Tax Credit

By COREY BOLES and JOHN D. MCKINNON

WASHINGTON -- Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain.

The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.

Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.

The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.

While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn't been finalized.

While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.

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Time to Read Between the Lines

 

 

Last Week in Review

 

 

"THE DEVIL IS IN THE DETAILS..." Or so the famous saying goes. And when it comes to really understanding the various reports and events unfolding in the economy, it's important to take a look at the details - not just the headlines. Here's what you need to know. On the inflation front, the Producer Price Index, which measures wholesale inflation, unexpectedly fell due to a drop in energy prices. While that seems like good news on the surface, keep in mind that next month's number could climb higher again, as oil and natural gas have both been on a tear higher lately. In housing news, Housing Starts and Building Permits both came in a bit below expectations, but this may be a sign that builders are exercising some caution - particularly in the face of the $8,000 tax credit for first time homebuyers that is presently set to expire on November 30th. Existing Home Sales came in better than expected - and a whopping 45% of those homes were sold to first time homebuyers - rushing to move in on that credit. Recent studies have shown that many who qualify for this tax credit aren't even aware of it...so please let me know if you or someone you know needs more information - the clock is ticking! Additionally, the level of existing homes inventory shrunk to a 7.8 month supply, down from a recent high of 10.1 months in April. ----------------------- Chart: Existing Home Sales (Supply in Months) In other news, 3rd quarter earnings season continues, where companies report their status as of the end of September. While many companies are beating expectations, it's important to realize that many of those companies achieved better earnings by cost cutting and layoffs, not from increased sales. This is a big disconnect between Wall Street and "Main Street". Stocks are rocketing higher based on these "positive" reports, but the cost cutting and job cutting measures can only go so far...you can't simultaneously grow the ranks of unemployment - and then grow your business, hoping for increased sales to those same people who are without jobs. Last week's Jobless Claims numbers seem to confirm this as Initial Jobless Claims rose more than expected. In addition, the number of individuals continuing to receive unemployment benefits fell to the lowest level since March, but this is likely the result of people's unemployment benefits expiring, without them having been able to find jobs. Also worth noting is the news that ratings agency Moody's lead analyst, Steven Hess, said that the US needs to cut its deficit or it could lose its "AAA" rating in the next 3 to 4 years, which we have maintained since 1917! Think of all we've been through - two World Wars, the Depression, three Wall Street collapses and major terrorist attacks...yet our credit quality has maintained that AAA rating, allowing us to issue debt at the most favorable rates. Hess went on to say that if the US doesn't "get the deficit down in the next 3-4 years to a sustainable level, then the rating will be in jeopardy." And just like on a mortgage when the credit rating gets reduced, interest rates move higher. This will definitely be something we'll keep an eye on in the months ahead. After all the week's action, Bonds and home loan rates ended the week slightly worse than where they began. AS THE PRESIDENT HAS DECLARED H1N1 - "SWINE FLU" - TO BE A NATIONAL EMERGENCY - GETTING THE FACTS IS MORE IMPORTANT THAN EVER. DO YOU KNOW HOW TO TELL WHAT'S JUST A COLD...AND WHAT IS ACTUALLY SWINE FLU? READ THIS WEEK'S MORTGAGE MARKET VIEW - AND PASS ON THE DETAILS TO YOUR FRIENDS AND COWORKERS.

 

Forecast for the Week

 

 

Another record sized round of Treasury auctions are on tap this week - and the massive amounts of supply that continue to flood the market can cause home loan rates to move higher, if there is ultimately not enough demand to sop up all the supply. Additionally, there are several economic reports which could be market movers. Tuesday brings both the Consumer Confidence and Durable Goods Reports, the latter of which gives us an update on consumer and business consumption and buying behavior via data on items that are non-disposable, such as cars, furniture, appliances, games, cameras, business equipment, etc. On Wednesday, there will be more news on the housing front with the New Home Sales Report, while Thursday brings another Initial Jobless Claims Report. Thursday also brings a read on the economy with the Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. And the week could end with a bang, as Friday brings the Fed's favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds held their ground for most of the week but ultimately were unable to remain above a key technical support level. I'll be watching closely to see what happens in the week ahead - and as always, reach out to me if you or others in your network need more information or questions answered...I'm here to help. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 23, 2009)

 

The Mortgage Market View...

 

 

H1N1: Information is the Best Defense! Despite predictions from researchers at Purdue University that the H1N1 outbreak will peak this week, the reality is that it won't be going away any time soon. Let's not forget that the news is filled with shortages of the vaccine, as the number of H1N1 cases continues to surge across the country. And federal officials have warned that a second, larger outbreak could occur in early January. The reality is that the best way to stop the spread of H1N1 is to know the symptoms and to take steps to protect yourself-and others-from it. The following information can help. What are the symptoms of H1N1... and how are they different from the common cold? Symptom Cold H1N1 Flu Fever Fever is rare with a cold. Fever is usually present with the flu in up to 80% of all flu cases. A temperature of 100°F or higher for 3 to 4 days is associated with the flu. Coughing A hacking, productive (mucus- producing) cough is often present with a cold. A non-productive (non-mucus producing) cough is usually present with the flu (sometimes referred to as dry cough). Aches Slight body aches and pains can be part of a cold. Severe aches and pains are common with the flu. Stuffy Nose Stuffy nose is commonly present with a cold and typically resolves spontaneously within a week. Stuffy nose is not commonly present with the flu. Chills Chills are uncommon with a cold. 60% of people who have the flu experience chills. Tiredness Tiredness is fairly mild with a cold. Tiredness is moderate to severe with the flu. Sneezing Sneezing is commonly present with a cold. Sneezing is not common with the flu. Sudden Symptoms Cold symptoms tend to develop over a few days. The flu has a rapid onset within 3-6 hours. The flu hits hard and includes sudden symptoms like high fever, aches and pains. Headache A headache is fairly uncommon with a cold. A headache is very common with the flu, present in 80% of flu cases. Sore Throat Sore throat is commonly present with a cold. Sore throat is not commonly present with the flu. Chest Discomfort Chest discomfort is mild to moderate with a cold. Chest discomfort is often severe with the flu. If you think you have the H1N1 flu, you should take a few common-sense steps to protect your friends, family members, and coworkers. For instance, if you feel sick, stay home until you feel better and have gone at least 24 hours without relying on medicine to break your fever. In addition, wash your hands, linens, dishes, and so on thoroughly. And cover your mouth and nose with a tissue when you cough or sneeze--and then throw the tissue away immediately. Finally, if you have to share a small space with other people, consider wearing a facemask to help make sure you don't spread the flu to the people around you. Follow these steps and monitor your symptoms to help stop the spread of H1N1...and remain happy and healthy!

 

The Week's Economic Indicator Calendar

 

 

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of October 26 - October 30 Date ET Economic Report For Estimate Actual Prior Impact Tue. October 27 10:00 Consumer Confidence Oct 54.0   53.1 Moderate Wed. October 28 08:30 Durable Goods Orders Sept 0.7%   -2.4% Moderate Wed. October 28 10:00 New Home Sales Sept 440K   429K Moderate Wed. October 28 10:30 Crude Inventories 10/23 NA   1.31M Moderate Thu. October 29 08:30 Jobless Claims (Initial) 10/24 525K   531K Moderate Thu. October 29 08:30 Gross Domestic Product (GDP) Q3 3.1%   -0.7% Moderate Thu. October 29 08:30 GDP Chain Deflator Q3 1.3%   0.0% HIGH Fri. October 30 10:00 Consumer Sentiment Index (UoM) Oct 70.0   69.4 Moderate Fri. October 30 09:45 Chicago PMI Oct 48.5   46.1 HIGH Fri. October 30 08:30 Personal Consumption Expenditures and Core PCE YOY NA   1.3% HIGH Fri. October 30 08:30 Personal Consumption Expenditures and Core PCE Sept 0.2%   0.1% HIGH Fri. October 30 08:30 Personal Spending Sept -0.4%   1.3% Moderate Fri. October 30 08:30 Personal Income Sept 0.0%   0.2% Moderate Fri. October 30 10:00 Employment Cost Index (ECI) Q3 0.5%   0.4% HIGH

 

 

Is The FDIC Killing Short Sales? PLEASE READ-MICHAEL DOUGHERTY

Interesting perspective from someone who knows.

 

Is The FDIC Killing Short Sales?

As some of you already know, I blogged recently about being interviewed recently by our local NBC news affiliate. 

Basically, IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure.  For the life of me, I couldn't figure out why they were doing this.  The BPO came in at the contract price of $275k, with a net to IndyMac of $241k.  What advantage could there possibly be for them to proceed to foreclosure?

Yesterday, I figured it out.  You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009.  Guess who the investors are behind OneWest?  George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire). 

Now, listen to the deal they got from the FDIC....

Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts).  They purchased all current HELOCS at 58% of Par Value!!!

Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following:  For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss.  The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan.  Let's use my clients situation as an example:

Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200

OneWest pays $334,600 for the loan

We have an all cash offer of $241,000, net to OneWest.

So, let's do the math, shall we?  The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer.  In this case, $485,200-$241,000, or $244,200.  Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss".  So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).

Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360.  Remember, OneWest paid $334,600 for the loan.  So, OneWest puts $101,760 in their pocket, thanks to the FDIC.  Folks, that is over $100k of our hard-earned tax dollars!

So, you ask...Why does this program hurt short sales?  Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES!  The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure?  And we wonder why nobody can get a Loan Modification?  Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k?  And, to add injury to insult, they have held this loan for 6 months!  Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE!  Imagine if they could make $100k, then get a deficiency judgement!  Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC.  Some of them include:  Bank of America (go figure), CitiMortgage, Wells Fargo, etc. 

This entire agreement between the FDIC and OneWest can be found here, on the FDIC website.  It's all there, for the world to see!  They have it all layed out.  All of the formulas, worksheets, etc. 

Now, it's up to us to bring it to the attention of our elected officials and the media.  Enough is Enough!

UPDATE 9/18/09:  I JUST READ AN AWESOME ARTICLE ON THIS, THAT GOES INTO WAY MORE DETAIL THAN MY BLOG ABOVE.  TAKE THE TIME TO READ IT WHEN YOU GET A CHANCE! CLICK HERE TO READ IT.

Wait, it gets better...The FDIC just announced that it needs to start borrowing money from the U.S. Treasure in order to replenish it's deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements).  Go Figure! 

Robert G. Hertzog

Phoenix Real Estate Consultant

Thanks Robert for sharing

 

Loads of Upgrades (556550)

Loads of Upgrades (556550)

Existing Home Sales Surge

There were few major surprises in the economic news this week, and little
change in the stock market. While there was a great deal of daily
volatility, mortgage rates ended the week nearly unchanged. A flood of
housing market data was released during the week, and most of it reflected
improvement in the sector. The biggest unexpected news came from the
September Existing Home Sales report, which jumped 9% from August to the
highest level since July 2007. Inventories of unsold existing homes dropped
sharply to a 7.8-month supply from a 9.3-month supply in August. This marked
the lowest inventory levels in two and one-half years. September Housing
Starts remained at depressed levels, which removes pressure on future
inventory levels. Building Permits, a leading indicator, also held at low
levels. In short, home sales improved, while inventory levels moved lower
with a relatively light supply of new homes in coming months. If there is a
note of caution, though, it's that much of the activity has been spurred by
exceptionally low mortgage rates and the first-time homebuyer tax credit,
and the future is uncertain on both fronts. The Fed is scaling back its
purchases of mortgage-backed securities, which might push mortgage rates
gradually higher, and lawmakers are currently debating whether to extend the
first-time homebuyer tax credit.
The Mortgage Bankers Association (MBA) also released its forecasts for this
year and next. According to the MBA projections, purchase originations will
decline slightly in 2009, but will then increase by 12% in 2010. Similarly,
the MBA forecasts that existing home sales will rise by 11% in 2010. The
chief economist of the MBA suggested that the timing of the economic
recovery and the level of mortgage rates are the biggest variables
influencing the results for 2010.

Also Notable:
* September Core PPI inflation rose at a tame 1.8% annual rate
* The Fed's Beige Book reported modest improvement in "many sectors" of the
economy
* The Treasury will auction a record $116 billion in 2-yr, 5-yr, and 7-yr
securities next week
* The Fed purchased $18 billion in agency MBS during the week ending 10/21

Average 30 yr fixed rate:
Last week:
+0.15%

This week:
+0.01%

Stocks (weekly):
Dow:
10,000
+50
NASDAQ:
2,160
+10

  
Week Ahead
The final week of October will be packed with important economic data. The
most highly anticipated will be Thursday's release of third quarter Gross
Domestic Product (GDP), the broadest measure of economic activity. Durable
Orders, another major indicator of economic activity, will come out on
Tuesday. The New Home Sales report is scheduled for Wednesday. Chicago PMI,
Personal Income, and Core PCE inflation will be released on Friday. Consumer
Confidence and Consumer Sentiment will round out the busy week. In addition,
the Treasury will auction a record $116 billion in 2-yr, 5-yr, and 7-yr
securities on Tuesday, Wednesday, and Thursday.

Inside Lending Newsletter From Theron Wall

 

visit my website     email me now Theron Wall Branch Manager 3615 Crossings Dr, Suite A Prescott, AZ 86305 Phone: (928) 778-7167 Mobile: (928) 533-7473 Fax: (928) 445-5308   For the week of October 19, 2009 – Vol. 7, Issue 42 >> Market Update  INFO THAT HITS US WHERE WE LIVE  For the third week in a row, rates on 30-year fixed-rate mortgages remained below 5% in Freddie Mac's Primary Mortgage Market Survey. The average for conforming mortgages was 4.92% with an average of 0.7 point (including the origination fee) for 80% loan-to-value ratio loans to borrowers with good credit. The Mortgage Bankers Association reported applications down 1.8% for the week, although re-financings were up, as more people took advantage of historically low mortgage rates. The MBA also projected double-digit growth for home sales next year. They see 2010 existing home sales up 11.2% to 5.57 million and new home sales up a healthy 21% from 2009 levels. Another encouraging stat came from the National Association of Realtors which reported 3.6 million existing homes for sale at the end of August, nicely down from 4.3 million 12 months ago. First time buyers may still be able to get the $8,000 tax credit expiring at the end of November. That's six weeks away, which is not a lot of time, but not impossible. Fence-sitters should get pre-qualified now. >> Review of Last Week FLIRTING WITH 10,000... Investors focused on corporate earnings saw enough encouraging signs to push the Dow past 10,000 on Wednesday. It was last at that magical mark on October 7 a year ago. The market closed above 10,000 again on Thursday, but Friday was a different story. GE and IBM reported quarterly results that were less than expected and University of Michigan Consumer Sentiment fell 3.9 points, after a 7.8 point rise in September, so the week ended below 10,000, but still with an overall gain. But don't fret over consumers -- they're clearly showing up at the stores. Retail sales for September fell just 1.5%, way less than expected after the end of the Cash for Clunkers program. In fact, "core" retail sales (take out autos, building materials and gas) were UP 0.5% and are UP three of the last four months. Ignore the pundits -- consumers ARE participating in this recovery. Other good indicators included the Empire State Manufacturing Index rising to its highest level in over five years and initial unemployment claims falling to 514,000, their lowest level since the start of the year. But the best news for investors was on the earnings front, with JPMorgan Chase, Goldman Sachs and Citigroup all beating estimates. Tech darling Google blew everyone away with earnings of almost $6 a share and an optimistic economic outlook. The week ended with Treasury Secretary Tim Geithner telling CNBC: "... you're going to see the economy growing at a significant rate...the rest of this year. [And] Positive growth in 2010 at a level that will begin to gradually bring down the unemployment rate." For the week, the Dow ended UP 1.3%, to 9995.91; the S&P 500 was UP 1.5%, to 1087.68; while the Nasdaq rose 0.8%, to 2156.60. The bond market saw prices under pressure in the shortened week. This included the FNMA 30-year 4.5% bond we watch, which dropped a tad from the previous week's $100.91 close, ending at $100.72. But, as reported above, mortgage rates stayed low, keeping us in "the golden age of mortgage rates", as one observer described it. >> This Week’s Forecast HOME SWEET HOMES... This week is full of news on the subject we love most. Tuesday we get Housing Starts and Building Permits for September, Friday delivers Existing Home Sales. For a gauge of the broader economy, the PPI looks at producer prices, while the LEI consolidates a group of indicators. We will all keep watching Initial and Continuing Unemployment numbers as we wait for Secretary Geithner's prediction to come true. Corporate earnings will stay big in the picture as 12 companies who are part of the Dow Jones Industrial Average share Q3 results. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of October 19 – October 23  Date Time (ET) Release For Consensus Prior Impact Tu Oct 20 08:30 Housing Starts Sep 610K 598K Moderate Tu Oct 20 08:30 Building Permits Sep 590K 579K Moderate Tu Oct 20 08:30 Producer Price Index (PPI) Sep 0.0% 1.7% Moderate Tu Oct 20 08:30 Core PPI Sep 0.1% 0.2% Moderate W Oct 21 10:30 Crude Inventories 10/16 NA 0.33M Moderate Th Oct 22 08:30 Initial Unemployment Claims 10/17 517K 514K Moderate Th Oct 22 08:30 Continuing Unemployment Claims 10/10 5.990M 5.992M Moderate Th Oct 22 10:00 Leading Economic Indicators (LEI) Sep 0.9% 0.6% Moderate F Oct 23 10:00 Existing Home Sales Sep 5.35M 5.10M Moderate   >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months. Last week the Consumer Price Index (CPI) inched up 0.2% for September. The Fed watches this number like a hawk for signs of inflation. Rates should stay down until the recovery builds, but after that, the Fed could move quickly. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Nov 4 0%–0.25% Dec 15 0%–0.25% Jan 27 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Nov 4 1% Dec 15 4% Jan 27 13%   This e-mail is an advertisement for Theron Wall. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is copyrighted by Wallick & Volk Mortgage and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of Wallick & Volk Mortgage. This is not the opinion of Brad Bergamini, Realty Executives Northern Arizona or any of its affiliates.  This post is for informational purpose only and is not guaranteed and does not render as legal advice.  Buying and selling Real Estate in Arizona or Prescott Arizona is a serious task and should be consulted with personally with Realtor or Real Estate Attorney.  Please visit my website for contact information http://bradbergamini.com

 

Smart Mortgage Update

 

Interest rates jumped a bit this week as the stock market has rallied.  The industry standard for Jumbo loans these days has become a 25% down payment.  While Jumbo ARM’s still carry competitive rates, it is hard to find 30 Year Fixed Jumbo under 6%.  Jumbos also carry higher fico requirements (typically 720) and low debt to income ratios requirements (normally under 45%).  The reason for all of this is that Jumbo loans (loans above 417k in Maricopa & Yavapai) are not government backed and therefore banks are on the hook for 100% of the loan.  This means that in order to offer a Jumbo loan the lender will require that it is basically a perfect loan.

 

As of 10/16/2009 based on a 200k Primary Residence Purchase (or a no cash out refinance), 720+ Credit, Full Doc Income Verification, paying one “point.”  Please note, this information is intended for Real Estate Professionals.

 

80% 30 year Fixed = 5%

90% 30 Year Fixed = 5% (Requires PMI)

90% 15 Year Fixed = 4.375% (Requires PMI)

80% 15 Year Fixed = 4.375%

96.5% FHA 30 Year Fixed = 5% (Requires MI)

100% VA 30 Year Fixed = 5.25% (No PMI required)

100% USDA/Rural 30 Year Fixed = 5.5% (No PMI required)

90% 5 Yr ARM = 4% (Requires PMI)

80% 5 Yr ARM = 4%

75% 5 Yr ARM up to $900k = 4.55%

75% 30 Year Fixed up to $900k = 6.65%

Refinances up to 105% of appraised value are available

 

Take Care,

Jerome