Jeanette's Real Estate Blog

Cosigning on the dotted line

2011-08-11T19:06:00.000-07:00

Tighter lender standards and an unstable job market have made it tougher for some people, especially those just starting out, to qualify for a home mortgage on their own. So, some home buyers are turning to family members or close friends with good credit to co-sign a home loan.
Making sense of the story
• While becoming a cosigner may seem like a good solution, money manager and lenders caution against those who are asked to be the cosigner.
• A cosigner, even if not living in the house, is really a coborrower, meaning he or she still is responsible for payments if the occupant is unable to meet his or her obligations. In other words, if the principal party defaults on the loan, the cosigner is on the hook.
• One financial planner suggests potential cosigners take a less risky alternative, such as providing a cash gift for the down payment. Under current tax laws, a person can give as much as $13,000 to a person, free of gift taxes, or $26,000 per person, if a married couple filing jointly is giving the money.
• Those considering cosigning a mortgage must conduct due diligence. First, the cosigner must understand why the family member or friend is asking for help. Potential cosigners shouldn’t be afraid to look into the requestor’s personal finances to help determine whether he or she will be able to repay the loan. Perusing credit reports also will show the track record he or she has for paying off debts.
• A discussion about worst-case scenarios also should take place before signing on the dotted line. Working out a written contract containing an agreement about what would happen in the event of a default, also is recommended.
• Cosigners also should keep in mind that the mortgage will show up on their credit report, and could affect their own ability to borrow money or buy a second home. If the principal borrower makes a late payment, that also will show up on the cosigner’s report.

The New York Times
By VICKIE ELMER
Published: August 4, 2011

LAW AGAINST SHORT SALE DEFICIENCIES EXPANDED

2011-07-16T14:24:00.000-07:00

In a major victory for REALTORS®, Governor Brown signed into law today a C.A.R.-sponsored bill, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.
Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale. A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.
Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.
This law is fully set forth as Senate Bill 458 (Corbett) at www.leginfo.ca.gov.

Fannie Mae Issues Servicing Standards for Delinquent Mortgages

2011-06-13T17:17:00.000-07:00

Standards are First Step in Fannie Mae's Implementation of the Aligned Servicing Requirements Announced by FHFA on April 28, 2011

WASHINGTON, DC — Fannie Mae today issued new standards for mortgage servicers regarding the management of delinquent loans, default prevention and foreclosure time frames under the Federal Housing Finance Agency's Servicing Alignment Initiative. The new standards, reinforced by new incentives and compensatory fees, require servicers to take a more consistent approach for homeowner communications, loan modifications and other workouts, and, when necessary, foreclosures.

"These new standards give homeowners facing difficulty making their mortgage payments a clear, consistent process," said Jeff Hayward, Senior Vice President of Fannie Mae's National Servicing Organization. "We want homeowners to be able to understand their options when facing foreclosure, and we want servicers to reach homeowners early in the process, communicate frequently and clearly, and help homeowners avoid foreclosure."

These standards require servicers to implement consistent processes across a number of areas, and hold them accountable if they do not.

Borrower Contact. Under the new standards, servicers must achieve "quality right party contact" with borrowers. This includes building a strong customer-service relationship with homeowners, determining the reasons for their delinquency, assessing their ability to pay, and educating homeowners on the availability of foreclosure prevention options. Fannie Mae's borrower contact standards will increase servicer effectiveness in reaching homeowners, bring greater consistency and clarity to servicer communications with homeowners, and increase the likelihood that servicers will contact homeowners early in the default process, which is one of the most important factors in reaching a resolution that avoids a foreclosure. During the first 120 days of delinquency, homeowners will be contacted both verbally and in writing to complete a mortgage modification or other solution to remain in the home, or enter into an arrangement to exit the home without a foreclosure.

Foreclosure Timelines. Servicers must follow clear timelines for referring loans to foreclosure, setting a date of sale for foreclosed properties, and use of designated counsel, and they will face compensatory fees for timeline violations. These standards will bring greater consistency, fairness, and efficiency to a process that has too often been characterized by inconsistency, abuse, and delay — to the detriment of mortgage investors, homeowners, and communities alike. Once 120 days of delinquency have passed, the foreclosure process will begin.

"We hope this step will encourage any homeowner who has not yet acted to work with the servicer to pursue all options to avoid foreclosure," said Hayward. "But even in situations where foreclosure can't be avoided, we believe this process and this timetable will help motivate all participants toward resolutions that will ultimately stabilize neighborhoods as quickly as possible."

Incentives and Compensatory Fees. Fannie Mae will provide incentives for servicers to complete loan workouts earlier in a homeowner's delinquency, and charge compensatory fees when servicers fail to make quality right party contact. Incentives and fees will be based on clear benchmarks. These steps are intended to help improve servicer performance and hold servicers accountable for their effectiveness in assisting homeowners. Compensatory fees remain a possibility for servicers who do not process foreclosures in a timely manner.

Between January 1, 2009 and March 31, 2011, Fannie Mae helped over 500,000 struggling homeowners avoid foreclosure. Implementation of the new servicing standards will speed further progress and ensure greater clarity for servicers on how to work with homeowners.

The new standards are set forth in two servicing guide announcements. To view the announcements, visit here and here.

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. Our job is to help those who house America.
Fannie Mae Resource Center Telephone 1-800-7FANNIE
(1-800-732-6643)

Signs of economic weakness relieve pressure on mortgage rates

2011-05-02T08:42:00.001-07:00

Purchase loan demand falls as FHA raises premiums
By Inman News

Mortgage rates fell for a second consecutive week on signs of weakness in the economy, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey.

Rates on 30-year fixed-rate mortgages averaged 4.78 percent with an average 0.7 point for the week ending April 28, down from 4.8 percent last week and 5.06 percent a year ago.

The 30-year fixed-rate mortgage, which hit an all-time low in Freddie Mac records dating to 1971 of 4.17 percent during the week ending Nov. 11, 2010, this year has ranged from 4.71 percent in early January to a high of 5.05 percent in February.

Rates on 15-year fixed-rate mortgages averaged 3.97 percent with an average 0.7 point, down from 4.02 percent last week and 4.39 percent a year ago. The 15-year fixed-rate mortgage hit a low in records dating back to 1991 of 3.57 percent in November.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loan averaged 3.51 percent with an average 0.6 point, down from 3.61 percent last week and 4 percent a year ago. The 5-year ARM hit a low in records dating to 2005 of 3.25 percent in November.

Rates on 1-year Treasury-indexed ARM loans averaged 3.15 percent with an average 0.6 point, down from 3.16 percent last week and 4.25 percent a year ago.

"Mortgage rates followed Treasury bond yields lower this week amid weak local economic data reports on business conditions and house prices," said Frank Nothaft, Freddie Mac chief economist, in a statement.

"Regional Federal Reserve Banks reported that business and manufacturing activities declined in Philadelphia, Dallas and Richmond in April," Nothaft said. "In addition, the Standard & Poor's/Case-Shiller 20-city composite home price index recorded year-over-year declines through February in 19 of the 20 markets."

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans falling a seasonally-adjusted 13.6 percent during the week ending April 22 compared to the week before.

The decline was driven by a 26.6 percent decrease in applications for government-backed loans, as premium increases on FHA loans announced Feb. 14 went into effect. Buyers trying to beat the deadline were probably responsible for a 20 percent increase in government purchase loan applications during the preceding four weeks, said Michael Fratantoni, MBA's chief economist.

Demand for purchase loans slipped to its lowest level since Feb. 25, and was down 28.8 percent from the same week a year ago.

In an April 14 forecast, MBA economists said they expect rates on 30-year fixed-rate loans will average 5.1 percent during April, May and June, and climb to an average of 5.6 percent during the final three months of the year.

MBA economists expect a more gradual rise in rates on 30-year fixed-rate loans next year, to an average of 6 percent in the final three months of 2012.

FICO to walkaways: You're on our screen

2011-04-27T08:46:00.000-07:00

April 27, 2011
By Ken Harney
Inman News™

Will early-warning system make homeowners think twice?

Fair Isaac, developer of the ubiquitous FICO score, has a new warning for homeowners plotting a strategic default or walkaway: We can now spot you in advance. We've developed a black-box risk-identification tool that enables lenders and mortgage servicers to tag you months in advance -- and then pursue their own strategic measures to intervene.

The tool is so effective, according to FICO, that it can "capture nearly 67 percent of strategic defaulters" who are otherwise unremarkable and undetectable, paying their mortgages on time.

Sound a little spooky? Not for the major lenders who are working with FICO to install the new statistical risk-scoring model, aimed at some of the costliest and most perplexing defaulters in the marketplace: people who just stop paying on their loan abruptly, without ever previously being late, even though they have the income to pay.

Strategic walkaways are a multibillion-dollar headache to banks and investors. A study by researchers at the University of Chicago's Booth School of Business found that during last September alone, 35 percent of mortgage defaults in the U.S. were strategic -- up sharply from 26 percent in March 2009.

With an estimated 23 percent of all residential mortgages underwater as of March of this year, according to data from consulting firm CoreLogic, spotting -- and dealing with -- walkaways has become a high priority for the biggest banks.

Walkaways are also more than a slight concern to default risk-scoring giants like Fair Isaac and Vantage Score LLC, the joint venture created by the three national credit bureaus: Equifax, Experian and Trans Union.

Both companies have been stunned to find that the very consumers they deemed the least likely to go into default -- people with 800-plus FICOs and 900-plus Vantage scores -- are statistically more likely to default strategically, with no outward signs of impending payment stoppages, than the lower-scoring masses.

People with low FICO scores still default more often than high scorers, but when high scorers do default, they are far more likely to do so out of the blue. In the lowest score category (300 to 499) more than twice as many people default nonstrategically -- they begin missing payments over time, typically because of income declines -- than strategically.

These walkaways are especially vexing to score-modeling experts like Andrew Jennings, Fair Isaac's chief analytic officer and head of FICO Labs. "They open up new credit accounts" before stopping their mortgage payments, he told me in an interview last week. "They prepare."

They intentionally default on their mortgages in part "because they believe it is in their best financial interest, and because they believe the consequences will be minimal," Jennings said.

Jennings supervised Fair Isaac's work in developing a special tool that pinpoints likely strategic defaulters while they're still cocooning and haven't yet revealed their intentions to lenders.

Some of the research involved examining massive samples of credit bureau data -- 5 percent of all U.S. mortgage accounts -- during a recent one-year period, looking for telltale clues, month by month, that would separate out strategic defaulters from ordinary defaulters.

What the project turned up, said Jennings, helped formulate the model that FICO has now created for lenders and servicers.

So what's in the black box? Obviously the complex statistical model and exactly how it works is proprietary. But Jennings said it looks at a composite of separate risk factors from credit and real estate databases, and enables servicers to identify borrowers whose profiles match those of strategic defaulters most closely.

Some of the key characteristics include:

--How long have the borrowers owned the house? The shorter the time span, the higher the risk.

--Are they good to excellent managers of their household finances and credit relationships? Do they make modest and responsible use of credit cards and other revolving debt? Do they pay their accounts on time as a rule? Do they rarely, if ever, go over the limits on their cards -- or even come close?

--Have they departed from their past credit usage patterns in recent months by opening up multiple new accounts?

--Based on local property-value indexes, is it likely that they have slipped into negative equity territory? Remember: How deeply underwater is only a moderately predictive factor. Lots of owners whose properties are worth far less than their mortgage balances do not strategically default, but keep plugging away paying every month, while borrowers who fit the FICO strategic defaulter profile may be only slightly underwater but still walk away abruptly.

By the way, location is not a key factor in the equation. FICO found that 40 percent of all strategic defaulters live in "recourse" states where lenders can -- and do -- pursue defaulters for any un-recovered debts following a foreclosure.

Of course, the model cannot peer into would-be walkaways' minds and motivations. "We're not trying to explain their psyches," Jennings said, "but you see the patterns" and certain borrowers' profiles light up like flashing neon signs.

The top bracket of high-risk homeowners identified by FICO's new model are 110 times more likely to strategically default than other borrowers -- even though they otherwise appear to be solid customers, according to Fair Isaac.

Armed with these risk profiles, what are banks and servicers likely to do as they scan their portfolios? Fair Isaac recommends that they intervene early with what it calls "pre-delinquent treatments."

These include contacting high-risk borrowers to warn them about the consequences of strategic defaults: Their credit scores will tank by 150 points or more, they'll be hampered or penalized in applications for rentals, employment, car loans or leases, and they can forget about buying another home for at least several years, possibly as long as seven.

If they live in a state that allows deficiency recoveries, servicers will probably emphasize their determination to do so in the event of any default.

Will all this work? Major banks and FICO think it should help. The jury is out at the moment, but if the early detection concept is valid, who knows?

Maybe it will cause some homeowners to think twice and discourage them from taking that first, crucial step: Secretly plotting their walkaway, months in advance.

Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance.

The Cost of Working with FHA is Going Up Again

2011-04-13T13:45:00.000-07:00

March 11th, 2011
On Friday, January 28th, HUD/FHA extended the “Less Than 90-Day” flip rule. Now trying to find a lender who will allow the seller to resell for 20%+ over what they bought it for is becoming more difficult.

Last October HUD/FHA increased the Monthly Mortgage Insurance (MMI) cost from .55% to .90% for a 30-year fixed with a minimum down payment loan. During that time, HUD/FHA also lowered the Up Front Mortgage Insurance Premium (UFMIP) they finance into the loan from 2.25% to 1%.

In a move to increase their capital reserves and encourage private money back into mortgages, HUD/FHA will once again raise the MMI cost. On April 18 MMI goes from .90% to 1.15% for 30- and 15-year fixed loans with minimum down payment. (Since April 18 is a Monday, your loan professional needs to pull the case number on Friday April 15 to avoid this increase.)

One positive outcome for homebuyers from this new change is that the HUD/FHA system will automatically cancel any uninsured case number where there has been no activity for six months since the last action except for:

Loans where an appraisal update has been entered, and/or
Loans where the Upfront Mortgage Insurance Premium (UFMIP) has been received
Last action includes:

Case number assigned
Appraisal information entered
Firm commitment issued by FHA
Insurance application received and subsequent updates and
Notice of Return and Resubmissions
Last action does not include updates to borrower names and /or property address (e.g. making changes to the number of borrowers on the loan will not reset the six-month time frame for automatic cancellation).

You will not have to track down the last lender to release the case number from up to a year ago. Now you only have to worry about up to six months. The reason I mention this is because sometimes the last lender with the case number may not respond very quickly or at all. When this happens you may have to involve FHA , potentially slowing down your closing.

Conventional lenders have suspended temporary buy downs on loans due to the new TILA (Truth-in-Lending Act) form. It does not adequately address disclosure for this loan feature correctly.

The Mortgage Guaranty Insurance Company (MGIC) recently announced changes to minimum borrower contributions and gifts. Gifts and grants can be considered borrower’s own funds for the purpose of meeting the MGIC 3% minimum borrower contribution when the following requirements are met:

Property is located in a non-restricted market
Debt to income is less than or equal to 41%
Credit score is greater than or equal to 740
Loan instrument is fixed rate/fixed payment for at least the first five years
Property is one unit
Property will be a primary residence
Loan has no subordinate financing or a soft second
If all the above requirements are not met, gift or grant funds are considered only after the minimum borrower contribution is met. (Consult your loan professional for the rest of the guidelines.)

Credit Scores
One of the major lenders announced that starting Friday, February 18, the recommended minimum credit score will be increased to 740 for purchase and rate and term refinance transactions would loan-to-value ratio between 95.01% and 97.00%. Recent updates also addressed the validity of credit scores.

Gas Prices
Oil prices are in the mid-$80 per barrel range, and gasoline in many parts of the nation is sitting at or above $3 per gallon for regular unleaded. This is bad news for anyone who uses transportation or buys goods that are transported. What do higher oil prices mean for folks in the loan business? Higher oil prices appear to be indicative of higher demand caused by a recovering economy. In theory, this demand will eventually help the real estate market. Many will argue, however, that we still have the foreclosure and inventory overhead keeping a lid on values, and the higher oil prices will have a negative impact on consumer spending on other goods and services. So higher energy prices may be a result of a stronger economy, but they can also slow an economy down. In fact, they can contribute to higher inflation which can then cause higher rates, causing another drag upon economic growth.

Food Prices around the World
Alan Greenspan spoke in Southern California in mid-February. One of his big fears, in the current economic climate, is the price of food around the world. As nations develop, they move from grain-based foods toward eating more meat. Meat uses more grain per calorie and is more expensive. Food prices have risen markedly lately and, in some cases, are near 2008 highs. This worldwide increase in food prices will likely not have major inflationary implications in most advanced economies. Food has a relatively low weight in CPI baskets in those nations. In contrast, however, food price inflation poses a significant downside risk to economic growth in many developing economies where food accounts for more of the consumption basket. Central banks in some important developing economies could end up tightening monetary policy too aggressively.

At the time of the writing of this article, the recent move up in interest rates wasn’t unexpected, as the rate markets have been technically bearish since Halloween. What was a surprise was the magnitude of the run-up. Many analysts believe that we have already seen the big jump in rates (unless the world stops buying our debt). Although rates are gradually expected to increase for much of 2011, don’t look for any significant increase. (information provided from Rob Chrisman of www.robchrisman.com)

If you have any questions or comments, you can email me, Scott Short, Comstock Mortgage at sshort@comstockmortgage. com or call 916-421-8559

Global real estate prices slow

2011-04-05T08:46:00.001-07:00

Inman News™
By GLOBAL EDGE

Share ThisEditor's note: This item is republished with permission from Global Edge Marketing Ltd. View original post.

House-price growth across the globe slowed in the last quarter of 2010, according to new figures from global property agency and consultancy Knight Frank, which has a headquarters in London and about 207 offices worldwide including U.S.-based Newmark Knight Frank.

Twenty of the 49 countries analyzed by the company showed quarterly declines, with Dubai (-6.1 percent), Ireland (-3.5 percent), Cyprus (-2.1 percent) and the U.S. (-2.1 percent) recording some of the biggest falls.

Prices are now falling in 41 percent of countries tracked, compared with 31 percent in Q2 2010.

The fastest risers were Hong Kong (up 20.1 percent annually) and Latvia (up 16.9 percent) with the latter bouncing back from a 70 percent fall in prices during the credit crunch.

The strongest regions were Asia-Pacific (7.5 percent annual growth), the Middle East (5.3 percent) and South America (3.8 percent). The weakest continents were Europe and North America.

The last legs of the global stimulus

Liam Bailey, head of residential research at Knight Frank, believes the slowdown is a result of the unwinding of the quantitative easing measures which came into effect in 2009.

"The key trend at play in the global market is the unwinding of the stimulus packages put forward in 2009 in Europe, North America and Asia-Pacific," Bailey said.

"The impact of 'hot money' created by quantitative easing may be dissipating, especially in Asia -- where the 30 percent, 40 percent, 50 percent and even higher annual rates of growth, which were common in some Chinese and Indian cities a year ago, have now cooled considerably.

"In Europe and the U.S., by contrast, the last vestige of the stimulus, namely ultra-low interest rates are regarded as critical to the ongoing security of the market. As an example, discussions surrounding an impending rise in the United Kingdom rate from 0.5 percent to 0.75 percent are enough to cause panic among housing market commentators."

Country Annual % change 6-month % change Quarter % change

Hong Kong 20.10% 10.10% 3.70%
Latvia 16.90% 1.20% -0.80%
Israel 16.20% 8.40% 3.50%
China (based on Beijing and Shanghai) 15.30% 6.10% 6.40%
Singapore 14.00% 3.40% 1.80%
Austria 9.90% 4.90% 3.70%
France 9.50% 5.60% 1.40%
India 8.90% 5.60% -1.70%
Poland 8.10% 8.30% 1.10%
Denmark 7.80% 4.30% 1.50%
Taiwan 7.40% 2.00% -1.00%
Belgium 6.80% 1.70% 2.60%
Norway 6.60% -0.60% -0.10%
Malaysia 6.20% 3.40% 0.90%
Australia 5.80% 0.50% 0.70%
Finland 5.40% 0.70% 0.30%
Sweden 5.20% 0.90% 0.40%
Switzerland 5.20% 2.60% 2.00%
Canada 4.10% -0.60% -0.30%
Slovenia 3.90% 0.70% 1.80%
Colombia 3.80% 3.10% 3.80%
Germany 3.00% 2.10% 0.20%
Indonesia 2.90% 1.10% 0.70%
Turkey 2.60% 1.50% 1.00%
Luxembourg 2.60% 0.10% 0.00%
Hungary 1.80% 2.00% 1.90%
Malta 1.60% 0.90% 1.60%
Jersey 1.30% 6.00% 0.80%
South Africa 0.90% -2.40% 0.40%
Russia 0.90% 0.20% 0.20%
United Kingdom 0.70% -3.20% -2.50%
Bulgaria 0.50% -0.70% -0.30%
Netherlands 0.50% -2.10% -1.70%
Iceland -1.40% 0.30% 1.30%
Italy -1.40% -0.60% -0.30%
New Zealand -1.60% -0.90% 0.30%
Slovak Republic -2.10% -1.80% -2.60%
Czech Republic -3.00% -1.40% -0.90%
Spain -3.50% -1.30% -0.40%
Japan -3.60% -1.60% -0.80%
Portugal -4.00% -3.10% -1.20%
United States -4.10% -5.30% -2.10%
Greece -6.00% -2.90% -0.70%
Dubai, United Arab Emirates -6.10% -10.10% -6.10%
Croatia -7.20% -3.70% -0.90%
Ukraine -7.80% -1.60% 0.00%
Lithuania -10.10% -5.80% -3.90%
Ireland -10.80% -4.80% -3.50%
Cyprus -- -6.50% -2.10%

Copyright © 2011 Global Edge Marketing Ltd.

Short sales

2011-03-30T14:06:00.000-07:00

C.A.R. open letter on short sales

March 10, 2011

An important message from the CALIFORNIA ASSOCIATION OF REALTORS®:

I write on behalf of the CALIFORNIA ASSOCIATION OF REALTORS®, whose 170,000 members continue to witness the devastating consequences the home foreclosure crisis is having on California's families, neighborhoods, and communities on a daily basis.

The number of families affected by foreclosure is staggering. During the past three years, more than 640,000 Californians have lost their homes. With the number of homeowners who owe more than their home is worth hovering at 30 percent, experts predict there will be many more foreclosures in 2011 and 2012. Unless we take immediate, aggressive action to assist these homeowners, any meaningful recovery in the housing market and overall economy will continue to be delayed.

Tragically, only a fraction of those who face foreclosure will remain in their homes when all is said and done. Those whose incomes and financial circumstances meet strict guidelines may qualify for a loan modification that will reduce their monthly payment to more affordable levels. Yet the federal Home Affordable Modification Program (HAMP) is expected to prevent only 700,000 to 800,000 foreclosures nationwide before it expires at the end of 2012, and the program does little to help those homeowners who are unemployed or otherwise no longer able to meet their financial commitments. Their last hope is to sell their home, which often means convincing their lender or the investor who "owns" the loan (and, in many cases, the holder of a second mortgage lien and the mortgage insurer) to accept a "short sale."

With a short sale, homeowners with a proven hardship negotiate an agreement to sell their home for less than the balance owed. Although not every homeowner or mortgage is eligible, those who are able to finalize a short sale avoid a foreclosure on their credit record and can move on with their lives. Last year, 20 percent of home sales in our state involved short sales.

Short sales can play an important role in our state's economic recovery by accelerating the pace of home sales and reducing the inventory of bank-owned homes on the market. There are other benefits as well. Homebuyers who can qualify for a mortgage at today's low interest rates also are able to purchase a home at below-market prices. Banks get a nonperforming asset off their books and avoid the headaches associated with disposing of assets they don't want to own in the first place. Neighborhoods have fewer abandoned homes, and local businesses have more customers with money to spend.

Unfortunately, many homeowners are unable to successfully negotiate a short sale. According to a recent survey of 2,150 California REALTORS® who have assisted clients with a short sale, only three out of five transactions closed – even when there was an interested and qualified buyer.

What's the problem? For one, no two mortgage agreements are the same, so it can be difficult to standardize short sale processes and procedures. Many homeowners have second mortgages, which further complicate matters. Then there's the challenge of convincing multiple parties to take a financial loss or, in the case of loan servicers, to forego fees they otherwise might earn during the course of the foreclosure process. Poor and slow service by many banks and servicers has only exacerbated the problem. Horror stories abound from potential homebuyers and REALTORS® forced to wait 90 or more days for a response to a purchase offer or being required to fax short sale applications or other paperwork as many as 50 times. These delays discourage potential homebuyers from considering a short sale purchase and undermine the process for those who short sales are intended to benefit – the hundreds of thousands of families facing foreclosure.

Increasing the number of closed short sales by speeding up and streamlining the short sale process is one important way we can help California families avoid foreclosure and move our economy closer to recovery. That's why the California Association of REALTORS® is taking steps to enable more families to arrange a short sale. Recently, we advocated for improvements to short sale guidelines established under the federal Home Affordable Foreclosure Alternative (HAFA) program. We're meeting with major banks, U.S. Treasury officials, government-sponsored entities (including Fannie Mae and Freddie Mac), and others to urge them to standardize processes, comply with federal guidelines, improve communication with other stakeholders and increase staffing with the goal of eliminating service issues. We've also offered our members training in every aspect of the short sale process so they can assist their clients.

But we can't do it alone. That's why we're focusing the spotlight on short sales and calling on regulators, elected officials, nonprofits, business organizations, companies, and individuals with a stake in California's economic future to resolve this issue and others that get in the way of a recovery. It won't be easy, and some compromises will be required. The important thing is that we need to act today. Our families and our communities can't wait any longer.

Sincerely,

Beth L. Peerce
President
CALIFORNIA ASSOCIATION OF REALTORS®

Request loan recast when financial disaster strikes

2011-03-30T08:48:00.000-07:00

March 30, 2011
Inman News™
By JACK GUTTENTAG

A mortgage recast is an adjustment in the monthly payment that makes the payment fully amortizing. The recast will be a payment increase when the existing payment is less than fully amortizing, and a payment decrease when the existing payment is more than fully amortizing.

For example, let's say your home loan has a balance of $100,000 at 5 percent with 300 months to go and a payment of $450 that, if continued, will not pay off the balance. The payment recast is an increase to $584.60, which will fully amortize the balance over 300 months. However, if the current payment was $650, the recast would be a payment decrease to $584.60.

Payment-increase recasts occur on two kinds of mortgages. One carries an interest-only option, where the required payment for some initial period, often 10 years, covers only the interest. The payment-increase recast occurs at the end of the interest-only period.

The second type of mortgage open to a payment-increase recast is the adjustable-rate mortgage (ARM) that allows payments that are less than fully amortizing. These ARMs sometimes have recasts at specified intervals, often every five years, or the recast may be triggered by the loan balance reaching some limiting value, such as 110 percent of the original loan amount. This can happen at any time, or it may not happen at all.

Payment-increase recasts are designed to protect the interest of the lender by making sure that the loan will pay off as scheduled. All interest-only loans and all ARMs that allow payments that are less than fully amortizing have explicit provisions for recasts in the loan contract.

Provisions for payment-decrease recasts, in contrast, which are designed to meet the needs of borrowers, are not included in loan contracts. The lender can agree to a recast; can agree subject to a charge, which can range from nominal to extortionate; or can refuse it. I have encountered all three such responses.

The borrowers who request recasts usually have fixed-rate mortgages (FRMs) on which they have been making extra payments in order to pay off before term, and then unexpectedly encounter a financial reversal. With their income reduced, their objective shifts from paying off early to reducing the payment, for which purpose they need a recast. They deserve it, and the cost to the lender is nominal, but some lenders will take advantage of them just because they can.

The borrower's right to a payment-reducing recast ought to be mandatory for all home mortgage contracts. Borrowers should not have to grovel for what can be critically important to them and of little consequence to lenders. Making recasts into a right would have the side benefit of encouraging borrowers to make extra payments as a form of contingency insurance.

Note that payment-reducing recasts are needed for fixed-rate mortgages much more than for ARMs. The reason is that when the interest rate is adjusted on an ARM, the payment is automatically recast. On ARMs that reset the rate every year, no additional recasts are needed. On ARMs with initial rate periods of 5-10 years, however, the need for a recast can arise in the early years just as it does on FRMs.

Today, borrowers are motivated to make extra payments primarily by the hope of getting out of debt sooner. With a right of recast made explicit, they will also view extra payments as a worst-case backstop. The more you pay when you have the means, the larger the payment reduction you can command in an emergency. I can't think of an easier way to motivate consumers to save more.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

http://www.makinghomeaffordable.gov/news/Pages/default.aspx

2011-03-27T21:03:00.000-07:00

http://www.makinghomeaffordable.gov/news/Pages/default.aspx

CalPERS update…

2010-12-16T09:21:00.001-08:00

Using retirement money for housing comes up occasionally. CalPERS, which ended its housing program, had its "Secure Personal Loan Program," in which members were allowed to borrow some $18,000 against their retirement contributions for a down payment. Unfortunately there have been increasing delinquencies and defaults, CalPERS says. But we digress - the California Public Employees Retirement System, or CalPERS, is no longer offering mortgage loans to members - the program which was overseen by CitiGroup. The public pension fund said that due to "limited member usage" as well as increasing costs, its board of directors approved a suspension of its mortgage loan program, with current locks having three months to fund. The Member Home Program has been around almost 30 years, but in the last six has only done 1,000-4,500 loans per year which isn't much considering there are 1.6 million members and retirees.

Plenty of Reasons to Buy a Home Even after the Tax Credit

2010-06-01T20:13:00.001-07:00

RISMEDIA, May 26, 2010—Even though the home buyer tax credit expired on April 30, 2010 and won’t be renewed, there may never be a better time to buy a home than today, according to the National Association of Home Builders (NAHB). Many outstanding opportunities still exist for home buyers, but they may not be around forever.

“The home buyer tax credit was just one of many factors motivating Americans to buy homes,” said NAHB Chairman Bob Jones, a builder and developer in Bloomfield Hills, Mich. “But buyers can still take advantage of today’s low interest rates and competitive prices to get a home they may not have been able to purchase just a few years ago.”

Besides mortgage interest rates that have been hovering at near-record lows, homes in many markets have become more affordable. Prices have moderated from the highs of the housing boom that occurred in most of the country, especially in major markets where they had increased significantly.

Today’s new homes are also built to be much more energy efficient than homes constructed a generation ago, making them more affordable to operate. New homes are designed to support modern lifestyles with open floorplans, flexible spaces, improved safety features and low-maintenance materials.

Consumers who are thinking about buying a home should not count on interest rates or prices staying at current levels, however. Mortgage rates are sensitive to market conditions, and even a slight increase can push monthly payments beyond a family’s budget. As the country recovers from the recession and people stabilize their financial situations, NAHB economists expect that home prices will begin to increase by 2011.

NAHB’s home buyer brochure “Opportunity Knocks for Home Buyers” describes many of the opportunities in today’s market, as well as the long-term financial benefits of homeownership. It provides examples of how interest rates affect monthly mortgage payments and the typical federal tax savings over the first five years of homeownership. The brochure can be downloaded from NAHB’s website at: www.nahb.org/homebuyerbrochure.

The home buyer tax credit is still available for eligible home buyers who had a signed sales contract by the April 30 deadline and who close by June 30, 2010, as well as for qualified members of the military, foreign service and intelligence communities, who have until April 30, 2011, to sign a contract. For more information, go to www.federalhousingtaxcredit.com.

Tax Credit

2010-04-12T10:06:00.000-07:00

Federal Homebuyer Tax Credit
Your buyers have one more month to take advantage of the homebuyer tax credits. Expiring April 30, 2010, first time homebuyers may be eligible for an $8,000 tax credit, which does not need to be paid back so long as they remain in the home for three years. Non first time buyers who have lived in their principal residence for five consecutive years within the last eight may qualify for a $6,500 tax credit. Nearly all properties qualify including single-family homes, condos, townhomes, and co-ops.

State Homebuyer Tax Credit
Governor Schwarzenegger signed AB 183 providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied homes. Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit. This credit is equal to the lesser of five percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state). Buyers also must be at least 18 years old and unrelated to the seller. First-time buyers are defined as those who have not owned a home in the past three years.

BOFA

2010-03-26T11:53:00.001-07:00

Bank of America announced that for homeowner’s who qualify, they will forgive a percentage of the principal balance of the mortgage as a way to incentivize homeowners to continue paying their mortgage.

In order to qualify, the homeowner must be 60 days late on their mortgage and Bank of America is looking for precarious conditions that would warrant a default risk such as having an adjustable rate mortgage (ARM) whose payments have increased and / or a homeowner that has had financial distress in their lives.

Bank of America has also said that one of the conditions for the principal balance forgiveness is that the homeowner must make on-time payments for 5 years in order to be granted the forgiveness.

The program is expected to roll out at the end of May 2010 and Bank of America states that approx 45,000 homeowners will qualify. Fannie Mae and Freddie Mac loans do not qualify for this, but Bank of America’s hope is that they will start a trend that other financial institutions will follow.

To read more go to:
http://www.walletpop.com/blog/2010/03/24/how-bank-of-americas-principal-reduction-plan-will-work/

Freddie Mac, Non-Profit Groups Team Up to Help Discouraged Borrowers Pursue Loan Modifications

2010-02-17T12:17:00.001-08:00

Walk-in 'Holistic' Help Centers in Phoenix, Chicago, S. Calif., Washington DC plus National One-On-One Outreach Campaign to Target Reluctant, Delinquent Borrowers
For Immediate Release (En Español)
January 28, 2010
Contact: corprel@freddiemac.com
or (703) 903-3933

McLean, VA – Freddie Mac (NYSE:FRE) and 13 national and local non-profit organizations today announced a pilot effort to convince discouraged delinquent borrowers to pursue mortgage workouts that can save their homes and steer clear of foreclosure.

Freddie Mac’s new Borrower Help Centers in Chicago, Phoenix, San Bernardino and Washington, DC are designed to provide free, confidential one-on-one “holistic” mortgage counseling to delinquent Freddie Mac borrowers. The company is also launching a separate Borrower Help Network offering similar counseling over the phone to targeted Freddie Mac borrowers across the nation.

Both efforts rely on non-profit organizations with strong reputations to contact and work with Freddie Mac borrowers who may be eligible for a modification but never called their lender or became frustrated or uncertain of the process and gave up trying.

“We know that fear and frustration are keeping thousands of borrowers from getting the help they’re eligible to receive,” says Ed Haldeman, Chief Executive Officer, Freddie Mac. “So we’re going to address the problem head-on by working together with nonprofit partners. These organizations are trusted and valued sources in their communities, and we believe they can make the difference in keeping families in their homes and out of foreclosure.”

Holistic financial counseling goes beyond mortgage issues and also includes an assessment of borrower debt and credit issues that could affect a borrower’s ability to stay current on a mortgage after a modification. Borrowers in some stage of foreclosure are 60 percent more likely to keep their homes than other borrowers, according to a recent study from NeighborWorks America.

Groups participating in the Borrower Help Center and Borrower Help Network include the National Urban League, National Council of La Raza (NCLR), HomeFree-USA, local Neighborhood Housing Services in Chicago, Phoenix, and Ontario, California, and other local community organizations.

“NCLR’s partnership with Freddie Mac on this program means that distressed minority homeowners can access effective, personalized housing counseling from trusted community organizations. This effort will strengthen our ability to replicate best practices and succeed in helping more Latino families stay in their homes,” said Janet Murguía, President and CEO of NCLR, the largest national Hispanic civil rights and advocacy organization in the United States.

"The National Urban League looks forward to working with Freddie Mac on this important project as we collectively seek to test enhancements to the home retention continuum that prioritize client counseling and best utilize trusted community groups in order to help more minority borrowers avoid unnecessary foreclosure,” states Marc H. Morial, President & CEO of the National Urban League. “The Borrower Help Network is a critical response to the housing crisis and its design is clearly linked to comprehensive and sustainable neighborhood stabilization, which remains the ultimate objective."

In 2009 Freddie Mac helped nearly 250,000 borrowers avoid foreclosure through loan modifications, forbearance, repayment plans and other workouts, including modifications under Making Home Affordable. Freddie Mac accounts for nine percent of all seriously delinquent mortgages, but finances almost 23 percent of America’s residential mortgages.

Neighborhood Borrower Help Centers Open in Four Key Markets
The free Borrower Help Centers in Chicago, Phoenix, Washington, DC and California’s Inland Empire have already started contacting delinquent borrowers identified by Freddie Mac for appointments. In addition, delinquent borrowers who know Freddie Mac owns their mortgage can also schedule free appointments by contacting the Borrower Help Center in their community.

Counselors at each Borrower Help Center are trained to review Freddie Mac and Making Home Affordable workout requirements with their clients. Counselors will also provide one-on-one guidance to help borrowers apply for modifications, supply missing information or documents needed to move an application forward, and work with Home Retention Services, a wholly owned subsidiary of Stewart Lender Services, Inc., to help borrowers effectively connect with their servicers.

At the same time, the counselors will work with the borrowers on other outstanding debt and credit issues, such as credit card debts or auto loans, that may also be causing financial distress.

Borrower Help Centers in Chicago are being staffed by Neighborhood Housing Services of Chicago and the Latin United Community Housing Association (LUCHA), and in Phoenix by Neighborhood Housing Services of Phoenix and Chicanos Por La Causa. Neighborhood Partnership Housing Services in Ontario, CA and Home Free USA in Hyattsville, MD, a Washington, DC suburb have also opened Borrower Help Centers.

National Borrower Outreach Network Launched
In a parallel effort to reach distressed borrowers located outside of the initial target areas, Freddie Mac is launching a separate Borrower Help Network consisting of eight national and local non-profit organizations.

Together they are launching a national phone campaign to make contact with delinquent Freddie Mac borrowers who have stopped responding to their lenders. Counselors will provide free holistic counseling, and help borrowers explore and understand their mortgage modification options.

The Borrower Help Network also will work with Home Retention Services to connect borrowers with their servicers for a mortgage modification or other foreclosure alternative.

Participating organizations include the National Urban League and its chapters in Broward County, FL and Hampton Roads, VA, NCLR and NCLR Affiliate Network members – Southwest Housing Solutions in Detroit and New Economics for Women in Los Angeles. The Metroplex Economic Development Corporation in Dallas, Korean Churches for Community Development and Boat People SOS, which works with Vietnamese Americans through 15 branches across the country, are also participating in Freddie Mac’s Borrower Help Network. (For more information, visit freddiemac.com/avoidforeclosure)

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Freddie Mac Borrower Help Centers
Chicago, IL

Latin United Community Housing Association (LUCHA)
1152 N Christiana Avenue
Chicago, IL 60651
773- 489-8484

Chicago Neighborhood Housing Services
1279 N. Milwaukee Ave., 5th Floor
Chicago, IL 60642
773-329-4185 (English)
773-329-4181 (Spanish)

California – Inland Empire

Neighborhood Partnership Housing Services (NPHS)
320 W. G Street, Suite 103
Ontario, CA 91762
800-761-6747

Phoenix, AZ

Phoenix NHS
1405 East McDowell Road, Suite 100
Phoenix, AZ 85006
602-258-1659

Chicanos por la Causa
1242 E. Washington Street, Suite 102
Phoenix, AZ 85034-4043
602-253-0838

Washington DC

HomeFree-USA
3401A East West Highway
Hyattsville, MD 20782
301-891-4606 (English)
301-891-4607 (Spanish)

Retail Distress Highest Among Unanchored Strips, Bubble Markets

2010-02-05T10:31:00.001-08:00

Distress is rampant in the retail sector, which leads all property sectors with $32 billion in distressed assets, according to New York-based Real Capital Analytics. But not all retail is created equal. A look inside the numbers reveals that unanchored strip centers, retail in regions plagued by high unemployment and deep housing busts, as well as loans originated in 2006 and 2007, are disproportionately more susceptible to distress.

For example, $9.4 billion in retail commercial mortgage-backed securities (CMBS) loans are delinquent, in foreclosure or already taken back by banks, accounting for about 29% of the $32.6 billion of total delinquencies across all property types, according to Horsham, Pa.-based RealPoint LLC.

Markets where the economic crisis has cut sharpest — where housing prices have dropped precipitously and where unemployment is above the national average — have experienced higher levels of delinquencies and distress among retail properties, according to Suzanne Mulvee, real estate strategist with Boston-based Property & Portfolio Research.

Mulvee points to Las Vegas, Atlanta, Phoenix, Orlando and Jacksonville, Fla., as cities where pain is most acute among retail properties. For example, in Las Vegas the unemployment rate hit 13.1% in December and year-over-year home prices were down 26.6%, according to the Standard & Poor's/Case-Shiller Home Price Indices.

In such markets, retail developers attempting to forecast demand for retail may have anticipated tens of thousands of new homes to be built and sold, Mulvee says. When those homes are either halted in construction or completed but left vacant, it creates an obvious problem for retail that was intended to serve those new homeowners. “Banks will tell you that,” she says. “Most of the issues are in their construction portfolios.”

Another overriding pattern that emerges among distressed retail loans is vintage. Mortgages originated in 2006 and 2007 are more likely to default than retail loans originated in other years. “It’s clear people overpaid for those properties,” says Tom Fink, a senior vice president with Trepp. “The expectations that these properties would generate enough income to pay operating expenses and also cover debt service was wrong. People that bought in 2006 and 2007 got hit by the maelstrom and are suffering now.”

In addition to vintage, property type is another indicator of potential distress. Unanchored strip centers are having greater problems than regional malls, power centers and grocery-anchored strip centers, according to Fink. These properties — typically 75,000 sq. ft. or less — have fallen into trouble quickly by losing just one or two tenants.

For example, smaller centers that had Starbucks as an anchor were hammered by the coffee chain’s decision to shutter hundreds of locations last year. If vacancy falls below predetermined limits, co-tenancy clauses can allow other tenants to exit their lease agreements, potentially turning one or two dark stores into a larger exodus.

One thing that is not affecting the numbers, however, is General Growth’s bankruptcy. Despite the firm’s ongoing restructuring, it has largely remained current on all its debt obligations. Some of its loans are in special serving, but the firm was never delinquent on its payments other than a slight hiccup that delayed payments right around the time it filed for bankruptcy.

Most experts think the worst is yet to come for retail and that loans will continue to go bad at a brisk rate throughout 2010.

“Retail is still going to be one of the most troubled assets,” Fink says. “The population has shifted within communities and significant big-box chains have gone out of business with no new concepts to take their place. At one time if OfficeMax closed then maybe Babies “R” Us or Linens ‘n Things or Circuit City would move in. Those retailers are all gone. The space they occupied remains empty, there is nobody to fill it.”

Banks in 2009 added to today’s woes by granting one-year extensions to some borrowers that were having problems meeting their debt obligations at loan maturity. But that process may be near its end. In some cases, banks may have granted extensions in order to allow time to negotiate with borrowers, but after six or eight months with no resolutions it is time to foreclose, Fink says.

Borrowers that were just able to scrape enough money together to make monthly mortgage payments in 2009 also may have trouble in 2010 because of eroding property fundamentals.

“A lot of the banks have been able to extend because the debt service coverage was there, but this is the year where the debt service coverage starts to take the bigger hit,” Mulvee says. That’s because property incomes are continuing to erode as vacancies increase, existing retailers get lease extensions or new retailers sign on at lower rental rates than lenders had projected when the loans were originated.

Inadequate property income may remove the extension option and force more foreclosures, Mulvee says, but that creates a new problem as lenders attempt to liquidate foreclosed assets. Each sold property adds to the data appraisers and investors use to determine market pricing. Foreclosed properties typically sell on the low end of the price spectrum, bringing down overall asset values.

“If they kick too much product they will lower the value of what they are holding,” she says. “They are trying to avoid creating that spiral.”

New rules for FHA borrowers

2010-01-21T11:32:00.001-08:00

The Federal Housing Administration (FHA) today outlined future changes to the FHA home loan program. The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan.
Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.
Policy changes include:
• Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.
• Raising the minimum credit score requirements: New borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer after it goes through the normal regulatory process.
• Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process.

EPA's Ban on R-22 Refrigerant begins Jan 1, 2010

2009-12-21T21:39:00.000-08:00

As of January 2010, R-22 refrigerant, a HCFC (hydrochlorofluorocarbon), will no longer be manufactured.
Homeowners may have various types of appliances that contain HCFC-22 (also called R-22) or its blends, including window units, dehumidifiers, central air conditioners, air-to-air heat pumps, ground-source heat pumps, and ductless air conditioners. This refrigerant has been the refrigerant of choice for residential heat pump and air conditioning systems for over four decades.

Servicing existing units after 2010
• Consumers won't be required to stop using HCFC-22
• Consumers won't be required to replace existing equipment
• Existing (pre-2010) equipment using R-22 can continue to be serviced with R-22.
• After 2010, supplies of R-22 will be more limited
• After 2010, only stockpiled or reclaimed R-22 will be available.
The average life expectancy of an air conditioning unit or heat pump is around 15 years. What this means to homeowners, for example, is if you had installed a new R-22 air conditioning system in the year 2002, you will be able to get refrigerant for your system at least until the year 2020 when it will no longer be manufactured. Chances are, within that much time you will need a new system, so you shouldn't base a purchase on Freon alone.

For more information visit R-22 Phaseout at EPA.gov.

Smart buyers will be out during the holidays

2009-12-21T21:36:00.001-08:00

The federal homebuyer tax credit is back in action in a new-and-improved format that will benefit first-time homebuyers and homeowners who want to sell their current home and buy a new one. The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it. Here's what you should know:

Deadline: April 30, 2010

The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.

Credit up to $8,000 or $6,500
Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominum that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.

Homebuyers who want to take advantage of the tax credit should consult the right people for help, including:
A tax preparer, who can help them ensure they meet all the requirements to use the credit.
A mortgage lender, who can help them choose a loan program that will fit their needs.
A Realtor, who can help them locate a home they can afford and want to purchase.
Buyers should be aware that not all loans allow the borrower to finance closing costs or accept a contribution from the seller toward those costs, Bernard says. Many loan programs do allow those options, but that "certainly is not a blanket opportunity," she says. Buyers whose savings won't stretch to cover all the out-of-pocket costs to buy a home should discuss that constraint with their loan officer or mortgage broker.

Federal tax credit will be extended through April 30, 2010

2009-11-05T14:48:00.000-08:00

More good news for consumers, our members, and the housing market recovery. Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As you may know, C.A.R. and our partners at NAR have worked for months urging Congress and the Senate to extend and expand this crucial piece of legislation. We expect President Obama to sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers. We expect that number to increase dramatically in the months ahead with this new legislation in place. Thank you to our members who called, wrote, and e-mailed their congressional representatives and voiced their support for the home buyer tax credit. Your voices were heard – today’s vote is a direct result of your actions and involvement.

Sincerely,

James Liptak
2009 President
CALIFORNIA ASSOCIATION OF REALTORS®

New loan limits for 2010

2009-11-05T11:53:00.000-08:00

New loan limits for 2010
The Federal Housing Finance Agency (FHFA) is expected to announce, as early as next week, the new conforming loan limits for 2010. The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.

Currently, as a result of the economic stimulus plan, the conforming loan limit is $417,000 for most areas in the U.S., but $729,750 in high-cost areas, including many in California. The loan limits are set to expire at the end of this year, and could be lowered to $625,500 for high-cost areas. If the current loan limits are reduced to $625,500 for high-cost areas, lenders likely will adjust their loan underwriting standards to align with the new 2010 loan limits, to ensure the loans can be purchased or guaranteed by Fannie, Freddie, and the Federal Housing Administration (FHA).

current limits for Fannie Mae, Freddie Mac, and FHA loans through 2010.

2009-11-05T11:52:00.000-08:00

Oct. 30, 2009
Dear C.A.R. Members:
Good news to report: President Obama is expected to sign a resolution passed late yesterday by Congress extending the current limits for Fannie Mae, Freddie Mac, and FHA loans through 2010. The limits were set to expire at the end of this year. This is especially critical for California, where more than 80 percent of all loans are financed by Fannie Mae, Freddie Mac, or FHA, and will help maintain the positive signs we are now seeing in California’s mortgage market. President Obama is expected to sign the resolution today or tomorrow as part of a broader piece of budgetary legislation that will prevent a government shutdown.
While home prices in California have declined, the demand for housing has not. The market has been dominated by first-time home buyers who have faced a shortage of financing opportunities. The loan limits are set at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas, including many regions in California. Sales in move-up and high-end markets have been constrained this year; the loan limits extension will help qualified home buyers in these markets to move forward with their purchases.
Although loan limits are safe through 2010, there is still work to be done. Congress has yet to act to extend the First Time Home Buyer Tax Credit past its current Nov. 30 expiration date. Yet the impact of the home buyer tax credit is clear: A C.A.R. survey of first-time home buyers shows that 40 percent would not have purchased a home without the tax credit.
In tandem with our efforts to extend the current loan limits, C.A.R. and NAR are vigorously working to have the soon-to-expire federal First Time Home Buyer Tax Credit extended, and we need your help.
I am asking every one of you to contact your congressional representative today. In the Senate, an amendment offered by Senators Dodd, Lieberman, and Isakson will both extend the program into 2010 and expand the eligibility requirements. The amendment has been attached to a bill that will extend unemployment insurance benefits. We expect the bill will pass the Senate and then be voted on by the House of Representatives.
Please call your Congressional Representative to urge them to support the Unemployment Extension bill that contains the home buyer tax credit. Please call (800) 961-3302 and enter your PIN number 195506713 when you are prompted to be connected to your legislator’s office.
Thank you for your help with this effort. Together, we can make a difference in Washington, D.C.
Sincerely,
James Liptak
2009 President
CALIFORNIA ASSOCIATION OF REALTORS®

2009-10-13T17:39:00.000-07:00

Great news for local title and escrow offices!
On Monday, October 12, 2009 Governor Schwarzenegger signed AB 957, The Buyer's Choice Act.
The Buyers Choice Act allows by law the buyers of REO properties to choose the title and escrow company. The banks and asset managers no longer can direct your buyers to title and escrow companies of their choice.
As you have seen and with many conversations I have had with customers, not being able to direct your transactions results in higher fees, more liability and a general lack of what this business is based on..... customer service.
Take action and protect your REO buyers with this law. The Governor felt this was so important that the law was made an urgent measure and became effective Monday, October 12, 2009.

Region's home sales, prices rise

2009-09-02T10:43:00.000-07:00

Sacramento home sales held steady through July and prices continued to inch up as they have done throughout the summer, according to La Jolla-based MDA DataQuick, which released the latest home sales figures Friday.

The company, which tracks sales through county recorder offices, reported a total of 3,412 homes sold in the four-county area, about a 2 percent increase from June. Sales volumes were lower by about 10 percent than the same period last year, when foreclosure sales were happening at a rapid pace.

The median sales price in Sacramento County rose to $180,000, which is still about 14percent lower than a year ago, but rising compared with the low-water mark of $165,000 set earlier this year. Median sales prices in the other three counties showed similar modest gains, up $15,000 in El Dorado County to $330,000, up $9,000 in Placer County to $295,000, and up $16,500 in Yolo County to $281,000.

Ealier this week, local analyst Trendgraphix Inc. reported a total of 2,455 existing homes in the four-county area sold in July. The company tracks sales through the multiple listing service, as opposed to recorded deeds, and doesn’t track new-home sales.

MDA DataQuick tracks all sales types, including new homes and existing single-family detached homes and condos.

Sacramento Business Journal - by Michael Shaw Staff writer

Brown Exposes Inner Workings of Loan Modification Boiler Room

2009-08-18T09:54:00.000-07:00

Los Angeles - Responding to a just-released report that exposes the inner workings of a loan modification boiler room, Brown warned homeowners to avoid "shadowy and unscrupulous" loan modification consultants who use aggressive telemarketing tactics and charge thousands of dollars in upfront fees for foreclosure relief.

The report, written by a court-appointed receiver, found that H.E. Servicing, Inc., a loan modification company that Brown sued last week, ran a "well-appointed telephone boiler room" focused on making money, rather than helping homeowners stay in their homes.

"From sun up to sun down, this shadowy and unscrupulous operation used high-pressure telemarketing tactics to bully homeowners into paying thousands of dollars for phony loan modification services," Brown said. "In reality, the goal wasn't to help these homeowners stay in their homes, but to rip them off and take their hard-earned dollars."

On July 7, 2009, as part of "Operation Loan Lies," Brown, the Federal Trade Commission and the State of Missouri sued US Foreclosure Relief Corp., George Escalante, Cesar Lopez and Adrian Pomery who operated a number of fraudulent foreclosure relief companies including H.E. Servicing, Inc. On the same day the suit was filed, the U.S. District Court for the Central District of California entered a temporary restraining order appointing an independent receiver to closely examine the structure, operation and finances of these companies.

After reviewing documents, tracing financial transactions, interviewing employees and speaking with state officials, the receiver made the following findings:

- "Even if most of the deceptive sales practices could be cured, this is not a lawful advance fee loan modification business. It is not operated and managed by a lawyer or a properly licensed DRE broker. It is a phone sales operation selling unlicensed loan modification services with more than 80 percent of its clients residing outside of California." (p. 2)

- "At the outset, it is a challenge to precisely categorize this business. It is not a law practice. It is not a licensed mortgage or real estate company. Rather, I see this business as a high-pressure, cash-up-front telephone sales business targeting distressed homeowners. It appears that some homeowners may have been helped, but the overriding goal of the business was not to help homeowners, but to make money." (p. 6)

- "The Sales Department is essentially a well-appointed telephone boiler room with phone cubicles for 44 sales people - ‘counselors' - and separate offices or stations for 3 on-site managers." (p. 9)

In addition to the excerpts above, the receiver's report, submitted July 15, 2009, made the following observations about H.E. Servicing, Inc.:

- The sales department operated like a boiler room. Spread across 11,285 square feet of office space in Anaheim, the company operated as a "bustling enterprise" with phone cubicles for 44 sales people and offices for three on-site managers. Sales people handled approximately 500 incoming calls per day in staggered shifts from 5:00 a.m. to 5:00 p.m. Of the 60 employees, only eight "staff negotiators" communicated directly with clients and lenders about mortgage details.

- The typical commission was $450 for a fully paid sale (i.e. $2,500 upfront payment) with an extra $25 if the consumer paid by debit card or wire transfer. If the consumer could only handle a payment plan (minimum $1,000 down), the sales person received a percentage (10-15%) of the amount actually paid, with no commission on the later payment. Other sales incentives were also offered, including a Rolex watch.

- Sales people informed homeowners that the company successfully negotiated 10,000 loan modifications, when in truth, only 311 were completed. Sales people informed homeowners that the company had 10,000 confirmed and negotiated loan modifications, a 90% success rate, nationwide service and over 100 workers. According to company records, from November 2008 to July 8, 2009 a total of 2,960 loan modification files were opened with only 311 completed.

- The company spent $70,000 a week on radio and television advertising in 100 media markets and had plans to expand to $80,000-$100,000, producing an estimated $270,000 a week in new business. The company also planned to aggressively hire additional sales staff.

- The company advertised a money back guarantee, but just before being shut down it implemented a cap on refunds, regardless of the amount due to consumers.

- Homeowners were led to believe that they were hiring a lawyer or law firm to save their homes. Sales people frequently referred to the company as "attorney-based." One sales person had a note claiming that the attorney was "the most aggressive attorney in the mortgage industry." By contrast, the receiver's report says that the business is "not a law practice."

- In the first six months of 2009, a report prepared by an outside accountant reported a net income of $4.5 million.

Last Friday, with the temporary restraining order set to expire, the U.S. District Court for the Central District of California held a hearing to consider the receiver's report and other evidence presented by the Attorney General, the Federal Trade Commission and the State of Missouri. After hearing this evidence, the court issued a preliminary injunction to keep the terms of the temporary restraining order in place.

The Court set a hearing for July 28, 2009 to consider options to assist homeowners, particularly those facing foreclosure.

Brown has been leading the fight against fraudulent loan modification companies. In addition to last week's legal action against 21 individuals and 14 companies, he has sought court orders to shut down several companies including First Gov and Foreclosure Freedom and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

As part of today's consumer alert, Brown's office issued the following tips for homeowners to avoid becoming a victim:

DON'T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON'T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON'T transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called "rescuers" use to evict homeowners and steal all or most of the home's equity.

DON'T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON'T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer."

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or www.hud.gov.
If you believe you have been the victim of a mortgage-relief scam in California, please contact the Attorney General's Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.

Win Some, Lose Some

2009-08-08T11:21:00.001-07:00

How REALTORS® prepare buyers for the realities of today’s multiple-offer markets

By Marcie Geffner

Three. Eight. 20. 30. 62. Would you believe 73? That’s how many offers some sellers in newly hot housing markets reportedly have received for their homes. * With so many offers on the table, it’s clear that competition for hot listings is indeed the new norm in some of California’s badly battered housing markets. That means many buyers inevitably will be disappointed, and the challenge then for REALTORS® is to convince those buyers not to give up their home-buying plans and flee the market.

Buyers Must Be Properly Prepped

The most effective strategy in such situations is to manage buyers’ expectations before they make an offer, says Jim Swanson, a broker-associate with Prudential California Realty in Sacramento. Virtually all of the prime new-on-the-market homes in that area attract multiple offers, Swanson estimates.

“If you did your job, it’s not a problem: They’ll be sanguine, and they’ll say it wasn’t the right house,” he explains. “If they’re crestfallen, then you failed before the offer was written.”

Swanson advises buyers to offer the highest price they’re willing to pay for a particular home. That way, if their offer isn’t accepted, they can take comfort in the knowledge that they wouldn’t have wanted to pay more and that, in their opinion, another buyer paid “too much” for that house.

Rodney D. Gallman, a REALTOR® with Altera Real Estate Mel Wilson & Associates in Northridge, also educates buyers upfront about the realities of multiple-offer markets. He says he explains that the process can be timeconsuming and that if a seller doesn’t choose their offer, they’ll need to look at more properties.

“Buyers always want to offer a little less and get a good deal,” he observes. “You have to let them know that there are multiple offers and if they don’t put their best price forward, chances are we won’t get this one.”

Gallman estimates that threequarters of the homes for sale—non-REO properties for sale by individual home sellers—in his area have attracted multiple offers.

“I have five listings in the Antelope Valley,” he says, “and I probably have three offers on each of them.”

Buyers Take Cue From Agent’s Enthusiasm

Connie Vaughn, a REALTOR® with ZipRealty in West Covina, advises buyers to make multiple offers of their own to improve their odds of an offer being accepted. She says most of the homes in her area receive multiple offers, and some have netted as many as 30 or more offers.

If none of the offers is successful, Vaughn says, she tries to encourage buyers “to keep looking and not give up. Sometimes, it gets frustrating, but you have to keep positive and say, ‘We are going to do our best, and we will succeed,’” she says. “I assure them that I am determined to get them into a house.”

Gallman agrees that the agent’s positivity is an important ingredient in the mix of factors that determine whether frustrated buyers become discouraged or soldier on until they achieve their goal.

“The personality of the agent—the energy he provides—dictates whether buyers can keep moving forward,” he says. “If you let them see that you aren’t excited, then they aren’t going to be excited either.”

Of course, it’s not always easy for REALTORS® to keep up that positive attitude in the face of their own disappointment along with the buyer’s frustration.

“This business is not for the weak at heart,” Gallman observes. “Multiple offers can be really frustrating.”

Yet again, the agent’s attitude is crucial to overcome such personal challenges.

“Sometimes it does get frustrating,” Vaughn agrees. “You have to keep positive and say, ‘We are going to do our best, and we will succeed.’ And you have to believe that it will work!”

Credit Scores Take Hits?

A new trend in multiple-offer markets is that some sellers require buyers to obtain a mortgage preapproval from a specific lender. This trend has forced buyers to apply for a loan with multiple lenders, and that has triggered more hard inquiries on those buyers’ credit reports.

Some buyers are concerned that these multiple applications will hurt their credit score, according to Jim Swanson, a broker-associate with Prudential California Realty in Sacramento.

“They are told by the first lender they talk to, ‘Oh, by the way, don’t consult another lender because it will affect your credit,’” he says.

Whether those inquiries will hurt the buyer’s credit score is difficult to say since that depends not only on the number of inquiries, but also the timing of those inquiries and other aspects of the individual’s credit history, according to MyFICO.com, a Web site operated by Fair Isaac in San Rafael.

Credit scores generally group together multiple inquiries for the same type of new loan over a short time period to allow for rate shopping. However, the duration of that time period varies among different credit scores, according to Cynthia Baker, a spokesperson for the Experian credit bureau.

The current FICO score uses rolling 30-day and 45-day “buffers” to group related inquiries, but older generations of the score still in use may have shorter inquiry-grouping buffers, according to Craig Watts, a spokesperson for Fair Isaac.

“REALTORS® are unlikely to run into a problem unless the buyer takes six months to make offer after offer and keeps getting declined. Our advice to consumers is to do their shopping in a reasonable period of time,” Watts says.

That advice may make the need to present a strong offer all the more urgent.

Marcie Geffner is a freelance writer in Los Angeles and former senior editor of California Real Estate magazine.

NEW LOAN DISCLOSURE RULES MAY POTENTIALLY AFFECT CLOSE OF ESCROW

2009-07-17T20:15:00.000-07:00

Starting July 30, 2009, if the APR on an initial Good Faith Estimate is no longer accurate (within a 0.125% range) at close of escrow, a lender must generally provide a residential borrower with a new disclosure and a three-day right to rescind before consummating the loan. REALTORS® are forewarned that, because of this new three-day waiting period, a lender's failure to timely provide corrected disclosures has the potential of delaying funding of the loan and close of escrow.
This new requirement is part of the Mortgage Disclosure Improvement Act (MDIA) implementing new loan procedures to protect borrowers and foster greater transparency in mortgage lending. For loan applications submitted on or after July 30, 2009, the new MDIA changes to the Truth In Lending Act are generally as follows:
• Applicability: The new MDIA rules pertain to federally-related mortgage loans covered under RESPA and secured by a consumer's dwelling. The rules apply to both purchase and refinance loans.
• Early Disclosures: A lender must provide a borrower with an initial Good Faith Estimate within three business days of receiving the borrower's written loan application as specified. For this provision, a "business day" is generally defined as a day on which the lender's offices are open for business.
• Upfront Fees Restriction: Neither a lender nor any other person may impose an upfront fee on the borrower (except for credit report) until the borrower has received the early disclosures in person or, if mailed, three business days after the early disclosures are mailed. For this rule, a "business day" is defined as all calendar days except Sundays and legal public holidays as specified.
• Seven-Day Waiting Period: A lender must wait seven business days after providing the early disclosures before consummating the loan. For purposes of this waiting period, a "business day" is defined as all calendar days except Sundays and federal legal holidays as specified. A borrower may waive the waiting period in writing in case of personal financial emergency, such as an imminent foreclosure sale.
• Re-disclosure Requirement: If the final Annual Percentage Rate (APR) at loan consummation varies more than 0.125% (or 1/8 of one percent) from the initial APR on the early disclosures of a regular transaction, the lender must provide the borrower with a corrected disclosure at least three business days before the loan is consummated. For purposes of this waiting period, a "business day" is defined as all calendar days except Sundays and federal legal holidays as specified.
• Three-Day Waiting Period: For corrected disclosures, a lender cannot consummate a loan until three business days after the the borrower receives the corrected disclosure in person. If the corrected disclosure is mailed, the borrower is deemed to have received it three business days after it is placed in the mail. A borrower may waive this waiting period in writing in case of a bona fide personal financial emergency, such as an imminent foreclosure sale.
The new MDIA rules and regulations are set forth at 74 Federal Register 23,289 (May 19, 2009) (to be codified at 12 CFR 226).

California New-Home Market Slowly Improving

2009-07-17T12:41:00.000-07:00

The monthly California Building Industry Association/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that sales in new-home communities of 10 units or more declined 26 percent compared with May 2008, but sales improved from the 31 percent decline in the prior month and is the fourth consecutive month of that improvement trend.
During May, 3,019 new homes and condominiums were sold in the subdivisions tracked by HWMI, compared with 4,094 in May 2008. Sales of single-family homes were down by 30 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 24 percent and sales of condominiums were off by 16 percent.
Compared with the same period last year, the median base price of homes sold dropped by 5 percent.
“The incremental gains since March are counter to this typical seasonal trend, which suggests the market has found the bottom and is truly stabilizing, albeit slowly,” said Jonathan Dienhart, Director of Published Research for HWMI. “With the state tax credits for home purchases running out and continued troubles in the broader economy, it is not yet clear that an actual recovery is at hand.

Clarifications to American Clean Energy and Security Act

2009-07-10T16:27:00.000-07:00

In the week following the passage of H.R. 2454, the American Clean Energy and Security Act, the Internet and talk radio were abuzz with erroneous reports of mandatory point-of-sale retrofits, audit and labeling, and other misinformation. This misinformation was due, in part, to the inability of Congress to post a current draft of the bill on the Web in a timely manner, due to a last-minute, 300-plus pages amendment. There also was a well-orchestrated, intentional scare campaign by opponents of the legislation.
C.A.R. and NAR had opposed H.R. 2454 specifically because of a mandatory labeling provision included in the original bill. NAR was successful in procuring a provision in the last-minute amendment that ensured the labeling requirement would only apply to new construction and not to existing homes. Additionally, the bill does not include any retrofit mandates at point-of-sale. What the bill does do is provide financial incentives, such as grants, loans, loan guarantees, and/or mortgage interest rate buy-downs, for property owners who voluntarily make energy efficiency improvements. As these voluntary improvements would be incentivized by federal tax dollars, the energy efficiency of the property would require an audit before and after the improvement.
The legislation will create a national building code standard that states will have to adopt or the federal government will set and enforce the state’s building codes. Although California’s code already would be in compliance with the provisions of the legislation, C.A.R. historically has opposed federal preemption of state laws. Both C.A.R. and NAR will continue to work with the Senate to amend this section of the bill.
The issue of energy conservation and climate change continues to be a hot-button issue for many Americans and often splits along party lines. While H.R. 2454 contained more than 1,400 pages, only a small portion of the bill directly impacted real estate. As a result, legislators easily can overlook critical real estate provisions and instead focus on headline-grabbing issues such as factory emissions and foreign oil dependency. C.A.R., NAR, and a strong grass roots effort by our members ensured that Congress recognized and addressed pitfalls within the bill that would have harmed the real estate industry. Because of NAR’s efforts, the final piece of legislation will not force existing homes to compete with newly constructed homes by mandating energy efficiency labeling, labeling will be excluded from the home buying process, and property owners who voluntarily choose to improve the energy efficiency of their property will have the financial incentives to do so.

Here are some URL's with additional information.

http://www.realtor.org/fedistrk.nsf/c2c6e17e27e92119852572f8005cd953/4c238a3be8220682852573d4006f1dfc?

PDF of The American Clean Energy and Security Act

http://frwebgate.access.gpo.gov/cgi‐bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2454eh.txt.pdf

Federal Reserve leaves key interest rate unchanged

2009-04-30T09:02:00.001-07:00

The Federal Reserve today voted to maintain the current target range for the federal funds rate at 0 percent to 0.25 percent, anticipating that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
“The economy has continued to contract, though the pace of contraction appears to be somewhat slower,” the Fed said in a prepared statement. “Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time,” and inflation will remain subdued.
As previously announced, the Fed will continue to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, and will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.

50 Green Tips for Earth Day and Beyond

2009-04-22T09:00:00.001-07:00

It doesn't have to be Earth Day for me to think about how I can make an impact (or less of an impact) on our...

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10 Happiest States in the U.S.

2009-04-14T13:23:00.001-07:00

Money can’t buy happiness, but it can make life a whole lot easier.

MainStreet.com’s Happiness Index examined household income, debt, employment, and foreclosures to choose the states that are surviving the current economic crisis with the most panache.

The analysis discovered that despite disastrous conditions in parts of Michigan and Ohio, overall, the Midwest is navigating the financial meltdown with the highest average salaries, lowest unemployment, and fewest foreclosures. In fact, Nebraska, in the center of the corn belt, scores highest on MainStreet’s Happiness Index.

Here are the rest of the top-10 happiest states:
Nebraska
Iowa
Kansas
Hawaii
Louisiana
Oklahoma
Wyoming
South Dakota
West Virginia
Wisconsin

10 Riskiest U.S. Housing Markets

2009-04-14T13:21:00.000-07:00

10 Riskiest U.S. Housing Markets
Even with hints of a housing recovery in some places, risky markets, dominated by nonprime mortgages, still prevail in a number of areas.

Forbes magazine and Moody’s Economy.com surveyed the 200 largest metropolitan areas, adding up the number of loans to low-rated borrowers and dividing that sum by the total number of mortgages to calculate the percentage of each area’s market that is below prime.

Here are the 10 metro areas with the highest percentages of nonprime mortgages, which makes them susceptible to defaults as unemployment rates continue to rise.

Mission, Texas
Detroit
Miami
Brownsville, Texas
Merced, Calif.
Lakeland, Fla.
Bakersfield, Calif.
Fort Lauderdale, Fla.
San Bernardino, Calif.
Visalia, Calif.

Housing Recovery? Not This Year, Experts Say

2009-04-14T13:19:00.000-07:00

Daily Real Estate News | April 10, 2009

One in every nine homes in the United States is sitting vacant, according to the U.S. Census Bureau. Economists predict that getting rid of this glut nationwide will take at least three years.

Here’s the math: The number of housing units in the United States increased by 8.65 million from 2002 to 2007. During that period, the number of U.S. households rose by only 6.7 million. Subtract a half-million homes that will be torn down or lost to fire, and that leaves an excess of 1.3 million units, not including vacation homes.

The country adds about 1.5 million households every year, but the recession and a slowdown in immigration is reducing that number. Additionally, Gen Xers, most of who are within the age range when people tend to have the most children, are relatively small in number and won’t create an enormous need for larger living space.

Factor in the number of new homes being built—about 700,000 this year, according to Arthur C. Nelson, director of the University of Utah’s Metropolitan Research Center— and the bottom line is a multi-year recovery.

As Robert Lang, head of the Metropolitan Institute at Virginia Tech, puts it, "Population is still growing, and sooner or later, you'll want to move out of relatives' basements."

Utah’s Nelson analyzed government and private housing data and predicts that hard-hit housing markets in the West and South will start to bounce back later this year and during the first half of 2010. The Northeast and Midwest will have the slowest comeback, possibly extending beyond 2012, he says.

PROPERTY TAX REDUCTION SCAM ALERT

2009-02-05T14:07:00.000-08:00

The Los Angeles County Assessor's office is alerting homeowners that various private companies are sending mailings to property owners offering their services to pursue a reduction in the owner's property taxes. The companies may charge hundreds of dollars to file for a reduction in value on behalf of the property owner. Some companies also are imposing late fees if the application is received after an arbitrary deadline. Solicitations from private companies offering to pursue a reduction in property taxes must clearly indicate that they are NOT a government agency and that their services are NOT approved or endorsed by any government agency. Failure to provide such notice is a violation of California law.

In 1978, California voters passed Proposition 8, a constitutional amendment that allows a temporary reduction in assessed value when a property suffers a "decline-in-value." A decline-in-value occurs when the current market value of your property is less than the assessed value as of January 1. The assessed value is the value shown on a property owner's most recent property tax bill. Typically, an application from the property owner is required to initiate a review of the property's value by the Assessor.

RECORD LOW MORTGAGE RATES BOOST REFINANCE ACTIVITY

2009-01-28T14:48:00.000-08:00

The Market Composite Index, a measure of mortgage loan application volume, was 1324.8 for the week ending Jan. 9, an increase of 15.8 percent on a seasonally adjusted basis from 1143.8 one week earlier, according to the most recent report from the Mortgage Bankers Association (MBA). On an unadjusted basis, the Index increased 95.7 percent for the week ending Jan. 9, compared with the previous week and was up 52.4 percent compared with the same week one year earlier.

The Refinance Index increased 25.6 percent to 7414.1 for the week ending Jan. 9, compared with 5904.5 the previous week, and the seasonally adjusted Purchase Index decreased 14.1 percent for the week ending Jan. 9, compared with 295.8 344.2 one week earlier. The Refinance Index is at its highest level since the week ending June 2003, according to the report.

The refinance share of mortgage activity increased to 85.3 percent of total applications for the week ending Jan. 9, compared with 79.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 1.1 percent for the week ending Jan. 9, compared with 0.9 percent of total applications from the previous week, according to the report.

IRS TO EXPEDITE TAX LIEN RELIEF FOR HOMEOWNERS

2009-01-28T14:44:00.000-08:00

The Internal Revenue Service (IRS) recently announced it will expedite its process of providing relief from federal tax liens for distressed homeowners. With more than one million current federal tax liens against real and personal property, the IRS announcement should help REALTORS® and their clients resolve federal tax lien issues in their sale and loan transactions.

As background, a homeowner seeking to sell or refinance a property must generally pay off an existing federal tax lien. However, during the current economic downturn, many homeowners don't have the cash or equity to do so. Hence, for a refinance, the homeowner may request that the IRS makes its tax lien subordinate, or secondary, to the lien of the refinancing lender. For a sale, the homeowner may, under certain circumstances, request that the IRS discharge its claim. The IRS's processing time for subordination or discharge requests has been about 30 days. The IRS currently is working to expedite that time frame to help distressed homeowners. For IRS instructions on requesting relief from federal tax liens, go to IRS Publication 783 for discharges and Publication 784 for subordinations at www.irs.gov.

Home Fads That Are Falling Out of Style

2009-01-28T14:36:00.000-08:00

LAS VEGAS – Some home features don’t stay popular forever. More homes are inching away from incorporating the following home features, according to recent consumer preference surveys.

1. Fireplaces: The fireplace skyrocketed in importance in homes in 1991 with 62 percent of new homes having one or more. But the number has steadily been decreasing ever since. In 2007, the number dropped to 51 percent.

2. Carpet: While 54 percent of homes still have carpet floors, the number is decreasing and hardwood floors are taking the place. Vinyl and ceramic tile flooring also are being bypassed more by buyers. Seventeen percent of new homes contain hardwood floors throughout the entire house.

3. Living room: These once-decorative centerpieces of homes are slowly vanishing from newer homes. Thirty-four percent of consumers say they’re willing to buy a home without a living room.

4. Desks in the kitchen: These desks were once looked at as great storage areas but they’re often too small and quickly become clutter spaces in a home, said Gayle Butler, editor in chief of Better Homes and Gardens. Instead, more consumers say they prefer larger desks in or near the family room—equipped with a messaging center—where they can keep an eye on their kids as they work on the computer.

5. Skylights: The little windows that allow natural light to seep into a home from above are falling out of style. Only 10 percent of new homes will include them this year, a continuing downward spiral for skylights.

6. Upscale kitchen finishes: Granite countertops are slowly becoming less desirable among buyers who are now moving toward affordable, low-maintenance laminate countertops—which tend to last longer and now come in various styles.

January 21, 2009
By Melissa Dittmann Tracey, Home Trends

The Housing Wealth Debate

2008-12-22T16:24:00.000-08:00

The Wall Street Journal recently published an article raising questions about people's optimistic "outlook" on generating wealth from their homes. The Journal characterized that view as wishful thinking. While not intending to cast aspersions on the analytical acumen of that well-respected publication, I do have a different take on that issue. My attempt in this corresponding article is to lay out the same information the newspaper published - albeit in a different light.

Owning a Home Still a Good Long-Term Investment
The Journal article claims that those hoping for a quick rebound in home prices are likely to be disappointed. Yes, some economists predict home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012. But market timing for home prices is even more difficult than trying to time rises in stock prices. Unlike stocks, real estate is local. In fact, the latest government data show only four states - Arizona, California, Florida, and Nevada - registering home price declines of double digits. This government data has narrow coverage on homes with subprime loans, so the data should be viewed as price trends in neighborhoods with little subprime loan exposure. That makes sense, as less than 10 percent of homes have subprime loans. Interestingly, these four states are the very ones showing recent notable sales increases as buyers have taken advantage of the lower prices. Anecdotal reports of multiple bids suggest prices may be bottoming out in these areas.

Home Prices
Experts say you should generally expect house prices to rise just a bit more than inflation and roughly in line with household income. OK - let's look at how that works in real life. If home prices rise (on average) at an inflation-adjusted rate of 2.5%-3% a year, then nominal home prices can be expected to increase about 4.5%-6% a year. In other words, if a household buys a $200,000 home today, then that home will be worth $310,000 in 10 years, $505,000 in 20 years, and $823,000 in 30 years, assuming a 5% home price growth. Given that most homeowners have 30-year mortgages, all the debt will have been paid off at the 30-year mark. At that point, the $823,000 is pure equity. If home price appreciation increases further - say at 6% - that home will be worth $1.08 million in 30 years. Given America's poor savings rate (that's a different issue altogether), any form of savings discipline such as a monthly mortgage payment helps Americans accumulate wealth.

Confidence in Rising Home Value
Even by the paper's own sources of data used to support its claims, owning a home is often still a better long-term investment than stocks. The Journal cites a poll of 2,000 adults conducted by real estate data provider Zillow.com that found 61% believed the value of their home would either remain level or rise over the next six months. Another survey of more than 1,000 homeowners, sponsored by real-estate-services firm Realogy Corp., found that 91% thought that owning a home was the best long-term investment they could make. And an online survey of 5,000 people commissioned by Citigroup found that just 32% believed it was a good time to invest in stocks - but 51% said it was a good time to buy a home. Well, who am I to argue with housing consumers!

Fundamentals Impacting Home Prices
Yes, as The Journal says, in the long term, house prices are driven by fundamentals that are hard to predict. Those fundamental drivers include immigration, birth rates, the size and nature of households, and incomes. The trick is to figure out where job and income growth will be strongest and where those households want to live.

Again I cite our mantra: All real estate is local. In fact, it can be really local. I remember a story in my local neighborhood paper several years ago about two homes that looked exactly alike. Both homes fetched roughly the same price at one point. But at the time of the Journal's recent story, one home was worth more than double the other - not because of any physical differences in the homes, but because of neighborhood characteristics.

Investors and the Academic Debate
Few homeowners have the time to follow academic debates about the details of home price measurements (see page 7) or the plethora of analyses on home prices published in economic or real estate academic journals, trade publications, or even The Wall Street Journal. But for those who choose to purchase properties as an investment only - that is, they're not actually living in the property - The Journal's story about a couple who, for lack of a better term, became "property managers" is telling. For nearly four decades, a married couple invested in rental properties in and near Stevens Point, WI. They thought real estate was a good way "to get rich slowly." Despite the housing downturn, they have gradually (emphasis added) built their net worth from zero to around $2.5 million through their rental properties. Yes, there were challenges -- they have dealt with countless plumbing emergencies, evicted deadbeats and even once had to clean up after a suicide in one of their properties.

Well, I salute that couple. Property management is not for everyone. But some people are willing to face its challenges for the financial rewards - and ignore silly academic debates. Witness

the couple's ' accumulation of $2.5 million.

Final Thoughts
Buying a home is a serious decision with serious responsibilities. It should be done with care and be based on good information. Consumers should always be wary of any "how to profit from it" slogans but at the same time should not be discouraged by doom-sayers. Yes, those households who bought during the buying frenzy and at the peak a few years back have lost a lot - if they are trying to cash in NOW. But that does not mean that the new crop of buyers will face the same fate. Generally, homeowners do accumulate wealth over the long-term. If one of your clients is a consumer who is financially and emotionally ready, current conditions certainly favor buyers over sellers. The time will surely come again when sellers have the edge. Trying to market-time a purchase may result in remorse from buying "too high" or "selling too late." Those home buyers willing to stay in the market for the long term will likely feel good and reap the benefits from their long-term investment.
by Lawrence Yun, Chief Economist, NAR Research

KEY INTEREST RATE TO RANGE FROM 0 TO .25 PERCENT

2008-12-18T12:37:00.000-08:00

In what analysts characterized as a symbolic move, the Federal Reserve yesterday established a target range for the federal funds rate of 0 percent to .25 percent, and said it was committed to expanding its purchases of mortgage-backed securities.

"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the Fed said in a prepared statement. "In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

"Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight," the Fed said. "Overall, the outlook for economic activity has weakened further.

"Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters."

Going forward, Fed policy will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. Over the next few quarters, the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and said it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.

According to the statement, the Fed also is "evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity."

CONFUSED ABOUT PLASTICS?

2008-12-18T12:36:00.000-08:00

You're not alone. Experts have reached a consensus and recommend that you avoid these varieties -- identified by a triangle and number on the bottom of most containers -- for the following reasons:

#3 Polyvinyl Chloride (PVC) commonly contains di-2-ehtylhexyl phthalate (DEHP), an endocrine disruptor and probable human carcinogen, as a softener.

#6 Polystyrene (PS) may leach styrene, a possible endocrine disruptor and human carcinogen, into water and food.

#7 Polycarbonate contains the hormone disruptor bisphenol-A, which can leach out as bottles age, are heated, or exposed to acidic solutions. Unfortunately, #7 is used in most baby bottles and five-gallon water jugs and in many reusable sports bottles.

C.A.R.'s "Green Tips" are part of the Association's effort to raise member awareness about environmentally sound practices and offer REALTORS® ideas for greening their business practices and better serving their green-minded consumers. For more green real-estate-related tips and discussion, visit C.A.R.'s green blog at http://www.car.org/newsstand/greenblog/.

Fannie Mae Provides New Servicer Flexibility to Help Borrowers Avoid Foreclosure

2008-12-18T12:33:00.000-08:00

News Release December 8, 2008

WASHINGTON, DC -- Fannie Mae (FNM/NYSE) announced a series of actions designed to help borrowers and loan servicers address potential mortgage problems and prevent unnecessary home foreclosures among the more than 18 million single-family loans owned or guaranteed by Fannie Mae.

Fannie Mae said the actions are designed to build on and complement the recently announced streamlined loan modification program (SMP) that targets borrowers who have missed three full payments and meet certain other criteria. The steps announced today are meant to reach borrowers earlier with foreclosure prevention options, and include:

Specific direction to servicers to provide foreclosure prevention assistance as soon as a borrower demonstrates the need for help -- even if a borrower is current but default is reasonably foreseeable.
Fannie Mae's new Early Workout program allowing servicers, in one step, to pre-negotiate a loan modification that becomes effective and permanent only after an initial trial period. The Early Workout process can begin as soon as a borrower demonstrates the need for a modification -- even if a borrower is current but a default is reasonably foreseeable.
Doubling of the maximum forbearance and repayment plan periods for most loans to borrowers in need of loan workouts.
A new 2009 Single-Family Master Trust Agreement and servicer guidance that give Fannie Mae servicers the flexibility to remove a loan from an MBS pool once the loan is one month delinquent for the purpose of a loan modification. This applies only to loans backing securities issued on or after January 1, 2009. Trust agreements for pools issued before that date do not allow for this flexibility, but as described above, Early Workout gives servicers the tools necessary to address problem loans as early as necessary, regardless of MBS pool date.

These policy changes will enable Fannie Mae servicers to provide a uniform, consistent set of foreclosure prevention options for borrowers who demonstrate the need for help, whether a loan is owned by Fannie Mae or is included in a securitized Fannie Mae MBS pool.

"A borrower's best chance of avoiding foreclosure is to get help as quickly and efficiently as possible," said Herb Allison, president and chief executive officer of Fannie Mae. "These changes to our servicing policies are intended to remove administrative obstacles so that Fannie Mae borrowers can get the help they need and avoid foreclosure. It is important that all who have a stake in the recovery of the U.S. housing market -- including borrowers, investors and lenders -- work together to help limit foreclosures, which have both economic and human costs to communities across America. Investors in our MBS will continue to be entitled to receive the payments due on their investments, while Fannie Mae and servicers will have more tools to manage the risk of foreclosure during these unprecedented times."

These steps are the latest in a series of recent actions Fannie Mae has taken to help minimize home foreclosures. Fannie Mae is working with the Federal Housing Finance Agency and 27 lenders and servicers in the HOPE NOW alliance to launch SMP by December 15. Additionally, the company has directed servicers to suspend foreclosure sales and the completion of evictions on occupied single-family properties through January 9, 2009.

Today's announcements are more fully explained below.

New Servicer Guidance
Previously, Fannie Mae's foreclosure prevention efforts have generally been made available to a borrower only after a delinquency occurs. Under Fannie Mae's new guidance, loan servicers can and should use foreclosure prevention tools to assist distressed borrowers when a borrower demonstrates the need. As noted above, these guidelines apply to borrowers who are still current in their payments but whose default is reasonably foreseeable. This new guidance is effective immediately.

Early WorkoutTM Program
Under Fannie Mae's existing single-family workout practices, a borrower must sign documents to initiate a trial workout period during which time the servicer agrees to forbear from taking action against the borrower. When the trial workout period is over, the borrower must execute a new agreement to convert the workout to a permanent modification. Under Fannie Mae's Early Workout program, the borrower will sign a single document at the beginning of the process to establish a new monthly payment during a trial period. If the borrower successfully makes the new payments during the trial period, the workout will convert to a permanent modification. The Early Workout program can be used if a delinquency has either occurred or is confirmed to be reasonably foreseeable.

The Early Workout program adds to the efforts underway through the SMP, which will be the subject of a separate announcement to be released prior to the December 15, 2008 SMP implementation date. A modification under the SMP will be proactively offered to borrowers who have missed three payments and whose loans and financial conditions meet certain pre-set criteria. The Early Workout is an option available for any troubled Fannie Mae loan, regardless of delinquency status, when the borrower qualifies under our servicing guidelines. The terms of an Early Workout will depend on the servicer's assessment of an individual borrower's situation.

Longer Forbearance and Repayment Plan Periods
Servicers will now be able to offer forbearance and repayment plan arrangements for longer periods to most single-family borrowers. Whenever allowed by our MBS Trust documents, the maximum period of forbearance (when a borrower's payments are suspended or reduced) has been increased for most mortgages from 6 months to 12 months. Additionally, the maximum length of a repayment plan (when a borrower makes additional payments over an extended period to bring a loan current) has been increased for most mortgages from 18 months to 36 months, including any periods of forbearance.

New and Amended MBS Trust Documents
In connection with these changes, Fannie Mae issued a new 2009 Single-Family Master Trust Agreement, an Amended and Restated 2007 Single-Family Master Trust Agreement, a new Single-Family base Prospectus, and updates to its servicing guidelines.

Fannie Mae's MBS Trust agreements generally require that the servicer of an MBS mortgage loan remove the mortgage loan from the related MBS pool prior to modifying a loan. Generally, to facilitate a loan modification and avoid a foreclosure, servicers may request that Fannie Mae remove a loan from its MBS pool at any time after the loan has been in default for at least four consecutive monthly payments without a full cure of the delinquency.

The 2009 Single-Family Master Trust Agreement (MBS issued on or after January 1, 2009) and servicer guidance gives Fannie Mae servicers the flexibility, in extraordinary circumstances, to remove a loan from an MBS pool once the loan is one month delinquent for the purpose of a loan modification.

The MBS Trust documents, as well as the associated Single-Family base Prospectus that becomes effective January 1, 2009, have been posted online at:

Trust Documents: http://www.fanniemae.com/mbs/documents/mbs/trustindentures/index.jhtml

Prospectus: http://www.fanniemae.com/mbs/documents/mbs/prospectus/index.jhtml

Investors should refer to the Trust agreements and the new base Prospectus for more detailed information. The current issue of MBSenger® also provides an overview of the changes described in this release.

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.

Fannie Mae Resource Center Telephone 1-800-7FANNIE
(1-800-732-6643)

Fed Cuts Key Interest Rate

2008-10-29T11:40:00.000-07:00

The Federal Reserve has slashed a key interest rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades.

The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004.

Banks being pressured to lend

2008-10-29T11:39:00.000-07:00

Los Angeles Daily News:By Jennifer Loven
10/29/2008
The White House on Tuesday sent banks and financial companies a clear message -- put aside fears and start making loans to businesses and consumers.

Joint Statement by Central Banks

2008-10-08T22:53:00.001-07:00

Release Date: October 8, 2008

For release at 7:00 a.m. EDT
Joint Statement by Central Banks

Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.

Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.

Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.

Federal Reserve Actions
The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.

Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.

The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-3/4 percent. In taking this action, the Board approved the request submitted by the Board of Directors of the Federal Reserve Bank of Boston.

Information on Actions Taken by Other Central Banks
Information on the actions that will be taken by other central banks is available at the following websites:

Bank of Canada
Bank of England
European Central Bank
Sveriges Riksbank (Bank of Sweden)
Swiss National Bank (51 KB PDF)

Statements by Other Central Banks
Bank of Japan (65 KB PDF)

2008 Monetary Policy Releases

FED, WORLD BANKS, LOWER SHORT-TERM INTEREST RATES BY HALF A PERCENTAGE POINT

2008-10-08T22:51:00.000-07:00

The Fed, in concert with several world banks today lowered key lending interest rates by half a percentage point in an effort crafted to curb economic damage from the U.S. financial crises that has been spreading across global markets.

The move follows Monday's sharpest declines in several years on Wall Street and Friday's passage of the historic $700 billion Emergency Economic Stabilization Act of 2008.

"Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices," the Fed said in a statement announcing the rate cuts. "The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability. Some easing of global monetary conditions is therefore warranted."

The Fed's short-term rate now stands at 1.5 percent, and the European Central Bank's rate is 3.75 percent. The joint action to lower the federal funds rates will allow central banks to push for new lending between banks around the world without risk of challenges from banks with relatively higher levels, according to analysts

BUILDER CONFIDENCE INCREASES TWO POINTS IN SEPTEMBER

2008-09-26T09:56:00.001-07:00

Builder confidence climbed two points to 18 in September, the first increase in seven months, according to the National Association of Home Builders (NAHB). NAHB attributes the increase to recently enacted federal tax credits for homebuyers and lower mortgage rates in the wake of the takeover of Fannie Mae and Freddie Mac.

"Builders have several reasons to be more optimistic at this time," said NAHB President Sandy Dunn. "Many are sensing that home sales are nearing a turning point with the support of the newly enacted first-time home buyer tax credit. Meanwhile, with the government's explicit backing of Fannie Mae and Freddie Mac now assured, this should help keep mortgage rates at very favorable levels going forward."

ECONOMISTS PREDICT HOME PRICES TO STABILIZE IN 2009, BUT ECONOMIC WOES TO CONTINUE

2008-09-26T09:54:00.000-07:00

Home prices in California are expected to stabilize next year, but the state's economic woes will continue, due to rising unemployment, declining consumer spending, and other factors, according to the latest UCLA Anderson Forecast released Wednesday. In addition, the forecast says that, while the national economy is still not technically in a recession, several converging economic soft spots make it vulnerable to one going forward, and have put the economy in what it calls "stalled" status.

"What we are describing is an economy operating at its 'stall speed,' where any modest shock can trigger a full-blown recession," said UCLA Anderson Forecast Senior Economist David Shulman.

UCLA's analysis predicts a weaker economy for California than the U.S. as a whole in 2009, due to very sluggish home construction levels and related unemployment activity over the last year.

"We can expect 'doldrums' to be the operative word describing the California economy over the next 18 to 24 months," said Jerry Nickelsburg, UCLA economist and co-author of the report. Government layoffs and job losses, he said, will offset any benefits coming from the stabilization of real estate prices

U.S. DEPT. OF THE TREASURY PROPOSES $700 BILLION PLAN TO STABILIZE FINANCIAL MARKETS

2008-09-26T09:53:00.001-07:00

Last Friday, the U.S. Dept. of the Treasury submitted a $700 billion proposal to purchase troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans. The goal of the plan is to promote stability in the U.S. financial markets. On Tuesday, Congress weighed in on the initial proposal, and members of both parties asked for several additions or amendments, including provisions to help homeowners avoid foreclosure; greater oversight of the plan; and a limit on compensation to executives of the troubled firms that receive assistance.

Today, U.S. Treasury Secretary Paulson, Federal Reserve Chairman Ben Bernake, and members of Congress testified before the Housing Financial Services Committee. Legislators today proposed adding an imposed tax on Wall Street firms and banks to help pay the cost of the program, and lessen the burden to taxpayers.

As "Newsline" went to press, President Bush announced that tonight at 9 p.m. EST he will address Americans directly about the financial crisis and possible implications if the plan is not passed.

NAR President Richard F. Gaylord recently announced the creation of a Presidential Advisory Group to address this critical issue. Five California REALTORS® were appointed to the 20-person Presidential Advisory Group.
According to C.A.R.'s sources, Congress may work through the weekend and into next week to finalize and pass legislation. C.A.R.'s and NAR's Leadership Teams are in close contact with elected officials and other key leaders in Washington to ensure that interests of the real estate industry are represented.

Wall Street Journal: Fannie, Freddie To Be Removed From S&P 500

2008-09-11T11:21:00.000-07:00

Fannie Mae and Freddie Mac will be removed from the S&P 500 Index at the close of trading today because the two companies no longer carry the minimum market capitalization required for listing.

FANNIE, FREDDIE PLACED INTO CONSERVATORSHIP

2008-09-11T11:09:00.000-07:00

FANNIE, FREDDIE PLACED INTO CONSERVATORSHIP
This past weekend, the U.S. Dept. of the Treasury placed Fannie Mae and Freddie Mac, government sponsored enterprises (GSEs), into a conservatorship. The federal government is authorized to take up to an 80 percent stake in the companies, and, as part of its duties under the conservatorship, will review both Fannie's and Freddie's financial condition quarterly, as well as inject money into the operations as needed.

Under the conservatorship, both GSEs will be allowed to increase their mortgage funding over the next year and a half, then, beginning in 2010, the plan calls for a reduction in their portfolios of 10 per cent a year until they have been reduced to $250 billion. As part of this weekend's action, both CEOs were relieved of their duties and Herbert Allison, former Merrill Lynch vice chairman, and David Moffett, former U.S. Bancorp CFO, were selected to lead Fannie Mae and Freddie Mac, respectively.

In light of the U.S. Dept. of the Treasury's action, C.A.R. this week reaffirmed its support for Fannie Mae and Freddie Mac and their countercyclical roles. While the short-term impact of the Treasury's actions over the weekend served to calm the markets and restore confidence, in the longer term these entities need to be able to fulfill their historic mission. A privatized Fannie and Freddie will short-circuit the countercyclical role the GSEs have played during precarious times in real estate markets.

C.A.R. is urging lawmakers to support continued government involvement in supporting the institutional secondary market and its role in creating homeownership opportunities. While C.A.R. applauds the U.S. Dept. of the Treasury for increasing the GSEs portfolio limits, the Association will be asking Congress to enact legislation to ensure the two companies continue to fulfill their mission.

To help your clients understand the role of the GSEs, please take a look at a new video featuring C.A.R. Executive Vice President Joel Singer at http://www.car.org/newsstand/video-js-gse. In "Fannie and Freddie: Why They Matter to You," Joel explains the often confusing but critical role Fannie Mae and Freddie Mac play in the housing market in clear and concise terms. C.A.R. President William E. Brown also is featured in a new video about the GSEs developed especially for our members. You can find "Understanding Fannie and Freddie" on the car.org home page at www.car.org.

Builder Confidence Holds Steady In August

2008-08-21T09:39:00.000-07:00

Sales Expectations Improve For Next Six Months

August 18, 2008 - Anticipating positive impacts of newly enacted housing stimulus legislation, single-family home builders registered some improvement in their outlook for home sales in the next six months, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today. The overall confidence measure held even this month at 16, while the component gauging sales expectations rose two points to 25.

“With the passage of crucial housing legislation last month that created an attractive home buyer tax credit, there is a sense that home sales may soon be reaching a turning point,” noted NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va. “Builders are anticipating the stimulative effects of this legislation and are optimistic that the tax credit will give those buyers who’ve been sitting on the fence the reason they need to jump back into the market.”

The Housing and Economic Recovery Act of 2008, signed into law by President Bush on July 30, implemented several critical reforms to the housing finance system, provided aid to troubled homeowners facing foreclosure, and created a temporary $7,500 tax credit for first-time home buyers who meet certain income requirements. NAHB has developed a Web site at www.federalhousingtaxcredit.com to promote the tax credit and answer commonly asked questions about it.

“While our overall measure of builder confidence remains at a record low at this time, it is a good sign that two out of three of the HMI’s component indexes rose in August, and this may be an indication that we are nearing the bottom of the long downswing in new-home sales,” said NAHB Chief Economist David Seiders. “Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

Two out of three of the HMI’s component indexes posted gains in August, including a one-point rise in the index gauging current sales conditions, to 16, and a two-point uptick in the index gauging sales expectations for the next six months, to 25. The component gauging traffic of prospective buyers remained unchanged, at 12.

Regionally, the Northeast and Midwest each posted gains in builder confidence, with the Northeast up two points to 16 and the Midwest up four points to 14. Meanwhile, the South remained unchanged at 20, and the West, whose new-homes market has been heavily impacted by an upswing in foreclosure sales at cut-rate prices, posted a decline of three points to 11.

EDITOR’S NOTE: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be accessed online at: www.nahb.org/hmi. More information regarding housing statistics is also available at: www.housingeconomics.com.

San Francisco Chronical: Twice as many in state can now afford a home

2008-08-21T09:37:00.000-07:00

A pair of reports released Tuesday highlighted the upside of the real estate downturn: Housing is becoming more affordable for more people across California and the Bay Area.

The percentage of households able to buy an entry-level residence in the state reached 48 percent during the second quarter, double the level from a year ago, according to the California Association of Realtors.

The trade group defines a starter home as one priced at 85 percent of an area's median, which works out to $329,120 for the state. The minimum income needed to purchase such a property is $62,870, down from $101,440 a year ago (assuming an adjustable-rate mortgage starting at 5.69 percent and a 10 percent down payment).

The Bay Area remains the least affordable part of the state, but 32 percent of its households can now afford a first home, up from 18 percent during the second quarter of 2007, the report said.

The minimum income required to purchase an entry-level home, estimated at $582,130, is $111,210.

The group's chief economist Leslie Appleton-Young drew a direct line between increasing affordability and the jump in home sales volume throughout much of the state during the last few months. The trend has been especially notable in regions with high levels of foreclosures, and thus steeply discounted homes.

In July, sales in the nine-county Bay Area posted their first annual gain since early 2005, soaring by more than 30 percent in the counties hardest hit by foreclosures, according to MDA DataQuick of San Diego.

"People are off the sidelines, stepping in, trying to gauge the bottom of the market and feeling that, even if this isn't quite the bottom, it's looking great," Appleton-Young said. "They're able to get into something they never thought was possible a year or two ago."

She said sales would be higher still if not for lending standards that have grown far more restrictive than in recent years.

The National Association of Home Builders/Wells Fargo Housing Opportunity Index, also released Tuesday, found that homes became more affordable in 25 of 28 California metropolitan regions during the second quarter. The New York City region took the lead as the least affordable place in the nation, knocking the area comprising San Francisco, San Mateo and Marin counties into a rare second-place spot.

Despite these gains, six of the 10 least-affordable metropolitan areas in the nation are located in the state, as are 11 of the bottom 20, noted an analysis of the report by the California Building Industry Association. In the San Francisco region, only 13.8 percent of homes are affordable to households earning the median income.

The Sacramento trade group for developers has long blamed the state's high housing costs on burdensome government regulations and fees, and continually lobbies for changes that make it less onerous and expensive to build.

"While affordability has improved, it's only because housing prices have dropped significantly in California," said Robert Rivinius, the association's president and chief executive officer. "When things get back to normal, housing prices will go back up and we'll be in the same mess, because we haven't changed any policies."

A break for buyers
About twice as many people could afford an entry-level home in both California and the Bay Area in the second quarter than could in the year-earlier period.

Entry-level price 2008 2007
State $329,120 48% 24%
Bay Area 582,130 32 18

Source: California Association of Realtors

E-mail James Temple at jtemple@sfchronicle.com.

This article appeared on page C - 1 of the San Francisco Chronicle

Pending Home Sales Rise, Wider Gains Anticipated as Buyers Tap Housing Provisions

2008-08-14T13:36:00.000-07:00

WASHINGTON, August 07, 2008

Some improvement is projected for existing-home sales in the months ahead, with broader gains seen by the fourth quarter as buyers take advantage of new provisions provided through the recently passed housing stimulus bill, according to the latest forecast by the National Association of Realtors®.

The Pending Home Sales Index,¹ a forward-looking indicator based on contracts signed in June, rose 5.3 percent to 89.0 from a downwardly revised reading of 84.5 in May, but remains 12.3 percent below June 2007 when it stood at 101.4.

Lawrence Yun, NAR chief economist, said sales have been in a pattern of rising and falling within a fairly narrow range. “The vacillation of data from one month to the next indicates a housing market in transition,” he said. “The rise in pending home sales was broad-based with all four regions showing gains. This is welcome news because a rise in contract activity is necessary for an overall housing recovery. With a tax credit now available to first-time home buyers, increases in home sales could be sustained with the momentum carrying into 2009.”

The PHSI in the South jumped 9.3 percent to 92.4 in June but is 16.6 percent below June 2007. In the West, the index rose 4.6 percent to 101.0 in June but remains 1.7 percent below a year ago. The index in the Northeast increased 3.4 percent to 79.6 but is 15.4 percent below June 2007. In the Midwest, the index rose 1.3 percent in June to 79.6 but is 13.3 percent below a year ago.

Sales gains have been consistently strong in recent months in Sacramento, Calif.; Las Vegas; and Ft. Myers, Fla., where affordability conditions have greatly improved.² The pickup in contract signings appears to be broadening with many affordable markets in mid-America now showing year-over-year gains, including Columbus, Ohio; Charleston, W.V.; Oklahoma City; and Colorado Springs, Colo. Pending sales have fallen significantly in Texas markets and in the Pacific Northwest - two regions with very strong local economies.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the housing stimulus package will provide long-term relief. “Provisions to stem foreclosures are helpful, but a greater lift to the economy should come from higher mortgage limits, enhancements to the FHA loan program and the first-time home buyer tax credit,” he said.

“These are excellent tools that will help buyers get into the market to take advantage of the unprecedented drop in home prices in many areas, as well as a wide selection of inventory, to make an investment in their future,” Gaylord said.

With roughly 2.5 million first-time home buyers taking advantage of the temporary tax credit, existing-home sales are likely to rise 7.0 percent to 5.51 million in 2009 from a expected total of 5.15 million this year.

Yun said home prices did not fall as much as anticipated in the second quarter. “Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices,” he said. “ In addition, rising commodity prices and higher construction costs have resulted in a very unusual market today with existing-home prices being less than replacement building costs in some areas. Home prices are projected to increase 3 to 6 percent in 2009.”

“Builders need to further cut production to help trim inventory. However, new-home sales are expected to bottom around the second quarter of next year with slight gains in the second half of 2009,” Yun said. New-home sales are forecast to drop 8.8 percent to 464,000 in 2009 from 509,000 this year. Housing starts, including multifamily units, should fall 17.2 percent next year to 795,000 from 960,000 in 2008.

The 30-year fixed-rate mortgage, which also has been vacillating, is likely to trend up to 6.5 percent by the end of 2008, and then hold at that level for most of next year. NAR’s housing affordability index is forecast to remain favorable this year, averaging 13 percentage points higher than in 2007.

Growth in the U.S. gross domestic product (GDP) is expected to be 1.7 percent this year and 1.5 percent in 2009. The unemployment rate is projected to average 5.5 percent in 2008 and 6.0 percent next year.

Inflation, as measured by the Consumer Price Index, is seen at 4.1 percent in 2008 and 2.6 percent next year. Inflation-adjusted disposable personal income is estimated to grow 1.7 percent this year and 1.1 percent in 2009.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

# # #

¹The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

²Market information is from unpublished snapshot data; please contact your local association of Realtors® for more information.

Second quarter metropolitan area home prices and state home sales will be published August 14. Existing-home sales for July will be released August 25; the next Forecast / Pending Home Sales Index will be released September 9.

IAS360 House Price Index Rises 1.1% in June

2008-08-14T13:34:00.000-07:00

DENVER, CO, August 12, 2008 — Integrated Asset Services, LLC (IAS, www.iasreo.com), a leader in default management and residential collateral valuation, today released its IAS360™ House Price Index for June 2008. The June report, which includes the most current and granular data available in the industry, showed a 1.1% appreciation in house prices on a national level, and a -11.5% decline from June 2007 to June 2008.

The IAS360 House Price Index is a comprehensive housing index tracking monthly change in the median sales price of detached single-family residences across the U.S. The index, based on all arms-length transactions, tracks data at a “neighborhood” level, which is then rolled up to report on the changes in 360 counties, nine census divisions, four regions, and the nation overall. The IAS360 House Price Index is delivered on a monthly basis.

The table above summarizes the national and regional results for the month of June. Three out of four U.S. census regions experienced appreciation in house prices during June, but continued to feel downward pressure year-over-year. The Western region posted a decline of -0.5% adding to the double digit year-over-year decline of -16.9%.

The table below illustrates that out of the nine census divisions the IAS360 HPI reports on, only three posted declines during the month of June. Conversely, every census division experienced substantial year-over-year declines except for the East North Central division which continued to appreciate at a rate of 5.3% during the month of June.

“In turbulent housing markets, timeliness and granularity are necessary in gauging the market,” said Dave McCarthy, President and CEO of Integrated Asset Services. “The IAS360 House Price Index county level data reports from the front lines in the housing struggle; depending on the neighborhood, we are seeing everything from strong and stable markets to barebones housing markets.”

“The IAS360 HPI is not a seasonally adjusted or smoothed index. Typically small month to month appreciation is present in the summer due to increased seasonal housing demand. Therefore, strengthening of the market in the summer can occur even when the longer term market trend might be downward,” said McCarthy.

IAS also provides “neighborhood” level house price trends through its iMVI product. More information on iMVI can be found on the IAS website, www.iasreo.com/cs.html.

*Due to the timeliness of the data, the IAS360 House Price Index is subject to revisions on a monthly basis.

This press release contains various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future results of operations and market opportunities that are based on IntelliReal and IAS’ current expectations, assumptions, estimates and projections about the company and its industry. Investors are cautioned that actual results could differ materially from those anticipated by the forward-looking statements as a result of the success of IAS’ branding and consumer awareness campaign and other marketing efforts; competition from existing and potential competitors; and IAS’s ability to continue to develop and integrate new products, services and technologies.

FORECLOSURE RELIEF BILL BECOMES LAW

2008-07-18T13:52:00.001-07:00

FORECLOSURE RELIEF BILL BECOMES LAW
This week, the State Legislature enacted foreclosure reform law to address the adverse effects of high foreclosure rates in California. The new law requires lenders to contact homeowners to explore options for avoiding foreclosure at least 30 days before filing a notice of default. It also requires owners acquiring property through foreclosure to maintain the exterior of vacant residential properties. The new law also extends from 30 to 60 days the time for residential tenants to move out of properties that have been foreclosed upon, unless other laws apply. These requirements will remain in effect until January 1, 2013. The full text of Senate Bill 1137 (Perata) is available at www.leginfo.ca.gov.

Highlights of the new law are as follows:

- Contact Between Lender and Borrower: Effective on or about September 8, 2008, a lender, trustee, or authorized agent may not file a notice of default until 30 days after contacting a borrower to assess the borrower's financial situation and explore options for avoiding foreclosure. A lender must generally contact the borrower in person or by telephone, or satisfy due diligence requirements for contacting a borrower. During the initial contact, the lender must inform the borrower of the right to request a meeting with the lender within 14 days. The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency. A subsequent notice of default must include the lender's declaration that it has contacted the borrower, tried with due diligence to contact the borrower, or the borrower has surrendered the property. A lender who had already filed a notice of default before the enactment of this law must include a similar declaration in the notice of sale. This requirement to contact borrowers applies to loans secured by owner-occupied residences made from 2003 to 2007. Certain exemptions apply if the borrower has filed for bankruptcy, surrendered the property, or contracted with a person or entity whose primary business is advising people, who have decided to leave their homes, on how to extend the foreclosure process and avoid their contractual obligations.

- Maintenance of Vacant Properties: Effective July 8, 2008, anyone who acquires property through foreclosure must maintain the exterior of vacant residential property. Violations of this law include permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action against trespassers or squatters, failing to take action to prevent mosquitoes from breeding in standing water, or other public nuisances. This law authorizes a governmental entity to impose a civil fine up to $1,000 per day for any violation, as long as the owner has been given notice and an opportunity to remedy the violation. A violator must be given at least 14 days to begin, and 30 days to complete, such remediation before a fine can be assessed.

- 60-Day Notice to Terminate Tenants: Effective July 8, 2008, a tenant or subtenant in possession of a rental housing unit that has been sold through foreclosure is generally entitled to a 60-day written notice to quit, not just 30 days. However, a borrower who remains on the property after foreclosure may be served a three-day notice to terminate. This law does not affect, among other things, rent-controlled properties with just-cause evictions. Effective on or about September 8, 2008, the lender, trustee, or authorized agent posting a notice of sale must also post and mail a specified notice of a tenant's right to a 60-day eviction notice from the new owner, unless other laws apply. This requirement to notify tenants of their rights applies to loans secured by residential real property where the borrower has a different billing address than the property address.

Fire Evacuees

2008-07-18T13:48:00.000-07:00

News: 2008 Press Release

For Release: July 2, 2008
Media Calls Only: 916-492-3566
Insurance Commissioner Steve Poizner Reminds Big Sur, Santa Barbara and Other Mandatory Fire Evacuees that Insurance May Cover Some Living Expenses
SACRAMENTO ― Insurance Commissioner Steve Poizner reminded residents who have been evacuated because of the Basin Complex Fires in Big Sur, the Gap Fire in Santa Barbara and other fires throughout the state that they may be eligible for reimbursement for additional living expenses due to mandatory evacuations. Businesses may also be eligible for reimbursement due to lost business.

"The last thing fire evacuees should have to worry about is how to pay for their hotel stays, extra food and other additional living expenses," said Commissioner Poizner. "Many homeowners insurance policies cover some additional living expenses due to mandatory evacuations. Evacuees should check their policies as soon as possible, and if they have any insurance questions, they should call my Department at 800-927-HELP."

Many residential homeowners insurance policies cover what is known as ALE, or additional living expenses. This permits homeowners to maintain their normal standard of living by covering the increased living expenses incurred as a result of damage caused by the fire or a mandatory evacuation. ALE coverage typically includes extra food costs, increased housing costs, furniture rental, relocation and storage costs, telephone installation and extra transportation costs to and from school or work.

###

Please visit the Department of Insurance Web site at www.insurance.ca.gov. Non media inquiries should be directed to the Consumer Hotline at 800.927.HELP. Callers from out of state, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

If you are a member of the public wishing information, please visit our Consumer Services.

Federal Reserve Annouces

2008-07-18T13:46:00.001-07:00

Release Date: July 13, 2008

For immediate release
The Board of Governors of the Federal Reserve System announced Sunday that it has granted the Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary. Any lending would be at the primary credit rate and collateralized by U.S. government and federal agency securities. This authorization is intended to supplement the Treasury's existing lending authority and to help ensure the ability of Fannie Mae and Freddie Mac to promote the availability of home mortgage credit during a period of stress in financial markets.

5 fastest growing cities of 2008

2008-07-18T13:43:00.000-07:00

RELEASED: THURSDAY, JULY 10, 2008
Robert Bernstein
Public Information Office
301-763-3030/763-3762 (phone/fax)
e-mail:
CB08-106

New Orleans Population Continues Katrina Recovery;
Houston Leads in Numerical Growth
New Orleans, hard-hit by Hurricane Katrina in 2005, was the fastest-growing large city in the nation between July 1, 2006, and July 1, 2007. This follows the city having the largest rate of population loss since 2000.

Houston, another city near the Gulf Coast, led the nation’s cities in numerical increase during the period. New Orleans had the fifth largest numerical growth.

U.S. Census Bureau estimates released today show New Orleans’ population rose by 13.8 percent to 239,124 during the one-year period, to lead all cities with populations of 100,000 or more in rate of increase. New Orleans was followed by Victorville, Calif., whose population climbed 9.5 percent to 107,221. Victorville, in Southern California’s San Bernardino County, saw its population pass the 100,000 mark for the first time in 2007.

Three Texas cities made the fastest-growing top 10: McKinney and Denton (near Dallas, ranking third and 10th, respectively) and Killeen (near Austin, ranking sixth). Rounding out the top 10 were North Las Vegas, Nev. (fourth); Cary, N.C. (near Raleigh, ranking fifth); Port St. Lucie, Fla. (on the Atlantic coast, seventh); Gilbert, Ariz. (near Phoenix, eighth); and Clarksville, Tenn. (on the Kentucky border, ninth). (See Table 1. [Excel]).

Houston added 38,932 residents between July 1, 2006, and July 1, 2007, to lead the nation in numerical population increase. Houston, which reached 2.2 million, was joined by three other Texas cities: San Antonio (third), Fort Worth (fourth) and Austin (eighth). North Carolina also contributed multiple cities to the list: Charlotte (ninth) and Raleigh (10th). Rounding out the top 10 were Phoenix (second), New Orleans (fifth), New York (sixth) and Atlanta (seventh). (See Table 2. [Excel]).

New York continued to be the nation’s most populous city, with 8.3 million residents. This was more than twice the population of Los Angeles, which ranked second at 3.8 million. Chicago, with 2.8 million, was third, followed by Houston and Phoenix (1.6 million). (See Table 3. [Excel])

Other highlights:

2006-2007

New to the listing of the 25 most populous cities in 2007 is Nashville-Davidson, Tenn. (a city-county consolidation), 25th with a population of 590,807. In addition, Fort Worth moved up to 17th place; Charlotte to 19th; and Milwaukee to 22nd. Washington fell out of the top 25.
California and Texas each placed five cities on the listing of the 25 fastest-growing and on the list of the 25 biggest numerical gainers between 2006 and 2007.
Other cities making both lists of the 25 largest numerical gainers and the 25 fastest-growing from 2006 to 2007: New Orleans; Victorville; North Las Vegas; Port St. Lucie; Gilbert; Fort Worth; Raleigh; Atlanta; Henderson, Nev.; and Bakersfield, Calif.
Columbus, Ga., had the largest percentage decrease from 2006 to 2007. Its population decline is attributable to a decline in the population living in military barracks. Columbus was followed by Baton Rouge, La.; Hollywood, Fla.; Jackson, Miss.; and Coral Springs, Fla. Six of the 25 fastest-losing cities were in Florida.
Cleveland suffered the largest numerical decline in population from 2006 to 2007, followed by Columbus, Ga.; Baton Rouge; Philadelphia; and Baltimore.
2000-2007

McKinney, Texas, was the nation’s fastest-growing city between April 1, 2000, and July 1, 2007, as its population more than doubled to 115,620. North Las Vegas was second, as its population rose 83.6 percent to 212,114. Eight of the top 25 were in California: Victorville, Elk Grove, Irvine, Roseville, Rancho Cucamonga, Moreno Valley, Bakersfield and Fontana.
New York was the largest numerical gainer, adding 265,873 residents over the period. Houston, which added 233,876, was second. Five other Texas cities made the top 25: San Antonio, Fort Worth, Austin, McKinney and Dallas.
New Orleans experienced both the largest rate of loss and largest numerical decline during the period, as its population fell 50.7 percent (from 484,674 to 239,124). Cleveland had the second greatest rate of loss (8.3 percent, from 477,472 to 438,042), with Philadelphia ranking second in numerical decrease (from 1,517,550 to 1,449,634).

For more information about the geographic areas for which the Census Bureau produces population estimates, see .

- x -
These estimates are produced using housing unit estimates to distribute the county population to subcounty areas within the county. Housing unit estimates use building permits, estimates of construction where no building permits are reported, mobile home shipments and estimates of housing unit loss to update housing unit change since Census 2000.

In a dilemma, Fed stands pat on rates

2008-06-25T15:03:00.000-07:00

Short-term interest rates remain unchanged as honchos in the Federal Reserve try to figure out which is the greater danger: inflation or recession.

The central bank's Federal Open Market Committee left the target for the federal funds rate at 2 percent, as expected. The prime rate will remain 5 percent. Most home equity lines of credit and variable-rate credit cards are based on the prime rate, and their rates will not change.

The rate-setting committee meets eight times a year. In the previous seven meetings dating back to last summer, the panel cut rates. The reduction in the federal funds rate was unusually rapid, going from 5.25 percent in September to 2 percent in April, as the Fed fought off a credit crunch.

With the economy in a slump, and with prices rising rapidly, the Fed has found itself in a dilemma. Short-term rates already are low, and if the central bank cuts them more to stimulate economic growth, then prices could rise even faster and get out of control. If the Fed raises short-term rates, the result could be a recession (or a deeper recession, if the economy already is in one) and a delayed recovery.

All this in an election year. Fed stands at 2% The Federal Reserve decided to keep the key interest rate the same after its meeting June 25.

The central bank's least-bad option was to leave rates alone and keep an eye on prices and employment. That's what the Fed did at this week's meeting, at the risk of knowing in hindsight that it should have moved rates up or down instead.

The Fed didn't have much of a choice, says Moe Ansari, president of Compak Asset Management in Irvine, Calif.

"The economy is getting worse, not better," Ansari says. "The economy cannot handle interest-rate increases. On the other hand, inflation pressure is going up. They're stuck between inflation and recession."

In May, the Consumer Price Index rose 0.6 percent from the previous month, and was up 4.2 percent over the previous May. Prices not only are rising faster than the Fed would like, but the rate of increase is accelerating. The inflation rate is lower (0.2 percent in one month and 2.3 percent in 12 months) when you don't count food and energy prices, which is better news for people who don't eat, use electricity or refuel cars.

Prices for commodities, especially oil, have risen ferociously in the last year through some combination of demand, speculation and a weakening dollar. In normal times, the Fed doesn't concern itself with any of those factors, but lately the central bank has trod onto the Treasury Department's territory by speaking out about exchange rates.

At a conference in early June that was attended by his European and Japanese counterparts, Fed Chairman Ben Bernanke said: "We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate."

Long story short, Bernanke wants a stronger dollar, which would break the rise in oil prices. How do you get a stronger dollar? Raise interest rates.

"My sense is they would like to raise rates," says Tom Hepner, an analyst with Ruggie Wealth Management in Tavares, Fla. "They'd like to act a little more independently in a stronger-dollar policy mode."

The Bush administration has paid lip service to the benefits of a stronger dollar, Hepner says, but the European Central Bank is likely to raise rates -- a move that would have the indirect result of keeping oil prices high in the United States.

The problem with raising short-term rates is that it would have an unpredictable effect on long-term rates, including those for mortgages. A higher federal funds rate could result in higher interest rates across the board. But it's also possible that a higher federal funds rate would reduce inflation expectations -- and that could bring mortgage rates down.

With housing in a slump, mortgage rates could use some help. "I think the solution is we need to find a way to get these fixed rates lower," says Steve Habetz, owner of Threshold Mortgage, a brokerage in Westport, Conn.

He says he almost wishes the Fed would raise rates, because it would prod fence-sitters into buying houses while, at the same time, countering inflation.

Habetz almost wishes for a Fed rate hike, but not quite. For the time being, he would be satisfied with anti-inflation talk from Fed officials, plus some creativity. He would like the central bank to buy mortgage-backed securities from Fannie Mae and Freddie Mac. If it bought enough securities, mortgage rates would go down. But the Fed would own investments that could lose value.

That brings the subject to the credit crunch that began in subprime mortgages in early 2007, spread to jumbo mortgages last August, and is moving into construction and development loans now. Maybe that will be an end of it, or maybe there will be a crunch in credit cards next. This fear that "the backside of the storm could hit us in the fall," in Ansari's words, might force the Fed to keep rates steady for the rest of the year.

Hepner thinks it will be next year before the Fed raises rates. "I believe personally that we're in a more extended kind of crablike market that's going to go down and waddle sideways, and we're continuing to have more shoes drop as far as the financial markets are concerned."

The federal funds rate is the target interest rate for banks borrowing reserves among themselves. The discount rate is the interest rate that the Fed charges banks to borrow reserves from the Federal Reserve. The Fed wants to be the lender of last resort: It wants banks to borrow from one another at the federal funds rate before borrowing from the Federal Reserve at the higher discount rate.

Bankrate.com's corrections policy -- Posted: June 25, 2008
Holden Lewis • Bankrate.com

C.A.R. REPORTS ENTRY-LEVEL HOUSING AFFORDABILITY RISES 18 PERCENTAGE POINTS IN FIRST QUARTER

2008-05-29T15:12:00.001-07:00

The percentage of households that could afford to buy an entry-level home in California stood at 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago, according to a report released Tuesday by C.A.R.

C.A.R.'s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.

The minimum household income needed to purchase an entry-level home at $356,350 in California in the first quarter of 2008 was $67,830, based on an adjustable interest rate of 5.65 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $2,260 for the first quarter of 2008.

C.A.R. REPORTS SALES INCREASED 2.5 PERCENT, MEDIAN HOME PRICE FELL 32 PERCENT IN APRIL

2008-05-29T15:11:00.001-07:00

Home sales increased 2.5 percent in April in California compared with the same period a year ago, while the median price of an existing home fell 32 percent, C.A.R. reported Friday.

"Home sales registered a 2.5 percent year-to-year gain compared with April 2007, ending a 30-month string of year-to-year percentage decreases that began in October 2005," said C.A.R. President William E. Brown. "This is not to say that the credit crunch that has contributed to the sales decline has disappeared. Both tighter underwriting standards and the ongoing effects of the credit/liquidity crunch continue to constrain sales."

Closed escrow sales of existing, single-family detached homes in California totaled 366,720 in April at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity increased 2.5 percent from the revised 357,640 sales pace recorded in April 2007

U.S. Home Slump Puts Owners Under Water

2008-05-09T10:33:00.000-07:00

U.S. home values dropped 7.7 percent in the first quarter to the lowest in almost three years, according to estimates by Zillow.com, an online data provider.

The decline is the biggest in 12 years of data compiled by Seattle-based Zillow.com, a Web site started in 2006 to provide homeowners, real estate agents and potential buyers with value assessments called ``zestimates'' for single-family homes, co- operative apartments and condominiums.

U.S. house prices dropped for the first time since the 1930s last year, discouraging buyers who fear being ``underwater'' on their mortgage, or owing more on their home than it's worth. That's already happened to almost 52 percent of homeowners who bought in 2006 when prices peaked, Zillow estimates. At the same time, record foreclosures are adding to a glut of unsold homes and driving prices down further.

``It's clear evidence that the fundamentals of those housing prices were not sustainable,'' Zillow Vice President of Data and Analytics Stan Humphries said in an interview. ``That's definitely aggravated nationwide by the liquidity crisis.''

Financial institutions have reported at least $318 billion in mortgage-related losses and asset writedowns since the beginning of last year.

Stricter Lending

The proportion of banks tightening lending standards for even prime borrowers rose last quarter to about 60 percent from 53 percent, according to the Federal Reserve's Senior Loan Officers' Survey.

The survey, published yesterday, also indicated the share of banks making it tougher for companies and consumers to borrow approached a record after the subprime-mortgage collapse made them more reluctant to lend.

``The inability to secure refinancing is ultimately contributing to the growing rates of foreclosure in many parts of the country,'' Zillow's Humphries said.

About 30 percent of existing U.S. homes sold through 2009 will be foreclosures, according to an April 24 report by Lehman Brothers Holdings Inc. economists Michelle Meyer and Ethan Harris.

New foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, according to the Mortgage Bankers Association. The median price of an existing home dropped 7.7 percent from a year earlier in March, the National Association of Realtors said on April 22.

Prices Sink

Low down payments as a proportion of the cost were a contributor, Zillow said. In Las Vegas, the median down payment in 2006 was 2 percent and values there have fallen 25 percent, leaving 90 percent of those borrowers owing more than the value of their homes.

Countrywide Financial Corp. has frozen home equity credit lines for almost all its Las Vegas customers, joining Bank of America Corp., Washington Mutual Inc. and IndyMac Bancorp Inc. Together the four lenders have frozen about 600,000 equity credit lines nationwide since January, said Michael Kratzer, president of a Bankrate Inc.-owned Web site.

Home equity lines are a form of revolving debt backed by the borrower's stake in a house they own. Lenders are curtailing access to such credit in cities where property values are falling.

Today's Zillow report showed 130 out of 160 metropolitan areas surveyed now have median home prices below last year's. Of the 10 metropolitan areas with biggest drops, five were in California: the Riverside-San Bernardino, Sacramento, San Diego, Los Angeles and San Francisco areas. Prices in those regions declined from 13 percent to 26 percent.

``It's very difficult to call a market bottom,'' Zillow Chief Financial Officer Spencer Rascoff said today in an interview with Bloomberg Television. ``I can tell you we are not at it yet. Nationwide we continue to see increasing rates of declines.''

Over the last five years, the nation as a whole showed a positive return on homes. About 144 areas, or 90 percent of those Zillow surveyed, have median prices above 2003 levels.

To contact the reporter on this story: Sharon L. Lynch in New York at sllynch@bloomberg.net

Last Updated: May 6, 2008 14:40 EDT

Some Economists Say Recession Is Here

2008-05-04T16:12:00.001-07:00

Two-thirds of the 52 economists surveyed last week by USA Today say the U.S. is in recession. Another 13 percent believe that the economy is headed that way sometime this year.

The good news is that nearly all believe the recession will be short and shallow and inflation will decline. Unemployment, one of the hallmarks of a recession, will probably rise to about 6 percent, says David Berson, chief economist for the PMI Group. "That's pretty low for a recession," he says

But Berson continues to worry about real estate. "Given the drop in home prices, there's a big risk that foreclosures will go up more than expected," Berson says.

Some economists, however, are more optimistic and do not think the economy has, or will necessarily, fall into a recession.

"A recession, by definition, is a broad-based decline in GDP that lasts more than a few months," says Ken Mayland of ClearView Economics. So even if there were a decline in the first quarter, Mayland says, that doesn't mean there will necessarily be a decline in the second quarter.

Source: USA Today, John Waggoner and Barbara Hansen (4/29/08)

Federal Rate Cut

2008-05-04T16:10:00.001-07:00

Fed lowers rates, hints cuts may be at end
The Federal Reserve cut the federal funds rate by a quarter of a point to 2 percent on Wednesday, the latest – and possibly last – in a series of reductions aimed at staving off a recession and easing the credit crunch.
MAKING SENSE OF THE STORY FOR CONSUMERS
• In September, when the Fed initiated the first of seven consecutive interest rate reductions, the federal funds rates stood at 3.25 percent. The last time the rate was this low was in December 2004.
• In making the announcement, the Fed noted that, “The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity.”
• There was some speculation that the Fed was leaving the door open to additional rate cuts if inflation concerns become reality. However, others speculate the Board may leave rates alone until the impact of its recent efforts become clearer.

2 arrested in alleged foreclosure fraud

2008-04-23T10:03:00.001-07:00

The men are accused of operating a scam that took in hundreds of homeowners.
By Tiffany Hsu, Los Angeles Times Staff Writer
April 18, 2008

Michael D. Henschel of Van Nuys, who has had a long history of legal run-ins, was arrested Thursday by Los Angeles County authorities, who accused him of operating foreclosure scams that took in hundreds of homeowners, costing some their houses.

Henschel, 59, faces 71 federal charges, including forgery and conspiracy counts, in an alleged scheme to defraud homeowners from 2000 to 2004. Canoga Park resident Alan Mitchell, 70, also was arrested and faces 32 charges.
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FOR THE RECORD:
Foreclosure charges: An article and accompanying photo caption in the Business section on Friday about an alleged foreclosure fraud misidentified the 71 state charges against Michael D. Henschel of Van Nuys as federal charges. The story said that Canoga Park resident Alan Mitchell also was arrested and faces 32 charges. Mitchell faces 32 state charges. —

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Scammers posing as foreclosure specialists are becoming increasingly common in California, with some blatantly posting fraudulent offers online, said Los Angeles County Sheriff's Det. Chris Christopher, who arrested the pair and has tracked them for years.

"There's so much real estate fraud out there and we're working like crazy, but we're not even putting a dent into it," he said.

Henschel and Mitchell are accused of offering to save homeowners from foreclosure if they paid a monthly consulting fee and transferred part-ownership of the properties -- often to a fictitious entity.

While pretending to renegotiate loans, the pair charged rent to homeowners, Christopher said. The two men would file for bankruptcy protection using phony debt and made-up names to hold off the banks and extend the "rental" period for several months, he said.

After a protracted, expensive process, the banks would reclaim the properties and evict the homeowners anyway, Christopher said. Although only seven victims are mentioned in the complaint, the scheme extended to hundreds of homeowners, he said.

Deputy Dist. Atty. David L. Fleck, listed as a prosecutor in the complaint, did not return calls for comment. It was unclear whether Henschel or Mitchell, who were to be arraigned today, had retained attorneys.Bail was set at $800,000 for Henschel and $400,000 for Mitchell.

William D. Pangburn, a Ventura attorney who has represented several of Henschel's alleged victims, said Henschel was a real estate expert who manipulated bankruptcy courts and "gullible, financially distressed people" for years.

"Mickey's cases never seem to be big enough to get the proper attention," Pangburn said. "They're so hard to unwind, you really have to persevere, and authorities feel like there are bigger fish to fry."

In the past, Henschel has faced a slew of misdemeanor and felony charges and has been convicted at least five times, but he has always managed to dodge prison time.

In 1995, he was charged and acquitted in Los Angeles of stealing nearly $90,000 from family friends by filing phony bankruptcies and deed transfers against two properties.

In an Arizona case that mirrors the current one, Henschel pleaded guilty in federal court in 2004 to filing more than 200 fraudulent bankruptcies and pocketing more than $50,000 in rental income and fees from homeowners with shaky mortgages. He was sentenced to probation, community service and restitution.

According to the latest complaint, Henschel knocked at the door of one man's North Hollywood home in 2001 and offered to purchase it, starting with a $1,500 payment and an additional $3,500 after escrow closed. The complaint said Henschel then transferred title to the man's residence to a cover trust and signed the man's name without his knowledge over the next two years to eight deeds that transferred partial interests in the property.

In 2002, according to the complaint, Mitchell sent fliers to a Rolling Hills woman advertising "foreclosure relief services" for $500 a month. Mitchell and Henschel transferred partial interests in her home to fictitious names until the woman's home was foreclosed on, the complaint says.

In yet another case, the complaint accuses Mitchell of falsely representing himself as an attorney to a couple while Henschel promised to land them a new loan. The men collected $2,500 while the homeowners lost their property.

tiffany.hsu@latimes.com

Walls closing in on Dunmore home-building dynasty

2008-04-23T09:54:00.000-07:00

By Dale Kasler - dkasler@sacbee.com
Published 12:00 am PDT Sunday, April 20, 2008
Story appeared in MAIN NEWS section, Page A1

Jeremy and Sidney D. Dunmore's Dunmore Communities launched the Alta Vista Meadows project on Rio Linda Boulevard. The brothers have lost to foreclosure or sold portions of the project, now called Bella Casa.
José Luis Villegas / jvillegas@sacbee.com

Their debts are substantial and their reputations have been dinged. Their main business is gone. They are caught up in an intergenerational soap opera that threatens the family legacy.

But Sidney B. Dunmore and his sons Jeremy and Sidney D. Dunmore, heirs to a Sacramento-area home-building dynasty that has unraveled in the past year, insist they aren't finished.

The elder Sid Dunmore, who lost the family's flagship, Dunmore Homes, to bankruptcy and might lose his personal residences, said he's been approached by people about getting back in business one day.

Fed Officials Saw Contraction in Economy `Likely'

2008-04-08T15:57:00.000-07:00

By Craig Torres

April 8 (Bloomberg) -- Federal Reserve officials anticipated that the economy would shrink in the first half of the year, with some concerned about ``a prolonged and severe economic downturn.''

``Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,'' the Fed said in minutes of the March 18 Federal Open Market Committee meeting released in Washington today.

Policy makers also found little sign that housing markets have reached a bottom, the minutes showed. Traders increased bets that the Fed will lower its benchmark interest rate half a point when policy makers meet April 29-30, futures prices show.

``Some believed that a prolonged and severe economic downturn could not be ruled out,'' the Fed minutes said, referring to FOMC meeting participants.

The minutes encompass a period when Chairman Ben S. Bernanke invoked rarely used authority to provide emergency financing for investment banks and rescued Bear Stearns Cos. from bankruptcy. Officials are seeking to limit the impact on the broader economy of what former Fed chief Alan Greenspan today termed the worst credit crisis in 50 years.

The Bear Stearns financing took the Fed ``to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles,'' Paul Volcker, chairman of the Fed from 1979 to 1987, told the Economic Club of New York today.

Futures Trading

Odds of a half-point rate cut, to 1.75 percent, rose to 46 percent today from 36 percent yesterday, futures showed. There's a 100 percent chance of at least a quarter-point reduction, the contracts indicate.

Policy makers lowered the rate three-quarters of a point at the March meeting, for a total of 2 percentage points so far this year, the fastest drop in borrowing costs in two decades.

``Members recognized that monetary policy alone could not address fully the underlying problems in the housing market and financial markets,'' the minutes said today.

Detailed Fed Board discussions of the $29 billion loan against Bear Stearns securities weren't included in the minutes because the full FOMC didn't participate in the decision.

Today's report does describe a March 10 conference call, when Fed officials decided to increase swap lines with the Swiss National Bank and the European Central Bank and establish a securities lending facility for government bond dealers.

`Turning Point'

The Fed's March actions are ``definitely a major turning point in our understanding of the role of the lender-of-last- resort in modern markets,'' Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said before the release.

Fed staff economists told policy makers they had ``substantially revised down'' their forecast to show a first- half contraction in gross domestic product, with a ``slow rise'' in the second half. In 2009, the staff projected growth ``somewhat above'' the economy's long-term potential pace, the minutes showed.

The staff's first-half forecast compares with Bernanke's April 2 assessment that ``we are slightly growing at the moment, but we think that there's a chance that, for the first half as a whole, there might be a slight contraction.''

Committee members discussed evidence of an ``adverse feedback loop,'' where lenders reduce credit, hurting growth and causing lending to contract further, the minutes showed.

Credit Impact

``Several participants noted that the problems of declining asset values, credit losses, and strained financial market conditions could be quite persistent, restraining credit availability and thus economic activity,'' the minutes said.

Anecdotal reports ``pointed to a retrenchment in capital spending,'' the minutes said.

The Fed took three steps in March to help offset money market constraints.

On March 7, the Fed announced that it would expand its auctions of funds to commercial banks to $100 billion a month, from $60 billion. The board also announced up to $100 billion in term repurchase agreements.

On March 10, the FOMC voted in favor of swapping up to $200 billion of Treasuries out of its portfolio in exchange for primary dealers' holdings of mortgage securities. Policy makers ``expressed concerns'' during their call, saying the program ``could be viewed as setting a precedent and thus raise expectations of other actions in the future,'' the minutes said.

Bear Help

On Sunday, March 16, the Fed Board also reduced the premium on direct loans to banks over the benchmark overnight rate, to a quarter point from half a point. The Board also approved financing $30 billion of illiquid Bear Stearns assets to help facilitate the merger with JPMorgan Chase & Co.

To stave off a run against large investment banks, the Fed Board also voted unanimously in favor of opening a discount window for primary government bond dealers.

The number of Americans signing contracts to buy previously owned homes declined more than forecast in February, a report showed today, indicating no sign of a bottom in the U.S. real- estate recession that is entering its third year.

Foreclosures rose to 0.83 percent of all home loans in the final quarter of last year, an all-time high, according to the Mortgage Bankers Association.

Policy makers saw ``little indication'' that the stabilization in housing markets had begun, the minutes said. ``Participants noted that the trajectory of house prices was a major source of uncertainty in their economic outlook.''

The Fed's preferred inflation measure, the personal consumption expenditures price index minus food and energy, rose 2 percent for the 12-month period ending February. Fed officials said ``recent information on inflation was disappointing,'' the minutes said, although weaker growth should reduce price pressures over time, some members said. Fed staff economists projected inflation would slow next year.

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

Last Updated: April 8, 2008 16:41 EDT

Federal Rate Cut

2008-03-17T13:29:00.000-07:00

Sunday, Bloody Sunday...adding to an already insane level of volatility
was yesterday's coordinated action by the Fed and JPM Chase to bail out
troubled investment banker and huge sub-prime holder Bear Stearns. Bear
Stearns was the number one buyer of sub-prime loans, with a huge
appetite for this type of paper- their greed for fees pushed them to buy
sub-prime transactions with both fists, and this strategy has come back
to haunt them.

In addition to the Bear Stearns news, the Fed was also buys slashing the
Discount Rate by .25%, bringing it to 3.25%. This is the first time the
Fed has taken this type of weekend action in nearly 30 years.
Tomorrow's FOMC meeting should produce a .75% cut to the Fed Funds rate
bringing it to 2.25%, thus lowering the Prime Rate to 5.25%.
Remember, as Bond prices move higher, mortgage interest rates move
lower.

Painfully Slow Growth for California and Southern California in

2008-03-02T12:01:00.000-08:00

News Release
George McQuade or Aida Mayo www.MayoCommunications.com
(818) 340-5300 or (818) 618-9229 PR@MayoCommunications.com
IMMEDIATE RELEASE
February 20, 2008

LAEDC Economic Forecast report also sees turmoil in housing, finance, and entertainment sectors

Los Angeles—While the economies of California and Southern California overall are not expected to fall into recession in 2008-2009, it will be a painful period for several industries and metro areas, according to the Los Angeles County Economic Development Corporation’s “2008-2009 Economic Forecast & Industry Outlook.” The Forecast is being released today (Wednesday, Feb. 20, 2008) at a conference on
at the Marriott Hotel in downtown Los Angeles.
“The housing industry will continue to slide in terms of prices and unit sales of both new and existing units,” said Jack Kyser, the LAEDC’s Chief Economist. “The most distress will be in the Riverside-San Bernardino area and Orange County, with the latter actually in a “spot” recession, as measured by employment, during the first half of 2008.” Kyser noted that there will also be turmoil in financial services as a result of the sub-prime problem. “Lenders will be extremely cautious in making loans, except to customers with good credit histories,” he
observed. The entertainment industry still faces labor negotiations with the Screen Actor’s Guild, while there will be some unpleasant fall-out from the recently settled WGA contract. In addition, a coast-wide contract for the Longshoremen’s union will be also be up for renewal in June 2008. “The best way to describe the current business situation for the nation, state and region is that it is a “twotrack” economy,” said Kyser. “Rolling backwards, on track one, are housing and its related industries and financial services. Other segments of the local economy are on track two, which is seeing slow, steady growth.” By the end of 2008, benefits from Federal Reserve interest rate cuts and the federal government’s economic stimulus package should start to be seen. The slow-growth scenario has financial implications for state, county, and city governments. Budgets at all three levels will remain stressed, due to the housing slide and declines in taxable retail sales. The LAEDC looks for slower government employment growth over the forecast time frame.
“There is some good news in the 2008-2009 economic outlook,” Kyser said. “The region’s tourism industry should see nice growth trends during the time frame, thanks to a declining U.S. dollar, an agreement between the U.S. and China allowing more leisure travel to U.S., and a lengthy roster of ‘events’ that will keep Southern California in the national and international spotlight.”

Professional, scientific, and technical services will also see decent growth, and the legal profession can expect a tsunami of lawsuits over the next few years from the sub-prime debacle. Technology should also record growth, although the LAEDC Forecast team has its fingers crossed over the receipt of more orders
for the C-17 military cargo plane built by Boeing in Long Beach. The Forecast also looks for a slight pickup in international trade in 2008, with the number of containers handled at the Los Angeles/Long Beach port complex up by 2.8 percent compared with the 0.6 percent decline in 2007. “Support for the region’s economy will also come from public works projects like the Gold Line extension and the Exposition Boulevard light rail line,” Kyser noted. “There is also significant private investment underway, such as LA Live and the Grand Avenue project. New firms such as Wachovia Bank and Tesco with their Fresh & Easy grocery chain are entering the Southern California market.

Additional findings from the LAEDC Forecast:
- California will see nonfarm employment growth of 0.5 percent in 2008, picking up to 1.0 percent in 2009. The unemployment rate will average 5.9 percent in 2008 easing to 5.6 percent in 2009.
- Los Angeles County should record nonfarm employment growth of 0.7 percent in 2008 and 1.2 percent in 2009. Its unemployment rate will average 5.6 percent in 2008 and 5.4 percent in 2009.
- Orange County, still suffering fallout from the sub-prime mess, will record nonfarm employment
growth of just 0.2 percent in 2008 and 0.8 percent in 2009. The County’s unemployment rate will average 5.0 percent in 2008, which for it is extremely high. In 2009, the rate will ease down to 4.8 percent.
- The Riverside-San Bernardino area will also see much slower growth over the Forecast time frame, reflecting a sharp slowdown in new home construction and a jump in home foreclosures. Nonfarm employment growth is placed at 1.4 percent in 2008 and at 2.2 percent in 2009. The area’s unemployment rate is forecast at 6.2 percent in 2008 and at 5.8 percent in 2009.
- San Diego County should see nonfarm employment growth of 1.0 percent in 2008 and of 1.5 percent in 2009. The LAEDC Forecast noted that rebuilding from the late 2007 wildfires will provide somewhat of a boost. The County’s unemployment rate will average 4.9 percent in 2008 and 4.6 percent in 2009.
- Ventura County could also be tiptoeing around a “spot” recession during the Forecast time frame, with nonfarm employment growth of 0.3 percent in 2008 and 1.0 percent in 2009. The County’s unemployment rate is placed at 5.5 percent in 2008 and at 5.2 percent in 2009.
For the nation, the LAEDC Forecast looks for GDP growth of 1.7 percent in 2008 and 2.5 percent in 2009.
The Forecast observed that extensive media coverage of the current “recession” may cause both business and consumers to pull back.
About LAEDC (www.LAEDC.org)
The Los Angeles County Economic Development Corporation (LAEDC), the region’s premier business leadership organization, is a private, non-profit organization established in 1981. Its mission is to attract, retain, and grow business and jobs for the regions of Los Angeles County. Since 1996, the LAEDC has helped retain or create more than 135,000 jobs, providing $5.6 billion in annual benefit to LA County.
[Editors: For media interviews please contact George McQuade, MAYO Communications, (818) 340-5300 or PR@MayoCommunications.com. For an advance preview of the report, see
http://www.laedc.org/reports/Forecast-2008-02.pdf]

Identity Theft Info!!

2008-03-02T11:44:00.000-08:00

GOOD INFORMATION

Read this and make a copy for your files in case you need to
refer to it someday. Maybe we should all take some of his advice!
A corporate attorney sent the following out to the employees in his
company.

1. Do not sign the back of your credit cards. Instead, put
'PHOTO ID REQUIRED.'

2. When you are writing checks to pay on your credit card
accounts, DO NOT put the complete account number on the 'For' line.
Instead, just put the last four numbers. The credit card company knows
the rest of the number, and anyone who might be handling your check as
it passes through all the check processing channels won't have access to
it.

3. Put your work phone # on your checks instead of your home
phone. If you have a PO Box use that instead of your home address. If
you do not have a PO Box, use your work address. Never have your SS#
printed on your checks. (DUH!) You can add it if it is necessary. But
if you have It printed, anyone can get it.

4. Place the contents of your wallet on a photocopy machine.
Do both sides of each license, credit card, etc. You will know what you
had in your wallet and all of the account numbers and phone numbers to
call and cancel. Keep the photocopy in a safe place.

I also carry a photocopy of my passport when I travel either
here or abroad. We've all heard horror stories about fraud that's
committed on us in stealing a Name, address, Social Security number,
credit cards.

Unfortunately, I, an attorney, have first hand knowledge
because my wallet was stolen last month. Within a week, the thieve( s )
ordered an expensive monthly cell phone package, applied for a VISA
credit card, had a credit line approved to buy a Gateway computer,
received a PIN number from DMV to change my driving record information
online, and more.

But here's some critical information to limit the damage in case
this happens to you or someone you know:

5. We have been told we should cancel our credit cards
immediately. But the key is having the toll free numbers and your card
numbers handy so you know whom to call. Keep those where you can find
them.

6. File a police report immediately in the jurisdiction where
your credit cards, etc., were stolen. This proves to credit providers
you were diligent, and this is a first step toward an investigation (if
there ever is one).

But here's what is perhaps most important of all: (I never
even thought to do this.)

7. Call the 3 national credit reporting organizations
immediately to place a fraud alert on your name and also call the Social
Security fraud line number. I had never heard of doing that until
advised by a bank that called to tell me an application for credit was
made over the internet in my name.

The alert means any company that checks your credit knows your
information was stolen, and they have to contact you by phone to
authorize new credit.

By the time I was advised to do this, almost two weeks
after the theft, all the damage had been done. There are records of all
the credit checks initiated by the thieves' purchases, none of which I
knew about before placing the alert. Since then, no additional damage
has been done, and the thieves threw my wallet away this weekend
(someone turned it in). It seems to have stopped them dead in their
tracks.

Now, here are the numbers you always need to contact about
your wallet, if it has been stolen:

1.) Equifax: 1-800-525-6285

2.) Experian (formerly TRW): 1-888-397-3742

3.) Trans Union : 1-800-680 7289

4.) Social Security Administration (fraud line):

1-800-269-0271

If you are willing to pass this information along, it could
really help someone that you care about.

Relief for Bay Area home buyers

2008-02-15T08:33:00.000-08:00

How economic stimulus addresses mortgage crisis
By Katherine ConradMercury News

The economic stimulus package introduced Thursday included a provision long sought by California housing leaders that would benefit home buyers and homeowners across the state, but especially in the Bay Area, where residents must contend with some of the highest prices in the country. When asked why Congress agreed to raise the limit on conforming loans - which carry lower interest rates and are backed by government-sponsored companies, Fannie Mae and Freddie Mac - one real estate expert answered, "Panic." "California leads the nation in recovery," continued Jeff Barnett, regional manager for Alain Pinel Realtors in Los Gatos, and a director for both the national and state associations of Realtors. "If you get good housing news out of California, it's a stimulus for the country."
Here are some questions and answers about the change.
QWhat have Congressional leaders agreed to?
AAn increase in Fannie Mae's and Freddie Mac's conforming loan limits from $417,000 to a maximum of $729,750.
QWho benefits?
AHome buyers who are in the market as well as home sellers, who should benefit from a larger pool of buyers who would be able to get bigger loans at lower interest rates. Homeowners with non-conforming, or jumbo loans, also could benefit because they could refinance into a new conforming loan.
Q Why is this proposal important to California?
The average home price in the Bay Area - more than
$600,000 - is almost triple the average price in the rest of the nation. As a result, many Bay Area homeowners have jumbo loans at higher interest rates.
QWhen will the plan take effect and how long will it last?
ACongressional leaders hope to have it on President Bush's desk by mid-February. It is scheduled to end on Dec. 31.
QWhy is it only for one year?
AIt's meant to stimulate the economy as soon as possible. Permanent changes would require more study and take longer to enact.
QWhat are the chances it will be extended?
AIt's possible, depending on how the economy is doing Dec. 31, 2008.
QShould I refinance my home loan just because of this change?
AOnly if you have a non-conforming loan. Homeowners with loans from $417,000 to $729,750 would be prime candidates to refinance for a lower rate.
QWhat was the conforming loan limit in California before this proposal?
A$417,000.
QWhy wasn't the conforming loan limit increased before now for some higher-priced areas?
AIt takes an act of Congress to change the limit. This is a low priority because only a few states such as California, New York and parts of Florida, benefit from raising the limit. The limit is already higher - $625,000 - in Hawaii, Alaska, Guam and the U.S. Virgin Islands. Even though housing leaders in California have pushed to raise the limit for the past several years, they have not succeeded. Until the rapid run-up in prices during the boom, most parts of California did not need a higher limit. The Bay Area, however, has had significantly higher home prices than the rest of the state since the mid-1990s.
QHow did they come up with the number $729,750?
AIt is 150 percent of the current limit of $417,000.
QWill the conforming loan limit vary from place to place?
ANo.
QWill the legislation have any effect on me if I already have a conforming loan?
ANo.
QHow many homeowners in Silicon Valley and in California have non-conforming or jumbo loans?
AThe number of jumbo loans in Silicon Valley is estimated to be 105,000, and in the entire state there are about one million loans, according to First American CoreLogic LoanPerformance in San Francisco. The number of conforming loans in the valley is about 200,000, and about 5 million in the state.
QWill this help homeowners at risk of foreclosure?
AIt could help some homeowners who couldn't refinance under the conforming loan limit of $417,000, unless their credit is already impaired.
QHow many more homes sales could be generated nationally from this stimulus?
As many as 350,000 - or about $44 billion in economic activity, according to Joseph Perkins, president of the Home Builders Association of Northern California.

Feds cut rate again!!

2008-01-30T20:36:00.000-08:00

Today the Fed's announced a 1/2 point cut to the Fed Funds rate. Remember- a fed cut in rates is a big help for business loans, consumer loans, Home Equity Lines of Credit and Adjustable Rate Mortgages. But how will this affect the fixed rates today? Fed Rate cuts do not have a direct impact on fixed mortgage rates. In fact, they often serve to push them in the opposite direction, by fanning fears of inflation when they cut- or by fighting inflation when they hike. Fixed mortgage rates are directly affected by inflation, because a fixed rate mortgage provides the investor with a fixed rate of return for a long period of time. As inflation increases, the buying power of that fixed return is eroded, because it costs more dollars to buy the same amount of goods and services. So if inflation is on the rise- investors will demand a higher fixed rate of return to compensate them for the more rapid erosion of buying power on their return.
The last time the Fed had a long cutting cycle was back in 2001. The Fed cut eleven times in eleven months, and eight of those cuts were by 50bp, for a total of a 4.75% drop in the Fed Funds Rate. But mortgage rates were actually higher throughout this drastic cutting cycle, because inflation ticked higher. Let's look at more recent history: the Fed cut by 50bp on September 18, 2007, and after prices enjoyed a move higher that afternoon, Mortgage Bonds lost 94bp over the next two days. On October 31, the Fed lowered by 25bp...and over the next five trading days, Mortgage Bonds lost 78bp. On December 11th, the Fed lowered by another 25bp, and over the next two days, Mortgage Bonds lost 64bp. Most recently- the surprise 75bp cut by the Fed cost us about 150bp on our rates over the next two days.

Fed rate-cut winners and losers

2008-01-23T15:07:00.000-08:00

When the Federal Reserve meets and changes rates we all have questions: What does it mean to me? Will my mortgage rate go up or down? Is this a good time to refinance? Bankrate is here to help. We've looked at five categories -- mortgages, home equity loans, auto loans, credit cards and certificates of deposit -- to determine if the Fed's moves made you a winner or a loser. Here's a look at mortgages:

Winner: Borrowers with good credit
The surprise decision by the Federal Open Market Committee to cut the federal funds target by 75 basis points likely reflects growing fears that the U.S. economy is weakening. Ironically, such worries may be good for people hoping to see lower mortgage rates.
Mortgage rates often dip when investors fearing an economic slowdown grow more conservative and buy up Treasuries and bonds. This causes long-term rates -- and by extension, mortgage rates -- to fall, creating an opportunity to get better terms on a loan.
However, the nation's recent credit woes mean you probably need a sound credit history to take advantage of these better terms.
"If you are a high-quality credit household and you're looking to buy a house, prices have fallen in many markets," says Doug Duncan, chief economist for the Mortgage Bankers Association. "In addition to that, interest rates have come down.
"Those two things indicate that you're likely to get a more affordable mortgage and homes will be more affordable."
People with adjustable-rate mortgages can also refinance to a fixed-rate mortgage. This will lock in their payment for years to come, regardless of the future direction of mortgage rates.
Loser: Borrowers with bad credit
Falling mortgage rates are great for homebuyers and homeowners looking to refinance. But if you've had credit problems in the past, tightening lending standards means you're less likely to be approved for a loan, Duncan says.
Take action
Now is a good time to start shopping for a home. It's also a good time to refinance from an adjustable-rate mortgage to a fixed-rate.
"The takeaway for the average Joe is that it's one heck of a time to refinance," says Bob Walters, chief economist for Quicken Loans.
Meanwhile, if your credit is bad or your home is losing value, you likely will have more difficulty getting a loan. Still, it's worth calling around to find a lender who may be willing to work with you, Walters says.
"I'm not saying that everyone's going to get approved," he says. "I'm saying that everybody should try."

-- Posted: Jan. 22, 2008

Levee report shocks city

2008-01-16T15:50:00.001-08:00

Feds plan tough restrictions that could halt building in Natomas and require flood insurance.

After years of post-Hurricane Katrina pressure to improve the nation's defenses against catastrophic flooding, the federal government took a drastic step Tuesday.
The Federal Emergency Management Agency said it would place Sacramento's fast-growing Natomas in a flood hazard zone, essentially halting construction of homes, offices and stores until the levees are improved.
The FEMA announcement sets a long-awaited deadline for homeowners to buy flood insurance before rates rise.

The designation was greeted with anger and shock by Sacramento city officials who have supported bold levee repair plans but oppose restrictions on building.
City leaders questioned the evaluation conducted by the U.S. Army Corps of Engineers. They said they would seek "an act of Congress" to stop the federal action. And they said the new rules could cripple Sacramento's economy.
"I am very frustrated and very angry with the Army Corps of Engineers and FEMA because Sacramento has really become the poster child of what to do right in flood protection," Mayor Heather Fargo said at a hastily called news conference.
Natomas is a major economic driver for the city, which is facing a significant budget crisis. "I'm totally outraged," City Manager Ray Kerridge said Tuesday. "I don't know how the federal government can do this to this city."
North Natomas today accounts for 47 percent of the development in the city of Sacramento.
Fargo said she wasn't sure the city would appeal, but it would seek help from U.S. Rep. Doris Matsui. "The one solution left that I'm aware of is an act of Congress," she said.
Unlike her late husband, however, it doesn't look as if Matsui will lead a charge to make FEMA back off. In the 1980s, U.S. Reps. Robert Matsui and Vic Fazio pushed through legislation that prevented FEMA from slapping building restrictions on much of Sacramento. But that was before Hurricane Katrina destroyed much of New Orleans.
"Public safety is No. 1," Matsui spokeswoman Lauren Smith said Tuesday. She said the congresswoman was "exploring avenues" that would allow critical projects, such as a planned North Natomas fire station, to proceed.
Sacramento is considered the urban area most vulnerable to catastrophic flooding in the nation.
In 1998, after an eight-year building moratorium, the corps said the Natomas levees met its minimal 1-in-100 flood protection standard, or the ability to withstand a flood with a 1 percent chance of striking in any given year.
Then, in July 2006, the corps said the levees didn't meet that standard after all, despite the $57 million in upgrades during the 1990s.
On Tuesday, the corps said Natomas levees aren't strong enough to withstand even a 30-year storm, the type of event that has a 3 percent chance of happening any given year.
Due to the limited time available for this study, the corps closely examined only two Sacramento River levee sections.
The corps found seepage and unstable slopes in both.
"That's enough information right there for us to not certify the levees," said Roger Henderson, assistant geotechnical branch chief for the corps.
In one stretch, three sites were up to 4 inches too short to hold back a 30-year flood.
FEMA proposes remapping the basin as an "AE Zone." That means all new construction or substantial remodeling must be elevated above higher flood levels now thought possible. In Natomas, that could mean buildings must be raised 20 feet – a prohibitively expensive requirement that would create a de facto building moratorium. The decision is likely to become final in December.
City and county officials cannot appeal the AE zone, but they can appeal the elevation, said FEMA spokesman Frank Mansell.
The new Natomas designation also means residents with federally backed mortgages must buy flood insurance. FEMA recommends anyone who does not already have flood insurance buy it now, or face higher rates after December. A policy covering a structure for $250,000 costs $769 per year. After December, it will cost $1,390, Mansell said.

Building in Natomas can proceed as long as a project receives permits by December, when the new maps become effective, officials said.
William Thomas, the city's development director, said the new designation could halt 8,200 housing units in North Natomas that have been approved but haven't received building permits. An additional half-billion dollars in office and retail construction may be affected.
The federal decision could delay public improvements such as a library, a high school and fire station planned for Natomas, Fargo said.

One major project that could be affected is the $1.3 billion expansion of Sacramento International Airport. That project includes a new four-story terminal replacing the Terminal B complex, as well as a hotel and multistory garage.
Sacramento County airport officials said Tuesday they have met with FEMA officials and believe they still will be able to move forward. Airports Director Hardy Acree said his agency is on a fast track to obtain building permits this spring. Construction is scheduled for summer.
Officials at the Sacramento Area Flood Control Agency said Tuesday's announcement won't change their plans for levee upgrades in Natomas. Executive Director Stein Buer said his agency has worked closely with the corps to understand its results and changing standards.
SAFCA hopes to start construction this summer on the first phase of a $400 million levee repair project in Natomas. It is designed to restore 100-year protection by 2010, and achieve 200-year protection by 2012.
But that project has yet to be approved by state and federal officials, and is subject to a lawsuit.
Tuesday's news left some Natomas property owners fuming at the slow progress in achieving flood protection for their area.
David DeLuz said he bought his North Natomas home in 2001 with the understanding that millions of dollars had been spent making the area safe.
DeLuz said homeowners should not have to pay for flood projects needed because of shifting standards and poor planning.
"We've got a situation where property values are going to be affected," DeLuz said. "What's going to happen to the demand for a house that exists in a 30-year floodplain? Homeowners are going to be left holding the bag."

Sacbee.com
January 15th, 2008

Subprime mortgage crisis crimps valley, state economies

2008-01-09T16:16:00.000-08:00

MORTGAGE CRISIS FALLOUT LIKELY TO BE FELT FOR YEARS
By Chris O'BrienMercury News
Article Launched: 12/26/2007 01:38:16 AM PST

Statistics and factoids aside, here's the scariest thing about the subprime mortgage crisis of 2007: Nobody knows for sure just how bad it could get. We do know, however, that its impact will be felt in Silicon Valley, and the rest of the country, for years. We may someday look back and see it as the most important business or technology story of 2007. "No one expected it to unfold into the monster it has," said Sung Won Sohn, president and chief executive officer of Hanmi Financial, a commercial bank in Los Angeles. "It kind of woke up investors and told them they weren't paying attention to risk. And now the pendulum has swung in the opposite direction, and they've become much more cautious." Summing up the immense complexities of what happened could take up this entire story. But to recap, the increasingly risky loans made to home buyers were being underwritten through a series of complex financial instruments. When foreclosures began to soar, and those loans went sour, it sent shock waves through the financial markets - and those shock waves seem to be growing rather than shrinking.
It's a crisis that kind of crept up on everyone. Early in 2007, lenders grew concerned over rising foreclosure rates that jumped 25 percent in January from the same month in 2006, according to RealtyTrac, a real estate company that specializes in foreclosures. By November, that concern had turned to alarm as the foreclosure rate was up 68 percent over the same month in 2006.
The ripples from this problem spread almost unnoticed until they hit the stock market, when some hedge funds announced they would suffer massive losses due to their backing of bundles of risky mortgages. Stocks had been shrugging all of this off, as the Dow Jones industrial average crossed the 14,000 barrier in July, but it plunged by more than 1,000 points in the next month as the extent of the problem became clearer. Since then, Wall Street banks have been outdoing each other for the biggest write-downs. One analyst estimated that Citigroup alone could eventually have to cut the values of risky loans on its books by at least $15 billion. And after a slow start, the U.S. Federal Reserve has begun taking aggressive action by first cutting interest rates and more recently targeting fraud. "Unfair and deceptive acts and practices hurt not just borrowers and their families, but entire communities, and indeed, the economy as a whole," explained Fed Chairman Ben Bernanke as he outlined a series of steps the central bank is taking to try to stem the mortgage crisis. This certainly isn't just a Silicon Valley story, or even just a California tale. Still, the effects are going to plague this region for years to come.
For businesses, the amount of credit available has been tightened considerably. That will make it tougher - and more expensive - to borrow money. Consumers, meanwhile, will get hit from several directions. Economists are holding their breath for 2008, waiting to see if foreclosure rates continue to climb. Even if they don't, the air has come out of the housing market, which had been allowing many homeowners to borrow money against the inflated values of their homes. That money had helped fuel a consumer spending boom. Beyond having less money to spend, the lingering crisis may deliver a psychological blow, making consumers even warier of shopping. Given that consumer spending accounts for up to 70 percent of the economy, that will further dampen prospects for growth. Also, as Sohn notes, economists believe about one in eight jobs is tied to housing. California and Silicon Valley have already taken a hit here, according to the latest figures from the California Employment Development Department, and that trend is expected to continue at least through 2008. Finally, the ripples from this crisis have hit state and local government budgets. Earlier this month, Gov. Arnold Schwarzenegger said he will declare a fiscal emergency to deal with a projected $14 billion deficit in the state budget next year. And Santa Clara County officials also said this month that drops in housing values and foreclosures will have an impact on their budgets next year. Economists at the UCLA Anderson Forecast said these expected cuts in government spending will hit the economy in 2008, providing another wet blanket on any growth. "I think this problem is still gathering steam," Sohn said. "We have quite a bit of digging to do."
Silicon Valley: Get your shovels.

KB Home loses $773 million; CEO is gloomy

2008-01-09T16:03:00.000-08:00

By Peter Y. Hong, Los Angeles Times Staff Writer January 9, 2008

The builder posts a bigger-than-expected loss of $773 million in its fourth quarter amid the housing slump. Shares of KB Home plunged 9% on Tuesday to a six-year low after the Los Angeles home builder reported a bigger-than-expected fiscal fourth-quarter loss of $773 million. Wall Street had expected a loss of $1.34 a share, according to a Bloomberg survey of analysts. Instead, the company reported a loss of $9.99 a share for the quarter ended Nov. 30. In a conference call with analysts Tuesday, KB Home Chief Executive Jeffrey Mezger discounted any hope of a quick turnaround in the housing market, citing "oversupply, foreclosures, reduced affordability and declining consumer confidence.""Current conditions are not improving enough to clear inventories," which stand at nine months for new homes nationwide, he said.To ride out the slump, Mezger said KB Home had eliminated jobs and cut back home construction. The company also cut its debt by $759 million and increased its cash balance by $625 million to $1.3 billion.This reserve should help KB Home survive the tough housing market, said Rashi Dahod, an Argus Research analyst."Regardless of a drop in stock price, their balance sheet is strong. They closed the year with $1.3 billion in cash," he said.The $773-million fourth-quarter loss compares with a loss of just under $50 million, or 64 cents a share, in the same period a year earlier.Revenue fell to $2.07 billion for the fourth quarter, down from $3.01 billion the previous year, because of lower home sales and prices.For fiscal 2007, KB posted a loss of $929.4 million, or $12.04 a share, contrasted with a profit of $482.4 million, or $5.82, in fiscal 2006. Revenue fell 32% to $6.42 billion.Mezger said the company's customer mix was shifting. "We are definitely seeing a buyer viewing the home for lifestyle, intending to live in it for a while. The days of the flipper are gone," he said. Although KB focuses on first-time buyers, Mezger said the number of customers trading up had declined."A lot of move-up buyers have difficulty disposing of their current home; they're upside down," he said, referring to homeowners who owe more on their property than it's worth.As land prices fall, Mezger said, KB Home will be able to buy lots at lower prices and boost future margins on home sales.The National Assn. of Realtors gave a more upbeat assessment of the housing market Tuesday, predicting that home sales would hold steady and then climb by year's end."A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed until late 2008," NAR chief economist Lawrence Yun said.Yun's prediction is based on NAR's pending home sales index, which the group reported fared better in November than it did in August and September. The index fell 2.6% from October, and was 19.2% below the previous November. The index tracks signed housing contracts. A 100 score reflects the average level of contract activity in 2001. The November index was 87.6, compared with 108.4 in November 2006.

Countrywide denies bankruptcy rumors

2008-01-09T15:59:00.000-08:00

Trading in company's stock resumes after run.
Rumors that Countrywide Financial Corp. was preparing to file for Chapter 11 bankruptcy protection sent the mortgage lender's stock price tumbling by more than 20 percent Tuesday, before trading was halted and the company issued a denial.
The New York Stock Exchange briefly halted trading of the company's stock to allow Countrywide to issue a statement saying there was "no substance" to the rumor or to additional speculation that rating agencies are preparing to downgrade the company's debt.
Trading was resumed after the announcement and Countrywide's stock, which closed at $7.64 Monday, bounced back above $6 after hitting a low of $5.76.
Today's rumors echoed similar fears in August, when Countrywide faced a liquidity crisis and analysts at Merrill Lynch & Co. and Friedman, Billings Ramsey analyst Kenneth Bruce warned that the company could face bankruptcy if it was forced to sell off assets at fire-sale prices.
Instead, Countrywide announced plans to lay off 12,000 workers, drew down an $11.5 billion line of credit with 40 banks, and gave Bank of America the right to buy a minority interest in the company in exchange for a $2 billion loan. Countrywide lined up an additional $12 billion in financing in September.
Countrywide and other mortgage lenders faced a crisis when Wall Street investors stopped buying many types of mortgage-backed securities and short-term "commercial paper" debt used to finance their operations, because of concerns about rising delinquencies and foreclosures.
Countrywide, which reported $1.2 billion in third-quarter losses in October, is scheduled to report its fourth-quarter results this month. Statistics for December could come out this week or next.
Last month, the Calabasas, Calif.-based lender said it funded $23.1 billion in residential mortgage loans in November, up 5 percent from October but down 40 percent from a year ago.
The stocks of bond insurers MBIA Inc. and Ambac Financial Group Inc. were also down sharply Tuesday, after analysts at Morgan Stanley said rising defaults will take a toll on both companies' bottom lines.

Inman News

Dunmore files for Chapter 11 Granite Bay builder

2007-11-21T10:40:00.000-08:00

Seeking protection from creditors, Granite Bay home builder Dunmore Homes filed for bankruptcy late Thursday as it tries to restructure its business.
The move comes six weeks after Michael A. Kane, a Comstock Mortgage senior loan consultant in Sacramento, bought the firm from its second-generation owner, Sid Dunmore. It's the first bankruptcy filing by a Sacramento-area home builder as dozens of local and national firms struggle with the downturn in demand and prices for new homes.
Kane, who bought the firm Sept. 26 and became president and chief financial officer, was unavailable for comment Friday.

Dunmore executive John Slaughter said the bankruptcy filing was in response to "an aggressive move by one creditor to put themselves in a position ahead of others in a lawsuit."
"If that would have happened, it would have probably done some damage to the other creditors," said Slaughter, vice president of construction and operations. "The only way to head that off was to file bankruptcy. ... In effect it treats all the creditors correctly while we keep handling this."
He declined to name the creditor.
Dunmore filed for Chapter 11 bankruptcy protection, which allows it to remain in control of operations while reorganizing. Chapter 11 generally gives creditors and debtors more flexibility in working together. The filing does not affect other Dunmore family subsidiaries, the company said.
Dunmore Homes, founded in 1953 by the late George P. Dunmore and run since 1977 by his son Sid, says it has built 22,000 homes in California and Nevada. The company still controls 3,500 home lots between Bakersfield and Yuba City.
In August the builder halted construction and sales at all its projects, including those in Elk Grove and Linda, near Yuba City.
In its filing in a federal bankruptcy court in New York state, Dunmore listed assets and liabilities of more than $100 million. It claimed between 5,000 and 10,000 creditors.
Slaughter said Kane reincorporated the firm in New York after buying it from Sid Dunmore.
The builder's largest creditor is JPMorgan Chase Bank, which is owed $20 million, according to the filing. Dunmore also owes $9.1 million to Travelers Casualty & Surety Co. of America.
Its local and regional creditors include numerous subcontractors who have worked on Dunmore projects throughout the Central Valley. Among others, Carmichael-based Cal Sierra Construction is owed $4.1 million. Teichert Construction Inc. of Sacramento is owed $1.6 million, according to the filing.
Also among the creditors is Stuart Nelson of El Dorado Hills-based SGN Nelson Construction. The firm recently filed a breach of contract lawsuit against Dunmore. GGN is owed $391,000, according to the filing.
"They haven't paid me for lumber and services," Nelson said Friday. "We've got 10 houses that are partially built that they owe money on. I'm not very happy."
The bankruptcy case is being handled by New York law firm Pachulski Stang Ziehl & Jones. Dunmore also has retained New York-based investment banker Alvarez & Marsal to assist in its restructuring efforts.

By Jim Wasserman
Published 12:00 am PST Saturday, November 10, 2007 Story appeared in BUSINESS section, Page D2

Governor, 4 big lenders agree on plan to stall high mortgage rates

2007-11-21T10:32:00.000-08:00

Carolyn Said, Chronicle Staff Writer
Wednesday, November 21, 2007

Four major subprime lenders promised to give a break to California homeowners who cannot afford escalating mortgage payments, under a plan announced Tuesday by the lenders and Gov. Arnold Schwarzenegger.
Countrywide, GMAC, Litton and HomeEq - which collectively service more than one quarter of subprime loans to people with poor credit - agreed to maintain the initial, lower interest rate for some subprime borrowers whose rates are scheduled to jump significantly higher. To qualify, borrowers must occupy their homes, have made their payments on time and prove they cannot afford payments with the higher interest rate.
The voluntary program is designed to stem a huge wave of foreclosures. Half a million homeowners in the state have subprime mortgages that are scheduled to jump higher within the next two years after their introductory period elapses. Such loan resets, in combination with a slumping real estate market, already have led to a record number of foreclosures across California and the nation.
"With this type of cooperation from loan servicers, we can save tens of thousands of people from being added to the foreclosure lists," the governor said in a statement. "This common-sense approach does not involve a government subsidy or bailout."
It was unclear for how long the loan servicers would freeze the interest rates.
"The word that was chosen is it's for a 'sustainable' period of time," said Mark Leyes, a spokesman for the California Department of Corporations, which oversees nondepository lending institutions. "What does that mean? The answer is, it depends. It could be two years, five years, even seven years. The idea is until the housing market recovers. At that point, housing values would be restored; equity is restored, refinancing becomes an option. But nobody knows how long that's going to be."
Larry Litton Jr., chief executive of Houston's Litton Loan Servicing, said his company plans to expand the initial interest-rate period for up to five years.
"That gives us an ability to go in five years later and if the market has recovered and the consumers can afford an increased payment, the payment can be increased at that time," he said.
Freezing the payment rate makes economic sense for the investors who own the mortgages as well as for the homeowners, Litton said. Studies have shown that each foreclosure costs lenders tens of thousands of dollars.
"Property values are falling dramatically, primarily because there are so many foreclosures already on the market in some areas," he said. "Clearly, it is not good for our investors to have the real estate back. It feels like a no-brainer for a loan servicer to keep the payment where it is, keep another piece of real estate off the market and keep the borrower in the house."
Many subprime loans have initial rates such as 8 percent or 9 percent - already a premium on the going rate for people with good credit. But what about loans with initial rates as low as 2 percent?
"I don't have any in my portfolio," Litton said.
The lenders also said they would streamline the process for determining who gets the loan modifications. Many borrowers have complained that requesting a loan modification required weeks or months of phone calls and ended in a rejection because the criteria for income and credit rating were too high. Others have said they were caught in a catch-22: They could not qualify for a loan modification until they missed some mortgage payments - which hurt their credit ratings. Studies have shown that major lenders have modified only a small percentage of mortgages.
The companies also agreed to provide regular reports to the Department of Corporations on their efforts to reach out to consumers and on how many loan modifications actually occur.
"Overall I am extremely pleased that the issue of foreclosures is squarely on the governor's radar screen and that he seems to have extracted some important commitments from some very significant loan servicers here in California," said Paul Leonard, California director for the Center for Responsible Lending, an advocacy group. "That said, the devil is in the details. The monitoring and reporting on the process is critically important."
-- A federal regulator proposes an incentive plan
for loan servicers who agree to modify lending terms to avoid default. C3
Who qualifies
If you have a mortgage through Countrywide, GMAC, Litton or HomeEq, you might qualify to have your introductory interest rate temporarily frozen. To get help, borrowers must occupy their homes, have made their payments on time and prove they cannot afford the loan's new rate. If this fits your situation, contact your loan servicer to apply.

Economic outlook darkens

2007-11-21T10:29:00.000-08:00

Leading index falls sharply on housing permit declines, lower consumer expectations
Inman News
The U.S. leading index, a key indicator of economic conditions, fell sharply in October after a small increase in September.
According to the Conference Board, the leading index decreased 0.5 percent last month and now stands at 136.9, with only three of the 10 leading indicators that make up the index increasing.
Most of the leading indicators contributed negatively to the index in October, led by large declines in housing permits, initial claims for unemployment insurance and index of consumer expectations. Stock prices, real money supply and manufacturers' new orders for consumer goods and materials were the only components that contributed positively to the index this month.
Based on revised data, the index increased 0.1 percent in September and decreased 0.9 percent in August. During the six-month span through October, the leading index decreased 0.5 percent, with five out of 10 components advancing.
The coincident index, which indicates the current state of the economy, was unchanged in October for the first time in 2007 following steady increases since the beginning of the year. The index now stands at 125.1, after increasing 0.2 percent in September and 0.2 percent in August.
During the six-month period through October, the coincident index increased 0.9 percent.

Consumer Confidence Index Declines Again

2007-11-06T19:37:00.000-08:00

The Conference Board Consumer Confidence Index, which has been declining since August, fell further in October. The Index now stands at 95.6 (1985=100), down from 99.5 in September. The Present Situation Index decreased to 118.8 from 121.2 in September. The Expectations Index declined to 80.1 from 85.0.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for October's preliminary results was October 23rd.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer Confidence posted its third monthly decline and continues to hover at two-year lows (Oct. 2005, 85.2). Further weakening in business conditions has, yet again, tempered consumers' assessment of current-day conditions and may very well be a prelude to lackluster job growth in the months ahead. In addition, consumers are growing more pessimistic about the short-term future and their rather bleak outlook suggests a less than stellar ending to this year."
Consumers' assessment of present conditions weakened further in October. Those claiming conditions are "good" decreased to 23.4 percent from 25.7 percent. However, those saying conditions are "bad" decreased to 16.3 percent from 17.8 percent. Overall, consumers were less upbeat in their appraisal of the job market. Those saying jobs are "hard to get" increased to 22.6 percent from 22.4 percent. Those claiming jobs are "plentiful" decreased to 24.1 percent from 25.6 percent in September.
Consumers' short-term expectations eroded further in October. Consumers expecting business conditions to worsen in the next six months rose to 13.8 percent from 11.9 percent. Those anticipating business conditions to improve declined to 13.7 percent from 15.7 percent.
The outlook for the labor market was also less optimistic. The percent of consumers expecting more jobs in the months ahead was virtually unchanged at 13.5 percent, while those anticipating fewer jobs increased to 20.1 percent from 18.7 percent. The proportion of consumers expecting their incomes to increase in the months ahead declined moderately to 19.6 percent from 20.0 percent.
Source: October 2007 Consumer Confidence IndexThe Conference Board

Fed rate cut .25 points

2007-11-06T19:35:00.000-08:00

Release Date: October 31, 2007
For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.
Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh. Voting against was Thomas M. Hoenig, who preferred no change in the federal funds rate at this meeting.
In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 5 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Richmond, Atlanta, Chicago, St. Louis, and San Francisco

C.A.R.'s California Housing Market Forecast for 2008

2007-10-11T08:34:00.000-07:00

Statewide median price down, pace of sales decline moderates after tumultuous 2007
LOS ANGELES (Oct. 10) – Home prices throughout most of California will post modest declines next year while sales of existing homes will stabilize from the precipitous decrease experienced in 2007, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) "2008 California Housing Market Forecast" released today. The forecast will be presented this afternoon during the CALIFORNIA REALTOR® EXPO 2007 (http://www.realtorexpo.org/), running from Oct. 9-11 at the Anaheim Convention Center in Anaheim, Calif. The trade show attracts nearly 12,000 attendees and is the largest state real estate trade show in the nation.
The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007.
“Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year,” said C.A.R. President Colleen Badagliacco. “Now is not the time for homeowners to ‘test the waters’ – only serious sellers should put their homes on the market in what will continue to be a challenging sales environment.”
“Sales could decline more steeply in 2008 if the current liquidity crunch in the mortgage markets has a longer-than-expected duration or if interest rates unexpectedly increase,” she said
“Geographically, more affordable regions such as the Central Valley and Inland Empire will experience greater softness in the resale market because of the large number of new homes coming onto the market in recent years,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Higher priced regions of the state, such as the San Francisco Bay Area and parts of San Diego, Los Angeles, and Orange counties will react more to affordability constraints.”
“By price-range, the highest-priced markets – those with medians over $1 million -- will show less stress,” she said. “The lower-priced markets will continue to face fallout from the subprime crisis, tighter underwriting standards, and competition from new home developments where price-cutting has been even more severe.”
C.A.R. economists also projected a 23 percent decline in sales this year to 367,500 units compared with 2006, and a 3.5 percent increase in the statewide median price to $576,000. However, the projected increase in the 2007 statewide median stands in contrast to the situation in most counties, regions, and communities of the state, where slight to modest year-to-year percentage declines have become more prevalent and will continue next year.
Historically, the last time the sales level fell below 2007’s projected 367,500 units occurred in 1995, when annual sales totaled 342,540 units. Sales last fell below 2008’s 334,500-unit forecast in 1985, with 328,270 units. The last time the statewide median price fell was a 0.5 percent decline in 1996. The most recent statewide median price decline greater than 4 percent was a 4.5 percent decline in 1993.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (http://www.car.org/) is one of the largest state trade organizations in the United States, with nearly 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Self-Employed Workers Struggle to Get a Mortgage

2007-10-08T08:47:00.000-07:00

Daily Real Estate News October 3, 2007

It is growing increasingly difficult for the self-employed to get a mortgage. Some lenders that specialized in home loans to self-employed workers and small-business owners have gone out of business. And many lenders that still offer such loans have tightened their standards, making it harder for self-employed borrowers to qualify.Here's what self-employed borrowers need in order to qualify for a mortgage in this new environment, according to Marc Savitt, president of the National Association of Mortgage Brokers.
More documentation. Along with two years of tax returns, self-employed borrowers might be asked to provide a profit-and-loss statement, bank statements, and proof that they've been in business for at least two years. A letter from their accountant probably won’t be good enough.
Fewer tax deductions. Savitt says self-employed workers who plan to buy a home in the next year or two might want to forgo some deductions. "Make sure you can show as much income as possible," he says.
Larger down payments. An old-fashioned 20 percent down is very persuasive.
Excellent credit. A credit score of 720 or higher will give self-employed borrowers some choices.
Patience. Even for well-off business owners, qualifying for a mortgage is "not that smooth, easy no-brainer like it used to be," Savitt says. "If you want it to be quick, you're paying a higher price."Source: USA Today, Sandra Block (10/02/07)

House Votes to Eliminate 'Phantom Tax'

2007-10-08T08:45:00.000-07:00

Daily Real Estate News October 5, 2007

The U.S. House of Representatives voted on Thursday to get rid of a tax burden for home owners who have had a loan forgiven or foreclosed on their home because they were unable to make their mortgage payments. The Mortgage Cancellation Tax Relief Act, H.R. 3648, passed by a vote of 386 to 27. Similar legislation is making its way through the Senate.Since the early 1990s, NAR has supported such measures to eliminate the "phantom tax" on financially-strapped home owners. “Congress made a good decision that will affect many Americans who find themselves in a truly bad situation,” says NAR President Pat V. Combs. “Changing the IRS code is an issue of fundamental fairness. It would relieve a tax burden at a time when an individual or family has experienced a true economic loss arising from the sale or loss of their home. These families are already in financial distress and are most likely unable to pay additional taxes.” The current tax code requires a lender who forgives debt to provide a Form 1099 to the IRS stating the amount the borrower has been forgiven. This disclosure applies whether it is a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt. If the property is sold at foreclosure or is sold for less than was borrowed, that difference is considered income and is subject to the tax.H.R. 3648 would ensure that any amount forgiven on mortgage debt secured by a principal residence will not be taxed. The legislation has a provision to safeguard against abuses. That provision is similar to one that already exists for commercial real estate owners and would treat commercial and residential property equally. "This is not only about the subprime turmoil we are currently experiencing," Combs says. "This is also about families who have lost their home or a need to sell that home for less than the amount owed on their home mortgage because of job loss, divorce, health issues, a decrease in the value of the home or other unfortunate circumstances. Clearly it is unfair to tax people on phantom income when they most likely have no cash with which to pay the tax."In other news, another bill has been sent to the House Judiciary Committee that would revise the bankruptcy code to allow judges to order mortgage lenders to ease terms for home owners in bankruptcy proceedings. Currently, mortgage lenders can foreclose against a home owner in default 90 days after the filing of bankruptcy.— REALTOR® Magazine Online

C.A.R. reports sales decrease 27.8 percent in August, entry-level median home price falls 5. 1 percent

2007-10-01T15:58:00.000-07:00

Tuesday, Sept. 25, 2007
C.A.R. reports sales decrease 27.8 percent in August, entry-level median home price falls 5. 1 percent
LOS ANGELES (Sept. 25) – Home sales decreased 27.8 percent in August in California compared with the same period a year ago, while the median price of an existing home increased 2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
"Despite the overall increase in the statewide median price, prices declined in 11 regions last month, falling 11.5 percent in the Central Valley region and 12.1 percent in Sacramento," said C.A.R. President Colleen Badagliacco. "Price softness is even more pronounced when we look at different segments of the market. For example, the statewide median price in the entry-level price range of less than $500,000 fell 5.1 percent in August to $349,360 compared with $368,210 for the same period a year ago.
"The median price per square foot for a single-family home is also on the decline, falling 4.3 percent this year to $336 compared with last year’s record high of $351 per square-foot," she said.
Closed escrow sales of existing, single-family detached homes in California totaled 319,200 in August at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 27.8 percent from the 442,150 sales pace recorded in August 2006.
The statewide sales figure represents what the total number of homes sold during 2007 would be if sales maintained the August pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during August 2007 was $588,970, a 2 percent increase over the revised $577,300 median for August 2006, C.A.R. reported. The August 2007 median price increased 0.5 percent compared with July’s $586,030 median price.
"While low affordability, tighter underwriting standards and expectations of lower prices continue to pose challenges for the market, the decline in sales accelerated in August as a result of the so-called credit or liquidity crunch that began in July.," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "The credit crunch emerged as uncertainty about the extent of the subprime problem drove investors across the globe to turn off the tap of funds to lenders in mortgage and other credit market segments. With credit drying up, even qualified buyers were unable to receive funding for home purchases."
"We expect the impact of the credit crunch to play out over the next several months, and that it will continue to negatively impact sales," she said.
Highlights of C.A.R.’s resale housing figures for August 2007:
C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in August 2007 was 11.8 months, compared with 5.9 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Thirty-year fixed-mortgage interest rates averaged 6.57 percent during August 2007, compared with 6.52 percent in August 2006, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.67 percent in August 2007 compared with 5.64 percent in August 2006.
The median number of days it took to sell a single-family home was 55.5 days in August 2007, compared with 50.9 days (revised) for the same period a year ago.
Regional MLS sales and price information is contained in the tables that accompany this press release. Regional sales data are not adjusted to account for seasonal factors that can influence home sales. The MLS median price and sales data for detached homes are generated from a survey of more than 90 associations of REALTORSâ throughout the state. MLS median price and sales data for condominiums are based on a survey of more than 60 associations. The median price for both detached homes and condominiums represents closed escrow sales.
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 24.6 percent, or 88 out of 357 cities and communities, showed an increase in their respective median home prices from a year ago. DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. (The top 10 lists are generated for incorporated cities with a minimum of 30 recorded sales in the month.)
Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices for August may be exaggerated due to compositional changes in housing demand. The DataQuick tables listing median home prices in California cities and counties are accessible through C.A.R. Online at http://www.car.org/index.php?id=Mzc3NzY .
Statewide, the 10 cities and communities with the highest median home prices in California during August 2007 were: Los Altos, $1,815,750; Manhattan Beach, $1,700,000; Saratoga, $1,620,000; Newport Beach, $1,550,000; Burlingame, $1,505,000; Palos Verdes Estates, $1,450,250; Calabasas, $1,330,000; La Canada/Flintridge, $1,317,500; Coronado, $1,315,000; Los Gatos, $1,255,000.
Statewide, the 10 cities and communities with the greatest median home price increases in August 2007 compared with the same period a year ago were: West Hollywood, 35.8 percent; Los Gatos, 35.7 percent; Encinitas, 27.7 percent; Los Altos, 26.2 percent; San Carlos, 21.9 percent; Los Angeles, 20.9 percent; Newport Beach, 18.3 percent; Burlingame, 18.3 percent; Cupertino, 17.4 percent; Novato, 17 percent; Santa Monica, 16.8 percent.

Fed's cut short-term rates by a half point

2007-09-18T17:20:00.000-07:00

By Holden Lewis

For the first time in more than four years, the Federal Reserve has made it cheaper to borrow, and by an unexpectedly big margin.
Federal funds rate

The central bank's rate-setting committee lowered the target for the federal funds rate by half a percentage point, to 4.75 percent. The prime rate will fall to 7.75 percent. Consumer interest rates based on the prime rate -- mainly home equity lines of credit and most variable-rate credit cards -- will fall a half-point in coming weeks.
Yields on certificates of deposit are likely to fall, too -- especially on shorter-term CDs -- even though they're not tied directly to the prime rate. As for mortgages: Don't count on mortgage rates to fall. They might, but they might not.
Everyone had expected a Fed rate cut, from investors and economists to teachers and car valets. The principal uncertainty had been about the size of the upcoming cut -- would it be a quarter of a percentage point, or half a point?
Most were expecting a smaller, quarter-point cut. The Fed sprung the surprise half-point decrease with this explanation:
"Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."
The committee added that inflation has been dropping, but that "some inflation risks remain."
This rate cut is intended to undo some of the damage caused by the housing bubble and the resulting credit crashes. The idea is to get people and businesses to buy on credit -- just not so recklessly this time.
Some economists and analysts worry that the Fed behaved recklessly with this half-point cut. A quarter-point decrease would have been preferable, they say.
"It would certainly be inflationary," says Anthony Liuzzo, a professor of business and economics at Wilkes University in Wilkes-Barre, Pa., speaking before the Fed's announcement. "It's kind of like eating sugar to get energy. It will strengthen you in the short term, but in the long term will be unhealthful."
Each year around this time, Liuzzo prepares an estimate of upcoming holiday spending. He forecasts a 3.5 percent increase in holiday spending this year, compared to a 4.4 percent rise last year. The forecast is subject to revision if an unexpected event occurs.
Why the Fed cutJim Baird, chief investment strategist for Plante Moran Financial Advisors of Southfield, Mich., believes two factors were behind this rate cut. "First, I would say that the market expects them to do something," he says. In other words, the Fed had to meet investors' expectations. Wall Street expected a rate cut, and would have reacted badly in the absence of one.
"On a more practical note, they may very well need to cut, in order to avoid further softening of the economy," Baird adds.
Investors wanted a half-point reduction. Many economists would have preferred a quarter-point cut for fear that a bigger decrease would look panicky. Now the Fed has to spin the rate cut in a way that will make the central bankers look calm.
"From a psychological standpoint, they might want to send a message to the market that they're concerned about developments and may want to take a more significant step than just cutting by a quarter-point," Baird says.
There's a risk that further down the road, the data will suggest that a rate cut was unnecessary. "But I don't think that scenario is very likely at this point," Baird says, because retail sales were weaker than expected in August. "That is evidence that the consumer is beginning to pull back a little bit, and that is not a positive sign for economic growth."
Will the cut affect mortgages?The biggest economic story of the year concerns housing: Home sales and average house prices have fallen nationwide, and it's harder to get jumbo and subprime mortgages. Lower mortgage rates might ease those troubles, but a Fed rate cut doesn't necessarily spell lower fixed-rate mortgages.
From Jan. 3, 2001, to June 25, 2003, the Federal Reserve cut the federal funds rate 13 times. When you look at what happened to the 30-year, fixed-rate mortgage in the month after each cut, here's what you find: Mortgage rates fell eight times and rose five times.
"There is a huge amount of misperception among borrowers that if the Fed reduces the rate half a point, my mortgage rates will go down," says Dan Dowling, president of United Mortgage Capital Corp., in Altamonte Springs, Fla.
Long-term mortgage rates go up and down mostly in response to investors' expectations of inflation.
This is the Federal Reserve's first rate decrease since June 25, 2003. Back then, the central bank worried that deflation might descend, crippling the economy, so the Federal Open Market Committee cut the federal funds rate to a 45-year low of 1 percent to fuel economic growth. The rate remained there for a year, and then the Fed raised short-term rates 17 meetings in a row, a quarter point at a time -- a gradual increase that took a little over two years. The target federal funds rate topped out at 5.25 percent in June 2006, and remained at that level until today's decrease.
In June 2003, the Fed justified its rate cut by invoking the specter of "an unwelcome substantial fall in inflation." The central bank succeeded in its aim of holding off catastrophic deflation. Indeed, the Fed did such a good job of suppressing deflation that it invited the opposite -- inflation -- but with a twist. Overall consumer prices remained under relative control, but prices of houses skyrocketed.
The fabled housing bubble occurred because the Fed made it cheap to borrow money. The federal funds rate was below 1.5 percent for 21 months. Mortgage rates were low, too. First-time and subprime homebuyers rushed in, driving up house prices. Subprime lenders, eager to make a buck, relaxed their underwriting standards. Meanwhile, from June 2004 to June 2006, the Fed was gradually raising rates.
Early this year, the double whammy of rising interest rates, plus poorly qualified borrowers, caused the subprime mortgage market to collapse. Millions of homeowners fell behind on their monthly house payments.
-- Posted: Sept. 18, 2007

U.S. ECONOMY WILL AVOID RECESSION, UCLA FORECASTS

2007-09-13T16:34:00.001-07:00

California's economy will limp to the brink of recession this year, thanks to a decline in jobs and the fallout from the subprime mortgage crisis, according to the latest quarterly UCLA Anderson Forecast.The forecast says that 2007 will see a peak in subprime mortgage resets but adds that mortgage defaults are expected to continue well into the first half of 2008. As a result, the housing market will continue to drag on the state's economy until early 2009, with expected job growth of less than 1 percent through Sept. 2008 and unemployment topping out at 5.9 percent by the end of next year."California is in for at least another year of economic doldrums, with rising unemployment, weak job growth, and a slowdown in all broad indicators," said UCLA economist Ryan Ratcliff.Nationally, the U.S. economy also will just barely avoid recession and begin making a slow move toward economic recovery in 2008. UCLA's forecast calls for growth in the gross domestic product (GDP) of more than 1 percent for the fourth quarter of 2007 and first quarter of 2008, with a return to 3 percent in 2009, avoiding the traditional definition of a recession, which is two consecutive quarters of a GDP decline.UCLA's forecast also lowered predictions for U.S. housing starts for 2007 to more than 1.1 million units, but predicts a modest climb to 1.4 million units by the end of 2009.

Fed cuts discount rate The central bank, citing tough market conditions, cuts the symbolic rate half a percentage

2007-08-21T08:39:00.000-07:00

By Paul R. La Monica
CNNMoney.com editor at large
August 17 2007: 10:53 AM EDTNEW YORK (CNNMoney.com) --

The Federal Reserve, reacting to concerns about the subprime lending crisis that's rocked financial markets in recent weeks, Friday cut its so-called discount rate half a percentage point, to 5.75 percent.
The discount rate, the rate the Federal Reserve charges qualified lenders, mainly banks, for temporary loans, is largely symbolic. The central bank did not change its more closely watched federal funds rate, which affects credit cards, home equity lines of credit, car loans and other consumer loan rates. That rate remains at 5.25 percent.
But one economist suggested that the Fed's discount rate cut has more than token significance. David Wyss, chief economist with Standard & Poor's, said the cut could help convince banks it was okay to keep lending to companies or consumers that actually are creditworthy.
"This is an important move. It's not just a symbolic action. The Fed is telling banks that the discount window is open. Take what you need," Wyss said.
Wall Street cheered the cut. The Dow Jones industrial average surged 300 points at the open but later slipped back. The 30-share Dow was up about 90 points, or 0.7 percent, some 90 minutes into the session.
What the smart money's saying about the market The S&P 500 and the Nasdaq composite posted slightly bigger gains. Stock futures were trading lower before the open after another wild day Thursday but surged following the Fed's announcement.
"The Fed is trying to maintain some stability in the market. They can't control the financial markets, which are being driven by emotion right now. But this move was a good option that will bring some relief to the market," said Oscar Gonzalez, an economist with John Hancock Financial Services.
The Fed last met Aug. 7 and decided to leave both the federal funds and discount rates unchanged. But since then, stocks have plunged further due to fears that some financial institutions and hedge funds were in serious trouble because of the mortgage meltdown.
Mortgage lender Countrywide Financial <http://money.cnn.com/quote/quote.html?symb=CFC&source=story_quote_link> (Charts <http://money.cnn.com/quote/chart/chart.html?symb=CFC&source=story_charts_link>, Fortune 500 <http://money.cnn.com/magazines/fortune/fortune500/2007/snapshots/372.html?source=story_f500_link>), for example, announced Thursday that it needed to tap an $11.5 billion line of credit because of liquidity problems. That came a day after an analyst at Merrill Lynch suggested that Countrywide might need to declare bankruptcy.
"The credit crunch is both real and driven by fear but primarily fear. Nobody knows who is exposed to these subprime loans. Uncertainty is the problem," said Zach Pandl, an economist with Lehman Brothers.
With this in mind, several market observers felt that Fed chairman Ben Bernanke needed to acknowledge the risk that the subprime mortgage crisis could hurt the broader economy.
Read the Fed's statement In a statement, the Fed said it took the move to "promote the restoration of orderly conditions in financial markets."In another statement, the central bank indicated that "financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward."
The Fed added that "although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably" and that the Fed was prepared to take more action if necessary.
The Fed, as well as other central banks around the world, had responded to the market turmoil by pumping more cash in to the banking system over the past week.
But many market observers felt the Fed would also need to lower rates to restore investor confidence, citing the example of former Fed chair Alan Greenspan.
Under Greenspan's stewardship, the Fed cut rates at an emergency meeting in 1998 as a result of the Asian financial crisis and also lowered rates at two unplanned meetings in early 2001 due to an economic slump and again that year after the Sept. 11 terrorist attacks.
Your best moves in a crazy market While Greenspan was praised at the time for these rate cuts, some have since criticized him for helping to create a low interest-rate environment that fostered a culture of "easy money" where consumers who had poor credit histories were able to take out the types of exotic mortgage loans that are now defaulting.
As such, some may accuse Bernanke and the Fed of cutting rates in order to bail out consumers who took out loans that they never should have in the first place and the banks that made the loans and invested in them. Wyss did not buy this though.
"If you enjoy cutting off your nose every time you have a cold, then not cutting rates would be a good strategy .There a lot of people who have this puritanical view that everyone should be punished," he quipped. "But the Fed's job is to worry about the whole economy. It has to make sure that rest of the economy doesn't suffer. What the Fed did today has nothing to do with bailing out banks. If you were going to lose money on a bad mortgage you will still lose money."
With that in mind, the central bank's next scheduled meeting is Sept. 18. According to federal funds futures listed on the Chicago Board of Trade, investors are betting that it is all but certain the Fed will cut the federal funds rate by at least a quarter of a percentage point.
Lehman's Pandl expects a quarter-point rate cut in September and another one after the Fed's two-day meeting in late October. That would bring the fed funds rate down to 4.75 percent.
But Pandl does not think the Fed will need to act before September since Friday's move may be enough to reassure Wall Street that it has things under control.

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent

2007-08-10T09:21:00.000-07:00

Release Date: August 7, 2007
For immediate release

Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.
Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.
Although the downside risks to growth have increased somewhat, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; William Poole; Eric Rosengren; and Kevin M. Warsh.
2007 Monetary policy
Last update: August 7, 2007

C.A.R. reports sales decrease 24.7 percent in June, median price of a home in California at $594,260, up 3.2 percent from year ago

2007-08-09T12:06:00.000-07:00

For release:Wednesday, July 25, 2007

LOS ANGELES (July 25) – Home sales decreased 24.7 percent in June in California compared with the same period a year ago, while the median price of an existing home increased 3.2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
"The focus on foreclosures and subprime lending is ongoing and, coupled with higher inventories of homes for sale, is prompting many would-be buyers to play a ‘wait-and-see’ role," said C.A.R. President Colleen Badagliacco. "However, well-maintained homes with curb appeal that are priced for today’s market continue to sell. It’s often a matter of counseling buyers and sellers to set realistic expectations on both sides of the transaction."
"First-time buyers continue to be impacted by tighter mortgage underwriting standards and the affordability challenge, which has not improved significantly despite price declines in most regions of the state," she said.
Closed escrow sales of existing, single-family detached homes in California totaled 364,280 in June at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 24.7 percent from the 483,690 sales pace recorded in June 2006.
The statewide sales figure represents what the total number of homes sold during 2007 would be if sales maintained the June pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during June 2007 was $594,260, a 3.2 percent increase over the revised $575,850 median for June 2006, C.A.R. reported. The June 2007 median price increased 0.2 percent compared with May’s revised $592,780 median price.
"With just over a 10-month supply of homes for sale on the market, we expect further softness in prices in the coming months," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "The San Francisco Bay Area continues to see leaner inventory levels compared to Southern California and the state as a whole."
"Unlike the downturn we experienced in the early 1990s, the sales decline is not driven by weakening economic conditions," she said. "Both the California and U.S. economies continue to expand."
Highlights of C.A.R.’s resale housing figures for June 2007:
. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in June 2007 was 10.1 months, compared with 6.1 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
. Thirty-year fixed-mortgage interest rates averaged 6.66 percent during June 2007, compared with 6.68 percent in June 2006, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.68 percent in June 2007 compared with 5.71 percent in June 2006.
. The median number of days it took to sell a single-family home was 51.7 days in June 2007, compared with 45.3 days (revised) for the same period a year ago.
Regional MLS sales and price information is contained in the tables that accompany this press release. Regional sales data are not adjusted to account for seasonal factors that can influence home sales. The MLS median price and sales data for detached homes are generated from a survey of more than 90 associations of REALTORSâ throughout the state. MLS median price and sales data for condominiums are based on a survey of more than 60 associations. The median price for both detached homes and condominiums represents closed escrow sales.
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 28 percent, or 105 out of 375 cities and communities, showed an increase in their respective median home prices from a year ago. DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. (The top 10 lists are generated for incorporated cities with a minimum of 30 recorded sales in the month.)
Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices for June may be exaggerated due to compositional changes in housing demand. The DataQuick tables listing median home prices in California cities and counties are accessible through C.A.R. Online at http://www.car.org/index.php?id=Mzc1OTE=. Statewide, the 10 cities and communities with the highest median home prices in California during June 2007 were: Laguna Beach, $1,700,000; Burlingame, $1,637,500; Los Altos, $1,635,000; Newport Beach, $1,615,000; Palos Verdes Estates, $1,542,000; Saratoga, $1,465,000; La Canada-Flintridge, $1,400,000; Mill Valley, $1,395,000; Manhattan Beach, $1,300,000; Hermosa Beach, $1,205,000.
. Statewide, the 10 cities and communities with the greatest median home price increases in June 2007 compared with the same period a year ago were: Menlo Park, 41.5 percent; Palos Verdes Estates, 25.9 percent; La Canada-Flintridge, 21.7 percent; Arcadia, 21.1 percent; Newport Beach, 20.1 percent; Santa Monica, 18.7 percent; Moorpark, 16.1 percent; Chino Hills, 12.6 percent; Saratoga, 11.9 percent; Los Angeles, 11.7 percent.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org ) is one of the largest state trade organizations in the United States, with more than 185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Source: CALIFORNIA ASSOCIATION OF REALTORS®

Foreclosures Up 55% in First Half of 2007

2007-08-03T10:36:00.001-07:00

Daily Real Estate News July 30, 2007

There was one foreclosure filing for every 134 U.S. households during the first half of the year, according to RealtyTrac’s midyear report. The report shows that foreclosure filings — including default notices, auction sale notices, and bank repossessions — rose to 925,986 for the first six months of 2007. That’s an increase of more than 55 percent over the same time last year, and a jump of 30 percent over the last half of 2006.“Despite a slight drop in June, foreclosure activity shows no sign of slowing down,” says James J. Saccacio, CEO of RealtyTrac, an Irvine, Calif.-based company that manages an online database of foreclosures. “Based on the rate of foreclosure activity in the first half of 2007, we could easily surpass 2 million foreclosure filings by the end of the year, which would represent a year-over-year increase of over 65 percent.” Nevada, Colorado, and California posted the highest foreclosure rates. Nevada’s rate doubled from the prior six months to a total of 25,208 filings — or one filing for every 40 households. Colorado was slightly better, at one filing for every 60 households. California had the third-highest rate, with one filing per 69 households, but topped the list for the total number of foreclosures filings: 189,560. Other states in the top 10 include Michigan, Florida, Ohio, Georgia, Arizona, Connecticut, and Indiana. A complete state-by-state listing is available on RealtyTrac's Web site.Source: RealtyTrac; Irvine, Calif.

Home Buyers Just Might Like the Cool Summer

2007-07-24T13:16:00.000-07:00

The Forecast - Home Buyers Just Might Like the Cool Summer Prices by Lawrence Yun, Senior Forecast Economist

Home sales to improve by fourth quarter.There may be good news on the horizon. A multitude of signs suggests that third-quarter existing-home sales will be better than resales registered in the second quarter of this year. Still, an added element of uncertainty regarding tightening lending standards makes it difficult to say definitively if the third quarter can close out with an improvement. I will go out on limb, however, and say that by the fourth quarter, existing-home sales will indeed show a marked improvement. May sales figures were low at 5.99 million sales (seasonally adjusted annualized rate). Closed sales in June and July could be similarly soft as pending home sales notched down for the third straight month. But several factors point toward inevitable improvement in home sales later this year. Accumulating Pent-Up DemandThe country has added nearly four million new jobs since national home sales began to decline in mid-2005. And those job gains have not been a shift from high to low paying jobs. Rather, the typical worker’s wages have been rising by 7 percent, leading to a rise in aggregate national income by $1.35 trillion over a two-year time span. Further, non-labor wealth has also grown significantly. The Dow is hovering at record highs and the accumulated household wealth as of the first quarter of this year was also at a record high of $56.2 trillion. (That household wealth figure is likely even higher for the second quarter, for which official data has not yet been released.) That is equivalent to four years of annual salary for all the workers in the United States. So, if you’re wondering if people have the financial wherewithal that enables them to purchase a home, they do.Household formation, meanwhile, mysteriously slowed in the first quarter of 2007. Household formation typically grows by 1.3 million to 1.5 million per year. In fact, a recent study by the Harvard Joint Center for Housing Studies projected such a rate of household formation for the upcoming years. However, the pace of household formation has slowed to less than 500,000 in the first quarter of 2007 – down 70 percent from its pace in 2006. That is absolutely mind-boggling in a job-creating economy. People are doubling up - finding roommates or moving back in with their parents. Why? As mentioned, finances are not the problem for most people. Could it be that people are waiting to see how long the housing market will slump? A turn in psychology and confidence is hard to predict. But one thing is clear: pent-up demand has been accumulating.Rents are RisingPeople are hesitating buying a home. In a job-cutting region like the Detroit area, it is understandable that there is a lack of demand (though bargain prices make a tempting opportunity for those with long-term views). However, for the rest of the country, people are not buying. That means, aside from doubling-up, they are renting. Not surprisingly then, rental rents have been rising. According to the CPI measure on rents, average rents rose 8 percent in the past 24 months (May 2005 to May 2007) while home prices have been largely flat. Renters, feeling the squeeze of these higher rents, may begin to look seriously at ownership rather than put money into their landlord’s bank accounts.Condos Making Modest gains The condo market led the recent housing cycle. The condo market was the first to lead the housing boom and first to lead the slump. The condo market also experienced much wider up-and-down swings in relation to the single-family market. Since the beginning of this year, the condo market has been consistently outperforming the single-family market in both sales and price changes. Could that imply an early signal of an overall housing market turnaround?Better quality mortgage products. Mortgage applications for home purchases (not refinancing) have been rising nearly 10 percent on a year-over-year basis since early May. This data from the Mortgage Bankers Association is not a perfect predictor of home sales due to sampling issues; the MBA’s Purchase Applications Index oversamples prime and FHA loan lenders and undersamples sub-prime lenders and measures applications and not approvals. In a tightening lending environment, more applications will get rejected, so there is likely an increased incidence of re-applications. Nonetheless, a rising applications figure implies consumers are seeking out better quality loan products rather than blindly accepting hidden and exorbitant costs of subprime loans. And better credit quality is certainly better for the housing market over the longer term.Weakness in the dollar. A weaker national currency typically moves in tandem with rising interest rates. As investors pull out of dollar-denominated assets, including U.S. government bonds, long-term rates have to rise to prevent further exit out of dollar-denominated investments.Recent months’ movements in the dollar and in long-term interest rates are testament to that logic. Despite that trend, however, mortgage rates are still attractive at around 6.7 percent. All the while the fall in the dollar has essentially dangled a huge For-Sale sign in front of foreign buyers. Europeans can now buy a vacation home in Florida at essentially a 15 percent discount.How many foreign buyers will now be tempted by what is essentially a deep double-digit price reduction? The Fed will cut rates in 2008. Inflation is still running at the high end of the Fed’s comfort zone. Nonetheless, inflation looks to slide as the year proceeds. Once consumer prices are well contained, that will provide the Fed with the opportunity to lower interest rates. Early 2008 is the likely time frame for a rate cut. Short-term rates will immediately fall as result. The long-term rates could modestly decline as well. Any help on rates is a positive development for the housing sector. So keep your eyes on the horizon. There are forces at play that will soon turn the U.S. housing market around. Buyers who make the commitment now are likely to be smiling this time next year.

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2007-07-24T13:09:00.000-07:00

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Census Bureau Announces Most Populous Cities

2007-07-08T16:56:00.000-07:00

RELEASED: 12:01 A.M. EDT, THURSDAY, JUNE 28, 2007
Robert Bernstein
Public Information Office

Census Bureau Announces Most Populous Cities
Phoenix has become the nation’s fifth most populous city, according to U.S. Census Bureau population estimates released today. As of July 1, 2006, this desert metropolis had a population of 1.5 million.
New York continued to be the nation’s most populous city, with 8.2 million residents. This was more than twice the population of Los Angeles, which ranked second at 3.8 million.
The estimates reveal that Phoenix moved into fifth place ahead of Philadelphia, the latest evidence of a decades-long population shift. Nearly a century ago, in 1910, each of the 10 most populous cities was within roughly 500 miles of the Canadian border. The 2006 estimates show that seven of the top 10 — and three of the top five — are in states that border Mexico.
Only three of the top 10 from 1910 remained on the list in 2006: New York, Chicago and Philadelphia. Conversely, three of the current top 10 cities (Phoenix; San Jose, Calif.; and San Diego) were not even among the 100 most populous in 1910, while three more (Dallas, Houston and San Antonio) had populations of less than 100,000.
The estimates also reveal that many of the nation’s fastest-growing cities are suburbs. North Las Vegas, Nev., a suburb of Las Vegas, had the nation’s fastest growth rate among large cities (100,000 or more population) between July 1, 2005, and July 1, 2006. North Las Vegas’ population increased 11.9 percent during the period, to 197,567. It was joined on the list of the 10 fastest-growing cities by three in the Dallas metro area: McKinney (ranking second), Grand Prairie (sixth) and Denton (ninth). In the same vicinity, Fort Worth just missed the list, ranking 11th.
Florida and Arizona each had two cities among the 10 fastest growing: Port St. Lucie (third) and Cape Coral (fourth) in Florida; and Gilbert (fifth) and Peoria (seventh) in Arizona, both near Phoenix. North Carolina (Cary, near Raleigh) and California (Lancaster, near Los Angeles) each contributed one city to the list. California had seven cities among the 25 fastest growing, leading all states.
Phoenix had the largest population increase of any city between 2005 and 2006, adding more than 43,000 residents to reach 1.5 million. However, Texas dominated the list of the 10 highest numerical gainers, with San Antonio, Fort Worth, Houston, Austin and Dallas each making the top 10. North Las Vegas; Miami; Charlotte, N.C.; and San Jose, Calif., rounded out the list of the 10 biggest numerical gainers.Overall, eight Texas cities were among the 25 biggest numerical gainers to lead all states.
New Orleans had by far the largest population loss among all cities with populations of at least 100,000 people. The city lost slightly more than half of its pre-Hurricane Katrina population. It fell from 452,170 on July 1, 2005, to 223,388 one year later — a loss of 50.6 percent. To put the size of this loss into perspective, Hialeah, Fla., which experienced the second-highest rate of loss over the period, saw its population decline by 1.6 percent For more information about the geographic areas for which the Census Bureau produces population estimates, see <http://www.census.gov/popest/geographic>.
-X-
These estimates are based on Census 2000 population counts — updated using information on building permits and other estimates of change.

Fed's hold funds rate at 5.25 percent

2007-07-08T16:54:00.000-07:00

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. The economy seems likely to continue to expand at a moderate pace over coming quarters.
Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.
2007 Monetary policy
Last update: June 28, 2007

The Conference Board Consumer Confidence Index Improves

2007-05-31T11:49:00.000-07:00

The Conference Board Consumer Confidence Index, which had decreased in April, bounced back in May. The Index now stands at 108.0 (1985=100), up from 106.3 in April. The Present Situation Index increased to 136.1 from 133.5 in April. The Expectations Index edged up to 89.2 from 88.2.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for May's preliminary results was May 21st.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: "The bounce-back in Confidence was due primarily to a more upbeat assessment of present-day business conditions. Consumers' view of the job market, both present and six months from now, was little changed and did not provide a boost in confidence. The short-term outlook remains cautious, and rising gasoline prices are having a negative impact on consumers' inflation expectations. All in all, confidence levels continue to suggest growth, albeit at a slow pace."
Consumers' appraisal of current-day conditions was more upbeat in May. Those claiming conditions are "good" rose to 29.4 percent from 27.5 percent. Those saying conditions are "bad" was barely unchanged at 14.5 percent. Consumers were also more neutral about the labor market. The percentage of consumers saying jobs are "hard to get" dipped to 19.9 percent from 20.3 percent. Those claiming jobs are "plentiful", however, remained at 29.0 percent in May.
Consumers' outlook for the next six months remains cautious. Those anticipating business conditions to improve increased to 15.1 percent from 13.8 percent. Consumers expecting business conditions to worsen, however, edged up to 10.1 percent from 9.7 percent.
Once again, the outlook for the labor market did not change significantly. The percent of consumers expecting more jobs in the months ahead was relatively flat at 13.3 percent, while those anticipating fewer jobs, 15.7 percent, was also unchanged. The proportion of consumers expecting their incomes to increase in the months ahead declined to 17.7 percent from 18.4 percent in April.
Source: May 2007 Consumer Confidence Ind
May 29, 2007

C.A.R. reports sales decrease 27.8 percent in April, median price of a home in California at $597,640, up 6.2 percent from year ago

2007-05-31T11:47:00.000-07:00

LOS ANGELES (May 25) – Home sales decreased 27.8 percent in April in California compared with the same period a year ago, while the median price of an existing home increased 6.2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
“April sales fell in part because of tighter credit standards and growing concerns about the impact of subprime loans on the market, ” said C.A.R. President Colleen Badagliacco. “Throughout the state inventory levels have increased to their highest levels in recent years, giving buyers more time to view a greater variety of homes and sellers who set realistic prices an edge in the market.”
Closed escrow sales of existing, single-family detached homes in California totaled 373,280 in April at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 27.8 percent from the 516,960 sales pace recorded in April 2006.
The statewide sales figure represents what the total number of homes sold during 2007 would be if sales maintained the April pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during April 2007 was $597,640, a 6.2 percent increase over the revised $562,820 median for April 2006, C.A.R. reported. The April 2007 median price increased 2.1 percent compared with March’s revised $585,460 median price.
“Although the median price of a home in California continues to rise, this reflects the fall-off in sales in the lower-priced markets of the state where new home inventories and foreclosures are competing with the existing home market,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Fewer sales from these regions coupled with modest gains in some of the stronger coastal markets are pushing the median price for the state up slightly.”
Highlights of C.A.R.’s resale housing figures for April 2007:
. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in April 2007 was 10 months, compared with 5.7 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
. Thirty-year fixed-mortgage interest rates averaged 6.18 percent during April 2007, compared with 6.51 percent in April 2006, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.45 percent in April 2007 compared with 5.62 percent in April 2006.
. The median number of days it took to sell a single-family home was 53.5 days in April 2007, compared with 42.5 days (revised) for the same period a year ago.
Regional MLS sales and price information is contained in the tables that accompany this press release. Regional sales data are not adjusted to account for seasonal factors that can influence home sales. The MLS median price and sales data for detached homes are generated from a survey of more than 90 associations of REALTORS® throughout the state. MLS median price and sales data for condominiums are based on a survey of more than 60 associations. The median price for both detached homes and condominiums represents closed escrow sales.
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 35.3 percent, or 128 out of 363 cities and communities, showed an increase in their respective median home prices from a year ago. DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. (The top 10 lists are generated for incorporated cities with a minimum of 30 recorded sales in the month.)
Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices may be exaggerated due to compositional changes in housing demand. The DataQuick tables listing median home prices in California cities and counties are accessible through C.A.R. Online at http://www.car.org/index.php?id=Mzc0ODE.
. Statewide, the 10 cities and communities with the highest median home prices in California during April 2007 were: Manhattan Beach, $1,850,000; Los Altos, $1,710,000; Saratoga, $1,550,000; Burlingame, $1,500,000; Laguna Beach, $1,457,500; Newport Beach, $1,400,000; Los Gatos, $1,200,000; Santa Barbara, $1,200,000; Palos Verdes Estates, $1,180,000; Mill Valley, $1,112,500; Rancho Palos Verdes, $1,109,000.
. Statewide, the 10 cities and communities with the greatest median home price increases in April 2007 compared with the same period a year ago were: La Habra, 55.1 percent; Laguna Niguel, 26.2 percent; Los Gatos, 20 percent; Los Angeles, 19.8 percent; Moorpark, 18.7 percent; Dana Point, 18.2 percent; San Juan Capistrano, 17.1 percent; Redwood City, 15.3 percent; Ridgecrest, 13.9 percent; Walnut Creek, 13.6 percent.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

West Sac mayor wants a team to revise redevelopment plans

2007-05-25T10:10:00.001-07:00

In a move to put plans for more pedestrian-friendly neighborhoods on the fast track, West Sacramento Mayor Christopher Cabaldon said a "strike team" will redesign the city's development standards.
The one-size-fits-all approach for parking lots and other developments will be a thing of the past, he said.
The announcement came Tuesday night before 300 guests at the mayor's annual State of the City address. The bulk of Cabaldon's speech focused on the city's growth as it marks its 20th anniversary.
"Launching big, ambitious projects and getting them done in two years is no longer big news, it's expected of West Sacramento," Cabaldon told the audience.
He listed the city's recent accomplishments, such as approval of a biodiesel plant at the Port of Sacramento, initiation of plans for a streetcar system to link to downtown Sacramento and a $400 million levee improvement plan.
However, Cabaldon said, "the biggest news story on West Sacramento" was about "the two whales who heard about West Sacramento and wanted to check it out for themselves."
The wayward humpbacks, Delta and Dawn, drew global attention to a city on the verge of a renaissance, he said.
West Sacramento has developed the most within the past 10 years, Cabaldon said.
Achievements include commercial developments, such as the new Ikea and Target stores, and more city control of the Port of Sacramento to help save it from bankruptcy.
Cargo volume is up at the port and the city is moving ahead with plans to deepen the Deep Water Ship Channel and provide public trails and public access to the port, Cabaldon said.
On the horizon for West Capitol Avenue is a new transit center, a Los Rios Community College District satellite campus, a community center, library and upscale housing.
The mayor pledged his commitment Tuesday to help the West Sacramento Chamber of Commerce in its Project Pride initiative to further enhance West Capitol Avenue and the city's image. The proposed strike team is a step toward that goal, he said.
The strike team would revise city development standards "to help us make sure that what we're building is what we want on our riverfront and downtown," Cabaldon said.
The team would consist of an independent adviser, city staff, two members of the City Council and members of the development community. The team's work would be done in less than a year, Cabaldon said.

By Lakiesha McGhee - Bee Staff Writer
Last Updated 1:38 am PDT Thursday, May 24, 2007Story appeared in METRO section, Page B3