Tags: Ranieri | Housing | Market | bottom

Mortgage-Bond Pioneer Ranieri: Housing Market Reaching Bottom

Monday, 07 May 2012 12:01 PM

The U.S. housing market is reaching a bottom, according to Lewis Ranieri, the mortgage-bond pioneer.

While “broad” concern that home prices have further to fall is restraining sales, “many, myself included, think we are at a bottom,” Ranieri said at a conference hosted by the Mortgage Bankers Association in New York.

The second or third quarter will prove the nadir, said Ranieri, who added that in his distressed mortgage business “we can’t buy loans fast enough anymore.” Home prices have slumped 35 percent since a 2006 peak, S&P/Case-Shiller index data show.

Ranieri, chairman of Uniondale, New York-based Ranieri Partners, helped expand the mortgage-securities market in the 1980s at Salomon Brothers Inc., where he was vice chairman. His firm’s investments include Selene Finance LP, which targets soured debt, and home lender Shellpoint Partners LLC.

Ranieri is concerned that policy makers won’t undertake many sales of foreclosed homes in so-called rent-to-own initiatives that give tenants the option of later purchasing properties, he said in a speech at the conference.

He and L. William Seidman, the former chairman of the Federal Deposit Insurance Corp., used the approach in Texas during the 1980s, Ranieri said. It works well since “the person acts like a homeowner because he truly believes that he is,” Ranieri said.

Rental Test

Fannie Mae and Freddie Mac, the government-supported mortgage financiers, are exploring bulk sales of seized properties to investors that would rent them out, starting with a test involving 2,500 homes held by Fannie Mae.

Ranieri said he asked their overseer, the Federal Housing Finance Agency, “which is worse: a vacant house that becomes a virus in a neighborhood or a poorly rented house which becomes a drug den?”

One of Ranieri’s firms has been approached in recent weeks by two long-time home lenders that are looking for a buyer, and “the stated reason was regulatory uncertainty,” he said.

Among the most troubling potential rules would be so-called qualified mortgage regulation that fails to give lenders “safe harbor” from lawsuits over whether they adequately assessed borrowers’ ability to repay their debt, he said.

“I truly believe the future of the industry will be decided in the next eight months” as regulators come up with new rules, he said.

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