By Zachary A. Goldfarb
Washington Post Staff Writer
Tuesday, November 25, 2008; D03
Freddie Mac increased its support for the nation's ailing home loan market in October, in part playing the role the government desired when it seized the mortgage finance giant.
The McLean-based company and its bigger sibling, Fannie Mae of the District, are two vital cogs in the nation's mortgage market, buying loans from lenders, insuring them against default and supplying fresh cash to make more loans. Some of these loans are sold to investors; others are kept by Fannie and Freddie. Under severe financial pressure, Freddie -- and to a lesser extent, Fannie -- pulled back last summer from its purchases of pools of these home loans known as mortgage-backed securities.
The company said yesterday that it bought $27 billion in mortgage-backed securities in October, growing its portfolio at an annual rate of 44 percent. The company's portfolio now stands at $764 billion; it may grow to $850 billion by the end of next year under the government's plan.
The purchases by Freddie -- and Fannie, which hasn't released its October data yet -- may have kept mortgage rates from skyrocketing amid the credit crisis. But they haven't reduced them, one of the goals of the government takeover.
One reason: The companies' debt costs -- what they pay to borrow money, which they then use to buy mortgage-backed securities -- have been rising. Those higher costs are passed on to borrowers.
"Freddie accelerated around corners last month to rebuild its balance sheet in a major catch-up move," Jim Vogel, an analyst at FTN Financial, wrote in a research note. "That it could do this . . . in a tough market is a minor positive for the mortgage market."
However, there were a few warning signs. Freddie's business of pooling mortgage loans, guaranteeing them and selling them to investors contracted slightly last month -- the first time that's happened in years. This business is much larger than its portfolio business, suggesting that lenders are making fewer home loans and private investors are growing more reluctant to buy mortgage securities.
Freddie also shifted dramatically toward using short-term debt to fund its operations, issuing $58 billion. Freddie has not been able to issue much long-term debt as doubts about its future and chaos in the credit market make investors reluctant to lend it money for any more than a one-year term. Analysts say short-term debt must constantly be repaid and exposes Freddie to risks, such as wide fluctuations in interest rates that might make it difficult to raise new funding as some debt matures.
Delinquencies on loans guaranteed by Freddie Mac also accelerated in October, rising to 1.34 percent from 1.22 percent in September.
Tuesday, November 25, 2008
Monday, November 24, 2008
Fannie, Freddie to Suspend Foreclosures During Holidays
By APARAJITA SAHA-BUBNA
Mortgage giants Fannie Mae and Freddie Mac will suspend foreclosure sales and evictions on certain properties until after the holiday season, as they prepare to implement a previously announced loan-modification program.
The temporary foreclosure suspension announced Thursday applies to 10,000 borrowers with Fannie-owned mortgages and 6,000 with Freddie-owned mortgages in occupied single-family and two- to four-unit properties with foreclosure sales scheduled between Nov. 26 and Jan. 9. Fannie and Freddie, which are under government control, last week said they would begin to modify the loan terms on potentially hundreds of thousands of mortgages that are at least 90 days past due.
The voluntary plan would enable certain borrowers to receive more affordable loans that would make their mortgage payments at most 38% of their monthly income. Although Fannie and Freddie hold a relatively small percentage of all the troubled mortgages, government officials hope their moves will be adapted by other mortgage holders, lenders and mortgage-servicing companies.
Freddie is trying to find buyers for a rapidly growing number of foreclosed homes, totaling 28,089 at the end of the latest quarter, up from 11,916 a year earlier. Fannie is also struggling to sell foreclosed homes as their prices drop. Its inventory of single-family foreclosed homes on Sept. 30 was 67,519, up from 54,173 three months earlier and 33,729 at the end of 2007.
—Lauren Pollock contributed to this article.
Mortgage giants Fannie Mae and Freddie Mac will suspend foreclosure sales and evictions on certain properties until after the holiday season, as they prepare to implement a previously announced loan-modification program.
The temporary foreclosure suspension announced Thursday applies to 10,000 borrowers with Fannie-owned mortgages and 6,000 with Freddie-owned mortgages in occupied single-family and two- to four-unit properties with foreclosure sales scheduled between Nov. 26 and Jan. 9. Fannie and Freddie, which are under government control, last week said they would begin to modify the loan terms on potentially hundreds of thousands of mortgages that are at least 90 days past due.
The voluntary plan would enable certain borrowers to receive more affordable loans that would make their mortgage payments at most 38% of their monthly income. Although Fannie and Freddie hold a relatively small percentage of all the troubled mortgages, government officials hope their moves will be adapted by other mortgage holders, lenders and mortgage-servicing companies.
Freddie is trying to find buyers for a rapidly growing number of foreclosed homes, totaling 28,089 at the end of the latest quarter, up from 11,916 a year earlier. Fannie is also struggling to sell foreclosed homes as their prices drop. Its inventory of single-family foreclosed homes on Sept. 30 was 67,519, up from 54,173 three months earlier and 33,729 at the end of 2007.
—Lauren Pollock contributed to this article.
Thursday, November 20, 2008
The Top 6 Mistakes of Foreclosed-Home Buying
By Luke Mullins, U.S. News
Nothing illustrates the devastation of America's housing bust more vividly than the abandoned properties now blighting the nation's communities. In the third quarter alone, foreclosure filings were reported on more than 750,000 properties in the United States, a 71 percent increase from the same period last year, according to RealtyTrac. But for real estate investors, one person's tragedy can be another's good fortune. With so many foreclosures on the market, "this is a once-in-a-generation opportunity for many people," says Steve Dexter, a foreclosure expert and author of the forthcoming book Buy and Hold Forever-Building Real Estate Wealth Far Into the 21st Century.
Still, the purchase of foreclosed property—an often complex and involved process—presents would-be buyers with plenty of opportunities to make costly mistakes. In an effort to help consumers avoid such pitfalls, U.S. News spoke with a handful of experts to create a list of six common blunders that individuals make when attempting to buy foreclosed properties.
1. Flying solo. While enterprising do-it-yourselfers can certainly get away with going through the traditional home buying process without an agent, foreclosed real estate is another matter. Such complex transactions require the expertise of not just any real estate agent but one with a background in buying and selling foreclosed homes. "In today's uncertain times it's important to be working with someone who has been through market cycles before," says Patrick McGilvray, president of TheHomeBuyingCenter.com, which links homeowners and owners of foreclosure real estate with potential house buyers. So unless you are truly a real estate expert, do some research and find an agent with foreclosure experience in your market.
2. Being unfamiliar with the law. It's important to remember that real estate agents aren't lawyers, and foreclosure laws can change significantly from state to state. "A lot of people don't realize [that] foreclosures are heavily regulated and every state has its own set of laws," says Alexis McGee, the president of Foreclosures.com. "If you don't have the language proper in your contract, or if you have even the font size wrong, it's criminal and civil damages-don't count on every Realtor knowing this." As such, McGee advises against relying on a real estate agent for legal advice. Instead, consumers should review the foreclosure laws in their state and then get qualified legal advice from a local real estate attorney.
3. Thinking short term. Since many foreclosed homes may decline further in value in the coming months, it's important that buyers approach the transaction from a long-term perspective." If you are not looking at a piece of foreclosed property from a 10-year time horizon-as an investor or as an owner occupant-then you will likely suffer," McGilvray says. So if you are just trying to cash in on a quick flip, don't buy a foreclosure. Only investors with the resources and patience for a long-term real estate investment and homeowners who can afford a fully amortized fixed-rate mortgage should consider buying foreclosed property, McGilvray says.
4. Seeing only the sticker. While the price you negotiate for a foreclosed home may be significantly less than its value just a few years back, many such homes may require substantial repairs. McGilvray says that anyone buying a foreclosed property should make sure to set aside an additional 10 percent of its price tag for repairs. "Make sure you have 10 percent, especially if the home is a few years old," he says. "It is amazing how quickly houses can deteriorate." Prospective buyers should keep these additional repair costs in mind when they are negotiating the home's price.
5. Searching too broadly. With so much inventory coming onto the market these days, it's easy for buyers to become overwhelmed. To that end, Dexter recommends that anyone in the market for a foreclosure target a specific neighborhood and contact an agent with experience there. Make sure to specify the type of property you are looking for in order to avoid being inundated with listings. Tell the agent, "I want all these kinds of houses in this neighborhood that are bank listings [and] I want to know about them all as they come on the market," Dexter says. The agent will then be able to shoot you all the listings that meet your requirements as they become available. "If [the buyer is] patient enough and they get plugged in to the flow of new bank listings coming in, they can pick up some awfully good deals."
6. Taking no prisoners. While buyers can certainly get good deals on foreclosed homes, it's a mistake to assume that banks will accept any and all offers. (Unless, of course, the listing specifically says so.) Banks aren't set up to sell houses, so they typically outsource their foreclosed properties to real estate agents, McGee says. In such cases, agents can receive listings in bulk, perhaps 50 at a time. While these agents want to get the properties sold off quickly, they also want to get a good price for the seller so that the bank will give them additional business in the future. "Saving face is important for them," McGee says. "A lot of people just assume that because this property is bank-owned they will just take half off. Well, that's just not true." As such, insultingly low offers have the potential to tank the negotiations over foreclosed homes, McGee says. So make sure you present your wholesale offer case well both in writing and verbally with the listing agent.
Nothing illustrates the devastation of America's housing bust more vividly than the abandoned properties now blighting the nation's communities. In the third quarter alone, foreclosure filings were reported on more than 750,000 properties in the United States, a 71 percent increase from the same period last year, according to RealtyTrac. But for real estate investors, one person's tragedy can be another's good fortune. With so many foreclosures on the market, "this is a once-in-a-generation opportunity for many people," says Steve Dexter, a foreclosure expert and author of the forthcoming book Buy and Hold Forever-Building Real Estate Wealth Far Into the 21st Century.
Still, the purchase of foreclosed property—an often complex and involved process—presents would-be buyers with plenty of opportunities to make costly mistakes. In an effort to help consumers avoid such pitfalls, U.S. News spoke with a handful of experts to create a list of six common blunders that individuals make when attempting to buy foreclosed properties.
1. Flying solo. While enterprising do-it-yourselfers can certainly get away with going through the traditional home buying process without an agent, foreclosed real estate is another matter. Such complex transactions require the expertise of not just any real estate agent but one with a background in buying and selling foreclosed homes. "In today's uncertain times it's important to be working with someone who has been through market cycles before," says Patrick McGilvray, president of TheHomeBuyingCenter.com, which links homeowners and owners of foreclosure real estate with potential house buyers. So unless you are truly a real estate expert, do some research and find an agent with foreclosure experience in your market.
2. Being unfamiliar with the law. It's important to remember that real estate agents aren't lawyers, and foreclosure laws can change significantly from state to state. "A lot of people don't realize [that] foreclosures are heavily regulated and every state has its own set of laws," says Alexis McGee, the president of Foreclosures.com. "If you don't have the language proper in your contract, or if you have even the font size wrong, it's criminal and civil damages-don't count on every Realtor knowing this." As such, McGee advises against relying on a real estate agent for legal advice. Instead, consumers should review the foreclosure laws in their state and then get qualified legal advice from a local real estate attorney.
3. Thinking short term. Since many foreclosed homes may decline further in value in the coming months, it's important that buyers approach the transaction from a long-term perspective." If you are not looking at a piece of foreclosed property from a 10-year time horizon-as an investor or as an owner occupant-then you will likely suffer," McGilvray says. So if you are just trying to cash in on a quick flip, don't buy a foreclosure. Only investors with the resources and patience for a long-term real estate investment and homeowners who can afford a fully amortized fixed-rate mortgage should consider buying foreclosed property, McGilvray says.
4. Seeing only the sticker. While the price you negotiate for a foreclosed home may be significantly less than its value just a few years back, many such homes may require substantial repairs. McGilvray says that anyone buying a foreclosed property should make sure to set aside an additional 10 percent of its price tag for repairs. "Make sure you have 10 percent, especially if the home is a few years old," he says. "It is amazing how quickly houses can deteriorate." Prospective buyers should keep these additional repair costs in mind when they are negotiating the home's price.
5. Searching too broadly. With so much inventory coming onto the market these days, it's easy for buyers to become overwhelmed. To that end, Dexter recommends that anyone in the market for a foreclosure target a specific neighborhood and contact an agent with experience there. Make sure to specify the type of property you are looking for in order to avoid being inundated with listings. Tell the agent, "I want all these kinds of houses in this neighborhood that are bank listings [and] I want to know about them all as they come on the market," Dexter says. The agent will then be able to shoot you all the listings that meet your requirements as they become available. "If [the buyer is] patient enough and they get plugged in to the flow of new bank listings coming in, they can pick up some awfully good deals."
6. Taking no prisoners. While buyers can certainly get good deals on foreclosed homes, it's a mistake to assume that banks will accept any and all offers. (Unless, of course, the listing specifically says so.) Banks aren't set up to sell houses, so they typically outsource their foreclosed properties to real estate agents, McGee says. In such cases, agents can receive listings in bulk, perhaps 50 at a time. While these agents want to get the properties sold off quickly, they also want to get a good price for the seller so that the bank will give them additional business in the future. "Saving face is important for them," McGee says. "A lot of people just assume that because this property is bank-owned they will just take half off. Well, that's just not true." As such, insultingly low offers have the potential to tank the negotiations over foreclosed homes, McGee says. So make sure you present your wholesale offer case well both in writing and verbally with the listing agent.
Wednesday, November 19, 2008
Realtors® Tell Congress Increased Housing Demand Will Stabilize the Market
WASHINGTON, November 18, 2008
In a statement to the House Financial Services Committee today, the National Association of Realtors® recommended a four-point plan to stimulate home sales and stabilize housing valuations.
“The only way to overcome today’s economic turmoil is to motivate and encourage worried or cautious housing consumers to enter the marketplace,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “Stabilizing the housing market will lead to a quicker and greater economic recovery. Our goal is to ensure there is a healthy market and sufficient capital to support mortgage lending to qualified borrowers.”
NAR developed the plan for consideration by the current lame-duck session of Congress, and for the 111th Congress and the new administration. The four-point plan’s principles are consumer-driven to help foster a housing recovery to support an economic rebound. The plan calls for eliminating the repayment of the first-time home buyer tax credit that was passed in the February stimulus bill, and to expand the tax credit to include all home buyers. The plan also recommends making the increased FHA and conventional loan limits permanent to stimulate home sales and stabilize prices. In addition, the plan urges that the Troubled Asset Relief Program be put back on track by targeting the funds for mortgage relief through a mortgage interest rate buy-down. Finally, the plan recommends finalizing legislation to prohibit banks from entering into the business of real estate brokerage and property management.
“The federal government must ensure there is sufficient capital to support mortgage lending not only in strong markets but also in tumultuous ones,” said McMillan. “Realtors® are frustrated with the current mortgage lending environment that places a variety of barriers on families who wish to buy a home, impeding sales and price stabilization. We look forward to working with the Congress and the new administration to transition out of current instabilities and move toward strong and stable financial and housing markets.”
In a statement to the House Financial Services Committee today, the National Association of Realtors® recommended a four-point plan to stimulate home sales and stabilize housing valuations.
“The only way to overcome today’s economic turmoil is to motivate and encourage worried or cautious housing consumers to enter the marketplace,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “Stabilizing the housing market will lead to a quicker and greater economic recovery. Our goal is to ensure there is a healthy market and sufficient capital to support mortgage lending to qualified borrowers.”
NAR developed the plan for consideration by the current lame-duck session of Congress, and for the 111th Congress and the new administration. The four-point plan’s principles are consumer-driven to help foster a housing recovery to support an economic rebound. The plan calls for eliminating the repayment of the first-time home buyer tax credit that was passed in the February stimulus bill, and to expand the tax credit to include all home buyers. The plan also recommends making the increased FHA and conventional loan limits permanent to stimulate home sales and stabilize prices. In addition, the plan urges that the Troubled Asset Relief Program be put back on track by targeting the funds for mortgage relief through a mortgage interest rate buy-down. Finally, the plan recommends finalizing legislation to prohibit banks from entering into the business of real estate brokerage and property management.
“The federal government must ensure there is sufficient capital to support mortgage lending not only in strong markets but also in tumultuous ones,” said McMillan. “Realtors® are frustrated with the current mortgage lending environment that places a variety of barriers on families who wish to buy a home, impeding sales and price stabilization. We look forward to working with the Congress and the new administration to transition out of current instabilities and move toward strong and stable financial and housing markets.”
Tuesday, November 18, 2008
HUD Unveils New Rules for Mortgages
By JAMES R. HAGERTY
The Department of Housing and Urban Development announced rules aimed at helping Americans shop for mortgages more effectively, but said it lacks powers to enforce those rules.
The rules update requirements of the Real Estate Settlement Procedures Act, known as Respa, a 1974 law that sets standards for home-purchase transactions. HUD Secretary Steve Preston said changes were needed because "many people made uninformed decisions" in taking out loans. That, he said, contributed to a surge in mortgage defaults.
[house for sale] Associated Press
HUD, which pushed ahead with the rules despite opposition from lenders and others involved in mortgage transactions, estimated the changes will bring savings of nearly $700 in loan-closing costs for the typical consumer.
In a news conference, HUD officials conceded they lack legal authority to penalize violators of the rule. Legislation would be required to give HUD those powers. But they said state and federal regulators of lenders and brokers can insist on compliance with federal rules and that the threat of class-action suits may keep lenders in line.
The rules require a three-page "good-faith estimate" for borrowers explaining rates, fees, any prepayment penalties and the possibility of later increases in monthly payments. HUD said it shrank that form from four pages to three in response to industry complaints.
The rules also limit to 10% the maximum amount certain fees can increase from the initial estimate. A new HUD-1 form, provided to consumers before they sign loan documents, is designed to help consumers more easily compare what they were promised with what they are actually being charged. One problem is that consumers may see that HUD-1 form only shortly before the closing, when they are pressed for time and may feel it is too late to resume their mortgage shopping.
HUD said the rules will help consumers understand how much a broker is being paid in fees, often called "yield spread premiums." But Rebecca Borne, a lawyer at the Center for Responsible Lending, a nonprofit group pushing for changes in mortgage regulation, said the new HUD forms fail to make those fees clear and won't prevent abuses of them.
Lenders and brokers will have until Jan. 1, 2010, to start using the forms. HUD dropped a provision that would have required a lengthy "script" to be read to borrowers at the closing table, setting out terms of the loan.
Write to James R. Hagerty at bob.hagerty@wsj.com
The Department of Housing and Urban Development announced rules aimed at helping Americans shop for mortgages more effectively, but said it lacks powers to enforce those rules.
The rules update requirements of the Real Estate Settlement Procedures Act, known as Respa, a 1974 law that sets standards for home-purchase transactions. HUD Secretary Steve Preston said changes were needed because "many people made uninformed decisions" in taking out loans. That, he said, contributed to a surge in mortgage defaults.
[house for sale] Associated Press
HUD, which pushed ahead with the rules despite opposition from lenders and others involved in mortgage transactions, estimated the changes will bring savings of nearly $700 in loan-closing costs for the typical consumer.
In a news conference, HUD officials conceded they lack legal authority to penalize violators of the rule. Legislation would be required to give HUD those powers. But they said state and federal regulators of lenders and brokers can insist on compliance with federal rules and that the threat of class-action suits may keep lenders in line.
The rules require a three-page "good-faith estimate" for borrowers explaining rates, fees, any prepayment penalties and the possibility of later increases in monthly payments. HUD said it shrank that form from four pages to three in response to industry complaints.
The rules also limit to 10% the maximum amount certain fees can increase from the initial estimate. A new HUD-1 form, provided to consumers before they sign loan documents, is designed to help consumers more easily compare what they were promised with what they are actually being charged. One problem is that consumers may see that HUD-1 form only shortly before the closing, when they are pressed for time and may feel it is too late to resume their mortgage shopping.
HUD said the rules will help consumers understand how much a broker is being paid in fees, often called "yield spread premiums." But Rebecca Borne, a lawyer at the Center for Responsible Lending, a nonprofit group pushing for changes in mortgage regulation, said the new HUD forms fail to make those fees clear and won't prevent abuses of them.
Lenders and brokers will have until Jan. 1, 2010, to start using the forms. HUD dropped a provision that would have required a lengthy "script" to be read to borrowers at the closing table, setting out terms of the loan.
Write to James R. Hagerty at bob.hagerty@wsj.com
Friday, November 14, 2008
Home sales see biggest gain since July 2003
By Patrick Rucker
WASHINGTON (Reuters) - Sales of previously owned U.S. homes rose 5.5 percent last month, the biggest gain since July 2003, and the inventory of unsold homes fell, a hopeful sign for a housing market mired in a long slump.
The National Association of Realtors said on Friday that sales of existing homes rose to a 5.18 million-unit annual rate from the 4.91 million unit pace set in August. Economists had expected sales to rise to only a 4.93 million unit rate.
It was the first time the sales pace had risen above its year ago level in nearly three years, a sign the market could be stabilizing.
The surprisingly large jump in sales pushed the inventory of unsold homes down by 1.6 percent to 4.27 million, or a 9.9 months' supply at the current pace, the lowest since February.
"We're not out of the woods yet by any means when it comes to falling house prices and our fundamental problem of an oversupply of homes, but we're getting near to the bottom every day," said White House spokeswoman Dana Perino.
Home prices, however, showed no signs of escaping their long, deep slide and economists said the number of homes on the market would likely have to fall further before they do.
The median national home price declined 9 percent from a year ago to $191,600, the lowest level since April 2004.
"As the median price continues to decline, seeking out that new equilibrium level, demand is -- slowly and hesitantly -- moving back into the market," said Lindsey Piegza, an economic analyst at FTN Financial in New York.
A Reuters poll taken October 21-24 found economists expect prices to continue to fall through next year. The median forecast from the survey was for a 15 percent drop this year and a 6.4 percent fall in 2009. Economists expect prices to turn up in 2010, but by a meager 1 percent.
'VULTURE INVESTORS'
Rising U.S. mortgage defaults have sent credit markets into a tailspin, threatening economies worldwide. A majority of economists polled said finding a floor for house prices is an essential condition for ending the financial crisis.
In order for prices to recover, the glut of unsold homes needs to be whittled down further, analysts said.
"Most, if not all, the rise in sales is due to vulture investors buying cheap foreclosed homes, but all sales reduce inventory," said Ian Shepherdson, the chief U.S. economist at High Frequency Economics in Valhalla, New York.
"If this continues, people will stop expecting further price falls and activity will start to recover."
Lawrence Yun, the chief economist for the Realtors' trade group, also pointed to a rise in foreclosure and other 'distress' sales in regions hard-hit by the housing downturn.
"In some regions, the lower prices are seeing buyers return to the marketplace," he said. "This was a nice jump and hopefully this trend can continue because the first step to stabilizing the market is an increase in home sales."
Sales jumped 16.8 percent in the West, while rising 4.4 percent in the Midwest and 2.2 percent in the South. In the Northeast, sales fell 1.2 percent.
Sales of single-family homes, which represent the lion's share of the market, rose 6.2 percent. Sales of condominiums held steady.
"We're still struggling with falling home prices and we will for a while, but we're forming a bottom here," said Bob Walters, chief economist at Quicken Loans in Livonia, Michigan.
(Additional reporting by Pedro Nicolaci da DaCosta, Ellen Freilich and Nick Olivari in New York; Polling by Bangalore polling unit; Editing by Andrea Ricci)
WASHINGTON (Reuters) - Sales of previously owned U.S. homes rose 5.5 percent last month, the biggest gain since July 2003, and the inventory of unsold homes fell, a hopeful sign for a housing market mired in a long slump.
The National Association of Realtors said on Friday that sales of existing homes rose to a 5.18 million-unit annual rate from the 4.91 million unit pace set in August. Economists had expected sales to rise to only a 4.93 million unit rate.
It was the first time the sales pace had risen above its year ago level in nearly three years, a sign the market could be stabilizing.
The surprisingly large jump in sales pushed the inventory of unsold homes down by 1.6 percent to 4.27 million, or a 9.9 months' supply at the current pace, the lowest since February.
"We're not out of the woods yet by any means when it comes to falling house prices and our fundamental problem of an oversupply of homes, but we're getting near to the bottom every day," said White House spokeswoman Dana Perino.
Home prices, however, showed no signs of escaping their long, deep slide and economists said the number of homes on the market would likely have to fall further before they do.
The median national home price declined 9 percent from a year ago to $191,600, the lowest level since April 2004.
"As the median price continues to decline, seeking out that new equilibrium level, demand is -- slowly and hesitantly -- moving back into the market," said Lindsey Piegza, an economic analyst at FTN Financial in New York.
A Reuters poll taken October 21-24 found economists expect prices to continue to fall through next year. The median forecast from the survey was for a 15 percent drop this year and a 6.4 percent fall in 2009. Economists expect prices to turn up in 2010, but by a meager 1 percent.
'VULTURE INVESTORS'
Rising U.S. mortgage defaults have sent credit markets into a tailspin, threatening economies worldwide. A majority of economists polled said finding a floor for house prices is an essential condition for ending the financial crisis.
In order for prices to recover, the glut of unsold homes needs to be whittled down further, analysts said.
"Most, if not all, the rise in sales is due to vulture investors buying cheap foreclosed homes, but all sales reduce inventory," said Ian Shepherdson, the chief U.S. economist at High Frequency Economics in Valhalla, New York.
"If this continues, people will stop expecting further price falls and activity will start to recover."
Lawrence Yun, the chief economist for the Realtors' trade group, also pointed to a rise in foreclosure and other 'distress' sales in regions hard-hit by the housing downturn.
"In some regions, the lower prices are seeing buyers return to the marketplace," he said. "This was a nice jump and hopefully this trend can continue because the first step to stabilizing the market is an increase in home sales."
Sales jumped 16.8 percent in the West, while rising 4.4 percent in the Midwest and 2.2 percent in the South. In the Northeast, sales fell 1.2 percent.
Sales of single-family homes, which represent the lion's share of the market, rose 6.2 percent. Sales of condominiums held steady.
"We're still struggling with falling home prices and we will for a while, but we're forming a bottom here," said Bob Walters, chief economist at Quicken Loans in Livonia, Michigan.
(Additional reporting by Pedro Nicolaci da DaCosta, Ellen Freilich and Nick Olivari in New York; Polling by Bangalore polling unit; Editing by Andrea Ricci)
Thursday, November 13, 2008
Foreclosed Home Sales Likely Driving Up U.S. Pending Home Sales
Economists say the second unexpected rebound in three months in the U.S. pending home sales index is likely due to sales of foreclosed homes. The June report from the National Association of Realtors (NAR) defied expectations for a 1.0% decline and rebounded 5.3% in June, following the 4.9% loss of sales in May.
The bounce is better than the most optimistic forecasts beforehand.
“This is promising news for July/August existing home sales as the pending sales figures become an existing home sale a month or two down the road (assuming they’re not cancelled),” wrote Jennifer Lee, economist at BMO Capital Markets.
Pending home sales represent homes that have been signed for but not finalized, a process that takes another month or two. The value of the index lies in its ability to forecast existing home sales, which represent eight-tenths of the market.
Lee said the gains likely represent sales of homes in foreclosure, which economists also believe were responsible for April’s gain. She pointed to a USA Today story that said home sales were rebounding in Las Vegas, 60% of which were foreclosed properties.
Millan Mulraine, economics strategist at TD Securities, added, “Despite the unexpected surge in pending home sales in June, with most other housing-related indicators pointing downward, there is little to suggest an imminent abatement in the U.S. housing market correction.”
The PHSI now stands at 89.0, up from 84.5 in the previous month. From a year prior, the index has declined by 12.1%, compared with an annual 15.7% decline in the previous month. An all-time low in the seven-year index was reached in March at 83.0.
On the plus side, each of the four regions saw improvement in the month as sales in the Midwest rose 1.3%, the South rose 9.3%, the West advanced 4.6% and the Northeast posted a 3.4% gain.
However, Lee said “the underlying problem remains,” noting that inventories of new and existing homes stand at 4.33 million homes, representing 11 months of overhang at the current pace of sales for existing homes and 10 months for new properties.
HFE chief U.S. economist Ian Shepherdson added, “We doubt sales of non-foreclosed homes are rising, given the recent rise in mortgage rates and continued price declines. Still, anything which reduces inventory, whether of foreclosed homes or not, is a very welcome development.”
Lawrence Yun, chief economist at the NAR, projected home prices would rise between 3% and 6% in 2009, as buyers entering the hardest-hit markets are putting a floor on prices.
“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.
The bounce is better than the most optimistic forecasts beforehand.
“This is promising news for July/August existing home sales as the pending sales figures become an existing home sale a month or two down the road (assuming they’re not cancelled),” wrote Jennifer Lee, economist at BMO Capital Markets.
Pending home sales represent homes that have been signed for but not finalized, a process that takes another month or two. The value of the index lies in its ability to forecast existing home sales, which represent eight-tenths of the market.
Lee said the gains likely represent sales of homes in foreclosure, which economists also believe were responsible for April’s gain. She pointed to a USA Today story that said home sales were rebounding in Las Vegas, 60% of which were foreclosed properties.
Millan Mulraine, economics strategist at TD Securities, added, “Despite the unexpected surge in pending home sales in June, with most other housing-related indicators pointing downward, there is little to suggest an imminent abatement in the U.S. housing market correction.”
The PHSI now stands at 89.0, up from 84.5 in the previous month. From a year prior, the index has declined by 12.1%, compared with an annual 15.7% decline in the previous month. An all-time low in the seven-year index was reached in March at 83.0.
On the plus side, each of the four regions saw improvement in the month as sales in the Midwest rose 1.3%, the South rose 9.3%, the West advanced 4.6% and the Northeast posted a 3.4% gain.
However, Lee said “the underlying problem remains,” noting that inventories of new and existing homes stand at 4.33 million homes, representing 11 months of overhang at the current pace of sales for existing homes and 10 months for new properties.
HFE chief U.S. economist Ian Shepherdson added, “We doubt sales of non-foreclosed homes are rising, given the recent rise in mortgage rates and continued price declines. Still, anything which reduces inventory, whether of foreclosed homes or not, is a very welcome development.”
Lawrence Yun, chief economist at the NAR, projected home prices would rise between 3% and 6% in 2009, as buyers entering the hardest-hit markets are putting a floor on prices.
“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.
Wednesday, November 12, 2008
Government launches new mortgage aid effort
By ALAN ZIBEL, AP Real Estate Writer Alan Zibel, Ap Real Estate Writer
WASHINGTON – Once again, the government has offered another plan to help troubled homeowners. Once again, critics say it doesn't go far enough.
The plan announced Tuesday by federal officials and mortgage giants Fannie Mae and Freddie Mac sounds sweeping in its approach: Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.
But there's a catch. The plan focuses on loans Fannie and Freddie own or guarantee. They are the dominant players in the U.S. mortgage market but represent only 20 percent of delinquent loans.
Sheila Bair, chairman of the Federal Deposit Insurance Corp., said the plan "falls short of what is needed to achieve wide-scale modifications of distressed mortgages."
With the government spending billions to aid distressed banks, "we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans," Bair said in a statement.
Democrats on Capitol Hill aren't satisfied, either. "When the loan is chopped up into a million pieces and any investor can block a modification from happening, a program like this will only scratch the surface of the mortgage crisis," said Sen. Charles Schumer, D-N.Y.
The economic crisis is still unnerving Wall Street. Stocks fell again as investors found few industries safe from the consumer spending slump. With Starbucks Corp. and luxury homebuilder Toll Brothers Inc. both posting disappointing quarterly results, the Dow Jones industrial average closed down nearly 180 points.
The financial crisis took on a new dimension on Capitol Hill. House Speaker Nancy Pelosi called for "emergency and limited financial assistance" for the battered auto industry and urged the outgoing Bush administration to join lawmakers in reaching a quick compromise during a postelection session of Congress.
The new mortgage assistance plan was announced by the Federal Housing Finance Agency, which seized control of Fannie and Freddie in September, and other government and industry officials.
Officials say they hope the new approach, which takes effect Dec. 15, will become a model for loan servicing companies that collect mortgage payments and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.
James Lockhart, director of the housing finance agency, urged investors to "rapidly adopt this program as the industry standard."
Still, government officials had no estimate of how many homeowners would be able to qualify. Fannie and Freddie own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. But they have far lower overall delinquency rates — under 2 percent.
To qualify, borrowers would have to be at least three months behind on their home loans and would have to owe 90 percent or more than the home is worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Qualified borrowers would get help in several ways: The interest rate would be reduced so that they would not pay more than 38 percent of their gross income on housing expenses. Another option is for loans to be extended to 40 years from 30, and for some of the principal to be deferred, interest-free.
Though lenders have beefed up their efforts to aid borrowers over the past year, their action hasn't kept up with the worst housing recession in decades.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
Indeed, Tuesday's announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer.
He moved out of his home in Mill Valley, Calif., earlier this month — taking his children, three dogs and one cat with him — after failing at several attempts to get a loan modification or a short sale. A short sale occurs when the lender agrees to receive less than the loan is worth.
Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end, he couldn't persuade Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan.
"I feel like I missed the boat," he said of the new efforts to help more homeowners. "I'm just mad at the whole system."
One reason the problem has been so tough to solve for borrowers such as Courtney is that the vast majority of troubled loans were packaged into complex investments that have proved extremely hard to unwind.
Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors worldwide. Most of those loans won't likely be helped by the new plan.
The rest are "whole loans," which are easier to modify because they have only one owner.
Still, after more than a year of slow and weak initiatives, there seems to be a serious effort among major retail banks to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.
Citigroup said Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments.
JPMorgan Chase & Co. last month expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The bank already has modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
Starting Dec. 1, Bank of America Corp. plans to modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.
_______ Associated Press Writers David Espo and Sara Lepro contributed to this report.
WASHINGTON – Once again, the government has offered another plan to help troubled homeowners. Once again, critics say it doesn't go far enough.
The plan announced Tuesday by federal officials and mortgage giants Fannie Mae and Freddie Mac sounds sweeping in its approach: Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.
But there's a catch. The plan focuses on loans Fannie and Freddie own or guarantee. They are the dominant players in the U.S. mortgage market but represent only 20 percent of delinquent loans.
Sheila Bair, chairman of the Federal Deposit Insurance Corp., said the plan "falls short of what is needed to achieve wide-scale modifications of distressed mortgages."
With the government spending billions to aid distressed banks, "we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans," Bair said in a statement.
Democrats on Capitol Hill aren't satisfied, either. "When the loan is chopped up into a million pieces and any investor can block a modification from happening, a program like this will only scratch the surface of the mortgage crisis," said Sen. Charles Schumer, D-N.Y.
The economic crisis is still unnerving Wall Street. Stocks fell again as investors found few industries safe from the consumer spending slump. With Starbucks Corp. and luxury homebuilder Toll Brothers Inc. both posting disappointing quarterly results, the Dow Jones industrial average closed down nearly 180 points.
The financial crisis took on a new dimension on Capitol Hill. House Speaker Nancy Pelosi called for "emergency and limited financial assistance" for the battered auto industry and urged the outgoing Bush administration to join lawmakers in reaching a quick compromise during a postelection session of Congress.
The new mortgage assistance plan was announced by the Federal Housing Finance Agency, which seized control of Fannie and Freddie in September, and other government and industry officials.
Officials say they hope the new approach, which takes effect Dec. 15, will become a model for loan servicing companies that collect mortgage payments and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.
James Lockhart, director of the housing finance agency, urged investors to "rapidly adopt this program as the industry standard."
Still, government officials had no estimate of how many homeowners would be able to qualify. Fannie and Freddie own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. But they have far lower overall delinquency rates — under 2 percent.
To qualify, borrowers would have to be at least three months behind on their home loans and would have to owe 90 percent or more than the home is worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Qualified borrowers would get help in several ways: The interest rate would be reduced so that they would not pay more than 38 percent of their gross income on housing expenses. Another option is for loans to be extended to 40 years from 30, and for some of the principal to be deferred, interest-free.
Though lenders have beefed up their efforts to aid borrowers over the past year, their action hasn't kept up with the worst housing recession in decades.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
Indeed, Tuesday's announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer.
He moved out of his home in Mill Valley, Calif., earlier this month — taking his children, three dogs and one cat with him — after failing at several attempts to get a loan modification or a short sale. A short sale occurs when the lender agrees to receive less than the loan is worth.
Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end, he couldn't persuade Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan.
"I feel like I missed the boat," he said of the new efforts to help more homeowners. "I'm just mad at the whole system."
One reason the problem has been so tough to solve for borrowers such as Courtney is that the vast majority of troubled loans were packaged into complex investments that have proved extremely hard to unwind.
Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors worldwide. Most of those loans won't likely be helped by the new plan.
The rest are "whole loans," which are easier to modify because they have only one owner.
Still, after more than a year of slow and weak initiatives, there seems to be a serious effort among major retail banks to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.
Citigroup said Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments.
JPMorgan Chase & Co. last month expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The bank already has modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
Starting Dec. 1, Bank of America Corp. plans to modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.
_______ Associated Press Writers David Espo and Sara Lepro contributed to this report.
Tuesday, November 11, 2008
Foreclosed Home Sales Likely Driving Up U.S. Pending Home Sales
Economists say the second unexpected rebound in three months in the U.S. pending home sales index is likely due to sales of foreclosed homes. The June report from the National Association of Realtors (NAR) defied expectations for a 1.0% decline and rebounded 5.3% in June, following the 4.9% loss of sales in May.
The bounce is better than the most optimistic forecasts beforehand.
“This is promising news for July/August existing home sales as the pending sales figures become an existing home sale a month or two down the road (assuming they’re not cancelled),” wrote Jennifer Lee, economist at BMO Capital Markets.
Pending home sales represent homes that have been signed for but not finalized, a process that takes another month or two. The value of the index lies in its ability to forecast existing home sales, which represent eight-tenths of the market.
Lee said the gains likely represent sales of homes in foreclosure, which economists also believe were responsible for April’s gain. She pointed to a USA Today story that said home sales were rebounding in Las Vegas, 60% of which were foreclosed properties.
Millan Mulraine, economics strategist at TD Securities, added, “Despite the unexpected surge in pending home sales in June, with most other housing-related indicators pointing downward, there is little to suggest an imminent abatement in the U.S. housing market correction.”
The PHSI now stands at 89.0, up from 84.5 in the previous month. From a year prior, the index has declined by 12.1%, compared with an annual 15.7% decline in the previous month. An all-time low in the seven-year index was reached in March at 83.0.
On the plus side, each of the four regions saw improvement in the month as sales in the Midwest rose 1.3%, the South rose 9.3%, the West advanced 4.6% and the Northeast posted a 3.4% gain.
However, Lee said “the underlying problem remains,” noting that inventories of new and existing homes stand at 4.33 million homes, representing 11 months of overhang at the current pace of sales for existing homes and 10 months for new properties.
HFE chief U.S. economist Ian Shepherdson added, “We doubt sales of non-foreclosed homes are rising, given the recent rise in mortgage rates and continued price declines. Still, anything which reduces inventory, whether of foreclosed homes or not, is a very welcome development.”
Lawrence Yun, chief economist at the NAR, projected home prices would rise between 3% and 6% in 2009, as buyers entering the hardest-hit markets are putting a floor on prices.
“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.
The bounce is better than the most optimistic forecasts beforehand.
“This is promising news for July/August existing home sales as the pending sales figures become an existing home sale a month or two down the road (assuming they’re not cancelled),” wrote Jennifer Lee, economist at BMO Capital Markets.
Pending home sales represent homes that have been signed for but not finalized, a process that takes another month or two. The value of the index lies in its ability to forecast existing home sales, which represent eight-tenths of the market.
Lee said the gains likely represent sales of homes in foreclosure, which economists also believe were responsible for April’s gain. She pointed to a USA Today story that said home sales were rebounding in Las Vegas, 60% of which were foreclosed properties.
Millan Mulraine, economics strategist at TD Securities, added, “Despite the unexpected surge in pending home sales in June, with most other housing-related indicators pointing downward, there is little to suggest an imminent abatement in the U.S. housing market correction.”
The PHSI now stands at 89.0, up from 84.5 in the previous month. From a year prior, the index has declined by 12.1%, compared with an annual 15.7% decline in the previous month. An all-time low in the seven-year index was reached in March at 83.0.
On the plus side, each of the four regions saw improvement in the month as sales in the Midwest rose 1.3%, the South rose 9.3%, the West advanced 4.6% and the Northeast posted a 3.4% gain.
However, Lee said “the underlying problem remains,” noting that inventories of new and existing homes stand at 4.33 million homes, representing 11 months of overhang at the current pace of sales for existing homes and 10 months for new properties.
HFE chief U.S. economist Ian Shepherdson added, “We doubt sales of non-foreclosed homes are rising, given the recent rise in mortgage rates and continued price declines. Still, anything which reduces inventory, whether of foreclosed homes or not, is a very welcome development.”
Lawrence Yun, chief economist at the NAR, projected home prices would rise between 3% and 6% in 2009, as buyers entering the hardest-hit markets are putting a floor on prices.
“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.
Monday, November 10, 2008
Realtors® Help Buyers, Sellers, With Short Sales Solutions
ORLANDO, November 09, 2008
When families lose their homes to foreclosure, communities, the housing market and the economy all suffer. Short sales are one way that some troubled homeowners can avoid foreclosure, and Realtors® at the Short Sales Solutions session today at the 2008 REALTORS® Conference & Expo gained valuable insights into how to facilitate these complex sales.
“Homeowners who are struggling to make their mortgage payments must have more options available to them to avoid foreclosure,” said National Association of Realtors® President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. “Short sales can benefit not only the homeowner in question, but also buyers, lenders and the surrounding community. With their established lender relationships and insights into complicated real estate transactions, Realtors® can add real value for both sellers and buyers interested in short sales.”
A short sale is a transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan. The lender often receives a higher amount of the remaining loan balance than it would from the sale of the property after a foreclosure. This helps support home values in the surrounding community. Short sales also help homeowners maintain some level of credit.
According to Freddie Mac, of homeowners who have loans that enter into the foreclosure process, 50 percent did not have any contact with the lender before foreclosure began. One of the most valuable services Realtors® can provide to clients who may be facing a foreclosure is guiding them through the lender’s short sale process and facilitating communication, according to session panelists Michael and Stacey Spikes of America’s Home Rescue.
“The process for short selling an FHA loan is different than the process for shorting a Veterans Administration or conventional loan,” said Stacey Spikes. “Knowing the type of loan the seller has, and understanding the proper steps for short selling that loan and the order of those steps, is critical.”
Homeowners who are having difficulty making their mortgage payments and who may be considering a short sale must generally meet three qualifying criteria: they must be behind on their payments, be able to prove a legitimate hardship, and have little or no equity in their home.
While a typical real estate transaction involves two real estate professionals, a seller, a buyer, and the buyer’s lender, a short sale can include all of these parties in addition to the seller’s loan servicer, housing counselor, junior lienholders, mortgage investors and mortgage insurers. In addition to the number of parties involved, Realtors® say there are many reasons for the difficulty in completing a short sale. These include burdensome paperwork, appraisals that do not consider the sellers’ duress or number of foreclosures in the community, over-burdened loss mitigation departments, and the complications created by second mortgages.
NAR has created a working group to examine the problems and difficulties surrounding short sales and to educate its members on how to best work with their clients through this process. NAR is also reaching out to its partners in the housing and mortgage industry to encourage adoption of principles and practices to streamline the short sale process.
“Short sales give many families in financial difficulties the possibility of salvaging their credit and avoiding the embarrassment of a foreclosure,” said Gaylord. “Realtors® across the country stand ready to help, and NAR will work hard to ensure that short sales are a viable alternative to foreclosures whenever possible.”
When families lose their homes to foreclosure, communities, the housing market and the economy all suffer. Short sales are one way that some troubled homeowners can avoid foreclosure, and Realtors® at the Short Sales Solutions session today at the 2008 REALTORS® Conference & Expo gained valuable insights into how to facilitate these complex sales.
“Homeowners who are struggling to make their mortgage payments must have more options available to them to avoid foreclosure,” said National Association of Realtors® President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. “Short sales can benefit not only the homeowner in question, but also buyers, lenders and the surrounding community. With their established lender relationships and insights into complicated real estate transactions, Realtors® can add real value for both sellers and buyers interested in short sales.”
A short sale is a transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan. The lender often receives a higher amount of the remaining loan balance than it would from the sale of the property after a foreclosure. This helps support home values in the surrounding community. Short sales also help homeowners maintain some level of credit.
According to Freddie Mac, of homeowners who have loans that enter into the foreclosure process, 50 percent did not have any contact with the lender before foreclosure began. One of the most valuable services Realtors® can provide to clients who may be facing a foreclosure is guiding them through the lender’s short sale process and facilitating communication, according to session panelists Michael and Stacey Spikes of America’s Home Rescue.
“The process for short selling an FHA loan is different than the process for shorting a Veterans Administration or conventional loan,” said Stacey Spikes. “Knowing the type of loan the seller has, and understanding the proper steps for short selling that loan and the order of those steps, is critical.”
Homeowners who are having difficulty making their mortgage payments and who may be considering a short sale must generally meet three qualifying criteria: they must be behind on their payments, be able to prove a legitimate hardship, and have little or no equity in their home.
While a typical real estate transaction involves two real estate professionals, a seller, a buyer, and the buyer’s lender, a short sale can include all of these parties in addition to the seller’s loan servicer, housing counselor, junior lienholders, mortgage investors and mortgage insurers. In addition to the number of parties involved, Realtors® say there are many reasons for the difficulty in completing a short sale. These include burdensome paperwork, appraisals that do not consider the sellers’ duress or number of foreclosures in the community, over-burdened loss mitigation departments, and the complications created by second mortgages.
NAR has created a working group to examine the problems and difficulties surrounding short sales and to educate its members on how to best work with their clients through this process. NAR is also reaching out to its partners in the housing and mortgage industry to encourage adoption of principles and practices to streamline the short sale process.
“Short sales give many families in financial difficulties the possibility of salvaging their credit and avoiding the embarrassment of a foreclosure,” said Gaylord. “Realtors® across the country stand ready to help, and NAR will work hard to ensure that short sales are a viable alternative to foreclosures whenever possible.”
Friday, November 7, 2008
Fighting Fear With Information
By Jack Guttentag
The mortgage world has suddenly become very frightening to many people who have no real reason to be frightened.
Their loans are in good standing, and they are not having any trouble meeting their payments. Still, they are in distress -- in large part because so many around them are in distress. Fear is contagious. The only antidote I know is good information.
One thing that people suffering from mortgage fright often forget is that a mortgage loan is a contract between two parties and cannot be violated by either without the permission of the other. If the loan is sold, the purchaser replaces the originating lender as the contracting party and is subject to the contract in the same way. If the servicing of the loan is sold, the servicer as the agent of the owner is required to abide by the terms of the contract, and the same holds if the loan is placed in a pool as collateral for a mortgage-backed security.
The first two letters below are from borrowers who do not have a problem with their mortgages but are distressed about what might happen to cause them a problem. The third is from a borrower in a more difficult position.
Q: Can whoever owns my mortgage demand immediate repayment of the balance? I know it doesn't make sense, but crazy things seem to be happening.
A: Mortgage contracts do not give the lender the right to demand immediate repayment. Balloon loans require repayment at the end of the balloon period, but that is stated in the contract. Fortunately, there are not too many balloon loans around.
Even if lenders had the legal right to demand immediate repayment, they wouldn't do it because it would only generate more foreclosures. For the same reason, borrowers with balloon loans in good standing who are unable to refinance anywhere else will find that their existing lender would prefer to refinance rather than to foreclose.
Q: When my adjustable-rate mortgage adjusts next year, the new rate should be the one-year Treasury rate plus a margin of 2.5 percentage points. Last year, my lender replaced the Treasury rate on new loans with Libor. Because of the crisis, Libor is now much higher than the Treasury. Can my lender switch my ARM to Libor when my rate is adjusted?
A: No. The rate is adjustable, but not the index used to calculate it. Your ARM contract stipulates the index and its source, and the only circumstance in which a different index can be substituted is if the specified index is no longer available. The different Treasury indexes used for ARMs are compiled by the Federal Reserve, and there is zero likelihood that they will disappear.
I wish I could answer the next letter with the same degree of certainty.
Q: We bought our house last year with 100 percent financing. Now it is worth $40,000 less than we owe. I don't know what to do. Do we keep making mortgage payments, or do we stop? A friend has advised us to lock the door and send the key to the lender, but that doesn't sit well with me. We've always met our obligations and have good credit. What do you advise?
A: This letter is typical of many I have received from borrowers who are "upside down" -- they owe more than their houses are worth. I have a lot of trouble dealing with it because, in good part, it is a moral issue.
One part of me says that when you borrow money, you should pay it back if you can. During the many years when house prices were rising, I never once heard of a mortgage borrower offering to share the capital gain with the lender. There is no justification in forcing the lender to share the capital loss.
Another part rejoins that few of the people who are upside down today enjoyed a capital gain on previous homes that they owned. Further, the borrower's major obligation is to his family, not to his lender. If the financial gain from letting the house go to foreclosure more than offsets the pain of having his credit trashed and searching for a new place to live, then that is what the borrower should do.
There is an economic dimension to this quandary. If those who are upside down could be assured that house prices have hit bottom and within a year or two will be right-side up, there is little doubt that most would choose to stay the course. Unfortunately, no economist in good conscience can provide such assurance today.
Finally, there is a policy dimension. Upside-down borrowers would be encouraged to keep going if they had some reason to believe that the government would help them get right-side up. Right now, the prospects for this are extremely murky, but don't write it off just yet.
The mortgage world has suddenly become very frightening to many people who have no real reason to be frightened.
Their loans are in good standing, and they are not having any trouble meeting their payments. Still, they are in distress -- in large part because so many around them are in distress. Fear is contagious. The only antidote I know is good information.
One thing that people suffering from mortgage fright often forget is that a mortgage loan is a contract between two parties and cannot be violated by either without the permission of the other. If the loan is sold, the purchaser replaces the originating lender as the contracting party and is subject to the contract in the same way. If the servicing of the loan is sold, the servicer as the agent of the owner is required to abide by the terms of the contract, and the same holds if the loan is placed in a pool as collateral for a mortgage-backed security.
The first two letters below are from borrowers who do not have a problem with their mortgages but are distressed about what might happen to cause them a problem. The third is from a borrower in a more difficult position.
Q: Can whoever owns my mortgage demand immediate repayment of the balance? I know it doesn't make sense, but crazy things seem to be happening.
A: Mortgage contracts do not give the lender the right to demand immediate repayment. Balloon loans require repayment at the end of the balloon period, but that is stated in the contract. Fortunately, there are not too many balloon loans around.
Even if lenders had the legal right to demand immediate repayment, they wouldn't do it because it would only generate more foreclosures. For the same reason, borrowers with balloon loans in good standing who are unable to refinance anywhere else will find that their existing lender would prefer to refinance rather than to foreclose.
Q: When my adjustable-rate mortgage adjusts next year, the new rate should be the one-year Treasury rate plus a margin of 2.5 percentage points. Last year, my lender replaced the Treasury rate on new loans with Libor. Because of the crisis, Libor is now much higher than the Treasury. Can my lender switch my ARM to Libor when my rate is adjusted?
A: No. The rate is adjustable, but not the index used to calculate it. Your ARM contract stipulates the index and its source, and the only circumstance in which a different index can be substituted is if the specified index is no longer available. The different Treasury indexes used for ARMs are compiled by the Federal Reserve, and there is zero likelihood that they will disappear.
I wish I could answer the next letter with the same degree of certainty.
Q: We bought our house last year with 100 percent financing. Now it is worth $40,000 less than we owe. I don't know what to do. Do we keep making mortgage payments, or do we stop? A friend has advised us to lock the door and send the key to the lender, but that doesn't sit well with me. We've always met our obligations and have good credit. What do you advise?
A: This letter is typical of many I have received from borrowers who are "upside down" -- they owe more than their houses are worth. I have a lot of trouble dealing with it because, in good part, it is a moral issue.
One part of me says that when you borrow money, you should pay it back if you can. During the many years when house prices were rising, I never once heard of a mortgage borrower offering to share the capital gain with the lender. There is no justification in forcing the lender to share the capital loss.
Another part rejoins that few of the people who are upside down today enjoyed a capital gain on previous homes that they owned. Further, the borrower's major obligation is to his family, not to his lender. If the financial gain from letting the house go to foreclosure more than offsets the pain of having his credit trashed and searching for a new place to live, then that is what the borrower should do.
There is an economic dimension to this quandary. If those who are upside down could be assured that house prices have hit bottom and within a year or two will be right-side up, there is little doubt that most would choose to stay the course. Unfortunately, no economist in good conscience can provide such assurance today.
Finally, there is a policy dimension. Upside-down borrowers would be encouraged to keep going if they had some reason to believe that the government would help them get right-side up. Right now, the prospects for this are extremely murky, but don't write it off just yet.
Thursday, November 6, 2008
Credit Unions To The Rescue
by Broderick Perkins
Been down to your friendly neighborhood credit union lately?
You could find that elusive home loan you been unable to get anywhere else.
Credit unions didn't need a bail out during the Great Depression, they didn't need federal intervention during the Savings & Loan debacle and they don't need government assistance now.
In fact, right now, they are rolling out the red carpet for home loan borrowers.
During the boom, credit unions avoided writing subprime home loans and other easy-money mortgages. They also shunned selling packages of mortgages to Wall Street moguls who packaged them into now low- to no-return securities.
That means credit unions are relatively untainted by the credit squeeze and they have both money to burn and a sound business foundation that allows them to keep on lending.
Instead of fearing the next Great Depression, member-owned credit unions are bracing for what could be their boom time in home loans and other financial services, now that banks and mortgage lenders are crashing and burning.
Mortgage production among credit unions is small by comparison to banks and mortgage lenders, but their originations rose a whopping 10.1 percent during the first half of 2008, according to the industry's federal regulator, the National Credit Union Administration (NCUA).
The Mortgage Bankers Association recently reported bank and mortgage lender loan originations took a nose dive, falling 17 percent during the same period.
Credit unions are more willing than many lenders to make homes loans for the creditworthy, but the old fashioned way.
If you go shopping for a credit union mortgage, leave your subprime attitude at the door. You won't be coddled, you can't get away with lying on your application, your creditworthiness will have to pass muster and you likely won't get more home than you can truly afford.
Credit unions are non-profits in the business to make money, but not profits. They serve members who pool their money to get a decent return, either in the form of savings interest or competitively priced loans.
The fundamentals apply: Credit unions take in deposits. They use the money to make loans. They charge more on those loans than they pay on deposits. Voila! A thriving business.
It's the lack of the profit motive that kept credit unions out of harms way during the mortgage meltdown. They have no incentive to get involved in the subprime racket, no reason to sell and repackage loans as investments and no need to otherwise venture into untried and untrue investment schemes.
Credit unions hold most loans to maturity and return the interest to members in the form of interest-bearing checking, savings and CD accounts. The rest they invest smart so they can continue to help members.
Also, because credit unions didn't hop aboard the home loan assembly line, their members aren't suffering the kind of housing hangover many home owners face today.
Less than 1 percent of all credit union mortgages are 60 days or more late, according to their Credit Union National Association (CUNA)
And, along with fixed-rate 30-year mortgages they also offer conventional adjustable rate mortgages (ARM) and hybrids.
As with other financial products -- savings and CDs -- rates on loans are often better at credit unions. The spread isn't as much with mortgages as it is with credit cards and car loans, but credit unions' mortgage rates are competitive.
As of October 15 CUNA reported the average rate on a 30-year fixed rate mortgage was 6.27 percent; for a 1-year ARM, 4.91 percent. Meanwhile, the MBA reported an average 6.47 percent for a 30-year loan and an average 6.67 for a 1-year ARM.
"Credit unions are the safest depository institution in the country to put your money in right now," says Dan Mica, President and CEO of CUNA.
He has room to boast.
Just as the Federal Deposit Insurance Corporation (FDIC) insures accounts up to $250,000 in federally insured banks, credit unions are likewise regulated and federally insured by the NCUA for the same amount.
Been down to your friendly neighborhood credit union lately?
You could find that elusive home loan you been unable to get anywhere else.
Credit unions didn't need a bail out during the Great Depression, they didn't need federal intervention during the Savings & Loan debacle and they don't need government assistance now.
In fact, right now, they are rolling out the red carpet for home loan borrowers.
During the boom, credit unions avoided writing subprime home loans and other easy-money mortgages. They also shunned selling packages of mortgages to Wall Street moguls who packaged them into now low- to no-return securities.
That means credit unions are relatively untainted by the credit squeeze and they have both money to burn and a sound business foundation that allows them to keep on lending.
Instead of fearing the next Great Depression, member-owned credit unions are bracing for what could be their boom time in home loans and other financial services, now that banks and mortgage lenders are crashing and burning.
Mortgage production among credit unions is small by comparison to banks and mortgage lenders, but their originations rose a whopping 10.1 percent during the first half of 2008, according to the industry's federal regulator, the National Credit Union Administration (NCUA).
The Mortgage Bankers Association recently reported bank and mortgage lender loan originations took a nose dive, falling 17 percent during the same period.
Credit unions are more willing than many lenders to make homes loans for the creditworthy, but the old fashioned way.
If you go shopping for a credit union mortgage, leave your subprime attitude at the door. You won't be coddled, you can't get away with lying on your application, your creditworthiness will have to pass muster and you likely won't get more home than you can truly afford.
Credit unions are non-profits in the business to make money, but not profits. They serve members who pool their money to get a decent return, either in the form of savings interest or competitively priced loans.
The fundamentals apply: Credit unions take in deposits. They use the money to make loans. They charge more on those loans than they pay on deposits. Voila! A thriving business.
It's the lack of the profit motive that kept credit unions out of harms way during the mortgage meltdown. They have no incentive to get involved in the subprime racket, no reason to sell and repackage loans as investments and no need to otherwise venture into untried and untrue investment schemes.
Credit unions hold most loans to maturity and return the interest to members in the form of interest-bearing checking, savings and CD accounts. The rest they invest smart so they can continue to help members.
Also, because credit unions didn't hop aboard the home loan assembly line, their members aren't suffering the kind of housing hangover many home owners face today.
Less than 1 percent of all credit union mortgages are 60 days or more late, according to their Credit Union National Association (CUNA)
And, along with fixed-rate 30-year mortgages they also offer conventional adjustable rate mortgages (ARM) and hybrids.
As with other financial products -- savings and CDs -- rates on loans are often better at credit unions. The spread isn't as much with mortgages as it is with credit cards and car loans, but credit unions' mortgage rates are competitive.
As of October 15 CUNA reported the average rate on a 30-year fixed rate mortgage was 6.27 percent; for a 1-year ARM, 4.91 percent. Meanwhile, the MBA reported an average 6.47 percent for a 30-year loan and an average 6.67 for a 1-year ARM.
"Credit unions are the safest depository institution in the country to put your money in right now," says Dan Mica, President and CEO of CUNA.
He has room to boast.
Just as the Federal Deposit Insurance Corporation (FDIC) insures accounts up to $250,000 in federally insured banks, credit unions are likewise regulated and federally insured by the NCUA for the same amount.
Wednesday, November 5, 2008
Can Home Builder Be Trusted?
By JUNE FLETCHER
Q: I keep seeing model lease-back offers from builders. Most of them pay enough rent to more than cover the monthly cost, but my biggest concern is about the builder's financial viability, since so many of them have gone bankrupt. Are there any particular things one should watch out for?
A: Builder lease-backs, in which the buyer rents a home to the builder who uses it as a model home, are generally great deals for all concerned. Builders get an early sale. Buyers get an upgraded home at a discount price, and a tenant who won't be calling in the middle of the night to complain about a clogged toilet.
But in these uncertain times, I can understand your caution. Since last year, an .estimated 20% of builders went out of business, according to Gopal Ahluwalia, director of research for the National Association of Home Builders. Most were small or mid-sized builders who didn't have enough cash in reserve to cushion them through a downturn.
[builder] Associated Press
You can analyze the earnings, debt and cash flow of a public company to determine its long-term financial health, but you can't do that with a small, privately-held one. You can talk to suppliers and subcontractors to see if they're being paid promptly, to recent buyers to see if they are satisfied and to local regulatory and consumer agencies to see if any complaints have been filed against the company. If you're still concerned, you can try to negotiate a lump-sum rather than a month-to-month lease payment, payable at closing.
Keep in mind that when the lease is up, you won't be getting a brand-new home. Although builders usually make an effort to keep models looking fresh, as they cut back on expenses they may cut down on the number of times carpets are shampooed and paint scuffs are touched up. In downturns, builders also sometimes make one model home complex serve several different communities, which means more wear and tear on each unit. I recently visited a model home in Prince William County, Virginia that was being used this way. It was only one year old, but felt much older. Visitors had slammed a kitchen drawer so often that the front was coming loose and had broken a closet light switch. The gray, opaque stain on the deck had worn through in spots.
A builder will often promise to repair and repaint a model at the end of the lease, to convert the sales office to a garage and to re-route sidewalks and fences running through the model-home complex. If you're worried that the builder will go belly-up before all this happens, get an estimate from an independent contractor of what it could cost to perform these necessary fixes. Have the builder deposit the funds to cover them in an escrow account. It's smart to hire an experienced real estate attorney to represent you during all these discussions.
Finally, don't just consider the builder's financial staying power -- think about your own. If home prices fall while the project is being built out, are you prepared to hold on until the market recovers? What if there's a delay in building planned community amenities like pools and clubhouses, a situation that's sure to hurt your ability to attract buyers or renters? As scary as it may be to think about these possibilities, planning for worst-case scenarios is the best way to avoid being overcome by them.
Write to June Fletcher at fletcher.june@gmail.com
Q: I keep seeing model lease-back offers from builders. Most of them pay enough rent to more than cover the monthly cost, but my biggest concern is about the builder's financial viability, since so many of them have gone bankrupt. Are there any particular things one should watch out for?
A: Builder lease-backs, in which the buyer rents a home to the builder who uses it as a model home, are generally great deals for all concerned. Builders get an early sale. Buyers get an upgraded home at a discount price, and a tenant who won't be calling in the middle of the night to complain about a clogged toilet.
But in these uncertain times, I can understand your caution. Since last year, an .estimated 20% of builders went out of business, according to Gopal Ahluwalia, director of research for the National Association of Home Builders. Most were small or mid-sized builders who didn't have enough cash in reserve to cushion them through a downturn.
[builder] Associated Press
You can analyze the earnings, debt and cash flow of a public company to determine its long-term financial health, but you can't do that with a small, privately-held one. You can talk to suppliers and subcontractors to see if they're being paid promptly, to recent buyers to see if they are satisfied and to local regulatory and consumer agencies to see if any complaints have been filed against the company. If you're still concerned, you can try to negotiate a lump-sum rather than a month-to-month lease payment, payable at closing.
Keep in mind that when the lease is up, you won't be getting a brand-new home. Although builders usually make an effort to keep models looking fresh, as they cut back on expenses they may cut down on the number of times carpets are shampooed and paint scuffs are touched up. In downturns, builders also sometimes make one model home complex serve several different communities, which means more wear and tear on each unit. I recently visited a model home in Prince William County, Virginia that was being used this way. It was only one year old, but felt much older. Visitors had slammed a kitchen drawer so often that the front was coming loose and had broken a closet light switch. The gray, opaque stain on the deck had worn through in spots.
A builder will often promise to repair and repaint a model at the end of the lease, to convert the sales office to a garage and to re-route sidewalks and fences running through the model-home complex. If you're worried that the builder will go belly-up before all this happens, get an estimate from an independent contractor of what it could cost to perform these necessary fixes. Have the builder deposit the funds to cover them in an escrow account. It's smart to hire an experienced real estate attorney to represent you during all these discussions.
Finally, don't just consider the builder's financial staying power -- think about your own. If home prices fall while the project is being built out, are you prepared to hold on until the market recovers? What if there's a delay in building planned community amenities like pools and clubhouses, a situation that's sure to hurt your ability to attract buyers or renters? As scary as it may be to think about these possibilities, planning for worst-case scenarios is the best way to avoid being overcome by them.
Write to June Fletcher at fletcher.june@gmail.com
Monday, November 3, 2008
No Economic Recovery Without Housing Stabilization, Say Realtors®
Mary Trupo 202/383-1007 mtrupo@realtors.org
The National Association of Realtors® has stepped up its challenge to lawmakers encouraging them to take new, decisive actions to address the continuing problems in the housing industry, as well as the ongoing economic crisis.
“Our members see firsthand the impact that an unstable housing market is having on communities all across this great country,” said Richard F. Gaylord, NAR president. “The U.S. Treasury and Congress need to work together to ensure that the American people – not Wall Street and large banks – benefit from the economic recovery plan.”
NAR sent a letter last week to U.S. Treasury Secretary Henry Paulson calling on him to refocus the Federal Housing Finance Agency’s efforts on restoring strength to the mortgage-backed securities market, which would help lower mortgage rates for all home buyers and for those who need to refinance.
NAR today provided an economic analysis demonstrating that a reduction, or a buydown, of interest rates by just 1 percentage point could result in up to 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. Inventories currently at 9.9 months’ supply would decrease to approximately a 7.5 month supply.
“These changes would help stabilize home values and the housing industry,” Gaylord said. “The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions. The administration needs to get back to the original intent of the plan – stabilizing the mortgage and housing markets – to help families avoid foreclosure. Home price stabilization would bring clarity to the valuations of mortgage-backed securities, removing uncertainty in the financial markets and positively affecting the overall U.S. economy.”
A recent consumer survey conducted by NAR member Realogy Corp. reinforces the importance of housing in a broader economic turnaround. The survey found that nine out of 10 homeowners believe that owning a home is still the best long-term investment they can make, but nearly one-third of those surveyed said they were putting plans to buy a new or existing home on hold because of the current economic environment. In a related survey, nearly half of all brokers surveyed said that they would expect sales to increase 10- 25 percent if 4.5 percent mortgage rates were available today.
Realogy President and CEO Richard A. Smith said that substantially lower mortgage rates would stimulate both existing- and new-home sales. “When home sales increase, housing-related consumer purchasing follows, and we would expect this to help lead our economy to a recovery,” he said. Both NAR and Realogy have called on the federal government to take corrective actions that will result in lower mortgage rates.
Federal Deposit Insurance Corp. Chairman Sheila Bair has presented some ideas aimed at helping millions of homeowners by guaranteeing their mortgages. “NAR would support this effort,” said Gaylord. “The government must focus on protecting homeowners and making the dream of homeownership once again attainable. This would help stabilize the housing market and strengthen the national economy.”
Toward this end, NAR submitted a stimulus plan to Congress and the administration earlier this month, calling on Congress to enact a new housing stimulus package that would help boost the economy. The plan includes consumer-driven provisions that would eliminate repayment of the first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, and focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.
Reducing the interest rate, combined with removing the home buyer tax credit repayment, would result in an additional 10 percent reduction in inventory, down to a 6.5-month supply, and would produce modest home price gains of 2 to 4 percent. Such price gains would provide up to $760 billion in housing equity recovery for the nation’s 75 million homeowners.
“There is no question – there cannot be an economic recovery without a stabilized housing market. Congress and the new administration need to act immediately to help America’s families protect their homes, savings and futures,” Gaylord said.
The National Association of Realtors® has stepped up its challenge to lawmakers encouraging them to take new, decisive actions to address the continuing problems in the housing industry, as well as the ongoing economic crisis.
“Our members see firsthand the impact that an unstable housing market is having on communities all across this great country,” said Richard F. Gaylord, NAR president. “The U.S. Treasury and Congress need to work together to ensure that the American people – not Wall Street and large banks – benefit from the economic recovery plan.”
NAR sent a letter last week to U.S. Treasury Secretary Henry Paulson calling on him to refocus the Federal Housing Finance Agency’s efforts on restoring strength to the mortgage-backed securities market, which would help lower mortgage rates for all home buyers and for those who need to refinance.
NAR today provided an economic analysis demonstrating that a reduction, or a buydown, of interest rates by just 1 percentage point could result in up to 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. Inventories currently at 9.9 months’ supply would decrease to approximately a 7.5 month supply.
“These changes would help stabilize home values and the housing industry,” Gaylord said. “The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions. The administration needs to get back to the original intent of the plan – stabilizing the mortgage and housing markets – to help families avoid foreclosure. Home price stabilization would bring clarity to the valuations of mortgage-backed securities, removing uncertainty in the financial markets and positively affecting the overall U.S. economy.”
A recent consumer survey conducted by NAR member Realogy Corp. reinforces the importance of housing in a broader economic turnaround. The survey found that nine out of 10 homeowners believe that owning a home is still the best long-term investment they can make, but nearly one-third of those surveyed said they were putting plans to buy a new or existing home on hold because of the current economic environment. In a related survey, nearly half of all brokers surveyed said that they would expect sales to increase 10- 25 percent if 4.5 percent mortgage rates were available today.
Realogy President and CEO Richard A. Smith said that substantially lower mortgage rates would stimulate both existing- and new-home sales. “When home sales increase, housing-related consumer purchasing follows, and we would expect this to help lead our economy to a recovery,” he said. Both NAR and Realogy have called on the federal government to take corrective actions that will result in lower mortgage rates.
Federal Deposit Insurance Corp. Chairman Sheila Bair has presented some ideas aimed at helping millions of homeowners by guaranteeing their mortgages. “NAR would support this effort,” said Gaylord. “The government must focus on protecting homeowners and making the dream of homeownership once again attainable. This would help stabilize the housing market and strengthen the national economy.”
Toward this end, NAR submitted a stimulus plan to Congress and the administration earlier this month, calling on Congress to enact a new housing stimulus package that would help boost the economy. The plan includes consumer-driven provisions that would eliminate repayment of the first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, and focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.
Reducing the interest rate, combined with removing the home buyer tax credit repayment, would result in an additional 10 percent reduction in inventory, down to a 6.5-month supply, and would produce modest home price gains of 2 to 4 percent. Such price gains would provide up to $760 billion in housing equity recovery for the nation’s 75 million homeowners.
“There is no question – there cannot be an economic recovery without a stabilized housing market. Congress and the new administration need to act immediately to help America’s families protect their homes, savings and futures,” Gaylord said.
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