Economics

Mortgage interest rates plunge on debt deal news

From one of my favorite loan officers, Gary Ogami at Pinnacle Peak Lending, Inc. comes the news that mortgage interest rates just hit year-long lows:

…rates are now at the year’s lows, and are only slightly above the all-time lows we saw almost one year ago.

The passage of a debt ceiling and deficit reduction agreement, along with weaker than expected manufacturing and GDP figures, bonds have rallied as investors have sought safety.  This has lead to higher bond, and more importantly, mortgage-backed securities (MBS) prices, which have brought yields and rates lower.  The last time we approached this price level for MBS’s was late summer/early fall of last year!

Mortgage Term Rate APR
30 Yr Fixed 360 months 4.250% 4.297%
15 Yr Fixed 180 months 3.625% 3.736%

 

Are you looking for a mortgage loan officer? Try Gary, I highly recommend him.

Gary Ogami
Pinnacle Peak Lending, Inc.
gary@pinnaclepeaklending.com

He’ll get your pre-qualification on the fast track and meanwhile you can start searching for homes on our MLS SearchContact us with any questions and when you’re ready to hire a Realtor!

Income and Wealth Distribution in the United States

These numbers are staggering, and I’ve now seen them in 2 different sources.

The Wealth-Income Pyramid, from zerohedge.com:
“The key to understanding “recession” and “recovery”:  The Wealth Pyramid
The top 20% are prospering and spending money; the bottom 80% are not, but thanks to vast wealth disparity, the top slice of households can keep consumer spending aloft.  This provides an illusion of “recovery” that masks the insecurity and decline of the bottom 80%”


“This goes a long way to explaining how "consumer spending" can be "recovering" even as the incomes of the bottom 80% stagnate or fall. The top 5% of Americans by income are responsible for 37% of all consumer spending-- about the same as the entire bottom 80% by income (39.5%).”
I recommend reading the entire article; the author does a good job of showing 2 different classes of Americans – the haves and the have-nots.

Of the 1%, By the 1%, For the 1%, from Vanity Fair:
“Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.”

“It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall.”
The article goes on to outline several reasons why the growing disparity between the wealthy and the poor will ultimately be bad for the country as a whole.

My Viewpoint (the short version):

I grew up a staunch believer in big capitalism and small government – you work hard, you create value, you get rewarded.  I’ve moderated over the years, becoming much more liberal, especially socially.  But articles like these bring what we’re seeing and hearing from people we talk with out into the open.

The have-nots ARE working hard, sometimes working 2 or 3 jobs, but they aren’t getting rewarded.  The current system/environment, especially with its high unemployment, feels like a throwback to the times of the industrial revolution – “if you won’t do this hard work for this low pay, there are 100 people in line behind you who will.”  Meanwhile the CEOs and land-owners are getting rich.

Yes, it’s fair, and it’s the capitalism our county was founded on.  But our country was also founded on fairness and equality – no unfair taxes just to line the King’s pockets, all men were created equal, and all that jazz.  The current wealth gap is starting to breach these fundamental values.

I don’t know what the answer is – I’m certainly not a politician – but something’s gotta give at some point…

Your working to get by Realtor,

Chris Butterworth

The Fed's 10-Year Projections

It's easy to make projections; it's a bit more difficult to make accurate projections.  And far more projections are made than accurate projections.  So why do we listen so intently to the experts' opinions, giving ourselves an emotional roller coaster, when they're probably no more likely to be right than you or me?


Let's take a look at Federal Reserve chairman Alan Greenspan's projections from 10 years ago this spring.  (testimony given on March 2, 2001):


Surpluses Forever!



Both the Bush Administration and the Congressional Budget Office project growing on-budget surpluses under current policy over the next decade.

...

The most recent projections from OMB and CBO indicate that, if current policies remain in place, the total unified surplus will reach about $800 billion in fiscal year 2010, including an on-budget surplus of almost $500 billion. Moreover, the admittedly quite uncertain long-term budget exercises released by the CBO last October maintain an implicit on-budget surplus under baseline assumptions well past 2030 despite the budgetary pressures from the aging of the baby-boom generation, especially on the major health programs.

These most recent projections, granted their tentativeness, nonetheless make clear that the highly desirable goal of paying off the federal debt is in reach and, indeed, would occur well before the end of the decade under baseline assumptions.

Yeah.  Not quite dead-on accurate...


He did go on to warn about the potential for fiscal bloat:



With today's euphoria surrounding the surpluses, it is not difficult to imagine the hard-earned fiscal restraint developed in recent years rapidly dissipating. We need to resist those policies that could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake.

Seems like congress listened to & believed the first part of Greenspan's projections, but the second part never got through.


More importantly, if the top expert in the field - the one with more access to more information and resources than anyone else - can be so incredibly wrong in such a short time horizon, why do we bother to get wrapped up in so many projections?


Thanks to the Calculated Risk blog for digging this one up.


Your happy when he occasionally gets a projection right Realtor,


Chris Butterworth

Are Property Taxes a Perpetual Liability?

I thought this was interesting..

Economist Mish Shedlock published an email correspondence with a reader, where they discuss the concept of property taxes being similar to a mortgage you can never pay off.

Imagine the perpetual loan, a loan that no matter what you do, you can never pay off. To help conceptualize the idea, think of it as a perpetual interest-only loan in which you are forbidden to completely pay off principal.
As preposterous as that deal may sound, it is highly likely you are in one.
If you own a house, you are in exactly that deal, except it conveniently not called interest. Instead it's called a property tax.

It’s a thought provoking discussion, but I’m not sure they’re looking at all angles..

My Viewpoint:

Property Taxes are just another option our government(s) have of raising the funds they need.  If they don’t have property taxes, the funds will come from somewhere else, such as increases in sales or income taxes.  In addition, they aren’t necessarily a penalty against homeowners, because renters live in a home which is still “owned”, even if by somebody else.

What would happen if the local government decides to raise property taxes aggressively?

The first round or two of property tax increases won't make a big difference.  (and that's assuming they can even get passed when put to a vote.)  Eventually though, higher taxes will make owning a home noticeably more expensive.  This will cause 1 of 2 things to happen:

1) Property owners (landlords) pass this increase on in the form of higher rents.  If this happens, nothing changes in the rent vs buy discussion, and the city/state gets their extra revenue.

2) Renters refuse to pay the higher costs - either by moving to less expensive housing or by finding a landlord who isn't trying to pass on the extra cost.  (renters have more flexibility to move on shorter time horizons.) If this happens, the gap between renting and buying will grow, and home prices will fall.  Falling home prices reduces the property tax valuation, so the city/state ends up without any increased revenue - a scenario with the same deficits but less ammunition to fight them (and a host of angry homeowners.)

In normal times, outcome #1 is feasible.  Today, I'm leaning towards #2.

Your would prefer lower taxes Realtor,

Chris Butterworth

Charting 2010

The Calculated Risk Blog published a post using a number of charts to show & tell the economy’s story of 2010.

Keeping in mind these are from a national view, and that Arizona’s numbers will be different, I still thought a few of them were worth sharing, especially since they tell a story of being through the worst of things…

Existing Homes – Months of Supply

Take a look at the blue line in this chart.  Inventory (nationally) has been above 7 months (the balanced market number) since mid-2006, but it looks like the number might have peaked.

image

.

Mortgage Delinquencies and Foreclosures

We’re still in record territory, but it looks like we might have peaked.  We’ll have to stay tuned to this one over the next couple of quarters.

image

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Percent Job Losses

I’ve shared this graph before, but I still can’t get over how much worse this recession is than anything we’ve experienced since World War II.  That being said, it looks like we’re heading in the right direction.

image

.

Obviously things aren’t going to get back to “normal” overnight, but I like seeing the big picture heading in the right direction.  I’ll work on some similar charts specific to Arizona to see how things compare locally.

Your hoping the glass is half full Realtor,

Chris Butterworth

Bank of America posts earnings loss

Bank of America just posted a big loss.

Bank of America, among many other things the #2 residential mortgage lender and #1 servicer, reported a second straight quarterly loss, driven by write-downs in the value of its mortgage business.

The bank lost $1.57 billion, or 16 cents a share, compared with a loss of $5.2 billion, or 60 cents a share, a year earlier. Last year's results included a one-time TARP charge of $4 billion. Without the mortgage business write-down, the bank earned $756 million, or 4 cents per share.**

See also my broker Jay Thompson, a.k.a. The Phoenix Real Estate Guy, wrote a blog post the other day, grouching about Chase’s earnings for the 4th Quarter. Chase earned a whopping $52 million per day in profit in the 4th quarter of 2010.

Meanwhile, I’ve been thinking about Bank of America’s new billboard advertising campaign. Have you seen these? The basic message is “we’re everywhere” with billboards like these:

Where you live. Where you work. Where you play.

So many ATMs it’s like they’re following me. (with a pretty, smiling woman in the picture)

More ATMs than anyone else in the history of the world.

OK, I made that last one up. But the point is, they’ve spent a busload of money to remind us how big they are.

2008: BofA spent $319 million in U.S. advertising (source, BankInvestmentConsultant.com)

June 2009: B of A spent $125 million on U.S. advertising to date. (source, BrandWeekc.om)

January 2010: B of A plans to spend between $15 million and $20 million on a new marketing campaign aimed at the IRA rollover market. (source, BankInvestmentConsultant.com)

What happened to “too big to fail”? Did we all forget that saying already? It’s only been about a year and a half since we realized that some U.S. banks were so ginormous that if they failed the world would explode.

And now, Bank of America’s entire billboard ad campaign is centered on the idea of “we’re so huge, you can’t escape us.” Doesn’t that make them too big to fail, by definition?

.

**As an aside, I love how we all let corporations get away with spinning their earnings reports. BofA gets to say “without that loss of 3/4 of a billion dollars, we had positive earnings.”   I’d like to be able to say to my creditors, “well, without that pesky mortgage of mine that’s underwater by $100,000, I’m fine. Really. Give me some more credit, I think I need to take a vacation this month.”

When pigs fly.

W.P. Carey on 2011

Elliott Pollack writes for the W.P. Carey (Arizona State University’s School of Business) blog:

(highlights below, emphasis mine)

The national recession has been over for almost 18 months now. Are you having a good time yet? Normally one would expect a very vibrant recovery from such a steep recession. The fact is that this recovery has been painfully slow.

Despite that, we expect 2011 to be better than 2010, albeit modestly so, and 2012 and 2013 to be better than 2011. A rapid recovery and expansion, however, are probably not in the cards even though a recovery is underway.

. . .

Arizona Outlook

While housing is probably at or near its bottom, there are still many negatives and there is no quick fix for the slow growth in population that has caused population-driven sectors of the economy to literally implode.

. . .

Overall, the recovery is going to be slow in Arizona. While the state's recovery has started, one must understand how a state that has been one of the top five growth states every decade since the end of World War II has gone from second in terms of job growth to 49th (2009).

. . .

How did the state go from second to 49th? It was due to a combination of factors that were relatively unique. Nationally, there was a financial meltdown in credit at the same time there was an over-extended consumer. In addition, Arizona was one of the four major housing bubble states, and therefore had a significant excess of single-family inventory. All of this led to a large loss of consumer wealth both nationally and in Arizona, which caused people to cut back. In addition, given credit markets and the loss of equity in homes, it became difficult to sell a home and retire. The decimation of peoples' 401(k)'s and home equities also caused them not to retire and move to Arizona, as did the lack of jobs in the state. This also caused population flows to weaken dramatically. Instead of approximately 140,000 a year, population flows slowed to about 40,000, which equates to about the amount of births over deaths. As a result, home building crashed, going from 63,500 units in 2005 to about 8,000 in 2009. In addition, the decline in jobs caused negative absorption of apartments, office, industrial and retail properties, thus causing an excess for commercial as well. And, the slowdown in population growth caused all of those segments of the economy that are dependent on population growth to implode. This is something that has not happened before in Arizona.

Nothing too groundbreaking here – it’s been all downhill since 2005-6 but we might have turned a corner and could possibly start rising slowly in 2011 – I find it staggering to look at the sheer change in the numbers.  Do you think we could have used an extra couple hundred thousand new residents to help absorb the excess housing inventory?  How ‘bout construction being at about 12% of what it was?  Wow!

Your hoping these “2011 will be better” economists are right Realtor,

Chris Butterworth

Not paying your mortgage? Don’t worry, banks making money off you anyhow.

Image ID 1290133, money4 by svilen001Clients always ask me, “WHY are banks so SLOW in agreeing to short sales??”

There’s a ton of reasons; almost none of them make sense. But for about 2-3 years I’ve been adding this opinion to my list of reasons banks are slow to OK short sales.

Mind you, this is my opinion. I have nothing to back up this idea other than a rudimentary understanding of Accounting 101:


  • accounts receivable = assets


  • accounts payable = liabilities


I believe that one of the many reasons banks are so slow to approve short sales is that while they stall, they can book the mortgage payments as an accounts receivable item, whether the homeowner is actually making the payments or not. The second the bank OKs a short sale, they have to book a giant loss. Again, only my opinion, but it passes the common sense test with everybody I’ve mentioned it to.

Now, a story at Forbes magazine backs me up, sort of. (hat tip to Mish’s Global Economic Analysis blog for the story link)

Robert Lenzner at Forbes writes US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages
[Due to loose accounting rules, banks are] allowed to accrue interest on non-performing mortgages” until the actual foreclosure takes place, which on average takes about 16 months.

All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a result, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off the books of the banks.

This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.

Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs.

Astounding! The extent to which our entire financial system is built on castles in the air is staggering. Banks make money because they say they do. Our dollar bills have value because we all agree they do.

I’m gonna go sit down now. My head hurts.

US home prices hit new lows. Not Phoenix.

The mainstream media are at it again. Chris and I have written about mainstream media and their panicky screamy headlines more times than I can count. Today the media are at it again.

The Washington Post ran a screaming headline this morning: “U.S. Home Prices Drop 1.3% from September to October”. They were almost gleeful when they noted that 6 of Case-Shiller’s 20 major metro markets hit all-time price lows. Oh the humanity!

Case Shiller story, Dec 28, 2010

 

But wait, let’s look at local statistics, not national headlines designed to sell newspapers. Actually, in Metro Phoenix, home prices have been essentially flat since November 2009.

Case Shiller story REFUTED, Dec 28, 2010

Look at the far right hand side of this chart, taken from the local Statistics God Mike Orr at the Cromford Report. This chart shows the median sold price of all home types in the entire Metro Phoenix region.

The numbers are awfully small, even when you click to embiggen the chart. So, so here are the median sold home prices by month, in Metro Phoenix.
$125,000 – November 2009
$125,000 – December 2009
$125,000 – January 2010
$125,000 – February 2010
$125,000 – March 2010
$126,000 – April 2010
$127,500 – May 2010
$127,900 – June 2010
$127,000 – August 2010
$126,000 – September 2010
$125,000 – October 2010
$125,000 – November 2010

Again I say to you my readers: Oh the humanity! The median sold home price has been essentially flat in Metro Phoenix since November 2009. While critics still claim that the federal home buyer tax credit artificially inflated home prices, way back in September 20101 I said that was a silly argument.

Now, the statistics show prices rose by a a mere $2,900 over 12 months. (what the federal government’s tax credit actually did was create buyer demand, which is what this market has needed more of since late 2006)

We’ve said it before and we’ll say it again: remember that the media screams sensational headlines because that’s their job. Rely on your local Realtors and other industry professionals to get you the truthful information without the hype.

Need a Realtor’s advice? Doesn’t matter if you’re ready to buy or sell this instant, or just thinking out loud about your options. Contact us at The Phoenix Agents. We’re here to help. Real Estate. Real People. Real Simple. The Phoenix Agents.

Fannie Mae: 2010 sucked, 2011 better

Image ID 1128001 by svilen001 at StockExchangePer Fannie Mae, the fourth quarter of 2010 will not wind up being a memorable time for housing sales.
Fannie projects that existing home sales will increase slightly, but that new home sales will drop significantly. Fannie’s number crunchers say we should expect 2010 housing sales to be down 7% from last year, and with slightly lower median prices across the nation. But it expects things to pick up in 2011.

Well “thank God!” is all I can say to that! Summer and Fall  2010 were some of the slowest times I’ve had in nearly 6 years of selling residential real estate in metro Phoenix Arizona. I’m ready for 2011 to be a happier & busier year than 2010.

image credit: Image ID 1128001 by svilen001 at StockExchange

Related Posts -

Local builder posts 4th quarter loss

Local home builder K. Hovnanian reported its 4th quarter income, which showed a smaller loss than 1 year ago, but came in lower than analysts expected.

K Hovnanians new home in Verrado, Buckeye, elev A

“K. Hov” is still building homes across the Valley. In the far West Valley K.Hov homes in the community of Verrado start at $149,900. They’re building substantially the same homes in Glendale, at the Loop 101 freeway and Bethany Home Road, starting at $164,900.

K Hovnanians new home in Chandler, elev A

K.Hov is also building in the East Valley: in Gold Canyon starting at $119,900 ; in the south Gilbert area starting at $199,999 ; and in the south Chandler area starting at $314,900.

Interested in seeing what K. Hovnanian’s new build home floor plans look like? Drop me a line and I’ll send you regular new listings from this or any other home builder.

You can also visit the K. Hovnanian website, but note that builder’s salespeople do not work for you, the buyer. They work for the buidler and their job is to craft a deal that’s best for the builder.

Sources consulted for this post:

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Disclaimer: Blog owners/author did not receive any compensation or consideration of any kind from K. Hovnanian, Market News Video, Forbes.com, Bloomberg or any other entity in exchange for writing & publishing the post.

$48 billion in debt reduction

Image ID 377234 by Stock Exchange user ede design

It seems like everyday we’re faced with mainstream media stories about how massive the foreclosure crisis has been. I don’t know about y’all, but I usually have a hard time getting a mental picture of how much money we’re actually talking about.

This morning I stumbled on an article with an easy-to-understand number and it’s ginormous.

CreditBloggers reports (via Northern Trust) that since the first quarter of 2008, Americans homeowners have shed $48 billion in mortgage debt, and $157 billion in credit card debt.

What’s unclear is whether Northern Trust tried to (or indeed if anyone is able to) drill down into their numbers to see how much debt was paid off versus how much was defaulted on.

Either way, that number is pretty staggering. Holy cow!

Image credit: StockExchange user ede design

Rental scams still alive and well

We’ve been looking for a small 1 bedroom condo in downtown Phoenix for a very longtime customer of ours. Something in the range of $600.

I found an ad on Craigslist that advertised a two-bedroom condo at the Copper Square condos for $588 per month. Copper Square is one of the premiere upscale hi-rise condo communities in Phoenix, and other 2 bedrooms there go for $1800-$2200 per month.

It sounded too good to be true.  I emailed the landlord through Craiglist with this:

$588/mo for a 2bedroom at Copper Square, seriously? What’s the catch? I’m seeking a studio or 1 bedroom for that price, need to move in Dec 15 to Jan 10. Must have parking for 1 car and must accept cats.  Please advise if you have anything that suits.

The reply…

I've moved to United Kingdom with my job and decided to rent it because the rent is very expensive here.The price is so low because I'm here and is very hard to find a tenant.I can rent you the condo for min. 1 month and max. 6 years(or more).I really want to find a good and responsible tenant for it, and I hope that you can send me some personal information about yourself.The rent for the whole condo for 1 month is $600 including all utilities(water,electricity, internet, cable, parking , air conditioning, fireplace, dishwasher, garbage) and the security deposit is $600(you'll get the deposit back at your departure-or you can use it to pay your last month of rent) and I want to receive the money monthly in my bank account. You can move in the condo in the same day when you receive the keys. The only problem is that I`m the only person who has the keys and I have nobody in United States that could show you the condo. In order to check it, see if you like it(I'm sure that you'll love it), you need to receive the keys and the contract.
If you want to rent the condo, please e-mail me back and I will explain you how the payment and shipping will take place!
Here are a few pictures:

Tips that this is a scam

  • spelling & punctuation errors
  • price not as advertised
  • landlord is out of the country and no one else can show it to me
  • tenant must sign a contract and send money before s/he can see the condo
  • condo unit number is not mentioned
  • emailer asks for personal information about tenant

Landlord gave me her name in the email, “Dawson”.  I checked the tax records. No Dawson owns anything at Summit at Copper Square.

Grrrr!  I hate scammers. They all should die. It’s not bad enough we’re all dealing with a terrible economy. Some people have to make it worse by trying to scam people out of the little money we have left. Die scammers, die!

It’s a jungle out there. Be wary, dear readers.

Jumbo mortgages

A jumbo mortgage is a home loan that’s too big (in dollars) to be sold to government backed agencies (Fannie Mae, Freddie Mac). The upper dollar limit for jumbos varies geographically but the general rule of thumb is a loan larger than $417,000 is a jumbo.

It seems to me that people who have money continue unaffected when there’s a deep recession in the American economy. I always joke: people with money are always economically safe, the truly poor can rely on welfare and charity, and the working & middle classes buckle down during recessions because they know they’re the ones who are really going to take a beating.

Be that as it may (or not)…   In an odd twist on normal, jumbo mortgages have suffered during the Great Recession. Usually they account for 18% of the real estate market, but according to a new Wall Street Journal (WSJ) report, jumbo mortgages were only 5% of the real estate mortgage market in 2009 and 2010.

Interest rates for jumbo mortgages have been high too, but are now back down to earth. The WSJ reports the average jumbo rate through the week ended Oct. 29 was 5.11%, down from about 6.14% on Jan. 1, 2010

It’s my experience that people who can afford to take out a jumbo mortgage expect to get a mortgage easily, with little trouble and few questions about their financial life. Beware, the New Normal is different, even if you’re wealthy. My favorite brokers and the WSJ story report that mortgage underwriting continues to be strict: Borrowers still need excellent credit profiles and must provide complete documentation and verification of income, unlike several years ago. Down payments of 20% to 40% typically are required.

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hat tip Relator John Wake for the inspiration and source article for this post

First time homebuyer rates surge

First-time homebuyers accounted for 50% of all home sales from July 2009 through June 2010, according to a National Association of Realtors (NAR) survey of buyers and sellers.

That's the highest share of first-time-buyer purchases in the history of the survey, which dates back to 1981.

In July 2010 first timers bought 38% of the homes sold, down a bit from the 43% rate in June.

The survey also showed that investors accounted for 19% of sales in July 2010, up from 13 percent in June; the balance (43%) were to repeat buyers.

A quick check of our sales here at The Phoenix Agents shows that first time buyers were 30% of our client base over the period July 2009 to June 2010. Investors accounted for another 30% of our business, while repeat buyers were the remaining 40% of our clientele.

I think what’s being ignored in the mainstream media (and probably the blog world too) is that 4 of 10 home buyers were repeat buyers. They sold a home and bought another, even in this grim economy.   That’s interesting. I’m not sure yet what it means, but it’s interesting considering our collective mindset this year has been the image of an economy in Neutral and a government in gridlock.

Source Article: NAR Existing Home Sale Survey

Most banks already repaid TARP funds.

Bailout is a dirty word these days. A lot of people go beet red and start shouting about ‘big government’ and ‘where’s my bailout’ when you mention TARP. Some people even go looking for the nearest Tea Party rally they can join.

But did you know that most banks already repaid their TARP funds?

You can see a list of who borrowed what and who already repaid their loan bailout money by visiting this Wall Street Journal story.  (http://blogs.wsj.com/deals/2010/10/01/tracking-which-banks-have-paid-back-tarp/)

Believe me, banks still cause us a lot of problems. But taking TARP money wasn't one of their blunders.

Bank of America halts foreclosures in all 50 states

Just announced today, Friday, October 8, 2010 - Bank of America will stop all foreclosure proceedings in all 50 U.S.  states while they review their internal legal procedures related to the foreclosure document filing process.


From the official statement:




"Bank of America has extended our review of foreclosure documents to all 50 states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for our past foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.” (source, Mortgage Professional Magazine, Oct 8, 2010)



The bank hasn't halted all foreclosure proceedings, however. If a borrower is delinquent, the bank is still issuing notices of default and pursuing efforts to modify certain mortgages, the spokesman said. (source: Wall Street Journal, October 8, 2010)


Last week, Bank of America halted foreclosures in 23 states where evictions need court approval, saying it was reviewing its filings in the wake of disclosures about improperly prepared documents. (source: The New York Times, October 8, 2010)


Bank of America services 14 million loans. More than 14 percent of those loans are past due or already in foreclosure. (source: The New York Times, October 8, 2010)

More news coverage --

from the political left, http://www.huffingtonpost.com/2010/10/08/bank-of-america-halts-foreclosures_n_755737.html AND http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100804213.html?hpid=topnews

from the political right, http://online.wsj.com/article/SB10001424052748704657304575539963605720860.html?mod=WSJ_hpp_LEFTTopStories AND http://www.foxbusiness.com/markets/2010/10/08/bank-america-extends-foreclosure-moratorium/

Fannie and Freddie caused housing crash?

Did Fannie Mae and Freddie Mac cause the housing debacle? Before we get to the answer, let’s all get on the same page about what Fannie, Freddie and FHA actually are.
Neither Fannie Mae, Freddie Mac or FHA is a bank, they don't lend money.  FHA insures loans and Fannie Mae and Freddie Mac are investors, they purchase loans from the banks who originate them as soon as they are "funded".  (source: the Examiner.com)

Look at the charts below and I think you’ll find that the people who scream that Fannie Mae and Freddie Mac caused the housing crisis are simply wrong. How can two companies that had the smallest share of the mortgage market have caused anything in that market? Other lenders - notably Bear Stearns, Lehman Brothers and the rest of that gang - were involved in the subprime mortgage world far deeper than Fannie and Freddie.

I’ll leave it to each of our lovely readers to decide whether the Fannie/Freddie bashers are stupid, lying or practicing world-class political spin.

mortgage originations by originator (I originally found these charts on Barry Ritholtz' The Big Picture blog)

See how the number of mortgages issued by Fannie and Freddie during the boom years of 2004-2007 dropped dramatically?

Meanwhile the number of mortgages issued by ‘private label’ lenders increased sharply. “Private label” in this context means companies like Lehman Brothers, Bear Stearns, Merrill Lynch, Goldman Sachs and Morgan Stanley.

Here’s the same data divided by mortgage type:

Mortgage originations by product type, 2003-2010

See all those subprime mortgages being offered by companies that weren’t Fannie and Freddie?

See 2004-06? That was the height of the boom; the market cooled after that. Fannie and Freddie lost market share during those years and Lehman, Bear and their friends made more mortgages every year.

This isn’t to say that Fannie and Freddie don’t have their problems. They do. They just aren’t guilty of causing the housing crisis.

Save money on your phone bill

I stumbled on this money saving tip by accident this morning. Do you have a land line telephone in your home? I do. Never use it. It exists only to keep my TiVo happy and full of programming data.


I called the phone provider - who is also my internet provider - and asked them to drop the line. Almost immediately, the phone company offered me a 25% discount off the price of the phone portion of the bill, good for six months. In hindsight, I probably could have negotiated for a bigger discount.


So I guess if you're seeking savings wherever you can find it, you might benefit from a quick call  to your land line phone provider.

Lease Purchase, Rent to Own

Rent to own and lease-purchase agreements are cropping up in the Greater Phoenix real estate world these days. They’re a natural result of the continuing tight credit market.

Lease-purchase and rent to own are essentially the same things.  A lease with a purchase option is almost the same, just with more complicated legalese thrown in there.

We don’t typically assist folks with leases that turn into purchases, no matter what the terms. We feel strongly that you really should hire a lawyer if you’re going to do anything that involves renting a house now and buying it in the future.

Here’s some brief thoughts on the situation; I took these from a quick email I sent out earlier today to some friends of ours.

Rent to owns (lease-purchase and lease-purchase options) are usually a little tricky --

  • does tenant pay a little extra each month towards down payment?
  • or does the tenant pay a lump sum amount now? (usually several thousand dollars!)
  • if so, who's bank account “gets” the deposit(s)? does that money earn interest? for whom?
  • under what circumstances are extra payments refundable?
  • what happens to that extra deposits/payments if the rent is late a day or two? if it’s late several weeks?
  • do you value the purchase price of the home now or in several years when the purchase happens?
  • do you get an appraiser? who pays for the appraiser?
  • what if the appraisal comes in lower than the agreed-on purchase price?
  • what if either side changes their mind between now and the purchase?

As you can see, there are a lot of questions. We recommend you hire a real estate attorney to help you figure out the answers. Call or email us, we know several excellent Greater Phoenix attorneys!