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....

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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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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.

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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.

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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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.

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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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

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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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.

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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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

www.yourpropertypath.com

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

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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.

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 Path New Brief

http://wwwyourpropertypath.blogspot.com/

Snap News updates real estate markets and all things of interest to property owners and real estate professionals.

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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.

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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