THE Congressional Budget Office released an updated budget outlook today. Here's the big news:
If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642 billion, the Congressional Budget Office (CBO) estimates, the smallest shortfall since 2008. Relative to the size of the economy, the deficit this year—at 4.0 percent of gross domestic product (GDP)—will be less than half as large as the shortfall in 2009, which was 10.1 percent of GDP 

8---The plan to game the system for a second time, Housingwire

While it’s clear that the government’s role in housing will not recede to zero, there appears to be consensus among policymakers that private capital needs to make a comeback in the market. 
One way to do this is through issuers of mortgage-backed securities or other financial institutions guaranteeing the credit on such securities by maintaining appropriate levels of capital.

The FHLBanks could continue playing their traditional role under an issued-based approach and could even expand upon the limited loan aggregation role that these institutions play today, DeMarco stated.
"Over the years, there has been some discussion of the FHLBanks becoming guarantors of mortgage-backed securities. While that expanded role could be possible under this approach, given past history, and what appears to be a general desire to move away from a government sponsored enterprise-based model, that outcome seems doubtful," the current acting director said.
Another approach is for securities to be issued in such a way that market participants themselves advance the capital while absorbing the credit risk.
To a large degree, this is what the old private-label MBS market did and is considered a securities-based approach that would establish a market infrastructure for pricing and capitalizing on mortgage credit risk, DeMarco explained.
In a securities-based approach, the role of the FHLBanks could increase in many critical ways.
"To establish a liquid non-government guaranteed market there would seem to be a need to have greater homogeneity in borrower characteristics. For borrower characteristics that do not fit neatly into the secondary market, we need to find a way to get insured depository institutions back into the business of funding mortgages," DeMarco said. 

9---As of February 2013, mortgages originated before 2009 accounted for 86 percent of all delinquent mortgages., DS News

This suggests the issue with the high mortgage delinquency rate is not new loans that are falling behind on payments.

“[E]ven the older vintages, at one time deteriorating quickly, are now contributing new delinquent borrowers at rates nearly identical to the good-performing newer mortgages,” said Tim Martin, group VP of U.S. Housing in TransUnion’s financial services business unit.
Rather, the real culprit leading to an elevated delinquency rate is the long timeline when handling problem loans.

“It’s no longer a credit quality or home price depreciation issue, and we are not adding many new delinquent mortgage borrowers into the pool these days,” he explained. “Instead, it’s an issue of the timelines to cure or foreclose. We are simply not draining the pool very fast; and the size of the ‘drain’ varies significantly by state.”

To make its point, TransUnion analyzed the impact of the increasing cure or foreclose timelines on delinquency rates.

After excluding borrowers who have remained in delinquency status for 180 days or more, TransUnion determined that the mortgage delinquency rate would have peaked in 2009 at about 3.05 percent compared to the actual peak of 6.89 percent. The current delinquency rate of 4.56 percent would actually be 1.68 percent, which is the lowest level since the second quarter of 2003 when the delinquency rate was 1.67 percent.

“With house prices up, interest rates low and some of the mortgage servicing ‘rules’ getting set, it appears that delinquent borrowers are finally working themselves through the system, one way or another,” Martin said. “Our analysis shows that if we were at more traditional Cure of Foreclose timelines, then we could already be reporting mortgage delinquency rates as being back to ‘normal.’

10---Detroit’s emergency manager throws down the gauntlet, wsws”

11---Obama Justice Department secretly seized Associated Press telephone records, wsws

12---DOJ Snooping on Journalists: A Witch Hunt to Enforce Obama Demand for Total Secrecy, antiwar

It’s unsurprising that the spying program was done in response to a leak on a foreign policy issue. No area invites secrecy and spying like “national security.” After all, the crowning foreign policy achievement of the Obama presidency has been, in the words of Georgetown law professor Rosa Brooks, “the unreviewable power to kill anyone, anywhere on earth, at any time, based on secret criteria and secret information discussed in a secret process by largely unnamed individuals.”

Last year, the government rejected an unprecedented amount of Freedom of Information Act requests. “The administration cited exceptions built into the law to avoid turning over materials more than 479,000 times, a roughly 22 percent increase over the previous year,” The Associated Press reported in March

13---In Canada’s housing market, the other shoe has already dropped, Globe and Mail

Indeed, the pace of year-over-year price appreciation has been slowly eroding for the past year and a half. Of the 11 major urban centres tracked by the national composite, seven (Victoria, Vancouver, Edmonton, Toronto, Hamilton, Ottawa-Gatineau, Montreal) now show price declines from their 2012 highs. In April, five of the 11 (Vancouver, Victoria, Ottawa-Gatineau, Quebec City, Halifax) suffered month-over-month price declines. The scales are, increasingly, tipping toward actual deflation in the Canadian housing market – and are already pretty decisively there in some parts of the country, most notably the West Coast.
Mr. Pinsonneault noted that new-listings and sales data point to continued market erosion in several major centres, specifically Vancouver, Victoria, Montreal and Ottawa-Gatineau. “It is therefore likely that the annual price inflation in the Teranet-National Bank composite index will continue to diminish substantially in the months ahead,” he concluded.

14---Dodd-Frank Qualified Mortgage Rules Will Create a New Bubble, US News

...the United States will float from bubble to bubble until borrowers have real money at risk. Investing substantial cash in a house—20 percent down payments were common before the decision to massively subsidize the American Dream—would give borrowers an incentive to examine whether their housing purchases and mortgages make sense, rather than having taxpayers bear the loss.

While these features became common at the bubble's peak, they were not core causes of the bust. That came from ignoring lending principles: borrower ability to pay (debt-to-income ratio), borrower willingness to pay (as evidenced by credit score), and the size of the loan relative to the value of the property (loan-to-value ratio). The result was Ponzi finance, in which borrowers took down ever-larger loans in the expectation that rising prices would allow them to refinance out of unaffordable debt. When prices dropped, massive defaults followed. Of these three key criteria, Qualified Mortgage only addresses one: debt-to-income ratio.

Although lenders will find the debt-to-income safe harbor the financial equivalent of Rotterdam's Maeslantkering flood barrier, borrowers may feel like Jersey Shore denizens during Hurricane Sandy. The Qualified Mortgage regulations set the maximum debt-to-income ratio at 43 percent—yet it is unclear that debt-to-income is the relevant measure. As the Consumer Financial Protection Bureau acknowledges, Federal Reserve Board research shows "debt-to-income ratios may not have significant predictive power once the effects of credit history, loan type, and loan-to-value are considered."

15--Housing stakeholders warn against strict mortgage down-payment requirements, The Hill

They argue that mortgage lenders will need flexibility in making loans under the new qualified mortgage (QM) rules, and that specific down payment requirements in a still-developing qualified residential mortgage (QRM) rule will hamper home purchases and lock out many qualified buyers.

Jerry Howard, president and CEO of the National Association of Home Builders (NAHB), said a borrower's ability to repay should be looked at "holistically" and that a down payment requirement would be the "antithesis" of that.
Amid tight lending conditions in the mortgage market "we do think the president is sending the right signal," Howard told The Hill.
  
Any unfinished regulations put a "chill on the market" and "no matter what prevailing wind is seeming to blow at the back of the housing industry, regulators are in a position to key up the housing sector and play a huge role in the traditional spring season."
"When we catch fire, we're fueling the optimism," he said.
   
Regulators say they will complete the QRM rule sometime this year, although Howard and a growing number of lawmakers are pressing for a quicker resolution to provide greater certainty in housing finance.
Bob Davis, executive vice president at the American Bankers Association (ABA), said the two rules should contain identical requirements for borrowers and a QRM rule is no place for unnecessary restrictions.
Davis said he would prefer that QM and QRM contain identical requirements because the QM, which was completed in January, includes significant consumer protections on top of the new rule issued by regulators detailing how mortgage lenders will determine a borrower's ability to pay back their loan.
"Don't write a rule that takes out the flexibility for the underwriting process when the 'ability to repay' rule already provides a lot of protections," he told The Hill....

There is no down payment requirement in the QM rule.
Setting a percentage of a down payment would draw a line in the sand for the risk retention requirement, he said.
Under the new QM rules, Davis said lenders will determine the amount of a down payment based on a broad range of required borrower qualifications and it would hurt those who couldn't meet the requirement.