The S&P Case-Shiller index data for February, 2009 show home prices continue to decline (20
city composite index is down 18.6% year-over-year), but the rate of decline did slow in most regions during the month. Home prices seem likely to fall further (future prices suggest another 10 percent or so this year for the 20 city index), but lower mortgage rates and improving consumer sentiment could help limit the declines, providing some additional support to the economy.

So here's the big question: if home prices have only another five percent or so to drop nationally, is it still worth waiting to buy? Clearly not if you are also selling in the same or a similar market, but it may still be worth waiting if you are a new buyer or new to the market and there seem to be a lot of available properties that meet your needs.

Another five percent drop in prices could have significant impact on your down payment. Instead of putting-down $7,500 (five percent on a $150,000 home for a $142,500 mortgage) you could put down that same $7,500 (5.45 percent on a $142,500 home for a $137,500 mortgage) and save thousands in interest over the life of the loan. For some purchasers, then, it may still be worth waiting, especially in distressed markets like Las Vegas and Miami.

The 20-city composite index showed a 2.2 percent decline from January (compared to a 2.8 percent decline in January and 2.55 percent decline in December). This index is now 30.7 percent lower than its peak level (July, 2006) and has fallen back to August, 2003 levels. While the year over-year-decline in for the 20-city composite at 18.6 percent is slightly lower than the 19 percent yr/yr decline reported in January, it is equal to December's, the second largest ever. Since 2000, the index has now increased at a compound annual rate of about 4.05 percent.

The 10-city composite index was 18.8 percent lower yr/yr and 2.1 percent lower sequentially. It is 31.6 percent below its peak levels reached in June 2006. Over the past 10 years, despite the recent decline, this index has still risen at a compound annual rate of about 6.2 percent.

All 20 metropolitan areas showed a sequential and year-over-year decline in February. But for 16 the January/February percent change was smaller than the December/January decline.

The worst year-over year decline in January was in Phoenix (-35.2 percent y/y, -50.8 percent from peak) followed by Las Vegas (-31.7 percent y/y, -48.4 percent from peak) and San Francisco (-31 percent y/y, -44.9 percent from peak).

Several markets showed modest year-over year declines, including Dallas (-4.5 percent y/y, -11.1 percent from peak), Denver (-5.7 percent y/y, -14.3 percent from peak) and Boston (-7.2 percent y/y, -18.5 percent from peak). Along with

the 10 and 20 city composite indices, only Charlotte, Washington DC, Cleveland, and New York
experienced greater declines from January to February than from December to January.

FHFA's (formerly OFHEO's) purchase-only house price index (non-seasonally adjusted) increased
1.13 percent in February, but declined 6.43 percent from a year ago. The year-over-year decline in February was lower than that in January and December.

Data from the National Association of Realtors on existing median home prices showed a 2.1 percent
increase in February and 4.2 percent increase in March. Year-over-year declines were 14.1 percent in February and 12.4 percent in March.

cringely Blog, News Case-Shiller, housing prices

There has never been a better time than now to refinance your mortgage - IF you can be approved. Thanks to the Fed, rates have been driven to record lows, though not as low as they appear given the number of rate add-ons dictated by new rules from Fannie Mae and Freddie Mac. The mortgage industry is finally getting in-gear for the refi boom, though approval rates are still in the 30-40 percent range, which is not good. Workouts are required in many cases and the system is still not in place to generate or monitor them. Also there is about to be a fight in Congress about restructuring the mortgage industry that may well lead to some playing of 'chicken' in the market that will hurt consumers. So while in the long run things are improving, in the short run we all need a friend in the mortgage business more than ever. We all need Home-Account.

cringely Pulse

There are various classifications of lenders — brokers , correspondent lenders, and mortgage lender-servicers which includes retail and commercial banks, credit unions, or thrift institutions.

Brokers may include table funded lenders who do not actually underwrite the loan directly. They act as agents or have lines of credit with the lenders. Correspondent lenders sell their loans to servicers, national examples include Quicken Loans and Lending Tree. Lender-servicers underwrite and keep the loans on there books, while collecting ongoing loan payments. This includes such lenders as Countrywide, Wells Fargo, or Bank of America.

Home-Account's lenders currently are considered Super regional correspondent lenders. They operate as direct lenders without working through a broker, either servicing the loans themselves or re-selling the loan to a larger servicer. Home-Account will be dealing with the banker who is funding the mortgage and at the same time either able to service the loan or sell the mortgage to a larger servicer resulting in lower interest rates (i.e. better value) for our members.

These specialized lenders are able to handle numerous applications and mortgages, on average able to close over 2,000 mortgage per month. Over a billion dollars of mortgage loans were funded in 2008 by just our initial five lenders.

Here are some additional links you might find interesting:

htttp://www.sideroad.com/Mortgage/home-financing-correspondent-lender.html

http://mortgage-x.com/library/lender_types.htm

http://www.bankaholic.com/finance/what-are-correspondent-lenders/

http://www.mtgprofessor.com/A%20-%20Type%20of%20Loan%20Provider/what_is_a_correspondent_lender.htm

Jack Guttentag Library Broker, Correspondent, lenders, mortgage

Yogi Berra said, 'It's not over 'til it's over,' but there's a hint at least in recent housing numbers to suggest we'll have a real bottom to the real estate market later this year.

It all comes down to supply and demand, with supply being the number of new and existing homes for sale and demand being the number of sales actually completed. Families are started even in a recession so housing units are continually being absorbed. Unfortunately the housing bubble created too many new housing units causing the market to collapse. The question this week is when will that collapse end, housing prices will firm, and existing homeowners can start to recover from their underwater mortgages? Based on housing inventory numbers from the National Association of Realtors we have another six months or so to go.

That's how long it will take, at current building and sales levels for the inexorable population increase to absorb enough excess housing inventories to return us to historic norms. What even allows us to get back to those norms is the steep decline in builders of new homes, many of which are no longer in business.

The number of new and existing houses on the market historically is enough to last 3-4 months, which is to say at current sales rates without replacing any of those homes all would be sold in 3-4 months. But right now housing inventories stand at 9.7 months. With only a marginal influx of new homes the difference between 9.7 and 3.5 (6.2 months) is the best predictor of when the market will hit BOTTOM, after which prices will finally start to increase on a national basis.

Does this mean yu should wait six months to buy a house? NO! It means this is an ideal time to be shopping for a house because it is a buyer's market. But the perfect house is hard to find. When you find yours, BUY IT!

cringely Pulse housing prices, mortgage crisis

Two months after Treasury Secretary Timothy Geithner began talking about new programs to help holders of federally insured mortgages who have lost all their equity in the housing bust and are now under water, rules for the new programs are finally starting to appear. But like most of the other federal homeowner initiatives described to date, early details suggest the Making Home Affordable Program will be of little practical help to those with low-to-negative equity and less-then-perfect credit scores.

The new programs for mortgage refinancing and modification sound ideal on paper, often requiring no mortgage insurance and allowing loan-to-value ratios as high as 105 percent and requiring no specific credit rating at all as long as homeowners have remained current to date on their mortgage payments. But the devil is in the details and looking into the conforming rate sheets just published by major lenders we see new risk-based pricing adjustments (generally called “loan level pricing adjustments” in the mortgage industry) that can add up to four basis points to the mortgage principal for homeowners with LTV's above 95 percent and credit scores below 620 – the very heart of the homeowner group in the greatest trouble.

While the government claims the programs can help 7-9 million homeowners, that doesn't seem likely under the current rules.

On top of other pricing adjustments for property type and loan amount these new programs can add thousands to the loan balances of homeowners with low equity and less-than-perfect credit, with the increased costs often enough to price many homeowners out of the programs entirely.

A homeowner trying to refinance a loan with a 100 percent LTV and poor credit, for example, might easily see the required risk-based points take that loan beyond the 105 percent LTV limit. While it is possible to take the points from savings or investments rather than roll them into the loan, most homeowners in this group don't have such savings or investments available.

While the new programs are good for homeowners with credit ratings above 680 and LTVs in the 80s or lower, this does not describe most of today's conforming mortgage holders who truly need a refi or modification.

cringely Blog, Uncategorized fannie mae, freddie mac, Geithner, Making Home Affordable Program, mortgage crisis, mortgage modification, refinance

Jumbo mortgages, those in excess of $417,000 or $729,000 depending on the market, practically disappeared with the burst of the housing bubble, but now they are coming back with major lenders like Bank of America and ING putting some real effort into the segment. But that doesn't mean people are actually buying homes that require jumbo mortgages, according to lenders. There is a jumbo REFI boom of sorts, but nobody seems to be buying big houses that aren't short sales or foreclosures.

Jumbo mortgages have stringent requirements, including hefty down payments. Buyers are still waiting to see if the real estate market has bottomed out, and few people these days want to commit to a big down payment if it means selling securities that are already down..

Rates for 30-year fixed-rate jumbo mortgages have dropped from an average of 7.28 percent a year ago to 6.44 percent last week, the lowest since April 2007, according to HSH Associates, which tracks consumer loan information. Rates for smaller 30-year mortgages were averaging 4.97 percent last week.

Jumbo mortgages are those too large to be backed by the federal government through Fannie Mae and Freddie Mac. Mortgages that are under those limits — $417,000 or $729,000 depending n the market — are so-called “conforming” loans.

Jumbo rates are also higher because the secondary market — where mortgages are sold to generate new funds — has dried up. Now, lenders need to keep loans on their own books, assuming the risk themselves.

Keith Gumbinger of HSH, which is based in New Jersey, said the difference between conforming and jumbo mortgage rates used to run around one-fourth of a percentage point, or 25 basis points. “So if a conforming rate was 5 percent, a jumbo would be around 5 1/4. Right now, that gap is extraordinarily wide. Last week, it was exactly 150 basis points.”

The Federal Reserve's influence to lower conforming mortgage rates has produced the larger gap, he said. “The gap remains extraordinarily wide, not because jumbos aren't doing their part. They are. But because other prices have been artificially influenced lower.”

He advised anyone looking for a mortgage or to refinance to shop around more than ever. “Some lenders are in a better position to make you a competitive loan than others. You've got to go out and scour around your marketplace. Shop it effectively.”

Some large lenders, including Bank of America, are starting to promote jumbo rates below 6 percent.

In time the combination of falling home prices and lower mortgage rates will improve the affordability of higher-end properties and sales will start to rise. The concern about waiting for the bottom is the only way you know you've hit bottom is when it is on the way up.

cringely Lender Updates, News, Uncategorized Bank of America, banks, housing prices, jumbo mortgages, LendersME, mortgage crisis, refinance

One of the lessons of the current mortgage crisis has been that home ownership probably isnt for everyone. At Home-Account we work tirelessly for the interests of homeowners and would-be homeowners, but that doesn't mean we've never seen a buyer or a mortgage we didn't like. Our objective is home OWNERSHIP – actually owning your home outright. And toward that goal we try to encourage our subscribers to work toward legitimate loan qualification, which means buying a home you can actually pay for. The recent mortgage bubble, in contrast, was often based on lenders giving mortgages to people who shouldn't have qualified and honestly couldn't afford the houses they were buying. The fact that the system encouraged that was because lenders were paid fees for closing loans and loans were securitized in such a way that the inevitable default was someone else's problem. Though it turned out, of course, to be a problem for us all.

The goal of responsible home ownership then requires us to point out that there is a move afoot to return, somewhat, to the bad old days of subprime mortgages. Specifically there is a bill in Congress – H.R. 600 – which will allow seller-funded down payments for FHA mortgages. Couched as allowing friends or relatives or foundations or charities to GIVE FHA mortgage applicants the 3.5 percent minimum FHA down payment, in practical terms it allows the seller to do so, too.

Under H.R 600 it is possible under certain circumstances to get an FHA mortgage for no money down. This technique has been used before and it usually comes down to the purchase price being inflated by the amount of the down payment, which is then transferred from the seller to the buyer. This is not good.

The point of having a down payment is for buyers to be at risk a bit – to have some skin in the game — which ought to encourage them to be reliable mortgage payers. That's our goal here at Home-Account, too – to help our subscribers to be reliable mortgage payers. But giving sellers a way to finance the down payment is for the most part a return to the slippery slope of subprime lending and will hurt us all in the long run.

H.R. 600, as it is presently written, is a bad bill and should be defeated.

cringely Pulse FHA, mortgage crisis, Pulse

Mortgage rates are down, the refi market is booming, equity markets are edging up.  Is the worst over?

No.

House prices are still going down and a huge percentage of sales are short sales or foreclosures.  Millions of homeowners are still underwater and getting more so every day.  And all the while the promised mortgage modification programs aren't yet ready to go.

It isn't enough to just have a policy.  The policy must be implemented.

And now two new events are coming along that may make everyone rethink the sighs of relief we've started to give:

1) The big banks are talking tough about prices they are willing to accept for their toxic assets, figuring the Treasury and Fed will back down and pay more given;

2) The prospect of a major market correction driven by program trading (a replay of 1987).

If the equity markets hiccup the banks figure they can force the Obama Administration into paying closer to face value for those toxic assets, in which case the banks suddenly AREN'T over-leveraged, they pay back their TARP funds and resume being masters of a tighter and even cliquier universe.

We're in for a wild ride over the next 2-3 weeks with little prospect that the federal mortgage modification programs will move any faster as a result.

cringely Pulse LendersME, mortgage modification, mortgages, Pulse

When Barack Obama was running for President one of his favorite sound bites was that any financial bailout should not just involve Wall Street, but Main Street, too – that the government's responsibility was to help both bankers and homeowners. But now that the election is won and Obama is in office, the two streets are still being treated very differently, with Main Street getting a lot less help from Washington.

This is a HOUSING crisis, not a BANKING crisis, yet $700+ billion has gone to help bankers and only $75 billion to “help” homeowners. The banker's money has mainly been spent and the homeowner money has hardly been touched. If this is a HOUSING crisis, why aren't more resources being devoted to housing?

It comes down to an issue of morality, believe it or not, with homeowners expected to be moral and bankers not. Everybody blew it, but the homeowners are being disproportionately punished for their actions.

There is no morality issue in the bank bailout. Banks are having their capital boosted based not on whether they are well run or in some way “deserving,” but purely on the basis of whether they are viewed as being in three groups: 1) doomed; 2) capable of being saved through injecting government funds, or; 3) too big to be allowed to fail no matter how poorly run. This means the least-deserving banks tend to get the most help.

But the Obama Administration's attempt to help mortgage holders is different. If you hope for government help in restructuring your mortgage you'd better not be behind in your payments. If you missed a mortgage payment months into this crisis, you are out of luck. If your mortgage isn't guaranteed by Fannie Mae or Freddie Mac, you are out of luck. If your mortgage is jumbo you are out of luck. And if you owe more than 105 percent of the value of your home you are out of luck.

That's a lot of homeowners out of luck. No wonder the Obama Administration thinks it needs only $75 billion to do the job, it is excluding so many people.

Let's try applying the homeowner rules to the banks. If both played by the same rules, then banks with mortgage portfolios that have dropped by more than about 15 percent (are five percent or more underwater) would be ineligible for government assistance. Banks that MADE jumbo loans would be ineligible for assistance. Banks that made loans with private insurance or no insurance would be ineligible for assistance. Banks that had shown themselves unable to meet capital requirements (had effectively missed a payment) would be ineligible for assistance. In each case, these criteria define EVERY bank that has received assistance. They ALL have mortgage portfolios down in value by 15 percent or more, ALL made jumbo loans, ALL made uninsured loans, and ALL are under capitalized.

So if we apply to banks the same rules that are being applied to homeowners, then no banks deserve support and there should be no bank bailout. Well that can't be, can it? So screw the rules, screw the idea of there being a moral issue with bankers, just start handing out cash without even requiring that they use any of it to make or restructure loans.

So that's what the Treasury and the Fed have done – bailed out the bankers without regard to their past OR FUTURE behavior. And $700+ billion later do we really truly feel better as a result?

Hell no we don't, because we still can't pay our mortgages!

This bailout is broken, it is unfair, and it is incredibly inefficient as a result. The bank bailout is based entirely on providing INCENTIVES to the banks – bribing them to THINK ABOUT doing the right thing. The government won't MAKE the banks do anything. They just ENCOURAGE the banks by giving money.

Where are the incentives in the much smaller housing bailout? There are incentives. THEY ARE ALL BEING GIVEN TO THE BANKS. It is very difficult to find in the new Federal mortgage modification rules much of anything that truly helps homeowners. Banks aren't REQUIRED to do anything; they can reject any mortgage holder for any financial reason. The banks are PAID to restructure the mortgages and the way those mortgages are being restructured (primarily through increasing term and adding balloon payments) not only costs the banks nothing, it tends to make them MORE money over the life of the loan.

So that $75 billion allocated to modifying mortgages and keeping people in their homes, how much of that $75 billion will actually go to homeowners? About 25 percent, or $18 billion almost entirely in first-time buyer tax credits. This means the bank bailout isn't $700+ billion, it is $758+ billion or FORTY-TWO TIMES the size of the housing bailout.

And why only first-time buyers? What makes them more deserving of help? The theory is that these are new homeowners so they'll be buying-up excess inventory and helping to firm prices. They aren't people selling one house to buy another. In another view they are virginal and uncorrupted by the housing bubble. It wasn't their fault, so they are being rewarded. More morality, inequitably applied.

Main Street isn't doing very well under this policy. Main Street is being cheated.

This is a bad plan, unfair and poorly executed. It places a moral burden on individuals and not on banks, yet there is no good explanation for why it has to be so.

What is it about banks that make them deserving of 42 times as much support as your Mom?

Nothing.

Like the Bush Administration before it, the Obama Administration has a bias for helping Wall Street. They couch this as a claimed inability to come up with any better ideas. Yet better ideas – ideas NOT couched in moral argument (or more appropriately couched in EQUAL moral justification) were presented right in this spot in the post titled The Not So Bad Bank. That's a plan that helps banks and homeowners equally, doesn't require incentives to work, acts faster, and costs a tenth as much.

What's wrong with doing the job better, faster, and cheaper?

cringely Blog, Uncategorized bank bail-out, banks, financial crisis, foreclosure, mortgage modification, mortgages, Obama Administration

The US accounting industry agreed Thursday to revamp rules that had required banks to quickly recognize losses from the housing slump and had been blamed by some for worsening the financial crisis. The Financial Accounting Standards Board, which sets corporate accounting rules, voted to change the so-called “mark to market” accounting standard, a spokesman for the group said.

Controversy had been growing on the rules, also known as “fair value” standards, that require a quarterly markdown of assets that have fallen in value. The rules had been tightened after a series of corporate scandals including at energy firm Enron, which used unrealistic figures to inflate its worth. But some analysts say that by forcing banks to recognize losses immediately, the rules delivered a one-two punch to the system by requiring financial institutions to raise new capital to offset the loss, and squeezing a bank's ability to make new loans to boost economic activity.

US banks had been forced to write off over 800 billion dollars' worth of losses linked to the real estate meltdown in the past two years.

Critics have argued that because markets for mortgage-related securities have been frozen, banks should be able to hold the assets to allow them to recover without booking immediate losses.

Jon Ogg, analyst at 24/7 Wall Street, said the mark-to-market rule forced banks “to put up good capital in reserves to offset the new lower market value of bad assets. That in turns takes up capital that could be used for new loans, and as you have seen over the last year creates a situation where the banks have to raise additional capital from the market or go to Uncle Sam with hat in hand. When the markets are shut off or illiquid, this can create the feared death-spiral for lending institutions.”

The change would allow banks to hold some securities to give them more time to recover in conditions where financial markets are frozen, making it hard to find a true market price. Some economists have excoriated “mark to market” as a cause of the crisis, pointing out past periods such as the 1980s Latin America debt crisis where banks would have been wiped out if they had to book losses instead of holding them to await recovery.

cringely Government News, News FASB, financial crisis, LendersME, mark-to-market