Treasury Secretary Henry M. Paulson, Jr - Economic Club of Chicago at 8:00 p.m. local time tonight

His remarks will cover a variety of topics, including the state of the economy, the housing markets and the credit markets, and policies we are pursuing in each area. Below are points he will make with regard to housing. These quotes can be attributed to him.
"While I expect the economy to continue to grow this year, the housing correction continues to pose the biggest downside risk. And we at Treasury are focused on the housing and mortgage markets."
"Let's put this in perspective: 93% of mortgages are paid on time. Less than 2% are in foreclosure."
"So while some in Washington are proposing big interventions, most of the proposals I've seen would do more harm than good. I'm not interested in bailing out investors, lenders and speculators. I'm focused on solutions targeted at struggling homeowners who want to keep their homes."
"This is a shared responsibility. If borrowers aren't willing to ask for help or respond to efforts to reach them, there is only so much that others can or should do on their behalf."
"Being "underwater" when you can afford your mortgage does not affect your ability to pay your mortgage. Homeowners who can afford their mortgage should honor their obligations. And nearly all do. Homeowners who can't afford their payments are the borrowers we are working to reach with affordable solutions. Homeowners who gambled in the housing market and viewed their purchase as a short term investment may choose to walk away. Those who do this are nothing more than speculators, and they are not the focus of our efforts."
"Falling home prices exacerbate foreclosures for those who can't afford their mortgage payment, either because of a change in ability to pay or because of an ARM reset – an income problem or a product problem. It is these borrowers who are faced with the prospects of foreclosure even when they want to remain in their homes. And that is where our efforts are aimed."
"We have a two pronged policy that focuses on these two sources of rising foreclosures: first, a stimulus package to support the economy and create jobs so that there will be fewer who will suffer income loss; second, a focused effort to help struggling homeowners who want to keep their homes."
"We encouraged mortgage industry participants to establish the HOPE NOW alliance to help all struggling borrowers. The alliance has placed a particular focus on subprime ARM borrowers. The member companies are already making progress -- the number of subprime modifications in the fourth quarter more than doubled over the third quarter."
"In January, the SEC signed off on a new protocol for streamlining some subprime borrowers into modifications and refinances. Servicers began to implement it then, some faster than others. I look forward to seeing the results for January soon. They will serve as a baseline for measuring the effectiveness of this effort going forward. I'll be examining the results closely – it's important to see that everyone who signed up for this protocol is following through on their commitment to implement it. I won't look kindly on free riders."

Neverland Ranch - March 8th - Auction

Michael Jackson's Neverland Ranch is set be sold at auction on March 19 2008. Jackson received word Monday from Financial Title Company, the trustee, that unless he pays off $24,525,906.61 by that date, a public auction will go forward in Santa Barbara, Calif., in front of the county courthouse. It's not just the house either. When Neverland is auctioned, it will include everything: all personal property inside, all fixtures and appliances, furniture, and ''all merry go round type devices,'' any rides, games. The auction literally includes every single thing that is or isn't nailed down. Financially, Jackson remains in no position to cure his dilemma. Even though he refinanced his $300 million loan from Fortress Investments with help from Sony Music, HSBC and Barclays Bank, the Neverland loan was not part of that deal. Fortress would clearly like to get out of the Jackson business altogether now, so selling at auction is their answer.
What if no one comes up with a decent bid? Fortress will likely take possession and list the property with a Santa Barbara real estate broker. Neverland could be marketed as a corporate retreat. Or perhaps a very wealthy new owner will show up and make a fire sale pitch.
But an era is about to end forever: Jackson, who brought this on himself, is about to lose one of his two biggest assets. All that will remain after that will be his song publishing interests, and they are leveraged into the next millennium.

Sold at Auction for $22 Million - Foreclosure

The widow of one of America's richest, publishing heir Randolph Hearst, saw her 52-room mansion on Manalapan's beach sold along with 70 other properties in a foreclosure auction today in a Palm Beach County courthouse in West Palm Beach.
The 28,000-square-foot Villa Venezia, owned by Veronica Hearst and once listed for $27 million through a Realtor, went for $22 million within five minutes of being put to bids for $100.

The buyer is New Stream Capital, the plaintiff in the foreclosure action. It lent over the past two years slightly more than $40 million to Veronica Hearst, stepmom to famous kidnap victim Patty Hearst.
Incidentally, golf great Greg Norman was lurking at the back of the intimate crowd during the sale but didn't bid.
"I'm just an interested bystander," Norman said. He was later seen huddling with New Stream lawyers.
The freshly divorced Norman recently moved to the chi-chi inland LeLac neighborhood of Boca Raton. He and fiancee Chris Evert, the 1970s tennis icon who lives near LeLac, are planning a summer wedding. He is said to be shopping for oceanfront properties in the Boca-Delray-Manalapan area.
Eight individuals or corporations placed bids on Hearst's mansion, meanwhile.
The most interested seemed to be North Palm Beach developer Drennen Whitmire, who owns South Ocean Capital. He went neck-and-neck with New Stream, bidding $14.5 million before giving up at $22 million.
Hearst's lawyer, Al LaSorte, said the widow had been preparing to wire $20 million-plus to her mortgage holder this morning to stop the sale. But when LaSorte saw there were eight interested parties, he says he and New Stream lawyers agreed New Stream would buy the house then sell it privately.
"The higher the sale, the more credit my client will get for what she owes them," the West Palm Beach-based LaSorte said. "There were already some pretty good offers, but now we'll take advantage of the interest the auction generated to get more. Mr. Norman seemed very interested to me."

Will Veronica Hearst end up being homeless?
Her 52-room mansion near Palm Beach, Fla, will be auctioned off on Monday so her creditor, New Stream Secured Capital, can recoup its mortgages to her of more than $40 million.
But Hearst, widow of Randolph, stepmother of Patty and mother of socialite Fabiola Beracasa, also put up her Fifth Ave. apartment as collateral, as well as her 45-acre lakeside estate in New Castle, N.Y.
If bids on Villa Venezia, the 28,000-square-foot former Vanderbilt mansion, don't reach $40 mil, New Stream will have to auction those homes, the attorney for the company confirms.
"Once we fix the amount on this property," said Alan Grunspan of the respected Carlton Fields law firm, "any deficiency will have to be sought against her other properties."
That may make her neighbors in New Castle happy — they fought with her for years when she didn't want the public to be allowed to swim next to her property. But fellow residents of her Manhattan building, like Ace Greenberg, may not be happy. It's a co-op, and Hearst didn't get the board's permission to pledge it.
Hearst also mortgaged her art collection, and a source says she has sold the chandelier out of the main hall of Villa Venezia. "And she's been selling her books right off the shelves, including one personally autographed to her by Diane von Furstenberg," the source attests.
Since only blood relations can inherit the family fortune built by William Randolph Hearst, the newspaper mogul immortalized by Orson Welles in "Citizen Kan," Veronica can't touch the trust, which is said to be worth billions. But Randolph left her well taken care of, and the question is, where did it go?
"She was a champion spender," says a source close to the situation. "She would hop on a private jet like some people would hail a taxi downtown. She was always going off to the shows in Europe. She was a huge couture client of Galliano's. She had a string of pearls said to be worth a million dollars, which she hasn't been wearing lately.
"She'd buy $100,000, $150,000 tables at benefit galas. She was husband-hunting."
Hearst's lawyer Matthew Chait, of the top law firm Shutts & Bowen, would not comment on his client's spending habits.

Southland home sales slowest for any month in 20 years

La Jolla,CA----Southern California home sales dipped below 10,000 transactions for the first time in more than 20 years last month as most potential buyers and sellers appear to be waiting out market turbulence, a real estate information service reported.
A total of 9,983 new and resale houses and condos were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in January. That was down 24.6 percent from 13,240 for the previous month, and down 44.9 percent from 18,128 for January last year, according to DataQuick Information Systems.
Last month's sales total was the lowest for any month in DataQuick's statistics, which go back to 1988. Since September, sales for each calendar month were a record low for that particular month.
"We don't know how much of this downturn is driven by market fundamentals, and how much is due to turmoil in the lending industry. The market has been sending mixed signals since August, and it's virtually impossible to see trends and make predictions. Our sense is that quite a bit of activity is on hold, we just don't know how long it can be kept on hold," said Marshall Prentice, DataQuick president.
The median price paid for a Southland home was $415,000 last month, the lowest since $414,000 in January 2005. Last month's median was down 2.4 percent from December's $425,000, and 14.4 percent below $485,000 for January 2007.
Last month's median was 17.8 percent below the $505,000 peak reached last spring and summer. While the steep decline in median sales price does reflect a drop in prices, it also reflects significant shifts in the types of homes selling. Particularly noticeable is a drop-off in sales of more expensive homes financed with "jumbo" mortgages.
Since the credit crunch hit in August, these loans for over $417,000 have become more expensive and harder to obtain. Sales financed with jumbo loans represented 18.9 percent of Southland transactions last month, down from 38.2 percent a year earlier.
The median price paid for a home financed with a conforming loan was $380,000 in January, down 5.0 percent from $400,000 a year ago, and down 7.3 percent from the $410,000 peak reached in March and April of 2007.
DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,889 last month, down from $1,985 the previous month, and down from $2,263 a year ago. Adjusted for inflation, the current payment is 14.5 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 25.0 percent below the current cycle's peak in June 2006.
Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages or with multiple mortgages has dropped sharply. Down payment sizes and flipping rates are stable, non-owner occupied buying activity is flat, DataQuick reported.

Substantial Tax Credit - 2nd Stimulus Package?

I stumbled across the following article @ MarketWatch.com

'A substantial tax credit for home buyers is likely to be part of any second economic stimulus package enacted by Congress.'


Senate Democrats reportedly already have crafted a measure that includes a credit for taxpayers who help take down the record inventory of unsold homes. And when the Senate Finance Committee meets in a few weeks, Republicans are likely to join them in pressing for a version of a plan that worked in the mid-1970s to help clear off a then-record glut of completed but unsold houses.


Whether the renewed interest in a tax credit is a result of some hard-nosed lobbying on the part home builders is anybody's guess. But earlier this month at its annual convention in Orlando, Fla., the National Association of Home Builders took the unprecedented step of suspending all political contributions to federal candidates and their political action committees.
The unusual move was taken because lawmakers failed to include two of the group's pet projects -- the tax credit and a provision that would allow builders to carry back net operating losses for an extending period of time -- in the initial $168 million stimulus package.
"More needs to be done to jump-start housing and ensure the economy does not fall into a recession," NAHB President Brian Catalde said at the convention.
The tax-credit proposal is just one of the ideas floating around Washington to shore up the ailing housing market. The New York Times reported on Friday that several plans are being kicked around that would help homeowners who face trouble with their mortgage payments, especially borrowers who owe more on their mortgage than their home is worth, a situation known as being "underwater."
The Times said some major financial institutions are pushing for the creation of a new federal agency that would buy up troubled loans and reissue them with federal guarantees, in some cases repricing the loans so homeowners would no longer be underwater. Another idea is to expand the Federal Housing Administration's role in refinancing troubled loans. Read more.
Inventory overhang
The inventory of unsold houses, both new and used, is considered the main reason why the market is in the doldrums. And NAHB chief economist, David Seiders, insists that housing is at "the root" of the nation's economic woes.
"House prices and inventories are central to the outlook for the economy and the financial markets," the economist said in his most recent forecast last week.
Therefore, he reasons, policies that stimulate home purchases in the immediate future can pay huge dividends. "The biggest bang for the buck most likely would be provided by a temporary program of tax credits for home buyers," he said.
In 1975, when there was almost a three-year supply of vacant houses on hand, lawmakers approved a $6,000 credit spread over three annual installments of $2,000 per year.
According to the NAHB, that carrot brought enough buyers into the market that builders and their subcontractors were able to get back to work. Inventories fell and production doubled, taking the pressure off of housing prices.
This time around, the builders are angling for a $10,000 credit, maintaining that on a price-adjusted basis, that amount is equal to the 1975 credit.
Political realities
But there are a few potholes in the group's path, not the least of which is the matter of cost. A tax credit is likely to put a $6 billion to $12 billion dent in the federal budget, and under current rules, that has to be accounted for with offsetting revenues.
Another big problem is that a second stimulus package also is likely to contain provisions that are rigidly opposed by the Mortgage Bankers Association, namely a proviso that would allow the courts to write down the value of troubled borrowers' mortgages. If that happens, the package would pit two of the housing industry's strongest lobbies -- and which are often allies -- against one another.
The MBA says allowing judges to modify mortgage contracts will increase the cost of credit to all borrowers at a time when financing has become more difficult to come by for all but the most creditworthy. "As long as this consumer-unfriendly provision is included, we cannot support the package as a whole," says MBA Chairman Kiernan Quinn.
But the NAHB is just as convinced that the tax credit is absolutely the right way to go.The inventory of new and resale homes fell modestly in December, the latest month for which figures are available. But the inventory-to-sale ratio showed little change because the volume of sales is so slow. And Seiders is concerned the numbers point toward further weakness.
"What we really need is something to stimulate sales," he said at the convention. "It's housing and the financial markets that are taking the economy down. We've got to get home buying going. If we don't get this thing knocked down, the prospect for recovery is tenuous

Get to the POINT(s)

The relationship between origination points and getting the best mortgage rate.ORIGINATION POINTSPoints run in increments of .125’s (1/8's).On a $100,000 loan, .125 of a point is $125 and 1 point is $1,000. Points are not always a bad thing. In fact, points can be very good. It is not as complicated as one would think. You first need to understand the relationship between originatin points and your proposed lender or broker, then understand the relationship between origination points and the holding period of your investment (How long do you intend to keep the home as a residence or for investment purposes).Background Info:Secondary Marketing sets pricing for the Correspondents, Lenders and Brokers. Secondary is where all mortgage lenders sell their mortgages in bulk, in the form of fixed term securities. When a lender's loan pools are large enough (they have enough closed loans in their office), they are sold on the open, or secondary markets, as a set, or pool. Some of the larger buyers on the secondary market are FNMA, FHLMC, GMAC, as well as many insurance and investment banking firms. These securities are bought and sold on Wall Street on a daily basis, similar to how stocks are bought & sold on Wall Street.Now let's talk about pricing on a retail level.First and foremost, your Loan Officer who works for a bank, mortgage lender or mortgage broker, originates mortgage loans for the public on a "Retail" level. This is the only methos of procuring a mortgage.The retail office they represent will always have a set revenue amount needed per transaction. On a standard $100,000 loan, $3,000 (or 3%, 3 points) in revenue is common for conventional type loans, $5,000 on sub prime loans, generally more on private or hard money loans, and even more on very time consuming transactions, such as commercial loans.Let's use an example. You are dealing with a Bank, Mortgage Lender or Mortgage Broker who has a branch revenue requirement of $3,000. A par rate (Buy rate) for a 30yr conventional fixed rate mortgage (FNMA) may be 5.250% through the secondary department or wholesale department (Wholesale is who brokers and correspondents fund their mortgages through) of a Mortgage Lender or Bank. "Par rate" or "buy rate" is the lowest rate available to the broker.The Mortgage Lender offers their retail branch and/or brokers the following pricing (Pricing changes daily in accordance with the market):
5.250% PAR5.375% -100.500 Rebate5.500% -101.000 Rebate5.625% -101.500 Rebate5.750% - 102.000% Rebate5.875% - 102.500% Rebate6.000% - 102.875% Rebate6.125% - 103.250% RebateThe "rebate" percentage is points-based. Thus, 102.500% represents 2.5%, or 2.5 points. This is an amount paid to the broker by the lender at closing.By offering a 5.250% rate, the originating branch of the bank, mortgage lender, or mortgage broker, will not receive any compensation for doing your loan. That won't work, as there are no Charitable Mortgage Lenders, Banks or Mortgage Brokers in the industry. If you want that 5.250% rate, you will have to pay 3 points (3% of the loan amount) so the originating branch meets their $3,000 branch revenue requirement. These are "origination points."Examples:
Your Loan Officer may offer you a rate 5.750% with no origination points. With the aforementioned pricing, they will receive 2 points ($2,000) from secondary or through the wholesale department of the mortgage lender.Your Loan Officer may offer you a rate of 5.500%, which includes a fee of 1% in rebate points. The full $3,000 will still be met. 1% ($1,000) will come from secondary and the other 2% or $2,000 will come from you at closing in the form of origination points.That’s how the relationship works. $3,000 may seem a bit high to the average consumer, but if you understood the amount or work involved in funding loans and the costs/risks involved in operating a mortgage lending branch or a mortgage brokerage company, $3,000 gross per transaction is on the low side.Note: Buyers generally pay up to 6 % commissions to Realtors for simply showing a home and writing a contract. Relative to such, $3,000 in gross revenue is certainly on the low side.Sub prime loans pay very little yield spread premium (Some don’t pay any at all), forcing originating mortgage lending branches and mortgage brokers to charge more origination points, in order to meet their revenue guidelines. Hard Money Lenders and Private Investors do not pay any yield-spread premium. In fact, many will even charge a point or two (or more) just to fund the loan. This is why you see even more points charged by originating mortgage lending branches and mortgage brokers for these types of transactions.Now let's talk about the relationship between your holding period and the amount of origination points you should pay. Using the above scenario:If you borrowed a $100,000.00. A no point loan will give you a rate of 5.750%. Your payment is $583.57. If you elected to pay 2 origination points or ($2,000) to buy down the rate to 5.250%, you would then have a payment of $552.20. That's a difference of approx. $31 per month. You paid $2,000 to buy down your rate by ½ of a percent. Sound good? Maybe.Divide $2,000 (origination points) by $31.00 and you get a breakeven period of 64.51 months. Recommendations:
- Someone looking to buy and flip (sell immediately), paying extra origination points for a better rate is a bad choice.- Someone looking to buy, hold and sell within 2 - 5yrs (Avg. first time home buyer), paying extra origination points for a better rate is again a bad choice.- Someone looking to buy, hold and sell after 64.51 months should pay the origination points for a better rate, as after the 64th month, your monthly savings is pure net profit to you.That's how origination points work. Origination points are not a bad thing, provided they are understood and applied correctly to one's Real Estate Buying Objectives.

California January 2008 Home Sales

A total of 19,145 new and resale houses and condos were sold statewide last month - Jan. 2008; That's the lowest number for any month in DataQuick's records, which go back to 1988. It was 25.2 percent lower than December's 25,585 and 41.0 percent lower than 32,425 for January last year.
The median price paid for a home last month was $383,000, down 4.7 percent from $402,000 for the month before, and down 17.1 percent from $462,000 for January a year ago. The median peaked last March/April/May at $484,000.
Much of the drop in median is due shifts in the types of homes selling, and how those homes are financed. Last month 17.6 percent of the state's financed home purchases were purchased with "jumbo" loans over $417,000. A year ago it was 36.2 percent.
The typical mortgage payment that home buyers committed themselves to paying last month was $1,743. That was down from $1,878 in December, and down from $2,155 for January a year ago. Adjusted for inflation, mortgage payments are 18.2 percent below the spring 1989 peak of the prior real estate cycle. They are 29.3 percent below the current cycle's peak in June 2006.
DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. The numbers cover all sales, new and resale, houses and condos.
Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages or with multiple mortgages has dropped sharply. Down payment sizes and flipping rates are stable, non-owner occupied buying activity is edging up, DataQuick reported.


The Bay Area -
Bay Area home sales plunged below 4,000 transactions for the first time in over 20 years last month as the market remained hamstrung by the credit crunch and uncertainty among buyers, sellers and lenders. Price declines steepened, especially in inland markets hit hard by foreclosures, a real estate information service reported.
A total of 3,586 new and resale houses and condos sold in the Bay Area in January. That was down 29.2 percent from 5,065 in December, and down 41.9 percent from 6,168 in January 2007, DataQuick Information Systems reported.
Last month's sales were the lowest for any month in DataQuick's statistics, which go back to 1988. Sales have decreased on a year-over-year basis for 36 consecutive months. Prior to last month the slowest January was in 1995, when 4,326 homes sold. The strongest January, in 2005, posted 8,298 sales. The average for the month is 6,319 sales.
The median price paid for a Bay Area home was $550,000 last month, down 6.4 percent from $587,500 in December, and down 8.5 percent from $601,000 in January last year. Last month's median was 17.3 percent lower than the peak $665,000 median, last reached in July, and was the lowest since February 2005, when the median was $549,000.
"There will be plenty of debate over the meaning of these extraordinarily low sales and the bigger drop in the median price. Some will insist demand has dried up in the absence of loose lending standards, with no turnaround in sight. Others will argue it's just a lull caused by temporary market turbulence, with brighter days just ahead," said Marshall Prentice, DataQuick president.
"What's clear to us," he continued, "is the credit crunch that struck in August had a sharp and immediate impact on Bay Area sales and median prices. The 'jumbo' loans the Bay Area relies on so dearly got pricier and harder to get, and their use has plummeted. The statistical picture could change quickly, though, if the government's effort to raise the conforming loan limit reignites $500,000-plus home sales. We could see significant gains in both our transaction totals and median prices."
Last month the percentage of Bay Area homes purchased with jumbo mortgages, or loans over $417,000, fell to 34.5 percent, down from 39.6 percent in December and down from about 63 percent before the credit crunch hit six months ago.
While last month's lower median price does reflect depreciation in the market ? especially in inland areas ? it also reflects the steep decline in sales of more expensive homes requiring jumbo financing. Purchases with jumbo loans have tumbled about 74 percent from a year ago, while those financed with conforming loans ? up to $417,000 ? have declined 29 percent.
DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Due to late data availability, the December statistics for Alameda County were extrapolated from the first three weeks of the month.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,503 last month, down from $2,744 the previous month, and down from $2,804 a year ago. Adjusted for inflation, current payments are 4.9 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 24.8 percent below the current cycle's peak in June last year.

What Happens in a Short Sale

A “short sale” refers to a situation where the owner of the home does not have enough equity in the property and not enough cash or liquid assets to be able to sell the property, pay off liens and selling expenses (e.g., closing costs, property taxes, transfer taxes, real estate commissions) and provide a clear title to the purchaser. In short, there is more owed on the home than what it will likely sell for on the market. Lenders use the term to describe this as a loan that is “upside down.” While many short sellers are at-risk of foreclosure, a short sale can also occur to a seller who bought high and took out a lot of equity and might be forced to sell due to a divorce or job transfer.
If a homeowner facing foreclosure cannot negotiate with the lender to work out a repayment plan or loan modification, a short sale can be a viable option. Many consider a short sale better in the long run for the homeowner because it avoids foreclosure which will damage a person’s credit score and make it much harder to buy another home in the future.
According to Beth Llewellyn, CEO of the Partnership for Homeownership, a foreclosure will stay on the credit report for at least 10 years as it is a court action similar to bankruptcy. However, foreclosure can do even more damage to a credit report than bankruptcy. Ultimately you must prove to the lender that the foreclosure happened due to something beyond your control such as job loss or illness.
“It’s ideal if the homeowner who chooses to sell can work with a professional REALTOR® before they are delinquent three months,” says Llewellyn. “Within this short window of time, a REALTOR might assist in negotiations with the lender to place the property on the market and possibly save the buyer any equity left, as well as prevent a foreclosure on their credit file.”
Be wary of scams. Consumer groups have learned that advertisements that say “Cash for Houses/Any Situation” or “We Buy Houses for Cash” bait homeowners with the promise of rescuing them from imminent foreclosure. Unfortunately, the “rescue” often involves the borrower signing over title of the house to a different person or entity, thus, and the family ends up being evicted from their home.
It is important that sellers work with a licensed REALTOR to sell their home. REALTORS are in the business of helping homeowners and have the expertise to guide them through a tough situation. A REALTOR has the expertise to develop a reliable Comparable Market Analysis (CMA) to determine the current fair market value of the home.
Understand the tax implications of the decision to sell short and consult with a tax advisor. See REALTORS Applaud Elimination of "Phantom Tax."
There will be paperwork and research required of you in this process. First you have to locate your mortgage documents to understand the terms of your loan. If you have authorized an attorney or REALTOR to act on you behalf in the sale of your home, the lender will need a letter of authorization. Other documentation required by the lender includes:
Financial Disclosure Form
One-page “hardship letter” explaining how you got in this position
Last two months pay stubs
Copies of most recent two months personal checking account statements for each borrower on the loan
Copy of signed last two years’ personal tax returns
Yes, the short sale will require time and consultation with the appropriate legal, tax and real estate professionals. It can take from two weeks to as long as 60 days to receive an approval of a short sale from a lender. But usually it’s a much better option than foreclosure given the impact to your credit history.
Sources: Partnership for HomeOwnership, Illinois Association of REALTORS®, National Association of REALTORS®, REALTOR® Will Weaver of the Floyd Wickman Team

REALTORS® Applaud Elimination of "Phantom Tax"
The National Association of REALTORS has been working for the past nine years to repeal the “phantom tax” law that forces individuals to pay income tax when a portion of their mortgage loan is forgiven after a short sale or as part of a foreclosure. The REALTOR-supported measure, the Mortgage Forgiveness Debt Relief Act of 2007 was signed into law by President Bush on December 20 and will ensure that any debt forgiven on disposition of a principal residence will not be taxed.

Even High Income Earners Face Foreclosure

Kurt Cobain and Courtney Love's Historic HomeThe house was once owned by a lumber baron. And then, grunge rocker Kurt Cobain purchased it. Once he died, his wife inherited it and his sister lived there. Naturally, Courtney Love had some trouble paying the mortgage, and in 2005, the house was slated for public auction when the bank foreclosed.

Woody Creek Ranch in ColoradoDon Johnson's Woody Creek Ranch -- like this one for sale by Resort Home Magazine -- has been on and off the foreclosure books for years. The last time, he paid off his debts to (among other lenders) a local liquor store to save it.

Whitney Houston's Alpharetta, Georgia houseWhitney Houston's house went deep into foreclosure proceedings but was eventually saved. She sold the home in September 2007 for $1.19 million.

Once a top star in the NBA, Latrell Sprewell has gone from making $14.6 million a year to facing foreclosure on a Milwaukee home because he could not make the $2,593 per month mortage payment on his Milwaukee area home. The odd part about this story is he turned down a $21 million dollar deal last season.

Does this mean the Tax payer is going to start obsorbing..

Who bailed out the S & Ls - and if this is to outpace THAT - who is going to obsorb the current situation...Many friends in high places (I'm the friend in low places..LOL) have told me over and over again - this maybe one of the - privatizing of profits while socializing the loss scenerios...

I found the below piece pretty interesting; matters like this don't just fade away into the sunset...

CHICAGO - Navigant Consulting, Inc. (NYSE:NCI), a global provider of business, regulatory and financial advisory services, released a study today that shows the number of subprime-related cases filed in federal courts dramatically outpacing the savings-and-loan (S&L) litigation of the early 1990s.
According to the Navigant study, the number of subprime-related cases filed in 2007 already equals half of the total 559 S&L cases handled by the Resolution Trust Corporation (RTC) over a multiple-year period. The subprime numbers represent only federal court filings.
"The S&L crisis has been a high water mark in terms of the litigation fallout of a major financial crisis. The subprime-related cases appear on their way to eclipsing that benchmark," said Jeff Nielsen, managing director of Navigant Consulting.
The number of subprime-related cases filed doubled during the second half of 2007, from 97 to 181 (for a total number of 278) cases. These cases included borrower class actions (43 percent), securities cases (22 percent), and commercial contract disputes (22 percent), along with bankruptcy, employment, and other cases.
"This appears to be just the beginning," said Nielsen. "We are already observing a steady acceleration of continuing litigation activity into 2008. The course of regulatory investigations, the prospect of government intervention and marketplace variables may affect the volume of filings, but the explosion of cases in 2007 suggests a daunting forecast of what is still to come."
The study found that virtually every participant in the subprime collapse is being sued. Fortune 1000 companies were named in 56 percent of cases. Mortgage Bankers and Loan Correspondents represent the highest percentage of defendants (32 percent) but defendants also include mortgage brokers, lenders, appraisers, title companies, homebuilders, servicers, issuers, underwriting firms, bond insurers, money managers, public accounting firms and company directors and officers, among others.
Geographically, around half of all cases filed are in California and New York courts.
About Navigant Consulting
Navigant Consulting, Inc. (NYSE:NCI) is a specialized independent consulting firm providing dispute, financial, investigative, regulatory and operations consulting services to government agencies, legal counsel and large companies facing the challenges of uncertainty, risk, distress and significant change. The Company focuses on industries undergoing substantial regulatory and structural change and on the issues driving these transformations. "Navigant" is a service mark of Navigant International, Inc. Navigant Consulting, Inc. (NCI) is not affiliated, associated, or in any way connected with Navigant International, Inc. and NCI's use of "Navigant" is made under license from Navigant International, Inc. More information about Navigant Consulting can be found at www.navigantconsulting.com.
For an interview and copy of the full study, Subprime Mortgage and Related Litigation: 2007 - Looking Back at What's Ahead, contact Shannon Prown, Navigant Consulting, at 215- 832-4436 or Derede McAlpin, Levick Strategic Communications, at 202-973-1314.

Project Life Line - The Big Lenders

Project Lifeline: Bank of America, Citigroup, Countrywide, JP Morgan, Washington Mutual & Wells Fargo united to create Project Lifeline program to help the Mortgage payment crisis.
With the credit crunch hitting the U.S. hard, a collection of banks are getting together in “Project Lifeline” with the aim of helping US homeowners. US house prices are getting depressed thanks to unsold homes and six major US banks are about to announce their plans to offer help to US homeowners with their mortgages. The BBC has said the banks are “Bank of America, Citigroup, Countrywide Financial, JP Morgan Chase, Washington Mutual and Wells Fargo”.
The Housing Department and US Treasury are expected to announce their plans today, which will include homeowners getting 30 days extra to renegotiate their mortgage payments.
Project Lifeline is another project on top of the existing “Hope Now” plan that the six banks are already involved in. Project Lifeline is designed to create affordable deals that will help homeowners delay foreclosures and improve payment situation. According To Boston Herald Project Lifeline expands on a program called “Hope Now,” which President Bush and U.S. Treasury Secretary Henry Paulson unveiled in December. Under Hope Now, major lenders agreed to voluntarily “freeze” low-cost “teaser” rates on some subprime adjustable-rate mortgages for five extra years. However, critics charge that the Hope Now plan does little for some 1 million borrowers facing imminent home loss. That’s because the program only covers people no more than 60 days behind on their loans. But Project Lifeline aims to help people who are further behind on mortgages

Housing Update

Treasury, HUD to Provide Housing Update
February 11, 2008HP-819
Treasury, HUD to Provide Housing Update
Treasury Secretary Henry M. Paulson, Jr. and HUD Secretary Alphonso Jackson will provide an update on efforts to help more capable homeowners avoid foreclosure Tuesday at the Treasury Department. A live webcast of this announcement will be available at www.treas.gov.
A technical briefing will follow the announcement. No cameras will be admitted to the technical briefing.
The following events are open to the media:
Who Treasury Secretary Henry M. Paulson, Jr.HUD Secretary Alphonso JacksonWhat Housing Update
When Tuesday, February 12, 11:15 a.m. EST
Where Treasury Department
Media Room (4121)1500 Pennsylvania Avenue, NWWashington, D.C.

Testimony of Daniel H. Mudd
President and CEO, Fannie Mae

Before the U.S. Senate Committee on Banking, Housing, and Urban Affairs
Hearing on “Reforming the Regulation of the Government Sponsored Enterprises”

February 7, 2008
Washington, DC

Chairman Dodd, Ranking Member Shelby, and members of the Committee, I appreciate the opportunity to speak today, and thank you for again taking up the issue of GSE regulatory reform. Fannie Mae is committed to supporting your efforts to pass reform legislation in 2008.

Before I offer my comments on regulatory reform, I’d like to provide the Committee with a brief update. Fannie Mae has undergone significant change during a time when the mortgage and housing markets have themselves undergone significant change.

Fannie Mae has new management, and a completely revamped corporate governance and internal control environment. Only one hurdle remains for us to fully comply with the 81 remediation measures called for in our 2006 consent order with the Office of Federal Housing Enterprise Oversight. That hurdle is the filing of our fully audited 2007 results with the Securities and Exchange Commission, which will be done at the end of this month.

We believe the internal improvements we have made since 2005 have helped us meet an external challenge: Maintaining liquidity, stability and affordability in the prime, conventional, conforming mortgage market during a period of extraordinary market stress. While subprime, jumbo and other non-conforming markets have shrunk or shut down completely, the center of the market where the GSEs have a large presence has performed relatively well. Credit remains readily available and rates have fallen for GSE-eligible loans.

Having said that, we are not immune from the disruptions in the market and we will take our lumps. In fact, we had a GAAP loss in the third quarter and we saw more difficult headwinds in the fourth quarter. But our business is meeting the increased demand for liquidity and our overall credit book has held up relatively well. Yes, these are tough times, but that is when you want a Fannie Mae.

The mortgage crisis in this country is widespread and growing. Economically distressed communities are being ravaged by foreclosures, and waves of subprime teaser rate “resets” are crashing over thousands of homeowners every month. The GSEs have an important role to play in helping the market through these problems. Both companies are doing loan workout and foreclosure prevention programs on a large scale. Through its HomeStay initiative, Fannie Mae successfully refinanced 68,000 subprime borrowers into prime, fixed-rate loans in 2007. In addition, we worked with more than 43,000
delinquent borrowers to help them stay in their homes. We’ve contributed nearly $9 million to non-profit mortgage counselors so they have the capacity to meet the growing demand for help. And, most importantly, we continue to maintain a stable, liquid center of the mortgage market so that credit-worthy borrowers can access affordable mortgages.

Such efforts on the part of Fannie Mae are worth considering as Congress and the administration take up the issue of reforming the regulatory regime of the GSEs. The choices you make now should be durable and stand the test of time. We support the creation of a strong, independent and bank-like regulator that can not only provide proper oversight, but can ensure the GSEs are able to respond to the changing – and sometimes volatile — housing and mortgage markets.

We recognize the tensions at the very heart of the GSE charter — the tension between the interests of a private enterprise and the public interest; the tension between avoiding risk for safety’s sake and embracing risk for the sake of expanding homeownership and affordable housing. Regulatory reform calls for that same balance: The need for a nimble, responsive, creative housing enterprise balanced with sound, professional regulatory oversight.

Mr. Chairman, you have asked me to comment on proposed legislation to strengthen that oversight. Our view of the principles that should guide regulatory reform has remained unchanged since I first testified before this committee on April 20, 2005. But the dramatic changes in the housing market that began last year only reinforce our views of key elements of regulatory reform. These views focus on:

• Our capital.
• The role of our mortgage portfolio.
• The products and programs we pursue.
• And our performance in funding affordable housing.


Capital

With respect to capital, the current housing crisis has reinforced two things. First, financial institutions need to have enough capital to weather a downturn, and second, in times like these, it is critical that they have enough capital to continue delivering liquidity to the market.

This is the balance we have been trying to strike. We presently have more capital than at any time in our existence as a public company. This will protect us from the downside impact of the housing crisis. It will also permit us to provide service to the market in its time of need and ultimately to generate earnings to maintain and build capital. That is the balance struck in banking regulation, and the balance we seek in GSE regulation.

Congress has established a statutory minimum capital standard for Fannie Mae and Freddie Mac that reflects the unique role of the government sponsored enterprises and the importance of capital in meeting their liquidity, stability and affordability mission. We
support this Committee’s re-affirmation of our minimum statutory capital requirement in S. 190, in the 109th Congress, and the House’s more recent re-affirmation in H.R. 1427.

As I have said before, the normal capital levels established by Congress for normal times should be the norm.

We also support the regulator’s ability to increase our capital requirements when necessary to meet a clearly articulated safety and soundness concern. But when such concerns are absent, legislation should ensure that our capital requirements return to the levels established by Congress.

Portfolio

On portfolio oversight, we believe the bank regulation approach strikes the right balance of ensuring safety and soundness and market responsiveness, and would work for the GSEs as well.

During times of illiquidity, Fannie Mae’s mortgage portfolio has grown to replace capital that flees the mortgage market. This happened during past real estate and liquidity crises in the 1980s, 1990s and early this decade. More recently, even though our portfolio growth is presently limited by our consent order, Fannie Mae has allocated increased investment to affordable rental housing, a market that other investors have abandoned.

We support regulation ensuring that the GSEs’ mortgage portfolios are managed in a safe and sound manner. But regulation should not impose arbitrary limits, including a so-called “systemic risk” standard, on the GSEs’ portfolios. Particularly when markets are weak, the GSEs need flexibility to expand their portfolios in order to achieve their mission of providing the liquidity the markets need. Indeed, bank regulators have consistently taken the approach that asset growth, by itself, does not cause a safety and soundness risk – only unplanned or poorly managed asset growth.

I dispute the notion that our portfolio is somehow exempted from the laws of gravity, or supply and demand, or conditions in the capital markets. That is why you see month-to-month growth and contraction in the size of our portfolio. Conditions change. When they do, and it makes sense, we grow, shrink or hold our investments.

To that end, we therefore support legislation clearly identifying the bank-like safety and soundness factors that would guide regulatory oversight of our portfolio.

New Product Approval

Another area that would improve and strengthen regulation is the consolidation of product approval with safety and soundness regulation. We believe our regulator should have oversight of the products and business initiatives we pursue, to make sure they are within our charter and are subject to safety and soundness controls, just like other financial institutions.

It is also important that the regulatory oversight process be efficient. Imposing a cumbersome pre-approval process or public notice and comment period would only impede our ability to serve the modern mortgage market.

A public notice and comment process would be contrary to any bank regulatory process of which we are aware. No other regulatory regime requires public disclosure of most new business initiatives.

Particularly during times of extraordinary disruption and change, like today, the GSEs must move quickly to address the pressing needs of the primary mortgage market. HomeStay, our initiative responding to the subprime crisis that I mentioned earlier, is an example. Our customers and partners in the lending community asked for a solution, and we provided one, in a matter of days. Our regulator, of course, reviewed it, and encouraged us to move ahead.

Another example is our quick response to hurricanes Katrina and Rita. Among the many targeted initiatives were:
• Underwriting flexibilities on new loans for borrowers affected by the hurricanes.
• Servicing flexibilities with respect to existing borrowers affected by the hurricanes.
• Providing 1,500 Fannie Mae properties to families displaced by the hurricanes.


Any of these business decisions could be considered “new products.”

In this area as well, the bank regulation model offers what we believe is the best guide. Banks keep regulators apprised of new business initiatives through the examination process and by regular communication with their examiners. So should the GSEs. In practice, banks consult their regulators routinely on significant business plans and developments without public notice and approval for every product innovation or new activity, except for a few exceptions, such as bank mergers or acquisitions. Well-capitalized, well-managed banks are able to offer new products and innovate to meet market demands without a burdensome pre-approval process. Subjecting every new initiative to a public inquiry through notice and comment periods would be unworkable for any bank. The GSEs are no different.

Affordable Housing

Lastly, any new regulatory regime should reinforce the GSEs’ mission to provide capital for affordable housing. Today, this responsibility is enforced by the Department of Housing and Urban Development under a complex and outdated system of goals that neither reflect the most current market data nor adapt to changing market conditions. These goals were established during a prolonged period of home price growth, and they assume that the primary mortgage lending market, which the GSEs do not control, will be able to deliver an increasing level of affordable housing mortgages steadily, through every market cycle. But the market has its own logic, as do home prices.

We support a different approach, with two key components. First, the GSEs’ regulator should set and oversee streamlined affordable housing goals that reflect current market data and adapt to changing market conditions. The regulator should evaluate the totality of our results at expanding affordable housing.

Second, Fannie Mae supports the creation of an Affordable Housing Fund, to be funded from the GSEs’ net income and integrated into a new affordable housing goals regime. We believe the GSEs should manage the fund in regular consultation with Congress and our regulator, including filing an annual plan and report on our efforts. We should manage the fund, and we should be held accountable for the results.

Conclusion

Mr. Chairman, you’ve asked me to come to this hearing to express Fannie Mae’s views on GSE regulatory reform. We believe H.R. 1427, which was passed by the House last year with bipartisan support, offers a sound basis upon which to build a lasting regulatory regime for Fannie Mae and Freddie Mac. The housing and mortgage markets need certainty and stability at this time, and strengthening oversight will provide an additional measure of confidence that the GSEs will be here doing our job the right way for the long run.

Thank you for the opportunity to be here today.

25 of the top 75 Worst Hit Zip Codes

Ranking Zip City State County Default Notices Auction Notices REO Total Filings

8 95206 Stockton CA San Joaquin 268 56 143 467


16 94565 Pittsburg CA Contra Costa 237 74 119 430


26 93535 Lancaster CA Los Angeles 185 75 114 374


27 93550 Palmdale CA Los Angeles 195 61 110 366


28 92563 Murrieta CA Riverside 169 57 134 360



29 92336 Fontana CA San Bernardino 199 56 99 354



36 92571 Perris CA Riverside 162 45 101 308


37 92345 Hesperia CA San Bernardino 174 45 88 307



40 95823 Sacramento CA Sacramento 151 50 104 305



43 92553 Moreno Valley CA Riverside 153 57 92 302


45 94509 Antioch CA Contra Costa 160 45 91 296


48 93635 Los Banos CA Merced 187 28 75 290



52 95376 Tracy CA San Joaquin 155 50 68 273


53 92376 Rialto CA San Bernardino 163 41 68 272



54 92503 Riverside CA Riverside 141 57 73 271



55 93536 Lancaster CA Los Angeles 148 51 72 271



58 95828 Sacramento CA Sacramento 145 35 84 264



59 92555 Moreno Valley CA Riverside 132 44 85 261



61 94531 Antioch CA Contra Costa 144 35 78 257



67 92592 Temecula CA Riverside 124 54 69 247


69 95758 Elk Grove CA Sacramento 118 30 87 235


70 95209 Stockton CA San Joaquin 127 44 63 234



71 92530 Lake Elsinore CA Riverside 118 49 66 233



72 92880 Corona CA Riverside 117 33 82 232


73 93551 Palmdale CA Los Angeles 118 39 75 232

Remarks on Housing before the American Securitization Forum

February 5, 2008HP-808
Las Vegas - Thank you for that kind introduction. And to all of you gathered here this morning, thank you for welcoming me. It is my pleasure to represent the Treasury Department today at this prestigious conference.
This year's fourth annual American Securitization Forum (ASF) conference has brought together some of the nation's best minds from our housing, finance, legal and accounting communities. Your program is excellent and this is an especially important time for experts like yourselves to come together and discuss these issues.
Since its creation in 2001, ASF has served an important role by building consensus and coordinating advocacy efforts among key participants in the securitization market, including issuers, investors, financial intermediaries, rating agencies, legal and accounting firms, trustees, servicers, and guarantors.
The efforts of this organization and each of the member firms you represent are more important now than ever. We commend ASF for the strong leadership you have recently shown in working to address current challenges in the housing and mortgage markets. The Treasury Department has the benefit of a close working relationship with ASF. Much progress has been made by our collaboration and we look forward to seeing the measurements of your success.
You are fortunate to have the strong leadership of George Miller and Tom Deutsch. Both George and Tom have impressive credentials and spent distinguished careers in the securitization market – George served at the Bond Market Association for 11 years prior to joining ASF and Tom worked for respected firms as a specialist in residential mortgage-backed securitization and credit card securitization. Their leadership was demonstrated in December when the ASF announced very important new industry guidelines creating an efficient process for identifying borrowers who qualify for refinancing or loan modifications. But there is much more work to do. I am pleased to be here today with all of you to discuss what more must be done to build off that progress to help homeowners in distress and allow your industry to thrive.
Let me begin my remarks today by providing a bit of perspective about your industry – the securitization market. Then, I will share my thoughts on current conditions in the housing market and the broader economy, and finally will describe our approach to these challenges, the progress we are making and the necessary next steps. After my remarks, if you have the time, it would be my pleasure to take a few questions.
Innovation and Securitization
As you all know firsthand, our capital markets have changed dramatically in recent years. The pace of financial innovation has gathered momentum, and technology and globalization have rapidly changed the nature of financial markets. It is my view that the rate of change in your industry will continue to accelerate.
Globalization and technological developments have led to innovations in financial products and forever changed our economy and the capital markets. As a result, some have suggested the world has flattened. At the very least, today's world has unquestionably become more compressed. And I believe this compression will increase with the passage of time.
Having spent 30 years in the financial services industry prior to joining Treasury, I witnessed considerable innovation in capital markets. When I began my career in the securities industry, technology was an infrequently-discussed skill or asset, thought of only as a processing tool. The capital markets were characterized by a nationalistic perspective and innovative vehicles, such as derivatives, were just beginning to appear. Compare that with today when the skilled technologist is a key actor in the industry, markets are global--operating 24/7 without boundaries, and innovation is a skill required for success.
But it was not until the late 1990s that this change in the industry accelerated to a mesmerizing pace. In my final five years in the financial services industry I saw as much innovation as I saw in my first 25 years.
The securitization market is an example of how this incredible pace of innovation has changed financial markets. Secretary Paulson and I have been very clear – we believe that the benefits of securitization are significant. It enables investors to improve their risk management, achieve better risk adjusted returns and access more liquidity.
While being an advocate for the benefits of your industry, it is also important for me to be straight forward. We must be honest and admit some degree of malfeasance. It is clear that in some instances market participants acted inappropriately. Secretary Paulson has indicated that certain adjustments to the mortgage process, such as licensing standards for mortgage originators, would help in weeding out the bad actors. Common sense licensing standards would take into account prior fraudulent or criminal activity, and should require initial and ongoing education.
Recent market fluctuation has also caused some to question more broadly the effectiveness of certain characteristics of the mortgage market process. This questioning, which is fair and appropriate, has specifically targeted rating agencies, securitization and mortgage origination.
Policymakers and market participants both must commit to a continual assessment of financial innovation and its implications. Secretary Paulson has taken responsibility, by way of the President's Working Group, to evaluate these issues.
The President's Working Group on Financial Markets was formed by President Reagan to study and issue recommendations regarding the market events of October 19, 1987. Since then, the non-partisan Working Group - chaired by the Secretary of the Treasury and composed of the chairmen of three independent financial regulators (the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission) - has continued to convene under an overarching mission of maintaining investor confidence and enhancing the integrity, efficiency, orderliness and competitiveness of U.S. financial markets.
Secretary Paulson is leading the President's Working Group to evaluate broad, long-term lessons-learned from current challenges, and where appropriate make recommendations. Securitization can remain a strong market in the future, but market participants must accept some degree of responsibility and commit to lessons-learned.
Housing Market Challenges
As I have just described, challenges in the markets are having significant consequences. What began as a credit issue last summer, raised questions about market liquidity in the autumn, and today is causing uncertainty about the economy.
The flow of liquidity that fueled a boom in borrowing and leverage across asset classes – from mortgages to leveraged buyouts – has now been reduced. Short-term funding markets were stressed and inter-bank funding spreads rose to unprecedented levels. Mortgage origination and other asset securitization dropped markedly, adding to the challenges in the housing sector. Given the interconnectedness of our capital markets, other stresses emerged as financial institutions grappled with valuing assets and balance sheets came under pressure.
Of course, housing has been at the center of all these challenges. Housing corrections take time and we are currently experiencing a period of adjustment in the housing sector of our economy. After years of unsustainable home price appreciation and relaxed lending practices, a housing correction was inevitable and necessary.
Our economy is resilient and fundamentally strong, but the housing correction, credit market turmoil, and high oil prices are weighing on growth this year and short-term risks are to the downside. We at Treasury expect that our economy will continue to grow over the coming year, but at a slower rate than we have enjoyed for the past few years.
However, there is the risk of a downturn. And to address this short-term challenge, President Bush announced a bipartisan agreement with House of Representatives on a growth package to bolster the economy this year. The proposal will provide about $150 billion of tax relief for the economy, leading to the creation of over half a million additional jobs by the end of this year. The Administration and the American people await action in the Senate to produce a targeted package to send to the President. By passing this economic growth agreement quickly, we can protect the strength of our economy as we weather the housing downturn and other challenges.
The housing downturn, of course, is about more than just economic statistics – it is also about the firsthand strain that families and homeowners will experience. Too many American homeowners face the frightening prospect of losing their home in foreclosure – and a significant number of other families already have. Foreclosures also impose negative externalities on neighboring homes and communities. Many homeowners who are paying their mortgages on time face lower property values due to foreclosures in their neighborhood. This places hardships on neighboring homes and undermines the financial stability of broader communities and the families who live there.
The latest available data (from the third quarter of last year) indicate that 2007 was on track for a foreclosure starts rate of 2.7 percent. To give that number a bit of perspective we should recognize that many homes end up in foreclosure every year, even when housing markets are strong. Between 2001 and 2005, for example, the U.S. annual rate of foreclosure starts averaged approximately 1.7 percent, meaning more than 650,000 homeowners began the foreclosure process each year. This baseline rate of foreclosure can result from events such as job loss, credit problems, changes in family circumstances, or other sources of economic instability.
Recently, some have made comparisons between the rate of foreclosure starts and the rate of modifications. There is no question we want and expect the rate of modifications to increase. However, we must not ignore refinancings. Every time a homeowner refinances into a long-term sustainable mortgage that is a win for both the homeowner and the original investor.
We expect the foreclosure rate to remain elevated this year and next. A rising foreclosure rate during a period of housing price depreciation is not surprising. Yet, largely because of relaxed underwriting standards in recent years – particularly in the subprime market – and because of resetting mortgages, the number of homeowners facing hardship will be higher than during other recent housing downturns.
In total, approximately 1.8 million subprime mortgages are expected to reset over the next two years, but not all will end in foreclosure. Many homeowners will be able to afford their new payments without trouble or will be able to qualify for refinanced, fixed-rate mortgages on their own. In fact, of the 2/28 subprime ARMs originated in 2005, 88 percent had not defaulted as of late last year. Others, however, have stretched far beyond their means, and unfortunately, foreclosure may be unavoidable. In fact, many loans enter into foreclosure before ever reaching the reset date. A third group of homeowners facing resets fall somewhere in the middle. The challenge is to identify the homeowners in this middle group, who with a focused and timely response can stay in their homes.
The Policy Response
After working closely with ASF and other members of the industry, Secretary Paulson has determined that the best response is based upon a three point plan: (1) to better identify, reach and connect with servicers and counselors at-risk homeowners who can be helped, (2) to assist in developing additional products for homeowners, and (3) to increase the speed and efficiency of moving these at-risk borrowers into affordable solutions.
Whenever facing a challenging public policy issue, such as this one, the first step is full understanding. While we are continuing to learn, our response to date represents months of listening to leading academics, servicers, mortgage counselors, lenders, homeowners, consumer advocates and investors to understand the causes of foreclosure and the best ways to help people keep their homes.
On August 31, President Bush announced an aggressive, comprehensive plan to help at-risk homeowners remain in their primary residences. The President charged Secretaries Jackson and Paulson to lead this effort.
As the Treasury Department and the Department of Housing and Urban Development (HUD) met with a variety of mortgage market participants and non-profit credit counselors in the late summer and early fall of 2007, it became clear that while many market participants were working diligently on their own trying to reach and help homeowners, it was inadequate given the scale and pace of pending resets.
On October 10, HOPE NOW was formed as an alliance among counselors, servicers, investors, and other mortgage market participants to maximize outreach efforts to at-risk homeowners and help them remain in their homes. The Alliance grew and today servicers participating in HOPE NOW comprise over 94 percent of the subprime mortgage loan market. Since its formation, ASF has been a true leader in HOPE NOW, ensuring that securitization market participants - especially investors - were helping craft solutions that would help homeowners without undermining the flow of capital.
On December 6, President Bush announced a new private-sector framework to streamline the process for modifying and refinancing subprime mortgages for eligible homeowners. These new industry guidelines, issued by your organization, created an efficient process for identifying borrowers who qualify for refinancing or for loan modifications. This, in turn, would free up resources and allow mortgage servicers to focus on those borrowers who require more in-depth analysis. It is now up to the industry, including the people in this room today, to help put this plan into action.
Early Progress: August 30th vs. Today
Early results of these efforts are coming in and we are encouraged by the progress being made.
On August 30, before the President's plan was in place, there was no widely-promoted national contact point for foreclosure prevention counseling. Today, HOPE NOW has adopted the Hope hotline (888-995-HOPE) as a centralized source of foreclosure counseling. HOPE NOW has expanded the capacity of the HOPE hotline so that it can sustain the increased call volume from nationwide outreach efforts. Since August, they have added hundreds of trained counselors who are ready and able to help borrowers who reach out through the hotline.
In August, the hotline was receiving an average of 625 phone calls a day. Today, the HOPE hotline is receiving 4,000 new phone calls a day, a five fold increase.
In August, funding for hotline counselors came from government and foundation sources only – the traditional sources of counselor support. Today, servicers and investors now reimburse HOPE hotline counselors $100 for every counseling session completed. This is an important step toward maintaining a sustainable funding model.
In August, there was no coordinated outreach effort to contact at-risk borrowers. Today, HOPE NOW members are reaching out to all at-risk borrowers and offering help through both mortgage servicers and non-profit credit counselors. A direct mail campaign began in November to contact all borrowers who are 60 days or more delinquent on their loans with no prior servicer contact. This letter informs them that help is available.
In the first two months, HOPE NOW and its members have mailed 483,000 letters to delinquent homeowners. After receiving these letters an estimated 77,000 borrowers called for help – again none of these borrowers had previously spoken to their servicer or responded to attempts to contact them.
In August, before the President's plan was in place, only some servicers were contacting borrowers early to alert them of a reset in their interest rates. Today, all HOPE NOW servicers are contacting all subprime mortgage borrowers at least 120 days prior to their mortgage reset. This will allow for early identification of borrowers who will have challenges – greatly increasing their options for help.
In August, before the President's plan was in place, the Federal Housing Administration (FHA) had limited flexibility to help families who had already run into trouble stay in their homes. Today, a new program - FHASecure – is in place offering refinancing options to homeowners who were making payments on time prior to an interest rate reset but have missed payments because of the reset. Since August, the FHA has helped over 75,000 families and it is estimated that about 100,000 more applications are in the pipeline.
In August, state housing agencies were authorized to issue tax-exempt bonds to fund housing purchases for only first-time homeowners. Today, the Administration has proposed not only to expand significantly the cap on bond issuance by $15 billion over three years, but also to allow these tax-exempt bonds to fund refinancings of existing homeowners.
In August, before the President's plan was in place, when servicers helped borrowers by writing down loan principal, homeowners owed taxes on that write-down. Today, after the Congress passed the Administration's mortgage forgiveness proposal, homeowners will avoid roughly $200 million a year in taxes that would have otherwise been due from principal forgiveness for the next three years.
In August, servicers seeking to address the upcoming wave of hybrid adjustable-rate mortgage resets and considering possible loan modifications were forced to deal with borrowers in a time-consuming, costly, case-by-case process. Today, as HOPE NOW servicers have begun to adopt the ASF's fast-track modification framework, the industry is able to act quickly in modifying the loans of those borrowers who faithfully have paid their mortgage but will not be able to afford the rate reset or qualify for refinancing. In doing so, not only are servicers now able to help many more borrowers much more quickly, but also are able to maximize cash flows for investors. This also frees up valuable time and resources for servicers to help other borrowers on a case-by-case basis.
As we have already noted, President Bush and Secretary Paulson are anxiously awaiting results of the ASF fast-track framework for subprime loan modifications. Even before the framework was announced, the rate of modifications began to climb. In the fourth quarter, after the launch of HOPE NOW, the rate of subprime loan modifications tripled from the rate in the third quarter. We expect your industry to hold to its commitment to help more homeowners, faster, by using the ASF framework, and we look forward to seeing the measurements of your success.
Conclusion
Despite many signs of economic strength, high energy prices, contracting credit conditions and the housing downturn pose headwinds to the economy. We accept the reality that a housing correction was in order; however our public policy goal is to limit the negative impact of that correction.
Meeting this goal will require continued help from your industry. By working to keep at-risk borrowers in their homes, we can help minimize the negative externalities caused by foreclosures. When a person is delinquent on his or her credit card payment that only affects the borrower and the lender, but when one loses a home to foreclosure, it impacts neighborhoods, communities and eventually the broader economy.
Our policy response is focused on avoiding preventable foreclosures. Among the tools we have enlisted are some preexisting programs, such as the Federal Housing Administration. But we are also looking to new, innovative tools, such as the ASF framework.
Early data indicate that progress is being made, but your industry must move even faster. Each additional day it takes to fully implement these tools, including the ASF framework, we are missing homeowners who could have been helped. We are monitoring servicers closely and expect all to report results of their efforts into HOPE NOW on a monthly basis.
Let me again express my appreciation for the strong leadership ASF has taken in working with their members and with the public sector to develop tools to help mitigate current challenges. These issues are complex and we will continue to learn as we move forward. We will look for additional tools to help prevent avoidable foreclosures.
Thank you. I will now take a few questions.

Would You Refinance The Once King Of Pop?

Its friday and I've gotten so many request on the Michael Jackson maybe-foreclsoure I thought I'd just load you up with some interesting information. I find it pretty amazing how MJ doesn;t pay back many people that loan him money yet he can always find someone to refinance for him - sounds a tad like our current subprime mess. I suppose owning the Beattles Catolgue is his saving grace - nice to have personnel property out weigh your real property holdings.


Fox reports that Michael Jackson, facing foreclosure on Neverland for $23M secured by Fortress Investments, may have obtained an extension on that foreclosure.

As late as October 2007 Jackson owed 23 plus million on a property that holds a 23 million dollar loan. Who are Jackson's money managers? He's own the ranch for 20 years and he is still upside down?

Foreclosure Detail Report
Site: 5225 FIGUEROA MOUNTAIN RD LOS OLIVOS CA 93441 Page-Grid: Parcel: 133-120-040 Owner: JACKSON, MICHAEL J 4770 DEXTER ST NW WASHINGTON DC 20007 Subject Info: County: SANTA BARBARA 64 (Highlight comment Randall Marquis11/6/2007 5:43:23 PMblank)Trustee/Contact: DBCG LLC 415-263-4300 209 KEARNY ST, FL 2 SAN FRANCISCO CA 94108 Beneficiary: DBCG LLC Phone: ALLIANCE DEFAULT SERVICES C/O Attn: Default Information: Doc #: 2007-0074509 Rec Date: 10/22/2007 Delq $: $23,212,963 As Of: 10/12/2007 Loan Doc #: Loan $:23,000,000 2006-0029252


Jackson's former advisers refinanced the loan in 2006, spokeswoman Raymone K. Bain said in a statement Thursday. The loan matured last month, and now he's refinancing again.
"Mr. Jackson is in the final stages of refinance and will not lose Neverland Valley Ranch," Bain said.
A notice from a San Francisco title default company suggested that Jackson's ownership of the ranch could be at risk.

The notice from the title default company urges Jackson to pay up, saying “If your property is in foreclosure because you are behind in your payments, it may be sold without any court action.”

Darien Dash, who owns Prescient, said Dash was owed the money for helping Jackson refinance a $272 million bank loan and secure $573 million in financing to buy Sony Corp.'s half of the Beatles' song catalog that Sony co-owned with the pop superstar.


In his suit against the 48-year-old pop singer, Prescient owner Darien Dash -- cousin to former CEO of Roc-A-Fella Records (Hip Hop Rap) Damon Dash and brother to actress Stacey Dash -- claimed Jackson cheated the company out of $48 million. His lawyer, Steven Altman said Dash was owed the money after helping Jackson refinance a $272 million bank loan and secure $573 million in financing to buy Sony's half of the Beatles' song catalog that Sony co-owned with Jackson. "We're very pleased with the settlement, although the terms of it we've agreed to keep confidential at Mr. Jackson's request. Jackson settled the case despite claims that he'd never heard of Dash. "The most important thing is that Michael Jackson's publishing catalog remains safe and sound," Jackson's lawyer, L. Londell McMillan said. He added, the settlement "presents a win-win for everybody."

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February 1, 2008HP-797
Under Secretary Steel to Discuss Housing at American Securitization Forum Conference
Under Secretary for Domestic Finance Robert K. Steel will deliver the keynote address Tuesday at the American Securitization Forum's Annual Conference in Las Vegas, Nev. The Under Secretary will discuss housing and the progress of the organization's streamlined process to reach more borrowers, which Secretary Henry M. Paulson, Jr. welcomed in December 2007.
The following event is open to the media:
Who Under Secretary for Domestic Finance Robert K. Steel
What Keynote Address
When Tuesday, February 5, 9:00 a.m. PST
Where American Securitization Forum 2008 Annual ConferenceThe Venetian Resort Hotel3355 Las Vegas Blvd.Las Vegas, Nev.
Note Media must register in advance. Contact Katrina Cavalli at (212) 313-1181.