Home Purchase Tax Credit Details

Visit this secure link for the most current and accurate information regarding the newly extended and expanded home purchase tax credit.

http://www.federalhousingtaxcredit.com/

Senate Approves, Extends, and Expands Homebuyer Tax Credit

The Senate today voted unanimously Wednesday night to extend the $8,000 tax credit for home buyers beyond its scheduled November 30, 2009 expiration date.  The credit would be available until April 30, 2010.  Under the new legislation the credit will also now apply to home buyers who are buying their second or subsequent home.  The credit currently applies only to first time home buyer.

The Senate vote was 98 to 0

Under a compromise reached late last week, the tax credit for veteran homeowners will apply only to those who have lived in their current residence for at least five years.  The credit for these buyers will be capped at $6,500 while first time buyers will continue to receive $8,000.

Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000 respectively.  Above those limits there are diminishing credits available.

The bill was passed as an amendment to legislation extending unemployment benefits.  The House is expected to vote on the bill before the end of the week.

Housing interests, especially the National Association of Home Builders and the National Association of Realtors, has pushed strongly for the extension and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.

Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit.  Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.  -  Jann Swanson, MND.

Pending Home Sales Up, Here’s Why!

Nov. 2 (Bloomberg) — The number of contracts to buy previously owned homes in the U.S. rose in September for an eighth straight month as Americans rushed to meet a deadline for a home-buyer tax credit.

The index of signed purchase agreements, or pending home sales, rose 6.1 percent after a 6.4 percent gain in August, the National Association of Realtors said in Washington. Compared with a year earlier, pending sales rose 19.8 percent, without adjusting for seasonal variations.

Many buyers accelerated purchases of new homes to take advantage of the $8,000 tax credit before it expires Nov. 30. Foreclosure-driven price declines and low mortgage rates have also pushed sales up this year. Home sales may cool in coming months unless the credit is extended under a deal worked out by Senate Democrats.

“Home sales continued to show improvement as we see people rush to take advantage of the homebuyer tax credit, although the sustainability of this move is in doubt, and we expect a far slower growth rate going forward,” David Semmens, an economist at Standard Chartered Bank in New York, said before the report.

Stocks extended gains after separate reports showed that manufacturing expanded at the fastest pace in more than three years and spending on construction unexpectedly increased.

The Standard & Poor’s 500 Index added 1.3 percent to 1,049.43 at 10:21 a.m. in New York.

Factory Index

The Institute for Supply Management’s factory index rose to 55.7 in October, the highest level since April 2006, from 52.6 in September, according to the Tempe, Arizona-based group. Readings above 50 signal expansion.

Construction spending rose 0.8 percent in September, the most in a year, followed a revised 0.1 percent drop in August, Commerce Department figures showed. Spending on residential and government projects climbed, while outlays on private commercial construction slumped.

Pending home sales were projected to be unchanged in September from the prior month, according to the median forecast of 33 economists in a Bloomberg News survey. Estimates ranged from a drop of 2.5 percent to an increase of 5.5 percent.

The Realtors group has collected pending sales data since January 2001, and it started publishing the index in March 2005.

Leading Indicator

Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later.

Sales rose in three of four regions from the prior month. They increased 10.2 percent in the West, 8.1 percent in the Midwest and 4.9 percent in the South. Sales fell 2 percent in the Northeast.

“As long as buyers do not overstretch and stay well within their budget, a sizeable pent up demand can be tapped among financially qualified potential buyers,” NAR Chief Economist Lawrence Yun said in a statement. Still, “We’re clearly not out of the woods because an excess of homes remains on the market.”

Sales of existing homes surged a record 9.4 percent in September to a 5.57 million annual rate, a report last month showed. The median price fell at the slowest pace in a year as the number of houses on the market shrank.

Federal Reserve

The Federal Reserve has announced it will phase out its purchases of $1.25 trillion in mortgage-backed securities by March, signaling borrowing costs for home buyers may rise after the average rate on a 30-year mortgage fell to a record 4.78 percent in April.

Consumer Confidence at a 26 Year Low

NEW YORK (CNNMoney.com) — A key measure of consumer confidence continued to slip in October, with consumers’ gauge of the current economic situation falling to a 26-year low, a research group said Tuesday.

The Conference Board, the New York-based research group said its Consumer Confidence Index fell to 47.7 in October from an upwardly revised 53.4 in September.

Economists were expecting the index to increase to 53.5, according to a Briefing.com consensus survey. The figure, which is based on a survey of 5,000 U.S. households, is closely watched because consumer spending makes up two-thirds of the nation’s economic activity.

The index component that evaluates consumers’ judgment of the present situation dipped to 20.7 in October, the lowest since the 17.5 measured in February 1983. It stood at 23 in September.

“Consumers’ assessment of the present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment,” said Lynn Franco, director of the Conference Board Consumer Research Center.

Employers continued to cut jobs from their payrolls in September, as the unemployment rate rose to 9.8% and hit another 26-year high in September, according to a report from the Labor Department earlier this month.

The percentage of those claiming that jobs are currently hard to get reached new high of 49.6%, while the number of consumers claiming that jobs are “plentiful” hit a new low at 3.4%.

“It is surprising how uniformly weak this report was,” said Mark Vitner, an economist at Wells Fargo. “The expectations had gotten ahead of themselves. Everyone thought that economy would follow the rebound in the stock market. But now that the rebound has leveled off, folks doubt whether conditions will get better.”

Recovery isn’t near for consumers. The expectation index, which measures consumers’ outlook over the next few months, declined to 65.7 from 73.7 last month. Similarly, the percentage of those expecting the job market to improve edged lower to 16.3% from 18%.

The number of consumers expecting their incomes to increase also fell to 10.3% from 11.2%, suggesting that shoppers will likely limit their holiday spending, said Franco. The average amount consumers spend on holiday-related shopping will drop by $22.27 to $682.74, said the National Retail Federation in a report last week.

The outlook for business conditions also grew more pessimistic in October, with the percentage of consumers expecting conditions to worsen climbing to 18.3% from 14.6%.

The overall index remains at historically low levels. A reading above 90 indicates the economy is solid, and 100 or above signals strong growth.

Vitner expects the main index to hover around 50 for the next several months.

“We need to see a real improvement in employment conditions. Layoffs need to stop rising and hiring needs to pick up,” he said. “The soonest that we think that consumers’ confidence will see a sustained rise would be late spring of next year.”

Economists predict GDP, the broadest measure of economic activity, rose at an annual rate of 3.2% in the third quarter of this year after a 0.7% drop in the second quarter. The government will release its advance third-quarter GDP report Thursday

Mortgage Rates As Low As They’ll Get!

Federal Reserve Mortgage Backed Securities Purchase Program is Coming to an End

Homebuyers & Refinancers  only have brief window to grab the sub-5-percent rates we’re seeing now. Michael Cauley, a broker with Mortgage Resource Plus Inc. in Birmingham, notes that even though the Fed’s $1.25 trillion Mortgage-Backed  Securities buying spree isn’t ending until April, it may slow down.

Cauley points out that the Fed program is down to its last $301 billion, which has to last another 25 weeks. That averages out to $12 billion a week to buy mortgage-backed securities, far off the pace of the $20 billion purchased just last week.

“This is obviously a significantly lower amount of buying, which will lead to higher mortgage rates,” Cauley says. “There’s no disputing the math. Consumers should not anticipate interest rates going lower than the current market.”

That means people who have their tax returns, wage stubs and other paperwork ready to go for a refinance or home purchase should get started!

“I remind everyone when rates are below 5 percent that it’s the lowest rate in 50 years,” says Dale Vermillion, author of “Navigating the Mortgage Maze.” “Any time you get the chance, you should take advantage of it.”

Find out HERE if your Mortgage is Owned By Freddie or Fannie

There are amazing refinance opportunities at my fingertips for many clients who would otherwise not qualify for today’s great rates.  This is part of the Economic Stimulus plan that is actually helping plenty of my clients to save money at a time when every penny counts.  One major factor is to find out if Fannie Mae or Freddie Mac owns your current first mortgage by using these simple online search tools.

To see if  FANNIE MAE owns your loan click on this link;

http://loanlookup.fanniemae.com/loanlookup/

To see if FREDDIE MAC owns your loan click on this link;

https://ww3.freddiemac.com/corporate/

Please contact me with the results you find and with any questions you may have.  This may be a great opportunity to save plenty of money by using our Government-Sponsored mortgage relief programs.

For more information read these previously posted articles;

Stimulus Refi’s to 125% Loan-to-Value

Brokers Now Offer Stimulus Refi’s With Freddie Mac Loans

Excerpt from previous post in March 2009…

President Obama’s eagerly anticipated foreclosure prevention program went into effect. It targets 9 million borrowers for help – are you one of them?

The $75 billion effort, dubbed the Homeowner Affordability and Stability Plan, boils down to two basic solutions:

First, the government is aiming to help more homeowners refinance their first mortgages into new low interest rates.  Second, it provides incentives to lenders and servicers to restructure your mortgage to more affordable levels.
Help for those seeking refinancing

This part of the program targets borrowers who have kept current on their mortgages. Many in this group have been unable to lower their housing costs through refinancings because of falling home prices.

Right now, if you’re “underwater” on your mortgage, meaning you owe more than the home’s market value, forget about qualifying for a refi. In fact, having 20% or less equity in your home makes refinancing almost impossible, unless you’re using an FHA loan or qualify for Mortgage Insurance which is harder to qualify for than the loan itself.

The new guidelines should help. Even homeowners with a mortgage that exceeds home value by 125% could be eligible, even if another 2nd mortgage exists on top of this figure. And there will be no prepayment penalties. But your loan must be owned by Fannie Mae or Freddie Mac.

Since lenders working with Fannie and Freddie already have most of the borrower documentation they need, the refinance process should go quickly. And, in some cases, lenders may not need to reappraise properties because borrowers cannot take cash out on these transactions; they’re only allowed to refinance the balance they owe.

The Administration estimates that this program, which will be in effect until June 2010, will help 5 million homeowners.

All borrowers will have to prove they have sufficient income to be able to keep up their loan payments and credit scores play a critical role in determining the rate you will receive.

Rates At Low, Gradual Increase Over Next Few Months

Detroit News – If you’ve been waiting to see how low mortgage rates can go, you can stop. This is it.

The latest surveys show the national average rate on 30-year mortgages stayed below 5 percent for the second or third week in a row, depending on which surveys you choose. While these ultra-low rates aren’t likely to last for long, experts say rates will hover around 5.5 percent for at least a few months more.

“Mortgage rates continue to flirt with record lows,” says Greg McBride, senior financial analyst at consumer finance site Bankrate.com. “The outlook in the near term is that rates are going to stay very, very low.”

Rates on a 30-year fixed-rate home loan were at 4.87 percent Thursday, down from 4.94 percent last week, according to the weekly survey by mortgage buyer Freddie Mac. The Mortgage Bankers Association put the rate at 4.89 percent, down from 4.94 percent the week before and 4.97 percent two weeks ago.

The dip in loan rates has home buyers and owners applying for new mortgages, the Mortgage Bankers say. Loan applications were up 16.4 percent for the week ended Wednesday, while refinancing requests increased 18.2 percent. That’s the highest level since mid-May, after mortgage rates dropped below 5 percent for a 10-week period.

Just how low is this? Consider that last year, at what was most likely the height of the Great Recession, 30-year loans averaged just above 6 percent. Even during the peak of mortgage madness a few years ago, rates on 30-year loans averaged more than 5.8 percent, according to Freddie Mac.

Fed buying plan pushed rates down

The cost of borrowing hasn’t come down because of the $8,000 first-time homebuyer’s tax credit, falling home prices or any rise in demand by borrowers. Instead, rates have been pushed down thanks to a bond-buying spree from the Federal Reserve.

After cutting the key federal discount rate effectively down to zero in December 2008, mortgage rates barely budged — partly because they already were below the bargain rate of 5.25 percent. To buoy the struggling housing sector, the Fed kicked mortgage rates even lower with a program to buy truckloads of mortgage-backed securities.

The increased flow of capital to mortgage lenders has pushed rates down by about another half-percent, McBride explains. Coupled with a drop in 10-year Treasury bonds, which also serve as a peg for mortgage rates, home loans have stayed in the bargain basement.

The result, coupled with the first-time credit and low home prices, has been a pick-up in home sales and — for most of the rest of the nation — a lift in home prices, too, as low loan rates make homes more affordable without sellers having to lower the price.

Huge spike in interest rates not expected

While rates of less than 5 percent can’t last for long, homebuyers don’t need to panic that rates will bust too far out of this historically low range right away. Even a fluctuation of a half-point in rates wouldn’t put a home purchase out of reach — the difference between a loan at 5 percent versus 5.5 percent on a $200,000 loan comes out to just $62 a month.

“Nobody can predict where interest rates are going to go,” says Harry Glanz, co-founder of Capital Mortgage Funding in Southfield, “but it would be insane for rates to go up if they want to sustain any kind of rally in the housing market. Everybody benefits from it.”

But homebuyers may only have brief window to grab the sub-5-percent rates we’re seeing now. Michael Cauley, a broker with Mortgage Resource Plus Inc. in Birmingham, notes that even though the Fed’s $1 trillion mortgage securities buying spree isn’t ending until April, it may slow down.

Cauley points out that the Fed program is down to its last $301 billion, which has to last another 25 weeks. That averages out to $12 billion a week to buy mortgage-backed securities, far off the pace of the $20 billion purchased just last week.

“This is obviously a significantly lower amount of buying, which will lead to higher mortgage rates,” Cauley says. “There’s no disputing the math. Consumers should not anticipate interest rates going lower than the current market.”

That means people who have their tax returns, wage stubs and other paperwork ready to go for a refinance or home purchase should get moving.

“I remind everyone when rates are below 5 percent that it’s the lowest rate in 50 years,” says Dale Vermillion, author of “Navigating the Mortgage Maze.” “Any time you get the chance, you should take advantage of it.”

Bob Walters, chief economist for mortgage broker Quicken Loans, notes that while rates might not really pick up until at least the first quarter of 2010, the current lows won’t last forever.

“When you can lock in a 30-year loan at 5 percent, just do it,” Walters says. “Years from now, people who locked in a mortgage at 5 percent will be very happy.”

Mortgage Applications Rise as Rates Fall, But Clock is Ticking

NEW YORK (CNNMoney.com) — Mortgage applications surged last week as interest rates on home loans remained low, an industry group said Wednesday.

The Mortgage Bankers Association said its index of mortgage application volume rose 16.4% last week versus the previous week.

The surge in activity came as rates on 30-year fixed rate mortgages, the most widely used loan, remained below 5% for the third week in a row.

The average interest rate for 30-year fixed-rate mortgages fell to 4.89% last week from 4.94% the week before, according to the MBA. It was the lowest level since May 2009 when 30-year rates were 4.81%.

The report bodes well for the U.S. housing market, which has been stabilizing following a major slump. In addition to low interest rates, home sales have been supported by affordable prices and government tax credits.

But analysts say the market remains hampered by rising unemployment and warn that the budding recovery could falter if a popular $8,000 tax credit is allowed to expire at the end of the year.

Surprise Unemployment Spike Dims Quick Recovery

The American economy lost 263,000 jobs in September and the unemployment rate rose to 9.8 percent, the government reported on Friday, dimming the prospect of any meaningful job growth by the end of the year.

The Labor Department’s monthly snapshot of unemployment dashed hopes that the pace of job losses would continue to slow as the economy clawed its way back from a deep recession. Economists had been hoping for 175,000 monthly job losses.

In one bright spot, fewer jobs were lost in August than originally reported — with 201,000 positions gone instead of earlier figures of 216,000.

But overall, the report offered little good news for the 15.1 million unemployed people in the United States. The number of hours worked stagnated. Overtime hours slipped in many industries. And temporary help companies — typically, among the first to rebound after a recession — shed 1,700 jobs.

Indeed, while many businesses are making money again and seeing new orders trickle in, most are not ready to hire back the workers they laid off, even part-time.

To economists, that suggests that unemployment could remain at historically high levels through next year, if not longer.

“It’s a little bleak,” said Marissa Di Natale, senior economist at Moody’s Economy.com. “We’re not going to see job growth until the second half of next year. And even when it does start to grow, it’s going to be slow.”

The economy has been bleeding jobs every month, without interruption, for nearly two years. More than 15 million people in the United States are now unemployed, and more are working part-time jobs for less pay, or have given up looking for work altogether.

“This is still severe,” said Andrew Stettner, deputy director of the National Employment Law Project. “It’s not going to be turning around as fast as people want.”

Overview & Effect of Restrictive Appraisal Rules HVCC

Realtors and lenders say new appraisal rules, forced on the industry by State Attorney General Andrew M. Cuomo, are slowing down the sales and mortgage process, hindering deals that used to sail through.

The new requirements hold appraisers to higher standards, and severely restrict contact between them and lenders to prevent fraud.

And appraisers aren’t taking chances, opting for more conservative valuations of homes with no leeway, not even to accommodate seller financing desired by both parties to the deal.

“The appraisers are being very close to the cost,” said Miriam Treger, a branch manager for RealtyUSA. “Part of what a house is worth is what somebody is willing to pay for it. If a house is worth $130,000, is it worth $132,000?”

As a result, what was once considered too easy — getting a higher sales price or loan amount approved than what a house was originally appraised for—can now be quite difficult.

That has meant brokers must either produce more information or “comparable sales” examples for appraisers, or work with buyers and sellers to renegotiate deals, as Schemm did.

“It’s really slowed down the whole entire process, and sometimes properties are having to be reviewed two or three times,” said Susan Lenahan, a leading real estate broker in Buffalo for MJ Peterson. “They take a whole lot longer. They have to be reinspected. And when you have multiple properties involved, like in a chain, people are really put out.”

Brokers and lenders agree that the changes were necessary after the mortgage and housing crisis exposed the shenanigans of the past. But they say the changes may have gone too far in the other direction. “It’s just too stringent,” Schemm said.

“It will never go back to the way it was, which is good,” Lenahan said. “But it’s really a problem for good, honest people.”

But some appraisers say nothing’s really changed. “Do we still get appraisal requests that have values on them? Yes. Do they still want us to target certain numbers? Absolutely,” said Ted Catalano, senior appraiser for Independent Appraisal Service in Kenmore. “So even though there’s not supposed to be any contact, the pressure’s still pretty intense.”

Easing the pressure

The new rules, known as the Home Valuation Code of Conduct (HVCC), were put into place last year to assure the independence of appraisers and protect them from improper influence by mortgage brokers, lenders and others with a financial interest in a deal.

That’s in response to a serious concern by Cuomo and other regulators that such pressure on appraisers to agree to a particular home valuation helped support or fuel the real estate bubble by inflating prices.

“The HVCC was meant to eliminate the pressure on appraisers to hit certain values,” said Thomas Kirchmeyer, president of appraisal firm Kirchmeyer & Associates. “Why would the lender want to risk approving a loan on a property that’s not worth what it sold for?”

Critics say that kind of influence was rampant in the industry for years. And it drove rash or speculative lending, while contributing to predatory or even fraudulent practices.

In fact, Cuomo sued mortgage information and research company First American and its appraisal subsidiary, accusing them of knowingly caving in to pressure from Washington Mutual to use appraisers who inflated home values to support loans. The suit said First American wanted more business.

“Appraisers that always gave the lender what they wanted would get most of the work,” Kirchmeyer said. “How do you think we got into this foreclosure mess in the first place?”

So in March 2008, following a year-long investigation into mortgage fraud, Cuomo teamed up with a federal regulatory agency to force mortgage finance giants Fannie Mae and Freddie Mac to agree to only buy loans from banks that meet certain standards.

Those standards mandated adherence to the appraisal code of conduct, which was revised before it went into effect in May 2009. It applies only to nongovernment- insured single-family mortgage loans. But since the two “government-sponsored enterprises” buy at least 60 percent of all mortgages made in this country, that agreement effectively changed the entire industry.

Also, the Federal Housing Administration is applying the code to FHA loans, as of Jan. 1.

“I believe it’s been very constructive,” said Robert L. Vacanti, president of Northeastern Appraisal Associates in Williamsville, a large national appraisal firm that has more than 2,000 appraisers in all 50 states within its network. “Anytime there’s a fire wall and anytime there is something that ensures appraiser independence, there’s less pressure on the appraiser.”

New restrictions

At its core, the code bars anyone tied to the lender from influencing or trying to influence an appraisal by withholding payment or future business, threatening to do so, or promising future business or payments depending on the valuations reached. Lenders also can’t provide stock or other benefits to appraisers.

It also prohibits lenders from asking for or providing a particular value to be reached, or providing estimated values or comparable sales, though they can provide a copy of the contract.

“It’s all to protect the interest of the lender and ultimately the consumer,” Kirchmeyer said. “Now, the order cannot even have an estimated value or target amount for the appraiser to see, resulting in a true unbiased opinion of value.”

But more broadly, individual loan officers and mortgage brokers, who may benefit financially from the loan sale, are no longer allowed to even choose, hire, pay, or communicate directly with appraisers.

Real estate agents also cannot choose, retain or compensate appraisers, but they can talk to them to provide information or address problems.

“There was a time when we could just tell the appraiser what we wanted and they could make it happen,” said Mary Certo, another RealtyUSA broker. “Now, in light of everything that has happened in the lending arena, we do not speak to them unless there is a problem.”

Instead, the lender must hire appraisers through either separate, non-commissioned staff with no connection to the sale of the loan, or through the use of independent, third-party appraisal management companies. Such companies act as middlemen, taking contracts from lenders and farming them out at random to individual appraisers around the country.

“Nobody that has a stake in the outcome of an appraisal can place the order,” Kirchmeyer said.

New industry emerges

That has resulted in the rapid growth of a whole new industry and a rush by appraisers to ensure they would stay relevant. Many large appraisal firms, like Northeastern and Kirchmeyer, even started their own management companies. So not only do they do the actual appraisals in their local areas, but they also manage appraisal assignments for an array of lenders, assigning the work both to their own staff as well as through regional or nationwide networks.

“We decide who the order goes to, not the lender,” Kirchmeyer said.

Management firms say that makes for a more efficient system. “I think it’s much more effective than it has been in the past,” Vacanti said. “The bank can communicate with us directly and not chase several hundred appraisers.”

But it has its own complications. For one thing, working through a middleman means it takes longer to get information to the appraiser. “Closings are tending to take a little bit longer, and agents are working very hard to get deals to the closing table,” Riordan said. “There’s more obstacles, more hurdles and more time spent.”

A lack of familiarity

And many lenders now outsource their appraisal work to a single national management firm from out of town, who in turn is not always familiar with individual markets and variations from city to city. “If you have a large national company coming into an area where they don’t know the marketplace, it could be a nightmare,” said Brooke Anderson-Tompkins, president of 1st Priority Mortgage, a division of RealtyUSA.

Regulators attempted to address that over the summer, requiring that the appraisers have clear experience in the geographic area in which they are working. But there are still significant variations within counties or even within cities.

“It’s a problem for us that some of the appraisers aren’t as familiar with the area,” Treger said. “Each neighborhood, especially in Western New York, has its own characteristics and traits.”

“In the city, things can change very rapidly, block to block. You really need someone who’s very knowledgeable,” said Tim Riordan, an associate broker at MJ Peterson. “We’re getting appraisers from as far away as Pendleton and Java who aren’t as intimately familiar with city neighborhoods.”

Lenahan said she’s had an experience with one out-of-town lender that saw the disaster declaration for Erie County stemming from the flooding in Gowanda. As a result, she said, all properties with that lender had to be reinspected. “They think that the city of Buffalo is Gowanda,” she said.

Also hindering the process is a newer requirement that appraisers use more recent comparable sales, from within the last three months. That’s fine in large markets with lots of sales, but critics say it doesn’t work as well in areas where the volume of activity is less, especially if the property itself is unique.

That’s why real estate brokers defend their desire to provide appraisers with more information, especially comparable sales they feel are appropriate and valid comparisons.

“We certainly understand there was too many problems with banks being in cahoots with appraisers. We don’t want that at all,” Treger said. “It’s just a matter of being able to prove the value, not ask for a favor.”

Helpful Home Buying/Selling Strategies In Current Market

(Money Magazine) — Home sales are rising. Builders are buying lots. And prices are no longer in free fall. After so much pain, there are signs of life in the housing market.

But the “recovery” is far from universal. In many cities cheaper homes are selling fast — but mid-range properties are still lingering, and high-end homes are gathering dust. “The luxury market still looks ugly,” says economist Joshua Shapiro at economics consultancy MFR. If you’re selling or buying, your strategies should depend on the value of the home you want or own.

The bottom tier (hot)

The lowdown: A big chunk of the 1.9 million post-boom foreclosures have been among the least expensive 35% of homes. Bargain prices on these foreclosures and a new tax credit of up to $8,000 for first-time buyers have lured investors and would-be homeowners back to the market, even in hard-hit areas, says Pat Lashinsky, CEO of online brokerage ZipRealty.

Sales of homes between $100,000 and $250,000 are up 9% from a year ago. Meanwhile, many banks halted foreclosures earlier this year while waiting for details on the Obama administration’s foreclosure-prevention plan. Greater demand combined with less supply is providing a strong spark to the market. “Buyers in most areas are now going up against multiple offers,” says Lashinsky.

Buyers: See homes the first day they’re listed, and if there’s one you want, submit an offer immediately, says Phoenix realtor Susan Ramsey. Don’t expect a deep discount; prices for lower-end homes are stabilizing. Put down 20% or more, if you can, to compete with cash-rich investors. Offer not accepted? Check in with the seller’s agent a few more times; many deals fall through.

If you aren’t under pressure to move, keep in mind that the supply crunch is probably temporary. The foreclosure rate is expected to stay at record highs for the rest of the year, and as prices stabilize, more sellers will jump back into the market.

Sellers: Forget trying to compete with foreclosures on price. Some buyers will pay more for a home in move-in condition, so spruce yours up and sell that fact hard in your marketing materials.

Many of the other listings are likely to be short sales in which the bank agrees to accept a price below what the owners owe on their mortgage. Since short sales can take months, offering a quick, flexible closing date will give you another advantage — and attract first-time buyers aiming to take advantage of the tax credit before it expires at the end of November.

The middle tier (cool)

The lowdown: Demand is soft. That’s because the likely buyers are trying to trade up — difficult for people who bought in the past five years, because they have so little equity. In fact, about a third of all homeowners with a mortgage owe more than the home is worth, according to First American CoreLogic.

Buyers: Unload your current home first, so you know what you can afford to spend on a new place. When you find a home you like, offer 10% less than the asking price — a realistic discount for a lukewarm market, says realtor Ramsey.

Sellers: If you have to move soon, it’s all about standing out from the pack. If your home is sitting on the market, go for one big price cut instead of slowly ratcheting down. A bold move will attract attention and prevent the listing from going stale. Offer to cover closing costs, and since many buyers will be short on cash after the purchase, throw in some necessary improvements, such as new carpeting, blinds, or painting.

If your home is in the half-million-dollar range, try to set the price at a level that doesn’t require a jumbo loan, normally $417,000 or less (up to $729,750 in pricey areas). The difference between a $400,000 conforming loan and a $420,000 jumbo loan is several hundred dollars a month. Finally, if you can hang in there, know that prices will likely start to recover within the next 12 to 18 months, says economist Shapiro.

The top tier (cold)

The lowdown: The recession and the credit crunch have almost shut down the top 10% of the market, says Joel Naroff, president of Naroff Economic Advisors. Fewer people can afford a luxury property, and since banks are hesitant to underwrite supersize loans, it’s tough to finance them.

Moreover, foreclosures are rarer at this price level, and homeowners, unlike banks, are reluctant to slash their price. Given all that, the prices on high-end homes will probably fall another 10% until the market hits bottom, says Mark Zandi, chief economist at Moody’s Economy.com.

Buyers: Get pre-approval before you shop: Jumbo mortgages are tougher to qualify for, require larger down payments (as much as 30% to 40%), and cost nearly a percentage point more than smaller loans. And ask for freebies: While sellers often balk at low-ball offers, they should be willing to negotiate, including paying closing costs and other extras. “You can set the terms,” says ZipRealty’s Lashinsky. If the seller refuses, move on.

Sellers: You’ll need to seriously undercut the competition. (Your agent can provide comparable sales figures for the past three months.) You may want to finance the deal yourself. And motivate buyer’s agents with a larger cut of the deal — a total of 4%, says Sacramento realtor Larry Henderson. It may be painful, but the price of your home is likely to fall further if you wait — and recovery for your market is a ways off.

Refinancers Saving Combined $11,500,000,000!

Housingwire.com – US borrowers who refinanced in the first half of 2009 will receive $11.5bn in total mortgage payment savings over the next five years as a result of recent government reductions in mortgage rates, according to a study released by First American CoreLogic.

The study analyzed more than 2.2m residential mortgage refinances between October 2008 and June 2009 to track the affects of the Federal Reserve’s interest rate reductions and government refinance programs on the increased consumer disposable income and their refinance activity.

Researchers analyzed data from First American’s public-record database, which covers 96% of the US population.

The study also showed that more than $1trn in US residential mortgage financings, including $790bn of refinancing, took place from January to June. Consumers who refinanced in the first half of 2009 saw their monthly payments drop by an average of $120, a 10.5% reduction from their previous payments.

This refinance boom was likely meant for mortgage debt reduction rather than equity extraction, according to the report.

“Assuming this is the case, the resultant reduction in monthly debt burdens for the consumer is a fiscal stimulus benefit that accrues to the overall economy,” researchers said in the report. “Lower mortgage payments mean more money in the consumer’s pocket for other purposes.”

Lower mortgage rates are one way to achieve a lower mortgage payment through refinancing.

Housing Recovery?

NEW YORK (Fortune) — Is the housing bust over?

Shares of Toll Brothers (TOL), Hovnanian (HOV) and KB Home (KBH) and other builders have surged. The exchange-traded fund that tracks the group has nearly doubled since March.

Home starts have risen for five straight months, while sales of new homes recently hit their highest level since last September. Prices are up as well: the Case-Shiller index of national house prices rose 2.9% in the second quarter, ending a three-year decline.

These signs — as well as anecdotal reports about house shoppers growing more willing to write a deposit check — have executives at homebuilding firms declaring the worst is over.

“We believe declining cancellations and more solid demand indicate that the housing market is stabilizing,” Toll Brothers chief executive officer Bob Toll said this month in a conference call with investors and analysts.

But housing boosters have forecast turnarounds repeatedly since the market peaked in 2006, only to be proved wrong by plunging prices. And skeptics say they’re wrong again now.

They argue that a deeply indebted consumer, a weak job market, expiring incentives and rising foreclosures spell a quick end to any housing rebound.

“We’re entering the phase where the homeowner has to earn his way out of this mess,” said Mark Hanson, who runs a California real estate research firm. “This summer is shaping up as the gateway into the next move down.”
Sales shift

Hanson attributes the much-ballyhooed recent house price gains to a shift in the types of properties changing hands. Earlier this year, as many as half of all transactions nationally were resales of foreclosed properties, largely at low prices.

Since then, so-called organic sales (those not involving distressed properties) have risen while foreclosure sales have remained stable. This improved mix — together with cheap financing and a couple of popular tax incentives — helped to revive prices in some hard-hit areas.

Thus, house prices in California have risen for three straight months, according to data provider MDA DataQuick. Foreclosure sales there have dropped to about a third of recent transactions from a high of 57% earlier this year.

But with schools opening up again and the summer home-selling season winding down, sales by nondistressed sellers are likely to fall in coming months, Hanson said.

Adding to the pressure on prices, the end is in sight (or already here) for some popular housing subsidies. An $8,000 federal tax credit for first-time home buyers is due to sunset in December. A $10,000 California tax credit for buyers of newly constructed houses expired last month.
Prime problems

Another concern is that the housing woes appear to be spreading well beyond the questionable borrowers who were at the center of the first stage of the financial crisis.
0:00 /2:48Banks leave foreclosures hanging

While many mortgage defaults in 2007 and 2008 stemmed from frauds perpetrated at the height of the bubble, a greater share of problems now are being driven by the weak job market. That’s evident in the fact that more so-called prime borrowers — those with the best credit histories — are falling behind on their payments.

Prime fixed-rate mortgages now account for about a third of foreclosure starts, according to the Mortgage Bankers Association. MBA chief economist Jay Brinkmann said in a statement earlier this month this is “a sign that mortgage performance is once again being driven by unemployment.”

Some 44% of prime borrowers fell behind on payments last year because they lost a job or income. That’s up from 36% in 2006, according to data from Freddie Mac.

Other numbers bode ill for a housing recovery as well. The inventory of houses for sale has come down from a recent peak but remains “high on a historical basis,” Office of Thrift Supervision economist Sharon Stark said this month.

“The supply of homes continues to be a drag on home prices and the ability for home prices to recover,” she added.

An orgy of homebuilding over the past decade has driven vacancy rates higher. The Census Bureau said 14.3% of rental and owner-occupied housing units were vacant in the second quarter, compared with 9.7% a decade ago.

And Hanson said the pace of foreclosures could soon accelerate as mortgage servicers catch up on foreclosures they have delayed while grappling with new mortgage modification guidelines.

“There could be a big wall of foreclosures once the servicers get running again,” he said.

Even Toll, who was talking about housing markets “dancing on the bottom or slightly above that” as long ago as December 2006, has been saying lately that the homebuilders could use a hand — from taxpayers, of course.

Toll said on a conference call Aug. 12 that the government should consider a Cash for Clunkers type plan for the housing market: giving consumers a rebate to scrap an old home and buy a new one.

Toll argued that a four-month program that offered people $15,000 vouchers for new home construction could “put twice as many people to work, twice as fast as what’s being done with the auto industry.”

It won’t be a shocker if Toll finds some takers in Congress for that one, given the growing jobless rolls across the nation. But legislators might first want to consider how effective such a plan might be.

“It took 10 years to create this problem,” said Hanson. “Do people really believe we can correct it all in 36 months?”

New Home Sales Advance in July

Data suggesting that the economy is stabilizing continues to pile in this week, most recently in the housing market. New Home Sales advanced by 9.6% in July, beating expectations for a 5% increase and following up on a 9.1% advance in the prior month.

July marks the fourth consecutive monthly increase, pushing the annual pace of sales to 433,000 — the first time same sales have passed the 400k mark since October. The annual rate is still 13.4% below the pace in July 2008, yet that compares nicely with the 19.1% annual decline reported in June.

“This report was surprisingly strong, and helps to further the story that the U.S. housing market has now reached a stabilization point,” said Ian Pollick, strategist at TD Securities. He added that “housing conditions remain favorable due to low mortgage rates, deep discounts and a rosier economic outlook.”

Excess overhang also got slashed by an entire month’s worth. At the current sales pace there are 7.5 months worth of inventory on the market, compared with 8.5 months in June. Overhang peaked in January at 12.1 months, and then fell in four of the past five months.

According to analysts at RDQ, the number of unsold new homes, in absolute numbers, is the lowest since March 1993.

The report carried plenty of revisions, but all were positive. The sales pace in June was revised up 11k to 395k, while May is now 362k (from 346k), and April is now 345k (from 338k).
“The fact that there were upward revisions to the prior three months and July’s gain is the fourth in a row speaks volumes to the housing recovery,” commented Jennifer Lee from BMO.

Sales in the Northeast advanced by nearly one-third (32.4%), while sales in the South climbed 16.2%, and sales in the West inched up 1%. In the Midwest, however, sales dropped 7.6%.
As for housing prices, the median during the month was $210,100, about equivalent to the figure in June and broadly in line with prices seen in 2009.

Record US Deficits for Next Decade. Sluggish Recovery.

WASHINGTON – The federal government faces exploding deficits and mounting debt over the next decade, White House and congressional budget officials projected Tuesday in competing but similar economic forecasts.

Both the White House Office of Management and Budget and the nonpartisan Congressional Budget Office predicted the budget deficit this year would swell to nearly $1.6 trillion, a record, and far above the then-record 2008 budget deficit of $455 billion.

But while figures released by the White House foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May, congressional budget analysts put the 10-year figure at a lower $7.14 trillion.

One reason for the difference: The CBO projection is based on an assumption that all the tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011 as dictated by current law. President Barack Obama’s budget baseline, however, hews to his proposal to keep the tax cuts in place for families earning less than $250,000 a year.

Beyond the 10-year forecast, the nation will face further challenges posed by rising health care costs and the aging of the population, the CBO said. “The budget remains on an unsustainable path” over the long-term and will require some combination of lower spending and higher tax revenues, it said.

Both forecasts see unemployment rising to 10 percent before falling and both suggest growth will return to the economy later this year but that recovery will be slow after the longest and deepest recession since the 1930s

“This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter,” said Obama economic adviser Christina Romer.

She predicted unemployment could reach 10 percent this year and begin a slow decline next year. Still, she said, the average unemployment will be 9.3 in 2009 and 9.8 percent in 2010. The CBO had similar figures.

Both see the national debt — the accumulation of annual budget deficits — as nearly doubling over the next day. The total national debt, made up of amounts the government owes to the public, including foreign governments, as well as money it has borrowed from itself, stood Tuesday at a staggering $11.7 trillion.

Obama himself may have drowned out the rising deficit news with the announcement Tuesday that he intends to nominate Ben Bernanke to a second term as chairman of the Federal Reserve. The Bernanke news, and a report that consumers are regaining some confidence, may have neutralized any disturbance in the financial markets caused by the high deficit projections. Stocks were up in late morning trading.

The deeper red ink and the gloomy unemployment forecast present Obama with an enormous challenge. The new numbers come as he prods Congress to enact a major overhaul of the health care system — one that could cost $1 trillion or more over 10 years. Obama has said he doesn’t want the measure to add to the deficit, but lawmakers have been unable to agree on revenues that cover the cost.

What’s more, the high unemployment could last well into the congressional election campaign next year, turning the contests into a referendum on Obama’s economic policies.

“The alarm bells on our nation’s fiscal condition have now become a siren,” Senate Minority Leader Mitch McConnell, R-Ky., said. “If anyone had any doubts that this burden on future generations is unsustainable, they’re gone — spending, borrowing and debt are out of control.”

The revised White House estimates project that the economy will contract by 2.8 percent this year, more than twice what the White House predicted earlier this year. Romer projected that the economy would expand in 2010, but by 2 percent instead of the 3.2 percent growth the White House predicted in May. By 2011, Romer estimated, the economy would be humming at 3.6 percent growth.

Both Romer and budget director Peter Orszag said this year’s contraction would have been far worse without money from the $787 billion economic stimulus package that Obama pushed through Congress as one of his first major acts as president.

At the same time, the continuing stresses on the economy have, in effect, increased the size of the stimulus package because the government will have to spend more in unemployment insurance and food stamps, Orszag said. He said the cost of the stimulus package — which spends most of its money in fiscal year 2010 — will grow by tens of billions of dollars above the original $787 billion.

For now, while the country tries to come out of a recession, neither spending cuts nor broad tax increases would be prudent deficit-fighting measures. But Obama is likely to face those choices once the economy shows signs of a steady recovery, and it could test his vow to only raise taxes on the wealthy.

Still, 10-year budget projections can be “wildly inaccurate,” said Stan Collender, a partner at Qorvis Communications and a former congressional budget official. Collender notes that there will be five congressional elections over the next 10 years and any number of foreign and domestic challenges that will make actual deficit figures very different from the estimates.

The Obama administration did tout one number in its budget review: The 2009 deficit is now expected to be $1.58 trillion, $263 billion less than projected by the White House in May. That’s largely because the White House removed a $250 billion item that it had inserted as a “place holder” in case banks needed another bailout.

4,000,000 Mortgages Are Now Delinquent, Foreclosures Up

NEW YORK (CNNMoney.com) — The number of Americans who have fallen at least 30 days behind on their home loan payments jumped 44% in the second quarter from a year ago, according to an industry report.

That puts delinquencies at a record 9.24% of mortgages, according to the National Delinquency Report from the Mortgage Bankers Association (MBA). That represents more than 4 million of the 45 million borrowers covered by the report.

What the rate does not include, however, are loans already in foreclosure. Some 4.3% of all the mortgages are in that stage, up from 3.85% three months earlier and 1.55 percentage points from one year ago.

The combined percentage of loans past due and those already in foreclosure hit 13.16% during the quarter, the highest ever recorded by the MBA survey

“There was a major drop in foreclosures on subprime ARM loans,” said Jay Brinkmann, chief economist for the MBA, in a prepared statement. “The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase.”

Indeed, the MBA survey reported that prime, fixed-rate mortgages accounted for nearly one in every three foreclosure starts. That’s way up from a year ago, when only one of every five foreclosure start involved a prime loan.

That bodes ill for the future health of the mortgage market. Prime loans make up two-thirds of the mortgage market, and if delinquencies among these mortgages continue to proliferate, the number of foreclosures will soar.

Brinkmann forecasts continued delinquency and foreclosure increases until the economy starts to recover. He predicts that job losses will peak by mid-2010, as will delinquencies, and foreclosures will start to fall about six months later.
Problem areas

The so-called “sand states” continue to contribute disproportionately to the mortgage meltdown. Four states — California, Florida, Arizona and Nevada — accounted for 44% of all foreclosure starts during the quarter.

“Issues related to the deteriorating economy and deteriorating home prices in those states have driven their delinquency problems],” said Brinkmann

In Florida, 12% of mortgages were somewhere in the process of foreclosure, the highest in the nation; another 5% were at least 90 days past due as of the end of June.

Adding in 30 days and 60 days past due and Florida’s total delinquency rate comes to 22.8% — almost twice the national percentage. The next highest states are Nevada at 21.3%, Arizona at 16.3% and Michigan at 15.3%. California stood at 15.2%, but because it is such a large state, that represents nearly 900,000 mortgage borrowers.

“It’s hard to look at a national recovery,” Brinkmann said. “We could have multiple bottoms with some markets recovering much faster than others.”

Homes More Affordable Now Than Last 2 Decades

NEW YORK (CNNMoney.com) — Homes continue to be more affordable than they have been in nearly two decades.

The typical American family, making the nation’s median income of $64,000 a year, could afford to buy 72.3% of all homes sold in the United States during the second quarter, according a quarterly report from the National Association of Home Builders (NAHB) and Wells Fargo (WFC, Fortune 500).

That’s off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable.

“The increase in affordability — along with the $8,000 federal tax credit for home buyers — is stimulating demand, particularly among young, first-time buyers,” said NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla., in a prepared statement.

The NAHB judges a home to be affordable if a family making the metro area’s median income could devote no more than 28% of their take-home pay toward housing costs.

The vast improvement this year is due to plunging prices and rock-bottom interest rates. The average U.S. home price has dropped more than 32% from its peak, which was set during the summer of 2006, according to the S&P/Case-Shiller Home Price index. And, for most of the three months mortgage rates were historically low, under 5% for a 30-year fixed-rate loan.

Long suffering sellers

The improved affordability comes, of course, at the expense of sellers. Real estate Web site Zillow reported that more than 30% of all homes sold during the three months ended June 30 went for less than what the sellers originally paid.

The longer they owned the home, the more likely they were to profit from the resale, but virtually anyone who bought within the past five years and sold during the quarter lost money on the deal, according to Stan Humphries, Zillow’s vice president in charge of data and analytics.

Foreclosure factor

The heartbreak among home sellers is compounded by the foreclosure problem. Many of the homes on the market got there because families lost their homes to foreclosure.

Part of the reason that home prices have become so reasonable is the volume of REOs — real estate speak for homes repossessed by banks — has spiked. There were more than 87,000 repossessions in July, about triple the number of July 2007.

Foreclosed homes are often listed and sold at steep discounts to produce quick sales, according to Brad Geisen, founder of Foreclosure.com, which markets such properties.

“The big banks are finally pricing their properties to what people will pay for them,” he said. “Foreclosure inventory is now selling at about the same rate it’s coming in.”

Closure of Taylor Bean Sheds Light on Mortgage & Housing Mess

McLean, VA – August 7, 2009 – The National Association of Mortgage Brokers (NAMB) today expressed its concern over the loss of Taylor, Bean & Whitaker as a major channel for wholesale funding of loans.  NAMB President Jim Pair, CMC, issued the following statement in response to this critical change in the market:

“Losing one of the largest wholesale mortgage lenders as a channel for funding has already triggered a ripple effect throughout the industry, canceling tens of thousands of  loan approvals and severely harming the consumer.  Taylor, Bean and Whitaker’s failure to fund its pipeline of loans will cause consumers to be left waiting as originators attempt to transfer loans.

“Because of the Home Valuation Code of Conduct (HVCC), loans will not be transferred without further costs forced on consumers as new appraisals will need to be ordered.  The lack of portability caused by the HVCC, coupled with already slow turnaround times, will undoubtedly prolong the process to obtain a home or refinance.  According to a recent National Association of Realtors ® survey, nearly 70 percent of NAR appraiser members say the HVCC has increased the time to close by more than a week.  The HVCC must be repealed immediately for these loans to be transferred and funded without harming consumers

“New disclosure requirements under Regulation Z of the Truth in Lending Act (TILA) implemented by the Mortgage Disclosure and Improvement Act (MDIA) took effect July 30, 2009.  Lenders are already raising concerns about the required waiting periods under the new rule and their effect on the unfunded loans by Taylor, Bean & Whitaker.  NAMB urges the Federal Reserve to clarify the new rule, so that all lenders and wholesalers are using similar guidelines preventing more obstacles and time delays for consumers during the loan closing process.

“The issue of Taylor, Bean & Whitaker has shed more light on problems in the marketplace.  Together, the HVCC and the MDIA disclosure requirements are causing unintended consequences and slowing a housing recovery.  NAMB will continue to work to ensure the consumer will not be hindered or delayed.”

Half of All Mortgages Will Soon Be “Underwater”

NEW YORK (CNNMoney.com) — Nearly half the nation’s mortgage borrowers will soon owe more on their mortgages than their homes are worth, according to a new report.

A Deutsche Bank analysis of the battered housing and mortgage markets estimated that 25 million borrowers, representing 48% of all Americans with mortgage loans, will plunge underwater before home prices are expected to stabilize in the beginning of 2011.

“If our home-price forecast is correct, roughly one in two mortgage borrowers and one in three homeowners will owe more than their home is worth,” said Karen Weaver, one of the researchers who authored the report. “That’s a dramatic shift from the past several decades when housing was the foundation of middle class wealth.”

This estimate is even steeper than what many other experts have previously reported or predicted. First American CoreLogic estimated 11 million homeowners — and rising — were underwater by the end of 2008. Moody’s Economy.com estimated 15 million at the end of March and projected 17.5 million by early 2010. Zillow.com reported that 20 million were already underwater at the end of the first quarter 2009.

This level of negative equity could compel more borrowers to “strategically” default — or walk away — particularly those who are so far underwater that they fear they’ll never break even.

“Severely underwater borrowers may conclude that their property value will never recover and they may ‘walk away’ even if they are able to make mortgage payments,” said Weaver.

Currently, 26%, of defaults are classified as strategic, according to a recently published paper by Paola Sapienza, a finance professor with Northwestern University, and Luigi Zingales, a finance professor at the University of Chicago.

They found little evidence that homeowners voluntarily default unless their equity shortfall exceeds 10%.

The Deutsche Bank paper forecasts that the percentage of borrowers who are severely underwater (25% or more) will more than double to 28%. So it’s likely that the number of people voluntarily defaulting will grow quickly.

The most likely to pack it in are those borrowers who know someone else who walked away. “People who know someone who defaulted strategically are 82% more likely to declare their [own] intention to do so,” claimed Sapienza and Zingales in their paper.
Epicenters

The twin centers of underwater world are the “sand states” and the rust belt. The worst hit metro areas are Merced and El Centro, Calif., where 85% of mortgage borrowers are underwater.

Others hard hit areas include: Modesto, Calif. (84%), Las Vegas (81%) and Stockton, Calif. (81%). The leading Florida cities are Cape Coral (76%) and Orlando (71%). Mansfield and Cleveland, Ohio, (54%) had the highest rates in the industrial Midwest.
Loan type

The type of mortgage loan had a big impact on whether borrowers are underwater. For each type of loan, Deutsche Bank estimated, as of March, what proportion of mortgage holders had negative equity.

Basic conforming loans: 16%. These loans, which limit the mortgage balance to home value, were the best performing, according to Deutsche Bank.

Prime jumbos: 26%. These mortgages are of such high value that they extend beyond the cap limits for loans bought or backed by Fannie Mae or Freddie Mac.

Alt-A loans: 49%. These notes were usually issued to borrowers with good credit scores who could not or would not provide full documentation of their incomes or assets.

Subprime loans: 50%. This is what many borrowers with poor credit history were forced to rely on.

Option-ARMs: 77%. AKA negative amortization loans are the worst performing loan product of all. Under the terms of these mortgages, borrowers could make minimum payments every month — payments that did not even cover the interest of the loans. Instead of balances shrinking over time, the amount owed grew.

This was lethal when combined with falling home prices. By 2011, Deutsche Bank predicts 89% of these borrowers will be underwater.

New Home Sales Increase Due to Lower Prices & Rates

Bloomberg-  Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilize.

Sales increased to a 384,000 annual pace, higher than any forecast of economists surveyed by Bloomberg News and the most since November, figures from the Commerce Department showed today in Washington. The number of houses on the market dropped to the lowest level in more than a decade.

Falling prices and a drop in mortgage rates have started to lure buyers even as the unemployment rate rises. Economists estimate that the worst U.S. recession in five decades is on the verge of ending as downturns in housing and manufacturing ease.

“We are making some progress in absorbing this huge inventory overhang” and that “is a fundamental step we need to take to begin to see home prices improve,” said Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. At the same time, rising joblessness means “a rebound will be modest at best,” he added.

Builders’ stocks jumped, with the Standard and Poor’s Supercomposite Homebuilding Index gaining 2.3 percent. The broader S&P 500 Stock Index was up 0.1 percent at 980.35 at 10:10 a.m. in New York. Treasuries, which fell earlier in the day, remained lower, with benchmark 10-year note yields rising to 3.75 percent from 3.66 percent at last week’s close.

Economists’ Forecasts

Economists forecast new home sales would rise to a 352,000, according to the median of 62 projections in a Bloomberg News survey. Estimates ranged from 335,000 to 377,000. Commerce revised May’s reading up to a 346,000 rate from a previously reported 342,000.

The median price of a new home decreased 12 percent to $206,200 from $234,300 in June 2008. Last month’s value compares with $219,000 in May.

Sales of new homes were down 21 percent from June 2008. They reached a record-low 329,000 in January, down 76 from the July 2005 peak.

The jump in sales in June was led by a 43 percent surge in the Midwest. Purchases increased 29 percent in the Northeast and 23 percent in the West. They dropped 5.3 percent in the South, to the lowest level since January 1991.

Properties for Sale

Builders had 281,000 houses on the market last month, down 4.1 percent from May and the fewest since February 1998. The number of unsold properties fell a record 36 percent from June 2008. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007.

Other reports underscore the stabilization in housing. The Wells Fargo/National Association of Homebuilders sentiment index has risen in five of the past six months and existing home sales have increased for three months in a row.

Even so, foreclosure filings reached a record in the first half of the year, providing competition for homebuilders and pushing down the value of all houses. Also, rising unemployment, which economists forecast will top 10 percent by early 2010, threatens to restrain any recovery in housing.

Standard Pacific Corp., the U.S. homebuilder that gets most of its revenue from California, is among companies seeing a stabilization. It’s net loss, the 11th consecutive drop, narrowed to $23.1 million in the second quarter from $249 million a year earlier, the Irvine, California-based company said last week. Revenue fell 29 percent.

‘A Lot Closer’

“While we still obviously have not achieved the level of profitability that we ultimately need, we are a lot closer than we were a couple of quarters ago and believe that we are in pretty good shape in the short run,” Chief Executive Officer Ken Campbell said in a July 22 statement.

Federal Reserve policy makers have committed to a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs. Those purchases, as well as direct government purchases of Treasuries, drove the rate on 30-year mortgages to a record-low 4.78 percent in April, according to figures from Freddie Mac. Rates have since hovered around 5 percent.

Fed Chairman Bernanke said July 21 that the economy is showing “tentative signs of stabilization” and the “decline in housing activity appears to have moderated.”

Another incentive is the $8,000 tax credit for first-time buyers that is part of the Obama administration’s economic stimulus plan. Purchases have to be completed before Dec. 1.

NVR Inc., the fourth-largest U.S. homebuilder, said last week that new orders increased 2 percent in the second quarter compared with a year earlier. The rate of cancellations fell to 14 percent from 19 percent in the second quarter of 2008 and 15 percent in the first three months of this year.

Help Permanently Reverse HVCC Here! Stop Misguided Appraisal Code

Sign petition here

http://www.hvccpetition.com

Representatives Childers (D-MS) and Miller (R-CA) introduced legislation (H.R. 3044) requesting an 18 month moratorium on the Home Valuation Code of Conduct (HVCC). ThinkBigWorkSmall applauds the introduction of H.R. 3044 and would like to thank Representative Childers (D-MS) and Representative Miller (R-CA) for their continued efforts and leadership on this issue but it is not enough. Tens of thousands of consumers have already been robbed of their opportunity to enjoy historically low rates by Attorney General Andrew Cuomo’s rule. HVCC needs to be permanently reversed in order to lower costs to the consumer and to restore the thousands of real estate transactions stalled by this horribly misguided code. We the undersigned understand that the intentions of the Home Valuation Code of Conduct (“HVCC”) were to help curb the potential for fraud with respect to the valuation of residential properties. We must however bring to your attention the reality of the situation that HVCC has already caused.

1. Since “Appraisal Management Companies (AMC’s)” are taking up to 40% of the total appraisal fee, and are not being regulated to ensure that their appraisers are licensed and competent, we are seeing unlicensed and inexperienced individuals performing property inspections with grave data entry errors. These inferior appraisals are then being “signed-off” by other parties that NEVER INSPECTED THE PROPERTY and are creating unnecessary financial hardship for buyers and sellers.
2. With mortgage loans being denied due to inaccurate appraisals, borrowers are being forced to apply with other lenders who in turn have to charge the consumer ANOTHER APPRAISAL FEE to proceed with the transaction. This vicious cycle can go on endlessly costing well intended clients a great deal of money and time.
3. Under HVCC, no one involved in the transaction is allowed to communicate these major issues (EVEN LICENSED LOAN ORIGINATORS) directly to their appraisers. So countless real estate transactions that would have otherwise closed are now failing, resulting in continued property devaluation and offering NO stimulus to our economy with the exception of the unregulated AMC’s who are making unjustified profits at the expense of home loan applicants and licensed, qualified appraisers.
4. Licensed appraisers have legal and ethical standards in place already. The emphasis should be on making appraisers abide by these, rather than frustrating the ordering and communication process. This well intended legislation is severely misguided.

Although HVCC has good intentions, its flaws are severely hurting our housing industry, the consumer and our economy. We are requesting that HVCC be discontinued permanently, in order to stop the devastation it has caused and will continue to cause on our housing industry and our economy.

Sign petition here

http://www.hvccpetition.com

Wells Fargo Has Mortgage Related Problems Despite Record Earnings

Wells Fargo & Co., the biggest U.S. home lender, said bad loans jumped in the second quarter as the recession made it harder for borrowers to keep up with payments. The bank dropped as much as 7.6 percent in New York trading.

Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the San Francisco-based bank said today in a statement. The increase was disclosed as Wells Fargo reported second-quarter net income soared 81 percent to a record $3.17 billion.

Wells Fargo added to credit reserves amid a 26-year high in unemployment and rising commercial real estate delinquencies. While the acquisition of Wachovia Corp. in January bolstered deposits and home lending, the bank must stanch losses from defaults in California and option adjustable-rate mortgages, ranked among the riskiest loans issued during the housing boom.

“Wells Fargo shows good earnings and the promise of very bad earnings over the next couple of quarters,” said Richard Bove, an analyst at Rochdale Securities who has a “neutral” rating on the shares, in a Bloomberg TV interview. “The outlook for Wells Fargo is not that attractive.”

Wells Fargo, whose biggest shareholder is Warren Buffett’s Berkshire Hathaway Inc., fell $1.50 to $23.85 at 10:37 a.m. in New York Stock Exchange composite trading, and sold for as little as $23.42. The bank declined 14 percent this year through yesterday.

Profit for the quarter equaled 57 cents per diluted share, compared with $1.75 billion, or 53 cents, a year earlier, the bank said. Revenue almost doubled to $22.5 billion.

Wachovia Loans

The increase in bad assets, including a $5.3 billion rise in loans that aren’t accruing interest, was tied to Wachovia mortgages, the cost of modifications, the difficulty of liquidating holdings, and the deterioration of commercial real estate, Wells Fargo said.

The cost of loans written off as uncollectible jumped 35 percent from the first quarter to $4.39 billion, including $984 million of Wachovia assets, more than double the previous period. The charge-offs widened to 2.11 percent of loans from 1.54 percent in the first quarter, exceeding the 1.85 percent estimate of Sterne Agee & Leach Inc. analyst Adam Barkstrom.

Wells Fargo took writedowns on Wachovia’s riskiest loans at the time of the takeover through so-called purchase accounting. The company said today that losses increased in the portion of the Wachovia portfolio that hadn’t been viewed as impaired at the time. Wells Fargo Chief Financial Officer Howard Atkins said in an interview Wachovia’s nonaccrual loans will moderate in the coming quarters.

TARP Repayment

The bank said it generated $14.2 billion toward satisfying the Federal Reserve’s Supervisory Capital Assessment Program, surpassing the $13.7 billion requirement. The process will be completed at the end of the third quarter, Wells Fargo said.

Wells Fargo is the last of the top four U.S. banks to post results. Bank of America Corp., the biggest U.S. lender, said last week that second quarter profit fell 5.5 percent on higher loan losses. JPMorgan Chase & Co., the second-largest U.S. bank, reported its first profit increase since 2007 on record investment-banking fees. Citigroup Inc. had a loss, excluding a $6.7 billion gain from selling control of the Smith Barney brokerage unit, as consumer and business loan defaults rose.

Of the four, only New York-based JPMorgan has repaid its bailout funds distributed by the Treasury last year. Wells Fargo said last month it will repay its $25 billion loan “at the earliest practical date.”

Credit Reserves

The lender probably won’t be able to pay back the funds within the next year to 18 months unless it raises more capital, wrote Sanford C. Bernstein & Co. analyst John McDonald, in a report this week.

Tangible common equity, a measure of capital available to withstand losses, rose to 5.24 percent from 3.84 percent in the prior period, while Tier 1 Capital increased to 9.8 percent from 8.3 percent, Wells Fargo said.

Wells Fargo added $700 million to build credit reserves, a decline from the first quarter’s $1.3 billion increase. The company incurred a $565 million special assessment fee from the Federal Deposit Insurance Corp. along with a merger-related and restructuring expense of $244 million.

Mortgage originations in the U.S. surged 40 percent in the second quarter to $625 billion, according to estimates from Inside Mortgage Finance publisher Guy Cecala. Wells Fargo reported mortgage banking income of $3 billion in the quarter on $129 billion of originations. Wells Fargo’s Atkins said the Federal Reserve is likely to keep mortgage rates low, spurring more refinancing.

California Unemployment

“Even if charge-offs go up, we’re still going to have good results because of earnings production,” said Atkins, in an interview after results. “Profit is very strong even with high credit costs.”

In California, unemployment hovered at a record 11.6 percent in June, compared with a nationwide average of 9.5 percent. Six of the state’s cities are among the 10 with the highest foreclosure rates in the U.S., according to RealtyTrac Inc., an Irvine, California-based company that keeps data on repossessed homes.

“We’re not out of the woods in terms of credit quality,” said Jennifer Thompson, an analyst at Portales Partners LLC in New York. She has a “hold” rating on Wells Fargo, because “with the company more exposed to some higher-risk markets, I’d rather wait for a better entry point,” Thompson said.   -Bloomberg

Find out HERE if your loan is owned by Fannie or Freddie

There are amazing refinance opportunities at my fingertips for many clients who would otherwise not qualify for today’s great rates.  This is part of the Economic Stimulus plan that is actually helping plenty of my clients to save money at a time when every penny counts.  One major factor is to find out if Fannie Mae or Freddie Mac owns your current first mortgage by using these simple online search tools.

To see if  FANNIE MAE owns your loan click on this link;

http://loanlookup.fanniemae.com/loanlookup/

To see if FREDDIE MAC owns your loan click on this link;

https://ww3.freddiemac.com/corporate/

Please contact me with the results you find and with any questions you may have.  This may be a great opportunity to save plenty of money by using our Government-Sponsored mortgage relief programs.

For more information read these previously posted articles;

Stimulus Refi’s to 125% Loan-to-Value

Brokers Now Offer Stimulus Refi’s With Freddie Mac Loans

Excerpt from previous post in March 2009…

President Obama’s eagerly anticipated foreclosure prevention program went into effect. It targets 9 million borrowers for help – are you one of them?

The $75 billion effort, dubbed the Homeowner Affordability and Stability Plan, boils down to two basic solutions:

First, the government is aiming to help more homeowners refinance their first mortgages into new low interest rates.  Second, it provides incentives to lenders and servicers to restructure your mortgage to more affordable levels.
Help for those seeking refinancing

This part of the program targets borrowers who have kept current on their mortgages. Many in this group have been unable to lower their housing costs through refinancings because of falling home prices.

Right now, if you’re “underwater” on your mortgage, meaning you owe more than the home’s market value, forget about qualifying for a refi. In fact, having 20% or less equity in your home makes refinancing almost impossible, unless you’re using an FHA loan or qualify for Mortgage Insurance which is harder to qualify for than the loan itself.

The new guidelines should help. Even homeowners with a mortgage that exceeds home value by 125% could be eligible, even if another 2nd mortgage exists on top of this figure. And there will be no prepayment penalties. But your loan must be owned by Fannie Mae or Freddie Mac.

Since lenders working with Fannie and Freddie already have most of the borrower documentation they need, the refinance process should go quickly. And, in some cases, lenders may not need to reappraise properties because borrowers cannot take cash out on these transactions; they’re only allowed to refinance the balance they owe.

The Administration estimates that this program, which will be in effect until June 2010, will help 5 million homeowners.

All borrowers will have to prove they have sufficient income to be able to keep up their loan payments and credit scores play a critical role in determining the rate you will receive.

It’s Official: Stimulus Refi’s Now Allow 125% Financing!

WASHINGTON – U.S. Housing and Urban Development Secretary Shaun Donovan today announced an expansion of the Obama Administration’s Home Affordable Refinance Program to include participation by borrowers who are current but up to 125 percent underwater on their mortgage. Under authorization provided by the Federal Housing Finance Agency, borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will now be allowed to refinance those loans according to the terms of the Home Affordable Refinance program established earlier this year.

Secretary Donovan made the announcement while touring a neighborhood in Las Vegas with Senate Majority Leader Harry Reid (D-NV) and Congresswoman Dina Titus. Las Vegas leads the nation in foreclosures and approximately 67 percent of the current mortgage holders have mortgages that are higher than the worth of their homes.

“I am pleased Secretary Donovan accepted my invitation to come to Nevada and see firsthand the challenges homeowners here are facing,” Senator Reid said. “His announcement that the loan-to-value requirement for the Administration’s refinance program has been raised to 125 percent is good news for anyone fighting to stay in their homes.”

“This decision is part of our ongoing efforts to maximize the effectiveness of the Making Home Affordable program and adapt to an ever-changing housing market,” said Treasury Secretary Tim Geithner. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It’s a crucial step in our broader efforts to get America’s housing market and economy on the path to recovery.”

Currently, only those borrowers whose first mortgage does not exceed 105 percent of the current market value of the property are eligible for the Obama Administration’s Home Affordable Refinance Program. For example if the property is worth $200,000, the borrower must owe $210,000 or less. Today’s announcement will allow more homeowners to become eligible for the program, by increasing the eligibility to 125 percent.

Click on this link to find out if Freddie or Fannie owns your loan;

http://straightforwardfinancial.wordpress.com/2009/07/06/525/

Housing Rebound Barely Continues, Complications Impede Recovery

NEW YORK (CNNMoney.com) — Home sales continued their modest upward swing in May, according to a closely watched industry report that rose for the fourth straight month for the first time in nearly 5 years.

The Pending Home Sales Index, reported Wednesday by the National Association of Realtors (NAR), rose 0.1% during the month. The index was up 6.7% compared with May 2008. It was the first four-month run up in the pending sales measure since October 2004

Industry prognosticators had forecast no growth at all in the index for the month, according to Briefing.com, expecting it to settle back after ramping up 6.7% in April.

But the rise in sales contracts may not yield a like increase in completed sales, according to Lawrence Yun, chief economist for NAR.

“Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said.

Many industry insiders have complained that home appraisals are being too often based on values of foreclosed properties, which sell for significantly less than the homes of ordinary sellers.

The banks that have repossessed the foreclosed homes are anxious to sell and accept offers at large discounts than comparable homes not in foreclosure.

“We see that distressed homes often are selling for 20% less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” said NAR President Charles McMillan, a broker in Dallas-Fort Worth.

Overall, home sales are still slow, about a third below the peak years of 2005 and 2006.

The market will probably not rebound very fast, according to Robert Dye, a senior economist with PNC Financial Services, the Pittsburgh-based bank

“[The May number] is not a robust indicator of future market expansion,” he said. “Taken with the April number, it points to a gradual but slow recovery.”

One factor favoring a rebound is lower home prices. NAR’s Housing Affordability Index remains near historic highs, although it declined in May to 171.6 from 178.8 a month earlier, mostly due to higher interest rates. April was the high point for the index, which dates back to 1970.

“Under these conditions the typical family would devote only 14.6% of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” said Yun.

“If rates hadn’t crept up, we may have seen a better number [for the May index],” said Dye.

Still, many other economic factors are decidedly negative, pointed out Dye. Consumer confidence is low, unemployment is up and prospects for more layoffs, work furloughs and slashed hours high.

“Market conditions are still poor,” he said.

Freddie Mac to Finally Allow Brokers to Offer Stimulus Refi’s

I’ve been busy helping people obtain sub 5% rates on Economic Stimulus Refi’s which have saved clients hundreds of dollars a month from their previous rate, sometimes without appraisals, and when no other opportunites existed in our tight Lending industry.  But up until now Brokers have only been allowed to help clients whose loans are owned by Fannie Mae.  Now Freddie Mac is finally realizing that Brokers play an important role in our Nation’s housing recovery process by offering and informing our clients of the best options available to them.  Freddie Mac will have their “Open Access” programs open to Brokers quite soon so be prepared and make sure you get your file started so that you can LOCK in the lowest rates when they come back down again!

Here is a preview of the upcoming changes for Freddie Mac’s Making Home Affordable refinance program;

Previewing Requirements for Relief Refinance Mortgage – Open Access To make Relief Refinance Mortgages more broadly available in the market and give borrowers more choices when refinancing, we are previewing the new Freddie Mac Relief Refinance Mortgage – Open Access. We are in the process of finalizing our requirements for this offering and will be communicating detailed origination requirements and an effective date for Freddie Mac settlements in a future Guide Bulletin. The Relief Refinance Mortgage – Open Access will permit LTV ratios up to 105 percent, unlimited TLTV/HTLTV ratios, and relief from standard mortgage insurance requirements. All Freddie Mac Seller/Servicers, regardless of whether they are the Servicer of record for the mortgage being refinanced, will be eligible for the Relief Refinance – Open Access option. The Relief Refinance Mortgage – Open Access will require full underwriting and the new refinance mortgage must meet all of Freddie Mac’s eligibility, underwriting and documentation requirements. Additional requirements for the Relief Refinance Mortgage – Open Access will include: Allowing the new refinance mortgage to be assessed through Loan Prospector (Freddie’s Automated System) Requiring a full interior/exterior appraisal for the new refinance mortgage. Please note that use of Home Value Explorer® point value estimates will not be permitted with the new Relief Refinance Mortgage – Open Access. Allowing the lesser of 4 percent of the new refinance mortgage amount or $5,000 of closing costs, financing costs and prepaids/escrows to be rolled into the new refinance mortgage. Cash back to the borrower may not exceed $250.

The Option ARM Problem Starting To Surface

June 11 (Bloomberg) — Shirley Breitmaier’s mortgage payment started out at $98 when she refinanced her three-bedroom home in Galt, California, in 2007. The 73-year-old widow may see it jump to $3,500 a month in two years.

Breitmaier took out a payment-option adjustable rate mortgage, a loan popular during the housing boom for its low minimum payments before resetting at higher costs later.

About 1 million option ARMs are estimated to reset higher in the next four years, according to real estate data firm First American CoreLogic of Santa Ana, California. About three quarters of those loans will adjust next year and in 2011, with the peak coming in August 2011 when about 54,000 loans recast, the data show.

Option ARM borrowers hit with unaffordable monthly payments are another threat to the housing recovery and the economy, said Susan Wachter, a professor of real estate finance at the University of Pennsylvania’s Wharton School in Philadelphia. Owners who surrender properties to the bank rather than make higher payments for homes that have plummeted in value will further depress real estate prices and add to the inventory of properties on the market, she said.

“The option ARM recasts will drive up the foreclosure supply, undermining the recovery in the housing market,” Wachter said in an interview. “The option ARMs will be part of the reason that the path to recovery will be long and slow.”

Option ARM recasts will mean more pain for California, the state with the most foreclosures in the U.S.

More than $750 billion of option ARMs were originated in the U.S. between 2004 and 2008, according to data from First American and Inside Mortgage Finance of Bethesda, Maryland. California accounted for 58 percent of option ARMs, according to a report by T2 Partners LLC, citing data from Amherst Securities and Loan Performance.

Option ARMs typically recast after five years and the lower payments can end before that time if the loan balance increases to 110 percent or 125 percent of the original mortgage, according to a Federal Reserve brochure on its Web site.

Refinancing is impossible in many states given the nationwide drop in prices. Mortgage rates are also rising. The average 30-year rate jumped to 5.59 percent in the week ended June 11 from 5.29 percent a week earlier, Freddie Mac said today. In California, the median existing single-family home price dropped 37 percent in April to $256,700 from a year earlier, according to the state Association of Realtors.

“Once you start amortizing that loan, the payment is going to shoot up,” said David Watts, a London-based strategist with research firm CreditSights.

The delinquency rate for payment-option ARMs originated in 2006 and bundled into securities is soaring, according to a May 5 report from Deutsche Bank AG. Over the past year, payments 60 days late or more on option ARMs originated in 2006 have almost doubled to 42.44 percent from 23.26 percent, Deutsche Bank said. For 2007 loans, the rate has climbed from 10.1 percent to 35.25 percent.

“We’re already seeing much higher levels of delinquencies of these option ARM loans even before you reach the point of the recast,” said Paul Leonard, the California director of the non- profit Center for Responsible Lending.

The threat of soaring payments has counselors at Housing and Economic Rights Advocates busy.

“There’s a level of hopelessness to the phone calls now,” said Brown.

Even Geithner’s House Couldn’t Be Sold

NEW YORK (CNNMoney.com) — Treasury Secretary Tim Geithner is struggling to unload his million-dollar manse located in a posh New York City suburb. And like so many other Americans, he’ll probably lose money on it when he does.

Geithner and his wife Carole put their 5-bedroom Tudor-style home in Larchmont, New York on the market for $1.635 million in February, just days after he was tapped by the Obama administration to help lead the nation out of the worst economic crisis in a century.

The Geithners paid a premium for the house when they bought it in 2004, plunking down $1.601 million after a bidding war. The “exquisitely renovated” home was originally built in 1931, according to a listing for the 0.2 acre property.

“When the house first went on sale it was very evident that he was not going to get what he paid for it,” said Scott Stiefvater of Stiefvater Real Estate in Pelham, N.Y. “He was [bound] to lose some money.”

//

It’s a familiar story as the housing crisis unfolds across the country. Indeed, after Geithner’s house sat unsold for nearly 3 months, the price dropped to $1.575 million. Still there were no takers, so Geithner listed it as a rental for $7,500 a month, and has since found a tenant.

But it’s unlikely that even such a steep rent will be enough to cover the mortgage, in addition to the $27,000 in annual property taxes. Of course, no one should feel too badly about watching Geithner take a loss. As Treasury Secretary he’s earning $191,300.

Meanwhile, home prices have plummeted 32.2% nationwide since the height of the housing bubble in July 2006 according to Case-Shiller. And millions of other homeowners who bought at the top of the market now find themselves unable to sell or refinance their way out of crushing monthly housing payments.

In April, home sales sank 36% year-over-year in New York’s Westchester County, according to the New York State Association of Realtors. But many homeowners are still refusing to lowering their prices, said Miriam Bernstein, an associate broker at RE/MAX Prime Properties in Scarsdale, N.Y.

The median sales price for a single-family home in the area was $570,000 in April, down 10% from $635,000 a year ago, while the median price actually increased 12% in April versus March.

Stiefvater said many Larchmont homeowners, like Geithner, are trying to rent out their homes while they wait for housing prices to bounce back.

“For now, [many] have the financial wherewithal to wait it out,” Bernstein said. “Eventually, the people sitting on the sidelines are going to have to sell.”

Federal DownPayment Assistance Using Stimulus Tax Credit Now Available

NEW YORK (CNNMoney.com) — First-time homebuyers will now have access to quick cash to help them with their down payments.

On Friday, the U.S. Department of Housing and Urban Development (HUD) announced that first-time homebuyers using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs.

“We believe this is a real win for everyone,” said HUD secretary Shaun Donovan in a speech before the National Association of Homebuilders (NAHB). “Families will now be able to apply their anticipated tax credit toward their home purchase right away. What we’re doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing.”

As part of the stimulus package, Congress created a refundable first-time homebuyers tax credit in hopes of helping on-the-fence buyers to take the home-purchase plunge. But buyers couldn’t collect the $8,000 credit until tax time, rather than at closing time — when it’s needed.

The delay created an obstacle to reigniting the housing market because most first-time buyers — the ones who would buy much of the available inventory — have only saved enough to cover 4% of the purchase price, according to the National Association of Realtors.

The mechanics of the new program, according to NAHB economist Robert Dietz, allow lenders to purchase tax credits from the buyers and then collect the rebate from the IRS.

The initiative also authorized similar programs already offered in Colorado, Missouri, New Jersey, Pennsylvania, Tennessee, Washington and other states. To quickly infuse cash into their housing markets, the housing finance authorities in these states created bridge loans to allow buyers to borrow against the $8,000 credit and then repay it with their tax refunds.

The first state to launch such a plan was Missouri, which rolled out its Missouri Housing Development Commission Tax Credit Advance Loan program on January 14 — a month before Congress approved the stimulus package. Since then, Missouri has approved applications by more than 360 borrowers and closed on 166 of them.

Lamar Cherry and his wife, Chrishanna, used the program to augment their down payment when they bought their home in Kansas City.

The couple purchased a four-bedroom, three-bath split-level home for $150,000, putting about 6% down. Much of that $9,000 came from the loan program, which they tapped so they wouldn’t have to drain their reserves.

“We had money saved up that we were going to use for the down payment,” said Cherry. “Now we can use some of that to buy some things we need for the house.”

At closing, the Cherrys, like all buyers in the program, signed for their first mortgage, plus a second mortgage issued by the state. The second note is good for 6% of the price of the home, up to $6,750; there is a $350 set-up fee, but no interest is charged if the debt is repaid by June 2010.

In Missouri, borrowers can only access $6,750 of the $8,000 credit for down payments. “We wanted them to have a cushion below that $8,000 in case other tax liabilities show up,” said Greg Spurgeon, the single-family homeownership administrator for the Missouri Housing Development Commission.

If borrowers don’t pay off the note, it becomes a 10-year fixed-rate mortgage with an interest rate one-half percentage point above that of their first mortgages. For example, borrowers paying 6% on their first mortgages would be charged 6.5% on the second.

So far, Spurgeon said, a significant proportion of participating homebuyers have repaid their loans. He expects most of the others to do the same before the deadline.

Cherry has claimed the federal tax credit on his 2008 taxes, but he hasn’t gotten his refund yet. He definitely intends to repay the loan before the 2010 deadline because, he said, not doing so would add about $75 a month to his house payments.

Housing Crisis Brings Home Values Down 32% Off Peak Levels!

NEW YORK (CNNMoney.com) — The home price slide accelerated during the first three months of 2009, according to a report issued Tuesday.

The S&P/Case-Shiller National Home Price index, a bellwether of real-estate market direction, plunged a record 19.1% during the quarter compared with the first three months of 2008. That followed an 18.2% drop last quarter.

The Case-Shiller 20-city index dropped 18.7% year-over-year, also a record. It fell 18.5% during the last three months of 2008. This index has plummeted 32.2% from its July 2006 peak and has fallen 32 straight months.

The national index covers almost all homes sold throughout the United States and is reported quarterly, while the 20-city index reports sales in 20 major metro areas and represents a cross section of the national market. The 20-city index comes out every month.

“Declines in residential real estate continued at a steady pace into March,” said David Blitzer, chairman of the Index Committee at Standard & Poor’s in a prepared statement. “All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines.”

The ugly report was somewhat unexpected, according to Mike Larson, a real estate analyst for Weiss Research.

“The market was anticipating better results,” he said. “There had been some signs of increased sales in post-bubble markets.”

But that sales increase has not translated into higher prices. Bargain hunting – bottom fishing really – for foreclosures and other distressed properties has driven sales volume up while further depressing prices.

The foreclosure sales, which many appraisers used to ignore when they evaluated home prices because they represented outliers rather than typical sales, now have to be accounted for.

“These used to be anomalies,” said Larson. “Now, when sales are dominated by foreclosures, where they represent 50% or more of [transactions], they are the market.”

The market plague has burst far beyond its Sun Belt epicenter, as the latest month’s data reveals. In March, Minneapolis recorded the largest monthly price loss of any metro area in the 20-city index, losing 6.1% compared with February. That is the biggest single-month decline for a city in index history.

Sun-Belt cities still had the largest year-over-year declines in March, with Phoenix prices down 36%, Las Vegas off 31.2% and San Francisco dropping 30.1%.

Two cities have now have fallen more than 50% from their peak prices: Phoenix is down 53% since June 2006 and Las Vegas is off 50.4% from its August 2006 high. Dallas prices suffered the smallest loss from peak, just 11.1% since June 2007.

Economist Mark Zandi, the founder of Moody’s Economy.com, is optimistic that the market will stop falling sometime this summer or fall. “We need to focus on the mortgage-modification program,” he said. “If that plan doesn’t work or only works as well as the other modification programs have, we’ve got a problem.”