The bill, dubbed “Building Star” and  playing off the name of the Environmental Protection Agency’s Energy Star program, would cover about 30 percent of the cost of energy-related equipment and services including energy audits, building envelope insulation, mechanical equipment upgrades, lighting and energy management and monitoring equipment. If passed, the program is expected to save building owners more than $3 billion on their energy bills annually by reducing enough peak electricity demand to avoid the need for nearly three dozen 300 MW power plants, according to a statement by Sen. Jeff Merkley, a cosponsor of the bill.

Buildings account for about 40 percent of total U.S. energy use, with the commercial sector, such as office, retail and healthcare facilities, making up 18 percent of the total.

While the energy-saving portion of the proposal will resonate with some, the bill’s supporters appear to be largely focused on its ability to stimulate job creation. The Energy Future Coalition, a Washington, D.C.-based advocacy group that was heavily involved in Building Star’s drafting, says it would create at least 125,000 jobs (see this 13-page white paper by the coalition for a more detailed look at the Building Star proposal). Much of that work would be for the construction industry, which has taken a particularly tough beating in the economic downturn. The coalition estimates the program would spur $15 billion-$20 billion in market activity.

Patrick Hughes, a spokesman for the Energy Future Coalition, said Building Star could get wrapped in with the Home Star bill, which Senate Energy and Natural Resources Committee Chairman Jeff Bingaman said earlier this week he wants to move quickly to launch. President Obama, who has called saving money through energy efficiency “sexy,” touted Home Star program in a speech on Tuesday.

If you are a professional Realtor serving the second home market, you need to check out this opportunity to lead: Green & Save Realtor Resources program. 

At $60 a year, the value proposition is huge with all the components to help you help your second home owners to improve their cottages and save. It gives Realtors another reason (positive) to revisit and talk with past home buyers, on a monthly basis with very little effort.

These guys might be in control of the mortgage business and real estate economy today. Because if you were trying to screw things up, creating new rules like HVCC and the RESPA revisions couldn’t come at a worse time or with worse consequences. Honestly, my staff and I have attended at least 60 hours of ‘retraining’ to understand some of the new rules, and we are all more confused than ever.

Every banker I know is scared of the changes, and consequences of breaking the rules. The penalties aren’t even clear cut. No one likes change, and new regulation is typically met with resistance and whining, but truly, we are screwing up the economy more with these new rules. Soon lenders will stop issuing pre-approvals, now that is yet another way to slow down much needed real estate sales.

This from: American Banker

The new mortgage disclosure rule is upending the first step in the process of lending to homebuyers.

Before shopping for a property, a prospective buyer typically gets a preapproval letter from a lender indicating how big a loan the person qualifies for. Real estate agents often ask for these letters so they can make sure the customer can afford the property before showing it.

Before writing the letters, lenders like to see proof of income, such as a pay stub or tax return. But under the Real Estate Settlement Procedures Act rule that took effect Jan. 1, lenders may not require such documents before giving the borrower a good-faith estimate of closing costs.

Since lenders are now being held to those estimates, they want to hold off on issuing them as long as possible. So some lenders are reconsidering or backing away from preapprovals. Without them lenders could end up wasting time on loan applications that fall out.

“If you don’t have preapproval letters, then Realtors are going to have to show people houses whether they can afford them or not,” said David Dickinson, president of Bankers Compliance Consulting Inc. in Central City, Neb.

US home prices climbed 5% in February from a year ago, despite an incoming wave of REOs that could saddle the market for another three years, according to the Clear Capital Home Data Index.

Prices grew on a yearly basis for the first two months of 2010. The 5% uptick in February bested the 2.3% yearly increase in January. However, prices remained unchanged on a rolling quarterly basis.

“If the increase in demand that preceded the end of the last tax credit is any indication, home prices may dip only slightly into negative territory before getting an added boost before the April tax credit deadline,” said Alex Villacorta, senior statistician at Clear Capital.

Prices in Providence, Rhode Island climbed 6.1% from the previous three months, the highest increase of any metropolitan statistical area (MSA). California had five of the 15 highest performing markets as Los Angeles prices gained 2.2% over the rolling quarter.

In 11 of the top 15 markets REO saturation increased by an average of 1.3%.

“We observed an expected increase in REO saturation this month as the flow of foreclosures continued to come into the market, while traditional non-distressed sales wait to be listed in the spring and summer months,” added Villacorta.

The price gains in the early months of 2010 contrast sharply with 2009, when credit lines were cinched, investments dropped in value and financial institutions facing failure dumped REOs onto the market, according to the report.

The good news is for many real estate markets, including the hardest hit (Michigan, California, Nevada, Florida) the rental revenues now equal the the sales values for many homes, even those not selling at distressed prices (bank owned and short sales). This may be another sign that the markets are at or near or maybe even beyond the bottom.

You guessed it. Put all the problems on one balance sheet (aka The People’s) and start eating more loans, grow that hind side larger.

No, just like any New Year’s dieter knows, what we really need is smaller Fannies in America. We need to get on the tread mill of fiscal discipline, only make loans that make common sense, and admit our past mistakes and modify the loans that don’t work today. A bunch of smaller fannies will direct lending in the right corners for economic growth.

A bigger Fannie is a big problem.

And so it is with the need for fiscal conservatives (people who believe this generation should pay it’s own bills and not heap debt on future tax payers - our kids) to embrace the Green movement with more gusto. Green in my mind means innovation and reinvention and questioning old paradigms of thrift. Through technology it is possible to get more for less. Government has an important role here in motivating and promoting innovation, but government’s rarely innovate (except for at NASA - think Velcro, Mylar, etc.)

It’s time to turn on the R&D mills full blast to rethink energy usage. Good article from CNNfn.com this morning:

”

Energy savers: The government is paying you to go green with its new Residential Energy Property credit, increasing the incentives it gives to homeowners who make energy-efficient upgrades to their homes.

The original credit was set to expire at the end of 2007, but it has been extended through 2010. And the new law allows you to claim up to 30% of improvement costs, up from 10% under the previous law.

The credit cap was also raised to $1,500 this year for upgrades made in 2009 and 2010. Qualifying improvements include adding insulation, energy conserving windows and efficient heating and air-conditioning systems.

The Tax Institute’s McAnarney said the credit is mainly for heating and cooling efficiency items, and therefore appliances such as energy conserving refrigerators are not included.

To find out which of your upgrades qualify for the tax break, McAnarney recommends checking with Energy Star, a government-backed program that determines energy efficiency.

The debate seemed to revolve around lender’s decisions to ‘extend loans and pretend that the loans were still viable’ is a good practice or a bad practice that will cause America to suffer an extended recession the same way Japan’s ‘extend and pretend’ banking system has worked for the last 12+ years.

Much criticism has been heaped on Japan’s banks for ‘not owning up to their losses’, writing down/off bad loans, and taking their pain. The world has preached at Japan to ‘come clean’ and write off all those bad real estate loans that are under water.

But if statistics were true at this conference and from ULI, 40% of all US home owners will be under water on their home values (debt exceeds value) by mid-2010. The speakers at the IMN conference said that commercial real estate will be near this statistic by year’s end. That would mean that without ‘extend and pretending’, banks might need to write off, sell or modify 40% of every loan in their portfolio. What would this do to a fractional reserve banking system?

Consider that for every $100 lent out in on a mortgage, the bank only holds $10-30.00 in deposits, and $3-5 in ‘equity capital’. A write off of just 5% of a bank’s loans will wipe out all their capital, and cause a bank to be technically insolvent.

When a bank goes bankrupt, the FDIC insurance (government/taxpayers) must chip in money to make the depositors whole or the entire financial system collapses. In light of this reality, the idea of extending and pretending that 95% of the underwater or non-performing loans makes good sense?

Time is the friend to financial market participants. By giving more time to borrowers to ’stabilize’ their properties, banks keep from owning properties and the properties stay in the hands of people who may be able to make them work. It is cynical to say that the present owner is not the best owner, most of the homes under water are not because the home owner neglects the house - to the contrary - they may have spent too much at Home Depot improving the kitchen.

No, this is a macro-event that is sinking all ships in real estate. Every foreclosure sale ‘clears’ the market and takes a bad loan/REO off the banks books and replaces it with a TARP loan and deficiency judgment against a borrower. But these are not real assets. The foreclosure sale also further depresses value and encourages the neighbors to short sale their now-under-water homes as well.

No the answer, as ugly and Japanese as it may seem is time and pretending.

Along this same note, transparency may be working against the housing market. I like Zillow, but every month I get an update from Zillow.com that reads “Mr. Waun your home has fallen by $18,752 this month”. This transparency is sinking the market too. In an internet age when you can value rare baseball cards, exotic cars, Peruvian wine and homes in an instant, the falling tide of home values is further encouraged by Zillow’s honesty.

How many home owners have decided to send back their keys because they have become all too aware that they are hopelessly and forever negative equity at home? Or are they? What if inflation does kick in gear, and real estate rises with this tide?

Last statistic from the conference, from the Wharton economist on my panel: 450,000 home starts occurred in the last 12 months, this is a historically low figure. The US population is growing. There is pent up demand.

Add those numbers together, and 28.9% of all sales are ‘distressed’ in January 2010. It also means that a new asset class is being created on the balance sheets of lenders - Deficiency Judgments.

If every short sale and foreclosure results in a loss to the bank, many of these banks are ‘booking’ the loss as a deficiency judgment that they can later (up to 7 years in the future) reach back to their borrower and ask for repayment. Many of these judgments will be monetized and resold to other investors who will chase the consumer borrowers for repayment. Judgments are legal claims that can create future liens on new homes, and garnishments on future wages.

It’s an ugly thought that consumers are walking around feeling like they shook off that bad debt in a foreclosure, or sold that underwater house in a short sale, only to find out in 5 years when they have savings and a new home again, that they still owe the interest, legal fees and bank’s losses?

And we expect consumers to smile and get back to spending when millions have new encumbrances? Is debt amnesty is in the future?

This is the beginning of a green-shoot form of grassroots lending base in the residential market. Just as most of the new jobs in a recovery are created by small and mid-sized companies, these new warehouse funds will spring new loan programs from the base of the residential housing finance market.

When I worked for a large bank, a superior once told me “we don’t innovate new loan programs here a XXX Big Bank, we buy innovators”. My boss’ boss encouraged me to go to a smaller bank and innovate, then the big bank would simply come and buy us once we proved out our theories.

And so it is in economic rebirth. The true innovation will come from garages, not well financed R&D complexes. Radical shifts often come out of the obscure corners. Green shoots are best watered at the roots.

Fannie might have been better to extend the loan guarantees directly to the smaller lenders, instead of putting NattyMac in the middle, but a Billion Dollars is a lot to go around when you break it into $1,000,000 warehouse lines. Small companies can use this money most effectively.