios for qualifying mortgages and adjusting pricing.

 

 

• Rebalancing our Housing policy and Strengthening Support for Affordable Rental Housing: The plan advocates additional support for rental housing through measures that could include expanding the FHA’s capacity to support lending to the multifamily market, with reforms like risk sharing with private lenders and dedicated programs for hard to reach property segments like smaller properties.

 

 

• Ensuring that Capital is Available to Credit-worthy Borrowers in All Communities, Including Rural Areas, Economically Distressed Regions, and Low-income Communities:　 The plan calls for greater transparency by requiring securitizers to disclose information on the credit, geographic, and demographic characteristics of the loans they package into securities.　 The Administration will explore other measures to make sure that secondary market participants are providing capital to all communities in ways that reflect activity in the private market, consistent with their obligations of safety and soundness.

 

 

• Supporting a Dedicated Funding Source for Targeted Access and Affordability Initiatives: The plan calls for a dedicated, budget neutral, financing mechanism to support homeownership and rental housing objectives.　 The Administration will work with Congress on developing this funding mechanism going forward.　

 

4. Longer-Term Reform Choices.　 The report also puts forward longer-term reform choices for structuring the government’s future role in the housing market.　 Each of these options would produce a market where the private sector plays the dominant role in providing mortgage credit and bears the burden for losses, but each also has unique advantages and disadvantages that we must consider carefully.

Deciding the best way forward will require an honest discussion with Congress and other stakeholders about the appropriate role of government over the longer term.　 The Obama Administration looks forward to working to build consensus, on a bipartisan basis, with a wide range of stakeholders on this issue.　

THE THREE OPTIONS…

Option 1: Privatized system of housing finance with the government insurance role limited to FHA, USDA and Department of Veterans’ Affairs’ assistance for narrowly targeted groups of borrowers

This option would dramatically reduce the government’s role in insuring or guaranteeing mortgages, limiting it to FHA and other programs targeted to creditworthy lower- and moderate income borrowers. While the government would continue to provide access for this targeted segment of borrowers, it would leave the vast majority of the mortgage market to the private sector.

Option 2: Privatized system of housing finance with assistance from FHA, USDA and Department of Veterans’ Affairs for narrowly targeted groups of borrowers and a guarantee mechanism to scale up during times of crisis

 

 

As in the option above, FHA and other narrowly targeted programs would provide access to mortgage credit for low- and moderate-income borrowers, but the government’s overall role in the housing finance system would be dramatically reduced. In this option, however, the government would also develop a backstop mechanism to ensure access to credit during a housing crisis.

Option 3: Privatized system of housing finance with FHA, USDA and Department of Veterans’ Affairs assistance for low- and moderate-income borrowers and catastrophic reinsurance behind significant private capital

 

 

Under this option, as in the previous options, the mortgage market outside of the FHA and other　 federal agency guarantee programs would be driven by private investment decisions with private capital taking the primary credit risk. However, to increase the liquidity in the mortgage market and access to mortgages for creditworthy Americans – as well as to ensure the government’s ability to respond to future crises – the government would offer reinsurance for the securities of a targeted range of mortgages.

 

　

Next on the list of observations is a tightrope transition from government supported loan funding to private investor supported loan funding. It appears the Administration is taking an “if we don’t do it, someone else will” approach. They will attempt to accomplish their objective of reducing the government’s “footprint” in the secondary mortgage market by tightening underwriting guidelines and raising fees. They believe this will effectively “level the playing” field and lower the barriers to entry for private investors. We hope risk retention (skin in the game) regs don’t “unlevel” that playing field. READ MORE: Proposed Risk Retention Reform Affects Banker and Broker Loan Pricing

　

　

　

　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　

　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　

 

　

California touts the most metros on the Top 10 list. San Jose (No. 1), Santa Ana (No. 2) and San Diego (No. 5) offer housing markets where property prices are expected to rise steadily over the next three years. Los Angeles didn’t crack the top 10, but this sprawling metropolis does offer the prospect of appreciation, despite a building boom and bust that was similar to Florida’s.

Click this link for the complete article

http://www.forbes.com/2011/01/21/cities-home-values-prices-real-estate-personal-finance.html?partner=email

General Loan Limits for 2011

The general loan limits for 2011 remain unchanged from 2010 (e.g., $417,000 for a 1-unit property in the continental U.S.).

FHFA publishes the loan limits on its Web site and Fannie Mae provides tools for determining applicable loan limits. See Resources below.

High-Cost Area Loan Limits for 2011

For loans originated on or before September 30, 2011, the “temporary” high-cost area loan limits will apply and will be the same as the 2010 high-cost area loan limits, up to a maximum of $729,750 for a 1-unit property in the continental U.S. Loans originated on or after October 1, 2011, will use the “permanent” high-cost area loan limits established by FHFA under a formula of 115% of the 2010 median home price, up to a maximum of $625,500 for a 1-unit property in the continental U.S.

***** Please note for loans that are closed after September 30, 2011, the maximum high-balance conforming loan limit will be adjusted back to $625,500.