Ultimately price stability is necessary for consumers or investors to feel confident that home values aren’t going to decline after they buy a home. Clearly their downsized risks from a weak job market and slowing economic activity however we're hopeful the housing market will continue to stabilize and we remain cautiously optimistic about the prospects for home prices as we move into the latter half of 2012.
Low mortgage rates and programs such as HARP 2.0 and the FHAs negative equity refinance program have boasted refinance volumes and helped homeowner’s lock-in historically low rates on their mortgages. Additionally low rate coupled with attractive home prices and higher cost to rent makes purchasing a home more attractive. These factors appear to be having a positive impact on consumer attitudes towards homeownership which seems to be improving. While there are signs of improvement in the housing markets, we are also continuing to see a steady flow of distrust home loans being offered for sale. The attorneys general foreclosure settlement with the large banks and the desire to free up capital will drive additional sale of distress home loans going forward.
The sales will likely consist of non-performing and re-performing loans both of which have the potential to provide attractive returns to companies with the requisite servicing expertise to drive timely and effective resolutions. The correspondent landscape is going through a transformation as most of the big banks who have been the market leaders in the channel for many years are exiting or materially reducing their volumes. This market change is primarily due to the pending implementation of the Basel III capital requirements, operational complexities and Rep & Warrant issues.
Many of those banks have shifted their focus to their retail channels, additionally the Federal Housing Finance Agency, FHFA is working to drive parity and guarantee fees across mortgage lenders in order to narrow the competitive advantage enjoyed by the largest lenders and to reduce concentration risk. Thus far the FHFA has been successful in narrowing this gap and may choose scenario further by the end of the year.