Calvin Saves L.A. County

Mortgage rates fall slightly

2009-05-05T18:16:00.000-07:00

NEW YORK (CNNMoney.com) -- Home mortgage rates were mostly unchanged this week, with the average 30-year fixed mortgage rate holding steady, according to a report released Thursday.

The average 30-year fixed mortgage rate remained at 5.23%, the same as the previous week, according to Bankrate.com's weekly national survey.

Still, rates remain at historic lows. Rates have plunged since late October, when 30-year fixed home mortgage rates averaged 6.77%.

"The movement in fixed mortgage rates has been very subdued in recent weeks, compared to the wild gyrations seen several months ago," the report said.

The release comes after a week of reports that showed a record jump in foreclosures and a decline in mortgage applications.

Six months ago, the average 30-year fixed mortgage rate was 6.77%, meaning a $200,000 loan would have carried a monthly payment of $1,299.86. With the average rate now at 5.23%, the monthly payment for the same size loan would be $1,101.93, meaning homeowners who refinance now would save almost $200 per month.

Other rates: The average 15-year fixed rate mortgage ticked down to 4.73% from 4.76% the week prior.

The average jumbo 30-year fixed rate jumped to 6.65% from 6.52% the previous week.

Adjustable rate mortgages were "broadly lower," the report said, with the average 1-year ARM slipping to 5.12% from rising to 5.32% and 5/1 ARMs fell to 5.05% from 5.11%.

Pending home sales jump 3.2%

2009-05-04T14:32:00.000-07:00

NEW YORK (CNNMoney.com) -- Is the housing meltdown ending?

Pending home sales rose in March for the second consecutive month and are up year over year. The Pending Home Sales Index from the National Association of Realtors showed a 3.2% gain to 84.6 from February, when it was 82. The index stands 1.6% higher than a year ago.

The consensus forecast of industry experts polled by Briefing.com had predicted no increase in the index.

It may still take a while before the market gains enough momentum to firmly state that the downturn has been reversed, according to Lawrence Yun, NAR's chief economist. And, the upturn may have been boosted by the first-time homebuyers tax credit, a temporary measure that will lapse in December.

"We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around," said Yun. "This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a down payment."

The index is understood to be a forward indicator of home sales trends since it measures contracts signed, not completed sales. The up-tick may indicate that home prices have fallen low enough for buyers to get off the fence.
Feeling for the bottom

Yun is not calling a bottom yet, however, because the index is still at a relatively low level. Instead, he's looking toward the summer selling season to determine what direction the market will take. Plus, he would like the number of homes on the market to drop to a more normal level of six to seven months of supply.

"If inventory goes down - it's at just under 10 months now - to below eight months, that would mean we're on the way to a sustainable recovery," Yun said.

Anecdotal evidence indicates that trend may be happening. Realtors and other industry insiders are seeing rising open house attendance and multiple bids on some particularly desirable properties. Plus, pricing has become sharper, according to Sherry Chris, the CEO of Better Homes and Gardens Real Estate.

"Overpricing seems to be ending," she said. "Properties are coming onto the market and selling quickly."

And buyers are feeling a little more urgency, she added. In many markets, buyers have not felt any pressure to make an offer. "They said to themselves, 'I don't have to act immediately. It will still be on the market two weeks from now,'" she said.

Today, buyers are more likely to bid because they perceive the market as at or near its bottom. An April Gallup Poll reported that 71% of Americans thought it was a good time to buy a house.

They don't, however, believe there will be price increases soon; three of four buyers think prices will stabilize or even decline in their areas over the next 12 months, according to Gallup.

Pat Newport, a real estate analyst for IHS Global Insight, is putting less emphasis on pending home sales than he once did for his housing market analyses. There has been a disconnect lately, he said, between the number of properties going into contract (pending home sales) and the number that actually close (existing home sales).

He speculates that this is because buyers are making offers and signing contracts but, because of financing problems, many deals are falling through.
Regional differences

The South saw the largest gain of any region, with pending home sales jumping 8.5%. Pending sales are 7.7% higher there compared with a year ago.

The Midwest gained 3.9% from February and 1.7% year-over-year. Northeast sales fell 5.7% and are off 24.1% compared with March 2008. The West dropped 1% for the month but are up 8.2% year-over-year.

Low home prices continued to help to drive sales, although NAR's affordability index actually fell 2.3% from February, when it hit a historic high. This index is based on family income, home prices and mortgage rates.

"Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment," said NAR President Charles McMillan, in a prepared statement. "For buyers who've been on the sidelines and have good jobs, the market has never looked more favorable.

Calvin Saves L.A. County's 100th post

2009-05-01T08:36:00.000-07:00

Today is a very special day for me as a blogger...I have reached my 100th post...I would like to thank each and every one of you for making this a reality...I hope that you have taken with you a sense of what goes on in the real estate industry...

I look forward to our continued success...

Here is to another 100 posts...

Cheers,

-Calvin

p.s. If you have friends or family that would appreciate the type of service I provide, please call me with their name and number. One of the greatest compliments I can receive is a personal introduction, and I'm never too busy to help your referrals.

Foreclosure filings in record jump

2009-04-30T10:17:00.000-07:00

NEW YORK (CNNMoney.com) -- Lenders continued to rewrite troubled mortgages at a fast clip during March, but the weakening economy still sent foreclosure starts soaring to a record high.

March mortgage workout results announced on Thursday by Hope Now - a coalition of mortgage lenders, servicers, investors and community groups put together to fight the foreclosure plague - were a decidedly mixed bag.

Approximately 134,000 mortgages were rewritten by Hope Now members, which is nearly 20,000 more than the average since September. Another 115,000 at-risk borrowers were granted repayment plans, for a total of nearly a quarter of million troubled mortgages addressed for the month.

Repayment plans merely postpone payments for delinquent borrowers without making them any more affordable. Mortgage modifications are changes in the terms of loans that reduce or freeze interest rates, extend the life of the loan, reduce loan balances or any combination of those three, to, ideally, lower the amount borrowers pay monthly. Modifications are considered more effective that repayment plans.

"The lending industry is steadily working out solutions for homeowners and keeping as many as possible in their homes," said Faith Schwartz, director of Hope Now. "I expect that these numbers will continue to increase as servicers work with the Obama Administration to implement its Homeowner Affordability and Stability Plan."
Steep spike in starts

Despite the efforts, however, more homeowners fell into default in March. Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February's 243,000, and the highest monthly total since the coalition began tracking data in mid-2007. Starts have risen by more than a third since January.

On the other hand, completed foreclosure sales, transactions in which lenders have actually taken back homes from defaulting borrowers, dropped by 39% in March. Banks repossessed only 53,000 homes compared with 87,000 taken over during February.

Since the mortgage meltdown hit in July 2007, 1,447,866 homes have been lost to foreclosure.

Michael Bright, a chief statistician with Hope Now, attributed the sharp reduction in completed foreclosures to servicers suspending foreclosures as they geared up to implement the administration's refinance and mortgage-modification program.

"It's too early to say this is a trend," he said in a press release. "But anecdotal reports from servicers do indicate that they are taking this extra step to help homeowners who qualify stay in their homes."

Once the program is fully in place, servicers will have more tools to be able to make successful modifications to unaffordable mortgages. In the meantime, they're allowing a kind of grace period for homeowners until the government program can be applied to individual cases.

"Our counselors have been getting hardly any answers for weeks," said Mark Seifert, director of the East Side Organizing Project in Cleveland, which advocates mortgage workouts for hundreds of delinquent homeowners a month. "The servicers have been sitting on their hands."

But the impact of the Homeowner Affordability and Stability Plan should begin to be felt soon, according to Schwartz, who thinks it going to change - and improve - the mortgage landscape.

"It's one of the most comprehensive programs I've seen," she said. ""Eleven major servicers have formally signed on, and we should start to see data from it over the next few months."

Obama's first 100: Now comes the hard part

2009-04-29T08:47:00.000-07:00

(CNN) -- Behind closed doors in recent days, senior White House aides have been saying that measuring President Obama's first 100 days is the journalistic equivalent of a Hallmark holiday.

"They don't mean anything," quipped one aide, "but you have to observe them."

But literally in the next breath the very same aide got pretty bold -- saying anyone doing one of these anniversary stories would be "hard-pressed to find another administration that has done as much" as Obama so early in a presidency, even when compared to the productivity of FDR.

"[Most productive] I think in my lifetime," said the senior aide. "An extraordinary beginning, but just the beginning."

In other words, Obama is just showing up for work on this "Hallmark holiday" with more than just a crummy greeting card to celebrate the occasion.

There will be metaphorical flowers and candy in the form of a White House welcome for the president's new BFF and favorite Democrat, Sen. Arlen Specter, to claim bipartisanship.

That's followed by a quick afternoon jaunt to the Midwest to show off early results at a town hall meeting in Missouri (the Show-Me State, get it?).

All of that capped off by the bright lights of a prime-time news conference in the East Room of the White House.

All this begs the question: Why did Obama's team suddenly embrace all this hoopla for what they claim to be an artificial holiday?

Part of the reason is that the president's advisers privately express some amazement that amid all of the crises facing America, Obama's approval ratings are sky-high.

They know it's probably inevitable that his poll numbers will come down, so they want to keep using what is probably their best asset -- the president himself -- now while they have the public's attention and can take advantage of his appeal.

"The American people are taking a measure of the president," a second top White House aide told me, "and they are saying 'we are happy with the decision we made' " in November.

Another reason for the aggressive sales pitch is even some of the president's fiercest Republican critics have to grudgingly admit the man has been busy charting an ambitious course in tough times.

He's signed 19 executive orders and 12 laws, most notably the $787 billion economic stimulus plan, the largest recovery package ever.

Ever.

Not to mention an expansion of children's health insurance and historic pay equity changes.

On foreign policy, he's largely kept campaign promises to wind down the war in Iraq, increase the U.S. troop presence in Afghanistan, and begin the process of shutting down the U.S. military prison at Guantanamo Bay.

But now comes the really hard part, and there are political land mines all around.

On domestic policy, Obama is facing roadblocks on his grand plans for health care and energy amid Republican charges he will sink the country deeper into debt to pay for it all. Oh, and did I mention there's still great uncertainty about the housing market, stock market, and auto bailouts?

On foreign policy, Iraq and Afghanistan are still huge wild cards. Meanwhile, the administration's diplomatic overtures to Iran, Cuba and Venezuela could produce spectacular results or they could fail dramatically and feed into Republican charges he's weak on national security.

The Specter party switch gives the president a tactical victory in that if his party has a 60-seat, filibuster-proof majority in the Senate, he can potentially muscle through key pieces of his agenda.

But this alone will not solve Obama's problems. There will be days when Specter bucks the president, and days when conservative Democrats like Sen. Ben Nelson jump ship, and suddenly 60 votes evaporate.

That's why the Specter move has to be considered in a much broader context -- this is an opportunity for Obama to deal with a much broader campaign promise that he has not come close to achieving, changing the tone in Washington and figuring out how to get both parties to work together. Can Obama use this moment to develop a genuinely bipartisan governing coalition, or will bitterness over Specter's move just lead both parties to retreat to their respective corners?

Look for the president in tonight's prime-time press conference to try and pivot to the next 100 days by saying the early burst of activity -- in the words of a top aide -- has been "a good down payment on change and he's ready to work to bring both parties together.

"The president has accomplished a lot," asserted this top aide, "but he also laid the foundation for the next 100 days."

The success of those next 100 days and beyond may largely be measured on how well the president can forge consensus with key Republicans on some of these big issues.

Maybe sending a few Hallmark cards to Capitol Hill can help break the ice.

Home prices down, but rate of loss eases

2009-04-28T08:40:00.000-07:00

NEW YORK (CNNMoney.com) -- The weak housing market continued to plague home sellers in February as home prices extended their losing streak to 31 consecutive months, according to a report issued Tuesday.

However, the rate of decline slowed, with the S&P/Case-Shiller 20-city home price index not hitting a record low for year-over-year drop for the first time since October 2007.

"We will certainly need a few more months of data before we can determine if home prices are finally turning around," said David Blitzer, chairman of the index committee at Standard and Poor's.

The index fell 18.6% from February 2008, compared with a 19% year-over-year decline in January. The index was also down 2.2% from January. The index has not recorded a price rise since July 2006 and has fallen 30.7% since that peak.

"I don't think it's great news," said real estate analyst Mike Larson of Weiss Research. "It's just a moderation in the monthly declines and it fits in with the pattern we're seeing of things getting less bad."

"But it's still a weak market. The patient has moved out of intensive care unit but it's still in the long-term care ward," he added.

Moderation: This is the second time in the past several months that the decline trend has seemed to moderate, according to Ken Goldstein, an economist with the Conference Board.

"The first occurence proved to be a ledge on the way down to the bottom," he said. "We're probably closer to the bottom now."

The leveling off has had a positive impact on consumer confidence,, which jumped suddenly this month, although still ay historically poor levels.

"Consumers are no longer in despair," said Goldstein. "They're just depressed."

Cities: Of the 20 cities tracked by the index, 16 recorded a slower decline in February than the month before.

No index city has fared as poorly as Phoenix, where prices have fallen 35.2% over the past 12 months and 4.5% in January. Prices are down 51% from their peak.

But Phoenix is hardly unique, according to Larson. He said that if you ask any real estate agent in any of the once overheated markets, he or she will tell you that prices in many neighborhoods are off 40% to 50% from their highs.

Las Vegas, which has recorded more foreclosures than any other city, is close behind Phoenix with a 31.7% year-over-year loss and a drop of 3.6% for the month. Prices there are off 48.4% from their peak.

Other big losers include San Francisco, down 31% over the past 12 months and 3.3% for the month; Miami, down 20.5% year-over-year and 3% month-over-month; and Los Angeles, 24.1% lower on an annual basis and down 2% on a monthly basis.

The housing bust has touched some of the cities on the list less severely. In Dallas, prices were down 4.5% annually and 0.2% monthly. Denver showed a 5.7% annual drop and a 1.7% monthly dip, and Boston was 7.2% lower on a yearly basis and 1.3% monthly.

That price declines did not accelerate in February is certainly a positive change, according to Goldstein, showing that the housing crisis is beginning to let up a little.

"Still, we're in a deep hole, one that will be tough to climb out of," he said.

First time home buying made possible with the help of an $8,000 tax credit

2009-04-27T10:15:00.000-07:00

COLUMBIA -- Many Americans are feeling the effects of the current economic crisis. And that, lawmakers say, has kept potential first time home buyers sitting on the fence.

But a tax credit, aimed at jump starting home sales, is helping some in our area buy their first house.

Travis Peterson and his wife just bought their first home in Columbia. It's the American Dream. And theirs was made possible with the help of an $8,000 tax credit.

"It's just been a blessing that credit came along," Peterson said. "And I'm so glad our realtor actually told me about it."

The Peterson's were able to buy their house, in part, because of the stimulus bill signed by President Obama, which includes a tax credit for first time home buyers.

"This is $8,000 that you can get back from the federal government to use to buy a house for the very first time in your life," said Sen. Claire McCaskill (D-Mo.) "To get your piece of the American dream."

The tax credit is designed to boost the economy by encouraging home buying, and so far it seems to be working. So far this year, 388 homes have been sold in Columbia. Of those, 6.5 percent were made possible thanks to the tax credit.

McCaskill says it's somewhat of a Catch-22 for home buyers since the credit can only be claimed after buying a house.

First time buyers, like the Peterson's, can often afford monthly mortgage payments but sometimes need help with up front fees, like down payments and closing costs.

To help, the Missouri Housing Development Commission (MHDC) is fronting the $8,000 tax credit to first time home buyers in an effort to jump-start local sales. So far, Missouri is the only state to offer this type of program.

"Missouri is the envy of the nation," said Carrol Van Gorp, with the Columbia Board of Realtors. "And they just are drooling over the program."

The money will be loaned out interest free and will be repaid back when the homeowner gets their federal tax credit.

"Our clients love it," said Jessica Kempf, a Columbia realtor. "I mean, it's actually making them jump off the fence and purchase something."

Quick Details:

* The federal tax credit is only available for first homes purchased between Jan. 1 and Dec. 1, 2009.

T.G.I.F.

2009-04-24T10:33:00.000-07:00

Good Friday Everyone,

This week's T.G.I.F. video is from 47 Year old Susan Boyle wows the judges with her performance in the auditions for Britains Got Talent, singing I dreamed a dream from Les Miserables.

I went to show my mom the Susan Boyle video, she said I already saw that on youtube. Crazy.

Amazing,

Calvin Bui

Hope seen, despite home sales downturn

2009-04-23T10:51:00.000-07:00

NEW YORK (CNNMoney.com) -- Sales of existing homes fell in March, according to an industry report released Thursday, but analysts say the housing market is showing signs of stabilization.

The National Association of Realtors said that existing home sales fell last month to a seasonally adjusted annual rate of 4.57 million units, 3% lower than the downwardly revised rate of 4.71 million in February.

March sales were down 7.1% year over year, and came in weaker than the 4.65 million rate forecast by analysts surveyed by Briefing.com.

Despite last month's decline, existing home sales appear to be stabilizing, according to Ian Shepherdson, economist at High Frequency Economics.

"Sales are volatile month-to-month, but the trend appears to be flattening off," Shepherdson said in a research note.

Single family home sales, which are considered the core of the market, fell at a 10% annualized rate in the first quarter of 2009, after a 17.4% drop in the last three months of 2008. At the current sales pace, existing-home sales will be down "only" 2% in the second quarter, according to Shepherdson.

First-time buyers made up 53% of existing home sales in March. Charles McMillan, NAR's president, said first-time buyers are "crucial" to a recovery in the overall housing market.

"The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down," McMillan said in a statement.

Meanwhile, sales of "distressed properties" accounted for over half of all transactions in March. Foreclosed homes typically sell for 20% less than traditional homes, according to NAR.

"Clearly foreclosure activity is driving the marketplace," said Adam York, an economist at Wachovia Economics Group, in a research report. "Buyers are clearly looking for 'bargains,' if they are looking at all."

Existing home sales in the West declined 4.2% in March. Sales in the South and the Northeast also fell, while sales in the Midwest were unchanged.

The national median existing-home price was $175,200 in March, up 4.2% from $168,200 in February. Still, the median existing-home price was down more than 12% since March 2008, when it was $200,100.

The total number of existing homes on the market at the end of March fell 1.6% to 3.74 million units. At the current sales pace, it would take an estimated 9.8 months to sell that inventory of properties. That's down from 9.7 months in February.

"The inventory overhang has stabilized too," Shepherdson said. But the number of existing homes on the market remains historically high, and prices will continue to fall rapidly "for the foreseeable future," he said.

Las Vegas tops foreclosure list

2009-04-22T09:56:00.000-07:00

NEW YORK (CNNMoney.com) -- The 26 cities with the highest foreclosure rate in the nation are all located in four hard-hit states, with Las Vegas topping the list, according to a report released Wednesday.

Metro areas in California, Florida, Nevada and Arizona topped the foreclosure filing list for the first quarter of 2009 in a report from RealtyTrac, an online marketer of foreclosed properties. A foreclosure filing includes default papers, auction sale notices and repossessions.

Las Vegas had the highest rate of foreclosures of any city, with one in every 22 homes subject to a foreclosure filing in the first three months of the year. The rate of foreclosure filings was 4.5%, seven times the national average.

Merced, Calif., had the second highest rate, with Cape Coral-Fort Myers, Fla., Stockton, Calif., and Riverside-San Bernardino-Ontario, Calif., rounding out the top five.

"The metro areas with the highest levels of foreclosure activity in the first quarter of 2009 paint a picture of concentrated problems in a relatively small number of hard-hit areas," said James J. Saccacio, chief executive officer of RealtyTrac, in a written statement.

Foreclosure rates have been very high in the 4 key states throughout the bursting of the housing bubble, and so it was to be expected that cities from those states would pepper the top of the list.

However, it was a surprise to see the list so top heavy, according to Rick Sharga, senior vice president at RealtyTrac.

"The concentration of troubled metro areas within the hardest-hit states, candidly, was even more severe than we expected it to be," Sharga said. "The degree to which those four states dominated the rankings surprised even us."
0:00 /0:48Should I sell my house short?

New problem cities: Meanwhile, some metropolitan areas had a surge in foreclosures. Boise City-Nampa, Idaho, in 27th place, Provo-Orem, Utah, in 37th, and Charleston-North Charleston, S.C., in 51st were examples Sharga gave of areas that had particular strong gains in filings.

Sharga said the rise of foreclosures in additional regions indicates new factors influencing the housing market as the recession drags on.

"What we believe we are seeing is some of the areas with unemployment problems," said Sharga. "These are people living paycheck to paycheck and, when the paycheck is gone, suddenly they can't afford to make their mortgage payments."

The data for RealtyTrak's metro area foreclosure report is collected from 2,200 counties across the nation, and those counties represent more than 90% of the U.S. population. Some 203 areas are covered by the report.

Across the nation, foreclosure activity in the first quarter hit a record high, according to another RealtyTrac report issued last week. Total foreclosure filings reached 803,489 in the first three months of the year, the highest monthly and quarterly totals since RealtyTrac began reporting in January 2005.

The national report also found that the worst of the foreclosures were centralized in a handful of worst-hit states. California, Florida, Arizona, Nevada and Illinois accounted for nearly 60% of the total foreclosure activity in the first quarter, with 479,516 properties received foreclosure filings in those states.

Obama launches mortgage rescue plan

2009-04-21T12:40:00.000-07:00

NEW YORK (CNNMoney.com) -- The Obama administration's loan modification program is finally underway.

The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase (JPM, Fortune 500), which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo (WFC, Fortune 500), $2.9 billion; and Citigroup (C, Fortune 500), $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.

Additional loan servicers will be added to the list over time, a Treasury spokesman said.

Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon.

"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," Wells Fargo said in a statement.

Distressed homeowners and housing counselors have been eagerly awaiting the program's launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.

Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.

The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Department of Housing and Urban Development providing the rest.

The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.

It was not immediately clear whether the servicers must pay the incentives to homeowners and investors out of their funding share.

In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.

The Treasury Department set the caps based on public data about the mortgages the servicers handle. Though the program mandates that servicers modify all loans that meet the requirements, the department feels the servicers will have sufficient funds to cover all troubled borrowers' applications.

"We're confident we'll have enough money," said Treasury spokesman Andrew Williams.

Separately, major servicers also recently started accepting applications under the refinance portion of the program.

How to nab a low-rate home loan

2009-04-20T09:10:00.000-07:00

(Money Magazine) -- On paper it seems like the perfect time to refinance. The average rate on a 30-year fixed mortgage recently hit a 20-year low when it fell below 5% in mid-March. And the Fed has said that it will spend $300 billion to buy back government-backed Treasury bonds; that will probably keep loan rates low for months to come.

But wade into the mortgage market, and you may quickly feel as if you're trying to grab a dollar in a game-show booth where the money is blowing around: Those ultralow rates are right in front of you, yet maddeningly elusive.

Lenders, grappling with deadbeat homeowners and shifting regulations, have pared back on mortgage products and upped credit requirements. Still, you have a good incentive to try: If you took out a mortgage two years ago, when rates were in the mid-sixes, you stand to drop your rate nearly two percentage points, saving almost $300 a month on a $300,000 loan. Here's how to navigate the roadblocks.

Figure out if you qualify. Nowadays, credit score and equity are king. To land the best rates, you'll probably need a credit score of at least 740, and 20% equity. "Banks are looking for reasons not to lend you money," says Mark Miskiel of Lighthouse Mortgage in Sedona, Ariz.

If you don't have 20% equity, a refi isn't out of the question - President Obama's housing package allows homeowners who owe as much as 105% to receive government-backed loans. To qualify for that program, however, your original mortgage must be held by one of the government-sponsored entities, Freddie Mac or Fannie Mae; you must prove that you can keep up with payments; and you'll get stuck with fees that tack 0.25% to 3% onto your rate.

Get rid of the HELOC. Home-equity loans and lines have become the enemy of would-be refinancers. Before you can close on a new loan, your home-equity lender must agree to "subordinate" the secondary loan (meaning that your primary lender will get repaid first in the event you run into financial trouble). That can take at least a month, says Bob Moulton of the Americana Mortgage Group in Manhasset, N.Y.

One way to speed up the process is to do a consolidation refi through your home-equity lender. If that's not possible, aim to submit the subordination paperwork as you start shopping for a primary mortgage. And know that other lenders may add up to 0.25% to your rate to cash out the secondary loan.

Know where to look. No matter how stellar your credit, you won't get a great rate without doing some serious shopping. That's because every bank is using different standards for underwriting loans, so while you may look like a risky borrower to one, another may welcome you with open arms. In general, says Keith Gumbinger of mortgage data firm HSH Associates, you're likely to get the best rates from small local banks and credit unions.

Unfortunately, if you need a jumbo loan (typically $417,000, but it can go up to $729,750 in high-cost areas), you can kiss those super-low rates goodbye. While jumbos normally run about half a percentage point higher than smaller ones, today the spread is a point and a half.

Pay a point upfront. A point, which equals 1% of your mortgage amount, typically buys you an eighth to a quarter of a percentage point drop in your rate. Today some overloaded lenders are knocking half a percentage point off for those who pay a point, hoping this extra initial cost will deter serial refinancers.

If you're planning to stay put for about five years, it may be worth it. Conversely, consider adding an eighth of a percentage point to your rate to lock it in for 45 days. Banks and lenders are putting a lot more effort into vetting applications, so it can take up to two months to close a loan, vs. about 30 days in the past; you don't want to risk rates' moving against you while you wait. The payoff for patience: a loan you can live with, for a very long time.

Not so long ago, having a pulse qualified you to take out a mortgage. These days lenders are vetting applicants with the ardor of a Senate committee grilling an AIG executive. Here's a summary of what's changed.

T.G.I.F.

2009-04-17T09:05:00.000-07:00

Happy Friday Everyone,

As I sit here and write this morning's blog entry, I'm constantly reminded about the Long Beach Grand Prix...So, this week's T.G.I.F video is dedicated to just that. This one is for you Mayor Foster, I know you read my blog religiously!!!

Enjoy the weekend and thank you for making my blog the #1 real estate blog in Long Beach!!!

Foreclosure filings jump 24%

2009-04-16T13:25:00.000-07:00

NEW YORK (CNNMoney.com) -- Foreclosure activity skyrocketed in March and the first quarter of 2009 to their highest levels on record as banks lifted moratoria on filings.

Total foreclosure filings - which include default papers, auction sale notices and repossessions - reached 803,489 in the first quarter, according to a report released Thursday by RealtyTrac, on online marketer of foreclosed properties. That is a 24% jump over a year earlier and a 9% increase compared to the previous quarter.

Of those filings, 341,180 happened in March - a 17% increase from February and a 46% jump from March 2008.

The March and first quarter numbers were the highest monthly and quarterly totals since RealtyTrac began reporting in January 2005.

"In the month of March we saw a record level of foreclosure activity - the number of households that received a foreclosure filing was more than 12% higher than the next highest month on record," said James J. Saccacio, chief executive officer of RealtyTrac, in a statement.

"Since much of this activity was in new foreclosure actions, it suggests that many lenders and servicers were holding off on executing foreclosures due to industry moratoria and legislative delays," he added.

The one bright spot in the report was that fewer homes were lost to bank repossessions in March and the first quarter, falling 3% from February and 13% from the previous quarter, the report said.

Foreclosures have hit the economy hard. Housing prices have plummeted and some homeowners are severely underwater - meaning they owe more than their homes are worth. That can remove the incentive to keep up with mortgage payments.

Amid mass layoffs and pay cuts, soaring unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Federal Reserve Bank of Boston.

Still, the housing market may be picking up. Builder confidence in April made its most dramatic increase in almost seven years.
Worst-hit states

Five states accounted for nearly 60% of the total foreclosure activity in the first quarter: In California, Florida, Arizona, Nevada and Illinois, 479,516 properties received foreclosure filings.

California alone, with 230,915 filings in the first quarter, accounted for nearly 29% of the total. The number of foreclosure filings in the state increased 35% from the fourth quarter and 36% from the year-ago period.

In March, California had 107,785 total filings - a jump of 33% from February and almost 67% from a year ago.

The state is tied with Rhode Island for the fourth-highest unemployment rate, at 10.5%. Jobs are disappearing as the housing crisis drags down California's economy.

Florida's total filings in the first quarter fell 12% from the fourth quarter, but the state's 119,220 were still the second-highest in the country.

Third was Arizona, with one filing for every 54 households, up almost 80% year-over-year and 6.2% from the fourth quarter.

Nevada was fourth in total filings, and first in completed foreclosures. Its foreclosure rate was more than five times the national average, and one in 27 houses received a filing.

Like California, Nevada employment has suffered as a result of the housing crisis. Nevada had a total of 41,296 filings, almost 111% over last March and 19% over the fourth quarter.

Bank repossessions in Nevada were down 3% from the fourth quarter, but defaults increased 27% and auction sale notices rose 35%.

Banks aren't reselling many foreclosed homes

2009-04-15T09:29:00.000-07:00

A vast "shadow inventory" of foreclosed homes that banks are holding off the market could wreak havoc with the already battered real estate sector, industry observers say.Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."

"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania. "Eventually those homes will have to be dealt with. If they're all put on the market, that will add more inventory to an already bloated market and drive down home prices even more."
More than one-third locally

In the Bay Area, a Chronicle analysis of data from San Diego's MDA DataQuick shows that more than one-third of foreclosures are in shadow territory - that is, they are not registering in county records as having been resold.

For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.
Turnaround usually quick

Realtors say foreclosures generally go on the market a month or two after the bank takes title and then sell fairly quickly, often getting an accepted offer within a week or two of being listed and then closing escrow within 30 days. That means that foreclosures should register as being resold within three months.

But taking the foreclosures in any given month or selection of months and looking at what happened three months later also reveals a big gap between what banks took back and what they resold.

Tom Kelly, a spokesman for banking giant Chase in Chicago, said the bank sells foreclosed homes in a timely fashion.

"We try not to be in the business of owning homes," he said. "Our goal is to get them back on the market as quickly as possible. We want to maximize what we sell them for and yet do it quickly."

Kelly was at a loss to explain the shadow inventory phenomenon other than the quantities involved.

"The inventory might be growing because there is just a lot of volume coming in. That would not surprise me," he said.

Locally, the monthly number of foreclosures has decreased since peaking at 4,321 in August 2007. That has allowed foreclosure resales to start closing the gap.

Most observers say the recent fall-off in foreclosures came because California and many banks implemented foreclosure moratoriums in the fall, not because the problem has diminished.
Only 65.5 percent resold

A second DataQuick study of all Bay Area homes repossessed by banks in the 18 months ending January 2009 tracked how many of those homes had resold by mid-March. It found that 65.5 percent had resold. Discovery Bay's ForeclosureRadar.com compared its database of Bay Area foreclosures to MLS listings for the past 120 days and found that fewer than one-fifth of the foreclosures showed up as for-sale listings.

"Foreclosure numbers are artificially depressed," said CEO Sean O'Toole. He puts California's shadow inventory at about 100,000 homes.

So why aren't banks selling off their foreclosures?

Observers say several factors are at work.

-- The "pig in the python": Digesting all those foreclosures takes awhile. It's time-consuming to get a home vacant, clean and ready for sale. "The system is overwhelmed by the volume," Sharga said. "In a normal market, there are 160,000 (foreclosures for sale nationwide) over the course of a year. Right now, there are about 80,000 every month."

-- Accounting sleight-of-hand: Lenders could be deferring sales to put off having to acknowledge the actual extent of their loss. "With banks in the stress they're in, I don't think they're anxious to show losses in assets on their balance sheets," O'Toole said.

-- Slowing the free-fall: Banks might be strategically holding back some foreclosures so prices don't fall as fast. "They want to be careful about not releasing them too quickly so they don't drive prices down and hurt the values," O'Toole said.

Besides the shadow foreclosures, yet another wave of distressed properties is in the pipeline. These are homes with delinquent payments for which the banks appear to be prolonging the foreclosure process. Some of that could be because they're negotiating with homeowners about loan modifications or other ways to keep them in the home. But banks also could be deliberately foot-dragging for the same three reasons listed above.

"The problem is that no one knows how extensive (the shadow inventory) is," said Patrick Newport, U.S. economist with the Massachusetts research firm Global Insight. "It's a wild card. If it's a really big number, you'll see prices drop a lot more and deeper problems for the financial system."

Unemployment: Big factor in home defaults

2009-04-14T11:04:00.000-07:00

NEW YORK (Reuters) -- Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Obama's plan to stem foreclosures by modifying loans.

Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.

Loan modifications are not necessarily a better deal for investors either, wrote Boston Fed economists Christopher Foote and Paul Willen, Atlanta Fed economist Kristopher Gerardi and Lorenz Goette, a professor at the University of Geneva.

Their research found that policies that directly help homeowners overcome setbacks such as losing their jobs may be more effective in combating foreclosures.

"Foreclosure-prevention policy should focus on the most important source of defaults," the economists wrote in a study released on the Boston Fed's Web site late last week.

The findings challenge the thinking behind a White House plan announced in February that would give up to 9 million families the chance to refinance their mortgages. President Obama's administration has made loan modifications a central plank of its efforts to tackle the housing crisis.

"One of the most influential strands of thought contends that the crisis can be attenuated by changing the terms of 'unaffordable' mortgages," the economists wrote. But policies that focus on loan modification "face important hurdles in addressing the current foreclosure crisis," they wrote.

The economists suggest that the government could instead replace part of an individual homeowner's lost income from a job loss through loans and grants and help those whose predicament is more permanent become renters.

In addition, investors do not necessarily stand to gain if foreclosure is avoided, they said, and that could help explain the relatively small number of loan modifications to date. Estimates that total gains for investors from modifying rather than foreclosing can run to $180 billion may not take into account a number of key factors.

Investors can lose money when they modify mortgages for borrowers who would have repaid anyway. Borrowers with modified loans may default again later, especially if the reason they were driven to default remains, the economists said.

Obama urges mortgage refinancing

2009-04-13T11:11:00.000-07:00

WASHINGTON (Reuters) -- President Barack Obama encouraged Americans Thursday to take advantage of historically low mortgage rates and said his administration was rolling out further phases of its plan to address the housing crisis.

Turning his attention to the U.S. economy after finishing his first trip as president to Europe and Iraq, Obama said more people across the United States could save money by refinancing their loans.

"The main message that we want to send today is, there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates," he told reporters during a meeting with advisers and a group of people who had taken advantage of the lower rates.

"We estimate that the average family can get anywhere from $1,600 to $2,000 a year in savings by taking advantage of these various mortgage programs that have been put in place."

Obama said citizens could check a Web site, MakingHomeAffordable.gov, to see if they were eligible for mortgage refinancing.

"We are in the process of rolling out additional phases to the program," he said, referring to the administration's housing measures.

"We are putting in place a loan modification program, working with banks, working with services that will allow other folks who are closer to losing their home (be) in a stronger position in the future.
Interest rates to go lower?

Meanwhile, the top U.S. housing official said interest rates on typical home loans will continue to fall from their current, record lows.

"I think you will see them continue to come down, based on everything that we're doing, but recognize that they've already started to make a big difference," Housing and Urban Development Secretary Shawn Donovan said on CNBC.

Obama, who spent part of his trip to Europe working on solutions to the global economic crisis, emphasized that the U.S. problems stemmed from the housing sector.

"Obviously one of the triggers of the financial crisis and now the economic crisis that we've suffered is that because in some areas ... housing values got way overheated, in some cases you had a lack of regulation that allowed all sorts of complex financial instruments take advantage of home owners," he said.

"We have seen a collapse in the housing market, a precipitous drop in values, and that led to our problems in the financial markets."

Making Home Affordable program may enable millions to refinance mortgages

2009-04-09T09:21:00.000-07:00

So you want to refinance your house, but it's not worth enough for you to get a good loan in the current market? A new Obama administration program is designed to fix that problem for millions of homeowners.

Here's how it works. In the past, the federal Fannie Mae and Freddie Mac mortgage programs would only handle loans of up to 80% of your home's value, unless you bought mortgage insurance. And if you owed more than your home was worth, you were flat out of luck.

As of this month, that has changed. Through June 2010, borrowers whose loans are owned or guaranteed by Fannie or Freddie may be able to get quick refinances for up to 105% of a home's value. They must be current on their mortgage payments, but administration officials estimate that as many as 5 million homeowners qualify. And refis are available for borrowers with credit scores as low as 620.

"This is going to create a real opportunity for millions of people to save money on their mortgages -- or replace an adjustable-rate mortgage with a fixed rate," Freddie Mac spokesman Brad German said.

First, the rationale for the program.

As federal interventions go, encouraging refinancings may not compare with the $182.5 billion bailout of American International Group Inc. But a homeowner with a $500,000 loan can save $476 a month by cutting a 6.5% interest rate on a 30-year mortgage to 5% -- savings that can be plowed back into the economy or can reduce the odds of foreclosure should the downturn deal the borrower a financial blow.

The historically low rates also make this a perfect time to replace a bubble-era adjustable-rate or interest-only loan with a traditional 30-year or 15-year fixed mortgage.

Switching to a fixed rate might mean higher payments initially, because of an artificially low payment on the adjustable mortgage, but guards against even higher payments in the future should rates skyrocket during an inflationary period, German pointed out.

Now, some caveats about the new refi program:

For starters, it's only for folks with solid payment histories. You're allowed to have been 30 days late on a single monthly mortgage payment once during the past year, but no more than one, and no 60- or 90-day late payments.

What's more, the refinancings only work for mortgages owned or guaranteed by Fannie Mae or Freddie Mac. Still, about 40% of all U.S. home loans are Fannie or Freddie loans, Faith said, so millions will be covered.

Borrowers who owe less than 80% of their homes' values are not eligible. They have the opportunity to turn to standard refinancings, a currently white-hot market that, as Kathy M. Kristof reports in an accompanying story, can require jumping through a host of financial hoops these days.

There are financial limits to the largesse, though. The maximum Fannie or Freddie loan is $729,750 in Los Angeles, Orange, Ventura and Santa Barbara counties, $697,500 in San Diego County, and $500,000 in Riverside and San Bernardino counties. Larger "jumbo" mortgages carry a heavy premium.

The erosion of home prices in former boom regions such as California is also a factor because a lot of people owe more than 105% of what their home is worth.

Finally, although the government-sponsored Fannie and Freddie refinancings are designed to encourage lenders to make new loans, the program is entirely voluntary. On its informational website, the government tells borrowers to exercise patience because lenders and servicers are just starting to implement the program, "and there may be a slight delay before they are prepared to process all applications."

If you think you're eligible and want to check, an initial screening test is available at the government website, including directions on how borrowers can determine if their loan is owned or guaranteed by Fannie or Freddie.

Mortgage applications rise

2009-04-08T09:20:00.000-07:00

NEW YORK (Reuters) -- U.S. mortgage applications rose last week, as demand for home purchase loans jumped even as interest rates edged up from record lows, data from an industry group showed on Wednesday.

Demand for home purchase loans, an indicator of home sales, far outweighed demand for refinancing. The increase may help gauge what is in store for the hard-hit U.S. housing market this spring, the peak home buying season.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended April 3 increased 4.7% to 1,250.6.

Cameron Findlay, chief economist at LendingTree.com, based in Charlotte, North Carolina, said home loan demand at his company has remained strong and steady over the last several weeks.

"In addition, the quality of the borrowers coming to us has remained high with high FICO scores and low loan-to-value ratios," he said on Tuesday. "This is an encouraging sign as responsible borrowers looking to purchase or refinance their homes are getting the help they need with low rate, high-quality loans."

FICO scores refer to borrowers' credit ratings.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.73%, up 0.12 percentage points from the a record low reached the previous week. The survey has been conducted weekly since 1990.

Interest rates were well below year-ago levels of 5.78%.

"As rates remain at historic lows, we anticipate this trend will continue as more borrowers take the time to shop around for competitive rates on home loans," he said.

The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world. Economists contend that the economy may not emerge from its slump unless the housing market stabilizes.

Low mortgage rates have generated demand for home refinancing loans and should continue to do so. Lower monthly payments provide a bit of relief to strapped consumers amid rising unemployment and a shrinking economy.

Until last week, the low rates had only a moderate impact on demand for loans to buy homes.

The MBA's seasonally adjusted purchase index rose 11.1% to 297.7.

The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 13.3%.
Weekly refinancing activity rises

The Mortgage Bankers seasonally adjusted index of refinancing applications increased 3.2% to 6,813.5.

The refinance share of applications decreased to 77.9% from 79.1% the previous week. The adjustable-rate mortgage share of activity was unchanged at 1.5%.

Fixed 15-year mortgage rates averaged 4.49%, up from 4.45% the previous week. Rates on one-year ARMs increased to 6.23% from 6.20%.

Signs of life in California real estate

2009-04-07T09:36:00.000-07:00

NEW YORK (CNNMoney.com) -- No state has been harder hit by the housing bust than California.

It has piled up more foreclosures and has endured among the worst home-price declines. The median price of a single-family home sold in February was $247,590, down 41% from 12 months earlier, according to the California Association of Realtors (CAR).

And home construction in the Golden State has nearly vanished: December housing permits shrank to about a quarter of what they were during the boom years, according to the National Association of Homebuilders.

Housing on the rebound?

But there are signs that California's housing market may be coming out of this tailspin: Sales volume is increasing, investors are returning and inventory is shrinking.

Bringing back buyers

Low prices have brought out droves of buyers. In February, they purchased more than 600,000 homes, some 80% more than they bought in February 2007, according to CAR. And most of this activity is where prices are off 40% to 60% from their peaks.

In the Sun City area of Riverside County, for example, prices have fallen more than 35% over the past 12 months. Two-thirds of February's sales in the area were of foreclosed properties owned by banks, according to Chuck Whitehead, broker with Coldwell Banker Associated Brokers.

"The sales rebound is largely centered around areas that have experienced the biggest impact from the subprime crisis," said CAR chief economist Leslie Appleton-Young.

How low can home prices go in your city?

In more stable communities, where fewer homes were saddled with toxic mortgages, prices have not crashed as badly and sales are rebounding more slowly. But foreclosures still account for a significant portion of sales, according to Phil Jones, a broker with Coldwell Banker Coastal Alliance in Long Beach.

Most analysts foresee continued price declines in California, according to Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies. "But [there'll be] a slowing of that decline, which portends the end of price drops."

That may already be happening in Long Beach, according to Jones. The measure he uses to judge market trends there, price per square foot, turned up in February, growing 5% to $360.

"Every one of my agents is very busy," Jones said.

Investing 2.0

Another positive sign that markets don't have much further to fall is that investors are returning to some markets.

"I spoke with one investor who is putting together a group of buyers and they're ready to get back into the market," said Jones. "They're planning to buy single-family homes in bulk."

John Dugan is one such investor. The San Francisco-based medical supplies salesman is using a portion of his Entrust Group-managed IRA to buy townhouses in the Sacramento area.

So far he's purchased three 840-square-foot, two-bedroom, one-bath duplexes. He paid just $35,000 to $80,000 a piece - down from their $180,000 to $200,000 selling prices a few years ago.

He paid cash for the first property and rents it out for $750 a month, a profit of $550 after dues and common charges. That's a 19% return on investment, without figuring on appreciation.

"This kind of pricing is something you only think of as Midwestern, not Californian," he said.

Supply dropping

The booming sales have whittled away existing home inventory to just six and a half months - down from 15 months a year ago.

"Typically, I would describe a normal market as having a six to seven month supply of homes," said Appleton-Young. "We have that now."

California's inventory now compares favorably with the rest of the nation, where there's a 9.7 month supply of homes on the market, according to the National Association of Realtors.

One wildcard, however, is that banks have kept many repossessed homes off the market. "Banks are spoon feeding them out very slowly so they don't overload the market," said Whitehead. But, he added, if they release a lot of properties during the heavy spring buying season, they "will be eaten right up by buyers."

Could the end be near?

All of those factors add up to a more optimistic forecast for California, which is seen as a harbinger of things to come for the rest of the country.

Appleton-Young said that while home prices should continue to decline for the rest of 2009, she predicts that the pace of decline will slow. In total, she's predicting a total loss of 19% for the year. But, "I think we could see home price stabilization by early next year," she said.

If that happens in California, it could spread to the rest of the hard-hit Sun Belt markets - and beyond.

"California was the pace setter for lots of the mortgage products that went toxic," said Retsinas. "The sense is if the problems can be addressed there, the rest of the country will follow."

Qualifying for a low-down FHA loan

2009-04-06T11:18:00.000-07:00

NEW YORK (CNNMoney.com) -- Mortgages insured by the Federal Housing Administration can be a lifeline for low-income or high-risk borrowers. These loans have tiny down-payment requirements, competitive rates and easy credit-score hurdles.

In fact, terms are so attractive that some may ask why all home buyers don't use FHA mortgages.

Well, a lot more of them do. Since the housing bust began, FHA lending has soared to account for 20% of the total dollar volume in home loans - up from just 3% in 2006. The number of authorized FHA lenders skyrocketed 500% over the past two years.

"FHA stays active in volatile and declining markets, continuing to make mortgage credit available to borrowers, even when private mortgage providers are withdrawing," said the Secretary of Housing and Urban Development, Shaun Donovan, in Senate Appropriations Committee testimony on Thursday. "During difficult times, it is critically important to have an entity like FHA play this role - offering families access to near-prime rate financing."

FHA loans are especially attractive for homebuyers with steady incomes who cannot scrape together a 20% down payment because FHA lenders will finance up to 96.5% of the home price.

According to Maryland-based mortgage consultant Allen Hardester, the other attractions of FHA loans include:

* A better loan modification program. The agency has a long history of helping borrowers who fall behind on payments. In two-thirds of default cases the agency figured out a plan to keep borrowers in their homes. And 90% of those mitigations were still working after two years.
* They're cheap to refinance. FHA loans can be easily - and often cheaply - converted to similar FHA mortgages if interest rates drop.
* Borrowers with weak or limited credit histories may still qualify. Mortgage applicants can have very short credit histories or a late payment or two on their records and still get approved with low interest rates. There is also no mandated minimum credit score; individuals are judged case-by-case.
* Low rates. For months, interest rates on FHA loans have been lower than conventional loans. Plus, rates don't vary with credit score; you pay the same whether you're a 620 or a 700.

Although these loans target low- and moderate-income Americans, there are no income restrictions. However, FHA does limit the amount that can be borrowed, based on area home values. For example, the most that can be borrowed in a high-cost area such as New York City is $729,750; meanwhile, in Buffalo, N.Y., a purchaser can borrow no more than $276,250. Check the cap limits in your home town.

In addition, borrowers must pay an up-front insurance premium totaling 1.75% of the loan, which goes into FHA's fund for repaying lenders if borrowers default. So if you take out a $200,000 loan, you would need $3,500 at closing, in additional to normal costs.

Otherwise, there are few restrictions to getting an FHA loan. However, there is a perception that they are difficult to obtain. And they once were.

Few lenders would originate FHA loans during the housing boom because the underwriting and appraisal process was so strenuous. "If there was a crack in the sidewalk, they wouldn't approve the loan," said George Hanzimanolis, a mortgage broker in Pennsylvania and past president of the National Association of Mortgage Brokers..

That all changed a few years ago when HUD rethought its guidelines. Now, the process can be nearly as fast and painless as conventional loans.

The one class of borrowers who may be slightly better off with conventional mortgages are ones with very high credit scores who make substantial downpayments. Keith Gumbinger, of HSH Associates, a publisher of mortgage information, said they may save an eighth of a point on their rates.

T.G.I.F.

2009-04-03T09:51:00.001-07:00

Good morning everyone,

This week's video is from Jimmy Kimmel Live. It's a hilarious look at the video of Nadya Suleman giving birth...As always, thanks for making my blog the #1 real estate blog in all of Long Beach...

Enjoy!!!

When home prices hit bottom

2009-04-02T10:36:00.000-07:00

(Money Magazine) -- Call it the Great Housing Paralysis of 2009. If you're hoping to buy your first home or invest in a second one, you're probably sidelined, unsure when to jump in. If you want to sell, you're thinking it may be better to wait. And even if you don't plan to either buy or sell anytime soon, watching one of your biggest assets tank is about as much fun as being chased by hornets. When will the pain stop?

Nationwide, home prices will bottom out at the end of this year, according to the forecasters at Moody's Economy.com. Median prices will probably fall another 10% on top of the 27% they've plummeted since their 2006 peak. That prediction assumes that President Obama's various recovery efforts - including billions to slow foreclosures and goose bank lending, plus a tax credit to most 2009 buyers who haven't owned in the past three years - will have some effect. If they don't, says Economy.com's Mark Zandi, the bottom could come as late as 2011.

And then? "The recovery will look more like a U than a V," predicts Mike Larson, a real estate analyst at Weiss Research. Translation: After home prices hit their lows, they'll probably stay there for a few years as the economy slowly struggles back to its feet. Prices aren't expected to reach their 2006 levels again for another decade.

Before you reach for the Xanax, think about a few things. First, the nation was in a housing bubble, remember? What's happening now is both inevitable and necessary. Second, if you haven't yet bought your first home, you should be happier than Kate Winslet on Oscar night. Third - and most important - the outlook varies dramatically depending on where you live. If you're in Memphis or Greenville, S.C., for example, the bleeding is almost over. Find projections for when the nation's 100 largest metro areas will hit bottom - and how prices are likely to change in the next 12 months in our Real Estate 2009 list.

As you've heard countless times, you should think of your home primarily as a place to live, not as an investment. And it's nearly impossible to time the bottom perfectly. That said, getting a sense of the price trends in your area can give you the confidence to make decisions that can save you a whole lot of money. For the latest advice on buying, investing, and selling - no matter where you live - read on.
Buyers

Factor in future drops. Buying in one of the areas that is expected to keep falling significantly for another year or more is - how shall we put it? - probably not the greatest idea. If you don't currently own a home, keep renting until your market is closer to its trough (you can find that information on the Real Estate 2009 list).

But if you really want to buy now - for example, you're moving to a city where the available rental housing isn't appropriate for your family - aim to negotiate a deal that factors in this year's expected price drop. For example, if your market is forecast to fall 10%, bid at least 10% less than the home's current value. If the seller refuses, find another house (there are plenty).

Even if you can't score a deal like that, you can console yourself that you'll have a decent shot at making up future price declines (and the thousands you spent in closing costs) as long as you stay put for at least five to seven years.

Consider foreclosures and short sales. If getting a great deal is your main goal, look for foreclosures, which typically sell for at least 20% to 30% less than market value, according to foreclosure-listing website RealtyTrac. Because these homes are sometimes abandoned and stripped, get a contractor to make a free estimate of the time and cost of repairs, and make sure they won't wipe out the amount you'd save.

Another economical option: short sales, in which bankers allow homeowners to sell for less than they owe. They can save you 10% or more. The seller typically still lives in the home, so it's usually in decent shape. One big drawback: The process can take up to six months and can fall apart at the last minute. "If foreclosure is 30 to 40 days away, it's very unlikely that the short sale will happen first," says Glenn Kelman, CEO of Redfin, an online real estate broker. For more see "Snag a Great Deal on a Short Sale."

Be smart about mortgages. Today's rates - averaging 5.2% for a 30-year fixed loan - are steals. They'll probably hover in the 4.75% to 5.5% range all year, says Larson, so there's no need to rush to lock in. (Jumbo loans - those larger than $417,000, or up to $729,750 in certain high-cost areas - average 6.8% and are unlikely to close in on traditional rates this year.) However, because some lenders are requiring more information today, it's taking longer (about 45 to 60 days) for banks to approve loans. To land the best rates with no extra costs, you'll usually need at least 20% down and a credit score of 720 or better. And to qualify for any mortgage, your monthly payments toward debt should eat up no more than 43% of your pretax income; your monthly mortgage, insurance, and taxes should total 31% or less.
Investors

Think tortoise, not hare. Because prices have further to fall in most areas, forget about flipping. You're better off investing in, say, a vacation home, a future retirement home, or a rental property that you're planning to hold for a minimum of five to seven years. Otherwise you run a significant risk of losing money from future price declines, plus closing costs.

Focus on location, location, location. If you plan to rent out your purchase at some point, look beyond the deal. "Many investors are simply looking for where prices have fallen the most, but they also need to look for areas where the economy is still strong and people can find jobs," says Amy Bohutinsky, a vice president at Zillow.com. Many cities with large price drops have high unemployment. Look for areas close to public transportation, a university, or shops and nightlife. "Those neighborhoods will appeal to people in their twenties and thirties who have been waiting and renting," says Bohutinsky.

Get pre-approved. Many lenders still want nothing to do with investors, so you'll face tougher loan requirements than you would have a few years ago. Banks may also limit you to perhaps four outstanding mortgages if you don't have tons of cash on hand. Before you start scouting neighborhoods, get pre-approved for a loan so that you're sure you will qualify.
Sellers

Stop deluding yourself. Ignore list prices and base your asking price on what similar homes in your area have actually sold for in the past three months. "Even six months ago the market was totally different," says Ellen Klein, a realtor in Rockaway, N.J.

No nibbles after 30 days? Drop the price. An even better strategy, says Klein: Right out of the gate, price your home at 10% below what comparable ones have gone for. That may attract more than one bidder, pushing up the final price. If your area is on Real Estate 2009 list and is forecast to fall by double digits in the next 12 months, do whatever it takes to unload now. The longer you hold on, the more the value will erode. The alternative: Stay put.

Spiff up the joint. If your area has lots of foreclosures, it'll be hard to compete on price. But it won't be hard to compete on condition. So make repairs now, then heavily market the fact that your house is move-in ready. Throw in a bigger commission to buyer agents so that they'll show it more often. Also advertise that you have a flexible closing date - even if it means you must rent until your next home is ready. That way buyers who must move in 30 days will know yours is an option.

Get creative. If you absolutely must move out soon and your home isn't selling, consider offering a rent-to-own option, sugests Eric Mangan of ForSaleByOwner.com. A potential buyer pays you a monthly sum to live there. After a set number of months - say, six to 18 - he either has the option to buy or is required to buy. You'll need to pay an attorney about $300 to draft the contract. But at least you'll have money coming in each month to cover some or all of your mortgage payment.

No matter where you live, remember that a year can make a huge difference. If the forecasts prove true, by this time in 2010 about half the metro areas mapped on these pages will have stopped falling. The housing market - slowly, gingerly - will start reviving. At last!

Pending home sales off lows

2009-04-01T10:06:00.000-07:00

NEW YORK (CNNMoney.com) -- The number of existing homes put under contract ticked up in February after hitting historic lows the previous month.

The National Association of Realtors reported that its monthly Pending Home Sales Index rose 2.1% to 82.1 from 80.4 in January.

The Midwest saw the largest gain of any regions, with pending home sales jumping 14.5%. The Northeast also recorded double-digit growth at 10.6%. The South inched up 4.4%, and the West dropped 13.5%.

"Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we'll see additional sales gains," said NAR's chief economist, Lawrence Yun.

Housing affordability hit a record high in February. NAR's Housing Affordability Index jumped 0.9 percentage points to 173.5 in February, which is up 36.3 percentage points from a year ago. To determine affordability, the HAI incorporates the relationship between home prices, mortgage interest rates and family income.

According to the NAR report, a family earning the national median of $59,700 could afford a $285,600 home in February, presuming they devote no more than 25% of gross income to mortgage principal and interest. The national median price for existing single-family homes is $164,600.

Yun expects inventories of homes on the market to swell during the coming months if sellers follow the normal pattern of increased selling during the spring.

"But with the positive housing stimulus incentives now in place, we expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory," he said.

That should lead to more stable housing market conditions by the end of the year, NAR predicts.

Record drop in home price index

2009-03-31T08:51:00.000-07:00

NEW YORK (CNNMoney.com) -- Housing prices in 20 major cities fell at record monthly and annual levels in January, according to a private report issued Tuesday, with prices down 2.8% from December and 19% from a year earlier.

The S&P Case-Shiller Home Price Index, a comparison of price changes recorded when homes are resold, is considered to be one of the most accurate gauges of market trends available. Its 20-city index has been down for 30 straight months.

Month-over-month home prices fell in all 20 markets during January and are now at late 2003 levels.

"There are very few bright spots that one can see in the data," said David Blitzer, chairman of the index committee at Standard and Poor's. "Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSAs (metropolitan statistical areas) falling more than 20% in the last year."

All told, prices have plunged 29.1% nationally since they peaked during the second quarter of 2006, according to Case-Shiller.
Where home prices will fall the most

Individual metro areas have fared far worse. In Phoenix, home prices have fallen 35% year-over-year, while Las Vegas has been down 32.5%, San Francisco has been down 32.4% and Miami has fallen 29.4%.

Phoenix has lost 48.5% from its peak, the most of any metro area. Other big losses were absorbed by: Las Vegas, Miami, Phoenix, San Francisco and San Diego; each has seen home prices decline more than 40% from their peaks.

All 20 index cities were in negative territory, with Dallas being the least affected at a loss of 4.9%. Others in single-digit losses were: Denver at 5.1%, and Cleveland at 5.2%.

The latest report confirms anecdotal information that has been streaming in from around the nation, according to Mike Larson, a real estate analyst with Weiss Research.

"The pace of decline has picked up recently," he said. "Arguably, that's just what we need to drive up sales activity and reduce inventory."

The nation is grappling with historically high foreclosure rates, which add to inventories of homes for sale and drive down prices. In many markets, a large percentage of the homes changing hands are what's known as "distressed properties," meaning they are either bank repossessions or short sales, deals in which owners sell their homes for less than what they owe on their mortgages.

Much of the sales traffic is in foreclosure inventory, which may be skewing price statistics downward because distressed properties are often in poor condition.

But Larson does not expect home prices to improve anytime soon as job losses mount. "The biggest risk going forward is the health of the overall economy," he said.

There has been a string of positive housing market reports over the past few weeks, pointed out Pat Newport, an analyst with IHS Global Insight. New home sales are rebounding, existing home sales are rising and low interest rates are sending mortgage applications up.

"Those reports are not reflected in the January Case-Shiller report," he said. They won't be until at least the February statistics and even the March statistics come out.

Foreclosures spike - so do mortgage-help plans

2009-03-30T11:26:00.000-07:00

NEW YORK (CNNMoney.com) -- Lenders have helped an increasing number of mortgage borrowers to get current on payments and stay in their homes, but the tide of foreclosures is still rising.

In February, nearly 250,000 homeowners received either mortgage modifications or repayment plans from their lenders, according to Hope Now, the coalition of lenders, investors and community advocacy groups put together to combat the foreclosure plague.

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. Modifications are considered more comprehensive and effective than repayment plans, which simply tack the late payments on to the end of the loan but don't reduce payments.

"The mortgage lending industry is responding to the needs of its customers and offering solutions that are appropriate to the current market and economic conditions," said Hope Now's director Faith Schwartz.

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.

February was the second straight month of sharply higher foreclosures; prior to January, the problem appeared to be easing. Foreclosures declined to 69,000 in November from 77,000 in October and then dropped again to 56,000 in December.

But the report could have been much worse, considering the nation's deteriorating economic picture, Schwartz said. "We're shedding 650,000 jobs a week," she said. "But there's more flexibility [by the lenders]. They're offering more forbearance in response to job losses."

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," said Schwartz. "[Under the program] It takes 90 days to complete a modification. Over the next three months we'll start to see some pull-through."

April will be "the month to get all the implementation details done on the new plan so that everything is crystal clear when they start using it," she added.

T.G.I.F.

2009-03-27T10:24:00.000-07:00

Good morning everyone,

This weeks video was passed along to me by a dear friend...I could not stop laughing at this video although I know I shouldn't have...Enjoy and Thank God It's Friday!!!!

Get out there and make it a GREAT day!!!

Mortgage rates are low. So are approval rates

2009-03-26T09:26:00.000-07:00

NEW YORK (CNNMoney.com) -- 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%.

This week's Bankrate.com data do 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."

For example, the underwriters insisted on seeing the detailed records of all the transactions of the client's bank accounts, not just the summary sheets he first provided.

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.

Habetz said, "A lot of people are listening to the media and not even coming in any more. As busy as we are, we should be a lot busier."

The increased underwriter scrutiny has forced him to screen his clients much more diligently. He weeds out all but the most credit-worthy borrowers before they get to the application stage.

"It costs applicants $600 plus for an application fee and appraisal and you don't want them to incur that expense if they don't have a good chance of getting the loans," he said.

One recent client purchased a home a couple of years ago for $260,000, did some work on it and wanted to refinance his loan based on a home value of $275,000.

But a similar house across the street was on the market for $219,000, said Habetz. He explained to the client that, while his house might be nicer, he would never get an appraisal high enough to make the refinancing work. It would just be a waste of money to try to get a loan.

"I never did fill out an application for him," he said.

HOPE 4 HOMEOWNERS prevents 1 foreclosure

2009-03-25T10:39:00.000-07:00

NEW YORK (CNNMoney.com) -- If HOPE for Homeowners, the foreclosure-prevention plan passed last summer, was a soft drink, it would be New Coke. If it was an automobile, it would be an Edsel. A movie? Howard the Duck.

In the five months since it has been in effect, HOPE 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."

Rep. Michael Castle (R - Del.), who sits on the House Financial Services Committee, agreed, calling HOPE "one of the most failed programs we've had in a long time."

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.

Castle is concerned that the new program will also be a waste of time and money. But Sen. Chris Dodd (D - Conn.), one of the chief architects of the earlier version of HOPE, supports keeping it in the bankruptcy bill, according to a source close to the negotiations. He hopes the changes will help convince more servicers to use the program.

The Senate is expected to vote on the bill in the next few weeks.
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.

Still, the tool would be in the box even if "the administration's plan would be the first thing [lenders] look at," Leonard said.

Existing home sales spike 5%

2009-03-24T17:04:00.000-07:00

NEW YORK (CNNMoney.com) -- Sales of existing homes unexpectedly rose in February, recovering from a sharp drop in the previous month, according to an industry report released Monday.

The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January. February sales were down nearly 5% from year ago levels.

Economists surveyed by Briefing.com were expecting existing home sales to decline to 4.45 million.

The report said first-time buyers made up half of all purchases in February, and that sales of distressed properties accounted for about 45% of all transactions.

Sales were unexpectedly strong in the West, with activity increasing more than 30% over last year.

"February wasn't too shabby for the existing-home market," said Mike Larson, real estate analyst at Weiss Research. "The catch? The increase in sales activity is coming at the expense of pricing."

The national median existing-home price was $165,400 in February, down 15.5% from last year, when the median price was $195,800.

Prices were depressed by the large number of foreclosed properties on the market, said NAR chief economist Lawrence Yun in a statement.

"Our analysis shows that distressed homes typically are selling for 20% less than the normal market price, and this naturally is drawing down the overall median price."

Meanwhile, the total number of existing homes on the market at the end of February rose 5.2% to 3.80 million units. At the current sales pace, it would take an estimated 9.7 months to sell down that inventory of properties.

The report also said the total number of homes for sale has steadily declined over the past six months from a record level last July.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said there's a "good chance" the collapse in home sales that has been going on since September is "now over." "Though a sustained recovery is still a long way off," he added.

Mortgage Rates at 4.5%!!!

2009-03-23T10:00:00.000-07:00

This is the million dollar question everyone is asking themselves right now… Will mortgage interest rates reach 4.5%, or possibly even lower? Presently homeowners are anxiously watching interest rates in a hope to refinance their loan at the most premium interest rate possible. I would like to share with you some critical information about the forecast of interest rates and how to set yourself up to achieve the best rate possible as you get ready to refinance.

Forecasting Interest Rates

Currently we are in a market where mortgage interest rates are extremely volatile. Some days we are seeing interest rates change as much as three to four times per day, meaning if you miss out on a targeted rate in the morning; it might not be there in the afternoon! The Obama Administration is doing everything in their power to decrease interest rates by injecting stimulus into the economy, purchasing stock in Fannie Mae and Freddie Mac, and most importantly the Federal Reserve is purchasing mortgage backed security bonds at an alarming rate. However, the banks and lenders are resisting and fighting the reduction of interest rates for a couple of reasons. First, there is concern as interest rates decrease more and more people will refinance their existing mortgage and the Investors who purchased the bonds securing their loan will lose out on any profits as these loans are paid back well before their expected term is fulfilled. Additionally, banks and lenders are concerned the majority of homeowners will not be able to refinance at these lower interest rates due to extenuating circumstances, such as qualifying their income, appraisal values, and borrower’s holding out for even lower rates. This thought pattern is reflected by the number of loan applicants who missed out on locking a premium interest rate a few months ago as they were gambling rates would continue to fall. Second, there is a concern banks and lenders will need to increase staff and support due to the new loan modification program presented through the Homeownership Affordability and Stability Plan. There will be an obvious influx of calls, questions, and mortgage reviews as a result of this program and banks/lenders might increase interest rates as a way of curtailing new applications as well as helping to afford any additional staffing at this time.

How Can You Set Yourself Up to Refinance at the Best Time?

It is my professional opinion interest rates will fall again. In fact, mortgage interest rates have greatly improved in the past couple of days. In order for you to have the ability to take advantage of the best rates there is a simple process you must follow! Below is a three step process I am recommending we follow which will ensure your success:

Get Your Docs In:

In order to lock in an interest rate once the targeted rate is met, I need to make sure we can get you approved for a new loan. The only way I can do this is to review the required information necessary for underwriting your loan. Let’s get the busy work out of the way upfront and put your family in a position where you are approved for a loan and the only thing we need to do is monitor interest rates. Additionally, this will permit us time to make sure all the necessary documentation is prepared and ready to submit. This will decrease the amount of time your file waits in underwriting and further allows us to avoid extending any interest rate locks.

Communication is Paramount:

We need to talk about the goals your family is looking to achieve through refinancing your home. As we evaluate your goals we can set aggressive targets to monitor so we are ready to act once these interest rate targets are met. I would be happy to meet with you and review all possible loan scenarios and answer all of your questions so you have the greatest amount of information necessary to make the most educated decision.

Pull the Trigger:

If I have received and reviewed all the necessary documentation in order to approve your loan, and we have communicated with one another the goals you are looking to achieve through refinancing your mortgage; there is only one step left. We monitor interest rates and pull the trigger and lock in a rate once your goal is achieved. I pledge to you to be in consistent communication throughout this period so you are constantly aware of the fluctuation of rates and what to expect next.

Here are a couple of last thoughts to keep in mind. I want you to be successful, remember that I am working for you! Do not get caught in the trap where if rates fall and meet the 4.5% mark, you decide to hold out for 4.0% or even 3.5%. If there is savings on the table it is my advice to take them while they are available. We are in a period of historically low interest rates and we most likely will not see mortgage rates at these levels for quite some time. It would be unfortunate if you missed out on a premium interest rate only because you were waiting for another decrease of .25% or .50%. Keep in mind; markets today are shifting and behaving in odd ways. We have seen rates gradually decrease, but have been jumping back up in a matter of days, if not minutes.

This is a pivotal time in the financial markets throughout the world, it is imperative you work with a banker who understands the economy and can help guide you through this process. Please contact me at calvinbui@gmail.com so we can begin this simple three step process and get you on a path to success. It is not a time to reinvent the wheel, do not make this harder on yourself than it needs to be!

T.G.I.F.

2009-03-20T10:30:00.000-07:00

Good morning everyone,

Quick blurb about this weeks mortgage rates. The Federal Reserve launched a bold $1.2 trillion effort yesterday to lower rates on mortgages and other consumer debt, spur spending and revive the economy. To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

Enjoy this weeks video on President Barack Obama chat's with Jay Leno!!!

Obama housing fix: Banks not ready

2009-03-19T14:04:00.000-07:00

NEW YORK (CNNMoney.com) -- As loan servicers scramble to implement President Obama's foreclosure prevention plan, the administration on Thursday unveiled a Web site to assist homeowners in determining whether they are eligible for help.

Obama rolled out his $75 billion foreclosure prevention program on Feb. 18, saying it would begin two weeks later when financial institutions received the guidelines.

The two-part Obama plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. It also provides thousands of dollars in incentives for servicers and borrowers to participate.
0:00 /02:50The $75 billion housing fix

Servicers, however, are still updating their systems to process modification and refinancing applications. And they are waiting for clarification on a few points of the president's plan.

It could be weeks before borrowers learn whether they qualify for either program. Many have complained about being turned away by their servicers.

Administration officials reiterated the need for borrowers to be patient as the servicers work to implement the program. The nation's four major servicers -- Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) -- have said they would participate.

"They are moving as fast as humanly possible," a senior administration official said Wednesday in a discussion about the government's new Web site.

The site can be found at makinghomeaffordable.gov.
Contact your servicer

Some financial institutions, while still not processing applications, are encouraging borrowers to contact them and submit their paperwork. That way homeowners can learn whether they qualify soon after the systems are in place.

Bank of America, for instance, is collecting borrowers' information. If it's clear they aren't eligible for the Obama plan, the bank looks to help them through one of the other loan modification programs already underway. If they might qualify for the president's program, Bank of America is compiling taking down names for future follow-up.

"As soon as we're ready, we'll make calls to the people who've already contacted us," said Rick Simon, a Bank of America spokesman.

Citigroup, meanwhile, is already modifying mortgage payments to no more than 31% of borrowers' monthly income, as part of its November bailout from the federal government.

"We anticipate that the modifications we are making will qualify under the Obama plan once the details are finalized," said Mark Rodgers, a Citigroup spokesman.

Servicers are encouraging borrowers to collect the financial information needed to determine eligibility.

"We're also asking our customers to gather the necessary documents so that when our systems are up and running, we can begin quickly to help those who will likely qualify," said a Wells Fargo spokeswoman.
Determining eligibility

The administration's new Web site helps homeowners determine whether they might qualify for either a loan modification or refinancing. It also provides links to finding government-approved housing counselors and warns people to avoid foreclosure rescue scams.

Borrowers can answer a set of questions to learn whether they could benefit from either the Obama modification or refinancing programs. The loan modification interactive tool, for instance, asks whether the borrower lives in the home, has a mortgage of less than $729,500 that was originated before Jan. 1 and is having trouble making payments.

The site also helps homeowners determine whether their monthly payments are more than 31% of their pre-tax income. And it gives an estimate of how low their new payment might go under the plan. For example, if you earn $4,000 a month and pay $1,400 a month, you could see your payments drop to $1,240 under the modification plan.

The refinancing tool, meanwhile, provides links to Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) that let borrowers determine whether they have loans held by either mortgage finance company, a key eligibility criteria.

Borrowers will also find a checklist of financial documents -- including pay stubs, tax returns and credit card statements -- that they will need to present when applying for the program.

The administration estimates that its foreclosure prevention fix will help up to nine million homeowners.

"We want to encourage as many eligible borrowers as possible to take advantage of our program," said a senior administration official. "This site encourages borrowers to investigate if they are eligible for one or both programs."

Mortgage applications spike

2009-03-18T10:57:00.000-07:00

NEW YORK (Reuters) -- U.S. mortgage applications surged in the latest week, driven by a spike in demand for refinancing as the average rate on 30-year fixed-rate home loans fell, the Mortgage Bankers Association said on Wednesday.

Refinancing applications jumped 30% in the week ended March 13 as the borrowing rate dipped 0.07 percentage point to 4.89%, tying the record low reached in early January in a survey that dates to 1990.

The MBA's market index, which includes both purchase and refinance loans, jumped 21.2% to 876.9, the highest since mid-January.

But purchase applications rose just 1.5% last week to 257.1, a one-month high.

The Mortgage Bankers Association said its seasonally adjusted refinancing applications index jumped 29.6% in the week ended March 13 to 4,497.6, also the highest level since mid-January.

Home loan rates have fallen as the government has purchased more than $250 billion of mortgage-related assets and announced unprecedented steps to stabilize the deepest housing slump since the Great Depression.

A year ago, the average rate on a 30-year mortgage was closer to 6%.

The Federal Reserve purchases of mortgage-related assets is nearing the half-way mark targeted by the end of June to help cut mortgage costs and revive housing. The programs are widely expected to be expanded to bring borrowing costs down, stimulate purchases and help struggling homeowners to refinance and avert foreclosure.

Demand for purchases has been lagging refinancing applications. While homeowners are often compelled to cut current costs, worries about job loss or hopes that prices will cheapen further have keep many potential buyers at bay.

Refinancing requests represented about 73% of all mortgage applications last week.

Housing starts unexpectedly surge

2009-03-17T10:01:00.001-07:00

NEW YORK (CNNMoney.com) -- Initial construction of U.S. homes unexpectedly surged in February, after falling for eight months, according to a government report released Tuesday.

Housing starts rose to a seasonally adjusted annual rate of 583,000 last month, up 22% from a revised 477,000 in January, according to the Commerce Department. It was the first time housing starts increased since June, when they rose 11%.

Economists were expecting housing starts to decline to 450,000, according to consensus estimates compiled by Briefing.com. Still, starts are down more than 47% from February 2008, when over 1.1 million new homes broke ground.

New construction of single-family homes, considered the core of the housing market, increased 1.1% to an annual rate of 357,000 versus 353,000 in January.

February's increase was driven by a nearly 80% increase in construction of multi-family homes. New construction of buildings with 5 or more units increased surged 80% to 212,000 from 118,000 in January.

Applications for building permits, considered a reliable sign of future construction activity, rose 3% to a seasonally adjusted annual rate of 547,000 last month. Economists were expecting permits to fall to 500,000.

While the surge in new construction was a welcome sign for the nation's battered housing market, analysts warned that the increase could be short lived.

"With new home sales still falling and the months' supply at a record, there is no reason for homebuilding to rise," wrote Ian Sheperdson, chief U.S. economist at High Frequency Economics in a research note. "This is a temporary rebound, not a recovery."

New home construction surged in the Northeast, jumping nearly 89% last month. Starts also increased in the Midwest and the South.

In the West, where the housing market was overbuilt in the boom years and where there is a glut of foreclosed homes, starts declined nearly 25% versus the previous month.

One reason you can't get a mortgage

2009-03-16T10:41:00.000-07:00

NEW YORK (CNNMoney.com) -- For real estate appraisers, determining what a house is worth has become increasingly difficult, which is making it even harder for buyers to purchase homes or for homeowners to refinance.

The main tool in the appraiser's kit is the sale prices of homes in the area. If they can find similar houses nearby in similar condition that sold recently for, say, $300,000, they can assume that the home they are appraising is worth a comparable amount.

But with sales volume falling, there are fewer homes with which to compare. In fact, sales of new homes crashed in January to the lowest level in 45 years, and existing home sales fell to a 12-year low.

And even when there are recent sales figures, they often don't hold up as a reliable baseline. Appraisals are estimates of market value at a given time, and with prices in free fall, values "age" quickly.

"We just don't have a flow of transactions to be able to come up with credible values," said Jonathan Miller, president of Miller Samuel, a noted New York appraisal firm. "Closed sales are now largely irrelevant because they're so far behind the market."

In fact, Marc Savitt, president of the National Association of Mortgage Brokers, recently had a bank underwriter object that none of the appraiser's comparable homes were near enough.

"They told him they wanted comps within a mile," said Savitt. "But, the market the way it is, there haven't been many sales and there were no recent comps within a mile."

Other options

So in lieu of good sales figures, appraisers often consider contract prices, the ones first agreed to between buyers and sellers. But those are not much better because many sales don't close.

And listing prices are "hit or miss," Miller said, because most sellers overestimate the value of their homes. Columbia business professor Eric Johnson calls that the "endowment effect," which causes people to place higher values on properties once they own them.

Sellers set their listing prices far too high, as a result, and that leads to a big chasm between list and sale price. In the New York region, for example, there's a 16% gap, on average.

During the boom, pressure was put on appraisers to inflate values so that sales would go through. Sellers, buyers, real estate agents, loan officers and mortgage brokers all had a vested interest in getting the sale completed. So if appraisers weren't cooperative and raise their values, they often got frozen out of deals.

Now, there's pressure on appraisers to be too conservative, so many homeowners are finding themselves unable to purchase a new home or refinance their existing mortgage.

"Lenders want the appraisal at the lower end of the range," said Joni Herndon, a Tampa, Fla.-based appraiser. "The lender may want it at $100,000 and the appraiser thinks it's worth closer to the high end of his or her range, say $115,000."

If the lender does reject the appraisal, one of three things usually happens. "Lenders can order a second appraisal, the seller can lower the price on the house or the buyer can come up with more cash," according to Jim Amorin, president of the Appraisal Institute, the industry's professional standards organization. "In some cases, none of those happens and the loan doesn't go through."

Making adjustments

One way appraisers are addressing stale comps is by using a "negative time adjustment." If a comparable property sold for $200,000 three months ago in a market where prices are falling at a 12% annualized pace, the comp can be reduced in value by 3% to reflect the market.

In some areas more than half the appraisals come in with these adjustments, according to David Adamo the CEO of mortgage broker Luxury Mortgage,

Another option is an "automated valuation model," which uses a mathematical formula to set home values. They establish a baseline home price by examining sales prices and the square footage of recently sold homes in the neighborhood. So if a house is 1,500 square feet in a community where the average home sells for $200 a square foot, the AVM puts the appraisal value at $300,000 and increases or decreases it as new sales data is recorded.

However, these valuations don't take into consideration a home's condition or appearance - or even verify the square footage - so the results can be very far off.

Plus, "those AVMs can have trouble keeping up with the market, too," said Nanette Traylor, an underwriter with Salt lake City-based mortgage lender Castle & Cooke Mortgage.

Impact on Obama's plan

But finding accurate appraisals is more important than ever now that the Obama administration has announced its Homeowner Affordability and Stability Plan. The first prong of this program allows homeowners with Freddie Mac or Fannie Mae loans to refinance into current record-low rates even if they are slightly underwater, meaning they owe more on their mortgages than their homes are worth.

However, eligibility will directly hinge on appraisals: Anyone who owes more than 105% of the value of the home won't qualify. That adds to the pressure appraisers may feel to "hit the number" so people on the bubble can slide in and refinance.

"There's clearly a heightened sensibility among lenders today," said the Appraisal Institute's Amorin. "They're saying, 'We better take a really good look at the collateral."

T.G.I.F.

2009-03-13T14:22:00.000-07:00

Hello everyone,

This weeks Friday video is on Kobe Bryant..Enjoy!!!

Rise in foreclosures 'a shock'

2009-03-12T12:20:00.000-07:00

NEW YORK (CNNMoney.com) -- The foreclosure picture suddenly darkened again in February. More than 74,000 homes were lost to bank repossessions during the month, up from 67,000 in January, according to a regular monthly report from RealtyTrac, the online marketer of foreclosed properties. Nearly 1.2 million have been lost since the foreclosure crisis hit in August 2007.

The number of foreclosure filings rose 6% during the month after falling 10% in January. Worse, filings leaped nearly 30% compared with February 2008. And the results confounded expectations: A downtrend had been expected due to the numerous foreclosure moratoriums in effect during the month.
"We were very surprised," said RealtyTrac spokesman Rick Sharga. "The moratorium were led by big players like Fannie and Freddie and all the major banks. It was supposed to cover the whole waterfront. The fact that foreclosures still went up was a shock."

A particularly troubling aspect of the report was that, for many borrowers, once they go into default, they never get out despite moratorium efforts. That's borne out by comparing bank repossessions - homes actually lost by borrowers - with total foreclosure filings: Nationally, repossessions increased 11% for the month, almost double the 6% rise for filings.

The same holds true for year-over-year figures: February filings jumped 30% compared with last year but repossessions rang up a 60% gain.

The reason so many people lose their homes once they are in default is partially attributed to the severe home price drops recorded in many of the worst-hit areas. When borrowers are severely underwater, owing more than their homes are worth, it removes an incentive to keep up with mortgage payments. Some simply walk away.
The worst hit states

Many states that had previously escaped the worst ravages of the foreclosure plague have started to feel the effects. In South Carolina, foreclosure filings, which include notices of default, notices of foreclosure sale and bank repossessions, skyrocketed 254% compared with last February. The state recorded a filing for every 818 households, the 20th highest rate among the states.

As foreclosures soared, so did South Carolina's unemployment. By January, that had reached 10.4%, the second highest rate, after Michigan, in the nation. It rose 1.6 percentage points higher than December, the biggest increase in any state, and it jumped 4.7 percentage points over the past 12 months, also more than anywhere else.

According to the Neighborhood Assistance Corporation of America CEO, Bruce Marks, poorly underwritten mortgages is still the main source of foreclosures in the state. "It continues to be problem mortgages," he said, "loans that were unaffordable from the start. But unemployment is adding to that."

NACA, which counsels at-risk borrowers and refinances many into low-cost mortgages, is throwing a counseling event in Columbia, S.C., this weekend. The agency expects to host more than 20,000 attendees and has already pre-registered more than 7,500 homeowners.

The dubious honor of worst foreclosure state still belongs to Nevada, where one of every 70 households had a filing. Foreclosures are up 156% from last February and 9% from January. More than 2,800 homes were repossessed by banks during the month.

Second was Arizona, with one filing for every 147 households, up 88% year-over-year and 23% from January. California, with nearly 81,000 filings, had more than any other state, with a rate of one for every 165 households. Florida had more than 46,000, one for every 188 households.

Other hard hit states were Idaho (one in 358), Michigan (one in 360) and Illinois (one in 369).
Worst hit cities

Among metro areas, Las Vegas, where one in every 60 housing units received a foreclosure filing in February, led all other cities with populations of 200,000 or more. Another Nevada city, Reno, had one for every 108 hosueholds, the eighth highest rate in the nation.

The Cape Coral, Fla., metro area had the second highest foreclosure rate in February, with one in 65 housing units.

The rest of the top 10 consisted of six California cities: Stockton (one in 67), Modesto (one in 68), Merced (one in 74), Riverside-San Bernardino (one in 80), Bakersfield (one in 85) and Vallejo-Fairfield (one in 111).

Phoenix rounded out the top 10, with one in every 110 housing units receiving a foreclosure filing. The Phoenix metro area posted the ninth highest foreclosure rate in February.

Mortgage applications jump 11%

2009-03-11T12:14:00.000-07:00

NEW YORK (Reuters) -- U.S. mortgage applications rose for the first time in three weeks as near record-low interest rates spurred demand for home refinancing and purchase loans, data from an industry group showed on Wednesday.

The jump in demand came several weeks after the unveiling of the strongest government action yet to aid homeowners since the housing market's meltdown began and may help gauge what is in store this spring, the peak home-buying season.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 6 increased 11.3% to 723.4.

U.S. President Obama last month announced the Homeowner Affordability and Stability Plan, which is designed to provide much-needed support to the housing market. The goals of the housing plan are to support refinancing for good quality borrowers; help distressed borrowers avoid foreclosure; and stimulate new housing demand through the expansion of Fannie Mae and Freddie Mac , the top two U.S. home funding companies.

Mark Goldman, lecturer of real estate at San Diego State University, said interest rates on mortgages are at enticing levels that could lift demand in the months ahead.

"It does not really matter if interest rates on mortgages move up one week or move down another, they are still at historically low levels," he said.

"What is important right now is that home affordability has improved and low interest rates help more people afford to buy a home," he said.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.96%, down 0.18 percentage point from the previous week and the second lowest rate since the weekly MBA survey began in 1990. The record low was 4.89% for the week ended Jan. 9, 2009.

Loan workouts outpace foreclosures statewide

2009-03-10T11:42:00.000-07:00

The California Department of Corporations today released a survey of state-licensed loan servicers, showing the monthly pace of loan workouts increased 94% to 31,451 in December from January 2008 and surpassed foreclosures in the final months of last year.

Servicers completed workouts on 85,422 loans in the fourth quarter, helping borrowers keep their homes. That’s 85% more than the 46,183 houses and condos foreclosed upon during the quarter. DataQuick previously reported banks foreclosed on fewer properties than in Q3 because of a state law enacted in September requiring them to talk to borrowers at least 30 days before filing a notice of default and discuss options to avoid foreclosure.

In the third quarter, servicers finished 74,122 workouts, a few less than the 79,511 foreclosures that period.

However, the Department of Corporations does not track the number of workouts that redefault. Nationwide government data has shown some 50% to 60% of borrowers who got a break on their loan early last year defaulted again within six months.

Some experts say the best way to prevent redefaults is to lower the amount, or principal, that borrowers owe at or below market value. But state data, as shown in the table, reveal servicers almost never reduce principal. It’s easy to understand why. That means taking a loss on a loan without gaining control of the collateral. (Note: table totals do not add up to 100% because I left off some categories.)

The survey covers more than half of outstanding loans in the state, but most nationally licensed servicers, such as Wells Fargo, are not included. The biggest servicer of all, Countrywide, continues to participate in the survey even though it is now part of Bank of America.

Since the survey doesn’t cover all mortgages, total workouts are likely outpacing foreclosures by a larger percentage than the survey suggests, and may have outpaced foreclosures in Q3.

A few more survey highlights:

* Short sales, when a bank lets a borrower sell his home for less than he owes, doubled on a monthly basis over 2008 to 13% — still a small percentage overall.
* Forebearance, when a borrower makes up late payments without getting a break in interest or debt, decreased from 20% in January ‘08 to 12% in December.
* Paid-in-full, meaning the borrower paid all missing payments and all other debt owed, dropped from 23% to 7%. I assume this is because few people who are in trouble financially have enough equity left in their home to sell it and walk away unharmed

Obama's Mortgage Relief Plan: The Details

2009-03-09T11:36:00.000-07:00

The Obama administration's plan for a housing rescue helps two groups of homeowners largely left out of previous efforts and also aims to deny benefits to those who have been unwise or greedy, according to details released last week.

President Barack Obama's plan would greatly expand mortgage relief to those who haven't missed payments and those whose homes are worth less than their mortgage.

In Connecticut, 14 percent of all single-family houses and condominiums have mortgages larger than what the properties are worth, according to new data from the Warren Group, which tracks real estate in New England. In Hartford, 45 percent of homes have mortgages that exceed their value. In Meriden, the figure exceeds 33 percent.

What the housing rescue program will not do, administration officials said, is reward the unwise or the greedy. Nor will it provide much help to those in the highest-priced areas, though it does reinstate last year's higher loan limits for refinanced or modified mortgages to $729,750 in more expensive areas.

"The plan is not intended to prevent every foreclosure or help every homeowner," said a senior Treasury official, who briefed reporters on condition of anonymity. "It is targeted at responsible homeowners. It will do nothing for speculators or flippers."

Lenders and brokers said that reinstating higher caps for eligible loans would help certain borrowers whose mortgages were purchased or backed by Fannie Mae and Freddie Mac. The higher cap had expired in December. The higher limits the Obama stimulus plan reinstated last month expire at the end of this year.

The idea is not to prevent all foreclosures, but to curb those the government deems "unnecessary," loans to responsible borrowers doing their best to stay in their home during rough economic times.

The administration has dubbed this the "Making Home Affordable" initiative and it has two main parts. One is aimed at prudent but "underwater" homeowners who would like to refinance into a lower rate, and the other at borrowers facing financial hardship who are seeking a way to lower their monthly mortgage payments.

Both programs are limited to borrowers who live in their homes, owe no more than $729,750 and fully document their incomes. The programs are effective immediately.

Details of the eligibility requirements for both programs has been posted on www.financialstability.gov.

The first part, called "Home Affordable Refinance," is aimed at homeowners whose property has lost value. It would be open only to borrowers with so-called conforming loans backed by Fannie Mae and Freddie Mac, and it would waive the usual conforming requirement that the borrower have 20 percent equity in the home.

The program would not reduce the principal of the loan, but it would allow the borrower to refinance that principal up to 105 percent of the home's current value.

Loans made with the support of other government agencies, including the Federal Housing Administration, the Department of Veterans Affairs or the Department of Agriculture, are not eligible.

The second program, called "Home Affordable Modification," is aimed at borrowers whose payments have become unaffordable, because of a hardship such as job loss or illness, or because the interest rate has been reset higher on an adjustable-rate mortgage. The government would provide cash payments and financial subsidies to help the lender lower the monthly payment to as much as 31 percent of the borrower's gross monthly income.

In most cases, the lender would reduce the interest rate to as low as 2 percent for five years. If that did not bring down the payment, the lender also could extend the term of the loan to 40 years or temporarily reduce the principal.

The 31 percent target income level would apply only to the borrower's primary mortgage payment; second mortgages, home equity loans and other consumer debt would not be included.

However, administration officials said they will offer other financial incentives to servicers to reach agreements with second lien holders to accept partial repayment of those debts..

Those whose interest rates are reduced below market value would see rates float back after the initial five-year loan period, at 1 percent a year, up to the market rate on the day the modification was signed.

T.G.I.F.

2009-03-06T10:30:00.000-08:00

Happy Friday everyone,

Thanks to all who continue to make this blog the #1 Real Estate blog in Long Beach. We've been so busy over here with Mortgage Modifications, Credit Restorations, and Short Pay Refinances. We are in the process of launching a new site that explains what services The Bui Group provides.

Come take a sneak peak at www.thebuigroup.synthasite.com

For our Friday tradition, this week I found a video that shows just how cool our new president is. He sits courtside, drinks beer, and supports his Chicago Bulls!!!

1 in 5 mortgages 'underwater'

2009-03-05T11:14:00.000-08:00

NEW YORK (CNNMoney.com) -- The dramatic decline in the housing market has hit Americans hard: 20% of people with mortgages owe more than their home is worth, according to a report released Wednesday.

More than 8.3 million U.S. mortgages were "underwater" as of December, said research firm First American CoreLogic. Three months earlier, 18% were underwater.

The phenomenon is exploding beyond bubble markets such as California, Florida, Arizona and Nevada, according to Sam Khater, senior economist for CoreLogic.

"As of December, home prices are declining in 75% of all metro markets, up from a third of those markets last March," Khater said.

Another 2.2 million homeowners are within 5% of negative territory, according to CoreLogic. These borrowers are prime candidates for refinancing under President Obama's foreclosure prevention plan.

Details on Obama's plan are expected to be released Wednesday. The administration has indicated that the plan will allow borrowers with between 80% and 105% loan-to-value ratios - near underwater and slightly underwater borrowers - to refinance their conforming loans, allowing many to lower their mortgage payments.

Anyone who is more underwater may qualify for a loan modification, where monthly mortgage payments would be reduced to 31% of gross income.

State totals: Of all the states, California has fared the worst. Homeowners in the beleaguered state lost more than $1.2 trillion in housing value last year, accounting for roughly half of the national decline.

California also led in the number of underwater borrowers: 1.9 million. It was followed by Florida (1.3 million), Texas (497,000), Michigan (459,000) and Ohio (435,000).

Those five states comprised more than 50% of the country's negative equity mortgages, the report said.

According to the CoreLogic report, home prices show little sign of stabilizing but declines in some of the worst-hit markets, such as the Central Valley of California, have recently lured buyers looking for bargains. But demand has not grown enough to boost prices, according to Khater.

"The supply must be whittled down more before prices can begin to stabilize," he said.

Outlook: As of the end of 2008, the total value of residential properties was $19.1 trillion, down $2.4 trillion from December 2007.

The report speculated that, over the next few months, the largest increase in underwater borrowers will come in states that have yet to record big home-price declines. The bubble states already have such high percentages of underwater borrowers and prices have fallen so far that only incremental increases should occur.

But the pace should quicken in states, such as New York, New Jersey, Montana and Hawaii, in which underwater borrowers still only account for fewer than 10% of all loans.

Obama foreclosure fix open for business

2009-03-04T11:34:00.000-08:00

NEW YORK (CNNMoney.com) -- The Obama administration's foreclosure prevention program is open for business.

The multipronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so housing payments are no more than 31% of monthly gross income. Separately, homeowners who haven't missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.

The $75 billion loan modification plan will provide incentives to borrowers and loan servicers and investors to spur mortgage modifications. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.

"This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans," said Housing Secretary Shaun Donovan.

Administration officials once again stressed that they are not using taxpayer money to bailout irresponsible homebuyers, listing those who will not qualify for assistance: people who bought investment properties, lied on their mortgage documents or purchased multimillion dollar homes.
iReport: Would you walk away from your home?

"The cost of not acting outstrips that of acting boldly," said a senior administration official.

Borrowers can now contact their servicers to see whether they are eligible for assistance. Federal officials have posted additional information for borrowers to determine their eligibility at www.hud.gov. They will also promote the program at homeownership events nationwide.
Who's eligible for modification?

The administration Wednesday released additional eligibility criteria and program guidelines.

The loan modification plan focuses on people who are behind in their payments or are at risk of default.

Federal officials clarified the definition of "at risk" as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.

To participate in the loan modification plan, borrowers must:

* have obtained their mortgage before Jan. 1, 2009;
* have a primary mortgage of less than $729,500;
* live in the property;
* fully document their income by providing tax returns and pay stubs;
* sign a statement of financial hardship; and
* go for counseling if their total household debt - including auto loans, credit cards and alimony - totals more than 55% of their income.

The modification program will be in effect until the end of 2012, but loans can only be adjusted once.

Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers' total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% - but the interest rate can't go below 2%.

The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower. This should prevent borrowers from suffering the "payment shock" that sent many borrowers with adjustable-rate mortgage into default in recent years.

If rate reductions aren't enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan's balance.

Servicers will receive $1,000 for each loan modified, as well as additional annual bonuses if borrowers keep up with payments. Mortgage investors will receive one-time $1,500 incentive payments for restructuring qualifying loans that are not yet delinquent. Finally, borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.

While the program is voluntary, once servicers commit to participating, they must evaluate all loans that may be eligible. Financial institutions that receive government money going forward must participate.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify.

The government is also providing incentives to servicers and borrowers to enter into "short sales" or "deed-in-lieu of foreclosure" agreements with those who can't afford to stay in their homes. In these cases, the bank agrees to take back the home for less than what's owed without filing for foreclosure.

The program also includes a new provision to eliminate borrowers' second mortgages, which will reduce their overall debt levels. Investors in those mortgages, who at times have blocked modifications because they don't benefit from the adjustments, will be paid to eliminate those claims. Details on how much they'll receive will be announced in coming weeks, senior government officials said. Servicers that get second-mortgage holders to participate will receive an additional $250.
The refinancing program

The refinancing program, which is open to homeowners who took out loans from Fannie Mae and Freddie Mac, allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However, borrowers cannot owe more than 105% of the value of their home and must be current on their payments.

The program ends in June 2010. Each servicer will provide details on the terms and costs associated with the refinancing program.
Be patient

While borrowers can now start contacting servicers, it may take several weeks for companies to implement the guidelines, said a senior mortgage industry official in a conference call with reporters.

Servicers are adding staff to handle the expected deluge of calls. Bank of America, for instance, just boosted its servicing staff by 1,000 people.

Still, officials warned borrowers - many of whom have complained of long waits and unresponsive staff at servicers - to be patient.

"There will definitely be a flood of activity, so it's important for consumers to be patient and be persistent and to take a hard look at their own personal financial situation so they can come prepared to really move the process forward as rapidly as possible," the officials said. To top of page

Citi: Mortgage break to unemployed

2009-03-03T10:08:00.000-08:00

NEW YORK (CNNMoney.com) -- Unemployed homeowners whose houses are financed by CitiMortgage may be eligible to have their mortgages temporarily reduced to $500 a month, the company announced Tuesday.

"We're planning to help recently unemployed homeowners by giving them the ability to pay as little as $500 a month on their mortgage, which is effectively less than the price of an average one-bedroom rental nationally," Sanjiv Das, CitiMortgage's president and CEO, told CNN Radio.

Borrowers are covered by the program for 90 days when they submit documents proving they are recent recipients of state unemployment benefits, Das said. Some homeowners may be able to get extensions after the 90 days expire, depending on their situation.

"This is intended to keep the neediest borrowers in their homes," Das said.

It's unclear how many of the 1.4 million CitiMortgage customers will seek assistance, but Das noted that about 4 million people have lost jobs over the past year.

"We hope to help thousands of customers with this," he said.

The company is the housing lender arm of Citigroup, a beleaguered bank that has received $45 billion in federal bailout funds and recently lost 36% of its ownership to the government.

Housing fix's bankruptcy plan under fire

2009-03-02T10:39:00.000-08:00

NEW YORK (CNNMoney.com) -- President Obama is in danger of losing the biggest stick in his foreclosure prevention arsenal.

The administration's plan to stem the housing crisis depends on Congress amending the bankruptcy laws to allow judges to modify mortgages, in particular by reducing principal to make monthly payments more affordable.

The so-called cramdown provision could put pressure on loan servicers to modify mortgages before borrowers file for bankruptcy.

A major critique of the voluntary modification programs is that servicers aren't doing enough to help struggling borrowers. But servicers will likely be more aggressive in working with homeowners if they know that the borrowers can turn to judges for relief.

"Reforming mortgage bankruptcy laws is the only remedy available that will provide the stick to go with the carrots that we have offered lenders to modify mortgages voluntarily," said Rep. Brad Miller, D-N.C., who worked on the legislation.

But congressional Democrats, who first introduced a bill broadening judges' power two years ago, are running into trouble gathering the support needed to pass the legislation. The House postponed a vote on the measure until early this week after a group of centrist Democrats voiced concerns. And its future in the Senate remains in doubt with many powerful Republicans strongly opposed to the legislation.

The House bill would allow judges to modify loans originated before the legislation's enactment. It would let the courts change mortgage terms to make a loan more affordable, permitting judges to reduce the principal to the property's market value, a step servicers loathe.

The Congressional Budget Office estimates more than one million households would benefit if bankruptcy judges were allowed to modify loans.

Debtors, however, would be required to contact their servicer about modifying their loans at least 15 days before filing for bankruptcy. And the debtor cannot have falsified information when he or she obtained the mortgage.

Trying to drum up support for the measure, administration officials are testifying before Congress and meeting behind closed doors with lawmakers to convince them of the need for the bill, while promising to limit its use.

"Carefully tailored bankruptcy reform is a piece of the solution," Housing Secretary Shaun Donovan told the Senate Banking Committee on Thursday. "We do not see bankruptcy court as the place to work out mortgages."

Giving bankruptcy judges the power to modify loans on primary residences -- they already can change mortgages on vacation homes -- is extremely controversial.

While Citigroup, which is under the close watch of federal regulators, has said it would support the measure, many key players in the financial industry are lobbying against the measure. Industry advocates argue that cramdown would force lenders to charge higher rates to compensate for the increased risk and uncertainty in mortgage contracts.

"This legislation will inject more risk into the housing and mortgage markets at a time when everyone is working hard to strengthen the housing market," said John Dalton, head of the Housing Policy Council, an offshoot of the Financial Services Roundtable.

If the measure must pass, the industry would like to see a requirement that borrowers have had to be offered and accepted a loan modification before seeking bankruptcy relief. Lobbyists also want to provision limited only to subprime mortgages. Also, they would like any principal balance above the home's current market value to be deferred rather than forgiven.

"Judicial modifications should be a last resort and only available where other non-judicial options have been exhausted or not available," John Courson, head of the Mortgage Bankers Association, wrote in a letter to Donovan and Treasury Secretary Tim Geithner.

T.G.I.F.

2009-02-27T12:01:00.000-08:00

Happy Friday. Another week has passed and another Friday is among us. That can only mean one thing. Video Friday's. This weeks video is about a "Bullet Proof Weave Stops Bullet Saves Her Life In Kansas! Attempted Murder Miracle"

Enjoy!!!

Obama unveils first budget plan

2009-02-26T10:22:00.000-08:00

NEW YORK (CNNMoney.com) -- President Obama on Thursday pulled back the curtain on his first detailed vision of the federal budget for the next 10 years.

His outline includes an ambitious plan to reform health care, half of which would be paid for by increasing the tax bite on high-income Americans.

Obama has said repeatedly that his first fiscal plan would have a two-pronged mission: to reduce the $1 trillion-plus deficit and make big investments in the future.

The administration estimates that the deficit for fiscal year 2009 will reach $1.75 trillion, or 12.3% of U.S. gross domestic product. That's a record in dollar terms and is the highest as a share of GDP since World War II.

Obama's promise: reduce the deficit he inherited to $533 billion by 2013.

"We will each and every one of us have to compromise on certain things we care about, but which we simply cannot afford right now. That's a sacrifice we're going to have to make," Obama said.

"What I won't do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century," he said.

Obama's outline also reveals how much more money he and his economic team are setting aside to stabilize the financial system. Their estimate: $250 billion. That would be on top of the $700 billion already authorized by Congress under the Troubled Asset Relief Program.

The document the White House delivered to Congress on Thursday is only a broad-stroke preview of the president's formal 2010 fiscal budget request, which is expected out in April. Lawmakers will spend the next several months debating and amending final legislation.

The Obama outline touches on the full scope of the federal government's spending and revenue collection efforts. Some of the highlights include:

Create a $634 billion health care reserve fund: The purpose of the fund would be "dedicated [to] financing reforms to our health care system," according to the budget outline. Among the fund's goals would be to aim for universality of coverage and reduce the growth in insurance premiums.

It would be paid for in two ways. The first, expected to raise $318 billion over 10 years, would limit how much of a deduction high-income taxpayers may take. Instead of reducing their tax liability by their top income tax rate, they wouldn't be allowed to reduce their bill by any more than 28%. So for every $100 in deductions, they would reduce their tax liability by $28.

The second way Obama proposes to pay for the fund is to achieve health care savings by, among other things, reducing payments to private insurance companies offering Medicare and reducing prescription drug prices. The administration estimates these efforts could save $316 billion over 10 years.

The budget outline also notes the $634 billion fund is "not sufficient to fully fund comprehensive reform" but is a first step in the process.

Let tax cuts expire for families making more than $250,000: The president's budget would allow the 2001 and 2003 tax cuts to expire for high income tax filers to help reduce the deficit. The White House estimates doing so could raise $640 billion over 10 years, although Obama's desire to extend those same cuts for lower and middle income families is estimated to increase the deficit by more than $900 billion during the same period.

Make permanent a number of tax breaks from stimulus: The president's budget seeks to make permanent the Making Work Pay credit worth up to $400 per worker ($800 per working family). It also seeks to make permanent the expansion of the child tax credit and the newly enlarged college credit now called the American Opportunity Tax Credit.

Commits more money for renewable energy efforts: Obama's budget will call on Congress to create a cap-and-trade program in which companies would have to pay for permission to emit greenhouse gases. Revenue from the program is intended to pay for a $150 billion renewable energy fund among other things.

Bernanke: Bail out bad borrowers, too

2009-02-25T10:19:00.000-08:00

NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke said Wednesday that the embattled housing market has crippled the economy, and at-risk homeowners need a bailout - even if they knew they couldn't afford their home in the first place.

"Some borrowers presumably knew what they were getting into," Bernanke said before the House Financial Services Committee. "But from a public policy point of view, the large amount of foreclosures are detrimental not just to the borrower and lender but to the broader system."

"In many of these situations we have to trade off the moral hazard issue against the greater good," he added.

Bernanke's comments come after President Obama unveiled a $75 billion plan Feb. 18 to help up to 9 million borrowers suffering from falling home prices and unaffordable monthly payments. Borrowers with little or no equity will be able to refinance their mortgages at the current market rate, and monthly payments will be reduced for at-risk borrowers.

Committee Chairman Barney Frank, D-Mass., said he supported the president's actions, and agreed with Bernanke that moral hazard needs to take a back seat for the time being.

But Bernanke said it is critical that government continue to regulate the markets so a repeat of the mortgage meltdown does not happen again.

"Part of the issue was mortgages that should not have been made and lenders did not take sufficient responsibility," he said. "We must address how we can solve these problems for the future."

Frank said he is committed to introducing legislation before the April recess to increase mortgage lending regulation.

"When we talk about stopping this from repeating itself, we're not simply going on people having had a bad feeling about it," Frank said. "But we are talking about rules and laws that will make it impossible."

Some members of the committee took issue with previous efforts to fix the foreclosure crisis, arguing that the government should have been focused on helping at-risk borrowers instead of easing the credit markets.

"Instead of lifting up the situation of the borrower, federal policy lowered the standards of the lender," said Rep. Jeb Hensarling, R-Texas.

Furthermore, not every committee member was certain that bold, unprecedented action, which Bernanke and the Obama administration have touted, is the right way to go.

"I'm worried that the [government's] policies will only delay the inevitable -- a full correction of the market -- while saddling future generations with trillions of dollars in debt," said Rep. Scott Garrett, R-N.J.
Nationalization, stress tests

Bernanke's testimony comes a day after he cautioned the Senate Banking Committee that a full economic recovery will take "more than two or three years." He reiterated that outlook Wednesday.

The Fed chief also received a barrage of questions about whether the government should take a more active oversight role in financial institutions. Bernanke downplayed talk that the government might have to nationalize some of the country's most troubled banks.

"The debate over nationalization kind of misses the point," said Bernanke. "[The government can] use the already very substantial powers that we already have through supervisory powers, through TARP, to make sure that banks don't just sit there. There's no need to do any radical change."

The Treasury Department is expected to outline its plans to stress test the nation's biggest banks later Wednesday.

Bernanke said he did not believe any of the banks undergoing the stress test are teetering on the verge of collapse and in need of the government taking an active role. He also said that the point of the stress test is to determine if the Treasury needs to prop up banks' capital position so they can weather a worsening recession.

"The outcome of the stress test is not going to be fail or pass," he said. "The outcome of the stress test is how much capital does this bank need in order to meet ... the credit needs of borrowers in our economy."

Bernanke gave this forecast as part of his semi-annual update to Congress about the nation's economic condition.

Home prices in record drop

2009-02-24T10:03:00.000-08:00

NEW YORK (CNNMoney.com) -- Home prices declined at a record pace around the nation in the final three months of 2008, according to an industry report released Tuesday.

The S&P Case-Shiller National Home Price Index reported that prices sank a record 18.2% during the last three months of 2008, compared with the same period in 2007.

Case-Shiller's index of 20 major metropolitan areas fell 18.5%, also a record.

"The broad downturn in the residential real estate market continues," said David Blitzer, chairman of the Index Committee at Standard & Poor's, in a statement. "There are very few, if any, pockets of turnaround that one can see in the data."

All 20 metro areas in the 20-city index recorded declines, with home prices falling more than 20% in eight of those cities. National home prices have dropped 26.7% since they peaked during the second quarter of 2006.

In a separate release from the government, the Federal Finance Housing Agency (FFHA) reported that prices on its home purchase index fell 8.2% during the quarter on a year-over-year basis, and 3.4% compared with the third quarter of 2008.

The government index, which used to be known as the OFHEO home price index, differs from the S&P Case-Shiller index in that it only compares sales of homes that are purchased with so-called "conforming loans", ones guaranteed or bought by mortgage giants Fannie Mae and Freddie Mac.

Homes purchased without financing or ones too expensive to qualify for a Fannie-Freddie loan are not counted in the FFHA statistics.
No slowdown

The decline does not seem to be slowing - just the opposite. The average home price dropped 2.5% between November and December in the 20 top metro areas. That was a larger increase than the 2.3% drop a month earlier.

"The deterioration in U.S. home prices continues apace, with the rate of decline picking up steam late last year," said Mike Larson, an analyst with Weiss Research."Rising foreclosure activity is putting pressure on prices, as lenders are increasingly pursuing a 'take what we can get' selling strategy."

Karl Case, the Wellesley economist who, with Yale economist Robert Shiller, co-developed the index, pointed out during a news conference following the index's release that the markets experiencing the steepest falls also enjoyed the biggest run-ups during the boom.

"Those markets were driven by subprime lending expansion from the summer of 2003 on," he said. "After the [Federal Reserve's lowered interest rates] to fight against the recession of 2001, subprime took off like gangbusters."

Sun Belt cities suffered the worst declines, with Phoenix down 34%, Las Vegas off 33% and San Francisco lower by 31.2%. Denver fared best, down 4%, while Dallas was lower by 4.3% and Cleveland slid 6.1%.

Of the nation's three largest housing markets, New York home prices dipped by 9.2%, prices in Los Angeles dropped by 26.4% and Chicago prices declined 14.3%.

Despite the drop in home prices, which has given affordability a big boost, the pace of home sales continues very weak. Existing homes have been selling at an annualized rate of fewer than 5 million, down more than 40% from the peak.

New home sales, at an annualized rate of about 331,000, are at their lowest level since the Census Bureau began keeping records back in 1963.

The worst may be yet to come, according to Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments and a noted bear on home prices.

"Prices are going to continue to fall," he said. "They have to reflect economic reality."

That reality includes stock prices down to their lowest level in nearly 12 years. "Where would real estate prices be if they went back to where they were 12 years ago?" said Schiff.

The index statistics do not contain a lot of good news for the future, according to Case.

"We'll learn more in the spring market," he said. "Sales should pick up and we'll begin to see how well the president's program is working. There's no evidence in the data to tell us that home prices will bottom out."

Who won't be helped by housing fix

2009-02-23T09:26:00.000-08:00

NEW YORK (CNNMoney.com) -- Don't have a job?

Struggling to keep up with payments on a home worth less than half the mortgage?

Owe way more than your home's value, but can still afford the payments?

Sorry, but you likely aren't among the 9 million people who may get help under President Obama's $75 billion foreclosure prevention program.

The program, unveiled Wednesday, is being hailed as the most comprehensive fix for the foreclosure crisis plaguing the nation. The president says it helps both responsible homeowners suffering from falling home prices and borrowers either at risk of or already in default.

But not everyone will benefit. The program does virtually nothing for the unemployed, who often don't have enough income to make any reasonable monthly payment affordable. And, since it relies more heavily on lowering interest rates than on reducing principal, it does little for borrowers concerned their homes will never recoup their value.

Take Joe Martinez of Bristow, Va., who fits the profile of the "responsible" homeowner Obama cited in the plan. The government contractor and his wife thought they did everything right when they bought their brand new $600,000 house two years ago. They put 5% down and got a 30-year fixed-rate mortgage they could afford.

Others in their neighborhood, however, couldn't keep up with the payments. As foreclosure rose, the value of the couple's home plummeted to $450,000, leaving them doubtful they'd ever recover their investment.

Martinez called their lender to try to get into the Hope for Homeowners program, which would reduce their loan balance to 90% of the home's current value. But they were turned down because they weren't in default.

So two months ago, the couple stopped paying their mortgage, hoping they could then qualify. But even if they don't, they are willing to take the hit on their credit scores to stop throwing money down the drain.

"There's just no point to stay here," said Martinez, 29, adding he could rent the house across the street for half his monthly mortgage payment. "We don't want to give up our home, but it's never going to come back."
Foreclosures will continue

The administration's program isn't designed to help every homeowner, experts said. Nor should it.

"It's a mistake to think we can stop all foreclosures," said Edward Morrison, a professor at Columbia Law School. "Only about one-third of existing foreclosures can be stopped."

The plan calls for loan servicers to modify mortgages for those at risk of or already in default so that the monthly payment is no more than 31% of the borrower's income. This will be done primarily through interest rate reductions, which are more palatable to most servicers than principal write-downs. The federal government will subsidize the interest rate reductions, as well as provide a multitude of incentives for servicers, mortgage investors and borrowers.

Also, borrowers with little or no equity in their homes who are on time with their payments could be eligible to refinance to take advantage of the current low interest rates, which hover around 5%. The plan lifts the guideline that borrowers must have at least 20% equity to refinance, allowing those with loans as large as 105% of their home's value to qualify. This is designed to help people who have seen their equity eaten away by falling home prices.
No job? Out of luck

A growing number of people are falling behind in their payments because they've lost their jobs, ensuring the tidal wave of foreclosures will continue as long as unemployment keeps rising.

It's very tough, however, to help people who lose their income, experts said. Reducing monthly payments can only go so far since the loan's value after modification has to be worth more than it would be if the home were put into foreclosure. Those who lose their jobs often can't make payments large enough to overcome this hurdle.

For these people, the solution often is a short sale, in which the lender agrees to take forgive the loan balance above the home's sale price, experts said.

"In some cases, the homeowners can't stay in the home," said Marietta Rodriguez, director of the National Homeownership Program for NeighborWorks America.

The best way to help the unemployed facing foreclosure is to get them jobs, experts said. The Obama administration is addressing that in the $787 billion economic stimulus package the president signed into law on Tuesday. It is expected to create or save up to 3.5 million jobs.
Underwater borrowers

Many underwater borrowers -- those who owe more than their home is worth -- may find the plan falls short. Some estimates say up to 12 million homeowners may be underwater, with 4 million of them behind on their payments.

The danger is that some of these borrowers may decide it's just not worth it to continue paying if the home isn't likely to recoup its value. This is especially true of those finding it hard to make their payments.

Some struggling borrowers will qualify for lower monthly payments, but they will likely continue to be underwater. The government is offering to reduce their principal by $1,000 a year for five years, but that sum won't do much to bring them back into balance in most cases.

The only way to effectively help those with negative equity in their home is to forgive part of the loan balance, some experts say. They are disappointed that this measure is not given more emphasis in the program.

"Cutting principal is really what's needed to contain foreclosures," said Christian Menegatti, lead analyst for economic research firm RGE Monitor.

Other borrowers, however, are too far gone to get a modification.

"If you're so far underwater, more than about 150 percent loan-to-value, we think you're very unlikely to succeed -- those will not be eligible, as well," Housing Secretary Shaun Donovan said Wednesday.

As for those who can afford their payments, the program contains little to address their housing problems. Only those with loans worth 105% or less of their home's value can partake in the refinancing offer.

Martinez isn't interested in having his interest rate lowered. He would like to see some of his principal forgiven.

"Why would it be such a big deal for them to modify my loan?" he said, noting that his tax dollars are being used to finance the program. "Wouldn't that stabilize the economy?"

Some experts, however, say Martinez is the exception. Those who can make their payments aren't likely to walk away because still need a roof over their head, said Howard Glaser, a mortgage industry consultant.

"Homeowners aren't day traders in their homes," he said. "The investment value is not an issue."

The 2009 Oscars Winners

2009-02-23T09:13:00.000-08:00

Good morning everyone,

The 2009 Oscars started with the “traditional” red carpet and showcase of Hollywood stars in their glamorous Academy Awards outfit.

Hugh Jackman probably did a great job hosting this year’s Oscars with his “singing” Oscars opening performance.

And, the 2009 Academy Awards winners are…
Performance by an actress in a supporting role

* Penélope Cruz in “Vicky Cristina Barcelona” (The Weinstein Company)

Adapted screenplay

* “Slumdog Millionaire” (Fox Searchlight), Screenplay by Simon Beaufoy

Original screenplay

* “Milk” (Focus Features), Written by Dustin Lance Black

Best animated feature film of the year

* “WALL-E” (Walt Disney), Andrew Stanton

Best animated short film

* “La Maison en Petits Cubes” A Robot Communications Production, Kunio Kato

Achievement in makeup

* “The Curious Case of Benjamin Button” (Paramount and Warner Bros.), Greg Cannom

Achievement in art direction

* “The Curious Case of Benjamin Button” (Paramount and Warner Bros.), Art Direction: Donald Graham Burt, Set Decoration: Victor J. Zolfo

Achievement in cinematography

* “Slumdog Millionaire” (Fox Searchlight), Anthony Dod Mantle

Achievement in costume design

* “The Duchess” (Paramount Vantage, Pathé and BBC Films), Michael O’Connor

Best live action short film

* “Spielzeugland (Toyland)” A Mephisto Film Production, Jochen Alexander Freydank

Performance by an actor in a supporting role

* Heath Ledger in “The Dark Knight” (Warner Bros.)

Best documentary feature

* “Man on Wire” (Magnolia Pictures), A Wall to Wall Production, James Marsh and Simon Chinn

Best documentary short subject

* “Smile Pinki” A Principe Production, Megan Mylan

Achievement in visual effects

* “The Curious Case of Benjamin Button” (Paramount and Warner Bros.), Eric Barba, Steve Preeg, Burt Dalton and Craig Barron

Achievement in sound editing

* “The Dark Knight” (Warner Bros.), Richard King

Achievement in sound mixing

* “Slumdog Millionaire” (Fox Searchlight), Ian Tapp, Richard Pryke and Resul Pookutty

Achievement in film editing

* “Slumdog Millionaire” (Fox Searchlight), Chris Dickens

Achievement in music written for motion pictures (Original score)

* “Slumdog Millionaire” (Fox Searchlight), A.R. Rahman

Achievement in music written for motion pictures (Original song)

* “Jai Ho” from “Slumdog Millionaire” (Fox Searchlight), Music by A.R. Rahman, Lyric by Gulzar

Best foreign language film of the year

* “Departures” (Regent Releasing), A Departures Film Partners Production, Japan

Achievement in directing

* “Slumdog Millionaire” (Fox Searchlight), Danny Boyle

Performance by an actress in a leading role

* Kate Winslet in “The Reader” (The Weinstein Company)

Performance by an actor in a leading role

* Sean Penn in “Milk” (Focus Features)

Best motion picture of the year

* “Slumdog Millionaire” (Fox Searchlight), A Celador Films Production, Christian Colson, Producer

T.G.I.F.

2009-02-20T12:31:00.001-08:00

Good Morning Everyone,

This morning I was treated to waking up to this wonderful song by Coldplay. So, this weeks video is called "Viva La Vida". Enjoy the great weekend!

Most affordable city in the nation

2009-02-19T12:31:00.000-08:00

NEW YORK (CNNMoney.com) -- Crashing home prices have led to the most affordable housing market in at least five years, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index released Thursday.

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

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

Topping the list of most affordable U.S. metro areas, which ranks areas with more than 500,000 in population, was Indianapolis. This is the city's 14th consecutive quarter in first place; it boasts a full 93% of all homes sold being affordable to median family households.

The least affordable was the New York City metro area, where only 13.9% of homes sold met the criteria.

In the fourth quarter, the national median home price fell to $190,000 from $205,700 in the previous-year period, according to a report issued last week by the National Association of Realtors. That combined with falling mortgage rates has made home buying the most affordable it has been since early 2002.

"Falling home prices and very favorable mortgage rates both contributed to the housing affordability gains we saw in the fourth quarter of 2008," NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla., said in a prepared statement.

That still wasn't enough to get moribund housing markets moving again. Existing homes sold at an annualized rate of 4.74 million in December, according to the National Association of Realtors, down from more than 7 million during the boom.

And a government report revealed that new home sales crashed to an annualized rate of 331,000 in December, the lowest since record keeping began in 1963.

"Worsening economic conditions, historically low consumer confidence and uncertainty about future home prices kept many qualified buyers on the sidelines," Robson said.
Still no buying push

That affordability has improved so much does not necessarily make people go house hunting, according to Mike Larson, a real estate analyst with Weiss Research.

"You could argue that house affordability indexes are improving but that may not be the best way of defining whether it's a good time to buy," he said. "Concerns about the economy and whether they're going to still have a job have kept many homebuyers from stepping up to the plate."

During the boom, when house affordability plunged, buyers came out in droves. They were confident in the economy and afraid that home prices would soar out of reach. Today, just the opposite applies.

"Affordability is going to get even better," said Larson. "Home prices are not done falling. Buyers recognize this. There's no sense of urgency, and rightly so."

Indeed, according to Nicholas Retsinas, director of Harvard University's Joint Center for Housing Studies, affordability, which was a major factor in homebuying during the boom, no longer matters very much. In most parts of the United States, affordability has returned to where it was in 2002 or 2003.

"The new barrier is willingness to buy," he said.

That's why one major goal of President Obama's housing-rescue plan involves slowing foreclosures to stabilize housing markets and foster consumer confidence.

"If that happens, maybe people will start thinking, 'Hey, maybe prices won't go down tomorrow,'" said Retsinas.
Most and least affordable

Affordability in Indianapolis, the 33rd largest metro area in the United States with 1.7 million people, was buoyed by fairly high median income of $65,100 and rock-bottom home prices. The median price for a home sold during the quarter was just $103,000, according to the National Association of Home Builders report.

Those prices, combined with reasonable mortgage interest rates, make home-buying in the area a snap. A buyer of a median-priced home putting 20% down would pay only about $450 a month in mortgage expenses.

But even though house buying costs are reasonable, the city's weakening economy meant it did not escape the foreclosure plague. More than 20,000 homes, representing nearly 3% of the city, received a foreclosure filing of some kind in 2008, the 26th highest rate in the nation.

Other most affordable towns were: Warren, Mich. (89.6%); Youngstown, Ohio (89.4%); and Detroit (89.3%).

In the New York City metro area, home prices took a steep dive during the quarter, to $455,000 from $500,000 three months earlier. But even that was not enough to dislodge the city from its rank as the most unaffordable metro area in the land.

Median income in the area is $63,000, less than in Indianapolis and, with home prices more than four times higher than in the Midwestern metropolis, only 13.9% of the homes sold there were affordable to median income families.

That was still a major improvement from two years ago, when only 5.1% of homes sold during the fourth quarter of 2006 were affordable. And New York households have been barely brushed by foreclosure so far with only 0.71% receiving some kind of foreclosure filing during 2008.

Other least-affordable metro areas included San Francisco at 20.6%, where affordability improved greatly from 5.7% during the second quarter of 2007; suburban Long Island, where 25.5% were affordable; and Los Angeles, where 26.9% were. To top of page

Obama: Aid 9 million homeowners

2009-02-18T09:27:00.001-08:00

NEW YORK (CNNMoney.com) -- President Obama is unveiling a $75 billion multi-pronged plan Wednesday that seeks to help up to 9 million borrowers suffering from falling home prices and unaffordable monthly payments.

The long-awaited foreclosure fix marks a sharp departure from the Bush administration, which relied mainly on having servicers voluntarily modify troubled mortgages.

Obama, meanwhile, will make it easier homeowners to afford their monthly payments either by refinancing the mortgages or having their loans modified. The president is vastly broadening the scope of the government rescue by focusing on homeowners who are still current in their payments but at risk of default. And he puts billions of federal funds into enticing servicers to modify the loans of those who've already stopped paying.

While still voluntary, the program contains a mix of carrots and sticks for mortgage servicers and investors, both of whom have been seen as resistant to modifying loans. The program would not only give servicers $1,000 for each modification, but would give them another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

But the administration is also wielding a big stick. It will work with Congress to amend bankruptcy laws to allow judges to modify mortgages, a step community advocates say is badly needed but that the financial industry abhors.

"In the end, all of us are paying a price for this home mortgage crisis," Obama was expected to say in a speech Wednesday. "And all of us will pay an even steeper price if we allow this crisis to deepen -- a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit."
Falling home prices

Obama is venturing into new territory to deal with a serious problem plaguing millions of Americans, even those who remain current on their loans. The mortgage meltdown has prompted a steep decline in prices, leaving many homeowners owing more than their house is worth. Nationwide, prices have fallen 17.5%, back to the level they were at in fall 2004, according to Zillow.com.

The administration, which is marketing its plan as help for "responsible homeowners," estimates it can help up to 5 million people.

The plan would help borrowers who owe more than 80% of their home's value to refinance and reduce their monthly payments. Lenders generally won't refinance people who have less than 20% equity in their homes.

But only those who are current on their payments and whose loans are held or guaranteed by Fannie Mae and Freddie Mac are eligible. Also, the new mortgage, including refinancing costs, can't exceed 105% of the current market value of the property, excluding many of the hardest hit. So if your mortgage is $210,000, your property can't be worth less than $200,000.

The program, which begins March 4, allows borrowers to refinance into 15-year or 30-year fixed-rate mortgages at the current market rate, which hovers around 5%. This could benefit those whose mortgages carry higher rates or those in adjustable-rate or interest-only loans, groups of people who could see big rate spikes in the future. The plan, however, will not reduce the loan balance.

For instance, consider a family that took out a $207,000 mortgage at 6.5% on a home originally worth $260,000, but now valued at $221,000. If they refinance to a rate of 5.16%, they could reduce their annual payments by more than $2,300.
Homeowner stability initiative

The administration is also creating a $75 billion initiative to reduce monthly payments for at-risk borrowers by subsidizing interest rates. The goal would be to bring payments to no more than 31% of a borrower's income.

It estimates this program, dubbed the Homeowner Stability Initiative, would help up to 4 million people. It also argues that the measure helps stabilize home prices for all in the neighborhood, maintaining as much as $6,000 in value.

Many homeowners who pay their mortgages on time have railed against the government using taxpayer money to bail out borrowers they see as irresponsible. The administration is joining others in saying that foreclosures hurt everyone because they drag down home values.

"I also want to be very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans," Obama was scheduled to say Wednesday. "It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone."

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

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

Obama's plan also addresses critics who say that some homeowners need extra help because they are carrying so much debt on top of their mortgages. Those with total debt -- including credit cards and auto loans -- equal to 55% of their monthly income must enter a debt counseling program to qualify for a modification.

In addition to providing incentives to servicers and investors, the administration will also reduce borrowers' loan balances by up to $1,000 a year for five years if they keep up with payments.

To entice servicers to modify mortgages in the wake of continuing home price declines, the administration and the Federal Deposit Insurance Corp. have developed a $10 billion insurance fund that will pay mortgage holders additional funds based on declines in a home price index.

The Treasury Department will also develop uniform guidelines for loan modifications, as well as require all financial institutions receiving government funds to participate in the program. Also, all federal agencies that own or guarantee loans will have to apply the guidelines where appropriate.

The Obama plan calls for legal changes to allow judges to modify mortgages during bankruptcy. Judges would be allowed to reduce the loan balance, a measure the financial industry fears because it would lower the value of the mortgage.

Community advocates say this step is required to aid homeowners who can't get help from their servicers. But, if Congress enacts this provision, they predict there will be fewer bankruptcies because servicers will be more diligent in helping homeowners outside of bankruptcy court.
Keeping mortgage rates low

The administration also plans to build on the Bush administration's use of mortgage financiers Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), which were taken over by the federal government in September. The agencies buy loans and securities backed by mortgages from financial institutions, giving them more money to make new loans.

The plan calls for Treasury to strengthen the companies by injecting another $100 billion into each. And it will allow them to buy more mortgages by increasing the size of their portfolios to $900 billion, up from $850 billion.

And, the government will continue to keep prevailing mortgage rates low by buying mortgage-backed securities issued by the agencies. This effort expands a $500 billion purchase plan announced in November that prompted mortgage rates to fall nearly a percentage point.

Citi, JPMorgan temporarily halt foreclosures

2009-02-17T08:58:00.000-08:00

NEW YORK (CNNMoney.com) -- JPMorgan Chase and Citigroup Inc. announced plans Friday to temporarily halt foreclosures as the government works to finalize the details of a financial rescue package that could include billions of dollars in aid for struggling homeowners.

The announcements come as regulators and lawmakers have stepped up pressure on financial institutions to suspend foreclosures until the plan comes out.

Vikram Pandit, Citi's (C, Fortune 500) chief executive, and Jamie Dimon, JPMorgan's (JPM, Fortune 500) CEO, both indicated their willingness to suspend foreclosures during testimony before Congress Wednesday.

Citi said the moratorium is effective Feb. 12 and will remain in place until March 12, or until the Obama Administration finalizes the details of its loan modification program, whichever comes first, the bank said.

The suspension will apply to home loans on a borrower's principal residence and to loans serviced by Citi in cases where an understanding has been reached with the investor.

In a letter to Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee, Dimon said JPMorgan has initiated a foreclosure moratorium through March 6, which would extend a program the bank announced last year.

"We believe three weeks is adequate time for the Treasury to announce - and for us to implement - a new plan," Dimon said.

Treasury Secretary Tim Geithner on Tuesday outlined the Administration's priorities for the second half of the $700 billion allocated under the Troubled Asset Relief Program, which includes spending $50 billion on foreclosure relief.

However, the details of that plan have yet to be worked out.

Geithner and Housing Secretary Shaun Donovan have been meeting with banks, housing advocates and trade organizations this week to listen to their foreclosure prevention proposals.

Among the proposals being discussed: requiring homeowners to take an affordability test and undergo a re-appraisal to see if they are eligible for a government subsidy. Regulators are also looking into more efficient ways to modify loans for borrowers already in default.

President Obama will elaborate on the Administration's foreclosure plan Wednesday, when he delivers a speech in Phoenix, White Hose Press Secretary Robert Gibbs told reporters Friday.

"We stand ready to work with you [Frank] to put the appropriate processes in place, including a national modification standard, to reduce the incidence of foreclosure and to encourage long-term, sustainable home mortgages," Dimon wrote.

In November, Citi announced a Homeownership Assistance Program, which was aimed at helping 500,000 Citi borrowers with mortgages worth about $20 billion stay in their homes.

Under that plan, borrowers needed to have "sufficient income" and be "making a good-faith effort" to repay their loans to qualify for assistance, said Steve Silverman, a Citi spokesman. The current moratorium lifts those restrictions, he said.

Separately, mortgage giant Fannie Mae said it will suspend all foreclosure sales and evictions of occupied properties through March 6 in anticipation of the government's mortgage assistance plan.

The company also said it has adopted a national Real Estate Owned Rental Policy that allows renters in Fannie Mae-owned foreclosed properties to remain in their homes or receive financial assistance if they choose to seek new housing.

The company had previously frozen foreclosure sales through January and had ceased evictions through the end of February.

Fannie Mae (FNM, Fortune 500) and fellow government-sponsored lender Freddie Mac (FRE, Fortune 500) are the largest sources of funding for the U.S. housing market, with mortgage portfolios worth $1.7 trillion.

Both companies have suffered major losses as delinquencies rise amid the turmoil in the housing market. In September, Fannie and Freddie were placed into conservatorship by the federal government and have received billions of dollars in federal aid.

T.G.I.F.

2009-02-13T18:53:00.000-08:00

Hey everyone,

This weeks video installment had me rolling on the floor laughing. Enjoy!!!

Foreclosures eased in January

2009-02-12T09:55:00.001-08:00

NEW YORK (CNNMoney.com) -- The frantic pace of foreclosures eased in January, according to a monthly report released Thursday.

Foreclosure filings - default notices, auction sale notices and bank repossessions - were reported on 274,399 U.S. properties during January, down 10% from December, according to RealtyTrac, the online marketer of foreclosed homes. That was still 18% higher than January 2008.

Lenders repossessed 66,777 homes.

RealtyTrac attributed a large part of the decline to foreclosure moratoriums imposed by mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) as well as other lenders and some states.

"The extensive foreclosure efforts on the part of lenders and government agencies appear to have impacted the January numbers," RealtyTrac CEO James Saccacio said in a prepared statement.

The trend toward foreclosure moratoriums has gained considerable momentum lately.

On Wednesday, the government's Office of Thrift Supervision (OTS) urged OTS-regulated institutions to suspend foreclosures for the principal residences of borrowers until a home-loan modification program is agreed to as part of the Obama administration's Financial Stability Plan (formerly known as TARP).

The plan, which Treasury Secretary Timothy Geithner revealed on Tuesday, devotes $50 billion to foreclosure prevention efforts. Its aim is to reduce monthly payments for at-risk homeowners.

"OTS-regulated institutions would be supporting the national imperative to combat the economic crisis by suspending foreclosures until the new Plan takes hold," OTS Director John Reich said in a prepared statement.

And, during a House Financial Services Committee hearing on Wednesday, chairman Barney Frank voiced his hope that the bank CEOs testifying before the committee would put moratoriums in place that would prevent any unnecessary foreclosures to occur before the administration plan is implemented.

"I would ask all of you now to make sure that we have a moratorium in effect," he said. "Having someone suffer foreclosure because two weeks hadn't gone by for this program [to take effect] would be unacceptable."
Of questionable benefit

Many industry observers question, however, how effective moratoriums have been.

"I think that in some instances, the moratorium gets put to productive use," said Mike Larson, a real estate analyst for Weiss Research. "There are some circumstances - inability to reach borrowers, for example - that delaying foreclosures can help and result in cures for borrowers."

But for the most part, moratoriums just postpone the inevitable. California foreclosure filings dropped following a moratorium that took hold this past September. Total filings there fell from 101,724 in August to just 56,954 in October, a 44% decline.

But the California moratorium only required that lenders speak directly with defaulting borrowers before any foreclosure filings could be issued. That had the impact of delaying filings there by about three months, according to Kevin Stein of the California Reinvestment Coalition. After a few months, those delayed filings started to come back into play and foreclosure notices have been increasing ever since. In January they totaled 76,761.

"We haven't seen any of the moratoriums work on a state level," said Rick Sharga, spokesman for RealtyTrac. "What we see in a huge fall off in foreclosure activity for the length of the moratorium followed by a huge spike. Unless there's a really effective program put in place that will actually cure foreclosures, all moratoriums do is delay them. And that can prolong the housing crisis."

"In most cases, it's just kicking the can down the road," added Larson. "It also asks investors in mortgages to take an even bigger hit as delays just add to their losses. That just makes it more hazardous to the financial community."

Moratoriums do little good for homeowners battered by the economic crisis.

"Considering the staggering number of job losses, it is hard to imagine that there could be any sustainable long-term decline in the number of homes going into foreclosure," said Gail Cunnungham, a spokeswoman for the National Foundation for Credit Counseling.

"Even when they were employed, millions of homeowners struggled to make their mortgage payments, and now with household incomes either cut in half or nonexistent, the mortgage problems in this country are likely to escalate."
Hardest hit areas

Nevada once again recorded the highest foreclosure rate in the nation. One of every 76 households had a filing during January. California, with one for every 173, was second; Arizona, one for every 182, was third; and Florida rounded out the top four with one for every 214. Oregon finished a surprising fifth, with one filing for every 357 households.

"It shows the foreclosure problem is starting to creep up the coast," said Sharga.

The 10 worst-hit cities are located in the Sun Belt, with California metro areas leading the way. The Golden State accounted for six of the top 10, with Merced posting the highest rate. It saw a foreclosure filing for one in every 59 housing units - nearly eight times the national average.

Other poorly performing California cities included Riverside-San Bernardino, which was fourth with one in every 81 households; and Modesto, fifth with one in every 84.

Two Florida cities were in the top 10: Cape Coral-Fort Myers was number third, with a rate of one in 80, and Port St. Lucie was ninth, with one for every 123.

Las Vegas posted the second highest rate in January one in 63 and the Reno area was ninth with one in every 128 households.

How stimulus can help your wallet

2009-02-11T10:53:00.000-08:00

NEW YORK (CNNMoney.com) -- Now it's time to make a deal on economic stimulus: Key members of the Senate and House are in talks to craft a final bill. They hope to reach an agreement ASAP.

Whatever they come up with, there's a good chance it will closely resemble the version passed Tuesday by the Senate.

The Senate provisions carry more weight because the Senate, unlike the House, cannot pass a final package without the support of a few Republicans. Only three Republicans voted for the Senate bill. Should the final package's cost or contents be substantially different, those Republican votes could be lost.

So using the Senate as a guide, we took a look at what the financial rescue package might mean for you.

Here's a rundown of many of the measures that would benefit individuals directly. It's likely that many, if not all, of these measures will make it into the final package. CNNMoney.com will update this list as negotiators hammer out a final deal.

Make Work Pay Credit: The bill provides a $500 credit per worker and a $1,000 credit per dual-earner couple. The full credit would be paid to people making $70,000 or less ($140,000 per dual-earner couple). It would also be refundable, which means that even very low-income families who don't make enough to owe income tax would be able to claim it. Estimated cost: $139.4 billion.

One-time payments to those who don't work: For seniors who don't work, as well as disabled veterans and retired railroad workers, the bill provides a one-time $300 payment. Estimated cost: $17 billion.

Break for higher income families: The bill includes a one-year provision to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax. The AMT was intended primarily for high-income taxpayers but has in recent years threatened to engulf those lower down the income scale. Estimated cost: $70 billion.

Temporary credit for car buyers: The bill would let those who buy a car in 2009 deduct the interest they pay on their car loan as well as the sales tax charged in the purchase. The full deduction would be available to those earning less than $125,000 ($250,000 for joint filers). Estimated cost: $11 billion.

Temporary credit for home buyers: The bill doubles the size of an existing temporary home buyer credit to $15,000. It also would allow all home buyers to claim it. And it removes the requirement under current law that the credit be paid back. Estimated cost: $39 billion.

New college credit: The bill introduces the American Opportunity Tax Credit, a $2,500 credit for higher education expenses. The full credit would be available to those making less than $80,000 ($160,000 for joint filers). Estimated cost: $10.3 billion.

Pell Grants: The bill increases the maximum Pell Grant by $281 in the 2009-10 academic year and by $400 in the 2010-11 academic year. Estimated cost: $14 billion.

Child care credit: The bill increases eligibility for the child care tax credit by lowering the income threshold that must be met to $8,100. That will allow lower income families to claim more of the credit. Estimated cost: $7.2 billion.

Earned income tax credit: The credit will be temporarily increased from 40% to 45% of qualifying earnings for low-income families with three or more children. It also includes a marriage penalty relief provision for couples who qualify for at least a portion of the credit. Estimated cost: $4.6 billion.
Direct lifeline benefits

Health insurance help for the jobless: The bill includes provisions to help eligible jobless workers pay for health insurance under Cobra. Cobra coverage allows newly laid off workers to keep health insurance provided by their former employers for a period of time.

One of the provisions offers a government subsidy -- 50% of premiums for 12 months -- to help out-of-work Americans pay for healthcare. Estimated cost: $20 billion.

Another provides states funding to help pay for expanded Medicaid rolls for workers who've lost their jobs and can't afford health care on their own or can't get Cobra coverage because their former employer doesn't offer a health care plan. Estimated cost: $87 billion.

Unemployment benefits: The bill provides jobless workers with an additional 20 weeks in unemployment benefits, and 13 weeks on top of that if they live in what's deemed a high unemployment state, of which there are about 30 currently. Estimated cost: $27 billion.

In addition, the weekly unemployment benefit will temporarily increase by $25 on top of the roughly $300 jobless workers currently receive. Estimated cost: $8.8 billion

Plus, the first $2,400 of benefits in 2009 would be exempt from federal income taxes. Estimated cost: $4.7 billion.

Also included in the bill is an incentive for states to provide unemployment insurance coverage for part-time workers and for workers who quit their jobs for compelling family reasons. Estimated cost: up to $2.6 billion.

Food stamp payments: The bill includes a provision would increase food stamp payments by 12%, so a family of four would see an additional $71 on top of the $588 per month they receive currently. Estimated cost: $16.5 billion.

Help for needy families: The bill provides $2.3 billion to states to create a contingency fund through 2010 for the welfare program called Temporary Assistance for Needy Families, which provides cash assistance to the needy. Estimated cost: $2.3 billion.

The $15,000 Home Buying Tax Credit: 6 Things to Know

2009-02-10T09:18:00.000-08:00

A number of readers have written in asking for details about the home buyer tax credit amendment that was recently added to the Senate version of the economic stimulus package. The provision, introduced by Sen. Johnny Isakson, a Republican from Georgia, would provide a tax credit of as much as $15,000--or 10 percent of the home's price tag, whichever is less--to anyone buying a primary residence during a one-year period beginning on the date of enactment. After reading through your questions, here's a list of six things to know about the amendment.

1. I recently bought a home and qualified for the $7,500 new home buyer tax credit. Should this provision become law, would I qualify for it well? The short answer is no, says Rob Dietz, an economist for the National Association of Home Builders. "The effective date of the…amendment is the date of enactment," Dietz says. "So if you've already completed a purchase, you would not be qualified for the new program."

2. Isakson's press release reads: "The amendment would sunset the current $7,500 housing tax credit on the date of enactment." What does the term "sunset" mean there? In this context, the term "sunset" means that the $7,500 new home buyer tax credit would be supplanted by the proposed $15,000 credit, which applies to all home purchases--not just new homes. "If you are operating under the $7,500 [credit], that's the one you [have]," says Joan Kirchner, Sen. Isakson's Deputy Chief of Staff. "Then, from the date of enactment forward, the new one takes over and nobody else gets the old $7,500 [credit]."

3. What are the odds of this provision becoming law? The $15,000 home-buying provision is a component of the massive--and increasingly controversial--economic stimulus package. The House of Representatives has already passed its version of the stimulus bill, and the White House is putting pressure on the Senate to do the same. However, the size of the package--which now totals more than $900 billion--has prompted some Republic Senators to try and slash provisions to lower the tab. Still, Kirchner argues that the $15,000 tax credit enjoys strong support from the National Association of Realtors and the National Association of Home Builders, and will remain in the stimulus bill that is signed into law. "Because of the way that it was adopted--unanimously, they didn't call a roll call vote because both sides agreed to accept it--this provision is in," Kirchner says. Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, also predicted that the amendment would make it into the final package. "It’s a targeted solution that will address housing as well as taxpayers--both of which need help," he said.

4. Does this tax credit need to be paid back? Nope. That's a key distinction from the $7,500 first-time home buyer credit, which was "actually a 17-year repayment, which translates into a no-interest loan," Dietz says.

5. Is there an income limit or any other restrictions on participation? The tax credit would be limited to primary residences and does not come with an income restriction, Kirchner says. "You must occupy [the property] for at least two years as your primary residence," she says. It applies to "any home, meaning a condo, a house, foreclosed, new, [or] previously owned."

6. Can I take the credit during tax year 2008? Yes, says Chris Cook, a legislative assistant to Sen. Isakson. Even if you buy a home in 2009, the provision would enable you "to file your taxes as if you purchased your home on December 31 of 2008," he says.

Foreclosure fix: Obama's options

2009-02-09T16:40:00.000-08:00

NEW YORK (CNNMoney.com) -- This much we know -- the Obama administration wants to set aside between $50 billion and $100 billion to address the foreclosure crisis.

But how exactly officials plan to address this bear of a problem remains to be seen.

Treasury Secretary Timothy Geithner is expected to lay out plans for the $350 billion remaining in the financial industry bailout package on Tuesday.

Geithner was originally scheduled to unveil the program Monday, but the Treasury Department announced Sunday that it was pushing back the plan by a day to allow Geithner and others in the Obama administration to focus on getting the stimulus bill passed in Congress.

It is unclear if Geithner will unveil a specific plan for tackling foreclosures Tuesday. But the administration has said for weeks that it will devote more resources to helping homeowners than its predecessor.

"We will implement smart, aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners, while also reforming our bankruptcy laws and strengthening existing housing initiatives like Hope for Homeowners," wrote Larry Summers, director of Obama's National Economic Council, to congressional leaders last month.

Finding a foreclosure fix is daunting, experts said. It eluded the Bush administration, which preferred to try to entice mortgage services to voluntarily modify loans without committing government funds.

Obama faces similar hurdles.

"It's been a real challenge," said Scott Talbott, senior vice president for government affairs for the Financial Services Roundtable. "To come up with a widespread approach is very difficult."
Potential plans

Obama's plan may expand on the Federal Deposit Insurance Corp.'s streamlined loan modification program, which serves as a model for workouts being conducted by several banks and by Fannie Mae and Freddie Mac.

The FDIC's program, which is underway at failed lender IndyMac, calls for making monthly payments more affordable by reducing interest rates, lengthening loan terms or deferring principal. Servicers aim to reduce payments to no more than 31% of a borrower's monthly income. So far, more than 10,000 delinquent loans have been modified, and offers have been made to another 20,000 borrowers.

Summers has said that banks that receive bailout funds will be required to implement foreclosure prevention programs.

The Obama administration is expected to put some money behind the modification efforts. It's likely any modification plan will come with incentives for servicers and with some type of backstop in case the borrower defaults again. FDIC Chairman Sheila Bair unveiled a $24.4 billion plan in November that offered servicers $1,000 and provided a guarantee to cover 50% of any losses in case of redefault. The proposal, which she estimates will help 1.5 million people avoid foreclosure, has gone nowhere so far.

Congressional lawmakers would require the president to develop a loan modification plan under the stimulus bill currently under debate in the Senate.

"Stemming the tide of foreclosures, which are at the heart of this economic crisis, must be one of our top priorities," said Senator Chris Dodd, D-CT, in a statement late Friday night after the Senate approved his amendment to the stimulus plan that would require the Treasury Department to spend at least $50 billion in funds from the bank bailout on a loan modification program.

"By providing the Treasury with the authority and funds to design and implement a loan modification program, we can help nearly 2 million families nationwide...avoid losing their home," Dodd added.

A major problem confronting the Obama administration, however, is what to do with the rising number of foreclosures stemming from unemployment. Loan modifications don't work for these borrowers.

The only viable solution for these delinquent homeowners is to get the economy moving again so they can get jobs, experts said.

Along those lines, Shaun Donovan, the Secretary of the Department of Housing and Urban Development, said in an interview on CNN Saturday morning that creating jobs was the top way to address the foreclosure problem.

"What is really driving the foreclosure crisis right now is that people are losing their jobs. And so job number one is to pass a recovery bill that will add three to four million jobs in this country," Donovan said.
Beyond bailout

To be sure, the administration's efforts will go beyond the bailout package. Already, it's likely the massive stimulus package will contain measures to spur homebuying, including a $15,000 tax credit for those purchasing a home. On deck is controversial legislation to allow bankruptcy judges to modify loans on primary residences.

Congressional Democrats are also looking to revamp the troubled Hope for Homeowners program, which was designed to refinance struggling borrowers into government-backed Federal Housing Administration loans. Few borrowers have signed up for the program, in part because of its high fees. Lawmakers hope to make it more attractive by easing the terms and providing incentives for servicers to participate.

In his statement late Friday, Dodd said his amendment would reform the program by reducing the upfront and annual premiums for borrowers, lowering the percentage of future equity that homeowners must share with the government and adding incentive payments to servicers.

Whatever the administration chooses to do, it should implement it quickly, experts said. Foreclosures continue to rise, with a new one started every 13 seconds, according to the Center for Responsible Lending.

"Every minute they delay someone is going to lose their home," said Kathleen Day, the center's spokeswoman. "The government has waited too long to act."

T.G.I.F.

2009-02-06T09:46:00.000-08:00

Hello to all of you loyal blog readers. I decided to take a more fun approach to Friday's. Each week we're going to find some of the funniest video's to post to get you ready for the weekend.

Please send your thoughts and comments to CalvinBui@gmail.com. And again, thank you for making this site the #1 real estate blog in Long Beach.

The new rules of mortgage lending

2009-02-05T08:20:00.000-08:00

NEW YORK (CNNMoney.com) -- If you're shopping for a mortgage these days, it's a whole new world out there.

"There have been a huge number of changes over the past few years in mortgage borrowing," said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors.

Of course, many of the subprime loans that helped fuel the housing boom - those that didn't require borrowers to show any proof of income, or that let homeowners make minimum payments - are are simply no longer available.

But even buyers looking for a traditional mortgage are now faced with different factors to consider.

Here is what you need to know:

Paying up-front points. Borrowers can pay points - one-time, up-front fees - in order to reduce their mortgage's interest rate over the life of the loan. One point represents 1% of the mortgage value.

But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That's a mistake, in his opinion.

When interest rates were high, paying points didn't make sense because borrowers were very likely to refinance after rates dropped. They wouldn't hold their original loans long enough to recoup their up-front costs.

But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage's interest rate by a quarter percentage point or so.

"Today the spread is worth a half point to a full point on the rate," said Rosenbaum.

It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan's interest rate, changing a 6% loan to 5%.

That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months.

Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan.

Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan.

Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn't pay points, since the strategy simply doesn't pay in the short term.

Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it?

Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance.

And if a buyer could afford to put more than 20% down, it was generally assumed that they should.

The traditional thinking was, "If you have the capital to commit, why not?" said Keith Gumbinger of mortgage research firm HSH Associates. "It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that."

High down payments can be wiped out in severely declining markets.

Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble.

"But prices are down so much, the couple still fell underwater," he said. "It would have been better to conserve that cash in case home prices continue to decline."

Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better.

But that's often a mistake.

"We almost always recommend that if you have the numbers that make your deal work, then lock it in," said Gumbinger.

His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited.

Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you're trying to buy a house.

"You'll sleep better at night," said Gumbinger.

Mortgage applications rise

2009-02-04T09:20:00.001-08:00

NEW YORK (Reuters) -- U.S. mortgage applications rose in the last week of January, reflecting a jump in demand for home refinancing loans even as interest rates rose to their highest levels since early December, data from an industry group showed Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Jan. 30 increased 8.6% to 795.4 after slumping 38.8% during the previous week.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.28%, up 0.06 percentage point from the previous week. Three weeks earlier, mortgage rates were 4.89%, the lowest level recorded since the MBA survey began in 1990.

John Lonski, chief economist at Moody's Investors Service in New York, said the recent trend higher in mortgage rates is a setback for the U.S. housing market and not what the economy needs right now.

"In this environment, we cannot afford to have mortgage rates going up, especially because of how critical the stabilization of housing is to any steadying of the overall economy," Lonski said on Tuesday.

"We cannot have a bottoming of the macro economy without first stabilizing home sales," he said.

Indeed, enticing mortgage rates impacts demand. The National Association of Realtors said on Tuesday its Pending Home Sales Index, based on contracts signed in December, surged 6.3% to 87.7 in December, the first increase since August.

The index, a key gauge of future home sales activity, tracks signed, not closed, contracts, so it is influenced by changes in mortgage rates.

The MBA's seasonally adjusted purchase index fell 11.2% to 261.4 in the latest week. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 9.2%.

The Mortgage Bankers seasonally adjusted index of refinancing applications, meanwhile, jumped 15.8% to 3,906.3.
Mortgage rates up with Treasury yields

The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world. Economists contend that the economy might not emerge from its slump unless the housing market stabilizes.

"Extraordinarily low mortgage yields are absolutely necessary to compensate potential home buyers for home price deflation risk and heightened unemployment risk," Lonski said. "That will probably require more intervention from the government."

The recent rise in mortgage rates can be tied to U.S. Treasury yields, which are linked to mortgage rates. Treasury yields have risen sharply on fears over surging debt issuance to fund a ballooning budget gap and an array of government rescue programs.

Before the recent rise, 30-year mortgage rates had mostly been on a downward trend ever since the Federal Reserve unveiled a plan in late November to buy as much as $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

The adjustable-rate mortgage share of activity decreased to 2.1% in the latest week, down from 2.4% the previous week.

Fixed 15-year mortgage rates averaged 5.15%, up from 4.98% the previous week. Rates on one-year ARMs increased to 6.09% from 5.96%.

Foreclosures dominate home sales

2009-02-03T09:25:00.000-08:00

NEW YORK (CNNMoney.com) -- Real estate values around the nation have collapsed, and sales of foreclosed and "underwater" homes now dominate many housing markets, according to a report released Tuesday.

The report, from Zillow.com, a real estate Web site, revealed that with foreclosures soaring, nearly 20% of the nation's home sales in 2008 were of bank-repossessed properties. Another 11% were short sales, in which homeowners owed more in mortgage debt than their homes were worth.

Madera, Calif., had the highest percentage of these distressed sales: 54.6% of all transactions there were foreclosed homes, and another 3.4% were short sales.

In Merced, Calif., 53.4% of sales were foreclosures and 4.8% were short sales. In nearby Stockton, 51.1% were foreclosures and 5.4% were short sales.

"As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing," said Stan Humphries, Zillow's vice president in charge of data and analytics.

"More value [was] wiped out in the fourth quarter of 2008 than was eliminated in all of 2007," Humphries said.

About $3.3 trillion in home equity was erased in 2008, with $1.4 trillion of that wipeout coming in the fourth quarter alone, according to Humphries. More than $6 trillion in value has been lost since the market peaked in 2005.

Those equity losses have put many homeowners underwater, where they're extremely vulnerable to foreclosure. These owners can't tap home equity for the cash they need to pay bills when they run into rough financial patches, and they often find it impossible to refinance - lenders will not loan more than the property is worth.

In the United States, 17.6% of all homes are now underwater, according to Zillow, as are 41.2% of all mortgages for homes bought in the past five years.

The worst-hit cities are in the once-booming Sun Belt. In Las Vegas, 61.4% of all homes are underwater.

Because so many homes are worth less than their mortgage balances, an increasing number have to be sold short. But short sale transactions can take a long time to complete, because lenders have been having trouble keeping up with the flood of requests.

"The speed of short sales is a function of the resources being allocated to them by lenders, and those resources are being stretched to the limit," Humphries said.

That means lenders may not act on approving short sales for months. The deals cannot go forward without their approval, because the banks must agree to forgive the difference between what they're owed and what the sale brings in.

As the time it takes to arrange short sales lengthens, they become harder to complete.
Time and money wasted

One example of how price declines can doom a short sale occurred recently in Phoenix. Curtis Johnson, a real estate broker there, worked with a health care worker whose hours were being cut and who could no longer afford her mortgage. She fell behind and decided to sell.

Johnson was able to find a buyer willing to pay $183,000, and got an approval form the lender. The owner confidently moved out, got a new place and started a new life. But the lender folded and the mortgage went to a new servicer, who took six weeks to approve the deal.

"Unfortunately, the buyers who were approved were no longer interested because the real estate market had dropped significantly," Johnson said. "They wrote a new offer, considerably lower then the first, and it was time to start over."

Two more offers eventually fell through before a new buyer was found and the owner's bank approved the price, this time at $163,000. On the day of that closing, however, the parties discovered that the buyer's lender had run out of funds and dropped out of the deal. The home went to foreclosure auction before another sale could be arranged.

The house is now on the market for $139,900.

"[The house is] listed for less than what would have been received had the bank been willing to work with us, and still has not yet sold," Johnson said.

Distressed sales like that depress the market for all homeowners. Regular sellers in cities dominated by foreclosures have to adjust their prices downward to compete.

The percentage of homes sold for less than what their owners originally paid has leaped up in the past couple of years. In the United States as a whole, 34.6% of the sales made in 2008 were done at a loss. In Merced, 71.6% of all sales last year were for less than the seller paid. Stockton, Modesto and Las Vegas all had in excess of 68% of all homes being sold at a loss.

Foreclosures beget more foreclosures by adding inventory to the market, which depresses prices, which increases foreclosures, according to Humphries.

"The vicious cycle continues," he said.

Stimulus: Senate's housing hopes

2009-02-02T09:49:00.000-08:00

NEW YORK (CNNMoney.com) -- As the economic stimulus package moves to the Senate, the drumbeat is growing louder for new provisions that directly address the housing crisis.

Key senators from both parties said they will push for measures intended to spur sales and help homeowners at risk of foreclosure.

"We need to go right at the housing problem. That's what started all of this," Senate minority leader Mitch McConnell, R-Ky., told CNN.

The Senate floor debate is set to begin on Monday. Here are three ideas likely to show up in amendments:

Create a 4% mortgage: Senate Republicans are likely to introduce a provision that would encourage lenders to offer a 30-year fixed rate mortgage at 4% for a limited period of time. The loans would only be available to credit-worthy home buyers and homeowners seeking to refinance.

The government would guarantee the loan for a number of years, an aide to McConnell told CNNMoney.com.

Senate Republican Conference Chairman Lamar Alexander, R-Tenn., said on the Senate floor Friday that the measure could involve not only a government guarantee but a subsidy as well.

"If today's prevailing rate were 5.2 or 5.3 percent ... the government would make up the difference."

The cost of such a provision hasn't been determined yet, but the aide said Senate Republicans would seek to structure the proposal in a fiscally responsible way, without specifying exactly what that meant.

Offering government-backed low-rate mortgages "could be very popular politically as it tries to fix the banks by fixing consumers," financial services analyst Jaret Seiberg of the Stanford Group wrote in a research note.

But using government funds to force rates lower "could be very expensive," Seiberg said.

And as mortgage rates rise, which they have in recent weeks, such a proposal could grow even more expensive.

Expand home buyer credit: Senate Budget Committee Chairman Kent Conrad, D-N.D., said last week he would propose an expansion of a temporary $7,500 first-time home buyer credit so that it applies to all purchases of primary residences.

Some Republican senators have called for an increase in the credit to $15,000.

On "Face the Nation," Sen. Charles Schumer, D-N.Y., said Sunday that lawmakers "can do more for housing." The proposal to increase the home buyer credit to $15,000 and make it available to all home buyers is "something that we look favorably upon," he said.

The Senate recovery package as it stands now removes the requirement under current law that the credit be repaid by buyers over time, assuming they don't sell their home for three years after claiming the credit.

The credit phases out for individuals making more than $75,000 ($150,000 for joint filers).

Hold off on foreclosures: Senate Banking Committee Chairman Christopher Dodd, D-Conn., told reporters last week that he would like a provision in the stimulus package that would impose a 90-day moratorium on foreclosures. Dodd may consider other housing measures as well.

Postponing a foreclosure for three months might allow some troubled borrowers to keep their homes by buying them time to work out a new loan agreement with their mortgage servicer.
Obama housing proposals on deck

Advocacy in the Senate for more housing measures in the stimulus bill comes while President Obama is expected to release a comprehensive plan to fix the financial system within the next two weeks.

Obama has been promising for the past month that he would soon propose a foreclosure prevention program, and many believe that could be part of a plan he announces in the coming week. Indeed, he said Saturday that his plan will include a proposal to lower mortgage costs.

Last month, Obama's economic team promised lawmakers they would use $50 billion to $100 billion of the remaining money from the Troubled Asset Relief Program to prevent foreclosures.

Whether the housing measures proposed by Republicans on the Senate floor are intended to be in addition to Obama's proposals or as replacements isn't clear yet.

One of the ideas likely to influence Obama's plan is a loan modification program put forth by FDIC Chairman Sheila Bair that has garnered support from lawmakers. That plan would require that lenders reduce housing payments for delinquent borrowers to 31% of gross monthly income.

Lenders could achieve that by lowering mortgage rates to as low as 3% for five years, before increasing at an annual rate of 1 percentage point until they hit the prevailing market rate. Loan terms could be extended as long as 40 years.

In exchange, Bair proposed the government would share up to 50% of the losses if a borrower who gets a modified loan ends up defaulting anyway. And it would help foot some of the servicers' loan modification costs.

Homebuyers get a bonus in the stimulus bill

2009-01-30T09:58:00.000-08:00

NEW YORK (CNNMoney.com) -- If you're thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that's now before Congress.

Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week.

Technically, the stimulus bill is actually changing the terms of the $7,500 tax credit that was issued as a part of the Housing Recovery Act, which Congress passed last summer. That legislation required that the tax credit be repaid over 15 years, making it more of a no-interest loan. Not surprisingly, the measure had little impact on the market. The stimulus bill now under consideration would make that tax credit a true credit that doesn't need to be repaid.

Many in the housing industry believe this credit could do a lot to jump start the moribund housing market.

"Our economists have studied the effect [of the credit] and they say there could be a 10% increase in home sales if it's implemented," said Mary Trupo, a spokeswoman for the National Association of Realtors. "It gives people who are sitting on the fence or who have inadequate funds for closing costs an incentive to act now."

A 10% increase would yield an extra half million sales this year.
Who qualifies

To be eligible, buyers cannot have owned a home for the past three years, and the new home has to be used as a primary residence. The credit phases out as income rises above $75,000 for singles and $150,000 for couples, and disappears entirely at $95,000 and $170,000, respectively.

Applying for it is easy, or at least as easy as doing your income taxes. Just claim it on your return. That's it. No other forms or papers have to be filed.

Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don't sell for at least 36 months, they keep the money.

And the credit is refundable, meaning that it can be claimed even if the amount of the credit earned exceeds the buyer's tax liability. So even if your total tax bill comes to just $5,000, you can still qualify for a full $7,500 refund.

The housing industry has been pushing this idea for many months, arguing that first-time homebuyers are the key to boosting home sales. First time buyers who purchase from existing homeowners free those sellers to trade up to bigger, better houses.
Buyers beware

But the credit has its drawbacks, according to Bob Williams, a spokesman for the Tax Policy Center, which gave it a mediocre C+ grade in its Tax Stimulus Report Card.

Williams argues that the credit is poorly targeted because it goes to every first-time buyer, not just the ones who wouldn't buy without it. So, it merely provides a windfall for many people who would have purchased anyway. (See correction, below).

And in the end, a $7,500 tax credit, regardless of the details, does nothing to address the issue that's holding most buyers back - the suspicion that prices are going to keep falling.

"As long as people are uncertain about what markets are going to do, this won't help much," said Williams. "It's not enough to change that."

The industry would like to make the tax credit stronger by making it available to all homebuyers, not just first-timers. And it's pushing to have the credit last through the end of the year, at least.

"By the time it's implemented," said Trupo, "there could be very few months left to act."

Banks working to prevent foreclosures

2009-01-29T13:55:00.000-08:00

NEW YORK (CNNMoney.com) -- In a sign that banks are stepping up their efforts to combat foreclosures, lenders intervened to help prevent 239,000 foreclosures last month, according to a report released Thursday.

Hope Now, a coalition of lenders, investors in mortgage-backed securities and community advocacy groups, said that December marked the fourth consecutive month that its members had arranged more than 200,000 mortgage workouts.

For all of 2008, the number of interventions approached 2.3 million, Hope Now said.

More importantly the number of homes lost to foreclosure has been on the decline. In December, lenders repossessed 55,608 homes, down from 69,000 homes that were repossessed in November, and 77,000 in October. In 2008, a total of 917,964 homes were lost to foreclosure.

"The December results demonstrate that Hope Now members are moving aggressively to do what's needed to avoid preventable foreclosures," said Faith Schwartz, Hope Now's director.

She adds that says that fewer homes were lost to foreclosure in December thanks also to seasonal factors, since lenders tend to ease up on repossessions during the holidays, and to foreclosure moratoriums implemented recently by some lenders, including mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

She also credited very low mortgage interest rates, with helping people refinance and stay in their homes. "That's very helpful for homeowners who have good credit and are not underwater," she said. "They can refinance into more affordable loans."
The crisis continues

Still, other housing experts still see plenty of trouble ahead.

"There's an overwhelming preponderance of data that confirms that these voluntary loan modifications simply don't work," said Jim Carr, COO for the National Community Reinvestment Coalition, an advocacy group whose members do foreclosure-prevention counseling.

A recent report issued by the U.S. Comptroller of the Currency found that 53% of borrowers who had their mortgages modified in the first half of 2008 were already at least two months delinquent again.

"The redefault rate is growing, home prices are tumbling, repossessions may be down but the projections for future foreclosures are going through the roof," he said.

Carr pointed out that a Credit Suisse report forecasts that as many as 8 million homeowners could face foreclosure over the next five years.

"We're way beyond voluntary modifications now," he said. "This is an unemployment-induced foreclosure problem and it will swamp Hope Now's efforts. Their staff is working so hard, but it's not anything they can control."

When homeowners are unemployed it matters little whether their lenders modify their loans. Without any income they simply can't afford any mortgage.

The December statistics also revealed the changing face of troubled borrowers. Previously, most mortgage workouts reported by Hope Now involved subprime borrowers. In the second quarter of 2008, for example, 62% of the group's workouts involved subprime loans.

In December, that percentage had fallen to 54%, a proportion that is likely to drop further this year. More prime borrowers are running into mortgage payment problems as the economy declines. Unemployment is now the main driver behind mortgage delinquencies.

Meanwhile, the number of problems caused by unaffordable mortgages -- such as hybrid adjustable rate mortgages, the so-called "toxic" ARMs -- have declined, since many of these loans have already failed and lenders no longer issue them.

Snag a great deal on a short sale

2009-01-28T10:04:00.000-08:00

(Money Magazine) -- When Brian Gavitt, a physician, and his wife Gayleen, a stay-at-home mom, started to eye homes in Sacramento last winter, they knew they were looking in the hardest-hit areas of the housing bust. So the couple, who were relocating from Lansing, figured they could land a fantastic bargain in no time at all.

The part about the bargain turned out to be true. The Gavitts bought a five-bedroom house in the upscale Natomas Park neighborhood ("Even now, you don't see FOR SALE signs up anywhere," says Gayleen.) And it was a steal at $300,000, a full $200,000 less than they would have paid just two years ago.

The amount of time it took to land the deal was another story. It was more than six months from when the Gavitts first saw their dream home to the moment they held the keys in their hands. The reason: The home they bought was a short sale.

Not along ago, few people had even heard of a short sale, which occurs when the bank agrees to discount the loan balance for a seller who owes more on his mortgage than the home is currently worth.

If you're in the market for a home today, you're almost guaranteed to be looking at some short sales. Nationwide, 14% of homeowners are currently underwater on their mortgages, calculates real estate website Zillow.com. And in many areas, it's far more: In the Gavitts' zip code, for example, over half of homeowners would owe more than their home is worth if they sold today, calculates Dee Schwindt, the Gavitts' realtor.

The good news is that short sellers are likely to still be living in the home and some may even be current on their payments. That means these aren't the run-down, distressed properties that you often find among foreclosures; in fact, there's a good chance that some of the most deluxe homes for sale in your market are underwater.

Before you get too excited about buying a short sale, know that they generally aren't, well, short. For the sale to go through, the seller's lender must approve the price and agree to take the shortfall as a loss. That extra step can cause the process to drag on three times as long as a normal home sale.

But as the Gavitts discovered, the hassles can be well worth it. Some buyers and realtors don't want to deal with short sales, leaving many choice homes with very few bidders. So if you're willing to brave the intricacies of the process, you'll be far more likely to land the home you always wanted. The key to snagging a good deal is knowing how to avoid the land mines.

Know what you're getting into. In a short sale, you are dealing with several parties: the sellers, their agent and the sellers' lender. That's why a short sale can take anywhere between two and six months to execute, compared with about 30 days for a typical sale. Though many banks are willing to take a loss on a mortgage in a short sale if it means avoiding an even bigger loss in a foreclosure, with so many owners trying to unload properties, the lender's negotiators are flooded with short-sale offers. So if you're moving or selling another property, keep in mind that you'll likely need to budget for a few months' worth of rental payments so you have somewhere to live in the interim.

Find the right pro. Lenders often make realtors who work on short sales take a hit on their commission, so some brokers may be loath to show you the listings. But don't even think about going solo. These deals take a lot of work and persistence, says Loni Parmelly, author of Success in Short Sales. Before you sign up with an agent, ask him how many short sales he's closed. If he hasn't done at least two, find someone more experienced.

Weed out candidates. In most cities, home listings will indicate in the description whether the property is a short sale. Ideally, you want to knock off ones that come with extra complexities. If possible, pass on any home that has more than one lien against it; having to negotiate loans with two lenders can greatly increase the amount of time it takes to complete the deal. Also avoid homes where the seller has other offers. That's because if another offer is pending, the seller's agent isn't likely to even submit yours for approval until the first one is rejected, meaning you'll have to wait for another negotiation to play out before you even get a chance.

Set the right price. The first step is to have your agent submit your offer to the seller. Don't just rely on the current list price to come up with your initial bid, says Bill Richardson, a district sales manager for the Keyes Co. Realtors in Boca Raton, Fla. The seller's agent may have far underpriced it in hopes of attracting buyers, but the bank likely won't accept a lowball offer. Ask your agent to determine the home's fair market value by searching comparable sales in the area, with an emphasis on other short sales and foreclosures (or get a rough estimate yourself at zillow.com). If the fair market value is lower than the list price, set your offer 10% lower than that.

At this point, you'll also want to get pre-approval for a mortgage; many banks won't even consider your offer if you don't have one, says Schwindt.

Protect yourself. Next, the seller's agent will submit your offer to the seller's lender. At this point, you'll be asked to sign a sales contract. See if the lender will agree to pick up all closing costs as part of the contract, says author Parmelly. Also ask your realtor to specify that you won't do an appraisal or inspection of the property until the offer is approved. That way you won't have to shell out hundreds of dollars until you know you realistically have a good chance of getting the home.

Finally, though most lenders will require you to make some kind of deposit along with the contract, don't put down more than $3,000 before your bid is accepted. That will give you room to put offers on other homes or even to pull out of the sale if it drags on for too long.

Be a pain in the neck. After your offer is submitted to the lender, you're likely to hear nothing for weeks, if not months. This is no time to relax. Call your agent at least once a week, and make sure the seller's agent is contacting the bank's negotiator nearly every day.

"These negotiators may have 400 files on their desk. They'll want to get rid of the squeaky wheels," says Parmelly, who worked as a loan negotiator for lenders for 16 years. To help the seller's realtor in her negotiations with the lender, it's a good idea to have your agent show her which comparable homes you used to arrive at your number.

If the clock keeps ticking and you're reaching the end of your rope, try playing hardball. After months, the lender the Gavitts negotiated with was still dragging its feet and their pre-approved loan rate was about to expire. "We said, 'We need an answer by Friday or we walk,' " Gayleen says. The bank responded by week's end.

Keep your eye on the market. When the bank finally sends its counter-offer, use it as a guideline rather than an ultimatum. Most of the time, the lender's number is based on its own research, that of a local realtor it hires and the outstanding loan balance. Usually its goal is to sell for at least 90% of the home's value, says Amy Bohutinsky, a spokes-person for Zillow.com.

The lender's offer may not be what you'd hoped for, but don't despair: You have a chance to counter. If the market has been flat since your initial bid, try for 5% to 10% less than the bank's number. If the market has been sinking rapidly, however, you may be able to prove that the home's value has shrunk further and offer even less. Once you have the lender's ear, the new offer should take less time to process.

Despite all the legwork and wait, the Gavitts are thrilled with their new home. "I'm glad people are turned off by short sales," says Brian. "It just means more choices for the rest of us."

Existing home sales in surprise jump

2009-01-27T09:56:00.000-08:00

NEW YORK (CNNMoney.com) -- The number of existing homes sold in December rose 6.5% from the previous month, according to a report released Monday, as bargain hunters took advantage of plummeting prices.

The National Association of Realtors said that home sales increased to a seasonally-adjusted, annualized rate of 4.74 million units. That's up from a revised pace of 4.45 million units sold in November and more than the rate of 4.4 million units projected by a consensus of industry analysts as reported by Briefing.com.

"We have some months to go before we are out of the woods on the housing front," said Robert Dye, senior economist at PNC financial services group. Especially considering "weak consumer confidence and ongoing rapid deterioration in labor markets."

Still, December's existing home sales are down 3.5% compared with December of 2007, when the seasonally-adjusted, annual sales rate was 4.91 million. Existing homes include single family homes, townhomes, condominiums and co-ops.

For all of 2008, there were 4,912,000 homes sold, which was the lowest volume since 1997, when there were 4,371,000 homes sold. Sales volume in 2008 was down 13.1% from the 5,652,000 existing homes sold in 2007.

Bargain hunters: Bargain prices are bringing buyers back into the market. The median existing home price was down 15.3% to $175,400 from December 2007, when the median price was $207,000. The median price measures where half of the homes sold for more and half sold for less.

"Americans love a bargain, and the housing market is no exception," said Mike Larson, real estate and interest rate analyst for Weiss Research in a written statement.

Thanks to the sales increase, the number of homes available on the market decreased 11.7% in December from the previous month, to 3.68 million. That represents a 9.3-month inventory supply at the current pace of sales, down from a 11.2-month supply in November.

"That's exactly what we need to see if the housing market is ever going to get back to a state of equilibrium," said Larson.

Home prices were pushed lower by the high volume of distressed sales, which accounted for 45% of December transactions according to the report.

"The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal, balanced conditions," said NAR chief economist Lawrence Yun in a written statement. He warned that the housing market is far from healthy. "Buyers will continue to have an edge over sellers for the foreseeable future."

Surge in the West: The number of homes sold nationwide was buoyed by a surge in the West, where the housing market has been hardest hit by a record number of foreclosures.

Existing home sales in the West surged 13.6% to an annual rate of 1.25 million in December, up 31.6% from a year ago. But the median price in the West was $213,100, down 31.5% from December 2007.

In the South, existing home sales increased 7.4% to an annual pace of 1.74 million in December, but that was still 11.2% lower than December a year ago. And sales in the Midwest increased 4% in December to an annual rate of 1.04 million, but were down 10.3% from the same period last year.

The Northeast saw sales edge 1.4% lower, to an annual pace of 720,000 in December, down 14.3% from December 2007.

In the months to come: Analysts said that the weakening job market would slow any recovery in housing.

On Monday morning, a slew of companies announced a massive wave of job cuts. Home Depot (HD, Fortune 500), the No. 1 home improvement retailer, announced it would eliminate 7,000 jobs, or 2% of its total workforce, while Caterpillar (CAT, Fortune 500) said it will cut 20,000 jobs.

"Unfortunately, we are seeing fast and furious [layoffs] now," said PNC's Robert Dye. "And that does add to the level of uncertainty and it does put workers and consumers on edge."

Mike Larson from Weiss Research echoed that sentiment. "It's hard to imagine a lasting turn in the housing market with thousands of layoffs being announced every few days," he said.

The Obama administration is now at work on an economic recovery plan, and Yun said that this will be critical to the revitalization of the housing industry.

"The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery," Yun said in a statement.

What is a short sale?

2009-01-23T12:38:00.000-08:00

With the increase in foreclosures lately you may have heard the term “short sale” and wondered what it was. A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure.

When a borrower is in default on a mortgage they not only owe the back payments but also may owe late fees, property inspection fees, attorney fees, etc. This can add up quickly to eat up all the equity the borrower had in the property. If the borrower is unable to bring the account current the lender will then foreclose on the property. With a foreclosure, the lender can lose up to 40% of the mortgage amount because of the extra costs involved with foreclosing on a property: attorney fees, court costs, lost interest, eviction costs, property maintenance costs, and selling costs. Foreclosing on a property can also take up to two years in some states. Therefore, it is sometimes in the best interest of the lender to accept the short sale.

It also can be in the best interest of the borrower. They will not have to endure the time and stress of a foreclosure and their credit may not be as adversely affected as it would with a foreclosure. It is quicker and easier and does not subject the borrower to the embarrassment of a foreclosure.

How does it work?

The first thing the borrower should do when they can no longer afford a property is to contact the lender immediately. The last thing a lender wants to do is foreclose on the property. Lenders typically have departments that work with people who are behind on their payments to resolve the situation. If you cannot resolve the default with the lender, and you want to see if they will accept a short sale, they will direct you to the department that handles short sales.

The lender will usually require the borrower to submit a lot of information to the lender in order to consider the short sale. The information required may include:
• Income documentation such as W-2s and pay check stubs to verify the borrowers’ income.
• Bank statements to verify the borrowers’ assets
• Hardship letter – this letter will describe for the lender the reasons the borrowers are in the financial position they are in and will ask the lender to accept the short sale. Borrowers should make this letter sound as sad as possible and back up the story with any documentation you may have such as medical bills, etc.
• Fair market value for the property – depending on the lender they may require an appraisal or may accept an opinion from a local Realtor know as a Comparative Market Analysis (CMA).
• Preliminary proceeds sheet from the sale of the property. This will show the proceeds of the sale of the property after the mortgage is paid off and all other closing costs and fees are paid. This will be negative in the case of the short sale and this negative amount is the amount of the shortage.
• Listing agreement and purchase agreement when they are available.

When the lender reviews all of this they may or may not approve the short sale. If they do not approve the short sale they will proceed with the foreclosure. If they do agree to the short sale you will close on the sale of your property and the lender will take the loss.

So, is the borrower off the hook?

Not necessarily. The lender still has options to try to collect this shortage. As a condition of the short sale the lender may require the borrower to sign a note to repay the shortage. They may also file a collection or a judgment for the amount of the shortage. This is something that an attorney with expertise in this area of real estate needs to be consulted.

Also, the IRS may come after the borrowers for income taxes on the amount of the shortage. If the shortage was forgiven, the lender will report the shortage as income to the IRS and the IRS will collect taxes on this amount. Again, for the specifics on this please consult a tax professional.

30-year fixed rated climbs back above 5%

2009-01-22T09:38:00.000-08:00

NEW YORK (CNNMoney.com) -- Interest rates on 30-year fixed rate mortgages rose after an 11 week streak of declines.

Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.12% for the week ending Jan. 22nd. That's up from last week when is averaged 4.96% but still below 5.48%, which is where the rate stood at this time last year.

"Fixed-rate mortgages followed bond yields and edged up this holiday week," said Frank Nothaft, Freddie Mac (FRE, Fortune 500) vice president and chief economist in a release on Thursday.

"However, over the first three weeks of 2009, the 30-year fixed-rate mortgage was an average 0.25 percentage points below its monthly average for December 2008. As a result, the number of mortgage applications for refinancing was roughly about 86 percent of all conventional loans over the same time period."

The 15-year fixed rate mortgage was also up this week, averaging 4.8%, compared with an average of 4.65% last week. But that's still still down from a year ago at this time, when the 15-year FRM averaged 4.95%.

One-year Treasury-indexed adjustable-rate mortgages (ARM) rose as well and averaged 4.92% this week, up from 4.89% last week. At this time last year, the 1-year ARM averaged 4.99%.

However, five-year Treasury-indexed ARMs continued to fall this week. The 5-year ARM averaged 5.24%, down from last week when it averaged 5.25%.