December 28, 2008

Freddie Mac: Long Term Rates Fall For Eight Consecutive Week Setting

Another New Low

30-year fixed-rate mortgage: Averaged 5.14 percent with an average 0.8 point for the week ending December 24, 2008, down from last week when it averaged 5.19 percent. Last year at this time, the 30-year FRM averaged 6.17 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

The 15-year fixed-rate mortgage: Averaged 4.91 percent with an average 0.7 point, down from last week when it averaged 4.92 percent. A year ago at this time, the 15-year FRM averaged 5.79 percent. The 15-year FRM has not been lower since April 1, 2004, when it averaged 4.84 percent.

Five-year Treasury-indexed adjustable-rate mortgages ARMs: Averaged 5.49 percent this week, with an average 0.6 point, down from last week when it averaged 5.60 percent. A year ago, the 5-year ARM averaged 5.90 percent.

One-year Treasury-indexed ARM: Averaged 4.95 percent this week with an average 0.6 point, up slightly from last week when it averaged 4.94 percent. At this time last year, the 1-year ARM averaged 5.53 percent.

Commentary

Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac's survey began in 1971," said Frank Nothaft, Freddie Mac vice president and chief economist. Real GDP growth fell 0.5 percent in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980. The market consensus calls for an even larger decline in the last three months of the year.

The housing market, meanwhile, continues to contract. Existing home sales (excluding condominiums and co-ops) fell 8.6 percent in November to 4.0 million houses (annualized) in November, representing the slowest pace since July 1997. Moreover, the median sales price fell 12.8 percent from November 2007, the largest 12-month decline since records began in January 1968, according to the National Association of Realtors®.

Rates alone are not doing enough to slow the downward trend in housing prices. The Fed has just gone from making Qualitative loans to Quantitative loans. This means that we are ready to throw money at problems and worry less about the quality of the loan and more about the need to keep things afloat.

I am hoping that the Fed simply buys the 10 year treasury bond and puts money supply into the marketplace while lowering the interest rate which so many variable mortgages are tied to. This would be direct action that would be almost immediate help for all the sub prime and negative amortization loans that are still out there and defaulting. And, in effect, the Fed would be buying its own debt and providing serious help to the cause of the problem.

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Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

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December 23, 2008

Fannie Mae gets into property management while the banks say no

One of the sad and untold stories of the housing crises. Even if you have been paying your rent to the owner of the home you have rented, each time, on time.....you can be evicted. Many owners that are renting out their home are behind in mortgage payments and you, the renter have no idea. Once the bank takes possession they will evict you. They have the right,even though you have been a tenant in good standing. Banks will tell you, they are not in the business of being landlords or property managers. They want the house empty, because they think it will sell faster.

Fannie Mae is the owner of 67,500 properties in foreclosure. Fannie Mae recognizing the difficulty of good people who pay on time, being forced out into the streets will sign new leases with renters living in their foreclosed properties. This could help as many as 75,000 renters stay in homes owned by Fannie Mae.

According to the NY Times, it is the first nationwide effort to provide widespread relief to renters ensnared by the unfolding mortgage crisis, and it will effectively transform Fannie Mae — a government-controlled mortgage finance company — into a national landlord.

Banks as a landlord would be problematic. Property management firms are often family owned business and they couldnt stand up to that kind of competition. Given how poorly the banks have performed as far as reasonable business decision making, I would like to see smaller management companies be offered the business should it be decided that tenants in good standing cannot be evicted just because an owner got into financial trouble.

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Howard Bell

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December 20, 2008

Mortgage Renegotiations: We Have Data Now

Mortgage work outs and renegotiation are not working. too many people are re defaulting on their mortgages. The Office of Comptroller of the Currency shows that a high re-default rate on mortgages that have been modified in the first two quarters of 2008.

Here are the results of the OCC statistics during the first and second quarter of 2008:

1. 36% of borrowers had re-defaulted by being more than 30 days past due

2. 56% defaulted after roughly six months

3. 58% of borrowers had re-defaulted after an eight month period

These numbers represent the number of mortgage work outs that had re-defaulted on their mortgages after the modification was completed. Clearly, the banks have not done enough in restructuring these loans to keep people in their homes. This coupled with a small amount of work outs completed and a terrible economy are adding to the housing mess that is now an across the board slowdown that is still not contained.

The fed is aware of the continuing spiraling down of the economy and is now shifting from making "qualitative loans" to making "qualitative loans". In other words, throwing so much money at the problem that eventually, the banks will have to free up and start lending.

I am a property manager and we recently chose to use an online rent collection company. I found this to be such an exceptional service, I chose to represent the company. Their property management software makes rent collection easy and saved us time and money. Tenants pay the bulk of the fees and we found most were happy to sign on. I have developed some tenant marketing materials for the program. If anyone has interest in learning more about how to limit the drudgery of rent collection and lower operating costs, please reach me here...

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Howard Bell

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A web site of over 450 articles related to real estate focused primarily on property management.

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Freddie Mac weekly Update: New Mortgage rate Lows

30 Year Fixed Rate Falls To AT A 37 Year Low

30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

30-year fixed-rate mortgage: Averaged 5.19 percent with an average 0.7 point for the week ending December 18, 2008, down from last week when it averaged 5.47 percent. Last year at this time, the 30-year FRM averaged 6.14 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

15-year fixed-rate mortgage: Averaged 4.92 percent with an average 0.7 point, down from last week when it averaged 5.20 percent. A year ago at this time, the 15-year FRM averaged 5.79 percent. The 15-year FRM has not been lower since April 1, 2004, when it averaged 4.84 percent.

Five-year Treasury-indexed adjustable-rate mortgages ARMs: Averaged 5.60 percent this week, with an average 0.6 point, down from last week when it averaged 5.82 percent. A year ago, the 5-year ARM averaged 5.90 percent.

One-year Treasury-indexed ARMs: Averaged 4.94 percent this week with an average 0.5 point, down from last week when it averaged 5.09 percent. At this time last year, the 1-year ARM averaged 5.51 percent.

Commentary from the Freddie Mac Site:

"Interest rates for 30-year fixed-rate mortgage rates fell for the seventh consecutive week, moving these rates to the lowest since the survey began in April 1971," said Frank Nothaft, Freddie Mac vice president and chief economist.

"The decline was supported by the Federal Reserve announcement on December 16th, when it cut the federal funds target to a record low and stated it stood ready to expand its purchases of mortgage-related assets as conditions warrant."

Thanks for Reading

Howard Bell

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A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

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December 13, 2008

Employment Report Allows Bond Yields to Fall

Long-Term Rates Follow As Short-Term Rates Rise

30-year fixed-rate mortgage:
Averaged 5.47 percent with an average 0.7 point for the week ending December 11, 2008, down from last week when it averaged 5.53 percent. Last year at this time, the 30-year FRM averaged 6.11 percent. The 30-year FRM has not been lower since March 25, 2004, when it averaged 5.40 percent.

The 15-year fixed-rate mortgage: Averaged 5.20 percent with an average 0.7 point, down from last week when it averaged 5.33 percent. A year ago at this time, the 15-year FRM averaged 5.78 percent. The 15-year FRM has not been since February 7, 2008, when it averaged 5.15 percent.

Five-year Treasury-indexed ARMs: Averaged 5.82 percent this week, with an average 0.6 point, up from last week when it averaged 5.77 percent. A year ago, the 5-year ARM averaged 5.89 percent.

One-year Treasury-indexed ARMs: Averaged 5.09 percent this week with an average 0.4 point, up from last week when it averaged 5.02 percent. At this time last year, the 1-year ARM averaged 5.50 percent

From the Freddie Mac Site

Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage rates room to ease back a little further," said Frank Nothaft, Freddie Mac vice president and chief economist.

The housing market still hangs in the balance, however," continued Nothaft. On a year-over-year basis, after rising in both August and September, pending existing home sales fell 1.0 percent in October, based on figures from the National Association of Realtors®. Meanwhile, conventional mortgage applications for home purchases over the week ending December 5th were up 2.0 percent from four weeks prior, but were still 51 percent below the same period last year, according to the Mortgage Bankers Association.


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Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

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December 6, 2008

US Focuses on Mortgage Foreclosure Pain

Finally, A Bail Out for Industry and For People

1. The Federal Reserve announces that it would spend 600 billion to buy mortgage backed securities issued by Fannie and Freddie, pumping some liquidity into the market. Interest rates dropped 1% on the news. This is not a trial balloon but a fact, a program to be put in place. The net result will provide some much needed cash for new loans and workouts for the two quasi public agencies.

2. Treasury is also considering buying 600 billion of mortgage backed securities from Freddie. Fannie and Ginnie Mae, causing a huge influx of mortgage re-fi's. Treasury is looking to use the buying power of Freddie and Fannie to push mortgage rates down to 4.5% by soaking up supply and providing a sense of trust because there are buyers of mortgage loans again.

3. The FDIC has a loss sharing plan which aims to reduce monthly payments to 31 percent of the borrower's income. This proposal is designed to promote wider adoption of such a systematic loan modification program:
a. by paying servicers $1,000 to cover expenses for each loan modified according to the required standards; and
b. sharing up to 50% of losses incurred if a modified loan should subsequently re-default

This proposal focuses on the fact that lenders have been slow to renegotiate or work out problem loans. FDIC thinks this plan can help the estimated 1.4 million non-GSE mortgage loans that were 60 days or more past due as of June 2008, plus an additional 3 million non-GSE loans that are projected to become delinquent by year-end 2009.

Reports indicate that we will be looking at 2.25 million foreclosures this year, up from just over a million last year and no doubt, getting worse. This is just not sustainable if we are to look at keeping industry afloat and start putting people back to work.

Finally....we are looking at helping people as well as industry. Although this amounts to a direct bailout of home owners and the nationalization of the worlds capital markets, it may be the only way of saving us from a complete collapse.

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Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

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November 29, 2008

Case Shiller Index Tracks Actual Prices of Home Sales

Following the top five markets is the Case-Shiller index. This is an important index to follow because it tracks actual the actual sales price of a property each time it sells. Its a real indication of whether a price for the same property has gone up or down year over year.

S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, shows continued broad based declines in the prices of existing single family homes across the United States, a trend that prevailed since 2007. Note; the top five markets in the Urban Land Institute survey, posted below are commercial markets. The Case Shiller index shows San Francisco off a whopping 29.5%, indicating that perhaps its weighted towards home rather than apartment or commercial property.

1-Year Change (%)
Atlanta - 9.5%
Boston - 5.7%
Charlotte - 3.5%
Chicago -10.1%
Cleveland -6.4%
Dallas -2.7%
Denver -5.4%
Detroit -18.6%
Las Vegas -31.3%
Los Angeles -27.6%
Miami -28.4%
Minneapolis -14.4%
New York -7.3%
Phoenix -31.9%
Portland -8.6%
San Diego -26.3%
San Francisco -29.5%
Seattle -9.8%
Tampa -18.5%
Washington -17.2%
** All markets are down

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Howard Bell

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A web site of over 450 articles related to real estate focused primarily on property management.

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Five good markets for Investment Property

The Urban Land Institute surveyed real estate professionals looking for the best commercial markets for investment in this economic climate. The top five markets according to the professionals surveyed were:

1. Seattle
2. San Francisco
3.Washington DC
4.New York
5.L.A.

The common qualities shared by all five cities were diversified by industry, did participate in the residential market boom and therefore did not have a housing glut and are able to attract international investments. There is no indication that commercial real estate precedes a healthy residential market, but it seems that a good business climate would certainly make that more likely.

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Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

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30 Year Fixed Rate Mortgage Rate at Seven Week Low

McLean, VA Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage averaged 5.97 percent with an average 0.7 point for the week ending November 26, 2008, down from last week when it averaged 6.04 percent. Last year at this time,the 30-year FRM averaged 6.10 percent. The 30-year FRM has not been this low since October 9, 2008, when it was 5.94 percent.
30-year fixed-rate mortgage: Averaged 6.10 percent.The 30-year fixed-rate mortgage has not been this low since October 9, 2008, when it was 5.94 percent.
15-year fixed-rate mortgage: Averaged 5.74 percent with an average 0.7 point, up slightly from last week when it averaged 5.73 percent. A year ago at this time, the 15-year FRM averaged 5.73 percent.

Five-year Treasury-indexed adjustable-rate mortgages: Averaged 5.86 percent this week, with an average 0.6 point, down slightly from last week when it averaged 5.87 percent. A year ago, the 5-year ARM averaged 5.86 percent.
One-year Treasury-indexed ARMs: Averaged 5.18 percent this week with an average 0.5 point, down from last week when it averaged 5.29 percent. At this time last year, the 1-year ARM averaged 5.43 percent.

"Interest rates for 30-year fixed-rate mortgages fell for the fourth consecutive week as signs the overall economy is flagging lowered most interest rates market-wide," said Frank Nothaft, Freddie Mac vice president and chief economist. "And economic growth in the third quarter was revised downward this week, led by the first decline in consumer spending since the fourth quarter of 1991 and the largest drop since the second quarter of 1980.

Thanks for Reading

Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

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November 15, 2008

FDIC has a PlanTo Save 4 million Homes from Foreclesure

FDIC Proposes to Gurantee 2.2 Million Modified Loans

The idea is to help borrowers with weak credit or small down payments. Borrowers would get lowered interest rates or longer loan terms to lower payments. This program can last for a period of time, giving owners some breathing room. The program would attempt to keep monthly payments under 31% for weak borrowers.

According to the FDIC site: The pace of loan modifications continues to be extremely slow (around 4 percent of seriously delinquent loans each month).

Basic Structure of the Proposal
1. By paying servicers $1,000 to cover expenses for each loan modified according to the required standards
2. Sharing up to 50% of losses incurred if a modified loan should subsequently re-default

The FDIC says its plans should apply to an estimated 4.4 million loans that are likely to become delinquent though the end of next year. The FDIC expects the plan to apply to 4.4 million loans that are likely to become delinquent though the end of next year.

Fannie and Freddie have their own plans to help their borrowers and the banks, however slowly are beginning to step up. B of A will help renegotiate 400,000 loans and Citi is doing a similar work out program. The trend will take some time to show results because we have so many defaults and it will get worse this year because the credit crunch is beginning to show in terms of jobs. But i think we are beginning to get serious. The biggest risk to success are ineffective policies.

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Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

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November 12, 2008

The Banks Are Finally Stepping Up


No Auction for Bad Mortgage Debt

Buying up bad mortgage debt was once what the TARP program was at its core. The idea was that banks would begin to lend again if there balance sheets were in better shape and they knew the value of what mortgages were worth. Because no institution was any longer buying mortgages, they couldnt put a value on them. Finally deciding to be prudent (after tanking the entire system) they just stopped lending.

The Govts first answer was to create an auction since this would provide a market place and others could bid on bank paper thus establishing a price. The banks would then be able to see what their balance sheets were worth and the Govt would buy up all the bad paper no one else wanted.

Happy banks lend money right? Not this time.... Ten banks were given 25 billion dollars to grease the wheels and start the lending process. They decided to use the money for bonus's and mergers. Salaries and junkets continued.

The New TARP Program

TARP now agrees that the auction idea was a bad one. It was a give away, whereby we would own the worst of the mortgage debt and banks would get to step away from the problem they created. it decided that giving capital to banks in return for preferred stock was a better use of the funds. This makes the Govt an owner and able to direct some of the bank activity as a major owner. I like the idea of this kind of control, if it is exercised on our behalf.

Much of the money earmarked for the auction will now go towards credit card debt, auto loans and student loans, much ore directly to the benefit of the people who have been harmed by irresponsible lending.

Some new facilities for commercial paper and a possible liquidity facility for highly-rated AAA asset-backed securities, will help bring back the money flow.

The Bank Can Sort it Out

Bank of America has been ordered to renegotiate some 400,00 mortgages it inherited from Country Wide. A slew of foreclosure-prevention initiatives were announced by Citi. IndyMac is in a similar process.

What Does it Mean for Real Estate

Now that the banks are stabilizing and will be forced to work out loans, we should see less foreclosures on the market, less short sales and eventually a long bottoming out process. With 7-10 million homes late or in default this is finally the beginning of a direct response to that problem.

I am a property manager and we recently chose to use an online rent collection company. I found this to be such an exceptional service, I chose to represent the company. Their property management software makes rent collection easy and saved us time and money. Tenants pay the bulk of the fees and we found most were happy to sign on. I have developed some tenant marketing materials for the program. If you have interest in learning more about how to limit the drudgery of rent collection and lower operational costs, please reach me at payrentonline@sbcglobal.net

Thanks for Reading

Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

http://yourpropertypath.blogspot.com/

Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

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November 9, 2008

Housing Can Save the Economy

National Association of Realtors in Orlando

Lawrence Yun, economist for NAR at the Orlando conference notes that the depth of the current recession depends on the housing market’s recovery, and that will depend on stabilizing prices and inventory absorptions

Home sales showed their first increase in three years during the last quarter. Yun “We are beginning to come back, but recovery won’t happen until inventories are reduced from their current 10-month levels back to a more normal six months. Even more critical to a housing recovery are stabilizing home prices. Only then will new buyers get back into the marketplace and underwater buyers be able to consider moving up, he added" via the Palm Beach Post.

NAR had some proposals for the next administration:

1. NAR to urge Congress to create a housing-specific stimulus package. Its chief component, Yun said, would empower the government to "buy down" mortgages to as low as 4.5 percent.
2. A one-year program in which the federal government would cover the mortgage fees or points, enabling borrowers pay to lower interest rates.
3. NAR also proposed that the $7,500 tax credit be made permanent.
4. Yun said a buydown of 1 point, "might be sufficient to absorb 800,000 homes in the marketplace". That would cost the US Govt about 100 billion. With as many as 4 million homes thought to be late or in default nationwide, this would help a great deal.

To date, the focus has been on the banks. The $25 billion given to the top banks will not go towards new loans as intended. They have already indicated that this money will go toward bonuses and mergers. New tax law favorable to banks that merge and take on bad debt is already in place.

The housing crises is now in the steepest price declines since the great depression. Housing is the key cause and the solution. These proposals will help soak up available supply and halt the onslaught of many homes on the market. Keeping people out of foreclosure and bankruptcy and able to pay bills is the key to stabilizing the economy.

Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF
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November 2, 2008

Mortgage Workouts Getting Serious


JP Morgan plans mortgage workouts to help 400,000 homeowners avoid foreclosure. They are in a rush to avoid more foreclosures and will institute new programs to keep homeowners in their home within the next three months.

Expect independent reviews of all these mortgages, many of which are the option pays that lead to negative amortization. Jp is afraid many people with high monthlies and no equity will satrt to walk. This a huge aggregation of mortgage holders - much larger than the subprime market that literarly broke the bank. And they have every reason to be afraid.

JP will temporarily suspend foreclosures while the changes are implemented.
JPMorgan will create new financing alternatives and renegotiate existing loans. I think you can expect to see this develop into a trend. The banks have finally realized that the foreclosures they allowed to go to market are tanking everything. lets see much more of this!

Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

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Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

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October 26, 2008

From the Chair of the FDIC to the Committee on Banking, Housing and Urban Affairs before the U.S. Senate

TARP gives the Treasury the authority to use loan guarantees and credit enhancements to facilitate loan modifications to prevent foreclosure.

The government will establish flexible standards for loan modifications and provide guarantees for loans meeting those standards, Ms. Blair said. The FDIC is working "closely and creatively" with Treasury on such a program.

The FDIC now is managing approximately 712,000 mortgage loans, including more than 60,000 mortgage loans that are more than 60 days past due, in bankruptcy or in foreclosure.

Of the more than 60,000 mortgages serviced by IndyMac Federal that are more than 60 days past due, in bankruptcy or in foreclosure, approximately 40,000 are potentially eligible for our loan modification program. Where the workouts have been completed, the modifications have reduced borrowers' monthly payments by more than $380 on average. That will keep a lot of people in their homes and more homes off the market. But its a big big problem, some say 4 million homes are facing foreclosure and the US wont have the money to save them all.

For the real estate industry, these kinds of buy ups and work outs will yield some results. The banks..... I wouldnt count on it. If you look at your credit card, you dont see the interest rate reflecting the lower rates the banks are benefiting from. Im sure they will keep loans limited and restrictive even when their bad paper is off the books. That what recapitalizing is...saving and rebuilding balance sheets, not looser loan standards. This will take a long time....

Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF
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Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

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October 19, 2008

A LIBOR Follow Up

What is LIBOR

Wiki: The London Interbank Offered Rate is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market. Most variable mortgages and short term loans are based on this rate. If it goes up your ARM follows.

What it means to you

The LIBOR rates have almost doubled recently, reflecting the fact that banks perceived so much risk. They didnt know whether the bank they loaned to would be there next week, so rates shot up fast. Now we are watching some encouraging trends, bare beginnings but still positive.

Key short-term lending rates fell again Tuesday. Libor, for three-month dollar-denominated loans fell to 4.63% from 4.72% while one-month rate declined to 4.46% from 4.56%. it has to mean that banks are begining to see a little less risk and that is th efirst step towards loosening credit.

More Good News

California: Notices of default filings, the first step of a foreclosure process -- fell 61.8 percent in September compared to August and fell 36.4 percent compared to the same month last year, reports data company ForeclosureRadar.com.( via MarketWatch)

The Feds Plan begins to Kick In
  1. Oct 27th - The fed's commercial paper facility will begin.
  2. Nov - The TARP program will begin buying toxic mortgage backed securities. The banks have already received 250 billion in fresh capital and after the TARP auctions, bank balance sheets will begin to look a lot better.
Once credit is looser and the financial system is on a better track, we hope that the housing crises will begin to see an early dawn. No doubt, there is much work in front of us and we are certainly victims to headline events, but maybe we are seeing the early signs of stabilization. Keep your fingers crossed.


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Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF
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Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

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October 18, 2008

Mortgage Rates Shoot Up This Week

Homeowners Competing With US For Loans

I wonder if high rates has something to do with the fact that the US Govt. competing in the marketplace for loans will cause money to be very scarce. One way the US borrows money to fund obligations is to issue treasury bonds. These bonds are bought by people seeking the relative safety of US I.O.U.'s.

Catch 22

California has just gotten through its billion dollar crises by issuing short term obligations to fund its operations until tax time. These kinds of Govt activities pull a lot of money out of the system, leaving less for business and for other borrowers, including homeowners. We are in a catch 22 in that we need to borrow to fund lenders so that they will begin to lend, But that very operation takes money out of the system making loans more expensive and harder to get.

30-year fixed-rate mortgage:
Averaged 6.46 percent with an average 0.6 point for the week ending October 16, 2008, up from last week when it averaged 5.94 percent. Last year at this time, the 30-year fixed-rate mortgage averaged 6.40 percent. This week's increase of 52 basis points was the largest weekly increase since the week ending April 17, 1987.

15-year fixed-rate mortgage: Averaged 6.14 percent with an average 0.6 point, up from last week when it averaged 5.63 percent. A year ago at this time, the 15-year fixed-rate mortgage averaged 6.08 percent.

Five-year Treasury-indexed ARMs: Averaged 6.14 percent this week, with an average 0.6 point, up from last week when it averaged 5.90 percent. A year ago, the 5-year ARM averaged 6.11 percent.

One-year Treasury-indexed ARMs: Averaged 5.16 percent this week with an average 0.6 point, up from last week when it averaged 5.15 percent. At this time last year, the 1-year ARM averaged 5.76 percent.

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Howard Bell
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October 12, 2008

A new study entitled Stretched Thin:

The Impact of Rising Housing Expenses on America’s Owners and Renters.

Conducted by the Center for Housing Policy. The study reveals that mortgage payments are only one of several things contributing to the challenges people face. Here are some of the facts contributing to the foreclosure tsunami. Following is a summary of very dismal findings.

Between 1996 and 2006, all the big homeowner expenses increased faster than incomes.

1 Mortgage principal and interest payments are generally the largest housing expense. From 1995 to 2005, these payments increased almost 46 percent, outpacing the increase in the median homeowner income of just over 36 percent.
2. Utilities 43 percent
3. Property taxes 66 percent, and property insurance 83 percent.
4. Fuel oil prices increased 131 percent and jumped another 52 percent to $3.69 per gallon in 2008. gasoline expenses have nearly tripled in the last six years from $1.38 per gallon in 2002 to $4.05 per gallon in 2008 and so as many Americans continue to live far from mass transits.
5. Natural gas prices more than doubled from $6.34 per thousand cubic feet in 1996 to $13.75 in
2006 and further increased to $14.30 in 2008.
6. Property taxes are a recurring expense for all homeowners. Typically, property taxes account for just over four percent of a homeowner’s overall income. From 1996 to 2006, average property tax bills increased nearly 66 percent.
7. Property insurance rose nearly 83 percent over the 1995 to 2005 period, partly as a result of disaster risks and increases in construction costs and the cost of repairs and partly because of increases in mortgage amounts.
Our Incomes

Incomes increased by 36.3 percent. Rents increased by 51 percent between 1996 and 2006, while incomes increased by 36.3 percent over the same period. The study further found that large increases since 2006 in the cost of heating oil, natural gas, and gasoline have further stretched families’ budgets. In 2006, homeowners typically spent 26.2 percent of their income on housing expenses – up from 21.5 percent in 1996 – while among renters, housing cons percent of income, up from 25.6 percent ten years earlier. Now many of us are spending nearly half our incomes on housing.

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Howard Bell
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A web site of over 450 articles related to real estate focused primarily on property management.

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October 11, 2008

LIBOR: What Is It

Wikipedia: The London Interbank Offered Rate is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market). LIBOR rates are widely used as a reference rate for variable rate mortgages

How Will it Affect You

London Interbank Offered Rate, or LIBOR, is an index that tracks rates banks charge each other for loans in 10 different currencies. According to the British Banking Association, LIBOR is used to set rates for financial products such as loans that total $350 trillion worldwide. (via Inman News)

Heres the Problem

Nearly all subprime and alt-A adjustable-rate mortgage (ARM) loans are tied to six-month dollar LIBOR, which hit 4.4 percent today, up from 3 percent on Sept. 15. Even ARMs backed by Fannie Mae Freddie Mac, are linked to six-month dollar LIBOR.

Citigroup introductory rates on 1.8 million ARM loans have already expired and are now tracking with LIBOR or other benchmarks, and that 121,000 mortgages will reset for the first time next month. Another 3.7 million ARM loans will reset after that. (via Inman news)

Bank of America was recently forced to renegotiate 400,000 predatory loans. This is designed to keep people in their homes and adjust downwards debt related to declining home values. The stock lost almost $10 that day. My guess is that the Govt will have to offer help to banks by buying directly into the company and renegotiate these loans to keep supply off the market.

The two problems we have to solve ASAP are bank liquidity and mortgage renegotiation or we will bury ourselves in a new wave of foreclosures. The good news is that we now know this and have accepted unprecedented Govt intervention as the only answer.

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Howard Bell

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October 9, 2008

One Year ARM Ticks Up as All Other Rates Fall

McLean, VA Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® )

30-year fixed-rate mortgage: Averaged 5.94 percent with an average 0.6 point for the week ending October 9, 2008, down from last week when it averaged 6.10 percent. Last year at this time, the 30-year FRM averaged 6.40 percent.

15-year fixed-rate mortgage: Averaged 5.63 percent with an average 0.6 point, down from last week when it averaged 5.78 percent. A year ago at this time, the 15-year FRM averaged 6.06 percent.

Five-year Treasury-indexed adjustable-rate mortgages ARMs: Averaged 5.90 percent this week, with an average 0.6 point, down from last week when it averaged 6.00 percent. A year ago, the 5-year ARM averaged 6.12 percent.

One-year Treasury-indexed ARMs: Averaged 5.15 percent this week with an average 0.6 point, up from last week when it averaged 5.12 percent. At this time last year, the 1-year ARM averaged 5.73 percent.

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Howard Bell

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October 4, 2008

Mortgage Debt: Getting to True Value

JP Morgan Chase recently bought Washington Mutual and all of its banking business. When they came up with the winning price they had to take a hard look at WAMU's assets and try to exact a reasonable value for its mortgage assets.

Now at a time when no one is buying mortgage debt because they have no idea how to evaluate them, looking into JP Morgans evaluation gives us a glimpse, at least, what financial institutions think they are worth.

JP Morgans assumptions are far more worrisome for the banking industry than previously thought. In a presentation on its WaMu acquisition, J.P. Morgan forecast a 58% peak-to-trough slump in California home prices if the U.S. enters a severe recession. In Florida, house prices could fall 64% in such a scenario, while nationwide prices could drop 37%, the bank said. WaMu's $51 billion option adjustable-rate mortgage portfolio will reach 20%. (via marketwatch.com)

As you know, the deal went through, meaning that neither institution really argued with the numbers or the dismal forecast. No doubt, these assumptions will be used as a template for the upcoming auctions that will be held by the Treasury.

Im told that the Treasury will use some of the $700 billion to host auctions of mortgage assets to try to determine a price for them. We are in such uncharted territory that Secty Paulson said to Congress that the only way to value them is to put them up for sale and see what happens. Imagine that!

Presumably, those assets that dont sell will be bought by the Treasury and managed until they can be sold at a later date. Here is where we will see those mortgage workouts that reflect the new true value and hopefully we will keep more people in their homes than the Banks will.

Part two will be to get creative about what to do with all of those homes already on the market. The so called suburban ghost towns. Inexpensive retirement communities? Non profits centered around larger community needs, such as career re-training programs, small light industry centers. Farm land? anyone....

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Howard Bell

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October 2, 2008

Freddie Mac Update: Mortgage Rates Flat

Shorter-Term ARMs Fall Slightly

McLean, VA Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® in which the 30-year fixed-rate mortgage (FRM) averaged 6.10 percent with an average 0.6 point for the week ending October 2, 2008, up from last week when it averaged 6.09 percent. Last year at this time, the 30-year FRM averaged 6.37 percent.

30-year fixed-rate mortgage: Averaged 6.10 percent with an average 0.6 point for the week ending October 2, 2008, up from last week when it averaged 6.09 percent. Last year at this time, the 30-year FRM averaged 6.37 percent.

The 15-year fixed-rate mortgage: Averaged 5.78 percent with an average 0.6 point, up from last week when it averaged 5.77 percent. A year ago at this time, the 15-year FRM averaged 6.03 percent.

Five-year Treasury-indexed adjustable-rate mortgages ARMs: Averaged 6.00 percent this week, with an average 0.6 point, down from last week when it averaged 6.02 percent.A year ago, the 5-year ARM averaged 6.11 percent.

One-year Treasury-indexed ARMs: Averaged 5.12 percent this week with an average 0.5 point, downfrom last week when it averaged 5.16 percent. At this time last year, the 1-year ARM averaged 5.58 percent.

Commentary From the Freddie Mac Site:

"Average mortgage rates were nearly unchanged during the past week, leaving rates above the levels of two weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist. "Reflecting the rate uptick from two weeks ago, the Mortgage Bankers Association reported that loan applications were down 23 percent last week.

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Howard Bell

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A web site of over 450 articles related to real estate focused primarily on property management.

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October 1, 2008

Foreclosures Not as Bad as Looks

Much of the Country is Doing Better

Although the rate of mortgage foreclosures hit another record high in the second quarter, as well as loans in foreclosure process, a closer look is telling. The Mortgage Bankers Association reports; Only eight states, Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana and Ohio, had rates of foreclosure starts that were above the national average.

In fact, and this is key, California and Florida alone accounted for 39% of all of the foreclosures started nationally during the second quarter. Together, the two states made up 73% of the increase in foreclosures between the first and second quarters, according to the MBA.

Of course, this is open to interpretation and Im sure there is much more to come. Still, it seems to me that we may have washed out many of the sub primes that were bad and reached some kind of equilibrium in many parts of the country. Im sure that the mergers and closures will create job loss and home loss in some markets that were strong, like New York City and possible San Francisco, but the rest of the country may have seen the worst.

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Howard Bell

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September 27, 2008

The Bail Out Wont Help Foreclosure Rates

Congress will be adopting a plan and proposing legislation to isolate and liquidate bad mortgages. hers what the last real estate crises looked like....

The S&L Crises

As many as 1,500 savings and loans went under during the country's last financial crises and real estate mess. We the people lost 160 billion on that one and Of course this is already at 1.1 trillion and climbing. Ultimately, a government-created entity, the Resolution Trust Corp. (RTC), sold off the bad real estate for as little as 10 cents on the dollar. This sell off was done over a four year period and may not have been the best return on investment possible.

Once taxpayers are in charge of these assets, will distressed borrowers be more likely to get loan modifications or workouts to keep them in their homes? If the government becomes the owner of hundreds of thousands of foreclosed homes, will it sell them quickly at fire-sale prices to investors?

The Center for Responsible Lending issued a press release which I am passing on because its a well thought out position. This is a word for word copy of the press release

Bailout Won’t Stop Foreclosures that Push Prices Down

September 20, 2008

The government plan announced by Treasury Secretary Paulson and Fed Chairman Bernanke fails to deal with the root cause of the crisis---families in foreclosure----and instead is purely and simply a bailout of the lenders who created this disaster. The bailout will not solve our economic problems because it will do virtually nothing to stop the foreclosure epidemic. Continuing foreclosures will drag down the economy even further.

A truly comprehensive plan must also benefit ordinary, hard-working Americans, the ones who already are bearing the brunt of Wall Street’s excesses. If it doesn't, then any new plan is more of the same----only with more taxpayer money at stake.

By forcing taxpayers to buy abusive and reckless loans from irresponsible lenders,taxpayers are funding a multi-billion dollar subsidy to private corporations. Yet the millions of families who have been unfairly pushed to the financial brink by these mortgages get nothing. Only by preventing the 6.5 million foreclosures expected in the next few years---and the $356 billion drop in surrounding property values that will result for an additional 46 million families----will the economy begin to recover.

Don't let anyone tell you the government will be able to prevent foreclosures by buying this troubled debt. Wrong. Mortgages of questionable value have been sold into highly complex securities, which have been carved up and sold to thousands of investors around the world. The government can't put these Humpty Dumpty slices back together again because it won't own or even control them all. Bailing out financial institutions is NOT the same thing as providing relief to foreclosure-plagued American families.

Regulators and lawmakers must implement solutions that benefit American families at least as much as banks, or nothing will change. Stopping the flood of foreclosures and adopting common-sense protections against predatory lending are the only lasting solutions.
A plan that addresses root causes must:

Lift the ban on judicial loan modifications. Voluntary loan modifications are not working, as the as mounting crisis attests. Today homeowners are barred from applying for loan changes through the bankruptcy courts if the loan is on their one and only home. Bankruptcy courts provide an existing infrastructure for supervising court-ordered loan modifications and addressing the many hurdles that prevent voluntary modifications. Judicial modifications are the best solution for preventing foreclosures that will drag down the economy further. This provides a fair, targeted way to make a real impact without requiring any tax dollars.

Cap consumer loans at 36% interest. This stops abusive interest rates that push vulnerable families back even further, and it also protects responsible lenders from unfair competition from abusive payday lenders charging 400% interest. This action alone would save America’s working middle class billions of dollars.

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Howard Bell
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A web site of over 450 articles related to real estate focused primarily on property management.

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September 25, 2008

Freddie Mac: Reversing Trend Mortgage Rates Shoot Up

This wont Help

30-year fixed-rate mortgage
: Averaged 6.09 percent with an average 0.7 point for the week ending September 25, 2008, up from last week when it averaged 5.78 percent. Last year at this time, the 30-year FRM averaged 6.42 percent.
The 15-year fixed-rate mortgage: Averaged 5.77 percent with an average 0.6 point, up from last week when it averaged 5.35 percent. A year ago at this time, the 15-year FRM averaged 6.09 percent.

Five-year Treasury-indexed adjustable-rate mortgages ARMs: Averaged 6.02 percent this week, with an average 0.6 point, up from last week when it averaged 5.67 percent. A year ago, the 5-year ARM averaged 6.15 percent.
One-year Treasury-indexed ARMs: Averaged 5.16 percent this week with an average 0.5 point, up from last week when it averaged 5.03 percent. At this time last year, the 1-year ARM averaged 5.60 percent.

From the Freddie Mac site:
"Mortgage rates followed Treasury bond yields higher this week amid market uncertainty over the current state of the economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Compared with last Thursday, 10-year Treasury yields are up about 0.3 percentage points, and 30-year fixed-rate loans moved up about the same amount. And while up, interest rates for 30-year FRMs are still more than 0.5 percentage points below this year's peak of 6.63 percent set the week of July 24th.

"The latest housing information for the third quarter continues to show some softness in prices and sales activity. House prices fell 5.3 percent over the twelve months ending in July – weaker than the market consensus – according to the Federal Housing Finance Agency's purchase-only house price index. During August, the median sales price of existing single-family homes (excluding condominiums and co-ops) fell 9.7 percent in August over August 2007, the largest 12-month drop since records began in 1968, according the National Association of Realtors (NAR). Overall resales dipped by 2.2 percent between July and August, on a seasonally-adjusted basis."

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Howard Bell
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A web site of over 450 articles related to real estate focused primarily on property management.

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September 23, 2008


Foreign investors have invested in America largely through buying American corporate bonds and US Treasuries. ow these assets lose value when the US prints money or causes the dollar to drop. Our foreign investors realize that it makes its debt a little less burdensome and renders the foreigners' holdings less valuable.

If you owned a lot of dollars and thought that the US might be taking on inflationary actions, like printing money to cover all of our new obligations. What would you do. Well, you could sell, but if you sold a lot you might drive down the price because you own so much.

With the new crises unfolding,smart foreign investors will hedge with hard assets - your homes and apartments look very good to them.

The number of overseas buyers has jumped. A study conducted last year by the Florida Association of Realtors and the National Association of Realtors found that 15 percent of the homes sold by almost 1,000 Florida agents in the past 12 months had been purchased by overseas buyers. Almost 60 percent of those buyers were Europeans taking advantage of the euro's continued strength against the dollar, up 33% since 2002.

Large Market Still Untapped

The number of agents certified as international specialists by the National Association of Realtors has grown to more than 2,000, a 30 percent increase in three years.


What Did They Buy

NAR has been looking into this for quite a while and here is what they have found. What did they buy? The NAR says that like domestic buyers, international clients prefer single-family detached homes or town homes, but they also showed a stronger preference for condominiums and apartments compared to home buyers in general.

Here Are The Numbers
  • Eighty-eight percent of existing home buyers bought detached homes, while 12 percent purchased multi-family housing (condos, co-ops, attached town homes, row homes, etc.) Seventy-eight percent of international homebuyers purchased in the multi-family category
  • Forty-seven percent of all international buyers purchased homes exclusively for vacation, while 22 percent were motivated primarily by investment.
  • Nearly a third of foreign buyers cited both vacation and investment as reasons for their purchase.
  • International homeowners spent an average of 4.2 months of the year in their U.S. property in 2006.
  • A third of all international buyers are from Europe,
  • Buyers from Asia and North America (outside the United States) each represent about one-fourth of the total market.
  • Sixteen percent of all international buyers are from Latin America. By individual country, most buyers come from Mexico (13 percent), the United Kingdom (12 percent) and Canada (11 percent).
The Survey Association of Foreign Investors in Real Estate

The Association of Foreign Investors in Real Estate (AFIRE) represents the interests of nearly 200 investing organizations from 21 different countries. AFIRE, a not-for-profit association of international real estate investors with headquarters in DC. I dont know this organization, it seems that the membership is largely institutional and investment property orientated.

Top Five Global Cities for Foreign Dollars
1. New York; up from #2 in 2006
2. Washington, DC; up from #4 in 2006
2. London; down from #1 in 2006
4. Paris; down from #3 in 2006
5. Shanghai; up from #9 in 2006

Top U.S. Property Types
Within the U.S. property market, the most dramatic change was a total reversal of investors’ preferred U.S. property types, with every property category shifting and, most dramatically, office properties falling into fifth place and retail properties rising to first.
1. Retail – from 5th place in 2006
2. Hotels – from 3rd place in 2006
3. Industrial – from 4th place in 2006
4. Multi-family – from 2nd place in 2006
5. Office – from 1st place in 2006

The Internet has been the key.
  1. Search the internet for sites that provide bi-lingual listing of properties for sale
  2. Find multi -lingual agents in your area. Often they will have a relationship to an agency that represents foreign buyers
  3. Try any of the largest agencies for their overseas listing partners.Log on to sites from other English speaking countries and find agents that represent buyers looking for US investment properties or vacation homes. Condos in the sun belt areas are preferred.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF
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