Are you worried about your real estate agent? See how they compare to Ted Truitt, the “Dean of the Deal.”

Roll over the question answers for Ted’s take on each one.

All joking aside, it is critical that you have complete trust in your agent and what they stand for. Try and get a referral from family or a friend to help you find a realtor who is focused on your best interests.

WASHINGTON (AP) — With foreclosures rising, federal bank regulators called on lenders Tuesday to work with distressed borrowers unable to meet payments on high-risk mortgages to help them keep their homes. The heads of Fannie Mae and Freddie Mac said the mortgage finance giants are developing new types of loans to aid homeowners in avoiding default.

Home-mortgage delinquencies and foreclosures have been surging in recent months, especially for people who took out subprime mortgages — higher-priced loans for people with tarnished credit or low incomes who are considered greater risks. The distress has roiled financial markets and stoked anxiety that it could spill over into the broader economy.

The Federal Reserve and the five other federal agencies that regulate banks, thrifts and credit unions, in a joint statement, encouraged the financial insitutions to extend flexible terms to struggling homeowners.

“Prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrower,” the statement said. “Institutions will not face regulatory penalties if they pursue reasonable workout arrangements with borrowers.”

The initiatives for subprime loans of government-sponsored Fannie Mae and Freddie Mac, the biggest buyers and guarantors of home mortgages in the country, were disclosed by their chief executives at a hearing by the House Financial Services Committee.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., exhorted mortgage lenders to show flexibility toward borrowers to help staunch a flood of defaults among homeowners with subprime loans.

Many of those borrowers “could avoid foreclosure if they were offered (loans) that allow for affordable mortgage payments,” Bair testified. Restructuring their expensive adjustable-rate mortgages “into more affordable products, especially 30-year fixed-rate mortgages, would bring them back to good standing, allow them to repair their credit histories and dampen the impact that foreclosures may have on the broader housing market.”

Most importantly, Bair added, “people would be able to stay in their homes.”

Adjustable-rate mortgages, known as ARMs, are especially prevalent in the subprime market. They are considered higher-risk loans because they typically draw borrowers in with an initial low “teaser” interest rate, which can spike upward after the first few years.

A homeowner who takes out a $200,000 ARM with a teaser rate of 4 percent, for example, initially pays $954.83 monthly in principal and interest. But when the interest rate jumps to 7 percent, say, in the second year of the mortgage, his payments rise to $1,320.59 a month — a move that regulators call “payment shock.”

The home-mortgage business has exploded in the last two decades with big Wall Street investment firms buying loans in bulk from banks and other lenders, and bundling them into securities to be sold to investors, spreading the risk. That has complicated the mortgage industry picture and the search for solutions to the immediate crisis.

Richard Syron, Freddie Mac’s chairman and chief executive, said the company is “working on a major effort to develop more consumer-friendly subprime products that will provide stable financing alternatives going forward,” which are expected to be available by midsummer.

He said the new products will include 30-year and possibly 40-year fixed-rate mortgages as well as adjustable-rate mortgages with longer fixed-rate periods.

Fannie Mae, in a new program called “HomeStay,” is offering new options so that lenders can help subprime borrowers refinance out of high-interest adjustable-rate mortgages or other difficult loans, said President and CEO Daniel Mudd. He said the company plans to stretch the term on subprime loans to 40 years from the current maximum 30 years — which will reduce monthly payments for borrowers by around 5 percent.

About 1.8 million adjustable-rate mortgages are resetting to higher rates this year and next, making foreclosures sure to continue rising, according to a new report by Congress’ Joint Economic Committee. Areas said to be hardest hit by foreclosures include Atlanta, Indianapolis, Denver, Dallas and Detroit.

There are plenty of critics out there saying the federal agencies are to blame for allowing such “fast and loose” underwriting to go on for as long as it did. Pointing fingers is not going to help those on the edge of losing their homes. With regulatory agencies, lenders and home owners working together can help stem the tide of pending foreclosures.

No one wins in a foreclosure situation and this effort will help prevent some of those from happening.

From Monday morning until Friday evening, mortgage rates barely moved last week. In the current environment, investors are highly sensitive to fresh economic information, but a lack of surprises last week left them with little news on which to trade. The first major event last week was Wednesday’s release of the FOMC minutes from the March 21 Fed meeting. The primary message was that the Fed believes the level of uncertainty in its outlook for both inflation and economic growth has increased. This led to the change from its tightening bias to a neutral stance, but it did not lessen the Fed’s concerns about higher inflation. Fed Chief Bernanke’s speech the week before last essentially made the same point, so the reaction in mortgage markets was minimal.

The only other major economic news last week was the Producer Price Index (PPI) inflation report. The core price level of intermediate goods remained unchanged in March, which was lower than expected, but the figures for February were revised higher, offsetting the good news. Generally, investors were inclined to wait for next week’s more influential Consumer Price Index (CPI) report for possible guidance on the inflation outlook.

In the housing sector, the National Association of Realtors (NAR) released a revised economic forecast for 2007 and 2008. The chief economist of the NAR suggested that tighter lending standards resulting from the troubles in the subprime sector will slow the recovery, but will lead to a healthier housing market in the future. The NAR expects 2007 to have the fourth highest level of existing home sales on record. According to their forecasts, existing home prices will remain roughly flat on average in 2007 and will increase modestly in 2008. In addition, they predict that mortgage rates will gradually rise to 6.60% during 2007.

Next week will start off quickly with the Retail Sales report on Monday. Consumers account for about 70% of economic activity, and this report is a major indicator of spending by consumers. Tuesday will be the biggest day with the Consumer Price Index (CPI), Housing Starts, and Industrial Production. Almost without exception, higher inflation leads to higher interest rates, and CPI is the most widely watched indicator. CPI looks at those finished goods which are sold to consumers. After Tuesday, the rest of the week will contain a scattering of second tier economic data. Finally, a weekend G7 meeting of world finance ministers may have an impact on Monday morning’s opening levels.

The picture to the right has nothing to do with the update, I just found it funny. My caption for it would be “life is good.”

Everyone agrees that the number of foreclosures is rising and that the previous years of aggressive lending (subprime) are partly to blame. Several blogs are dedicated to discussing the problems and tracking the increase of bank-owned properties.

There are some simple steps that a home owner should take in order to try and avoid foreclosure. It is important for the owner to be proactive and to communicate often with their lender. The Homeownership Preservation Foundation is a HUD-certified non-profit that offers advice and resources to help homeowners with financial trouble.

From a recent Freddie Mac, Roper survey, nearly two-thirds of delinquent borrowers say they are unaware of workout options from their lender. The borrowers never contact their lenders in over half of the foreclosure situations. While the likelihood of successful foreclosure avoidance depends upon each individual borrower’s financial situation, a 2004 Freddie Mac survey concluded that repayment plans could lower the probability of home loss by 80% among all borrowers and by 68% among low-to-moderate income borrowers.

If you know someone who is having trouble with their mortgage, encourage them to talk with their lender to learn about the options that are available to help them.

]]> http://howtogethome.com/2007/04/10/avoiding-foreclosure/feed/ http://howtogethome.com/2007/04/07/speaking-of-high-prices/ http://howtogethome.com/2007/04/07/speaking-of-high-prices/#comments Sun, 08 Apr 2007 02:07:23 +0000 Michael http://howtogethome.com/2007/04/07/speaking-of-high-prices/ When you think of high-priced homes most people will think of California — with good reason. Five of the top 10 highest-priced markets for existing single-family homes are in the Golden State.10 highest priced home markets and the median home price

1. San Jose-Sunnyvale-Santa Clara, Calif. $775,000
2. San Francisco-Oakland-Fremont, Calif. $736,800
3. Anaheim-Santa Ana-Irvine, Calif. $709,000
4. Honolulu $630,000
5. San Diego-Carlsbad-San Marcos, Calif. $601,800
6. Los Angeles-Long Beach, Calif. $584,800
7. New York-Westchester County, N.Y. $537,800
8. Nassau-Suffolk counties, N.Y. $474,700
9. Bridgeport-Stamford-Norwalk, Conn. $473,700
10. Northern New Jersey $469,500

Note: List of markets based on data contained in a February 2007 report by the National Association of Realtors. Some overlapping geographic areas have been removed. Source bankrate.com

Fed Chief Bernanke recently emphasized that inflation is running higher than the Fed’s comfort level and that the Fed’s primary policy concern is that inflation will not move lower. This Employment report will further fuel these concerns, and it will make this month’s other economic and inflationary indicators even more important to the mortgage markets.

In the housing sector, the Pending Home Sales index increased slightly in February. The index is based on contracts which were signed but were not yet closed, so it is a leading indicator of future home sales. Following the release, the Chief Economist of the National Association of Realtors (NAR) suggested that an “underlying stabilization” is taking place in the housing market, but he added that troubles in the subprime sector will slow the pace of future activity to some degree. Given the bad weather in February and the issues in the subprime market, this data was encouraging.

Good news on the economy and the strong labor market may cause a slight uptick in mortgage rates, but are welcome signs of life for those trying to make their mortgage payments.

- Both goals take a lot of work and happen over a period of time, which is not fun or exciting.

- Numbers are slow to move in the direction you want & quick to move against your goals.

- Both can seem hopeless at times and being able to charge it at McDonald’s doesn’t help.

- There are tons of books out there to help you do it, but no one reads them.

- Eating and spending make people “feel better” but are counter-productive to the goal.

- Many folks try, get frustrated and then give up.

- There are late-night infomercials for both claiming fast results for only $19.95.

- Both require a lifestyle change and without it, the person is guaranteed to fail.

There is an elevated risk level associated with both weight (blood pressure and heart disease) and lower credit scores (default) that can have an adverse impact of an individual’s life. Working on either requires a plan and setting realistic goals. With credit card offers and fast food so plentiful, it may seem like the system is working against you. Instant gratification is for sale at a drive-thru and they take Visa.

Stay focused, work hard, and never give up. A very smart guy once told me “you have to change it on the inside first.” A healthy weight and a good credit score are more like a journey than a destination. Both reflect making good choices and are worth the effort it takes.

Our friends over at Calculated Risk (CR) have put together some estimates based on the available data related to MEW. Take a minute and read over the post and the related graphs. I bring this economic reality to my blog because I think it is important for everyone to think about how one views the equity in one’s home. Just because it is tax-deductible, does not mean that maxing out one’s HELOC is a great idea. Retail banks have pushed home equity lines of credit (HELOC) products for years with interest-only options and lender paid closing costs.

The HELOCs were seen as rather safe loans to the banks as they were secured by a real asset, which for the most part, has been appreciating in value for the last decade. HELOCs were easy to get, easy to use, and they came with a checkbook. If one follows the example on CR, then you can see that $171 billion was taken out in MEW in the 3rd quarter of 2005. If 66% percent of that flowed through to personal consumption expenditures, it is easy to see how home equity spending has supported the US economy the last few years.

Now I do not want to get labeled as an alarmist or appear negative, but I think it is important for home owners to become more selective about how they spend their equity. Before the era of HELOCs, principle paid towards one’s mortgage was locked up until the home was sold. Locked up can sometimes be a good thing.

It is too early too tell what will happen to home values and thus the amount of equity available to spend. Either way, protect your equity and save/spend it wisely.

The most damaging economic data for mortgage markets last week came with Friday’s release of the Fed’s preferred PCE inflation measure, which showed an unexpected rise to a 2.4% annual rate. Coming on the heels of Bernanke’s concerns about stubbornly high inflation, this was definitely bad news for mortgage markets. The same day, the Chicago PMI national manufacturing index far exceeded the forecasts, providing a second blow. In addition, Thursday’s final revision to growth in fourth quarter 2006 GDP, the broadest measure of economic activity, was also higher than expected.

Unlike many of last week’s other economic reports, February New Home Sales came in far below the consensus forecasts, falling to the lowest level in seven years, while unsold inventories rose to the highest level since 1991. Tighter lending standards may have had a larger than expected impact on New Home Sales last month. Fortunately for the housing sector, though, the troubles have not spread to Existing Home Sales, which make up about 85% of the housing market, as the February data released the week before last exceeded forecasts.

Next week is a big week in the news department as well. Friday will bring the all important jobs report and everyone will continue to watch and see how the subprime story continues to develop. Today brought even more testimony from the Fed chief on the recent mortgage troubles. Nice to see that everyone agrees that current lending practices need to be evaluated to make sure they are helping and not hurting consumers.

No go outside and play. The weather is much to nice to be inside reading some blog.

1. Home Values: It has yet to be determined how many current loans will be foreclosed, but the more inventory of unsold homes, the more pressure on property values. Supply is never a good thing when it comes online faster than the market can absorb it.

2. Buying a Home: You are a clear winner if you are shopping for a new home. With an increasing number of homes to pick from and very motivated sellers, buyers will benefit. The ability to mortgage that home will depend on your personal financial situation, but 30-year fixed rates remain very low.

3. Selling a Home: Price it to sell. There is no fancy way to say it. There are fewer buyers who can qualify with the tighter credit standards and there are more homes on the market to pick from.

4. Getting a Mortgage: Now more than ever, it is important to do business with someone you trust and be confident with their ability to fund the loan. As there is a significant contraction in the mortgage market, more and more lenders are being forced to close (44 since late 2006) because of the changing market. Get a referral from a friend or your real estate agent and look for a Mortgage Planner than has been in the business for a few years. Their experience can save you money.

I’ll try to keep you current as the market conditions change.