Bloomberg.com

Californiahome-price cuts end sales losing streak

Bargain hunters who bought foreclosed properties in April helped reverse a 30-month decline in homes sales and sent the median home price tumbling by 32 percent compared with a year ago, according to a report issued Tuesday by the CALIFORNIA ASSOCIATION OF REALTORS®.  April 2008 home sales were 2.5 percent above the April 2007 level, but buyers looking for bargains were behind a $190,240 drop in the median price from $594,110 in April 2007 to $403,870 this April.  The figures were heralded as good news for long-suffering first-time homebuyers.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Seasonally adjusted existing home sales rose to an annualized rate of 366,720 this April from 357,640 in April 2007.  The Association’s Unsold Inventory Index, which measures how many months it would take to deplete the supply of homes at the current pace of sales, fell from 11.3 months in April 2007 to 9.2 months this April.  Median days on the market stood at 53.1 days a year ago, compared with 52.1 days this April.
• The vast majority of sales were at the more affordable end of the spectrum.  Homes priced under $500,000 accounted for 64 percent of all sales in April, compared with only 40 percent a year ago.  Homes from $500,000 to $1 million, meanwhile, accounted for only 26 percent of sales this April, down sharply from 45 percent a year ago.  Once-fallow markets like Sacramento and Riverside saw increases in sales of more than 20 percent as bargain-hunters took advantage of favorable interest rates, lower prices and a glut of foreclosures on the market.
• An estimated 30,000 foreclosed homes have been auctioned in California over the past year.  Observers say lenders holding repossessed properties have been anxious to sell them at discounts of as much as 40 percent, and that fact is enticing buyers back into the market in greater numbers.

To read the full story, please click here:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKzbMH2M1azY&refer=home

      Thomson Reuters

Single-family home prices tumble in March

Single-family home prices fell 14.4 percent in the first quarter from a year ago, according to the Standard & Poor’s/Case Shiller index.  Separately, the Commerce Department reported that new home sales rose for the first time in six months while the unsold inventory of new homes declined for the twelfth consecutive month.  In other news, The Conference Board said its Consumer Confidence measure declined from 62.8 in April to 57.2 in May on consumer worries about housing, higher fuel and food costs, and the future of the economy.

MAKING SENSE OF THE STORY FOR CONSUMERS

• S&P’s survey of 20 markets showed a 2.2 percent price decline in March.   A 10-market survey showed a 2.4 percent monthly decline and a 15.3 percent overall drop.  In California, Los Angeles prices fell 21.7 percent in March compared with a year ago, while San Diego fell 20.5 percent. 
• New home sales edged up 3.3 percent in April after an 11 percent drop in March to an annualized rate that remains 42 percent below last year’s levels.  The good news: Inventory feel 2.4 percent to a 10.6-month supply, down from 11.1 months in March.
• Consumer Confidence fell to the lowest level since October 1992. Other measures also dropped considerably:  The group’s measure of present conditions dropped from 81.9 in April to 74.4 in May, and its gauge of expectations through the end of 2008 declined from 50.0 in April to 45.7 in May.  The Conference Board also reported that the percentage of consumers planning to buy a home sometime during the next six months fell from 2.5 percent in April to 2.1 percent in May.

To read the full story, please click here:

http://www.reuters.com/article/newsOne/idUSN2736173520080527?sp=true

     Bloomberg.com

Foreclosures in military towns surge at four times U.S. rate

Foreclosure filings in 10 communities within 10 miles of a military facility jumped by an average of 217 percent between January and the end of April compared with the same period a year ago – a rate more than four times that of non-military towns and cities, according to RealtyTrac.  Foreclosure filings near Fort Jackson, S.C., jumped 492 percent from the same period in 2007 while filings in three California communities with nearby bases also climbed significantly.

MAKING SENSE OF THE STORY FOR CONSUMERS

• In California, Carlsbad (near Camp Pendleton) experienced a 131 percent increase in foreclosure filings from the January-April period a year ago.  Also on the list were Barstow, home of a Marine Corps logistics base   (120 percent) and Twentynine Palms (73 percent), home of the Marine Corps Air Ground Combat Center.  The figures compare to an overall U.S. increase in foreclosure filings of 59 percent for the period.
• Experts say military personnel who bought homes over the last few years are more likely to have received subprime loans because of relaxed lending criteria that overlooked their frequent moves, lower pay and credit scores.  While Veterans Administration loans historically have met the needs of soldiers and their families, they carried more stringent qualification criteria – one reason the percentage of VA loans granted actually fell during the real estate boom.
• Military personnel are protected from losing their homes due to nonpayment of mortgages while on active duty and for 90 days after they return home.   Several members of Congress, including California’s Bob Filner, are advocating the timeframe be extended to a year.

To read the full story, please click here:

http://www.bloomberg.com/apps/news?pid=20601109&sid=awj2TMDLnwsU&refer=home

     CBS News/60 Minutes

House of cards:  The mortgage mess

Not much has changed since 60 Minutes first broadcast this story last January about the causes of the subprime mortgage mess and its effect on communities like Stockton, Calif., which this updated story calls “the nation’s foreclosure capital.”

MAKING SENSE OF THE STORY FOR CONSUMERS

• What’s behind the subprime mortgage mess?  Banks loaned hundreds of millions of dollars to homebuyers who otherwise wouldn’t qualify on the assumption that home values would continue to increase.  Wall Street packaged these loans as securities and sold them as investments.  Those investments collapsed beginning in July 2007 under the weight of the housing market slowdown.
• As of January, 2008, there were 4,200 homes in default or foreclosure in Stockton.  Today, more than 6,000 area homes are in default or foreclosure.  Observers say many borrowers who ended up in default or foreclosure got there because they bought without a downpayment and borrowed significantly more than the home was worth.  Mortgage lenders, meanwhile, readily approved buyers based on their “stated income.”
• According to CBS, “100 of the world’s biggest financial institutions now are on the hook for a reported total of $379 million in bad debt – and counting.”

To read a transcript of the story, please click here:

http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml

To view the story, please click here:

http://www.cbsnews.com/sections/i_video/main500251.shtml?id=4126094n&channel=/sections/60minutes/videoplayer3415.shtml

In Other News…

     The Associated Press

Plenty of “for sale” signs but actual sales lagging

To read the full story, please click here:

http://ap.google.com/article/ALeqM5ih-MLks9gapQmcOV8huTs9f2fsswD90T6G600

     The Associated Press

Gov’t home price index posts largest drop in 17-year history

To read the full story, please click here:

http://ap.google.com/article/ALeqM5hL1BztOWFNmmcLQ6aOP-BAz9FlMgD90QSHKO1

     Los Angeles Daily News

Paying home dues painful

To read the full story, please click here:

http://www.dailynews.com/news/ci_9373275

     San Francisco Chronicle

Home sales get lift, but lid still on prices

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/21/BUSM10QERD.DTL

       Thomson Reuters

Crunch turns back clock on mortgage lending

To read the full story, please click here:

http://www.reuters.com/article/ousiv/idUSN0951352620080522

     Ventura County Star

Home sales offer hope to some

To read the full story, please click here:

http://www.venturacountystar.com/news/2008/may/24/home-sales-offer-hope-to-some/

  Los Angeles Daily News

First-time buyers find silver lining in foreclosure cloud

More than a third of Los Angeles County families had the income needed to purchase a starter home in the first quarter, a 66 percent increase over a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® reported Tuesday.  The affordability figure is the highest since 2003 and was heralded as a hopeful sign for the troubled Southern California real estate market.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Dramatically lower home prices and a .56 percent drop in interest rates are behind the improvement in the Association’s First-time Housing Affordability Index.  A year ago, LA County households needed an income of $100,000 to qualify to buy a home costing $496,120, which is 85 percent of the area’s median home price, assuming a 10 percent downpayment at an interest rate of 5.65 percent.  In the first quarter of 2008, entry-level buyers in the county could qualify to buy a home costing $390,450 with an income of $74,320.

• First-time buyers and those seeking homes under $500,000 are behind a 22 percent increase in home sales in the six-county Southern California region between March and April, according to a report issued Monday by DataQuick Information Systems.  The report said two-thirds of homes sold were priced at less than $500,000.

• C.A.R. VP and Chief Economist Leslie Appleton-Young said she expects to see the affordability index continue to improve as additional foreclosures coming on the market keep prices at a level where more families can afford to buy. 

To read the full story, please click here:

http://www.dailynews.com/news/ci_9328073



     The Associated Press

SoCal home sales jump in April but still lag year-ago period

Southern California homebuyers stepped off the sidelines in April, snatching up foreclosures and homes priced under $500,000 at a rate that was 22 percent higher than in March but down 19 percent from April 2007 and the lowest level since 1995, according to DataQuick Information Services. 

MAKING SENSE OF THE STORY FOR CONSUMERS

The median home price for the six-county region was $385,000, unchanged from March but down 24 percent from an April 2007 peak of $505,000.   April marked the first time in eight months that the median price did not decline.

• Sales were strongest in areas hit hardest by foreclosures:  Riverside County (where sales increased month to month for the first time in two years), Lancaster, Chula Vista, Anaheim, Lake Forest and Victorville experienced the strongest rebounds.  Two-thirds of homes sold during the month in Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego counties were priced under $500,000.  About 38 percent of the homes sold were in foreclosure at some point during the previous year, up only 2 percent from March but sharply higher than the 5 percent reported a year ago.  In Riverside County, 53 percent of sales involved troubled properties.
• The credit crunch, potential for a recession, and uncertainty over when foreclosures will peak caused DataQuick analysts to remain cautious.  Lack of financing for high-value homes continues to be an issue and could forestall a recovery if the trend persists.  In April, only 15 percent of Southern California home loans were above $417,000, down sharply from the same period a year ago. 

To read the full story, please click here:

http://ap.google.com/article/ALeqM5h_DkmV9N0qyf2vfd5bqwsVnBh0JgD90OUO9G0

     The Associated Press

Forecasters see weak economy even if housing, credit improve

The worst of the housing downturn and credit crunch may end this year but unemployment will rise and the economy will continue to weaken and fall into a short-lived and shallow recession, according to a survey released by the National Association for Business Economics (NABE). 

MAKING SENSE OF THE STORY FOR CONSUMERS

• 56 percent of economists surveyed believe the U.S. already is in a recession or will enter one this year, up from 45 percent in February.  Economic growth also will slow from a projected 1.8 percent in February to 1.4 percent in the current survey – well below last year’s 2.2 percent growth figure and next years projection of 2.3 percent growth.  If correct, the new prediction for 2007 will mark the slowest growth since the 2001 recession.  Weakness in the housing sector was cited as the most significant factor in the slowing economy.
• The group remains hopeful that the housing downturn will hit bottom in 2008 but predict that prices will continue to fall into 2009.  Economists were equally divided in their opinion of which quarter of 2008 would see a bottom for home sales.
• The group said it expects the credit crunch to soften later this year, opening the door to some improvement in the housing sector.  They expect the Fed to maintain interest rates through the rest of 2008 but believe it could increase key rates from 2 percent to 3 percent by the end of 2009. 

To read the full story, please click here:

http://ap.google.com/article/ALeqM5ipl_WNYXj_wwvEKRgqcFHWu_4sQgD90ORCOG1

     The New York Times    

Senate leaders agree on housing aid

The U.S. Senate said it has agreed on legislation to help homeowners avoid foreclosure by creating an affordable housing fund that will enable Fannie Mae and Freddie Mac to offer about $500 billion in foreclosure rescue funding in the program’s first year.  Observers expressed optimism that the Bush administration will support the effort because it does not involve direct funding by taxpayers.  The Senate proposal would tighten regulation of Fannie Mae and Freddie Mac and create a new regulator, the Federal Housing Finance Agency, which would be empowered to take action in the event the two quasi-government companies experience future liquidity problems.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Earlier this month, the House approved a similar bill.  Under both plans, lenders would be allowed to limit their foreclosure losses by reducing the principal balance of loans to homeowners at risk of default and foreclosure.  The primary beneficiaries would be homeowners with certain kinds of high-cost adjustable rate mortgages, who would be allowed to refinance to a more stable fixed-rate mortgage insured by the Federal Housing Administration.
• Under the House bill, it is estimated that as many as 500,000 mortgages may be refinanced over the next five years at a cost to taxpayers of $2.7 billion.  The Senate version, which would help the same number of borrowers, shortens the plan to three years and reduces the cost to about $500 million, with costs to come from a new Affordable Housing Fund that would collect about half a cent on every dollar in mortgages purchased in the secondary market by Fannie Mae and Freddie Mac.
• The bill also would set a new Fannie Mae/Freddie Mac conforming loan limit of approximately $550,000 in high-cost markets, up from the current $417,000 limit.  The limit has been temporarily increased to $729,250 in the most expensive markets as part of February’s economic stimulus package.

To read the full story, please click here:

http://www.nytimes.com/2008/05/20/business/20housing.html?_r=1&th&emc=th&oref=slogin

In Other News…

     Bloomberg.com

Fannie Mae to drop down payment rules in worst areas

To read the full story, please click here:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRvoZOztbEcs&refer=home

     Christian Science Monitor

Housing woes lure back bold buyers

To read the full story, please click here:

http://www.csmonitor.com/2008/0516/p01s10-usec.html

     Los Angeles Times

At the luxury end, home prices are falling

To read the full story, please click here:

http://www.latimes.com/business/la-fi-homes20-2008may20,1,1204841.story

      National Public Radio

L.A. developer sells 18 houses in single auction

To listen to the audio story, please click here:

http://www.npr.org/templates/player/mediaPlayer.htmlaction=1&t=1&islist=false&id=90455179&m=90620457

     The New York Times    

Collateral foreclosure damage for condo owners

To read the full story, please click here:

http://www.nytimes.com/2008/05/15/business/15condo.html?r=1&th&emc=th&oref=slogin

     Sacramento Bee

Sacramento area renters suffer from foreclosure

To read the full story, please click here:

http://www.sacbee.com/103/story/942899.html

     The Associated Press

Median prices drop in many cities

Two-thirds of the nation’s 149 metropolitan real estate markets experienced lower home prices during the first quarter of 2008 – the largest number of declines ever reported – and 46 states saw declining sales, according to figures issued Tuesday by the NATIONAL ASSOCIATION of REALTORS® (NAR).   Nationally, the median price fell 7.7 percent to $196,300 in the first quarter, down from $212,600 a year ago, while sales fell 22.2 percent from the first quarter a year ago.

MAKING SENSE OF THE STORY FOR CONSUMERS

• The slowdown is most pronounced in high-cost markets. In the West, which includes California, the median price was down 12.3 percent to $296,300 compared with a year ago.  That’s due, in part, to the limited availability of mortgage financing in response to the subprime mortgage crisis.  NAR believes recent increases in Fannie Mae/Freddie Mac loan limits to encompass jumbo loans will improve the situation somewhat in the months to come, although qualifying criteria will remain stringent. 
• Home price and sales declines vary dramatically by neighborhood and are largely based on the extent of a neighborhood’s exposure to subprime mortgages.  Neighborhoods with a high percentage of subprime loans are experiencing a higher rate of foreclosures, which typically drives prices down.
• NAR emphasized that the average buyer today intends to stay in the home they purchase for 10 years, which should position them to receive long-term benefits from home ownership.  Homes purchased six years ago, for example, would have increased in value by 23.8 percent over that period, based on the difference in national median price between the first quarter of 2002 and first quarter 2008.

To read the full story, please click here:

http://ap.google.com/article/ALeqM5hL1BztOWFNmmcLQ6aOP-BAz9FlMgD90KSLC00

     The Economist

Map of Misery:  America may well be only halfway through the house-price bust

Colorful maps of the United States showing the change in home values, foreclosures and other economic measures by state paint a clear picture of where the housing market has suffered the most severe declines.  It is more difficult to visualize the extent of further declines before prices begin to stabilize or improve.

MAKING SENSE OF THE STORY FOR CONSUMERS

• The impact of the housing downturn varies dramatically by region, with California, Nevada, Arizona, Florida, Hawaii and portions of the Midwest among the states showing price declines or no change between the fourth quarter of 2006 and the fourth quarter of 2007, according to the federal Office of Federal Housing Enterprise Oversight (OFHEO).  Even so, some 13 states in the nation’s center experienced price increases of more than 5.47 over the same period and another dozen states showed increases of between 4.17 and 5.47 percent.
• Assessing future price declines is trickier.  Based on prices of futures contracts linked to the Standard & Poor’s/Case-Shiller index, investors expect a 20 percent decline in home prices.  And Goldman-Sachs expects another drop of 11 to 13 percent based on a model that looks at home prices, disposable incomes and long-term interest rates – although that model suggests the decline could be as much as 25 percent or more for six states, including California.
• A new study from the University of Wisconsin suggests that home prices need to fall by between 10 and 15 percent over the next 18 months for another measure, the rent/price yield, to return to equilibrium.  From 1960-1995, that measure, which compares annual rents as a percentage of home price, ranged from 5 to 5.5 percent, but fell to an historic low of 3.5 percent at the peak of the market boom.

To read the full story, please click here:

http://www.economist.com/finance/displaystory.cfm?storyid=11333030

     Los Angeles Times

In mortgage market, “walkaway” homeowners may be urban myth

True or false:  More and more homeowners who owe more than their house is worth are giving their house keys back to the bank?  While anecdotal evidence suggests that mailing the keys back to the bank is occurring, there doesn’t appear to be any evidence that the practice has become widespread.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Data on the number of “walkaway” homeowners is lacking.  The Mortgage Bankers Association and major banks believe the practice is increasing but don’t have any numbers to back up this supposition.
• Lenders suggest the practice is more prevalent among investors and “flippers” than among homeowners who live in their home.  Bankers confirm that most borrowers are interested in working out a solution when they fall behind in their payments or when their home value is “under water” or their interest rate is about to reset.
• There is no sign that walking away from a mortgage obligation is becoming more “socially acceptable,” observers say.  Homeowners historically have been known to do whatever it takes to avoid losing their home to foreclosure.

To read the full story, please click here:

http://www.latimes.com/business/la-fi-walkaway11-2008may11,0,1641820.story

      San Francisco Chronicle

Jumbo mortgage rates becoming affordable

In the past week, jumbo conforming loans have become almost as affordable as standard conforming loans thanks to higher loan limits and a drop in bank interest rates.  That’s good news for high-cost markets and homeowners with equity in their homes who may be able to refinance to a lower-cost standard conforming rate.  However, borrowers still face tightened lending requirements.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Last week, a 30-year fixed-rate jumbo conforming loan with no points averaged 6.125 percent, compared with 5.875 percent for a standard conforming and 6.75 percent for a regular jumbo loan.  Jumbo conforming loans are used for home purchases between $417,000 and $729,750, while standard conforming loans apply to homes with a purchase price below $417,000.  Conforming loans are those that meet certain underwriting criteria and can be guaranteed by Fannie Mae and Freddie Mac.  A lower rate could save borrowers several hundred dollars a month in mortgage costs.
• Both Fannie Mae and Freddie Mac require jumbo loan borrowers to make a higher downpayment (in the 10 percent to 15 percent range); require higher credit scores; provide income documentation; and typically have lower debt-to-income ratios than standard conforming loans.
• Congress recently increased the maximum loan amount to 125 percent of an area’s median home price up to $729,750.  The new higher rates were intended to more accurately reflect home prices in high-cost markets and to stimulate housing market activity by allowing lenders to package more loans for sale to Fannie Mae and Freddie Mac.

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/13/BUBV10L0PG.DTL

In Other News…

     The New York Times     

Mortgage holders find it hard to walk away from their homes

To read the full story, please click here:

http://www.nytimes.com/2008/05/10/business/10housing.html?th&emc=th

     Nightly Business Report (PBS)

A tale of five cities:  Silicon Valley, California

To read the full transcript, please click here and scroll down:

http://www.pbs.org/nbr/site/onair/transcripts/080508f/

     San Francisco Chronicle

Timing may be right for real estate investors

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/09/BUOA10FFMO.DTL

     San Francisco Chronicle

Brentwoodthe poster child for housing bust

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/11/MNGE1095FT.DTL

     San Diego Union-Tribune

Analysts inching toward ‘R’ word

Economic trends in county seen as recipe for recession

To read the full transcript, please click here:

http://www.signonsandiego.com/uniontrib/20080508/news1b8econ.html

     Victor Valley Daily Press

Single female homebuyers on the rise in Victor Valley

To read the full story, please click here:

http://www.vvdailypress.com/news/single6305 article.html/valleyfemale.html

     Bloomberg.com

U.S.home slump puts owners ‘under water,’ Zillow says

Home values dropped 7.7 percent nationally in the first quarter and five California metropolitan areas were among the markets whose prices plunged by the highest percentage year over year and whose homeowners had high rates of negative equity, according to a report issued Tuesday by Zillow.  Nationally, a little more than half of homeowners who purchased during the 2006 market peak today owe more on their home than its current value.

• 130 of 160 metro markets included in the survey now are priced lower than a year ago.  Among the California markets suffering the greatest decline:  Stockton (-33.5 percent), Riverside/San Bernardino/Ontario (-26 percent), Greater Sacramento (-20.5 percent) and Los Angeles/Long Beach/Orange County (-16.4 percent).
• Despite the year-over-year decline, the nation as a whole and the four California markets cited as having the greatest decline experienced gains when home prices are annualized over five years.  Home prices experienced a net gain of 4.7 percent nationally over five years, 6.2 percent in Los Angeles/Long Beach/Orange County, 5.8 percent in Riverside/San Bernardino/Ontario, 1.5 percent in Greater Sacramento, and 0.3 percent in Stockton.
• Zillow calculated that 95.8 percent of Stockton-area homeowners who purchased in 2006 now owe more than their home is worth:  In Riverside/San Bernardino/Ontario the number stands at 88.5 percent; in Los Angeles/Long Beach/Orange County the number is 71.6 percent; and 69.4 percent in Sacramento.
• Owing more than a home is worth may not be a problem for homeowners who can afford the monthly payment or who plan to stay in the home for an extended period.  Those most affected are people who have lost a job or obtained a mortgage they couldn’t afford, those seeking to refinance into a lower or fixed interest rate, or those whose circumstances require them to sell now.

To read the full story, please click here:

http://www.bloomberg.com/apps/news?pid=20601103&sid=a5fN1s4jvUmE&refer=us

For a Silicon Valley perspective, please click here:

http://www.mercurynews.com/ci_9167620?source=most_emailed

     MarketWatch

Banks squeezing credit to consumers, businesses

Despite efforts to maintain the availability of credit to consumers and businesses in the wake of the subprime credit crisis, more than half of banks surveyed by the Federal Reserve said they have tightened lending policies during the past three months on a wide range of consumer and commercial loans, including residential mortgages.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Consumers have been most affected by stricter credit guidelines.  A record 62 percent of banks reported tighter standards for prime mortgages and 72 percent said they tightened subprime requirements.  However, the number of lenders offering subprime loans declined to only 17 percent from about 30 percent two years ago.
• The majority of lenders tightened standards due to worries about risk, illiquid markets and their own deteriorating capital position.  Most said they were increasing spreads on interest rates, requiring more documentation, increasing collateral requirements, or requiring co-signers and/or covenants before approval a loan.

To read the full story, please click here:

http://www.marketwatch.com/news/story/banks-squeezing-credit-consumers-businesses/story.aspx?guid=%7BB449EDEF%2D0D14%2D48BF%2DAE62%2D1FB693529F31%7D&dist=msr_2

     The Associated Press

Fannie Mae loses $2.2B in 1Q, warns of severe weakness

The nation’s largest government-sponsored mortgage lender, Fannie Mae, reported a loss of $2.2 billion for the first quarter Tuesday and announced plans to raise $6 billion in capital to fund the purchase of mortgage loans the company rebundles for sale as securities.   The company announced it set aside $3.2 billion to cover bad loans, will cut its dividend from 35 cents a share to 25 cents, and expects “severe weakness” in the mortgage market through the rest of the year.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Seventy-five percent of mortgage-backed securities are issued by Fannie Mae and the smaller Freddie Mac.  The federal government has positioned the two companies as key players in the effort to restore liquidity and stability to the nation’s real estate finance system.   However, some analysts worry that taking on additional debt could be damaging down the line if the real estate downturn continues or worsens.   There also are concerns that Moody’s Investor Service may lower Fannie Mae’s credit rating based on its diminishing capital position.
• Fannie Mae’s regulators have taken steps to help free up additional sources of cash by reducing the mandatory reserves the company must maintain.   The Office of Federal Housing Enterprise Oversight has said it will again reduce this surplus requirement by five points to 15 percent.   That will be followed by another five-point cut in September if Fannie Mae’s position does not worsen.

To read the full story, please click here:

http://ap.google.com/article/ALeqM5iVAF4FNNGCiKCJfNJMp-FCePBQxAD90G5PA00

     Bloomberg TV

Feder of Radar Logic sees ‘bright spots’ in housing

Michael Feder, CEO of Radar Logic, Inc., and Rod Dubitzsky of Credit Suisse Group talk with Bloomberg’s Kathleen Hays about their outlook for home foreclosures, housing prices and sales, and Federal Reserve monetary policy.

To view the full video, click here:

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vty46VzRAM.c.asf

In Other News…

      The New York Times

Doubts raised on big backers of mortgages

To read the full story, please click here:

http://www.nytimes.com/2008/05/06/business/06fannie.html?th&emc=th

      Parade Magazine

What your home is worth

To read the full story, please click here:

http://www.parade.com/articles/editions/2008/edition_05-04-2008/1What_Your_Home_Is_Worth

     Chicago Tribune

REALTORS® try house parties to push sales

To read the full story, please click here:

http://www.chicagotribune.com/business/chi-re-parties-sales-0504may04,0,4817652.story

     Los Angeles Times

House sitting – on a grand scale

Forget staging – the latest weapon in the savvy seller’s arsenal is the home manager

To read the full story, please click here:

http://www.latimes.com/classified/realestate/news/la-re-sitters4-2008may04,0,2116928.story

      San Luis Obispo Telegram-Tribune

Lure of a deal startstobringbuyersback

To read the full story, please click here:

http://www.sanluisobispo.com/news/local/story/350569.html

       Reuters

• In September, when the Fed initiated the first of seven consecutive interest rate reductions, the federal funds rates stood at 3.25 percent.  The last time the rate was this low was in December 2004. 
• In making the announcement, the Fed noted that, “The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity.”
• There was some speculation that the Fed was leaving the door open to additional rate cuts if inflation concerns become reality.  However, others speculate the Board may leave rates alone until the impact of its recent efforts become clearer.

     Bloomberg.com

• The Conference Board’s Confidence Index fell from a revised 65.9 in March to 62.3 in April – the largest three-month decline since the 2001 recession.
• According to S&P/Case-Shiller, home prices in 20 large metropolitan cities fell 12.7 percent in February from the previous February.  The decline was greater than expected and the greatest decline since the Index began tracking home prices in 2001.  Month over month, home prices fell 2.6 percent after dropping 2.4 percent in January.  Seventeen of the 20 markets measured report record year-over-year declines.  California cities included in the top 20 are Los Angeles (prices down 19.4 percent from a year ago), San Diego (prices down 19.2 percent), and San Francisco (prices down 17.2 percent).
• Homebuilder Eli Broad told reporters at a conference in Beverly Hills that he believes it will take three or four years to deplete the current inventory of homes for sale. He predicted home prices may drop another 20 percent.

     San Francisco Chronicle

• Many Adjustable Rate Mortgages (ARMs) start with a lower introductory rate that adjusts periodically (typically once a year for prime loans, twice a year for subprime loans) after an initial period of two, three, five or 10 years.  ARMs generally are tied to a Treasury or London Interbank (Libor) index, with the mortgage rate typically set at 2 to 6 percentage points above that index rate.
• The good news is that Libor rates have been stable, thanks in part to the actions of the Federal Reserve to lower interest rates.   For example:  Let’s say a borrower in Spring 2006 obtained a mortgage indexed at five points above Libor (then at around 5 percent).  That would have meant an indexed rate at that time of 10 percent.  However, a two-year introductory rate capped the payment at 8 percent.  As of last week, Libor was at 3.08 percent, which means this fictional mortgage would reset at 8.08 today – only a slight change for the borrower.
• Without the Fed’s rate cuts, more than $100 billion in subprime ARMs would have jumped at least two percentage points.  Now, only about $60 billion in these mortgages will adjust up by more than two points.

     The Associated Press

• Communities throughout inland California have been hit hard by properties that are left uncared for after a family moves out due to foreclosure.  These untended properties tend to negatively affect the value of surrounding properties and entire neighborhoods.
• Hardest hit have been Merced, San Joaquin, Stanislaus, Sacramento and Yuba counties.  In Merced County, one in 737 residents has been affected.  In Sacramento County, it’s one in every 1,003 residents.
• The proposed law, sponsored by Sen. Dom Perata, would give local governments the ability to fine lenders after providing 14 days’ notice to remedy a maintenance problem.  Bank opposition was eliminated after provisions requiring lenders to give four month’s notice of interest rate increases and requiring face-to-face meetings before foreclosing were removed.

     Los Angeles Times

• If the acquisition is approved by regulators, Bank of America, the nation’s largest bank, would have 25 percent of the nation’s mortgage market and could capture as much as 40 percent of the market within a few years as smaller competitors struggle with the negative impact of foreclosures, according to the Greenlining Institute.
• Bank of America was applauded for promising to help 265,000 troubled borrowers by modifying $40 billion in mortgages over the next two years.  The company also promised to increase its community giving by 33 percent to about $2 billion and double community reinvestment lending to $1.5 trillion nationwide over the next decade.  The bank said it would be willing, under certain circumstances, to accept a write-down of principal in order to keep homeowners motivated to remain in homes whose values are less than the loan balance.  However, bank officials said they are not inclined to help speculators, who it said account for roughly half of the Countrywide borrowers facing foreclosure.
• Bank of America said it would base its combined mortgage business in Calabasas, where Countrywide currently is headquartered.  The two companies have doubled the number of employees dedicated to working with troubled borrowers to more than 3,900 – a figure BofA said it would maintain for at least another year.
• At hearings in Chicago last week the bank testified that it plans to eliminate subprime lending and mortgage options that permit borrowers to pay less than monthly interest, restrict loans that allow borrowers to obtain a mortgage without verifying their income, and limit prepayment penalties.

     San Diego Union-Tribune

     Sacramento Bee

     San Francisco Chronicle

     The New York Times

     The Associated Press