Fri Feb 27 2009 News Snippets

Key West Real Estate underwater again?

Just teasing Martha

Economy shrinks at fastest pace in 26 years
The economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession.

A much sharper cutback in consumer spending -- which accounts for about two-thirds of economic activity -- along with a bigger drop in U.S. exports sales, and reductions in business spending and inventories all contributed to the largest revision on records dating to 1976.

Looking ahead, economists predict consumers and businesses will keep cutting back spending, making the first six months of this year especially rocky.
The faster downhill slide in the final quarter of last year came as the financial crisis -- the worst since the 1930s -- intensified.

The nation's unemployment rate is now at 7.6 percent, the highest in more than 16 years. The Federal Reserve expects the jobless rate to rise to close to 9 percent this year, and probably remain above normal levels of around 5 percent into 2011.
Builders cut spending on commercial construction projects by 21.1 percent, the most since the first quarter of 1975.
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Can you say Cramdown?

The deal reached by Citigroup with top Senate Democrats to allow for cramdowns is a potential breakthrough for the financial-services industry and potentially for the housing market. Not that it will stop housing values from declining — it may not, because it allows bankruptcy judges to change loan terms, lower principal or the interest rates, and that, in effect, is a reset of the value of the home. But it may accelerate the process of the decline in housing values. It’s possible that Citigroup saw the writing on the wall, and realized that a renegotiated mortgage at a lower rate with a higher chance of repayment was better than nothing at all, and that’s something that the lion’s share of those who have a piece of these mortgages — through the various slicing-and-dicing that occurred with securitization — will have to accept as well. “It would alter their value — it would alter the amount that the person that’s getting paid on principle would ultimately get paid,” says Robert Brusca, chief economist at Fact-and-Opinion Economics. “Maybe the difference is, now that person now will be paid.” About 1 in 10 homeowners, or 4.6 million people, are either delinquent in their mortgage payments or in the process of foreclosure, and the rising delinquencies and fear of increased need for bad loans has been at the heart of the credit crisis that began with subprime securities in mid-to-late 2007 and slowly engulfed the entire financial sector.
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House Faces Tuesday Vote on Bankruptcy Cramdowns

The House of Representatives will on Tuesday consider a sweeping homeowner assistance legislative package that would allow bankruptcy judges to modify mortgage debt on a borrower’s principal residence. The bill, HR 1106, or the Helping Families Save Their Homes Act, contains the controversial “cramdown” measure originally passed by the House Judiciary Committee in early January.
HR 1106 also includes so-called safe-harbor legislation for servicers, designed to protect servicers from legal liability in the event of massive-scale mortgage modifications.
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Headlines

• Combat Troops to Leave Iraq by Fall 2010

• Citigroup reaches deal to give government up to a 36% stake

• U.S. to yield marijuana jurisdiction to states

• http://news.aol.com/article/biden-web-site-number/362018
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Rocky Mountain News Stops the Presses

The newspaper crisis roiling the United States has claimed its biggest victim so far: The Rocky Mountain News, Colorado's oldest newspaper and a Denver fixture since 1859, published its last edition Friday.

Four owners of 33 U.S. daily newspapers have sought Chapter 11 bankruptcy protection in the past 2 1/2 months. A number of other newspapers are up for sale.

Scripps has owned the News since 1926. The newspaper will close just two months short of its 150th anniversary.

Thurs Feb 26 2009 News Snippets

Dem spat delays mortgage relief bill in House

A dispute among House Democrats stalled legislation Thursday to let bankruptcy

judges reduce the principal and interest rate on mortgages for debt-strapped homeowners.

The measure, backed by President Barack Obama, is the most controversial part of a broader housing package that had been expected to pass the House this week.

It hit a snag after a group of moderates expressed concerns in a closed-door meeting of House Democrats about how the bill would affect homeowners who are still struggling to make their mortgage payments.

The banking industry has lobbied hard against the measure, mounting a successful multimillion-dollar effort last year to kill it.

This year, mortgage industry players who are scrambling to narrow the scope of the measure to reduce its potential cost for banks have won some key concessions. House Democrats agreed to limit the measure to existing loans made before the bill is enacted and to borrowers who can show they tried other ways of modifying their home loans before resorting to bankruptcy, among other changes.

But banks want to go much further, restricting the bill only to subprime or other exotic loans.

Centrist House Democrats who have been working closely with the financial services industry to scale back the bill balked at supporting it on Thursday after a news report suggested that Sen. Dick Durbin, D-Ill., the lead sponsor of the bankruptcy measure in the Senate, was willing to limit it only to subprime mortgages. The Senate is expected to take up the legislation within two weeks.

In the House, Rep. Ellen Tauscher, D-Calif., the head of the business-minded New Democrat Coalition, raised concerns during the private session that the measure omitted help for homeowners who aren't staring at bankruptcy but are buckling under burdensome mortgage payments.

House leaders said they had postponed a vote until Tuesday to give Democrats time to meet with Obama's housing secretary, Shaun Donovan, about how the measure fits with his housing plan.

"There's an equity question here," said Rep. Ed Perlmutter, D-Colo., another member of the coalition. "The discussion has got to be, what's the benefit to the guy next door who is struggling to pay the bills, is paying the bills and isn't filing for bankruptcy?"

Democratic skeptics are worried "that this could be too hard on the banks," said Rep. John Conyers, D-Mich., the Judiciary Committee chairman who sponsored the bill.

Consumer advocates and most Democrats regard the measure as crucial to slowing the rapid rate of foreclosures. They say it's the only way to force mortgage holders — known as loan servicers — to take steps to help homeowners stay in their homes.

The mortgage industry contends, however, that the measure will impose steep and unpredictable costs on its companies, which will be forced to raise fees and interest rates for borrowers. Opponents, including most Republicans, call it the "cram-down."

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House price fall is biggest in 21 years

Home prices in big US cities dropped at a record rate last year as slumping sales and rising foreclosures hammered the housing market.

The fall of 18.5 per cent in the year to December in the Case-Shiller index was the biggest fall since the measure, published by Standard and Poor’s, started 21 years ago. House prices have now fallen to levels last seen during the third quarter of 2003

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FHA Eyes Regulatory Changes To Aid Homeowners

The Obama administration is working on regulatory changes to allow the Federal Housing Administration to assist homeowners faced with "more than just temporary" losses in income, a senior U.S. housing official testified Tuesday to a U.S. House panel.

The Department of Housing and Urban Development is also requesting authority to allow the FHA to buy down balances of troubled mortgage loans, HUD Director for Single Family Asset Management Vance T. Morris told the panel.

Lawler said the administration plan to allow homeowners who owe more than 80% of the value of their homes to refinance more easily wouldn't increase the risk to Fannie and Freddie.

The program, open only to borrowers with mortgages backed by the mortgage giants, would allow people with high loan-to-value mortgages to refinance without purchasing additional mortgage insurance. The companies' government charters prevent them from buying mortgages with loan-to-value ratios above 80% unless the borrower obtains credit enhancement.

As part of its housing plan, the Obama administration has proposed changes to FHA and Veterans Administration authority to ensure that partial claims are paid to investors in mortgages backed by the agencies in the event of a "cram down," or a reduction in the principal amount or a change in the interest rate, by a bankruptcy judge or a voluntary modification by the servicer. The changes are intended to prevent investors from shunning mortgages insured by the agencies and to spur more loan modifications.

Weds Feb 25 2009 News Snippets

Jobs in all 50 states

You've probably heard a lot about the American Recovery and Reinvestment Plan. And you may have heard the President or members of his economic team say that this plan will save or create 3 to 4 million jobs over the next two years. Maybe you wondered where that number comes from. Well, it's from a study by Christina Romer, the Chair of the Council of Economic Advisers and Jared Bernstein, Chief Economist to the Vice-President. Their analysis has been confirmed by outside experts including the forecasting firm Macroeconomic Advisers and Moody's.
Jumpstarting job growth is the top priority of the Recovery and Reinvestment Plan. Construction jobs to rebuild our nation's crumbling infrastructure*....technology jobs to bring put medical records online and lower health care costs while reducing medical errors...engineering jobs to modernize federal buildings and save billions in annual energy costs...jobs equipping our schools and colleges so the country's best young minds have a place to grow...and jobs laying broadband lines so a business in rural America can compete with any other business in the world.
Over 90% of the jobs created will be in the private sector.

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More information on the types of job created in the stimulus plan see this study from the Council of Economic Advisers.

http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf

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http://www.twitscoop.com/

Tues Feb 24 2009 News Snippets

Bernanke: economy suffering 'severe contraction'

Federal Reserve Chairman Ben Bernanke said the economy is likely to keep shrinking in the first six months of this year. Housing, credit and financial crises — the worst since the 1930s — plunged the economy into its worst downhill slide in a quarter-century at the end of last year.

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Consumer confidence plummets to new low in Feb.

Consumer Confidence Index, which was down slightly in January, plummeted more than 12 points in February to 25, from the revised 37.4 last month. That was well below the 35.5 level that economists surveyed by Thomson Reuters expected.
The index, which had hovered in the high 30s over the past few months, broke new lows since it began in 1967. A year ago, the consumer confidence reading stood at 76.4.
The Present Situation index, which is consumers' assessment of current economic conditions, fell to 21.2 from 29.7 last month. The Expectations' Index, which is consumers' outlook over the next six months, sank to 27.5 from 42.5.
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Stimulus Tax Breaks

Most households will qualify for a tax break. Boost for some could be worth several hundred to several thousand dollars. 97% of American households could see tax savings as a result of the American Recovery and Reinvestment Act. the average savings would be $1,179

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Home prices plunge 18% in 4Q

Prices of existing single-family homes tumbled 18.2% on average in the fourth quarter of 2008, marking the biggest year-over-year price decline in the 21-year history of the Standard & Poor’s/Case-Shiller National Home Price Index.
The metropolitan area posting the biggest price decrease was Phoenix, where prices fell 34%. This was followed by Las Vegas, where prices fell 33%, and San Francisco, where there was a dive of 31.2%. Other metro areas posting declines in excess of 10% were Atlanta, Chicago, Detroit, Los Angeles, Miami, Minneapolis, Portland, San Diego, Seattle, Tampa, and Washington.
The metro areas showing the smallest price erosion were Denver and Dallas, where prices fell 4% and 4.3%, respectively.
Home prices at the end of December were at their lowest levels since the third quarter of 2003

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American Express offers some holders $300 incentive to cancel accounts.

The company is offering a $300 prepaid card, which can be used anywhere American Express is accepted, to certain customers who pay off their entire balance between March 1 and the end of April. Enrolling in the deal automatically cancels the customer's account, regardless of whether he successfully pays off the balance.

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Extent of Bankruptcy Reform Hinges on Details

How the administration chooses to define several parts of its plan will impact whether tens of thousands of homeowners are excluded.
the Obama initiative would cap the value of mortgages that could be revised in bankruptcy court. It would also pertain only to loans originated in the "past few years," according to a summary of his proposal.
The House, where bankruptcy reform has already been approved in committee, could take up the measure as soon as next week.
The administration has designed a program to lavish incentives on lenders that modify mortgages. The incentives are the carrots to encourage more modifications, and bankruptcy reform is seen by the administration as the stick lenders would face for failing to comply.
Democratic congressional leaders aim to have the legislation passed within the next month, the aide said.
The proposal would also cap the value of the loans eligible for bankruptcy modification to limits set by mortgage finance firms Fannie Mae and Freddie Mac, which could be difficult in parts of the country that saw the biggest run-up in prices.
(The conforming loan limit is currently $417,000 in most parts of the country and $625,000 in high-price areas, including the Washington region, though the limit in these areas will soon rise to $729,750.)

Mon Feb 23, 2009 News Snippets

Distressed homeowners fight foreclosure by taking their lenders to court

Homeowners who feel they've been treated unfairly by lenders are fighting back. Some are bringing lawsuits in hopes of forestalling losing their homes or freeing themselves of what they believe are onerous borrowing terms. Occasionally they take a do-it-yourself approach, using free online legal documents to file their cases. One common tactic is pressing to have mortgages "rescinded," which allows consumers to cancel their loans if lenders violated the Truth in Lending Act by failing to, among other things, clearly state loan costs and terms.
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Threat of judges changing mortgage terms may motivate lenders

Last week, President Barack Obama unveiled a $75 billion housing plan to bail out some of the country's most endangered homeowners.
One provision of the plan is great news, some lawyers and consumer advocates say. It would allow bankruptcy judges to modify the terms of mortgages.
Under such "judicial modifications" of home mortgages, judges would have the power to reduce mortgage loan balances for the primary residences of consumers who file for bankruptcy. They could also extend the term of the loan and reduce the interest rate "when families run out of other options," according to the Obama plan.
Legislation that would amend the U.S. Bankruptcy Code to give judges modification power is expected to be taken up by the House of Representatives this week.
Supporters of the effort say that such a change would give consumers who file for bankruptcy much-needed relief and give lenders more incentive to work with distressed homeowners before they seek help from a bankruptcy judge.
"At a time when an estimated 6,600 American families are losing their homes to foreclosure every day.
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Economists see deeper recession, upturn starting this year

A survey of leading economists finds them now forecasting a far deeper and more painful recession ahead in the first half of the year, but a modest pickup in the second half of 2009, followed by a solid recovery in 2010.

Sun Feb 22, 2009 news snippets

Credits, Modifications, Stimulus, Oh My!

Question: "Where can I obtain a copy of the stimulus bill just passed?"
Answer: The entire text of the stimulus bill is posted on the Web site of the U.S. House of Representatives
Committee on Appropriations.
http://appropriations.house.gov/pdf/PressSummary02-13-09.pdf
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Last year's $7500 Homebuyer Credit / Loan vs this year's $8000 credit
$7,500 tax credit, which was part of the Housing Recovery Act passed last summer. You don't have to start repaying
it for two years from the date of sale, and you have 15 more years to pay it all back. The value of this, which
amounts to a tax-free loan, is about $4,000.
vs. 2009 credit: house must be purchased between Jan. 1, 2009 and Nov. 30, 2009 to qualify. Unfortunately, the way
the stimulus bill was drafted makes it like two tax credit programs that run consecutively. The 2009 purchaser
receives a substantially more valuable credit.
=========================================The Death of Hardware
the two words "cloud computing" scare the hell out of Bill Gates.
thanks to the thousands of miles of fiber-optic cable laid during the late 1990s, the speed of computer networks has
finally caught up to the speed of the computer processors.
Suddenly computers that were once incompatible and isolated are now linked in a giant network, or "cloud."
As a result, computing is fast becoming a utility in much the same way that electricity did
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Edward Morrison, a professor at Columbia Law School. "Only about one-third of existing foreclosures can be stopped

Sat Feb 21, 2009 News Snippets

The White House has established a Web site, Recovery.gov, designed to help Americans track projects funded by the stimulus bill.
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Lenders and mortgage investors would have to agree on a lower interest rate that would be designed to reduce the borrower's mortgage payments to 38 percent of their pretax income. The government would then provide financing to bring that ratio down to 31 percent.

Households who owe more on their mortgages than their homes are worth to refinance. There are nearly 14 million households in that situation, according to Moody's Economy.com.
===========================================================National Association of Home Builders/Wells Fargo Housing Opportunity Index

Now it's the most affordable housing market in at least five years

More than 60% of all U.S. homes sold during the last three months of 2008 were affordable - meaning that a family making the national median of $61,500 a year would pay 28% or less of their total income toward housing expenses.

At 62.4% affordable, the figure is up considerably from 56.1% in the previous quarter and 46.6% at the end of 2007

In the fourth quarter, the national median home price fell to $190,000 from $205,700 in the previous-year period

Existing homes sold at an annualized rate of 4.74 million in December, down from more than 7 million during the boom.

New home sales crashed to an annualized rate of 331,000 in December, the lowest since record keeping began in 1963.

Affordability, which was a major factor in homebuying during the boom, no longer matters very much. In most parts of the United States, affordability has returned to where it was in 2002 or 2003. The new barrier is willingness to buy. Harvard University Joint Center for Housing Studies
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"Even the experts don't quite know what's going on." Paul Volcker, a top economic adviser
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March Will Be The Tipping Point Of The Recession

The Federal Reserve has said that it now expects unemployment to hit almost 9% by the end of the year.
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What borrowers need to know

*FOR BORROWERS CURRENT ON THEIR MORTGAGE

-What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?
Such eligible borrowers may now be able to refinance into a 30- or 15-year, fixed-rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgages they hold.

-I owe more than my property is worth, do I still qualify to refinance under the plan?
Eligible loans will now include those where the new first mortgage will not exceed 105 percent of the current market value of the property.

-How do I know if I am eligible?
Complete eligibility details will be announced on March 4 when the program starts. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

-When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4.

-What should I do now?
Gather the information that you will need to give your lender after March 4, including information about the monthly income; your most recent income tax return; information about any second mortgage on the house; and payments on each of your credit cards or other loans.

*FOR BORROWERS AT RISK OF FORECLOSURE

-What help is available for borrowers who are at risk of foreclosure?
By providing lenders with financial incentives to modify existing first mortgages, the Treasury Department hopes to help as many as 3 million to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

-Do I need to be behind on my mortgage payments to be eligible for a modification?
No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default.

-How do I know if I qualify for a payment reduction under the plan?
You may qualify for a mortgage modification if (a) the house is your primary residence; (b) your monthly mortgage payment is greater than 31 percent of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits.

-I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on 2-, 3- and 4-unit properties are eligible as long as you live in one unit as your primary residence.

-How much will a modification cost?
There is no cost to borrowers for a modification under the plan.

-Is my lender required to modify my loan?
No. Lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering incentives and it is expected that most major lenders will participate.

-My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. Many lenders have said they intend to postpone foreclosures on mortgages that may qualify for the modification.

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Re: The possibility of Bankruptcy Law change to allow Judges to write down mortgages.

Banks want to minimize "cramdowns" and waves of modifications.
(Why you might ask Martha?) Because in part due to the tricky "accounting nuances." If a bank "lowered the balance of a certain mortgage, there would be a strong argument that it would have to reduce the value on its balance sheet of all similar mortgages in the same geographic area to reflect the danger that the region had hit an economic slump. Under this stringent approach, financial industry mortgage-related losses could far surpass even the grim $1.1 trillion estimated by Goldman Sachs."

But they are really swimming against the tide of public opinion. We'll soon know if the banks would have been much better off generating their own modification plan.

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Fannie Mae allows investors to mortgage more properties (The change is effective March 1)
Fannie Mae modified a policy that allowed real estate investors to have only four financed properties. The number can now be five to 10.

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Interest Rates

Rates on 30-year-fixed mortgages fell this week, declining along with bonds yields amid easing concerns over inflation due to the still-slowing economy.

The average rate on a 30-year fixed mortgage dropped to 5.04 percent this week from 5.16 percent last week. A year ago, the 30-year, fixed-rate mortgage averaged 6.04 percent.

The average rate this week on a 15-year fixed-rate mortgage was 4.68 percent, down from 4.81 percent last week, Freddie Mac said. The rate stood at 5.64 percent a year ago.

Average rates on five-year, adjustable-rate mortgages declined to 5.04 percent from 5.23 percent. Rates on one-year, adjustable-rate mortgages fell to 4.80 percent from 4.94 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year mortgages averaged 0.7 point for this week. The fee for 15-year mortgages averaged 0.6 point.

Fees for five-year adjustable rate mortgages averaged sixth-tenths of a point, and 0.5 point for one-year adjustable rate mortgages.

Mortgage finance companies Fannie Mae and Freddie Mac, which were seized by the federal government in September 2008, own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s more than half of all U.S home mortgages.
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The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, has declined for eight consecutive quarters and is 58.5 percentage points below the 100-point criteria that represents a balanced marketplace.

Commercial real estate activity continuing to decline, as measured by net absorption and the completion of new commercial buildings, is likely to weaken further over the next six to nine months.

Office MarketLosses in the job market continue to reduce demand for office space. Vacancy rates are projected to increase to 16.7 percent in the third quarter of 2009 from 13.4 percent in the third quarter of 2008.

Industrial MarketThe industrial sector is now beginning to feel the impact of the global economic slowdown, which is reducing the demand for exports. Vacancy rates in the industrial sector are forecast to rise to 12.2 percent in the third quarter of 2009 from 10.7 percent in the third quarter of last year.

Retail MarketThe slowdown in consumer spending has hit retailers hard. The retail vacancy rate will probably rise to 13.4 percent in the third quarter of this year from 9.8 percent in the third quarter of 2008. Average retail rent is expected to fall 9.0 percent this year; it declined 2.0 percent in 2008.

Multifamily MarketThe apartment rental market – multifamily housing – has held its own as a result of depressed home sales as potential buyers seek rental housing. Multifamily vacancy rates are forecast to edge up to 6.0 percent in third quarter of this year from 5.8 percent in the third quarter of 2008. Average rent is projected to grow 1.7 percent this year, following a 2.9 percent gain in 2008.

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Key West Real Estate Stats

The Number of Sales for 2008 was 1,166, an ‐11% decline relative to 2007. Sales had fallen during the 1st quarter by ‐21%, ‐19% by mid‐year, and ‐15% as of the 3rd quarter compared to the same period in 2007.

A positive sales trend occurred during the period August through December 2008 when the number of sales of all property types increased by +5% over that sameperiod in 2007.

The Dollar Value of Sales decreased by ‐29% to $679MM for 2008. In 2007, it was $964MM.

Year to date, the Dollar Value has been ‐30% to ‐32% each quarter versus 2007.
The Average Sale Price for 2008 was $588K, ‐21% less than the $740K for 2007.
The average Sale Price for the 1st quarter of 2008 was $635K, $626K by mid‐year, and $604K as of September 30, 2008.

Original List Price to Sale Price for 2008 was 78.6% compared to 81.3% at the end of 2007, a ‐3% drop.

The Average List Price declined by ‐8% to $899K as it continues to track downward from $931K on June 30 and $990K at the end of 2007.

The peak price of $1,065K occurred at the end of 2005.

The 4,573 New Properties Listed during 2008 was ‐9% less than the 5,055 of 2007, and ‐24% from the highest amount of 6,008 registered in the Winter of 2006.

The Months of Inventory, which is the months required to sell the existing inventory on December 31, 2008 if no other properties were listed for sale, increased by +15% to 46 months (3 yrs 10 mos.). It was 40 months at the end of 2007, 37 to finish 2006, and 15 at the end of 2005.

The Number of EOY 2008 Properties For Sale, 4,424, was up +2% over the 4,337 at the end of 2007. For 2006, the end of year number was 4,628, and for 2005, 3,469.

The continuing high inventory of properties provides Buyers numerous purchasing opportunities in all price ranges!

The properties that are priced to the current market are the ones that are sold, and the market has steadily declined since 2005 and will remain flat or continue the decline in 2009 until the inventory is depleted to an overall level of less than 3,000 properties for sale.

232 was the average number of days of market time needed to sell a property, an increase of +2% over the 227 of 2007, +22% from 190 in 2006, and +45% versus the 2005 days to sell figure of 160.
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Now roughly 10 million underwater homeowners
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Title: voluntary foreclosures or Temptation to Walk Away

$75 billion homeowner-rescue plan offers a lot of help to people in imminent danger of losing their homes. It does far less for those who are deep underwater on their mortgages but have the wherewithal to keep making their monthly payments.

The most effective way to keep underwater homeowners from walking away en masse would be a big writedown of the principal they owe. That would give them positive equity in their homes -- or at least the hope for it once prices begin creeping upward again -- and with it, a reason to stay put. But, principal writedowns -- pay offs up to $5,000 of principal for homeowners who remain current on their payments -- aren't required, or even central to the proposal.

Writing down mortgage debt on houses that are underwater could total $1 trillion or more.

"If your house is worth much less than the loan, you're pretty sure you'll never really own it." says Yale University economist John Geanakoplos
Lowering the amount that people owe on their homes would obviously help the homeowners.

What's surprising is that it might even benefit the people who bought their loans, bundled into mortgage-backed securities. How could that be? Because the values of those securities have already plunged -- in some cases to as little as 25% per dollar of face value -- in the expectation of massive foreclosures. If big writedowns managed to keep more people in their homes, it could actually enhance the value of those mortgage-backed securities.ForeclosureRadar.com, tracks California foreclosures: By lowering payments and not principal balance, you're guaranteeing the extension of this crisis for years to come. Even for those who want to keep their homes at the moment, reducing monthly payments without addressing negative equity may just postpone the inevitable.

Fri Feb 20, 2009 News Snippets

Fannie Mae announced it is suspending foreclosure sales on occupied properties as well as extending the eviction halt through March 6 while awaiting implementation of the Administration’s national foreclosure prevention and loan modification program
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Homeowner Affordability Stability Plan (or Initiative) **specific details of the plan will be released March 4th when the program officially begins.

Of 52 million U.S. homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their house is now worth.

plan aims to keep between 7 million and 9 million people from foreclosure.

plan encourages refinancing by allowing four to five million “responsible” homeowners whose loans were owned or guaranteed by Fannie Mae or Freddie Mac to refinance their mortgages.

the allocation of $75 billion to provide encouragement for homeowners on the verge of default to modify their loans. Lenders will be encouraged to lower interest rates for up to five years.

the Treasury Department will match the difference between the original rate and the adjusted interest rate. Lenders also have the option of reducing the principal balance on the mortgage loan, with Treasury sharing in the cost to the lender.

The Administration will also take steps to reform bankruptcy laws so that judges reduce home mortgages on primary residences to their fair market value -- as long as borrowers pay their debts under a court-ordered plan.

Treasury will give incentives of $1,000 to loan servicers for each mortgage eligible for modification and will pay up to $1,000 annually for each year the borrower stays current on the loan. Incentive payments of $1,500 would be paid to borrowers holding at-risk loans if they are able to restructure their loans prior to falling behind on loan payments and an additional $500 would be paid to servicers assisting those borrowers.

Federal Deposit Insurance Corp. to create an insurance fund of up to $10 billion to discourage lenders from foreclosing on mortgages that could have been modified. Mortgage holders could be paid an additional insurance payment for each modified loan they hold, if the home price index declines.

Per HUD, the accrued mortgage late charges should be waived by the lender at the time of the loan workout.

the plan will increase Treasury’s funding commitment to Fannie Mae and Freddie Mac and the Federal Reserve will continue to purchase long-term mortgage securities to maintain stability in the mortgage market.

will broaden the scope of the government rescue by focusing on homeowners who are still current in their payments but at risk of default.

puts billions of federal funds into enticing servicers to modify the loans of those who've already stopped paying.

The program would not only give servicers $1,000 for each modification, but would give them another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

Uniform modification guidelines: the administration intends to generate uniform guidelines for loan modifications. The guidelines, would be in place in two weeks, used by Fannie and Freddie, and the administration will work to get them implemented throughout the mortgage industry. In addition, all financial institutions receiving bailout cash from the government going forward will be required to use them as well.

would provide a set of incentives to mortgage lenders to convince them to help up to 4 million borrowers on the verge of foreclosure. The goal: cut monthly mortgage payments to no more than 31 percent of a homeowners income.

under water — dwellings whose market value have sunk below the principal still owed on the mortgages. program will help 4 million to 5 million families — if their mortgages are owned or guaranteed by Fannie Mae or Freddie Mac.

homeowners don't need to be delinquent in order to get help.

relief would be almost instantaneous, basically as soon as rules are published March 4.

The biggest players in the mortgage industry already had halted foreclosures pending Obama's announcement.

The plan would help borrowers who owe more than 80% of their home's value to refinance and reduce their monthly payments.

But only those who are current on their payments and whose loans are held or guaranteed by Fannie Mae and Freddie Mac are eligible.

The new mortgage, including refinancing costs, can't exceed 105% of the current market value of the property, excluding many of the hardest hit.

allows borrowers to refinance into 15-year or 30-year fixed-rate mortgages at the current market rate, which hovers around 5%.

The effort would help borrowers -- both those current and delinquent -- who live in their homes lower their monthly payments for five years. The servicer would reduce interest rates so that the monthly obligation is no more than 38% of a borrower's income and then the government would kick in money to bring payments down to 31% of the homeowner's income.

Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Those with total debt -- including credit cards and auto loans -- equal to 55% of their monthly income must enter a debt counseling program to qualify for a modification.
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Home construction drops far more than expected, Conditions in the market for new homes have not been this bad since the 1930s

Construction of new homes and applications for future projects both plunged to record lows in January as all parts of the country showed big declines in building activity.

analysts said they still do not expect a turnaround in housing until late this year at the earliest.

construction of new homes and apartments dropped 16.8 percent last month to a seasonally adjusted annual rate of 466,000 units. That's well below the 530,000 units economists expected, and was the slowest pace on records dating back a half-century.

Applications for building permits, considered a good barometer of future activity, also dropped to a record low, falling 4.8 percent to a rate of 521,000 units, slightly below economists' expectations.

reduction in new projects should aid the housing market in the long run as fewer properties for sale help increase competition and stabilize prices for those left on the market.

housing construction will continue to decline in the months ahead.

we will see a bottom in 2009 and by the end of this year we will start to see the beginning of a recovery. But it will be a slow recovery because of the significant overhang of empty houses for sale.

More than 2 million American homeowners faced foreclosure proceedings last year, and that number could soar as high as 10 million in the coming years.

Construction dropped 42.9 percent in the Northeast to a record low of 36,000 units at an annual rate. Building fell 29.3 percent in the Midwest to a record low of 53,000 units, while it dropped 12.8 percent in the South to a new record low of 246,000 units. Construction activity fell 6.4 percent in the West to an annual rate of 131,000 units, the slowest pace since October 1966.

For all of last year, the number of housing units builders broke ground on totaled 906,200, also a record low. That was down from 1.36 million housing units started in 2007.

Tighter lending standards, rising defaults and fear about the housing market's future have sidelined buyers.
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The Federal Reserve said the economy will actually shrink and unemployment will rise higher.

the unemployment rate will rise to between 8.5 and 8.8 percent this year.

the economy will contract this year between 0.5 and 1.3 percent.

negative forces have plunged the nation into a recession, now in its second year.

unemployment — now at 7.6 percent, the highest in more than 16 years — will keep climbing and stay elevated for quite some time.

unemployment would remain "substantially" higher than normal at the end of 2011 "even absent further economic shocks."

The Fed forecast calls for the jobless rate to dip to between 8 and 8.3 percent next year, and to between 7.5 and 6.7 percent in 2011.

the economy should grow between 2.5 and 3.3 percent next year.

the pace of recovery in 2010 would be damped," according to the Fed documents.

the economy would pick up speed in 2011, growing by as much as 5 percent.

it could take five or six years for the economy and employment to get back into a sustainable mode of health.

On the inflation front, companies will keep a lid on price increases this year.

The Fed expects prices to rise between 0.3 and 1 percent this year.

America's last serious case of deflation was during the Great Depression in the 1930s.

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State Rankings 2007
For the fourth consecutive year, New Hampshire was named the nation’s Most Livable State by Morgan Quitno Press
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First-time buyers

First-time homebuyers have exactly 285 days to buy a home if they want to pocket $8,000 tax-free.

can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.

will bring an additional 300,000 new homebuyers into the market

the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount.

Three scenarios:
1: final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since
you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
2: final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this
scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
3: final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009.

Buyers may not have owned a home for the past three years to qualify as "first time" buyer.

They must also live in the house for at least three years, or they will be obligated to pay back the credit.

income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy - Just claim it on your return.

domino effect, because each first-time homebuyer sale will lead to maybe two more trade-up transactions down the line. many homeowners would be trading-up but they have had no buyers for their own homes.

Who won't benefit, first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.

Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the downpayment. Then, when the buyers receive their tax credit from the IRS, they pay back the state.

Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one.

Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.
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The mortgage meltdown has prompted a steep decline in prices. Nationwide, prices have fallen 17.5%, back to the level they were at in fall 2004.

FORECLOSURE Tactic
Some homeowners are stalling foreclosure by asking their lender to produce the original mortgage paperwork.

HOUSING STARTS
Construction of new homes and apartments dropped 16.8 percent in January to a seasonally adjusted annual rate of 466,000 units and was the slowest pace on
record, according to the U.S. Commerce Department.

ECONOMIC BAILOUT
The 20 largest banks that received U.S. government rescue funds slightly reduced their lending to consumers and businesses in the last three months of 2008.

The National Association of Home Builders (NAHB) has launched a consumer Web site with detailed information and an extensive list of frequently-asked
questions. found at: http://www.federalhousingtaxcredit.com/