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The Census Bureau and the Department of Housing and Urban Development today released New Home Sales survey data for October 2009.

The survey is primarily based on a sample of houses selected from building permits. Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued. Changes in sales price data reflect changes in the distribution of houses by region, size, etc., as well as changes in the prices of houses with identical characteristics. It takes four months to establish a trend of new home purchases

Last month, single family new home sales fell for the first time since March, snapping a five month trend of increasing sales. The pace of new homes sales was 402,000 sales per year, well below economist's expectations for a pace of 440,000 annual new home sales. This was a 3.6% decline from August new home sales. New home supply was unchanged at 7.5 months. The median home sale price was 204,800...9.1% lower from September 2008.

in today's release, which reported on October survey data, sales of new single family houses rose 6.2% to a rate of 430,000 annual transactions, much better than the market's expectation for 410,000 annual sales and 25,000 units higher than the revised higher 405,000 pace reported in September.

Below is a chart of the month over month change in the pace of annual new home sales. Notice the current rate is well below normal...

The estimate of new houses for sale at the end of October was 239,000. At the current annual pace of sales, new home supply will last for 6.7 months....the lowest amount of supply since December 2006. The median sales price of new houses sold in October 2009 was $212,200; the average sales price was $261,100.

The Treasury Department is taking another crack at moving its foreclosure prevention efforts from concept to reality. And now it is adding "shame" to its list of weapons.

The Department will announce today that it intends to increase pressure on lenders and servicers to move borrowers from trial loan modifications into actual restructured loans. The action comes amid reports that the administration's $75 billion Making Homes Affordable Program (HAMP) is foundering.

While the government has been trumpeting the success of the trial modification program - some 650,000 troubled borrowers had entered the program by the end of October - only a very small percentage of those borrowers have transitioned into a permanent loan modification. It is estimated that November figures will show completed modifications to number in only the tens of thousands coming out of close to ¾ million trials.

The New York Times is reporting that Treasury will announce plans to assign officials to monitor the largest mortgage servicing companies on a daily basis and will require companies to develop and report their specific plans to increase the number of modifications they complete. Treasury is also expected to delay incentive payments to servicers until individual modifications are permanent.

The Wall Street Journal and others are quoting Michael S. Barr, assistant secretary for financial institutions who directs the HAMP program, as saying that banks are not doing a good enough job. "Some of the firms ought to be embarrassed and they will be. They're not getting a penny from the federal government until they move forward," Mr. Barr said. According to Barr, the government will publically identify lenders and servicers who are not performing under the program and that they will be particularly focusing on those companies that are not doing a good job.

It is hard to know where to place blame for the apparent failure of HAMP. Some critics have said that the program is unworkable in that it was designed for last year's problems. It was supposed to cushion homeowners against the rate shock expected when the discounted teaser rate mortgages and option mortgages that were written during the housing boom reset. Instead, foreclosures are now increasingly hitting families who have suffered job losses and other financial setbacks and cannot afford even the modified payments required under the program.

Other critics have placed the blame squarely on the shoulders of the banks and servicers. There are claims that servicers are profiting unduly from late and legal fees, that foreclosures result in a greater return than restructuring the loans, and that the servicers are entering into trial modifications in order to collect the incentives and to wring a few additional payments out of defaulting borrowers. Still others say that it is the investors who actually own the mortgages who are unwilling to modify the loan terms.

There are also reports that servicers are apparently either unable or unwilling to handle the actual mechanics of the modifications. Borrowers complain that they are cannot get through to appropriate departments, that the documentation they provide is repeatedly lost, even that fax numbers are abruptly changed.

The servicers say that they are doing a good job and are making a good faith attempt to comply with the requirements and guidelines of the program.

According to the Times, there is now discussion in the Senate about a national foreclosure relief program based on one now in use in Philadelphia. In that city mortgage companies are forced to submit to court-supervised mediation with the borrower before they are allowed to proceed to foreclosure. Democrats in Congress are also a low pushing to allow the bankruptcy courts to "cram downs" mortgage balances to an amount compatible with the current market value of the house.

In honor of Veteran’s Day, the fixed income market was closed yesterday. A few lenders did issue rate sheets, most were priced conservatively, which is a common strategy on bank holidays.

After a slow start to the week, we finally got some economic data to digest this morning. First out was the Mortgage Bankers’ Association’s Weekly Application Index. This data tracks the weekly change in mortgage applications at major lenders. An increasing trend is positive for stocks since the purchase of a new home leads to many other purchases. Additionally, an increasing trend in refinances should also lead to more consumer spending as home owners refinance to lower mortgage rates and lower mortgage payments giving them more cash flow.

The report indicated that purchase applications fell by almost 12% last week while refinance activity posted an 11.3% increase. With mortgage rates declining last week it isn’t surprising to see the surge in refinance activity. However, the plunge in purchase applications may indicate future problems in the housing sector. READ THE MND STORY

At 8:30, Weekly Jobless Claims data hit newswires. This data totals the number of Americans who filed for first time unemployment benefits in the prior week. Additionally, we get received continuing claims data which totals the number of Americans who continue to file for benefits due to the lack of finding a new job. Recent reports have shown the number of people filing for benefits to be decreasing.

The Department of Labor reported first time claims fell more than expected by 12,000 to 502,000 for the week ending November 7th. Economists had expected a reading of 510,000. This is the lowest level of initial claims since January. Continuing claims also fell more than expected by 139,000 to 5.63 million, the eighth consecutive decline. Continuing claims do not take into account the number of Americans that are receiving extended benefits under current stimulus programs. However, the number of Americans in this category also declined by 6,000 to 4.04 million.

At 1pm, the Treasury will announce the results of this week's final auction, offering $16 billion 30 year bonds. As always with treasury auctions, the amount is known in advance so market participants look at the demand for our nation’s debt to gauge the auctions success. Strong demand, especially by foreign investors, is one of the many factors that have contributed to record low mortgage rates. AQ and Matt will cover the auction once it is complete shortly after 1pm on the MBS Commentary blog.

Reports from fellow mortgage professionals indicate mortgage rates holding steady. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. You can elect to pay less in fees and secure a higher interest rate which is ideal for consumers not planning on keeping their home for more than three years. Remember, securing a mortgage rate is like buying anything else, you can pay more in fees and get a better rate or pay less in fees and secure a higher rate.

There is not much room for MBS prices to move higher or for mortgage rates to move lower at the moment. If you are happy with the rate being offered to you and don’t want to risk rates moving higher, you should lock today. While there still is some room for MBS prices to tick higher, it is better to have locked when you should have floated than it is to float when you should have locked.

Tomorrow is another light data day with the only significant reports being International Trade and Consumer Sentiment. International Trade is expected to show our trade imbalance increasing while Consumer Sentiment is expected to post modest improvement in consumers attitudes.

The House of Representatives has voted to pass legislation extending the home buyer tax credit until April 30, 2009.

Last night the Senate voted 98-0 to pass the legislation. Next the bill will head to President Obama to be signed into law.

While the bill extends the $8,000 tax credit for first time home buyers, it also makes available a tax credit to homeowners who have lived in their current residence for at least five years. The credit for these buyers will be capped at $6,500.

Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000 respectively. Above those limits there are diminishing credits available.

Housing interests, especially the National Association of Home Builders and the National Association of Realtors, has pushed strongly for the extension and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.

Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit. Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.

There have also been charges of fraud in the operation of the program. To combat this the new law has some expanded safeguards including a minimum age of 18 for obtaining the credit, a requirement that a settlement statement accompany the tax return claiming the credit and a prohibition on non-arms length transactions.

Another criticism of the extension has been that it ends just as the "spring market" is getting underway. Diane Olick writing for CNBC's RealtyCheck said it "is sort of like offering cheap snow boots in July."

Robert E. Story, Jr., CMB, Chairman of the Mortgage Bankers Association (MBA), today issued the following statement in response to the passage in the U.S. Congress of legislation to extend and expand the homebuyer tax credit.

"At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA's top single family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.

"The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes. By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified

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WASHINGTON – Buying a home is about to get cheaper for a whole new crop of homebuyers — $6,500 cheaper.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the Senate voted Wednesday to extend and expand the tax credit to include many buyers who already own homes. The House is scheduled to vote on the bill Thursday.

Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

"This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.

The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that the Senate included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.

"We are still in a world of economic hurt, and Congress must continue to act boldly and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "With the right mix of tax breaks and investments we will get through this recession and get folks working again."

The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.

"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.

The business tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years, giving them refunds of taxes paid in those years. Under current law, businesses with annual gross receipts of more than $15 million can claim losses back only two years.

The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. Congress included a scaled-back version of the tax break — for companies with revenues of $15 million or less — in the economic recovery package enacted in February. The new tax break would be available to companies of any size, providing a quick source of cash.

The U.S Chamber of Commerce has been a big backer of the tax break for money-losing companies.

"It frees up capital that they can use to maintain jobs and potentially even hire new people as the economy returns," said Caroline Harris, senior tax counsel for the U.S. Chamber of Commerce.

The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.