Down Goes Frazier! Down Goes Frazier!

In This little E-Mail Box Of Mine .........

Michael:
Insuring lenders won't help if they don't have the capital to make loans!
Keep in mind, the assets that are currently hurting us so badly have been mostly written down to levels that are blind to any fundamentals. I'm seeing AAA-rated mortgage backed bonds (Alt A) trading at 40-50 cents on the dollar. For one particular issue I looked at today, 5% of the underlying loans are delinquent and there are no option-ARMs in the portfolio.
You can buy this today and not lose a penny of your investment, even if over 80% of the loans eventually default and you only collect 50% on the defaulted loans. On top of that, you get a 15%+ yield. (the numbers are all approximate because there is no real market for these assets, regardless of their intrinsic value)
These are the kinds of assets that the government would be purchasing. Unless you see the end of the world coming, the taxpayer would make money on credits like these, especially if the government is not permitted to buy these at a premium to their current marks (which I believe the bill would have required)
This just highlights the extreme levels of fear in the market. No one is buying. If the government doesn't intervene, this only gets worse.
Panic isn't stopped by panicked investors. Panic is stopped by an entity with a long time horizon and a big balance sheet. Right now, the government is the only player who fits that profile.

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I have been in the camp that believed that the government had not sufficiently made the case for such a massive bailout. The events of the last several days have changed my mind. I read today that banks across Europe are collapsing.
That said, the original bailout plan was conceived too quickly, was too favorable to the finance companies and gave too much power to one person. The revised plan was an improvement but was still insufficient.
There is no doubt that a bailout/rescue bill of some type will be passed before Congress leaves town. However, the odds have improved that we will see a plan that gives taxpayers a better shake.
As much as I hate the idea of a bailout, the alternative would likely be very painful for most of us who read this blog. Very few of us will enjoy Schadenfreude if the economy takes an excessively hard landing.
This isn't about propping-up the housing market...that's probably toast for the next 2 to 3 years at least. Home prices are going to have to reach an equilibrium level and this bailout plan is not designed to keep that from happening

--------------------------------------------------------------------------------------------------"Credit should remain available unless the Chinese change their mind about investing their huge surpluses in the US."
It's not as easy as that, unfortunately. As the world economy downshifts dramatically, much of the "surpluses" that China has been running will disappear. I think we will discover in short order that it really wasn't Chinese "savings". They are a growing economy, with a limited system of financial intermediation and tremendous poverty still, and they have been going flat out investing in their own country.
Much of the "savings" has been an illusion. They are the flip side of our trade balance. We borrow dollars against our houses and assets. We then ue those dollars to buy Vhinese goods. Chinese exporters give those dollars to their central bank. Their central bank "prints" yuan to give to the exporters, who then spend those yuan in domestic investment and consumption. This leads to price inflation in China (because the central bank is printing) and credit inflation in the US. The price inflation in China ultimately destabilizes their economy because of the pressure on profits and on the population. The credit inflation in the US leads to asset bubbles that are unsustainable in that the credit used to elevate the price cannot be repaid out of income. And around it goes.
When the lenders fear they will not be repaid (whether in the US or in China), and the producers cannot profitably run their businesses and/or the population cannot afford to eat (this is starting to be the case in China), the system collapses. All ponzi schemes end, and the fact that this one is collapsing at record low real interest rate levels should tell us volumes about what a mess the Fed has created by consistently trying to force real interest rates below their equilibrium level for so long. Those who on this blog used to argue that the Fed is so much smarter now than in the 1930s should really think about where we have arrived after all this "smart tinkering".
Any attempt to seriously "inflate" away the problem spooks the lenders and they stop lending. Deflation assures that the creditors are at least partially repaid with valuable currency, but it is extraordinarily painful to those leveraged buyers who were counting on "inflation" to bail them out, and iof course certain creditors will be out of luck anyway.
And so, we are at a macroeconomic impasse. I firmly believe that the guys who got us into this mess are not going to be able to get us out. But they sure will try!

Thoughts On The Bail Out

We're just rewarding bad behavior and punishing good. The responsible folks, who don't borrow beyond their means and make all their payments, have to bail out the irresponsible borrowers who took loans they couldn't pay back, and the unscrupulous banks that lent money to irresponsible borrowers.
People and institutions that make bad financial decisions should pay for those decisions. Where's my interest rate reduction, or my loan principal write-down? Oh, that's right, I don't get any breaks, because I pay my bills, so I get punished for my financial responsibility. I just have to pay for your bail out.

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Actually, I wouldn't say it is rewarding the bad behavior.
The owners (stock holders) of those banks already lost almost all their money.
And if there is no bailout, everyone will be punished, in term of economy and jobs. With bailout, at least we won't get into Great Depression 2.
Without bailout, the chance of anyone getting any mortgage is close to nil for the next year or so. It won't matter whether the price tanks...because it will because nobody can buy it. The renters will be locked out of the market, not by price, but by financing (or lack of).
With bailout, the price will still tank. However, buyers will hopefully get reasonable financing options, so we can actually take advantage of the situation.
I hope some people like to see others suffering.... to me, I don't care whether others suffer. I only care if I can take advantage of the situation.

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If the bailout works, it will work because it re-instills confidence in the current economic system. Economists, even today, only really can explain about half of all economic activity.The neoclassical model is particularly bad at modeling actual human behavior because humans don't tend to act like the "rational man" of their theories.
The overwhelming majority of economists agree that the New Deal lessened the effect of the Great Depression, the main problem is that the stimulus was not sufficient enough. This was proven when we entered WWII and government spending rose to 50% of the economy and full employment followed. Even during the period before the war, the economy grew at an average of 9-11%, the fastest economic growth period we have ever seen outside of wartime.

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The overwhelming majority of economists didn't think there was a housing bubble either. In truth, the overwhelming majority of economists are fools

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If we're going to have a socialized mortgage market then let's at least make sure to socialize the profits as well as the losses.

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and the band plays in......

Its getting very interesting.....

"The housing correction poses the biggest risk to our economy," Paulson said the day he announced the Fannie and Freddie seizure. "Our economy and our markets will not recover until the bulk of this housing correction is behind us."

Some experts even argue that the steps being taken to rescue firms like AIG could make a recovery in housing and the broader economy more difficult, as financial firms and investors become more reluctant to lend money.

"We are certainly taking credit and squeezing it tighter and tighter," said Kevin Giddis, managing director of investment bank Morgan Keegan. "Housing needs buyers. Buyers need credit."

1 Year price differance Aug 2007-Aug 2008

ATL -8.5%
Boston -5.5%
CLT -1%
CHI -9.5%
Cleveland -7.3
Dallas -3.2
Denver -4.7
Det -16.3
Vegas -28.6%
L.A -23.3% (Southern Cal)
Miami -28.3%
Minn -13.8%
NY -7.3%
PHX -27.9%
PTL -5.8%
San Diego -24.2%
SF -23.7%
Seattle -7.1%
Tampa -20.1%
Washington DC area -15.7%

A Little Light In This E-Mail Box Of Mine

Cycles: Seen them before, we'll see them again.
We have been through the cycles of the real estate market before , and we will go through them again. Right? We have seen the rise and the fall of the stock market many times, gold, oil ,copper, coal and any number of other markets and will see them again. Right?

When I trained traders on how to handle markets, the lesson was that nothing goes straight up, and nothing goes straight down, but we move and pull back, move and pull back. Everything is cyclical. Right? We have seen the meteoric rise of real estate, and at least in the residential markets a sizable decline. By my reckoning we are now due for a rise. Is that right?

Past Cycles and Fear

We saw it in the late 1980's and early 1990's, when the market pulled back, provided a buying opportunity, and then took off again. Lesson two that I would teach is that you would need to be a buyer when the lump in the pit of your stomach made it the hardest. When fear was the greatest and you were rushing in to buy as the sellers were running past you in the opposite direction. You need to buy when no one else is willing to buy. Is that where we are now?

The Present and The Future

There are some differences this time, primarily that it is not the asset itself that is the problem, but the financing mechanism. In the other real estate recessions we had supply and demand problems: that is to many properties and not enough buyers (although in some geographic areas like Florida and Las Vegas they have both problems). Now what we have is a crisis in the mortgage markets, that have caused even the most credit worthy borrowers to have an extremely diifcult time getting a loan.

We also now have huge institutional investors sitting on the sidelines with a ton of cash at the ready to jump in and buy, when they determine that the time is right. That is a good thing. We are in an extremely news driven environment, where at least at this point in time the news could not be darker. We have financial institutions like Washington Mutual and Lehman Brothers among what will probably be others that are trading as if they appear to be the next in line for a Federal bailout. Is this that time when the bold will jump in? Some may, while other may wait.

The smart money will be buyers, at a time when hindsight says it was the perfect time. Others will get in after they are sure it was a market bottom, while others will be last to the new party and be left holding the bag in this new cycle.

The Moral of the Story

One thing is for certain. We are in the downside of the cycle, that will ultimately bottom at some point, the news cycle will turn suddenly bright, and many "smart" and "bold" people will make a great deal of money. When that is going to be is for smarter minds than me to determine, but one lesson from the past is true.

Real estate is not only location, location, location, but now more than ever it is going to be timing, timing, timing. And "those that cannot remember the past are destined to repeat it."

The shoe has fell.....

After weeks of anticipation and speculation, Treasury Secretary Henry Paulson announced that the federal government had taken over Freddie Mac and Fannie Mae.
Most of the day both before and after the seizure was announced television and Internet news sites were filled with comments and reactions from business writers, financial analysts, and presidential and vice presidential candidates. The general theme was that the takeover had to be done; that the two corporations were in critical condition and would probably continue to decline thus increasing the ultimate rescue costs; and that they were "too big to fail." There were, however, a lot of experts who questioned the method and scope of the action.
No one is really sure what the takeover will cost - estimates range as high as $200 billion - but it is clear that taxpayers and some stockholders are going to take a bath. It is also questionable just how much the drastic federal move will impact the housing slump, foreclosures, interest rates, or lots of other things that were given as reasons for the action.


Here is what we do know.


The two mortgage giants are now operating in a government conservatorship that will be administered by the new Federal Housing Finance Agency (created under the same Congressional authority that authorized the Treasury Department to shore up Freddie and Fannie. James Lockhart, former director of the Office of Federal Housing Enterprise Oversight which had responsibility for the two government sponsored entities (GSEs) is the new director of the Finance Agency.
The Conservator will control and direct the operation of the Company and will have all the powers formerly held by the shareholders, directors, and the officers of the Company and conduct all business, collect all money due to the company, preserve the assets and property of the company, and contract for any assistance necessary.
In return for providing funds to guarantee their debt the Treasury Department will immediately receive $2 billion in preferred stock that will pay a 10 percent dividend. $1 billion of the stock will come from each of the two companies and the Conservatorship will purchase additional stock, perhaps as much as $100 billion worth, if the GSE's capital reserves fall below an agreed upon level. This preferred stock will take president over any claims by holders of common or the existing preferred stock.
According to Secretary Paulson, the GSEs will modestly increase their mortgage backed securities portfolios through the end of next year "through prudent mortgage purchases" and will then reduce those holdings by 10 percent per year after 2009. The portfolios shall not exceed $850 billion for each company. An Associated Press article quoted Mark Zandi, chief economist for Moody's Economy.com, as saying this will effectively make the federal government the nation's mortgage lender.
It appears that Treasury is primarily interested in protecting holders of GSE debt. This class of creditors includes many large investment companies and a number of foreign governments.
The Treasury Department is establishing a new secured lending credit facility which will be available to the two GSEs and to Federal Home Loan banks.
Both CEOs - Fannie's Daniel Mudd and Freddie's Richard Syron - have lost their executive positions and mammoth salaries although it appears that each has agreed to stay on to assist in an orderly transition.
The conservatorship is open-ended in terms of time. The conservator alone will make the determination that the companies have returned to a safe and solvent condition.
There is much about the effects of Sunday's actions that is not known at this time and some who commented on television and print on Sunday seemed shell-shocked by the extent of the action. Several financial reporters commented that Treasury had acted far more broadly than anyone had expected.

Among the current imponderables:


What is this whole thing going to cost? As stated above, the number $200 billion is being bandied about as a direct cost, but it is impossible to measure the losses that will spread throughout the economy. The common and preferred stock is widely held by individuals, entities such as pension funds, and other financial institutions of all sizes. While these stockholders have already watched their investments plummet in value over the last 18 months, will they lose everything? Several of Paulson's statements on Sunday seem to indicate that possible losses to stockholders in the financial sector may determine the treatment of all stockholders. Pardon the cynicism, but this apparently means that big business interests will be protected.
How great will be the impact on the housing market? There seems to be a consensus that there will be little impact on the numbers of houses for sale and that home prices will continue to fall; less conviction than hope that mortgage rates will come down. Optimists say the takeover will increase the stability of and confidence in the credit market and could result in a reduction of as much as one quarter to one percent in rates.
Have lending standards already been tightened sufficiently since the subprime crisis began or are borrowers and lenders in for another round of rules that will make it tougher to obtain or grant financing?
It appears likely if not certain that fees charged banks for loan securitization services may be reduced which could lower the costs of obtaining loans.
What will happen to homeowners who are already in trouble with their mortgages? In the case of the recent closing of IndyMac Bank the FDIC almost immediately announced a program to assist these borrowers and it is clear that the government has no desire to own hundreds of thousands of foreclosed homes. Some commentators mentioned an expansion of the Hope Now program, but the sheer magnitude of the problem could be overwhelming.
Immediate reactions to Paulson's announcement on Sunday were mixed although most reactors seemed to feel it was appropriate and inevitable. Some questions were raised as to whether the takeover was too radical or did not go far enough. The presidential candidates expressed a range of support for the Conservatorship. Barack Obama commented on ABC's This Week that he felt no class of investors or debtors should carry more of the burden than others. The Republican candidates both applauded the action.
The impact on the stock market cannot yet be determined although the Asian markets were reacting favorably as was the futures market. It will be an interesting day on Wall Street.
The Conservatorship will obviously be big news for many months. We will periodically update the reactions and the effects as they become known.

Tid Bits For Friday

The two firms (Fannie Mae / Freddie Mac), which were set up by the government, own or back about $5 trillion worth of home debt - half the mortgage debt in the country. Since last summer, they have suffered about $12 billion in losses. Fannie and Freddie have become virtually the only source of funding for banks and other home lenders looking to make home loans. Their ability to do so is crucial to the recovery of the battered home market and the broader U.S. economy. The two firms buy loans, attach a guarantee, then sell securities backed by the loans' income stream. They have been badly hurt in the last year by the sharp decline in home prices and the rise in mortgage delinquencies and foreclosures. Shares of the two troubled mortgage giants have plummeted more than 80% this year on fears about their financial health in the wake of the housing crisis. Saving Fannie Mae and Freddie Mac could [will] cost the U.S. taxpayer. But so could letting the two mortgage giants collapse. A rescue plan that uses federal dollars would risk increasing the deficit and possibly lowering the U.S. debt rating, making it more expensive for the government to borrow in the future. A decision not to intervene could lead to deep pain in the mortgage market and the parts of the economy tied to it. Presidential Cannidates also have their own views on the housing market. Some advocate letting the free markets play themselves out with little government intervention. Ron Paul is the biggest supporter of this. Paul does not support the increase in relaxation of guidelines in such programs such as the FHA programs and Fannie Mae guidelines. As you may be aware, President Bush has been pushing for increases in FHA and Fannie Mae loan limits as well as proposing a freeze on current ARM rates for buyers who have been making their payments on time at the introductory rate, but may have difficulties once their rates reset. Barrack Obama sees a much different root problem and solution to it. His answer is for more accountability in the real estate industry itself. Obama plans to go after the lenders, banks, loan officers and realtors who may have misled buyers as far as the programs that they were getting themselves into. He proposes increased penalties and tightening of guidelines for predatory lending, and does not necessarily believe that direct government intervention other than tax breaks for middle-class homeowners is necessary. While this is a great idea in and of itself, I do not believe that Obama has gotten to the root of the problem in his solution. Those who believe in free-market economics obviously are in support of letting the markets work themselves out. I would consider myself to lean more in this direction, although I do believe that some government protection of the industry must happen as there is plenty of room for fraud and manipulation of fees and buyers as the current guidelines now stand. We are seeing some of this happen already, specifically in Nevada and other states as loan officers are becoming directly responsible for making sure that stated income or non-verified income loans are reasonable and justified. This shifts the responsibility more on to the lending institutions and less on the borrowers. High on McCain's to-do list is something almost no Democrat or Republican leader has advocated: Raising, not lowering, minimum mortgage downpayments for the rapidly-growing FHA program. Pending bipartisan legislation on Capitol Hill would CUT FHA's downpayments from the current three percent minimum to as low as zero -- favored by the House -- or to 1.5 percent -- favored by the Senate. "So many homeowners," he told a California audience, "have found themselves owing more than their home is worth because they never had much equity in the house to begin with." He said he opposes bailouts of lenders who made bad loans, which would in effect be rewarding them for their own poor underwriting decisions. But short of that sort of collapse, he thinks lenders today ought to modify borrowers' loans, reduce principal debt and interest rates -- taking the hits to the bottom line themselves -- rather than looking to the federal government. He said when there are no good measures of the true value of mortgage bonds -- when no investors want to buy them and no index tracks them -- current accounting rules may make lenders' balance sheets look far worse than they really are.

Recover in 2011

In contrast to expectations that the U.S. housing market could see a turnaround in the first half of 2009, the monthly housing price index report for June from Radar Logic suggests that recovery won't occur until 2011. According to Radar Logic's Residential Property Index (RPX), 23 of the 25 metropolitan areas surveyed saw year-over-year price declines as of June 2008.
"Not surprisingly, June 2008 year-over-year RPX values continue to show weakness," said Michael Feder, CEO of Radar Logic. Feder said a close examination shows a mix of strength as well as absorption of distressed inventory, but added that "it is too soon to call this a bottom."
The RPX is a relatively new market that enables real estate to be traded as a liquid asset, via property derivatives marketed by major financial institutions. In the June report, trading in forwards on RPX was said to be gaining momentum.
"While it is still a new market, daily contract pricing is producing a forward curve," the report said. "That curve suggests weakness through 2009, stability in 2010 and a recovery in 2011. This is in contrast to some industry economists who are calling for a bottom in 2009."

Trash City - I know.

Being in this business I see many bank repos. I visit (for business) many of these repos prior and post move out and from first hand experience I can say - for some its a very somber time as they clean and others - its like Animal House Version Dump 12.6 This morning I was reading an article I thought you might find amusing on a friday. Never thought I see this headline on a CNN web site - the piece is called - These homes for sale suck - Never before have there been so many squalid, dilapidated homes on the market - and they're helping to exaggerate already-plummeting home prices.
NEW YORK (CNNMoney.com) -- Mold, maggots and piles of festering trash - no wonder home prices are in freefall.
It's not just the subprime mortgage crisis that's to blame for plummeting home prices. A flood of squalid properties on the market is helping to exaggerate the post-bubble price declines.
"Part of the reason home prices are declining is a fundamental deterioration in the housing stock," said Glenn Kelman, CEO of the online, discount broker Redfin. "During the boom, nine out of 10 houses for sale in many markets were in prime condition. Now, for every 10 houses, at least three are dogs."

"..... been permitted to fall into disrepair by lenders overwhelmed with thousands of vacant homes. If these houses sell at all, they're going for bargain basement prices that are hurting home values throughout the neighborhood.

"I've never seen so many houses in this condition before," said Ray Anderson of Buyer's Advantage Real Estate in Auburn Calif., near Sacramento. "And I've been in the business 20 years. I've seen bank-owned properties in the past. They were never like this."


The article goes on and presents other ramifications for these rat holes. Click her to read full article.

Foreclosure / Public Health Concerns / and if the bank owns it who's to blame...?

It seems hard to believe, but there appears to be yet one more thing for which we can blame the mortgage crisis. And this is not a financial problem; it is a public health concern.
Several cable networks have reported over the last few weeks that the hundreds of foreclosed houses covering suburban neighborhoods may be contributing to the spread of the West Nile virus.
This is particularly true in warmer areas such as California, Arizona, Florida, and Nevada where homeowners tend to have a lot of outdoor playthings, chiefly swimming pools.
The pools, even if they had been drained for the winter, are collection spots for rainwater. The pools are not used, the water is not treated, and, instead of refreshing, cool aqua spots in which kids splash and where adults gather for cookouts, they are now dirty, brackish, maybe even bright green with algae. But these pools are prime breeding spots for the West Nile transmitting mosquito.
The West Nile virus does not make most people very sick, but several dozen have died in the few years it has been reported as a threat, and there have been incidents recorded of paralysis and other permanent disabilities.
CNN reports that Orange County, California alone may have as many at 1,500 pools located on properties that have been foreclosed, and while public health authorities are not sure to what extent they are encouraging the growth of the mosquito population, it only stands to reason that there is some impact, at least from a nuisance standpoint.
Banks and real estate agents who have not utilized the energy to secure the houses or mow the lawns are certainly not going to spend time and money to drain and cover pools and, even if the West Nile threat is insignificant, the increase in shear numbers of insects will make for a miserable fall and spring.
In addition to the pools, abandoned and neglected property has other water hazards; a kiddie pool left in the backyard, fish ponds, bird baths, a vertically hung tire swing, all have the capacity to catch and hold sufficient water to cause concern.
Cities and towns that fear a possible epidemic say they have little choice but to clear and/or treat the source at taxpayer expense even though it is the responsibility of the banks. This will not be as easy as it once was, as many of the effective mosquitos and larva sides are now prohibited for use because of their own possible public health problems or will stir up such protests from the community that municipalities dare not use them.
In the 1990s when banks and the FDIC stonewalled condo associations over HOA fees on foreclosed houses, affected states did not hesitate to pass super lien laws that gave the association the ability to levy senior liens for unpaid fees on the units. These liens took precedent over all others except taxes and the financial institutions shaped up pretty quickly. It is past time that legislation is passed to allow senior liens for the costs of securing property, keeping it from further deterioration, clearing out squatters and drug dealers and so forth. If the banks do not pay the bills the towns can foreclose, wipe out the banks' mortgages, and sell the homes to residents or investors at whatever price the market will bear sufficient to recoup taxpayer's losses and get the properties up and running again.

Saved By The Bell - Trump steps up and helps a friend & gets a good deal

Things were so dire that McMahon’s listing agent flew to New York over the weekend to make a personal appeal to Trump. Ed (85 years old). Donald Trump reportedly has agreed to purchase Ed McMahon’s 7,013-square-foot mansion in the gated Summit neighborhood in the Beverly Hills, Calif. postal area, which has been in foreclosure as it has been on the market most recently for $4,600,000. The Donald made the purchase through a unit of Countrywide Financial. If you recall this home was initially listed @ $7+ million. Ed was in massive $$$ straights. Upon The Donald purchase - ED (the ailing Johnny Crason side kick) and his wife are going ot be allowed toremain in the home. We all knew someone was going to step up and help this once American Icon. The Donald owns $100,000 of millions if not close a billion dollars in real estate holdings. This appears to be a major - "with a little help form from friends."
The home is located @ inside the Beverly Hills postal area. McMahon purchased the house in 1990 for $2.6 million, according to public records, but was unable to keep the home out of foreclosure due to major $$$ hardship. Click Here

Mortgage interest rates remain FLAT.

Mortgage interest rates remain flat according to the weekly Primary Mortgage Market Survey released by Freddie Mac. The 30-year fixed-rate mortgage (FRM) averaged 6.5 percent with 0.7 point, unchanged from the previous week. The 15-year FRM averaged 6.10 percent, up 3 basis points from one week earlier. Fees and point increased from 0.6 point to 0.7 point.
Short-term rates also remained relatively unchanged. The five-year Treasury-indexed hybrid adjustable rate mortgage moved from 6.05 percent from an average 6.07 percent. Fees and points were static at 0.6 point. The one-year Treasury-indexed ARM averaged 5.22 percent compared to 5.27 percent a week earlier. Fees and points averaged 0.6 both weeks.

The one-year Treasury-indexed ARM averaged 5.22 percent compared to 5.27 percent a week earlier. Fees and points averaged 0.6 both weeks.
"The housing market is continuing to act as a drag on the economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Residential fixed investment subtracted 0.6 percentage points off second quarter growth in real GDP.
"More recently, mortgage applications for home purchases in the past few weeks fell to the slowest pace since the week ending February 21, 2003, according to the Mortgage Bankers Association. Finally, although showing some initial signs of improvement, the inventory of unsold homes remains at historically high levels."
The Mortgage Bankers Association (MBA) in results from its Weekly Mortgage Applications Survey reported substantially more movement in long term loans but the single ARM it tracks was virtually unchanged.
The average rate for 30-year FRMs increased to 6.57 percent from 6.41 percent with points, including the origination fee nudging up from 1.13 to 1.14.
The 15-year FRM (fixed rate mortgage) rate increased to 6.17 percent from 6.02 percent while points increased to 1.06 from 1.02.
The average contract interest rate for one-year ARMs decreased to 7.15 percent from 7.17 percent, with points increasing to 0.38 from 0.36.
Mortgage applications were down 1.5 percent on a seasonally adjusted basis from the previous week and 2.2 percent unadjusted. The volume was down 36.9 percent from the same week in 2007.
Refinancing as a share of all applications decrease to 35.2 percent from 35.9 percent a week earlier and the market share of ARMs increased slightly to 7.3 percent from 6.9 percent the previous week.

Canadians Top List of Foreign Buyers of U.S. Property, NAR Says

Canadians are flocking to snatch up property in the U.S. as a result of affordable house prices and attractive exchange rates, the National Association of Realtors says.
Since May 2007, NAR estimates that between 150,000 and 190,000 homes in the U.S. were bought by foreign nationals.
This year, Canada replaced Mexico as the country with the largest share of foreign buyers in the U.S., with the percentage of Canadian buyers doubling to 23.5% from 11% last year, NAR said in its 2008 Profile of International Home Buying Activity survey. The UK came in behind Canada, followed by Mexico, China, India and Germany.
"Many international buyers recognize that real estate is an excellent investment and are drawn today by abundant inventory, low interest rates and a softer dollar," said NAR president Richard F. Gaylord. "These conditions allow them to own their own piece of the American dream."
Gaylord said foreign exchange rates have helped make U.S. homes more affordable for foreigners, particularly in Florida and Arizona. He noted that the euro has surged in value 24% against the U.S. dollar over the past two years.
Single-family vacation homes at an average price of $297,400 were the most popular purchase for international buyers. The most popular states for purchases were Florida, California, Texas, New York, Washington and Nevada, NAR said.
The NAR survey found four in 10 foreign buyers paid for their purchases in cash, compared to 7% of domestic U.S. buyers. It also found that the average international buyer stayed at their U.S. property for 2.6 months during the year.
Purchases by international buyers also tended to be more expensive, with 14% of properties sold valued at $750,000 or more.
The 2008 NAR Profile of International Home Buying Activity survey is based on responses from approximately 4,000 Realtors who serve foreign buyers.

Hovnanian CEO Interview MortgageNewsDaily.com Video News CNBC Aug 6, 2008. 7:38 AM EST Discussing the current housing market condition and outlook, with Ara Honanian, Hovnanian Enterprises CEO.

Protect Your Equity - More so if its your one chance...

$450,000 to construct. When they were done, the home dwarfed all the ranch and split-level structures in neighboring lots.

That was not all. Beazer Homes' employees and company partners raised a quarter-million dollars in contributions for the family. The sum included scholarships for the three Harper children and a home maintenance fund.
The Harpers, whom ABC chose from among 15,000 "Extreme Makeover" applicants, spent the week in Disneyland while 1,800 people swarmed about the site. The family returned to a new home, plus contributions worth about $200,000.

Click Here for more info

"Housing and Economic Recovery Act of 2008"

LOS ANGELES, Jul 30, 2008 (BUSINESS WIRE) -- The CALIFORNIA ASSOCIATION OF REALTORS(R) (C.A.R.) applauds President Bush's decision to sign H.R. 3221 into law. For the past several years, C.A.R. and the NATIONAL ASSOCIATION OF REALTORS(R) have aggressively lobbied for Congress to pass numerous provisions found in this historic bill.
The legislation, called the Housing and Economic Recovery Act of 2008, will assist an estimated 400,000 homeowners facing foreclosure, many of whom reside in California, by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas.
"This federal housing bill is a significant move in the right direction for California homeowners," said C.A.R. President William E. Brown. "It will aid in stabilizing our economy and help stem foreclosures, while also providing support to first-time homeowners."
The bill permanently increases the conforming loan limit to $625,500. C.A.R. has long advocated for higher conforming loan limits. In February, the Economic Stimulus Act of 2008 was signed, temporarily raising the conforming loan limit in high-cost areas to $729,750 from $417,000 until December 31, 2008.
"Although we would have liked Congress to make permanent the current $729,750 loan limit, C.A.R. is pleased with the new permanent loan limit of $625,500. It will allow California homeowners to refinance their loans into safe affordable loan products and allow first-time home buyers to enter the market," said Brown.
The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area's median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area's median home price, up to $625,500. Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008.
C.A.R. also supports the following bill provisions:
-- A temporary increase in mortgage revenue bonds to refinance subprime mortgages.
-- New regulator for Government Sponsored Enterprises to restore investor confidence in GSE loans and help the market and economy stabilize.
-- First-time home buyer tax credit, which allows first-time home buyers to receive a tax refund worth up to 10 percent of a home's purchase price, up to a maximum of $7,500. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.
-- Temporary raise in the loan limit for the Veterans Affairs home loan guarantee program to the same level as the economic stimulus limits until the end of 2008.
-- Adjustment to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), allowing sellers to provide the non-foreign affidavit to a qualified closing entity and not just the buyer.
-- The setting of minimum requirements for mortgage originators, which mandates fingerprinting of loan originators and establishes a nationwide loan originator licensing and registration system. The requirements do not apply to those only performing real estate brokerage activities unless they are compensated by a lender, mortgage broker, or other loan originator. States will have the ability to implement more stringent laws.
-- The creation of a National Affordable Housing Trust Fund to help cover the cost of the FHA rescue plan for the first five years and develop affordable housing in subsequent years.
Other provisions in the legislation include:
-- The Treasury Department's proposal to create a federal backstop program to ensure the financial well-being of Fannie Mae and Freddie Mac.
-- The FHA's inability to insure loans that utilize a seller-funded down-payment assistance program. Down-payment assistance from family, employers and other nonprofits is still allowed.
-- The Community Development Block Grant Programs' $4 billion allotment for communities to purchase and refurbish foreclosed homes.
Leading the way...(R) in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS(R) ( www.car.org) is one of the largest state trade organizations in the United States, with nearly 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

I told you so...

I get about 100 to 150 e-mails a day asking me about these services that charge to help stop foreclosure. I've heard from $1500 to $6500 dollars - and each time I tell them we do it at NO COST - I get this response as if - the other guys must be better since they are charging me - wrong. Your the SUCKER (I need to drive the point home - no disrespect) and I told you that in your e-mails. In real estate deals - monies are earned upon fullfilment and not simply - TRYING. I know foreclosure must be a very streeful time but know that good people still exist in the world and those people are compensated by the BANK . If I can be of any help michael@valleyfinance.com


Freddie Mac today told mortgage servicers it was doubling the amount of money it pays for each workout that keeps a delinquent borrower with a Freddie Mac-owned mortgage out of foreclosure.
Freddie Mac also announced it will start reimbursing servicers for the cost of door-to-door outreach programs, give servicers more time to negotiate workouts in states with fast foreclosure processes, and make administrative changes intended to streamline the workout process.
"We are taking these steps because we want to reinforce the tremendous importance of workouts and reward their use," said Freddie Mac Vice President of Servicing and Asset Management Ingrid Beckles. "Giving our servicers more time and greater compensation to help troubled borrowers is fundamental to preserving homeownership and maximizing our efforts to minimize foreclosures." According to Beckles, starting August 1, 2008, compensation for repayment plans will rise from $250 to $500 while loan modification compensation will increase from $400 to $800. For short sales or pre-foreclosure sales, where Freddie Mac agrees to accept less than the full amount owed on a borrower's loan, compensation will go from $1,100 to $2,200. (The higher amount recognizes the greater servicer staff time involved when negotiating property sales.)
Freddie Mac also said it will now reimburse the cost of leaving a door hanger up to $15 per mortgage and up to $50 per mortgage for a door knocking that results in the borrower contacting their servicer. Freddie Mac will also reimburse servicers up to $200 for additional fees paid to vendors for door knocking that results in successful alternatives to foreclosure. This policy is effective from August 1, 2008, through March 31, 2009.
To qualify for the reimbursement, the servicer must show that the mortgage was at least 90 days delinquent, the servicer had no prior contact with the borrower, and that the outreach was done by an independent third party vendor.
Freddie Mac also announced it is extending the time for foreclosures so servicers will have more time, if needed, to negotiate workouts with delinquent borrowers in Washington, DC, and 20 states with relatively fast foreclosure processes.
In addition to Washington, DC, the affected states include Alabama, Alaska, Arizona, Arkansas, California, Georgia, Hawaii, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, North Carolina, Rhode Island, Tennessee, Texas, Virginia, West Virginia and Wyoming.
Specifically, starting August 1, 2008, servicers are allowed up to 300 days (10 months) from the due date of the last payment to the foreclosure sale in these states to seek aggressive and sustainable workout solutions for the borrowers and still meet the standards set in Freddie Mac's Servicer Performance Profiles. The company uses the Servicer Performance Profiles to measure and reward the quality of a servicers' investor reporting and default management.
Even though the laws in these states permit a lender to foreclose in less than 300 days, this announcement means Freddie Mac will permit its servicers more time to complete foreclosures. The new policy won't affect borrowers in states where the foreclosure process already exceeds 300 days.

H.R. 3221

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Please take the following actions: 1. Join our Action Network and we'll send you important updates regarding our issues and how you can speak out on important issues.
2. Send an email to your elected officials and tell them to pass important legislation that you can follow right here.
FEATURED ALERT
Housing Bill Shuts Down Non-Profit Downpayment Assistance Programs on October 1, 2008.
Take Action Today to Save Downpayment Assistance!
Nehemiah Corporation of America, a national non-profit organization, has helped over 300,000 families who would have otherwise been locked out of homeownership due to lack of downpayment funds. Both the House and Senate passed H.R. 3221, Housing and Economic Recovery Act of 2008, a comprehensive piece of legislation that addresses a variety of housing related issues. The bill contains a provision (SEC. 2113) that forbids FHA from insuring mortgages in which the borrower’s downpayment comes from a private downpayment assistance provider, beginning October 1, 2008. As of this date, the minimum downpayment will be increased from 3% to 3.5%. ...The bill is headed for the President’s desk where his prompt signature is expected. With the stroke of the President’s pen, downpayment assistance will be shut down in the United States on October 1, 2008.The consequences will be devastating! By FHA's own estimates, DPA comprises nearly 40% of FHA's volume. This means more than 300,000 working class families will be locked out of homeownership in the next year alone. Communities across America will take the brunt of the $50 billion in lost real estate sales, not to mention the indirect impact on the real estate, mortgage and building sectors that will be forced to shed tens of thousands of jobs due to this dangerous legislation.Act Now! Contact your elected officials and urge them to introduce and pass a bill that allows downpayment assistance to endure. Failure to act now will ensure the death of all private downpayment assistance programs.Preserve private downpayment assistance programs for families who are credit-worthy, but lack the savings necessary to fulfill their homeownership goals, protect the already fragile economy, improve the current housing market, and save jobs.Take Action Today to Save Downpayment Assistance! In order to save downpayment Assistance, we need to come together NOW to convince Congress to introduce and pass a bill that allows downpayment assistance to continue indefinitely.

Attention Fence Sitters

(Light at the end of the tunnel - slowly approaching) -

My advice to anyone looking to get into the market - sooner then later. No one can tell what the bottom looks like, but it sure looks like it. I see banks streamlining their short sale and REO process. This progress enables the process to be more efficient. Stagnation of process and procedure killed the market in the midst of our crisis. I also see inventory moving fatser and I also see the down payment assistant programs going away. This means buyers will need to pony up with real cold hard cash. This is nothing new nor a surprise to everyone. The loan programs issued at the direction of Wall Street are giving way to [market correction forces at work] more conventional [safe-er] loans. This will cool us from the rapid market run ups. Real Estate has always been a safe long term investment and I can't imagine a better time for buying. I still believe my company offers the best loan in the business. Don't let all the doom and gloom keep you on the fence. Smart money buys low and sells high (remember that as cardinal rule 1). It may run counter intuitive for some people; and that is why only some people or currently not hurt by our present market condition. If I can be of any help to you michael@valleyfinance.com I am also facilitating Bank Homes to Market so I can help you access to inventory not yet to market plus other benefits only a private banker can offer. Click here to read more about the NEW HOUSING BILL.

New homes sold at an annualized pace of 530,000, exceeding the median forecast of 503,000 in a Bloomberg News survey – 07/25/2008. The report went on to add:The number of properties on the market dropped by the most in four decades, indicating builders are making some headway in clearing out inventories. The median sales prices last month decreased 2 percent from June 2007 to $230,900. These figures can be influenced by changes in the mix of sales at the regional level. For that reason, economists prefer price measures that track the same home over time. The supply of homes at the current sales rate fell to 10 months' worth from 10.4 months in May. There were 426,000 homes for sale at the end of June at an annual pace, the fewest since December 2004. The figure was down 5.3 percent from the prior month, the biggest decline since November 1963. A report yesterday from the National Association of Realtors showed existing home sales fell 2.6 percent to a 4.86 million annual rate, the lowest level in a decade. The median home price dropped 6.1 percent from June of last year. Concern over the ability of Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, to survive the meltdown in subprime lending has heightened the credit crisis and may push up mortgage rates and further curtail access to loans. U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth.

[Keep in mind the correction has began and with the inventory shrinking its a good sign of price stabilization we are currently seeing in some markets]

Say - UNCLE

San Diego City Attorney MICHAEL J. AGUIRRE
NEWS RELEASE
FOR IMMEDIATE RELEASE: July 23, 2008 Contact: Communications Division (619) 235-5725
CITY ATTORNEY FILES LAWSUIT AGAINST COUNTRYWIDE;AGUIRRE ALLEGES CONSUMER LENDING FRAUD ANDSEEKS COURT ACTION TO STOP LENDER FORECLOSURES
San Diego, CA—San Diego City Attorney Michael Aguirre filed a civil complaint this morning in San Diego Superior Court against Countrywide Financial Corporation alleging that the lending institution engaged in a “pattern of unlawful, fraudulent or unfair predatory real estate lending practices” that has caused numerous City of San Diego residents “to be in jeopardy of losing their homes through foreclosures.” The legal action also calls for injunctive relief and civil penalties.
“We are asking a court to prevent Countrywide from initiating or advancing any foreclosure on any residential sub-prime mortgages involving properties which are owner occupied in the City of San Diego,” said City Attorney Michael Aguirre. “We believe these borrowers are victims of fraud and were roped into unconventional sub-prime loans when they probably could have qualified for a conventional fixed-rate mortgage.”
The civil lawsuit was filed by the Consumer and Environmental Protection Unit of the San Diego City Attorney’s Office. The complaint alleges that Countrywide’s unlawful lending practices directed against San Diego home purchasers and homeowners involved one of the following elements:
a. Making loans based predominantly on the foreclosure or liquidation value of a borrower’s collateral rather than on the borrower’s ability to repay the mortgage according to its terms; b. Inducing the borrower to repeatedly refinance a loan in order to charge high points and fees each time the loan is refinanced (“loan flipping”); or c. Engaging in fraud or deception to conceal the true nature of the mortgage loan obligation. The lawsuit further alleges that the goal of Countrywide’s unlawful, fraudulent, or unfair “predatory” lending practices was to increase the Company’s share of the national mortgage market by mass producing loans for sale on the secondary market. Countrywide originated loans with little or no regard for the borrowers’ financial ability to afford the loans or to sustain homeownership.
(MORE)
Recent City Attorney media releases can be accessed on the San Diego City Attorney’s home page located on the Internet at http://www.sandiegocityattorney.org/
1200 Third Avenue, Suite 1620, San Diego, California 92101-4188 (619) 236-6220
Page 2
The lawsuit contends that Countrywide was motivated to engage in the unlawful lending practices for the personal financial benefit of several named defendants whose profit exceeded $800 million. To view the lawsuit against Countrywide, visit http://www.sandiegocityattorney.org/, click “Significant Reports
and Legal Documents.”

Ever Consider H.U.D homes?

What is a HUD Home?A HUD home is a 1 to 4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.

Who can buy a HUD Home?Almost anyone! If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors.

What about financing?Although HUD does not offer financing directly, some of our homes qualify for FHA-insured loans. Contcat me directly michael@valleyfinance.com

To search for H.U.D homes click here and here and if you need money to make it all happen michael@valleyfinance.com