Tuesday News Snippets

Dotcoms strike back!

Shares in most regular retailers have slumped over the past six months, for obvious reasons. Expect more bricks and mortar stores to close as overstretched consumers retrench. But when it comes to online retailers, the story changes.

Amazon stock, which tanked initially, has doubled since November. Hype over the Kindle electronic book reader has helped. Online jeweler Blue Nile has also bounced. And look at Netflix – its stock just hit a record high, surging over $40 for the first time. The Internet-based movie rental company is one of the big winners of the recession so far, as consumers stay home and order in movies. And it makes sense: A Netflix subscription, typically about $14 a month, is much cheaper than cable.

Historians note that many of the stocks which did best during the Great Depression were actually so-called "growth" companies, because they were the ones conquering the future. When a hurricane sweeps through a forest it knocks down a lot of the older, weaker trees. The younger ones survive and prosper. And so it may be in the economy.
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Bankrate.com

Mortgage deduction savings exaggerated
Monday March 30, 6:00 am ET

Dear Dr. Don,

I still owe $100,000 on my house at an interest rate of 5.88 percent. I would like to pay off the mortgage, but people keep insisting that I shouldn't because I'll lose the mortgage interest deduction.

Yours is a classic question in personal finance. Are taxes the tail that wags the dog or are they just one of many variables to consider when deciding on a financial course of action? I lean toward the latter. You want to consider the tax impact of your financial decisions but not to the exclusion of all else.

The mortgage interest deduction does reduce taxes paid, at least to the extent your deductions exceed the standard deduction. But there's still the after-tax cost of your debt to consider.

The rule of thumb in deciding whether you should prepay your mortgage is to compare the effective cost of your mortgage debt with what you expect to earn on an after-tax basis on your investment.

Martha, I thought the timing on this article from bankrate.com (an independent source) was interesting after our talk last night.
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Foreclosures spike - so do mortgage-help plans.

In February, nearly 250,000 homeowners received either mortgage modifications or repayment plans from their lenders.About 134,000 of the workouts completed were mortgage modifications, which typically lower the interest rate on loans, lengthen mortgage terms or reduce principal owed to make loans more affordable.

But in spite of these efforts, the number of foreclosures started in February rose to 243,000 from 217,000 in January. About 87,000 homes were repossessed by banks during February, a 28% jump from the 68,000 foreclosures completed in January. Since the mortgage meltdown hit in July 2007, 1,395,044 homes have been lost.

The Obama administration's foreclosure prevention initiative could send mortgage modification numbers higher in the coming months, but it will take time. We won't see a spike right away. [Under the program] It takes 90 days to complete a modification. Over the next three months we'll start to see some pull-through.
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Opposition stalls mortgage "cram-down" legislation.

A proposal supported by President Barack Obama to allow bankruptcy judges to alter the terms of mortgages for struggling homeowners has been stalled by opposition from moderate senators and the financial-services industry.

Congress will head into a two-week break on April 6, and Senate negotiators say they do not have the 60 votes needed to get the legislation through the chamber. The banking industry says cram-downs would boost mortgage rates, clog bankruptcy courts and raise risks for lenders.
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Sales of second homes fell 22% in 2008

Second home sales comprised 30% of the housing market, down from a peak of 40% in 2005, when financing was easier and before the nation fell into recession.
Just 9% of sales last year were for vacation homes, down from 12% in 2007. Proportionally, investment properties held steady at 21%.
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The American Dream Is Up for Rent

More residents in the outermost fringes of suburbs are renting, creating rental economies in regions built on the promise of home ownership.

More than three million homes have either been lost to foreclosure or a foreclosure-related sale between 2006 and 2008,

Friday News Snippets

Click graph to enlarge.

It is not much, but this is definitely a positive report.

This graph shows the saving rate starting in 1959 (using a three month centered average for smoothing).

Although this data may be revised significantly, this does suggest households are saving substantially more than during the last few years (when they saving rate was close to zero). This is a necessary but painful step ... and a rising saving rate will repair balance sheets, but also keep downward pressure on personal consumption.
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Mortgage applications surge 30%.

U.S. mortgage applications jumped last week as record low interest rates spurred a surge in demand for home refinancing loan.

Refinancing accounted for 78.5% of all applications.

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Commercial loan losses starting to escalate.

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Economy

Americans' Spending Slows, Confidence Remains Near Low as Job Losses Mount American consumers’ spending slowed in February and their confidence remained near a three-decade low this month, reflecting the toll of a deteriorating job market.

Jobless Rate Climbs Above 10% in Three More U.S. States as Slump Spreads The number of U.S. states with a jobless rate exceeding 10 percent almost doubled in February as the worst employment slump in the postwar era spread.

Weds News Snippets

Existing home sales vs new home sales through Feb 09.

For a number of years the ratio between new and existing home sales was pretty steady. After activity in the housing market peaked in 2005, the ratio changed. This change was caused by distressed sales - in many areas home builders cannot compete with REO sales, and this has pushed down new home sales while keeping existing home sales activity elevated.

For a healthy market, the distressing gap between new and existing home sales will probably close.

Good chance new home sales will bottom in 2009?

Because the data is heavily revised, we won't know until many months after the bottom occurs. Also, we need to distinguish between growth rates and levels. Any bottom would be at a very grim level, and any recovery would probably be very sluggish because of the huge overhang of existing homes (especially distressed homes).
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HOPE for Homeowners, The foreclosure-prevention plan passed last summer.

In the five months since it's been in effect, has helped exactly one homeowner to avoid foreclosure. This despite Congress having made $300 billion available to back these loans and estimating that the program would benefit as many as 400,000 families.

"As it stands now, we've only gotten 752 applications," said Federal Housing Authority spokesman Brian Sullivan. "And only insured one loan. Needless to say, the program isn't working terribly well."

Nonetheless, the House of Representatives recently approved an updated version of HOPE as part of the bankruptcy-reform bill that is a keystone to President Obama's Homeowner Affordability and Stabilization Plan. But it was no overhaul to the program; the changes are very subtle.

Dashed expectations

The original program called for lenders to voluntarily refinance delinquent mortgages by reducing the principal balance on loans to 90% of a home's current market value. The new 30-year, fixed-rate loans would then be backed by the FHA.

Under the new plan, lenders would only have to write it down to 93%.

Borrowers who owed $220,000 on a house valued at $200,000, for example, would need their mortgage balances reduced to $180,000 to qualify for an original HOPE for Homeowners refi. That's a $40,000 write-off. Under the new plan, lenders would have to forgive $34,000.

Lenders simply won't do that very often.

They prefer to use term extensions or interest rate reductions to help make mortgage payments affordable for at-risk homeowners. As a result, most of the big lenders refused to participate in the program, which was strictly voluntary though heavily encouraged by the Bush and Obama administrations.

"Writing down principal is the last thing you want to do because you have to realize the loss immediately," said Paul Leonard, a spokesman for the Housing Policy Council, a coalition of mortgage lenders.

No volunteers.

The program has also failed, Leonard added, because of the conditions and limits the program imposed. Borrowers, for example, had to agree to pay the government 50% of any future profits they made from selling the property.
Under the new version of HOPE, borrowers would no longer have to split any earnings with Uncle Sam.

Other changes include incentive payments to servicers of $1,000 to induce them to participate.

The Congressional Budget Office now projects that HOPE for Homeowners could help just 25,000 mortgage borrowers over the next 10 years at a cost of $675 million.

Despite those modest numbers, Leonard said that the members of Housing Policy Council want to keep HOPE for Homeowners on the table even though the administration's Homeowner Affordability and Stabilization Plan does much more than HOPE.

Besides reducing mortgage payments through interest rate reductions or term extensions, HASP provides for lowering mortgage principals - the only thing that HOPE offers.
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GOP Housing Plan Would Tackle Mortgage Fraud.

House Republican leaders plan to unveil a housing package that would increase the tax credits available for home buyers and would direct law enforcement to crack down on mortgage fraud.

(Note: What a surprise the GOP's answer to the housing crisis is tax credits and to activate the police)

Under the proposal, borrowers refinancing their mortgage would be eligible for $5,000 to help cover closing costs or to reduce their principal balance. The plan also revives a $15,000 home buyer tax credit proposal that Republicans pushed last year. This time, the proposal would require the borrower to have at least a 5 percent down payment.

Both programs would expire in July 2010.
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Banks’ Hidden Junk Menaces $1 Trillion Purge.

The U.S. government wants to clear as much as $1 trillion in soured loans and securities from bank balance sheets with its latest bailout plan.

That might prove a short-term respite. No sooner might the Treasury Department mop up those assets than $1 trillion or more in new ones spring up to take their place.

That is due to the potential return of assets held in so- called off-balance-sheet vehicles that banks may soon have to put back onto their books. The end result may be that banks are in no better shape to increase lending even after the government bailout.

At the end of 2008, for example, off-balance-sheet assets at just the four biggest U.S. banks -- Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. -- were about $5.2 trillion, according to their 2008 annual filings.

The hidden assets that may return to banks consist of mortgages, credit-card debts and auto loans, among others. Over the years, banks bundled them together and sold them to investors as securities.

Whether these assets are “troubled” or “toxic,” their return to bank balance sheets could slow efforts to get credit flowing again. After all, banks shed the loans to make their balance sheets look smaller, allowing them to hold less capital to act as a buffer against losses. Until a couple of years ago, that boosted profits
It also helped inflate the credit bubble, even as these accounting maneuvers made it harder for investors and regulators to see how much risk banks actually faced.

The tangled web that banks wove over the years will take a long time to undo.
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Analysis from the International Monetary Fund.

Expects world output to shrink by between 0.5 per cent and 1 per cent this year and the economies of the advanced countries to shrink by between 3 and 3.5 per cent. This is unquestionably the worst global economic crisis since the 1930s.
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California home prices drop nearly 41% from year ago.

The median price of existing single-family homes in California dropped 40.8% in February from the same month in 2008, according to statistics released today by the California Assn. of Realtors.
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Home prices nationally continue to fall, and are no longer confined to just the ‘sand’ states.

As of January 2009, more than 700, or nearly three-quarters, of all metropolitan markets were experiencing home price depreciation, up significantly from 254 markets experiencing depreciation in December 2007 and 394 in June 2008.
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These guys have a clue this time?

UCLA economists are coming out with a new forecast today that offers a grim picture of the year ahead. Nationwide, the unemployment rate will worsen -- peaking late next year at 10.5%.

UCLA says the economy will begin to grow slowly by the fourth quarter of this year.
That's when residential construction should also begin to turn around.

Consumer prices should snap out of a downward trend the second half of this year, but disposable income rates will not match the high levels of 2004 until 2011.

Monday News Snippets

Signs of Life from the Real Estate Market

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In ZIP codes across the country, as once-inflated property prices bottom out housing sales are increasing.

No. 1 Fairfield, Calif.

ZIP: 94533 Metro area: Vallejo-Fairfield

Annual home sale increase: 226%

Fourth-quarter sales: 342

Median home price: $179,500

Median home price change: -19.0%

Nondistressed sales percentage: 17%*

No. 21 Deltona, Fla.

ZIP: 32738Metro area: Deltona-Daytona Beach-Ormond Beach

Annual home sale increase: 2%

Fourth-quarter sales: 126

Median home price: $104,500

Median home price change: -13.0%

Nondistressed sales percentage: 40%

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Treasury's toxic asset plan could cost $1 trillion.

The Obama administration's latest attempt to tackle the banking crisis and get loans flowing to families and businesses will create a new government entity, the Public-Private Investment Program, to help purchase as much as $1 trillion in toxic assets on banks' books.

The plan on toxic assets will use the resources of the $700 billion bank bailout fund, the Federal Reserve and the Federal Deposit Insurance Corp.

The toxic asset program will have three major parts:

_A public-private partnership to back private investors' purchases of bad assets, with government support coming from the $700 billion bailout fund. The government would match private investors dollar for dollar and share any profits equally.

_Expansion of a recently launched Fed program that provides loans for investors to buy securities backed by consumer debt as a way to increase the availability of auto loans, student loans and credit card debt. Under Geithner's plan for the toxic assets, that $1 trillion program would be expanded to support purchases of toxic assets.

_Use of the FDIC, which insures bank deposits, to support purchases of toxic assets, tapping into this agency's expertise in closing down failed banks and disposing of bad assets.

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Mortgages May Be Near the Bottom

Mortgage rates are unlikely to go much below the average 4.75% on a 30-year they were at Thursday, partly because there are fewer lenders.

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Foreclosures last year were up 81% from 2007 and 225% from 2006.

Banks repossessed more than 850,000 properties in 2008 compared with about 404,000 in 2007.

Houses in some stage of foreclosure totaled 303,410 in December, up 17% from the previous month and up nearly 41% from December 2007. These filings came despite (foreclosure) moratoriums.

US foreclosure rate 2008 1.8%2008 Properties with filings 2,330,483Change from 07 to 08 81.2%

Florida foreclosure rate 2008 4.5%2008 Properties with filings 385,308Change from 07 to 08 133.1%

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Bad to the Bone

Banks are holding truly bad assets that are surely worth something, but not worth anywhere near the marks banks have placed on them.

Someone from the Treasury, the FDIC, and/or the Fed will be buying something troubled that may once have even resembled an asset.

We have an estimated $2 trillion in “bad assets” out there, the vast majority tied in some way, shape or form to residential or commercial mortgage credit. Which means that any argument over the real value/intrinsic value/future value of a debt/security/asset — call it what you will — ultimately comes down to a question of what you believe about the underlying collateral.

Investors have clearly spoken in terms of what they believe that collateral to be worth.

And it’s far less than what many banks can afford to sell at.

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Newspapers Wade Into An Online-Only Future

As the business model for newspapers cracks apart, there are those who are lamenting and those who are inventing.

TGIF News Snippets

*Click Graph to enlarge

2007-2008 Home Sales price changes in selected areas (Red) and with Bank REO sales added in (Black)
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Bankruptcies

The courts expect bankruptcy filings will increase by 27 percent this year to 1.2 million as more people face foreclosures and other financial problems caused by the poor economy.
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Foreclosure Tactic

Do you know that your have the legal right to make the lender provide proof that they own the note? Do you know that you can even contest the foreclosure even after the lender has taken the property back?
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Mortgage rates are low.
So are approval rates.

Even with more credit-worthy applicants seeking loans, banks are reluctant to give them the money, despite near record low mortgage rates.

Mortgage interest rates are already flirting with record lows and the Federal Reserve's move to buy up government debt will send those rates even lower. But it doesn't look like it will get any easier for borrowers - even those with good credit.
Bankrate.com reported Thursday that the average interest rate on a 30-year fixed mortgage fell to 5.29%, compared with 5.37% in the prior week. In January, rates fell as low as 5.28%.

Data does not even reflect the Fed's Wednesday announcement that it will purchase $300 billion in long-term government debt.

"This is a big commitment made by the Fed," said Mike Larson, a real estate analyst for Weiss Research, "like going all in in poker. The Fed is buying anything and everything to drive down rates."

The 10-year Treasury yield is used to help calculate 10-year mortgage rates, so as the yield falls, the corresponding mortgage interest rate follows.

Larson said he would not be surprised to see mortgage rates drop into the 4.5% range soon. If they do, that would surpass the 4.7% loans available just after World War II, the cheapest mortgages in American history, according to Larson.

However, one expert cautioned that mortgage rates may not fall as quickly as Treasury yields.

"Mortgage interest rates no longer move in lockstep with Treasurys," said Keith Gumbinger of HSH Associates, a publisher of mortgage information. "A half-point drop in Treasury yields will not translate into a half-point drop in rates. But there will be a big downdraft on rates."

Even before the Fed's move, rates were low and many borrowers were trying to take advantage of them. Applications for mortgages jumped 21.2% last week compared with a week earlier, according to the Mortgage Bankers Association (MBA), with homeowners seeking to refinance their old, higher interest rate loans accounting for nearly 73% of all applicants.

Most people who apply for loans generally receive them, according to Gumbinger, who said the pull-through rate - the percentage of applicants whose loans are approved - has been running about 60%.

Still, that's significantly lower than the pull-through rate the MBA recorded during the height of the housing boom a time when lenders set the bar for mortgage borrowers very low. In 2005, for example, more than 66% of all applicants were approved. In 2003, nearly 79% got their loans.

It's not like borrowers back then were more qualified. They were not. Credit scores for those who actually receive mortgages have been on the rise during the past few years.

Borrowers with scores of 750 or above accounted for 38% of loans issued during the second quarter of 2008, compared with just 23% two years earlier, according to the MBA. Those with low credit scores of 650 or less represented only 15% of loans during the first three months of 2008, compared with 28% during the first quarter of 2006.

During the bubble years, many borrowers weren't asked to prove income or assets or demonstrate that they could afford to repay their loans. Indeed, in many cases, it was obvious that they could not. So, they were given low teaser rates they could manage for the first couple of years and, after that, the thinking was, they could refinance the loan and start the process over again.

The housing bust ended all that and the people applying for loans now are of much better credit quality. But underwriters are so tough today that they still reject four of every 10 loans.

Sharp underwriting"The underwriters are being so careful," said Steve Habetz, a mortgage broker based in Connecticut. "The minutia they're asking applicants for is amazing."

He had a couple with a 750 credit score looking to refinance a loan, which would leave the clients with a 60% loan-to-value ratio; in other words, an excellent credit risk.

"It took weeks to get approval," said Habetz. "They kept asking for more and more detail about his assets."

Underwriting standards are so stringent, according to Gumbinger, many potential mortgage borrowers don't even bother considering buying a home because of all the hoops they have to jump through. "Borrowers understand they have to be better qualified to get a loan now so they don't even bother to try," he said.

They must repair their credit or come up with bigger down payments if they want to buy a home.
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$1 trillion in new liquidity.

Right now, there is about $800 billion plus currency in circulation sitting in wallets, purses and cash registers around the country. Another $800 billion is sitting in a vault at the Federal Reserve Board, for a total monetary supply of about $1.6 trillion. In a vault? Yes. When Congress voted the TARP program to bail out banks, the banks actually took only a small part of the money. The rest they used to offset losses on their balance sheets while letting the Fed hold onto the money.

Why didn't the banks want the money? Because they're not about to make loans in this economy. They're more than happy to let the cash sit at the Fed earning them interest. (The Fed decided to start paying interest last November).

So now the Fed will, in essence, be creating another trillion of money supply to sit in the vault alongside the $800 billion already there. The new money will remain idle for the same reason the old money has because banks won't make loans in this environment.

And what of the money that is going out the door to buy Treasury bills? Those selling Treasuries won't run out and spend the money on flat-screen TVs. With higher taxes coming up next year and the economy in the tank, they won't spend it or lend it they'll probably just turn around and buy more T-bills.

Think of a parking garage filled with cars. The cars' owners leave them in the garage, because it's a bad day with rain and snow and conditions aren't suitable for driving. Similarly, banks and consumers leave their money in the vault at the Fed or in their bank accounts or under the mattress.

When conditions improve, though, all those metaphorical cars will suddenly be taken out for a drive. All at once.

Weds News Snippets

Can you say Action?

See the 1st draft of Martha's new video by clicking here.

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Fannie Mae Refinancing Volume Jumps to $41 Billion in February

Nearly three times the refinancing volume the company experienced during the month of January and the largest refinancing volume in nearly a year.
Fannie anticipates that volumes will increase even more as millions of additional homeowners become eligible to refinance under the President's Making Home Affordable plan. ====================

Home Affordable Refinance

Fannie Mae launched its Home Affordable Refinance initiative earlier this month as part of the President's Making Home Affordable plan.

Key features include:

*Additional Flexibilities: Most borrowers refinancing an existing FannieMae loan will not be required to buy new or additional mortgageinsurance if the loan at the time of the refinance is more than 80percent of the home's value. Existing mortgage insurance must becarried forward to the new loan.

*In addition, Fannie Mae can refinance loans up to 105 percent of a home's value with this new flexibility, so even borrowers who are "underwater" -- who owe more than their home is worth -- may be able to refinance. This will expand the number of borrowers able to take advantage of lower interest rates that reduce monthly payments, or refinance into a more sustainable mortgage.

*Streamlined Processing: Beginning April 4, all 1,600 lenders and 29,000 mortgage brokers using Fannie Mae's Desktop Underwriter(R) platform will be able to process an application to refinance any existing Fannie Mae loan, allowing for greater lender origination capacity, more consumer choice and easier refinancing for borrowers.

**What Borrowers Need to Know:

- To qualify, your mortgage loan must be owned by Fannie Mae.- You must have a solid payment history on your existing mortgage.- The expanded refinance flexibility ends in June 2010.

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Mortgage Rates Down This Week

Thirty-year fixed mortgage rates, which had been hovering around the 5.25% mark for about a month, are down to 5.14% this morning on Zillow Mortgage Marketplace. Purchase mortgage rates have had a few other small dips in the past week. =======================

Encouraging Signs of Life in the Real Estate Market .

ZIP codes across the country, as once-inflated property prices bottom out housing sales are increasing. =======================

Fannie Tightens Its Conditions for Backing Condo Mortgages

Just as a flood of new condominiums are scheduled to hit the housing market this year, Fannie Mae has added restrictions making it more difficult for developers to sell their units.

The government-backed mortgage-finance company stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won't back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity. ======================

Housing: Two Bottoms

There will be two distinct bottoms for housing:

1) First single-family housing starts and new home sales will bottom.
and then followed some time later ...
2) Prices for existing homes will bottom.

Monday News Snippets

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FORECLOSURES

Nationwide, the number of households threatened with losing their homes in February rose 30 percent from 2008 levels, and 6 percent over January levels, according to RealtyTrac. In Florida, one out of every 188 homes is in some stage of foreclosure, with an increase of 13.79 percent since January and 42.97 percent since February 2008.

The Top 10 Foreclosure States as of February:

1. Nevada: 1 in 70 homes
2. Arizona: 1 in 147 homes
3. California: 1 in 165 homes
4. Florida: 1 in 188 homes
5. Idaho: 1 in 358 homes
6. Michigan: 1 in 360 homes
7. Illinois: 1 in 369 homes
8. Georgia: 1 in 389 homes
9. Oregon: 1 in 446 homes
10. Ohio: 1 in 451 homes

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Foreclosed Properties Overcome Their Bad Reputation

Fed by foreclosures, used home sales are actually climbing in some regions. But that’s taking business from new home builders, whose sales fell to a four-decade low in January–a 77% plunge from their peak in summer 2005.
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Mortgage 'Cramdown' Plan Hits Turbulence in Senate

The bill, which has already passed the House, would allow judges to write down mortgage debt for people in bankruptcy court. Democratic leaders have long sought such a "cramdown" provision for homeowners.

The bill needs 60 Senate votes to clear a procedural hurdle to passage, and Democratic aides say they are several votes shy. They had hoped the bill would reach a vote before the April recess but it has yet to be scheduled. Senate aides involved in the talks say that timing may slip further.

"The momentum has swung against cramdown," said Sen. Bob Corker (R., Tenn.).

The House bill is already substantially weaker than one crafted by senators several weeks ago. It limits cramdowns to existing mortgages; loans made in the future wouldn't qualify. Bankruptcy judges can write down a primary mortgage only if the borrower can show efforts to modify the loan were made prior to filing for bankruptcy.

Separately, the American Bankers Association on Friday raised alarms about a little-noticed part of the bill, saying it would let a borrower end up owning a house for a fraction of the purchase price if the lender breaches certain federal disclosure rules.

The industry said the House version of the bill would force judges to invalidate a lender's claim in bankruptcy for committing minor and accidental errors, such as understating a finance charge by as little as $36.

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Freddie Mac: 30-year mortgage rate falls to 5.03%

Freddie said Thursday the 30-year fixed-rate mortgage average fell from the previous week to 5.03% with an average 0.7 point for the week ending March 12. In the previous period, the average was 5.15%, and the year-ago average was 6.13%. New home sales fell 10.2% in January to the slowest pace since records began in January 1963 while pending existing home sales slowed by 7.7%, the weakest since the series began in January 2001.

More recently the Federal Reserve noted in its March 4th regional economic report that residential real estate markets remained in the doldrums in most areas, with only scattered, very tentative signs of stabilization.
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Freddie/Fannie Results ower, & Freddie Puts Restrictions on Refinances

Home-mortgage company Freddie Mac reported a loss of $23.9 billion for the fourth quarter and said it will need a $30.8 billion injection of capital from the U.S. Treasury.

The company said it expects its provisions for losses on mortgage defaults to remain high this year and that it is likely to require further funds from the Treasury. Freddie had a loss of $2.45 billion in the year-earlier quarter.
For all of 2008, Freddie reported a loss of $50.1 billion, compared with a year-earlier loss of $3.1 billion. The losses over the past two years exceed the total of about $42 billion earned by the McLean, Va., company from 1971 through 2006. Freddie blamed the losses largely on rising mortgage defaults and declines in the value of derivatives used to hedge against interest-rate risks and other securities.

Fellow mortgager Fannie Mae last month reported a $25.2 billion loss for the fourth quarter.

The Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie in exchange for senior preferred stock. The Treasury already provided $13.8 billion to Freddie late last year, and Fannie has asked for $15.2 billion of capital under the same program.

Meanwhile, a new mortgage-refinancing program offered by Freddie as part of the Obama administration's foreclosure-prevention plan doesn't allow borrowers to shop around for the lowest fees. Any borrower with a Freddie-backed loan who wants to refinance under the program needs to do so through the company that services his current loan.

Fannie Mae, said borrowers with Fannie-backed loans will be able to seek refinancings under the program from more than 30,000 lenders nationwide. While Fannie is letting borrowers shop around, those deemed a higher risk are hit with fees that can total 3% or more of the loan balance. Freddie's maximum fee on these refinancings is 0.25%.

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Mortgage Investors Call for Changes in Rescue Plan

Investors who hold billions of dollars of residential mortgage-backed securities are pressing the Obama administration to make changes in its housing rescue plan.

Many of the four million borrowers the administration hopes to help through its loan-modification program have mortgages that were packaged into securities and sold to investors world-wide. Roughly $1.9 trillion of mortgage loans outstanding as of Dec. 31 had been packaged into securities that don't carry government backing, according to Inside Mortgage Finance. Thus far, servicers have been more reluctant to modify those loans than mortgages they own.

Home-equity loans and other second mortgages are an issue because such debt is junior to first mortgages. Some investors and analysts say that mortgage servicers may find it in their own financial interest to modify the first mortgage and not touch the related home-equity loan or line of credit.

Roughly half of delinquent subprime borrowers also have a second mortgage, according to Credit Suisse Group.

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Home-value insurance?

EquityLock Financial, a company based in Utah, offers contracts – as opposed to insurance policies – that agree to pay homeowners if they lose money when they sell later, an amount equal to the percentage of the downturn of their local market, based on an agreed-upon home-price index.

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Who knows the right price, Martha?

Homebuyers, home sellers, and real estate pros don't always agree on what a property is worth, and many buyers thinking that sellers and licensees set the price too high. According to a survey by HomeGain.com Inc., 63 percent of homeowners believe the price their practitioner recommended was too low. About 45 percent of sellers think prices should be 20- to 30-percent higher, and 14 percent believe their home should be priced 30 percent higher.

Meanwhile, 21 percent of homebuyers say homes are overpriced up to 10 percent; 32 percent say prices are 10 percent to 20 percent too high; and 6 percent say homes are overpriced by at least 20 percent. Only 18 percent of potential homebuyers believe properties are priced fairly.

News Snippets

Neustar has been named to Forbes Magazine’s “25 Fastest Growing Tech Companies” list for 2009.

No. 17 NeuStarNeustar provides clearinghouse and directory services to the communications industry. Customers include communications service providers, Internet service providers, mobile network operators and cable television operators.

(note to Martha) Neustar is the registry for the .us ccTLD in our domain biz. Oh, they are also the TLD registry for .biz

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Household Net Worth Sees Record Fall

The net worth of American households fell by the largest amount in more than a half-century of record keeping during the fourth quarter of last year.

The Federal Reserve said Thursday that household net worth dropped by a record 9 percent from the level in the third quarter. The decline was the sixth straight quarterly drop in net worth and underscored the battering that U.S. families are undergoing in the midst of a steep recession with unemployment surging and the value of their homes and investments plunging. Net worth represents total assets such as homes and checking accounts minus liabilities like mortgages and credit card debt.

Family net worth had hit an all-time high of $64.36 trillion in the April-June quarter of 2007 but has fallen in every quarter since that time. The record 9 percent drop in the fourth quarter pushed total net worth down to $51.48 trillion, a level that is 20 percent below the third quarter 2007 peak.
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Can Marijuana Help Rescue California's Economy?

Democratic State Assembly member Tom Ammiano introduced legislation last month that would legalize pot and allow the state to regulate and tax its sale — a move that could mean billions for the cash-strapped state.

Pot is, after all, California's biggest cash crop, responsible for $14 billion in annual sales, dwarfing the state's second largest agricultural commodity — milk and cream — which brings in $7.3 billion annually.

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CRAMDOWN UPDATE

The bankruptcy loan modification legislation, a key part of the president's housing policy, is (get used to it) held up in the senate while leadership looks for sixty votes to break a filibuster of the bill. The legislation, which is opposed by the mortgage loan industry, would allow bankruptcy judges to modify primary home loans so borrowers can afford to pay them; currently, primary home loans are the only loans that judges cannot adjust during bankruptcy proceedings.

A Democratic senate aide, who wouldn't speak on the record while negotiations are on-going, tells me that Senator Dick Durbin, who is managing the legislation, needs to find a few Republicans to support cloture. After that, the bill will come to the floor -- it could be as soon as next week or after the Easter recess. More from the aide...

We are working with groups on all sides, major lenders, credit unions, Democrats and Republicans in an effort to try and get this language to a place where we can pass it. Opponents of the bill want to narrow it to only sub-prime mortgages, and that's pretty much a non-starter. Every argument opponents of the bill have offered is the same old song and dance, same stuff we've been hearing from the mortgage lenders for years. Doing this will increase rates across the board. Not true. Doing this will cause a flood of people going into bankruptcy, not true. Bankruptcy attorneys who support the bill and [Attorney Generals] who support the bill all say that bankruptcy is not a good thing, nobody wants to declare bankruptcy, [but this bill is necessary]. The opponents are not offering any alternatives.

Negotiators have already agreed to limit the provision to only mortgages issued at the time the bill is enacted, so future mortgage holders couldn't take advantage of the provision.

The usual suspects in the GOP are being approached -- Spector, Snow and Collins, as well as less frequently seen compromise players like Tennessee's Bob Corker and Florida Senator Mel Martinez. Martinez, whose state has one of the worst foreclosure rates, should be receiving a lot of pressure from his constituents to get behind the legislation.

Thurs Mar 12 2009 News Snippets

Foreclosures up 30 percent in February

Despite halts on new foreclosures by several major lenders, the number of households threatened with losing their homes rose 30 percent in February from last year's levels.

Nationwide, nearly 291,000 homes received at least one foreclosure-related notice last month, up 6 percent from January.

While foreclosures are highly concentrated in the Western states and Florida, the problem is spreading to states like Idaho, Illinois and Oregon as the U.S. economy worsens.

At least for the foreseeable future, it's going to be pretty ugly.

Two states that contributing to the increase were Florida and New York, where temporary bans on foreclosures ended.

But other states are moving to enact similar measures. On Wednesday the Michigan House approved legislation that would give homeowners facing foreclosure a 90-day reprieve. The legislation now goes to Michigan's Republican-led Senate, where its future is unclear.

While the number of foreclosures continue to soar nationwide, banks have held off listing properties for sale, Sharga said. There were around 700,000 such properties nationwide at the end of last year, making up a "shadow inventory" of unsold homes that could drag the housing crisis out even longer.

It's going to take us longer than you might anticipate to burn through the inventory of distressed properties.

The faltering economy, driven down by the collapse of the housing bubble, is causing the housing crisis to spread. Nearly 12 percent of all Americans with a mortgage — a record 5.4 million homeowners — were at least one month late or in foreclosure at the end of last year, according to the Mortgage Bankers Association. That's up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007.

More than 74,000 properties were repossessed by lenders in February as the worst recession in decades, falling home values and stricter lending standards continue to sap the U.S. real estate market.

Nevada, Arizona, California and Florida had the nation's top foreclosure rates. In Nevada, one in every 70 homes received a foreclosure filing, while the number was one every 147 in Arizona. Rounding out the top 10 were Idaho, Michigan, Illinois, Georgia, Oregon and Ohio.

Among metro areas, Las Vegas was first, with one in every 60 housing units receiving a foreclosure filing. It was followed by the Cape Coral-Fort Myers area in Florida and five California metropolitan areas: Stockton, Modesto, Merced, Riverside-San Bernardino and Bakersfield.

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Martha, Can you say TARP?

Lawmakers voiced frustration with what they said was a continued lack of clarity from the Treasury on how banks were spending money they have received under the Troubled Asset Relief Program.

Subcommittee chairman Dennis Kucinich, D-Ohio, complained that at least three financial institutions that have received TARP money — Citigroup Inc., Bank of America Corp., and JP Morgan Chase and Co. — have made billions of dollars in foreign investments.

"If the banking system is in serious enough trouble to require massive amounts of federal support, shouldn't that federal support be channeled to the domestic economy?" Kucinich asked.

Within weeks, Treasury Secretary Timothy Geithner plans to unveil a new public-private investment fund that will be used to purchase illiquid assets, such as toxic mortgage related securities at the heart of the financial crisis. Kashkari said the private sector has voiced interest in the program and said he expects pension funds and mutual funds that hold retirement savings to be among the major investors.

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“Only Thing We Have to Fear Is Fear Itself”: FDR’s First Inaugural Address

Martha, how people "feel" about the potential for recovery affects how fast we actually do recover.

Americans Still See Economic Recovery As A Long-Term Process

Sixty-four percent (64%) of Americans say the economy will be stronger in five years than it is today, while just 17% think it will be weaker by then. Only 42% say the economy will be stronger in a year's time, and nearly as many (37%) expect it to be weaker.

Just 12% believe the stock market will recover within a year. Twenty-one percent (21%) say it will take two years, and 13% believe three years are needed. The plurality of adults (37%) predict it will take more than three years for the market to come back.

Thirty-eight percent (38%) also believe it will take more than three years for housing prices to recover. Some are more optimistic: Eight percent (8%) believe housing prices will come back within a year, 18% say two years, and 19% three years.

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America lost 2.5 million millionaires in 2008

The financial crisis has weighed heavily on American households, and millionaires are no exception, according to a report released Wednesday.The number of American households with a net worth of $1 million or more, excluding the value of their primary residence, fell 27% to 6.7 million in 2008 from an all-time high of 9.2 million the year before.

Affluent households, defined as those with a net worth of $500,000 or more, declined 28% to 11.3 million from 15.7 million.

Even the very rich have not been immune. Households worth $5 million or more, excluding primary residence, fell 28% to 840,000 last year from 1.16 million households in 2007.

The culprit is not just the stock market, which we all know has dropped precipitously, but broad declines in the asset classes available to the nation's wealthiest investors.

The average value of investments in their principal residence, mutual funds, managed accounts and IRAs all fell in 2008 versus 2007.

Millionaire households estimated that the financial crisis dented their net worth by between 30% and 40%.

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Lost a few Billionaires as well.

Today there are 793 people on our list of the World's Billionaires, a 30% decline from a year ago.
Of the 1,125 billionaires who made last year's ranking, 373 fell off the list--355 from declining fortunes and 18 who died. There are 38 newcomers, plus three moguls who returned to the list after regaining their 10-figure fortunes. It is the first time since 2003 that the world has had a net loss in the number of billionaires.

The world's richest are also a lot poorer. Their collective net worth is $2.4 trillion, down $2 trillion from a year ago. Their average net worth fell 23% to $3 billion.

Mon Mar 9 2009 News Snippets

Boyd Supports Bill To Help Florida Families Avoid Foreclosure

Congressman Allen Boyd (D-North Florida) voted in favor of legislation last week that will help responsible families, who are struggling to make ends meet, stay in their homes.

The Helping Families Save Their Homes Act (H.R. 1106) will offer an alternative to foreclosure by providing incentives to lenders to modify loans and allowing a court of last resort the ability to adjust existing mortgages.

This legislation improves the Federal Housing Administration’s Hope for Homeowners program to protect servicers that take part in loan modification programs from investor lawsuits, while providing incentives for lenders to modify loans to avoid a more costly foreclosure. The bill also allows, as a means of last resort, homeowners to permit a bankruptcy judge the authority to reduce principal, extend the repayment period, and adjust the terms of the mortgage, provided the homeowner has exhausted all steps to modify their loan outside of bankruptcy and have run out of other options.

The Helping Families Save Their Homes Act passed the House of Representatives on March 5, 2009. It has now been referred to the Senate for consideration.
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LICENSE RENEWAL

Only 27 days remain for real estate pros who must renew their license in the first quarter, which ends March 31. To maintain a license, post-licensing or continuing education requirements must be completed and renewal fees paid, even for licensees operating with a suspended license. According to DBPR, the department now has a "100% Post and Continuing Education Monitoring database." If your required education is not completed (or completed but not reported), DBPR will deny license renewal. Need to check your status to see if your license expires March 31? The DBPR Web site allows visitors to check licensee status and license renewal expirations online at:

https://www.myfloridalicense.com/wl11.asp?mode=0&SID
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Cramdownblog.com Available

Fri Mar 6 2009 News Snippets

Reading about a depression is depressing. What can I do about that? Hey, don't worry. Be happy. It's hard to be grateful for what you have when your 401(k) lost most of its value and you have no savings, but it's probably the best thing you can do for your mental health. Sonja Lyubomirsky, professor of psychology at the University of California-Riverside.

That said Martha, take a gander at some of these notes / stats.

The jobless rate jumps to 8.1% as employers cut another 651,000 jobs in February.

Harvard University economist Robert Barro has found that big market drops raise the probability of an outright depression, defined as a GDP drop of 10 percent or more.

Home prices at the national level have already plunged nearly 27 percent from their 2006 peaks.

Richard Moody, the chief economist of Mission Residential, expects values to drop another 10 to 15 percent before bottoming out in the middle of 2010.

If the ongoing recession evolves into a full-blown depression, home prices could fall an additional 25 to 30 percent

now that their 401(k) is a 201(k)

It will take the typical employee with 20 or more years on the job an extra 1.8 years working to recover recent market losses, according to calculations by Jack VanDerhei, research director of the Employee Benefit Research Institute.

Factory orders also slipped for the sixth month in a row in January, the Commerce Department reported.

Labor Department said new unemployment claims last week totaled 639,000

Florida, where 60 percent of homeowners who have a subprime ARM are at least one payment behind and one in five of all mortgage holders aren't current.

economic model from the Federal Reserve Bank of New York predicts the recession, already 16 months old, will end this year.

White House economists are predicting a strong rebound over the next three years.

private forecasters are far gloomier, predicting tepid growth going forward for several years and unemployment rising to at least 10 percent next year and staying elevated.

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Mortgage Delinquencies Hit New Record

A stunning 48 percent of the nation's homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and the rate for homeowners with all mortgage types hit a new record

A record 5.4 million American homeowners with a mortgage of any kind, or nearly 12 percent, were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association reported. That's up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007.

That said,

Thurs Mar 5 2009 News Snippets

12 pct. are behind on mortgage or in foreclosure

A stunning 48 percent of the nation's homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and the rate for homeowners with all mortgage types hit a new record, new data Thursday showed.

But that's not the worst of it.

The reckless lending practices in states like Florida, California and Nevada that were the epicenter of the housing crisis are no longer driving up the nation's delinquency rate. Instead, the foreclosure crisis now is being fueled by a spike in defaults in states like Louisiana, New York, Georgia and Texas, where the economies are rapidly deteriorating and thousands are losing their jobs.

A record 5.4 million American homeowners with a mortgage of any kind, or nearly 12 percent, were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association reported. That's up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007.

The only bright spot in the report is the devastation wrought by subprime ARMs appears to be waning. Their 30-day delinquency rate continues to fall and is at the lowest point since the first quarter of 2007.

That offers little reassurance to Florida, where 60 percent of homeowners who have a subprime ARM are at least one payment behind and one in five of all mortgage holders aren't current.
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House approves mortgage revision

Struggling homebuyers would get new leverage to force banks to renegotiate their mortgages under a bill that passed the House on Thursday on a vote of 234-191.
Centrist Democrats received concessions from Speaker Nancy Pelosi, California Democrat, on the original bill, winning changes to require borrowers to make more efforts to rework their loans and monthly payments with lenders before resorting to bankruptcy courts. The bill faces an uncertain fate in the Senate, which is expected to consider it in the coming weeks.

Underscoring the extent of the housing crisis, the Mortgage Bankers Association said Thursday that nearly 12 percent of U.S. homeowners were in foreclosure or behind on their payments at the end of 2008.

The trade group said mortgage delinquencies were the highest in records dating to 1972, while loans in foreclosure rose to 3.3 percent, also an all-time high.

Senate Democrats, led by Richard J. Durbin of Illinois, recently won agreement from industry giant Citigroup for a bankruptcy "cram-down" provision even more restrictive than the House measure, but virtually no other major bank or industry lobby has signed on to the Citigroup plan.

Weds Mar 4 2009 News Snippets

Feds Detail Plan to Stem Foreclosures

Rules for the Obama mortgage rescue plan were released today. The plan focuses on two distinct groups of borrowers. The first group is made up of borrowers who are delinquent and who want to modify their loans so they'll be more affordable. To qualify for loan modification help, you must have lost your job, suffered a pay cut or face higher mortgage payments.

To get help, you will need to meet the strict financial hardship guidelines of Fannie Mae or Freddie Mac.

The second group of people who will be helped consists of those seeking to refinance mortgages even though the equity in their home is lost. This group will be able to refinance even if they need to borrow as much as 105% of their home's current market value. Prior to the rescue with current tight lending conditions, people wanting to refinance could only do so if they had 20% of equity in their home and could borrow a maximum of 80% of the loan value. This rescue will help these people get out of higher interest rate mortgages. Refinancers will not have to meet the strict hardship guidelines.

Modification applicants will face the stricter rules and have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify. Help will be provided only to people living in their homes and with an unpaid principal balance of up to $729,750. Also, you will need to go for counseling if your total household debt -- including auto loans, credit cards and alimony -- totals more than 55% of your income.

Your loan must be originated before Jan. 1, 2009 to qualify for modification. Modification will go through 2012.

Hardship guidelines require people to prove they experienced a decrease in income or an increase in expenses that caused the delinquency. In other words, those who simply bought more house than they could afford would not qualify for loan modification.

Lenders could reduce a borrower's interest rate to as low as 2 percent for five years. Rates would then rise to about 5 percent until the mortgage is repaid.
Borrowers are only allowed to have their loans modified once.

Currently Fannie Mae and Freddie Mac, which were seized by the government in September, own or guarantee $5.2 trillion of the $12 trillion residential home loan market. After the Obama loan program is completed, the market will be more strongly tilted toward government ownership or loan guarantee as loans owned in the private marketplace shift to government ownership or guarantee.

Sheila Bair, Chairman of the FDIC, said in a speech yesterday about the modification program, "Servicers are ready for it. Even some of the investors are starting to soften up." Servicers will be paid $500 for each loan they modify and as much as $1,000 for three years after modification when the borrower stays current. Loan holders will get a $1,500 incentive for modifying loans for borrowers at risk. Borrowers who stay current in their modified loans for five years will get a $1,000 incentive per year toward their loan principal.

Contact loan servicer to find out if mortgages are held by Fannie or Freddie. The two mortgage finance companies own or guarantee almost 31 million home loans — more than half of all U.S home mortgages.
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FHA Mortgage Update

The importance of the FHA (Federal Housing Administration) in the home mortgage market has changed markedly over the years. This has been due less to changes in the FHA itself than to changes in the broader market in which it operates.

In the early 1990s, FHA had about 15 percent of the home-purchase market. In subsequent years through 2006, FHA lost business to the growing subprime market, which took many borrowers who could have gone FHA. In addition, FHA lost business to the prime conventional market, which developed and aggressively merchandised option ARMs and interest-only products, as well as reduced documentation underwriting, none of which FHA offered. In 2006, FHA's share of the purchase market had fallen to less than 4 percent.

Then came the financial crisis. With home prices declining and defaults rising, the subprime market largely disappeared, option ARMs declined to a trickle, and documentation requirements on prime conventional loans were substantially tightened. In addition, FHA loan limits were raised materially in 2008, and again in 2009. In early 2009, FHA's market share of new purchases was back to about 15 percent, and its share of refinances was substantially higher.

The FHA Market Niche: An FHA borrower in early 2009 1) Doesn't need a loan larger than the FHA maximum in the borrower's county; 2) Can't put more than 3.5 percent down, which is the FHA requirement; 3) Is not eligible for a VA loan, which allows zero down; and 4) Can't be approved for a conventional loan but can be approved under FHA's more liberal underwriting rules.

A borrower who can put 10 percent down on a loan smaller than the FHA maximum and can be approved for a conventional loan will usually do better with the conventional loan, but there can be exceptions.

FHA Loan Limits: The loan limits on FHAs effective until year-end 2009, established on a county basis, were the same as those applicable to Freddie Mac and Fannie Mae. On a one-family house, they ranged from $271,050 to $729,750 in 76 higher-price counties. Loan limits on 2-4 family houses are higher. On HECMs (reverse mortgages), the maximum was raised to $625,500 for the balance of 2009. You can find the limit applicable to any particular county here.

Down Payment Requirements: FHA borrowers in some cities, counties, or states have access to special programs that eliminate the need for a down payment by offering second mortgages at favorable terms. Usually no payments are required on the second mortgage until the house is sold. The public agencies offering these programs have their own eligibility rules that are independent of FHA. The only generally available zero-down loans are VAs and USDA loans in rural counties.
Underwriting Requirements: FHA will accept lower credit scores than are acceptable on prime conventional loans, and are more forgiving of past mistakes.

FHA will forgive a bankruptcy after only two years, and a foreclosure after three years.

Mortgage Insurance: FHA borrowers pay a monthly mortgage insurance premium of ½ percent per year (.55 percent on loans with less than 5 percent down), and an upfront premium of 1.75 percent, which is almost always included in the loan amount. In contrast, most conventional loans have only a monthly premium which is higher than the FHA monthly premium but disappears at 20 percent down. Because of the higher mortgage insurance premiums, an FHA will be more costly to a borrower when the rate and points are the same.

Differences in Rate and Points Between FHAs and Conventionals: In shopping lenders who offer both FHA and conventional loans, I have found that, in many cases, the rate and points quoted on FHAs are higher. Lenders often charge larger markups on FHAs, partly because they are more costly to originate, and also because "they can." There isn't as much competition for FHAs because a large proportion of brokers and smaller lenders don't offer them.

Some lenders quote the same or even lower rates and points on FHAs. This kind of market fragmentation, appears to be a consequence of the financial crisis. It places an added burden on borrowers shopping for the best deal, as if that weren't already difficult enough.

Comparing Prices: Borrowers should be able to compare the all-in costs of an FHA and a conventional by comparing their APRs. The APR takes account of the rate, points, other lender fees, and all mortgage insurance premiums. Unfortunately, the APR assumes that all loans run to term, which makes it deceptive for any borrower who expects to have the loan for less than 10 years.

Furthermore, most of the lenders are not calculating the APR on FHAs correctly. The most common mistake is ignoring the upfront mortgage insurance premium, which their software was never programmed to accommodate.

Tues Mar 3 2009 News Snippets

Housing "Cramdown" vote may happen Thursday Obamas "Big Stick"

The Helping Families Save their Homes in Bankruptcy Act of 2009, approved by a U.S. House committee on Feb. 24, is headed to the full House for consideration.

The bill would allow bankruptcy judges to order banks to reduce mortgage principal amounts or restructure terms — a practice known as a “cramdown” — for homeowners that file for Chapter 13 bankruptcy protection.

Would let federal judges lengthen loan terms, cut principal payments and reduce interest rates for borrowers in Chapter 13 bankruptcy protection.

Would try to ensure that bankruptcy court is a last resort for strapped homeowners who have first tried to work through a voluntary modification with the lender or servicer of their mortgage.

Democrats have said the provision, known as “cramdown” in the financial services industry, is a necessary way to force lenders to write down the principal and interest payments on mortgages for primary residences.

The concern is we want to ensure that the people who get relief have tried other avenues.

Don’t want people to get loan modifications in bankruptcy if they could get it outside of bankruptcy.

The language that was circulated on Tuesday includes a provision saying the court should consider whether the modification offered to a homeowner is a “good faith” effort to meet the standards set up by Obama’s housing plan as a “qualified loan modification.” The main component of that plan would mean that the modification would result in the homeowner’s first mortgage payment equaling no more than 31 percent of his income, according to draft language circulated on Tuesday afternoon.

Borrowers would also need to certify that they’ve provided their income, expenses and debts to the mortgage holder.

Judges would be required to use federal appraisal guidelines to calculate home values to determine whether a loan is “under water,” which is when the mortgage balance owed exceeds the property’s worth. To qualify, the loan must be unaffordable to the borrower, not just under water, according to the summary. Borrowers would also need to share a portion of the price gains with lenders if the house is sold during the bankruptcy plan, according to the summary.

About 350,000 additional U.S. households likely would file for Chapter 13 in the 10 years after the measure becomes law, according to estimates published Feb. 23 by the Congressional Budget Office. Even without the change, the office expects Chapter 13 filings to rise 13 percent this year to nearly 400,000.

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Unlock your IRA to take advantage of Bargain Priced Real Estate with a "self-directed" IRA

IRA (Individual Retirement Account) holders can use their retirement funds to purchase real estate before the age of retirement without getting hit with taxes or penalties. In addition, you can realize real estate investment profits tax-deferred in your retirement account!

A self-directed IRA LLC gives you even more control, you get to use a checkbook tied to your retirement funds. "The checkbook control of a self-directed IRA LLC enables you to write checks on the spot to purchase foreclosures, tax liens, and other timely investments.
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Citigroup to lower some mortgage payments

Citigroup Inc. said Tuesday that it will lower mortgage payments for some homeowners to an average of $500 a month for three months as part of a new program to help the unemployed.

The struggling bank makes the move as President Barack Obama looks to lenders to adjust the way loans are handled.

Citigroup's new mortgage efforts also come on the heels of the latest attempt to bail out the company, which includes the U.S. government's exchange of up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The deal between the Treasury Department and Citigroup represents the third rescue attempt for the bank in the past five months.

Unemployed homeowners who may qualify for assistance from Citigroup under the Homeowner Unemployment Assist program include those that are 60 days or more past due on their mortgages or in foreclosure and can pay the reduced amount. Customers must also have a first mortgage loan that is owned and serviced by CitiMortgage Inc. and conforms to government sponsored enterprise limits. The house must also be the customer's primary residence, with homeowners meeting all insurer and guaranty requirements.

"Our Homeowner Unemployment Assist program is intended to serve as a bridge toward a longer-term solution, helping homeowners stay in their homes and in their communities while they get their feet back on the ground,"

Citigroup predicts thousands of homeowners may be eligible for the program over the next two years.

Those that partake in the program and are still without jobs after three months will have their mortgages handled on a case-by-case basis to come up with the best payment option, Citigroup said. Others that find work within the three-month period can go back to paying their original mortgage amount or receive a long-term loan modification if qualified.

The program may also be expanded to include customers that are in early delinquency stages or are current on their mortgage at a later point in time once an initial evaluation of the program is complete.

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4 ways stimulus helps homeowner, buyer

A refundable first-time homebuyer tax credit of up to $8,000 is the centerpiece of four housing incentives found in the 2009 American Recovery and Reinvestment Act.

Lawrence Yun, chief economist for the National Association of Realtors, predicts homebuyers will purchase an additional 300,000 homes in 2009 as a result of the tax credit.

"The impact will likely not be felt for at least three or four months, because it generally takes buyers that long to qualify for a mortgage and search for a home," says Yun.

The new credit improves on a first-time homebuyer credit passed in 2008. That credit had to be paid back over a period of 15 years, making it more of a loan than a true credit.

"We think this year's tax credit will certainly have a much bigger impact because it is a true tax credit which is also refundable," Yun says. "For instance, if you owe $1,000 in taxes and qualify for the first-time homebuyers tax credit, you will receive a tax refund of $7,000."

Yun believes activity spurred by the new credit will help bring down housing inventory and stabilize prices.

Rules for 2009 first-time homebuyers tax credit

Does not have to be repaid unless the home is sold within three years.
Applies only to first-time homebuyers, defined as those who have not owned a home within the previous three tax years.

Available only for homes purchased between Jan. 1, 2009, and Dec. 1, 2009.

Restricted by income; phases out for individuals with an adjusted gross income of $75,000 or above and for married couples with a combined adjusted gross income of $150,000 or above.

Tax credit is for up to 10 percent of the purchase price, up to a maximum of $8,000. For example, a buyer of a $150,000 home could receive a tax credit of a maximum of $8,000, while a first-time buyer of a $70,000 home would be eligible for a tax credit of $7,000.

The credit can be taken on 2008 taxes even when the purchase is made in 2009.
a provision allowing homebuyers to claim their credit immediately.

Homebuyers can take advantage of this filing exception in one of three ways:

closing on the home prior to April 15, 2009, getting an extension to file taxes later in the year or filing an amended return.

Some state housing programs are introducing programs that allow homebuyers to access the tax credit money at settlement.

For example, the Missouri Housing Development Commission's Tax Credit Advance Loan Program allows qualified homebuyers to obtain a no-interest second mortgage worth up to 6 percent of the home purchase or $6,750, whichever is less.

This second mortgage can be applied to down payment and closing costs, then repaid with the proceeds from the income tax credit.

While the tax credit is meant to cover 10 percent of the purchase price (up to $8,000), an $8,000 credit covers only about 4 percent of the purchase price of a home with the 2008 national median single-family price of $197,000.

Meanwhile, more affluent homeowners will not be able to take advantage of the new credit, which phases out for individuals with an adjusted gross income of $75,000 or above and for married couples with a combined adjusted gross income of $150,000 or above.

Another shortcoming of the income limitations. Some of the same places where the housing market has been hit hardest, such as Southern California, are also communities where incomes are high.

Because of the income caps, homebuyers in such markets -- which are most in need of a boost in sales -- will be unable to take advantage of the credit.

Other incentivesIn addition to the first-time homebuyer tax credit, the stimulus legislation includes three more measures that could have a positive impact on homeowners, homebuyers and home sellers.

Expansion of the home improvement tax credit. The tax credit for making energy-efficient home improvements has been raised to 30 percent of the cost of the improvements, up to a maximum of $1,500.

Eligible improvements -- which must meet the standards established by the federal government -- include replacing doors and windows, adding insulation, and installing new heating and air conditioning systems and water heaters.
The fact that these incentives are "credits" rather than "deductions" makes them more appealing.

It is well worth taking advantage of a tax credit (as opposed to a deduction), since you get 100 percent back on your taxes from a credit. "In this case, the homeowners will also have the benefit of reduced utility bills in future years."
It could motivate some homeowners to make energy efficiency improvements. But he also cautions that people who fear unemployment are less likely to take advantage of the incentive.

But people need to be able to pay for these improvements upfront.

Higher FHA reverse mortgage loan limits. Loan limits for reverse mortgages insured by the Federal Housing Administration have been increased to $625,500 across the country.

"The loan limits for reverse mortgages have been too low for some time, so this increase could have a big impact.

The previous limit was $417,000 across the country, which meant that in markets where homes are more costly --such as the San Francisco area, New York City and its suburbs, and Washington, D.C. -- FHA-insured reverse mortgages were not available for many homes.

Many private reverse-mortgage programs have disappeared, making FHA loans virtually the only game in town.

The higher FHA reverse-mortgage limits are especially important in light of the "HECM for Purchase" program passed into law as part of 2008 federal stimulus legislation.

The program -- which took effect Jan. 1 -- allows older homeowners to use the proceeds from a reverse mortgage to purchase a new principal residence. To qualify for a new purchase reverse mortgage, buyers need to be seniors over age 62 and presently own a home.

Senior citizens who want to move have been stuck in this market, but now they can take a reverse mortgage on a new purchase and pay it off when their existing home sells. They don't have to wait until their current home sells to move.

The changes to reverse mortgage rules, which took effect Jan. 1, could improve markets in places popular with retirees, such as Florida and Arizona.

Higher FHA and conforming loan limits. The maximum FHA loan limit for high-cost areas has been restored to the 2008 level of $729,750.

Stimulus legislation passed by Congress in the first half of 2008 temporarily raised the FHA loan cap from $362,790 to $729,750 in cities where housing is particularly expensive. However, the higher loan limit expired in January and was replaced by a lower loan limit of $625,000.

The stimulus package restores the 2008 limits through the rest of 2009. This will help keep a greater percentage of loans in expensive cities (such as New York and San Francisco) in the "conforming loan" category.

Conforming loans are eligible for guarantees from mortgage giants Fannie Mae and Freddie Mac. Such guarantees help reduce mortgage rates on conforming loans. The guarantees also make it easier for first-time and low-income borrowers to qualify for mortgage loans.
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Pending home sales fell 7.7 pct to new low in Jan.

The number of homebuyers who agreed to purchase an existing home sank to a new low in January as economic woes turned them away from the staggering housing market, the National Association of Realtors said Tuesday.The group's seasonally adjusted index of pending sales contracts fell 7.7 percent to 80.4 in January from a downwardly revised December reading of 87.1.January's reading was far worse than the 85.1 economists expected, according to Thomson Reuters, and came in below the previous record low of 83.1 in November.

The index, which started in 2001, tracks signed contracts to buy previously owned homes. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.
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Fed launches new $200B consumer credit program (dubbed the Term Asset-Backed Securities Loan Facility)

The Federal Reserve on Tuesday rolled out a much-awaited program aimed at boosting the availability of credit to consumers and small businesses. The Fed will lend up to $200 billion to spur consumer lending — for autos, education, credit cards and other consumer debt. The money will be used to provide financing to investors to buy up the debt.

Participants — companies and investors that pledge eligible collateral to back the loan — must request the new government loans by March 17. The Fed will provide the three-year loans on March 25. The Fed said the program has the potential to generate up to $1 trillion of lending for businesses and households.

Mon Mar 2 2009 News Snippets

Dow industrials fall below 7,000; lowest since 97

The worries pushed the blue chips below 7,000 for the first time since Oct. 28, 1997 and finishing at 6,763, lowest since 1997. The credit crisis and recession have now slashed half the average's value since it hit a record high over 14,000 in October 2007.

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Why Hair Goes Gray

Scientists may have figured out why hair turns gray, and their finding may open the door to new anti-graying strategies.

New research shows that hair turns gray as a result of a chemical chain reaction that causes hair to bleach itself from the inside out.
The process starts when there is a dip in levels of an enzyme called catalase. That catalase shortfall means that the hydrogen peroxide that naturally occurs in hair can't be broken down. So hydrogen peroxide builds up in the hair, and because other enzymes that would repair hydrogen peroxide's damage are also in short supply, the hair goes gray.