Archive for June 30th, 2012

Diana Olick: How Obamacare Ruling May Affect Some REIT Investors

Diana Olick: How Obamacare Ruling May Affect Some REIT Investors

 

Investors in health care real estate have been reaping huge rewards of late, as the baby boom generation ages and as the sheer diversity of the sector makes it a darling of the stock market. Health care real estate investment trusts (REITs) are up significantly in the past year.  That is why sector investors are waiting cautiously for the Supreme Court’s decision on President Obama’s health care law. Analysts say whatever way the decision goes, health care REITs would see a modest impact, depending on how heavily invested they are in the different health-real estate subsets. However senior housing would be unaffected, according to Jim Sullivan of Green Street Advisors, because senior housing has a lot more to do with the overall economy than it does health care. Overall, REIT holdings break down as follows:  40 percent in senior housing, 30 percent in skilled nursing facilities, 20 percent in medical office buildings and 10 percent in biotech and other facilities. Medical office buildings are something of a double-edged sword.  If Mr. Obama’s plan were upheld, that would mean more insured people in the system, creating more demand at medical office buildings.  It would also mean doctors being paid less due to cuts in Medicare.  If doctors make less, they can’t pay as much rent to the owners of the medical office buildings.

“It would be a modest positive if the law were upheld and a modest negative if law is overturned,” notes Sullivan on medical office buildings.  Overall he is quite bullish on the sector and its enviably fragmented nature.  The stock market has given these companies a very cheap cost of equity, and that in turn has allowed them to buy billions of dollars’ worth of health care real estate over the last couple of years.

2012
06/30
CATEGORY
Economy
Real Estate
Stock
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JPMorgan shares slide on $9 billion loss report

JPMorgan shares slide on $9 billion loss report

 

Losses on JPMorgan Chase’s bungled trade could total as much as

$9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation. JPMorgan Chase (JPM, Fortune 500) dipped more than 3% after the New York Times report. The loss would be far wider than the $2 billion originally announced by JPMorgan on May 10. At that time, Chief Executive Officer Jamie Dimon said that the trading losses had occurred since the start of April. The trading losses stemmed from the firm’s corporate unit, which had been conducting derivatives trades to try to hedge against risk. The losses were blamed on a trader known as the “London whale.” The Federal Reserve is currently poring over the bank’s trades to examine the scope of the growing losses and the original bet.

Nonetheless, the sharply higher loss totals will feed a debate over how strictly large financial institutions should be regulated and whether some of the behemoth banks are capitalizing on their status as too big to fail to make risky trades. Other bank stocks slipped in premarket trading. Bank of America, Citigroup and Wells Fargo fell at least 1% before the opening bell.

2012
06/30
CATEGORY
Banks
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CFPB cites confusion in reverse mortgage market

CFPB cites confusion in reverse mortgage market

 

The Consumer Financial Protection Bureau (CFPB) released a report highlighting the risks for consumers on reverse mortgages, noting consumers remain confused about the product. The bureau, which conducted the study as a requirement of the Dodd-Frank Act, found that few consumers completely understand how reverse mortgages work. It also announced an “RFI” to gather public input regarding reverse mortgages.  “Reverse mortgages are complex and have the potential to become a much more pervasive product in the coming years as the baby boomer generation enters retirement,” said CFPB Director Richard Cordray.  A reverse mortgage allows older homeowners to access the equity they have built up in their homes and defer payment of the loan until they die, sell, or move out.

They require no monthly mortgage payments, but borrowers are still responsible for property taxes and homeowner’s insurance.

Still, the CFPB said 10% of reverse mortgage borrowers are at risk of foreclosure because they have failed to pay taxes and insurance. The array of product choices in the reverse mortgage market make a housing counselor’s job much more difficult, the bureau said.  Counselors need improved methods for helping consumers better understand the complex tradeoffs they need to make in deciding whether to get a reverse mortgage.

 

2012
06/30
CATEGORY
Foreclosures
Homeowners
Mortgage
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House panel votes to audit the Fed

House panel votes to audit the Fed

 

The House Oversight Committee approved a bill Wednesday opening the Federal Reserve to a full audit. The bill is sponsored by Rep. Ron Paul, R-Texas, and has some bipartisan support. Under the bill, the Government Accountability Office would be able to review scores of Fed activities, including internal emails and the foreclosure review to be conducted under consent orders with the largest mortgage servicers. “The Fed’s balance sheet now stands at nearly $3 trillion. It is long past time for a real audit,” said committee chair Rep. Darrell Issa, R-Calif.  The GAO conducted an audit of Fed actions and loans granted during the recent financial crisis. The report showed more than $16 trillion in loans given to both struggling U.S. and foreign banks.  “One of the things we learned from the report is that Fed management did not account for the risks,” said Rep. Dennis Kucinich, D-Ohio, said in support of the bill. “They showed complete disregard for potential financial losses.” Rep. Elijah Cummings, D-Md., introduced amendments to limit the audit, claiming the bill would open the Fed actions and deliberations up to political manipulation.  “The reality is subjecting these deliberations to audit could influence how they are conducted and even the policy chosen, thus degrading the independence of the Federal Reserve,”

Cummings said.

2012
06/30
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Foreclosures
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Trouble Signs Remain in GDP; Claims Down, Prices Up

Trouble Signs Remain in GDP; Claims Down, Prices Up

 

U.S. consumer spending and export growth were not as robust as previously believed in the first quarter, suggesting less momentum in the economy. The Commerce Department confirmed on Thursday that the economy grew at a 1.9 percent annual pace in the January-March period, but the mix of growth was not encouraging for the current quarter. A separate report showed the number of Americans filing new claims for jobless benefits fell last week, but remained too high, indicating the job market was struggling to gain traction. Economists said the stream of weak data could prompt the Federal Reserve to launch a third round of bond purchases to support the flagging recovery. Consumer spending, which accounts for about 70 percent of U.S. economic activity, increased at a 2.5 percent rate in first quarter, rather than the previously reported 2.7 percent pace. The labor market has lost a step in recent months as uncertainty spawned by the debt crisis in Europe and an unclear fiscal policy path at home has made businesses reluctant to hire. Jobless claims have barely moved since April and the lack of improvement suggests a fundamental weakness in the labor market. A total of 5.9 million people were claiming unemployment benefits under all programs during that period, up 71,724 from the previous week.

2012
06/30
CATEGORY
Economy
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