Private Investors Dominate Foreclosure Market

Cities and municipalities are having trouble spending the money allotted by the controversial Neighborhood Stabilization Program, which was passed by Congress last year to acquire houses in blighted neighborhoods.

The goal was to buy vacant properties at 1 percent less than appraised value, rehab them, and either sell or rent the homes to low-income residents.

The stumbling block is that the houses are being purchased by private investors and more affluent home buyers at cheap prices.

Some people don’t see that as a problem. “If the private market is coming back and buying houses and crowding the government out, that’s not a bad thing,” said Joseph Pigg, senior counsel at the American Bankers Association.

In some areas, the nonprofit National Community Stabilization Trust is working with banks to give government access to foreclosed homes before they are put on the market. But that may be too little, too late. “It’s very unclear when the dust settles how much real change in neighborhood stability and quality of life we’ll see,” said housing expert Alan Mallach of the Brookings Institution.

Source: CNNMoney.com, Tami Luhby 

Industry Lobbies to Extend Buyer Tax Credit

Key organizations in the housing industry are urging Congress to increase the $8,000 home buyer credit to $15,000 and make it available to all home buyers instead of just those buying a first home.

“What is being billed as a recovery is not showing up in the cash register yet,” says Richard A. Smith, CEO of Realogy Corp. and a member of the Business Roundtable, which is orchestrating the lobbying effort.

The Roundtable’s campaign is also pushing Congress to make permanent expanded limits for loans eligible for government purchase or backing. The limit is now $729,750 in high-cost housing markets.

Source: The Wall Street Journal, Nick Timiraos

U.S. to Offer Incentives to Modify Seconds

The Obama administration is announcing incentives today for mortgages servicers to modify home equity loans and other second mortgages.

Servicers must agree to modify second mortgages when the first mortgage has been modified. They must extend the term of the second mortgage and match the rate of the first mortgage. Then the government will share the cost with the servicer of cutting the rate to 1 percent for amortizing loans and 2 percent for interest-only loans.

Under the program, the government will pay mortgage servicers $500 upfront and $250 a year for three years for the modifications. Borrowers will receive payments of up to $250 a year for five years if they stay current on the modified loan.

There will also be a schedule of incentives for holders of second liens to drop their claims altogether.

The Department of Housing and Urban Development and Treasury will make the announcement jointly.

Bank of America, Wells Fargo, and JPMorgan Chase have already agreed to participate in the program.

A separate announcement will include changes to the Hope for Homeowners program, which helps homeowners refinance into more affordable government-backed loans. To get this program moving, the administration is announcing a $2,500 upfront payment to servicers. Lenders will receive $1,000 a year for three years if the loan stays current.


Source: The Wall Street Journal, Jessica Holzer (04/28/2009)

Government Struggles to Keep Interest Rates Low

Mortgage rates are rising, despite the government’s efforts to hold them down.

 

The government can’t control all the factors that affect mortgage rates. Mortgage interest has climbed because more borrowers refinanced when rates fell and boosted the supply of mortgage bonds.

 

Experts also attribute rising rates to expanded borrowing by the government to pay for stimulus packages, worries about Fannie Mae and Freddie Mac, and concerns about whether the central bank will continue to purchase mortgage bonds after June.The suggestion that the government solve the problem by creating an entity that offers 30-year mortgages at preset rates of 4 percent or 4.5 percent has drawn criticism.

 

“Not a lot of buyers are likely to want to buy a 3.5 percent mortgage-backed security, so the government may end up being a significant holder of these loans,” said Nicholas Strand, a mortgage strategist with Barclays Capital.  “And that number could run up to trillions of dollars.”

 

Source: The Wall Street Journal, Prabha Nataraian (02/03/2009)

McCain Wants to Buy Up Bad Mortgages

Republican presidential candidate John McCain proposed during Tuesday night’s debate using $300 billion of the $700 billion of the financial bailout money to buy up bad home mortgages, instead of rescuing the financial markets.

“I would order the secretary of the Treasury to immediately buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes at the diminished values of those homes and let people be able to make those payments and stay in their homes,” he said.

Democratic nominee Barack Obama last month sounded a similar theme, proposing that the government consider taking such a step.

But McCain’s approach was far more unequivocal.

A background paper provided by the McCain campaign said the plan “could be implemented quickly as a result of the authorities provided in the stabilization bill, the recent housing bill, and the U.S. government’s conservatorship of Fannie Mae and Freddie Mac.”

It was unclear, either from McCain’s remarks or from the backup materials provided by the campaign, how such a massive plan would be administered. Though McCain, a budget hawk and critic of rising federal spending, did concede one point. “Is it expensive? Yes,” he said.

Source: The Associated Press, Jim Kuhnhenn

This hit home today…

being that I’m from NY and have worked on Wall Street with Lehman…I was saddened, and a bit fearful when I saw the headlines.. Then after my prayers,- I know that God is still on the throne and all that is, will not break my spirit.  With renewed strength, my prayers are with those whose lives are greatly impacted by the current state of the U.S.

Financial Giants Fall Victim to Mortgage Crisis

Weighed down by losses in the U.S. mortgage crisis, the stability of major financial institutions continues to be shaky. On Monday, U.S. investment bank Lehman Brothers Holding Inc. filed for bankruptcy and Bank of America announced that it would be buying struggling Merrill Lynch.

Lehman’s is the largest casualty, so far, in the past year in the ongoning credit crisis. Lehman filed for bankruptcy on Monday following a failed attempt over the weekend to find a buyer.

Concerns over the stability of other firms also looms, particularly after the U.S. government’s decision not to provide any bailout for Lehman. In March the government provided financial backing for JPMorgan’s takeover of Bear Stearns, the first big bank to fold under the mortgage crisis.

Also on Monday, No.2 U.S. bank giant, Bank of America announced it would be buying Merrill Lynch in a $50 billion deal.

“Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders,” Bank of America Chairman and Chief Executive Officer Ken Lewis said in a statement. “Together, our companies are more valuable because of the synergies in our businesses.”The buyout is expected to close in the first quarter of 2009.

Source: Reuter News, Ellis Mnyandu (9/15/08) and Associated Press, Madlen Read and Tim Paradis(9/15/08)