WEEKLY BRIEFING

HOUSING: POLICY & FINANCE

1/7/2013


Hamilton Place Strategies | 805 15th Street NW, Suite 700 | Washington, DC 20005

FISCAL CLIFF DEALS HOUSING GOOD HAND

x Two major provisions ocusing on the housing industry were part o last week`s iscal cli deal. 1he irst provision, which deals with mortgage debt tax relief
was extended through 2013. Without the extension, homeowners unable to make their monthly payment would resort to outright foreclosure rather than seek
a short sale due to the amount of taxes required through a sale. Borrowers have historically not taken the other alternative route of a loan modification, as
lenders are hesitant to adjust principal. Short sales increased to 98 thousand for the year as of the end of the third quarter of 2012, according to RealityTrac.

The second provision is a tax deduction for homeowners with private mortgage insurance. Borrowers are able to deduct the amount paid to insurers, thus
reducing the cost of ownership. Industry participants believe this rule is a significant step for the revitalization of the private-label market; which has all but
disappeared since the financial crisis. The deal is said to also be positive for mortgage insurers. David Stevens, CEO of the Mortgage Bankers` Association,
viewed it as a positive and reiterated the broader intention of the deal: 1he goal is to moe mortgage inancing away rom goernment agencies.`

THE 2013 REGULATORY OUTLOOK IS BANK-CENTRIC

x Annet Nazareth and Gabriel Rosenberg of Davis Polk & Wardell released a comment piece in the Financial Times: 13 Regulatory Predictions or 13` in which
rules for financial institutions dominate the discussion. Among the 13 predictions, as market participants would expect, Basel III capital rules and new
regulations such as the Qualiied Mortgage rule are attracting a lot o attention. According to the authors, the ClPB`s proile will expand significantly this year.
Unfortunately, but perhaps not surprising, broader changes in the housing market via reform of the government-sponsored entities - Fannie and Freddie -
will be passed another year, with talk but no real action`.

HOUSING STOCKS POST-&/,))

x CNBC`s Diana Olick gave us the idea to look at housing-related stock performance post-cli.` Ater the deal, markets rose across the board, howeer, we saw
some housing stocks significantly outperform the Dow (Exhibit 1 - see chart appendix). As the data shows, this was not true across the board. Yet, with the
housing sector expected to be a tailwind in 2013, the bounce after the cliff deal between the Senate and the White House illustrates the potential danger the
fiscal cliff posed to a crucial sector in 2013.

WHAT TO WATCH FOR IN THE WEEK AHEAD (Jan. 7-11)

x This week will be relatively quiet in regards to data releases; though, a number of Fed members will speak to constituents at various regional conferences on
general outlook for 2013. This could provide insight into future policy direction. Based on the FOMC minutes released last week, the panel was split on when
they would deem it appropriate to slow or stop asset purchases. For more information on the FOMC minutes, see Cardiff Garcia`s FTAlphaville post FOMC
minutes: hawkish hints, but not really`.

x The CFPB is likely to release their finalized version of the Qualified Mortgage (QM) rule January 10 at an event held in Baltimore. According to the CFPB,
Lach eent will eature remarks rom ClPB Director Richard Cordray, as well as testimony rom consumer groups, industry representatives, and members of
the public.` 1he agency is expected to inalize the rules by January 21.
KEY DEVELOPMENTS
WEEKLY BRIEFING
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1/7/2013


Hamilton Place Strategies | 805 15th Street NW, Suite 700 | Washington, DC 20005

x Congress is out of session until the House and Senate return on January 14 and January 21, respectively. No hearings or events are currently scheduled, but
activity will pick up once they start the new session. The swearing-in of the 113th Congress occurred last Thursday, which included a record number of women
as well as a record number of Latinos, Asians, and Iraq and Afghanistan war veterans.
SOURCES: HPS INSIGHT, BLOOMBERG, FEDERAL RESERVE, CALCULATED RISK, LINKTANK
Monday
1/7
Tuesday
1/8
Wednesday
1/9
Thursday
1/10
Friday
1/11
Indicators & Reports
MBA Purchase
Applications
Jobless Claims
Treasury Budget
Fed Activity
Jeffrey Lacker Speaks
Esther George Speak
James Bullard Speaks
Narayana Kocherlakota
Speaks
Charles Plosser Speaks
Congressional Hearings
& Events
CFPB: Mortgage Policy
ECONOMIC CALENDAR (DEC. 17 21)



















WEEKLY BRIEFING
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1/7/2013


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Key Banking Rules Likely in Year Ahead
American Banker
1/3/2013
By: Joe Adler
Bankers are expected to learn in 2013 what trades the Volcker Rule allows,
what qualifies as a "qualified mortgage" and what it means to be "systemically
important."`

Comment: 13 regulatory predictions for `13
Financial Times
1/3/2013
By: Annette L. Nazareth and Gabriel D. Rosenberg
Last year we offered our 12 Regulatory predictions for `12 with a number of
hits and a few misses. We accurately predicted an increase in court challenges
to regulatory reform but were wrong in our view that the Consumer Financial
Protection Bureau would remain director less. So with the clear warning that all
crystal balls are slightly cloudy, here are our predictions of 13 key regulatory
issues for 2013.`

FOMC minutes: hawkish hints, but not really
FTAlphaville
1/3/2013
By: Cardiff Garcia
These minutes are for the meeting at which the Fed announced its switch to a
version of the Evans` Rule. While that change was expected, it wasn`t expected
to be made as soon as it ultimately was.`

Fiscal cliff deal gives mortgage insurers confidence
HousingWire
1/3/2013
By: Kerri Ann Panchuk
The fiscal cliff deal preserved a tax deduction for the premium cost of
mortgage insurance on homeowners with an adjusted-gross income of under
$100,000.`




TRULIA NAMES LAS VEGAS AND SEATTLE AS 2012`S TOP
TURNAROUND HOUSING MARKETS
Trulia
1/3/2013
By: Trulia
Trulia today released the latest findings from the Trulia Price Monitor and the
Trulia Rent Monitor, the earliest leading indicators available of trends in home
prices and rents. Based on the for-sale homes and rentals listed on Trulia, these
monitors take into account changes in the mix of listed homes and reflect
trends in prices and rents for similar homes in similar neighborhoods through
December 31, 2012.`
Housing Lobby`s Win Costing U.S. $600 Billion: Mortgages
Bloomberg
1/3/2013
By: Jody Shenn & Noah Buhayar
Congressional efforts to reduce the U.S. deficit revived tax breaks for
mortgage insurance and extended interest deductions for homeowners that will
cost the government $600 billion over five years.`

Fiscal Cliff Avoided: What it Means for Housing and Home Builders
NAHB
1/2/2013
By: NAHB
The fiscal cliff, an economically damaging set of tax hikes and spending
reductions scheduled to begin in 2013, has been avoided (for now) and that is
good news for housing in the short-run.`

'Fiscal Cliff' Deal Favors Housing Recovery
CNBC
1/2/2013
By: Diana Olick
The housing market is on firmer ground today, as two major tax provisions
survived the "fiscal cliff." Congress did not touch the mortgage interest
deduction, and it extended tax relief for one year on mortgage debt
forgiveness.`


TOP NEWS AND RESEARCH
WEEKLY BRIEFING
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1/7/2013


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America`s Bubble Dependent Economy
Global Macro Monitor
1/2/2013
By: Global Macro Monitor
"Interesting chart (which we marked up) from the JEC of the U.S. Congress
illustrating household net worth as a percent of personal income. If that
doesn`t look like a head and shoulders ormation in the making, nothing does!`

Mortgage-Fee Plan Faces Pushback
The Wall Street Journal
1/2/2013
By: Nick Timiraos
The federal regulator of Fannie Mae FNMA +0.76% and Freddie Mac FMCC
0.00% is running into opposition from lawmakers, state attorneys general, and
consumer advocates over a proposal to raise fees on loans in five states where
foreclosures take the longest.`

QE3 and beyond
Econbrowser
1/1/2013
By: James D. Hamilton
Now that we'e closed the books on 2012, I thought it might be useul to take
a look at where monetary policy has led us oer the last our years.`

Tax Bill: Cancelled Mortgage Debt Relief extended for one year in Senate Bill
Calculated Risk Blog
1/1/2013
By: Bill McBride
It appears that the Mortgage Debt Relief Act of 2007 will be extended for one
year. Usually cancelled debt is considered income, but a provision of the Debt
Relief Act allowed borrowers "to exclude certain cancelled debt on [a] principal
residence from income. Debt reduced through mortgage restructuring, as well
as mortgage debt forgiven in connection with a foreclosure, qualifies for the
relief."`






Drawing Up New Mortgage Rules Proves a Balancing Act
The Wall Street Journal
1/1/2013
By: Alan Zibel

The White House has begun preparations to nominate a new director to lead
the agency that oversees Fannie Mae and Freddie Mac as soon as early next
year, according to people familiar with the discussions. This would pave the
way for President Barack Obama to fill what has become one of the most
important economic policy positions in Washington.

Housing to Software Fueling Western U.S. Jobs Rebound
Bloomberg
12/31/2012
By: Steve Matthews, Aki Ito & Amanda Crawford
liring by homebuilders and sotware and mobile application deelopers is
helping the western third of the U.S. lead the nation in employment growth,
according to Moody`s Analytics Inc. and IlS Global Insight Inc.`

Mortgage Rates Start the New Year Near All-Time Record Lows
Freddie Mac
12/31/2012
By: Freddie Mac
Freddie Mac (OTCBB: FMCC) today released the results of its Primary
Mortgage Market Survey(R) (PMMS), showing fixed mortgage rates
continuing to hover near their all-time record lows helping to keep homebuyer
affordability high and aiding the ongoing housing recovery.`

Settlement Expected on Past Abuses in Home Loans
The New York Times
12/30/2012
By: Jessica Silver-Greenberg
Banking regulators are close to a >10 billion settlement with 14 banks that
would end the goernment`s eorts to hold lenders responsible or oreclosure
abuses like faulty paperwork and excessive fees that may have led to evictions,
according to people with knowledge o the discussions.`



WEEKLY BRIEFING
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1/7/2013


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Monday, Jan. 7, 2013

Tuesday, Jan. 8, 2013

Jeffrey Lacker Speaks
Richmond Federal Reserve Bank President Jeffrey Lacker`s speech on the
economic outlook to the South Carolina Business & Industry Political
Education Committee in Columbia.`

Wednesday, Jan. 9, 2013

MBA Purchase Applications
The Mortgage Bankers' Association compiles various mortgage loan indexes.
The purchase applications index measures applications at mortgage lenders.
This is a leading indicator for single-family home sales and housing
construction.`

Thursday, Jan. 10, 2013

Jobless Claims
New unemployment claims are compiled weekly to show the number of
individuals who filed for unemployment insurance for the first time. An
increasing (decreasing) trend suggests a deteriorating (improving) labor market.
The four-week moving average of new claims smoothes out weekly volatility.`

Esther George Speaks
Kansas City lederal Resere Bank Lsther George speaks to the Central
Exchange on the "2013 Economic Outlook," and after will answer questions of
the audience.`

James Bullard Speaks
St Louis lederal Resere Bank President James Bullard`s speech on the
economy and monetary policy to the Wisconsin Economic Forecast Luncheon
in Madison.`





Narayana Kocherlakota Speaks
Minneapolis lederal Resere Bank President Narayana Kocherlakota`s speech
and town hall meeting in Minneapolis.`

CFPB Event: Mortgage Policy
Each event will feature remarks from CFPB Director Richard Cordray, as well
as testimony from consumer groups, industry representatives, and members of
the public.`

Friday, Jan. 11, 2013

Treasury Budget
The U.S. Treasury monthly budget report for November showed a monthly
deficit of $172.1 billion and was much greater than expected but most of the
difference reflects calendar timing of payments. Adjusting for calendar shifts so
far this fiscal year, the Treasury says the budget was running only slightly worse
than last year, at $269 billion versus $266 billion. Looking ahead, the month of
December typically shows a moderate deficit for the month. Over the past 10
years, the average deficit for the month of December has been $22.2 billion
and $51.8 billion over the past 5 years. The December 2011 deficit came in at
$86.0 billion.`

Charles Plosser Speaks
Philadelphia Federal Reserve Bank President Charles Plosser`s speech on the
economic outlook at New Jersey Economic Leadership Forum in Somerset,
New Jersey.`












ECONOMIC CALENDAR

WEEKLY BRIEFING
HOUSING: POLICY & FINANCE
1/7/2013


Hamilton Place Strategies | 805 15th Street NW, Suite 700 | Washington, DC 20005



ABOUT HAMILTON PLACE STRATEGIES

This report was prepared by Patrick Sims and Russell Grote.

Hamilton Place Strategies is a policy and communications consulting firm based in Washington. As a firm, our focus and expertise lie at the intersection of
government, business and media. Our deep experiences in all of these dimensions allow us to serve industry leaders seeking to navigate the paths between Washington
and the private sector.

!
Hamilton Place Strategies
Exhibit 2
HOUSING STARTS REMAIN ELEVATED IN NOVEMBER
DUE TO STRONG GROWTH IN MULTIFAMILY SECTOR
Source: Federal Reserve Bank of St. Louis, U.S. Dept. of Commerce, HPS Insight
0
100
200
300
400
500
600
700
800
900
S
t
a
r
t
s

(
T
h
o
u
s
a
n
d
s
)

Sep-12 Oct-12 Nov-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mar-12 2010Y Feb-12 Jan-12 2011Y
Multifamily Single Unit Housing Starts (SAAR)
Hamilton Place Strategies
Exhibit 3
DROP IN THE PERCENT CHANGE FROM A YEAR AGO IN
STARTS REDUCED HOUSING ACTIVITY IN NOVEMBER
-20
0
20
40
60
80
100
120
Feb-12 Jan-12 2011Y 2010Y Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mar-12
P
e
r
c
e
n
t

C
h
a
n
g
e

F
r
o
m

a

Y
e
a
r

A
g
o

(
%
)

Nov-12
Permits Starts Sales Housing Activity, Percent Change From a Year Ago (SAAR)
Source: Federal Reserve Bank of St. Louis, U.S. Dept. of Commerce, HPS Insight
!
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