Green Realty

Houses in subprime shape lead price charge down - Aug. 22, 2008

2008-08-21T13:17:00.000-07:00

NEW YORK (CNNMoney.com) -- Mold, maggots and piles of festering trash - no wonder home prices are in freefall.

It's not just the subprime mortgage crisis that's to blame for plummeting home prices. A flood of squalid properties on the market is helping to exaggerate the post-bubble price declines.

"Part of the reason home prices are declining is a fundamental deterioration in the housing stock," said Glenn Kelman, CEO of the online, discount broker Redfin. "During the boom, nine out of 10 houses for sale in many markets were in prime condition. Now, for every 10 houses, at least three are dogs."

Most of these mutts are foreclosed properties that have been permitted to fall into disrepair by lenders overwhelmed with thousands of vacant homes. If these houses sell at all, they're going for bargain basement prices that are hurting home values throughout the neighborhood.

"I've never seen so many houses in this condition before," said Ray Anderson of Buyer's Advantage Real Estate in Auburn Calif., near Sacramento. "And I've been in the business 20 years. I've seen bank-owned properties in the past. They were never like this."

Distressed properties usually sell for discounts of 10% to 40% below comparable, well-maintained homes, according to Tom Inserra, executive vice president for Zaio, an appraisal company that is creating a national database of home values.

Richard Smith, CEO of Realogy, the parent company for Coldwell Banker, Century 21 and Sotheby's International Realty, estimates that homes that are not bank-owned have actually only seen price declines in the low single digits over the past 12 months. That's compared with the 15% price drop recorded by the S&P/Case-Shiller Index for all homes over the same period.

'Crime scene'

Lori Mize has firsthand experience with horrible homes for sale. She waited for years for prices to come down in her Elk Grove, Calif. home area, just east of Sacramento. With the median home there now selling 30% below the market's peak, Mize thought it was time to buy. But nearly all the homes in her price range - $250,000 to $300,000 - are bank-owned properties, which tend to be in the most beat-up condition.

After looking at a few of them, she was almost ready to give up.

"The first one I saw was the worst home I had ever seen in my life," said the married mother of two young girls. "There were magic-marker messages on the front door saying, 'STAY OUT.' They had poured paint and other stuff on the carpets. There was a lot of trash. I felt like I was at the scene of a crime. I wouldn't let my daughters touch anything."

In Florida, another foreclosure hot spot, vacant homes deteriorate rapidly in the high heat and humidity.

Garbage and food that's left behind fester. "The properties smell," said Eve Alexander, an agent in Orlando. "You find maggots. The swimming pools are green. The lawns dry up. They're eyesores. Neighbors yell at us to water the lawn."

Often the homes have been stripped bare. "All the kitchen appliances, cabinets and countertops, bathroom fixtures, lights are [stolen]," she said.

Others trash the place before they leave, according to Adele Hrovat, a real estate agent with the Buyer's Realty of Las Vegas. "They punch holes in the walls, dump oil on the carpets. The banks are so overwhelmed, they haven't gotten to the point when they send in crews to fix them up," she said.

Indeed, soaring foreclosures have returned many houses to their lenders, who put them right back on the market - usually as is.

Nationally 18.6% of all homes sold during the three months ended June 30 were foreclosures, compared with just 7% during the same period a year earlier, and 3.1% in 2006, according to the real estate Web site Zillow.com. And that doesn't include short sales, which is when a home is sold for less than the mortgage balance and the bank forgives the unpaid balance and also account for a lot of sales in many areas.

Just a few years ago in Detroit, only one in a hundred listings were foreclosures or short sales, according to agent David Mills of Homebuyer's Realty. Now half of the listings are. Some have been badly damaged and suffered huge drops in value.

"A three-year old home that recently sold for $660,000 is listed for $350,000. There's no kitchen, no master bath. The toilet was taken, the tub, cabinets gone."

A growing problem

With the number of foreclosed properties projected to keep rising, there seems to be no end in sight to falling prices, according to Texas A&M real estate economist Mark Dotzour. Even though many of these dilapidated homes are actually pretty good bargains, Dotzour isn't surprised that more people aren't jumping in. Everyone is reluctant to buy in a declining market.

"Once buyers start to feel confident that prices in a given community have stabilized, they'll start buying again," he said.

For that to happen, the natural population increase will have to absorb all the excess housing inventory, until supply and demand are in balance again.

In the meantime, Congress has allocated $4 billion for municipalities to rehab derelict foreclosures in an effort to prevent them from dragging down nearby neighborhoods.

But mostly hitting bottom is just waiting for market events to play out and the construction of new homes drops and remains below below the replacement rate for a while.

"Once that inventory is gone, we'll be at the market bottom, and the price trajectory will flatten out," said Dotzour.

Until then, dilapidated homes will continue to aggravate the steep price drops being recorded throughout the nation.

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Mortgage rate fall to 6.47% - Aug. 21, 2008

2008-08-20T17:08:00.000-07:00

NEW YORK (CNNMoney.com) -- Rates on the 30-year fixed mortgage fell from last week, even as the housing market showed more signs of weakness.

Government-sponsored mortgage finance giant Freddie Mac (FRE, Fortune 500) reported Thursday that 30-year fixed-rate mortgages averaged 6.47% this week. That's just below the previous week, but still under the 6.52% average a year ago.

"Even with the current historically affordable mortgage rates, news continues to show signs of weakening in the housing sector," said Frank Nothaft, Freddie Mac vice president and chief economist.

More bad news

He noted that housing starts fell in July to their slowest pace in 17 years, and homebuilder confidence remains at record-low levels.

Other mortgage rates also slipped this week, according to the Freddie Mac survey.

Rates on 15-year fixed-rate mortgages fell to 6.0%, down from 6.07% last week. Last year, the 15-year mortgage averaged 6.18%

The five-year adjustable-rate mortgage declined to 5.99%, down from 6.02% last week. At this point last year, it averaged 6.34%.

The rate on one-year adjustable-rate mortgages increased to 5.29%, compared to 5.18% last week. At this time last year, the 1-year ARM averaged 5.60%.

Reports on new and existing home sales for July are due next week. Also on tap is the S&P Case-Shiller home price index for June.

Meanwhile, mortgage application volume fell last week to its lowest level in nearly eight years, the Mortgage Bankers Association reported Wednesday. The sharp drop in refinancing volume in recent weeks has been the leading driver of the declining application volume.

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More Fannie, Fannie worries send share on roller coaster - Aug. 21, 2008

2008-08-20T15:52:00.000-07:00

NEW YORK (CNNMoney.com) -- Shares of mortgage finance giants Fannie Mae and Freddie Mac plunged and then rebounded in early trading on Thursday after new reports that the federal government may have to take over the troubled firms.

Fannie fell as much as 87 cents or 20%, to $3.53, but then rebounded to a small gain in morning trade. Freddie shares tumbled as much as 99 cents, or 30%, to a record low before rebounding. The lows of the day represented a 20-year low for Fannie (FNM, Fortune 500) when adjusted for splits, and a record low on that basis for Freddie (FRE, Fortune 500), which started trading in 1989.

The Wall Street Journal Thursday said that the firms needed to refinance $225 billion in mostly short-term debt by the end on September. Concerns about the firms' ability to refinance the debt had prompted Treasury Department officials to begin developing a series of options to shore up the companies, if necessary.

The two shareholder-owned firms were originally set up by the federal government to provide financing to the mortgage market. Today they are the primary source of funding for banks and other home lenders, and they own or guarantee more than $5 trillion in mortgages. But both have reported large losses due to rising foreclosures and declining home prices on the loans they own or back.

Earlier this summer, Treasury Secretary Henry Paulson secured congressional authority to lend the firms an unlimited amount of money if necessary, as well as the ability to have the government buy shares in the two firms. It is widely expected that such a move would wipe out the holdings of current shareholders.

Paulson and executives of the firms have continued to insist that they don't expect such moves to be necessary, as they have stated that both firms have capital in excess of levels required by regulators to cover their expected future losses. But the investors have not been convinced, sending shares down more than 60% in the first three trading days of this week alone. Shares have now lost nearly 90% year-to-date.

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Distressed IndyMac borrowers to get relief - Aug. 20, 2008

2008-08-19T17:37:00.000-07:00

NEW YORK (CNNMoney.com) -- The FDIC, six weeks after taking over mortgage lender IndyMac Bank, said Wednesday that it will start automatically modifying some of the bank's most troubled loans to keep borrowers in their homes.

The Federal Deposit Insurance Corp. said it has started to send out the first of what will be an estimated 25,000 letters to borrowers most seriously delinquent on their loans.

The goal of the modifications: to provide borrowers with affordable payments so they can stay in their homes while minimizing the risk of foreclosure and loss to investors in securities backed by the loans.

"Foreclosure is often a lengthy, costly and destructive process. Avoiding foreclosure not only strengthens local neighborhoods where foreclosures are already driving down property values, it makes good business sense," FDIC Chairman Sheila Bair said in a statement. "This is a 'win-win' program all around."

Equally important, by turning what are currently non-perfoming loans into performing loans, the FDIC hopes to maximize the value of IndyMac assets to potential buyers, which would be good news for IndyMac customers who had uninsured deposits at the bank when it was taken over. A higher purchase price would also mean fewer costs for the FDIC and its insurance fund.

"By turning troubled loans into performing ones, we enhance their overall value," Bair said in a press call Wednesday afternoon.

Bair, who has long pressed lenders to help struggling homeowners by systematically modifying their mortgages to more affordable terms, inherited $200 billion in mortgages owned or serviced by IndyMac when the bank was taken over by regulators in July.

She said she hopes this new FDIC program will serve as a model for other loan servicers.

"It's my hope that it will provide further catalyst to provide more loan modifications for borrowers across the country," Bair said.

How the program will work

The FDIC is defining "affordable" loans as those in which the mortgage payment (including principal, interest, taxes and insurance) does not exceed 38% of a borrower's income.

That debt-to-income ratio may be achieved in a number of ways, according to the FDIC: by reducing the interest owed on the loan, by stretching out the number of years over which the loan may be paid back or by principal forbearance, which defers payment on a portion of the original principal until the home is sold or the loan is refinanced.

For IndyMac borrowers to qualify for an FDIC modification, they would have to show verification of income - most IndyMac loans are so-called Alt-A loans, which were given to borrowers with good credit but no proof of income. Borrowers would also have to verify that the home at issue is their principal residence. And they would need to sign the letter sent to them by the FDIC and send it back with the first payment due on the modified loan.

The FDIC said borrowers may call (800) 781-7399 to talk with an IndyMac Federal representative to see if they qualify.

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New York becomes least affordable housing market in U.S. - Aug. 19, 2008

2008-08-18T20:31:00.000-07:00

NEW YORK (CNNMoney.com) -- Home prices continue to tumble across the country, making homes more affordable in most U.S. cities, according to a new report released Tuesday.

Nationally, 55% of homes sold from April through June were affordable to families earning the U.S. median income of $61,500, according to a quarterly report released Tuesday by the National Association of Home Builders.

That's up from 53.8% in the first quarter of 2008, and the most affordable home prices have been since the second quarter of 2004.

"Several factors combined to increase housing affordability nationwide. There was a marginal rise in mortgage rates, which still remain near the historically low levels of a few years ago, family income nationwide held steady, and lower house prices," said NAHB President Sandy Dunn in a press release.

Indianapolis led the the nation's major metro areas in home affordability for the 12th straight quarter. The median price of homes sold during the second quarter was $108,000, down from $122,000 last year. And 91.6% of the households there earning the median income of $65,100 could afford to buy a median priced home. That's up from 86.8% last year.

New York was the least affordable major housing market in the country, according to the report. It was the first time that a major metropolitan area outside of California was the least affordable home market in the 17-year history of the report.

In New York, the median home price fell slightly year over year to $481,000 from $510,00. That led to an increase in affordability; 11.4% of households earning the median income of $63,000 could afford to buy a median priced home, up from 6.3% in the second quarter of 2007.

Despite that change, New York still fell to the least affordable area from second-least affordable last year, according to this survey.

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Home building plunges to 17-year low in July - Aug. 19, 2008

2008-08-18T12:47:00.000-07:00

NEW YORK (CNNMoney.com) -- Housing building fell sharply in July to a 17-year low, a government report issued Tuesday showed.

Starts plunged 11% to an annual rate of 965,000 from a revised 1.084 million pace in June, according to the Census Bureau report. Economists surveyed by Briefing.com had forecast starts would fall to a rate of 960,000.

Permits - often seen as a sign of builders' confidence in the housing market - tumbled 17% to an annual rate of 937,000 from a revised 1.138 million in June. Economists had forecast that permits would come in at 959,000.

The sharp percentage drop from June was due partly to a jump in multi-family home starts and permits during that month. Single-family home starts and permits slipped only slightly from the June level. But the single-family starts were also at a 17-year low in July, while single-family permits fell to a level not seen since the 1982 recession, reaching a rate of only 584,000 homes in July.

The sharp fall in building activity suggests that home building will continue to be a drag on the economy in the second half of the year. Earlier this year, many economists hoped that building activity would bottom out this summer and start to show signs of improvement.

In the second quarter, the drop in home building took 0.6 percentage points off of gross domestic product, the broad measure of the nation's economic activity. It marked the 10th straight quarter that home building has been a drag on GDP.

But the continued drop in building could be just what the battered real estate market needs. One of the biggest problem for sellers is a glut of unsold homes on the market. Since demand for homes remains weak, the glut will only ease if fewer new homes are built.

In June, builders faced a median wait of 8.4 months to sell a completed home, the longest delay in selling time in 25 years, according to a separate Census Bureau report issued recently.

The government report on housing starts and permits comes the day after a survey of builder confidence by the National Association of Home Builders remained at a record low in August. Only 5% of builders said the current market is good, 8% said they expected a favorable market in the next six months and fewer than 2% said they were seeing strong traffic from potential buyers.

The downturn in housing and building has hammered the results of most of the nation's major builders. Late last month Centex (CTX, Fortune 500), which is the No. 2 builder by revenue, reported a larger-than-expected loss and warned it was seeing no improvement in the home building market.

Most builders have reported larger than expected losses, although Pulte Home (PHM, Fortune 500), the largest builder by revenue, did slightly better than forecasts. Only one major builder, NVR (NVR, Fortune 500), has reported a profit through the current downturn, although its earnings have plunged.

As a group, the revenue of the nation's eight largest home builders has plunged 37% over the last year. Analysts surveyed by Thomson Reuters are forecasting another 36% drop in revenue over the course of the next 12 months.

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Builders' sentiment survey matches all-time low - Aug. 18, 2008

2008-08-17T17:07:00.000-07:00

NEW YORK (CNNMoney.com) -- Homebuilders' confidence in the housing market remained at record low levels, a trade group said Monday.

The NAHB/Wells Fargo housing market index for August held at a seasonally adjusted reading of 16, matching July's reading. Economists surveyed by Thomson/IFR also expected the index to remain at 16.

A reading below 50 indicates that more builders think home sales conditions are poor than those who think the environment is positive for sales. August's reading ties the record low level reached in July, which fell below the previous record low set in June.

Builders were asked for their view of the current market, the number of buyers looking at homes and expectations for six months from now.

Only 5% of the builders surveyed believe the current market is favorable, up from 4% in July. Of the more than 300 homebuilders surveyed, 73% view the market as poor. Still the bleak numbers were an uptick from July, sending the August present sales component index up to a level of 16 from 15 in July.

The future sales index also got a slight boost in August, rising to a level of 25, up 2 points from the previous month. Just 8% of builders said housing market will be favorable by the end of the year, though that's up from 6% in the previous month. Poor conditions are expected to continue six months from now by 60% of the builders surveyed.

Builders said the number of prospective buyers is still low, and the component traffic of buyers index held steady at 12. Only 1.2% of builders said they received a high number of prospects, while 77% said the number of potential buyers was low.

Light at the end of the tunnel

Although overall builders' confidence remains at an all-time low, Seiders believes the market is due for a turnaround soon.

"Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond," he said in a statement. "It is a good sign that two out of three of the ... component indexes rose in August, and this may be an indication that we are nearing the bottom of the long downswing in new-home sales."

Though there is some stabilization of national existing home sales already, Seiders noted much of that has been driven by an upswing on foreclosure sales at cut-rate prices.

As a result of a battered market, President Bush signed the Housing and Economic Recovery Act late last month. The bill includes a temporary home buyer tax credit of up to $7,500 for first-time home buyers or haven't purchased a home in three years.

Qualified buyers must earn less than $75,000 - or $150,000 for a couple - after which point the tax credit begins to phase out. The Senate Finance Committee estimates that about 1.6 million people will use the credit.

"Builders are counting on some support from this new first-time homebuyer tax credit," Seiders said. "Though first-time home buyers generally buy more in the existing home market than in the new home market, new homes get a ladder effect from the existing home market."

Monday's report came a day ahead of the government's report on housing starts and building permits for July, which economists forecast will fall close to 17-year lows after unexpected gains in those measures in the June report.

Shares of homebuilders were mostly lower Monday. Lennar Corp. (LEN, Fortune 500), Centex Corp. (CTX, Fortune 500) D.R. Horton Inc. (DHI, Fortune 500) and Hovnanian (HOV, Fortune 500) all lost about 1%, though Radian Group (RDN) traded in slightly positive territory.

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Tax credit for first time home buyers comes with caveats - Aug. 18, 2008

2008-08-17T15:39:00.000-07:00

NEW YORK (CNNMoney.com) -- Washington policy makers and housing industry insiders hope a new tax credit for first-time home buyers will get the moribund housing market moving again.

But most analysts agree that the program is more of a band-aid than a cure-all for the battered real estate market. What's more, others are quick to point out that the credit must be repaid, which means it's actually an interest-free loan that could get some homeowners in trouble.

"It's one of those things that are more complicated than it seems at first blush, said Allen Fishbein, director of housing and credit policy for the Consumer Federation of America. "Consumers have to make sure they understand the credit thoroughly.

The $7,500 credit is for people buying their first homes, and was passed as part of the Housing and Economic Recovery Act of 2008 and signed into law in July. To qualify for the full $7,500, individuals must earn less than $75,000 annually, while couples may earn up to $150,000. Buyers with income of between $95,000 and $170,000 are eligible for a partial credit.

The Senate Finance Committee estimates that about 1.6 million people will use the credit.

The housing industry pushed for the program. "Breaking the log jam of unsold homes is something we are very much behind," said Richard Dugas, president of builder Pulte Homes, at a news conference to discuss the program. First time home buyers represented about 20% of the market for new homes in 2007.

Realtors are also behind the credit. "[It] will help chip away at inventory levels, stabilize prices and spur [sales] activity," said Richard A. Smith, CEO of Realogy, the parent company of both Coldwell Banker and Century 21.

The industry has had success with tax credits in the past. In 1975, Congress passed a $2,000 credit for home buyers (about $8,200 in today's dollars).

"Buyers flocked to market and cleared out a then-record inventory of homes," said NAHB president Sandy Dunn. But that credit did not have to be repaid.

And the impact should extend beyond first time home buyers, according to Lawrence Yun, chief economist for the National Association of Realtors. A boost in demand for starter homes means that those sellers will be able to trade up to bigger, more expensive places, and so on up the chain.

How it works

Buyers who have not owned a home in the past three years can take a tax credit worth 10% of a home's sale price, up to $7,500, whichever is smaller.

The credit is good for homes closed on after April 9, 2008 and before July 1, 2009, and can be taken on taxes filed during 2008 or 2009. Even buyers who bought a home before the bill passed, but after April 9, can claim the credit.

Unlike tax deductions, which only offset taxes by lowering taxable income, the tax credit is a straight dollar-for-dollar deduction of your tax bill. So a buyer who would ordinarily pay $8,000 in taxes would pay just $500.

It's also "refundable," which means if a buyer's taxes are less than $7,500, the government will send them a check for the difference. For example, if a couple's income generates a tax bill of $5,000, the government will refund all of that plus $2,500.

Buyers must to start paying back the loan within two years, at a rate of no more than $500 a year for 15 years. When the the home is sold, any outstanding balance will be repaid from the profit; if it's sold at a loss and the difference will be forgiven.

And some argue that mortgage lenders will take the credit into consideration, making it easier for buyers to get a loan.

"[The $7,500 reserve] will make borrowers less likely to fall into default," said Ken Goldstein, an economist with the Conference Board, since it gives them a nest egg should they run into trouble. Still, that assumes that buyers will sock the $7,500 away rather than spend it.

No cure

Indeed, the credit comes with plenty of caveats from economists and industry analysts.

"It's not going to provide first-time home buyers with cash up front," said the Consumer Federation of America's Allen Fishbein. "You have to apply to get the credit after the fact. There's a delay before you get the financial advantage."

And there are concerns that borrowers may treat the credit as a windfall, spending it as if it doesn't have to be repaid.

"It may appear to be free money," said Fishbein. "Consumers have to have their eyes open about how this works."

Other economists caution that while the credit may be helpful, it's hardly a solution to the crisis.

"It will not turn things around," said Jared Bernstein, an economist with the Economic Policy Institute. "Given the economy, it will only push a precious few first-time home buyers over the edge right now."

Plummeting home prices will blunt any impact that the credit may have, according to Nicholas Retsinas, director of the Harvard University's Joint Center for Housing Studies. As far as he's concerned, the market is simply too soft right now for a modest measure like this to make a big difference.

"The challenge right now is as much willingness to buy as affordability," he said. "The market still has this psychological barrier because people think prices will be lower tomorrow. I don't think this can overcome that barrier."

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Home prices have fallen 7.6% over the past 12 months - Aug. 14, 2008

2008-08-13T14:12:00.000-07:00

NEW YORK (CNNMoney.com) -- Real estate prices continued to post steep year-over-year declines during the three months ended June 30, according to a new report from the National Association of Realtors (NAR).

Nationwide, the median existing single family home price plunged 7.6% to $206,500 from $223,500 in the second quarter of 2007. The median price represents the point at which half of all homes sold for more and half sold for less.

A record numbers of foreclosures helped drive down prices, according to NAR. In fact, foreclosures and short sales accounted for about one third of all existing homes sales.

"In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement cost values," said NAR president, Richard Gaylord. "Many buyers with long-term expectations are getting exceptional value in the current market."

Sun Belt metro areas led with price declines. These areas ran up fabulous gains during the mid-2000s boom, but are experiencing even more severe declines during the bust.

Regional and local prices

In Sacramento, Calif. prices plunged 35.6% year-over-year to $$229,500. Cape Coral, Fla. saw a decline of 33.1%, while prices in Riverside, Calif. dropped 32.7%, and Los Angeles prices are down 29.6%. Las Vegas prices fell 23.6% and Phoenix was down 22.5% for the quarter.

More bargain hunting buyers are coming into the market, according to the Realtors association. "The biggest home-sales gains over the previous quarter have been in some of the markets with the steepest and fastest price drops," said Lawrence Yun, NAR's chief economist. "Buyers in these areas are responding to deeply discounted home prices."

The biggest regional home price declines occurred in the West, where the median home price declined 17.4% to $290,500.

At the same time, sales in that part of the country increased. Existing-home sales were up 25.8% in California, 25% in Nevada, 20.5% in Arizona.

Prices in the South, at $177,000, were almost flat, down just 0.9%, while Florida sales saw an uptick of 10.1% in the quarter.

The Northeast median home sold for $269,000, down 9.6%, and prices in the Midwest were down 4.1% to $161,500.

Among metro areas, Yakima, Wash. posted the largest price increase, up 8.9% year-over-year to $162,300. Binghamton, N.Y. was second with a price jump of 8.7% to $120,900.

Condo prices fell much less than single family homes, down just 3% year-over-year to $220,000 from $226,900. A couple of cities recorded double-digit condo price gains, led by Syracuse, N.Y., up 17.8% to $144,900, and New Orleans, up 15.9% to $192,100. Houston condo prices rose 9.9% to $141,100.

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Another bad jump in foreclosures in July - Aug. 14, 2008

2008-08-13T08:00:00.000-07:00

NEW YORK (CNNMoney.com) -- The foreclosure juggernaut lurched forward in July as banks took back 77,295 homes - up 8% in a month and 183% in a year, a report issued Thursday shows.

Total foreclosure filings - delinquency notices, auction sale notices and bank repossessions - were up 8% from June and 55% year-over-year, according to RealtyTrac, an online marketer of foreclosed homes. One of every 464 U.S. households received at least one filing during the month.

"Bank repossessions, or REOs, continued to be the fastest growing segment of foreclosure activity," said RealtyTrac's chief executive officer, James Saccacio, in a statement. "The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale."

The company says it has more than 750,000 active listings of repossessed homes for sale on its database. That represents about 17% of all the existing homes for sale in the United States as reported by the National Association of Realtors.

Leading states

Foreclosure activity in Nevada, surpassing all other states, touched one in every 106 households in July. Foreclosures in the state were up 15% for the month and were almost double the rate of last July.

Other hard-hit states included California (one of every 182 households), Florida (one of 186) and Arizona (one of 195). For sheer volume, California led the other states with a total of 72,285 filings.

An especially high percentage of the California filings were bank repossessions. There were 23,406 in all, up from just 4,444 in July 2007. The state accounted for more than a third of all such events in the nation. The number was also a big jump from June's total of 20,624 bank repossessions in the state.

"The properties there, once they enter foreclosure, are making a beeline back to the banks," said RealtyTrac's spokesman, Rick Sharga.

Many of the California homes were bought during the height of the frenzy of the mid-2000s at inflated prices. Now that home values have dropped, borrowers who bought at the top owe more than their homes are worth. These properties are almost impossible to refinance and are difficult to sell.

A couple of Midwestern states have also been consistently among the leading foreclosure hot spots and July was no exception. Ohio was fifth in the nation for foreclosures with one for every 375 households. That includes 4,057 bank repossessions, a 33% increase since July 2007. Michigan had 3,933 repossessed homes, or 17% fewer than last July, when it recorded 4,739.

City centers

The worst-hit metro area of the 230 regions that RealtyTrac covers was Cape Coral, Fla. About one of every 64 households in the Gulf Coast city received a filing during the month, more than seven times the national average.

Merced, Calif., with one filing per 73 households, had the second highest foreclosure rate, followed by the nearby Central Valley cities of Stockton and Modesto, which each had about one filing for every 82 households.

The report is bound to disappoint Washington policy makers and lending industry insiders who have stepped up their efforts to slow the massive default problem. June filings, which were down 3% from May, had been a cause for slight optimism.

But, according to Sharga, that decrease was helped along by rule changes in Massachusetts and Maryland that prevented lenders from issuing filings for up to an additional 90 days after borrowers first fall behind in their payments.

That significantly reduced the number of foreclosure filings in both states. In June, for example, Massachusetts recorded a 55% decrease in initial filings.

"Now, both states are creeping back up," he said. "The 90-day lull in Massachusetts is being followed by a whole run of properties [in delinquency]."

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[Via Home Mortgage Rates and Real Estate News]

Lawmakers to investigate Countrywide 'VIP' practice - Aug. 13, 2008

2008-08-12T21:03:00.000-07:00

WASHINGTON (AP) -- Two Republicans are calling for an investigation into whether House lawmakers or staffers received preferential treatment from mortgage lender Countrywide Financial Corp.

The troubled lender, which was sold to Bank of America Corp (BAC, Fortune 500). earlier this year, has been the focus of allegations that it gave favorable loan terms to lawmakers.

Sens. Christopher Dodd, D-Conn., and Kent Conrad, D-N.D., have acknowledged receiving mortgages through a VIP program for friends of former Countrywide Chief Executive Angelo Mozilo, but have said they were unaware of any favorable treatment.

Reps. Darrell Issa, R.-Calif., and Mark Souder, R-Ind., are calling on the House ethics committee to examine allegations, made in Conde Nast Portfolio magazine, that House staffers and members also received such treatment.

In a letter sent Tuesday to the ethics committee, Issa and Souder called the report a "serious and broad allegation."

The ethics panel does not comment on investigations. Under its rules, the committee may open an investigation in response to a complaint filed by a lawmaker, but is not required to do so.

Issa and Souder had called on Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, to investigate, but Waxman said last month the ethics panel would be the "appropriate venue" for such an inquiry.

A representative from Bank of America was not immediately available to comment Wednesday afternoon.

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[Via Home Mortgage Rates and Real Estate News]

Home sellers suffering huge losses - Aug. 13, 2008

2008-08-12T17:02:00.000-07:00

NEW YORK (CNNMoney.com) -- More homeowners than ever are selling at a loss, propelling the real estate market deeper into crisis.

In the 12 months that ended June 30, nearly 25% of all homes sold nationwide fetched less than sellers originally paid, according to real estate Web site Zillow.com.

While the nation's double-digit decline in home prices has been well documented, the new report underscores the economic force of those price declines. Homeowners are walking away with much less in their pocket when they sell. And that affects more than the real estate market.

"It's stunning what's happening out there," said Stan Humphries, Zillow's vice president of data and analytics, who looked at statistics that date back to 1996. "The numbers are the worst we've seen and it's not just the magnitude of the problem but the scope - so many markets are affected."

In Merced, Calif., 63% of homes sold during the past 12 months brought in less than what the owner paid. Prices there have fallen 40% over the past 12 months and 56% from their 2006 peak.

About 63% of sellers in Stockton, Calif., lost money during the same period, 60% in Modesto, Calif., 55% in Las Vegas and 38% in Phoenix.

And the trend has worsened in recent months. In Merced, 74.9% of sellers took a loss when they sold during the three months ended June 30 compared with just 28.7% during the same period in 2007.

The experience of one would-be seller in Cape Coral, Fla., illustrates the kinds of losses sellers are suffering. The homeowner, who asked not to be named, paid $147,000 in 2003 for a three-bed, two-bath ranch. Prices have dropped there more than 22% in the past 12 months.

He said he made a 10% downpayment spent big on upgrades, including two renovated baths. The house was appraised at $279,000 two years ago. Two months ago: $140,000. He has been trying to sell it for more than a year and has dropped the price to $129,900.

"It's terrible," he said. "I'm taking a major loss. I'll probably have to bring a check to the closing."

The short-sale solution

Many sellers are so underwater that their only solution is a short sale. Elsa Bell, a claims adjuster, bought her Riverside, Calif., house in 2006 for $330,000, using a no-down-payment loan. In April she put the house on the market for $275,000, but it hasn't sold.

"The bank is willing to do a short sale, and we have an offer of $170,000 on the house, but we believe the bank will turn that down," Bell said.

A short sale is when a lender agrees to take less than the amount it is owed on a mortgage and forgives the remaining debt.

For Bell, whatever the sale brings, it's going to be a lot less than what she paid.

The good news is that she should get out of the deal fairly clean. Since she has little invested, she has little to lose. The bad news is that a short sale may mean a hit to her credit score.

Nationwide, nearly a third of all homeowners who bought since 2003 owe more on their homes than the homes are worth. And those that, like Bell, put little or none of their own money into the home purchases, are more likely to try to sell short or simply abandon their homes.

"They hand over their keys and walk away from the homes," says Danielle Babb, a real estate investor, instructor at the University of California Irvine and author of "Finding Foreclosures."

That adds to foreclosure rates. Zillow reported that nearly 15% of U.S. existing home sales during the last 12 months involved foreclosed homes.

That trend will almost surely continue.

In Stockton, Calif., 2006 buyers now owe a median of nearly $171,000 more than their homes are worth. In Salinas, Calif., 2006 buyers now have median negative equity of $161,000, and in Merced, the figure is nearly $160,000.

Broader impact

A plethora of sellers taking losses can have a chilling effect on people's lives, says Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

People don't want to sell at a loss, so they put off their plans, whether it's a move for a better job opportunity elsewhere or trading up to a larger home.

"That will delay the [market correction]," said Baker. "It takes time for people to recognize that [these losses] are real."

A quick turnaround is not likely. More than $200 billion in adjustable rate mortgages are scheduled to reset during the second half of 2008, according to the National Association of Realtors, and loans of all types defaulting at high rates. There is also about 11 months of inventory at the current rate of sales.

"With $3.9 million unsold homes on the market, prices will have to come down even more before the market stabilizes," said Zillow's Humphries.

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[Via Home Mortgage Rates and Real Estate News]

Mortgage application volume drops 1.5% - Aug. 13, 2008

2008-08-12T11:53:00.000-07:00

WASHINGTON (AP) -- Mortgage application volume fell 1.5% during the week ended Aug. 8 as fixed interest rates hovered near annual highs, according to the Mortgage Bankers Association's weekly application survey.

The MBA's application index fell to 425.9 from 432.6 a week earlier, according to the trade group's survey.

Application volume declined as fixed interest rates rose. The average rate for traditional, 30-year fixed-rate mortgages rose to 6.57% during the week ended Aug. 8, just shy of the 2008 high of 6.59% set last month.

The average rate for 15-year fixed-rate mortgages, which are often a popular choice for refinancing a home, rose to 6.17% from 6.02%. It was the highest average interest rate for 15-year fixed-rate mortgages this year.

Refinance application volume fell 4.2 % during the week, while purchase volume was flat. Refinance applications accounted for 35.2% of all applications during the week.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 425.9 means mortgage application activity is 4.259 times higher than it was when the MBA began tracking the data.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.

The average rate for one-year adjustable-rate mortgages declined slightly to 7.15% from 7.17%.

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[Via Home Mortgage Rates and Real Estate News]

A dead end on the road to housing recovery - Aug. 12, 2008

2008-08-11T08:10:00.000-07:00

NEW YORK (CNNMoney.com ) -- Prime mortgages are starting to record disturbingly high default rates, which could slow any potential housing recovery.

The delinquency rate for prime mortgages worth less than $417,0000 was 2.44% in May, compared with 1.38% during May of 2007, according to LoanPerformance, a unit of First American (FAF, Fortune 500) CoreLogic which compiles and analyzes residential mortgage statistics.

Delinquencies jumped even more for prime loans of more than $417,000, so called jumbo loans. They rose to 4.03% of outstanding loans in May, compared with 1.11% a year earlier.

And prime loans issued in early 2007 are performing the worst of all, failing at a rate nearly triple that of prime loans issued in 2006 according to LoanPerformance.

"The extent of how bad these loans are doing is very troubling," said Pat Newport, real estate economist with Global Insight, a forecasting firm.

Washington Mutual (WM, Fortune 500) CEO Kerry Killinger said on an earnings call last month that the bank's prime loan delinquencies are on the rise. As of June 30, 2.19% of the prime loans issued by WaMu in 2007 were already delinquent, compared with 1.40% of prime loans issued in 2005.

And on a July earnings call, JP Morgan Chase (JPM, Fortune 500) CEO Jaime Dimon, called prime mortgage performance "terrible," and suggested that losses connected to prime may triple. For the second quarter, the bank reported net charges of $104 million for prime rate delinquencies, more than double the $50 million recorded three months earlier.

The latest shoe

Prime loans are just the latest class of mortgages to see a spike in failure rates. The first lot to go bad was, of course, subprime mortgages, which set the housing meltdown in motion. Next were the Alt-A loans, a class somewhere between prime and subprime loans that doesn't require strict documentation of a borrower's assets or income.

Now, as prime loans are added into the mix, the resulting foreclosures could haunt the housing market for a long time, according to Global Insight's Patrick Newport.

"Home prices will drop for quite a while," he said, "maybe several years."

Prices are already off nearly 20% from their 2006 highs, according to the S&P/Case-Shiller Home Price index.

And there's a strong inverse correlation between home prices and defaults, according to Lawrence Yun, chief economist for the National Association of Realtors.

"It's a feedback loop," he said. "Price declines lead to more defaults, which leads to more price declines."

More foreclosures will add to an already massive oversupply of homes on the market. Inventories are up to about 11 month's worth of sales at the current rate.

Indeed, about 2.8% of all homes for sale were vacant as of June 30, according to the Census Bureau's statistics. That's up about 50% from three years ago, and near historic highs.

More foreclosures, fewer loans

The failure of prime mortgages will also make it more difficult for new borrowers to find affordable loans - and that will slow sales even more. Lending standards have been tightening for months, but if prime loans start to look risky, lenders will be even more conservative about who gets a mortgage.

About 60% of the loan officers surveyed reported that they tightened lending standards for prime mortgages during the first three months of 2008, according to the April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve, which is released quarterly.

That number will likely be even higher for the second quarter, according to Mike Larson, a real estate analyst for Weiss Research. "It's already harder and more expensive to get loans," he said. "Lenders pull in their horns when things go south."

While easy credit fueled the housing boom, restricted credit is certainly contributing to the bust.

"Eventually," said Newport, "time will break the cycle. Pricing will drop enough to attract more buyers, and inventories will decline."

But there will probably more hard times ahead before markets come back into balance and recovery begins.

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[Via Home Mortgage Rates and Real Estate News]

Government regulators expand scrutiny of Countrywide - Aug. 8, 2008

2008-08-07T21:33:00.000-07:00

LOS ANGELES (AP) -- The Securities and Exchange Commission has escalated its scrutiny of Countrywide Financial Corp. into a formal investigation, according to a regulatory filing by Bank of America Corp.

The document, filed Thursday, did not specify what aspect of the lender the SEC's probe is focused on, although regulators launched an informal inquiry into Countrywide Chairman and CEO Angelo Mozilo's stock trades last fall.

Bank of America, which finalized its acquisition of Countrywide last month, also noted in the filing that Countrywide has responded to subpoenas from the SEC.

Representatives for Charlotte, N.C.-based Bank of America and Countrywide declined to comment beyond the filing Friday.

A call to an SEC spokeswoman in California was not immediately returned.

The Los Angeles Times reported Friday that the SEC probe centers on whether Mozilo's stock trades violated the law and whether the lender's financial disclosures misled investors.

The newspaper based its report on unnamed persons close to the investigation.

Mozilo, who is no longer with Countrywide, could not immediately be reached for comment.

Suspicious trading

Mozilo's trades of Countrywide stock began drawing negative attention last year as the company's stock price tumbled.

The executive exercised options on thousands of shares of common stock through a prearranged trading plan, but the timing of changes in the stock-selling program drew shareholder criticism.

The changes, which were made in the months before the company's stock plunged, allowed Mozilo to significantly increase his sales of Countrywide shares.

Mozilo has denied making any improper trades and has said he is cooperating with the SEC.

Since the collapse of the subprime mortgage market last summer, Countrywide has been hit with lawsuits by investors, consumers and state officials in California, Illinois, Florida and Connecticut.

On Aug. 11, a U.S. Bankruptcy Court judge in Pittsburgh is set to review an agreement in which Countrywide agreed to pay a bankruptcy trustee $325,000 to settle allegations that the mortgage lender sought improper fees or payments from bankrupt homeowners and otherwise violated bankruptcy court orders and regulations in nearly 300 cases.

Countrywide acknowledged errors in handling some debts, but it had denied any systematic effort to thwart bankruptcy protections to collect money.

Countrywide is also among the companies being investigated by the FBI as part of the agency's probe into the financial services industry in the wake of the mortgage meltdown.

Shares of Bank of America (BAC, Fortune 500) rose 73 cents, or 2.3%, to $32.25 Friday.

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[Via Home Mortgage Rates and Real Estate News]

Mortgages get more expensive - again - Aug. 8, 2008

2008-08-07T16:34:00.000-07:00

NEW YORK (CNNMoney.com) -- The good news: Mortgage giant Fannie Mae is taking steps to shore up its finances. The bad news: You're going to pay for it when you take out a mortgage.

Fannie plays a central role in the market for home mortgages by purchasing loans, securitizing them and selling them to investors. In announcing announcing a $2.3 billion loss on Friday, it also said it would make major changes that could have a significant effect on mortgage liquidity and pricing.

The company said it will increase its fees, stop buying certain high-risk loans and charge a higher risk premium for buying loans in the declining market.

"[These actions] have raised the costs of mortgage credit and reduced its availability," said Mark Zandi, chief economist for Moody's Economy.com. "Policy makers had been hoping they would move forward to provide more credit and now they're just hoping they don't pull back."

The increases were inevitable, according to Keith Gumbinger of HSH Associates, a publisher of mortgage loan information.

"The cost of mortgage credit is getting pushed higher by the issues in the marketplace," he said. "They can't reduce their market exposure and that means more expensive mortgages."

Point taken! Times are tough

Fannie increased fees for some loans by a quarter of a percentage point, based on borrowers' credit scores and the amount of their down payments. It will charge, for example, 1% (up from 0.75%) for a buyer with a credit score of 680 paying 20% down.

And Fannie (FNM, Fortune 500) doubled its "adverse market delivery charge" to 0.5%. That is an across-the-board fee assessed against every loan Fannie buys, according to a Fannie spokeswoman. Fannie first instituted the charge this spring.

"It's very negative," said Lawrence Yun, chief economist for the National Association of Realtors. "Any time there's an additional imposition of fees in obtaining a mortgage, it knocks some potential buyers out of the market."

Fannie's smaller cousin, Freddie Mac (FRE, Fortune 500), which also announced a big loss this week, has been taking similar steps to shore up in finances and reduce its exposure to risky loans.

The additional fees imposed by Fannie will hit newcomers particularly hard, according to Yun. First-time buyers are usually most on the margins and struggling to afford a home purchase. The added fees will be passed on to borrowers and could mean quarter-point increases in interest rates.

Reducing the number of first-time buyers can have a domino effect on the market. Existing homeowners looking to trade up to bigger, more expensive homes may postpone doing so because they can't sell their present home.

Bye-bye to Alt-A loans

Fannie will also eliminate buying Alt-A loans by the end of 2008. Alt-A loans, a category between prime and subprime, accounted for about 11% of the company's loans during the last years of the boom. They have been used mostly by people who couldn't or wouldn't document their incomes, their assets or both. These buyers will find it harder to obtain financing once Fannie stops buying the loans.

According to Yun, however, the cutback in Alt-A will hurt people buying second homes to rent out or resell, rather than first time homeowners.

"These are people who often rely on their good credit to buy investment properties putting little or no money down," he said.

But removing some of them from the market will decrease demand in a market already struggling with high inventory.

Fannie and Freddie, as private companies created and sponsored by the government, have to foster home ownership while satisfying their shareholders. They have to maintain profitability or risk triggering a government rescue.

"They were created to provide liquidity in times of crisis," said Yun. "If they don't do that, what's the point of having Fannie and Freddie in the first place?"

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Finding gold in foreclosures - Aug. 8, 2008

[Via Home Mortgage Rates and Real Estate News]

Finding gold in foreclosures - Aug. 8, 2008

2008-08-07T15:10:00.000-07:00

NEW YORK (CNNMoney.com) -- Hoping to score a house on the cheap by buying a foreclosed property? There are good deals out there, but the process is complicated and risky. Here's what you need to know.

There are certainly plenty of foreclosed homes on the market. In California, 40% of existing homes sold in the second quarter were foreclosures, according to DataQuick, a provider of real estate information, compared with 5.4% a year earlier.

Indeed, Fannie Mae CEO Daniel Mudd said Friday that the company is pushing hard to sell more foreclosed properties, to get them off the books. "I don't think this is a time to be holding onto REOs and hoping for a better day," he said.

Steve Dexter, author of "Prospering in the Rising Wave of Foreclosures," has bought dozens of foreclosed homes and thinks now is a good time to dive in. "It's the best way to buy, and it's time to buy again," said

There are three different stages of foreclosure, each of which presents different opportunities for buyers. The first step is to figure out which one makes the most sense for you.

Pre-foreclosure

A home goes into pre-foreclosure when a borrower has fallen behind on his payments, but the house has yet to be auctioned off.

Buyers can find pre-foreclosures by poring over the delinquency notices that lenders file with county courthouses when a borrower misses a payment.

Armed with prospects, buyers should go scouting. If they see homes they like, they should contact the owners to see if they want to sell.

"You call them or knock on their doors and say, 'I know you're having a problem and I think I can help you,' " said Alexis McGee, co-founder of Foreclosures.com.

McGee only buys when she figures she can make a profit of 30% or more; marketing and other expenses wipe out about half that by the time she resells. But people buying a house to live in might be happy with a 20% discount from market value.

Cold calling and making low-ball offers on people's homes can be difficult: Some owners are emotional, even angry. Many are trying to hold onto their houses and don't appreciate what they consider scavengers sniffing around.

"But you're not taking advantage of these homeowners," said Duane LeGate, president of HouseBuyerNetwork.com, which puts together buyers and sellers of distressed properties. "All many of them want is financial relief from bad mortgages, and you're offering it."

Indeed, some owners are open to doing what's called a short sale, which is when a buyer pays less for a house than the mortgage that is owed on it. Lenders must agree to a short sale, and will then forgive the rest of the debt.

Often, banks are reluctant to do such deals, since it requires them to take a loss. It can take months and a lot of badgering before a deal goes through, and not every buyer is up for that kind of hassle.

But as the housing market deteriorates, lenders are warming up to short sales, according to Foreclosure.com founder Brad Geisen. "It makes a lot more financial sense for them to liquidate early rather than go through the foreclosure process," he said, which can cost lenders about $50,000.

Gabe Cera recently bought one through an associate of LeGate, Raul Pineyro, owner of Cacophony Group Real Estate Services in Dade County, Fla. Cera purchased a four-bed, three-bath in Miami for about $60,000 less than what the owner's mortgage was worth.

"I'm very satisfied," Cera said. "The transaction was very smooth and quick and I think I saved a lot of money."

In buying any pre-foreclosure, LeGate advises buyers to not be turned off by dirty carpets or ugly paint jobs. That's where the best deals are.

"Anybody can go the Home Depot (HD, Fortune 500) and buy some paint and a new rug," he said.

Sheriffs' sales

In the next stage of foreclosure, homes in default are auctioned off on the county courthouse steps. These homes can be real bargains, but the process is a crap shoot.

Bidders can't inspect the property, so there's no telling how much work it needs. And there is also no telling what kind of liens there are against the home, due to unpaid taxes and so forth, which can also jack up the cost of these homes. Finally, Buyers need to come with cash, ready to put 10%-20% down on the spot, and able to pony up the rest in a matter of days.

"If you want to buy on the courthouse steps," said LeGate, "you'd better be a pro."

Even after a purchase, a deal can fall through if the current owner can come up with enough cash to repay the buyer the amount of the winning bid.

LeGate himself has bought several homes at auction, with mixed results.

"The first time, I bought, renovated and sold the house all within 29 days and made a killing," he said. "I thought I was a mini-Donald Trump. The second time, the previous owner poured cement into the pipes before he left and when I turned on the water, it clogged everything. I lost more on the second house than I made on the first."

Post-foreclosure

After a lender takes back a house, the property goes back on the market as what's called an REO (real estate owned) property. These are treated like ordinary sales, listed with a broker. Typically, bargains are not as sharp.

Author Steve Dexter advises house hunters to go to the Web sites of all the major lenders and look for REOs in their communities. Alternatively, "Get a young, hungry real estate agent who's screening REOs all the time and put them to work for you," he said. Foreclosures for sale may also be found on the sites of Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), as well as eBay (EBAY, Fortune 500).

Dexter prefers to buy REOs because the process is so clean; the title is clear and the property is delivered vacant, even if the prices aren't as good. He says one bank manager told him he usually sells REOs for 95% of listing prices, on average.

"You might not think that's too great for buyers," said Dexter, "but the listing prices are lower [than market value]," usually by 10% or more. The total discounts often exceed 15%.

Another way to buy an REO is through an REO auction. As bank portfolios of these properties have swollen, they've started to unload them en masse. Pam McKissick, chief operating officer of Williams & Williams, an auction company based in Tulsa, said her company buys big portfolios of post-foreclosure properties from lenders and then auctions them to individual buyers.

The REOs that Williams & Williams pick up are usually sold within 30 days; successful bids can be quite low. "It's a very rapid process," said McKissick, " You want to put a family back into a home quickly and bring the neighborhood back. This does that."

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[Via Home Mortgage Rates and Real Estate News]

Long-term mortgage rates hold steady - Aug. 7, 2008

2008-08-06T16:40:00.000-07:00

NEW YORK (CNNMoney.com) -- Interest rates for long-term mortgages held steady this week as the troubled housing market continued to weigh on the nation's economy, Freddie Mac reported Thursday.

The government-backed mortgage finance giant said rates for 30-year fixed-rate mortgages averaged 6.52% for the week ending Thursday, unchanged from last week.

The recent average remains lower from the same time last year when rates for 30-year fixed-rate mortgages averaged 6.59%.

The news came as the housing market - with record foreclosures and sinking home sales prices - continued to take a toll.

"The housing market is continuing to act as a drag on the economy," Frank Nothaft, Freddie Mac's vice president and chief economist, said in a statement. "Residential fixed investment subtracted 0.6 percentage points off second-quarter growth in real GDP."

Inventory still high. Mortgage applications increased slightly for the week ended Aug. 1, but were still much lower compared with the same week last year, the Mortgage Bankers Association said Wednesday.

The MBA said its Market Composite Index -- a measure of mortgage loan application volume -- was 432.6, up a seasonally unadjusted 2.4% compared with the previous week and down 33.7% from a year earlier.

"Although showing some initial signs of improvement, the inventory of unsold homes remains at historically high levels," Nothaft said.

There was some promising housing news on Thursday, however. The number of pending homes for sale rose 5.3% in June, a surprise rebound from the previous month, according to the National Association of Realtors. However, sales are still down 12.3% from last year. (Full story)

The country's homeownership rate, meanwhile, essentially held steady during the second quarter of this year, compared to the previous quarter and second quarter of 2007, according to the U.S. Census Bureau.

Rates for other types of mortgages were mixed.

Freddie Mac (FRE, Fortune 500) said 15-year fixed-rate mortgages this week had rates averaging 6.10%, an increase from last week when they averaged 6.07%. A year ago, the 15-year mortgages averaged 6.25%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 6.05% this week, down from last week when they averaged 6.07%. A year ago, the 5-year ARM averaged 6.33%, Freddie Mac said.

One-year Treasury-indexed ARMs averaged 5.22% this week, down from last week when it averaged 5.27%. A year ago, the one-year ARM averaged 5.65%.

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[Via Home Mortgage Rates and Real Estate News]

Can $4B stabilize foreclosure-plagued areas? - Aug. 7, 2008

2008-08-06T16:06:00.000-07:00

NEW YORK (CNNMoney.com) -- City officials and community activists can't wait to get their hands on nearly $4 billion the federal government is about to inject into blighted neighborhoods suffering from record foreclosures.

Opponents of the measure say the paltry sum won't do much good considering the number of vacant homes on the market - one million families are expected to lose their homes this year - and will more likely turn into a political boondoggle.

It remains to be seen which side is right. But the program - part of the massive housing rescue bill Bush enacted last month despite his own misgivings - will serve as one test of Washington's ability to mitigate the foreclosure crisis.

The U.S. Department of Housing and Urban Development is expected in late September to come up with a formula for how to distribute $3.92 billion to states and cities nationwide to turn foreclosed property to affordable housing for sale or rent.

The funds are intended to help communities deal with the flood of vacant homes, which drain public resources and drag down property values of neighboring houses.

"This money will help get neighborhoods hard hit by foreclosures back on their feet again," said Jeff Falcusan, policy advisor for the National Association of Housing and Redevelopment Officials, a trade group.

Congress mandated that the money be allocated based on the number and percentage of foreclosures, homes financed with subprime loans and homes in default or delinquency in the community. Once the formula is set, HUD has 30 days to dole out the funds. Government officials then have 18 months to put the money to use in their neighborhoods.

In addition to buying and fixing up homes, municipalities can use the money to demolish blighted structures and redevelop vacant land. The foreclosed property must be bought at a discount from its current appraised value to avoid bailing out the lenders.

Local governments could rehab the properties on their own or with the help of public housing authorities. They could also partner with community groups.

The program is also designed to increase the affordable housing stock in the community. The law mandates that the homes be sold or rented to families at or below 120% of the area median income, with one-quarter of the funds set aside for families at or below 50% of median income.

Communities "will have the opportunity to put these houses back into productive use," said Steve Adamske, communications director for the House Committee of Financial Services.

Vacant homes = trouble

Vacant properties can cause big problems for municipalities. As the number of abandoned homes multiplies, property tax revenues fall. Yet, the vacant houses often require more public resources, including frequent visits by police, health department and code enforcement officials. And they hurt property values of surrounding houses.

In Tucson, Ariz., which has been hit hard in the housing slump, abandoned pools have been a particular concern because they attract West Nile-carrying mosquitoes, said Emily Nottingham, the city's community services director. Neighbors also complain about dilapidated houses and overgrown gardens.

"It can really become an eyesore for a neighborhood," she said. Vacant houses "can attract squatters and if the weeds are overgrown, it's harder for adjoining houses to be sold. Pools turn green and attract mosquitoes."

Foreclosures are a widespread problem in Tucson. It already has 4,000 foreclosed properties on the market and is expecting the number to grow. The city is projecting 8,000 homes to enter foreclosure this year - some of which are already up for sale - and another 8,000 in 2009.

The key to using the federal funds most effectively is concentrating efforts in particular neighborhoods rather than scattering the money around town, experts said.

"Target neighborhoods where it can make a difference," said Buzz Roberts, senior vice president for policy at Local Initiatives Support Corp., a national non-profit group which focuses on rebuilding low-income communities.

Local rehab efforts

Rehabbing blighted communities is nothing new for many municipalities and community groups, experts said. Numerous efforts are underway to address the mess left behind in the foreclosure crisis, said Ali Solis, vice president for public policy and industry relations at Enterprise Community Partners, a non-profit group that develops and finances affordable housing.

For instance, Living Cities, a collaboration of corporations and philanthropies, is doling out $10 million in grants to renovate foreclosed properties. The initial recipients include Dallas, Detroit, New York and Washington, D.C.

In Cincinnati, local officials are hoping to use the federal funds to augment a $1.25 million revitalization effort already in the works, said Michael Cervay, director of community development.

The funds should allow the city to demolish or fix up hundreds of vacant homes. The city has about half of the 5,600 homes that went into foreclosure in Hamilton County in 2007. Even more foreclosures are expected this year.

"It will make a significant impact on the problem in Cincinnati," he said.

A drop in the bucket

Some foreclosure experts, however, said that the funding is too little to have any real effect, especially in the hardest hit areas. California, for example, had 209,000 homes go into foreclosure over the past year, said Sean O'Toole, founder of foreclosureradar.com, a foreclosed properties website for real estate professionals.

"$4 billion is kind of a meaningless sum," O'Toole said. "It can't possibly make a difference. You've brought a pistol to a nuclear war."

Converting foreclosed houses into livable homes may prove a big challenge for many municipalities, said David John, senior research fellow at the Heritage Foundation, a conservative think tank. He foresees a lot of the funding going to waste in poor planning or fraud.

Also, because of the weak housing market, local officials might find themselves unable to unload the houses once they are renovated at a price the recoups the repair costs, he said.

"The money could be better used for other purposes," John said. "State and local government have a rather bad record of managing this kind of activity. They don't really have much expertise in retail housing."

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[Via Home Mortgage Rates and Real Estate News]

Pending home sales tick up - Aug. 7, 2008

2008-08-06T14:03:00.000-07:00

NEW YORK (CNNMoney.com) -- The number of pending homes for sale rose in June, a rebound from the previous month, according to a report released Thursday.

The National Association of Realtors' Pending Home Sales Index rose 5.3% in June to 89 from a downwardly revised reading of 84.5 in May.

The index remains 12.3% below its level in June 2007, when it stood at 101.4.

"The vacillation of data from one month to the next indicates a housing market in transition," said Lawrence Yun, NAR chief economist. "The rise in pending home sales was broad-based with all four regions showing gains."

The number of homes under sales contracts fell more than expected in May after a surprising spike in April.

The trade group launched the Pending Home Sales index in 2001, and a reading of 100 is equal to results that first year.

The index is considered a more forward-looking indicator of home sales than the NAR's closely watched existing home sales report. Unlike existing home sales estimates, pending home sales are usually counted a month or two before a closing contract is signed.

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[Via Home Mortgage Rates and Real Estate News]

4 jobs you can do without the pros - August 1, 2008

2008-08-06T13:35:00.000-07:00

(Money Magazine) -- Some tasks you definitely shouldn't tackle yourself. Laser eye surgery is out of the question, and so is pulling your own wisdom tooth. Even around the house, you're wise to hire a pro for jobs requiring highly technical expertise, such as adding skylights or boosting electrical service.

But plenty of home improvement projects look more intimidating than they really are. If you take them on yourself, you can cut the cost in half. The reason: "Materials generally account for 30% to 50% of a contractor's fee," explains Claude Minnich, owner of Clarke Hardware, a 102-year-old shop in Culpeper, Va. Unlike standard DIY fare - painting, tiling, planting - these four jobs aren't covered in classes at the home center. But if you're comfortable with the tools required and can follow a manufacturer's instructions, you'll be fine going solo.

Plumb some benefits

Replacing a sink, toilet or faucet is easy because you don't have to run new pipes or attach new fittings. Just remove the old item and put the new one in its place.

Potential savings: $100 to $300

Time required: One to two hours

What's involved: Shut the water main and open the house's lowest-lying faucet to drain the pipes. Then remove the old fixture (reverse the installation instructions). If a connection won't loosen, spray it with WD-40; use two wrenches, one to undo the nut and the other to hold the pipe steady, to prevent breakage.

What might drive you crazy: One slip of a wrench and you'll mar that gleaming new porcelain fixture. Protect finishes near your wrench with an old towel.

Tools needed: A basin wrench ($10) for removing and installing faucets; pipe joint compound ($3) or Teflon tape ($1) for watertight seals that can be reopened later

Stonewall - your yard

With a man-made faux-stone kit - it's really concrete (unilock.com) - anyone with a strong back can lay a retaining wall.

Potential savings: $1,000 to $3,000

Time required: One to five days, depending on the condition of the site and the size of the wall

What's involved: To create a base for the wall, you have to dig out a few inches of soil, lay down a bed of gravel, compact it, then lay down sand and compact that. Afterward, building the wall is a snap: You just set the "stones" in place one row at a time, applying a special glue between each row.

What might drive you crazy: Lugging around heavy chunks of cement

Tools needed: A masonry chisel ($15) and rubber mallet ($40) for cutting stones, plus a gas-powered plate compactor ($80 a day) to make quick work of laying the base

Lighten up

Your fear of electricity is well founded. Misguided DIYers can cause fires or even zap themselves. But you don't need an intimate knowledge of circuitry or voltage to replace a light fixture, change a wall switch for a dimmer or swap new outlets for old ones. If you can turn screws and twist a few wires together, you're good.

Potential savings: At least $100 (the minimum electricians charge for a visit)

Time required: 10 to 30 minutes for each electrical item

What's involved: First, turn off the power at the circuit breaker. (Tip: Throw the main switch for the whole house to be perfectly safe.) Then back out the screws holding the switch, fixture or outlet in place and loosen the screws or wire nuts (colorful plastic caps), attaching the item to the house wiring. Then you'll have to reconnect that wiring to the corresponding contacts on the new unit you're installing and fasten it in place.

What might drive you crazy: Deciphering the instructions, like figuring out which way to wrap wires around screws (answer: clockwise)

Tools needed: A noncontact voltage tester ($11) to confirm that power is off and a circuit tester to show whether you've wired an outlet correctly ($6). Then let there be light.

Hustle and floor

You already know about the kind of laminate flooring (such as Pergo) that snaps together without glue, but, says Gene Hamilton, author of "Home Improvement for Dummies," "there are now carpet, cork and linoleum products that are just as easy."

Potential savings: $300 to $1,000 (based on a typical charge of $2 to $7 a square foot by flooring installers)

Time required: Four to six hours for a large (12-foot-by-12-foot) room

What's involved: For cork or linoleum tiles, place the first row against one wall of the room and gradually move across to the other side, snapping the tile edges together, working right over the existing floor. With carpet tiles, start by measuring out and marking two guidelines that divide the room into even quadrants. You then lay the tiles against those lines and work toward the walls.

What might drive you crazy: You'll need to pry off baseboards before beginning the job and replace them at the end. Proceed slowly. If you break them, you'll have to cut new pieces later.

Tools needed: For tiles, you'll need a chalk line ($10) to mark those guidelines and a framing square ($10) to make sure they're straight. For linoleum or cork, use a handsaw ($15) or, even better, spring for a power circular saw ($50 to $150).

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[Via Home Mortgage Rates and Real Estate News]

Snapshot of American diversity - Aug. 7, 2008

2008-08-06T08:11:00.000-07:00

NEW YORK (CNNMoney.com) -- Maricopa County in Arizona added more people than any other in the nation last year, according to a U.S. Census Bureau survey released Thursday.

Maricopa, which includes Phoenix, gained 102,000 residents, of which 79,000 were minorities. Of those residents, 60,700 people are Hispanic, making up nearly 77% of newcomers, according to the census.

All told, Maricopa had a minority population of 1.6 million, or 41% of its residents.

The annual survey tracks age, sex and race across counties with 10,000 or more people.

"It's a fast-growing state and Maricopa is in the heart of that," said Greg Harper, a demographer with the Census Bureau.

The survey - based on estimates of U.S. population for July 1, 2007 - shows that nearly one in 10 counties in America has a population of more than 50% minority residents. This year's tally comes to 302 counties, down from 303 counties in 2006.

New Orleans on the rise

The 2007 survey is also the first to show a resurgence of people to the counties devastated by Hurricane Katrina in August 2005.

Orleans Parish - home to New Orleans - had the largest increase in black population, gaining 20,800 African-Americans.

Neighboring St. Bernard Parish was the fastest growing county in the nation, with a 97.3% increase in population, according to Harper.

"To some degree, the New Orleans area is bouncing back," Harper said. "This growth is a rebound from Katrina."

Diverse L.A. County

Los Angeles County led the nation in terms of diversity: it had the country's largest minority population, with 7 million people or 71% of the county's total. L.A. county was home to one in every 14 of the nation's minority residents.

The survey showed that the county had the largest Hispanic, Asian and American Indian and Alaska native population in the nation.

The county also had the nation's largest population of white residents, with 2.9 million people.

Oldest and youngest counties

La Paz County, Ariz., had the country's oldest population, according to the census. With 32% of its population 65 or older, it led 24 counties with at least one-quarter of their populations 65 or older.

According to the survey, four of the 10 counties with the highest proportion of children younger than 5 were in Texas. In 26 counties, 10% or more of total population was younger than 5.

Countywide change across the nation

Largest concentration of Hispanics: Starr County, Texas, 97.3%.

Largest African-American population: Cook County, Ill., 1.4 million.

Largest concentration of blacks: Claiborne County, Miss., 84.5%.

Largest increase in Asians: Santa Clara County, Calif., 18,400.

Largest concentration of American Indian or Alaska Native population: Shannon County, S.D., 87%.

Largest concentration of whites: Magoffin County, Ky., 98.9%.

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Mortgage applications rise 2.8% last week - Aug. 6, 2008

2008-08-05T11:42:00.000-07:00

WASHINGTON (AP) -- Mortgage application volume rose 2.8% during the week ending Aug. 1, according to the Mortgage Bankers Association's weekly application survey.

The MBA's application index rose to 432.6 from 420.8 a week earlier, which was the lowest reading of the year.

Refinance volume increased 4.4%, while purchase volume grew 1.8% during the week. Refinance applications accounted for 35.9% of all applications during the week, compared with 35.2% during the previous week.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 432.6 means mortgage application activity is 4.326 times higher than it was when the MBA began tracking the data.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.

Application volume rose from its 2008 low as interest rates were mixed. The average rate for traditional, 30-year fixed-rate mortgages fell to 6.41% from 6.46% during the prior week.

The average rate for 15-year fixed-rate mortgages - often a popular option for refinancing a home - rose to 6.02% from 5.98%.

Rates for one-year adjustable-rate mortgages fell to 7.17% from a 2008 high of 7.25%.

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[Via Home Mortgage Rates and Real Estate News]

A good time to lock in mortgage rates - Aug. 4, 2008

2008-08-03T08:22:00.000-07:00

NEW YORK (CNNMoney.com) -- With mortgage interest rates on the rise, home buyers can save considerable cash by locking in a reasonable rate deals when they find one.

During the housing boom, interest rates were extremely low - generally between 5.5% and 6.5% - and very stable. So borrowers often didn't bother to ask their lender to lock in their rates, which is when a lender promises to give a borrower a certain interest rate, regardless of market fluctuations. If one good deal disappeared, another one was generally right around the corner.

But today the mortgage market is very volatile, and rates are trending upwards. So losing out on a good deal may mean it's gone forever. If buyers see a bargain, say experts, they should pounce.

"If you hear of a rate that seems to be much better than the rest of market, get it in writing and lock it in," said Steve Habetz, a veteran mortgage broker in Connecticut.

Mortgage giant Freddie Mac (FRE, Fortune 500) reported Thursday that the average rate for a 30-year fixed stood at 6.52%, up from May when rates were under 6%.

Rates on the rise

And Bankrate.com analysts including Cameron Findlay, the chief economist for LendingTree.com, Mick Larson, real estate analyst at Weiss Research and Dan Dowling, president of United Mortgage Capital Corp. in Altamount, Fla., all expect rates to go up in the next six weeks.

With the threat of inflation growing and investors wary about buying mortgage securities, some forecasters have predicted rates will hit at least 7% by the end of the year.

For every half point interest rate increase, the monthly payment on a typical mortgage of $200,000 jumps nearly $70. That adds up to more than $800 a year, and $8,000 in the first 10 years of a 30-year mortgage alone.

Locking a rate is easy, as long as you have a contract or at least a binder on a home. Just tell your mortgage broker and he or she will give you a commitment in writing. Locks are available for as long as 60 days, according to Habetz, at very low cost.

Locking in for 60 days may cost only an eighth of a point extra, turning a 6.5% loan into a 6.625% one. Paying that extra eighth of a percent makes sense if the locked rate is below market, or if you expect rates to rise.

"More than 60 days and the lender is usually looking for cash up front," said Habetz.

Habetz recently had an offer from Wells Fargo (WFC, Fortune 500) several weeks ago that beat anything else available. It was for a 5-year adjustable rate mortgage (ARM) with an introductory rate of 4.875% - at least a full percentage point lower than competing offers.

"It lasted only two or three days," he said, "and all we had time to do was to get the customers we were already working with into the loan."

Those customers probably saved themselves $5,000 or so for every $100,000 they borrowed over the first five years. The amazing part of this story, to Habetz, was that not all his clients took advantage of the offer.

"Some of my customers said, 'That's an attractive offer. If it's that good, it will probably get better,'" he said.

Wrong. It only got worse, and those people locked themselves out of a great deal.

But locking in your rate isn't entirely risk-free. After all, rates might actually go down.

"When rates go down," said Habetz, "most lenders won't take [your rate] down with them unless rates drop substantially. Then they may give you the new rate plus an eighth of a point."

Certainty in an uncertain market

But that scenario appears unlikely.

Concerns about inflation are helping to push rates higher. "Inflation has gone from the back burner to the front," said Greg McBride, a senior financial analyst for Bankrate.com.

At the same time, nervous investors in mortgage backed securities, are demanding higher rates for buying these bonds in what they deem a very risky market. That translates into higher rates for borrowers.

So locking in a good deal now should mean a lower rate for most borrowers. And besides saving them money, a lock should take some of the uncertainty out of financing a home purchase, since buyers can determine exactly what their monthly home ownership expenses will be several weeks before closing.

"There are times in your financial life when you should be aggressive and there are times when you should be conservative," said McBride. "When you're buying a house and looking at mortgage rates, that's a time to be conservative."

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Freddie enlists loan servicers in foreclosure prevention - Jul. 31, 2008

2008-07-30T16:43:00.000-07:00

NEW YORK (AP) -- Freddie Mac is doubling the amount of money it pays loan servicers for each successful mortgage workout among other measures to keep struggling borrowers out of foreclosure, it said Thursday.

The mortgage financier is also giving more time to negotiate workouts in states with fast foreclosure processes and will reimburse servicers for door-to-door outreach.

Freddie will pay $500 for each repayment plan and $800 for each loan modification on Freddie-owned mortgages. Servicers will receive $2,200 for each short sale where Freddie accepts less than the full amount owed on the mortgage.

In some states and Washington, D.C., the government-sponsored entity will give up to 10 months from the due date of the last payment to find sustainable workouts for strapped borrowers. These states allow a lender to foreclose in less than 10 months.

The affected states are Alabama, Alaska, Arizona, Arkansas, California, Georgia, Hawaii, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, North Carolina, Rhode Island, Tennessee, Texas, Virginia, West Virginia and Wyoming.

Freddie also will reimburse a servicer up to $15 per mortgage for leaving a door hanger and up to $50 per mortgage for knocking on a door that results in the borrower contacting their servicer.

These new policies go into effect Aug. 1. The outreach reimbursement expires March 31, 2009.

Shares of Freddie (FRE, Fortune 500) fell 25 cents, or 2.9%, to $8.48 in midday training.

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Subprime fraud ran rampant in New York - Jul. 31, 2008

2008-07-30T15:25:00.000-07:00

NEW YORK (CNNMoney.com) -- Mortgage scammers took advantage of loopholes in New York State lending laws to defraud homeowners and lending institutions all over the state, according to a new report released Thursday.

The New York State Commission of Investigations reported that the state's mortgage borrowers need more regulatory protection from predatory lenders. It also linked subprime loans closely to New York's growing foreclosure problem; in 2007, 59% of all foreclosures statewide involved subprime loans.

New York had 39,000 properties with foreclosure filings in 2007, according to RealtyTrac, the online marketer of foreclosed properties, ranking eighth in the nation behind states like California, Nevada and Florida.

"The principle focus of this investigation was subprime mortgage fraud," stated the Commission's chairman, Alfred Lerner, in a press release accompanying the report, "but it was impossible not to recoil at the extremely worrisome statistics in the subprime lending market in general. We are seeing foreclosures among New York's subprime mortgage holders at alarming rates, a situation made far worse by unscrupulous appraisers and brokers."

A 400 hour workweek

Many of the most egregious cases involved clearly predatory lending practices in which there was never any possibility that the borrowers could afford to pay off their loans.

In one example from 2006, Suzette Francis, a woman with two young children, no assets, working as a $10-an-hour security guard and living in a homeless shelter, obtained a mortgage for $470,000 that, as the report stated, "exhibited...every characteristic and feature associated with dangerous subprime loans."

Francis had down payment and no proven income or assets. Her adjustable rate mortgage started at 10.8% and was capped at 16.85%. At that rate, even her initial monthly payment came to more than $4,400. She would have to work 400 hours a month just to pay her loan.

"I'm, like, in a million dollar debt in housing and cash poor," Francis told the Commission while testifying earlier this year.

The fact that this kind of lending went on in New York, which has relatively strong lending regulations, suggests that similar abuses may have been even more widespread in states with more relaxed laws.

Targeting minorities

Particularly targeted all over the nation have been minority communities. The Commission found that, all other things equal, New York state African-American and Hispanic borrowers were twice as likely to have subprime loans as whites.

"A lot of 'one-stop-shops,' where real estate agents are also mortgage brokers, operate in minority neighborhoods," said Mary Biunno, senior assistant counsel for the Commission, "and they rope in a lot of people."

Some of these operations profit by giving clients poor advice in order to get fees and commissions for arranging sales and loans. They provide appraisers and attorneys who work for them rather than for the clients.

"Customers in minority communities eligible for prime loans have been pushed into taking out high-risk subprime loans by shady mortgage brokers," the report said.

The Commission issued several recommendations to avoid future problems including:

Instituting standardized regulations governing the industry which apply to all the professionals - real estate agents, mortgage brokers and loan officers, attorneys and appraisers. All must be licensed and fulfill educational requirements.

Banning the practice of brokers taking on dual rolls. The report stated, "The potential for conflict of interest and outright criminality is so great [when one] individual acts as both real estate broker/agent and mortgage broker...in a single...transaction [it] should be prohibited.

Improving borrower education and outreach efforts to draw more borrowers into financial literacy programs. The state should consider mandating pre-purchase financial counseling for all subprime borrowers.

It will be a challenge to follow through on these recommendations, since federal regulations take precedence over state laws, nullifying New York's attempts to protect consumers. So the Commission also recommended that New York solicit cooperation from federal regulators such as the Federal Reserve, FDIC and the Office of the Comptroller of the Currency.

At a minimum, according to the Commission, national banks should be requested to share data on subprime loans with the states.

The single best piece of advice that Biunno had for anyone buying a home is to hire their own attorney.

"It may add to the expense a little," she said, "but when people go to buy a home, they should have a trusted attorney and they should never take a recommendation from a real estate agent."

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Mortgage rates drop as commodities ease - Jul. 31, 2008

2008-07-30T15:15:00.000-07:00

NEW YORK (CNNMoney.com) -- Mortgage rates fell slightly this week according to a weekly report released Wednesday, as lower oil prices briefly ease fears of price inflation.

The Primary Mortgage Market Survey from mortgage finance company Freddie Mac said that rates of 30-year fixed-rate mortgages (FRMs) averaged 6.52% for the week ended July 31 with an average 0.7 point discount, down from an average 6.63% last week, and down from an average of 6.68% recorded during the same week last year.

The 15-year FRM averaged 6.07% this week with an average of 0.6 point, down from 6.18% last week, and down from 6.32% last year.

A point, or "discount point," can be purchased at the time of closing to decrease the mortgage rate. Each point costs 1% of the loan amount and each point that a borrower purchases lowers the the loan interest rate.

Five-year adjustable-rate mortgages (ARMs) averaged 6.07% this week, with an average 0.6 point, down from last week when it averaged 6.16%. A year ago, the 5-year ARM averaged 6.29%.

One-year ARMs averaged 5.27% this week with an average 0.6 point, down from last week when it was 5.49%. At this time last year, the 1-year ARM averaged 5.59%.

"Mortgage rates moved lower this week as a drop in commodity prices eased market concerns over inflation pressures," said Freddie Mac chief economist Frank Nothaft in a statement.

The price of gasoline at the pump continued to fall below $4 a gallon as crude oil prices have fallen nearly $23 a barrel over the past several weeks from its peak of $147.27 on July 11.

"Yes, there is some influence in hope for less inflation pressure, but we'd need a more extended period of these softening prices" to see a significant decline, said Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information.

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Hope Now reports record mortgage workouts - Jul. 30, 2008

2008-07-29T14:37:00.000-07:00

NEW YORK (CNNMoney.com) -- A record number of American homeowners are seeking - and getting - help to solve their mortgage woes.

According to the Hope Now coalition of mortgage lenders, servicers, investors and community advocacy groups, more than 76,000 at-risk mortgage borrowers had their loans permanently modified in June to make them more affordable, with lower interest rates, reduced principal or both. That's up about 9% from May and 26% from January.

Another 105,000 homeowners were given repayment plans, which means that they'll have extra time to make up missed payments. Repayment plans, which don't reduce a borrower's debt load and are generally considered to be less effective at helping homeowners, made up about 58% of all the mortgage work outs in June.

"The industry continues to accelerate the pace at which it is helping homeowners and expects this positive trend to continue," said Hope Now's Executive Director Faith Schwartz.

Hope Now says it has helped a total of 1.9 million homeowners since its program launched in July, 2007.

But all this has still failed to stem the rising foreclosure tide. The coalition reported that more than 82,039 people lost their homes to foreclosure during the month, up 12% from May. This flood of vacant homes on the market is pushing prices down further. On Tuesday, the S&P/Case-Shiller 20-city Home Price Index showed that in May home prices dropped a record 15.8% from a year ago.

A new law

The Hope Now report was released just hours after President Bush signed the massive housing rescue bill, which allocates $300 billion to help at-risk borrowers refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration.

That will give Hope Now's 26 members another means to help homeowners. Under the bill, lenders and servicers must voluntarily lower borrower's mortgage balances to 90% of current market value, and pay the FHA a fee equal to 3% of the new principal.

The group also reported the results of a survey of its members it conducted to determine the extent of the industry's exposure to subprime ARM resets.

It found that about 928,000 of these loans had been scheduled for reset during the first half of 2008. Of that total, some 382,000, or 41%, have been refinanced, while 57,000, or 6% of them, have been modified and given more favorable loan terms. Less than 1% of these borrowers who were current with their payments when their loan reset went into default.

Better guidelines

Hope Now recently introduced a number of revised policies in order to help more delinquent borrowers stay in their homes.

It has pledged faster response times to borrowers seeking work outs. That means its members will acknowledge work out requests within five days, keep borrowers informed on the status of the work outs and give them either an approval or denial, within 45 days.

Hope Now has also stepped up its outreach efforts, making sure at-risk borrowers are aware of work out options. Its members are sending letters to subprime adjustable rate mortgage (ARM) borrowers 120 days before their loans reset warning them that their payments will go up soon, and offering credit counseling.

Additionally, the coalition has teamed with community groups to participate in 14 massive foreclosure prevention work shops around the country, which put borrowers together with credit counselors and lenders to quickly reach workable solutions to mortgage payment problems.

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Mortgage applications hit 2008 low, MBA survey says - Jul. 30, 2008

2008-07-29T12:12:00.000-07:00

NEW YORK (AP) -- Mortgage application volume tumbled 14.1% during the week ending July 25, hitting its lowest level of the year, according to the Mortgage Bankers Association's weekly application survey.

Volume fell even though interest rates on fixed-rate mortgages retreated from sharp increases a week earlier.

Refinance volume plunged 22.9% during the week, while purchase application volume fell 7.8%. Refinance applications accounted for 35.2% of total application volume during the week.

The overall application index fell to 420.8 from 489.6 a week earlier.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked such data. The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.

The average rate for traditional, 30-year fixed-rate mortgages fell to 6.46% from 6.59% during the previous week. Rates for 15-year fixed-rate mortgages - often a popular option for refinancing a home - fell to 5.98% from 6.10%.

The average rate for one-year adjustable-rate mortgages rose to 7.25% from 7.16% a week earlier.

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How the housing rescue bill can help you - Jul. 30, 2008

2008-07-29T11:50:00.000-07:00

NEW YORK (CNNMoney.com) -- President Bush signed a $300 billion housing rescue bill Wednesday aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac.

After the law kicks in on Oct. 1, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA).

The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program - but the bill allows for as many as 1 million or 2 million borrowers to participate in the program.

Here's what homeowners need to know.

Who's eligible?

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.

They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

How can I apply?

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development.

How does the refinancing process work?

This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In areas where prices have plummeted by as much as 20%, that will mean a substantial loss for the lender.

But lenders won't sign off on a workout unless they think that they'll lose less money on that than they would by allowing a home to go through the costly foreclosure process.

Each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks will do a new appraisal to determine the home's current value, as well as examine and verify income statements, bank accounts, job histories and credit scores.

Based on that new appraised home value, the FHA lender must determine how much the original lender has to reduce the original mortgage, so that it will reflect 90% of the home's market value.

If the original lender agrees to the writedown, the new lender buys the old loan and takes over the reworked mortgage.

As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal.

What does it cost?

There should be little up-front costs for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher interest rate.

However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually.

Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

Plus, they'll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs.

After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even after factoring in the FHA fees.

In areas that have sustained huge price drops, such as Sacramento, Calif., where prices have fallen by about 30% over the past year, some loans might be reduced by more than 40%.

Additionally, the FHA loans carry reasonable interest rates, which are fixed for the life of the loan, as opposed to a subprime adjustable-rate mortgage that can jump higher every six months.

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Bush signs housing rescue bill into law - Jul. 30, 2008

2008-07-29T11:26:00.000-07:00

NEW YORK (CNNMoney.com) -- President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac.

The Senate voted 72-13 in favor of the bill on Saturday, after the House passed it three days earlier.

"We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. "The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes."

The new law, one of the most far-reaching on housing in decades, marks the centerpiece of Washington's efforts to address the nation's housing meltdown.

The legislation has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator.

The White House last week reversed its long-standing threat to veto the bill. In fact, the administration still objects to parts of the legislation, including aid to states to buy foreclosed properties.

But the president decided to sign it since "oversight of the housing government sponsored enterprises (GSEs) and the new temporary authorities requested by [Treasury] Secretary [Henry] Paulson are urgently needed now, and they'll contribute to confidence and stability in housing and financial markets," Fratto said last week.

Helping at-risk borrowers

Provisions that will most directly affect consumers and communities include:

A larger role for the Federal Housing Administration. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value.

The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - will be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.

While the law authorizes the FHA to insure up to $300 billion in loans, the CBO estimates that the agency is only likely to insure up to $68 billion and help keep roughly 325,000 people in their homes. Those estimates were based on the CBO's assessment of who is likely to qualify under the program and accounts for a certain number likely to default anyway.

(Here are more details on this provision.)

A stronger regulator for the GSEs. The new regulator will have a greater say over how well funded the two government sponsored enterprises (GSEs) are - a major concern in the markets that has sent stocks in both companies plunging in the past two months.

A permanent increase in "conforming loan" limits. The law will permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000.

The FHA maximum loan limits for high-cost areas would also increase to a maximum of $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because those mortgages are more likely to be traded if they are considered conforming.

A new home-buyer credit. The new law includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.

A ban on down-payment assistance from sellers. The new law eliminates a program that has allowed sellers to provide down payment assistance for FHA loans.

The law would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.

A new affordable housing trust fund. The law establishes a permanent fund to promote affordable housing. The fund will be paid for by fees from Fannie and Freddie.

Grants to states to buy foreclosed properties. The law grants $4 billion to states to buy up and rehabilitate foreclosed properties. The White House has opposed such funding, contending that it will benefit lenders and not homeowners.

Bolster Fannie and Freddie

A late and controversial addition to the new housing law provides temporary authority for the Treasury to lend a financial hand to Fannie Mae and Freddie Mac if the Treasury deems it necessary to help stabilize markets.

Concerns over whether Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) will have enough money to weather future losses in the housing market has sent shares plummeting in recent weeks. Since the beginning of June, Fannie's stock price has dropped 57% and Freddie's plummeted 66%. For the past year, they're both down roughly 85% as of the end of trade on Friday.

Fannie and Freddie guarantee the purchase and trade of mortgages and own or back $5.2 trillion in mortgages.

The law includes provisions that let Treasury offer Fannie and Freddie an unlimited line of credit and buy stock in the companies. The provisions expire in 18 months.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the companies could leave taxpayers with a fat bill to pay.

Treasury Secretary Paulson has said that merely having the powers in place may boost confidence in the two companies enough to preclude the need for Treasury to step in.

The Congressional Budget Office last week estimated the potential cost of a rescue could be $25 billion. CBO said there is probably a better than 50% chance that Treasury would not need to step in. It also said there is a 5% chance that Freddie's and Fannie's losses could cost the government $100 billion.

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Feds cracks down on mortgage fraud - Jul. 30, 2008

2008-07-29T07:49:00.000-07:00

NEW YORK (CNNMoney.com) -- While Congress and the Bush administration are focusing on bailing out struggling homeowners and financial companies, another group of federal officials are going after the people who helped propel the country into the mortgage crisis.

The FBI's Mortgage Fraud Task Force, which works with federal, state and local law enforcement officials across the United States, has ramped up its work. Its targets: mortgage brokers, lenders, appraisers and professionals who defraud homeowners and bankers.

A federal grand jury is looking into three large players in the housing market - Countrywide Financial, IndyMac and New Century Financial - the Los Angeles Times reported last week. All three succumbed to the mortgage meltdown. The paper said that investigators are also looking into whether Countrywide founder Angelo Mozilo gave mortgage deals to powerful friends and politicians, including members of Congress.

In recent weeks, law enforcement officials have descended on those suspected of fraud. This month alone, mortgage professionals in Maryland, Florida, Washington and elsewhere have been charged with bilking lenders and homeowners out of millions of dollars.

These charges come on the heels of the U.S. Justice Department's roundup of more than 400 people - accused of inflicting more than $1 billion in losses - who were caught up in the latest nationwide sweep named Operation Malicious Mortgage.

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind of millions of American homeowners," Deputy Attorney General Mark Filip said in June.

Mortgage pros involved in most fraud

Mortgage schemes come in many flavors, but the most common by far are conducted by industry insiders. Some 80% of all fraud losses involve collaboration or collusion by professionals, which is known as "fraud for profit," according to the FBI.

Often the schemes involve inflated appraisals, falsified documents and fake buyers. The crooks take as much equity as they can out of a house before they stop making mortgage payments, usually leaving the lender stuck with the property.

In Las Vegas earlier this month, five people pleaded guilty in a scheme that cost banks $17 million. They were involved in recruiting people to pose as homebuyers, falsifying loan applications and then defaulting on mortgages. Six more people are awaiting trial in the case.

In other schemes, professionals steal people's identities and credit histories to qualify for loans. Sometimes, the sham involves flipping a house from buyer to buyer, inflating its value, before abandoning it.

In some cases, industry insiders claim to help delinquent borrowers save their homes from foreclosure, but actually take the title of the home, strip out the equity and then desert it.

In mid-July, law enforcement officials charged a 36-year-old Maryland man with defrauding homeowners facing foreclosure. In the case, the man conspired with the owners and employees of the Metropolitan Money Store to dupe struggling borrowers, telling them they could keep their homes and repair their credit if they turned over the title of their houses. Instead, the FBI charges, they stripped the homes of their equity and let them fall into foreclosure. Nine defendants face a variety of charges, including mail fraud, wire fraud and money laundering. He is looking at a maximum sentence of 30 years in prison and $1 million fine.

The other type of fraud, known as "fraud for housing," involves a borrower falsifying his income or employment to qualify for the loan.

While acknowledging that the feds can't turn a blind eye to mortgage fraud, industry observers question how effective their efforts will be at stemming such crimes. Some say the problem is just too widespread, while others maintain the key to stopping mortgage fraud lies in closer monitoring of the lenders and other professionals.

"The deterrent will come through better regulation and underwriting standards," said Todd Foster, a former federal prosecutor and FBI agent who is now a defense attorney in Tampa. "I'm not sure these prosecutions will have as great an effect as that."

Fraud reports soar with home prices

Law enforcement agencies started ramping up their investigations into mortgage fraud earlier this decade after seeing a spike in banks filing reports of suspected criminal activity. In 2004, they formed a mortgage fraud task force with local and state officials and, within 16 months, had charged more than 300 people with crimes ranging from doctoring loan documents to inflating property appraisals.

There are now 42 regional mortgage fraud task forces nationwide charged with rooting out criminal activity in the housing market, with many of them created after the sector starting imploding last year. One of the most recent was a squad in Southern California, a hotspot for mortgage schemes, which was assembled in June.

"We don't know the depth of the problem," said Sharon Ormsby, the FBI's section chief of financial crimes. "We are trying to be diligent and target those subjects who will do their communities the most harm."

The FBI has 180 agents devoted to the sector. They are juggling more than 1,400 investigations, double the caseload it had three years ago. It is also probing 22 corporations for subprime-related schemes.

Law enforcement officials have been busy in recent months. In the first four months of the year, the FBI obtained 189 indictments and 122 convictions, on top of 321 indictments and 260 convictions last year. The top markets for mortgage fraud include Florida, Georgia, Michigan, California and Illinois.

The housing market's collapse doesn't spell the end of mortgage fraud, Ormsby said. Foreclosure scams will likely increase, for instance.

"The market, whether up or down, doesn't affect fraud," she said. Nowadays, the criminals "just need to be more creative."

Clamping down on mortgage fraud is tough, says Patricia McCoy, law professor at the University of Connecticut. Since the players are often small, law enforcement has to go after "many small fish in many different towns" nationwide, she said.

While many blame the regulators for being too lax during the housing boom, McCoy said officials could have ramped up their efforts earlier too. It might have encouraged lenders to increase their oversight.

"If the FBI had been much more serious about mortgage fraud, they might have gotten the lenders to be serious about taking fraud prevention measures, she said.

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Home prices drop record 16% - Jul. 29, 2008

2008-07-28T13:07:00.000-07:00

NEW YORK (CNNMoney.com) -- May home prices dropped a record 15.8% from a year ago, according to the S&P/Case-Shiller Home Price Index of 20 cities. It was the 22nd consecutive month of decline recorded by the index. Prices fell 0.9% from April to May.

Each of the 20 metro areas covered by the index posted annual declines; nine posted record lows and 10 cities recorded double-digit drops.

The Case-Shiller 10-city Index posted a year over year decline of 16.9%, and a 1% month over month dip. Both the 10-City Composite Index and the 20-City Composite Index are reporting record annual declines.

"Since August 2006, there has not been one month where we have seen overall price increases, as measured by the two Composites," said David Blitzer, Chairman of the Index Committee at Standard & Poor's.

Case-Shiller has been tracking the 20-city index for 19 years, while the 10-city index is 21 years old. The current price decline streak has been unprecedented in both length and depth. Starting in April 1990, the 10-city index streaked down for 10 consecutive months. But that total loss was just 6.5%.

Since the 10-city index peaked in July 2006, it has plunged 19.8%. The 20-city is down 18.4%.

The 20-city index's Sun Belt cities, which recorded the biggest price gains during the boom, have led the charge down. Las Vegas prices have plummeted 28.4% during the past 12 months; Miami prices fell 28.3%; and Phoenix homes lost 26.5% of their value.

Midwest metro areas, which have endured tough economic times for years, are also feeling the pain. Detroit prices are off 17.4% for the 12 months, and Cleveland is down 8%.

Northeast cities like Boston, down 6.2% for the 12 months, and New York, off 7.9%, have been less volatile than the Sun Belt.

The smallest year-over-year declines were recorded by Charlotte, N.C. (down 0.2%), Dallas (down 3.1%), and Denver (down 4.8%).

Optimistic observers might point out that price declines appear to be slowing. The 10-city index's 1% month to month dip in May was less than April's, when it registered a 1.5% decline, while the 20-city index fell just 0.9% in May after dropping 1.3% in April.

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Paulson, banks join forces on covered bonds - Jul. 28, 2008

2008-07-27T19:21:00.000-07:00

NEW YORK�(Fortune) -- The government is reaching across the Atlantic in its latest bid to revive the U.S. housing market.

On Monday, Treasury Secretary Henry Paulson laid out guidelines for banks seeking to issue so-called covered bonds as a way to finance home mortgages. Four big U.S. lenders - Citi (C, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) - said they support the venture.

By issuing covered bonds, a bank borrows money from investors, using assets on its balance sheet - such as home mortgage loans - as collateral. Until now, covered bonds haven't been issued in the U.S., though the concept has long been in use in Europe.

But with the housing bust threatening to push the economy into recession - the International Monetary Fund warned Monday that "a bottom for the housing market is not visible" - policymakers and financial institutions have been trying out new ideas in hopes of making mortgages more available, while breaking the cycle of falling house prices and rising foreclosures.

"I believe covered bonds have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions by providing a new funding source that will diversify their overall portfolio," Paulson said. The efforts of the big banks would "kick-start" the development of the U.S. covered bond market, he added.

"We believe a robust U.S. covered bond market would provide an additional stable and cost-effective funding source for banks to originate and hold mortgages on their balance sheet," the banks said in a joint statement. "We look forward to being leading issuers as the U.S. covered bond market develops, with programs consistent with the FDIC and Treasury statements."

The move comes as shares of banks and brokerage stocks posted their latest sharp decline and investors fret over the fallout of falling house prices on the health of financial institutions. While the Federal Reserve has slashed short-term interest rates over the past year, partly in response to the sharp decline of house prices, mortgage rates recently soared to highs last seen at the turn of the century.

Banks in Europe have used covered bonds as a primary source of mortgage finance for many years, and the market for covered bonds is worth more than $3 trillion.

Until recently, American lenders have preferred to sell their mortgage loans to investors as securities, in the process known as securitization. But when loans to borrowers with poor credit histories started souring at unusually rapid rates last summer, investors fled the market for mortgage-backed securities - a trend that marked the beginning of a credit crisis that has choked off lending in the housing market and, increasingly, elsewhere in the economy.

Monday's move comes on the heels of the Senate's approval of a bill that gives the Treasury the authority to buy shares in two struggling U.S. mortgage firms: Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). Fannie and Freddie are the biggest providers of mortgage finance in the nation, through their guarantee of mortgage-backed securities issued by others and the purchase of mortgages for their portfolios.

With U.S. house prices having plunged at a double-digit percentage rate over the past year, fears have arisen on Wall Street that Fannie and Freddie will face losses that will eat through their thin capital cushions. At the end of last quarter, Freddie held some $800 billion in mortgage loans and other assets against shareholder equity - a measure of net worth - of just $16 billion.

Paulson said in a speech before the Federal Insurance Deposit Corp. earlier this month that the use of covered bonds might be one way to "increase the availability and lower the cost of mortgage financing to accelerate the return of normal homebuying activity."

Still, while Europe's covered bond market is certainly large, it's no stranger to the fears that have shaken other debt markets around the world. The yield on covered bonds sold in Europe by the two U.S. banks that have sold the bonds - Washington Mutual (WM, Fortune 500) and Bank of America - have soared since those offerings were made in 2006, Bloomberg reports.

Paulson said he sees the expansion of covered bond sales into the U.S. as just one part of the government's effort to bolster market confidence. "There is no silver bullet here," Paulson said Monday.

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How the housing rescue bill can help you - Jul. 26, 2008

2008-07-25T15:58:00.000-07:00

NEW YORK (CNNMoney.com) -- The Senate on Saturday passed a $300 billion housing rescue bill aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac.

President Bush is likely to sign the bill into law within days. After the law kicks in on Oct. 1, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA).

Here's what homeowners need to know.

Who's eligible?

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

How can I apply?

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development.

How does the refinancing process work?

But lenders won't sign off on a workout unless they think that they'll lose less money on that than they would by allowing a home to go through the costly foreclosure process.

Based on that new appraised home value, the FHA lender must determine how much the original lender has to reduce the original mortgage, so that it will reflect 90% of the home's market value.

If the original lender agrees to the writedown, the new lender buys the old loan and takes over the reworked mortgage.

What does it cost?

Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even after factoring in the FHA fees.

In areas that have sustained huge price drops, such as Sacramento, Calif., where prices have fallen by about 30% over the past year, some loans might be reduced by more than 40%.

Additionally, the FHA loans carry reasonable interest rates, which are fixed for the life of the loan, as opposed to a subprime adjustable-rate mortgage that can jump higher every six months.

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Senate poised to pass housing rescue package - Jul. 26, 2008

2008-07-25T10:37:00.000-07:00

NEW YORK (CNNMoney.com) -- In a rare weekend session, the Senate on Saturday is expected to pass a landmark housing bill that will offer up to $300 billion in loans for troubled homeowners and establish a government rescue plan for mortgage finance giants Fannie Mae and Freddie Mac.

The House passed the bill on Wednesday just hours after President Bush reversed his long-standing vow to veto the bill.

Once the package clears the Senate, it will be sent to President Bush, who is likely to sign it soon.

The legislation, one of the most far-reaching housing bills from Congress in decades, marks the centerpiece of Washington's efforts to address the nation's housing meltdown.

"This will begin to lay the groundwork for a turnaround in the housing market and hopefully in the broader economy as well," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee and a principal author of the bill.

The bill has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator.

Helping at-risk borrowers

Provisions in the 700-page bill that would most directly affect consumers and communities include:

Increase the Federal Housing Administration's role. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value.

The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - would be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.

Establish a stronger regulator for the GSEs. The new regulator will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.

Permanently increase "conforming loan" limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000.

The FHA maximum loan limits for high-cost areas would also increase to $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.

Create home-buyer credit. The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.

Bar down-payment assistance for FHA loans. The bill eliminates a program that has allowed sellers to provide down payment assistance.

The bill would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.

Create an affordable housing trust fund. The bill establishes a permanent fund to promote affordable housing. The fund would be paid for by fees from Fannie and Freddie.

Give grants to states to buy foreclosed properties. The bill would grant $4 billion to states to buy up and rehabilitate foreclosed properties. The funding had been opposed by the White House, which said it would benefit lenders and not homeowners.

Bolster Fannie and Freddie

Concerns over whether Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) will have enough money to weather future losses in the housing market sent shares plummeting in recent weeks. Since the beginning of June, Fannie's stock price has dropped 57% and Freddie's plummeted 66%. For the past year, they're both down roughly 85% as of the end of trade on Friday.

To help stabilize markets, Treasury Secretary Henry Paulson asked Congress to temporarily empower Treasury to offer the companies a backstop if needed. Consequently the housing bill now includes provisions that let Treasury over the next 18 months offer Fannie and Freddie an unlimited line of credit and the authority to buy stock in the companies.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the companies could leave taxpayers with a fat bill to pay.

The Congressional Budget Office on Tuesday estimated the potential cost of a rescue could be $25 billion. CBO said there is probably a better than 50% chance that Treasury would not need to step in. It also said there is a 5% chance that Freddie's and Fannie's losses could cost the government $100 billion.

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New home sales' annual rate well above forecasts - Jul. 25, 2008

2008-07-24T14:48:00.000-07:00

NEW YORK (CNNMoney.com) -- New home sales fell in June, the government said Friday, but the annual rate was stronger than economists expected.

The Census Bureau reported Friday that June sales of new single-family homes came in at a seasonally adjusted annual rate of 530,000, down 0.6% from May's revised reading of 533,000.

That revision was significant; the original May reading was 512,000.

The June figure was much higher than the economists' consensus forecast of 505,000, as compiled by Briefing.com.

Sales have declined 33.2% from the year-earlier rate of 793,000, the government said.

The median sales price of new houses sold in June 2008 was $230,900, which is 1.4% higher than the revised median sales price of $227,700 from a month ago, but still 2% lower from the median house price of $235,500 from a year ago.

The average sale price for June was $298,600, which was $300, or 0.1%, lower than the revised average sales price of $298,900 in May. Compared with a year earlier, the average sale price has fallen 2.6% from $306,500.

The seasonally adjusted estimate of new homes for sale at the end of June was 426,000, which represented a 10-month supply of housing inventory at the current sales rate.

That was 3.8% smaller than the revised 10.4-month supply of housing inventory in May. The inventory of new homes available for sale was 20.5% higher than the 8.3-month supply of housing inventory reported in June 2007.

The National Association of Realtors reported Thursday that sales of existing slowed more than expected last month to their lowest level in 10 years. Sales by homeowners dipped to an annual pace of 4.86 million, down 2.6% from a pace of 4.99 million in May.

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Servicers get Washington grilling - Jul. 25, 2008

2008-07-24T14:38:00.000-07:00

NEW YORK (CNNMoney.com) -- A key House committee was set to grill home lenders and housing advocates on Friday about mortgage industry efforts to work out affordable loans for troubled homeowners.

The House Financial Services Committee plans to hear from executives at two big lenders: Michael Gross of Bank of America Corp. (BAC, Fortune 500) and Mary Coffin of Wells Fargo & Co. (WFC, Fortune 500) Also testifying is Faith Schwartz, the executive director of Hope Now, an industry alliance of lenders, loan servicers and housing counselors.

The House Financial Services Committee is chaired by Rep. Barney Frank, D-Mass., who has led the House's legislative response to the housing crisis. On Wednesday, the House passed sweeping legislation that will offer up to $300 billion in assistance to troubled homeowners and throw government support behind mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). The Senate is expected to vote on the bill on Saturday.

"Reducing foreclosure is an essential matter of justice and an essential matter [for the economy as well]," Frank said in his opening remarks.

He also urged lenders and loan servicers - the middlemen that administer and collect payments on the loans - to inform the committee of any barriers to their foreclosure prevention efforts that still exist after the bill takes effect in October.

"There are no silver bullets," he said. "I'm not the Lone Ranger. If there are obstacles, tell us. And we will do the best we can to remove those obstacles."

A pledge to help

Bank of America's Gross said in prepared testimony that the bank will modify and work out at least $40 billion in mortgages by the end of 2009, helping about 250,000 troubled homeowners.

"We know that consumers who are experiencing financial challenges, but who ultimately have the ability to repay their loans, often need our help to stay in their homes," Gross said. "We are ready to help them. We do so because no one benefits from a foreclosed home."

Many critics of the mortgage industry have charged that lenders and loan servicers are dragging their feet when it comes to helping at-risk mortgage borrowers.

But David Kittle, chairman-elect of the Mortgage Bankers Association, said that wouldn't be in their best interest. "It makes good economic sense for mortgage servicers to help borrowers who are in trouble," he said. "Foreclosure is a lengthy and extremely costly process for the industry and, generally, a losing financial proposition. Several independent studies have found the losses to be quite significant: over $50,000 per foreclosed home or as much as 30 to 60 percent of the outstanding loan balance."

Still, foreclosures are growing at a faster rate than mortgage workouts, according to the most recent data from Hope Now. Meanwhile the housing crisis continues to deepen.

Home prices have plunged 15% nationwide over the past 12 months, according to the S&P/Case-Shiller Home Price Index. More than 340,000 borrowers have lost their homes to foreclosure during the first six months of the year, up 136% compared with the same period in 2007. The number of homeowners in default during the same period rose to 1.4 million, up 56% from a year earlier.

The housing rescue bill should help to break the cycle, and lenders and loan servicers are promising to do more to keep borrowers in their homes.

Servicers step up

"Since last fall, we have been working aggressively to address these problems," Hope Now CEO Faith Schwartz said in prepared testimony. "The goal of Hope Now is to keep more people in their homes"

Hope Now has recently announced new guidelines that were intended to speed up the mortgage modification process and keep borrowers better informed of its progress.

Loan servicers have pledged to respond to a borrower's request for a workout within five days, and come to a decision on the modification within 45 days.

Hope Now also promised to improve the way it reports the number of people it has helped. Critics, such as FDIC chief Sheila Bair, would like to see much more detail about what kind of mortgage workouts Hope Now members are arranging. Right now, it reports workouts only under very broad categories.

"This is a serious committed effort that will continue until problems in the housing and mortgages market abate," Schwartz said in prepared testimony. "It is neither a silver bullet nor a magic solution, but this effort will continue to compliment the efforts of legislators and regulators as we work through the housing issues."

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Servicers get Washington grilling - Jul. 25, 2008

2008-07-24T14:04:00.000-07:00

NEW YORK (CNNMoney.com) -- A key House committee was set to grill home lenders and housing advocates on Friday about mortgage industry efforts to work out affordable loans for troubled homeowners.

The House Financial Services Committee plans to hear from Michael Gross, who is Bank of America's (BOA) managing director for loss mitigation, mortgage, home equity and insurance services, Mary Coffin, Wells Fargo (WFC, Fortune 500) Home Mortgage's executive vice-president, as well as Faith Schwartz, the executive director of Hope Now, an industry alliance of lenders, loan servicers and housing counselors.

The House Financial Services Committee chaired by Rep. Barney Frank (D-Mass.), who has led the House's legislative response to the housing crisis. On Wednesday, the House passed sweeping legislation that will offer up to $300 billion in assistance to troubled homeowners and throw government support behind mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). The Senate is expected to vote on the bill on Saturday.

Bank of America's Michael Gross is expected to pledge that the lender will modify and work out at least $40 billion in mortgages by the end of 2009, helping about 250,000 troubled homeowners.

"We know that consumers who are experiencing financial challenges, but who ultimately have the ability to repay their loans, often need our help to stay in their homes," Gross said in prepared testimony. "We are ready to help them. We do so because no one benefits from a foreclosed home."

Many critics of the mortgage industry have charged that lenders and loan servicers are dragging their feet when it comes to helping at-risk mortgage borrowers.

Foreclosures are growing at a faster rate than mortgage workouts, according to the most recent data from Hope Now. Meanwhile the housing crisis continues to deepen.

The housing rescue bill should help to break the cycle, and lenders and loan servicers are promising to do more to keep borrowers in their homes.

"Since last fall, we have been working aggressively to address these problems," Hope Now CEO Faith Schwartz said in prepared testimony. "The goal of Hope Now is to keep more people in their homes"

Hope Now has recently announced new guideline that were intended to speed up the mortgage modification process and keep borrowers better informed on its progress.

Loan servicers have pledged to respond to a borrower's request for a workout within five days, and come to a decision on the modification within 45 days.

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More foreclosure gloom - Jul. 25, 2008

2008-07-24T09:11:00.000-07:00

NEW YORK (CNNMoney.com) -- Foreclosures continue to soar, with 220,000 homes lost to bank repossessions in the second quarter of this year, according to the latest statistics from RealtyTrac, an online marketer of foreclosed homes. That's nearly triple the number from the same period in 2007.

There were a total of 739,714 foreclosure filings recorded during that three month period, up 14% from the first quarter, and up a whopping 121% from the same period in 2007. That means that out of every 171 U.S. households received a filing, which include notices of default, auction sale notices and bank repossessions.

"Most areas of the country are seeing at least some increase in foreclosure activity," said RealtyTrac CEO James Saccadic. "Forty-eight of 50 states and 95 out of the nation's 100 largest metro areas experienced year-over-year increases in foreclosure activity."

Because foreclosure filings are growing so quickly, RealtyTrac will have to reevaluate its foreclosure forecast for the year, according to spokesman Rick Sharga.

"We've been saying foreclosures will total 1.9 million to 2 million this year," he said. "But midway through the year, we're already at 1.4 million so we're going to be raising our projections."

And there is more bad news: Bank repossessions are up as a proportion of total filings, representing 30% of the notices issued during the quarter, up from 24% a year ago.

"I don't think that's a surprise if you look at the general conditions out there," said Brian Bethune, chief financial economist for Global Insight. "There have been six straight moves of weaker employment this year. The ongoing problems in the housing market are compounded by a generally weaker economy. Foreclosures won't go down until we start to see employment move up again."

Sun Belt front and center

California's Central Valley remains ground zero for foreclosure filings. Stockton, which is just east of San Francisco, had the highest rate of foreclosure filings of any metro area, one for every 25 homes. That's seven times the national average.

Riverside/San Bernardino, which is east of Los Angeles, had the second highest rate in the nation with one filing for every 32 households. Las Vegas, Bakersfield and Sacramento rounded out the top five.

Detroit continued to suffer more than any other non-Sun Belt area, with one filing for every 66 households. And several Ohio cities were also hard hit, led by Toledo (one in 92 households), Akron (one in 93) and Cleveland (one in 108).

On the other hand, there were a handful of metro areas that remained relatively unscathed. Honolulu, at one filing for every 1,331 households had the lowest rate of all, followed by Allentown, Penn. (one for every 972) and Syracuse, NY (one for every 880).

At the state level, Nevada had the highest rate with one filing for every 43 households, while California had the highest total number of filings - 202,599.

The report came as more negative news for the housing market this week. On Thursday, a report form the National Association of Realtors revealed that existing home sales had declined again as the number of homes for sale continued to rise. On Tuesday, a government agency reported home prices registered another drop in May.

All this is happening as Congress struggles to pass a housing rescue bill that will make FHA-insured loans available to many at-risk borrowers. That bill, even if signed this week, will not take effect until October.

One of the sponsors of the bill, Barney Frank (D -- Mass.), released a statement on Thursday in which he encourages lenders and mortgage servicers to delay taking action against delinquent borrowers before the new law takes effect.

"I am urging the mortgage servicers to hold off on foreclosures in applicable cases," he said, "so borrowers can take advantage of the program."

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Homeowners close equity spigot - Jul. 24, 2008

2008-07-23T21:34:00.000-07:00

NEW YORK (AP) -- The amount of money Americans pulled out of their homes is at a four-year low as homeowners battle falling home values and stricter standards among lenders, Freddie Mac said Thursday.

Homeowners "cashed out" about $68 billion in home equity during the first half of the year, the lowest since the first six months of 2004, according to the McLean, Va.-based mortgage finance company.

About $38 billion in home equity was cashed out through refinancing of loans made to prime borrowers in the second quarter - less than half the $79 billion cashed out during the same period last year, said Amy Crews Cutts, Freddie Mac (FRE, Fortune 500) deputy chief economist.

In the second quarter, 66% of homeowners who refinanced loans purchased by Freddie Mac "cashed out" at least 5% of their equity.

Tapping home equity allows homeowners to get cash out of their homes. And economists watch that number closely because it affects consumer spending and investment decisions.

Consumer spending, which accounts for two-thirds of total economic activity, remains under severe strains, as the housing market downturn, combined with rising food and gasoline costs, have hurt consumer confidence.

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Grand jury investigates subprime lenders - Jul. 24, 2008

2008-07-23T18:48:00.000-07:00

LOS ANGELES (AP) -- A federal grand jury is investigating subprime mortgage lenders Countrywide Financial Corp., New Century Financial Corp. and IndyMac Federal Bank, a person familiar with the situation told The Associated Press on Thursday.

Subpoenas seeking documents have been issued to all three companies, according to the person, who was not authorized to speak publicly about the case and requested anonymity.

The subpoenas are seeking e-mails, phone bills, financial records and other information, according to the Los Angeles Times, which cited people with direct knowledge of the subpoenas in first reporting the investigation was under way.

The grand jury investigation is the clearest sign yet that prosecutors are investigating whether fraud and other crimes might have contributed to the mortgage crisis that led to the demise of all three California-based lenders.

The Times also said investigators have begun looking at whether Countrywide and its former chairman, Angelo Mozilo, gave mortgage breaks to influential friends, including members of Congress.

Countrywide (CFC, Fortune 500) had been the nation's largest originator and servicer of home loans. Its business included subprime loans, many of which went to people with poor credit histories.

California, Illinois and the city of San Diego are suing the company over its lending practices.

Bank of America Corp. (BAC, Fortune 500) bought Countrywide in a deal approved by the lender's shareholders late last month. Scott Silvestri, a spokesman for Bank of America, did not immediately return a call from the AP seeking comment.

New Century (NEWCQ) had been the second-largest originator of subprime loans in the country before seeking Chapter 11 bankruptcy protection in April 2007. Subprime loans are those made to borrowers with poor credit repayment records.

Federal regulators seized IndyMac's (IDMC) assets on July 11. The bank is the largest regulated thrift in the nation to fail, regulators said.

The FBI told The Associated Press last week that it is investigating IndyMac.

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Mortgage rates rise again - Jul. 24, 2008

2008-07-23T16:28:00.000-07:00

NEW YORK (CNNMoney.com) -- Rates on 30-year mortgages rose for the third consecutive week amid concerns about mounting inflation, the weak housing market and speculation that the Federal Reserve will hike interest rates soon.

Mortgage finance firm Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.63% this week. That's up from 6.26% last week but still below the 6.69% average a year ago.

Thursday's average marked the eighth week that rates have been above 6%.

"Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week," said Freddie Mac chief economist Frank Nothaft in a statement.

The ongoing downturn in the housing market was highlighted Thursday by a separate report that showed sales of existing homes fell more than expected last month.

The National Association of Realtors reported that sales by homeowners dipped in June to an annual pace of 4.86 million, down 2.6% from May. Analysts were expecting NAR to report a sales pace of 4.95 million, according to estimates compiled by Briefing.com.

The report also showed that the median price of a home sold during the month fell to $215,100, down 6.1% from $229,000 a year earlier, as the housing market continues to work through a glut of inventory.

In response to the nation's housing woes, the House passed sweeping legislation on Wednesday that will offer up to $300 billion in assistance to troubled homeowners and throw government support behind mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

In addition to housing market concerns, rising inflation rates also helped push mortgage rates higher this week.

"Some of the key drivers to these concerns were consumer prices jumping 1.1% in June - the largest increase since September 2005 on a year-over-year basis - coupled with consumer prices growing at a 5% clip - the strongest since February 1991," Nothaft said.

Many analysts think mounting inflation may cause the Federal Reserve to hike interest rates at its September meeting.

Other types of mortgages also showed rate increases this week, according to the Freddie Mac survey.

Rates on 15-year fixed-rate mortgages rose to 6.18%, up from 5.78% last week.

The five-year adjustable-rate mortgage rose to 6.16%, up from 5.80% last week.

The rate on a one-year adjustable-rate mortgage rose to 5.49%, compared to 5.10% last week.

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Existing home sales fall 2.6% in June - Jul. 24, 2008

2008-07-23T16:00:00.000-07:00

NEW YORK (CNNMoney.com) -- Sales of existing homes slowed more than expected in June while inventory increased, according to an industry trade group reading of the sluggish housing market released Thursday.

The National Association of Realtors reported that sales by homeowners dipped in June to an annual pace of 4.86 million, down 2.6% from a pace of 4.99 million in May.

The existing home sales rate - including single-family, townhomes, condominiums and co-ops - is down 15.5% from the 5.75 million units sold in June 2007.

The 4.86 million sales figure came in well below the 4.95 million estimate forecast by economists surveyed by Briefing.com.

"The factors that are weighing on the housing market remain in place - weak consumer confidence, a weak labor market and rising mortgage rates - so there are some strong fundamental headwinds still weighing on the market," said Robert Dye, senior economist at PNC Financial Services Group.

"We are hoping for a bottom, but we are not expecting any significant rebound from that bottom until the labor market and consumer confidence starts to improve," he added.

But with inventory still on the rise, home prices are falling further. The number of homes available for sale at the end of June rose 0.2% to 4.49 million, which represented an 11.1-month supply of inventory at the current sales pace, up from a 10.8-month supply in May.

Meanwhile, the median price of a home sold in June fell to $215,100, down 6.1% from $229,000 a year earlier.

Single family homes. Sales of single-family homes declined 3.2% to an annual rate of 4.27 million in June from 4.41 million in May. That's 14.8% below the 5.01 million-unit pace in June 2007.

The median existing single-family home price was $213,800 in June, down 6.7% from a year ago.

New homeowners. First-time homebuyers are not confident that this is the best time to enter the market. "A recent online survey of Realtors shows nearly a quarter of potential home buyers are waiting on the sidelines," NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said in a written statement.

"About four in 10 homes are purchased by first-time buyers, which frees existing owners to trade up," according to Lawrence Yun, NAR's chief economist.

Rising rates. Higher interest rates are also holding buyers back. "Even as prices are coming down, the total mortgage price is under upward pressure from rising mortgage rates," said Dye.

On Thursday, Freddie Mac (FRE, Fortune 500) said that the 30-year fixed-rate mortgage jumped to 6.63% for the week ending July 24, 2008, up from 6.26% last week.

"Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week," Frank Nothaft, Freddie Mac vice president and chief economist, said in a written statement.

Regional sales breakdown. Existing-home sales in the West actually rose 1.0% in June, but were 6.4% lower than a year ago. Buyers were attracted to bargain prices, with are down 17.2% from June 2007.

In the South, existing-home sales fell 3.1% from May to June, and 18.1% year-over-year. Home prices in the South have only fallen 2.4% from a year ago.

Midwest existing-home sales declined 3.4% in June, and slid 17.6% from a year ago. But the median price there was actually up 2.8% from June 2007.

June existing-home sales fell 6.6% in the Northeast on a month-to-month basis and dipped 15.8% from June 2007. The median price was also down sharply, 12.6% below June 2007.

Despite the decline in the housing market as a whole, there are a few bright spots. The NAR says that existing-home sales are actually rising significantly from a year ago in areas that have been particularly hard-hit by the housing bust, such as Bakersfield, Calif.; Fort Myers, Fla.; and Las Vegas, Nev.

In addition, "sales are now beginning to pick up in Orlando, Fla., Phoenix, and Oakland, Calif.," Yun said in a written statement. "Interestingly, sales fell in Atlanta, Houston, and Kansas City, Mo., despite affordable home prices and solid local employment conditions."

Housing bill. The report came a day after the House passed a bill that will provide up to $300 billion to help struggling homeowners and will back the mortgage finance giants Fannie Mae and Freddie Mac. The bill will go to the Senate next for vote.

"The housing stimulus package working its way through Congress would go a long way toward helping consumers and boosting the overall economy," Yun said in a written statement.

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Vacant home and ownership rates flat in 2nd quarter - Jul. 24, 2008

2008-07-23T14:27:00.000-07:00

NEW YORK (CNNMoney.com) -- The percentage of vacant homes available for sale remained relatively flat in the second quarter, just a notch above the rate for the first quarter of 2008 and for the comparable period a year ago.

The nation's homeownership rate, meanwhile, also stayed relatively stagnant at 68.1%.

Some 2.8% of homes, excluding rental properties, were empty and on the market from April through June, according to Census Bureau figures released Thursday. The vacancy rate hit a record high of 2.9% in the first quarter. It was 2.6% a year ago.

Just under 2.2 million empty homes were for sale in the most recent quarter. The south had the highest vacancy rate at 3.2% and the northeast had the lowest at 1.9%.

Congress and the Bush administration are scrambling to stabilize the troubled housing sector, which is roiling financial markets worldwide. The House Wednesday approved a bill offering up to $300 billion in assistance to strapped homeowners. Lawmakers also approved Treasury Secretary Henry Paulson's plan to back mortgage finance companies Fannie Mae and Freddie Mac. The Senate is expected in coming days to take up the legislation, which President Bush has said he will sign.

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How the housing rescue bill can help you - Jul. 23, 2008

2008-07-22T19:19:00.000-07:00

NEW YORK (CNNMoney.com) -- The House is expected on Wednesday to pass a $300 billion housing rescue bill aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac.

If the bill is then passed by the Senate and signed by President Bush, who today withdrew his threat to veto the legislation, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new, low-cost fixed-rate loans insured by the Federal Housing Administration.

The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program - but the bill allows for as many as one or two million borrowers to participate in the program.

Here's what homeowners need to know.

Who's eligible?

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must spending at least 40% of their gross monthly income on all household debt to be eligible for the program.

They can be up-to-date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

Before a homeowner can get an FHA-backed mortgage they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

How can I apply?

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development.

How does the refinancing process work?

This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In areas where prices have plummented by as much as 20%, that will mean a substantial loss for the lender.

But lenders won't sign off on a workout unless they think that they'll lose less money on that than they would by allowing a home to go through the costly foreclosure process.

Based on that new appraised home value, the FHA lender determines how much the original lender has to reduce the original mortgage by, so that it will reflect 90% of the home's market value.

If the original lender agrees to the write down, the new lender buys the old loan and takes over the reworked mortgage.

As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally it pays the FHA an up-front premium equal to 3% of the mortgage principal.

What does it cost?

Borrowers also agree to share any profits from future home price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even factoring in the FHA fees.

In areas that have sustained huge price drops, such as Sacramento, where prices have fallen about 30% over the past year, some loans might be reduced by more than 40%.

Additionally the FHA loans carry reasonable interest rates which are fixed for the life of the loan, as opposed to a subprime adjustable rate mortgage that can jump higher every six months.

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New Fed rules miss one key lending abuse - Jul. 23, 2008

2008-07-22T13:43:00.000-07:00

NEW YORK (CNNMoney.com) -- Mortgage brokers are getting paid fat fees by lenders to put unsuspecting borrowers into expensive loans. And the new lending rules issued last week by the Federal Reserve do nothing to stop this abusive practice.

The Department of Housing and Urban Development estimates that this practice cost borrowers $16 billion in 2007 alone.

"This remains a serious problem," said Howell Jackson, a professor at Harvard Law who has testified before Congress on the subject. "It increases the cost of borrowing for lots of people, especially in the subprime space where borrowers are less experienced."

At issue is the so-called yield spread premium: The difference between the lowest interest rate that a borrower qualifies for and the actual rate that a lender charges.

The larger the yield spread, the more a broker earns, and that can tempt them to steer borrowers to bad loan.

Say a couple buys a new house and qualifies for a 6.5% rate on a 30-year fixed mortgage. A greedy broker might put the couple in a 7% loan so that he earns a bigger payday, or even a 7.25% loan. A broker usually earns about 1% of the loan value for every extra quarter point of interest he or she charges borrowers. So brokers who put naive home buyers into high-cost loans such as hybrid adjustable rate mortgages or option arms could make 5% or more on a loan.

Most home buyers never realize that they are paying any additional costs. Federal rules dictate that brokers can disclose these fees with just a footnote in the closing papers that's easily overlooked.

"In subprime loans, brokers could easily make an extra 2 percentage points," said Jackson. "On $500,000 loans, that's well in excess of $10,000, as much as a 10-fold increase over what most people would consider fair compensation."

Why the abuse will continue

When the Fed first floated its new lending regulations last year, it did include a proposal to limit the practice of lender payoffs to brokers, but that didn't make it into the final set of regulations. The rules that were passed limit prepayment penalties, require proof of assets and income, and require that lenders consider whether borrowers can afford a loan before it's issued.

The Fed said it dropped the Yield Spread Premium rule because consumer testing indicated that people were confused by it. Disclosing broker fees led many to assume that it's less expensive to go directly to a lender for a loan, which isn't necessarily true.

Not surprisingly, mortgage brokers opposed the rule, pointing out that it would have required them, but not lenders, to disclose their total compensation in a written agreement before their fees were be rolled into the loan. Right now fees aren't fully disclosed until the closing.

Besides, said Marc Savitt, president of the National Association of Mortgage Brokers, this kind of abuse is a thing of the past. The now moribund housing market has spawned cutthroat competition, so brokers have had to slash their fees and improve loan terms to win clients over.

What's next

Still, the Fed plans to address the problem. A spokesman says it will focus its efforts on improving fee disclosures so that consumers will more readily understand what they are paying and why.

There's also legislation sponsored House Financial Services Chairman Barney Frank, D-Mass., that would ban lenders from paying fees to broker based on loan terms. The bill passed the House last year as part of an anti-predatory lending act, but it has since languished in the Senate.

Additionally, the Department of Housing and Urban Development is working on its own version of a rule to govern Yield Spread Premiums, according to HUD spokesman Brian Sullivan.

"Mortgage rules are 30 years old," he said, "and don't reflect the way people finance their homes today."

HUD's rule would require lenders and brokers to fully disclose payments made by lenders to brokers, and that such payments somehow translate into lower costs for consumers. But it's drawing opposition. The agency is now taking comments on the proposed regulation, and has received 12,000 so far.

"We're getting a rash of pushback from industry sources who would prefer we do nothing," said Sullivan.

States are also taking action. North Carolina recently banned Yield Spread Premiums tied to sub prime mortgages, joining about 10 or 12 other states in curbing their use, according to the Center for Responsible Lending.

"The states will always be in the best position to act more quickly to help homeowners in their own backyards," said CRL president, Michael Calhoun.

Earlier this year, Massachusetts attorney general Martha Coakley issued regulations that outlawed commissions tied to putting borrowers into expensive loans.

For its part, Minnesota passed a new state law requiring that brokers act in the best interests of their clients, much as an attorney or financial advisor must do. Other states will likely follow suit.

"These types of abuses have the potential to emerge again if we don't take some legislative steps," said Howell Jackson.

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Mortgage applications fall 6.2% as rates rise - Jul. 23, 2008

2008-07-22T13:39:00.000-07:00

WASHINGTON (AP) -- Mortgage application volume declined 6.2% during the week ending July 18, according to the trade group Mortgage Bankers Association's weekly application survey.

The MBA's application index declined to 489.6 during the week, from 522.2 a week earlier.

Refinance application volume declined 5.6%, while purchase volume fell 6.7%, on an adjusted basis.

Refinance applications accounted for 39.4% of all applications.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 489.6 means mortgage application activity is 4.896 times higher than it was when the MBA began tracking the data.

The average rate for traditional, 30-year fixed-rate mortgages rose to 6.59% from 6.22% during the week ending July 11.

The average interest rate for 15-year fixed-rate mortgages - a popular option for refinancing a home - rose to 6.10% from 5.74%.

Rates for one-year adjustable-rate mortgages remained unchanged at 7.16% from the prior week.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.

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California foreclosures at 20 year high - Jul. 22, 2008

2008-07-21T18:10:00.000-07:00

LOS ANGELES (AP) -- A real estate research firm says foreclosures in California soared in the second quarter to the highest level in at least 20 years.

DataQuick Information Systems also says in its report Tuesday that the number of default notices sent to homeowners also hit a new level.

DataQuick says some 63,061 homes were lost to foreclosure between April and June - the most in any quarter since 1988, when the firm began tracking foreclosures.

Foreclosures increased about 33% from the previous quarter and jumped 261% versus the same quarter last year.

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U.S. home prices drop 4.8% in May - Jul. 22, 2008

2008-07-21T15:15:00.000-07:00

WASHINGTON (AP) -- A government report says U.S. home prices fell 4.8% in May from the same month last year.

The Office of Federal Housing Enterprise Oversight also says prices, on a seasonally adjusted basis, fell 0.3% from April to May. The index is down almost 5% from its peak in April of last year.

OFHEO oversees the government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac.

The index is calculated using mortgage loans of $417,000 or less.

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Wachovia to exit wholesale mortgage business - Jul. 22, 2008

2008-07-21T10:56:00.001-07:00

CHARLOTTE, N.C. (AP) -- Wachovia Corp., the nation's fourth largest-bank, said Monday that it is leaving the wholesale mortgage lending business.

Beginning July 25, the company will no longer offer mortgages through brokers, joining other lenders making similar moves to exit the troubled sector. Rival Bank of America (BAC, Fortune 500) got out of the business several months ago.

Wachovia didn't disclose how many jobs will be cut as a result of the change. More details are expected Tuesday when the Charlotte, N.C.-based bank releases its second-quarter earnings.

Wachovia (WB, Fortune 500) spokesman Don Vecchiarello said in a statement that the company "recognized some opportunities to re-position our business" given the current market conditions.

"We believe it is important to focus on serving the needs of customers who have relationships with the bank, and who are located in geographies where Wachovia franchises are located," Vecchiarello said.

Earlier this month, Wachovia hired Robert Steel, former Treasury Undersecretary and Goldman Sachs Group Inc. executive, as its new CEO. Within a week of being on the job, the bank's shares tumbled to a new 17-year low.

Steel succeeds Ken Thompson, a chief executive officer who was ousted by the bank's board in June after a series of missteps, including the decision to buy mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the housing boom.

That deal left Wachovia with a deteriorating $120 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments. Shares of Wachovia dropped more than 5% in after-hours trading following the announcement.

They closed the regular trading session up 21 cents or 1.6% at $13.18, near the bottom of their 52-week range of $7.80 to $53.10.

Big banks, such as Bank of America and National City Corp., have stopped making loans through brokers entirely, relying instead on their loan officers. National City (NCC, Fortune 500) said it was forced to do so by a continuing downturn in loan demand, while Bank of America said it saw better "long-term opportunity" in working through its own loan officers.

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Wachovia to exit wholesale mortgage business - Jul. 22, 2008

2008-07-21T10:56:00.000-07:00

CHARLOTTE, N.C. (AP) -- Wachovia Corp., the nation's fourth largest-bank, said Monday that it is leaving the wholesale mortgage lending business.

Wachovia didn't disclose how many jobs will be cut as a result of the change. More details are expected Tuesday when the Charlotte, N.C.-based bank releases its second-quarter earnings.

Wachovia (WB, Fortune 500) spokesman Don Vecchiarello said in a statement that the company "recognized some opportunities to re-position our business" given the current market conditions.

They closed the regular trading session up 21 cents or 1.6% at $13.18, near the bottom of their 52-week range of $7.80 to $53.10.

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Wachovia to exit wholesale mortgage business - Jul. 21, 2008

2008-07-21T00:12:00.000-07:00

Charlotte, N.C. -- Wachovia Corp., the nation's fourth largest-bank, said Monday that it is leaving the wholesale mortgage lending business.

Wachovia didn't disclose how many jobs will be cut as a result of the change. More details are expected Tuesday when the Charlotte, N.C.-based bank releases its second-quarter earnings.

Wachovia (WB, Fortune 500) spokesman Don Vecchiarello said in a statement that the company "recognized some opportunities to re-position our business" given the current market conditions.

They closed the regular trading session up 21 cents or 1.6% at $13.18, near the bottom of their 52-week range of $7.80 to $53.10.

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Commercial mortgage delinquencies led by office, retail - Jul. 21, 2008

2008-07-20T15:42:00.001-07:00

NEW YORK (AP) -- Delinquencies among commercial mortgages rose slightly in June due to increases in delinquencies among office and retail sectors, credit ratings agency Fitch Ratings said Monday.

Fitch said June delinquencies rose to 0.41% among commercial-mortgage backed securities from 0.39% a month earlier.

Both office and retail mortgage defaults are still below the commercial mortgage delinquency average, despite their increases in June.

Retail delinquencies rose to 0.21% from 0.17% in May, Fitch said. The increase came as 15 additional loans went delinquent in June.

About 0.19% of loans secured by offices were delinquent in June, Fitch said.

Multifamily homes continue to account for the most delinquencies among commercial mortgages. The sector's delinquency index is 1.77%. Multifamily home mortgages accounted for 57% of all commercial mortgage delinquencies in June, though among they make up only 14.6% of all loans reviewed by Fitch.

Each month, Fitch reviews delinquencies among commercial mortgages backing securities it rates to determine the sector's delinquency rate.

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Commercial mortgage delinquencies led by office, retail - Jul. 21, 2008

2008-07-20T15:42:00.000-07:00

NEW YORK (AP) -- Delinquencies among commercial mortgages rose slightly in June due to increases in delinquencies among office and retail sectors, credit ratings agency Fitch Ratings said Monday.

Fitch said June delinquencies rose to 0.41% among commercial-mortgage backed securities from 0.39% a month earlier.

Both office and retail mortgage defaults are still below the commercial mortgage delinquency average, despite their increases in June.

Retail delinquencies rose to 0.21% from 0.17% in May, Fitch said. The increase came as 15 additional loans went delinquent in June.

About 0.19% of loans secured by offices were delinquent in June, Fitch said.

Each month, Fitch reviews delinquencies among commercial mortgages backing securities it rates to determine the sector's delinquency rate.

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Freddie Mac: 30-year fixed mortgage rates fall for 2nd week - Jul. 17, 2008

2008-07-20T15:15:00.000-07:00

NEW YORK (CNNMoney.com) -- Rates on 30-year fixed mortgages fell for the second week in a row on increased speculation that the Federal Reserve will not raise interest rates before the end of the year, according to mortgage backer Freddie Mac.

Freddie Mac (FRE, Fortune 500) said that 30-year fixed-rate mortgages averaged 6.26% with an average 0.6 of a point in the week ending Thursday, down from 6.37% last week. Last year at this time, the 30-year loan averaged 6.73%.

"Mortgage rates fell this week amid market speculation that the Federal Reserve may not raise the overnight bank-lending rate this year after all," said Frank Nothaft, Freddie Mac vice president and chief economist, in a written statement.

Nothaft cited Federal Chairman Ben Bernanke's grim economic outlook in his July 15th semi-annual testimony before Congress as one of the factors changing market perception of the Fed's movement of interest rates going forward.

"The economy continues to face numerous difficulties, including ongoing strains in financial markets, declining house prices, a softening labor market, and rising prices of oil, food, and some other commodities," Bernanke told the Senate Banking Committee early Tuesday.

The 15-year fixed rate mortgage this week averaged 5.78% with an average 0.6 of a point, down from last week when it averaged 5.91%. A year ago at this time, the 15-year fixed rate mortgage averaged 6.38%.

Five-year adjustable-rate mortgages (ARMs) averaged 5.80% this week, with an average 0.6 of a point, down from last week when it averaged 5.82%. A year ago, the 5-year ARM averaged 6.35%.

One-year Treasury-indexed ARMs averaged 5.10% this week with an average 0.6 of a point, down from last week when it averaged 5.17%. At this time last year, the 1-year ARM averaged 5.72%.

In addition, "some of the factors motivating the change in market perceptions this week included retail sales for June rising at the slowest pace since February and consumer sentiment in July holding at low levels not seen since 1980," said Nothaft.

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Need a mortgage now? Bring loads of cash - Jul. 16, 2008

2008-07-17T13:28:00.000-07:00

NEW YORK (CNNMoney.com) -- Are you ready to buy a house in this crazy market? Better bring a boatload of money to the closing.

In a brutal real estate market where all the players want to hedge against the tremendous risks, down payment requirements and up-front fees have soared, shutting many potential home buyers out of the market.

"I have as many people calling me for financing as ever," said George Hanzimanolis, a Pennsylvania mortgage broker, "but I'm putting less than half of them into loans."

That's happening all over the country, and may slow the housing market's recovery. Indeed, in a Realtor.com survey released today, potential home buyers said high down payments were the second biggest obstacle, after high home prices, to buying a home.

These days, home buyers almost always have to make a substantial down payment, at least 5%, according to Rich Wordman, president of the Florida Association of Mortgage Brokers. The days of no-down loans are over.

In deeply declining markets, lenders are reluctant to issue loans unless borrowers put at least 10% down, he said.

JP Morgan Chase (JPM, Fortune 500), for instance, now asks for a minimum of 10% down in most markets, according to a spokesman, and for 20% in hard-hit areas. In Reno, Nevada, which has been devastated by the housing crisis, the bank requires 25%.

Even bigger jumbos

For expensive homes, the down payments are disproportionately more. Lenders issuing jumbo loans, which are too pricey to be sold to Fannie Mae (FNM, Fortune 500) or Freddie Mac (FRE, Fortune 500) in the secondary market, are asking for at least 20% down, according to Ed Craine, a San Francisco mortgage broker. In the most expensive markets, where jumbo loans are over $729,000, that means a minimum down payment of $148,500.

Higher interest rates on jumbo loans are also making them more expensive than they normally would be - with interest rates a full point to a point and a half higher than non-jumbo loans, said Mike Tacconi, a mortgage advisor with lender CMG Mortgage Services based in San Ramone, Calif.

And buyers purchasing homes for investment purposes are getting clobbered. Lenders are telling them to come up with at least 25% of the purchase price, according to Tacconi - and sometimes as much as 35%, depending on the kind of loan.

"Rents are high where I am," said Pennsylvania mortgage broker Hanzimanolis, "so people are having trouble saving enough for down payments."

Those high down payments are are being driven in part by the private mortgage insurance companies, according to Jay Brinkman, chief economist for the Mortgage Bankers Association, which have themselves hiked their down payment requirements. These firms insure loans when borrowers put less than 20% down, making lenders whole when homeowners default.

In the past, these companies, such as MGIC Investment Corp (MTG). and PMI Group (PMI), often guaranteed mortgages when borrowers put no money down. Today they require 5%, 10% in steeply declining markets, according to Jeff Lubar, spokesman for the trade association Mortgage Insurance Companies of America.

In addition, private mortgage insurers are also charging higher insurance rates. Historically, PMI cost about 0.5% of a home's purchase price. Now, a borrower putting 5% down can pay about 0.75% for the first year.

Higher rates

And although interest rates are relatively low, industry experts say that they're higher than they should be, thanks to concerns about the solvency of Freddie and Fannie, which buy about half of all outstanding mortgages in the U.S.

The average 30-year, fixed-rate loan carried a 6.37% interest rate last week, according to Freddie Mac, up nearly a point from the year's low of 5.48% set last January and up from under 6% in late May. At the same time, yields on 10-year treasuries, which mortgage rates usually track, have trended down.

From June 12 to July 10, 10-year treasurys fell from 4.20% to 3.81%, while mortgage rates actually increased, inching up from 6.32% to 6.37%. Borrowers are probably paying at least a half point more than they ordinarily would, according to Keith Gumbinger of HSH Associates, a publisher of loan information.

That's because the questions surrounding the future of Fannie and Freddie have made the investors who buy their loans - hedge funds, pension funds, and banks - wary. They're demanding higher interest rates to take on the added risk they perceive.

Freddie and Fannie have also imposing higher up-front fees for riskier borrowers, based on credit scores.

As of June 1, buyers with scores of less than 620 with less than a 30% downpayment must pay a fee of 2.75% of mortgage principal, up from 2%. Between a 620 and 640 credit score, borrowers pay 2.5% (up from 1.75%); 640 to 660, 1.75% (1.25%); 660 to 680, 1.25% (0.75%); and 680 to 720, 0.5% (0).

"The fees are costing consumers a considerable amount of money," said Marc Savitt, a mortgage broker there and current president of the National Association of Mortgage Brokers.

All these added expenses are slowing an already moribund real estate market. That means it's going to take even longer to get rid of the tremendous inventory of unsold homes, according to the MBA's Brinkman, especially in areas that were overbuilt during the boom.

Cities hard hit by the housing bust, like North Las Vegas, Stockton, Calif. and Tucson, Ariz, may have to suffer through many more months of stagnant prices and increased foreclosures before they return to better times.

And these higher costs are going to stick around long after housing recovers, according to Brinkman. From now on, they'll just be the price of doing business.

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A plan to jumpstart the mortgage market - Jul. 17, 2008

2008-07-16T20:54:00.000-07:00

NEW YORK (CNNMoney.com) -- A group representing the buyers and sellers of mortgage backed securities unveiled a plan on Wednesday to recharge the moribund mortgage market.

Most of the nation's mortgage loans are packaged together by their issuers - such as Countrywide, Wells Fargo and Wachovia (WB, Fortune 500) - and sold to investors as mortgage backed securities. That's how lenders raise more money to make more loans.

As the housing crisis hit last year and losses in these investments began to pile up, individuals and institutions like pension funds, hedge funds, insurance companies and banks, stopped buying these pools of residential mortgages. That left lenders cash-strapped, and made it harder for home buyers to get loans.

But now the American Securitization Forum hopes its plan, Project RESTART, will increase the supply of mortgage loans available to borrowers and lower their cost. Jump starting the mortgage market could provide a needed boost to the struggling housing market.

"Project RESTART's goal is to rebuild confidence in investors in these securities," said Tom Deutsch, ASF Deputy Executive Director.

This task is especially critical as fears continue to swirl about the health of the government sponsored enterprises, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), which also buy loans from lenders to package and sell to investors. For the past year or so, Fannie and Freddie have provided the bulk of mortgage funding, adding to the strain they are under.

This plan aims to revive the segment of the secondary market that trades in mortgages that are not backed by the two mortgage giants.

"Mortgage credit is extremely constrained," said Tom Deutsch, ASF's Deputy Executive Director. "The market is not functioning as it should and this is one of the ways that will help restart it."

How it works

The plan calls for making the process of securitizing loans for investors more transparent, so that they can more clearly understand the nature of the mortgage pools they purchase. That would allow investors to better assess the risks and rewards of individual pools and judge their pricing more accurately, and should encourage then to resume buying these securities.

Until now, lenders provided little information to investors about the nature of the mortgages in a given pool. And most pools were made up of a wide variety of high and low risk loans. That meant investors often didn't have a real understanding of just how risky these investment pools were.

Ideally, according to Deutsch, the financial information on each individual mortgage borrower in a pool of loans would be available to investors. That's not practical. But by having lenders aggregate the borrower data in a standardized way and then disclose the character of the securities as transparently as possible, he hopes to accomplish nearly the same thing.

Pools of mortgages, for example, could be structured so that all the loans in them share many of the same traits. One pool might only contain loans from prime borrowers who have fully documented their income and their assets, put down a down payment of at least 20% and have credit scores of 720 or greater.

A conservative investor looking for a low-risk but moderate revenue stream might opt to purchase a piece of that pool.

On the other hand, more risk-tolerant investors might prefer a piece of a pool featuring all subprime borrowers with low credit scores that would offer a higher rate of return. The key is that each of these investors would know what they are buying.

Initially the focus will be on residential mortgages of all types, jumbo, prime, Alt-A and subprime, according to Patrick Greene, a senior vice president of Wells Fargo Bank and (WFC, Fortune 500) a member of the panel that worked on the plan.

"Wells Fargo ... spends every day thinking about how we can create more liquidity," he said.

And ASF has big plans to eventually apply the same kinds of processes and standards to other consumer debt that is securitized, including student and auto loans and credit cards.

The ASF has asked industry participants to submit comments on the plan between now and Aug. 22, and the plan will be adjusted accordingly. Deutsch is optimistic.

"This is an initiative with significant support from the industry, as it was developed by participants in all areas of the securitization market," he said. "We expect to see widespread adoption of the [plan]."

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A plan to jumpstart the mortgage market - Jul. 17, 2008

2008-07-16T16:58:00.000-07:00

NEW YORK (CNNMoney.com) -- A group representing the buyers and sellers of mortgage backed securities unveiled a plan on Wednesday to recharge the moribund mortgage securitization market.

As the housing crisis hit last year and losses in mortgage backed securities began to pile up, investors stopped buying packages of residential mortgages from lenders. That's made it harder for home buyers to get loans from cash-strapped lenders.

But now the American Securitization Forum hopes its plan, Project RESTART, will increase the supply of mortgage loans available to borrowers and lower their cost. Jump starting the secondary market could provide a needed boost to the struggling housing market.

"Project RESTART's goal is to rebuild confidence in investors in these securities," said Tom Deutsch, ASF Deputy Executive Director.

This task is especially critical as fears continue to swirl about thehealth of the government sponsored enterprises, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), which also buy loans from lenders to package and sell on the secondary market. For the past year or so, Fannie and Freddie have provided the bulk of mortgage funding, adding to the strain they are under.

This plan aims to revive the segment of the secondary market that trades in mortgages that are not backed by the two mortgage giants.

"Mortgage credit is extremely constrained," said Tom Deutsch, ASF's Deputy Executive Director. "The market is not functioning as it should and this is one of the ways that will help restart it."

How it works

The plan calls for increasing the transparency of the securitization process, so that investors can more clearly understand the nature of the mortgage pools they purchase. That would allow investors to better assess the risks and rewards of individual pools and judge their pricing more accurately, and should encourage then to resume buying these securities.

A conservative investor looking for a low-risk but moderate revenue stream might opt to purchase a piece of that pool.

"Wells Fargo ... spends every day thinking about how we can create more liquidity," he said.

And ASF has big plans to eventually apply the same kinds of processes and standards to other consumer debt that is securitized, including student and auto loans and credit cards.

The ASF has asked industry participants to submit comments on the plan between now and Aug. 22, and the plan will be adjusted accordingly. Deutsch is optimistic.

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Freddie Mac: 30-year fixed mortgage rates fall for 2nd week - Jul. 17, 2008

2008-07-16T15:56:00.000-07:00

Five-year adjustable-rate mortgages (ARMs) averaged 5.80% this week, with an average 0.6 of a point, down from last week when it averaged 5.82%. A year ago, the 5-year ARM averaged 6.35%.

One-year Treasury-indexed ARMs averaged 5.10% this week with an average 0.6 of a point, down from last week when it averaged 5.17%. At this time last year, the 1-year ARM averaged 5.72%.

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Builder confidence reaches record low - Jul. 16, 2008

2008-07-15T17:19:00.001-07:00

NEW YORK (CNNMoney.com) -- Home builder confidence fell for the third consecutive month, hitting a record low in July, a trade group reported Wednesday.

The National Association of Home Builders/Wells Fargo Housing Market Index fell 2 points in July to 16, marking the lowest point in the 20-year history of the index.

Wall Street economists surveyed by Thomson/IFR had expected the index to remain at 18.

A reading below 50 indicates that more builders think home sales conditions are poor than those who think the environment is positive for sales.

"The worsening housing slump and the near meltdown in financial markets last week makes it even more urgent for Congress to complete action on the housing bill now, a move that will help stabilize and restore confidence in housing and the U.S. economy," NAHB President Sandy Dunn said in a statement.

The group is backing a housing stimulus bill that would provide temporary tax credits of up to $8,000 for first-time home buyers. NAHB believes this would stimulate sales, reduce the inventory of unsold homes on the market, stabilize house prices and stem the deterioration of the mortgage market.

The index reflects the results of a survey that asks builders for their view of the market, including the number of buyers looking for homes and expectations for six months from now. Each of the survey's component indexes also fell to record lows in July.

The current sales index declined 1 point to 16; the number of buyers index fell 4 points to 12; and the sales expectations index dropped 4 points to 23.

Every region but the Northeast posted a decline in builder confidence in July. The Midwest fell 6 points to 10, its lowest score since the group began collecting regional data in December 2004. The West matched its record low in January 2008 with a 3-point drop to 13. The South declined 1 point to 20. The Northeast gained 2 points to 14.

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Builder confidence reaches record low - Jul. 16, 2008

2008-07-15T17:19:00.000-07:00

NEW YORK (CNNMoney.com) -- Home builder confidence fell for the third consecutive month, hitting a record low in July, a trade group reported Wednesday.

The National Association of Home Builders/Wells Fargo Housing Market Index fell 2 points in July to 16, marking the lowest point in the 20-year history of the index.

Wall Street economists surveyed by Thomson/IFR had expected the index to remain at 18.

A reading below 50 indicates that more builders think home sales conditions are poor than those who think the environment is positive for sales.

The current sales index declined 1 point to 16; the number of buyers index fell 4 points to 12; and the sales expectations index dropped 4 points to 23.

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Need a mortgage now? Bring loads of cash - Jul. 16, 2008

2008-07-15T15:15:00.000-07:00

NEW YORK (CNNMoney.com) -- Are you ready to buy a house in this crazy market? Better bring a boatload of money to the closing.

In a brutal real estate market where all the players want to hedge against the tremendous risks, down payment requirements and up-front fees and have soared, shutting many potential home buyers out of the market.

"I have as many people calling me for financing as ever," said George Hanzimanolis, a Pennsylvania mortgage broker, "but I'm putting less than half of them into loans."

These days, home buyers almost always have to make a substantial down payment, at least 5% these days, according to Rich Wordman, president of the Florida Association of Mortgage Brokers. The days of no-down loans are over.

In deeply declining markets, lenders are now reluctant to issue loans unless borrowers put at least 10% down, he said.

Even bigger jumbos

"Rents are high where I am," said Pennsylvania mortgage broker Hanzimanolis, "so people are having trouble saving enough for down payments."

In addition, private mortgage insurers are also charging higher insurance rates, he said. Historically, PMI cost about 0.5% of a home's purchase price. Now, a borrower putting 5% down can pay about 0.75% for the first year.

Higher rates

From June 12 to July 10, 10-year treasuries fell from 4.20% to 3.81%, while mortgage rates actually increased, inching up from 6.32% to 6.37%. Borrowers are probably paying at least a half point more than they ordinarily would, according to Keith Gumbinger of HSH Associates, a publisher of loan information.

Freddie and Fannie have also imposing higher up-front fees for riskier borrowers, based on credit scores.

"The fees are costing consumers a considerable amount of money," said Mark Savitt, a mortgage broker there and current president of the National Association of Mortgage Brokers.

And these higher costs are going to stick around long after housing recovers, according to Brinkman. From now on, they'll just be the price of doing business.

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Fed unveils new rules aimed at curbing shady home loans - Jul. 14, 2008

2008-07-15T14:12:00.002-07:00

NEW YORK (CNNMoney.com) -- The Federal Reserve unanimously approved new mortgage lending rules Monday in a crackdown on shady practices - particularly those involving subprime loans made to borrowers with weak credit.

The agency made several substantial revisions to the proposed regulations it unveiled in December. Many of the changes acknowledged consumer advocates' concerns that the rules still contained too many loopholes that would allow shady lending practices to continue.

But the Fed also made some concessions to industry executives, who feared increasing oversight would lead to less lending.

The new rules will apply to all mortgage lenders, not just those supervised and examined by the Fed. All but one requirement will take effect Oct. 1, 2009. However, board members said they will continue to work on further oversight of the mortgage industry.

"The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Fed Chairman Ben Bernanke. "Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers."

The proposals won't help the millions of homeowners who've already fallen behind in their mortgages, but the Fed is aiming to prevent another such crisis by tightening lending standards, particularly for subprime mortgages.

Many critics have charged that under former Fed Chairman Alan Greenspan, there were few restraints during the real estate boom. They say the agency should have flexed its muscles several years ago, clamping down on unscrupulous lenders and protecting borrowers.

Consumer advocates said they were pleased with the changes, but stressed that the Fed's action is just one in a series of steps needed to better protect borrowers from shady lenders. Industry executives, meanwhile, applauded the Fed for attempting to protect consumers while keeping in mind the need for low-cost mortgage loans.

The rules

The new rules governing "higher-priced," or subprime, loans will:

Prohibit creditors from extending credit without regard to a consumer's ability to repay the loan from income and assets other than the home's value. The lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan.

Require creditors to verify income and assets they rely upon to determine repayment ability

Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years.

Require creditors to establish escrow account for property taxes and homeowner's insurance. This rule will be phased in during 2010.

The Fed changed the definition of higher-priced loans to first mortgages with rates at least 1.5 percentage points above the average mortgage rate published by Freddie Mac. Also, second mortgages with rates at least 3.5 percentage points above the Freddie Mac rate will fall into this category.

With this change, the Fed is hoping to address industry complaints that the previous definition would capture non-subprime loans as well.

Additional rules will apply to all mortgages, regardless of rate.

Creditors and mortgage brokers cannot coerce a real estate appraiser to misstate a home's value.

Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. Also, they must credit consumers' loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.

Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan, including home improvement loans or refinancings. Currently, these estimates are only required for home-purchase loans. Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer's credit history.

In advertisements, companies must include additional information about rates, monthly payments and loan features. The rule also bans seven deceptive practices, such as saying a rate is fixed when it can change.

In a nod to the brokerage industry, the Fed withdrew a proposal requiring additional disclosure of the "yield-spread premium," which allows banks to pay brokers for steering homeowners into higher-priced loans. After testing consumers, the agency found that the rule would likely not be effective. But the Fed said it would continue reviewing the issue.

Advocates for consumers and industry generally pleased

Both consumer advocates and industry executives put a full-court press on the Fed in recent months, trying to get the agency to revise its proposed rules. More than 4,500 comments were filed since the agency announced its plan in late December.

After reviewing the final rules, advocates said they felt the changes did provide additional protections for the consumers. In particular, it's important that the Fed eliminated the requirement that borrowers prove lenders engaged in a "pattern or practice" of originating unaffordable loans since that's very hard to do, said Brenda Muniz, legislative director of Acorn, a housing advocacy group.

Still, the Fed could have done better by completely banning prepayment penalties, as several states have done, said Deborah Goldstein, executive vice president of the Center for Responsible Lending, a consumer rights organization. She noted that people in subprime fixed-rate loans are still subject to hefty fees if they try to refinance their loans within two years.

Also, some advocates wondered why the rules won't take effect for 15 months, and why subprime borrowers can opt out of escrowing their property taxes and homeowner's insurance after the first year.

"It's the first step toward better protecting consumers in the mortgage market, but not the last step," said Jim Carr, chief operating officer of the National Community Reinvestment Coalition, an advocacy group.

Industry executives, meanwhile, endorsed the changes overall, but said there still may be some areas of concern in the 419-page document. For instance, the Mortgage Bankers Association said it plans to ask its members about the elimination of the "pattern or practice" rule.

Still, the new rules will help consumers, without placing such a burden on lenders that they will have to curtail credit, industry insiders said.

"This is just the right amount of regulation," said Marc Savitt, president of the National Association of Mortgage Brokers.

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Hearing eyes Fannie, Freddie and banking crisis - Jul. 15, 2008

2008-07-15T14:12:00.001-07:00

NEW YORK (CNNMoney.com) -- The housing finance crisis and spiraling energy costs will remain a drag on the U.S. economy for the rest of the year, Federal Reserve Chairman Ben Bernanke told lawmakers in a gloomy presentation about the economic outlook.

The nation's top central banker warned "many financial markets and institutions remain under considerable stress, in part because the outlook for the economy, and thus for credit quality, remains uncertain."

The Senate panel was meeting to hear from Bernanke about the economy and to consider the crisis at mortgage finance giants Fannie Mae and Freddie Mac, as well as growing fears about bank failures.

Shares of Fannie and Freddie on Tuesday continued the recent slide that has prompted the Treasury Department and Fed to step in and offer support.

Shares of Fannie (FNM, Fortune 500) plunged 27% on Tuesday, leaving them 64% lower this month. Freddie (FRE, Fortune 500) shares tumbled 26%, leaving them down 68% in July. Both have lost more than 80% of their value since the start of the year.

Bernanke: "Financial headwinds'

Bernanke said the financial sector's problems are not the only problems facing the economy. "The financial headwinds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities," he warned.

The combination of rising commodity prices and tighter credit "has sapped household purchasing power even as they have boosted inflation," Bernanke said.

Bernanke added that spending has held up better than expected, helped by the Treasury's economic stimulus program, which has so far pumped $92 billion into the economy. At the same time, he warned that spending by consumers "seems likely to be restrained over coming quarters" and that businesses also are likely to be cautious with spending plans.

He also expressed concerns about rising inflation risks due to high commodity prices, suggesting that the Fed might not be able to take steps to support economic growth because of the risk that they would feed inflation pressures.

Despite Bernanke's gloomy outlook - his most pessimistic since he took office in 2006 - he said the Fed had raised its forecast for overall economic growth. It is now looking for 1% to 1.6% growth for all of 2008, up from its April forecast of 0.3% to 1.2% growth.

While the forecast did not break down the growth by quarter, he said he did not expect any robust growth over the next six months. Bernanke said the revision in the full-year forecast was caused by stronger-than-expected growth in the first two quarters of 2008, helped by the stimulus checks that goosed spending in the second quarter.

Three weeks ago, the Fed left interest rates unchanged for the first time in nine months as it said the risks of an economic slowdown appear to have diminished.

But his comments about the economy in the second half of the year seemed much more bearish than suggested in that Fed statement. Bernanke said that while he believed there would be second-half economic growth, he thought it would be weak.

His comments helped feed a sell-off in oil prices Tuesday, as traders started pricing in lower U.S. consumption of oil in the second half of the year.

Bernanke's testimony came as part of his regularly-scheduled semi-annual testimony on the state of the economy. The committee was set to joined by Treasury Secretary Henry Paulson and Christopher Cox, chairman of the Securities and Exchange Commission, for a second hearing Tuesday about Fannie Mae and Freddie Mac.

Mortgage market in cross-hairs

Mortgage finance giants Fannie and Freddie are a key source of funding for banks and other home lenders. Their ability to provide that funding is seen as a key to any recovery in housing and the economy as a whole.

The companies were set up by Congress, but they are owned by shareholders, who have fled the firms' stock recently on fears that continued problems in housing and rising mortgage defaults will force them to seek significantly more capital, a move that would dilute the value of existing shares.

Problems in the banking and home lending sectors were further highlighted by the failure of IndyMac, a California bank that was taken over by the federal government Friday evening in what could end up being the most costly bank failure in U.S. history. Stocks of many major regional banks plunged Monday on concerns over more failures.

IndyMac had been a major provider of mortgage loans that did not demand lenders to provide full or any documentation of their income. There are likely to be questions about the state of banking and the risk of more failures at Tuesday's hearings.

Sunday evening Paulson announced a proposal by Treasury to have Congress raise the $2.25 billion it is allowed to loan the two firms, and even open the door for the federal government to buy shares in the two companies if needed. The Fed announced it stood ready to loan money to the firms if they needed access to funds ahead of congressional actions.

Bernanke, in response to a question from Sen. Richard Shelby, R-Ala., said he felt that IndyMac "was particularly weighed down with low-quality mortgages. In that respect its failure, barring acquisition by another firm that didn't occur, was inevitable."

But he added that the banking system is well capitalized. "My concerns have turned less on the solvency of the institutions and more on their ability to provide credit necessary to keep the economy growing."

Bernanke said he believed that home building was likely to finally end its slide later this year or early next year, but that the decline in housing prices could continue longer than that, although he said he couldn't predict when, or at what level, they will find a bottom.

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Hard questions for Fannie, Freddie rescue - Jul. 15, 2008

2008-07-15T14:12:00.000-07:00

NEW YORK (CNNMoney.com) -- Treasury Secretary Henry Paulson was hammered by lawmakers on Tuesday over the Bush administration's plan to prop up mortgage finance giants Fannie Mae and Freddie Mac.

Members of the Senate Banking Committee drilled into Paulson on a day when the shares of Fannie and Freddie were once again pummeled by investors.

Paulson was asked about his request that Congress remove limits on how much money Treasury can lend to the troubled mortgage finance firms - was it just a "blank check" from taxpayers? He also faced questions about a second part of the plan - to allow Treasury to buy equities in the firm - and whether Fannie and Freddie are as safe as the companies, Treasury and regulators now claim.

"I fear we're sitting on a financial powder keg," said Sen. Richard Shelby, R-Ala., the committee's ranking Republican.

Paulson told the committee that the two firms have adequate capital to continue operating. He said that proposals he announced on Sunday - expanding the Treasury credit line for or buying equity in Fannie and Freddie - were "backstops" to assure the markets.

"Our proposal was not prompted by any sudden deterioration in conditions at Fannie Mae or Freddie Mac," Paulson said. "At the same time, recent developments convinced policymakers and the [firms] that steps are needed to respond to market concerns and increase confidence by providing assurances of access to liquidity and capital on a temporary basis if necessary."

And he said while the rescue plan would only be authorized through the end of 2009, it is important to put as few restrictions as possible on Treasury's ability to act if problems do occur in those times. Paulson argued that the best way to assure the markets was to give the broadest possible guarantees of access to government capital by those firms. He said that's the best way to make sure there is no need for Treasury to loan them money or buy their equity.

"If you've got a squirt gun in your pocket, you probably will have to take it out," Paulson said. "If you have a bazooka in your pocket and people know it, you probably won't have to take it out."

The rescue plan won some support, most notably from Sens. Christopher Dodd, D-Conn., and Charles Schumer, D-N.Y. But the amount of opposition and skepticism from other members of the committee, both Democrat and Republican, suggested that hopes voiced by Paulson and Dodd for action on the proposal within the next week may be a long shot.

One Republican, Sen. Jim Bunning, R-Ky, vowed to do everything in his power to defeat the proposal, which Schumer took as a threatened filibuster that could stall the proposal dead in its tracks. Schumer told Paulson that if he wanted the plan passed, the White House would have to push Republicans to join Democrats who supported the plan. Paulson agreed that the typical partisan fights would have to be put aside if it were to pass.

"I hope we can get this done quickly and we don't take hostages," he said to Schumer.

Dodd and Paulson hope the measure can be added to a broad housing reform bill. One part of that measure, long sought by Republicans, would impose greater regulatory oversight of Fannie and Freddie. It also includes a plan, pushed by Democrats, to have the Federal Housing Administration provide help to homeowners facing foreclosure.

The legislation passed the Senate on Friday and is now back before the House for consideration. The effort to put the now controversial rescue plan into that legislation could provide new obstacles for its passage.

Share plunge raises red flag

The two firms, known as government sponsored enterprises, or GSEs, were set up by Congress to help provide mortgage funding, but they are owned by private sector shareholders. Their shares have plunged in recent days among concerns that they would need to raise additional funds to cover future losses or need to be taken over by its federal regulator. Either step would reduce or wipe out the value of current shareholders' stakes.

Paulson said that he believed the problems facing Fannie and Freddie were caused by their the historic downturn in housing. He argued that sustaining the firms was crucial to not only the recovery of the housing market but also to protecting the nation's reputation in global markets.

"The confidence in their securities are essential to confidence in our financial markets," he said.

But other senators questioned whether the rescue plan would reward management and shareholders who should have seen problems coming due to the downturn in housing. And some even questioned if trying to rescue the firms at this point is really the best course.

"The question we are really going to be dealing with is this a model that works any more?" asked Sen. Chuck Hagel, R-Neb.

Paulson, who has led the government's response to the tumult over Fannie and Freddie, took the brunt of the questioning. Federal Reserve Chairman Ben Bernanke sat through most of the hearing and made virtually no comments. Executives from Fannie and Freddie did not testify.

Dodd, chairman of the Banking Committee, said the current crisis requires unprecedented measures.

"Inaction is not an option in my view," Dodd said. "We can not just watch events unfold."

Dodd repeated comments in recent days that he believes Fannie and Freddie are both operating on a sound financial basis. "I think it's very important that we not contribute to the unwarranted fear," he said. "This is a time for calm."

'We all know why we're here'

But Republican Shelby questioned whether conditions are more dangerous than those assurances would suggest.

"If the enterprises are operating in a safe and sound manner, what are we doing here today? Well, we all know why we're here," Shelby said in his opening statement. "The GSEs, even when they're deemed safe and sound, can pose systemic risk."

Paulson did concede that even though he believes the firms are well capitalized, he agrees they pose a risk to the broader financial system. He said that's part of the reason the rescue plan has been proposed.

"Our plan is aimed at supporting the stability of financial markets, not just these two enterprises," said Paulson.

Bunning, a longtime critic of Fannie and Freddie, cited the firms' stock slide since the plan was announced. "Your plan is not being accepted," Bunning said.

Paulson responded that "there's not something any of us can do is stabilize the stock price." He pointed to more positive signs such as the fact the spread between Fannie and Freddie debt and treasury yields has narrowed.

Bunning also questioned whether Paulson's expectation that the authority to loan significantly more money or buy equity will not be used if it is authorized.

"There's a lot of us who would like to believe what you're saying," said Bunning. "But we're skeptical. Anytime we approve something, it gets used."

Shares of Fannie (FNM, Fortune 500) plunged 27% on Tuesday, leaving them off 64% just this month. Freddie (FRE, Fortune 500) shares tumbled 26%, leaving it down 68% so far in July. Both have lost more than 80% of their value since the start of the year.

Fannie and Freddie are a key source of funding for banks and other home lenders. Their ability to provide that funding is seen as a key to any recovery in housing and the economy as a whole.

On Sunday evening, Paulson announced a proposal by Treasury to have Congress raise the $2.25 billion it is allowed to loan the two firms, and even open the door for the federal government to buy shares in the two companies if needed. The Fed announced it stood ready to loan money to the firms if they needed access to funds ahead of congressional actions.

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Mortgage applications rise 1.7% - Jul. 16, 2008

2008-07-15T14:08:00.001-07:00

WASHINGTON (AP) -- Mortgage application volume rose 1.7% during the week ending July 11, according to the trade group Mortgage Bankers Association's weekly application survey.

The MBA's application index rose to 522.2 during the week, from 513.4 a week earlier.

Refinance application volume rose 6.9%, while purchase volume fell 1.7%, on an adjusted basis. Refinance applications accounted for 39.2% of all applications.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 513.4 means mortgage application activity is 5.134 times higher than it was when the MBA began tracking the data.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.

The average rate for traditional, 30-year fixed-rate mortgages fell to 6.22% during the week ending July 11, from 6.43% the previous week.

The average interest rate for 15-year fixed-rate mortgages -- a popular option for refinancing a home -- fell to 5.74% from 5.94%.

Rates for one-year adjustable-rate mortgages fell to 7.16% from 7.24% the prior week.

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[Via Home Mortgage Rates and Real Estate News]

Mortgage applications rise 1.7% - Jul. 16, 2008

2008-07-15T14:08:00.000-07:00