Media Advisory 07/24/08

Thursday, 24 July 2008

How housing rescue bill can help you

A bill passed by the House on Wednesday will assist up to 2 million borrowers in danger of foreclosure by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. The bill also allocates funding to assist Fannie Mae and Freddie Mac. Most borrowers will receive substantial savings on FHA-backed loans, which carry reasonable interest rates that are fixed for the life of the loan. It also would give the FHA new authority to guarantee repayment of up to $300 billion in mortgages if a lender agrees to write down the loan principal below a home’s current appraised value. First-time home buyers would receive a tax credit. Additionally, states would be authorized to issue an additional $11 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time home buyers and fund the construction of low-income rental housing. Finally, it would permanently raise the limit to $625,000 for mort! gages that Fannie Mae and Freddie Mac could purchase. The bill now goes to the Senate for approval and then to President Bush, who is expected to sign the bill into law.

MAKING SENSE OF THE STORY FOR CONSUMERS

· To qualify for the housing assistance program, homeowners must live in their home and have loans that were issued between January 2005 and June 2007. They also must be spending at least 40 percent of their gross monthly income on all household debt. Borrowers do not have to be in default, but they must show proof that they will not be able to continue making their existing mortgage payments.

· Prior to receiving an FHA-backed mortgage, homeowners must first pay off any other debt on the home, such as a home equity loan or line of credit. Borrowers also are not permitted to take out another home equity loan for at least five years, unless it’s used to pay for the necessary upkeep of a home and is approved by the FHA. Total debt cannot exceed 95 percent of the home’s appraised value at the time of appraisal.

· The program is voluntary, so the original lender(s) must agree to rework the loan before a homeowner starts the application process. Each loan must be underwritten by an FHA-approved lender and will be evaluated on a case-by-case basis. Homes will be re-appraised and banks will verify income statements, bank accounts, job histories and credit scores.

· Although there are little up-front costs for borrowers, consumers receiving a refinanced loan must agree to certain terms, including paying an insurance premium of 1.5 percent of the principal annually to the FHA.

To read the full story, please click here:

http://money.cnn.com/2008/07/23/real_estate/housing_rescue_guide/index.htm?postversion=2008072321

RISMedia Real Estate News

Seeing the Light at the End of the Tunnel

According to a recent survey conducted by Leading Real Estate Companies of the World®, real estate brokers’ outlook on the market is improving. The nationwide survey indicated that 59 percent of the respondents saw a stronger market in the last 60 days. Although inventory levels remain high, 20 percent of brokers reported a decline in inventory compared with a year ago.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Although prices have decreased in the past year, the majority of brokers indicate that price declines are less than 10 percent, demonstrating that real estate markets are local and can fluctuate greatly from one community or region to the next. About one-third of brokers indicated that foreclosures have had a significant impact on prices in their area.

· Brokers are at odds on which segment of the market is the most sluggish. More than half of the brokers surveyed believe that high-end homes represent the slowest segment, while 31 percent believe that it’s the mid-range "move up" market. Only 13 percent of brokers believe that the first-time buyer market is the slowest.

To read the full story, please click here:

http://rismedia.com/wp/2008-07-17/leadingre-housing-beat-seeing-the-light-at-the-end-of-the-tunnel/

Los Angeles Times

Treasury Secretary Paulson calls bank system secure

Following the collapse of IndyMac, consumers are questioning the security of the U.S. banking system, although only a small percentage of banks are expected to fail. A bill aimed at stabilizing the housing market will assist borrowers and will allow the Treasury Department to increase its line of credit to Fannie Mae and Freddie Mac and purchase stock in the companies, if necessary. Reports show that both companies stand a better than 50 percent chance of weathering the current market without government aid.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Paulson assured IndyMac consumers that all funds fully insured by the Federal Deposit Insurance Corp. (FDIC) guarantee of $100,000 and below will remain safe. Several thousand depositors had accounts exceeding the FDIC guarantee and may not have been fully insured depending on how the accounts were structured. Deposits above $100,000 will be paid out at 50 percent of the value.

· Fearful of future loan defaults, investors have rapidly sold off shares in Fannie Mae and Freddie Mac. Combined, the two banks own or back approximately half of the nation’s $12 trillion in mortgage debt. Paulson is supporting a plan to ease the ability of Fannie and Freddie to borrow from the government, which in turn allows the Treasury Department to acquire stakes in both.

· Experts remain divided on when mortgage defaults will subside. Median housing prices have declined for 22 consecutive months, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR). Some economists predict that the market will bottom out mid-2009, while others think the market is at or near the bottom now.

To read the full story, please click here:

http://www.latimes.com/business/la-fi-paulson21-2008jul21,0,1007132.story?track=rss

In Other News…

Los Angeles Times

Record home losses in state

To read the full story, please click here:

http://www.latimes.com/news/local/inland/la-fi-foreclose23-2008jul23,0,7902436.story

San Francisco Chronicle

Bay Area home prices plunge 27% in last year

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/18/MN6711QRVS.DTL&hw=Carolyn+Said&sn=004&sc=375/

CNN Money