During these tough times for Japan, may we remember the beauty aside from the scenes we see today

Visit The American Red Cross  website to learn how you can help with the relief efforts in Japan

“Things are seldom what they seem, skim milk masquerades as cream.” — W.S. Gilbert: Was an English dramatist, poet, and illustrator

NEWS AND HEADLINES

Many areas of the nation have stabilized, but falling home prices in other areas pushed more borrowers into a negative equity position. CoreLogic’s recent study showed that in the 4th quarter of 2010 23% of borrowers nationwide, or 11.1 million, were holding “underwater” mortgages which is a collective $750 billion of negative equity. Negative equity is concentrated in the hardest hit states: Nevada (65%), Arizona (51%), Florida (47%), Michigan (36%), and California (32%).

Are we really better off winding down Freddie and Fannie entirely? Most, if not all, of the mortgage and real estate professionals in the US would suggest that we’re better off with those agencies staying around in one form or another.

Dodd-Frank is not set in stone. There is some small bit of hope that the comp issue will be delayed, although it is not likely. But House Republicans are drafting five bills to repeal or change parts of the Dodd-Frank financial-overhaul law that have been opposed by business groups. A story in the WSJ noted that the bills are to be discussed at House subcommittee hearing today. The group is not trying to reverse the entire bill, but is targeting specific provisions.

FHA Commissioner Dave Stevens, who announced his resignation last week, will be merely having a different morning commute: he will become the MBA’s president and CEO in early May. The MBA “represents more than 2,400 firms in the nation’s real estate finance industry,” although critics claim that the membership has such divergent goals and objectives that it is nearly impossible for the MBA to adequately address them. One story noted that, “An administration official said Stevens signed a pledge when he took office not to lobby any official for the remainder of the Obama administration and not to speak on official matters for two years with anyone from HUD, if he left government.”

Freddie Mac announced a new offering of multifamily mortgage-backed securities – $1 billion of Structured Pass-Through Certificates (“K Certificates”). They are expected to price next week and settle the week after, and are backed by 76 recently originated multifamily mortgages and are guaranteed by Freddie Mac. Check out FreddieMulti

Yesterday rates improved again, although they started off the day much better but then tailed off. The Treasury’s 10-year notes closed up 6+/32s (3.32%) after being better by almost 1 point earlier in the day. After starting off strong (better by about .5), agency MBS’s finished the day only better by about .125 on “below normal” volume. Traders are reporting that the Treasury market volatility is not being mirrored in the agency MBS market – a good thing for hedgers! As expected, the FOMC statement was close to January’s (which was identical to December’s), but with a little more underscoring of inflation concerns. In short, the statement was slightly more bullish. With all that has happened in Japan and the Middle East, the Fed wanted to emphasis stability so did not deviate too much from last statement.

This morning we learned from the MBA that last week’s mortgage applications fell slightly after a 15% jump the week before. The four-week moving average is up 4.9%, while the four-week moving averages for the purchase index and refinance index are up 1.6% and 6.6%, respectively. Refinancing accounts for 66.4% of total applications.

This morning we also had Housing Starts & Building Permits. Recall that initial Housing Starts numbers jumped 14.6% in January to a 596,000 annual rate, but the entire increase came from a 78% surge in multifamily starts following the rush of multifamily permits in December ahead of building code changes. Single family starts, which comprise 70% of the market, fell 1%. Last month Permits were down about 10%. Housing Starts dropped 22.5% and Building Permits dropped 8.2% – painful numbers.

We also had the Producer Price Index, which for last month was +1.6%, with the core rate (ex-food & energy) was+.2%. After this news, and given the continued impact of Japan, Europe, the Middle East, etc., the 10-yr’s yield is down to 3.28% and MBS prices are better by roughly .125.

THE IMPACT FORECLOSURES HAVE ON HOUSE PRICES

Home values are again beginning to fall. What has caused this renewed downward pressure on prices? It can be directly tied to the number of distressed properties in the region which have shredded values in some marketplaces. Foreclosures and short sales impact prices in two major ways.

They are discounted competition to the house next door

When a home buyer decides to purchase, price is a major component in the equation. Every buyer wants to make sure they are getting an excellent deal especially after what has taking place over the last five years. According to RealtyTrac, foreclosures, on average, sell for a 41% discount and short sales sell for a 19% discount.

These distressed properties might not be in the same physical condition as the non-distressed properties. However, at sizable discounts, many purchasers are more than willing to do the necessary repairs. Every buyer who buys a distressed property is one less eligible buyer for the other homes. Less demand in a market with an oversupply of houses for sale means lower prices.

Distressed properties could impact your buyer’s appraisal

We had the honor to speak at the Leading Real Estate Companies of the World Conference and the RELO Direct Corporate Forum last week in Las Vegas. Chip Wagner of A. L. Wagner Appraisal Group, Inc also spoke. He is a third generation appraiser and an industry icon who will be inducted into Worldwide ERC‘s prestigious “Hall of Leaders” in May in recognition of his years of hard work in the field.

At the conference, Mr. Wagner explained:

“Recently appraisers have been accused of prolonging the nation’s real estate downturn by developing value opinions that are below proposed sales prices. Specifically, we have been accused for using distressed properties among the comparable sales used in the valuation process.

If a specific market area has a low amount of distressed listings and comparable sales, it is likely there is little impact on property values, and we may be seeing appreciation taking place. A “low amount” would be under 10% to 15%. In market areas where there is a high amount of distressed market competition, typically greater than 1/3 of the market, this distressed competition has to be analyzed as this is the new “norm” for that market area. Buyers active in that area are looking at all of the competing properties and making their purchase offers and buying decisions based on all of the information available to them. Sometimes the appraisers are using that data, and sometimes they are not. The important thing is that the appraiser properly research and analyze each property, understanding the differences in seller motivations and the condition between the properties.”

These properties sell at substantial discounts. When they are used as comparable sales, they could dramatically impact values.

Bottom Line

The number of distressed properties coming to market is increasing and will create downward pressure on house prices throughout 2011.

MORE BANKS PAY TO FIX UP FORECLOSURES FOR RESALE

More banks are investing thousands of dollars to fix up foreclosures in trying to spur sales and appeal to a broader buying pool. Banks have inherited plenty of foreclosed homes that have everything from water damage, mold, broken windows, and missing plumbing fixtures.

But while banks used to be hesitant to invest much money in fixing up these homes, more real estate pros say that banks are heeding their suggestions for repairs and seeing the benefits of how a little investment can make these properties more sellable. As such, they are paying for new paint and carpet, refinishing damaged floors, replacing old windows, and repairing leaky roofs.

They hope to extend the foreclosed homes’ appeal past traditional investors and professional rehabbers. For example, home buyer would have trouble securing a mortgage on homes that lenders deem “uninhabitable” because of needed repairs.

The banks interest in fixing up these properties also can help the overall real estate market because the foreclosed properties can sell at a higher price.

Real estate agents say they are making more suggestions to banks on how to spruce up the properties. First, they identify the target customer for a property. For example, if the home will likely appeal to owner-occupant, agents may recommend fixes such as paint to $25,000 kitchen remodel.

CALIFORNIA REALTORS LAUNCH AGENT RATINGS PILOT PROGRAM

The California Association of Realtors is getting behind the concept of agent ratings and reviews, sponsoring a pilot program with a multiple listing service in California’s Silicon Valley in which clients of participating agents are sent customer satisfaction surveys from a third-party vendor whenever a transaction closes.

Although it will be up to the agents whether the survey results are displayed to the public, brokerages will be able to use the client reviews to spot problem areas for agents to work on, backers said.

Six brokerages belonging to Sunnyvale-based MLSListings Inc are participating in the pilot program, which CAR says is aimed at developing an industry standard across Northern California for measuring real estate agent performance and customer service.

Brokers from Intero Real Estate Services, Bailey Properties, Alain Pinel Realtors, Sereno Group, Realty World and Legacy Real Estate have volunteered to participate in the pilot program.

Some of the brokerages participating in the pilot are requiring that all of their agents be rated by their clients, said Jim Harrison, president and CEO of the 18,000-member MLS. Others are allowing agents to opt out, he said.

“We just launched this a few weeks ago” with funding from CAR that should last about a year, Harrison said. “The objective is to see if there is enough interest in the marketplace to make it a permanent service.”

Consumer reviews can be a double-edged sword. While good reviews can be a boon for an agent’s business — Realtors often incorporate glowing testimonials from clients in their marketing — some fear their business will be harmed if they’re unfairly maligned online.

In December, Zillow.com began allowing consumers to rate agents they’ve worked with in the past. Other sites facilitating agent ratings or reviews include include Redfin, ZipRealty, Homethinking, AgentRank and Yelp.

In the CAR-MLSListings pilot program in Northern California, it’s up to agents to decide whether to make public the results of the customer satisfaction surveys, which are conducted by Quality Service Certification Inc.

Third-party rating service

Based in Orange County, Calif., QSC provides similar services for about 60,000 real estate professionals nationwide — in most cases through contracts with brokers, said CEO Larry Romito.

Improving customer satisfaction not only helps agents land referral and repeat business, but can also reduce the risk of consumer complaints and lawsuits, Romito said.

Agents participating in QSC’s review program sign pledges to homebuyers and sellers listing more than a dozen services they promise to deliver. Listing agents, for example, promise they will deliver a competitive or comparative market analysis (CMA) to help clients price their home, and buyer’s agents promise to do the same before helping their clients make an offer.

Agents also promise to contact their clients after they close “to assure the satisfactory completion of all service details,” and offer them the opportunity to evaluate the service they received.

All agents working with QSC have three options regarding the public display of survey results:

Withold them from the public;

Disclose only their customer satisfaction rating, a numeric score of one to five based on a minimum of four surveys;

Disclose their customer satisfaction rating, and provide detailed survey results in the form of pie charts and graphs.

If agents opt in, the information is published on QSC’s consumer-facing site and can also be displayed or linked to from multiple listing service, broker or agent website using a widget.

Value to consumers

While some agents may worry they will be portrayed unfairly online, consumers may not trust a rating system that produces only positive reviews.

Jonathan Cardella, the CEO of online brokerage and property search site NeighborCity.com, said he is “very skeptical of any user ratings when it comes to real estate agents.”

A Zillow spokeswoman, meanwhile, said reviews of local agents are “an incredibly useful tool for consumers,” and that the open-ended written comments submitted are “just as important, if not moreso” than numeric ratings.

The written comments “help consumers better understand the experience others had working with a particular agent and where the agents strengths and weaknesses lay,” Zillow spokeswoman Whitney Tyner said in an e-mail message.

Although agents have the ability to publicly respond to all reviews, Zillow will not remove reviews that “are based on legitimate experiences,” Tyner said (in February, Zillow also began allowing renters and landlords to review agents they’ve worked with).

Agents with five or more reviews have seen customer contacts increase by 134 percent, on average, she said.

Zillow and QSC each declined to provide the average customer satisfaction rating for agents they’ve collected reviews on.

Romito said QSC’s surveys are “consumer-centric” — focusing on the client’s assessment of service — and that the company is unique in employing an invitation-only, “closed system” to insure a representative sample of legitimate responses is collected.

FREDDIE MAC’S FORMER CHIEF MAY FACE S.E.C. ACTION

The former chief executive of Freddie Mac may face a civil action as the government ramps up an investigation of disclosure practices at the mortgage finance giant and its sister company, Fannie Mae , people briefed on the investigation said.

The executive, Richard F. Syron, a former president of the American Stock Exchange and now an adjunct professor and trustee at Boston College, has received a so-called Wells notice from the Securities and Exchange Commission, an indication the agency is considering an enforcement action against him.

The S.E.C.’s long-running investigation is now zeroing in on how Freddie and Fannie publicly disclosed their exposure to risky loans and whether those depictions were too rosy, according to the people briefed on the investigation who spoke on the condition of anonymity because the inquiry is not complete. Although the companies offered detailed snapshots of their mortgage portfolios, the S.E.C. is exploring whether they underreported their ownership of subprime loans and mortgages that required few documents from borrowers.

The government continues to examine the potential culpability of people and agencies involved in the mortgage mess and the subsequent financial crisis.

The Justice Department has investigated Fannie and Freddie but no charges have been brought.

The S.E.C., which has faced intense criticism for bringing few prominent cases stemming from the crisis, has now spent two years interviewing former and current employees at the two companies. If the case against Fannie and Freddie officials proceeds, it may shape up to be one of the most significant actions brought by the agency in recent years.

The S.E.C. investigation centers around Fannie’s and Freddie’s disclosures from 2006 to 2008. Regulators are focusing on the way both companies reported their subprime mortgage portfolios and concentrations of loans extended to borrowers who offered little documentation, also known as Alt-A loans.

Fannie Mae and Freddie Mac were public companies that operated with a Congressional mandate to foster homeownership. They do not offer loans, but instead buy up thousands of mortgages from lenders, package them and sell them as securities to investors. The lenders, for their part, use the money to offer new loans to consumers.

During that period, however, both companies did disclose to investors breakdowns of their loan portfolios by slicing data according to borrowers’ credit scores and how much equity they had in their homes, among other things, filings show.

Fannie Mae and Freddie Mac were public companies that operated with a Congressional mandate to foster homeownership. They do not offer loans, but instead buy up thousands of mortgages from lenders, package them and sell them as securities to investors. The lenders, for their part, use the money to offer new loans to consumers.

By 2005, lawmakers and lenders began to push the companies to delve deeper into the risky subprime markets, to enhance business and offer the chance at homeownership to a segment of the population often ignored by lenders. The companies, meanwhile, sought to regain market share that they had ceded to Wall Street.

But the billions of dollars in risky mortgages acquired at the height of the real estate bubble ultimately sank the once-mighty mortgage financiers. The Bush administration rescued Fannie and Freddie from the brink of collapse in September 2008, effectively making them wards of the federal government. The companies have since tapped more than $100 billion from their government lifelines. Fannie recently requested an additional $2.6 billion from the Treasury Department while Freddie requested $500 million.

Last month, Treasury Secretary Timothy F. Geithner called for the slow wind-down of the two companies.

WHAT BUYERS WANT IN HOMES TODAY

Buyers have a long list of what they want when home shopping, but one of their biggest desires: A good deal.

“And no matter where a seller prices their property, they’re looking to negotiate,” says Patricia Szot, president of the MetroTex Association of REALTORS®.

But that’s not all they want. Bankrate.com recently asked real estate professionals to chime in on the top desires of their buyers when home shopping. Here are four things that made the list of top home buyer preferences:

1. Homes that are in good condition. “There’s not a lot of flexibility in that,” says Ron Phipps, president of the National Association of REALTORS®. Many buyers now take the attitude: “I’d rather spend the money getting into the house” and not have to spend more money later, Phipps says. One of the major reasons is that “buyers have limited amounts of cash,” he adds. “Even if they want to do a fixer-upper, they don’t have the money to do it.”

2. A bargain with incentives. Buyers are looking for a good deal, even when considering bank-owned properties, says Joan Pratt, real estate broker with RE/MAX Professionals in Castle Pines, Colo. “They want the short sales and the foreclosures and they want them to look like they’re owner-occupied,” she says. “They don’t want to paint. They don’t want to put carpet in. They don’t want to clean.”

And they aren’t only asking for a low price but they also want incentives to buy too. As such, sellers are offering everything from gift cards for new furniture to paint to financial assistance at closing.

3. Outdoor living areas. Homes with screen porches, outdoor kitchens, two-way fireplaces are becoming increasingly competitive in the marketplace as more buyers say they want more outdoor living space.

4. Open kitchens. “The wall between the kitchen and the family room is evaporating,” Phipps says. “The kitchen is becoming part of the gathering space.”

Make sure to eat healthy, and get your daily serving of fruits and vegetables!  Fight the colds, or work to keep them away. 

“Love is what we are born with. Fear is what we have learned here. The spiritual journey is the unlearning of fear and the acceptance of love back into our hearts.” — Marianne Williamson: Spiritual author and speaker

 NEWS & HEADLINES

From an economic perspective, world stock markets are hitting 2 1/2 month lows today, and Treasury yields have dropped due to the devastation. Contrary to what some Wall Street analysts believe, one reader wrote, “What happened in Japan is a complete human and economic disaster, not an opportunity for economic growth. Rebuilding projects after a natural disaster are not stimulative whatsoever – the immediate economic effect of the quake/tsunami was that tons of capital and material wealth/assets were destroyed instantly (not to mention all the lives lost). Rebuilding the infrastructure returns that area to where they were before the quake/tsunami. That doesn’t equal growth in an economic sense – you have to distinguish between the seen (so-called job creation of the quake/tsunami) and the unseen (economic growth potential of that same labor and capital had there been no quake/tsunami). If one quake/tsunami is ‘supportive to economic growth’, wouldn’t that mean that 10 quake/tsunami’s would be phenomenal for economic growth? That makes no sense whatsoever.” The earthquake in Japan is no laughing matter. Just as Aflac – it fired comedian Gilbert Gottfried as the voice of its duck after a series of Twitter jokes about the earthquake in Japan, Aflac’s most important market.

The MERS saga continues. We’re continuing to see various rulings by various states on MERS’ ability to actually assign and foreclose on mortgages. Most recently it was the Supreme Court of the State of New York, which ruled in favor of Mortgage Electronic Registration Systems. The ruling judge wrote, “Plaintiff has shown that the assignment of the mortgage was not made retroactively…Although the assignment refers only to an assignment of the mortgage, physical delivery of the note is sufficient to transfer the obligation, and plaintiff has established that the note was delivered to it prior to the commencement of this action.”

Data improvements continue to be made. For example, the GSEs are focusing their efforts on providing resources to assist lenders and the appraisers they work with to prepare to implement the UAD (Uniform Appraisal Dataset). Any lender interested can visit Fannie’s and Freddie’s websites to glean more information than I can repeat here, which is recommended since it is the “wave of the Future: FannieUAD and FreddieUAD.

For the markets, MBS prices ended Monday nearly .250 better in price, while the 10-yr Treasury improved by about .375 and closed out at roughly 3.35%. Pushing bond and equity markets are, of course, the disaster in Japan, unrest in the Middle East-North Africa area, and European sovereign risk issues – all helping move money into US Treasuries. Believe it or not, one mortgage trader mentioned, “While supply has been limited, there are concerns that it will pick up some with the recent decline in mortgage rates.”

Today we have had Import Prices (+1.4%) and Export Prices (also +1.4%) and the Empire State Manufacturing data (stronger than expected at “17.5” versus February’s “15.4”). We also have the start of another FOMC meeting, but no change to rates is expected. Keep in mind that these monthly economic numbers really pale in comparison to the monumental events overseas. We are now at the low yields of the year, with the 10-yr down to 3.25% and MBS prices are better by .5.

DIM HOMEBUILDER OUTLOOK IMPROVES SLIGHTLY

Homebuilders’ pessimistic outlook improved slightly this month, but it remains dim amid falling home prices and a weak pace of construction.

The National Association of Home Builders said Tuesday that its index of industry sentiment for March improved slightly to 17. That’s the first gain in five months, after four straight readings of 16. Any reading below 50 indicates negative sentiment about the market. The index hasn’t been above that level since April 2006.

Last year was the worst in more than a decade for sales of previously owned homes and the worst for new-home sales in nearly a half-century.

Fewer homes mean fewer jobs. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the builders’ trade group.

High unemployment, tighter bank lending standards and uncertainty about home prices has also kept many people from buying homes, despite low mortgage rates and home prices that have fallen by more than half in some markets since the peak of the housing boom. The industry received a boost in the first half of 2010 when the government offered tax credits to home-buyers. Once they expired in April, home sales plummeted.

Economists say home prices will hit bottom this year before a modest recovery takes hold. Large swaths of the hardest hit states, including Arizona, California, Florida and Nevada, continue to struggle with foreclosures and short sales, when a lender allows a borrower to sell their property for less than what is owed.

Still, the March reading is the highest for the builder index since last May, when it reached 22. The spring season is traditionally the best for home sales.

Regionally, the Northeast saw a one-point decline to 20 and the Midwest was steady at 12. The South jumped from 18 to 20 and industry sentiment in the West rose from 13 to 17.

DIGITIZING BUSINESS CARDS

Despite the promise of a paperless universe run entirely on mobile phones and laptops and tablets, the humble business card is still with us. When we’re out in the real world, the fastest way to reliably get our contact information to another human being is to hand them a piece of paper with our info printed on it. Business cards don’t crash or require an upgrade, or autocorrect our names into gobbledygook.

The challenge then becomes making use of the information we gather by way of business cards. The proverbial shoebox full of business cards that gets ever more full. The stack of cards from the last conference. The loose card you picked up by chance after a short conversation at a coffee shop.

Cardmunch is an iPhone app (a BlackBerry app is coming soon, according to the company’s site). It uses the phone’s camera to take a picture of the business card. That image is then uploaded to the Cardmunch server, where actual human beings transcribe the information.

Finally, the card data is downloaded back to your phone along with the image of the business card itself.

Most other card readers try to use machine recognition to figure out what’s written on the business card. If you’ve used any of these you know that you may spend as much time correcting the results as you would’ve spent just typing the data into your contact manager in the first place. Using human beings gives far better results, and Cardmunch does that.

Once the card data is in your phone in the Cardmunch app, you can import it into your contacts if you’d like. From the Cardmunch website you can export your list of “Cardmunched” contacts as CSV or VCF formats.

Another handy trick with Cardmunch is that you can immediately send a LinkedIn request (LinkedIn recently bought Cardmunch) and a follow-up e-mail. So all that post-conference follow-up can happen much more quickly and painlessly.

BE A REAL ESTATE STRATEGIST FOR YOUR CLIENTS

Today’s marketplace demands more than the basic requirements from Realtors. It requires investigation when you meet with a new buyer. It requires strategic thinking.

Many buyers are well educated when they enter home-sale transactions. They know what properties are selling for, what is active, what’s under contract, what the numbers mean, and how to analyze the market. They know what is happening today.

As real estate professionals, your market knowledge of yesterday has to be from a “shifts and trends” standpoint. More important to your long-term strategy, though, is your outlook for tomorrow. I do not mean speculation — you need to know about your clients’ future plans.

Too often we limit our client discussions to the deals: where things stand, how to put a deal together, and how to close the deal. Getting this far usually takes nuance. Getting beyond it takes an equal effort, if not more.

What about tomorrow? When do your clients plan to sell? I know, they just started looking. But likely they know when they plan to sell because they’ve talked about it. If they haven’t talked, it’s your role to begin the discussion.

Ask your clients about their goals for the next two to five years. If your buyer is single, and has a significant other, do they plan to move in together? If your buyers are recently married, do they plan to have kids? Do they see potential for a job promotion or starting their own business? Have they put their goals in writing?

Determine if your clients see today’s purchase as an investment or just a place to hang their hats. Where do they see the market going in the next three years, and what part of the country would they like to live in if their careers offer the opportunity to move?

If you know they are planning to start their own business, eventually the new home’s office will be too small and they will need additional bricks and mortar.

If they would love to have a second home in Colorado but it’s just a dream, assume your charge as their housing strategist, help them to create a second-home plan, and work the referral.

Talking with clients about tomorrow will give you a holistic understanding of their housing needs. Build a long-term strategy and then work to that plan. In your clients’ minds, you are now a part of their housing future and their lives. You’ve gone beyond where a newsletter or a market snapshot can take you.

We aim to be trusted advisers. Let’s raise the level of discussion with our clients and build trust together.

 FORECLOSURE PREVENTION AND REFINANCE PROGRAM EXTENDED

The Obama administration has given another year of life to an foreclosure prevention program allowing certain borrowers to refinance underwater mortgages owned or guaranteed by Freddie Mac and Fannie Mae.

The Home Affordable Refinance Program had been set to expire June 30. HARP, as it’s known, will now continue through June 2012.

With 30-year fixed-rate mortgages below 5%, the level they have inhabited much of the past two years, that may provide an attractive option for some homeowners.

One catch is that they can’t be too underwater — their Fannie Mae or Freddie Mac mortgages can be no larger than 125% of the value of their homes. They also must be current on their loan payments.

When HARP was announced in March 2009, the intent was to provide up to 5 million replacement loans to homeowners on more favorable terms.

That proved unattainable, as did the goal of the sister plan known as Home Affordable Modification Program. HAMP, as it’s called, initially aimed at modifying the terms of existing loans to help up to 4 million homeowners avert foreclosure.

While far off the ambitious early marks, Fannie Mae and Freddie Mac had provided 621,803 refinance loans under HARP as of Dec. 31, 2010, compared to 579,650 permanent modifications provided by HAMP.

The HARP program initially was designed to handle loans amounting to 80% to 105% of the value of the home. But as property values plunged, putting millions of homeowners further underwater on their mortgages, the loan-to-value ratio was increased to 125%.

In addition to extending the program for a year, Freddie Mac will exempt HARP loans from certain recently announced increased fees, according to Fannie Mae and Freddie Mac’s overseer, the Federal Housing Finance Agency.

The FHFA also said that Fannie Mae is changing its previous eligibility cutoff of Jan. 1, 2009, to May 31, 2009, meaning another five months of loans may be considered for a HARP refinance.

Additional information on the refi program is available in FHFA’s Fourth Quarter 2010 Foreclosure Prevention & Refinance Report, and at www.MakingHomeAffordable.gov .

Although it’s a rainy day out…it’s still a beautiful day because tomorrow is never promised! Enjoy Your Monday!

“The only thing that stands between a man and what he wants from life is often merely the will to try it and the faith to believe that it is possible.” – Richard M. DeVos

NEWS & HEADLINES

The industry is watching the lawsuits filed by NAMB and NAIHP. I received this note from one industry vet, “Where is the MBA in all of this? The MBA, in my opinion has a conflict of interest. Its biggest members are clearly the largest lenders, who are not mortgage bankers they are banks: the ‘Banks that are Mortgage Bankers Association’. Pure mortgage banks are under-represented. If this Rule goes into effect and it is as bad as expected, the wholesalers are in trouble if they do not have a bank behind them. What are mortgage bankers supposed to do? Clearly, what is in the interest of Chase is not in the interest of any mid-size wholesale investor.”

FHFA will not be giving up HARP for Lent. It announced an extension of the Home Affordable Refinance Program, which is administered by Fannie Mae and Freddie Mac, to June 30, 2012. In addition, Fannie Mae and Freddie Mac will make the following adjustments to their programs: Freddie Mac will exempt HARP loans from their recently announced price adjustments and Fannie Mae will conform their eligibility date to May 2009. The program expands access to refinancing for qualified individuals and families whose homes have lost value. Looking at the stats for loans with LTV’s from 80-125%, HARP did about 190,000 in 2009 and 622,000 in 2010.

What is the bond market focused on? One item that has really turned some heads recently was the letter from PIMCO’s Bill Gross, stating that its Total Return Fund sold all of its Treasury holdings. Mr. Gross has been right and wrong in the past. One quote said, “PIMCO’s not sticking around to see what happens when QE II ends” in June. Currently 70% of the Treasury’s annual bond supply is being gobbled up by the Fed through quantitative easing – what happens if the purchases stop? Even with the turmoil around the world there is little “Flight to Quality” bid for US Treasury debt because the Fed is “busy printing dollars to create Inflation to solve our own debt crisis.

Investors are also worried about the potential impact on global recovery the event in Japan could produce. Japan is the world’s 3rd largest economy, the 4th largest exporter, 3rd largest importer of oil and 5th largest importer overall, so concerns are running high – Japan’s debt is already at 200% of GDP. Even before the earthquake, Japan’s economy had been struggling to recover from deflationary pressures and investors are concerned the government has little room to borrow the funds needed to support massive rebuilding efforts. Look for rebuilding projects to eventually be supportive to economic growth, as disaster cost estimates are nearing $200 billion. Look for central banks worldwide to keep liquidity flowing into the system, as they work together to ensure economic growth and Japan are supported.

Here in the US, there is no scheduled economic news today, but tomorrow we have the Empire Manufacturing number. On Wednesday we have some Export & Import Price data, the Producer Price Index, but also the end of the Fed meeting – don’t look for any change to rates. Thursday is Jobless Claims, Housing Starts & Building Permits, and the Consumer Price Index. On the 17th we have Industrial Production & Capacity Utilization, along with Leading Economic Indicators and the “Philly Fed” numbers. MBS prices ended the day Friday worse by about .250; this morning we find the 10-yr yield sitting around 3.38% and MBS prices +.125.

IF PRICES ARE FALLING, WHY ARE THE RICH BUYING?

There is an interesting phenomenon taking place in the real estate market. While house prices are falling, the rich are starting to purchase. DataQuick Information Systems reported last week that sales on homes $1 million or more rose 18.6% last year after four consecutive years of decline. This is at the same time that sales outside of this price point actually fell 2.8%.

And even more amazing is that homes over $5 million have also increased substantially. Housing Wire reported that:

In 2010, 975 homes sold in this bracket, up nearly 14% from the year prior.

Why would the wealthy be starting to purchase especially when everyone is predicting that prices will soften? The people of wealth understand finances. They realize that the COST of real estate is a much more important than its PRICE. With the government attempting to make massive changes to the residential lending business, the wealthy know financing a home may never be better. They realize it is time to buy. They can purchase a million dollar+ home for a rate lower than at almost any time in history.

Rates are at historic lows and the spread for jumbo loans has shrunk dramatically. As CNN Money explained:

Normally buyers have to take out a jumbo loan to finance any mortgage beyond the $417,000 threshold ($729,000 in high-cost cities such as New York). These loans have higher interest rates because they are considered non-conforming – or higher risk – and are not backed Fannie Mae or Freddie Mac.

In 2009 buyers of high-end homes paid 1.8 percentage points more in interest than the average buyer. But in 2010, that spread had shrunk to just 0.6 points more.

They can also fix that rate for 30 years. The 30-year-fixed-rate-mortgage may be a victim of the new lending reforms. Mark Zandi, chief economist of Moody’s Economics addressing the administration’s recent report on reform:

“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages.”

Bottom Line

Let’s assume the rich aren’t just lucky. Let’s assume they built their wealth by making good financial decisions. What have they decided about real estate? It’s time to buy.

AMERICANS FEEL A LITTLE MORE RICH

Americans are getting wealthier: Americans’ wealth increased 3.8 percent in the final three months of 2010, the Associated Press reports. Most of the growth is attributed to gains in stock portfolios.

Overall, household net worth increased to $56.8 trillion last quarter, despite a drop of 1.6 percent in real estate holdings, the Federal Reserve reported Thursday.

Net worth–which is the value of assets such as homes, checking accounts, and investments, but minus debts such as mortgages and credit cards–has increased two consecutive quarters after dropping last spring.

More gains in wealth could prompt Americans to spend more and strengthen the overall economy, experts say.

Meanwhile, companies are also starting to feel a little more rich. The boost to companies’ cash-flow is expected to bring about a boost to job hiring in the coming months.

GOP SET TO BEGIN CHIPPING AWAY AT MORTGAGE GIANTS

Republican lawmakers are preparing this week to introduce a series of legislative proposals to gradually reduce the role of Fannie Mae and Freddie Mac.

The effort represents a tactical shift from the comprehensive approach for a speedier wind-down of the mortgage-finance giants that Republicans backed during last year’s negotiations on the Dodd-Frank Act.

That legislation would have started cutting the government’s ties to the mortgage giants or begin winding them down in two years. The bill’s sponsor, Rep. Jeb Hensarling (R., Texas), has said he still plans to reintroduce his legislation later this year, and leading House Republicans say they are still committed to the goal of winding down Fannie and Freddie and handing their role over to the private sector.

The decision to take a piecemeal approach with individual bills reflects the challenge in forging a political consensus—even among Republicans—around overhauling the nation’s housing-finance infrastructure. And as the housing market continues to be vulnerable, deep caution greets any proposal that might pass on higher borrowing costs to consumers.

If Republicans advance individual bills, that could offer more opportunities for cooperation with the White House than if they advance a single bill outlining a more immediate wind-down of Fannie and Freddie.

Others say the risks assumed by Fannie and Freddie could simply move into the federally-insured banking sector or federal loan agencies and that taxpayers would still be exposed to losses in a crisis. “It looks like it’s a more private solution, but it may not be in the end,” Mr. Geithner said at a House hearing earlier this month.

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BANKS PUSHING BACK ON FORECLOSURE PACT

Bankers are ratcheting up their rhetoric as they fight a mortgage-servicing settlement proposal, predicting lasting damage to the U.S. economy in an effort to force regulators to soften terms of any penalties.

On Thursday, Wells Fargo & Co. (NYSE: WFC – News) Chief Executive John Stumpf said extensive loan principal reduction would increase the U.S. deficit if taxpayers are forced to pay for write-downs of loans held by government-controlled Fannie Mae and Freddie Mac.

“It’s important to the country so that whatever happens does not slow down the recovery,” Mr. Stumpf said.

Bank of America (NYSE: BAC – News) executives issued similar warnings on Tuesday, calling principal reductions “no panacea” and questioning the fairness of the approach. “When you start helping certain people and don’t help other people, it’s going to be very hard to explain the difference,” said Chief Executive Officer Brian Moynihan.

Advocates of tougher sanctions dismiss the bank’s protestations.

‘It Takes Nerve’

It takes nerve to complain about delays when your failures caused them,” said Peter P. Swire, who last year served as a top White House housing adviser. Their argument “boils down to the view that they should get away with all their mistakes because they’re too hard to fix now.”

Privately, though, lawyers for the top mortgage servicers have held private conference calls this week to map out their response and possible areas of compromise, said people familiar with the situation. BofA, for example, would be willing to consider “very limited targeted principal reduction efforts” that help borrowers achieve a more-affordable monthly payment, said a person familiar with the matter.

[More from WSJ.com: Suits Claim Loan Scams]

The public jockeying comes as 11 federal agencies and 50 state attorneys general begin efforts to determine the appropriate penalties for mortgage-servicing abuses uncovered after the “robo-signing” controversy erupted in the fall. While officials hope to deliver a settlement term sheet by next week, those internal negotiations remain fluid, according to people familiar with the discussions.

“We’re in a classic phase of negotiations in which both sides are trying to strengthen their ability to get what they view as a good settlement,” said Michael Barr, a former assistant Treasury secretary in the Obama administration.

Officials are weighing a range of ways banks could pay those penalties by targeting those sums toward the housing recovery, including by writing down loan balances on first- or second-lien mortgages. Reaching a consensus could be complicated by the fact that some banking regulators are resisting loan write-downs, while other federal and state officials support them, the people said.

Other officials and economists say that existing programs have faltered not because of a failure to address underwater borrowers but because homeowners that receive loan modifications still have high debt loads.

[More from WSJ.com: Rising Gas Prices Hit Home]

Still, several banks have touted their efforts to write down mortgages for certain borrowers. On Thursday, BofA rolled out a proposal offering modifications that include write-downs for U.S. soldiers on active duty.

Banks also are resisting some parts of a separate 27-page proposal from state and federal officials to more tightly regulate mortgage servicers. They say that the totality of the provisions would delay an already lengthy foreclosure process, which averaged more than 500 days in January, according to Lender Processing Services.

Doing the Math

To buttress their arguments that the settlement would delay a housing recovery, banks are working up internal estimates of how much extra time the proposal would add to the foreclosure process. BofA’s estimate is 200 days, said a person familiar with the number. At J.P. Morgan Chase & Co. (NYSE: JPM – News), the prediction is as high as 12 months, said people familiar with the estimate.

On Thursday, the Association of Mortgage Investors, an industry group, expressed support for many elements of the proposal, including principal reduction, saying it would “help distressed borrowers and bring some closure to the ongoing housing industry problems.”

 “The secret to productive goal setting is in establishing clearly defined goals, writing them down and then focusing on them several times a day with words, pictures and emotions as if we’ve already achieved them.”  –  Denis Waitley 

In a story that first broke in Mortgage News Daily (MND), Dave Stevens resigned his position as FHA commissioner. Stevens is expected to end his stint as FHA commissioner by the end of April and return to “the private sector.” He was nominated about two years ago and sworn in during July, 2009.

Monday we learned that NAIHP filed a suit focused on TILA changes, and yesterday, moments after the commentary went out, news came out that NAMB Files Lawsuit Against the Federal Reserve to prevent the April 1^st implementation of the LO compensation rule. The NAMB suit seeks temporary and preliminary restraints that would enjoin the implementation of a specific section of the Federal Reserve Board’s Final Rule on loan originator compensation, Regulation Z; Docket No. R-1366, Truth-in-Lending. “This section, if implemented, would prohibit mortgage brokers from paying their loan officers commissions based on fees paid by the consumer.” One simple sentence leading to one huge mass of confusion.

For a variety of reasons fixed-income and MBS prices improved yesterday, not the least of which is the lack of supply of MBS’s in the market. Watch for this in the applications figure next week. The 30-yr bond auction went pretty well, and stock markets were down (not that bonds always go up when stocks go down!), and the yield on the 10-yr went below 3.40%. By the end of the day MBS prices had improved between .5-.625.

Today is a new day, but the trend is continuing. The massive earthquake in Japan added to the global uncertainly and turmoil that has rattled markets recently. The 8.9 magnitude quake, and aftershocks, was followed by a tsunami. Bonds are obviously rallying, but insurance company stocks are leading stocks lower. The Yen is rallying on expectations of repatriation flows. The film clips of the event in Japan are truly amazing. Here in this country, Hawaii and the low-lying areas of the West Coast will be dealing with a tsunami warning. Retail Sales, almost an after-thought, came in roughly as expected, and we find the 10-yr this morning around 3.37% and MBS prices are chopping around unchanged.

A separate survey by Freddie Mac showed mortgage rates were largely unchanged this week, with rates on 30-year fixed-rate loans below 5 percent for the third week in a row.

A home-price index compiled by CoreLogic showed national home prices down 5.7 percent from a year ago — an even steeper decline than the 4.7 percent year-over-year drop seen in December.

January’s decline brought the drop in home prices from their April 2006 peak to 32.8 percent, CoreLogic said.

HOUSE VOTES TO KILL FHA SHORT REFI’S   

Critics say the program — which allows underwater borrowers who are current on their loans to refinance into an FHA-insured mortgage if their lender agrees to write off at least 10 percent of their principal — has gotten off to a slow start. Taxpayers may be on the hook for up to $8 billion to reimburse lenders for a share of their potential losses on the loans, critics say.

Democrats who dissented from last week’s 33-22 vote to move the bill out of the Financial Services Committee for a floor vote said that while Troubled Asset Relief Program (TARP) funds for the program have been capped at $8 billion, actual expenditures will depend on program use.

Critics of the program “can’t have it both ways” by arguing that no one is using the program and that it will have a big price tag, Democrats said.

If the FHA ends up insuring only a few short refis, then shutting down the program now would have no or very limited cost savings, supporters of the program said.

If the short refi program gains traction and is more widely used, there may be a “modest cost,” which supporters characterized as an “investment in reducing foreclosures, rightsizing homeowners’ payment obligations and underwater loan status, and complementing other federal programs which work to address our nation’s housing problems. Either way, shutting down the program at this time makes no sense.”

FHA Commissioner David Stevens told the committee that while only 245 applications have been submitted and 44 loans approved since the program launched in September, 23 lenders were participating in the program.

The Obama administration said this week that it “strongly opposes” the bill and another approved by the Financial Services Committee last we ek, HR 836, which would eliminate the Department of Housing and Urban Development’s Emergency Homeowners Loan Program (EHLP).

WILL I GET MORE MONEY IF I WAIT?

Sellers in any real estate market are looking to get the best possible price. If you are looking to sell in the next year, today’s price may well be the best price. Home values stabilized somewhat in 2010. Many hoped that was a sign that values had bottomed out and we would see price appreciation in 2011. Studies released this week have painted a different picture.

If we look at CoreLogic’s January Home Price Index (HPI), we see that prices are again beginning to decline: declined by 5.7 percent in January 2011 compared to January 2010…  

 Mark Fleming, chief economist with CoreLogic, said, “A number of factors continue to dampen any recovery in the housing market. Negative equity, which limits the mobility of homeowners, weak demand and the overhang of shadow inventory all continue to exert downward pressure on housing prices. We are looking out for renewed demand in the coming months as the spring buying season gets underway to hopefully reduce the downward pressure.”

 They are not talking about the spring market increasing or even stabilizing prices. They hope it will “reduce” the pressure to drive prices lower.

 

Radar Logic’s RPX Composite Price comes to virtually the same conclusion:  under a severe supply overhang that includes a large and growing “shadow inventory” of homes in default or foreclosure.”

Radar Logic believes the RPX Composite price will continue to exhibit year-on-year declines throughout 2011 due to a growing supply of homes for sale and in the inventories of financial institutions, and weakening demand due to the reduction of government incentives for home buyers. Moreover, banks are facing uncertainty over whether they will be forced by regulators to expand mortgage modifications, and may reduce lending and tighten standards as a result.

“No matter what you call it, a “double dip” or the continuation of a long process of deterioration, the current trend in home prices is evidence that housing markets are continuing to languish,” said Quinn Eddins, Director of Research at Radar Logic. ” We expect the negative trend to continue under a severe supply overhang that includes a large and growing “shadow inventory” of homes in default or foreclosure”

Bottom Line

It seems that prices have again begun to fall nationally. With the overhang of existing and shadow inventory, prices will probably continue to decline throughout most of 2011. If you’re thinking of selling, now might be the best time. Check with a local real estate professional to see how this might impact your area.



Foreclosure-related filings against U.S. homes fell 14 percent from January to February and were down 27 percent from a year ago — the biggest year-over-year drop recorded by data aggregator RealtyTrac since it began issuing reports in 2005.

“Give me beauty in the inward soul; may the outward and the inward man be at one” – By Socrates

NEWS & HEADLINES

The Federal Reserve Board is offering up a webinar on the TILA changes on March 17th. FedCompWebinar. And to register go to this link: ImportanttoRegister.

Believe it or not, a shutdown could be a positive for Treasuries. But in the MBS market, the FHA loan origination process, for example, may be impacted to some extent due to a shutdown. There are two important steps in the FHA loan origination process where FHA lenders have a dependency on FHA: obtaining a case number for a new FHA loan and after it closes being endorsed by FHA so that a mortgage insurance certificate can be issued. The case number for an FHA loan is obtained via FHA Connection. It is possible that FHA Connection may continue to operate even if there is a government shutdown. If that is the case, obtaining case numbers would not be a problem. (During the November 1995 shutdown, case numbers could not be obtained.) Barclays’ analysts believe that it is very likely that loans will not be endorsed and “mortgage insurance certificates will not be issued in the event of a shutdown. Lenders could continue to originate FHA eligible loans but they will need to wait to obtain an endorsement and an MI certificate. It should be noted that lenders with DE authority can potentially obtain MI certificates if FHA Connection continues to operate.” The shutdown in 1995 mainly caused a delay rather than drop in FHA loan origination, but if lenders decide to stop accepting FHA applications, it could be a problem.

Yesterday we had a very good 10-yr auction. And without any economic releases, the focus was/is indeed on the auction (supply versus demand), continued oil issues, and debt problems in Europe. So the Treasury’s $21 billion auction went well, coming in around 3.50% with a good bid-to-cover ratio. Stocks finished roughly unchanged, whereas MBS prices finished the day better between .375-.5.

We did have some news this morning. Weekly Jobless Claims came in at 397k, up 26k from a revised 371k. And the trade balance for January widened by $6 billion ($40.3 to $46.3 billion) to its highest level since last summer, viewed as putting more of a crimp in consumer spending. Less than 20% of the trade change was attributed to oil. After the news the 10-yr has improved to 3.45% and MBS prices are a shade better.

THREE STRATEGIES FOR GETTING YOUR FACEBOOK FAN PAGE

By now, if you haven’t heard of Facebook, it’s likely because you’re still busy trying to program your VCR or you have a Victrola that needs cranking. Which is to say, it’s everywhere. But how does a professional use Facebook to build their business, generate leads, and meet potential clients? First, you have to set up a fan page for your businesses or brand. After that, you have to get the word out. The page won’t do the work for you. So here are some tips on finding an audience and keeping their interest …

Give it a Proper Name: Sure, it seems easy enough but choosing a smart name might mean something entirely different to you than it does to a search engine. The best name to use, if you’d like to be found more often in searches, is the exact name of your business. Using clever phrases or your web domain may seem like a good way to separate yourself from Facebook’s 500 million active users, but more often than not it’ll make you less likely to be found by the very people you’re trying to attract.

Promote Your Page: Like anything else, if you want people to know about something, you have to tell them. So take advantage of Facebook’s widgets and badges and add links to your page on your business website, your blog, and anywhere else you can think of. The more opportunities you create to promote your page, the more likely you’ll have a burgeoning fan base before long.

Advertise: Facebook offers an advertising platform that allows you to buy a simple ad that you can target by location, age, or interests. That means, your ad appears before exactly the audience you want to attract. It’s not free, but if you’re serious about building your fan page, it’s a good way to start adding fans that aren’t in your family or social circle.

FORECAST: HOUSING WILL CONTINUE TO LAG RECOVERY

The U.S. economy is growing and employment should soon pick up steam, but housing will continue to lag behind other sectors, economists at the UCLA Anderson Forecast said in their latest report.

“Housing continues to wallow in its modern-day depression as low interest rates are being more than canceled by the glut of new product created during the bubble years of 2004-2007, the tidal wave of foreclosures, and increased credit standards being imposed by lenders,” said UCLA Anderson Forecast Senior Economist David Shulman in his forecast.

Although housing prices are down 30 percent, that would-be incentive to buyers has been offset by increased down-payment requirements, Shulman said.

Fears of “a further ratcheting down in prices, along with the shock of witnessing an unprecedented collapse in price structure, has kept buyers out of the market. Put simply, the investment value of homeownership has declined. Furthermore, the usual factors associated with housing weakness … tepid job growth and high unemployment, are suppressing demand.”

The Anderson Forecast calls for only a “modest” recovery in housing starts, which are expected to grow 12 percent this year, to 658,000. Housing starts peaked at 2.1 million in 2005, and bottomed at 554,000 in 2009.

Once the employment situation improves, housing starts should break the 1 million mark in 2012 and approach 1.5 million in 2013, with pent-up demand offsetting an expected rise in mortgage rates, the forecast said.

But a glut of housing in fringe areas will continue to keep a lid on construction of single-family homes in the “exurbs,” Shulman predicted.

The UCLA Anderson Forecast predicts real growth in GDP of 3.8 percent the first three months of this year, and 3 percent through 2013.

That growth should drive payroll employment to increase to a pace of 1.9 million in 2011, 2.6 million in 2012 and 3 million in 2013, Shulman said. But because so many jobs were lost during the recession, employment still won’t have bounced back to the peak level reached in first-quarter 2008.

The forecast predicts unemployment will rise modestly in the second quarter before beginning to decline, and will not fall below 8 percent until the end of 2013.

State and local governments, struggling under the weight of pension and health benefits, will continue to lay off or furlough employees and seek pay cuts, Shulman said.

Texas and California, he noted, used to have very similar unemployment rates. At the end of 2010, however, California’s unemployment rate was 12.5 percent — 4.2 percentage points higher than the 8.3 percent unemployment rate in Texas.

Nickelsburg expects California’s growth will “run slightly hotter” than the U.S. overall, thanks to increased international trade and business investment in equipment and software.

To get back to pre-recession unemployment levels, California not only has to regenerate the 1.3 million jobs lost during the recession, but generate additional jobs to accommodate the growing workforce.

The implosion of the housing market left California with at least 350,000 job seekers who won’t be able to find work in the fields they’d been employed in, Nickelsburg wrote.

California may be losing jobs to Texas, he theorized, although the state continues to attract more venture capital.

RANKING YOUR REAL ESTATE CLIENTS

Social media marketing gurus tout how they have thousands of Facebook friends or Twitter followers. While this may be a great approach for Internet marketers, it may not be a wise approach for Realtors.

When Realtors brag about how many friends they have on Facebook or how many followers they have on Twitter, they may be missing what really matters. What matters is not the size of your database, but the quality of people in your database.

Fast-forward to today. Take a look at your Facebook friend list, your LinkedIn account and your Twitter account. Of those people, how many of them would you recognize if you were to bump into them on the street?

If you don’t know who they are, do you really expect them to trust you and to refer business to you? In other words, would you be better off with 200 people that you interacted with on a regular basis and that you know, or with 2,000 Facebook friends, most of whom you have no idea about who they are?

Time to cull your database

If you’re like most agents, you probably will feel uncomfortable “unfriending” or “unfollowing” people on social media. There’s another approach that will achieve the same result without offending anyone.

It’s one thing to have a large following on your blog or for your e-mail newsletter. In fact, it’s highly desirable to grow this list as long as everyone on it has agreed to opt in to it.

On the other hand, if you have a friend or follower feed that is packed with communications from people who you don’t know and don’t care about, start separating the chaff from the best potential referral sources.

Ultimately, the best way to build your business is to be in regular contact with members of your A-list and B-list who know you, interact with you, and who trust you to represent them when they are ready to list or sell their home.

JUDGING AN AGENT’S LISTING PRESENTATION

One of the primary questions asked of real estate agents is “Why would I list my home with you?”. 90% of them give the same exact basic answers.

They discuss the 50 websites they have access to, brag about their (or their company’s) market share, and present a standard marketing plan sprinkled with print media and open houses. Shockingly, these agents are puzzled when home sellers choose the agent with the lowest commission or the one who promises a higher sales price. When every offer is basically the same, wouldn’t you pick the one that puts the most money in your pocket?

In today’s world, where only 10% of the available inventory is going to sell this month, you need more than a listing agent – you need a LEADER. As far as I am concerned, there are three components to leadership:

1. Expertise

An agent must prove themselves as well versed in many areas in order to ask someone to follow them. Market trends like those discussed in this blog daily, interest rate movements, the changing mortgage landscape, knowledge of your competition (the other homes for sale that are also trying to lure any potential buyers), and being a raving fan of the community are some of the components that make an expert. Additionally, experts have others in their sphere of influence who are experts in other disciplines- mortgage, taxation, estate planning and more

2. Listening Skills

How can anyone help anyone if they don’t take the time to LISTEN? They need to understand your needs. What’s more important…price or timing? Why are you moving? Where are you going to begin the next chapter of your life? What are the reasons you bought your home (because it might give a clue to your eventual purchaser)? Great agents ask a lot of questions. If you find yourself asking more questions than the agent, you have not found a leader. Leaders listen so they can help their followers get the result that the followers desire. It’s called Servant Leadership.

3. Creativity

Once you are comfortable that an agent knows their stuff and that they care more about your result than their pay check, you need an agent who has unique solutions to the problem. Simply stated: How can they get your house to stand out with all this inventory? An agent’s marketing plan is what ultimatelyattracts potential buyers and, if your agent is just putting you in with all the clutter of the big websites on the Internet, you are doomed for disappointment. Single property websites, text messaging, QR codes as well as geographic, cultural and employment marketing strategies are crucial. Unique Open Houses that incorporate potential repairs, renovations or upgrades with the FHA’s 203K loan could be important as well. Or, you can also try anything else that’s “outside the box”.

As a consumer, it’s okay to follow when you find a true leader- one who is a creative, serving expert. Take it from me…they are rare. However, when you find one, they are worth their weight in gold.

“The best way to persuade people is with your ears—by listening to them.” — Dean Rusk: Was secretary of state under Kennedy and Johnson

“Well, at least Fannie & Freddie didn’t blame the brokers for the foreclosure mess!” Foreclosures

Anyone seeing this headline probably did a double take: “FDIC Announces Settlement With World’s Foremost Bank.” It turns out that it is in Sidney, Nebraska – but even the initials could turn some banking heads. “The FDIC announced a settlement with World’s Foremost Bank, Sidney, Nebraska (WFB), for alleged unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission Act as well as violations of the Truth in Lending Act. The FDIC also issued its list of state nonmember banks recently evaluated for compliance with the FDICCRA

How are short sales in California going? Well, according to Realtors, not so good: ShortSaleDelays

Yesterday’s results of the 3-year note auction were strong, but not strong enough to turn the market around. It drew the highest cover ratio (an indication of demand) since November, and the yield came in at about 1.30%. Slightly lower oil prices, and no market-moving news, the 10-year note lost about .375 (3.55%) while the Dow closed up over 120 points. Overall, MBS volume held below normal.

Today, as with every Wednesday, we saw the MBA’s Mortgage Application Survey for last week. Mortgage applications increased 15.5%, with the refi number up 17% and the purchase number up 12%. “An improving job market is beginning to pave the way for an improving housing market.” Refi’s accounted for about 65% of applications, and ARM loans are up to 6% of apps.

The day’s major highlight, outside of watching oil prices (above $105 per barrel), is the second leg of the latest round of Treasury auctions with $21 billion in 10-year notes at 1:00PM EST (tomorrow is the 30-yr auction). On Friday we have Retail Sales (Feb) and Michigan Sentiment (Mar). We find the 10-yr sitting around 3.53 and MBS prices sitting around unchanged.

HIRE A SMART DUCK

You can learn so much just by observing nature. I was having lunch at an outside table at a restaurant. It was impossible not to notice the ducks that gathered around the tables at the restaurant looking for food. The birds would wait for the people to leave and then they would flock to the tables looking for crumbs that were dropped to the floor. There were dozens of birds fighting over the scraps left behind. Every duck did the same thing; except for one.

This duck was different. Instead of waiting for the couples to leave, this duck would wait only until the food was originally delivered. At the moment the staff delivered the food, the duck would race to the table and look up at the people who were about to eat. Surprisingly, every person immediately took something from their plate and feed it to this duck. They fed the duck BEFORE they began to eat.

This duck didn’t settle for scraps and leftovers. He ate the best food off the plate. This duck didn’t fight with dozens of others. He was alone when the customers fed him.

It was truly amazing.

It made me think about the difference in real estate agents. Some will list a house, put it on MLS and hope for the best. Others will represent a buyer by simply checking the MLS to see if a suitable house is available for sale. They are like many agents in the marketplace. They are waiting for something to happen. Just like all those other ducks.

Then there are agents who will take it upon themselves to make something happen. They will diligently search for the buyer of their new listing. They will knock door-to-door looking for the perfect house for their new client who is dreaming of a new home for their family. They are like that special duck. They are not waiting for the leftovers.

Bottom Line

In all of nature, some wait for things to happen and others make things happen. When hiring a real estate agent, look for the later. Don’t settle for scraps.

MORE BORROWERS UNDERWATER: WHY WE SHOULD CARE

Falling home prices at the turn of the year pushed more borrowers into a negative equity position, meaning they owe more on their mortgages than their homes are worth.

In Q4, 23 percent of borrowers nationwide, or 11.1 million, were holding “underwater” mortgages; that’s a collective $750 billion of negative equity, according to the latest survey from CoreLogic (NYSE: clgx). That’s up from 22.5 percent, or 10.8 million, in Q3, again, thanks to falling home prices. To make matters worse, 2.4 million borrowers have less than 5 percent equity in their homes, deemed as “near-negative” equity.

Of course negative equity is concentrated in the hardest hit states: Nevada (65 percent), Arizona (51 percent), Florida (47 percent), Michigan (36 percent) and California (32 percent). This as the consensus among housing watchers is that home prices will fall another 5 to 10 percent this year before slowly climbing back. That means negative equity will climb another ten percentage points.

So why should we care if the bulk of these underwater borrowers can still make their monthly mortgage payments? “Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties,” notes CoreLogic’s chief economist Mark Fleming. “Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish.”

Negative equity will slow the pace of home sales, no question, but it will also provide more problems for policymakers and state and federal regulators. Right now the mortgage market is at the mercy of a huge potential settlement with the state attorneys general and a whole bunch of feds, part of which will be a push for principal write down on troubled loans. With negative equity continuing to rise, the principal write down argument gains strength. I spoke with Missouri state AG Chris Koster yesterday at a conference in DC:

“I think principal write-down is the right way to go. Twenty to 25 billion dollars is a significant amount of money. The big question is are we talking about five banks, 15 banks who chip in on that fund? We don’t know the answer to that until we get through these negotiations, but we’re at the beginning of something serious that could be successful.”

But the head of the new Consumer Financial Protection Bureau, Elizabeth Warren, told a Reuters summit last week, with regards to punishing the banks with a monetary fund or fine, “I don’t think this is about a pound of flesh. I think that’s the wrong way to think about it.” She seems more interested in repairing the market than giving borrowers back equity, the loss of which may or may not have been their own doing.

My concern is that the more borrowers in a negative equity position, the more may intentionally default on their loans in order to try for principal write down. Yes, it’s the moral hazard, slippery slope argument, which I know appears to be losing some steam in Washington at least.

The negative equity issue also comes into play as regulators decide on risk retention rules and what exactly will qualify as a “Qualified Residential Mortgage.” QRM’s will be exempt from risk retention, so banks will not have to hold on to 5 percent of the risk on those loans before securitizing them. Rising negative equity bolsters the case for higher down payments for QRMs, especially as home prices continue to slide.

So yes, it’s just another new number of how a lot of borrowers look on paper. It doesn’t mean every underwater borrower will go delinquent on his or her mortgage. But it does add to risk, which this housing market does not like one bit.

‘SPREAD THE WORD’: HOME OWNERSHIP MATTERS

The day before the National Association of REALTORS® starts its Home Ownership Matters Bus Tour at the Chicago Flower & Garden Show, REALTORS® from the Chicago area gathered at NAR headquarters Friday for a town hall-style meeting. The topic: the state of home ownership in America today.

2011 NAR President-Elect Moe Veissi, in Chicago for the kick-off, encouraged REALTORS® attending the meeting to start talking with peers and clients about how much the U.S. economy is affected by home ownership. “We need to spread the word,” he told the 100 or so REALTORS® in the audience. Key messages he asked members to share:

• The housing market makes up $4 trillion, or about 15 percent, of the total U.S. gross domestic product.
• The housing industry has led the way out of six of the last eight U.S. recessions.
• For every two homes sold in the United States, one job is created.

Veissi asked members to join in the fight by voicing their concerns to their elected officials and by sharing these statistics publicly in their community. “Let’s help the American consumer understand how vital home ownership is to a healthy U.S. economy,” he said, “and how it helps to create the thing we need most right now, jobs.”

One of NAR’s key priorities is preventing any chipping away of the mortgage interest deduction as a means of helping to reduce the federal deficit. The push comes at a time when editorial boards of major newspapers such as The New York Times and The Washington Post have come out in favor of eliminating or reducing this tax benefit, which has been in place for almost 100 years.”Home owners already pay a majority of the taxes in this country,” Veissi said.

“The deduction didn’t cause the deficit problem,” agreed Chicago Association of REALTORS® President Mab Guzman, who joined Veissi for the question-and-answer session. Rather that taking away the deduction, the government needs to look internally at how it can streamline its operations, she said. “Small businesses have been making these kind of cuts for years.”

“It seems so illogical to take away the mortgage interest deduction,” said Joe Siciliano, CRS, after the meeting. “It’s creating jobs, which is important,” said Siciliano, managing broker of Coldwell Banker Residential Brokerage in Chicago. “But also, people bought their home years ago based on this tax benefit. I feel more strongly after hearing Moe speak today that we need to keep this benefit.”

Also top of mind for members was the need to fix the financial system and free up capital for qualified buyers. “The pendulum swung too far in one direction. Now, it’s swinging too far the other way,” Veissi said.

“If we had more financing options, we would sell more real estate today,” agreed Marki Lemons-Ryhal, ABR, CRS, a team leader with Keller Williams Realty in Chicago.

Veissi said NAR strongly favors reforming “rather than eliminating” the government-sponsored enterprises that enable the secondary mortgage market to operate. “The GSEs are broken but they’re fixable,” Veissi said. “Without them, we’ll lose the system that helped many of our parents and grandparents become homeowners. If you privatize the secondary mortgage market, you eliminate the concept of the 30-year mortgage,” he said.

The Home Ownership Matters bus tour is an opportunity for NAR to engage with American consumers on these issues. The bus travels from Chicago to Denver to Portland during the month of March, with a few intermediate stops along the way. The tour’s message is simple but powerful: Home ownership matters to individuals, to communities, and to the country. We hope to see a lot of you as we travel from city to city!

LET’S MAKE A DEAL TO HELP HOMEOWNERS

State attorneys general have launched talks with big banks accused of illegally foreclosing on homeowners with the hopes of reaching a deal that could result in more mortgage modifications, a top negotiator said Monday.

Iowa Attorney General Tom Miller has been leading a 50-state probe into mortgage servicers’ foreclosure practices since October.

The negotiations are between the attorneys general and federal agencies on one side, and the five largest mortgage servicers, which comprise 59% of the market.

The AGs did not indicate which banks they are negotiating with. However, the five largest servicers are Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500),), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM), according to Inside Mortgage Finance.

Miller refused to confirm reports that the talks have included a proposed $20 billion settlement or a requirement that servicers provide that amount in mortgage modifications to underwater homeowners.

But the final deal could have a major impact on the housing market, making it easier for homeowners to get mortgage modifications, including reductions in the principal amount they owe on their house in some cases, Miller said.

Federal and state officials gave the mortgage servicers a 27-page opening offer late last week but Miller refused to give details of the offer, citing the ongoing negotiations.

So far, the federal government has shied away from forcing banks to offer principal reductions. Instead, the priority has been to lower interest rate payments. And several congressional efforts to pass bills allowing bankruptcy judges to modify loans have all failed.

“We realize the result we come to can have an impact on the housing market and hence the economy,” said North Carolina Attorney General Roy Cooper. “That’s why all of us at the table want it to be a positive impact.”

However, Miller also added that the first offer made to the servicers lacked specifics on the two “most important” things: a proposed settlement figure and a proposal to make way for more mortgage modifications.

The big reason it was missing was because: “We struggled with it.”

“Whatever that proposal is, it’s going to have some limitations and leave some people out,” Miller said.

The government probe of mortgage servicers followed reports that the institutions were using shoddy documentation to improperly foreclose on homeowners. That news prompted several servicers to halt foreclosures for a short period of time.

The attorneys general launched the probe in October to review improper documentation and mortgage modifications.

The government agencies involved include states attorneys general, the Department of Justice, the Department of Housing and Urban Development, the Department of Treasury, the Federal Trade Commission as well as the new Consumer Financial Protection Bureau.

“This is the time. This is the place. This is the vastness. Right here is paradise. Always. Always.” — Byron Katie: Speaker and author of self-inquiry

SHORT SALES FLUSTER CALIFORNIA REALTORS

Four out of 10 California Realtors say the last short sale they handled didn’t close, and most are frustrated at how long it takes lenders to respond to offers and other inquiries.

The California Association of Realtors says a survey of 2,150 members highlights the lack of standardization among lenders, long approval timelines, and a reluctance on the part of lenders to approve short sales.

Asked in December whether their most recent short-sale transaction closed, 57 percent of California Realtors said it did, and 43 percent said it did not.

Once Realtors had submitted a short-sale agreement to lenders, 63 percent said it took more than 60 days to get a written response approving or disapproving the sale. Only 4 percent said they received a response in less than 14 days.

Nearly half (44 percent) said it took more than five business days to get a response to other types of inquiries about a short-sale property, with only 14 percent saying lenders responded within one day.

Some 64 percent of Realtors surveyed reported that they were “not satisfied” or “not at all satisfied” with how long it took to hear back from lenders. About one in five (22 percent) said they were “satisfied” or “extremely satisfied” with the timeliness of lenders’ responses.

The survey was delivered to 20,000 Realtors, and 94 percent of those who filled it out said they handled a short-sale listing or participated in a short sale in 2010.

The Obama administration has relaxed some requirements for short-sale incentives that the Treasury Department provides to borrowers and lenders through the Home Affordable Foreclosure Alternatives program (HAFA), and said it would hold lenders to stricter timelines for approving or rejecting transactions.

CAR President Beth Peerce wrote the Treasury Department and the heads of Fannie Mae and Freddie Mac in December, saying HAFA short-sale approvals “are not only few and far between, but also generally unworkable.”

When the Nevada Association of Realtors in August surveyed homeowners who’d been in foreclosure, 61 percent said they’d never heard of the HAFA program. While 10 percent of those surveyed said they’d used HAFA, only 2 percent said it did any good.

Loan servicers working for Fannie Mae and Freddie Mac signed off on 107,953 short sales in 2010, nearly double the 55,447 approved in 2009.

But the robo-signing controversy may have helped put a dent in the pace of short sales in the final three months of the year. Fannie and Freddie’s loan servicers signed off on 25,734 short sales during the fourth quarter of 2010, down nearly 13 percent from the previous quarter.

HOMEOWNERSHIP: WHAT AMERICANS THINK

There is a growing number of people debating whether the government should continue its level of support for homeownership. Mortgage assistance is being pulled back and even the mortgage-tax-deduction is now up for debate. We want to look at how the people of this country view owning a home and the reasons they buy. Last week, Fannie Mae released the National Housing Survey. Here are the survey’s more interesting findings.

Belief in Homeownership

96% of all homeowners said homeownership has been a positive experience.

84% of Americans still believe that owning a home makes more sense than renting. Even 68% of renters believe owning makes more sense.

64% consider buying a home as a safe investment. Buying a home was considered safer than buying stocks by over three times the number of people (64% vs 17%).

2 in 3 Americans believe that lifestyle benefits of homeownership (65%) are superior to the financial benefits (32%).

Top Non-Financial Reasons to Buy a Home

Lifestyle Benefits: The broader security and lifestyle benefits of homeownership, such as providing a good and secure place for your family and children, where you have the control to make renovations and updates if you want, and in a place that’s in a community and location that you prefer.

It means having a good place to raise children and provide a good education

You have a physical structure where you and your family feel safe

It allows you to have more space for your family

It gives you control over what you do with your living space (renovations & updates)

It allows you to live in a nicer home

It allows you to live in a location that is closer to work, family, or friends

Top Financial Reasons to Buy a Home

Financial Benefits: The financial benefits of homeownership: its value as an investment (especially compared to paying rent), its value as a way to build up wealth for retirement or to pass on to your family, and the tax benefit.

Paying rent is not a good investment

Buying a home provides a good financial opportunity

Owning a home is a good way to build up wealth and pass it along to my family

It is a good retirement investment

Owning a home provides tax benefits

Owning a home gives me something I can borrow against if I need it

Bottom Line

The people of this country have always seen great value in owning their own home. They still do. We believe we should never underestimate the importance of homeownership as a crucial piece of the American Dream.

 TIPS TO SEGMENT YOUR ONLINE AUDIENCE

In the chatter of online marketing tools — buy this, get that, need to have, gotta have — the purpose is often unclear. Sure, I suppose having all the newest tools might make you seem … newer? Cooler? More on top of trends? Who knows.

What matters is how you reach customers and homebuyers. Another thing that matters: how you communicate with those groups. This week’s column is about some old technology that easily gets forgotten in the hype and buzz: e-mail.

E-mail has been the workhouse of the Internet for ages. It predates the Web and chat rooms and bulletin board systems. It is, in technological terms, older than dirt. And it’s a fundamental part of so many of the hip new technologies.

Want a Facebook account? Your e-mail address is your login. Want a Twitter account? They want your e-mail address. Want all the Google goodies? They want your current e-mail address and then they want you to switch to one of their e-mail addresses.

E-mail in real estate

How do real estate professionals use e-mail? Certainly it’s important to open that very important communication channel with customers and use it effectively.

Some property search sites require visitors to register in order to see the search results. What happens with that e-mail address?

Some real estate blogs let you subscribe to the posts via e-mail. What happens with those e-mail addresses?

What about e-mail addresses you gather in the course of your real world networking or even your online networking? What happens to those addresses?

And the biggie: past customers. I bet most real estate professionals have the e-mail addresses of their past customers. What happens to those?

Making sense of online audiences

One of the common issues I see when I talk with real estate professionals is the tendency to group sets of e-mail addresses based on channel: “This is my list of people from my blog and this is my list of people from Facebook and this is my list of people from an open house I did last weekend.”

This can lead to confusion for both the real estate professional (“What message should I be sending to this list?”) and the customer (“Why am I getting this open house announcement for a house that’s 1,000 miles away?”).

If you currently group your collection of e-mail addresses based on the channel or source where you gathered them, try this instead:

1. Make a group of e-mail addresses that contains just people who are interested in your geography, but not necessarily interested in real estate.

These people might be ready to buy a house, but probably not. Places where you got their e-mail address might be your community-news focused blog or a Facebook page that’s more about what happens in your town than about the real estate market.

This group might be composed of locals but it could just as easily contain people who are considering relocating to your area or people who vacation in your area.

This is your “general community” group. It’s a list to focus on sharing your community and brand-building activities.

2. Make another group of e-mail addresses that contains only people who have expressed interest in buying or selling property in your geography.

These people might have registered on your property search. Or maybe they’ve contacted you directly via your blog or other social media channels. Either way, the people on this list are all explicitly interested in real estate in a geography that you serve.

This group, again, could be composed of locals or people relocating or people who are interested in buying or selling vacation property.

This is your “real estate specific” group. It’s a list to focus on your service and results.

Consider how the people move from one list to the other

Your general community group will probably be bigger. There probably will be more people interested in your community in general than in buying real estate in your community.

You will send these people information about your town and likely make mention of the fact that you do real estate, and so on. If you hammer hard on real estate, people will leave this list.

If you include a simple method for them to get into a different list that focuses on real estate, then when they’re ready they will flow into your real estate-specific list.

Once someone moves into your real estate-specific list, hopefully you will work with them and help them buy or sell a house. Once that’s happened, the person really doesn’t need to be on the real estate-specific list. Provide an easy way for them to migrate back to the general community group.

If you focus on these two groups: people interested in your community and people interested in real estate in your community, then you can untangle the mess of communication. Remembering that someone may be a member of both at the same time and that people will naturally flow their attention from one group to the other is important.

Oh yeah, and stating the obvious: Don’t send e-mail to someone who didn’t specifically ask you to send them e-mail.

 5 FACTORS THAT AFFECT HOME VALUES

Location has long been touted as the most important variable affecting the value of residential real estate. Recently, the S&P/Case-Shiller Home Price Indices suggested that location is still a front-runner in terms of determining valuation.

In October 2010, four cities in the 10-city composite index registered price gains from the previous year: Los Angeles (3.3 percent), San Diego (3 percent), San Francisco (2.2 percent) and Washington, D.C. (3.7 percent). In many cities around the country, like Las Vegas and Detroit, home prices continue to decline.

The front-runners listed above are coastal port-of-entry cities. Three are in California. However, the inland cities of California — Fresno, Merced, Bakersfield and Riverside, to name a few — are not experiencing the same relatively good price performance. They are still plagued with a surplus of foreclosure inventory and high unemployment.

A large number of foreclosures and short sales in an area can bring the overall price of homes down. It’s difficult for appraisers to find nondistressed comparable sales to support higher prices because of the lack of conventional, nondistressed sales. However, if there are only a few distressed sales in an area, the distressed sales will probably not have much if any effect on the valuation of conventional sales.

Location within an area can also influence home values. Some market niches in an area are doing better than others. A niche need not be a physical location. It could be a price range. For example, well-priced listings in the $1 million to $1.4 million price range in Piedmont, Calif., have been selling relatively quickly, sometimes with more than one offer. The $3 million and above price range has not been doing as well.

HOUSE-HUNTING TIP: Today’s buyers are usually willing to pay more for homes that have a good “walk to” score. That is, they are within walking distance of shops, parks, cafes and transportation. Buyers with children often prefer a location close to schools. However, the value of a home might be diminished if it is located too close to a school — such as across the street.

Proximity to a major metropolitan area usually has a positive impact on prices, particularly when combined with a good public transportation. Employment opportunities in the area also boost home prices.

Supply and demand are up there with location in terms of impact on price. A surplus of unsold inventory gives buyers choice and a lack of a sense of urgency. Too little inventory relative to demand has the reverse effect. This usually puts an upward pressure on prices. Sellers in sought-after neighborhoods who put their homes on the market when there’s little for sale often sell for more than they anticipated.

Buyers take the condition of the property into account before they make an offer to purchase. A home with a lot of deferred maintenance might put off buyers altogether, particularly in the current market. If buyers make offers on homes that have been neglected, they will factor work that needs to be done into their price.

Deferred maintenance can be corrected. Incurable defects can put a bigger damper on price, particularly in a down market. An incurable defect, like being located next to a freeway or on a busy street, is something that can’t be corrected. You’ll have to live with it.

In a hot market, buyers often overlook these defects because prices are rising and buyers are more willing to make compromises. In a slow market, with no urgency to buy immediately, buyers are pickier. They take their time and buy when they find the right house.

THE CLOSING: Price accommodations need to be made to overcome buyers’ objections to incurable defects.

“We are at our very best, and we are happiest, when we are fully engaged in work we enjoy on the journey toward the goal we’ve established for ourselves. It gives meaning to our time off and comfort to our sleep. It makes everything else in life so wonderful, so worthwhile.” — Earl Nightingale: Was a motivational speaker and author

NEWS & HEADLINES

Fannie Mae recently sent out requirements delineating what 1003 information must be provided to the agency during loan delivery, including the loan origination company’s (not the branch, or state-level) unique NMLSR identifier: FannieNMLSR

Factory Orders increased 3.1% in February, the biggest gain since September 2006, after an upwardly revised 1.4% gain in December. Ex-transportation orders advanced 0.7%, propelled by a jump in demand for non-durable goods that may reflect higher commodity prices.

Fed Policy Makers Signal Abrupt End to Bond Purchases in June. Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.

Freddie Mac: 30-Year Fixed-Rate Mortgage Drops for Third Consecutive Week, with the 30yr fixed rate averaging 4.87%, down from 4.95%. The 15yr FRM averaged 4.15%, down from 4.22%. the 5YR ARM averaged 3.72%, down from 3.8%,and the 1yr ARM averaged 3.23%, down from 3.4%.

Rates have been volatile for the last few days. On Wednesday the 10-yr worsened by about .375 and closed with a yield of 3.46%. ADP numbers, Jobless Claims, Productivity numbers, the announcement of next week’s 3, 10, and 30-yr auctions, MBS prices worsened Wednesday and again yesterday (losing roughly .5 in price).

The markets are focused on the same things that are garnering headline news: higher oil prices, the ongoing turmoil in the Middle East and Africa, and comparisons between Charlie Sheen’s and Moammar Gadhafi’s rants. The favorable economic news helped stocks yesterday, and after yesterday’s closing 10-yr yield of 3.57%, one might expect a little bounce with the unemployment data but with oil still moving up, and now over $103 per barrel, things are dicey.

Today we learned that Nonfarm Payrolls for February were up 192,000, about as expected, and there were back-month revisions of over 50,000. Private payrolls were up 222,000, and the headline unemployment rate dropped to 8.9%. The fixed-income markets didn’t really do much on the news, with the 10-yr sitting around 3.56% and mortgage prices not moving much from Thursday’s close.

TEN SECRETS TO SAVING

Here are some tips you can share to your buyers to help them with saving.

Cheap is chic, frugality is in fashion, and Americans have sworn off their spending addiction. In a replay of 2010, their top resolution for 2011 is to save more money. Americans fell off the wagon. This year, consumers aim to save an average of $2,600, a far cry from their average goal of $14,000 in 2010. The reason: many of them didn’t meet their ambitious savings target.

1. Take money off the top of your salary for retirement or some other goal.
2. Start now. Don’t wait till you make more money. The more you make, the more you spend. Start small.
3. Check out the How much will my savings be worth?  calculator to see how even $100 per paycheck will add up over time.
4. Write down your goals, which makes them more real. Be specific. “Saving for the future” is admirable but vague. Pledging to save $2,000 for a vacation to Cancun is likely to get you there.
5. Set up an account for each goal – education, vacation, car, computer – or for large, recurring expenses, such as insurance premiums.Deposit your paycheck into your savings account and transfer money as you need it (don’t exceed the number of transfers you are permitted per month).
6. Subtract your credit purchases from checking right away so that you’re not surprised when you get the bill.
7. Toss spare change into a glass jar on your desk or dresser and watch your money grow. I once ran into a fellow who told me that he makes a habit of squirreling away spare change and found money (like a quarter you may pick up while standing in line somewhere). His stash adds up to about $1,000 per year.
8. Give yourself an instant reward. Each time you brown-bag your lunch instead of eating out, toss the savings into your cash jar.
9. After you pay off a loan or a bill, keep writing the check and send it to a savings or investment account.
10. Head start. Getting into the savings habit is a matter of mind over money. But it helps to have some cash, too. Fortunately, most of us will get a head start this year with the 2% cut in the payroll tax – which could mean as much as $2,136, depending on your income. Check out this article that shows you how to save $50 a day on everything from mutual fund fees to your next glass of wine. That adds up to $18,250 per year.

 OVERLOOKED TAX DEDUCTIONS FOR REAL ESTATE PROFESSIONALS

Every year, thousands of real estate professionals pay more tax than they need to because they fail to take all the deductions to which they are legally entitled. The Internal Revenue Service will never complain if you don’t claim all the deductions you can. It’s up to you and your tax preparer to figure out what you can deduct, keep proper records, and claim deductions on your return. Every dollar in deductions you fail to take can cost you 40-50 cents in extra taxes — money the IRS is happy to keep.

Two of the most often overlooked deductible expenses arise from doing business from your home.

Home-office deduction

Probably the No. 1 deduction real estate pros miss is the home-office deduction. Many erroneously believe they don’t or can’t qualify for this deduction. Untrue. Almost any real estate agent or broker who works as an independent contractor can qualify for the home-office deduction.

You can qualify for this deduction if you have a home office that you use exclusively and regularly for administrative or management activities for your real estate business, and you have no other fixed location where you regularly perform such activities.

Administrative and management activities can include, but are not limited to:

• keeping books and records
• setting up appointments
• paying bills
• maintaining client databases or contact lists
• reviewing real estate publications; or
• engaging in real estate continuing-education activities

Office expenses in the home

Many real estate pros believe that they can’t deduct any expenses they incur while working at home unless they qualify for the home-office deduction. This is a myth that has cost many real estate pros valuable deductions.

Even if you don’t qualify for or take the home-office deduction, you can still take tax deductions for expenses you incur while doing business at home. These are expenses that arise from the fact that you are doing business, not from the use of the home itself.  These include:

Telephone Expenses (You can’t deduct the basic cost of a single telephone line into your home, but you can deduct the cost of long-distance business calls and special phone services that you use for your business (such as call waiting or a message center). You can also deduct the entire cost of a second phone line that you use just for business, including a mobile phone.)

Business Equipment and furniture (The cost of office furniture, copiers, fax machines, and other personal property you use for your business and keep at home is deductible, whether or not you qualify for the home-office deduction. If you purchase these items specifically for your real estate business, you can expense them (deduct them in one year) under Internal Revenue Code Section 179, or depreciate them over several years.)

Supplies (Supplies for your real estate business are currently deductible as an operating expense if they have a useful life of less than one year. Otherwise, you must depreciate them or expense them under Section 179.)

HONESTY IS THE BEST POLICY

For years, many buyers weren’t honest about their income and some loan officers didn’t care. The loans were bundled by Wall Street and sold to investors who were told anything but the truth about their value. For years, some real estate professionals prodded appraisers to move that appraisal up “just a bit” and most sellers thanked them for it. The housing bubble was created on a bed of dishonesty. I’m not saying that any group was malicious in their intent. Everyone probably believed that it would all work out in the end. But, it didn’t. Instead, we were faced with the largest housing collapse since the Great Depression.

A market built on so many half-truths couldn’t continue to grow. Its foundation was rotten. Governmental regulation has forced most parties to rethink the way the housing industry can survive. A person given a mortgage must now prove they have the capability to repay it. An appraiser is held to a higher standard as they determine values. Has the pendulum swung too far? Perhaps. But, something needed to be done.

That brings us to today. Let’s make sure that we demand honesty from real estate professionals in everything we ask them to do. Buyers must insist that the loan officer determines the amount of mortgage they can actually afford. Sellers must make sure they are given an honest estimate of their home’s value in today’s market when listing. Remember to reward the person who has the courage to tell you what you need to know not the one who is telling you what you want to hear.

Honesty is the only thing that will bring back the housing market.

WATCH YOUR WORDS IN LISTING ADS

The wording you choose in the ad for your listings is important if you want it to grab the right buyer attention.

A study by the University of Guelph in Ontario analyzed the wording of more than 20,000 Canadian home listings and found that a listing’s phrasing can influence a home’s sale price as well as the length of time it took for the home to sell.

For example, when the listing’s ad incorporated words like “beautiful” – rather than “move-in condition” – the sale price was influenced by 5 percent or more, as much as $15,000 on a $300,000 house.

Other words that reflected “curb appeal” or the attractiveness of the home, such as good neighborhood or excellent upkeep, also were found to help the property sell faster than homes that were described as “value” and “price,” the study found.

“There’s usually something that can be said in a positive way which will force a buyer reading an ad to see opportunities,” says Catherine Lindstadt, a licensed associate broker at Prudential Douglas Elliman Real Estate. “It’s important to help a seller elaborate on their home’s assets with details and to give the buyer a visual.”

Instead of saying “spacious,” she prefers key words such as “open floor plan,” “vaulted,” or “high ceilings.”

A University of Texas at San Antonio study found in analyzing agents’ comments left on the Multiple Listing Service that comments that state facts about a home also are associated with increased selling prices.

“Buyers are attracted to amenities that can be verified–new roof, new carpeting, updated kitchen, beautiful landscaping, golf course community, lakefront, waterfront, gated community,” says Marie Montchal, a licensed associate broker and senior vice president of relocation and ancillary services at Daniel Gale Sotheby’s International Realty Relocation Center.

But beware of the word “new,” she says. “I know that ‘new kitchen,’ ‘new bath,’ ‘new roof’ and ‘new windows’ is inviting, but I have a guideline of two to three years, or ‘newer’ if it’s older than that,” she says.

Good Thursday Morning Team, 

I found the perfect blog to share with you this morning. As we all know there is no “I” in TEAM, and this blog reflects all aspects of a working team, and what it takes to continue great working relationships. With this said, my team and I are very appreciative of the working relationships we’ve developed with everyone we work with. We’re ready to work for you! So if you’ve got questions, concerns, or need a pre-approval, open house flyer, or want to find out if and how RPM can overcome other lender hurdles call me! Speaking of Open House Flyer – let me know if you’re in need of a co-branded open house flyer for this upcoming weekend. Have a great Thursday, and again, call me, lets talk about how to maintain success not only the new month of March but for 2011 as a whole.

“The first and best victory is to conquer self.” – by Plato

It Takes A TEAM

Today, people say: “It takes a village to raise a child”. The realities of today’s life (two family incomes and such) have extended a family to lean on others (neighbors, relatives, teachers, etc.) to protect and teach our young people about culture, history and acceptable behaviors. Teams, because of their ability to provide specialized solutions to problems, have often proved to be more efficient deliverers of information.

In real estate today (maybe more than ever), it also takes a team. As with a basketball team, each member needs certain skill sets and proper coaching on how to weave the different skills into a cohesive unit to achieve the desired outcome. The evolution of how things work has created a necessity of excellent communication between all the players. The needs of buyers and sellers have developed an even broader need for new members of a great team.

A great working relationship between an agent and a loan officer is an obvious connection. Changing mortgage guidelines, appraisal challenges and qualification standards requires everyone working together. But, there are so many others whose expertise may be needed to properly advise today’s clients.

An accountant

One of the reasons people buy a home is that they hear of the tax advantages. What really are they? How will the purchase affect my monthly cash flow? Should we adjust our exemptions with our employer? What about home repairs and depreciation? What about parents who gift money to their kids…is there a smart way to do it?

And for sellers, especially people who may not be buying a new home, what are the consequences of their sale? Capital Gains Tax? Can/should they consider “gifting” proceeds to relatives? Long term health care? Life Insurance? That leads to…

A financial planner

How does buying or selling real estate impact cash flow and long term savings and planning?

Attorneys

Divorce attorneys, estate attorneys, elder care attorneys and even bankruptcy attorneys have a role in many transactions these days. Choices made without their counsel can have very damaging repercussions.

Home Inspectors, Termite Companies and Home Improvement Contractors

These professionals protect customers from nightmares, or explain the costs associated with preventing or curing problems.

Making a decision to buy or sell a home has far reaching effects. To think your real estate agent or loan officer is an expert in everything is not prudent. However, aligning yourself with a professional who surrounds themselves with other professionals is extremely wise. Make sure the people you work with have a network of related experts that you can tap into. You need to be represented by a TEAM!

Initial claims unexpectedly decreased by 20,000 to 368,000, the lowest level since May 2008, and stronger than the expected rise of 9,000. Continuing claims declined by 59,000 to 3.774 million. For three of the last four weeks, claims have remained under 400,000, widely considered the point in which the economy is gaining more jobs than it’s shedding. New claims figures have been volatile in recent weeks due to unusually severe winter weather in January, however a Labor Department economist said there were no unusual factors in the latest week’s data.

ISM’s nonmanufacturing purchasing managers’ index edged up to 59.7 in February from 59.4 in January, stronger than the expected 59.0. The business activity/production index increased to 66.9 from 64.6 in January, new-orders slowed to a still-high 64.4 last month from 64.9, and the employment index rose to 55.6 from 54.5. Non-manufacturers are paying more for inputs, especially energy products. The ISM’s prices index increased to 73.3 in February from 72.1.

Nonfarm business productivity rose at a 2.6% annual rate in 4Q2010, the same rate as previously estimated, and stronger than the expected 2.2%. Unit labor costs fell at a 0.6% annual rate, lower than the forecast a 0.4% drop. This is favorable news for the bond market as rising productivity and tight wages help keep inflation down, even though not always welcome by workers.

Treasury 10-Year Notes Touch One-Week Low as Employment Data Signal Growth. The 10-year note is down 20/32 with the yield increasing 0.07 percentage points to 3.54%, the highest since Feb. 22. Although MBS prices are lower by 10/32 on 4.5% 30yr coupons, their yields are tightening to USTs. The Fed is scheduled to buy $6 – $8 billion of UST’s maturing between 2018 to 2021 today as part of QE2.

Bernanke Says Stronger Recovery Would Reduce State Woes relating to the possibility of widespread state and municipal bond defaults due to lower tax receipts and cash-strapped local governments. Bernanke said risk “remain elevated, they have been looking somewhat better recently, presumably reflecting expectations of continuing improvement in the finances of states and localities.” “Because the pace of near-term economic growth expected by most forecasters is relatively modest given the depth of the downturn, some time will likely be required before state and local fiscal conditions return to something approximating normal,” Bernanke said that while it’s “possible” U.S. states could pose a risk to the financial system, the Fed won’t purchase state debt. “While states are facing very tough financial conditions, at least as long as the recovery continues, they are seeing higher tax revenues and that will at least be helpful to some of them,”

Trichet Says ECB May Raise Rates, Show ‘Strong Vigilance’ European Central Bank President Jean-Claude Trichet said the ECB may raise interest rates next month to fight accelerating inflation pressures.

HOME PRICES: THE DOUBLE-DIP IS NEAR

On Tuesday, we found out that home prices were near their post-bust lows. Two days later the government reported that January saw a double-digit dip in the number of new homes sold.

Then Robert Shiller, the Yale economist and co-founder of the S&P/Case-Shiller home price indexes, dropped this bomb: “There’s a substantial risk of home prices falling another 15%, 20% or 25%,” he said.

Baker looks at the ratio between local home prices and annual rents to judge whether markets are overvalued. If the median-priced home sells for more than 15 times the median annual rent, there’s a good chance prices may come down.

On a national level, Shiller and other economists compare home price changes with income growth over the years. Before the bust, home prices had been outpacing earnings since the late 1990s.

Just to get that back to a normal ratio — which we last saw in 1998 — home prices would have to drop another 15%, according to Anthony Sanders, a director of Real Estate Entrepreneurship at George Mason University.

“Even after the bubble burst, the ratio of income to home prices is still way too high,” he said.

Naturally, many disagree with these assessments. Karl Case, who co-founded the home price index with doom-sayer Shiller, believes that the market will “bounce along the bottom all year.” If that’s the case, buyers who take the plunge now shouldn’t expect big profits if they sell in the next few years, but they shouldn’t have to take a major hit either.

Besides, a home purchase is more than a potential investment, especially for families planning to stay put for a while. The big plus for them is the pleasure of living in their own homes.

Despite the gloom, many Americans remain confident about home buying. A survey released Monday by Fannie Mae revealed that 65% of people believe it’s a good time to purchase, with 78% expecting prices will rise or remain the same over the next 12 months.

And buyers may take heart from some positive recent indicators, such as an up tick in the sales of existing homes in January; a drop in vacant rental homes; and more investors snapping up properties.

There’s also been an upswing in the number of high-end homes — those costing more than $750,000 — being sold, according to Yun.

 MORE HOME OWNERS FORECLOSE BY CHOICE

A growing number of home owners whose homes have dropped drastically in value are deciding to stop paying their mortgage and walk away from the property, even though they can afford to keep making the payments–a move known as strategic default.

The exact number of strategic defaults is unknown. A study conducted by the Federal Reserve Board showed that half of home owners who walked away from their home owed twice what their house was worth.

From celebrities to prominent business people to the average home owner, strategic default is a growing option more home owners are taking. For example, Morgan Stanley walked away last year from a $1.5 billion mortgage on five buildings in San Francisco despite record-breaking profits in 2009.

For some, strategic default has spurred a debate over ethics.

“Most people considering strategic default come to me and want my permission,” says Ronald Kaniuk, a foreclosure defense lawyer. “People who cannot pay their mortgage are apologetic. For people who can afford their mortgage or can just barely afford their mortgage and see it as a losing investment, they want absolution.”

But the stigma attached to strategic defaults is influenced by how many other people are doing it, says Luigi Zingales, an economist and professor at the University of Chicago’s Booth School of Business.

“Once you think it’s socially acceptable, it becomes easier to do,” Zingales says. But Zingales cautions home owners that strategic defaults hamper neighbors’ property values and can affect the home owner’s credit scores. Plus it can become a question of ethics–they are breaking a commitment they made to pay back the mortgage.

4 WAYS TO GET A HOME IN SHOW-SELLING SHAPE

Make your home stand out in a crowded real estate marketplace. Housing experts offer some tips for sprucing up a home to get it ready to sell.

1. Create curb appeal. Here are some easy, big impact ideas: Paint the front door, pick a new color for the exterior trim, fix any old shutters, and make sure the path from the driveway is clear to the front door. Also, remove any overgrown plants and replace them with low-growing shrubs and perennials.

2. Fix the flaws. Fix everything, they say, including broken joints, cracks in walls or the foundation, and recaulk the bathroom tub, if needed. “If the little things are not done, people will think, what else is not done?” says Steve White, the owner of Handyman Connection in Elmsford, N.Y.

3. Paint. “Paint is the greatest single thing you can do and it’s the most cost effective,” says David Sanders of Sanders Properties in Nyack, N.Y. “Use light, cheery colors. People don’t want to walk into a dark, dreary room.”

4. Add some new bling. Interior designer Nancy August from Piermont, N.Y. says just swapping out the home’s hardware for new can quickly freshen up a home. For example, new hinges, doorknobs, drawer pulls, and light switches and fixtures can quickly transform a dated room, particularly in a dated bathroom.

 OFFICIALS DISAGREE ON PUNISHMENT FOR MORTGAGE MESS

Even as state attorneys general and regulators in Washington approach the end of their investigation into abuses by the nation’s biggest mortgage companies, deep disputes are emerging over how much to punish the banks as well as exactly who should benefit from a settlement.

The newly created Consumer Financial Protection Bureau is pushing for $20 billion or more in penalties, backed up by the attorneys general and the Federal Deposit Insurance Corporation.

But other regulators, including the Office of the Comptroller of the Currency, which oversees national banks, and the Federal Reserve, do not favor such a large fine, contending a small number of people were the victims of flawed foreclosure procedures.

As the negotiations grind on, there are signs that the banks still have not come to grips with the problems plaguing the foreclosure process. These problems burst into view last fall with accounts of so-called robo-signers processing thousands of foreclosures at a time without the required legal safeguards. The resulting furor prompted the attorneys general and other government officials to step in. Some banks suspended foreclosures to review their processes before resuming.

The acting comptroller of the currency, John Walsh, testified last week that while there were widespread problems with documentation and oversight of law firms and other crucial links in the foreclosure chain, only a “small number of foreclosure sales should not have proceeded.”

Despite skepticism on the part of the comptroller’s office, other regulators would like a broader plan to help pay for modifications of mortgages that are delinquent or in default, even if homeowners cannot point to a specific example of wrongdoing on the part of servicers. In other cases, the money might be used to help mortgage holders whose loan principal exceeds the home’s current value.

What’s more, the Obama administration, as well as the F.D.I.C., sees any broad settlement with the servicers as an opportunity to do more than just fix the foreclosure process. They want to stabilize the housing market, where prices are continuing to decline, and try to help bolster the economic recovery, which is facing newer threats like higher oil prices.

Some two million American homes are in foreclosure, a third of which are vacant. Another two million households are behind on their payments and facing the prospect of foreclosure this year. To make matters worse, roughly a fifth of the nation’s home loans exceed the value of the underlying house, raising the risk that homeowners will simply walk away, further weakening the housing market.

Right now, the Obama administration argues, the housing market is facing the worst of both worlds – a big back-up in foreclosures as procedures are reworked, and a similarly long wait to get a mortgage modification in which the principal or the interest rate of the loan is lowered, easing monthly payments.

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Timothy Geithner: Wind down Fannie Mae and Freddie Mac. Treasury Secretary Timothy Geithner told Congress yesterday that they must proceed with housing finance reform legislation,  including winding down of Fannie Mae and Freddie Mac,  within the next two years or else risk another financial crisis.   “The administration is committed to a system in which the private market – subject to strong oversight and strong consumer and investor protections – is the primary source of mortgage credit,” Geithner said in his prepared opening statement. “We believe the government’s primary role should be limited to several key responsibilities: consumer protection and robust oversight; targeted assistance for low- and moderate-income homeowners and renters; and a targeted capacity to support market stability and crisis response.”
 
Values are going up! At least farmland values – they have doubled, on average, in the last 10 years! Given all the thousands of banks that lend on farm land. The FDIC will host a half-day symposium to discuss farmland value issues, titled “Don’t Bet the Farm: Assessing the Boom in U.S. Farmland Prices,” on March 10th in Virginia. The worry is, of course, about a farmland bubble.

While we are chatting about the FDIC, commercial banks and savings institutions insured by it reported an aggregate profit of $21.7 billion in the fourth quarter of 2010, a $23.5 billion improvement from the $1.8 billion net loss the industry reported in the fourth quarter of 2009. It is the sixth consecutive quarter that earnings registered a year-over-year increase, and had four straight quarters of positive earnings.” Apparently 62% of all institutions reported improvements in their quarterly net income from a year ago. Note that as has been the case in each of the past five quarters, reductions in provisions for loan losses were responsible for most of the year-over-year improvement in earnings. You can see the numbers for yourself at FDICShiningStars

Here is a list you don’t want to be on: the FDIC’s orders of administrative enforcement actions taken against banks and individuals in January. The FDIC processed a total of 61 matters in January, with 24 consent orders, 4 removal and prohibition orders, 20 civil money penalties, 2 prompt corrective actions, 8 orders terminating consent orders and orders to cease and desist, and 3 orders terminating supervisory prompt corrective action directive. Visit the FDIC’s Web page at InTroublewiththeFDIC 

 Whether it is too much hassle to obtain a loan, or no one likes rates, buying with cash on the courthouse steps, or the expected rate of return on real estate is better than the 0% at the bank, about 31% of California home sales were paid for with cash in January. DataQuick points out that it beats December’s number of 28.9% and 27.8% share a year ago. That helps liquidity, but doesn’t directly help those in the mortgage biz.

The FHFA has a number of choices regarding HARP. “We see the following four broad choices for FHFA regarding HARP: Let the program expire, extend the program as is until the HAMP expiration date (December, 2012) with some minor operational adjustments, extend the program for a short period (6 months) and require lenders to demonstrate that they have taken action to improve the effectiveness of the program before they extend it for longer (another 1 year), or extend and expand the program as recommended by MBA.” Merrill evaluated each of the options and looked at the key drivers for each of these choices. “We think that the simple extension is the most likely scenario but from the policy perspective, we think that FHFA should use this opportunity to push for increased focus by lenders to improve effectiveness.”

Yesterday, Ben Bernanke said that he doesn’t see unemployment return to “normal” for years. He also sees “temporary inflation gain from commodity prices,” and that the “housing sector remains exceptionally weak.” “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.” His comments did not shake up the markets too much, nor did the economic news that came out. Construction Spending dropped .7%, and the ISM Manufacturing number came out at “61.4%” which was as expected and up for 19 months in a row. But unrest is still very real – gold is up near record highs, and oil prices continue upward – and that sent stocks down while fixed-income prices moved back to unchanged during the day. The 10-yr closed out at 3.41% and MBS prices finished Tuesday at Monday’s levels.
 
This morning we had the MBA index show a decrease of 6.5% , with refi’s down 6.5% and purchases down 6.1%. The refinance share of mortgage activity stands at about 65%, and the ARM share of apps sits at 5.5%.
 
Today is a new day, although once again Chairman Bernanke will head to Capitol Hill to repeat his Semiannual Monetary Policy Report, this time to the House Financial Services Committee beginning at 9AM CST. The February ADP number was released, showing private payrolls were up 217,000. Last month, as has happened many times since ADP numbers started coming out, the numbers had little predictive ability for the official employment numbers that come out two days later. But the ADP numbers show that small business employment has increased every month for the last year, which does point to a trend. Later we’ll have the Fed’s Beige Book with economic anecdotes from around the 12 Districts in preparation for the March 15 FOMC meeting. The 10-yr’s yield is about 3.44% and MBS prices are down about .125.

FOR BUYERS: THE FINANCIAL OPPORTUNITY OF A LIFETIME?

We often point out that a buyer should be more concerned about the COST of a home rather than the PRICE. Price obviously is a component of cost. However, unless you buy all-cash, you must also be concerned about the financing of the purchase. The price and the financing together determine the cost of a home. Today, we want to look at only the financing piece.

An opportunity exists today because of recent government involvement; an opportunity that may never again be available in our lifetimes. There has been much discussion about what role the federal government should have in supporting homeownership. We will leave our opinions on the debate for another time. However, we want to alert you to two advantages available to a purchaser today that may disappear in the future:

Historically low interest rates
The ability to lock in these rates for thirty years
 

Interest Rates
Because of the financial crisis, the government stepped in and instituted a series of programs which pushed mortgage interest rates to historic lows. If we look at 30 year mortgage interest rates before and after government intervention we see the impact these programs had.

According to Freddie Mac, from 2006 to the start of the financial crisis (the fall of 2008), the average rate was 6.29%. Since then, the average rate has been 4.92%.

A purchaser can still get a 30 year-fixed-rate-mortgage at approximately 5%. However, interest rates this low may soon disappear. The government has questioned its role in supporting homeownership. In the administration’s REFORMING AMERICA’S HOUSING FINANCE MARKET: A REPORT TO CONGRESS  they are very strong in voicing their thoughts on this issue:

             …our plan also

dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.

Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters, and carefully designed support for market stability and crisis response…

Under our plan, private markets…will be the primary source of mortgage credit and bear the burden for losses.

What are the probable results of this decision?

The Royal Bank of Scotland:

“The (government) currently provides 95% of housing finance in the U.S.; any reductions of their involvement in supporting mortgages mean

interest rates will have to go up to induce private lending.”

AnnaMaria Andriotis, writer for SmartMoney:

“In the proposals were changes that will mean more expensive mortgages, with higher fees and,  probably, higher interest rates, larger down payments and, in the near term, fewer lenders to choose from.”

The day of a 5% rate seem to be coming to an end.

Locking in a rate for thirty years

We must also realize that having the ability to lock-in a rate for 30 years may soon be a thing of the past.

There are a growing number of people who think that our mortgage industry should imitate those of other industrial countries around the world. If we do start limiting government support for the mortgage process, the 30-year-fixed-rate mortgage may disappear. Other countries, like Canada, only allow a purchaser to lock in a rate for a five year term. After that, the borrower must renegotiate a new mortgage at current rates. Could that happen here? Mark Zandi, Chief Economist of Moody’s Economics.com addressing the administration’s recent report:
“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages. Based on the experience overseas, the fixed-rate share in the U.S. would decline to an average of between 10% and 20% of the mortgage market compared with a historical average of closer to 75%.”

Bottom Line

The COST of a home is dramatically impacted by the mortgage component. Today, we can get a 5% mortgage and lock it in at 5% for the next thirty years!! Both of these opportunities may disappear in the future. You should take this into consideration if you’re looking to purchase a home.

CONSUMER GROUP DEFENDS LOW DOWN PAYMENTS
Full underwriting and reasonable debt-to-income ratios are a better way to “get back to basics” in mortgage lending than requiring homeowners to make down payments of 10 to 20 percent, the Center for Responsible Lending argues in a policy brief.

The Obama administration’s proposal to shrink Fannie Mae and Freddie Mac’s role in mortgage markets calls for higher down payment minimums heading toward 10 percent. Lawmakers are drawing up their own plans that could be even more drastic.

While the Federal Housing Administration’s 3.5 percent minimum down payment requirements remain in effect for now, underwriting standards have been tightened and premiums raised in an effort to reduce FHA’s market share. Some lawmakers advocate raising FHA down payment minimums to 5 percent.

Mandating larger down payments would harm the economy, housing markets and middle class families, Center for Responsible Lending lobbyist Susanna Montezemolo argues in a policy brief.

Low down payments have been a “significant and safe part of the mortgage finance system for decades,” Montezemolo says, with more than 27 million mortgages taken out between 1990 and 2009 with down payments of less than 20 percent.

That number — which excludes FHA and VA loans — represents nearly a quarter of loans purchased by Fannie Mae and Freddie Mac during that period, and 13 percent of all mortgage originations.

Those loans generally performed well, producing limited losses for lenders, investors and taxpayers, while expanding the middle class, Montezemolo maintains. It was risky loan terms and weak underwriting standards that drove record defaults in subprime lending, she argues.

If homebuyers are required to put 10 to 20 percent down when they take out a mortgage, that will shrink the pool of eligible homebuyers a lot, with only marginal improvements in loan performance, Montezemolo writes.

Crunching the numbers, she figures it will take a family that saves $3,000 a year 14 years to save up enough for a 20 percent down payment on a $172,100 home. That’s a savings rate of 7.5 percent a year for an average middle class family with about $50,000 in annaul income — well above the current 5.8 percent savings rate for U.S. households.

Homeownership “remains a key driver of personal and national economic prosperity, and will be fostered by responsible low down payment loans,” Montezemolo concludes. She suggests mortgage loan performance will improve under new origination standards in the Dodd-“Frank Wall Street Reform and Consumer Protection Act, without having to raise down payment requirements.

 HUD RAMPS UP GRANTS TO FAIR HOUSING GROUPS

Federal housing regulators are boosting grant funding by 48 percent to fair housing groups and nonprofit agencies that educate the public about housing and lending discrimination laws and help catch violators.

The U.S. Department of Housing and Urban Development today awarded $40.8 million to 108 fair housing organizations and nonprofit agencies in 36 states and the District of Columbia through HUD’s Fair Housing Initiatives Program, up from $27.6 million last year.

The grants are used to investigate allegations of housing discrimination, educate the public and the housing industry about their rights and responsibilities under the Fair Housing Act, and to promote equal housing opportunities.

Most of the money — $28 million — is earmarked for private enforcement initiatives, in which fair housing organizations investigate alleged housing discrimination. This year’s award includes $10 million to fund activities that address lending discrimination, including mortgage rescue scams, HUD said.

Another $6.8 million in awards are to be used to educate the public and housing providers about fair housing laws, and $6 million was set aside for groups serving rural and immigrant populations lacking existing fair housing organizations.

HUD published a list of groups receiving grant funding on its website, including the National Community Reinvestment Coalition, the National Fair Housing Alliance, and San Francisco Consumer Action.