U.S. new home sales rise but hold near lowest levels of 2013

(Reuters) – Sales of new single-family homes in America rose in August but held near their lowest levels this year, a sign that a sharp rise in interest rates is weighing on the U.S. economy.

Sales rose 7.9 percent to an annual rate of 421,000 units, the Commerce Department said on Wednesday.

The pace of sales was in line with analysts’ expectations and supported the view that rising mortgage rates were taking steam out of America’s housing recovery.

August’s increase in new home sales did not make up for the steep drop registered in July, when the pace of sales was the weakest since October.

Mortgage rates surged beginning in May when the Federal Reserve gave signals it was thinking of winding down a bond-buying stimulus program. The Fed surprised financial markets last week when it said it would put off reducing monthly bond purchases for now. Policymakers said rising borrowing costs played a role in their decision.

The housing market, which has been a major drag on America’s economy since the 2007-09 recession, appeared to turn a corner early last year when home prices began to rise.

Last month, the median price for a new home sale fell to $254,600. The median sales price, which is not adjusted for seasonal swings, has fallen every month since May, although is still up slightly from August 2012.

The inventory of new homes for sale increased by 3.6 percent in August from July, leaving the stock of unsold new homes at its highest level since March 2011.

(Reporting by Jason Lange; Editing by Krista Hughes)

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John Marcotte

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Regulators move forward on foreclosure relief

A lock secures a chain on the steel fence of a foreclosed home previously owned by U.S. Bancorp in Los Angeles, California July 17, 2012. REUTERS/Mario Anzuoni

By Aruna Viswanatha

(Reuters) – Borrowers whose homes were foreclosed on during the U.S. housing crisis will start receiving payments in April from a $3.6 billion fund under a previously announced settlement with 13 banks, regulators said on Thursday.

Certain borrowers whose mortgages were serviced by one of the 13 banks can expect to receive between a few hundred dollars and $125,000, under settlements designed to end case-by-case reviews of past foreclosures.

The Office of the Comptroller Currency and the Federal Reserve in 2011 ordered banks including Bank of America Corp, JPMorgan Chase & Co, and Wells Fargo to review individual loan files after widespread mistakes were discovered in the way mortgage servicers had processed home seizures.

The reviews were initially expected to determine which borrowers were harmed and to compensate them based on their individual experiences. The process proved slow and expensive, though, with more than $1.5 billion going to consultants.

In January regulators replaced the reviews with about $9.3 billion in settlements, including $3.6 billion in cash payments to foreclosed borrowers. Struggling borrowers will receive the rest of the money in the form of assistance, including loan modifications and forgiveness.

By the end of March, regulators will provide information about the payments to borrowers who fall into one of 11 categories, including those eligible for protections under the Servicemembers Civil Relief Act, those who were not in default when foreclosed on, and those denied a loan modification, the OCC said.

Regulators are still determining how many borrowers fall into each category, OCC Deputy Comptroller Morris Morgan said on a conference call with reporters. Once they have that figure, they can calculate how much money each borrower is likely to receive, he said.

DECLINING ERROR RATE

The OCC and the Fed have faced criticism from Congress over both the reviews and the settlement that ended them. Lawmakers have asked for more information about the consultants who conducted the reviews and what they turned up.

Regulators initially said about 6.5 percent of the loans reviewed appeared to have some errors. On Thursday Morgan said that error rate had declined, but did not provide a specific figure.

The banks are expected to try to keep borrowers in their homes, but the settlement does not mandate specific kinds of relief.

The servicers will receive varying degrees of credit for modifying first and second loans, waiving deficiency judgments, offering short sales, and other types of relief.

Three servicers subject to the original reviews, Everbank, OneWest and GMAC Mortgage, did not enter into the settlements and will continue their reviews, the OCC said.

(Reporting by Aruna Viswanatha; Editing by Gerald E. McCormick and Lisa Von Ahn)

John Marcotte

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