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ECONOMIC INDICATORS October Appraisal Institute

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ECONOMIC INDICATORS October Appraisal Institute Powered By Docstoc
					 Vol. 1, No. 7, December 2010

 Regulatory and Legislative—Origination
    •    Fannie Mae Guidelines Effective Dec. 13 Allow Gift as Down Payment [Posted Nov. 24, 2010]
    •    Freddie Mac Reports $2.5 Billion Third Quarter Loss; Recovery Far Away [Posted Nov. 10, 2010]
    •    Freddie Mac's 90-day Delinquency Rate Drops Slightly [Posted Nov. 3, 2010]

 Regulatory and Legislative—Asset Management and REO
    •    House Subcommittee Probes Bank Executives, Regulators on Foreclosures [Posted Nov. 24, 2010]
    •    Fed to Issue Foreclosure Report in Early 2011 [Posted Nov. 24, 2010]
    •    White House Unveils Home Energy Retrofit Program [Posted Nov. 17, 2010]
    •    Obama Nominates North Carolina’s Smith for FHFA Head [Posted Nov. 17, 2010]
    •    Mortgage Servicing Model Needs Overhaul: Fed’s Raskin [Posted Nov. 17, 2010]
    •    SEC Urges Banks to Disclose Potential Foreclosure Losses [Posted Nov. 3, 2010]

 Inside the States
    •    Iowa AG: Foreclosure Probe to Continue; JPMorgan to Re-start Process [Posted Nov. 10, 2010]
    •    Ohio AG Criticizes Banks’ Move to Resume Foreclosures; Pushes for Loan Modifications [Posted
         Nov. 3, 2010]


 Around the Industry
    •    HUD Launches New One-Stop Website for Economic and Housing Data [Posted Nov. 24, 2010]
    •    Fed's Bullard Supports Private Sector over GSEs for Housing Finance [Posted Nov. 24, 2010]
    •    Home Prices Fall 1.6 Percent in Third Quarter: FHFA [Posted Nov. 24, 2010]
    •    Housing Inventory Declines, but Shadow Inventory Jumps [Posted Nov. 24, 2010]
    •    New Home Sales Drop 8.1 Percent in October [Posted Nov. 24, 2010]
    •    Existing Home Sales Drop 2.2 Percent in October [Posted Nov. 24, 2010]
    •    Housing Affordability Remains Near Historic Highs: NAHB [Posted Nov. 24, 2010]
    •    Builder Calculates Cost of ‘Going Green’ [Posted Nov. 24, 2010]
    •    B of A Chief Calls for Quick Foreclosure Probe Settlement [Posted Nov. 17, 2010]
    •    Housing Permits Up, Starts Down in October [Posted Nov. 17, 2010]
    •    Regional Fed Official: Housing Policies Must Change [Posted Nov. 10, 2010]
    •    Homeownership at Lowest Level Since 1999 [Posted Nov. 10, 2010]
    •    Homebuilder Posts Nearly $1 Billion in Losses [Posted Nov. 10, 2010]
    •    Single Family Homes Decline in Size, Price since 2005: NAHB [Posted Nov. 10, 2010]
    •    MBA Forecasts Purchase Originations up, Refinancing down in 2011 [Posted Nov. 3, 2010]
    •    U.S. Housing Deemed "At Value" Compared Globally [Posted Nov. 3, 2010]

 Economic Indicators – October 2010




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Regulatory and Legislative – Origination
Fannie Mae Guidelines Effective Dec. 13 Allow Gift as Down Payment
New Fannie Mae lending rules effective Dec. 13 will allow buyers to use gifts and grants from nonprofit
groups for their minimum 5 percent down payment, The New York Times reported Nov. 18.

Because many lenders now require a down payment of 10 percent or more, the new rules mean that
borrowers will still have to come up with extra funds — either their own or gifts. Still, “this is definitely
going to help upgrade buyers and young couples who for whatever reason don’t have enough money and
are getting some from their families,” Edward Ades, the owner of Universal Mortgage, told the Times.

The new gift rules apply only to single-family principal residences, including town houses, co-ops and
condominiums, and they cover mortgage amounts in excess of 80 percent of the property’s value. In
addition, there is a limit on the loan balance — $729,000 in high-cost areas like New York City, and
$417,000 in other areas, The Times reported.

Meanwhile, Fannie Mae is getting tougher on debt-to-income ratios, payment histories on revolving debt
and people who are at the end of their mortgages (10 or fewer payments left). Perhaps the hardest-hit
sector concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a
Fannie-backed loan for seven years, up from four, according to The Times.

Freddie Mac Reports $2.5 Billion Third Quarter Loss; Recovery Far Away
Government-sponsored enterprise Freddie Mac lost $2.5 billion in the third quarter, its narrowest shortfall
in more than a year, according to the company’s Nov. 3 news release. However, despite signs that the
housing market is stabilizing, recovery remains a ways off as foreclosure process delays could further
increase company losses.

HousingWire reported Nov. 3 that Freddie’s decreasing losses haven’t abated its need for government
support. Freddie plans to ask the Treasury Department for an additional $100 million to shore up potential
losses that could stem from looming foreclosures.

Meanwhile, the total cost to rescue and then overhaul mortgage giants Fannie Mae and Freddie could
reach $685 billion, according to Nov. 4 estimates from Standard & Poor's, The Wall Street Journal
reported. Fannie and Freddie have already cost taxpayers nearly $134 billion, but S&P analysts predict
that the government could ultimately be forced to inject $280 billion into the firms because of a slowdown
in the housing market, the Journal reported.

The S&P loss estimates are higher than those made recently by the Federal Housing Finance Agency,
which oversees Fannie and Freddie.

According to the FHFA, the taxpayer tab for both companies combined is on pace to reach $154 billion
under the current home-price forecast. But if the economy enters a double-dip recession and home prices
fall more than 20 percent, the cost to taxpayers could reach $259 billion, the Journal reported.

Freddie Mac's 90-day Delinquency Rate Drops Slightly


2 | Residential Update Vol. 1, No. 7, December 2010
The serious delinquency rate of home mortgages declined to 3.8 percent in September, from 3.83 percent
in August, according to Freddie Mac.

A possible reason: Both Fannie Mae and Freddie Mac started foreclosing again (they have a record
number of real estate-owned properties) and real estate owned is not counted in the delinquency rate,
Calculated Risk reported Oct. 27.

Freddie predicts the delinquency rate will probably start increasing again in October because of more
foreclosure moratoriums and falling house prices, Calculated Risk reported.

Some of the delinquency rate uptick in 2009 was probably due to foreclosure moratoriums. Also,
distortions from modification programs probably played a role because loans in trial modifications were
considered delinquent until the modifications were made permanent, Calculated Risk reported.

For Freddie’s full report, visit www.freddiemac.com/investors/volsum/pdf/0910mvs.pdf .




3 | Residential Update Vol. 1, No. 7, December 2010
Regulatory and Legislative – Asset Management
and REO
House Subcommittee Probes Bank Executives, Regulators on Foreclosures
During a House Financial Services subcommittee hearing Nov. 18, lawmakers pressed bank executives
and regulators on their inability to combat the mishandling of mortgage documentation amid foreclosure
proceedings, Reuters reported. However, there was little agreement about what changes should be
implemented.

The subcommittee hearing focused on allegations that major banks, including Bank of America,
JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, signed hundreds of foreclosure documents a
day without proper legal reviews.

While admitting fault, bank representatives told the subcommittee that their foreclosures have been
accurate and that faulty procedures have been addressed, Reuters reported. In their testimony, the
bankers stressed their firms do everything possible to avoid foreclosures, and that troubled borrowers are
not rushed out of their homes.

Acting Comptroller of the Currency John Walsh said the foreclosure scandal is centered on a few lenders
and is not a widespread issue. “I am not aware of a reason to believe there is a systemic failing of the
system," Walsh testified, according to Reuters.

In light of receiving billions of taxpayer aid during the recent economic crisis, the current foreclosure
scandal has reignited public outrage with of some of the nation’s largest lenders. Walsh said examiners
were focused on monitoring mortgage modification programs, rather than foreclosure paperwork
processes. Subcommittee Chair Rep. Maxine Waters, D-Calif., questioned whether regulators provided
sufficient oversight. "Why should (the banks) take you seriously?" Waters asked at the hearing.

Bank leaders voiced their support for a quick settlement, which will likely require banks to make greater
efforts to keep struggling owners in their homes, Reuters said. However, the 50-state attorneys general
foreclosure probe will likely not wrap up for a few more months.

Federal Governor Elizabeth Duke said that she was in favor of the development of a nationwide fund for
borrowers who wrongly lost their homes. "I think (it) would be very positive if there was a mechanism to
deal with these problems as they arise," Duke said at the hearing, according to Reuters.

At the same hearing, Walsh said his department is heading an inter-agency examination of Mortgage
Electronic Registration System, a private company that allows lenders to electronically package and sell
mortgages without having to file paperwork, American Banker reported Nov. 18. (See related story,
Securitization Process Comes under Scrutiny; Lobbyists on Defensive”.)Walsh’s office is also examining
Lender Processing Services Inc., which provides third-party foreclosure services to banks.

"Where we find errors or deficiencies, we are directing banks to take immediate corrective action, and we
have an array of enforcement actions and penalties that we will not hesitate to impose if warranted,"




4 | Residential Update Vol. 1, No. 7, December 2010
Walsh told the subcommittee. "These can include civil money penalties, removals from banking, and
criminal referrals."

Meanwhile, lawmakers criticized the Obama administration's main program to help prevent foreclosures.
"I think it's safe to say (the Home Affordable Modification Program) is not meeting its goal of preventing
foreclosures," Waters added.

Fed to Issue Foreclosure Report in Early 2011
Federal Reserve Governor Elizabeth Duke told a Congressional subcommittee Nov. 18 that various
government agencies will unveil a comprehensive report on foreclosure practices in early 2011.

In addressing the Financial Services Subcommittee on Housing and Community Opportunity, Duke told
lawmakers that the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal
Deposit Insurance Corporation and the Federal Reserve are conducting an in-depth review of practices at
the largest mortgage servicing operations.

“The interagency examination and review focuses on foreclosure practices generally, but with an
emphasis on the breakdowns that led to inaccurate affidavits and other questionable legal documents
being used in the foreclosure process,” said Duke in her prepared testimony. “The regulators expect the
initial on-site portion of our work to be completed this year and currently plan to publish a summary
overview of industry-wide practices in early 2011.”

According to Duke, the agencies are reviewing financial firms' policies, procedures and internal controls
related to foreclosure practices and are sampling loan files to test the effectiveness of those policies,
procedures and internal controls. She noted the agencies are “prepared” to take supervisory action where
necessary and appropriate to hold institutions accountable for poor practices.

The number of foreclosures initiated on residential properties soared from about 1 million in 2006 – the
peak of the housing market – to 2.8 million last year, according to Duke. In the first half of 2010, there
were an additional 1.2 million foreclosure filings, with an additional 2.4 million homes somewhere in the
foreclosure pipeline at the end of June.

“All told, we expect about 2.25 million foreclosure filings this year and again next year, and about 2 million
more in 2012,” Duke explained in her testimony. “While our outlook is for filings to decline in coming
years, they will remain extremely high by historical standards.”

According to Duke, currently almost 5 million mortgage loans are 90 days or more past due or in
foreclosure.

White House Unveils Home Energy Retrofit Program
The White House introduced a series of actions Nov. 9 designed to enhance the sustainability of the
nation’s home energy efficiency retrofit industry while providing consumers with more information about
energy efficient products and financing options.




5 | Residential Update Vol. 1, No. 7, December 2010
The White House launched four initiatives in response to an October 2009 report that found homeowners’
lack of access to information and consumer-friendly financing options, as well as a lack of skilled workers,
as the key barriers to a strong nationwide market for home energy upgrades. The initiatives are:

    •    The Home Energy Score program;
    •    The FHA PowerSaver loan program;
    •    New publications on “Workforce Guidelines for Home Energy Upgrades” and“Healthy Indoor
         Environment Protocols for Home Energy Upgrades”; and
    •    Small Business Administration Green Business Opportunities Course.

“The initiatives (we’ve) announced are putting the “Recovery Through Retrofit” report’s recommendations
into action – giving American families the tools they need to invest in home energy upgrades,” Vice
President Joe Biden, whose office helped shape the proposals, said in a White House news release.
“Together, these programs will grow the home retrofit industry and help middle class families save money
and energy.”

The announcement culminated an 18-month-long interagency effort among 11 federal departments and
agencies and six White House offices.

For appraisers, the establishment of workforce guidelines for home energy upgrades will identify the skills
and knowledge necessary for workers in the home energy retrofit industry. These guidelines are currently
being established and can be viewed at
www1.eere.energy.gov/wip/pdfs/workforce_guidelines_home_energy_upgrades.pdf .

To learn more about all the government’s initiatives, visit
www.whitehouse.gov/sites/default/files/fact_sheet_recovery_through_retrofit.pdf .

Discuss Now: Appraisal Institute members can discuss this story by logging in to the Sustainable Green
Buildings Community of Practice.

Obama Nominates North Carolina’s Smith for FHFA Head
President Barack Obama has nominated North Carolina Banking Commissioner Joseph A. Smith Jr. to
become chief regulator for Fannie Mae and Freddie Mac, the White House announced Nov. 12.

If confirmed by the Senate, Smith will replace Federal Housing Finance Agency Acting Director Edward J.
DeMarco. The assignment would place Smith at the helm of Obama administration efforts to determine
the future of the two government-sponsored enterprises, which own or guarantee more than half of U.S.
mortgages, according to Bloomberg.

“Mr. Smith brings to this position both tremendous expertise and a deep commitment to strengthening our
housing finance system for the American people,” Obama said in a news release. “I’m grateful that he has
accepted this nomination, and I look forward to working with him in the months and years to come.”

Smith, who has supervised mortgage firms, banks and consumer lenders in North Carolina since 2002,
initiated a foreclosure-prevention program that won support from both consumer advocates and banks. In




6 | Residential Update Vol. 1, No. 7, December 2010
1999, North Carolina became the first state to enact predatory lending laws to restrict high-cost and
subprime loans, according to Bloomberg.

He’s been “forceful and persuasive but not dogmatic and inflexible,” Paul H. Stock, executive vice
president of the North Carolina Bankers Association in Raleigh, told Bloomberg. “He’s been an
outstanding commissioner for banks. We hate to lose him.”

But some have their doubts, according to Bloomberg.

Graham Fisher & Co. analyst Joshua Rosner told Bloomberg that efforts by Fannie Mae and Freddie Mac
to force sellers to repurchase soured mortgages may be weakened by Smith, as DeMarco is a “very
aggressive” regulator.

Under government conservatorships managed since August 2009 by DeMarco, the companies have been
the biggest cause of putback requests to lenders, with outstanding amounts related to mortgages they
directly own or insure, totaling $13.3 billion on Sept. 30, according to securities filings cited by Bloomberg.

“(DeMarco’s) understandings have led him to be very aggressive on putbacks as he has a firm belief on
what the role of a conservator should be,” Rosner told Bloomberg. “I’m not sure a political appointee
without as much experience will be as devout.”

Mortgage Servicing Model Needs Overhaul: Fed’s Raskin
Federal Reserve Board Governor Sarah Raskin said that the current business model used to service
mortgages has caused the entire industry to collapse, HousingWire.com reported. "Unfortunately, as we
are seeing now, there are also dramatically significant drawbacks to this model," Raskin said Nov. 5.

The root of the problem is a misalignment of interests, with servicers focusing more on short-term profit
rather than on long-term benefits, Raskin told attendees of the National Consumer Law Center’s
Consumer Rights Litigation Conference in Boston.

"Third-party servicers earn money through annual servicing fees, (myriad) other fees and on float interest,
and they maximize profits by keeping their costs down, streamlining processes wherever possible and by
buying servicing rights on pools of loans that they hope will require little hands-on work," Raskin said.

According to Raskin, the problem started when the industry’s servicing model transformed from an
“originate-to-hold” system to an “originate-to-distribute” system, citing that prior to widespread
securitization, it was typical for mortgages to be serviced by the originating lender.

Raskin said that more regulation is needed. "Until a better business model is developed that eliminates
the business incentives that can potentially harm consumers, there will be a need for close regulatory
scrutiny of these issues and for appropriate enforcement action that addresses them," she added.

SEC Urges Banks to Disclose Potential Foreclosure Losses
The Securities and Exchange Commission urged banks in an Oct. 29 letter to report potential losses
resulting from inaccurate property foreclosure documents, Bloomberg News reported. The




7 | Residential Update Vol. 1, No. 7, December 2010
recommendation comes amid mounting investor and federal regulator pressure for banks to refund
billions of dollars tied to securities sold on the mortgage-bond market.

In its letter, the agency asked banks to disclose what they expect to lose from buy-back requests and
encouraged the lenders to set aside funds for potential litigation. The letter also suggested banks discuss
potential delays that could arise from the foreclosure process.

Banks that are unable to estimate potential losses are being asked to say so, according to the SEC’s
letter. While the SEC did not say which individual banks received its letter, financial institutions across the
country are feeling the heat as attorneys general from all 50 states are investigating whether loan-
servicing companies used improper procedures during foreclosure proceedings, Bloomberg reported.

So far, JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. have set
aside a combined $10 billion to cover buybacks, according to Bloomberg.




8 | Residential Update Vol. 1, No. 7, December 2010
Inside the States
Iowa AG: Foreclosure Probe to Continue; JPMorgan to Re-start Process
The Nov. 2 election of 17 new attorneys general will not stop the ongoing 50-state investigation into
foreclosure processes at major lenders, according to Iowa’s Attorney General Thomas Miller.

As reported by HousingWire, the Mortgage Foreclosure Multistate Group – formed Oct. 13 with an
executive committee of 13 state AGs and three state banking regulators in an effort to investigate
inappropriate foreclosure activities at prominent financial institutions – plans to continue its work, despite
turnover of some of its executive committee members.

Miller said in a Nov. 4 statement released after winning his reelection bid that there is no foreseeable
change in the committee’s direction.

Large banks – including Ally Financial, Bank of America, JPMorgan Chase and Wells Fargo, among
others – have raised the ire of overseers after reports surfaced that the lenders were “robo-signing”
foreclosures. “Robo-signing” is a process that involves rapidly signing foreclosure approvals without
checking documentation or having a notary present.

In light of the allegations, most banks suspended their foreclosure activities to review their foreclosure
processes. But after a quick review, most lenders have either begun or announced plans to restart
foreclosure processes.

On Nov. 4, JPMorgan Chief Executive Charlie Scharf said his company plans to resume foreclosures in a
couple of weeks, according to a report in The Washington Post. JPMorgan had frozen foreclosures in 40
states affecting about 127,000 loans, the Post reported.

Other banks, such as Bank of America recently resumed some foreclosures while Ally Financial has been
unfreezing foreclosures on a case-by-case basis as individual files are cleared, according to the Post.

According to Scharf, the need to resume foreclosures is immediate as banks risk the loss of millions of
dollars for each month that foreclosures are delayed.

Ohio AG Criticizes Banks’ Move to Resume Foreclosures; Pushes for Loan
Modifications
Ohio Attorney General Richard Cordray has called on lenders to modify loans and work out payments
with borrowers rather than hastily restart foreclosures by fixing faulty paperwork, according to an Oct. 30
story in The Wall Street Journal.

Cordray's letter may prompt attorneys general from the other 49 states and the District of Columbia to file
similar letters in their states. All of the AGs, as well as 39 state bank regulators, announced a nationwide
inquiry into the foreclosure process Oct. 13.

The initial focus has been on whether industry employees – so-called "robo-signers" – signed off on
thousands of foreclosures every month without reviewing the files as legally required, according to ABC
News.


9 | Residential Update Vol. 1, No. 7, December 2010
Cordray’s actions were prompted by Bank of America’s Oct. 18 decision to lift its self-imposed moratorium
on foreclosures in 23 states, as well as Wells Fargo’s Oct. 27 announcement to resubmit affidavits for
55,000 pending foreclosures – suggesting that some paperwork might be flawed, the Journal reported.

A Wells Fargo internal review found problems with foreclosure affidavits in the 23 states where a judge’s
decision is required, Reuters reported Oct. 27. "We found human errors, and we are fixing those," Teri
Schrettenbrunner, a Wells Fargo spokesperson, told Reuters. JPMorgan Chase & Co. and GMAC
Mortgage, a division of Ally Financial Inc., both also imposed 23-state foreclosure freezes.

According to Cordray, several banks are trying to cover up fraud with temporary fixes without addressing
the underlying problems. "The banks are committing fraud on the court, essentially perjury, and then
saying 'Whoops! You caught me! Here's some different evidence and use that instead,'" Cordray told the
Journal. "I know a lot of judges are not going to take kindly to that."

Wells Fargo told the Journal that the company will cooperate with Cordray's inquiries, adding that the
organization does not believe that any of its borrowers were unjustly foreclosed on. Tom Kelly, a
JPMorgan spokesperson, said the company is still reviewing foreclosure documents and has not refiled
any new or replacement affidavits. Gina Proia, a spokesperson for GMAC, said her company is "not
proceeding with foreclosure sales in Ohio or any state using a defective affidavit."

Ohio is the only state so far to file a civil fraud suit, seeking penalties of up to $25,000 per violation and
restitution against GMAC Mortgage and its parent company, Ally Financial Inc.

Meanwhile, Elizabeth Warren, interim director for the Consumer Financial Protection Bureau, told Dow
Jones Newswires that the federal government would not attempt to take the lead on the foreclosure
controversy.




10 | Residential Update Vol. 1, No. 7, December 2010
Around the Industry
HUD Launches New One-Stop Website for Economic and Housing Data
The Department of Housing and Urban Development’s new website consolidates a wide variety of
economic and housing market data at the regional, state, metropolitan area and county levels. The site,
unveiled Nov. 22, uses data from the Census Bureau, Labor Department, state and local governments
and housing industry sources, including HUD’s own field economists.

Available at www.hud.gov/datamap , the site employs an interactive map of the U.S. that allow visitors to
access a variety of reports – from a region-wide look at employment and housing activity to individual
county-level figures on population trends, rental activity and vacancy rates.

The site offers a variety of reports and overviews:

“Market at a Glance” reports contain economic and housing market data trends for every metropolitan
area and county nationwide with employment data updated on a monthly basis. HUD expects to release
these reports monthly and eventually make them “live” documents, which would enable field economists
to include analysis as they complete more in-depth research for specific areas and monitor local
conditions.

“Regional Housing Market Profiles” are based on the quarterly U.S. Housing Market Conditions report
and include non-farm employment, population changes and building activity, according to HUD. These
regional profiles also focus on the most recent housing rental and sales activity for the past two years. In
addition, approximately 10-12 individual metropolitan areas will be specifically profiled each quarter to
provide these same data down to the metro area level, HUD says.

“Regional Narratives” are broad overviews of economic and housing market trends within 10 regions of
the U.S. These narratives are based on information obtained by HUD economists from state and local
governments, from housing industry sources, and from HUD’s ongoing investigations of housing market
conditions

Periodically, HUD field economists focus on particular metropolitan housing markets to produce counts
and estimates of employment, population, households and housing inventory. The resulting
“Comprehensive Housing Market Analysis” considers changes in the economic, demographic and
housing inventory characteristics during three periods: from 1990 to 2000; from 2000 to the as-of date of
the analysis; and from the as-of date to up to up three years in the future.

To view the reports mentioned above for a each region of the country, or for particular states,
metropolitan areas or even counties, visit www.huduser.org/portal/regional.html .

Fed's Bullard Supports Private Sector over GSEs for Housing Finance
The private sector – rather than government programs – should supply most mortgages as the United
States moves to reform the housing finance system, a top Federal Reserve official said Nov. 17.




11 | Residential Update Vol. 1, No. 7, December 2010
St. Louis Federal Reserve Bank President James Bullard said, "To the extent possible, we need to let the
private sector provide the bulk of U.S. housing finance ... without the incentive-distorting set of
government programs and taxpayer guarantees that caused our current system to collapse," Reuters
reported.

Before the housing crisis, U.S. housing finance depended largely on government-sponsored enterprises
Fannie Mae and Freddie Mac and the Federal Home Loan Banks. The government took over control of
Fannie Mae and Freddie Mac at the peak of the financial crisis.

Congress has not decided what to do about the future of the GSEs or the mortgage finance system in
financial regulatory reforms enacted this year. The future housing roles of the companies and government
is still up in the air, Reuters reported.

Home Prices Fall 1.6 Percent in Third Quarter: FHFA
Home prices in the third quarter fell 1.6 percent from the previous quarter on both a seasonally adjusted
basis and an unadjusted basis, according to the Federal Housing Finance Agency’s purchase-only house
price index. The index, released Nov. 24, fell 3.2 percent year-over-year on a seasonally adjusted basis.

FHFA’s seasonally adjusted monthlyindex for September was down 0.7 percent from its August value.

While the national, purchase-only house price index fell 3.2 percent from the third quarter of 2009 to the
third quarter of 2010, prices of other goods and services rose 2 percent over the same period, FHFA data
showed. Accordingly, the inflation-adjusted price of homes fell approximately 5.1 percent over the latest
year.

FHFA’s all-transactions house price index, which includes data from mortgages used for both home
purchases and refinancings, rose 1.1 percent in the third quarter compare from the previous quarter,
down 1.2 percent from a year ago.

Prices rose in the third quarter compared to the previous quarter in 13 states and the District of Columbia,
FHFA data showed. Year-over-year prices increased in 10 states and the District of Columbia. Of the nine
Census divisions, the New England Division had the largest rise in home prices with a 0.9 percent
increase. With a drop of 4 percent, the Mountain Division had the largest decrease in home prices.

Falling 10.1 percent in the third quarter compared to a year ago, the Atlanta-Sandy Springs-Marietta, Ga.,
metropolitan area had the steepest year-over-year price drop, FHFA data showed. Prices held up best in
the San Diego-Carlsbad-San Marcos, Calif., area, where prices rose 4.6 percent over that period.

FHFA’s purchase-only and all-transactions house price index track average house price changes in
repeat sales or refinancings of the same single-family properties. The purchase-only index is based on
more than six million repeat sales transactions, while the all-transactions index includes more than 41
million repeat transactions. Both indexes are based on data obtained from Fannie Mae and Freddie Mac
for mortgages originated over the past 35 years.

Housing Inventory Declines, but Shadow Inventory Jumps



12 | Residential Update Vol. 1, No. 7, December 2010
The nation’s combined total housing inventory, which includes shadow properties and current listings,
reached 6.3 million units in August, up from 6.1 million a year ago, according to data from ZipRealty and
CoreLogic. Based on the current rate, it will take 23 months for the stock to clear most markets, up from
17 months a year ago.

The number of homes listed for sale in October fell for the first time in several markets after nine months
of climbing inventory, The Wall Street Journal reported Nov. 19.

While historical data shows that home inventory typically increases during this period, data compiled by
ZipRealty Inc. showed that the number of home listings dropped an average of 3.3 percent in 26
metropolitan areas in October compared to the previous month, up 13 percent from a year ago.

While some lenders have halted foreclosures in certain states in the wake of the foreclosure robo-signing
investigation, October’s drop may suggest that some sellers are postponing their decision to sell until the
economy improves.

Austin, Texas, saw inventory fall 7.3 percent compared to the previous month, while Denver, Orlando,
Fla., and Seattle saw drops of 6.5 percent, 6.4 percent and 6 percent respectively. On a yearly basis,
inventory fell in three Florida markets, including Orlando, Jacksonville and Miami, as well as in Chicago
and Charlotte, N.C.

Conversely, Las Vegas, Tucson, Ariz., Los Angeles and Phoenix saw inventories rise in October
compared to the previous month with increases of 3.7 percent, 1.7 percent, 1.6 percent and 1.4 percent,
respectively. San Diego and San Francisco had the largest year-over-year increases with inventories
jumping 62 percent and 53 percent, respectively.

Data also indicated that more than half of all homes listed in several metropolitan areas saw reductions in
selling prices, including listings in Jacksonville, Fla., Phoenix, Chicago, Baltimore, Boston, Tucson, Ariz.,
and Orange County, Calif.

In related news, the shadow supply of homes set to enter the housing market jumped to 2.1 million units
in August, more than 10 percent compared to a year ago, according to a Nov. 22 CoreLogic news
release. CoreLogic data showed that it will take eight months for the current shadow inventory of homes
to clear most markets, up from five months a year ago.

According to CoreLogic, there were 4.2 million homes listed on the market as of August, representing a
15-month supply, up from 11 months a year ago.

"The weak demand for housing is significantly increasing the risk of further price declines in the housing
market," Mark Fleming, CoreLogic's chief economist, said in the release. "This is being exacerbated by a
significant and growing shadow inventory that is likely to persist for some time due to the highly extended
time-to-liquidation that servicers are currently experiencing."

New Home Sales Drop 8.1 Percent in October
New single-family home sales fell 8.1 percent to a seasonally-adjusted annual rate of 283,000 units in
October from September, according to Department of Commerce data released Nov. 24. New home sales


13 | Residential Update Vol. 1, No. 7, December 2010
are down 28.5 percent from October of last year.

Sales in the West, Midwest and Northwest dipped 23.9 percent, 20.4 percent and 12.1 percent,
respectively, in October from the previous month. However, sales in the South inched up 3.1 percent.

Median new home prices logged in at $194,900 in October, while the average sales price came in at
$248,200, according to Commerce Department data.

New home inventory fell in October from the previous month to 202,000 units on a seasonally adjusted
basis, according to Commerce Department data. Based on the current sales pace, there is now an 8.6-
month supply of new homes on the market on a seasonally adjusted basis, up from September’s supply
of 7.9 months.

Existing Home Sales Drop 2.2 Percent in October
Sales of existing homes fell 2.2 percent in October to a seasonally adjusted annual rate of 4.43 million
units from the previous month’s rate of 4.53 million units, the National Association of Realtors reported
Nov. 23. The pace is 25.9 percent down from the October 2009 rate of 5.98 million units.

“The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some
states is likely to have held back a number of completed sales. Still, sales activity is clearly off the bottom
and is attempting to settle into normal sustainable levels,” NAR Chief Economist Lawrence Yun said in a
news release. “Based on current and improving job market conditions, and from attractive affordability
conditions, sales should steadily improve to healthier levels of above 5 million by spring of next year.”

Single-family existing home sales fell 2 percent in October to a seasonally adjusted annual rate of 3.89
million units from the previous month’s rate of 3.97 million units, NAR reported. That marked a 25.6
percent drop from the 5.23 million units recorded a year ago. Existing condominium and co-op sales fell
3.6 percent in October to a seasonally adjusted annual rate of 540,000 units from the previous month’s
rate of 560,000 units, down 27.6 percent from the 746,000 units reported a year earlier.

Existing home sales in the Northeast inched down 1.3 percent in October to an annual rate of 750,000
units, down 27.2 percent from a year ago. The Midwest fell 1.1 percent to an annual rate of 940,000 units,
down 32.4 percent from a year ago. The South dropped 3.4 percent to an annual rate of 1.71 million
units, down 24 percent from a year ago. The West dropped 1.9 percent to an annual rate of 1.03 million
units, down 21.4 percent from a year ago.

First-time buyers accounted for 32 percent of home purchases in October, unchanged from the previous
month, while investors accounted for 19 percent, up 1 percent from the previous month. Repeat buyers
accounted for the remaining transactions. All-cash sales accounted for 29 percent of all purchases,
unchanged from the previous month, while distressed homes accounted for 34 percent, down 1 percent
from the previous month.

NAR reported that the median existing home price for all home types logged in at $170,500 in October,
down 0.9 percent from a year ago. The median existing single-family home price came in at $171,100,
down 0.5 percent from a year ago, while the median existing condominium price was $166,000, down 4.2
percent from a year ago.


14 | Residential Update Vol. 1, No. 7, December 2010
By region, the median price in the Northeast was $240,200, up 1.9 percent from a year ago. The Midwest
came in at $139,500, down 3.6 percent from a year ago. The South logged in at $148,700, down 0.7
percent from a year ago. The West came in at $209,300, down 4.8 percent from a year ago.

Existing home inventory fell 3.4 percent in October to 3.86 million units, NAR said. Based on the current
sales pace, there is now a 10.5-month supply of existing homes on the market, down from the previous
month’s 10.6-month supply.

Housing Affordability Remains Near Historic Highs: NAHB
Housing affordability remained near its highest level for the seventh consecutive quarter as interest rates
dipped below 5 percent for the first time since record-keeping began nearly two decades ago, according
to the National Association of Home Builders/Wells Fargo Housing Opportunity Index released Nov.18.

The index indicated that 72.1 percent of all new and existing homes sold in the third quarter were
affordable to families earning the national median income of $64,400.

"With interest rates remaining at historically low levels, and house prices starting to stabilize,
homeownership is within reach of more households than it has been for almost 20 years," NAHB
Chairman Bob Jones said in an accompanying news release. "While these favorable conditions are
beginning to draw homebuyers back into the market, builders continue to have major problems in
obtaining credit for new-home construction, and this obstacle must be overcome if builders are to respond
to improving demand moving forward."

Indianapolis-Carmel, Ind., was the most affordable major housing market in the country where 93.3
percent of all homes sold during the third quarter were affordable to families earning a local median
income of $68,700 annually. Rounding out the top five were Youngstown-Warren-Boardman, Ohio-Pa.;
Grand Rapids-Wyoming, Mich.; Dayton, Ohio; and Wichita, Kan.

Among smaller housing markets, the most affordable was Kokomo, Ind., where 96.1 percent of homes
sold during the third quarter were affordable to families earning a local median income of $61,400.
Rounding out the top five were Mansfield, Ohio; Lima, Ohio; Monroe, Mich.; and Bay City, Mich.

New York-White Plains-Wayne, N.Y.-N.J., continued to lead the nation as the least affordable major
housing market during the third quarter. In New York, only 22.6 percent of all homes sold during the
quarter were affordable to those earning a local median income of $65,600. Rounding out the top five
were San Francisco; Bridgeport-Stamford-Norwalk, Conn.; Los Angeles-Long Beach-Glendale, Calif.; and
Santa Ana-Anaheim-Irvine, Calif.

Four of the top five least-affordable smaller metro housing markets during the third quarter were in
California. Santa Cruz-Watsonville, Calif., led the pack, followed by San Luis Obispo-Paso Robles, Calif.,
Santa Barbara-Santa Maria-Goleta, Calif., Ocean City, N.J., and Napa, Calif.

Builder Calculates Cost of ‘Going Green’




15 | Residential Update Vol. 1, No. 7, December 2010
A New Orleans builder has constructed a trio of “green” homes to educate consumers, other builders,
appraisers, lenders and regulatory agencies about the cost of green building, Builder magazine reported
Nov. 2.

Roy Domangue’s project in Gonzales, La. – Going Up, Going Green – consists of three new 1,912-
square-foot homes that are almost identical except for variations in green building practices and products
to achieve different levels of certification (Bronze, Silver and Gold) under the National Association of
Home Builders Green Building Standard rating system, Builder magazine reported.

In addition, the homes meet the current International Residential Code energy efficiency requirements,
comply with high-wind and flood-plain codes, and (except for the Bronze-level house) qualify under the
federal Energy Star and Builder’s Challenge programs.

The “Going Up” part of the project means the homes demonstrate pier-and-beam and raised-floor
foundations – a common practice in flood-plain areas and now required by the Federal Emergency
Management Agency after hurricanes Katrina and Rita, Builder magazine reported.

The “Going Green” portion represents the cost to build and upgrade to higher ratings. Domangue found
that upgrading to the Silver level (from Bronze) incurred a $5,455 premium (after a $2,000 state rebate),
and that advancing to Gold cost another $11,035 above that, after applying $4,700 in state and federal
incentives. The additional upgrade costs stemmed from improvements related to the homes’ air-
conditioning systems and thermal shells, Builder magazine reported.

As a teaching tool for classes and open house tours, Domangue will leave several sections of each home
unfinished to expose green building practices and products, according to Builder magazine.

Discuss Now: Appraisal Institute members can discuss this story by logging in to the Sustainable Green
Buildings Community of Practice.

B of A Chief Calls for Quick Foreclosure Probe Settlement
Bank of America Corp. Chief Executive Officer Brian Moynihan said that a quick settlement to
the nationwide attorneys general foreclosure probe “is in everyone's best interest," according to ABC
News. His comments came Nov. 16 at the Bank of America Merrill Lynch Financial Services conference
in New York.

Large banks – including Bank of America, JPMorgan Chase, Ally Financial and Wells Fargo, among
others – have been at the center of controversy after reports surfaced alleging that foreclosures were
improperly pushed through the system without proper quality controls. In light of the allegations, most
banks suspended their foreclosure activities to review processes. But after a quick audit, most lenders
have either begun or announced plans to restart foreclosure proceedings.

Moynihan told conference attendees that the current foreclosure process is difficult for homeowners to
navigate, emphasizing that industry leaders and lawmakers need to streamline foreclosures, ABC
reported. A Bank of America executive is expected to join Iowa's attorney general as part of the
congressional hearing concerning the foreclosure probe, Moynihan said.




16 | Residential Update Vol. 1, No. 7, December 2010
Meanwhile, despite investor concerns over the fact that lenders will likely be required to repurchase
billions in defaulted home mortgages, Moynihan said that Bank of America was addressing its
repurchases and that costs should be manageable. However, Moynihan warned that the process could
take years.

While discussions with Fannie Mae, Freddie Mac, insurers and investors continue about the exact terms
of pending repurchases, Moynihan said that the bank would not buy back mortgages just to ease inventor
concerns.

Housing Permits Up, Starts Down in October
Overall housing starts fell 11.7 percent in October from the previous month to a seasonally adjusted
annual rate of 519,000 units, according to U.S. Commerce Department data released Nov. 17. Single-
family housing starts fell 1.1 percent to 436,000 units, while multi-family starts plunged 47.5 percent to
74,000 units.

Overall housing starts dropped 30.5 percent in the West and 13.4 percent in the South. By contrast, starts
increased 12.9 percent in the Northeast and 1 percent in the Midwest.

Overall permit activity nudged up 0.5 percent in October to a seasonally adjusted annual rate of 550,000
units. Single-family permit activity increased 1 percent from the previous month to a seasonally adjusted
annual rate of 406,000 units, while multi-family permit activity rose 0.8 percent to 121,000 units.

By region, overall permit activity in the South and West dipped 3.4 percent and 0.9 percent, respectively,
while the Midwest increased 14.3 percent. The Northeast remained steady from the previous month,
according to Commerce Department data.

Meanwhile, homebuilder confidence improved slightly to 16 in November from the previous month’s
downwardly revised level of 15, according to the National Association of Home Builders/Wells Fargo
Housing Market Index released Oct. 16. The index measures builders’ confidence in the housing market
for newly built single-family homes. Scores lower than 50 indicate that more builders view sales
conditions as poor than good.

"Though the gains have been incremental, the fact that builder confidence has improved over the past
two months is encouraging," NAHB Chair Bob Jones said in a news release. "Many builders are reporting
that while the quantity of buyer traffic through their model homes has not improved dramatically, the
quality of that traffic seems to be getting better – meaning that more people appear to be serious about
buying in the near future."

By region, the homebuilder confidence index in the Midwest increased five points to 18, the West rose
three points to 15 and the Northeast dipped three points to 13. The South remained steady from the
previous month at 18.

Regional Fed Official: Housing Policies Must Change
Thomas Hoenig, chairman of the Kansas City Federal Reserve Bank, said that the current U.S. housing
system has “critical flaws,” which contributed to its downturn and could cause future disruptions unless
policy-makers take action.


17 | Residential Update Vol. 1, No. 7, December 2010
Hoenig’s comments came during a Nov. 5 presentation at the National Association of Realtors
Conference in New Orleans, the Omaha (Neb.) World-Herald reported.

Hoenig called on lawmakers and policymakers to support sensible financial practices. He said new tax
credits, bailouts of Fannie Mae and Freddie Mac, and paying for mortgage restructurings are no way to
revive the hurting housing market.

Among the ways he believes government can stabilize the housing sector would be reducing or removing
subsidies that encourage home ownership, such as tax deductions for mortgage interest; replacing
Fannie and Freddie as a new public entity or private businesses; and stopping the downward pressure on
interest rates, the World-Herald reported.

Homeownership at Lowest Level Since 1999
The nation's third quarter 2010 homeownership rate remained unchanged from the second quarter rate at
66.9 percent – the lowest in more than a decade, according to a Nov. 2 report from the Census Bureau.
The last time the rate dipped below 67 percent was the fourth quarter 1999 when it hit 66.9 percent.

The homeownership rate fluctuated between 63.5 percent and 65.1 percent from 1985 through 1995. It
climbed dramatically during the Clinton and Bush administrations, hitting a peak of 69.2 percent in the
fourth quarter 2004 at the height of the housing boom. But since the housing bubble burst, the rate has
been declining gradually.

For the third quarter 2010, the homeownership rates were highest in the Midwest (71.1 percent) and
lowest in the West (61.3 percent). The homeownership rates in the South and West were lower than a
year ago, while rates in the Northeast and Midwest were not statistically different from their corresponding
third quarter 2009 rates.

The number of vacant homes – defined as houses and apartments – has skyrocketed over the past four
years from about 16 million at the start of 2006 to around 19 million by the fourth quarter 2008, where it
has lingered since, according to The Associated Press’ analysis. There are around 131 million housing
units nationwide, according to the Census Bureau.

Homebuilder Posts Nearly $1 Billion in Losses
PulteGroup Inc., one of the nation's largest homebuilders, said third quarter orders dropped 15 percent
from the second quarter and 12 percent from third quarter 2009. The company reported a third-quarter
loss of $995.1 million, compared with a 2009 third-quarter loss of $361.4 million, The Wall Street Journal
reported Nov. 3.

Pulte’s revenue fell 3.1 percent to $1.06 billion in the third quarter. Gross margin on home sales fell to 7
percent from 12.6 percent while closings dropped 7.2 percent to 3,865 units, according to the Journal.

Earlier in 2010, builders saw light at the end of the tunnel. But that glimmer of hope came from the federal
government's tax credit of up to $8,000 for first-time home buyers. Since the credit’s April 30 end date,
home purchases and home construction orders have dropped. And with the housing market expected to




18 | Residential Update Vol. 1, No. 7, December 2010
weaken further in 2011, Pulte told the Journal it will cut costs by about $100 million by consolidating
divisions and reducing staff.

In related news, Bowen Family Homes closed on Oct. 29 after 40 years in the homebuilding business,
The Atlanta Journal and Constitution reported Nov. 2.

In May 2010, Bowen ranked No. 81 on Builder Magazine's 2009 Builder 100 List, down from No. 39 in
2008. The magazine showed Bowen with 305 closings in 2009 and revenue of $63 million, down from
800 closings and revenue of $219 million in 2008, Atlanta Journal reported. At the height of its business,
Bowen averaged 1,700 single-family and townhome sales per year, according to Hoover’s.

Single Family Homes Decline in Size, Price since 2005: NAHB
The median size of U.S. single-family production homes has steadily decreased since reaching a peak of
2,268 square feet in 2006, according to a National Association of Home Builders survey released Oct. 7.
The survey found that contractor-built homes also decreased in size.

The median square footage of production homes was 2,100 square feet in 2009, according to the survey.
The median size of contractor-built homes has also declined. In 2007 and 2008, more than 9 percent of
the homes started were 4,000 square feet or larger; but in 2009, that number dropped to 7.3 percent,
Custom Home Online reported Nov. 4.

Economic troubles and concerns about high energy costs are the two main reasons for the size decline,
according to Custom Home Online.

While some of the features homeowners require – such as number of bedrooms – haven't changed
during the recession, luxury amenities are another story, according to the survey. Fewer new single-family
homes include three-car garages, fireplaces, patios and decks. Although the number of patios and decks
has decreased, the survey showed that the number of homes with porches has increased to 63 percent in
2009 from 54 percent in 2005.

The two-story foyer is a luxury feature that remains consistent in new homes. In 2009, 35 percent of all
single-family homes started included two-story foyers. This feature is common in more expensive homes,
as shown by the survey: Of the homes started in 2009 that included two-story foyers, 58 percent were
priced in the $500,000 to $999,000 range, while nearly 71 percent were in the $1 million or higher range,
Custom Home Online reported.

As for framing systems, 95 percent of new single-family homes started in 2009 used wood as the primary
framing material, no matter the size, price or construction method, according to the survey. In terms of
siding, vinyl was most common in 2009, used by 36 percent of new homes, Custom Home Online
reported.

MBA Forecasts Purchase Originations up, Refinancing down in 2011
Purchase originations over the next year are forecast to increase while mortgage originations could fall
from an estimated $1.4 trillion in 2010 to slightly under $1 trillion in 2011 due to a sharp decline in
refinance originations, according to an Oct. 26 report issued by the Mortgage Bankers Association.




19 | Residential Update Vol. 1, No. 7, December 2010
The MBA predicts modest increases in home sales and says stabilizing home prices will act as a positive
driver for purchase originations. On the other hand, the MBA expects refinance originations to fall steadily
as mortgage rates gradually increase throughout 2011 and 2012.

“Economic growth in 2010 has been subdued and this trend will likely continue for most of 2011,” said Jay
Brinkmann, MBA's chief economist and senior vice president for research and economics, in an MBA
news release.

Among the key points of the latest MBA forecast are:

    •    Real GDP growth will be 2.2 percent in 2010, although most of that was seen in the first quarter.
         Growth is estimated to have slowed to around 1.5 percent in the third quarter and will be 1.9
         percent in the fourth quarter. Growth is expected to be about 2.1 percent in 2011 and 3 percent in
         2012.
    •    Fixed mortgage rates are expected to average about 4.4 percent in the fourth quarter of 2010,
         increase to 5.1 percent by the end of 2011, and head toward 5.7 percent in 2012.
    •    Total existing home sales for 2010 will be around 8 percent lower than in 2009, despite a boost to
         sales in the first half from the homebuyer tax credit program. Existing home sales are projected to
         increase modestly in 2011, increasing by a little less than 2 percent, before increasing by about
         16 percent in 2012.
    •    New home sales for 2010 will be down by about 13 percent relative to 2009, but will begin a slow
         recovery in 2011, increasing around 20 percent from a low base, and then increasing 40 percent
         in 2012 as markets recover.
    •    Purchase originations for 2010 will be $480 billion, about 28 percent below the 2009 level of $665
         billion. Purchase originations should rise about 30 percent in 2011, as existing home sales
         recover and home prices stabilize, and should rise again in 2012 to $877 billion.
    •    Refinance originations will end 2010 at $921 billion, a decrease of 31 percent from $1.3 trillion in
         2009. Refinance activity will decrease by 60 percent in 2011 to about $370 billion as mortgage
         rates increase and the pool of eligible borrowers shrinks, and fall further to $310 billion in 2012.
         The refinance share of originations should fall from 66 percent in 2010 to 37 percent in 2011, and
         then 26 percent in 2012.

In addition, the MBA projects that the Federal Housing Finance Agency’s national repeat transactions
home price measure will continue to decline before starting a reversal in early 2012 – although it believes
the measure will vary by state and home value. According to the MBA, median home prices should
increase in 2011 relative to 2010 while the markets for higher-priced homes should continue to thaw.

U.S. Housing Deemed "At Value" Compared Globally
America's housing market is “more or less” fairly valued at this point, at least when taking into account
price-to-rent ratios, according to an annual survey from The Economist, released Oct. 21.

The Economist compared the current ratio of house prices to rents with its historical average to determine
a market's "fair value." Only four markets were undervalued: Japan at -34.6 percent, Germany at -12.9
percent, Switzerland at -6.4 percent and the United States at -2.1 percent, Inman News reported Oct. 28.




20 | Residential Update Vol. 1, No. 7, December 2010
Besides the undervalued four, every other market was overvalued by double-digit percentages. Australia
had the most overvalued housing market at 63.2 percent. Italy's market was the least overvalued at 10.5
percent, Inman reported.

Year-over-year, four markets experienced price decreases: Ireland at 17 percent, Japan at 4 percent,
Spain at 3.4 percent and Italy at 2.8 percent. Prices year-over-year jumped the most in Singapore at 23.1
percent, Hong Kong at 20.6 percent and Australia at 18.4 percent.




21 | Residential Update Vol. 1, No. 7, December 2010
ECONOMIC INDICATORS – October 2010
Market Rates and Bond Yields
                                                         Oct10         Apr10           Oct09           Apr09         Oct08          Oct07
 Reserve Bank Discount Rate                              0.75          0.75            0.50            0.50          1.81           5.24
 Prime Rate (monthly average)                            3.25          3.25            3.25            3.25          4.56           7.74
 Federal Funds Rate                                      0.19          0.20            0.12            0.15          0.97           4.76
 3-Month Treasury Bills                                  0.13          0.16            0.07            0.16          0.67           3.90
 6-Month Treasury Bills                                  0.18          0.24            0.16            0.35          1.20           4.01
 3-Month Certificates of Deposit                         0.27          0.30            0.24            0.89          4.32           5.08
 LIBOR-3 month rate                                      0.40          0.40            0.49            1.49          5.31           5.15
 U.S. 5-Year Bond                                        1.18          2.58            2.33            1.86          2.73           4.20
 U.S. 10-Year Bond                                       2.54          3.85            3.39            2.93          3.81           4.53
 U.S. 30-Year Bond                                       3.87          4.69            4.19            3.76          4.17           4.77
 Municipal Tax Exempts (Aaa)†                            3.83          3.95            3.85            4.48          5.15           4.20
 Municipal Tax Exempts (A)†                              4.57          4.67            4.71            5.47          5.89           4.41
 Corporate Bonds (Aaa)†                                  4.68          5.29            5.15            5.39          6.28           5.66
 Corporate Bonds (A)†                                    5.09          5.78            5.57            6.70          7.58           6.13
 Corporate Bonds (Baa)†                                  5.72          6.25            6.29            8.39          8.88           6.48

Stock Dividend Yields
 Common Stocks—500                                       1.97          1.84            2.02            2.60          2.83           1.84

Other Benchmarks
Industrial Production Index*,¶                           93.4          91.5            88.6            86.5            93.9         100.0
Unemployment (%)¶                                        9.6           9.9             10.2            8.9             6.5          4.7
Monetary Aggregates, daily avg.¶
 M1, $-Billions                                        1,779.6        1,701.4†† 1,676.2†† 1,608.5†† 1,472.7                         1,370.3
 M2, $-Billions                                        8,767.1        8,490.6†† 8,492.1†† 8,364.3†† 8,007.1                         7,395.6
Member Bank Borrowed Reserves
 $-Billions^                                             n/a           n/a             n/a             n/a             n/a          0.254
Consumer Price Index
 All Urban Consumers                                     218.7         218.0           216.2           213.2           216.6        208.9

                                                         3Q10         4Q09         3Q09            4Q08         3Q08         4Q07      3Q07
Per Capita Personal
 Disposable Income††
 Annual Rate in Current $s                               36,657       36,049       35,888          35,677       36,060 35,042 34,579
Savings as % of DPI††                                    5.5          5.5          5.6             5.2          3.6    2.1    1.8


* On November 7, 2005, the Federal Reserve Board advanced to 2002 the base year for the indexes of industrial production, capacity, and electric
   power use. This follows the December 5, 2002, change to a 1997 baseline, from the previous 1992 baseline. Historical data has also been updated.
^
   The Fed stopped releasing this figure in March 2008.
¶
   Seasonally adjusted
†
   Source: Moody's Bond Record
††
   Revised figures used




22 | Residential Update Vol. 1, No. 7, December 2010
Conventional Home Mortgage Terms


                                                          Oct10       Apr10          Oct09       Apr09         Oct08          Oct07
 New House Loans—U.S. Averages
 Interest rate (%)                                        4.40         5.21          5.14          4.96          6.10           6.55
 Term (years)                                             29.1         27.9          28.7          29.0          29.3           29.4
 Loan ratio (%)                                           71.4         74.1          74.0          75.6          75.2           78.6
 Price (thou. $)                                          361.7        320.2         325.0         319.4         333.7          350.7

 Used House Loans—U.S. Averages
 Interest rate (%)                                        4.62         5.10          5.10          4.96          6.23           6.56
 Term (years)                                             27.6         27.6          27.9          28.2          28.6           28.9
 Loan ratio (%)                                           72.5         74.3          74.0          75.0          76.4           80.0
 Price (thou. $)                                          294.6        305.5         291.5         302.0         283.9          280.0

Conventional Home Mortgage Rates by Metropolitan Area

                                                       3Q10       3Q09       3Q08       3Q07
Atlanta                                                4.68       5.30       6.44       6.73
Boston-Lawrence-NH-ME-CT#                              4.55       4.98       6.12       6.65
Chicago-Gary-IN-WI#                                    4.81       5.54       6.45       6.78
Cleveland-Akron#                                       4.81       5.21       6.16       6.74
Dallas-Fort Worth#                                     4.80       5.24       6.47       6.78
Denver-Boulder-Greely#                                 4.69       5.36       6.46       6.74
Detroit-Ann Arbor-Flint#                               4.79       5.28       6.36       6.79
Houston-Galveston-Brazoria#                            4.65       5.33       6.48       6.84
Indianapolis                                           4.60       5.40       6.57       6.82
Kansas City, MO-KS                                     4.64       5.20       6.18       6.50
Los Angeles-Riverside#                                 4.85       5.32       6.48       6.72
Miami-Fort Lauderdale#                                 4.92       5.44       6.53       6.86
Milwaukee-Racine#                                      4.63       5.30       6.47       6.76
Minneapolis-St. Paul-WI                                4.61       5.30       6.37       6.65
New York-Long Island-N. NJ-CT#                         4.73       5.26       6.30       6.66
Philadelphia-Wilmington-NJ#                            4.71       5.33       6.27       6.73
Phoenix-Mesa                                           4.84       5.49       6.56       6.79
Pittsburgh                                             4.70       5.28       6.15       6.57
Portland-Salem#                                        4.64       5.17       6.39       6.71
St. Louis-IL                                           4.77       5.23       6.58       6.88
San Diego                                              4.85       5.39       6.40       6.68
San Francisco-Oakland-San Jose#                        4.76       5.24       6.48       6.77
Seattle-Tacoma-Bremerton                               4.65       5.15       6.28       6.72
Tampa-St. Petersburg-Clearwater                        4.88       5.33       6.50       6.87
Washington, DC-Baltimore-VA#                           4.65       5.32       6.37       6.83

* As of the first quarter 2003, the Federal Housing Finance Board no longer reported on the markets of Greensboro, Honolulu and Louisville.
#
  Consolidated Metropolitan Statistical area




23 | Residential Update Vol. 1, No. 7, December 2010

				
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