Harnan Financial Group, Inc.

Improvement in the housing markets!!

noreply@blogger.com (Harnan Financial) — Wed, 09 Sep 2009 21:05:00 +0000

The article below is very interesting to read. Housing is definitely improving with interest rates at their lowest in 3 months making it a perfect time to refinance! We are now seeing multiple offers on single family homes by investors and first time buyers.

The secret is definitely out regarding lower interest rates and real estate beginning to bottom out.

Also 2009 is winding up which means you only have a limited amount of time to cash in on your $8,000 tax credit for all first time home buyers! The time is now for purchase and refinance. Call Harnan Financial Group, Inc. today!

noreply@blogger.com (Harnan Financial) — Wed, 09 Sep 2009 20:55:00 +0000

Home loan demand at 3-month high,millions more foreclosures

By Julie Haviv
NEW YORK (Reuters) - The lowest mortgage rates in 3 months had U.S. consumers clamoring for home loans last week even as the government said on Wednesday it expected millions more foreclosures.
The Treasury Department followed up with a report saying only 12 percent of U.S. homeowners eligible For loan modifications under the Obama administration's housing rescue plan have had their mortgages modified.
But aside from the mixed picture on housing, the Federal Reserve said the overall economic situation was improving in spite of weakness in the housing and labor markets, while Treasury Secretary Timothy Geithner added that the economy was starting to grow again.
The housing market has been showing signs of stabilization in recent months, with sales on the increase and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
Mounting foreclosures could mean another leg down for home prices and perhaps send the sector into a vicious cycle, analysts say.
The Treasury said 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Michael Barr, assistant Treasury secretary for financial institutions, told a House of Representatives Financial Services subcommittee.
But the housing crisis is showing signs of easing. The Federal Reserve's Beige Book survey said most regions reported some improvement in hard-hit residential real estate markets.
And U.S. mortgage applications surged last week to their highest since late May as consumers sought to take advantage of the lowest interest rates in months, data from the Mortgage Bankers Association showed.
The MBA said rates on 30-year fixed-rate mortgages tumbled to a 3-month low, spurring a surge in demand for home refinancing loans. Applications to buy a home, a tentative early indicator of sales, also climbed, hitting their highest since early January.
Low mortgage rates, high affordability and the government's $8,000 tax credit -- part of the economic stimulus bill -- for first-time home buyers have helped pave the way for stabilization.
"CAUTIOUSLY POSITIVE"
The Fed report said half of Federal Reserve districts saw evidence the U.S. economy had improved by the end of August, although labor markets remained weak and retail sales were flat overall.
"Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive," the Fed said.
But it also said there was still downward pressure on housing prices, and that business people in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's "cash for clunkers" incentive program lapses.
Geithner, however, said the government's efforts to help the financial sector were paying off and helping the overall economy.
"The economy is now growing again. We've seen the cost of credit start to come down. Banks are repaying the investments the government had to make in them with a significant... return," he said during a speech at Syracuse University in New York.
"We are going to keep at this until we fix it --- until we get it back on track," he added

Lower Prices on Homes fuel Housing Market...Harnan Financial Group can get you into a home!

noreply@blogger.com (Harnan Financial) — Wed, 12 Aug 2009 22:23:00 +0000

Existing-Home Sales Rise, Helped by Lower Prices
Published: Wednesday, 12 Aug 2009 10:47 AM ET

By: CNBC.com

A real estate group says U.S. home prices posted a gain in the second quarter, another sign that the ailing housing market is finally coming to life.
AP
The National Association of Realtors says the median sales price in the quarter was $174,100, up 4 percent from the first quarter, but still almost 16 percent below a year ago.
Prices were still down from a year ago in 129 out of 155 metropolitan areas the group tracks.
Total sales rose to a seasonally adjusted annual rate of 4.76 million, from 4.58 million in the first quarter, but were still about 3 percent below a year ago.
Thirty-nine states reflected sales increases from the first quarter, and nine states were higher than one year ago.
"With low interest rates, lower home prices and a first-time buyer tax credit, we've been seeing healthy increases in home sales, which are a hopeful sign for the economy," said Lawrence Yun, NAR chief economist.
Foreclosures & Short Sales: Are You Buying a Money Pit?
Foreclosures and short sales made up more than one-third of the sales, weighing down home prices. The national median price was $174,100 — 15.6 percent lower on the year.
The largest sales gain between the first and second quarters was in Idaho, up 67.5 percent; followed by Hawaii which rose 24.2 percent; New York, up 22.3 percent, Wisconsin; with a 21.7 percent gain; and Nebraska with a 20.3 percent increase. Twelve other states experienced double-digit sales increases from the first quarter.
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Year over year, California, Minnesota and Michigan are showing double-digit gains from the second quarter of 2008 but are off from the first quarter of this year.
Sharp price declines have continued to be concentrated in areas with high levels of foreclosures, such as California, Florida, Arizona and Nevada.
The biggest metro area price drop, of nearly 53 percent, was in Fort Myers, Fla. Prices also fell 35 percent or more in Phoenix, Riverside, Calif. and Las Vegas. The biggest price gain, of nearly 31 percent, was in Davenport, Iowa, followed by Cumberland, Md., at nearly 22 percent.
Regionally, existing-home sales in the Northeast jumped 15.0 percent in the second quarter, but are 8.4 percent below a year ago. In the midwest, existing-home sales rose 3.2 percent in the second quarter but are 5.3 percent lower on the year.
Sales rose 3.9 percent in the second quarter in the south, 7.2 percent lower on the year. In the west, existing-home sales fell 2.3 percent in the second quarter, but are 11.8 percent above a year ago.
Many economists now say that the worst of the housing recession is over, though foreclosures are expected to rise over the next year.
© 2009 CNBC.com

noreply@blogger.com (Harnan Financial) — Fri, 26 Jun 2009 20:36:00 +0000

Home Sales Going Up, but Prices Should Continue to Drop

Recent reports that home sales may have bottomed out appear to have stirred some optimism that the worst of the housing crisis could be over.
Unfortunately, house prices and loan performance are lagging indicators in a recovery — and this downturn has seen the biggest price drops and the worst loan performance since the Great Depression.
Historical patterns show that house prices will fall and defaults and foreclosures will continue to rise until there is an improvement in the job market. If the employment numbers start to increase in mid-2010, as many expect, the turnaround in prices and delinquency rates may not come until the first quarter of 2011.
Nevertheless, sales are expected to trend upward and that is an important development, according to David Berson, chief economist for the PMI Group Inc. in Walnut Creek, Calif. "It is the precursor to everything else improving. Sales had to go up first and that is happening now," Mr. Berson said.
The National Association of Realtors reported a 2.9% increase in existing home sales in April and the trade group is forecasting a major jump in sales during the last three quarters of this year. NAR economists expect home sales will rise to a 5.5 million seasonally adjusted annual rate in the fourth quarter, up 19% from the first quarter, as the $8,000 tax credit for first-time homebuyers boosts sales.
Federal Reserve Board chairman Ben Bernanke even told Congress that he is seeing "some signs of bottoming" in the housing market. And he expects overall economic activity to "bottom out, and then turn up later this year."
Despite the improvement in sales, the PMI chief economist says house prices will continue to fall this year. "It will go down 9% to 10% this year and it will be roughly flat next year," Mr. Berson said. "There are just too many homes for sale," he said, and too many vacant homes.
The PMI Group uses First American Loan Performance data in forecasting house prices, which shows prices have declined by 22% since the peak in the third quarter of 2006. From the first quarter of 2008 through the first quarter of 2009 prices have fallen 11.7%.
Meanwhile, the Census Bureau reported that only 345,000 full-time employees lost their jobs in May, compared 700,000 during the winter months. But the unemployment rate jumped to 9.4% from 8.9% in April.
"It is a good sign and it bolsters the argument that the housing market should bottom in terms of sales and perhaps in (housing) starts" possibly in June or July, according to Scott Anderson, senior economist at Wells Fargo & Co.However, the yield on the 10-year Treasury note has risen sharply in the past few weeks and the
Federal Reserve is struggling to keep mortgage rates low. The average rate on 30-year fixed-rate mortgages hit 5.59% during the week of June 12, according to Freddie Mac. This has already impacted refis. The Mortgage Bankers Association refinancing application index has plummeted to 2,600 from 6,800 on April 3.
"Just as we are hitting bottom in the housing market there is a lot of uncertainty about how strong the recovery will be," the Wells Fargo economist said. "The risk factor is mortgage rates," Mr. Anderson said, which could keep home sales stuck at "moribund levels."
His forecast calls for house prices to drop 5%-10% from April 1 through February 2010. He expects the unemployment rate will peak around 9.7% in the fourth quarter of 2009 or the first quarter of 2010 and remain at that level for most of the year. Defaults and foreclosures won't "top out until some time in 2010," Mr. Anderson said.
Meanwhile, declining house prices undermine homeowners' equity and make it difficult to modify mortgages, especially if the owner losses their job.
A Mortgage Bankers Association delinquency report shows there were 600,000 foreclosure starts in the first quarter. And foreclosure starts on prime loans jumped ahead of subprime loans for the first time this decade.
Defaults on prime loans are the "hardest to fix" because they mostly reflects the loss of a job or other life event, according to MBA chief economist Jay Brinkmann. "Since the mortgage performance lags improvement in the job market, that would put us to the end of 2010 or possibly the first quarter of 2011 before we see a nationwide improvement in the performance of mortgages," Mr. Brinkmann said.
He made his comments in releasing MBA's delinquency report, which shows the serious delinquency rate on all single-family loans (90 days or more past due or in foreclosure) hit an all-time high of 7.38% in the first quarter.

FHA Loans may soon use the new first-time home buyer tax credit...

noreply@blogger.com (Harnan Financial) — Fri, 26 Jun 2009 20:23:00 +0000

FHA Preps Tax Credit for Down Payment Use
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Home buyers qualifying for Federal Housing Administration-insured mortgages may soon use the new first-time home buyer $8,000 tax credit as a down payment, US Department of Housing and Urban Development secretary Shaun Donovan said today.
The process of applying the tax credit toward down payment, called ‘monetization’ in the industry, allows for FHA-qualified borrowers to use the tax credit to obtain a government-insured mortgage.
Donovan’s announcement came at a National Association of Realtors legislative summit this morning, although HUD’s details on the initiative aren’t scheduled for official release until next week. The initiative will allow FHA-approved lenders to monetize the tax credit through short-term bridge loans, letting borrowers access the funds at the closing table.
“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said, according to NAR.
The tax credit arrived as part of the American Recovery and Reinvestment Act of 2009 for qualifying taxpayers that buy homes in 2009. The law states that qualifying home buyers may claim up to $8,000 — or $4,000 for married individuals filing separately — on either their 2008 or 2009 tax returns. Unlike the previous law — which required recipients of the tax credit to repay the funds over a number of years without interest — the new home buyer credit effective with the passage of the act does not have to be repaid.

Use Your $8,000.00 homebuyers credit for closing!!!!

noreply@blogger.com (Harnan Financial) — Fri, 19 Jun 2009 23:11:00 +0000

The $8,000 First-Time Home Buyer Tax Credit Program Expands: 5 Things to Know

As the historic housing plunge rumbles on, Uncle Sam is offering a fresh incentive to get first-time home buyers off the sidelines. U.S. Housing and Urban Development Secretary Shaun Donovan on Friday unveiled a policy change that would provide home buyers with quicker access to a recently enacted first-time home buyer tax credit. Buyers would be free to put the funds toward closing costs and a portion of their down payment. The federal government hopes that the measure will stimulate housing demand, something desperately needed to help mop up the glut of unsold inventory.

Here are five things you need to know about the policy change:
1. Less waiting: President Barack Obama's $787 billion economic stimulus plan—which was signed into law in mid-February—included a tax credit worth up to $8,000 for qualified first-time home buyers. These buyers, however, couldn't get their hands on the cash until after tax season. The new HUD initiative would enable these borrowers to obtain short-term loans allowing them to tap the tax credit before going to closing. "Families will now be able to apply their anticipated tax credit toward their home purchase right away," Donovan said in a news release. "What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

2. Initial 3.5 percent: The measure, however, comes with several key limitations. First, it only applies to Federal Housing Administration mortgages. More importantly, the short-term loans can't be used to pay for the minimum 3.5 percent down payment that FHA loans require. Instead, the loan can be used for closing costs and to finance the portion of the down payment that exceeds the 3.5 percent threshold. The administration opted to have borrowers come up with the initial 3.5 percent themselves to ensure that buyers have "some skin in the game," which may reduce the likelihood of default, says Howard Glaser, a mortgage industry consultant and a former HUD official. In so doing, federal officials had to strike a delicate balance. "On the one hand, you want to make sure that homes are affordable to first time home buyers, but you don't want to set the bar so low that people who can't afford homes are buying homes," Glaser says.
3. Closing costs: Despite these limitations, the benefits of the program should not be overlooked, says Guy Cecala, publisher of the trade publication Inside Mortgage Finance. "The down payment is probably the biggest chunk of change you have got to pay [when purchasing a home], but it is not the only thing," Cecala says. "Even with a typical FHA loan, there are probably $3,000 to $4,000 in closing costs, title insurance, and [additional fees]." By chipping in toward such costs, the program "could just grease the wheels for a couple more people to get into FHA," says Keith Gumbinger of HSH.com. At the same time, borrowers who use the short-term loan to increase the size of their down payment could obtain a lower mortgage rate.
4. Impact? Cecala doesn't believe the new measure is a game changer for the battered real estate market. "I think it will be helpful to a first-time home buyer," he says. "Is it going to generate a lot more housing activity? No." Cecala argues that would-be buyers remain on the fence largely out of a concern that a home will lose value after the purchase. Such concerns will continue with or without the policy change.
Glaser, however, is more optimistic. "This is the missing piece," he says. "Home prices are coming down significantly in some markets, interest rates at historic lows, and now, by addressing cash on the table at closing, I think that borrowers who wouldn't have otherwise been in the market are going to feel more confident about investing in a home."
5. State efforts: The details of the HUD initiative come after several states have enacted similar programs. Missouri, for example, has had a program in place since January that enables home buyers to put the tax credit towards closing costs or their down payment.

California Housing Prices Continue to Rise

noreply@blogger.com (Harnan Financial) — Fri, 19 Jun 2009 22:54:00 +0000

Southern California home prices rise slightly in May

Stefano Paltera / For The Times
Real estate experts attribute the slight rise in the Southern California median home price to an increase in sales of higher-priced properties. Orange County, the region’s most affluent county, had the biggest gain.
The median price was $249,000, which is up less than 1% from $247,000 in April. It was the first month-to-month gain since July 2007.
Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.The $249,000 median price in May was up less than 1% from April's $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.

The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down.Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium."As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we'll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose," said John Walsh, president of San Diego-based MDA DataQuick.

A slowly growing number of buyers like Geoff Graham, 40, is changing the mix of homes sold. Graham and his husband, James Tee, 35, bought a new three-bedroom row house in San Diego's Hillcrest neighborhood last month for $750,000.The couple had admired the place a year ago but couldn't believe the seller wanted $995,000. "I thought, 'What a cool place, but who in the world would ever pay so much money for it ?' " Graham said.The answer was no one.In January, Graham and Tee saw that another row house in the development had sold for $760,000 and decided that price was within their comfort zone. The $10,000 state tax credit for new-home purchases also "made us feel a little more comfortable paying that price," Graham said.Homes priced at $500,000 and above accounted for 17% of Southland home sales in May, up from 15% in April, DataQuick reported.The median price is the level at which half of the homes are sold at higher prices and half at lower prices. As higher-priced homes have trickled into the sales mix, foreclosures are less dominant. In May, foreclosed homes accounted for 50% of sales, down from 54% in April and a peak of 57% in February.The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market's peak.May's price was a 51% drop from that peak, and it was down 33% from the May 2008 median price of $370,000.Lower prices continued to drive purchases: the 20,775 Southern California homes sold in May was up 1% from April and 23% above the May 2008 sales total.The housing market "is starting to reach the bottom; prices have reached levels where they make sense again," said Christopher Thornberg, a Los Angeles economist who was an early forecaster of the housing bubble."But hitting the bottom is different from coming off the bottom," he said, noting that prices will probably remain low as long as "we still have a massive wave of foreclosures to deal with."About 150,000 homes in California were in some stage of foreclosure in May, according to ForeclosureRadar, an online seller of default data.The median price climbed most in the region's more affluent counties. Orange County posted the largest monthly median price increase among the Southern California counties. Its $410,000 median price was up 8% over its April median of $380,000. Ventura County's median was up 4% in May, to $355,000 from $340,000 in April. San Diego also saw a modest 2% price increase in May, to $295,000 from $290,000 in April.Those counties rank first, second and third, respectively, in household income among the six counties, according to the U.S. Census Bureau.The median home price in May essentially matched April's figure in Los Angeles ($300,000), Riverside ($180,000) and San Bernardino ($137,000) counties.San Diego County may be a bit ahead of the local housing market curve: Its median sale price peaked at $517,500 in November 2005. That peak occurred 1 1/2 years before Los Angeles County hit its high median price in May 2007, at $550,000, according to DataQuick.Those 18 additional months of price declines may have worn down the resistance of some San Diego sellers who until recently had expected to sell properties for near-peak prices. Kris Berg, a San Diego broker who works in the Scripps Ranch community, said homes in her area listed for around $700,000 are now selling quickly.Those same homes might have sold for more than $900,000 at the height of the market, and until recently sellers continued to demand such prices, with few if any takers."A year ago, two years ago, so many sellers were still insisting their house was special. Now, the ones who want to sell are getting it; they're pricing their homes more appropriately," Berg said.

10 Homebuying Tips for Uneasy Times

noreply@blogger.com (Harnan Financial) — Mon, 20 Apr 2009 20:09:00 +0000

Mortgages are harder to obtain today, and deals require more money down, but it's still a good time for buyers. Here's how to get the home you want at the best price.
David Koeppel, MSN Money
Nervous about buying a home? You should be. Your home is probably the single biggest investment you'll make in your lifetime. With an unpredictable economy, a mortgage crisis and record foreclosures, the commitment to buy can be downright overwhelming. In recent years, lax lending standards eliminated some of the obstacles, but now lenders are once again getting picky. The good news is that for those who qualify for a mortgage -- with a steady income, strong credit and a modicum of savings -- this is actually a good time to purchase a home. Mortgage rates are low, and home prices have been declining in most parts of the United States. To help you navigate the uncertainties, especially if you're entering the market for the first time, here are 10 tips for buying a house:
1. Find out how much you can afford, and stay within your budget.
Don't overreach. Forget the McMansion on the hill if it's beyond your means. Focus on finding something that will offer affordable monthly payments and a debt load you can handle.To make sure you fully understand and remain within your boundaries, consider a preapproved mortgage. Many reputable lenders offer them. The preapproval process tells you exactly what you will have to pay. Preapproval also provides some extra peace of mind, ensuring that when the time comes, you'll have financing in place. That can be important to real-estate agents and sellers as well as to buyers. If you're planning to buy, your household budget should allow for hefty savings toward a down payment, unless you're expecting a generous gift from a family member. The days when first-time buyers could purchase a home with a down payment of less than 10% are gone. Lenders are now requiring buyers to put down a minimum of 10% and sometimes up to 20% to 25%. "First-time buyers must come to the table with some dollars," says Ilyce Glink, the author of "100 Questions Every First-Time Home Buyer Should Ask". "You need more income, a better credit score and to think about how much debt you can carry. It has become a more difficult process."
2. Shop around for the right agent.
Real-estate agents operate on different internal clocks. One may be inclined to call you every day, while another may want to call every few weeks. Ask questions about the agent's approach and try to find one well-suited to your situation. Ideally, the agent you choose will do a lot of business in your neighborhood of choice and will have been in the business for years, gathering plenty of useful information about lending options, title searches and useful ways to compare properties. Try to avoid real-estate agents who are doing on-the-job training. "Finding a Realtor is a lot like a short-term marriage," Glink says. "Shop around; look for the Realtor who is working the most. What's their level of experience? Are they a good fit with you personality-wise?"
3. Do your homework.
A diligent and dedicated agent by your side is not enough. Buyers need to research their potential new home and neighborhood as thoroughly as possible. Thankfully, a lot of that work can be done from your bedroom or office computer. The National Association of Realtors says 84% of buyers use the Internet to help them find a home. Do not be part of that other 16%. You'll find the Net is packed with resources about cities, neighborhoods, crime statistics and school districts. Local bloggers can give today's homebuyers insight into everything from pricing trends to who's feuding with a neighbor down the block. "The Internet is a terrific tool. When I last looked for a house in 1992, that kind of information was nonexistent," says Elliot Goldstein, 46, who, with his wife, Stacey, 45, and their two children, is planning to move to Hoboken, N.J. "I get virtual house tours, multiple listing services . . . everything I need to find out about Hoboken I can find out online."
4. Visit the neighborhood.
Rich as the information on the Internet is, it's no substitute for showing up. Experts suggest repeated visits to your neighborhood of choice, so you can check out homes for sale and attend open houses. Walk around. Shoot the breeze with the neighbors. Visit the community several times at different times of day. "Walk it, smell it, hear it," says Dennis Torres, director of real-estate operations at Pepperdine University. "At 3 p.m., maybe your lawn will be overrun with kids getting off school. At 10 p.m., there could be a club that's only open at night playing loud music."
5. Don't be afraid to haggle.
How low can you go? Real-estate agents say it all depends on the pressures facing the individual seller. Some of those pressures are related to particular locations -- towns go up and down in appeal -- and some have to do with the individual's situation. But broadly speaking, if ever there was a buyer's market, this it. "In a strong market, a seller would laugh off a lowball bid," Glink says. "Now you may be able to bid 20% less than you did nine or 12 months ago. Sellers will entertain lowball bids if they're truly desperate to get on with their lives." Or at least negotiate a few additional amenities. That was the case for first-time homebuyer Jenna Smith, 23, whose six months of near-constant house hunting in suburban Atlanta taught her what she could and couldn't negotiate. Smith wound up buying into a new suburban development in January. But first she asked the builder to install hardwood floors instead of carpeting. She also wanted a new refrigerator and microwave. The builder eventually agreed, and Smith had her home -- with hardwood floors and appliances -- for $197,000.
6. Buying foreclosed properties? Proceed with caution.
This gets a bit tricky. Real-estate experts are talking a lot about foreclosed properties. Many suggest that, under the right circumstances, exploitation of a foreclosure can give a buyer a nice home at a very nice price. Foreclosure filings and bank repossessions are up dramatically, according to RealtyTrac, a California company that monitors homes in stages of foreclosure. So much so that some agents and lenders have been organizing weekend bus tours (one charges passengers $97 a ride) to showcase foreclosed properties in hard-hit cities such as Stockton, Calif., Chicago and New Haven, Conn. The tours have been popular both with shoppers searching for homes and with investors interested in buying multiple properties. Though buying a foreclosed property can potentially provide big savings, it can also present a lot of problems that may not be apparent. Pepperdine's Torres recommends that buyers avoid homes with title uncertainties and consider only properties that have been officially foreclosed on and deeded back to the foreclosing bank.
7. Find the right lender and mortgage.
Many unscrupulous subprime lenders have been shut down. That doesn't mean there aren't still some shady characters around. Don't be tempted to deal with them. Find a lender with roots in the community and a record of integrity that offers reasonable rates. It pays to do some comparison shopping. Real-estate agents can be a good source. A good agent should be able to recommend reputable area lenders and help a buyer compare types of loans. "Mortgage rates are very near historic lows, and inventory is high," says Stephanie Singer, a spokeswoman for the National Association of Realtors. Thorough research of loan offerings will pay off. Smith, the recent buyer from the Atlanta area, landed a 5.875%, 30-year fixed-rate mortgage from her employer, Merrill Lynch. Merrill required her to come up with a 20% down payment on the $197,000 home, or $39,400. Her monthly mortgage payments are about $1,100.
8. A good home inspector is hard to find. But find one.
In recessionary times, the pride of homeownership tends to suffer. It's not that people don't want to maintain their homes; it's that other priorities intervene. With competing pressures coming from credit card bills, skyrocketing gas prices and rising grocery bills, that new paint job on the house may not make it to the top of the list. A good inspector can help you spot problems that may result from neglect. Bringing in a home inspector is relatively cheap (often from $200 to $300), but according to Torres, it's the least buyers should do to make sure they're purchasing a home in reasonably good shape. Torres recommends buyers accompany inspectors when they examine a home and look out for anything suspicious. Don't be afraid to ask plenty of questions, he adds. "Ask what every crack, what every stain might be," Torres says. "Look beyond the cosmetic, the paint, the carpet and the flowers. Check under the steps, check under the eaves."
9. Buy for the long run.
Homebuying should be viewed as a long-term investment. Don't expect the kind of price appreciation that occurred in the early 2000s. Buy a home you can live in happily for a good many years, if possible. A long-term commitment will pay dividends in peace of mind. "A home is about putting down roots," author Glink says. "It's not about fixing or flipping or making a mint no matter what some infomercial tells you."
10. Don't time the market. Do take your time.
When will market prices hit rock-bottom? No one knows for sure, so waiting to get in at the lowest possible price isn't recommended. Still, experts predict it will remain a buyer's market for the foreseeable future, so don't rush. Goldstein and his wife will be moving into their new
three-story row house in Hoboken for about $1.2 million at the end of August, allowing his two children to spend a final summer at the family home in Closter, N.J. If negotiations hadn't gone his way, Goldstein was prepared to walk away, he said. That's the way to do it. "Don't let other people talk you into something you don't want," says buyer Smith. "It's your house; they don't have to live in it."
Produced by Anh Ly

Existing Home Sales Post Surprising 5.1% Gain

noreply@blogger.com (Harnan Financial) — Tue, 31 Mar 2009 17:23:00 +0000

Sales activity remains slow, but plunging prices draw in first-time buyers
updated 11:14 a.m. PT, Mon., March. 23, 2009

WASHINGTON - Sales of previously occupied homes jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties.
Economists said sales, while still extremely slow, may finally be coming back to life after declining sharply following the stock market plunge last autumn.
Prices, however, are expected to keep falling well into the year. Tens of thousands of homes reman tied up in the foreclosure process and are not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.

“The four-letter word in the housing market is 'jobs,'’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “If you’re worried about having a job tomorrow, you’re not likely to buy a home now.”

It was the largest monthly sales jump since July 2003, with first-time buyers accounting for about half of all transactions, according the data released Monday. Sales had been expected to dip to an annual pace of 4.45 million units, according to Thomson Reuters. The results, which came after a steep decline in January, mean that sales activity has returned to December’s levels, but still remains lower than most of last year.

The sales figures don’t yet reflect the new $8,000 tax credit designed to lure even more first-time buyers into the market. That should juice up early summer sales, but how much will depend on the overall condition of the U.S. economy.
Full article available:http://www.msnbc.msn.com/id/29836196/from/ET/

TAX CREDITS: As listed above, in its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for
first-time home buyers.

CA Home Buyer 10000 Tax Credit, entitled on new homes brought between March 1, 2009 and March 1, 2010 (must be new construction to meet the minimum requirements).

City of Los Angeles Housing Department (LAHD) will offer purchase assistance financing to
eligible low- and moderate-income homebuyers seeking to purchase a foreclosed home in an NSP Priority Area in the City of Los Angeles.

EXISTING HOME SALES ROSE 5% IN FEB

noreply@blogger.com (Harnan Financial) — Tue, 24 Mar 2009 17:55:00 +0000

Biggest jump in more than five years; median price down 5% to $165,400

WASHINGTON - Sales of previously occupied homes jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties.

Economists said sales, while still extremely slow, may finally be coming back to life after declining sharply following the stock market plunge last autumn.

Prices, however, are expected to keep falling well into the year. Tens of thousands of homes reman tied up in the foreclosure process and are not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.

“The four-letter word in the housing market is 'jobs,'’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “If you’re worried about having a job tomorrow, you’re not likely to buy a home now.”

The National Association of Realtors said sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January.

It was the largest monthly sales jump since July 2003, with first-time buyers accounting for about half of all transactions, according the the data released Monday. Sales had been expected to dip to an annual pace of 4.45 million units, according to Thomson Reuters. The results, which came after a steep decline in January, mean that sales activity has returned to December’s levels, but still remains lower than most of last year.

The median sales price plunged to $165,400, down 15.5 percent from $195,800 a year earlier. That was the second-largest drop on record and prices are now off 28 percent from their peak in July 2006.

However, in a positive sign, asking prices are starting to rise in places like San Diego and Orange County, Calif., where declines have been severe, said Lawrence Yun, chief economist for the Realtors. That could be an early indication that prices are stabilizing in the most distressed parts of the country.

Meanwhile, in contrast with the housing boom, when buyers took out ever-riskier loans and maxed out their home equity lines, “homebuyers are not overstretching” Yun said. “They want to stay within their budget.”

The number of unsold homes on the market last month rose 5.2 percent to 3.8 million, a typical increase for the winter months. At February’s sales pace, it would take 9.7 months to rid the market of all of those properties.

“Inventories are still high relative to sales rates, and would probably be even more so if all those wishing to sell their home actually had the house on the market instead of pulling it off in the face of rapidly eroding prices,” wrote Joshua Shapiro, chief U.S. economist at MFR Inc.

Sellers don’t want to compete with foreclosures that have swamped the market, especially in California, Florida, Nevada and Arizona.

About 45 percent of sales nationwide are foreclosures or other distressed property sales, which typically sell at a 20 percent discount, according to the Realtors group.

http://www.msnbc.msn.com/id/29836196/from/ET/

New Homeowner Affordability and Stability Plan

noreply@blogger.com (Harnan Financial) — Tue, 24 Feb 2009 18:36:00 +0000

Questions and Answers to the Obama $75 Billion Plan to Aid 9 Million borrowers suffering from falling home prices & unaffordable payments

Borrowers Who Are Current on Their Mortgage:

Q: I owe more than my property is worth, do I still qualify to
refinance under the Homeowner Affordability and Stability Plan?
A: Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

Q: Will refinancing reduce the amount that I owe on my loan?
A: No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

Q: When can I apply?
A: Mortgage lenders will begin accepting applications after the details are announced on March 4, 2009.

Q: What are the interest rate and other terms of this refinance offer?
A: The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the
refinance and any associated points and fees quoted by the lender. Interest rates may vary across
lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.

Borrowers Who Are at Risk of Foreclosure:

Q: How do I know if I qualify for a payment reduction under the Homeowner Affordability and
Stability Plan?
A: In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final
eligibility will be determined by your mortgage lender based on your financial situation and detailed
guidelines that will be available on March 4, 2009.

Q: Do I need to be behind on my mortgage payments to be eligible for a modification?
A: No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

Q: I heard the government was providing a financial incentive to borrowers. Is that true?
A: Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

Q: My loan is scheduled for foreclosure soon. What should I do?
A: Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility. We support this effort.

Q: How much will a modification cost me?
A: There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a
counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

Homeowner Help?......Finally

noreply@blogger.com (Harnan Financial) — Tue, 17 Feb 2009 23:56:00 +0000

I haven't posted a commentary in quite some time. Finally I feel I've got something to say!! It's been a difficult 12 months, but help appears to be on the horizon. I will be truthful, I was not one for bailouts....any of them!!! In my heart, I still feel that we as homeowners have got to take responsibility.(i don't mean those of us who have always acted responsibly, pay our bills on time, live within our means etc.) There's a reason why everyone isn't able to own a home. It takes sacrifice, perserverance, determination and timing to make real estate ownership a reality. Now don't get me wrong, there are definitely individuals who were taken advantage of. But folks, if it sounds to good to be true, guess what......IT IS!!!!

As a mortgage broker, our industry is taking the brunt of this catastrophe. And although there were a few who acted criminally, the banks, wall street and now out of business mortgage bankers are really the true culprits. I say all this to say that I have resided to the fact that it appears there is no other way out for us except to bail out those who are upside down and those whose mortgage payments have skyrocketed. I don't believe in rewarding irresponsible behavior but I've finally come to except it's no other way. Let's just get it on and over with and begin to heal our country.

This is a painful lesson for all of us. We are back to the days of working to save for a down payment, having and maintaining good credit and demonstrating a stable work history. (this one could be the toughest)..... There are good reasons why everyone can't/doesn't own real estate.

Home Buyer Tax Credit Help or Hindrance

noreply@blogger.com (Harnan Financial) — Thu, 12 Feb 2009 17:49:00 +0000

The Senate measure offers the credit to anyone buying a primary residence. But buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four -- to get the full benefit.
By Ben Meyerson and Sarah Gantz 7:03 AM PST, February 9, 2009
Reporting from Washington --

The Senate's proposed $15,000 tax credit for home buyers would boost the ailing housing market but do little to help low-income people who need it most, experts say.

The measure, which is part of the $827-billion economic stimulus plan that the Senate is due to vote on Tuesday, would offer the credit to anyone who buys a primary residence. But to take full advantage of the credit, buyers would have to earn enough to use it and spend at least $150,000 on a home.

As many as 1 million home sales could result from the tax credit, according to Mary Trupo of the National Assn. of Realtors. "By increasing demand and decreasing inventory, it'll help to stabilize home values and result in fewer foreclosures," she said.

But low-income people will not benefit, said Linda Couch, deputy director of the National Low Income Housing Coalition. "The bill is focusing a lot more of its resources on higher-income households and home ownership than it is on the lowest-income people and people really teetering on the edge of homelessness."

Since the money comes as a deductible tax credit spread over two years, home buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four to get the full benefit, according to the housing coalition.

But if the home costs less than $150,000, the deduction is only worth 10% of the house's value, meaning that those buying the cheapest homes wouldn't receive the full benefit.

Alma Jill Dizon, a Realtor from Riverside, agreed that there wasn't much in the measure for low-income Americans. "From what I can tell, it's really going to benefit people who already have enough salary" to buy a house, said Dizon, who said she sells homes from $150,000 to more than $1 million.

Dizon said her market is dominated by older, three-bedroom, one-bath homes in need of repair. Those houses sell for about $150,000 to first-time buyers who don't have the savings to make a deposit on something larger.

"You have to owe enough in taxes in the first place" to take advantage of the rebate, Dizon said. "That's why it benefits people who earn more money and earn more on taxes."

But the tax credit could greatly help the housing market by making the more expensive homes in the area more appealing, she said. What once were multimillion-dollar homes in Riverside now are priced between $500,000 and $1 million, she said. With a tax credit, those homes -- many of which are on the brink of foreclosure -- are beginning to look more attractive to buyers.

"This isn't actually going to get a lot of people buying houses at the very bottom," Dizon said. "Who is going to start buying more houses is people in the middle and upper range. That can be good as far as staving off more trouble in those ranges, in those better neighborhoods."

But halfway across the country, in Cleveland, another Realtor, Ralph A. Vaneck could use a hand selling nicer homes. There, the median income is half of Riverside's -- $27,007 compared with $54,099.

"The non-foreclosure market is where the major help is needed -- that's the dead part of the market," said Vaneck, president of Westway Realty. Those homes are priced between $95,000 and $120,000.

People are more interested in purchasing foreclosed homes because they can get them for as little as $35,000, he said; 85% of his business comes from selling foreclosed homes.

The Senate measure expands an incentive approved last year -- a $7,500 credit for first-time home buyers that had to be repaid later. The House's version of the economic stimulus package renewed last year's provision and eliminated the payback requirement.

But the Senate bill goes further, making the credit available to anyone buying their primary residence, and doubling the eligible amount to $15,000.

Once the Senate passes its version of the stimulus package, a conference committee will resolve differences between it and the House bill. Then both houses will be asked to vote on the compromise.

Trupo of the National Assn. of Realtors sees hope in whatever the housing credit turns out to be, although Realtors favor the higher amount.

"If it's $15,000, $7,500 or somewhere in the middle, there is going to be a significant impact to the market," she said.

Helping the housing market get back on its feet is in the interest of everyone, said Jerry Howard, president and chief executive of the National Assn. of Home Builders.

"Until you stabilize house values, you won't be able to stabilize -- let alone stimulate -- the economy," he said. "This is the kind of stimulus that ought to get buyers off the sidelines and into the housing market."
bmeyerson@tribune.com
sgantz@tribune.com

Myths on Buying and Selling Your Home

noreply@blogger.com (Harnan Financial) — Mon, 26 Jan 2009 18:54:00 +0000

The truth about the housing market
In today’s uncertain market, fear runs rampant on both the buying and selling sides of the fence. Many myths need debunking. Here are five untruths held by buyers, and five held by sellers.

Buyer myth No. 1: The longer the house is on the market, the more you can negotiate.
When buyers ask, “How long has this property been on the market?”, they think “six months” means they can negotiate the price down. It more often means the seller is stubbornly holding on to their price.
Buyer myth No. 2: The sellers today are desperate.
Most aren’t. Always ask why the sellers are selling. It’s the key to finding how motivated and anxious they are. “I’m being transferred to Dallas” is a very different answer than “We’d like to find something bigger.” The first homeowner is hot to trot.
Buyer myth No. 3: You can’t buy a home today with less than 20 percent down.
FHA loans require only 3.5 percent down, and you can even ask the seller to pay the closing costs.
Buyer myth No. 4: You need good credit to get a good loan.
Once again, the FHA to the rescue! They’re happy to lend money to buyers with bad credit.
Buyer myth No. 5: You shouldn't buy before prices have bottomed.
You can’t sharpshoot the real estate market. Once you identify the “bottom,” prices have already moved up.

Seller myth No. 1: Now’s the absolute worst time to sell.
Not necessarily. It depends upon where you live. Many of the worst hit markets, like Las Vegas, Phoenix or San Diego, are already beginning to turn around. And if you’re a homeowner who wants to trade up, the loss you’ll take on your current home will be more than offset by the bargain you’ll get on the next one.
Seller myth No. 2: Never respond to a low-ball bid.
All buyers today feel obligated to put in low-ball offers to see if the seller bites. If you respond with a reasonable counter offer, most buyers can be convinced to come up in price and make the deal.
Seller myth No. 3: The first offer is never the best offer.
Most sellers believe that it’s smart to hold out for something better. But four times out of five, the first offer is the best you’ll ever see.
Seller myth No. 4: 'I can always reduce my price later.'
Sellers often price their home high for a few weeks just to test the market. But buyers shop by price bracket and if your house is in the wrong one, you’ll just help sell everyone else’s home while yours sits there overpriced. And reducing your price later in small increments puts you in the position of chasing the tide as it goes out.
Seller myth No. 5: Before you refinance, shop around.
You can if you want, but you’ll usually get the best deal from your current lender. And you’ll be able to negotiate your closing costs.

Source: Barbara Corcoran
MSNBC.com The Today's Show

What's Ahead For Mortgages in 2009??

noreply@blogger.com (Harnan Financial) — Wed, 21 Jan 2009 21:38:00 +0000

The mess won't be cleaned up soon, so homeowners -- and buyers -- must address key questions about financing, the housing market and 'underwater' loans.

If 2008 was the year of foreclosures and when "underwater" entered every homeowner's lexicon, 2009 will be the year of refinances and mortgage modifications.
In hindsight, the mortgage mess seemed inevitable: Absurdly loose credit from 2002 to 2007 led to a bubble in house prices, scores of subprime lenders went out of business in 2007 as the risks caught up with them, and the misery spread to homeowners in 2008.
As home prices fell, millions of homeowners discovered that they owed more than their houses were worth. They were unable to refinance and unable to sell. Delinquencies (defined as house payments at least 30 days late) soared.
As the recession matures in 2009, more people are going to fall behind on their mortgage payments. At the same time, the federal government will try to hold down mortgage rates. And house prices will continue to fall. These three factors limit the smart moves you can make in 2009 with your mortgage and equity debt.

Buying a house
House prices have been falling in most places. In declining markets, people have trouble deciding whether to buy a house now or wait for prices to fall further. Instead of getting stuck on the buy-or-wait question, smart consumers consider other questions first:
1. Have we put our financial house in order? Not long ago, the best mortgage deals were offered to borrowers with credit scores of 720 or higher. Nowadays, many lenders' thresholds have risen to 740. The necessity of a higher credit score is just one consequence of the mortgage debacle, and lenders have tightened their requirements in other ways, too.
During the boom years, many applicants merely stated their incomes without having to provide documentation. Those days are gone. Low-documentation and no-documentation loans are rare. Expect to provide paycheck stubs or tax returns, or both, to demonstrate that you earn what you say you earn.
The lender will want to see that your expenses are in line with your income. You might have to provide bank statements to show where the money goes. If a big chunk of your monthly income goes toward debts for credit cards, cars and college, the lender might constrain the amount you may borrow.
2. Have we saved enough for a down payment? During the credit and housing boom, people routinely bought houses with no money down. Piggyback loans were the norm as homeowners avoided mortgage insurance. Now, substantial down payments have made a comeback, and so has mortgage insurance.
A few low-down-payment programs are still available, all courtesy of the federal government. The Department of Veterans Affairs guarantees mortgages with no down payment, and so does the Department of Agriculture's Rural Housing Service. There are restrictions on who is eligible for those loans, where the loans are available and for how much.
More people are eligible for Federal Housing Administration-insured mortgages, which require down payments as low as 3.5%.
Outside those federal loan programs, most lenders require significant down payments. The requirements vary by lender, the type of dwelling and where it is. A few creditworthy people might be able to buy houses with 5% down, but a 10% minimum is more common.
Mortgage insurance companies won't insure loans on Florida condominiums, so lenders require down payments of at least 20%. For jumbo mortgages in California, many lenders require 30% down payments.
On top of that, the lender will want to know how you got the down payment money. Is it from personal savings? Was all or part of the money a gift from family? If some of the money was given to you, the lender will want to make sure you have enough savings and income to handle temporary financial setbacks.
3. Is this the right time in our lives? Homebuyers, especially first-timers, should aim to own for the medium to long term. House prices have room to fall further in many -- if not most -- markets, and it could take years for prices to rebound. In short, it's a bad idea to buy a house with the intention of selling it in two or three years. Doing so could be a money-losing proposition, especially after factoring in the costs of real-estate commissions and taxes.

Refinancing the mortgage
Elements within the housing industry flew a trial balloon in December to gauge public support for using the Treasury to cut mortgage rates to 4.5%. There was one catch: The low rates supposedly would be for purchases, not refinances.
Nevertheless, mortgage rates have dropped to levels not seen since the refinancing boom of 2003. The low rates sparked a refi boomlet in late 2008, but lots of homeowners were frozen out because their homes had lost equity.
About two-thirds of homes have mortgages. Of those, an estimated one-sixth are underwater -- in other words, the owner owes more on the mortgage than the house is worth. These borrowers can't refinance unless they have enough money saved to make up the difference -- and then some, because they need a bit of equity, too.
According to First American CoreLogic, almost one-quarter of mortgages nationwide were in the category of "near negative equity" in October. These loans were not underwater (yet), but the owners had 5% equity or less. Such borrowers might have trouble refinancing because of the paucity of their equity.
The squeeze caused by falling home values will have a relatively big effect on homeowners with good credit who got adjustable-rate mortgages sometime in 2004, 2005 or 2006. These are the people who will have an incentive to refinance out of their ARMs and into fixed-rate mortgages (a process that Quicken Loans chief economist Bob Walters calls "dis-ARMing").
Most prime adjustables during the 2004-06 period were 3/1 and 5/1 ARMs. These loans had introductory rates that lasted for three or five years; after that the rates will be reset annually. Dates of that first rate reset peaked last summer, but about half a million prime borrowers will see their first reset in 2009.

Modifying the mortgage
One of the big questions of 2009 -- politically, economically and financially -- will be: How do we mass-modify mortgages to avoid foreclosures? Coming up with an answer won't be easy.
A mortgage modification is an alteration of the details of the existing home loan. Usually, but not always, a modification is done after the borrower has fallen behind on the payments by 90 days or more. In a modification, the borrower keeps the loan -- in other words, it's not a refinance. Modifications are usually done when the house is worth less than the mortgage balance.
There are several ways to modify a mortgage. Sometimes the term is extended -- for example, a 30-year mortgage is turned into a 40-year loan. In other cases, the rate is reduced. Or interest is charged on only some of the loan balance. Occasionally, in what's called a principal reduction, the lender forgives some of the debt so that the borrower no longer owes more than the house is worth.
Modifications traditionally have been done case by case. But skyrocketing demand for mortgage modifications will require companies to apply rules that apply to large swaths of borrowers. The rules will determine who gets a modification and who doesn't. Controversy will result when deserving people don't qualify for modifications, while some undeserving people do.
When the government took over IndyMac, one of the country's largest mortgage servicers, the Federal Deposit Insurance Corp. set up rules designed to encourage mortgage modifications. Since then, the government has required lenders, such as Citigroup, to adopt the FDIC's mortgage modification rules as a condition for receiving federal aid.
It's too early to know how successful the FDIC's mortgage modification plan will be, but overall, modifications haven't worked all that well. According to the Office of the Comptroller of the Currency, more than half of loans modified in the first three months of 2008 had fallen behind on their payments within six months.
FDIC Chairwoman Sheila Bair questioned the comptroller data, saying it failed to distinguish "sustainable modifications versus cosmetic modifications."

Paying home equity debt
Because of declining home values, lenders became reluctant in 2008 to underwrite new home equity loans and home equity lines of credit. That trend is likely to continue through 2009.
In areas where home prices are falling fastest, lenders have been reducing the limits on home equity lines of credit or canceling them outright. The best advice on home equity debt is the most basic: Keep paying the monthly bills if you can.

By: Bankrate.com

Power to Modify Mortgages Sits Well With Judges

noreply@blogger.com (Harnan Financial) — Mon, 12 Jan 2009 20:52:00 +0000

Federal bankruptcy judges say they are eager to have the power to restructure mortgages for struggling debtors because it could save hundreds of thousands of homeowners from foreclosure.
Top Senate Democrats are advancing legislation to let bankruptcy-court judges approve new repayment terms on first mortgages for primary residences for homeowners who have sought protection in a Chapter 13 filing. The proposal allowing so-called mortgage cramdowns, in which the principal amount of the loan is reduced, is one of several efforts Democrats are pushing to give homeowners relief as they wrestle with increasing debt levels and plummeting home values.
Reuters
Proposed changes to bankruptcy laws could save thousands of homeowners from foreclosure.
Judges overseeing bankruptcy cases already can approve modifications for credit-card debt and most other kinds of loans, including second-home mortgages. But they haven't been able to modify primary-home mortgages since 1979, when the U.S. bankruptcy code went into effect, said Samuel L. Bufford, a U.S. bankruptcy judge in Los Angeles. Before then, many states allowed judges to do some form of modification, he said.
Allowing a judge to modify loans gets around the problem that many mortgages have been turned into securities and sold to multiple investors. "The bankruptcy system depends on people making deals, but the deal-making piece of it has disappeared when it comes to mortgages because of the way mortgages were sold and packaged," Judge Bufford said. "There's nobody on the lender side to do the deal unless you [get permission] from investors, and that's impossible."
The measure is "a good idea," said Laurel Isicoff, a federal bankruptcy judge in Miami. Financial institutions have gotten help from the government, but the only way to fix the economy is through "a holistic approach" that also "solves the problem of people losing their homes."
Until last week, when Citigroup Inc., one of the nation's largest mortgage lenders, dropped its opposition, the banking industry had long fought modification of first mortgages in bankruptcy, fearing it would encourage more homeowners to file for Chapter 13 and that it would further destabilize the housing market. Representatives of the Mortgage Bankers Association said last week that they were still opposed to cramdowns. But Citigroup's support increases the chances of passing legislation that would allow judges to lower the interest rate, reduce the principal or alter the length of primary mortgages.

Opponents of the proposed law change, including the Securities Industry and Financial Markets Association, say it would have "serious and negative consequences," including increasing mortgage rates for consumers overall because investors who typically buy the loans might deem new mortgage contracts too risky.
A Chapter 13 filing is a plan in which debtors can retain assets and pay back their debt over three to five years. About two-thirds of Chapter 13 filers have a mortgage, but half of them aren't able to keep paying the mortgage as part of their reorganization, judges and lawyers say.
A. Jay Cristol, a federal bankruptcy judge in Miami, said that changing the bankruptcy law would be beneficial because "after foreclosure, families get broken up and lenders hold on to nonperforming assets that they sell at a loss."
Samuel Schwartz, a Las Vegas bankruptcy lawyer, has a client who is facing foreclosure on her primary residence even though she has been able to modify the loans on her two investment houses. Under the current bankruptcy rules, she was able to "strip away" the second mortgage on one of the investment homes and she "crammed down," or reduced, the principal balances on the first mortgages for both rentals -- reducing her combined loan balances to a total of $355,000 from $590,000.
She was also able to strip away the second mortgage on her primary residence but couldn't modify the first mortgage. That mortgage, Mr. Schwartz said, is more than $100,000 above the current value of the property. Thus, she still may lose her own home. Under the new law, her first mortgage on her home also could be modified.

By: Amir Efrati and Jennifer S. Forsyth of The Wall Street Journal

Home Ownership Goals Created a House of Cards

noreply@blogger.com (Harnan Financial) — Tue, 06 Jan 2009 00:46:00 +0000

Lender guidelines were 'obliterated' in buying frenzy
Government long has promoted home ownership as a means of strengthening communities and building the wealth of its citizens, but the recent housing market collapse has some analysts wondering whether consumers have gotten too much of a good thing.
While federal policies helped tens of thousands of U.S. consumers achieve home ownership during the housing boom, they also opened the door to the widespread use of risky loans, a national credit crunch and a wave of foreclosures.
“Public policy has been used to promote home ownership since the wake of the Great Depression,” said Mark Zandi, chief economist at Moody's Economy.com. “These efforts were overdone this decade during the housing boom and bubble.”
In 2005, the year the San Diego County real estate boom peaked, the home ownership rate in the county was 58.2 percent, according to the U.S. Census Bureau's American Community Survey. By 2007, the rate in the county had fallen to 55.9 percent. That marked a loss of nearly 22,000 owner-occupied residences.
Nationally, the home ownership rate steadily increased from 44 percent to 63 percent between 1940 and 1970, the bureau found. It remained in the mid-60s for more than three decades before rising to 67.3 percent in 2006. In 2007, it declined slightly to 67.2. Zandi expects the rate to continue to slide until it reaches to pre-boom levels.
Veteran lender Bill Dallas, a former board member of the California Mortgage Bankers Association, said government intervention combined with loose loan underwriting standards put many buyers into home loans they couldn't afford. In the buying frenzy that characterized the first half of this decade, guidelines for making sure that borrowers had enough cash in reserve to weather economic storms were “obliterated.”
Adriana Erni, a real estate broker, recently became a renter after losing her University City home to foreclosure. Erni bought her three-bedroom house in 2005, near the height of the surge in prices.
When she and a friend bought the home with an adjustable-rate loan and no money down, she figured they could refinance it before their mortgage payments increased. Instead, she found herself unable to get a new loan when home values dropped. At the same time, her income declined as the real estate market slumped.
Erni sought help from Community HousingWorks, a nonprofit that assists distressed borrowers in negotiating loan modifications. Even with the agency's help, she was unable to stop the foreclosure process. She vacated the home in late November.
Although she feels “crushed and wounded,” Erni hopes to buy another home. For now, she is content to rent.
“You need some time to heal,” she said.
Healing the economy was what U.S. policymakers had in mind when they were looking for ways to boost home ownership in 2001. The nation was in a slump amid the bursting of the dot-com bubble and the Sept. 11 terrorist attacks. To get back on track, then-Federal Reserve Chairman Alan Greenspan decided to lower interest rates.
Home ownership became a key driver of the economy. Federal regulators did not intervene when lenders began using subprime, adjustable-rate mortgages to temporarily reduce mortgage payments, allowing more people to qualify for loans.
Thousands of borrowers became homeowners without regard to their creditworthiness or their ability to cope when adjustable mortgages reset at higher rates. Because such loans carry higher fees, lenders made more money.
Attempts to pass federal legislation against predatory lending to protect borrowers from being placed in unnecessarily costly loans were opposed by the Bush administration and members of Congress. They feared that restrictions on lending would slow the rise of home ownership.
Instead, the housing market heated up as lenders and consumers went on an easy-credit bender. Highly leveraged loan products surfaced that had not been widely used since the Great Depression. At the height of the home-buying frenzy, a running joke in the lending industry was that anyone who could fog a mirror could get a loan.
In mid-2002, President Bush urged lenders to add 5.5 million minority homeowners by the end of the decade. In the years that followed, San Diego County neighborhoods with large minority populations would be hard-hit by foreclosures resulting from risky subprime loans.
Government-sponsored mortgage giants Fannie Mae and Freddie Mac ensured that funds were consistently available to lending institutions. Under pressure from the Bush administration, Fannie Mae and Freddie Mac increased their funding of mortgage loans to lower-income borrowers.
If government and lenders pushed hard for increased home ownership, it was with good intentions, said Dustin Hobbs, spokesman for the California Mortgage Bankers Association.
“You definitely had, for generations, presidents from both parties and congressmen from both sides really pushing home ownership, with Fannie and Freddie and every way they could, and with good reason,” Hobbs said. “It is the best way that individuals acquire wealth. There was a consensus from consumer groups to mortgage bankers to government that more needed to be done to create home ownership.”
Not everyone bought into the idea that owning is preferable to renting. Some contrarian economists held that people could build more wealth by renting and investing the money that would have gone into down payments and home maintenance.
They pointed out that home prices fluctuate. People who buy at the peak of a fevered market run the risk of losing wealth during a speculative price bubble.
“What is wrong with renting?” asked economist Christopher Thornberg of Beacon Economics. “I am so tired of hearing that owning a home is the height of being an American.”
While government played a strong role in triggering the current credit crisis, others share the blame, said Alex J. Pollock, a resident fellow at the American Enterprise Institute, a research group in Washington, D.C. Real estate speculators and consumers were eager to take advantage of low interest rates.
One of the first national voices to warn that the rising home ownership rate was based on unsustainable debt was Nicolas P. Retsinas, the head of Harvard University's Joint Center for Housing Studies. Retsinas recalled that the marketing of risky loans to consumers was aggressive.
“At one point, there were 250,000 people working for mortgage brokerages in the U.S.,” he said. “Their compensation was based on transactions. And they were all selling. Were risks understated? Yes.”
Lenders were feeding Wall Street investors' growing appetite for securities backed by subprime loans.
Rob Katz, president of the Del Mar DataTrac software firm in San Diego, recalls meeting with his company president in 1999 when he was a technology officer at a mortgage firm in Northern California. Katz was told that the company was going to begin making loans for 107 percent of a home's value without verifying income. When Katz protested, he was assured that the loans would quickly be sold to mortgage investors, who would take the hit if they failed.
Many lenders have been forced out of business since the end of the housing boom. Most analysts say that chastened financial institutions won't loosen their purse strings and allow another big surge in home ownership.
While he applauds the newfound restraint, Retsinas worries that tight credit will prevent low-and moderate-income households from achieving home ownership, particularly in high-cost markets such as San Diego County.
Although there was much abuse of adjustable subprime loans, they were a home ownership lifeline for many buyers.
“The question going forward is, what is going to replace subprime lending?” Retsinas said. “There are always going to be people who do not make a lot of money. Should they be shut out? I think we can find a way to develop mortgage products that are reasonable, that are transparent, where everyone knows the risks involved. That will be a challenge, because we just shut the spigot tight.”

By Emmet Pierce (Contact) Union-Tribune Staff Writer

Mortgage Applications Surge on Falling Rates

noreply@blogger.com (Harnan Financial) — Mon, 29 Dec 2008 18:11:00 +0000

Bankers are seeing a wave of mortgage-loan applications triggered by falling interest rates, and are reassigning scores of workers to handle the crush of would-be borrowers.
A large percentage of the applications are for refinancings rather than purchases, and the phenomenon is so new it isn't yet clear how many of the borrowers will actually receive loans. But some bankers say it could be the beginnings of a possible turning point in a battered lending sector and a still-weak housing market.
Borrowers "are starting to say, 'Wow, I can get this piece of property at this price, which is a fair amount lower than I could have gotten a year ago,"' said Todd Chamberlain, head of the residential mortgage division at Birmingham, Ala.-based Regions Financial Corp.
The nation's largest mortgage provider, Bank of America Corp., is among the most optimistic. Chief Executive Kenneth Lewis has predicted that housing prices will stabilize by mid-2009. The Charlotte, N.C., bank recently told 300 loan processors in Richmond, Va., and Tampa, Fla., to switch from home-equity loans to mortgages starting Monday. Mortgage applications nearly doubled through the first half of December as compared to the same period in November, said Bank of America spokesman Dan Frahm.
Because of its acquisition this year of California home lender Countrywide Financial Corp., Bank of America was No. 1 in mortgage originations during the third quarter, with $51.5 billion. It also provided $7 billion in home-equity loans during the same period, but those lines of credit aren't as popular now that many U.S. borrowers owe lenders more than their home is worth.
The uptick in potential mortgages may help mitigate government pressure on banks to increase lending after receiving billions in U.S. aid. But it's too early to tie the wave to the larger economy or a potential housing recovery, as the requests are largely refinancings.
How many of the new applications wind up as actual mortgages remains to be seen, and some borrowers may not qualify. Loans may also take longer to process now that lenders are more careful about documentation and appropriate credit standards. Also, some borrowers may pull their applications, thinking rates could still go lower.
"We don't know now what the approval rate will be," said Tom Kelly, a spokesman for J.P. Morgan Chase & Co. The New York lender isn't adding any new employees to deal with the increase in applications, which had doubled prior to the Fed rate cut last week. After the Fed cut, volume went up another 20% to 25%, Mr. Kelly said.
Still, the application frenzy has been one of the first bright spots for banking in months.
Borrowers flocked to take advantage of falling rates following the Federal Reserve's commitment to stabilize the market by purchasing mortgage bonds and possibly Treasury bonds. The moves drove mortgage rates down by roughly three quarters of a percentage point. After this past Tuesday's move by the Fed to cut its benchmark rate to near zero, mortgage rates briefly fell to their lowest level since the 1960s, according to HSH Associates. And rates ended the week with an average 5.17% for a 30-year loan, the lowest average since Freddie Mac began its weekly rate survey in 1971. A year ago the 30-year-loan averaged 6.14%.
Thus far, though, borrowers have been more interested in refinancing existing home mortgages than making new purchases, which are typically less sensitive to interest-rate movements.
Whether Bank of America, which intends to cut 30,000 to 35,000 companywide positions over the next three years, hires new workers to handle the rising mortgage-application volumes "has not been determined," Mr. Frahm added.
In the Southeast, Regions is also shifting employees who process loans from home equity to mortgages. At a Nashville, Tenn.-based processing center, Regions recently added seven workers to a 50-person operation, five of them taken from other areas of the company, one a new hire and one a contract employee. Applications are up almost triple from November, said Regions's Mr. Chamberlain.
In the Midwest, Minneapolis-based U.S. Bancorp also will likely add to its mortgage work force via temporary hires, said Dan Arrigoni, head of the bank's mortgage division.
"We are trying to do all we can to handle the volume," he said, noting that applications for home loans jumped from 11,000 during a 13-day stretch in November to 30,000 during the same period this month.
At Atlanta-based SunTrust Banks Inc., purchase applications rose only "slightly" in December, while refinancing applications more than quadrupled, said spokesman Hugh Suhr.
Home-purchase requests were just 24% of the total application volume so far this month at Bank of America and 25% at Regions. But such requests are still well above their usual levels for this time of year, bankers said.December is "horrible normally," said Mr. Arrigoni. "People are out Christmas shopping. They have everything on their mind but home buying." For people waiting

By Dan Fitzpatrick of The Wall Street Journal/Real Estate

Streamlined Modification Program (SMP) Now Available to Borrowers

noreply@blogger.com (Harnan Financial) — Thu, 18 Dec 2008 19:37:00 +0000

Program Part of Ongoing Effort to Prevent Foreclosures

Fannie Mae today said that the Streamlined Modification Program (SMP) announced by the Federal Housing Finance Agency (FHFA) in November is now available to Fannie Mae servicers and borrowers as an option to help prevent foreclosures. Fannie Mae on December 12, 2008, provided information and guidelines to its servicers regarding the implementation of the SMP.
The SMP is designed to be a streamlined process for modifying the loans of a large number of borrowers who are delinquent in their mortgage payment and may be able to avoid a foreclosure through the program. As FHFA has indicated, SMP was intended to help set standards in the mortgage servicing industry for conducting loan modification programs on a large scale as a foreclosure prevention measure.
Fannie Mae has been working with FHFA and 27 lenders and servicers in the HOPE NOW alliance to implement the SMP. Under the program, borrowers who meet certain eligibility criteria and demonstrate financial hardship may be eligible for a loan modification that reduces their monthly principal and interest payment. The streamlined process allows a borrower to sign a single document at the outset of the workout process that both establishes a new monthly payment during a three-month trial period, and sets forth the modification terms that will take effect if the borrower makes the new payments during the trial period. The program is available to borrowers who have missed at least three monthly payments on their existing mortgages.
"By bringing the collective efforts of FHFA, Treasury, HOPE NOW, Fannie Mae, Freddie Mac and other mortgage industry participants together through the SMP to confront the foreclosure challenge, we'll be able to help more families across America stay in their homes," said Herb Allison, Fannie Mae president and CEO. "Along with other recently announced initiatives by Fannie Mae to reach and help financially troubled borrowers earlier, including our Early Workout program, the SMP is a critical component of our company's foreclosure prevention efforts. These efforts are helping more than 10,000 delinquent borrowers every month get back on track."
Modification Options
Through the SMP, servicers may change the terms of a loan to reduce a borrower's first lien monthly mortgage payment, including taxes, insurance and homeowners association payments, to an amount equal to 38 percent of gross monthly income. The changes in terms may include one or more of the following:
-- Adding the accrued interest, escrow advances and costs to the principal balance of the loan, if allowed by state law;
-- Extending the length of the mortgage loan as appropriate;
-- Reducing the mortgage loan interest rate in increments of 0.125 percent to an interest rate that is not less than 3 percent. If the new rate is set below the market interest rate, after five years it will step up in annual increments to either the original loan interest rate or the market interest rate at the time of the modification, whichever is lower;
-- Forbearing on a portion of the principal, which will require the borrower to make a balloon payment when the loan matures, is paid off, or is refinanced.

Highlights of the SMP's eligibility requirements communicated to servicers include:
-- Conforming conventional and jumbo conforming mortgage loans originated on or before January 1, 2008;
-- Borrowers who are at least three or more payments past due and are not currently in bankruptcy; -- Only one-unit, owner-occupied, primary residences; and -- Current mark-to-market loan-to-value ratio of 90 percent or more.

Servicers will be sending modification solicitation letters beginning this month to thousands of borrowers believed to be eligible for the program. It is critical that eligible borrowers respond to these letters and reach out to their servicers to determine if they can receive SMP assistance. Also, borrowers who don't receive a letter are encouraged to contact their servicer to see if they may be eligible for SMP help. Fannie Mae will be working with servicers to monitor and improve implementation of the program as necessary.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. In 2008, we mark our 70th year of service to America's housing market. Our job is to help those who house America.

By: PRESS REALEASE (Source: Fannie Mae)

"Pay Option" Loans Could Swell Defaults

noreply@blogger.com (Harnan Financial) — Thu, 11 Dec 2008 21:43:00 +0000

New wave defaults likely as risky loans reset to sharply higher payments

Some time after Sharren McGarry went to work as a mortgage consultant at Wachovia’s Stuart, Fla., branch in July 2007, she and her colleagues were directed to market a mortgage called the “Pick A Pay” loan. Sales commissions on the product were double the rates for conventional mortgages, and she was required to make sure nearly half the loans she sold were "Pick A Pay," she said.
These “pay option” adjustable-rate mortgages gave borrowers a choice of payments each month. They also carried a feature that came as a nasty surprise to some borrowers, called "negative amortization." If the homeowner opted to pay less than the full monthly amount, the difference was tacked onto the principal. When the loan automatically “recasted” in five or 10 years, the owner would be locked into a new, much higher, set monthly payment.
While McGarry balked at selling these pay-option ARMs, other lenders and mortgage brokers were happy to sell the loans and pocket the higher commissions.
Now, as the housing recession deepens, a coming wave of payment shocks threatens to bring another surge in defaults and foreclosures as these mortgages “recast” to higher monthly payments over the next two years.
“The next wave (of foreclosures) is coming next year and in 2010, and that is primarily due to these pay-option ARMS and the five-year, adjustable-rate hybrid ARMS that are coming up for reset,” said William Longbrake, retired vice chairman of Washington Mutual. The giant Seattle-based bank, which collapsed this year under the weight of its bad mortgage loans, was one of the biggest originators of pay-option ARMs during the lending boom.
The next wave may be even more difficult to handle than the last one.
“It’s going to get tougher to modify loans as these option ARMs come into their resets," Federal Deposit Insurance Corp. Chairwoman Sheila Bair told msnbc.com this week. "Those are more difficult than the subprime and traditional adjustable rates to modify because there is such a huge payment differential when they reset."
Monthly quota: 45 percent

With 16 years of experience in the mortgage business, McGarry didn’t believe the “pay option” loan was a good deal for most of her customers, so she didn’t promote it.
“I looked at it and I thought: I’m 60 years old. If I were in these peoples’ situation 10 years from now, where would I be?” she said. “Do I want to be in a position that 10 years from now I can’t make this higher payment and I’m forced to make this payment and be forced out of my home? So I wouldn’t do it.”
Her job description included a requirement that she meet a monthly quota of Pick A Pay mortgages, something she said wasn’t spelled out when she was hired. Still, she said, she continued to steer her customers to conventional loans, even though her manager “frequently reminded me that my job requirement was that I do 45 percent of my volume in the Pick A Pay loan.”
In June 2008, her manager wrote a “Corrective Action and Counseling” warning, saying she wasn’t meeting the bank’s “expectation of production.” McGarry soon left Wachovia after finding a job with another mortgage company. On June 30, the bank stopped selling mortgages with negative amortization. In October Wachovia, suffering from heavy mortgage-related losses, agreed to be acquired by Wells Fargo.
A spokesman for Wachovia said that generally the bank doesn't comment on internal marketing policies. But he said commissions on Pick A Pay mortgages were higher because the loans were more complicated and required more work to originate. He also noted that when Wachovia's Pick A Pay loans recast, the payment increase is capped for any given year, which helps ease borrowers' burden of meeting a higher payment.
The first wave of home foreclosures that hit in late 2006 and early 2007 followed the resetting of subprime adjustable mortgages with two- and three-year "teaser rates" written during the height of the lending boom earlier in the decade. But pay-option ARMs — which often don't "recast" for five years — have a longer fuse. Unless defused by aggressive public and private foreclosure prevention programs, the bulk of these loans will explode to higher payments in 2009 and 2010.
The scope of the problem was highlighted in September in a study by Fitch Ratings, one of the bond rating agencies that assesses the risk of defaults on mortgage-backed investments. Of the $200 billion in option ARMs outstanding, Fitch estimates that some $29 billion will recast in 2009 and another $67 billion in 2010. That could cause delinquencies on these loans to more than double, Fitch said.
To make matters worse, only 17 percent of option ARMs written from 2004 to 2007 required full documentation. Many of the borrowers who took out these loans also took out a second mortgage, which means they likely have little or no equity in their home, according to the report. That means many could owe more than their house is worth when the loan recasts to unaffordable payments.
Heavy losses from investments backed by pay option ARMs were a major cause of the demise of Wachovia and Washington Mutual, one of the largest originators of option ARMs during the height of the lending bubble. (Washington Mutual was seized by the FDIC in September, which arranged for the sale of its assets to JPMorgan Chase. Wachovia was acquired in October by Wells Fargo, which outbid Citibank after it arranged a deal with the FDIC to acquire Wachovia.)
Since the housing bubble began to deflate in 2006, roughly 3 million homes have been lost to foreclosure. Over the next two years, another 3.6 million are expected to lose their homes, according to Moody’s Economy.com chief economist Mark Zandi.
Many of the most problematic loans — those sold with a two- or three-year low “teaser” rates — have already reset to higher levels. Those resets have been a major force in the first wave of foreclosures, which rose from 953,000 in 2006 to nearly 1.8 million last year and are on track to hit 3.1 million this year, according to First American CoreLogic, which tracks real estate data.
And the pace of foreclosures is still climbing. More than 259,000 U.S. homes received at least one foreclosure-related notice in November, up 28 percent from the same month last year, according to RealtyTrac.
Though the pace dropped slightly from the previous month, there are indications "that this lower activity is simply a temporary lull before another foreclosure storm hits in the coming months," said RealtyTrac CEO James Saccacio.
Mortgage delinquencies — homeowners who have fallen behind but not yet been hit with foreclosure — are also on the rise, according to the latest quarterly survey from the Mortgage Bankers Association. A record one in 10 American households with mortgages was overdue on payments or in foreclosure as of the end of September.
The impact is being felt unevenly across the country. Foreclosures are clustered in states that saw the biggest expansion in lending and home building. In Nevada, one in every 74 homes was hit with a foreclosure filing last month. Arizona saw one in every 149 housing units receive a foreclosure filing, and in Florida it was one in every 157 homes. California, Colorado, Georgia, Michigan, New Jersey, Illinois and Ohio have also been hard hit.
“In the neighborhoods that have concentrations of subprime loans you already have concerns about crashing neighborhoods with too many vacant houses and crime rises,” said Longbrake. “The same thing will be true for these option ARMs. They are concentrated in particular neighborhoods and particular locales around the country."
Developed in the late 1980s, pay-option ARMs were written at first only for borrowers who showed they could afford the full monthly payment. But during the height of the lending boom, underwriting standards were lowered to qualify borrowers who could only afford the minimum payment, according to Longbrake.
College savings made easy

McGarry says she was encouraged to promote the idea that with a Pick A Pay loan the borrower could pay less than the full monthly payment and set aside the difference for savings or investment. The pitch included sales literature comparing two brothers. One took the Pick A Pay loan, made the minimum payment and put money in the bank. The second brother got a conforming loan. Five years later, both brothers needed to pay their children’s college tuition.
“(The brother with the conforming loan) didn’t have the money in the bank,” said McGarry. “And the brother that had the pay-option ARM could go to the bank and withdraw the money and didn’t have to refinance his mortgage. That’s how they sold it.”
McGarry said the sales pitch downplayed the impact of negative amortization. When the loan principal swells to a set threshold — typically between 110 and 125 percent of the original loan amount — the mortgage automatically “recasts” to a higher, set monthly payment that many borrowers would have a hard time keeping up with.
Fitch estimates that the average potential payment increase would be 63 percent, or about $1,053 a month — on top of the current average payment of $1,672.
The impact on the millions of American families losing their homes is devastating. But the foreclosure fallout is being felt around the world. As the U.S. slides deeper into recession, foreclosures are the root cause of a downward spiral that threatens to prolong and widen the economic impact:
-As the pace of foreclosures rises, the glut of homes on the market pushes home prices lower. That erodes home equity for all homeowners, draining consumer spending power and further weakening the economy.
-The overhang of unsold homes also depresses the home building industry, one of the major engines of growth in a healthy economy.
-As home values decline, investors and lenders holding bonds backed by mortgages book steeper losses. Banks holding mortgage-backed investments hoard cash, creating a credit squeeze that acts as a bigger drag on the economy.
-The resulting pullback in consumer and business spending brings more layoffs. Those layoffs put additional homeowners at risk of defaulting on their mortgages, and the cycle repeats.
"Foreclosures are going to mount and the negative self-reinforcing cycle will accelerate," said Zandi. "It's already happening, but it will accelerate in a lot more parts of the country."
As pay-option ARMs put more homeowners under pressure, other forces are combining to increase the risk of mortgage defaults. As of the end of September, the drop in home prices had left roughly one in five borrowers stuck with a mortgage bigger than their house is worth, according to First American CoreLogic. In a normal market, homeowners who suffer a financial setback can tap some of the equity in their home or sell their home and move on.
“That’s a big issue,” said Mark Fleming, First American CoreLogic’s chief economist. “As equity is being destroyed in the housing markets, more and more people are being pushed into a negative equity position. That means that they’re not going to have the option for sale or refinance if they hit hard times."
“Negative equity” is also a major roadblock in negotiations between lenders and homeowners trying to modify their loan terms.
After over a year of debate in Congress, and private efforts by lenders, no one has come up with the solution to the thorniest part of the problem: Who should take the hit for the trillions of dollars of home equity lost since the credit bubble burst?
“(Customers) keep calling and saying ‘With this bailout, this isn’t helping me at all,’” said McGarry, who is now working with clients trying modify or refinance their loans. “It really and truly is not helping them. If their lender will not agree to settle for less than they owe — even though those lenders are on the list of lenders that will work with you — they still are not working with (the borrower).”
It’s a monumental undertaking that was never anticipated when servicers took on the task of managing these mortgage portfolios. These companies are already struggling to keep up with the volume of calls, and defaults are projected to keep rising. They’re also swamped with calls from desperate homeowners who are falling behind on their monthly payments.
“We have never seen anything this large before; we make 5 million phone calls a month to reach out to borrowers,” said Tom Morano, CEO of Residential Capital, the loan servicing unit of GMAC. “The volume of calls that’s coming in is much higher than it has ever been, and everybody is struggling with that.”
Now, as the spiral of falling home prices is exacerbated by rising unemployment, millions of homeowners who were on a solid financial footing when they signed their loan face the prospect of a job loss that would put them at risk of foreclosure. Some servicers say that’s the biggest wild card in projecting how many more Americans will lose their homes.
“The concern I have is if we have an economy where unemployment gets to 8 or 9 percent,” said Morano. “If that happens the amount of delinquencies is going to be staggering.”
With the latest monthly data showing more than half a million jobs were lost in November, some economists now believe the jobless rate could rise from the current 6.7 percent to top 10 percent by the end of next year.

By John W. Schoen MSNBC.com

The Million-Dollar-Home Dream goes POOF!

noreply@blogger.com (Harnan Financial) — Tue, 09 Dec 2008 21:43:00 +0000

If you paid seven figures, it probably isn't worth that anymore; for buyers, $500,000 is the new $1 million.
Half a million dollars is, by almost any standard, a lot of money. But during the past few years, when credit was easy and regulations were loose, for many Americans it didn't seem like all that much.
That's because they were able to borrow huge amounts of money to buy new homes, often with little or nothing down. And while most homes sold in the United States, even at the height of the housing bubble, were $500,000 or less, rising prices in many major cities and affluent suburbs around the country pushed the cost of a three-bedroom home into seven figures or more.
But the gap between $500,000 and $1 million is more than monetary. It is also psychological. And during the recent boom years, Americans became reckless consumers, buying cars, houses, clothes and much more that they couldn't really afford. The dream of a $1 million home, once so distant, became tantalizingly reachable.
Now that has all changed. While certain pockets, such as Manhattan, San Francisco and Boston, remain high, real-estate prices around the country have fallen dramatically. The downside to this, of course, is that many people now owe more money on their home than their home is worth. The upside is that valuations are much more realistic — and affordable.

Pain is spreading
That's because homes priced at half a million — and higher — are now also beginning to shrink in value. Initially, the properties hit hard by the subprime crisis were lower-priced dwellings more often than not bought by people with poor credit. But now, as too many people are experiencing, the pain is spreading even to people with good credit and higher incomes.
Until recently, sellers in wealthy neighborhoods were somewhat protected from the subprime credit crisis and were still drawing buyers with high salaries, good credit scores and a cushion of savings. But the problems worsened after global financial-services giant Lehman Brothers collapsed on Sept. 15. Credit markets froze, corporate giants laid off thousands of highly paid workers, and the stocks that padded the portfolios of the wealthy plummeted.
Even once seemingly impervious markets such as New York City, Florida and California, which had attracted well-heeled international buyers looking to take advantage of a weak dollar, began to struggle as the global economic slowdown washed over Europe, Asia and even the Middle East.
Asking prices for luxury homes nationwide have fallen 5.4% since Jan. 4, and such homes now stay on the market for 148 days, compared with 125 days at the beginning of the year, according to The Institute for Luxury Home Marketing's Luxury Market Report, which tracked prices through Nov. 7. The data — compiled by Altos Research — look at prices in the top 10 wealthiest ZIP codes in 30 large metro areas around the country.

Watching and waiting
"The entry level of the upper tier — the $500,000 price point and up — has been softening for a while," said Laurie Moore-Moore, founder and CEO of the Institute for Luxury Home Marketing, a Dallas-based group that trains high-end agents. "What we've also seen in the last month is huge uncertainty at the very top of the market. People want to know where are we headed, how serious [the downturn] is going to be, and what is the duration. There are enough questions that even at the top of the market, people are waiting and watching."
BusinessWeek.com put together a sampling of homes selling for about $500,000 in 17 of the most affluent communities across the nation. A few years ago, those homes would have likely commanded much higher prices.
Art Tassaro, a real-estate agent with Friedberg Properties in the wealthy New York suburb of Cresskill, N.J., said buyers have all but disappeared in the past few months. Sellers who want their home to move quickly need to be aggressive about pricing. One method is to average the three lowest sales prices in a given neighborhood during the past year and then discount that price by an additional 5%, he said.
"If it was bad before, it's worse now," he said.

Of course, if you’re buying …
Grim times for sellers can be full of opportunity for buyers, especially those with cash, Tassaro said.
John Marcell, president of Better Mortgage Brokers in Upland, Calif., said sellers are discounting prices significantly in order to make a sale. Most sales are so-called short sales, where the lender agrees to accept less than the outstanding loan amount to avoid a foreclosure.
High-end homes are just sitting on the market in his area, he said. Entry-level homes now make up the market's strongest segment, because first-time purchasers can take advantage of low prices without having to worry about unloading their existing homes, he said.
"The only sales of million-dollar homes are foreclosures," Marcell said.

By Prashant Gopal, BusinessWeek.com

The $700 Billion Rescue passed....but will it work???

noreply@blogger.com (Harnan Financial) — Mon, 06 Oct 2008 17:49:00 +0000

The $700 billion rescue bill that Congress finally passed will limit panic in the markets, since it gives the government vast new authority to take over sclerotic securities that have clogged the credit system and already brought down some of America's biggest companies. With the feds stepping into the bloodbath, the hemorrhaging should stop. But the economy is still in precarious shape, and unrealistic expectations about the bailout could end up disappointing consumers hoping for some kind of immediate relief.Here are some likely developments for which consumers should prepare:

Less volatility. One thing the bailout will do is give investors some clarity and predictability, which will help calm the financial markets. With a clear plan for handling troubled companies--instead of the ad hoc approach applied to Bear Stearns, Lehman Brothers, and others--the government will abide by a consistent set of bailout rules, which will prevent the wild swings in the stock markets that made September a heart-stopping month.

But beware a sucker's rally. With the congressional melodrama over and the bailout in place, the markets will be reacting once again to ordinary economic forces--which are weak, at best. A few other big financial firms, and a lot of regional banks, are expected to take a hit next, especially if the credit crunch persists. Even if the government manages those problems smoothly, shareholders could get wiped out or of suffer deep losses. The global economy is cooling, too, which means less demand for American exports--a rare economic bright spot until lately--and lower profits for American multinational firms. All of those factors are likely to weigh down stocks.

Safe banks. There will probably be more bank failures, but the bill makes it clear that depositors don't need to worry about their money. The bill raises the amount of deposits covered by the FDIC from $100,000 to $250,000. That makes an implicit guarantee explicit: Until now, the FDIC has covered all deposits, including those over $100,000, to prevent "walks" on banks by people withdrawing everything over the insured limit. Now, the government will guarantees that higher amounts will be covered, even if banks fail.

A recession. Unfortunately, a more stable financial system probably won't prevent a sharp economic downturn, which already seems to be underway. Economists will probably continue to argue about whether it's technically a recession. But for many consumers and a lot of big industries, it doesn't matter what you call it: Times are tough, and getting tougher.
Job cuts in September--159,000--were the most in five years. Most economists are betting that additional jobs are going to be cut in coming months as companies hunker down. Worried consumers are likely to cut spending, deepening the dismal cycle.
There's already a recession in the auto industry, for example, which accounts for a big chunk of Americans' economic activity. Sales in September plunged to the lowest levels in 15 years. Deep worries--and profit-crunching discounts--are spreading to other sectors of the retail economy, too.
The bailout might help contain the damage. Theoretically, the feds' shock therapy will lessen the risk that a lot of companies will go bankrupt, which should motivate nervous bankers to start lending once again, with less fear that their money will vanish. If that actually happens, it will help big and small businesses alike continue to meet their payrolls. But there's nothing in the bill that forces banks to lend money, and they could just keep sitting on their cash for a while. And even if money loosens up, that's still no guarantee that consumers will spend. So any economic boost from the bailout will be indirect and probably take a while.

Minimal tax relief. A tax increase to pay for the bailout seems unnecessary, since many analysts think that the eventual sale of troubled securities could cover the government's costs. But added short-terms costs means that tax cuts anytime soon look less likely. Both Barack Obama and John McCain are pushing tax breaks, a perennial campaign promise. Obama wants to cut taxes for most Americans earning less than $250,000. McCain's plan calls for cutting capital gains taxes and corporate income taxes and extending other tax cuts that are set to expire soon. But don't bank on much relief: With the soaring costs of the federal bailout--plus added expenses, like up to $50 billion in loans for the Detroit automakers--anything that adds to the federal deficit next year is going to be hard to slip past budget hawks in Congress. A smaller set of tax cuts might be possible, though.

Scarce consumer loans. Banks have cut back on virtually every kind of loan to consumers, whether it's for cars, homes, vacations, or small credit-card purchases. One new government provision may help some homeowners who are at risk of defaulting, through a program that allows certain homeowners to renegotiate their loans with the bank. But it's not clear how effective that program will be.
While the bailout is supposed to ease the "credit crunch," it will probably be a while before relief reaches consumers. For one thing, the government will focus first on freeing money for banks and businesses so they are able to keep their operations humming and meet payroll expenses.
If banks do loosen up, the money flow may eventually trickle down to consumers. But stringent lending standards are likely to be in place well into next year, because banks are still digesting defaults on mortgages, car loans, and credit cards. And default rates are rising, not falling. Until those losses are covered, banks are going to say no more often than yes. For the next year or two, many Americans may have little choice but to save for a sunnier day.

Story by: Fadwa Knox

The Consumer Bailout That Nobody Knows About

noreply@blogger.com (Harnan Financial) — Thu, 02 Oct 2008 19:41:00 +0000

As congress considers the $700 Billion bailout for the financial system, there is a little known "bailout" for home owners that has already been enacted into law, according to Gibran Nichols, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. Section 1403 of the new housing bill that was signed into law on July 30, 2008 (HR 3221) requires mortgage servicers to modify loans for homeowners and help them avoid foreclosures as long as three requirements are met:

A.) Default on the mortgage either has already happened or is "reasonably foreseeable"
B.) The homeowner is living in the property as his or her primary residence.
C.) The lender is likely to recover more through the loan modification or workout than by forcing the homeowner into foreclosure

"The fact is that this law is effective immediately, and most distressed homeowners are simply not aware that they have this option," Nicholas said. Borrowers make their monthly payments to mortgage servicers, and servicers keep a portion of the payment as their profit while sending the rest to the Wall Street investors who actually own the mortgage. "This law requires services to act in the best interest of their investors and obligates them to modify your loan if you can afford the modification loan terms and if they are likely to recover more for their investors by working with you than by going all the way through the foreclosure process." Nicholas said.

While negotiating loan modification with your mortgage lender, it is advisable to follow these four steps:

1.) Make sure you are dealing with your lender's loss mitigation and/or work out department
2.) Write a hardship letter demonstrating job loss, serious medical condition, balloon payment coming due, adjustable rate reset or some other financial calamity that will make it impossible for you to continue making your mortgage payments as scheduled. Unless you are in imminent danger or default as required by this new law, lenders are not likely to work with you.
3.) Send the lender you financial statements, employment records, tax returns and bank statements demonstrating how you would be able to afford the modified loan terms under your present financial circumstances.
4.) Send the lender a current appraisal of your home or some documentation on recent comparable sales in your neighborhood demonstrating the current value of your home. "The key to demonstrating how the lender is likely to recover less money through foreclosure than they would by working with you in your purposed loan modification plan," Nicholas said.

It is advisable that you speak with a professional mortgage consultant. Give us a call! We want to help you!!

By: Artcle written by Paige of RISMedia.com

RATES ARE LOW!!

noreply@blogger.com (Harnan Financial) — Tue, 09 Sep 2008 18:17:00 +0000

RATES HAVE GONE DOWN!! GIVE US A CALL RIGHT NOW!!!

Government Takes Control of Fannie Mae and Freddie Mac: Possible Benefits to the Consumer

noreply@blogger.com (Harnan Financial) — Mon, 08 Sep 2008 20:19:00 +0000

The government takeover of Fannie Mae and Freddie Mack is designed to put downward pressure of mortgage rates and to ensure that home loans remain available.
Those goals are made crystal clear in the statements made by public officials.
The primary mission of the two mortgage giants "now will be to proactively work to increase the availability of mortgage finance," says James Lockhart, who will temporarily govern Fannie and Freddie.
Lockhart, head of the Federal Housing Finance Agency, adds that his agency will examine Fannie's and Freddie's fees" with an eye toward mortgage affordability."
Treasury Secretary Henry Paluson says the government has three objectives: "market stability, mortgage availability and taxpayer protection." That's another signal that the government wants mortgages to remain available, at good rates, to borrowers with low risk to default.
Jim Sahnger, a mortgage broker with Palm Beach Financial Network in Stuart, FL, says, "The good news for the consumer is that money will still continue to flow, provided you have the ability to qualify."

Rate Reduction Expected
Dean Baker, an economist with the Center for Economic and Policy Research, a think tank in Washington, D.C., says, "I think that the immediate impact will be somewhat positive. You'll see some drop in mortgage rates because it'll decrease the uncertainty" that had pushed mortgage rates up this summer.
Baker says he can imagine a drop in mortgage rates of around a quarter of a percentage point, give or take about 5 basis points. A basis point is one-hundredth of a percentage point. "It's something," he says. "It's not going to make a huge difference."
It's hard to guess the timing of such a rate decrease. Baker says it might happen as soon as today, but possibly later. "Probably we're talking the inside of two weeks," Barker says.
Sahnger agrees that rates will fall soon. "there will be an immediate impact as far as rates," he says. " I think rates are going to improve modestly at the beginning."

Why Rates Should Fall
Mortgage rates are expected to fall because the Treasury Department will buy mortgage-backed securities. Here's why rates would fall as a result of the Treasury buying mortgage-backed securities:
When investors buy bonds, they have a wealth of choices. They can buy U.S. Treasury bills and notes, or corporate debt, or bonds from state and local governments. Or they can buy mortgage-backed securities, which behave much like bonds. Mortgage-backed securities are known as MBS in industry shorthand.
Fannie and Freddie guarantee the mortgage-backed securities that they issue, and those securities are deemed quite safe as investments. Not as safe as Treasury notes, but relatively safe. Fannie and Freddie are government-sponsored enterprises, or GSEs and for decades they had implicit government backing. That backing is now explicit.
In the past few months, investors have rushed to the safety of Treasury notes and haven't been as eager to buy mortgage-backed securities. The lessened demand caused the prices of mortgage-backed securities to go down. When bond prices fall, bond yields rise, and that's what happened with mortgage-backed securities. As yields went up, so did mortgage rates. The difference, or spread, widened between Treasury yields and mortgage-backed securities.
Now that the Treasury will buy mortgage-backed securities, their prices should rise because of the greater demand. (The same thing would happen if the federal government bought, say, boxcar loads of sugar. You would expect sugar prices to go up.) When bond prices rise, yields drop -- so mortgage rates should follow.
Lockhart, whose department will run Fannie and Freddie, describes this succinctly when he says, "As the GSEs have grappled with their difficulties, we've seen mortgage rate spreads to Treasuries widen, making mortgages less affordable for homebuyers. While the GSEs are expected to moderately increase the size of their portfolios over the next 15 months through prudent mortgage purchases, complementary government efforts can aid mortgage affordability. (The) Treasury will begin this new program later this month, investing in new GSE MBS."

Jumbo Rates Stay Up
The government's action will have a beneficial effect on some mortgages, but not all. It will have little or no impact on jumbo mortgages -- home loans for large amounts. (The definition of a jumbo loan varies, depending on house prices in each metro area. A jumbo is a loan of more than $417,000 in much of the country, and is higher in more expensive housing markets -- up to $729,750 in places such as Los Angeles.)
Because they are perceived as riskier, rates on jumbo mortgages have been unusually high for the last year. Historically, jumbo rates had hovered about a quarter of a percentage point above the rates for mortgages backed by Fannie and Freddie. Now they're about a full percentage point higher, and that gap is unlikely to fall soon.
The government's bailout of Fannie and Freddie won't affect rates on home equity loans or home equity lines of credit, either.

By: Holden Lewis Bankrate.com