Along with this, The National Association of Home Builders/Wells Fargo Building Confidence Index increased to 44 during the month of May for the first time in five months. The future outlook amongst builders for home sales during the next six months rose to the highest level in over six years. However, it was noted that builders face many challenges. "While builders today are considerably more optimistic than they have been at earlier stages of the housing recovery, numerous challenges are slowing their ability to get new projects underway," said Rick Judson, chairman of the National Association of Home Builders (NAHB) and a home builder from Charlotte, N.C. "In particular, limited access to construction credit, tough qualification standards for mortgage borrowers and rising costs for building materials, developable lots and labor are impacting the pace of construction activity."

The National Association of Realtors reported that Existing Home Sales increased in April 0.6% to a seasonally adjusted rate of 4.97 million in April. Resale activity for the month is 9.7% higher than April 2012. According to the NAR report, sales remain below demand due to limited inventory and tight credit.

Lending restrictions continue to be an issue. According to The Federal Reserve Board April 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices, "Modest to moderate net fractions of banks indicated that they were currently less likely to approve such loan applications with a FICO score of 620, depending on the down payment, though most of those were smaller banks. Willingness to approve applications for most of the other FICO score-down payment categories was reportedly about unchanged from a year ago. However, a modest net fraction of banks were more likely to approve an application with a FICO score of 720 and a 20 percent down payment. Banks were also asked to compare their bank's current likelihood of approving an application for an FHA-insured home-purchase loan with a given FICO score and the FHA minimum down payment of 3.5 percent with their likelihood a year ago. About one-third of respondents indicated that they were less likely to approve such home-purchase loan applications with FICO scores of 580 or 620."

With this in mind, it is no wonder that mortgage refinances continue to drive the market at this time even though mortgage rates are low and should be attracting home buyers. Special refinance programs have made it easier to refinance for those whose credit is not up to lender requirements. In particular, homeowners who are eligible (loans that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009) for HARP loans have the added benefit of reduced documentation and no need for an appraisal. Now that the HARP refinance program has been extended to the end of 2015, many more homeowners have the chance to get their mortgage payments up to date to meet the guidelines.

Although housing may be doing well, there are many challenges that lay ahead. Employment remains rocky with many consumers still unable to obtain work. The latest weekly report from the Labor Department shows that unemployment claims rose by 32,000 for the week ending May 10th to a seasonally adjusted 360,000 which was the most since late March. While housing may be heading into a seller's market and mortgage rates remain low, rising home prices may become too high for consumers who are not seeing their incomes increase to meet stricter debt to income guidelines.

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By comparison, aid in the form of short sales totaled $20.1 billion to about 175,000 borrowers.

One prominent critic, Kevin Stein of the California Reinvestment Coalition, said the assistance still involved too little reduction of first-mortgage balances -- the action, he said, that was "meant to be the heart of the agreement."

In California, Stein said, relief skewed too heavily toward short sales and writing off second liens -- delinquent credit lines and second mortgages that would be worth little or nothing if an underwater home went through foreclosure.

Stein gave Bank of America, which is required to deliver by far the most assistance to borrowers, good marks during the latest quarter, saying its assistance was delivered almost entirely by reducing principal on first mortgages.

Wells Fargo, by contrast, continued to use short sales heavily, Stein said. It dispensed aid about equally through short sales and principal reductions, he said.

It's impressive that the Fed and many economists have successfully predicted the path of interest rates and inflation in the wake of the worst financial crisis in a generation. But neither the central bank nor academicians managed to predict or prevent the crisis in the first place. The failure dwarfs the accomplishment.

Although this is good news for potential home buyers, not all those looking for a home will be able to purchase one. According to the report, 73.7% of new and existing homes were sold to families who earned a median income of $64,400 during the first quarter of 2013. This has dropped from 74.9% during the last quarter of 2012. "Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies," noted National Association of Home Builders (NAHB) Chairman Rick Judson, a home builder from Charlotte, N.C. "This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor."

Even with home affordability still within a range that is considered high, rising real estate prices are having an affect on many home buyers. According to the recent Standard & Poors/Case-Shiller Home Price Indices, real estate prices in 20 major metropolitan markets rose 9.3% year over year and have had the highest annual gain since May 2006. However, this is a different market today where mortgage rates are considerably much less than in 2006.

Even though the affordability index is high, homeownership continues to decline. According to the Census Bureau, the share of Americans who own their homes during the first quarter of 2013 was at 65%, a decrease from 65.4% last year. The current level is the lowest since the third quarter of 1995. While low mortgage rates may be fueling affordability, credit is tight and many consumers cannot obtain mortgage approval for a home purchase or a traditional refinance. While reports show that home prices are rising, many homeowners remain underwater. There are still many consumers struggling through this housing recovery.

For every positive piece of data, there remains conflicting information when it comes to the housing market. Many homeowners who have already refinanced through the HARP loan program are beginning to gain back equity in their homes as home prices increase, although those who bought at the peak of the market may not be seeing a complete turnaround just yet. Affordability has no impact on these homeowners who most likely will remain in their current homes until they are no longer underwater. At a time when home affordability remains high, FHA loans, which are commonly used by first time homeowners, increased the annual mortgage insurance premium in April, making it more difficult for some home buyers to afford a purchase. Although FHA mortgages are for low to middle income households, rising premiums are pushing many of those within these groups away from homeownership and back into renting. According to Ellie Mae's Origination Insight Report, FHA loans made up 22% of loan originations for April.

Without a doubt, there are those who are reaping the benefits of affordability. Low mortgage rates, a major component of affordability, are available even for jumbo loans for high end property purchases. This segment of the housing industry, which is faced with less borrower unemployment issues and better income stability, has seen a major improvement that began in 2012.

Since last year, home affordability has been high, however, nationwide homeownership has not improved. Without everything in place, including the availability of credit, affordability will not make much of a difference for the masses. Further, without the increase in residential homeownership, there may not be a full, sustainable recovery taking place.

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Now that has crashed spectacularly. House prices are falling as fast as they did in Florida when the American housing boom turned sour. Prices are now 16.6% lower than they were at the peak of the bubble in 2008. The National Association of Estate Agents predicts another 7% drop this year. Unless you bought your home back in the last century, it will now be worth less than you paid for it -- and even worse, probably less than you borrowed on it as well.

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Up until now, the Netherlands has been Germany's key ally in imposing austerity across the continent as the answer to the currency's problems. But as the slump worsens, Dutch support for an endless diet of cuts and recession -- and perhaps the euro itself -- will start to evaporate.

According to the Bureau of Economic Analysis, U.S. personal spending increased 0.2% in March, mostly due to money being spent on energy over the winter months. This amount was a decrease from 0.7% in February. Consumer spending is the largest source of U.S. economic growth and represents approximately two-third of economic activity.

The S&P/Case-Shiller Home Price Index reported that average home prices increased 8.6% and 9.3% for the 10 and 20 City Composites for the 12 months ending in February 2013. Both composites showed the highest annual growth rates since May 2006. All 20 cities had higher prices for two months in a row for the first time since early 2005. According to CoreLogic's March HPI report, home prices across the nation, including distressed sales, rose 10.5% on a year-over-year basis when compared to March 2012 and was the biggest increase since March 2006.

Even though home prices are rising, the "wealth effect" has not turned into more spending by consumers. Many homeowners are indeed seeing an increase in their home equity, however, they may not be able to refinance their mortgage in order to tap into this additional cash since lenders continue to have tight guidelines. In fact, cash out refinances are not as common as they were in the past and during the housing boom. Many homeowners are instead reducing their principal debt or shortening the terms of their loans in order to eliminate their mortgage faster. According to Freddie Mac, 27% of borrowers who refinanced actually shortened the term of their mortgage and 39% reduced their principal balance in the fourth quarter of 2012.

There are still many homeowners who remain underwater and cannot take cash out of their homes. For these borrowers who have conventional loans, the only option to save some money is to refinance through the HARP refinance program if they are eligible. HARP loans are for mortgages that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009. Even with rising home prices, this program has now been extended to the end of 2015. Homeowners who have FHA loans can refinance through the FHA streamline refinance program which has reduced fees for loans that were endorsed prior to June 1, 2009. There are many underwater homeowners who do not fall into either of these categories and cannot take advantage of low refinance rates since, during the housing boom, their loans were handled by one of the many other types of mortgages available. This is where a HARP 3 program that includes all types of mortgages which would be a benefit for these homeowners and the entire economy.

Even with small job increases, personal income is not rising at a rate that would produce increased spending to the point of a better economy. The Labor Department reported that 165,000 jobs were added in April and that the unemployment rate dropped to 7.5%. While this is good news, there are still millions of consumers out of work, working part time jobs or totally dropped out of the work force. According to the Labor Department, job openings fell in March 1.4% and total hiring declined 4.3%. Even with a falling unemployment rate, the jobs market is lagging way behind what it should be to bring an adequate amount of consumer spending.

The results are that U.S. spending is not getting the boost that was expected through quantitative easing, as well as, rising home prices. Homeowners are now well aware that the old belief, home prices never fall, is not reliable. Instead of spending the equity in their homes, as was done in the past, homeowners are looking to get rid of mortgage debt, the sooner the better. Although any type of housing recovery is good news, this one is not producing the economic growth that was expected.

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Mr. Schneiderman says that Bank of America and Wells Fargo did not follow guidelines dictating how the banks field and process requests from homeowners trying to modify their mortgages.

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After the deal was reached in February 2012, Mr. Schneiderman's office began receiving a deluge of complaints from housing counselors across the state. The counselors, Mr. Schneiderman's office said, reported that homeowners were still wading through a bureaucratic quagmire.

While he was in Charlotte, N.C., for the Wells Fargo Championship, the former chairman and chief executive officer of the San Francisco-based company, Dick Kovacevich, talked about the economy, Wells Fargo's acquisition of Wachovia Corp. and his take on the government sponsored housing enterprises.

Kovacevich called the Wachovia deal the "best merger in banking history from both a strategic and a financial standpoint."

And it was -- because the Fed and Treasury kept the resulting, stuffed-to-the-gills-with-Alt-A behemoth from imploding.