Happy Fiscal New Year: An origination-foreclosure-forgiveness-money-back potpourri

Happy Fiscal New Year.

Last week it was announced that new home sales are up, at a seasonally adjusted annual rate of 373,000. From the bottom, that number is up nicely. But from the top, it’s way down. (Source: Calculated Risk)

As there were 141,000 new homes for sale last month, FNC’s Bob Dorsey says it should take four-and-a-half months until that inventory is clear.

Bill Rayburn says this does not compute. “Let’s talk about some things we know. Home prices are stabilizing, maybe up. New home sales are up slightly. People are starting to be able to rebuild their equity through appreciation. So why don’t we get a restart?”

Bob Dorsey: Mark Zandi from Moody’s had an article this week about how he thinks a lot of the market is going to start turning around significantly with the interest rates continuing to come down. So we’ve got prices going up, new home construction going up, existing home sales going up. (Read more: “Obama policies ended housing free fall”)

Rayburn: Let’s talk about free money.

Dorsey: In the 30- to 90-day delinquent range, there are 1.9 million properties. Some of those are going to cure. In the 90-day-plus range, there are 1.5 million properties. And, the ones in foreclosure right now, 2 million. The five big banks entered into an agreement to forestall a lot of lawsuits by different state and federal governments. They agreed to pay $25 billion. If they forgive some loans that are delinquent, they get a credit against that $25 billion.

But last week, a lot of people began getting letters they weren’t happy about. The letters say, “We’ve forgiven your $28,000 or $147,000 from your delinquent mortgage. By the way, we sent a copy to the IRS, too.” The trouble is, some people already went through bankruptcy and those loans are no longer in existence.

Rayburn: Let’s look at that from the bank’s perspective. This was a good deal for the banks and their shareholders, and it was a good deal for homeowners, because they got forgiveness. The bank didn’t know who was and was not going to be in bankruptcy. One of the things about a settlement is, it’s probably good for everybody.

Dorsey: So when everybody’s unhappy, that’s the right settlement?

Rayburn: It’s the right solution. Exactly. (laughs)

Listen to audio from this discussion, and stay tuned for video, at the FNC Morning View blog.

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