Lew Ranieri: Housing Recovery is Years Away

Despite all reports to the contrary, markets in general and housing in particular are ultimately a function of supply and demand. On that note, why isn’t the housing market poised to truly do better anytime soon? The overhang of housing supply due to ongoing strategic mortgage defaults is increasing. These strategic mortgage defaults are much more a factor in the prime-Jumbo market segment than the conforming or sub-prime mortgage market.

Bloomberg addresses this topic in writing, ‘Strategic’ Mortgage Defaults Jump to 12% of Total,

A total of 9.47 percent of all home mortgages were delinquent at the start of this year, with an additional 4.58 percent in the foreclosure process, according to seasonally adjusted Mortgage Bankers Association data.

Housing won’t recover for three to five years as mounting foreclosures hold down prices, mortgage-bond pioneer Lewis Ranieri said yesterday in a panel discussion at the Milken Institute Global Conference in Beverly Hills, California.

“There’s another big leg down,” he said. “You can’t have much of a rally when you’ve got this big overhang.”

Attempts to support housing via principal reduction may be helpful to selected homeowners but while it may be a short term salve it is a long term disaster. Why? The overhang will merely be drawn out rather than stopped and mortgage credit for future generations will be more expensive. The current administration may view it as another in its ongoing means to redistribute income but it has nothing to do with capitalism.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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