Proposal to exclude sub-prime from mandated targets

Fannie Mae and Freddie Mac would no longer be able to rely on sub-prime mortgages to meet their government-mandated goals for helping lower-income Americans obtain home loans, according to proposed regulations.

The rules offered by the Federal Housing Finance Agency would restrict the companies from using private-label bonds backed by Alt-A and sub-prime mortgages, or commercial mortgage-backed securities, to meet affordable-housing targets.

Fannie Mae and Freddie Mac, the largest sources of money for US residential mortgages, had been relying on riskier private-label debt to satisfy goals of financing loans for low- and moderate-income homebuyers, according to FHFA.

Fannie Mae and Freddie Mac were seized in 2008 largely because of regulators’ concern that the companies wouldn’t have enough capital to cover losses on that type of debt.

‘The results of providing large-scale funding for such loans were adverse for borrowers who entered into mortgages that did not sustain homeownership and for the enterprises themselves,’ the agency said in the proposal.

Private-label, or non- agency, bonds are issued by banks and don’t carry guarantees by Fannie Mae, Freddie Mac or government-agency Ginnie Mae. Freddie Mac held about US$176 billion in non- agency debt in its US$755.3 billion portfolio as of December, according to its monthly volume summary. Fannie Mae had about US$90 billion in its US$772.5 billion portfolio.

The companies have been required to devote a certain amount of their annual business to low- and moderate-income borrowers, economically depressed neighbourhoods and other disadvantaged groups. Those goals were modified after the companies were seized by regulators in September 2008.

At least half the dwellings the companies helped finance with their more than US$500 billion in total mortgage purchases in 2008 were used to satisfy affordable housing goals, according to calculations from company filings.

The new affordable-housing rules would also forbid Fannie Mae and Freddie Mac from counting second-lien debt such as home-equity and ‘piggy-back’ loans and the financing of some rental units toward the goals. It would also change how the companies account for multi-family financing.

Much of the new structure is set out in the 2008 law that created FHFA and strengthened oversight of Fannie Mae and Freddie Mac. The rules would establish separate targets for multi-family and owner-occupied properties as well as set efforts to include poorer borrowers than before, the FHFA said.

Edward DeMarco, FHFA’s acting director, said in a letter to lawmakers earlier this month that he doesn’t expect Fannie Mae and Freddie Mac to take on as many risks to fulfil their affordable-housing missions in the future.

FHFA reiterated that statement in the proposal, saying it doesn’t intend for the companies ‘to undertake economic or high-risk activities in support of the goals’ it proposed.

Fannie Mae, which dates back to the 1930s, and Freddie Mac, started in 1970, were chartered by the government primarily to lower the cost of homeownership. Fannie Mae has posted US$120.5 billion in net losses in the nine quarters ended in September and requested US$59.9 billion in Treasury aid to remain solvent. Freddie Mac has lost US$67.9 billion and sought US$50.7 billion in taxpayer-funded aid.

Source: Business Times, 19 Feb 2010

Price appreciation, location, facilities, affordability cited

A MAJORITY of public housing residents feel that their flats are value for money, according to a study conducted by the Housing and Development Board (HDB).

The Sample Household Survey (SHS) 2008 – which polled almost 8,000 households – found that 85.8 per cent of residents considered their flats worthwhile. HDB said yesterday that this was mainly because of ‘the appreciation in flat value, good location, proximity to facilities, and affordability’.

Though the Housing Board did not provide a breakdown of the demographics of those surveyed, it mentioned that residents in newer blocks with a building age of five years or less were more likely to feel that their homes were value for money.

A high proportion of residents in much older blocks built 21 years ago or earlier also saw good value in their flats. ‘The main reasons given were the location of their flats, flat prices that had either already appreciated or were expected to have a good resale value in the future,’ HDB said.

The affordability of resale HDB flats has been a talking point because of rising prices. The resale price index rose 8.2 per cent in Q4 2009 from the previous year.

The Housing Board conducts the SHS survey every five years to determine the profile of public housing residents, identify trends and gather feedback, but this is the first time that it has asked whether flats present good value. As a result, there is no figure from 2003 or earlier for comparison.

An even larger proportion of residents interviewed said that they were happy with their homes. The SHS found that 96.4 per cent of households were satisfied with their flats, and 95.1 per cent were satisfied with their neighbourhood.

Respondents listed the location, transportation network and provision of estate facilities as the three aspects they liked most about the HDB environment.

The results are a slight improvement over those in 2003. Then, 94.2 per cent of households said they were satisfied with their flats, and 93.3 per cent were satisfied with their neighbourhood.

The HDB resident population was 2.92 million in 2008, up 2.7 per cent from five years previously. This comprised Singapore citizens and permanent residents. The last official count of the resident HDB population stood at an estimated 3.02 million, in March last year.

The average age of the HDB resident population rose to 37 years in 2008 from 30 years about two decades ago.

The average household income from work increased to $5,680 in 2008 from $4,238 in 2003.

Source: Business Times, 19 Feb 2010

PROPERTY and hospitality group Roxy-Pacific Holdings expects to launch two residential projects – in Haig and Tembeling roads – by the end of the second quarter or early Q3.

‘We’ve started to replenish our landbank through the acquisition of six plots for residential development,’ the company’s chairman and chief executive Teo Hong Lim said yesterday. ‘Land cost is moving on the high side. We’ll continue to search for opportunities but we won’t be as aggressive in land acquisition for the next half-year.’

However, the group plans to expand its hotel business. ‘This is an interesting turning point for the hotel industry,’ said Mr Teo, pointing to the opening of the integrated resorts (IRs). A few months back, Roxy bid for a hotel site in New Bridge Road but did not win the tender.

The group yesterday reported its Q4 and full-year 2009 results. Q4 net profit more than doubled year on year to $5.9 million, as group revenue rose 47 per cent to $44.1 million on stronger contributions from property development and property investment.

Property development, which accounted for about 75 per cent of group revenue, jumped 87 per cent to $33.5 million, due to revenue recognition from nine projects.

Revenue from property investment surged 114 per cent, due to the recognition of rent from Kovan Centre and a higher rental yield from Roxy Square.

Q4 revenue from the hotel business slid 16 per cent to $9.9 million, as the Grand Mercure Roxy Hotel reported lower average room rates (ARR) and average occupancy rates (AOR) amid a weak economic environment.

For the full year, ARR sank 27 per cent to $147. AOR was more robust at 86.2 per cent, marginally lower than the 88 per cent in 2008. Full-year group net profit rose 13 per cent to $27.9 million, as revenue jumped 26 per cent to $163.5 million.

Roxy has proposed a final dividend of one cent per share, subject to shareholders’ approval at the annual general meeting on March 31, to be paid on April 23.

On the outlook this year, Mr Teo said: ‘We see sustainable growth for the property segment in 2010 as optimism returns with the completion of the two IRs and a recovering global economy, which should draw well-heeled foreign buyers back to the Singapore property market.’

Roxy’s stock closed 1.6 per cent lower at 30 cents yesterday.

Source: Business Times, 19 Feb 2010

LOCAL speciality property and hospitality group Roxy-Pacific Holdings more than doubled its fourth-quarter net profit to $5.9 million amid a resurgent property sector.

Revenue in the three months ended Dec 31 surged 47 per cent to $44.1 million as the group’s property development and property investment businesses did very well.

Full-year net profit rose by 13 per cent to $27.9 million from a year earlier on a 26 per cent revenue jump to $163.5 million.

Revenue in the group’s property development segment shot up 87 per cent in the fourth quarter, driven largely by the progressive recognition of revenue from more development projects such as The Marque@Irrawaddy and The Azzuro.

The property investment segment surged 114 per cent, mainly owing to the increased rental yield from shop units at Roxy Square and recognition of rental from Kovan Centre.

Its executive chairman and chief executive Teo Hong Lim said: ‘We have started to replenish our land bank through the acquisition of six plots of land for residential development.

‘With strong pre-sale revenue of $280.8 million to be progressively recognised from the 2010 financial year to the 2011 financial year, a strong cash position of $108.3 million and a healthy balance sheet, we are well-positioned to seize opportunities as the economy recovers.’

The group said the property market is expected to stay healthy, bolstered by the completion of the two integrated resorts and a recovering economy that is expected to grow by 3 per cent to 5 per cent this year.

Roxy-Pacific’s earnings per share were 0.93 cent in the fourth quarter, up from 0.45 cent a year earlier.

Net asset value per share was 20.96 cents as of Dec 31 last year, up from 17.32 cents a year earlier.

The company has proposed a final dividend of one cent per share.

Source: Straits Times, 19 Feb 2010

PERMANENT residents (PRs) may buy one in five, or 20 per cent, of HDB resale flats today but the latest figures available indicate they form a far smaller minority of the HDB resident population.

Findings of the HDB’s 2008 Sample Household Survey released yesterday showed that PRs made up 8 per cent of the total 2.92 million residents living in HDB flats in 2008.

Non-PR foreigners make up another 4 per cent, which means almost nine in 10, or 88 per cent, of HDB residents were still Singaporeans.

Foreigners and PRs have been singled out recently by disgruntled buyers priced out of the market as possible reasons for the sky-high demand that has pushed HDB resale flat prices to record levels.

But the numbers, the latest available, show that PRs and foreigners are not likely to cause significant increases in flat prices, said Associate Professor Sing Tien Foo of the National University of Singapore’s real estate department.

Still, to address concerns, the HDB said recently it is considering introducing a separate ethnic quota for PRs to prevent them from forming enclaves in public housing estates – but details are not available yet.

Source: Straits Times, 19 Feb 2010