Frank Howard Allen Blog

Tuesday, 30 December 2008

POSTED BY: Brendan Coen AT 01:46 pm | Permalink | 0 Comments | E-mail this

Monday, 15 December 2008

This week’s C.A.R. Mortgage Update contains information about mortgage delinquencies; self-employed individuals receiving mortgages; modifying Fannie Mae and Freddie Mac; and the proposed interest rate drop’s impact on consumers.

Mortgage delinquencies rise for seventh straight quarter

The rate of delinquent mortgages rose to 3.96 percent in the third quarter, a

12 percent increase compared with the second quarter, according to the

latest report from credit reporting agency TransUnion. The report shows

seven consecutive quarters of rising mortgage delinquency rates.

TransUnion classifies borrowers as delinquent when they are 60 days or

more past due on their home loans.

To read the full story, please click here:

http://money.cnn.com/2008/12/08/news/economy/mortgage_rates/index.htm?cnn=yes

Self-employed are frozen out of mortgages

Although the credit freeze has thawed for many well-qualified borrowers, those who are self-employed and cannot fully document their income still are facing a credit squeeze despite having pristine FICO scores and sizable down payments. Most financial institutions are reluctant to approve loans for borrowers who cannot provide W-2 forms from an employer to fully document their wages.

To read the full story, please click here:

http://online.wsj.com/article/SB122818315556971151.html

Modifying the mortgage giants
Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac have altered their focus from maximizing returns to investors to concentrating on servicing the secondary market. Tactics being employed including modifying the terms of a large number of mortgages to make them more affordable; and a plan by the Treasury Dept. to purchase 30-year, fixed-rate mortgages, which could drive down interest rates to 4.5 percent.

To read the full story, please click here:

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/07/AR2008120702378.html?sid=ST2008120702908&s_pos=

Rate drops are of little help to many in California
The p roposed plan by the U.S. Treasury Dept. to have Fannie Mae and

Freddie Mac purchase mortgage loans with interest rates of 4.5 percent

spurred many homeowners to apply for refinancing, and some home buyers to

apply for new loans. However, the proposed plan, if approved, would not help

homeowners and home buyers in California or other high-cost areas with

jumbo loans, because Fannie Mae and Freddie Mac only can purchase

mortgage loans up to $729,750 – the current conforming loan limit. The

current loan limits expire Dec. 31, 2008 and the “new” conforming loan limit

will be lowered to $625,500 in January.

To read the full story, please click here:

http://www.latimes.com/business/la-fi-mortgage5-2008dec05,0,7289395. story

Proposal could drop mortgage rates to 4.5 percent
The U.S. Treasury Dept. is considering a plan proposed by the Financial Services Roundtable, an industry trade group, to purchase mortgage-backed securities from Fannie Mae and Freddie Mac in an attempt to restore confidence in mortgage-backed securities and encourage banks to make additional loans.

Under the plan, the Treasury Dept. would purchase 30-year, fixed-rate mortgages, which should restore confidence in mortgage-backed securities and encourage banks to make more loans. As a result, banks could lower the rates on mortgage-backed securities, which could lower mortgage rates for consumers.

To read the full story, please click here:

http://www.mercurynews.com/ci_11133357

Yahoo! News

Homeowners who modified loans are in trouble again

Approximately 53 percent of homeowners who modified their mortgages during the first quarter of the year redefaulted within 6 months of the modification, leading some to question wheth er government money may be better spent on creating jobs rather than averting foreclosures.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Some analysts speculate that many borrowers with modified mortgages are in default because lenders did not modify the mortgages with terms or payments that were affordable for the borrower; however, data provided by the government does not provide enough detail about the types or quality of loan modifications made.

· If foreclosures maintain their current pace, the U.S. is on track to have 2.25 million foreclosures this year. As more companies are forced to layoff employees and homeowners find it difficult to meet their debt obligations, additional families could l ose their home to foreclosure. New Jersey Gov. Jon Corzine called for a three- to- six-month halt on foreclosures while the government works out a more aggressive plan to keep families in their homes. In November, Fannie Mae and Freddie Mac announced they are halting foreclosure sales on single-family, occupied homes until at least January 2009.

· Some consumer advocates, lawmakers, and think tanks are advocating a dramatic government response, similar to the Home Owners’ Loan Corp. created in 1933 to help borrowers refinance troubled home loans. The Home Owners’ Loan Corp. was used to extend loans from shorter terms to fully amortized, longer term loans. Through its efforts, more than one million people facing foreclosure were granted long-term mortgages and were able to keep their homes. The Home Owners’ Loan Corp. turned a small profit in 1951 when it liquidated its assets.

To read the full story, please click here:

http://news.yahoo.com/s/ap/20081208/ap_on_bi_ge/financial_meltdown

Los Angeles Times

Most local markets show net growth in home values

Although news stories report nationwide declines in home values, a recent survey by the Federal Housing Finance Agency (FHFA) shows the majority of homes in metropolitan markets gain in net value over the course of five years, demonstrating the long-term value of homeownership.

MAKING SENSE OF THE STORY FOR CONSUMERS

· According to the Federal Housing Finance Agency’s (FHFA) third quarter survey, 273 metropolitan markets, out of 292, showed positive net home values over a five-year period, with only 19 markets showing home value depreciation during the same time. Unlike stocks, which can change dramatically from one day to the next, house values tend to appreciate and depreciate at a slower rate and prove to be more durable over extended periods of time. Most owner-occupied homes increase in value over a five-year period, excep for those areas with a severely depressed local economy. Homes owned and occupied for at least five years have an average annual rate of return of nearly 12 percent, according to statistics gathered by C.A.R. over the last 40 years.

· Although homes have declined in value over the past year, many homes purchased five years ago or earlier are net positive overall. In Los Angeles, homes purchased five years ago or earlier have declined approximately 18.8 percent in value over the last year, but have gained an average of 31.9 percent over a five-year period. In San Francisco, despite home values declining an average of 8 percent over the past year, the average home has gained in value an estimated 31.9 percent over five years.

To read the full story, please click here:
http://www.latimes.com/business/la-fi-harney7-2008dec07,0,5500307.story

The New York Times

It may be time to think about buying a house
Lower mortgage rates and increased affordability is presenting an opportune time for home buyers, especially first-time home buyers, who continue to have the advantage and ability to move quickly on a home purchase without having to first sell their current home.

MAKING SENSE OF THE STORY FOR CONSUMERS

· &nbs p; Some housing experts believe the recovery of the housing market is dependent upon first-time home buyers. When houses are affordable for first-time buyers, the supply of available homes dwindles, bringing the supply and demand into alignment, which generally leads to an increase in median home prices. First-time buyers also have the benefit of not relying on their current home to sell prior to purchasing a new one. As first-time buyers purchase homes, the sellers of those homes also are able to move up, further shrinking the supply of available homes.

· Some home buyers may be reluctant to purchase a home while prices continue to decline. One study, “The Changing Prospects for Building Home Equity,” predicts that buyers in 33 of the 100 largest metropolitan areas may see a decline in their home value by 2012. It is important to note though that over the long term, most homes increase in net value. The study also was conducted before the government’s most-recent efforts to lower borrowing costs for home buyers.

· Credit scores continue to be an important factor in determining not only a borrower’s eligibility, but also the interest rate offered by the bank. Most financial institutions offer the best mortgage rates to borrowers with FICO scores above 720. John Ulzheimer, president of consumer education for credit.com, recommends borrowers stop using credit cards and pay down debt balances several months before applying for a loan. Ulzheimer also states that the credit scoring system may penalize borrowers using their lines of credit frequently, even if balances always are paid in full. Consumers can check their three credit reports for free at annualcreditreport.com.

· Borrowers without a 20 percent down payment for a median-priced home still may qualify for a home loan if they purchase a less-expensive property, which often require smaller down payments. By conducting research on various neighborhoods and working closely with a REALTOR® some buyers still may qualify for a home in a desired community.

To read the full story, please click here:
http://www.nytimes.com/2008/12/06/business/yourmoney/06money.html?_r=1&em

In Other News

Reuters

Regulators preparing rescue of credit unions: report

To read the full story, please click here:

http://www.reuters.com/article/newsOne/idUSTRE4B81S220081209

CNN Money

Los Angeles Times

Chinese tour groups go house-hunting in U.S.

To read the full story, please click here:

http://www.latimes.com/business/la-fi-chinahomes7-2008dec07,0,6321372.story

CNN Money

October pending home sales slip 1%

To read the full story, please click here:

http://money.cnn.com/2008/12/09/real_estate/October_home_sales_slump/index.htm

Foreclosures soar 76% to record 1.35 million

To read the full story, please click here:
http://money.cnn.com/2008/12/05/news/economy/mortgage_delinquencies/index.htm?postversion=2008120512

Reuters

Bernanke says20need to do more to halt foreclosures

To read the full story, please click here:
http://www.reuters.com/article/newsOne/idUSTRE4B354T20081204

San Francisco Chronicle

Employers cut 533K jobs in Nov., most in 34 years

To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/12/03/financial/f214220S93.DTL&tsp=1

POSTED BY: Brendan Coen AT 02:15 pm | Permalink | 0 Comments | E-mail this

Thursday, 04 December 2008

Media Advisory 12/4/08

C.A.R. Mortgage Update

This week’s C.A.R. Mortgage Update contains information about a recent interest rate drop in fixed-rate mortgages, mortgage modification programs, and Freddie Mac’s portfolio.

U.S. Mortgage Rates Drop Most in Seven Years on Fed Debt Plan

Interest rates last week on 30-year, fixed-rate mortgages fell to an average of 5.5 percent, the largest one-day decrease in at least seven years. The decline was prompted by news that the Federal Reserve plans to purchase $600 billion of mortgage-related debt and set up a $200 billion program to support consumer and small-business loans. Homeowners with sufficient equity in their homes may qualify for the lower rates and refinance into a new home loan.

To read the full story, please click here:

http://www.bloomberg.com/apps/news?pid=20601213&sid=akf9_ZmmdeTY&refer=home

Promises of help with mortgage, but foreclosure is still most likely outcome
Many banks and financial institutions have implemented mortgage modification programs to help homeowners stay in their homes. A recent survey of organizations approved by the federal government to provide mortgage counseling found that 55 percent of respondents stated that loan modifications were “somewhat common,” up from 45 percent in April – the last time the survey was conducted. However, the survey also revealed that foreclosure tends to be the most common outcome for borrowers, especially those who owe more on their mortgage loan than their house currently is worth.

To read the full story, please click here:

http://www.mercurynews.com/ci_11074314

Freddie Mac Increases Home Loan Support
Freddie Mac purchased $27 billion in mortgage-backed securities in October, increasing its portfolio at an annual rate of 44 percent. The company, which was placed into conservatorship by the federal government in September along with Fannie Mae, could grow its portfolio to $850 billion by the end of next year under the government’s plan.

Both Fannie Mae and Freddie Mac, commonly referred to as government sponsored enterprises (GSEs), purchase loans from lenders, insure them against default, and supply capital to lenders, enabling them to make new loans. Many analysts believe that Freddie Mac may have prevented mortgage rates from skyrocketing by purchasing the mortgage-backed securities in October.

To read the full story, please click here:

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/24/AR2008112401242.html

Wall Street Journal

The Future for Home Prices

Home prices in some areas of the country have declined by as much as 35 percent, but most housing industry experts agree that the long-term trend of home price appreciation will continue.

MAKING SENSE OF THE STORY FOR CONSUMERS

· According to several recent surveys, the majority of American homeowners believe that real estate still provides the best opportunity for increasing their wealth and net worth, and that home prices will rebound. However, most housing experts predict that home prices will not reach bottom until at least the second half of 2009.

· Historically, home prices tend to increase on average at an inflation-adjusted rate of 2.5 to 3 percent each year. Karl Case, co-creator of the S&P Case-Shiller home-prices indices, believes the same long-run pattern will continue, despite recent events in the market. Others speculate home prices will increase at a rate roughly 1 percentage point higher than inflation or at an average of 4 percent a year over the next two decades.

· Home prices often are driven by immigration, birth rates, the size and nature of households, and incomes – all of which are difficult to predict. Forecasting where jobs and income growth will be stronger and where immigrants and others will want to live is key. Areas with lower housing costs, modern industries, leisure businesses, well-diversified regional economies, mild climates, and other attractions likely will attract future homeowners and drive demand for housing.

· Coastal areas tend to be more volatile, and often have home prices that rise and fall much faster during booms and busts than do inland areas. Land shortages and building restrictions, which often are the case in crowded coastal areas, make it difficult for builders to respond quickly to sudden rises in housing demand. Inland areas tend to provide more vacant land, enabling builders to meet housing demands more quickly, minimizing sudden movements in prices.

· Some housing experts believe that baby boomers will be much less likely to settle in traditional retirement areas, such as Fort Lauderdale, Fla., after they retire and may prefer urban settings with cultural activities, friends, and family in close proximity. This could increase the housing demand and drive up home prices in urban neighborhoods. Additionally, the retirement of baby boomers over the next two decades – approximately 78 million boomers – may depress home prices in some areas, as more boomers sell their homes.

To read the full story, please click here:

http://online.wsj.com/article/SB122764977315457619.html

San Francisco Chronicle

Be persistent during ordeal of short sale
Approximately one in five homeowners is “underwater” – meaning they owe more on their mortgage than their home is currently worth. For borrowers in default or at risk of defaulting, selling their house for less than is owed, often termed a short sale, may be the only option. However, short sale offers must be accepted by the bank that owns the mortgage, and can take as long as a few months before an offer is accepted.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Some home buyers are submitting unrealistically low offers on bank-owned properties, hoping to purchase a home at a bargain price. Low offers often use valuable time and resources that could be dedicated toward more favorable offers more likely to garner bank approval. It is vital that home buyers work closely with their REALTORS® to submit appropriate offers, especially when dealing with a short sale property.

· Theoretically, short sales should be a win-win for the bank and the homeowner. Although the bank does not receive the full payment on the mortgage, it also does not incur the costs of foreclosure and/or eviction, if necessary. Many homeowners also prefer short sales because it does less damage to their credit score than a foreclosure. However, many real estate experts say that the majority of banks are reluctant to approve short sales, and often let properties go into foreclosure, even when there are reasonable offers on the property. In addition to considering the price, most lenders also take into consideration whether the homeowner can demonstrate financial hardship. If the homeowner is capable of making payments, many lenders will try to work out a loan modification, rather than a short sale.

· Short sales often are more time intensive than traditional transactions and often require additional paperwork. Due to the large number of short sale offers, many take as long as a few months to receive approval. If information or required forms are missing or incomplete, the bank may set the offer aside, which could delay the process and cause the property to go into foreclosure. To expedite the process, it is important that sellers work closely with their REALTOR® to provide all of the necessary paperwork.

To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/30/BUIQ14C4F5.DTL

Los Angeles Times

U.S. recession could last into 2010
The cycle-dating committee of the National Bureau of Economic Research (NBER) this week announced the United States entered a recession in December 2007. Although NBER does not predict how long a recession will last, some analysts believe the current recession may not end until 2010.

MAKING SENSE OF THE STORY FOR CONSUMERS

· The Federal Reserve’s move to shore up the financial market by lowering its key interest rate to 1 percent will not directly affect long-term rates paid by borrowers; however, the Federal Reserve also is considering purchasing Treasury bonds on the open market, which could lower long-term borrowing costs.

· In most instances, approximately 100,000 jobs must be created each month to keep pace with population growth and maintain a healthy economy. However, through October, an average of 120,000 jobs per month were eliminated, bringing the national unemployment rate to 6.5 percent. Many economists believe the rate will increase to 8 percent or higher in 2009.

· Despite most economists being reluctant to say home prices have bottomed out, in many areas of California the median home price is declining at a slower pace in month-to-month comparisons. C.A.R.’s October sales and price report showed that the median price of an existing, single-family home in California declined 1.9 percent from September to October, compared to 9.6 percent from August to September.

· One conventional definition is that a recession takes place when the country has two consecutive quarters of negative gross domestic product growth. However, NBER defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months. The last official recession began in March 2001 and lasted eight months before ending in November 2001

To read the full story, please click here:
http://www.latimes.com/news/nationworld/washingtondc/la-fi-econ2-2008dec02,0,1860484.story

In Other News

Bloomberg

Consumer Confidence in U.S. Increased in November

To read the full story, please click here:
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aoS5L54TQkmI

San Francisco Chronicle

Bay Area sees deals on homes for under $100,000

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/12/01/MNCB147SV4.DTL

Reuters

Consumers cut spending, durable goods orders fall

To read the full story, please click here:
http://www.reuters.com/article/ousiv/idUSN2633812620081126

Wall Street Journal

New-Home Sales Decline 5.3%

To read the full story, please click here:
http://online.wsj.com/article/SB122771251156859761.html

San Francisco Chronicle

Home prices down by record amount in September

To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/26/BULG14C3F8.DTL

POSTED BY: Brendan Coen AT 06:38 pm | Permalink | E-mail this