Mark to Market

Here is an excellent piece that explains the Mortgage Crisis:

Courtesy of Mike Neill
American Alliance Mortgage Company

"The current economic crisis is the top news story for nearly every media outlet. But until recently, one of the most important factors that led to this challenging market has also been one of the least discussed. "

MARK TO MARKET

Yes, it is a little complicated, but every little bit of information helps us better understand.

Smaller Homeowner Bailout Already In Place

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From Realty Times of October 16, 2008

Smaller Homeowner Bailout Already In Place, by an old freind, Broderick Perkins


Don't wait for home owner bailout provisions to trickle down from the $700 billion "Emergency Economic Stabilization Act of 2008," (H.R. 1424) recently rushed through Congress.

When it comes to help from new federal legislation for distressed home owners, the $300 billion "Housing and Economic Recovery Act of 2008" (H.R. 3221), signed earlier this year, can provide more immediate relief.

The $300 billion recovery act has both a mandated mortgage modifying provision and a voluntary "Hope For Homeowners" (H4H) refinance program, for home owners who qualify.

President Bush signed the larger $700 billion stabilization act on Oct. 3, 2008, but it is, in-part, "stay tuned" legislation. Exactly how it will be implemented to help home owners -- or the economy at large, for that matter -- isn't fully clear.

In part, the stabilization act calls for federal agencies holding mortgage and mortgage securities to identify loans that can be modified and work toward modifications. The stabilization act also allows the U.S. Secretary of the Treasury to use loan guarantees and credit enhancements to help home owners avoid foreclosures. And the stabilization deal calls for shoring up the H4H program. How any of those provisions will be implemented, however, is still under consideration.

Loan modifications

On the other hand, the older recovery act, signed in July came with one provision ready to go. It mandated that mortgage servicers modify loans for certain home owners to help them avoid foreclosure as long as three requirements are met:

A default on the mortgage either has already happened or is "reasonably foreseeable."

The home owner lives in the property as his or her primary residence.

The lender is likely to recover more through the loan modification or workout than by forcing the home owner into foreclosure.

It's up to the home owner to prove, in writing, his or her case to the lender. That could mean some back and forth negotiating, even legal wrangling. To that end, an accredited mortgage, banker and broker certifier, CMPS Institute, offers a sample letter containing more assistance, and tips to help home owners negotiate a loan modification.

The institute further advises:

1. Your hardship letter should demonstrate job loss, a serious health condition, an ensuing balloon payment, a coming adjustable rate reset or some other financial calamity that will preclude you from making your mortgage payments as scheduled.

2. Send the letter along with documented evidence -- your financial statements, employment records, tax returns and bank statements and other evidence that demonstrates how you can afford a modified loan under your present financial circumstances. Also send the lender a current appraisal of your home or otherwise document the current value of your home.

3. Deal directly with a representative of the lender's "loss mitigation" or workout department-- not a broker, loan originator or other mortgage staffer.

FHA refinancing

Newly effective Oct. 1, 2008 a second provision of the recovery act allows troubled mortgage holders to avoid foreclosure by refinancing into smaller, more affordable, Federal Housing Administration (FHA)-backed mortgages, provided Uncle Sam gets a piece of the equity-growth action and provided the lender voluntarily agrees to the deal, which includes writing down or reducing loan balances.

U.S. Department of Housing and Urban Affairs' (HUD) "Hope For Homeowners"fact sheets spell out the details.

The refinanced, 30-year, fixed rated FHA mortgages in the H4H program are for home owner-occupants having difficulty making their payments.

The existing mortgage must have been originated on or before January 1, 2008, and the owner must have made at least six payments.

Banks can volunteer to write down an existing mortgage to 90 percent of the new appraised value of the home. To get the deal to fly, any holders of existing mortgage liens must release the liens and waive all prepayment penalties and late payment fees. The existing first mortgage holder has to accept the H4H loan as full settlement of all outstanding indebtedness.

As of March 2008, the home owner's total monthly mortgage payments due must be more than 31 percent of the household's gross monthly income.

The loan amount on the new H4H mortgage cannot exceed $550,440. The amount can include a financed 3 percent "Upfront Mortgage Insurance Premium" and other loan costs. The home owner must also pay a 1.5 percent annual mortgage insurance premium.

The home owner cannot take out a second mortgage for the first five years of the new loan, except under certain emergency conditions.

The borrower must agree to share equity with the FHA, both the equity created at the beginning of the new mortgage and future appreciation in the value of the home. If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years. The FHA will share a portion of its equity earnings, when available, with past lien holders until any available appreciation is exhausted. Any left over appreciation goes to the FHA on the sliding scale.
More help for home owners: "Foreclosure Prevention Efforts Grow.

Copyright © 2008 Realty Times. All Rights Reserved.

Broderick has done a great job sorting through the Govt lawyer language to explain an important program available NOW. Visit his website at

DEADLINENEWSROOM


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Troubled Asset Relief Program

From Realty Times -

Washington Report: Paulson and Neel Kaskari by Kenneth R. Harney .. 10-13-08

Most people call it the $700 billion bailout, but in Washington it goes by the unglamorous name: TARP.

That stands for Troubled Asset Relief Program, and it's the centerpiece of the federal government's effort to take bad mortgages and other toxic financial products off the books of banks.

The idea is that by buying those assets at a fair market price, the banks will have the capital and confidence to begin making loans again to small businesses, home builders and individual consumers - thereby helping to ease the current credit freeze.

TARP is barely a week into official operation, but there are important developments underway that anyone interested in real estate ought to know about.

Treasury Secretary Paulson picked a 35-year-old whiz kid from his former Wall Street firm, Goldman Sachs, to run the entire program. His name is Neel Kaskari and he's an aeronautical engineer by training who used to work on satellite designs for NASA.

High on Paulson's and Kaskari's priority list will be to quickly start buying up defaulted "acquisition, development and construction" (ADC) loans made by local and regional banks to home builders. That's potentially huge for real estate because it could eventually set the stage for a slow revival of new home building.

Another target: Defaulted equity lines of credit and second mortgages made to home buyers during the boom years. You probably remember the wildly popular "piggyback" plans that allowed people to purchase homes with no downpayment.

Many of those second liens are gushing red ink in bank portfolios right now. By getting them off the books, the program should eventually allow local and regional banks to begin offering credit lines and seconds to homeowners who need them and qualify for them.

Though TARP will also be buying up billions of dollars of complex mortgage securities from giant banks -- and that's extremely important -- its help to small and medium-sized lending institutions on ADC loans and home equity lines may well have more immediate, tangible impacts on local real estate markets around the country.

Still another key priority: Reworking the repayment terms of tens of thousands of "underwater" and delinquent mortgages to allow home owners to remain in their houses and avoid foreclosure.

That, in turn, should gradually begin to have positive impacts on local real estate market conditions.

But don't expect miracles overnight. This is going to take months and years to fully work its way through the system.

In the meantime, Realty Times will keep a close eye on TARP -- and keep you posted on important developments.
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Copyright © 2008 Realty Times. All Rights Reserved.


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Market Conditions & Total Mortgages in U.S.

Market Conditions by Realty Times Staff October 7, 2008

It appears that with the recent final woes in the nation and on Wall Street, the Dow fell below 10,000 for the first time since 2004 in the first hour on Monday, many consumers are holding back on their spending.

Even before the latest ailing markets, reports indicated that August had been the weakest for consumer spending in six months. The Commerce Department reported that consumer spending was unchanged in August -- not a positive sign in an economy that needs jumpstarted.

The New York times reports that cutbacks seem to be across the board, from the automobile industry to fashion to restaurants. "Less than a month ago, Nigel Gault, chief domestic economist at Global Insight, a forecasting service, predicted that domestic economic output would rise 1.2 percent in the third quarter." This number is currently closer to zero percent.

Copyright © 2008 Realty Times. All Rights Reserved.

Some numbers heard on the radio. 95% of all mortgages are current and being paid every month. There are $14 Trillion total mortgages in the U.S. Thus 5% or $700 Billion are of concern. Interesting number, $700 Billion. Hmmmmm.


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THE BAILOUT - SURPRISE, SURPRISE!!

The bailout bill has failed in the U.S. House !!!!

What next, nobody knows at this stage. Probably Thursday before they can restart negotiations.

Brief Overview of Bailout Plan

From Realty Times on September 29, 2008

Washington Report: Overview of Bailout Plan by Kenneth R. Harney


There's no question what's been dominating debate in Washington -- the Treasury's and Congress's plans to buy hundreds of billions of dollars of distressed mortgages from lenders and investors.

The fine print rules and regulations for the bailout plan won't be known for weeks, but here's a quick overview from a real estate perspective on how it's supposed to work:

At its core, the plan is all about taking home loans off lenders' and investors' books that are currently illiquid -- they can't be sold, or are extremely difficult to sell -- because no one is sure what they're really worth.

Consider this hypothetical example: Say you own a mortgage-backed bond that has 100 subprime home mortgages in it. At the moment, 24 of those loans are delinquent; but 76 are paying on time. That proportion is pretty close to reality, according to the latest delinquency numbers from the Mortgage Bankers Association.

Now, because there are serious defaults in the pool, there's a stigma attached to your subprime bond. The best offer you've heard is maybe 20 cents on the dollar - which is ridiculous because over three quarters of your loans are paying on time, and the monthly cash flows should be worth a lot more.

You need an organization or program to intervene, buy your mortgage pool for a fairer price. That, in turn, will allow you to take in some cash and make some new mortgages.

The buyer of your loans can now work to see whether the interest rates, monthly payments, and other features of the 24 “bad” mortgages can be modified to be more affordable for the home owners involved.

Let's say that over a period of three years, those modifications end up saving 15 of the 24 delinquent mortgages from going into foreclosure. The new owner of the pool now has 90 loans paying on time, making it a lot more valuable than it paid.

Although the example is simplified, it's pretty much what the bailout plan is all about: Taking undervalued assets, holding them for awhile and turning them into better assets -- lemons into lemonade -- and reselling them, maybe even at a profit.

It's not clear at the moment how successful this will be long-term. But by buying up incorrectly valued mortgages at a “fair” price, the government has a chance to pump new money into the market -- money for new home mortgages -- and even lower interest rates in the process.

Exactly how to do that -- with what rules and guidelines -- has been what all the noise in Washington has been about.

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Copyright © 2008 Realty Times. All Rights Reserved.

THE STATE OF US FINANCES AND FORECLOSURES

The following statement recently appeared in a News Article:

"Lenders have repossessed a record 656,545 properties nationwide – or 8.6 of every 1,000 households in the US" - the data was attributed to ForeclosureS.com.

It concerns me that it is stated in terms of 1,000 households - in reality it is 0.86% of households, less than 1%, but sounds more ominous when they say it as they do. I do agree it is a very painful experience for those affected, and do not mean to minimize the impact to those folks, but let's at least keep it in a reasonable perspective.

In a similar fashion, August Foreclosures were a new record! However, have any of you heard that the percentage of foreclosures in August reflected a reduced rate of foreclosures over July? Stated differently, the rate of foreclosures dropped! Hmmm, don't guess you heard that.

How about the Bank Foreclosure Crisis. Some large banks have fallen, and no doubt others will follow. I can't prove the numbers I heard but this is what I heard. "The Feds are still looking at 117 banks that are potential Lehman Brothers or Bear Stearns". The speaker then went on to say that there are 8500 banks in the U.S.
Hmmmm, if that's accurate, then the 0.0138% largest of the 8500 banks may be in trouble.

What is the old expression, liars figure, figures lie? Well, it does sell papers. Maybe this makes me guilty of being a liar?

Again, not trying to minimize the concerns we face but let's at least try to offer the whole story after we sell the paper.


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MARKET CONDITIONS

From Realty Times:

Market Conditions
by Realty Times Staff

When the government decided to place Fannie Mae and Freddie Mac into its conservatorship, it opened up many different possible avenues the heal the ailing giants.

The New York Times reports that there haven't been any specific proposals made by lawmakers to date on what to do -- but in one option, some lawmaker "favors restoring the companies to health and then returning them to the way they were before they went into conservatorship, but with safeguards to prevent another crisis."

This seems a much milder approach than free-market theorists who favor a liquidation of the companies.

National Association of Realtors President, Richard Gaylord, issued the statement: "I commend Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart for their bold actions to bring stability and continued liquidity to the nation’s mortgage market. Fannie Mae and Freddie Mac have always played a vital role in the U.S. economy by making fair and affordable mortgage loans available for home buyers and owners. Their critical mission must not be interrupted, and Sunday’s announcement goes a long way in making sure that does not happen."

Many experts hope that with this takeover will come restored confidence and more movement in the mortgage markets -- and maybe more affordable housing.



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Copyright © 2008 Realty Times. All Rights Reserved.

Real Estate Outlook: Recession Fears Put to Rest

From the September 9, 2008 REALTY TIMES:


Real Estate Outlook: Recession Fears Put to Rest
by Kenneth R. Harney


The latest national economic growth numbers should finally put to rest fears of a recession that could choke the real estate recovery now getting underway.

Second quarter Gross Domestic Product (or GDP) came in at an upwardly-revised 3.3 percent -- far above the 1.9 percent the federal government had previously estimated.

Key reasons for the robust economic performance: Exports, which have been riding the weak dollar to record levels, and lower imports because the prices of foreign-made goods have been priced higher.

Why should anyone interested in real estate care about GDP? Well, number one, when the economic growth rate accelerates, consumer confidence in the economy rises. That, in turn, pulls potential buyers off the sidelines and opens the door to higher housing sales.

And sure enough, the consumer confidence numbers for August, released last week by the Conference Board, are up by 5 points.

We're already seeing some impressive jumps in home sales in places that haven't seen positive news in two to three years -- central Florida and even some of the hardest-hit parts of California. According to a new report from the real estate tracking firm, DataQuick, sales in southern California jumped 16.7 percent in July over June, and were 14 percent above the pace of July the year before.

Another encouraging sign: Last week's mortgage rates dropped to 6.39 percent for 30-year fixed rate loans, according to the Mortgage Bankers Association of America. Fifteen year rates are still just under 6 percent. Applications for loans to buy homes jumped by 6 percent for conventional loans and an impressive 19.9 percent for FHA mortgages.

The federal government's latest quarterly survey on home prices reveals that the best price appreciation performances are now coming from areas that barely got noticed during the hottest years of the housing boom -- markets like Charleston, West Virginia ( up 6 percent for the year), Greenville, South Carolina (up 5.8 percent), Tulsa, Oklahoma (up by nearly 5 percent) and Scranton, Pennsylvania, where values were up by 4.7 percent..

All these markets -- and there are dozens more spread through Texas, the Midwest and the South -- never experienced the wild days of double digit appreciation.

They offer affordable housing prices and moderate - but steady and slow - price growth. They're not flashy -- never have been, probably never will be -- but that's why they're still producing positive appreciation numbers, while the boom to bust markets are not.

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Copyright © 2008 Realty Times. All Rights Reserved.

There are some who feel that the numbers on which this article is based are not really correct - that the Feds are leaving out some things that would negatively effect the GDP. October may give us a better indicator and hopefully still support the premise that the Recession is no longer a concern.

ALWAYS SOME GOOD NEWS

The following provided courtesy of Craig Bohall at www.submort.com:

1) The Senate approved legislation that would cut in half the down-payment requirement for loans obtained from the Federal Housing Administration. The bill also raises the maximum loan size to $417,000. - change your paradigms! This isn’t your parents FHA loan!

417K limit with 1.5% down!!
There are millions of your renters out there with 1.5% for a down payment!

2) First time home buyers - add this tool to your browser:

http://www.pmi-us.com/media/pdf/em/pmi_successhomeownerbk.pdf

to preview and/or download the Becoming a Successful Homeowner book. Available in English or Spanish.

3) Fannie Mae revised yet another guideline on 12-05-07 (announcement 07-23) regarding sales concessions VS financing concessions. Financing concessions like origination, discount, are acceptable as far as concessions paid by the seller or Realtor because they are normal and customary.

SALES concessions however are NOT normal and customary to the financing transaction and are treated as follows and I quote… “Sales concessions that take the form of non-realty items such as cash, furniture, automobiles, decorator allowances (paint and carpet), moving costs, or other giveaways, pre paid HOA dues are considered sales concessions and the value of such concessions MUST BE DEDUCTED FORM THE SALES PRICE WHEN CALCULATING THE LTV RATIOS”

In plain English = carpet allowances or any such NON typical item needed for the financing of the home will be valued and deducted from the sales price to determine the new loan amount….

Translation =

OLD RULE = 100K home, 5% down = 95K loan

NEW RULE = With a 5K “sales” concession, you deduct 5K from sales price = 100K – 5K = 95K

Buyer gets a 95% loan from 95,000 which means the loan amount now is 90,250.
HOWEVER, you are buying a 100K home so that means more money down.

Payment abatements are no longer eligible to be delivered to Fannie Mae effective immediately! (seller pays for first few months of payments for buyer)


Craig Bohall

"Striving to be...your lender for life!"

480-619-4411 - office
1910 S Stapley Dr #107
NW corner of Stapley & Baseline
480-540-3596 - cell
480-344-7968 - e-fax
cbohall@submort.com
www.submort.com/

MORTGAGE BAILOUT - DO YOU QUALIFY?

An excellent article from Business Week. The big question, does the plan go far enough?

New mortgage bailout plan: Do you qualify?

There are several subarticles on the bailout, including investor reaction.

If you are in an "ARM" mortgage, this is must reading!

A NEW CONCEPT FOR UPLIFTING THE USA

The gathering of inputs from 363 highly connected integrated metropolitan areas to bring new life to a stodgy federal structure.


Blueprint For American Prosperity


Let's all pray and hope it will begin to bring us into the New 21st century.