22. June 2009 by Burbank Real Estate.

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Of note this week is the FOMC (Federal Open Market Committee) rate policy meeting.

While it’s widely expected that the fed funds rate will remain unchanged, at zero to .25%,  the focus will be on the statements from this meeting regarding the state of the economy and the Fed’s long term policy goals.

Existing Home Sales are out tomorrow, which are expected to show an increase and New Home Sales are due out Wednesday and also expected to show an increase over the previous month.

On Thursday we’ll get jobless claims and GDP (Gross Domestic Product) for the first quarter of 2009, which is expected to post a decline.

Friday will bring Personal Income and Outlays and Consumer Sentiment.

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16. June 2009 by Burbank Real Estate.

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Housing starts showed better than expected strength in May, posting a 17.2% increase!

The rebound was led mainly by multifamily dwellings as they accounted for a 61.7% increase.  None the less, single family homes did post an increase of 7.5%.  The West and South regions posted the most significant gains.

The good news here is that we are starting to see signs of life in the housing market.  Opinions differ, especially by geographical areas, but more analysts are starting to predict better times ahead for the housing market in the next couple of years.

In other news, Industrial Production numbers came out today, posting a drop of 1.1%, which was widely expected.

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10. March 2009 by Burbank Real Estate.

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The Obama administration has given us some new details on its $275 billion plan to help stem the tide of foreclosures nationwide.  It’s offering many incentives to investors, lenders etc. to entice them into modifying distressed mortgages to keep Americans in their homes. The steep fall in home prices is the main reason we’ve had a global financial meltdown, so the administration’s housing plan is vital to ending the deepening economic recession.

The plan is called the “Making Home Affordable program”, which the administration thinks can help up to 9 million homeowners.

There are two primary goals of this plan:

·        First, it offers $200 billion to provide refinancing for some homeowners who owe more than their homes are worth-also referred to as being “underwater” on their mortgages. To qualify, these homeowners-5 million of them by administration estimates-must have their mortgages in the hands of Fannie Mae or Freddie Mac, the mortgage finance giants that the government seized last September.

This plan will help, but it won’t reach homeowners in places like California and Florida where homes are now worth substantially less than their mortgages.

Because most mortgages are bundled into securities and sold into a secondary market, it’s not easy for homeowners to find out whether Fannie or Freddie owns their loans or whether they’ve been pooled with other loans and sold by an investment bank to other investors.

·        The other part of Obama’s plan attacks the problem of affordability. The administration provides another $75 billion in incentives to help prevent foreclosures in cases in which the homeowners, up to 4 million of them, are about to lose their homes. The money comes from the $700 billion bailout fund approved last October.

This part of the plan is extremely complex as it offers many financial incentives to mortgage servicers, who are essentially bill collectors for private investors who own pools of U.S. mortgages. Some incentives stay with the servicers while others flow through to investors.

In exchange for the incentives, a servicer would modify a mortgage so that no more than 38% of a homeowner’s monthly after-tax income was taken by the monthly mortgage payment. The government then would step in and share the cost of reworking that mortgage so that no more than 31% of the borrower’s monthly income was tied up in the payment.

·        Any lender that takes new taxpayer bailout money under the administration’s Financial Stability Plan will be required to participate.

·        The Obama plan got a strong endorsement Wednesday from the Financial Services Roundtable, which represents many of the largest mortgage lenders.  This first step will go far in adopting consistent guidelines for everyone.  But,  officials confirmed that there’s no standard procedure for lenders under the Fannie and Freddie portion of the plan. It will be up to each lender to determine whether the refinances go through them or whether mortgage brokers and other intermediaries can help homeowners seek refinanced loans under the program.

·        Officials were also careful to note that mortgage servicers won’t be able to modify mortgages if the terms of their contracts with the investors who own the pools of mortgages don’t allow it.  There is no reliable data on how many of these investors are on the other ends of contracts that prohibit mortgage modifications. That question is important, since many of the weakest loans underwritten during the height of the housing boom, from 2004 to 2006, were sold by now-defunct investment banks to investors abroad, many in Europe.

So who qualifies?

·        Your mortgage must predate the start of 2009, you must live in the home and you’ll have to provide proof of income.

·        First, are you already behind on payments or even in the foreclosure process? If the answer is no, then ask yourself whether your current mortgage rate is high enough to make it worth your while to refinance to take advantage of today’s low rates for 15-year and 30-year fixed-rate mortgages.

·        You must find out who owns your loan. Most mortgages are bundled together and sold into a secondary market, where investors technically own them. If Fannie Mae or Freddie Mac placed your loan into the secondary market, you can contact the company that sends your monthly mortgage statement to discuss the new program. If your mortgage is in the portion of the secondary market where the private sector issued the mortgage-backed securities, you don’t qualify.

·        To qualify under the refinance portion of the Obama plan, you can owe up to 5% more than your home is now worth. Thus, many homeowners in California, Florida, Arizona and Nevada, where home prices have plunged, won’t qualify.

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3. March 2009 by Burbank Real Estate.

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First, what is the pending home sales index? 

The NAR (National Association of Realtors) developed the pending home sales index as an indicator of housing activity. It tends to be a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed and it usually takes four to six weeks to close a contracted sale.

Until housing data improves, the economy as a whole won’t show significant signs of life.  The numbers that came out today offered little hope. While the pending home sales index jumped up in December, 6.3 percent to 87.7 the pending home sales index fell a very steep 7.7 percent in January.  This data indicates that we’ll probably have weak home sales data for February and March. The year-on-year rate is still contracting at -6.4 percent.

Sales showed continued weakness in the Northeast, South, and Midwest but, did show a gain in the West, a region worth special attention given that the general real estate collapse has been centered here.

Bottom line is that with the labor market still in major turmoil, we probably won’t see a significant rebound until later this year or beginning of next year.  If you are in the market to buy a home, now is a great time with low interest rates and reduced prices!

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18. February 2009 by Burbank Real Estate.

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President Obama unveiled the Homeowner Affordability and Stability Plan today.  It’s safe to say that we don’t have all the details yet, but here’s what I know:

• As many as 9 million homeowners could be helped by this plan, the idea is to help prevent foreclosures and help families and in turn, communities.

• The plan contains three main components, and is limited to primary residences, which means speculators will get no help.
• The loans referenced in the plan cannot exceed Freddie Mac/Fannie Mae conforming loan limits.

• The first part helps homeowners who are suffering from falling housing prices who still have equity in their homes, but don’t have the 20 percent equity needed to refinance.  Under the plan, homeowners who have conforming loans owned or guaranteed by Freddie Mac and Fannie Mae will be allowed to refinance their homes, even if they do not have 20 percent equity left in the house. The U.S. Treasury Dept. estimates that about 5 million homeowners will be helped by this portion of the program.

• The second part, known as the Homeowner Stability Initiative, is designed to assist homeowners who are “underwater” on their mortgages. The $75 billion initiative will bring together lenders, servicers, and the government so that all stakeholders share in the cost of the modification.  Primary mortgages would be reduced to monthly payments that do not exceed a 38 percent debt-to-income ratio, with the lender assuming the costs. The government and lender then would split the costs of further reducing the monthly payments until they were at a 31 percent debt-to income ratio.
• Homeowners do not have to be delinquent to participate.

• The Homeowner Stability Initiative will create incentives for servicers, mortgage holders, and homeowners. Servicers would receive an up-front fee of $1,000 for every eligible modification meeting the initiative’s guidelines. Guidelines are scheduled to be released by March 4. Mortgage holders will receive an incentive payment of $1,500, and servicers $500, for modifications made on loans that are current but at risk of imminent default.

• Creating clear and consistent guidelines for loan modifications is one of the goals. The Obama Administration plans to work with federal agencies, banking and credit union regulators, and the private sector in order to develop loan modification guidelines that can be implemented across the entire mortgage market. While adoption of the guidelines will be voluntary for the private sector, all financial institutions receiving Financial Stability Plan assistance going forward will be required to implement the loan modification guidelines.

• The government estimates that between 3 and 4 million homeowners will benefit from the Homeowner Stability Initiative component of the plan.

• The third part of The Homeowner Affordability and Stability Plan is supporting low mortgage rates by strengthening Fannie Mae and Freddie Mac.  The Treasury Dept. plans to increase their Preferred Stock Purchase Agreements with both Fannie Mae and Freddie Mac from its current $100 billion in both entities to $200 billion in each. The Treasury Dept. also will continue to purchase Fannie Mae and Freddie Mac mortgage-back securities in order to help promote stability and liquidity in the marketplace.  Additionally, the Treasury Dept. will increase Fannie Mae and Freddie Mac’s portfolios by $50 billion, for a total of $900 billion. The Obama Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving home buyers, such as CalHFA. Funding for this will not come from TARP money but from the Housing and Economic Recovery Act.

There are many skeptics out there but I have to say, this appears to be a good start to solving a very complex problem.

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