Hope now for the "HOPE NOW" program?

Obama Pushing Loan Modifications

The Obama administration, scrambling to get its main housing initiative on track, extracted a pledge from 25 mortgage company executives to improve their efforts to assist borrowers in danger of foreclosure.

In an all-day series of meetings Tuesday at the Treasury Department, government officials reached a verbal agreement with the executives for a new goal of about 500,000 loan modifications by Nov. 1 and stressed the program's urgency.

The sessions came amid concerns that the Obama administration will fall far short of its original goal of helping up to 3 million to 4 million troubled borrowers with modified loans.

As of this week, only about 200,000 borrowers were enrolled in three-month trial loan modifications ...A "verbal agreement"?

Counting the number of mods might make for useful PR, but some mods are more effective than others. A capitalization of missed payments and fees, along with a rate reduction and/or extended term, are the most common modifications. But for homeowners with significant negative equity that is just "extend and pretend" and leads to a high redefault rate and just postpones foreclosure.

NY Times

Today Show with Matt Lauer and Al Roker

Today Show from Key West!

The visit to Key West is part of the show's "Today Show Takes a Vacation," with Matt Lauer and Al Roker here. I am downtown with them as I write this and will give you a report later. For now, just turn on your TV. ;-)

Martha on KONK AM Today!

Martha Robinson will be on KONK AM radio today at 12 noon EST, covering some of the more interesting topics impacting both the national and local (Florida Keys) real estate markets.

Locals can tune in to the station at 1680 on their AM dial, and the world can also listen in via the webcast by clicking KONK AM.

A little Bailout tune

Banks new dance "the loan modifications drag"

About 325,000 homeowners have been offered mortgage modifications since the Obama administration launched its housing rescue program in March — far fewer than the number who have fallen into foreclosure in that time.

The program has been plagued by homeowner complaints about long delays and misleading information from mortgage servicers.

The administration is prodding the 27 participating servicers to ramp up their progress by adding staff, expanding call centers and improving training. The servicers have been summoned to a meeting with top officials in Washington on July 28, and the government intends to begin publishing monthly reports on individual servicers' performance by Aug. 4.

Under the program, homeowners who are eligible for assistance are offered new mortgage terms, and if they agree, they enter a three-month trial phase to determine if they can keep up their reduced payments. If they stay current, the modification becomes permanent.

About 160,000 modifications are now in either the trial or the permanent stage. The rest — 165,000 — are in the offer stage. There are no numbers yet on how many modifications have successfully passed the trial phase.

That number is still small compared with foreclosures. There were 1,155,299 properties with foreclosure filings from March through June, according to RealtyTrac.

During a hearing Thursday before the Senate banking committee, Herb Allison, who oversees the Treasury Department's stimulus program as assistant director for financial stability, said there are more to come.

Even if (the housing rescue plan) "is a total success, we should still expect millions of foreclosures, as President Obama noted when he launched the program in February," Allison testified.

Some angry lawmakers criticized the progress. Sen. Christopher Dodd, D-Conn., the committee's chairman, said he was "frustrated" and called the pace of foreclosures "disgraceful."

"Why does the national foreclosure mitigation program tell us homeowners are waiting an average of six to eight weeks ... for a response?" Dodd said.

Some economists are questioning the effectiveness of the Obama administration's program.

"The reality of loan modifications is that it's labor intensive," says Joel Naroff of Naroff Economic Advisors. "The ability or willingness of financial institutions to do it raises real questions about how many loans can be modified. Besides, you can't prevent foreclosures when people don't have a job."

By Stephanie Armour, USA TODAY

Mortgage rates rise after falling for 3 weeks

Rates for 30-year mortgages have edged up after falling for three-consecutive weeks.

The average rate for a 30-year fixed mortgage this week was 5.3 percent, up from 5.14 percent a week earlier.

Rates on 30-year mortgages fell to a record low of 4.78 percent earlier this year, but then rose to nearly 5.6 percent last month after yields on long-term government debt, which are closely tied to mortgage rates, climbed.

Though the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since prospective buyers would be able to borrow less money and might decide to hold off on their purchases.

The average rate on a 15-year fixed-rate mortgage rose to 4.68 percent, up from 4.63 percent last week, according to a Freddie Mac survey.

Rates on five-year, adjustable-rate mortgages averaged 4.74 percent, down from 4.83 percent a week earlier. Rates on one-year, adjustable-rate mortgages edged up to 4.77 percent from 4.76 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for all loans in Freddie Mac’s survey except for one-year adjustable rate mortgages, which averaged a fee of 0.6 percent.

Banks purposely slowing foreclosure sales?

On the surface, South Florida’s home prices appear to be bottoming out, but a dip in the number of bank-owned properties for sale is leading analysts to conclude that lenders may be slowing the flow of foreclosures to the market as a way of stanching further price declines.

Monthly numbers from the Florida Association of Realtors show that South Florida existing-home sales continued to rise in June, as bank-owned homes and short-sales attracted bargain hunters from across the country.

Median single-family home prices were down again since June of last year. But they have strengthened from April prices.

The apparent leveling out of prices is being attributed to two things: a shrinking number of distressed homes entering the market and a larger share of high-priced homes changing hands.

Beneath the surface

Listings of bank-owned homes and short-sales – in which a home is sold for less than the mortgage owed – fell from 44 percent in May to 39 percent in June. And sales of these so-called distressed properties dropped from roughly 60 percent in May to 54 percent in June.

Fewer well-priced foreclosures on the Florida market are now routinely sparking bidding wars.

Bank-owned homes in hot condos and neighborhoods are going under contract within days.

Lenders, some real-estate lawyers and analysts believe, may be behind the trend as they either inadvertently drag out the foreclosure process or hold back the release of foreclosures for sale to the public.

Either way, the smaller numbers could be curbing further price declines, since analysts say home prices will not recover until the high numbers of distressed properties are cleared from the market.

“There is less distressed inventory being distributed to brokers for sale,” said Doug DeWitt, a Miami-based real-estate broker. “I think they are trying to establish a bottom by not flooding the market, which seems to have worked a little bit.”

Julian Dominguez, owner of Foreclosure Information Systems, a company that publishes reports about foreclosure auction sales in Miami-Dade, said he is seeing the hold-back firsthand.

“They are canceling a lot of sales at the auction. That’s mainly because they don’t want to take title,” said Dominguez, who has been attending the now thrice-weekly auction sales.

Ross Toyne, a Miami-based lawyer who represents condo associations in disputes with lenders, said he thinks lenders are deliberately dragging their feet – both in the foreclosure process and in bringing the properties to market for resale.

“They are doing themselves a favor. They’re afraid they would have to drop the price not enormously, but ginormously to get the market to clear,” Toyne said.

Condo associations have alleged that the feet-dragging is a ruse to avoid having to assume the maintenance cost of properties – including association fees.

Speculations

Ken Thomas, a Miami-based banking analyst, said it all makes sense. Once a bank takes back a home at the end of the foreclosure process, it has to value the property at its current market value – and take a hit to its bottom line. Some banks, he said, may be holding off that day of reckoning.

“Some of them simply can’t afford to recognize the loss,” Thomas said. He also said there was no rule or law requiring banks to immediately sell a property once it had been taken back through foreclosure.

Not everyone is convinced that’s the case.

Mark King, an attorney with the Miami office of Jones Walker who represents banks in commercial foreclosures, attributed any decrease in bank-owned inventory more to the inability of lenders to effectively manage the huge volume of homes being reclaimed through foreclosure. They don’t have the manpower or know-how to handle the volume.

“To say banks have a devious, brilliant strategy for controlling the market is probably giving them more credit than they deserve,” King said, adding that it may differ from lender to lender. “Maybe some are doing it for strategic reasons. When you digest so many of these assets so quickly, inevitably there will be some indigestion and you may not want to continue consuming at the same pace.”

But foreclosures certainly haven’t been worked out of the system. Rising unemployment will only exacerbate the trend, analysts predict. The Miami Herald.

Latest Key West Stats part 2

click image to enlarge

Latest Key West RE Market Stats (6-09)

Click image to enlarge

Unemployment = Foreclosures

The erosion of the labor market (the unemployment rate recently hit 9.5 percent) is the key factor in the rise of home foreclosures, says Celia Chen, an economist at Moody's Economy.com.
"Employers continue to shed jobs, and that makes it difficult for even people with good credit who were doing fine to keep up with their mortgage payment," Chen says. For example, a recent report issued by federal bank regulators found that home loans to borrowers with solid credit histories were going bad at a rapid clip. "Prime loans, which represented two thirds
of all mortgages in the portfolio, experienced the highest percentage increase in serious delinquencies, climbing by more than 20 percent from the prior quarter to 2.9 percent of prime mortgages," the report stated.

Plunging home values: Nearly three years after its peak, the painful decline in home prices continues. Although the pace of decline moderated slightly from the previous month, home prices in 20 major metro areas dropped 18.1 percent in April from a year earlier. Falling home values have dragged more than 20 percent of American homeowners "underwater"--meaning they owe more on their mortgages than the property is worth--as of the first quarter. By
sucking equity out of homes, the price declines have also evaporated much of a homeowner's financial incentive for paying their mortgage bill, Chen says. "When somebody doesn't have equity in their house and they are struggling to pay their mortgage, the likelihood of a foreclosure is much higher," she says. In addition, home owners with less
equity in their homes will have a more difficult time refinancing their mortgage.

Banks stalling in Housing Crisis

A key component of Obama's housing rescue plan is an effort to restructure--or modify--as many as 4 million troubled loans. So far, about 325,000 modification offers have been made through the program, according to Bloomberg news. The program is having an impact for certain individual borrowers, but the efforts--at least so far--have not put much of a dent into the national foreclosure epidemic. Borrowers have complained of long delays and bureaucratic hurdles in their efforts to modify their mortgages.

Though the administration's effort includes incentive payments to convince servicers to modify the loans, some banks may find it less costly to foreclose on the property. There is going to be some pressure from the administration to get banks to start renegotiating more loans. "But if [modification is] not in [the servicer's] self-interest,they're not going to do much."

Mounting political pressure: Mortgage services appear to be facing mounting pressure from Washington to redouble their efforts. "We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share," Treasury Secretary Tim Geithner and HUD chief Shaun Donovan said in a recent letter to 25 mortgage servicing firms.

In a hearing last week, Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, expressed his frustration more directly. "Why am I still reading about lost files, understaffed and undertrained servicers, and hours spent on hold on the phone?" Dodd said in a prepared opening statement. "Why are servicers and lenders refusing to accept principal reduction so that homeowners can start building equity and get the housing market moving again?"

Foreclosure outlook: Despite this pressure, Newport expects foreclosure rates to creep higher for the next year or so. "It's going to keep on getting worse until the unemployment rate peaks, which we think will happen in about the middle of next year," he says. For her part, Chen argues that a successful mortgage rescue program could expedite a housing recovery. "The hope is that we will be able to push through enough mortgage modifications to prevent home prices from falling too much more," she said.

Fed Chairman Ben Bernanke today

On the economic front, Bernanke repeated the Fed's forecast that the economy should start growing again in the second half of this year, but he warned growth would be slight, leading to higher unemployment.

The nation's unemployment rate climbed to a 26-year high of 9.5 percent in June. The Fed says it could rise as high as 10.1 percent this year, and stay elevated into 2011. The post-World War II high was 10.8 percent at the end of 1982, when the country had suffered through a severe recession.

Bernanke again pledged to keep its key bank lending rate at a record low near zero for an "extended period." Economists predict rates will stay at record lows through the rest of this year.

Sears Tower No More

Sears Tower was renamed Willis Tower on Thursday after Willis Group, the global insurance broker, in a changing of the guard that underscores Chicago's increasing importance as a major global financial and business center.

Commercial RE Losses Piling Up

U.S. banks have been charging off soured commercial mortgages at the fastest pace in nearly 20 years ... losses on loans used to finance offices, shopping malls, hotels, apartments and other commercial property could reach about $30 billion by the end of 2009.

Many of the most troubled [regional] banks have heavy exposure to commercial real estate. ...

In contrast to home loans, the majority of which were made by about 10 lenders, thousands of U.S. banks, especially regional and community banks, loaded up on commercial-property debt.

Nude beach may be on Oct. 6 ballot

At least one Key West official wants to let the voters decide whether a nude beach should be allowed in the Southernmost City.

City Commissioner Bill Verge will ask his fellow lawmakers next week to place a question on the Oct. 6 ballot asking voters whether they support an exception to the current law that prohibits nude sunbathing within the city limits.

"This is a community decision, not a commission decision," Verge said Tuesday.

He wants to know how the voters feel about a nude beach.

In recent months, a group known as Florida Keys Free Beaches has been championing the idea of a clothing-optional beach. Representatives from the group spoke at a July 7 City Commission meeting. They described Haulover Beach, a clothing-optional beach in Miami Beach, and told the commission that the beach is safe, patrolled by its own beach ambassadors and family-friendly.

The group has suggested that the east end of Smathers Beach would be a good place for a clothing-optional designation, but they may have to work with several local kiteboarders, who use that area for their fledgling sport.

None of the local kiteboarding companies operate their business from that area, but it is where they capture the attention of many potential clients and students, said kiteboarder Greg Meintjes, who added that he and other kiteboarders do not oppose a nude beach, but they do want to be sure they still have access to their "adopted" area of the beach.

If Verge's proposed referendum makes it to the ballot, and if voters show support for a nude beach, it would be up to the City Commission to identify a location for it, Verge said.

Florida Keys Free Beaches also has explored using the area of Higgs Beach in front of West Martello Tower as a clothing-optional area.

That designation would require county approval, because Higgs Beach and the adjacent park property are owned and managed by Monroe County.

Commissioners will vote Tuesday on Verge's proposed referendum. The proposal must pass two public readings to become an official part of the Oct. 6 ballot.

Voters also will be asked whether the Key West mayor should serve a term of four years rather than two, and whether the city should sell a piece of property to the Pier House Resort.

The city owns the land that houses the resort's Caribbean Spa, and is considering selling it to the resort owners for about $6 million, although a purchase price is not yet finalized.

The City Commission meets Tuesday at 6 p.m. in Old City Hall, 510 Greene St.

By MANDY BOLEN The Citizen

Economist's View - After the Storm

"Ideas and Rules for the World in the Aftermath of the Storm"

A summary of the "causes and nature" of the financial crisis worth reading.

Article Link

Credit Card Simplicity and Transparency?

Pick a number from 1 to 50

The average percentage below market value that buyers are saving on foreclosure properties in Florida.

Top 10 Foreclosure Cities

1. Merced, California
2. Modesto, California
3. Stockton, California
4. Riverside, California
5. Detroit, Michigan
6. Fort Lauderdale, Florida
7. Cape Coral, Florida
8. Vallejo, California
9. Las Vegas, Nevada
10.Sacramento, California

Doc's Stats

Comparison of four bear markets.

DOW Crash of 1929 34.2 months, loss at low of 89.2%
1973 Oil Crash 20.7 months, loss at low of 48.2%
2000 Tech Crash 30.5 months, loss at low of 49.1%
2007 Real Estate Crash 17 months so far, loss at low so far 56.8%

Your TARP money hard at work

Wells Fargo Bank NA filed a civil complaint against itself in a mortgage foreclosure case in Hillsborough County, Fla.

In this particular case, Wells Fargo holds the first and second mortgages on a condominium, according to Sarasota, Fla., attorney Dan McKillop, who represents the condo owner.

As holder of the first, Wells Fargo is suing all other lien holders, including the holder of the second, which is itself.

Court documents clearly label "Wells Fargo Bank NA" as the plaintiff and "Wells Fargo Bank NA" as a defendant.

Wells Fargo hired Florida Default Law Group., P.L., of Tampa, Fla., to file the lawsuit against itself.

And then Wells Fargo hired another Tampa law firm -- Kass, Shuler, Solomon, Spector, Foyle & Singer P.A. -- to defend itself against its own lawsuit, according to court documents.

Wells Fargo's defense lawyers even filed an answer to their client's own complaint.

"Defendant admits that it is the owner and holder of a mortgage encumbering the subject real property," the answer reads. "All other allegations of the complaint are denied." LOL

How Consumers Use Search Engines in Real Estate

According to Google research, almost one in two searches for the keyword ‘real estate’ include a geographic modifier like a city name.

‘real estate’ is searched more than 1.2 billion times a year on Google. Within those searches, 545 million contain a local geographic modifier in addition to ‘real estate’.

Hub, Spoke, Rim Wheel Strategy For Localism

The hub, spoke and rim as a wheel approach is more effective than one large Web site. The hub is the generalist authority (a city dot-com, for example) while the spokes allow for niche specialization and the rim of the wheel can string all of the sites together.

Once you establish the hub site (such as a GeoDomain), begin to build out local city and neighborhood sites like city name plus RealEstate.com and neighborhood name plus RealEstate.com. The community sites can be created very quickly made with a property search solution and some rich local content.

Cross-linking around the rim will create a trail that search engines and consumers will follow as they look around different towns.

The extraordinary search engine benefit of the hub and spoke strategy is that the highest page rank of any site on the wheel gets shared along with the traffic to all of the other sites through the linking rim. SEO efforts and traffic generated by any spoke on the hub help to elevate the rankings of the entire wheel.

Geo-targeted domains are the most localized and specialized like city name plus “real estate”. These sites are likely to appear above their national competitors in search results containing local modifiers like a city name. They also offer advertisers a highly targeted advertising marketplace.

Sites with successful localism like Nashville.com are reportedly generating more than $1 million per year in advertising income.

A little fun - Evian Babies

Feature Listing! Pearl's Rainbow

Weekly Unemployment Claims Decline, but Record Continuing Claims

Click on graph for larger image. Weekly claims and continued claims since 1971.

In the week ending July 4, the advance figure for seasonally adjusted initial claims was 565,000, a decrease of 52,000 from the previous week's revised figure of 617,000.

The 4-week moving average was 606,000, a decrease of 10,000 from the previous week's revised average of 616,000.

The four-week average of weekly unemployment claims decreased this week by 10,000, and is now 52,750 below the peak of 13 weeks ago. It appears that initial weekly claims have peaked for this cycle.

*but

Continued claims increased to a record 6.88 million.

The advance number for seasonally adjusted insured unemployment during the week ending June 27 was 6,883,000, an increase of 159,000 from the preceding week's revised level of 6,724,000.

Apartment Vacancy Rate at 22 Year High

The vacancy rate for U.S. apartments reached its highest level in more than 20 years.

The national vacancy rate rose to 7.5 percent.

The record high was 7.8 percent in 1986.

Effective rent was down 1.9 percent from the prior year and 0.9 percent from the first quarter to $975.

With general expectations of an economic recovery pushed back to early 2010 at the earliest, it seems likely that apartments will have to endure a few more quarters of distress, lower rents and higher vacancies.

More Evidence of the "Foreclosure Backlog"

Nationally, First American reported 6.5% of mortgages were in default in May, up from 4% in May 2008.

The national repossession rate was 0.7% in May, up from 0.6% in May 2007.

Pent Up Foreclosures - measures the difference between foreclosures completed versus defaults. This gap is widening as a result of government intervention. ... If they do not ACCELERATE the foreclosure process and release some of the pressure now, the consequences will be disastrous.

The foreclosures are coming. The foreclosures are coming!

Mortgage Refinance Activity Up from Recent Lows

Click on graph for larger image.

The Market Composite Index, a measure of mortgage loan application volume, was 493.1, an increase of 10.9 percent on a seasonally adjusted basis from 444.8 one week earlier. ...

The Refinance Index increased 15.2 percent to 1707.7 from 1482.2 the previous week and the seasonally adjusted Purchase Index increased 6.7 percent to 285.6 from 267.7 one week earlier....

The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 5.34 percent ...

Google Buffs Up Its Real Estate Listings

When Google does anything, you have to pay attention.

Slowly, the Internet search behemoth is making its home-sale listings easier to use. You'll find them on Google Maps, where you can simply enter a search phrase such as "Homes For Sale Silver Spring, Md." and call up a map with listings highlighted.

I did such a search, narrowing it down to homes priced between $250,000 and $500,000, and was puzzled by some of the listings Google chose to highlight most prominently. They were scattered around the broad area that uses Silver Spring as a mailing address. And the ninth one on the list was actually located in the District, far away from Silver Spring.

A blog posting by Heather Hopkins, analyst for Hitwise, a company that measures Web traffic, showed that Google was not among the top 10 real estate Web sites in the week ending July 4. Realtor.com, the National Association of Realtors' site, had the biggest number of visits by far, with 7.6 percent of all real estate site visits. Zillow came in second, with 3.7 percent. Then came Yahoo real estate and Zip Realty, each with about 2.9 percent, and Trulia and Rent.com, each with 2 percent. Rounding out the top 10 were RE/MAX Real Estate, Homegain, the U.S. Department of Housing and Urban Development and Homes.com, each with less than 2 percent of all visits to real estate sites.

Casino King Steve Wynn Lists Fifth Avenue Spread

Click on picture to enlarge

LOCATION: Fifth Avenue, New York, NY

PRICE: $25,000,000

SIZE: 3,500 square feet (approx.), 2 bedrooms, 3.5 bathrooms

DESCRIPTION: ...It is literally 3500+/- sq ft of immaculate renovation designed for ultimate comfort. Originally built in 1925 as a 13 room, 4 bedroom plus library apartment, it has recently been transformed into one of the most glamorous homes on Fifth Avenue with a master suite and bath created from 3 bedrooms...The original living room, formal dining room and library were combined into a living space which wows you as you enter this full floor apartment. There is a new formal dining room, a large guest bedroom with bath, an exquisite powder room an an electronics system second to none...

FDIC Bank Failures by Week

Click on graph for larger image in new window.

So far there have been 52 FDIC bank failures in 2009.

It appears the pace has picked up lately (12 bank closings over the last two weeks).

This is nothing compared to the S&L crisis. There were 28 weeks during the S&L crisis when regulators closed 10 or more banks, and the peak was April 20, 1998 with 60 bank closures (there were 7 separate weeks with more than 30 closures in the late '80s and early '90s).

Obama expands mortgage refinancing program

Another attempt to fix the housing problem in the face of refusals to participate by the banks and republicans.

The Obama administration is widening its mortgage refinancing program to allow more borrowers hit hard by falling home prices to take part.

Borrowers whose loans are now worth up to 125% of their home's value are now eligible to refinance their homes under the Obama foreclosure prevention plan announced in February. Previously, the limit was 105%.

The move acknowledges that home prices in many areas have fallen so far that many people were shut out of the program.

Some 67% of homeowners in Las Vegas -- one of the hardest hit areas and where Housing Secretary Shaun Donovan announced the expansion Wednesday -- owe more than their homes are worth.

More than one in five borrowers are now underwater, with homes in parts of California and Florida losing more than 50% of their value, according to Zillow.com, a real estate Web site. Some 20 million people own homes worth less than their mortgages.

"The president's Making Home Affordable plan is already helping far more than any previous foreclosure initiative and with today's announcement we will extend its reach still further," said Donovan.

How many more people will be drawn to the program now, however, remains a question, especially since mortgage rates are on the rise. Administration officials do not have an estimate.

Refinancings slow to ramp up

Some 20,000 loans have been refinanced so far, according to the Treasury Department.

The initiative waives the requirement that homeowners have at least 20% equity in their home, allowing them to take advantage of today's lower rates. Homeowners must still meet other criteria, including being current on their payments and having loans that are owned or backed by Fannie Mae or Freddie Mac. The administration has set up a Web site, http://www.makinghomeaffordable.gov/, with more information.

Wednesday's expansion means those with homes worth $200,000 and mortgages as large as $250,000 can still qualify. Previously, these borrowers could not have loans exceeding $210,000.

The program, however, has been slow to ramp up. Borrowers have complained that banks are not approving their applications. The Mortgage Bankers Association last week slashed its 2009 forecast of originations because fewer refinancings were being done than they originally expected. The group said only 13,000 were done in the three months after the plan's launch.
The administration has projected that 4 million to 5 million mortgage borrowers would be helped. A Treasury official Tuesday said that the figure applied to those who would be eligible, not necessarily those who would participate.

Administration officials do not have an updated figure of how many people would be eligible or participate now that the criteria has been widened.

The recent uptick in mortgage prices has blunted the plan's benefit, as well. The Federal Reserve has been buying mortgage-backed securities and long-term Treasurys in an effort to lower rates.

It worked for a while. Rates hit a low of 4.84% on April 28, but are now at 5.45%, according to HSH Associates.

Since mortgage rates have been in the 6% range in recent years, refinancing to the mid-5% range may not be worth it, said Keith Gumbinger, vice president at HSH Associates. A homeowner with a $200,000 mortgage at 6% would see a savings of about $64 a month if he refinanced at 5.5%, and that's before closing costs.

"Are interest rates low enough to warrant getting into the process?" he said.
The administration's announcement comes on the same day as an industry group reported that the demand for refinancing dropped 30% last week. In addition to higher rates, rising unemployment is contributing to the decline.

Borrowers with Freddie Mac loans who refinance through their current servicer can apply right away, but those who want to go through a different lender must wait until Oct. 1. Those with Fannie Mae mortgages can't use a different lender and they'll have to wait until Sept. 1 to refinance if their loans are more than 105% of their home's value.

A second part of the program lets eligible borrowers who are in default -- or at risk -- lower their monthly payments to no more than 31% of their pre-tax income. This can help those who are not making as much at their jobs or who have monthly payments they can't handle. Homeowners, servicers and mortgage investors can receive incentives to entice them to participate in the program.

Banks have extended more than 200,000 trial modification offers, according to the Treasury Department. Homeowners must make three monthly payments on time before the modification is made permanent.

Home prices drop, but at a slower rate

Home prices continued to tumble in April, falling 18.1% from a year earlier -- but the change from March narrowed sharply, indicating that housing markets may be starting to turn.

Not only are home prices still falling but other metrics, such as unemployment and foreclosure rates, are worsening as well.

Price declines have put so many homeowners underwater, owing more on their mortgages than their homes are worth. By some calculations as many as 20% of homeowners are underwater.

Huge declines from peaks: Phoenix, where homes have lost 35.3% of their value over the past 12 months, was the worst performing market over that period. Las Vegas prices plunged 32.2% and San Francisco dropped 28%.

Denver prices fell the least over the last 12 months, down 4.9%, followed by Dallas at 5% and Boston at 7.7%.

Prices in Dallas rose 1.7% between March and April, the largest increase among the 20 cities. Las Vegas prices dropped 3.5%, the biggest decline -- which was still narrower than the month before.

Dallas also has suffered the smallest decline from the top of its market, off just 9.6% from its peak in June 2007. The rest of the cities have all suffered double-digit percentage drops from their peaks, with the worst being Phoenix, down 54.1% from June 2006.

Metro area Change from April 2008

Atlanta -14.8%

Boston -7.7%

Charlotte -10.0%

Chicago -18.7%

Cleveland -10.5%

Dallas -5.0%

Denver -4.9%

Detroit -25.4%

Las Vegas -32.2%

Los Angeles -21.3%

Miami -27.3%

Minneapolis -22.1%

New York -12.5%

Phoenix -35.3%

Portland -16.0%

San Diego -20.0%

San Francisco -28.0%

Seattle -16.8%

Tampa -21.3%

Washington -16.9%