Sep. 14, 2011: SEC & REIT’s; the latest on Fannie & Freddie; WSJ piece on government’s role in BofA cuts; lenders brace for loan amount changes Rob Chrisman
“A clever person solves a problem. A wise person avoids it.” But at this point, most believe that it is too late to avoid the problems in the mortgage industry. No one seems to believe that much will happen with Freddie and Fannie ahead of next year’s election, which easily leads to a debate about the benefits of a government that seems more concerned about elections far in the future than in dealing with tough issues. That aside, here is the latest: http://www.reuters.com/article/2011/09/13/usa-housing-congress-idUSN1E7881AZ20110913 “Here’s something that really helps the value of mortgage servicing,” he said sarcastically. “Let’s not pay our mortgage and save our money, let the house go into foreclosure, and then buy it back on the courthouse steps for pennies on the dollar.” http://detnews.com/article/20110907/METRO01/109070383/Owners-escape-tax-debt-by-rebuying-foreclosed-homes “A few months ago, real-estate companies that invest in mortgage securities were one of the hottest sectors among companies planning initial public offerings of stock. Now, however, they are among the least likely to go public anytime soon.” So began a story in the Wall Street Journal about REIT’s, which must pay out 90% of their taxable income as dividends. “If the remaining five pending mortgage REITs eventually go public, then the entire pool of publicly traded mortgage REITs will grow to 28 from the 23 that the National Association of Real Estate Investment Trusts had on record through August.” The SEC recently launched a review that could determine whether mortgage REITs should continue to be unregulated companies or whether they should be subjected, like mutual funds, to the Investment Act of 1940. “But now, the SEC appears to be making a distinction between REITs that manage and operate real estate versus REITs that invest in real-estate securities. If the SEC determines that mortgage REITs shouldn’t qualify for exemption, the companies will lose the ability to use hefty amounts of leverage, or borrowed capital, to boost returns and provide high dividends.” (There is more analysis at
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