A New Lifeline from FHA

If foreclosure, short sale or bankruptcy closed the door on your homeownership dreams, FHA just opened it back up with their Back to Work program

Typically there has been 2 sets of seasoning requirements for borrower’s with a distressed property sale in their past.  On conventional financing, borrowers must wait a minimum of 2 years from the closing of a short sale or 7 years from the completion of a foreclosure.  On FHA loans, 3 years minimum seasoning has been required for both short sales and foreclosures.
In August, HUD, the office of Housing and Urban Develop (the agency which administers FHA), issued new guideline for lenders providing FHA loans.  In this mortgagee letter, HUD made it possible for borrowers who would otherwise be ineligible for an FHA-insured mortgage due to FHA’s waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments, may be eligible for an FHA-insured mortgage.

There are a few requirements the borrower must meet in order to qualify for the Back to Work Program.  A few of them are:

 

·         620 minimum credit score

·         The borrower’s total debt cannot exceed 43% of the borrower’s gross income

·         The foreclosure, short-sale or bankruptcy must have been the result of a documented “economic event”.  This may be something like a reduction in employment hours or total loss of job.  Divorce is not considered a qualifying economic event

·         The borrower must have 12 months of perfect payment history after the economic event that lead to the credit challenges

·         Housing counseling is required

 

The housing counseling requirement is to help the borrower prevent a future credit challenge.  The borrower has the right to choose their preferred class, but it must be HUD approved and at least 1 hour in length.  The counseling class can be done via the internet, but must be completed at least 30 days prior to applying for the new mortgage.  The class must address the cause of the economic event, actions taken to overcome the event and reduce the likelihood of it recurring.

This new FHA program is a great opportunity for qualified borrowers who would otherwise not be able to purchase a home until their waiting period elapsed.  Many lenders are not offering this new product so check with your local mortgage bank first.

 

Fed’s Monetary Stimulus Meets “Fiscal Cliff”

The contrast could not be sharper: Economists are all but certain the U.S. Federal Reserve will expand its monetary stimulus this week, but they have no clue how the fiscal battle in Congress will shake out.

U.S. central bankers look set to extend their monetary stimulus, known as Quantitative Easing, into the new year at a meeting on Tuesday and Wednesday. Analysts expect the Fed to continue buying $85 billion worth of securities per month.

"The Fed would not have emphasized the number ‘$85 billion' in securities purchases in its statement if it wasn't prepared to continue at that pace well beyond the end of the year," said Roberto Perli, a senior managing director at investment research firm ISI.

No matter what it does, Fed Chairman Ben Bernanke has made it clear the central bank lacks the firepower to counter the possible drag from the looming $600 billion combination of expiring tax cuts and automatic spending reductions popularly known as the "fiscal cliff."

Alarm over an immediate, looming deadline may be overstated. Some analysts say the cliff is better described as a slope, since not all provisions will kick in at once. But Congress' budget watchdog and the Fed both think it spells recession.

The world is watching with bated breath, particularly given the fragile state of other major economies.

Geithner predicts Republicans will yield on taxes

Treasury Secretary Timothy Geithner pushed Republicans on Sunday to offer specific ideas to cut the deficit, and predicted that they would agree to raise tax rates on the rich to obtain a year-end deal and avoid possible economic doom.  But the top U.S. Republican, Speaker of the U.S. House of Representatives John Boehner, stood firm and renewed his stand against increased tax rates, leaving talks at a stalemate.

"Here's the problem," Boehner told "Fox News Sunday" as both sides took their battle to TV talks shows. "When you go and increase rates, you make it more difficult for our economy to grow," he said.  Besides, Boehner said, if Republicans agreed to give President Barack Obama $1.6 trillion in new tax revenue, "He's going to spend it," not reduce the deficit.

Geithner, Obama's top negotiator, said in a separate appearance on Fox that Republicans must step up.

The treasury secretary said Republicans will be responsible if no deal is reached by the end of the month, triggering the "fiscal cliff," deep automatic spending cuts and across-the-board tax hikes that could plunge the country into a recession.  "There's not going to be an agreement without rates heading up," Geithner said on CNN's "State of the Union."

With polls showing most Americans favor raising tax rates on the wealthy and cracks starting to appear in what had been a solid wall of Republican opposition to such a move, the Obama administration figures it has the upper hand.

"The president has seen a lot of options from us. There are a lot of them on the table and I'm hopeful that the conversation will continue," Boehner said.

Boehner also reaffirmed his party's opposition to Congress giving the president sole authority to increase the U.S. debt limit, a power both Democrats and Republicans value.  "Silliness. Congress is never going to give up this power," Boehner said, explaining it provides lawmakers needed leverage in dealing with the White House.

Bernanke Presses Lawmakers to Resolve Fiscal Cliff

Federal Reserve Chairman Ben Bernanke was in New York City Tuesday to send a message back to Washington: Cut a deal to avoid the fiscal cliff, and don’t play politics with the federal debt limit again.

Confusion over the course of U.S. tax and spending policy is weighing on the spending decisions of households and businesses, as well as on financial markets, Bernanke said in remarks to the New York Economic Club.

“Uncertainty about how the fiscal cliff, the raising of the debt limit and the longer-term budget situation will be addressed appears already to be affecting private spending and investment decisions, and may be contributing to an increased sense of caution in financial markets,” he said.  Economists say the most visible sign of uncertainty over the fiscal cliff is in the lack of capital-spending growth since the summer.

Orders for nondefense capital goods excluding aircraft, a key metric of demand, was flat in September after a 0.2% gain in the prior month. This came on the heels of close to an 8% slide in June and July.

“Such uncertainties will only be increased by discord and delay,” according to Bernanke.  He urged the members of Congress not to kick the can down the road. Putting off policy choices would only “prolong and intensify these uncertainties,” he said.  “In contrast, cooperation and creativity to deliver fiscal clarity — in particular a plan for resolving the nation’s longer-term budgetary issues without harming the recovery — could make the new year a very good one for the American economy.”

Without action by the White House and Congress on the fiscal cliff, about $500 billion in spending cuts and tax increases are set to begin in 2013. Economists, the Congressional Budget Office, and Fed economists have warned that America could slip back into recession if the so-called fiscal cliff is not addressed before the end of the year.

In a question-and-answer session, Bernanke warned that Fed policy could not protect the economy if it goes over the cliff.  “I don’t think the Fed has the tools to offset that,” he said.

Betting on Housing Market Recovery

Low interest rates and the Fed's efforts to curtail unemployment all point to a likely housing recovery. Ben Bernanke disclosed in September that the Fed continues to purchase mortgage-backed securities that will put downward pressure on mortgage rates--thus increasing refinancing at lower rates and boosting overall demand for housing. Housing prices are also starting to build up, indicating an increase in demand. Hurricane Sandy is further boosting new-housing and repair demand on the East coast. Bloomberg reports that construction in the US is growing at the fastest rate in four years. With all these indicators pointing to an improving housing sector, needless to say, now may be the right time to bet on it. 

One housing market company destined to win in this recovery is Home Depot (NYSE: HD), the largest home-improvement retailer in the world. Home Depot reported its third quarter earnings the day before yesterday. The retailer reported Q3 EPS of $0.74, which beat analyst forecasts by $0.04, and revenue of $18.1B, which beat forecasts by $150M. The stock closed at $63.38 the same day, close to its 52 week high which is the highest the stock has reached in over a decade.

Home Depot's CEO, Frank Blake, yesterday reaffirmed that housing is now becoming “an asset rather than a negative.” According to Home Depot's CFO, Carol Tome, housing turnover this year is about 4.5 million units on an annualized basis which is impacting the company's comparables about 50 basis points this year.

Bernanke Successor May Face Challenges

President Barack Obama's next choice to head the U.S. Federal Reserve could have his or her hands tied if Ben Bernanke and company continue to re-write the policymaking rule book at their current clip.

Under Chairman Bernanke, who is expected to step down when his current term expires in January 2014, the U.S. central bank has embraced the goal of making the historically shrouded business of setting monetary policy far more transparent. It has adopted a string of new rules and guidelines to clarify its policy intentions, including an inflation target and a conditional vow to hold interest rates near zero until at least mid-2015.

The next step is being hotly debated now. Fed policymakers are striving to agree on a set of economic variables, or thresholds -- probably particular levels of unemployment and inflation -- that would signal when the time to raise interest rates was finally drawing near.

The trick is making a credible commitment that convinces investors to keep longer-term borrowing costs low, thus
stimulating the economy, while at the same time ensuring the Fed can react swiftly to changing economic realities. The concern is that these rules and guidelines will crimp the central bank's flexibility in years to come as it deals with
the fits and starts of a protracted U.S. economic recovery. "The more they do it over the next year, the more the next
chair will be constrained," said Vincent Reinhart, chief U.S. economist at Morgan Stanley and a former Fed economist.

The "constructive ambiguity" the central bank has famously used over the years to safeguard its policy-setting discretion is slowly disappearing, he said.

Bernanke Likely Won’t Seek Third Term as Fed Chairman

Federal Reserve Chairman Ben Bernanke has told close friends he probably will not stand for a third term at the central bank even if President Barack Obama wins the November 6 election, the New York Times reported.

Republican presidential nominee Mitt Romney has already said he would not re-nominate Bernanke if he wins the presidency. Bernanke’s term as chairman ends in January 2014.

Bernanke, who was first appointed to run the U.S. central bank by former president George W. Bush and was given a second term by Obama, has declined to comment publicly on whether he would accept another four-year term.

“I am very focused on my work, I don’t have any decision or any information to give you on my personal plans,” he told a news conference last month after the Fed announced a new and open-ended round of bond buying to support the U.S. economy.

The Fed’s unconventional efforts to spur growth have been criticized by many Republicans and some economists who argue that they threaten future inflation and abet profligate spending in Washington.

Treasury Secretary Timothy Geithner has already made it clear he wants to leave by the end of the year.

Former Treasury Secretary Lawrence Summers would be at the top of Obama’s list to replace Bernanke, although his reputation for not being a team player could count against him, New York Times columnist Andrew Ross Sorkin wrote.

Longer shots include Janet Yellen, the vice chairwoman at the Fed, and economist Alan Krueger, a former assistant secretary of the Treasury for economic policy, or even Geithner, Sorkin wrote in his “Dealbook” column.

Glenn Hubbard, who headed the Council of Economic Advisers under George W. Bush, is often mentioned as Romney’s most likely nominee for the Fed chairmanship or the top job at the Treasury Department.

Taking the Fright Out of Halloween Candy

These days Halloween candy crowds the aisles of store shelves within minutes of the final back-to-school sale. And while it might seem like a good idea to stock up during the early-bird sales, too often "the candy is gone by the time it's actually Halloween, so you have to go for a second batch," says Melinda Johnson, a dietitian and director of the didactic program in dietetics at Arizona State University in Tempe.

Here are some tips from Johnson and the academy to help your family avoid a Halloween candy hangover:

• Stock up at the last minute. As Johnson noted, the longer the candy is in your house, the more likely it is that everyone will sample it before the big day.

• Buy candy you don't like. No matter how much willpower you possess, it can be hard to resist the siren call of the mini Snickers or Butterfinger. You might easily be able to take a pass on PixieSticks, however. Chances are a few of your favorites will show up in your kids' bags and you can treat yourself then.

• When they return from trick-or-treating, have your kids separate their candy into two piles: Like and Don't Like. "Immediately pack up the candy in the 'don't like' pile and give it away," says Johnson. This will not only reduce the amount of sugar in the house, it will remind kids that when they indulge in sweet treats, they should be ones that they really like rather than ones that are just there for mindless snacking.

• Consider a candy buyback. "I know of lots of dentists who buy Halloween candy from their patients," says Johnson. Some dentists offer cash or coupons, toothbrushes or other services, she says. The candy is sent to troops overseas. You can find information about the program, and share it with your family dentist, at http://www.halloweencandybuyback.com.

• Send sweets yourself to the troops. Individuals who would like to ship Halloween candy to military personnel overseas can find information about how to do so at http://www.operationgratitude.com.

September Existing Home Sales Down but Prices Improve

September existing-home sales declined modestly, but inventory continued to tighten and the national median home price recorded its seventh back-to-back monthly increase from a year earlier, according to the National Association of Realtors^®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 1.7 percent to a seasonally adjusted annual rate of 4.75 million in September from an upwardly revised 4.83 million in August, but are 11.0 percent above the 4.28 million-unit pace in September 2011.

Lawrence Yun , NAR chief economist, said the market trend is up. "Despite occasional month-to-month setbacks, we're experiencing a genuine recovery," he said. "More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest. Rather, inventory shortages are limiting sales, notably in parts of the West."

"The shrinkage in housing supply is supporting ongoing price growth, a pattern that could accelerate unless home builders robustly ramp up production," Yun said.

Existing-home sales in the West fell 3.4 percent to an annual pace of 1.13 million in September but are 0.9 percent above a year ago. With continuing inventory shortages in the region, the median price in the West was $246,300, which is 18.4 percent higher than September 2011.

Bernanke Defends Fed Stimulus as China and Brazil Raise Concerns

Federal Reserve Chairman Ben Bernanke on Sunday said it was far from clear that the U.S. central bank's highly stimulative monetary policy hurts emerging economies, defending a policy raising concerns in China, Russia and Brazil.

In a blunt call for certain emerging economies to allow their currencies to rise, he also said that foreign exchange intervention encouraged destabilizing inflows of foreign capital, but he did not specify China by name.

"The perceived advantages of undervaluation and the problem of unwanted capital inflows must be understood as a package - you can't have one without the other," Bernanke said in Tokyo.

Bernanke has often defended Fed actions against domestic critics, who argue the policy of keeping interest rates near zero while ramping up asset purchases hurts savers and risks future inflation.  But in the Tokyo speech, Bernanke addressed critics abroad, saying stronger growth in the United States bolsters global prospects as well, countering the likes of Brazil's Finance Minister Guido Mantega who has labeled the Fed's latest stimulus effort "selfish".

Critics say the Fed's unorthodox policies weaken the U.S. dollar and boost the currencies of developing countries, hurting their ability to export.  "It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies," Bernanke said at an event sponsored by the Bank of Japan and the International Monetary Fund. While the speech was delivered in private, the Fed provided a text to the media.

Restating a theme that he has addressed in the past, the Fed chief also said that if emerging economies stopped intervening and allowed their currencies to rise, this would help insulate their financial systems from external pressure.  "Under a flexible exchange-rate regime, a fully independent monetary policy, together with fiscal policy as needed, would be available to help counteract any adverse effects of currency appreciation on growth," Bernanke said.

Housing Still Impediment to U.S. Growth

A disappointing rebound in U.S. housing continues to trip up the country's overall economic recovery, two influential Federal Reserve officials said on Friday, highlighting a corner of the economy that still frustrates monetary policymakers.

New York Federal Reserve Bank President William Dudley said the housing market's failure to fully respond to the Fed's easy money policies remains a headwind to U.S. growth, while Elizabeth Duke, a governor at the central bank, highlighted problems associated to the "extraordinary" level of abandoned properties.

A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis and the lackluster environment that continues to hamper the world economy today.

Though national house prices have edged up this year, Dudley said credit availability remains "impaired" and the overall pace of the broader U.S. economic recovery has been disappointing.  "While there are several headwinds that have been restraining economic growth, a key impediment is that the housing market has failed to respond fully to the significant easing of monetary policy," Dudley said at a residential real estate conference hosted by the New York Fed.

The central bank has kept benchmark interest rates ultra low for nearly four years and has bought more than $2 trillion in large-scale assets to kick-start growth and get Americans back to work. It launched a third round of asset buying last month and signaled it would keep rates near zero for three more years. 

Many economists believe the housing market has finally turned a corner as prices have started to stabilize, while home sales were around two-year highs in August. But the large overhang of foreclosures and the many people who are underwater on their homes are among the hurdles the sector still faces.

What the Fed Move Means

  Talk about a shot in the arm. The Federal Reserve's Sept. 13 announcement of a third round   of "quantitative easing" sent some mortgage-bond funds to their biggest one-day gains in a year.

The Fed said it would buy mortgage-backed securities, or MBS, for an indefinite period to bolster the economy. That could spell an opportunity for investors—and might warrant stocking up on funds that hold the securities, say analysts.

While "QE3" was anticipated, the particulars of the program were something new. Instead of committing to buy a fixed amount of Treasury debt—as it did when announcing QE2 in November 2010—the Fed left this round of easing open-ended.

The Fed says it plans each month to buy $40 billion of agency mortgage-backed securities, which are supported by government-sponsored enterprises such as Fannie Mae and Freddie Mac . The Fed says the buying will continue until the labor market improves substantially.

But because it is unclear how long the Fed will continue its bond-purchasing program, most segments of the mortgage market seem to have priced in only about a year's worth of Fed purchases, says Steven Abrahams, head of MBS and securitization research at Deutsche Bank.

The mortgage market also will be hypersensitive to changes in the labor market, says Mr. Abrahams. When unemployment claims or payrolls reports are unexpectedly weak, traders will expect the Fed's bond-buying program to continue longer, which will push mortgage bond prices up, he says. Prices could fall after strong reports. (Bond yields move in the opposite direction of prices.)

Fed Pulls Trigger, To Buy Mortgages in Effort to Lower Rates

The Federal Reserve fulfilled expectations of more stimulus for the faltering economy, taking aim now at driving down mortgage rates until an improvement in unemployment that the central bank says will be a problem for several years.

The Fed said it will buy $40 billion of mortgage-backed securities per month in an attempt to foster a nascent recovery in the real estate market. The purchases will be open-ended, meaning that they will continue until the Fed is satisfied that economic conditions, primarily in unemployment, improve.

There's strong hints that they'll do Treasuries next," Joe LaVorgna, chief economist at Deutsche Bank Advisors, said in a phone interview from London. "They're pulling out all the stops to try to get this economy to gain some traction and, most important, to get unemployment down."

"The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," the Open Market Committee said in a statement. 

As a follow-up to the statement, the Fed released its latest economic projections, which foresee slow growth including a jobless rate that stays above 7 percent into 2014. The economic projections expect growth to remain slow but to improve due to the stimulate measures announced Thursday.

In addition, the Fed said it will continue its program of selling shorter-dated government debt and buying longer-term securities, a mechanism known as Operation Twist. It also will continue its policy of reinvesting principal payments from agency debt and mortgage-backed securities back into mortgages.

The Fed left its funds rate unchanged at near-zero but offered one change in that regard, saying the rate would stay at "exceptionally low levels" until at least mid-2015.

Jobs Rut Tips Scale in Favor of Fed Stimulus

The Federal Reserve looks set to launch a third round of bond purchases this week to try to drive borrowing costs lower and breathe more life into an economy that is not growing fast enough to lower unemployment.

Despite political opposition and some internal dissent, economists said a weak report on jobs growth for August was likely enough to convince the U.S. central bank a looser monetary policy was needed.

"The Federal Reserve will ease again," said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, California. "There are too many people without jobs and the unemployment rate is too high at this stage of an economic recovery."

The economy created just 96,000 jobs in August, well below expectations and less than what is needed to keep up with population growth, a government report showed on Friday.

While the jobless rate declined to 8.1 percent from 8.3 percent, that was only because Americans gave up the hunt for work in droves, further bolstering the case for more bond buying, or quantitative easing. "This is certainly a disappointing report and increases the odds for QE, which were already reasonably high," said David Sloan, an economist at 4CAST Ltd.

In remarks late last month, Fed Chairman Ben Bernanke laid the groundwork for a third round of bond purchases, or QE3, by calling the stagnation in the labor market "a grave concern." As part of any new bond buying, many economists think the Fed will return to the housing-related debt purchases it resorted to during the damaging 2007-2009 recession, perhaps buying a mix of mortgage-backed securities and U.S. Treasuries.

Some hope MBS purchases would drive mortgage rates lower and give an extra push to a housing sector that has shown some signs of life recently, boosting economic growth.

Bernanke Says Fed Ready to Act But Short on Specifics

Federal Reserve Chairman Ben Bernanke on Friday left the door wide open to a further easing of monetary policy, saying the stagnation in the U.S. labor market was a "grave concern," but he stopped short of providing a clear signal of imminent action.

His stark language gave a temporary lift to U.S. stocks, but economists walked away from the Fed chairman's remarks still divided over whether the central bank would launch a fresh round of bond purchases at its upcoming meeting in September.

Bernanke said the Fed had to weigh the costs as well as the benefits of more monetary stimulus, although he hinted the costs were likely worthwhile.

"As we assess the benefits and costs of alternative policy approaches ... we must not lose sight of the daunting economic challenges that confront our nation," Bernanke said at the Kansas City Fed's annual Jackson Hole symposium.

"Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."

That was a somewhat weaker hint of policy easing than the minutes of the Fed's last policy meeting had delivered, but Bernanke's dour economic assessment left few doubts where his sympathy lay.

Clouds Over Economy Unlikely to Clear Soon

The U.S. economy is like an overcast fall day: neither hot nor cold, with a chance of worsening weather.

The cloudy state of the economy has put the Federal Reserve in a fix. The central bank seems increasingly willing to take another stab at stimulating the economy, but only if growth clearly appears to be faltering.

The game plan of the Fed will capture much of the economic spotlight this week as central bankers gathers for their annual retreat at Jackson Hole in Wyoming. Wall Street will be looking for clues on whether the Fed is ready to pull the trigger.

What could influence the Fed is another weak consumer spending report. Consumer spending has fallen two straight months, the first time that’s happened since the tail end of the last recession.

Earlier data on retail sales, however, suggests consumer spending rose modestly in July. Economists surveyed by MarketWatch forecast spending to rise 0.3% in July.

“Lower gas prices during the summer gave consumers a boost,” said economist Michael Gapen of Barclays Capital. “Income growth has somewhat improved and the savings rate has risen.”

The savings rate moved up to 4.4% in June from just 3.2% last winter.

What’s less certain is whether consumers will continue to spend at a modest clip over the rest of the year. The U.S. is not growing very fast, companies are reluctant to hire, the global economy has hit a rut and a political stalemate in Washington has businesses on edge.

Deep cuts in federal spending and higher taxes are slated to kick in on Jan. 1, 2013 unless Washington rescinds them, but chances of a compromise appear remote until after the presidential election in November

Treasury Changes Fannie and Freddie Bailout Deal

The government is changing the terms of its bailout agreement with Fannie Mae and Freddie Mac in a way that will shrink the holdings of the two mortgage giants more quickly and will require payment to the government of all quarterly profits the companies earn.

The Treasury Department announced the changes Friday in an effort to deal with concerns that the companies could at some point exhaust the federal support they were guaranteed when they were taken over by the government in September 2008 during the financial crisis.  The two firms would have to turn over all profits they earn every quarter. They would also be required to accelerate the reduction of their mortgage holdings to hit a cap of $250 billion by 2018, four years earlier than planned.  Under the new arrangement, the firms' portfolios can be no larger than $650 billion each at the end of this year.

The Obama administration unveiled a plan last year to slowly dissolve Fannie and Freddie, with the goal of shrinking the government's role in the mortgage system. The proposal would remake decades of federal policy aimed at supporting Americans' ability to buy homes and could make home loans more expensive. However, Congress hasn't yet decided how far the government's role in mortgages should be reduced.  Industry groups including the American Bankers Association and the Mortgage Bankers Association were generally supportive of the administration's action.

"Much more work needs to be done to reform the secondary market (for mortgage-backed securities) but today's announcement helps move this process forward and ensure the taxpayers' investment is ultimately repaid," Frank Keating, president of the banking group, said in a statement.

Currently, Fannie and Freddie make dividend payments to the Treasury every quarter. That has forced them to borrow money from the government and use that money to repay the government in periods when they didn't turn a large enough profit to cover the dividend payments. 

Under the new arrangement, the government will simply take all the profits that the firms make in any quarter as a dividend payment. The government will not require a dividend payment in periods when the firms run a loss.

So far, Fannie and Freddie have paid nearly $46 billion in dividends.

June Existing Home Prices Rise Again

Existing-home prices continued to show gains but sales fell in June with tight supplies of affordable homes limiting first-time buyers, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 5.4 percent to a seasonally adjusted annual rate of 4.37 million in June from an upwardly revised 4.62 million in May, but are 4.5 percent higher than the 4.18 million-unit level in June 2011.

Lawrence Yun, NAR chief economist, said the bigger story is lower inventory and the recovery in home prices. "Despite the frictions related to obtaining mortgages, buyer interest remains solid. But inventory continues to shrink and that is limiting buying opportunities. This, in turn, is pushing up home prices in many markets," he said. "The price improvement also results from fewer distressed homes in the sales mix."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.68 percent in June from 3.80 percent in May; the rate was 4.51 percent in June 2011; recordkeeping began in 1971.

The national median existing-home price for all housing types was $189,400 in June, up 7.9 percent from a year ago. This marks four back-to-back monthly price increases from a year earlier, which last occurred in February to May of 2006. June's gain was the strongest since February 2006 when the median price rose 8.7 percent from a year prior.

Distressed homes - foreclosures and short sales sold at deep discounts - accounted for 25 percent of June sales (13 percent were foreclosures and 12 percent were short sales), unchanged from May but down from 30 percent in June 2011. Foreclosures sold for an average discount of 18 percent below market value in June, while short sales were discounted 15 percent. "The distressed portion of the market will further diminish because the number of seriously delinquent mortgages has been falling," said Yun.

Mortgage Lenders Easing Standards, But Not for Everyone

With home prices rising in many markets around the country, might mortgage lenders start loosening up their hyper-strict underwriting rules and extend loans to buyers who now find themselves on the sidelines? Could current preferences for FICO credit scores in the mid-700s, down payments of 20%-plus and tight debt-to-income ratios begin to ease a little, given the widely acknowledged fact that loans underwritten in the last several years have performed exceptionally well — that is, defaulted at low rates?

Maybe. A lower unemployment rate would help, say mortgage industry leaders, as would signs of more robust growth in the overall economy. But the industry is unlikely to go back to what Frank Nothaft, chief economist of Freddie Mac, called "the loosey-goosey standards we had in 2005 through 2007": minimal documentation of income and assets, zero down payments and a disregard for applicants' ability to afford payments on the loans they sought.

Fannie Mae is planning an overhaul of its automated underwriting system in October. Fannie's system plays a huge role far beyond its own business, since lenders often submit borrowers' application data through it to get a quick read on whether a loan meets the baseline tests for eligibility — even if the mortgage is destined ultimately for the FHA, VA or a bank's portfolio. Although Fannie Mae officials insist that the upcoming changes to credit risk evaluation and other factors won't significantly alter the percentages of approvals that the system generates, they concede that some applicants who are currently getting green lights for loans won't get them, and others who are currently on the margins will sail through.

Other signs that the lending industry may not be quite ready to loosen up: In the latest quarterly survey of banks conducted by the comptroller of the currency, 25% said they had tightened rules for mortgages in recent months, whereas just 10% said they had eased their standards. Two-thirds said their rules remained the same.

Also, a study by mortgage data firm Ellie Mae of new loans closed in June found that credit scores for approved mortgages remain extraordinarily high. Fannie and Freddie's refinancings had an average FICO score of 767 and average equity percentages of 29%. Home purchase loans had average down payments of 21% and 763 FICOs. Even the conventional home purchase loan applications that lenders rejected had high credit scores and down payments by historical standards: 738 average FICOs and 19% down payments.

Despite Slowing Economy, Fed in No Hurry to Act

The economy is growing more slowly than last quarter, but probably not enough to push the Federal Reserve into action next week.

U.S. gross domestic product, the value of all goods and services produced, grew at a pace of 1.5 percent in the second quarter, down from a revised 2 percent in the first quarter.

Traders had been watching to see if the number, reported Friday, would signal a growth scenario that would encourage the Fed to be more aggressive at its two-day meeting next week.

“It’s not an emergency. I think they’ll be inclined to wait for September,” said Peter Fisher, head of BlackRock’s Fixed Income Portfolio Management Group. Fisher said he expects the economy to have been growing at about 2 percent and, all told, that’s what the data and revisions show.

Fourth-quarter growth was revised from 3 percent to 4.1 percent, and the revisions show that 2011 was slightly better than thought. The first quarter was raised by 0.1 percent.

“There’s no news here,” Fisher said.