The Treasury Department is considering a plan to push down 30-year fixed-rate rates for home purchases to as low as 4.5%, in the hopes that it will stimulate sales, stop the freefall of prices, and allow homeowners to afford bigger loans.
But the proposed plan only helps those who buy homes, not those who want to refinance. Furthermore, you must have a steady job and good credit to qualify -- and you must not owe more on the house than it's worth.
Assuming the plan comes to fruition and you're in the market for a new home, should you take the bait?
Let's look at the pros and cons:
Pros: Unless a seller or builder bought down your rate, it's likely that you've never had the chance to buy a home with a 4.5% fixed-rate mortgage (see 30 Year FRM 1971-2008 graph at (mortgage-x.com). It's so tempting a rate that it may entice fence-sitters who have been waiting for home prices to hit bottom to jump anyway, since it (and other stimulus measures like it) are likely to evaporate once the economy starts to improve.
If the government succeeds in cutting rates to these levels, it will boost buying power considerably. If you bought a resale home at the current median price of $183,300 and took out a loan for 80% of the purchase price, you'd pay $879 a month at a 6% rate, but only $743 a month at 4.5%. Assuming that you don't try to buy more house than you can afford, presumably you will have more money to buy other goods, like a car or washing machine. Boosting the bottom line of retailers will help save jobs, which must happen before the economy can get back on track.
Cons: If, tempted by low rates, you take on a bigger loan than you can afford, at a time when jobs are being erased, you're not just putting your financial future at risk -- you're reaffirming the whole free-spending, McMansion-loving culture that created this mess in the first place.
Employers have cut 1.2 million jobs this year, sending the unemployment rate to a 14-year high of 6.5%, and economists expect that the rate will be higher when the Labor Department announces November's numbers on Friday.
The bottom line: If you can get a lower fixed-rate loan than you have now, either for a new purchase or a refinance, you'd be foolish not to take it. But there's no reason that you have to use the money for a bigger house, or a bigger loan. Downsize your expectations, your home and your debt, and you'll be better prepared if you yourself are downsized...more
Monday
Saturday
Investors Not Happy With 4-Loan Limit...
Some real estate investors are up in arms over a new Fannie Mae-Freddie Mac policy that limits to four the number of real estate loans that can be held by a single person.
The rule, which took effect Dec. 1, prohibits an investor from obtaining even a fifth mortgage no matter how much money he puts down or how much income documentation he provides. It offers no exceptions for assets or history of success as a real estate investor.
“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, an Atlanta-area investor. “It’s going to keep qualified buyers out of the market.”
Some investors are trying to work around the rule by partnering with other investors to either buy in cash or use their eligibility to borrow.
Source: The Atlanta Journal-Constitution, D.L. Bennett (12/05/08)
The rule, which took effect Dec. 1, prohibits an investor from obtaining even a fifth mortgage no matter how much money he puts down or how much income documentation he provides. It offers no exceptions for assets or history of success as a real estate investor.
“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, an Atlanta-area investor. “It’s going to keep qualified buyers out of the market.”
Some investors are trying to work around the rule by partnering with other investors to either buy in cash or use their eligibility to borrow.
Source: The Atlanta Journal-Constitution, D.L. Bennett (12/05/08)
Mortgage Rates Take a Big Dip
For the week ended Dec. 3, Freddie Mac reported the lowest interest on 30-year fixed home loans since late January.
The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period.
Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.
Source: Realty Times (12/05/08)
The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period.
Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.
Source: Realty Times (12/05/08)
Wednesday
Existing-Home Sales Down as Buyers Hesitate
Existing-home sales declined on the heels of a strong gain in September as uncertainty and economic concerns increased in October, according to the NATIONAL ASSOCIATION OF REALTORS®.
Existing-home sales—including single-family, townhomes, condominiums and co-ops—fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October from a downwardly revised pace of 5.14 million in September. Sales and are 1.6 percent below the 5.06 million-unit level in October 2007
Single-family home sales declined 3.3 percent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007.
Condominium and co-op sales eased by 1.8 percent to a seasonally adjusted annual rate of 550,000 units in October from 560,000 in September, and are 12.0 percent below the 625,000-unit pace a year ago.
Lawrence Yun, NAR chief economist, said consumer hesitation is understandable.
“Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” he said. “We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home price stabilization, there will not be an economic recovery.”
Regional Data
Midwest. Existing-home sales in the Midwest fell 6.0 percent in October to a pace of 1.10 million and remain 9.1 percent below October 2007. The median price in the Midwest was $149,400, down 6.7 percent from a year ago.
—NAR
Existing-home sales—including single-family, townhomes, condominiums and co-ops—fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October from a downwardly revised pace of 5.14 million in September. Sales and are 1.6 percent below the 5.06 million-unit level in October 2007
Single-family home sales declined 3.3 percent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007.
Condominium and co-op sales eased by 1.8 percent to a seasonally adjusted annual rate of 550,000 units in October from 560,000 in September, and are 12.0 percent below the 625,000-unit pace a year ago.
Lawrence Yun, NAR chief economist, said consumer hesitation is understandable.
“Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” he said. “We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home price stabilization, there will not be an economic recovery.”
Regional Data
Midwest. Existing-home sales in the Midwest fell 6.0 percent in October to a pace of 1.10 million and remain 9.1 percent below October 2007. The median price in the Midwest was $149,400, down 6.7 percent from a year ago.
—NAR
Sunday
Slow Mortgage Start ...
The federal government's latest effort to help financially distressed homeowners is getting off to a slow start.
Lenders filed just 42 applications to refinance troubled mortgages under the federal Hope for Homeowners program in the two weeks after the program's Oct. 1 launch, according to the Federal Housing Administration. Some estimates have suggested that it could eventually help as many as 400,000 homeowners.
The program allows mortgage companies to refinance delinquent borrowers into affordable, government-backed loans, provided the mortgage company writes down a portion of the loan balance. To qualify for a new loan, homeowners must agree to share future appreciation with the federal government. In addition, the new loan amount -- including a 3% upfront mortgage insurance premium -- can't exceed 90% of the current appraised value, which is likely to mean a significant reduction in the loan balance....more
Lenders filed just 42 applications to refinance troubled mortgages under the federal Hope for Homeowners program in the two weeks after the program's Oct. 1 launch, according to the Federal Housing Administration. Some estimates have suggested that it could eventually help as many as 400,000 homeowners.
The program allows mortgage companies to refinance delinquent borrowers into affordable, government-backed loans, provided the mortgage company writes down a portion of the loan balance. To qualify for a new loan, homeowners must agree to share future appreciation with the federal government. In addition, the new loan amount -- including a 3% upfront mortgage insurance premium -- can't exceed 90% of the current appraised value, which is likely to mean a significant reduction in the loan balance....more
Local real estate outlook...
The Chicago real estate market has moved up in an annual popularity contest, but it still gets a lukewarm reception from investors.
Chicago ranks 10th for commercial and multifamily residential investment in the 2009 "Emerging Trends in Real Estate" survey released last month by the Urban Land Institute and PricewaterhouseCoopers LLP. That's up from 12th in the 2008 survey.
Critics cite a glut in office space and coInvestors are concerned about Chicago's overbuilt condo market, which is having a negative spillover effect on apartments as more condo investors, unable to sell their units, rent them out instead. About 28% said they would buy into the local apartment market.ndominiums as big negatives for the market, while fans like the transportation and infrastructure and the buzz surrounding the city's 2016 Olympics bid.
Respondents gave Chicago a rating of 5.1 on a 9-point scale, down from 5.5 in the 2008 survey and the lowest score since 1994. With the economy heading into a recession and the credit markets locked up, investors gave most big markets lower ratings than they did in the last survey.
Chicago's "not doing great, but it's doing much better than other Midwestern markets," says Jonathan Miller, principal author of the "Emerging Trends" report....more
Crains Chicago Business
Chicago ranks 10th for commercial and multifamily residential investment in the 2009 "Emerging Trends in Real Estate" survey released last month by the Urban Land Institute and PricewaterhouseCoopers LLP. That's up from 12th in the 2008 survey.
Critics cite a glut in office space and coInvestors are concerned about Chicago's overbuilt condo market, which is having a negative spillover effect on apartments as more condo investors, unable to sell their units, rent them out instead. About 28% said they would buy into the local apartment market.ndominiums as big negatives for the market, while fans like the transportation and infrastructure and the buzz surrounding the city's 2016 Olympics bid.
Respondents gave Chicago a rating of 5.1 on a 9-point scale, down from 5.5 in the 2008 survey and the lowest score since 1994. With the economy heading into a recession and the credit markets locked up, investors gave most big markets lower ratings than they did in the last survey.
Chicago's "not doing great, but it's doing much better than other Midwestern markets," says Jonathan Miller, principal author of the "Emerging Trends" report....more
Crains Chicago Business
Saturday
2009 Economic Outlook
The U.S. economy has entered a recession and will contract for the next three quarters, and the recovery, from the second half of 2009, will be tepid. The unemployment rate will peak at 6.7 percent by midyear next year before steadily heading down. However, existing home sales will be rising despite challenging economic times.
The most important factor driving home sales is affordability. With home prices falling in many parts of the country and mortgage rates still near historic lows, affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. This 93 percent of working households (rather than 95 percent during good economic times) respond to incentives. Added measures, from the first-time homebuyer tax credit to a larger number of mortgage loans qualifying to be purchased by Fannie and Freddie and through the FHA program, will further bring homebuyers to the marketplace.
Back in the previous recession, the economy shed nearly 2 million net jobs from 2001 to 2003. All the while, existing home sales rose from 5.2 million to 6.2 million just as jobs were being cut. New home sales likewise rose from 900,000 to 1.1 million. Mortgage rates were falling and housing affordability was rising during these years. The 2 million job cuts were painful, but the economy still had 130 million job hOn the economic front, recession in itself is not a positive for the housing market because there are fewer job holders. But if a recession is accompanied by rising housing affordability, then home sales can trend higher - as is now. A prolonged deep recession, however - certainly a possibility in light of the most severely tested financial market stress since the Great Depression - can dampen consumer confidence and put up barriers to home buying.
An early indication that buyers are responding to incentives was the solid jump in the pending home sales in August to the highest level in over a year. The biggest increases were in areas with rising affordability from sharp reductions in home prices in California, Nevada, and Florida. The expansion will broaden to other markets where home prices have markedly fallen, including Rhode Island, Virginia, and Minnesota. Existing home sales, therefore, will likely breakout from the narrow trading range of 4.8 to 5 million of the past 12 months to 5.2 million by the year end and to 5.4 million in 2009. Even with the improvement, the next year's sales level will still be well below the 7.1 million peak sales achieved with rampant speculative buying in 2005.
The Bottom Line
Put it all together and what do we have? A recovering economy will help consumer and business spending to turn the corner and the economy to move to a self-sustaining pace. But it requires a catalyst to get things started. The tumbling housing market and subprime mortgage defaults have caused financial markets to freeze and have pushed the economy into a recession. However, recent rising home sales and some sustained momentum will bring the economy back into the fold. Rising home sales will also thin out the housing inventory and begin stabilizing home prices. The credit market will start to unfreeze once home prices have passed bottom. Simply, the economy will not recover without a housing market recovery.
Fortunately, policymakers and both Presidential candidates clearly recognize the need to get the housing market moving. The two housing stimulus bills (homebuyer tax credit and higher loan limits), $700 billion Treasury plan and the Federal Reserve's actions are designed to assure steady mortgage flow and help revive the housing sector. With it, the economy will expand and create jobs. America and its exceptional ingenuity always find a way to move past crises and back to economic prosperity.
Lawrence Yun, Chief Economist
The most important factor driving home sales is affordability. With home prices falling in many parts of the country and mortgage rates still near historic lows, affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. This 93 percent of working households (rather than 95 percent during good economic times) respond to incentives. Added measures, from the first-time homebuyer tax credit to a larger number of mortgage loans qualifying to be purchased by Fannie and Freddie and through the FHA program, will further bring homebuyers to the marketplace.
Back in the previous recession, the economy shed nearly 2 million net jobs from 2001 to 2003. All the while, existing home sales rose from 5.2 million to 6.2 million just as jobs were being cut. New home sales likewise rose from 900,000 to 1.1 million. Mortgage rates were falling and housing affordability was rising during these years. The 2 million job cuts were painful, but the economy still had 130 million job hOn the economic front, recession in itself is not a positive for the housing market because there are fewer job holders. But if a recession is accompanied by rising housing affordability, then home sales can trend higher - as is now. A prolonged deep recession, however - certainly a possibility in light of the most severely tested financial market stress since the Great Depression - can dampen consumer confidence and put up barriers to home buying.
An early indication that buyers are responding to incentives was the solid jump in the pending home sales in August to the highest level in over a year. The biggest increases were in areas with rising affordability from sharp reductions in home prices in California, Nevada, and Florida. The expansion will broaden to other markets where home prices have markedly fallen, including Rhode Island, Virginia, and Minnesota. Existing home sales, therefore, will likely breakout from the narrow trading range of 4.8 to 5 million of the past 12 months to 5.2 million by the year end and to 5.4 million in 2009. Even with the improvement, the next year's sales level will still be well below the 7.1 million peak sales achieved with rampant speculative buying in 2005.
The Bottom Line
Put it all together and what do we have? A recovering economy will help consumer and business spending to turn the corner and the economy to move to a self-sustaining pace. But it requires a catalyst to get things started. The tumbling housing market and subprime mortgage defaults have caused financial markets to freeze and have pushed the economy into a recession. However, recent rising home sales and some sustained momentum will bring the economy back into the fold. Rising home sales will also thin out the housing inventory and begin stabilizing home prices. The credit market will start to unfreeze once home prices have passed bottom. Simply, the economy will not recover without a housing market recovery.
Fortunately, policymakers and both Presidential candidates clearly recognize the need to get the housing market moving. The two housing stimulus bills (homebuyer tax credit and higher loan limits), $700 billion Treasury plan and the Federal Reserve's actions are designed to assure steady mortgage flow and help revive the housing sector. With it, the economy will expand and create jobs. America and its exceptional ingenuity always find a way to move past crises and back to economic prosperity.
Lawrence Yun, Chief Economist
Thursday
A short sale's long journey...
With home values falling and a rough economy denting people's wallets, it doesn't take much for a homeowner to get underwater on a mortgage, owing more on the loan than the home is worth. Toss in a personal dilemma or two and the situation can become even more bleak.During the year's second quarter (the most recent data available), one in seven homeowners, regardless of when they bought, had negative equity in their homes, according to Zillow.com. The statistics were worse for people who bought their homes during the market's peak in 2006; 45 percent of those homeowners were upside down.
Kenneth Baldwin is one of those statistics, and it took him months to decide that it was better to walk away from his home with his dignity and credit-worthiness relatively intact than to continue struggling to keep it.In July 2006, with a good credit history but no down payment to make, the then-42-year-old bought a $236,500 three-bedroom, bi-level home in Lake in the Hills for himself and his fiancé. He received an interest-only 80/20 loan. An 80/20 loan is typically two loans—a primary loan for 80 percent of the value of your home, and a secondary loan, sometimes called a piggybank loan, in lieu of a down payment that covers the remaining 20 percent at a much higher interest rate than the first.Then his relationship soured and the terms of the loan reset. Instead of a $1,800 monthly payment covered by two incomes, Baldwin had to fund a monthly payment of $2,200 by himself. He tried to make it work, and found himself stressed when he couldn't make a payment.By the spring, he'd had enough of the stress and decided to sell his home, with his lender's permission, for less than the amount he owed on it in a short sale.
Delinquent borrowers whose homes are listed for sale at a discount and carry the "lender approval required" caveat. Despite what can be a time-consuming approval process, the transactions have become an increasingly popular option.
In May, Baldwin's lender, IndyMac Bank, agreed to let him sell his house for $214,000, forgiving $49,659.60 of the loan. The transaction still will dent his credit record but nowhere to the extent it would have, had he let the house lapse into foreclosure. After the closing, Baldwin received a $5,000 check as a sort of "thank-you" from the lender.
courtesy of Chicago Tribune 10/17/08
Kenneth Baldwin is one of those statistics, and it took him months to decide that it was better to walk away from his home with his dignity and credit-worthiness relatively intact than to continue struggling to keep it.In July 2006, with a good credit history but no down payment to make, the then-42-year-old bought a $236,500 three-bedroom, bi-level home in Lake in the Hills for himself and his fiancé. He received an interest-only 80/20 loan. An 80/20 loan is typically two loans—a primary loan for 80 percent of the value of your home, and a secondary loan, sometimes called a piggybank loan, in lieu of a down payment that covers the remaining 20 percent at a much higher interest rate than the first.Then his relationship soured and the terms of the loan reset. Instead of a $1,800 monthly payment covered by two incomes, Baldwin had to fund a monthly payment of $2,200 by himself. He tried to make it work, and found himself stressed when he couldn't make a payment.By the spring, he'd had enough of the stress and decided to sell his home, with his lender's permission, for less than the amount he owed on it in a short sale.
Delinquent borrowers whose homes are listed for sale at a discount and carry the "lender approval required" caveat. Despite what can be a time-consuming approval process, the transactions have become an increasingly popular option.
In May, Baldwin's lender, IndyMac Bank, agreed to let him sell his house for $214,000, forgiving $49,659.60 of the loan. The transaction still will dent his credit record but nowhere to the extent it would have, had he let the house lapse into foreclosure. After the closing, Baldwin received a $5,000 check as a sort of "thank-you" from the lender.
courtesy of Chicago Tribune 10/17/08
No Quick Fix for Housing Prices
The Treasury Department's rescue plan for the U.S. financial industry doesn't directly address the root cause of the crisis: falling home prices.
The government's plan, which includes taking stakes in major financial institutions and temporarily guaranteeing certain new bank debt, could cushion the economy and thus the housing market from further blows. But many economists say additional measures are needed to stimulate demand for homes and to reduce mortgage delinquencies and foreclosures.
At the heart of the rescue plan is an effort to keep the credit crunch from sending the economy into a tailspin. "If the financial system doesn't get working again, then the economic downturn is going to be much worse, and that means the housing market will be a lot worse than it otherwise would be," says Frederic Mishkin, a Columbia University economist who stepped down as a Federal Reserve Board governor in August.
But some economists say the government needs to do more to address the underlying problems that triggered the credit crisis. "It's very disappointing" that the plan doesn't do anything "to stop the spiral in home prices," which is reducing net worth and creating a falloff in consumer spending, says Harvard University economist Martin Feldstein. He proposes that the federal government offer low-interest loans to replace 20% of homeowners' mortgages.
The government's latest intervention comes as mortgage delinquencies continue to climb and home prices are plummeting in many markets. Some 5% of mortgages were at least 30 days past due at the end of the third quarter, according to Equifax and Moody's Economy.com, up from 4.6% in the second quarter and 3.5% a year earlier. In Florida and Nevada, delinquency rates now top 8%.
Nationwide, house prices have fallen 18% from their peak in the first quarter of 2006, according to Case Shiller. By another measure, from the National Association of Realtors, home prices are off 12% from their peak. They are expected to fall an additional 10% to 15% between now and mid-2009, says Mark Zandi, chief economist at Moody's Economy.com.
Falling prices are feeding a vicious cycle that leads to more mortgage delinquencies and foreclosures. As more Americans end up "under water," or owing more on homes than they are currently worth, more people are likely to walk away from mortgages, causing foreclosures to rise further and adding to negative market psychology.
The rescue effort could buy the government some time to get other measures up and running -- and to see whether they will help stabilize home prices. Some analysts say one government initiative that appears to be bearing fruit is the increase in loan limits of mortgages backed by the Federal Housing Administration -- to as high as $729,000 in some cities. In September, FHA mortgages financed 28% of home purchases, up from 19% in August, according to Zelman & Associates, a housing research firm, and the number of buyers seeking government-backed mortgages more than doubled from last year, as houses have become affordable again....more
The government's plan, which includes taking stakes in major financial institutions and temporarily guaranteeing certain new bank debt, could cushion the economy and thus the housing market from further blows. But many economists say additional measures are needed to stimulate demand for homes and to reduce mortgage delinquencies and foreclosures.
At the heart of the rescue plan is an effort to keep the credit crunch from sending the economy into a tailspin. "If the financial system doesn't get working again, then the economic downturn is going to be much worse, and that means the housing market will be a lot worse than it otherwise would be," says Frederic Mishkin, a Columbia University economist who stepped down as a Federal Reserve Board governor in August.
But some economists say the government needs to do more to address the underlying problems that triggered the credit crisis. "It's very disappointing" that the plan doesn't do anything "to stop the spiral in home prices," which is reducing net worth and creating a falloff in consumer spending, says Harvard University economist Martin Feldstein. He proposes that the federal government offer low-interest loans to replace 20% of homeowners' mortgages.
The government's latest intervention comes as mortgage delinquencies continue to climb and home prices are plummeting in many markets. Some 5% of mortgages were at least 30 days past due at the end of the third quarter, according to Equifax and Moody's Economy.com, up from 4.6% in the second quarter and 3.5% a year earlier. In Florida and Nevada, delinquency rates now top 8%.
Nationwide, house prices have fallen 18% from their peak in the first quarter of 2006, according to Case Shiller. By another measure, from the National Association of Realtors, home prices are off 12% from their peak. They are expected to fall an additional 10% to 15% between now and mid-2009, says Mark Zandi, chief economist at Moody's Economy.com.
Falling prices are feeding a vicious cycle that leads to more mortgage delinquencies and foreclosures. As more Americans end up "under water," or owing more on homes than they are currently worth, more people are likely to walk away from mortgages, causing foreclosures to rise further and adding to negative market psychology.
The rescue effort could buy the government some time to get other measures up and running -- and to see whether they will help stabilize home prices. Some analysts say one government initiative that appears to be bearing fruit is the increase in loan limits of mortgages backed by the Federal Housing Administration -- to as high as $729,000 in some cities. In September, FHA mortgages financed 28% of home purchases, up from 19% in August, according to Zelman & Associates, a housing research firm, and the number of buyers seeking government-backed mortgages more than doubled from last year, as houses have become affordable again....more
Tumultuous Times...Credit Crisis Information & Summary...
Summary
The Emergency Economic Stabilization Act of 2008 was signed by President Bush into law on October 3. NAR closely monitored the Federal Government response to the credit crisis, and our Washington D.C. Policy staff worked with regulatory agencies and elected officials on Capitol Hill to assure a robust secondary mortgage market. Liquidity in the mortgage market is essential to the health of the economy.
The Bill Will Help Homeowners and Borrowers
The Senate legislation responded to the criticisms that lenders have been slow and/or unwilling to work with homeowners and borrowers. It encouraged negotiation in short sales and consumer efforts to refinance or reconfigure existing mortgages: When the Treasury (or other federal agency that holds mortgages) acquires troubled existing mortgages from financial institutions, agencies are required to work with lenders and mortgage servicers to find ways to avoid foreclosures. All federal agencies are required to work with servicers to facilitate loan modifications that will consider the net present value of the mortgage. Similar refinancing and foreclosure prevention requirements apply to mortgages involving owners of multi-family properties and owners of commercial properties. Policy goal is to assure that tenants don’t lose their residence or their place of business when an owner has problems with the mortgage. Changes to existing mortgages can include (but are not limited to) revisions in principal, interest rate and period for repayment.
The Bill Will Get Money into the Financial System Quickly
The credit markets are nearly frozen. Lenders can’t lend because they are receiving no payments on existing loans. The legislation allowed the government to buy troubled loans and mortgage securities. The funds that the institutions received when the government purchased the existing portfolios were to be available to issue new mortgages with more carefully specified and monitored lending standards. Provisions include:
Create a Troubled Asset Relief Program (TARP) to purchase and guarantee the troubled assets from the financial institutions that hold mortgages and/or mortgage-backed securities.
A new Office of Financial Stability within the Treasury to operate TARP, with input from the Federal Reserve, Federal Deposit Insurance Corp (FDIC – the agency that works with failed and failing financial institutions to insure and protect consumers), the Comptroller of the Currency (bank regulator), Office of Thrift Supervision (regulator of former savings and loan companies) and the Secretary of Housing and Urban Development.
Don’t give out all the money at one time. First release of funds to purchase troubled assets will be $250 Billion. Second release of up to $100 Billion must be authorized by the President. Final $350 Billion can be issued only on Congressional approval. Congress given 15 days to act.
courtesy of IAR
The Emergency Economic Stabilization Act of 2008 was signed by President Bush into law on October 3. NAR closely monitored the Federal Government response to the credit crisis, and our Washington D.C. Policy staff worked with regulatory agencies and elected officials on Capitol Hill to assure a robust secondary mortgage market. Liquidity in the mortgage market is essential to the health of the economy.
The Bill Will Help Homeowners and Borrowers
The Senate legislation responded to the criticisms that lenders have been slow and/or unwilling to work with homeowners and borrowers. It encouraged negotiation in short sales and consumer efforts to refinance or reconfigure existing mortgages: When the Treasury (or other federal agency that holds mortgages) acquires troubled existing mortgages from financial institutions, agencies are required to work with lenders and mortgage servicers to find ways to avoid foreclosures. All federal agencies are required to work with servicers to facilitate loan modifications that will consider the net present value of the mortgage. Similar refinancing and foreclosure prevention requirements apply to mortgages involving owners of multi-family properties and owners of commercial properties. Policy goal is to assure that tenants don’t lose their residence or their place of business when an owner has problems with the mortgage. Changes to existing mortgages can include (but are not limited to) revisions in principal, interest rate and period for repayment.
The Bill Will Get Money into the Financial System Quickly
The credit markets are nearly frozen. Lenders can’t lend because they are receiving no payments on existing loans. The legislation allowed the government to buy troubled loans and mortgage securities. The funds that the institutions received when the government purchased the existing portfolios were to be available to issue new mortgages with more carefully specified and monitored lending standards. Provisions include:
Create a Troubled Asset Relief Program (TARP) to purchase and guarantee the troubled assets from the financial institutions that hold mortgages and/or mortgage-backed securities.
A new Office of Financial Stability within the Treasury to operate TARP, with input from the Federal Reserve, Federal Deposit Insurance Corp (FDIC – the agency that works with failed and failing financial institutions to insure and protect consumers), the Comptroller of the Currency (bank regulator), Office of Thrift Supervision (regulator of former savings and loan companies) and the Secretary of Housing and Urban Development.
Don’t give out all the money at one time. First release of funds to purchase troubled assets will be $250 Billion. Second release of up to $100 Billion must be authorized by the President. Final $350 Billion can be issued only on Congressional approval. Congress given 15 days to act.
courtesy of IAR
Friday
Ill. foreclosures rise in August
Foreclosure filings in August increased 27 percent compared to the same month a year ago, a significantly slower pace than in previous months, according to data released Thursday.
Nationwide, 303,800 homes received at least one foreclosure-related notice in August, up 12 percent from July, RealtyTrac Inc. said. That means one in every 416 U.S. households received a foreclosure filing last month.
Illinois ranked ninth in the nation in foreclosure filings in August, with one filing for every 483 households, according to RealtyTrac. That's up 20.7% from July and 72.9% from August 2007.
August's nationwide increase was smaller than the two prior months. June and July both had year-over year increases in foreclosure filings of 50 percent or more. Still, the total number of foreclosure filings is still the highest since RealtyTrac began issuing its report in January 2005.
Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 90,893 properties were repossessed by lenders nationwide last month — up more than half from 43,141 in August 2007, the company said.
The top three states in foreclosure rates were Nevada, California and Arizona, in that order, RealtyTrac said. Florida, Michigan, Georgia, Ohio, Colorado, Illinois and Indiana rounded out the top 10, though Michigan, Georgia, Ohio and Colorado all reported rate decreases year-over-year.
Weak sales, sinking home values, tighter home loan lending practices and a slowing U.S. economy hamstrung by high fuel prices has left some homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan.
Banks and mortgage investors are also holding a glut of foreclosed properties and are slashing prices to get them off the books. more...
Nationwide, 303,800 homes received at least one foreclosure-related notice in August, up 12 percent from July, RealtyTrac Inc. said. That means one in every 416 U.S. households received a foreclosure filing last month.
Illinois ranked ninth in the nation in foreclosure filings in August, with one filing for every 483 households, according to RealtyTrac. That's up 20.7% from July and 72.9% from August 2007.
August's nationwide increase was smaller than the two prior months. June and July both had year-over year increases in foreclosure filings of 50 percent or more. Still, the total number of foreclosure filings is still the highest since RealtyTrac began issuing its report in January 2005.
Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 90,893 properties were repossessed by lenders nationwide last month — up more than half from 43,141 in August 2007, the company said.
The top three states in foreclosure rates were Nevada, California and Arizona, in that order, RealtyTrac said. Florida, Michigan, Georgia, Ohio, Colorado, Illinois and Indiana rounded out the top 10, though Michigan, Georgia, Ohio and Colorado all reported rate decreases year-over-year.
Weak sales, sinking home values, tighter home loan lending practices and a slowing U.S. economy hamstrung by high fuel prices has left some homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan.
Banks and mortgage investors are also holding a glut of foreclosed properties and are slashing prices to get them off the books. more...
Mortgage Bailout Is Greeted With Relief, Fresh Questions
Investors cheered the U.S. government's seizure of the nation's two troubled mortgage giants, with stock markets rallying in the U.S. and abroad and mortgage rates falling. But obstacles remain if the Treasury's takeover of Fannie Mae and Freddie Mac is to succeed.
Meanwhile, new details emerged of the pressures that led up to Treasury's plan to take the reins of the troubled companies. In the weeks before the government's intervention, nervous foreign finance officials barraged Treasury Secretary Henry Paulson and Federal Reserve officials to find out what was happening with the mortgage giants, according to people familiar with the matter.Among those expressing concern were Asian investors, including the Chinese, say two people familiar with the matter. Foreign banks' concerns were among the factors that helped prompt the government's move on Sunday to take over Fannie and Freddie, these people say.
Monday's performance of short-term financial indicators -- from mortgage rates to stock prices -- suggests the Bush administration's seizure of Fannie and Freddie might work. At the same time, Treasury and its banking advisers were bombarded with questions about their big gamble. Many in the market warned that it will do little to salve the deeper wounds in the American economy and financial markets.
Wild swings in the Dow Jones Industrial Average betrayed this tension. The blue-chip index soared 347 points in the opening minutes of trading, then fell back 253 points from that peak by lunchtime before rising another 197 points. The Dow industrials finished the day at 11510.74, up 289.78.
Sweeping Intervention
Mr. Paulson's weekend announcement represented one of the most sweeping interventions in financial markets since the Depression, essentially putting the government in charge of helping finance American mortgages. Fannie and Freddie are vital cogs in the housing market, backing three-quarters of all mortgages being made in the U.S. now that bruised Wall Street banks have withdrawn from that market. They hold or back more than $5 trillion in mortgage debt. But as the housing market cratered, investors grew nervous about the companies' capital positions and their ability to weather the storm.
Under the takeover, the government replaced the companies' chief executives and shifted management control to their regulator, the Federal Housing Finance Agency, or FHFA. The government pledged to provide as much as $200 billion to help both firms ride through their expected mortgage-related losses. Mr. Paulson outlined his desire to see both companies begin to reduce the size of their mortgage portfolios beginning in 2010.
The challenges that remain are formidable, ranging from whether Wall Street banks can step into the housing-finance void that the two firms will eventually leave behind, to whether Congress can put aside years of bitter fighting to craft a future for the two mortgage giants it initially created.
If Treasury's intervention is working, mortgage rates should fall. Fannie and Freddie could begin backing more mortgages, at least temporarily. The two companies might loosen their very stringent underwriting rules. And housing demand should get a marginal boost, putting a dent in the nation's glut of unsold homes by enticing potential buyers who have been sitting on the fence because of higher interest rates.
The Treasury will be watching closely to see if the companies need a cash infusion. Under the plan announced Sunday, Treasury can make a capital injection if it determines that the companies' assets have fallen below their liabilities. Most market watchers expect that to happen eventually.
Credit markets reacted positively to the move, as spreads -- the difference between the yields on ultrasafe U.S. Treasury bonds and corporate and mortgage debt -- narrowed. As expected, spreads fell dramatically Monday on Fannie and Freddie's own bonds, as well as on those backed by pools of loans that conform to Fannie and Freddie's standards....more
Meanwhile, new details emerged of the pressures that led up to Treasury's plan to take the reins of the troubled companies. In the weeks before the government's intervention, nervous foreign finance officials barraged Treasury Secretary Henry Paulson and Federal Reserve officials to find out what was happening with the mortgage giants, according to people familiar with the matter.Among those expressing concern were Asian investors, including the Chinese, say two people familiar with the matter. Foreign banks' concerns were among the factors that helped prompt the government's move on Sunday to take over Fannie and Freddie, these people say.
Monday's performance of short-term financial indicators -- from mortgage rates to stock prices -- suggests the Bush administration's seizure of Fannie and Freddie might work. At the same time, Treasury and its banking advisers were bombarded with questions about their big gamble. Many in the market warned that it will do little to salve the deeper wounds in the American economy and financial markets.
Wild swings in the Dow Jones Industrial Average betrayed this tension. The blue-chip index soared 347 points in the opening minutes of trading, then fell back 253 points from that peak by lunchtime before rising another 197 points. The Dow industrials finished the day at 11510.74, up 289.78.
Sweeping Intervention
Mr. Paulson's weekend announcement represented one of the most sweeping interventions in financial markets since the Depression, essentially putting the government in charge of helping finance American mortgages. Fannie and Freddie are vital cogs in the housing market, backing three-quarters of all mortgages being made in the U.S. now that bruised Wall Street banks have withdrawn from that market. They hold or back more than $5 trillion in mortgage debt. But as the housing market cratered, investors grew nervous about the companies' capital positions and their ability to weather the storm.
Under the takeover, the government replaced the companies' chief executives and shifted management control to their regulator, the Federal Housing Finance Agency, or FHFA. The government pledged to provide as much as $200 billion to help both firms ride through their expected mortgage-related losses. Mr. Paulson outlined his desire to see both companies begin to reduce the size of their mortgage portfolios beginning in 2010.
The challenges that remain are formidable, ranging from whether Wall Street banks can step into the housing-finance void that the two firms will eventually leave behind, to whether Congress can put aside years of bitter fighting to craft a future for the two mortgage giants it initially created.
If Treasury's intervention is working, mortgage rates should fall. Fannie and Freddie could begin backing more mortgages, at least temporarily. The two companies might loosen their very stringent underwriting rules. And housing demand should get a marginal boost, putting a dent in the nation's glut of unsold homes by enticing potential buyers who have been sitting on the fence because of higher interest rates.
The Treasury will be watching closely to see if the companies need a cash infusion. Under the plan announced Sunday, Treasury can make a capital injection if it determines that the companies' assets have fallen below their liabilities. Most market watchers expect that to happen eventually.
Credit markets reacted positively to the move, as spreads -- the difference between the yields on ultrasafe U.S. Treasury bonds and corporate and mortgage debt -- narrowed. As expected, spreads fell dramatically Monday on Fannie and Freddie's own bonds, as well as on those backed by pools of loans that conform to Fannie and Freddie's standards....more
Government Bails Out Fannie Mae and Freddie Mac
closely following the government bailout of Fannie Mae and Freddie Mac. In taking over the two mortgage giants, the U.S. government is taking responsibility for the two firms, which provide funding for around three-quarters of new home mortgages.
James Hagerty, Ruth Simon and Damian Paletta examine the takeover and how it enables the Treasury to acquire $1 billion of preferred shares in each company and has pledged to provide as much as $200 billion to help the two companies deal with heavy losses on their mortgage defaults. All of this action could mean a greater burden placed on American taxpayers.
The bailout has also led to activity on the stock market this morning as investors hope the government’s actions will help bring the Wall Street credit crisis to an end, as Peter McKay reports. He adds that dangers do remain for stock investors, including the spread of job losses and slowing growth overseas, as well as the low prices of homes in the U.S. combined with high unsold inventory.
Heidi Moore examines the winners and losers of the bailout on the Deal Journal blog. Among the winners, she writes, are homeowners, Hank Paulson and Republicans, while lobbyists, Congress and management make the list of losers.
Presidential candidates Barack Obama and John McCain have both agreed that it is certainly time for government action on Fannie Mae and Freddie Mac, as Moore writes in a separate piece. Both candidates agree that the two mortgage companies are not properly structured. Obama expressed that he had “no sympathy” for the now-ousted CEOs of Fannie and Freddie, while McCain said he would “[make] them go away” if he is elected....more
James Hagerty, Ruth Simon and Damian Paletta examine the takeover and how it enables the Treasury to acquire $1 billion of preferred shares in each company and has pledged to provide as much as $200 billion to help the two companies deal with heavy losses on their mortgage defaults. All of this action could mean a greater burden placed on American taxpayers.
The bailout has also led to activity on the stock market this morning as investors hope the government’s actions will help bring the Wall Street credit crisis to an end, as Peter McKay reports. He adds that dangers do remain for stock investors, including the spread of job losses and slowing growth overseas, as well as the low prices of homes in the U.S. combined with high unsold inventory.
Heidi Moore examines the winners and losers of the bailout on the Deal Journal blog. Among the winners, she writes, are homeowners, Hank Paulson and Republicans, while lobbyists, Congress and management make the list of losers.
Presidential candidates Barack Obama and John McCain have both agreed that it is certainly time for government action on Fannie Mae and Freddie Mac, as Moore writes in a separate piece. Both candidates agree that the two mortgage companies are not properly structured. Obama expressed that he had “no sympathy” for the now-ousted CEOs of Fannie and Freddie, while McCain said he would “[make] them go away” if he is elected....more
Ban on Down-Payment Aid Is Fought...
Members of Congress are making a last-ditch effort to head off an Oct. 1 ban on the use of seller-assisted down payments on federally insured mortgages with a compromise measure designed to win over skeptical federal housing officials.
The proposed bill would resurrect the programs, which Congress, with the backing of the Department of Housing and Urban Development, axed earlier this year. The compromise measure would limit their use to borrowers with higher credit scores. In exchange, HUD would be able to institute risk-based pricing for federally insured mortgages, allowing the agency to charge higher premiums for less-creditworthy borrowers.
Supporters of the measure face an uphill battle, with just weeks before the Oct. 1 deadline and with Congress focused on other matters in the weeks before an election recess. Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee, said that HUD has appeared receptive to the proposal, but a HUD spokesman said the agency had "deep reservations about the legislation in its current form."
Under the programs, a third party, usually a nonprofit, provides a down payment to the buyer and is reimbursed by the seller, often a home builder. That allows buyers to qualify for a mortgage backed by the Federal Housing Administration, which requires a down payment of at least 3% -- which will increase to 3.5% on Oct. 1.
The programs had largely filled the void left by the subprime-mortgage market that all but vanished in 2007. Federal officials renewed an effort to end seller-funded assistance earlier this year, arguing that borrowers were two to three times as likely to default on their loans if they received their down payment from a nonprofit. Other critics say that builders simply increase the price of a new home by the price of the down payment....more
The proposed bill would resurrect the programs, which Congress, with the backing of the Department of Housing and Urban Development, axed earlier this year. The compromise measure would limit their use to borrowers with higher credit scores. In exchange, HUD would be able to institute risk-based pricing for federally insured mortgages, allowing the agency to charge higher premiums for less-creditworthy borrowers.
Supporters of the measure face an uphill battle, with just weeks before the Oct. 1 deadline and with Congress focused on other matters in the weeks before an election recess. Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee, said that HUD has appeared receptive to the proposal, but a HUD spokesman said the agency had "deep reservations about the legislation in its current form."
Under the programs, a third party, usually a nonprofit, provides a down payment to the buyer and is reimbursed by the seller, often a home builder. That allows buyers to qualify for a mortgage backed by the Federal Housing Administration, which requires a down payment of at least 3% -- which will increase to 3.5% on Oct. 1.
The programs had largely filled the void left by the subprime-mortgage market that all but vanished in 2007. Federal officials renewed an effort to end seller-funded assistance earlier this year, arguing that borrowers were two to three times as likely to default on their loans if they received their down payment from a nonprofit. Other critics say that builders simply increase the price of a new home by the price of the down payment....more
Monday
Chicago-area home sales down 25% in July...
Home sales in the Chicago area fell 25% in July, according to the Illinois Assn. of Realtors.
The decrease over July 2007, while steep, marked a slight improvement over recent periods. In the second quarter, Chicago-area home sales were down 29% compared with the second quarter last year.
"While most housing-related indicators reveal continued problems, there is some increasing evidence the supply and demand may be moving more into balance, especially in many metropolitan markets in Illinois," Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois, said in a Realtors’ release Monday.
In the nine-county Chicago region, single-family and condominium sales totaled 7,274 in July, a drop of 25.2% compared with 9,730 sales in July 2007, the Realtors’ group said in the release.
In the city of Chicago, home sales fell 20.9% in July, to 2,167 compared with 2,738 in July 2007.
The median home sale price in the Chicago area was $254,900 in July, down from $262,500 in the same period last year. The median price in the city of Chicago was $299,000 in July, down 0.3% compared with $300,000 in July 2007.
The median is the price where half the homes sold for more and half sold for less.
Statewide sales also fell 25.2% in July, to 11,021, compared with 14,738 in July 2007, the Realtors’ group said. The median sale price statewide was $199,900, a decrease of 4.8% compared with the same month last year.
“While July typically is the slower summer month for home sales in Illinois, this year the drag on the housing market is amplified by overall economic uncertainty among consumers," Kay Wirth, president of the Illinois Assn. of Realtors, said in the release.
The Realtors group's sales figures include new and existing homes. The nine-county Chicago Primary Metropolitan Statistical Area consists of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.
Meanwhile, sales of existing homes rose 3.1% in the U.S. in July, easily beating Wall Street's expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust....more
The decrease over July 2007, while steep, marked a slight improvement over recent periods. In the second quarter, Chicago-area home sales were down 29% compared with the second quarter last year.
"While most housing-related indicators reveal continued problems, there is some increasing evidence the supply and demand may be moving more into balance, especially in many metropolitan markets in Illinois," Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois, said in a Realtors’ release Monday.
In the nine-county Chicago region, single-family and condominium sales totaled 7,274 in July, a drop of 25.2% compared with 9,730 sales in July 2007, the Realtors’ group said in the release.
In the city of Chicago, home sales fell 20.9% in July, to 2,167 compared with 2,738 in July 2007.
The median home sale price in the Chicago area was $254,900 in July, down from $262,500 in the same period last year. The median price in the city of Chicago was $299,000 in July, down 0.3% compared with $300,000 in July 2007.
The median is the price where half the homes sold for more and half sold for less.
Statewide sales also fell 25.2% in July, to 11,021, compared with 14,738 in July 2007, the Realtors’ group said. The median sale price statewide was $199,900, a decrease of 4.8% compared with the same month last year.
“While July typically is the slower summer month for home sales in Illinois, this year the drag on the housing market is amplified by overall economic uncertainty among consumers," Kay Wirth, president of the Illinois Assn. of Realtors, said in the release.
The Realtors group's sales figures include new and existing homes. The nine-county Chicago Primary Metropolitan Statistical Area consists of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.
Meanwhile, sales of existing homes rose 3.1% in the U.S. in July, easily beating Wall Street's expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust....more
Sunday
Help for Home Buyers..
When it comes to housing, it's a buyer's market -- especially for first-time home buyers eligible for new tax breaks.
The American Housing Rescue and Foreclosure Prevention Act of 2008, passed by Congress at the end of July with hopes of shoring up the ailing housing market, also includes an important tax break. First-time home buyers who purchase a home after April 8, 2008, and before July 1, 2009, are eligible for a $7,500 tax credit (or, if the home costs less than $75,000, a credit equal to 10% of the purchase price).
This credit, however, comes with a catch. You'll have to pay it back.
Here's the good part: The credit reduces your tax liability on a dollar-for-dollar basis and can even boost your refund. If you owe $10,000 in taxes, you can take the credit and pay just $2,500. Or if you owe $5,000 in taxes and have paid it over the year, you can take the credit and receive all your money back with an additional $2,500.
But unlike other federal tax credits, the new credit must be paid back to the government over a period of 15 years.
Income Limits
"It's the equivalent of an interest-free loan from the government," says Bob Trinz, senior tax analyst at the tax and accounting business of Thomson Reuters.
To qualify for the credit, you (and if married, your spouse) must not have owned a principal residence during the three-year period before you buy the home. In general, the credit is available in full only if your adjusted gross income doesn't exceed $75,000 ($150,000 if you file a joint return).
The credit phases out over the $150,000 to $170,000 adjusted gross income range for joint filers ($75,000 to $95,000 for individual filers).
If you claim a $7,500 credit, you'll have to start paying it back as an extra tax amount on your federal returns at the rate of $500 per year, beginning with the tax return for the second year after you buy the new home. That is, if you buy a home this year and claim the credit, you'll have to start paying back the money when you file your 2010 return in 2011.
For more details and examples of how the new law works, visit the Web site of Congress's Joint Committee on Taxation at www.jct.gov and look for publication JCX-63-08 on the home page. For additional information on tax breaks from the Internal Revenue Service, see Publication 530 at irs.gov...more
The American Housing Rescue and Foreclosure Prevention Act of 2008, passed by Congress at the end of July with hopes of shoring up the ailing housing market, also includes an important tax break. First-time home buyers who purchase a home after April 8, 2008, and before July 1, 2009, are eligible for a $7,500 tax credit (or, if the home costs less than $75,000, a credit equal to 10% of the purchase price).
This credit, however, comes with a catch. You'll have to pay it back.
Here's the good part: The credit reduces your tax liability on a dollar-for-dollar basis and can even boost your refund. If you owe $10,000 in taxes, you can take the credit and pay just $2,500. Or if you owe $5,000 in taxes and have paid it over the year, you can take the credit and receive all your money back with an additional $2,500.
But unlike other federal tax credits, the new credit must be paid back to the government over a period of 15 years.
Income Limits
"It's the equivalent of an interest-free loan from the government," says Bob Trinz, senior tax analyst at the tax and accounting business of Thomson Reuters.
To qualify for the credit, you (and if married, your spouse) must not have owned a principal residence during the three-year period before you buy the home. In general, the credit is available in full only if your adjusted gross income doesn't exceed $75,000 ($150,000 if you file a joint return).
The credit phases out over the $150,000 to $170,000 adjusted gross income range for joint filers ($75,000 to $95,000 for individual filers).
If you claim a $7,500 credit, you'll have to start paying it back as an extra tax amount on your federal returns at the rate of $500 per year, beginning with the tax return for the second year after you buy the new home. That is, if you buy a home this year and claim the credit, you'll have to start paying back the money when you file your 2010 return in 2011.
For more details and examples of how the new law works, visit the Web site of Congress's Joint Committee on Taxation at www.jct.gov and look for publication JCX-63-08 on the home page. For additional information on tax breaks from the Internal Revenue Service, see Publication 530 at irs.gov...more
Wednesday
Who qualifies for mortgage help and how to get it...
Questions and answers about the Hope for Homeowners Act of 2008, passed by Congress last weekend to try to steer as many as 400,000 struggling homeowners away from foreclosure:
Q: What exactly will the legislation do?
A: It will allow those who qualify to cancel their old mortgage loans and replace them with 30-year fixed-rate loans for up to 90 percent of the home's current value. The FHA will insure a total of $300 billion of the loans over a three-year period.
But the decision on whether to write such a loan remains up to banks, which would have to be willing to take a loss on the existing loans in exchange for avoiding an often-costly foreclosure.
Q: Who is eligible?
A: Eligible borrowers must have spent more than 31 percent of their monthly incomes on their mortgages as of March 1, 2008. The troubled loan must have originated no later than Jan. 1, 2008, and be on the borrower's primary residence. And the borrower's income must be verified.
Q: When does the program start?
A: It takes effect Oct. 1 and runs through September 2011, although the FHA isn't likely to have it operating at full capacity until next year.
Q: Since lenders can pick and choose which loans to refinance, how can consumers determine if theirs will be selected?
A: Check with the bank or financial company servicing your mortgage, but it may be weeks before they make decisions concerning the new guidelines and assess individual loans.
Even then, keep expectations limited.
"Servicers are going to be reluctant to take the government up on their offer," predicted Mark Zandi, chief economist at Moody's Economy.com. "The earliest they'll start taking them up on it is early next year. And even then it's likely to be modest."
Q: Is there anything a homeowner can do to improve chances of benefiting from the program, such as crunching numbers to make a case for the bank?
A: Not really. The best step is to keep up your payments as best you can.
Q: But doesn't this provide an incentive to NOT pay your mortgage, if you're barely ahead of bills and are underwater on your house, so you can qualify?
A: No. If your situation deteriorates enough, the bank may reject any possible new loan.
"Turning yourself into a financial basket case is not going to work," said Dan Seiver, a finance professor at San Diego State University. "If you turn into a complete deadbeat, the servicer is going to just foreclose and dump it....more
Q: What exactly will the legislation do?
A: It will allow those who qualify to cancel their old mortgage loans and replace them with 30-year fixed-rate loans for up to 90 percent of the home's current value. The FHA will insure a total of $300 billion of the loans over a three-year period.
But the decision on whether to write such a loan remains up to banks, which would have to be willing to take a loss on the existing loans in exchange for avoiding an often-costly foreclosure.
Q: Who is eligible?
A: Eligible borrowers must have spent more than 31 percent of their monthly incomes on their mortgages as of March 1, 2008. The troubled loan must have originated no later than Jan. 1, 2008, and be on the borrower's primary residence. And the borrower's income must be verified.
Q: When does the program start?
A: It takes effect Oct. 1 and runs through September 2011, although the FHA isn't likely to have it operating at full capacity until next year.
Q: Since lenders can pick and choose which loans to refinance, how can consumers determine if theirs will be selected?
A: Check with the bank or financial company servicing your mortgage, but it may be weeks before they make decisions concerning the new guidelines and assess individual loans.
Even then, keep expectations limited.
"Servicers are going to be reluctant to take the government up on their offer," predicted Mark Zandi, chief economist at Moody's Economy.com. "The earliest they'll start taking them up on it is early next year. And even then it's likely to be modest."
Q: Is there anything a homeowner can do to improve chances of benefiting from the program, such as crunching numbers to make a case for the bank?
A: Not really. The best step is to keep up your payments as best you can.
Q: But doesn't this provide an incentive to NOT pay your mortgage, if you're barely ahead of bills and are underwater on your house, so you can qualify?
A: No. If your situation deteriorates enough, the bank may reject any possible new loan.
"Turning yourself into a financial basket case is not going to work," said Dan Seiver, a finance professor at San Diego State University. "If you turn into a complete deadbeat, the servicer is going to just foreclose and dump it....more
House OKs rescue for homeowners, Freddie, Fannie
The 272-152 vote reflected a congressional push to send election-year help to struggling borrowers and to reassure jittery financial markets about the health of two pillars of the mortgage market.
Hours before the vote, President Bush dropped his opposition to the measure, which now is on track to pass the Senate and become law within days.
The White House swallowed its distaste for $3.9 billion in grants for devastated neighborhoods. In return, the administration got both the power to throw Fannie Mae and Freddie Mac a lifeline and the legislation Republicans long have advocated to rein in the government-sponsored mortgage companies.
Treasury Secretary Henry M. Paulson and lawmakers in both parties negotiated the final deal. It accomplishes several Democratic priorities, including aid for homeowners, a permanent affordable housing fund financed by the two mortgage companies and the money for hard-hit neighborhoods. The grants are for buying and fixing up foreclosed properties.
The bill would let the Federal Housing Administration back $300 billion in new loans so an estimated 400,000 homeowners who cannot afford their house payments could try to escape foreclosure by refinancing into safer, more affordable mortgages. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.
"The industry really has to step up and use it," said Bruce Dorpalen, director of housing counseling for Acorn Housing Corp., a nonprofit housing group based in Philadelphia.
The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the agency. It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time buyers, and increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.
Hours before the vote, President Bush dropped his opposition to the measure, which now is on track to pass the Senate and become law within days.
The White House swallowed its distaste for $3.9 billion in grants for devastated neighborhoods. In return, the administration got both the power to throw Fannie Mae and Freddie Mac a lifeline and the legislation Republicans long have advocated to rein in the government-sponsored mortgage companies.
Treasury Secretary Henry M. Paulson and lawmakers in both parties negotiated the final deal. It accomplishes several Democratic priorities, including aid for homeowners, a permanent affordable housing fund financed by the two mortgage companies and the money for hard-hit neighborhoods. The grants are for buying and fixing up foreclosed properties.
The bill would let the Federal Housing Administration back $300 billion in new loans so an estimated 400,000 homeowners who cannot afford their house payments could try to escape foreclosure by refinancing into safer, more affordable mortgages. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.
"The industry really has to step up and use it," said Bruce Dorpalen, director of housing counseling for Acorn Housing Corp., a nonprofit housing group based in Philadelphia.
The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the agency. It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time buyers, and increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.
Monday
US spells out Fannie-Freddie backstop plan
WASHINGTON - The Federal Reserve and the Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival. The steps are also intended to send a signal to nervous investors worldwide that the government is prepared to take all necessary steps to prevent the credit market troubles that started last year with losses from subprime mortgages from engulfing financial markets and further weakening the economy and housing markets.
The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies "should such lending prove necessary." They would pay 2.25 percent for any borrowed funds — the same rate given to commercial banks and Big Wall Street firms.
The Fed said this should help the companies' ability to "promote the availability of home mortgage credit during a period of stress in financial markets."
Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies should they need to tap it and to make an equity investment in the companies — if needed.
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Paulson said Sunday. "Their support for the housing market is particularly important as we work through the current housing correction."
The Treasury's plan also seeks a "consultative role" for the Fed in any new regulatory framework eventually decided by Congress for Fannie and Freddie. The Fed's role would be to weigh in on setting capital requirements for the companies.
The White House, in a statement, said President Bush directed Paulson to "immediately work with Congress" to get the plan enacted. It also said it believed the plan outlined by Paulson "will help add stability during this period." more...
The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies "should such lending prove necessary." They would pay 2.25 percent for any borrowed funds — the same rate given to commercial banks and Big Wall Street firms.
The Fed said this should help the companies' ability to "promote the availability of home mortgage credit during a period of stress in financial markets."
Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies should they need to tap it and to make an equity investment in the companies — if needed.
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Paulson said Sunday. "Their support for the housing market is particularly important as we work through the current housing correction."
The Treasury's plan also seeks a "consultative role" for the Fed in any new regulatory framework eventually decided by Congress for Fannie and Freddie. The Fed's role would be to weigh in on setting capital requirements for the companies.
The White House, in a statement, said President Bush directed Paulson to "immediately work with Congress" to get the plan enacted. It also said it believed the plan outlined by Paulson "will help add stability during this period." more...
Thursday
Home Supply Fell Over Past Year
The supply of homes available for sale in 18 major metropolitan areas in June was down 2.4% from a year earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif.
The data cover listings of single-family homes, condominiums and town houses on local multiple-listing services in those areas. It was the first decline for the 18 markets since Zip began collecting the inventory data in mid-2006.
Zip said inventory totals in June were about even with those a month earlier in the 18 metro areas.
Though the supply of homes listed for sale has leveled off after soaring in recent years, it remains plentiful. Nationwide, about 4.5 million previously occupied homes were listed for sale at the end of May, according to the National Association of Realtors. That is enough to last nearly 11 months at the current sales rate, the trade group says. The market is considered roughly in balance between supply and demand when the inventory is enough to last around six months...more
The data cover listings of single-family homes, condominiums and town houses on local multiple-listing services in those areas. It was the first decline for the 18 markets since Zip began collecting the inventory data in mid-2006.
Zip said inventory totals in June were about even with those a month earlier in the 18 metro areas.
Though the supply of homes listed for sale has leveled off after soaring in recent years, it remains plentiful. Nationwide, about 4.5 million previously occupied homes were listed for sale at the end of May, according to the National Association of Realtors. That is enough to last nearly 11 months at the current sales rate, the trade group says. The market is considered roughly in balance between supply and demand when the inventory is enough to last around six months...more
Illinois foreclosure filings down in June
Real estate foreclosure filings in Illinois fell 16% in June from May, and the state had the 13th-highest foreclosure rate in the country, according to a report released Thursday.
The 8,157 foreclosure filings in Illinois last month was still 42% higher than the total for June 2007, according to the report by RealtyTrac, an Irvine, Calif.-based research firm. The filings, which includes default notices, auction sales and bank repossessions, covers both residential and commercial properties.
Foreclosure filings nationally fell 3% in June from the previous month but were still 53% higher than June 2007, a sign “we have not yet reached the top of this foreclosure cycle,” RealtyTrac CEO James Saccacio says in a news release.
With one filing per 637 households, Illinois’ June foreclosure rate ranked 13th in the country. Nevada had the highest foreclosure rate for the month, with one filing per 122 households, followed by California at 192 and Arizona at 201. The U.S. foreclosure rate was one filing per 501 households....more
The 8,157 foreclosure filings in Illinois last month was still 42% higher than the total for June 2007, according to the report by RealtyTrac, an Irvine, Calif.-based research firm. The filings, which includes default notices, auction sales and bank repossessions, covers both residential and commercial properties.
Foreclosure filings nationally fell 3% in June from the previous month but were still 53% higher than June 2007, a sign “we have not yet reached the top of this foreclosure cycle,” RealtyTrac CEO James Saccacio says in a news release.
With one filing per 637 households, Illinois’ June foreclosure rate ranked 13th in the country. Nevada had the highest foreclosure rate for the month, with one filing per 122 households, followed by California at 192 and Arizona at 201. The U.S. foreclosure rate was one filing per 501 households....more
Sunday
FINANCING: What's old is new again in buying...
Here's what to expect in summer 2008: •Certain loans will require a second look in Cook County.
No one would take a loan they soon would not be able to afford unless they didn't know what they were getting into, according to Illinois lawmakers, who've backed a law that will require first-time buyers and all refinancers in Cook County to get counseling before signing up for a loan with certain features. Starting July 1, every mortgage closed and recorded in Cook County must carry a "certificate of exemption" or a "certificate of compliance." The exemption signifies that the mortgage carries no features that require counseling: three-year adjustables and the like. Certificates of exemption are also attached to mortgages made by banks or credit unions not regulated by Illinois. Certificates of compliance indicate that the borrower was counseled on his loan and wants to take it. It's up to the firm conducting the closing—usually a title company—to ensure that the appropriate certificate is attached to the mortgage when it's recorded.
The term, "lease-to-purchase option," is making a modest comeback after nearly disappearing. Sellers running out of patience—and money—waiting for a buyer are inclined to consider it, says Margie Thorgesen, president of the Aurora Tri-County Association of Realtors. These options can be structured differently, with the exact terms worked out between the parties. But basically, someone can rent for a term and then have the opportunity to purchase the home at a set price. Some lease-option agreements allow part of the rent to be used as a down payment.
Buyers stall, lenders pull back and sellers can't plan. In cooperation with the Illinois Association of Realtors, the Regional Economics Applications Laboratory at the University of Illinois recently began using regional economic data to forecast the market about a month out, says REAL director Geoffrey Hewings. After slight price increases in May and June, prices will decline slightly in July—about 2 percent—in the Chicago area, says Hewings. That would put the median price in July at $254,397, down from $256,346 in June. The June issue of Money magazine ventures further, predicting a 6.8 price decline in Chicago from through May 2009, and a 0.8 percent decline in Lake County home prices in the period.more...
No one would take a loan they soon would not be able to afford unless they didn't know what they were getting into, according to Illinois lawmakers, who've backed a law that will require first-time buyers and all refinancers in Cook County to get counseling before signing up for a loan with certain features. Starting July 1, every mortgage closed and recorded in Cook County must carry a "certificate of exemption" or a "certificate of compliance." The exemption signifies that the mortgage carries no features that require counseling: three-year adjustables and the like. Certificates of exemption are also attached to mortgages made by banks or credit unions not regulated by Illinois. Certificates of compliance indicate that the borrower was counseled on his loan and wants to take it. It's up to the firm conducting the closing—usually a title company—to ensure that the appropriate certificate is attached to the mortgage when it's recorded.
The term, "lease-to-purchase option," is making a modest comeback after nearly disappearing. Sellers running out of patience—and money—waiting for a buyer are inclined to consider it, says Margie Thorgesen, president of the Aurora Tri-County Association of Realtors. These options can be structured differently, with the exact terms worked out between the parties. But basically, someone can rent for a term and then have the opportunity to purchase the home at a set price. Some lease-option agreements allow part of the rent to be used as a down payment.
Buyers stall, lenders pull back and sellers can't plan. In cooperation with the Illinois Association of Realtors, the Regional Economics Applications Laboratory at the University of Illinois recently began using regional economic data to forecast the market about a month out, says REAL director Geoffrey Hewings. After slight price increases in May and June, prices will decline slightly in July—about 2 percent—in the Chicago area, says Hewings. That would put the median price in July at $254,397, down from $256,346 in June. The June issue of Money magazine ventures further, predicting a 6.8 price decline in Chicago from through May 2009, and a 0.8 percent decline in Lake County home prices in the period.more...
Foreclosures Rise 48% in May As U.S. Housing Woes Deepen..
The number of U.S. homeowners swept up in the housing crisis rose further last month, with foreclosure filings up nearly 50% from a year earlier, a foreclosure listing company said Friday.
Across the U.S., 261,255 homes received at least one foreclosure-related filing in May, up 48% from 176,137 a year earlier and up 7% from April, RealtyTrac Inc. said.
The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't get refinanced into an affordable loan.
Mortgage rates have been rising, reflecting increased concerns about what the Federal Reserve might do to battle inflation. Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.32% this week, the highest level in nearly eight months and up sharply from 6.09% last week.
As foreclosed properties pile up, they are adding to the inventory of homes on the market and dragging down home prices. The trend is most dramatic in parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously.
Lehman Brothers economist Michelle Meyer said in a report Thursday that U.S. home sales are likely to hit bottom at the end of this summer, but said a recovery in sales is likely to be "feeble." Home prices, she wrote, are still expected to fall another 10% by the end of 2009. more...
Across the U.S., 261,255 homes received at least one foreclosure-related filing in May, up 48% from 176,137 a year earlier and up 7% from April, RealtyTrac Inc. said.
The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't get refinanced into an affordable loan.
Mortgage rates have been rising, reflecting increased concerns about what the Federal Reserve might do to battle inflation. Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.32% this week, the highest level in nearly eight months and up sharply from 6.09% last week.
As foreclosed properties pile up, they are adding to the inventory of homes on the market and dragging down home prices. The trend is most dramatic in parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously.
Lehman Brothers economist Michelle Meyer said in a report Thursday that U.S. home sales are likely to hit bottom at the end of this summer, but said a recovery in sales is likely to be "feeble." Home prices, she wrote, are still expected to fall another 10% by the end of 2009. more...
Friday
Home-Price Declines Accelerate
Home prices are falling faster as the economy slows and turmoil in the mortgage markets continues.
Prices fell an average of 1.7% nationwide in the first quarter from the final three months of 2007, according to the Office of Federal Housing Enterprise Oversight. The decline was the largest in the index's 17-year history. The government index, which is seasonally adjusted and based on data for home purchases, had dropped 1.4% in the prior quarter. Compared with a year earlier, home prices dropped 3.1% in the first quarter.
The price drops, which occurred in 43 states, "spell further erosion in home-equity levels and potentially more trouble for mortgage markets," said the agency's director, James Lockhart, who added that the declines may help potential home buyers. Areas that had the biggest price gains over the past decade now are experiencing the sharpest declines. Prices in California and Nevada declined more than 8% from the prior quarter.more...
Prices fell an average of 1.7% nationwide in the first quarter from the final three months of 2007, according to the Office of Federal Housing Enterprise Oversight. The decline was the largest in the index's 17-year history. The government index, which is seasonally adjusted and based on data for home purchases, had dropped 1.4% in the prior quarter. Compared with a year earlier, home prices dropped 3.1% in the first quarter.
The price drops, which occurred in 43 states, "spell further erosion in home-equity levels and potentially more trouble for mortgage markets," said the agency's director, James Lockhart, who added that the declines may help potential home buyers. Areas that had the biggest price gains over the past decade now are experiencing the sharpest declines. Prices in California and Nevada declined more than 8% from the prior quarter.more...
Sunday
Why Lenders Are Leery Of Short Sales
As more people fall behind on their mortgages, lenders have been slow to take advantage of a longstanding alternative to foreclosure -- a so-called short sale.
At first glance, a short sale might seem like a win-win for everyone involved. In such an arrangement, the borrower sells the home for less than the amount owed, with the lender forgiving the difference. The sale releases borrowers from their obligations. For mortgage Short sales -- which were rare when the housing market was booming -- can also be a good way for lenders and investors to minimize losses. They typically result in losses of 19% of the loan amount, compared with an average loss of 40% for homes that are sold after foreclosure, according to a recent analysis by Clayton Holdings Inc., which tracks more than $500 billion in mortgage loans monthly for investors. The costs of foreclosure can include not only legal fees, but also taxes, insurance and the expense of maintaining the home until the property is sold and repairing any property damage.
As the housing market continues to weaken, the number of short sales is edging upward. Short sales currently account for about 18% of home sales, according to the National Association of Realtors. But it can be extremely difficult to get these deals completed. Unlike a traditional real-estate sale, a short sale requires the approval of not only the buyer and the seller, but also the mortgage-servicing company. In many cases, loans have been packaged into securities -- which means that the mortgage servicer must consider the interests of the investors who own the loans.holders, it can be less costly than foreclosing -- and could provide protection against future price drops. For buyers, it can be a chance to buy a home at an attractive price.more....
At first glance, a short sale might seem like a win-win for everyone involved. In such an arrangement, the borrower sells the home for less than the amount owed, with the lender forgiving the difference. The sale releases borrowers from their obligations. For mortgage Short sales -- which were rare when the housing market was booming -- can also be a good way for lenders and investors to minimize losses. They typically result in losses of 19% of the loan amount, compared with an average loss of 40% for homes that are sold after foreclosure, according to a recent analysis by Clayton Holdings Inc., which tracks more than $500 billion in mortgage loans monthly for investors. The costs of foreclosure can include not only legal fees, but also taxes, insurance and the expense of maintaining the home until the property is sold and repairing any property damage.
As the housing market continues to weaken, the number of short sales is edging upward. Short sales currently account for about 18% of home sales, according to the National Association of Realtors. But it can be extremely difficult to get these deals completed. Unlike a traditional real-estate sale, a short sale requires the approval of not only the buyer and the seller, but also the mortgage-servicing company. In many cases, loans have been packaged into securities -- which means that the mortgage servicer must consider the interests of the investors who own the loans.holders, it can be less costly than foreclosing -- and could provide protection against future price drops. For buyers, it can be a chance to buy a home at an attractive price.more....
Wednesday
Multifamily Deals Multiply
As the pace of commercial real-estate sales grinds almost to a halt amid financial-market instability and concerns about property values, deal activity is still brisk in one corner of the industry: multifamily housing.
Fueling the deals and buoying apartment values is the rare availability of financing, thanks to government-sponsored Fannie Mae and Freddie Mac. Prompted by their mandate to provide market liquidity and funding for affordable housing, but also driven by a fresh opportunity for profit, both firms are expanding in the multifamily market to fill a vacuum left by private lenders.
"It's a good time in our business," says Thomas Toomey, president and chief executive of UDR Inc., a Denver-based multifamily real-estate investment trust. "We have access to capital."
UDR recently benefited from that capital availability in its $1.71 billion sale of 25,684 apartments -- nearly 40% of its portfolio -- to a joint venture of DRA Advisors LLC and Steven D. Bell & Co. Fannie provided the vast bulk of financing, reflecting its new aggressiveness in the sector. Mr. Toomey says six months ago the deal would have been impossible because of the dearth of financing...more
Fueling the deals and buoying apartment values is the rare availability of financing, thanks to government-sponsored Fannie Mae and Freddie Mac. Prompted by their mandate to provide market liquidity and funding for affordable housing, but also driven by a fresh opportunity for profit, both firms are expanding in the multifamily market to fill a vacuum left by private lenders.
"It's a good time in our business," says Thomas Toomey, president and chief executive of UDR Inc., a Denver-based multifamily real-estate investment trust. "We have access to capital."
UDR recently benefited from that capital availability in its $1.71 billion sale of 25,684 apartments -- nearly 40% of its portfolio -- to a joint venture of DRA Advisors LLC and Steven D. Bell & Co. Fannie provided the vast bulk of financing, reflecting its new aggressiveness in the sector. Mr. Toomey says six months ago the deal would have been impossible because of the dearth of financing...more
New Tax Forms Give Homeowners Relief...
It's shaping up to be a less-painful year for many taxpayers who are preparing their 2007 returns.
For one thing, most filers will be getting a special payment from the government, thanks to the economic stimulus package enacted last week. Additionally, some taxpayers who may have been puzzled trying to claim certain deductions a year ago -- including one for state and local sales taxes -- shouldn't have any problem this year because those deductions are clearly marked on the 2007 forms. There's also a new deduction for mortgage insurance.
Another twist: a new law that will benefit strapped homeowners whose mortgage debt was forgiven, in part or in whole, during 2007. On the downside, there are tough new record-keeping rules for charitable donations. For an overview of the major changes and how they might affect your pocketbook..more....
For one thing, most filers will be getting a special payment from the government, thanks to the economic stimulus package enacted last week. Additionally, some taxpayers who may have been puzzled trying to claim certain deductions a year ago -- including one for state and local sales taxes -- shouldn't have any problem this year because those deductions are clearly marked on the 2007 forms. There's also a new deduction for mortgage insurance.
Another twist: a new law that will benefit strapped homeowners whose mortgage debt was forgiven, in part or in whole, during 2007. On the downside, there are tough new record-keeping rules for charitable donations. For an overview of the major changes and how they might affect your pocketbook..more....
Homeowners Need Extra Help on Mortgages, According to Bernanke..
More needs to be done to help troubled homeowners, including a broader effort to write down the principal of some problem loans, Federal Reserve Chairman Ben Bernanke said Tuesday.
"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure," Mr. Bernanke said in prepared remarks. (Read the full speech.)
Speaking at the Independent Community Bankers of America conference in Orlando, Fla., Mr. Bernanke said the current turmoil in the housing market "calls for a vigorous response."
"Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done," Mr. Bernanke said.
Though most loan modifications by lenders have focused on reducing the interest rate on a borrower's loan, Mr. Bernanke said a reduction in the principal might be more appropriate. Specifically, with many borrowers owing more on their home than the value of their mortgage, "a reduction in principal may increase the expected payoff by reducing the risk of default."more...
Understanding Points, Rates and Fees
Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.
Purchase Points
Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.Interest Rate
When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.
Fees
There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).
..more..
"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure," Mr. Bernanke said in prepared remarks. (Read the full speech.)
Speaking at the Independent Community Bankers of America conference in Orlando, Fla., Mr. Bernanke said the current turmoil in the housing market "calls for a vigorous response."
"Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done," Mr. Bernanke said.
Though most loan modifications by lenders have focused on reducing the interest rate on a borrower's loan, Mr. Bernanke said a reduction in the principal might be more appropriate. Specifically, with many borrowers owing more on their home than the value of their mortgage, "a reduction in principal may increase the expected payoff by reducing the risk of default."more...
Understanding Points, Rates and Fees
Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.
Purchase Points
Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.Interest Rate
When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.
Fees
There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).
..more..
Federal Reserve Reduces Federal Funds Rate by 1/2 Point to 3 Percent
The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible. The Fed action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.
The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.
In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."
The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed's Dallas regional bank, dissented, preferring no change in rates.
The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.
Financial markets, which had been hoping for a bolder half-point move, rallied on the announcement. The Dow Jones industrial average, which had been in negative territory shortly before the Fed action, climbed back into the positive range in the minutes following the statement, with the Dow Jones industrial average up by more than 70 points in the first half-hour of trading.
Economists said the Fed decided to move a half-point rather than a quarter-point because it did not want an adverse reaction on Wall Street....more
The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.
In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."
The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed's Dallas regional bank, dissented, preferring no change in rates.
The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.
Financial markets, which had been hoping for a bolder half-point move, rallied on the announcement. The Dow Jones industrial average, which had been in negative territory shortly before the Fed action, climbed back into the positive range in the minutes following the statement, with the Dow Jones industrial average up by more than 70 points in the first half-hour of trading.
Economists said the Fed decided to move a half-point rather than a quarter-point because it did not want an adverse reaction on Wall Street....more
Tuesday
Fed Cuts Interest Rate
WASHINGTON (AP) -- The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest funds rate cut on records going back to 1990.
Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world's largest economy was spreading worldwide.
Despite the Fed's bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.
In a brief statement explaining its move, the Fed said that "appreciable downside risks to growth remain" and officials pledged to "act in a timely manner" to deal with the risks facing the economy. The action was approved on an 8-1 vote.
Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.
"The world's stock markets are in meltdown so the Fed came in with an inter-meeting move to try to stop the panic," Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.
The Bush administration, which had announced on Friday that President Bush supported a $150 billion economic stimulus package, said Tuesday that it was not ruling out doing more than the $150 billion proposal if necessary....more
Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world's largest economy was spreading worldwide.
Despite the Fed's bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.
In a brief statement explaining its move, the Fed said that "appreciable downside risks to growth remain" and officials pledged to "act in a timely manner" to deal with the risks facing the economy. The action was approved on an 8-1 vote.
Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.
"The world's stock markets are in meltdown so the Fed came in with an inter-meeting move to try to stop the panic," Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.
The Bush administration, which had announced on Friday that President Bush supported a $150 billion economic stimulus package, said Tuesday that it was not ruling out doing more than the $150 billion proposal if necessary....more
Sunday
Bush to Revive Push For Housing Remedy
Shoring up public sentiment on the economy -- especially the battered housing sector -- could be vital to staving off a recession as Mr. Bush enters his last year in office. Pollsters say many people who aren't directly affected by rising defaults on subprime-mortgage loans are feeling the effects anyway, as they see the values of their homes drift downward. Even if Mr. Bush fails to get much more action out of lawmakers, White House pressure could help Republicans' political fortunes by reinforcing negative public perceptions of inaction in the Democratic-led Congress.
The administration and the Federal Reserve have taken several steps to attempt to address credit-market problems caused by rising mortgage defaults, including an administration-brokered industry effort to help people avoid foreclosure.
Mr. Gillespie and other aides didn't offer new specifics for how Congress could address the housing problems. There are at least two significant pieces of legislation that Congress left unfinished last year. One would bring relief to more low-income borrowers, allowing them to refinance adjustable-rate mortgages through the Federal Housing Administration. A second initiative could help ease a credit crunch for many middle- and upper-middle-income borrowers, in part by allowing government-sponsored mortgage companies such as Fannie Mae to securitize more large loans. Currently, those companies can't take on loans with values of more than $417,000. The administration supports a temporary increase in that limit but only in connection with comprehensive reform of the agencies' oversight, including a strong regulator with authority to limit the size of the mortgage portfolios they hold.
A third possible element in a housing initiative would give states authority to issue more tax-exempt bonds to help troubled homeowners refinance their homes.
Last month, the White House announced a voluntary initiative that encourages mortgage-servicing companies to freeze interest rates for people with adjustable-rate mortgages who are running into problems as their rates rise. As many as 1.2 million homeowners with subprime loans, or those to borrowers with poor credit, theoretically could get either rate freezes or expedited refinancing.
But some observers expect the actual impact of that program to be more limited. Meanwhile, estimates of the overall number of homeowners who might go into default has risen to three million. That is creating a need for further help from state and local governments.
"Changing the tax code can also help state and local government do their part to help homeowners," Mr. Bush said in December. "This temporary measure would make it easier for state housing authorities to help troubled borrowers -- and Congress should approve it quickly."
"If Treasury is looking for something to put pressure on Congress, [enabling states to issue more tax-exempt bonds] is something they can point to," said Steve O'Connor, senior vice president of the Mortgage Bankers Association.
Mr. Gillespie suggested that Mr. Bush also will make a push for energy-policy changes, despite last month's signing of an energy bill. A possible focus this time is opening controversial new supply sources such as the Arctic National Wildlife Refuge and the outer continental shelf. Mr. Gillespie also mentioned pending trade agreements, renewal of Mr. Bush's intelligence-gathering authority, and renewal of the No Child Left Behind education initiative as top legislative priorities for 2008. The White House and Treasury also have been weighing various plans for boosting the overall economy, not just the housing sector, possibly through additional tax cuts...more
The administration and the Federal Reserve have taken several steps to attempt to address credit-market problems caused by rising mortgage defaults, including an administration-brokered industry effort to help people avoid foreclosure.
Mr. Gillespie and other aides didn't offer new specifics for how Congress could address the housing problems. There are at least two significant pieces of legislation that Congress left unfinished last year. One would bring relief to more low-income borrowers, allowing them to refinance adjustable-rate mortgages through the Federal Housing Administration. A second initiative could help ease a credit crunch for many middle- and upper-middle-income borrowers, in part by allowing government-sponsored mortgage companies such as Fannie Mae to securitize more large loans. Currently, those companies can't take on loans with values of more than $417,000. The administration supports a temporary increase in that limit but only in connection with comprehensive reform of the agencies' oversight, including a strong regulator with authority to limit the size of the mortgage portfolios they hold.
A third possible element in a housing initiative would give states authority to issue more tax-exempt bonds to help troubled homeowners refinance their homes.
Last month, the White House announced a voluntary initiative that encourages mortgage-servicing companies to freeze interest rates for people with adjustable-rate mortgages who are running into problems as their rates rise. As many as 1.2 million homeowners with subprime loans, or those to borrowers with poor credit, theoretically could get either rate freezes or expedited refinancing.
But some observers expect the actual impact of that program to be more limited. Meanwhile, estimates of the overall number of homeowners who might go into default has risen to three million. That is creating a need for further help from state and local governments.
"Changing the tax code can also help state and local government do their part to help homeowners," Mr. Bush said in December. "This temporary measure would make it easier for state housing authorities to help troubled borrowers -- and Congress should approve it quickly."
"If Treasury is looking for something to put pressure on Congress, [enabling states to issue more tax-exempt bonds] is something they can point to," said Steve O'Connor, senior vice president of the Mortgage Bankers Association.
Mr. Gillespie suggested that Mr. Bush also will make a push for energy-policy changes, despite last month's signing of an energy bill. A possible focus this time is opening controversial new supply sources such as the Arctic National Wildlife Refuge and the outer continental shelf. Mr. Gillespie also mentioned pending trade agreements, renewal of Mr. Bush's intelligence-gathering authority, and renewal of the No Child Left Behind education initiative as top legislative priorities for 2008. The White House and Treasury also have been weighing various plans for boosting the overall economy, not just the housing sector, possibly through additional tax cuts...more
Real Estate: How Far Will It Fall in 2008?
There is one big question looming for homeowners and commercial real-estate investors this year: How much worse will it get?
The past year was the most painful in decades for residential real estate, as defaults on loans to less-creditworthy borrowers created a broader credit squeeze. House prices fell, home ownership dropped, foreclosures soared, and the housing market emerged as the soft underbelly of the economy.
Commercial real estate hit its peak early in 2007, when private-equity firm Blackstone Group LP paid $23 billion for office giant Equity Office Properties Trust, and then did an about-face. As credit tightened throughout the economy, commercial-property values tilted downward for the first time in several years.
Housing prices are likely to slide further this year, as credit remains tight and interest rates on many mortgages are set to rise, or "reset," and could trigger more defaults.
The commercial real-estate market, which includes properties such as offices, apartment buildings and shopping centers, could continue to soften as slower economic expansion causes rents to rise more slowly than in the past.
Residential Blues
Relief from the housing woes is unlikely anytime soon. "It will be another very bleak year with the worst of it occurring in the first half," predicts Mark Zandi, chief economist at economic-research site Moody's Economy.com. "Inventory is only growing and needs to be worked off before the market finds some stability," he said.
Through the third quarter of 2007, slightly more than 2.5% of all houses, or more than two million, were for sale and vacant, according to the U.S. Census Bureau. Since the first records were kept in 1965, that figure had never been higher than 2%, until the fourth quarter of 2005.
Demand is likely to stay depressed, keeping prices low, as high-risk borrowers who in the past would have qualified for subprime loans find themselves locked out of the market. Borrowers with little, if any, money for a down payment and those who don't want to document their finances also are likely to find the going tough.
House prices have fallen 6.5% as of October, since peaking in June 2006, according to the S&P/Case-Shiller Home Price index, which measures home values in 20 cities. Daniel Mudd, chief executive of government-sponsored mortgage investor Fannie Mae, expects prices to decline another 4% to 5% in 2008....more
The past year was the most painful in decades for residential real estate, as defaults on loans to less-creditworthy borrowers created a broader credit squeeze. House prices fell, home ownership dropped, foreclosures soared, and the housing market emerged as the soft underbelly of the economy.
Commercial real estate hit its peak early in 2007, when private-equity firm Blackstone Group LP paid $23 billion for office giant Equity Office Properties Trust, and then did an about-face. As credit tightened throughout the economy, commercial-property values tilted downward for the first time in several years.
Housing prices are likely to slide further this year, as credit remains tight and interest rates on many mortgages are set to rise, or "reset," and could trigger more defaults.
The commercial real-estate market, which includes properties such as offices, apartment buildings and shopping centers, could continue to soften as slower economic expansion causes rents to rise more slowly than in the past.
Residential Blues
Relief from the housing woes is unlikely anytime soon. "It will be another very bleak year with the worst of it occurring in the first half," predicts Mark Zandi, chief economist at economic-research site Moody's Economy.com. "Inventory is only growing and needs to be worked off before the market finds some stability," he said.
Through the third quarter of 2007, slightly more than 2.5% of all houses, or more than two million, were for sale and vacant, according to the U.S. Census Bureau. Since the first records were kept in 1965, that figure had never been higher than 2%, until the fourth quarter of 2005.
Demand is likely to stay depressed, keeping prices low, as high-risk borrowers who in the past would have qualified for subprime loans find themselves locked out of the market. Borrowers with little, if any, money for a down payment and those who don't want to document their finances also are likely to find the going tough.
House prices have fallen 6.5% as of October, since peaking in June 2006, according to the S&P/Case-Shiller Home Price index, which measures home values in 20 cities. Daniel Mudd, chief executive of government-sponsored mortgage investor Fannie Mae, expects prices to decline another 4% to 5% in 2008....more
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