Pending home sales hit 10-month low, services sector rebounds

Workers assemble Motorola phones at the Flextronics plant that will be building the new Motorola smart phone ''MotoX'' in Fort Worth, Texas September 10, 2013. REUTERS/Mike Stone

(Reuters) – Contracts to buy previously owned U.S. homes hit a 10-month low in October, but a strong rebound in services sector activity early this month suggested some resilience in the economy as the year winds down.

The National Association of Realtors said on Monday its Pending Home Sales Index, based on contracts signed last month, slipped 0.6 percent to 102.1, the lowest level since December.

It was the fifth straight month of declines in contracts and suggested home resales could remain on the back foot for the rest of this year. These contracts become sales after a month or two. Home resales fell in October for a second straight month.

“The data suggest sluggish home sales going into the end of the year and that the tightening of financial conditions this summer did have a negative impact,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

Economists, who had expected pending home sales to rise 1.3 percent in October, said the weak home sales trajectory could see the Federal Reserve sticking to its $85 billion monthly bond buying program at least until early next year.

The U.S. central bank has targeted housing as a channel to boost growth and speed up job creation.

The Realtors group said October’s 16-day partial shutdown of the federal government had sidelined potential buyers.

According to the NAR, a survey of realtors found 17 percent of respondents reported delays in signing contracts because they had to wait for the Internal Revenue Service to verify income before the mortgage could be approved.

The Realtors group expected a bounce back in contracts, but it cautioned that lack of inventory remained a constraint.

(Reporting by Lucia Mutikani Additional reporting by Ryan Vlastelica in New York; Editing by Andrea Ricci)

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U.S. should get mortgage firm data for probe, judge says

(Reuters) – A federal judge on Monday recommended that a large firm that reviewed mortgages for Wall Street banks turn over e-mails and other data that may help the government decide which banks to sue for packaging shoddy mortgages into securities that fueled the financial crisis.

U.S. Magistrate Judge Donna Martinez in Hartford, Connecticut, said Clayton Holdings LLC should turn over due diligence reviews it prepared for its clients from 2005 through 2007, e-mails between employees and clients during that time, and a database that was used in providing services.

Investigators had subpoenaed the materials on July 1 on behalf of the Residential Mortgage-Backed Securities Working Group, which includes the U.S. Department of Justice and other federal and state regulators.

If enforced, the subpoena could help the government pursue cases against banks it wants to hold accountable for selling securities that fueled the U.S. housing and financial crises.

The government alleged that Clayton’s due diligence reviews discussed “potential problems with individual loans making up the loan pools, as did internal and externalcommunications at Clayton associated with the reviews.”

Clayton called the subpoena a “fishing expedition” on its dealings with its 193 clients, not just the 16 financial institutions that the government had advised were being probed. It also said it has cooperated with the working group and responded to “every government request for over six years.”

Martinez nonetheless concluded that Clayton did not show that it was too burdensome to comply with the subpoena, or that the government already had much of the information it sought.

The case is being handled by the office of U.S. Attorney Loretta Lynch in the Eastern District of New York. Robert Nardoza, a spokesman for Lynch, did not immediately respond to a request for comment. Thomas Carson, a spokesman for Acting U.S. Attorney Dierdre Daly in Connecticut, declined to comment.

Clayton was a “major provider of third-party due diligence services” to Wall Street, according to the Financial Crisis Inquiry Commission’s 2011 report.

“Because of the volume of loans examined by Clayton during the housing boom, the firm had a unique inside view of the underwriting standards that originators were actually applying – and that securitizers were willing to accept,” it said.

The government issued the subpoena under the Financial Institutions, Reform, Recovery and Enforcement Act of 1989, which it uses to recover civil penalties for losses to federally insured financial institutions.

FIRREA has a 10-year statute of limitations, versus five years for some securities fraud laws. Bank of America Corp and Wells Fargo & Co are among companies that the government has sued under FIRREA in mortgage-related cases.

The case is U.S. v. Clayton Holdings LLC, U.S. District Court, District of Connecticut, No. 13-mc-00116.

(Editing by Dan Grebler)

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