What's in the Bailout for Homeowners - Sunday, September 28, 2008

Emergency Economic Stabilization Act of 2008 - The $700 billion bill is expected to pass the House on Monday and the Senate by Wednesday this week. Includes plan to stem foreclosures and to work with servicers to modify loans. In Sunday's version of the bill, federal agencies holding mortgages and mortgage securities would be required to identify loans that could be modified without causing big losses for taxpayers. However, exactly how that would be done isn't totally clear. It also allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures, though on a press call Treasury officials declined to elaborate on these provisions. Servicers have been under pressure to modify loans since the mortgage meltdown began a year ago. However, they say the biggest roadblock to changing loan terms are the investors who hold the securities created from those mortgages. (KNX-AM, 9/28, CNNMoney, 9/28)

In a separate bill, the Senate on a 78-12 vote sent a $634 billion measure to President Bush, who was expected to sign it even though it spends more money and contains more pet projects than he would have liked. The measure is needed to keep the government operating beyond the current budget year, which ends Tuesday. As a result, the legislation is one of the few bills this election year that simply must pass. Bush's signature would mean Congress could avoid a lame-duck session after the Nov. 4 election. (CNNMoney, 9/27)

Homeowner Help At Last - The Hope for Homeowners program, which begins Oct. 1, allows borrowers who can't meet their current mortgage terms to refinance into more affordable, fixed-rate loans backed by the Federal Housing Administration. The legislation also calls for changes to strengthen the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures, but did not specify the enhancements.
(CNNMoney, 9/28)

Banks in a Domino Effect - In a week where WaMu was acquired by JPMorgan Chase, Wachovia is the subject of a bidding war between Citigroup and Wells Fargo. Across the Pond, the governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest £9bn in huge financial services group Fortis, in effect nationalizing it. Plus Spanish bank Santander will take over 20-billion British Pounds to take over UK's Bradford & Bingley a year after Northern Rock collapsed and was nationalized by the British government. (NYTimes, 9/28, BBC, 9/28)

Emergency Rate Cut - Some economists think that the Federal Reserve will try to boost battered confidence in banks and the economy by cutting the Federal Funds Rage by at least a quarter percentage point as early as Tuesday, although the Fed's next scheduled meeting to discuss interest rates is a two-day session that ends on October 29. (CNNMoney, 9/26)

Current Mortgage Rates:

• 30-year fixed - 5.98%
• 15-year fixed - 5.65%
• 5/1 ARM - 5.98% (CNNMoney, 9/25)
  

Schwarzenegger signs 10 housing-related bills, vetoes one - The bill he vetoed would have banned negative amortization loans, in which homeowners pay less than the interest on their loan and can end up owing more than their homes are worth. It also would have prevented mortgage brokers from steering borrowers into more profitable but higher-risk loans if those buyers actually qualified for lower-cost mortgages. In addition, prepayment penalties would have been capped. Schwarzenegger said he vetoed the bill because it would have applied only to state-regulated brokers, leading to unequal protections for consumers. He also said it could have prompted unfair lawsuits against brokers. Lieu's bill was part of a more ambitious package of eight Assembly bills earlier this year aimed at risky lending practices. Four of the eight died in a Senate committee after bankers and mortgage brokers objected, and two others were watered down. Among the housing bills the governor signed are ones that will allow more oversight of mortgage brokers, require brokers to disclose more information to consumers and regulators, and help create new mortgage-refinancing programs. (CNN, 9/26)


Sources: CNNMoney, New York Times, BBC, KNX-AM, CNN

30-Year Mortgage Rates Reach 7-Month Low , Sunday, September 21, 2008

Freddie Mac reports a decline in the 30-year fixed mortgage rate to 5.78 percent during the week ended Sept. 18 from 5.93 percent the prior week, marking the lowest level in seven months. During the same period, the 15-year mortgage rate dropped to 5.35 percent from 5.54 percent. Meanwhile, interest on five-year adjustable mortgages slipped to 5.67 percent from 5.87 percent; and the one-year ARM slid to 5.03 percent from 5.21 percent. (San Diego Union-Tribune, 09/19/08)

$700 Billion Proposed Bailout of the Banking System - According to the administration's proposal, the federal government would buy up as much as $700 billion of illiquid mortgage assets at a deep discount from banks. The Treasury Department would run the program directly, unlike the savings and loan crisis of the 1990s when Congress created the Resolution Trust Company to spearhead a financial bailout. Lawmakers are reviewing the plan and have scheduled hearings on the matter in the next few days. (CNN, 9/21)

The Federal Reserve voted yesterday to keep the federal funds target rate at 2 percent, where it has been since April. (Investor’s Business Daily, 09/16/2008)

The housing market is a year away from improvement, says Steven Preston, secretary of the U.S. Department of Housing and Urban Development. Preston predicts that it will be “the middle of next year or well into next year” before “we begin to see more consistency in buyers coming back into the marketplace.” The recovery from the housing crisis in 2009 is likely to be regional in nature, the HUD secretary says. “The crisis will begin abating in a number of regions of the country. That is what I am hopeful of. But I think it will be more intractable in other regions,” he says. “It is going to be some time” before recovery comes to certain communities in California, Florida, Arizona, and Nevada. (Christian Science Monitor, 09/16/08)

Refinance Applications Jump 88% from prior week - Homeowners rushed to take advantage of the drop in interest rates following the government's takeover of Fannie Mae and Freddie Mac, data released Wednesday showed. Applications by homeowners looking to refinance their mortgages spiked 88% last week, according to the Mortgage Bankers Association. Refinances accounted for nearly 52% of all application activity, up from 36% the previous week, the trade group said. The volume of purchase applications also edged up last week by 5%. The average rate for traditional, 30-year fixed-rate mortgages dropped to 5.82% from 6.06% the prior week. The average rate for 15-year fixed-rate mortgages, often a popular option for refinancing a home, fell to 5.54% from 5.73%. (CNN, 9/17)

Home Values Fall 34% in Southern California - The cost of new and resale homes and condos dropped to $330,000 last month in a six-county region. It was down from $500,000 in August 2007 and down 5.2% from $348,000 in July, MDA DataQuick said. A total of 19,366 homes and condos were sold last month, up about 9% from August 2007 but down almost 5% from July. MDA DataQuick president John Walsh said much of the sales activity has been logged in lower-priced inland areas where the market has been driven by foreclosures. Foreclosures accounted for almost 46% of all resold properties last month, up from 10% in August 2007 and almost 44% in July. (CNN, 9/17)

Sources: CNNMoney, Christian Science Monitor, Investor's Business Daily, San Diego Union-Tribune.

Interest Rates Drop – Sunday, September 14, 2008

With the government conservatorship of Freddie Mac and Fannie Mae a week ago, mortgage interest rates dropped significantly the past week. Rates on 30-year fixed-rate mortgages (FRMs) averaged 5.93% for the week ended September 11, with an average 0.7 point discount. That's down from an average 6.35% last week, and down from an average of 6.31% recorded during the same week last year. Experts think these rates will pull the final holdout buyers off the fence and promote a turn-around in the housing market that we are already beginning to see in some markets. A 15-year FRM averaged 5.54%, falling from 5.90% last week and 5.97% from a year ago. The five-year adjustable rate mortgage (ARM) dropped to 5.87% from 5.97% last week, and 6.17% a year ago. One-year ARMs averaged 5.21%, a slight increase from a week ago when it stood at 5.15%. That's down from a year ago when the rate averaged 5.66%. (CNNMoney, 9/10, 9/11)

Other points regarding the government conservatorship of Freddie & Fannie:

· Under the conservatorship, the FHFA has the authority to take up to an 80 percent stake in the companies, and will review both GSEs’ financial condition quarterly. The federal government also may inject capital into Fannie Mae and Freddie Mac, if needed. Both GSEs will be allowed to increase their mortgage funding over the next year and a half, and their stock will continue to trade, with stockholders retaining all rights in the stock’s financial worth. However, the plan does call for a 10 percent reduction per year to GSEs’ portfolios, beginning in 2010, until they have been reduced to $250 billion.

· Although the conservatorship has resulted in lower interest rates for consumers, and restored investor confidence, C.A.R. is concerned that the Treasury and the new CEOs will change the mission and role of GSEs. Without GSEs, mortgage capital eventually will be less predictable and more expensive. This may result in adjustable-rate mortgages becoming the standard loan for home buyers, as well as higher down payment requirements, and the possible disappearance of the 30-year fixed-rate mortgage.

· C.A.R. supports a structure that maintains GSEs in their current countercyclical roles and is urging lawmakers to support continued government involvement in supporting the institutional secondary market. As a result of these concerns, C.A.R. will be asking Congress to enact legislation to ensure GSEs continue to fulfill their congressional mission of supplying an affordable and stable flow of capital for home loans. (CAR, 9/11)

Your home: When it’s wise to downsize - As a result of reaching retirement age and becoming empty nesters, more baby boomers are choosing to downsize from large, multi-room homes to ones with less square footage. While some buyers are choosing to downsize to save money, others -- especially those still in the workforce -- are opting for a lifestyle change, such as a shorter commute; the convenience of an onsite fitness center, often found in condominium communities; or energy savings. (CNNMoney, 9/5)

· Some buyers are choosing to downsize to condominiums, as they are often located in close-proximity to shops, restaurants, transportation; and everyday needs such as grocery stores, dry cleaners, or the pharmacy. Although this is convenient, buyers who wish to save money by downsizing should weigh all the facts before making the decision to downsize. While most single-family homes incur costs such as property taxes, utilities, and home maintenance, most condominium communities require owners to pay monthly homeowner association (HOA) fees, and sometimes special assessments. The monthly dues and special assessments are generally used for items such as replacing a swimming pool, upgrading the community clubhouse, or adding new amenities. Buyers concerned about these costs should ask how much HOA fees have risen over the past five years, and whether the association has plans for new assessments in the near future.

· Even with the added costs, many buyers will realize an annual savings when downsizing. Some experts estimate that the average annual savings in utility costs and property taxes could be as high as $3,900 if a buyer downsizes from a 2,800-square-foot residence to one that is 1,800 square feet.

· Buyers who are at or near retirement should consider acquiring a mortgage loan with a 15-year maturity or a traditional 30-year, fixed-rate loan that does not charge a prepayment penalty. Although payments on a 15-year mortgage are higher and the interest rate is only about .10 percent lower than a traditional 30-year, fixed-rate loan, borrowers can save approximately $141,000 in interest over the life of the loan.

· If a borrower elects for a traditional, 30-year, fixed-rate loan, they should consider one without a pre-payment penalty. This allows the borrower to make extra payments each month and pay off the mortgage more quickly, without adding additional pressure should their financial situation change. (CAR, 9/11)

Fast Facts: · Calif. median home price - July 08: $350.760(Source: C.A.R.) · Calif. highest median home price by C.A.R. region July 08: Santa Barbara So. Coast $940,000(Source: C.A.R.) · Calif. lowest median home price by C.A.R. region July 08: High Desert $177,330(Source: C.A.R.) · Calif. First-time Buyer Affordability Index - Second Quarter 08: 48 percent (Source: C.A.R.)

A sincere thank you to all of you who donated to Danielle's Avon Walk. With your help, not only did she meet her goal, but she surpassed it, raising nearly $2000. She tells me that she has never walked so far for so long ever (39 miles), and has ended up with sunburn and plenty of water blisters on her feet. But she has never had so much fun raising money for a good cause. Thank you again!

Sources: California Association of REALTORS®, CNNMoney.

Current Valley Housing Analyses and Freddie Mac/Fannie Mae Takeover, Sunday, September 7, 2008

San Fernando Valley home sales surged 16% during July as buyers raced to grab bargains; median price down 31%

Buyers jumped into the resale housing market during July, pushing sales of existing single-family homes in the San Fernando Valley up 16.2 percent from a year ago and 6.9 percent higher than the June tally, the Southland Regional Association of Realtors reported on Thursday, Aug. 29.

While still at historically low levels, sales have increased every month this year since January.

Realtors across the San Fernando Valley report a resurgence of multiple offers on properties as buyers compete with each other over the most favorably priced homes. Many of those offers present ridiculously low prices which have virtually no chance of being accepted, especially by banks that have little negotiating latitude as they try to recoup investments on foreclosed properties.

As lenders adjust to new rules, lenders will start writing loans in the higher price ranges, thus fueling a resurgence in that segment of the market, too.

Because buyers are striving to take advantage of a rare opportunity to buy a single-family home at a favorable price, condominium sales lagged during July.

A total of 205 condos sold, down 25.7 percent from a year ago and off 10.9 percent from this June. Condo sales had been moving up every month since January with July being the first decline this year in month-to-month condo activity.

The real numbers of foreclosures and short sales are likely to wane in the coming months, especially as lenders implement new procedures and the recently-approved economic stimulus package plus other moves by federal authorities begin to take effect.

The single-family median price of $435,000 was down 31.0 percent compared to a year ago. However, it did post a modest gain compared to June, up 1.0 percent. The median has been falling since the record high of $655,000 was set in June 2007.

The condo median of $280,000 was off $127,500 or 31.3 percent compared to July 2007. The condo record high of $415,000 was set in February 2006.

Link said he expects the market to remain busy and perhaps pick up added momentum in the coming months. Pending escrows – a measure of future resale activity – support that view.

There were 1,141 open escrows at the end of July, 39.2 percent higher than a year ago and up 1.2 percent from this June. It marked the third consecutive month that the pending sale total has topped the 1,100 benchmark. The inventory of homes for sale while higher than just a few years ago is not excessive.

There were 6,950 active listings throughout the San Fernando Valley at the end of July, down 3.4 percent from a year ago. Of that total, single-family homes accounted for 75 percent of the active listings.

At the current pace of sales, the active inventory represents a 7.5-month supply – slightly higher than the 5- to 6-month supply deemed to represent a balanced market.

By comparison, the inventory during the recession of the 1990s hit a record high of 14,976 in July 1992 and the inventory compared to pace of sales was three-times higher at a 23-month supply.

Contrary to an inaccurate public perception, the active inventory in the San Fernando Valley has been trending lower since November 2007 when it stood at 7,505.

Buyers confident the housing market is recovering push Santa Clarita Valley home sales up 22%

Sales of existing single-family homes increased 22.2 percent throughout the Santa Clarita Valley during July with the 237 closed escrows up 43 transactions from the 194 total of a year ago, the Southland Regional Association of Realtors reported on Thursday, Aug. 28.

Home sales increased on a month-to-month basis for the sixth consecutive month, rising 3.5 percent in July compared to June.

Condominium sales also increased, rising 2.4 percent for a total of 85 closed escrows, two sales higher than a year ago and 10 sales ahead or 13.3 percent higher than this June.

While the market will not return to normal until foreclosed properties and so-called “short sales” work their way through the system, statistics released by the Southland Regional Association of Realtors indicate that the market has changed direction.

In a growing number of instances, Realtors across the Valley report, multiple offers have reappeared as people strive to capture homes that sold at much higher prices just a short while ago. Chastain-Shine said that one property listed at $450,000 recently attracted 32 purchase offer.

Most of the activity is concentrated on homes listed for less than $500,000, she said, which has the effect of pulling the overall median price lower.

The median price of single-family homes sold last month was $441,000, down 22.6 percent from a year ago, well below the record high of $643,000 set in April 2006. The median has been sliding on a consistent basis since then and its drop has accelerated as buyers focus on entry-level-priced housing.

The condo median price of $285,000 was down 20.8 percent from a year ago and unchanged on a month-to-month basis. While still above 20 percent, the decline in the median price for both single-family homes and condos appears to be slowing as sales activity begins to pick up.

That perspective was bolstered by statistics reporting pending escrows – a measure of future sales activity. The number of open escrows at the end of July increased 33.9 percent compared to a year ago and gained 3.5 percent over this June.

While higher than during the sellers’ boom market, the inventory of homes currently listed for sale is not excessive, despite the public’s inaccurate perception that there is a vast backlog of homes for sale.

There were 1,722 active listings throughout the Santa Clarita Valley at the end of July, down 24.6 percent from a year ago and 8.4 percent lower than this June, the Association reported. Of that total, 73 percent of the listings were single-family homes.

At the current pace of sales, the inventory represents a 5.5-month supply. Industry experts believe a balanced market – where neither buyer nor seller hold sway – appears when there is a 5- to 6-month supply.

The mismatch between the public’s view and reality often leads to fruitless negotiations as buyers think sellers must accept ridiculously low purchase offers.

Professional representation, especially when negotiating with a bank, is more vital than ever. Completing a purchase successfully today requires market knowledge and experience on the part of the Realtor and a realistic, informed view regarding prices on the part of the buyer.

Feds Takeover Fannie Mae and Freddie Mac - Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back. The move, which extends as much as $200 billion in Treasury support to the two companies. I believe this move affects the investors to Freddie Mac and Fannie Mae significantly, and we will see the market reaction on Monday. I do not see a big effect to current buyer and sellers. Taxpayers generally may be hit in the long term as more government funds are diverted to these two companies. (CNNMoney, 9/7)

Sources: Southland Regional Association of REALTORS®, CNNMoney.

Buyers Galore! – Sunday, August 24, 2008

Personal Note: Trends I’m Noticing – Okay, moving away from all the data and news, I’m noticing a lot more buyers (real estate agents are saying, “duh!”). Even when I’m trying to get a listing to sell a home, I end up more often than not with a buyer. REO (foreclosure) properties are a lot easier to deal with than Short Sales, and if priced right, my buyer’s offer might be one of 11 offers for that home. If you’re in the market, be patient and persistent. I'm seeing prices still declining in Santa Clarita and San Fernando Valleys, but sales volumes are increasing. In the Antelope Valley, there are still a lot of foreclosures coming on the market. Call me if you have any questions!

In Summary -

• Many mortgage brokers are finding that consumers do not fully understand the home loan process and as a result, make mortgage mistakes. Some common mistakes that borrowers make are: not cleaning up their credit; failing to search out first-time home buyer programs; paying junk fees; and not planning for closing costs.
• Borrowers can increase their chances of being approved for a home loan by requesting their credit report and FICO score at least six months prior to applying for a loan. This allows the consumer to dispute errors and/or pay any outstanding debt.
• Borrowers also should seek out a first-time home buyer program because they often offer better interest rates and terms, and some even are tailored to people with poor credit, or can assist those that do not have enough saved for a down payment.
• To avoid paying junk fees, such as those charged for "document preparation," for example, a borrower can use a mortgage broker or call a variety of lenders to compare loans, interest rates, and fees.
• Some borrowers are shocked when they realize that they must bring cash to the closing table, typically anywhere from 2 percent to 7 percent of the home's selling price. To avoid this "sticker shock," experts recommend that borrowers get a good-faith estimate from their lender early in the loan process. (CAR, 8/21)

Q2 ENTRY-LEVEL HOUSING AFFORDABILITY INCREASES 50 PERCENT - Nearly half of first-time home buyers in California were able to afford an entry-level home in California in the second quarter of 2008, according to a report released yesterday by C.A.R. Affordability rose to 48 percent in the second quarter compared with 24 percent a year ago. At 68 percent, the High Desert region was the most affordable area in the state. The San Francisco Bay Area region was the least affordable in the state at 32 percent, followed by the Santa Clara region at 33 percent. The Monterey, Northern Wine Country, Palm Springs/Lower Desert, Santa Barbara County, Southern California, Merced, Riverside, and Sonoma regions all reached record-high affordability levels in the second quarter of 2008. (CAR, 8/20)

HOME BUILDERS' CONFIDENCE IN MARKET INCREASES IN AUGUST - Sales expectations among single-family home builders for the next six months increased two points in August to 25, while current sales conditions increased by one point to 16, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The NAHB/Wells Fargo HMI monitors builder perceptions of current single-family home sales and sales expectations for the next six months, where a score greater than 50 indicates that more builders view sales conditions as good than poor. (CAR, 8/20)

CALIFORNIA FORECLOSURE ACTIVITY INCREASES; DEFAULT NOTICES DECLINE - California led the nation with 72,285 foreclosure filings in July, a 5 percent increase from June and an 85 percent increase from July 2007, according to a recent report by RealtyTrac®. Bank repossessions, auction notices, and default notices all increased in year-over-year comparisons. Default notices however, which are the first phase in foreclosure proceedings, declined 4 percent from June, according to the report. (CAR, 8/20)

NEW HOUSING STARTS DECREASE IN JULY - The U.S. Census Bureau reported that building permits, an indication of future residential construction, decreased 17.7 percent in July to 937,000 from 1,138,000 in June. New housing starts also decreased 11 percent in July from June, and were 29.6 percent below the revised July 2007 rate. (CAR, 8/20)

Real estate chaos hits appraisal industry - As a result of the current market and a return to proper underwriting guidelines, appraisers are finding it increasingly difficult to get lenders to accept appraisals. Some lenders even are declining low appraisals and scrutinizing loan applications more carefully than in previous real estate cycles. Whereas most lenders used to evaluate a home appraisal's credibility based on comparisons generated from their desk, now some banks are requesting that appraisals be verified by on-site visits to the property, as well as the nearby homes listed as comparables. (SF Chronicle, 8/17)

• Since real estate markets are local and prices can greatly fluctuate from one area to the next, experts recommend that sellers and REALTORS® work with local appraisers that have knowledge of the region.
• Similar to utilizing a REALTOR® versus a sales agent, it is recommended that sellers work with an appraiser that is a member of the Appraisal Institute or the American Society of Appraisers, the appraisal industry's two largest trade groups. Appraisers that are members of these organizations are required to complete more coursework than those just licensed by the state.
• Because some lenders are declining appraisals, some mortgage brokers recommend that buyers leave their financing contingencies in place until the lender has signed off on the appraisal. (CAR, 8/21)

How the Housing Law Affects Reverse Mortgages - The recently signed federal housing bill has many provisions, including changes to reverse mortgages, which are loans against a house that the borrower is not required to pay back as long as they live in the home. Some of the amendments include raising the amount that seniors, age 62 and older, can borrow using a federally backed reverse mortgage; and lowering the cost of receiving the home's equity. Some ageing experts advise consumers to be cautious before refinancing into a reverse mortgage. (USNWR, 8/18)

• Although seniors can access their home equity by refinancing into a reverse mortgage, many of these loans come with a variety of fees. Once the fees are paid, borrowers may choose to receive a lump sum payment, monthly payments, a credit line, or a combination based on the home's value. A provision in the housing bill reduce the maximum fee to 2 percent on the initial $200,000 of a home's value and 1 percent on the remaining balance, with a maximum set at $6,000. Some lenders charge less fees, so similar to finding a traditional mortgage, consumers should shop around and negotiate with their lender on these fees. In some cases, closing costs, service fees, mortgage insurance premiums, and interest rates also can be negotiated.
• Most reverse mortgages are Home Equity Conversion Mortgages (HECM), which are backed by the Federal Hosing Administration. In order for a borrower to qualify for an HECM, they must discuss the loan with a loan counselor employed by a nonprofit or public agency approved by the U.S. Dept. of Housing and Urban Development. This ensures borrowers understand all of their options and make the right decision.
• Some borrowers may not understand that although the loan does not have to be repaid, as long as they remain in the home, they still are responsible for property taxes, insurance, utilities, fuel, maintenance, and other homeowner expenses. If some of these items are not kept up to date, the borrower risks the lender calling the loan due. It is important to note that reverse loans must be paid back with the proceeds, along with any remaining equity, if the home is sold. (CAR, 8/21)

Good news for California housing - Home sales in Southern California increased in July compared with a year ago, while foreclosures decreased in month-over-month comparisons, according to a recent report. The California Legislature also is working with consumer and lending groups on a bill that would protect consumers from predatory lending and establish guidelines and restrictions on brokers and lenders. (LAT 8/20)

• Although the foreclosure rate is approximately double what it was a year ago, in month-over-month comparisons, it is 8 percent lower, indicating that foreclosures could be reaching a plateau. In a report released by RealtyTrac, default notices, which are the first phase in foreclosure proceedings, declined 4 percent from June.
• If signed, the bill will prohibit lenders from offering pick-a-payment loans to subprime borrowers; establish limits and timeframes on prepayment penalties to subprime borrowers; and prohibit brokers from leading subprime borrowers into loans with higher interest rates if they can qualify for one with a lower interest rate. The bill also would prohibit lenders from paying a financial incentive to brokers for steering borrowers into loans with prepayment penalties or higher interest rates. Additionally, mortgage brokers would be required to place the consumer's financial interests above their own. (CAR, 8/21)

Fast Facts –

• Calif. median home price - June 08: $368,250 (Source: C.A.R.)
• Calif. highest median home price by C.A.R. region June 08: Santa Barbara So. Coast $1,035.000 (Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region June 08: High Desert $180,570 (Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - Second Quarter 08: 48 percent (Source: C.A.R.)
• Mortgage rates - week ending 08/14/08 30-yr. fixed: 6.52 Fees/points: 0.7% 15-yr. fixed: 6.07 Fees/points: 0.7% 1-yr. adjustable: 5.18 % Fees/points: 0.5% (Source: Freddie Mac)

Sources: California Association of REALTORS, Los Angeles Times, San Francisco Chronicle,U.S. News and World Report, Freddie Mac.

Greenspan expects Housing to Stabilize Soon – Sunday, August 17, 2008

AV Market Right for Home Buyers – Today’s AV Press top article states lower prices now are creating unique opportunities for home buyers. Read it yourself at http://avpress.com/n/17/0817_s1.hts. (8/17)

Greenspan expects Housing to Stabilize Soon - Former Federal Reserve Chair Alan Greenspan in an interview with the Wall Street Journal this week says he expects U.S. home prices to stabilize in the first half of 2009. "Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities. We won't really know the market value of the asset side of the banking system's balance sheet – and hence banks' capital – until then," he said. (8/13)

Mortgage Rates Steady - Freddie Mac reports that the 30-year fixed mortgage rate held steady at 6.52 percent during the week ended Aug. 14. However, interest on 15-year fixed loans fell slightly to 6.07 percent from the prior week. Meanwhile, the five-year adjustable mortgage rate dipped to 6.05 percent, and the one-year ARM dropped to 5.18 percent. (Chicago Sun-Times, 8/15)

California 10^th Most Expensive States for Closing Costs - The 2007 average closing cost of $2,736 has gone up to an average of $3,118 in 2008, a 14 percent increase. New York City at $4,016 is the most expensive place to close. North Carolina is the least expensive area with an average fee of $2,650. Here are the top 10 most expensive states to pay closing costs.

1. New York: $4,016
2. Texas: $3,975
3. Florida: $3,683
4. Oklahoma: $3,558
5. New Mexico: $3,465
6. New Jersey: $3,432
7. Pennsylvania: $3,411
8. Alaska: $3,409
9. Colorado: $3,358
10. California: $3,321 (bankrate.com, 8/15)

Sources: National Association of REALTORS, Chicago Sun Times, Antelope Valley Press, Bankrate.com, Wall Street Journal.

301

SCV Home Sales Increase for 5th month – Sunday, August 10, 2008

SCV Market continues to stabilize and show improvement during June – Sales of existing single-family homes increased 11.2 percent compared to 12 months ago with Realtors closing escrow on 299 transactions. The total also was 4.1 percent higher than this May. Likewise, condo sales of 75 units were 5.6 percent ahead of a year ago and equal to the May tally. While the single-family median price fell 25.6 percent from a year ago to $450,000 – a drop of $155,000 – and has been drifting downward since April 2006 when the record high of $643,000 was set, the pressure on home sellers to reduce prices is not nearly as strong as buyers presume. Condo prices also have been falling with the median off 23.0 percent from a year ago to $285,000. The condo record-high median price of $397,000 was set in January 2006. There were 1,940 active listings at the end of June, down 16.4 percent from a year ago and less than 1 percent below the May tally. At the current pace of sales, the inventory represents a 6.4-month supply, only slightly on the high side of the 5- to 6-month supply that is deemed to represent a balanced market. – Southland Regional Association of REALTORS, 7/29/08

SFV June Home Sales Slightly Behind A Year Ago - Realtors closed escrow on 671 single-family homes during June, off 19 sales or 2.8 percent below the 669 sales of June 2007. A total of 230 condominiums also changed owners last month, off 15 sales or 6.1 percent below last year’s 245 transactions. A total of 6,935 properties were listed for sale at the end of June, up 1.6 percent from a year ago, but down 2.0 percent from May. At the current pace of sales, the inventory represents a 7.7-month supply, only slightly higher than the 5- to 6-month supply deemed to represent a balanced market. For comparison, at the height of the recent sellers’ boom market the inventory frequently hovered at a less than 1-month supply. And, in the early 1990s, when a recession wracked the nation and California rebuilt its economy, the supply often soared above a 20-months, hitting a record 23-month inventory in January 1993 with total listings at nearly 15,000 in July of 1992 – double the number of properties on the market today. The median price of single-family homes sold last month was $431,000, down 34.2 percent from a year ago when the record high of $655,000 was set. The condo median price of $295,000 was off 26.2 percent. The condo record high of $415,000 was set in February 2006. Statistics support the notion that a growing number of people are entering the market. Pending sales – a measure of future resale statistics – increased 20.6 percent from a year ago and were up slightly from May. There were 1,128 open escrows at the end of June, the third consecutive month that pending sales have increased and topped the 1,000 benchmark. – Southland Regional Association of REALTORS, 7/29/08

Hooray Santa Clarita!

• SANTA CLARITA LIFEGUARDS WIN CALIFORNIA SWIM COMPETITION - Third Consecutive Year of Wins for Santa Clarita Lifeguards
• MAJOR CRIME DOWN OVER 16% IN SANTA CLARITA - First Six Months of 2008 Reveal Downward Trend for Part I Crimes --City of Santa Clarita, 8/8/08
  

Big Gain in Pending Home Sales Index - A hike of almost 10 percentage points in NAR's forward-looking sales indicator suggests strong prospects later this year. - National Association of REALTORS, 8/8/08

More Unmarried Couples Buying Homes - Unmarried couples made up 7 percent of home buyers last year, making up the second-fastest growing buyer segment. Experts recommend that each buyer have a will stating that their share of the property goes to the surviving owner upon his or her death, but they also should consider including joint tenancy with the right of survivorship in the deed. They also must understand that obtaining a mortgage requires full financial disclosure, meaning that their past credit histories will be out in the open. Moreover, buyers must understand that in the event of a breakup, the mortgage must be refinanced for it to be removed from one's credit report. -- National Association of REALTORS, Atlanta Journal-Constitution, 8/3/08

New Housing Bill 1st Time Buyer Tax Credit - Under the new housing bill, home buyers who have not owned a home in the last three years will be eligible for a tax credit equal to 10 percent of the property up to a maximum of $7,500.

· The credit is $3,750 for married couples filing separately. Unmarried people who jointly purchase a home will be able to divide the $7,500 credit.

· This program is actually a loan, which home buyers must repay over 15 years at zero percent interest beginning in the second year after they purchase the home. A home buyer who qualified for the whole credit would pay $500 for 15 years or about $41.67 per month.

· The credit applies only to homes purchased on or after April 9, 2008, and before July 1, 2009.

· High-income home buyers don’t qualify: Eligibility begins phasing out for single filers with adjusted income of more than $75,000 and $150,000 for joint filers. It completely phases out at $95,000 for singles and $170,000 for married couples filing jointly.

Alex Calder writes that you read this act at http://banking.senate.gov/public/_files/HousingandEconomicRecoveryActSummary1.pdf -- Washington Post, 8/3/08; Alex Calder, 8/6/08.

NEW STUDY SUGGESTS HOME LOAN LIMITS, NOT SUBPRIME BORROWERS, LED TO MORTGAGE CRISIS - A new study from the UC Irvine Paul Merage School of Business Center for Real Estate suggests that the private mortgage industry, not subprime borrowers who took out risky adjustable rate loans, led to the current lending crisis that resulted in the dramatic rise and fall of home prices across the country and mounting foreclosures. According to the study, had loan limits for Fannie Mae and Freddie Mac, the nation's two largest mortgage lenders, been lifted ahead of the current housing crisis, the two agencies would have been able to provide more loan products for borrowers, and the private mortgage sector would not have pushed as many subprime loan products-- loans that, for many homeowners, became unaffordable as their initial adjustable interest rates reset at higher amounts. –California Association of REALTORS 8/6/08.

McCain vs. Obama on Real Estate – third in a series summarizing the stance between the leading presidential candidates regarding topics associated with real estate:

Mortgage Giant Rescue – Both candidates say they want to go after predatory lenders. Obama introduced the STOP FRAUD Act in the Senate and now it's a part of his platform. McCain called for creating a task force to investigate criminal wrongdoing in the mortgage lending and securitization industry. For greater details, check http://money.cnn.com/galleries/2008/news/0806/gallery.election_issues/8.html. -- CNNMoney

Fast Facts:

• Calif. median home price - June 08: $368,250 (Source: C.A.R.)
• Calif. highest median home price by C.A.R. region June 08: Santa Barbara So. Coast $1,035.000 (Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region June 08: High Desert $180,570 (Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - First Quarter 08:44 percent (Source: C.A.R.)
• Mortgage rates - week ending 07/31/08 30-yr. fixed: 6.52 Fees/points: 0.7% 15-yr. fixed: 6.07 Fees/points: 0.6% 1-yr. adjustable: 5.27 % Fees/points: 0.6% (Source: Freddie Mac)

Sources: Southland Association of REALTORS®, California Association of REALTORS®, Freddie Mac, CNNMoney, Washington Post, Alex Calder, Atlanta Journal-Constitution, City of Santa Clarita, National Association of REALTORS®.

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Home Sales Up, Consumer Confidence Steady, & the Fed meets Tuesday–Sunday, August 3, 2008

Interest Rates Likely To Hold Steady - The Fed meets August 5 and most market experts believe the weakness in the economy will keep the Fed from raising interest rates, an action that will probably be viewed as an admission that it is pretty powerless to do much about either problem right now. (CNN, 8/1)

In Brief:

• Homeownership is strongly related to age and socioeconomic status. The average age of first-time home buyers is 32, according to the National Survey of Families and Households (NSFH). Thirty percent of homeowners are under 31 years of age. Ownership peaks at 76.7 percent among those age 61 to 70, and then declines slightly to 68.5 percent for age 71 and older.
• Owners say they are happier and have higher self-esteem than renters, according to the NSFH.
• 86 percent of a national sample of Americans believe that people are better off owning than renting, according to the Fannie Mae National Housing Survey. (CAR)

C.A.R. REPORTS SALES INCREASED 17.5 PERCENT; MEDIAN HOME PRICE FELL 37.7 PERCENT IN JUNE - The median price of an existing, single-family detached home in California during June 2008 was $368,250, a 37.7 percent decrease from the revised $591,280 median for June 2007, C.A.R. reported. The June 2008 median price fell 4.3 percent compared with May's $384,840 median price. (CAR, 7/30)

CONSUMER CONFIDENCE HOLDS STEADY IN JULY - Consumer confidence held steady in July and now stands at 51.9, up from 51 in June, according to the latest Conference Board Consumer Confidence Index, which measures consumers' current outlook on the economy across a several business sectors and expectations for the near future. (CAR,7/30)

Mortgage Rates Drop – Freddie Mac says 30-year fixed rate fell to 6.52% with an average 0.7 point discount as the price of oil and gasoline fell this week. This is down from an average 6.63% last week, and down from an average of 6.68% recorded during the same week last year. The 15-year FRM averaged 6.07% this week with an average of 0.6 point, down from 6.18% last week, and down from 6.32% last year. Five-year adjustable-rate mortgages (ARMs) averaged 6.07% this week, with an average 0.6 point, down from last week when it averaged 6.16%. A year ago, the 5-year ARM averaged 6.29%. One-year ARMs averaged 5.27% this week with an average 0.6 point, down from last week when it was 5.49%. At this time last year, the 1-year ARM averaged 5.59%. (CNN, 7/31)

Prez signs Housing Bill - President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac. This bill was featured in last week’s blog at http://changhomesnews.blogspot.com/2008/07/housing-rescue-bill-on-presidents-desk.html. (CNN, 7/30)

McCain vs. Obama on Real Estate – second in a series summarizes the stance between the leading presidential candidates regarding topics associated with real estate:

Mortgage Giant Rescue – Both support efforts to stabilize Fannie Mae and Freddie Mac, but are otherwise vague. For greater details, check http://money.cnn.com/galleries/2008/news/0806/gallery.election_issues/7.html. Mortgage Fraud next week.

Fast Facts:

• Calif. median home price - June 08: $368,250(Source: C.A.R.)
• Calif. highest median home price by C.A.R. region June 08: Santa Barbara So. Coast $1,035.000(Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region June 08: High Desert $180,570(Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - First Quarter 08:44 percent (Source: C.A.R.)

Sources: California Association of REALTORS®, CNNMoney.

Housing Rescue Bill On President’s Desk - Sunday, July 27, 2008

Housing Rescue Bill has passed both chambers of Congress when it passed the Senate on Saturday. Points of the bill:

• Goes into effect October 1 and President likely to sign it to law this week
• Borrowers will be able to refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA)
• Qualified borrowers must live in their homes
• They must have loans that were issued between January 2005 and June 2007
• They must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.
• They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.
• They must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.
• Requires case-by-case approval from the FHA
• Total debt cannot exceed 95% of the home's appraised value at the time
• The program is voluntary, so the original lender(s) must agree to rework the loan before a homeowner starts the application process. Each loan must be underwritten by an FHA-approved lender and will be evaluated on a case-by-case basis. Homes will be re-appraised and banks will verify income statements, bank accounts, job histories and credit scores.
• Although there are little up-front costs for borrowers, consumers receiving a refinanced loan must agree to certain terms, including paying an insurance premium of 1.5 percent of the principal annually to the FHA.

In addition, the measure also would permanently increase the cap on mortgage loans guaranteed by Fannie and Freddie to a maximum of $625,000 from $417,000. (CNNMoney, 7/26; CAR, 7/23)

In Short:

• Two of the most commonly reported barriers to homebuying are high down payment requirements and high home prices. The majority of Americans feel that it has become more difficult to obtain mortgages and that the application process is more difficult than a year ago. Consumers also believe that the terms they are offered are too demanding given the weak economic conditions. Many of today’s loans require home buyers to put down at least 5 percent, but most market experts recommend a minimum of 10 percent. Areas with high foreclosure rates may require 20 percent down and markets that have been severely impacted by foreclosures such as Reno, Nev. may require a 25 percent down payment. However, home buyers have reason to be optimistic. If signed by President Bush as expected, the American Housing Rescue and Foreclosure Prevention Act would allow states to issue an additional $11 billion to first-time buyers and homeowners with subprime mortgages.
• Although interest rates remain low by historic standards, concerns over the sustainability of Fannie Mae and Freddie Mac have contributed to an increase in interest rates. Investors who purchase these loans are wary and are demanding higher interest rates to offset the added perceived risk. The average 30-year, fixed-rate loan was up nearly a point two weeks ago, to 6.37 percent, compared with the year’s low of 5.48 percent, which was set in January.
• Credit ratings are playing an ever-increasing role among consumers seeking to purchase a new home or refinance an existing one. By improving their credit scores, Americans can save billions of dollars annually on interest payments. As of June 1, buyers with credit scores of less than 620 that put down less than 30 percent must pay a fee of 2.75 percent of their mortgage principal. Consumers with higher credit ratings were previously rewarded by not having these up-front fees imposed. Now, those with a credit score between 680 and 720 may be required to pay a 0.5 percent fee. Consumers can boost their credit scores and receive more favorable rates by keeping credit card utilization rates below 50 percent and avoiding exceeding the maximum limit on credit cards. (CAR, 7/25)

MORTGAGE INTEREST RATES DECLINE - Interest rates on the 30-year fixed-rate mortgage (FRM) averaged 6.26 percent with an average 0.6 point for the week ending July 17, down from an average of 6.37 percent the previous week and 6.73 percent a year ago. There is speculation that the Federal Reserve may not raise the overnight bank-lending rate this year after all. (CAR, 7/23)

HOUSING STARTS IN CALIFORNIA INCREASE 9.2 PERCENT IN JUNE - Building permits issued for single-family homes in California rose 9.2 percent to 3,954 in June compared with May but remain 54.9 percent below where they were for the same period a year ago, according to new data from the California Building Industry Association. (CAR, 7/23)

According to the Leading Real Estate Companies of the World®, a national network of about 700 brokers across the country, 59 percent of brokers report seeing stronger market conditions between May and July. Some 20 percent of the respondents also reported declines in inventory during this period and more buyers moving forward with serious home searches than in prior months. (CAR, 7/23)

Treasury Secretary Paulson calls bank system secure - Following the collapse of IndyMac, consumers are questioning the security of the U.S. banking system, although only a small percentage of banks are expected to fail. A bill aimed at stabilizing the housing market will assist borrowers and will allow the Treasury Department to increase its line of credit to Fannie Mae and Freddie Mac and purchase stock in the companies, if necessary. Reports show that both companies stand a better than 50 percent chance of weathering the current market without government aid. (LA Times, 7/21)

• Paulson assured IndyMac consumers that all funds fully insured by the Federal Deposit Insurance Corp. (FDIC) guarantee of $100,000 and below will remain safe. Several thousand depositors had accounts exceeding the FDIC guarantee and may not have been fully insured depending on how the accounts were structured. Deposits above $100,000 will be paid out at 50 percent of the value.
• Fearful of future loan defaults, investors have rapidly sold off shares in Fannie Mae and Freddie Mac. Combined, the two banks own or back approximately half of the nation’s $12 trillion in mortgage debt. Paulson is supporting a plan to ease the ability of Fannie and Freddie to borrow from the government, which in turn allows the Treasury Department to acquire stakes in both.
• Experts remain divided on when mortgage defaults will subside. Median housing prices have declined for 22 consecutive months, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR). Some economists predict that the market will bottom out mid-2009, while others think the market is at or near the bottom now. (CAR, 7/25)

McCain vs. Obama on Real Estate – first in a series summarizes the stance between the leading presidential candidates regarding topics associated with real estate:

Foreclosures - Obama wants the government to step in to help homeowners facing foreclosure. McCain has gradually broadened his position to support government intervention, but wants stricter requirements for borrowers seeking aid. For greater details, check http://money.cnn.com/galleries/2008/news/0806/gallery.election_issues/6.html

Fast Facts:

• Calif. median home price - May 08: $384.840
• Calif. highest median home price by C.A.R. region May 08: Santa Barbara So. Coast $1,199.000
• Calif. lowest median home price by C.A.R. region May 08: High Desert $200,740
• Mortgage rates - week ending 07/17/08 30-yr. fixed: 6.26 Fees/points: 0.6% 15-yr. fixed: 5.78 Fees/points: 0.6% 1-yr. adjustable: 5.10 % Fees/points: 0.5% (CAR, 7/23)

Sources: California Association of REALTORS, CNNMoney, LA Times, RISMedia.

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Mixed News at the Trough, Sunday, July 20, 2008

Economic news this week show inflation pressures in the Consumer Price Index and retail prices. Despite the doldrum news from the Fed and Bernake’s testimony in Congress, many figure, stats, and actions show that we are bound for a turn-around. We often find such mixed news at the top and the bottom of an economic cycle. Look at the last couple weeks’ blogs and a summary of a Barron’s Magazine article below.

In Short:

• The nation’s banks are in less danger of failing today than they were during the savings & loan crisis of the late 1980s and early 1990s, when more than 1,000 financial institutions failed and taxpayers funded a bailout totaling more than $125 billion. How does the current crisis compare? To date this year, only six lenders have failed and the Federal Deposit Insurance Corporation (FDIC) has only 90 banks on its "watch" list, compared with 575 banks in 1994. However, former FDIC Chair William Isaac recently called bank failures a "lagging indicator" rather than a "leading indicator" and predicted there will be more bank failures this year as lenders cope with subprime lending losses.
• Banks and loan servicers may be beginning to catch up with troubled loan workouts, but the numbers of borrowers who require assistance continues to rise. During the first six months of this year, Countrywide says it modified the terms of 86,000 loans, and Bank of America, which recently acquired Countrywide, reports that counselors are completing more than two workouts for every completed foreclosure. Hope Now, an alliance of lenders, says it conducted 70,000 loan modifications in May, although an estimated 85,000 families lost their homes that month. Even if loans are modified borrowers still may not be able to make their mortgage payment if they have lost a job, for example. According to a working group of the Conference of State Bank Supervisors, 32,000 loans that were modified in recent months already are delinquent again. That may be because few loan modifications actually result in lower monthly payments due to a cut in the principal loan balance. In California, only 1.3 percent of loan modifications involved such a reduction.
• IndyMac Bancorp’s new management, the Federal Deposit Insurance Corporation (FDIC), has halted foreclosures and said it is focusing on modifying existing loans to make them more affordable for IndyMac borrowers. The bank has about $15 billion in mortgage loans in its own portfolio and manages servicing for another $185 billion in mortgages owned by other institutions. FDIC officials said they were examining troubled loans contained in the broader servicing portfolio loan by loan to determine whether they can be modified. However, borrowers serviced by IndyMac who need help may want to move quickly: The FDIC hopes to sell the troubled thrift and its assets within 90 days. IndyMac reopened under federal oversight on Monday after regulators closed its doors on Friday. Last year, it ranked as the tenth-largest mortgage lender and eight-largest mortgage servicer in the county. (CAR, 7/17)

Upcoming weeks: more on where McCain and Obama stand on the economy, foreclosures, gas prices, health care and more.

Mortgage Rates Fall Again - Rates on 30-year fixed mortgages fell for the second week in a row on increased speculation that the Federal Reserve will not raise interest rates before the end of the year, according to mortgage backer Freddie Mac. 30-year fixed-rate mortgages averaged 6.26% with an average 0.6 of a point in the week ending Thursday, down from 6.37% last week. Last year at this time, the 30-year loan averaged 6.73%. The 15-year fixed rate mortgage this week averaged 5.78% with an average 0.6 of a point, down from last week when it averaged 5.91%. A year ago at this time, the 15-year fixed rate mortgage averaged 6.38%. Five-year adjustable-rate mortgages (ARMs) averaged 5.80% this week, with an average 0.6 of a point, down from last week when it averaged 5.82%. A year ago, the 5-year ARM averaged 6.35%. One-year Treasury-indexed ARMs averaged 5.10% this week with an average 0.6 of a point, down from last week when it averaged 5.17%. At this time last year, the 1-year ARM averaged 5.72%. (CNNMoney, 7/17)

Bottom’s up: This real-estate rout may be short-lived - Home sales and prices may be down, foreclosures may be mushrooming and the blowback from the subprime mortgage crisis may be threatening banks and secondary mortgage lenders, but there are some early signs the real estate market is trending in a more positive direction -- although you may not know it if you rely on the mainstream media for your real estate news. (Barrons, 7/14)

• Recent data suggest real estate market pessimism may be overblown. Even economist Karl Case, father of the S&P/Case Shiller Home Price Index, admits many industry pundits and members of the media are ignoring key facts – as demonstrated by their focus on negative year-over-year price figures rather than more recent monthly data. An example: Home prices actually increased slightly in eight of 20 Case Shiller markets between March and April. Instead, the focus of most media reports was on year-over-year figures, which continue to support the notion that the market may not have hit bottom, let alone begun to improve.
• Transaction-related indices may be skewed at present by a far larger than normal share of subprime-derived default and distress sales. In the San Francisco Bay Area, for example, more expensive homes (those priced over $721,548) have dropped in price by only about 10.7 percent from their peak, compared with homes priced under $473,711, which have tumbled by 40.9 percent.
• Even new housing construction numbers suggest an improvement, according to Case. He notes that housing starts, which fell to 975,000 in April from 2.27 million in January 2006, have fallen by similar percentages three times during the last 35 years. Case observes that each previous time this has occurred the market has staged a surprising upturn within a quarter. Only a slide into a recession would temper his optimism about the potential for a similar recurrence of this trend. (CAR, 7/17)

Fed stiffens restrictions on mortgage lenders - The Federal Reserve is clamping down on what it called "deceptive acts and practices" by some mortgage lenders that it says helped lead to the subprime mortgage crisis. The new rules, which apply to all banks and other lenders and specifically target subprime loans and borrowers, will take effect Oct. 1. (LA Times, 7/15)

• The new rules "are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Federal Reserve Chairman Ben Bernanke.
• The new rules will prohibit loans to borrowers who can’t repay the loan from income and assets other than the home’s value and will require lenders to verify the borrower’s income and assets. Prepayment penalties are banned for the first four years of any adjustable rate subprime loan and for the first two years on other subprime loans. Lenders also must establish escrow accounts for property taxes and insurance for all first-lien loans
• Also banned are seven misleading advertising practices, including use of the word "fixed" to describe a rate or payment that changes at any time during the loan term. Other prohibited practices include loan comparison advertising (unless all payments and rates are disclosed), foreign-language ads where disclosures are presented in English, and encouraging appraisers to misrepresent a home’s value. The rules also will require lenders to credit payments on the date of receipt, prohibit pyramiding of loans, and require a good faith estimate of costs and payments on any loan application for a home secured by its value (including home equity loans and refinancings) within three days. Further, borrowers cannot be charged any fees other than to obtain a credit report before receiving that estimate. (CAR, 7/17)

Bush offers plan to save Fannie, Freddie - Eroding confidence in the nation’s two largest mortgage finance companies led President Bush to ask Congress to approve a rescue plan that would provide billions of dollars in investments and loans to the two companies. Separately, the Federal Reserve said it would make funds available to Fannie Mae and Freddie Mac on a short-term basis, if necessary. The dual rescue efforts came over the weekend after stock prices for the two quasi-governmental companies plunged late last week, potentially jeopardizing a planned debt offering by Fannie Mae and sending shock waves through the nation’s equity markets. (NY Times, 7/14)

• The White House plan calls on Congress to raise the national debt limit and to allow the Federal Reserve to determine how large a cash reserve the two companies must have on hand. The proposals are expected to be attached to a housing bill that will be voted on by Congress as early as this week.
• Both Fannie Mae and Freddie Mac have existing credit lines of $2.25 billion that were set 40 years ago by Congress when Fannie Mae held about $15 billion in outstanding debt. It now has about $800 billion in debt; Freddie Mac debt totals about $740 billion.
• Despite concerns that the program will protect shareholders and investors while asking taxpayers to foot the bill, Treasury Secretary Henry M. Paulson, Jr. reiterated that the failure of either Fannie Mae or Freddie Mac would have a devastating impact on the world economy because their debt is held by investors around the globe. (CAR, 7/17)

Census lists 5 CA cities in fastest-growing - While there are signs of a slowdown in migration to the West and sunbelt region, California continues to see steady population growth, placing five cities on the list of the 25 fastest-growing large municipalities in the country between 2006 and 2007, according to new population estimates from the U.S. Census Bureau. According to the report, Victorville, Calif. saw a population increase of 9.5 percent to 107,232 in 2007, putting the San Bernardino County city second on the list of the nation's fastest-growing large cities with populations of 100,000 or more. New Orleans ranked number one on the list, with a population increase of 13.8 percent to 239,124 after a seeing its population in 2005 dwindle to half in the wake of Hurricane Katrina. The other four California cities that made the list are Bakersfield; Irvine; Moreno Valley; and Visalia. (CAR, 7/16)

Although local sales have been increasing in May and June, California May sales have decreased 51% since a year ago. (CAR, 7/16)

Fed Approves New Rules For Mortgage Lenders to Protect Consumers - The Federal Reserve Board on Monday approved a set of new rules, effective Oct. 1, 2009, pertaining to home mortgage loans aimed at better-protecting consumers and ensuring responsible lending practices. The new rules prohibit unfair, abusive, or deceptive home mortgage lending practices and restrict certain other mortgage practices. In addition, the rules establish a new set of advertising standards for the mortgage lending sector and require certain mortgage disclosures to be given to consumers earlier in the home-buying transaction. (CAR, 7/16)

State Enacts Law to Protect Homeowners Facing Foreclosure - the California Legislature enacted a set of foreclosure reforms to address the adverse effects of high foreclosure rates. The new law requires lenders to contact homeowners to explore options for avoiding foreclosure at least 30 days before filing a notice of default. The law also requires owners acquiring property through foreclosure to maintain the exterior of vacant residential properties, and extends from 30 to 60 days the time for residential tenants to vacate properties that have been foreclosed upon, unless other laws apply. (CAR, 7/16)

Sources: California Association of REALTORS, New York Times, Los Angeles Times, Barrons, CNNMoney.

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