Las Vegas real estate, mortgage, appraisal blog

The development of affordable housing in California has received a boost as the US Treasury Department announced that it will be allocating nearly $284 million. This is part of the more than $3 billion that has been distributed to state housing agencies in order to help fund these kinds of projects, an article in HousingWire explained.

The Treasury Department announced the allocation of nearly $284m in American Recovery and Reinvestment Act to spur affordable housing development in California.

The funds are the latest in more than $3.1bn given to housing agencies in 45 states and Puerto Rico in lieu of tax credits to fund affordable housing projects.

“This innovative Recovery Act program allows the federal government to partner with states to support local developers and helps ensure that housing developers can access the financing necessary to build affordable housing,” said Treasury deputy secretary Neal Wolin.

“We have worked quickly to make available more than $3 billion to state housing agencies, and we expect to see continued efforts at the state level, so that these funds can be delivered to the communities that need it most,” Wolin added.

The program began in May, and after state housing agencies are notified they will receive funds, each agency manages a competitive process for disbursing the funds to developers.

Florida is the leading recipient of funds, with more than $580m given to the state’s housing agency. North Dakota received the least among participating states, with about $3.7m given.

In other news, a Wall Street Journal article on Homeowners walking away was very enlightening. Hearing straight from the borrowers mouth proved to be as well, as evidenced in the comments.

The banks (my lender is     ) are unwilling to modify mortgages for the people able to pay. I suspect if the people underwater, but with money and good credit - you know, responsible people - were able to secure a more reasonable APR that made their monthly payments less painful, they’d more easily tolerate paying on that over-valued house. I their customers they deserve to get screwed especially by people in non-recourse states.have no outstanding debt other than my mortgage. No credit debt, no student loan, no car note - nothing. I can afford my house. But the 6.9 APR irks me. I’ve tried for months to get a MODIFIED better rate - something in the mid 4s. But because of no hardship and being underwater, the banks refuse. After 10 months of trying for a better rate I HAVE NO QUALMS walking away in a non-recourse state. For what - keeping an 800 FICO score? Screw that! The wife’s credit and our cash will secure the new home - a better house, larger, with a better APR - and the bank can bite me. Hell, when our old house goes up for auction maybe I’ll convince my brother to buy it for half its current cost. If banks like     , who egregiously borrowed tax payer money, are unwilling to help those same taxpayers who are

An article from on MSNBC noted that Senators agreed yesterday to extend the very popular tax credit for first-time homebuyers and to expand it as well.

New numbers show the impact the tax credit has had on first-time homebuyers achieving their own home. An article today from MSNBC gave insight into how this is effecting the housing market.

A press release Monday from the Treasury Department outlined the new Homeowner Affordability and Stability Plan to mixed reactions. ABCNEWS reported that this program has the potential to help numerous people find the homes they need.

The administration said the new plan will help keep mortgage rates low, and increase resources for low and middle income borrowers to buy or rent homes.

"This initiative is crucial to helping working families maintain access to affordable rental housing and homeownership in tough economic times," Treasury Secretary Tim Geithner said in a statement. "Through the years, many low and moderate income Americans have been well served by state and local HFAs, but the housing downturn has hit these organizations too."

Over the years, state and local housing finance agencies have helped over 3 million working families get financing for new homes, but they have been hurt by the current financial crisis.

The biggest worry from most who hear of this initiative is the cost to taxpayers and the strain it will put on the budget. Michael Barr had an answer to that.

Whatever the eventual size of the program, Barr said American taxpayers will be reimbursed through fees paid to Fannie Mae, Freddie Mac, and the Department of the Treasury. All these agencies are major backers of mortgages.

"There will be strong taxpayer protections," he said, adding that the "expected cost to the federal government is zero" because of these fees.

Not everyone is so optimistic. The Atlantic took each of the goals and dissected them to ascertain their usefulness in this climate.

Lower Interest Rates

The first and third points essentially means lower interest rates. This leads me to ask: do we really need to get mortgage rates lower? In case you don't follow mortgage rates, they're already pretty darn low. Here's a chart I made based on data from mortgage-x.com:

Even at their high point for the year, they were around the low for the past six years.

More Rental Properties?

The next point is perhaps the most interesting, and not in the earlier report I commented on last month. Do we really need more rental properties? To my knowledge, there is already an overabundance of empty housing out there. Why spend money rehabilitating additional properties -- just let the market set the price for what's existing. It's already been driving down the price of renting recently, making what's already available more affordable. I'm not sure why government intervention is needed to aid a phenomenon the market is already providing.

HFAs Taking The Losses

The new plan boasts that the HFAs will foot the bill, which is a round about way of saying that they will maintain exposure for most losses. I'm not convinced. Here's what the press release says:

HFAs will pay fees set to minimize costs to the Treasury Department and to taxpayers.

And:

Fannie Mae and Freddie Mac will administer a Temporary Credit and Liquidity Program (TCLP) for HFAs to help relieve current financial strains and enable them to continue to serve their important role in providing housing resources to working families.

Okay, so the idea is that the HFAs will pay fees which will act as cushion for potential losses to the financing that Fannie and Freddie are providing. How high are those fees? The rates they're going to offer to borrowers are already lower than the market rate -- the price which is supposed to cover the risk involved and cost of funding. Given how incredibly low those rates already are, how can the HFAs make money off these mortgages if they're paying a fee to cover the remainder of the risk? After all, on the population we're talking about, that risk is significant. Even beyond pure loss, there's also servicing cost to worry about, which could be substantial on loans like these.

The reality, I suspect, is that these fees won't possibly be high enough to cover most losses taxpayers will face if the loans go bad. They can't be, or else the HFAs wouldn't be able to make any money from the loans.

HFAs To Seek Market Sources For Capital

Speaking of those fees, here's how the Treasury intends to incentivize the HFAs to move to private sources of capital:

The fee for HFAs to use the TCLP will increase over time. This increasing cost to the HFAs will encourage the HFAs to transition from the TCLF to private market financing alternatives as quickly as possible.

This sounds like good intentions gone awry. First of all, what private sources in their right minds would want to finance these loans? Their return is below market and their risk is high. I like the idea that there should be an incentive to move these to private capital, I'm just entirely unconvinced that there's much private capital out there that wouldn't charge a lot for financing. If there was, then why would they need Fannie and Freddie in the first place? Meanwhile, if HFAs can't get other financing, they'll lose money not only on associated mortgage losses (which could be high) but also face increasing fees.

A more pressing question was being asked by Money Morning, however.  Should the focus be on creating jobs instead of supporting the housing industry?

The worst recession since the Great Depression has already eliminated 7.2 million jobs, and analysts figure 750,000 more jobs could disappear over the next six months. That means the administration of U.S. President Barack Obama may be forced to employ a second stimulus if it wants to preserve the fledgling recovery that has carried the Dow Jones Industrial Average back above 10,000.

The U.S. unemployment rate officially hit 28-year high of 9.8% in September, according to the Labor Department. But that number grows to 16.8% when you add the number of “total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers,” also known as the “underemployment” rate.

When 16.8% of the workforce is unemployed or underemployed, any growth in gross domestic product (GDP) is likely to be severely constrained. And in this case, a protracted jobless recovery promises to extend the housing and banking crisis, put a damper on wages, and further reduce consumption, which is the traditional path to a sustained economic recovery.

“This recovery looks like road kill, “Christopher Rupkey, economist at The Bank of Tokyo-Mitsubishi UFJ Ltd. told The Associated Press. “The heavy layoffs have stopped, but there are simply no new jobs available, and the harder the jobs are to get, the harder and longer this road to recovery is going to be.”

In July – the last month the government released statistics – there were more than six officially unemployed persons for every job opening. Historically the ratio is closer to 2-1.

The job market always tends to lag the broader economy’s recovery. But after a recession of such severe magnitude, businesses are more reluctant to resume hiring.

“There’s extreme caution among businesses about managing the bottom line and not getting overextended,” Brian Bethune, the chief U.S. financial economist for IHS Global Insight Inc. told NPR. “There just isn’t enough confidence out there for them to think about raising employment levels.”

Meanwhile, productivity – or output per worker per hour worked – has continued to rise. That means businesses won’t necessarily feel compelled to hire new worker, despite improved economic conditions.

Minutes of a Federal Reserve meeting show that most policymakers believe that the economic recovery that everyone has been looking for has started. They admit that the turnaround is weak and some even want the central bank to help stimulate the economy by taking additional steps, according to an article in CNNMoney.

The minutes of the two-day meeting, concluded Sept. 23, were the most explicit statement yet that the Federal Open Market Committee now believes the recession that started in December 2007 is over. The committee comprises the group of Fed governors and district bank presidents who set interest rates and take other steps to spur or slow economic growth.

"Most thought an economic recovery was under way," the minutes stated. "Many participants noted that since August, they had revised up their projections for the second half of 2009 and for subsequent years."

Up to now, the Fed's statements have been more circumspect. Its statement , released at the end of the meeting, said simply that economic readings suggest "that economic activity has picked up following its severe downturn."

This is the first time that Fed minutes explicitly said that most members believe the recession is over. However, in response to a question in an appearance at the Brookings Institution last month, Fed Chairman Ben Bernanke did say that the recession is "very likely over."

The decision on when a recession begins and ends is not up to the Federal Reserve, but instead the National Bureau of Economic Research. That group doesn't make any sort of declaration until months after the fact, in order to take into account final readings of various economic measures such as employment, income and industrial production.

For example, the NBER didn't declare that the recent recession had begun in December 2007 until a full year after the fact.

There is a growing consensus among outside economists that the recession is over. A survey of top forecasters by the National Association for Business Economics earlier this month found 81% believe the economy is in recovery.

Still, there was debate at the Fed's September meeting about what to do next. There was broad agreement that the fed funds rate, the key rate used to pump money into the economy, should be kept near 0%, and that the statement should say "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

Although many may disagree with the assertion that the economic recovery is in action there is also news of how many stimulus jobs have been created. Another article in CNNMoney commented on how much has been paid out and how many are benefitting.

An article in Money Morning posed that very question. Are American taxpayers going to have to bail out the FHA? Although officials are denying that this is going to happen there is dissenting opinion on that from many different sources. In fact, at least one critic has testified that 24 to 36 months from now the cash reserves will be gone and will require a federal bailout.

The New York Times reported last week that the recent mortgages, those made in the past two years, are the catalyst.

Reading real estate news these days makes one feel like they're about to get whiplash. There is either gloom and doom or sunshiney optimism. A nice middle ground has been found by those lobbying congress to extend the tax incentives for first time homebuyers. A recent Housing Wire article went into the reasons this could be more of a boost than many of the other options being offered.

Representatives of the real estate agent and land title industries testified in Congress that an extension of the $8,000 first-time homebuyer tax credit is the best tool for US housing markets to recover.

American Land Title Association (ALTA) president Mike Pryor called for not only the extension of the deadline to the credit, but also an effort to remove the income restrictions and the requirement that buyers be a first-time home purchaser.

“Incentives like low interest rates and a limited, first-time homebuyer tax credit ensure that revenue and employment losses are not as bad as they could be. Congress should take simple, common sense steps to remove barriers to growth in the title industry and prevent additional barriers from being created,” Pryor told the House Small Business Committee.

Representatives from the National Association of Realtors (NAR) also testified at the hearing. NAR regional vice president and NY broker Joseph Canfora testified that according to association data, 355,000 to 400,000 purchases were attributed directly to the credit.

“The more robust the credit and the greater its duration, the greater the chance that the housing market can perform its traditional role of helping the economy move out of a recession,” Canfora said.

Canfora also said that the tax credit helped reduce housing inventory. Noting that a balanced market typically has a six- to seven-month supply of homes. In February, when the credit was enacted, the US market had a 9.1-month inventory, Canfora said. In August, the inventory was at an 8.2-month supply.

National Association of Home Builders (NAHB) chairman Joe Robson, a builder in Tulsa, Okla., told the committee extending the tax credit would help alleviate the over supply of homes and create more demand for builders, providing a boost to the sector.

An increase in home ownership, economic stimulus and of course the creation of new jobs are what Joe Robson points to, with numbers that are fairly impressive.

“We estimate that this would increase home purchases by 383,000 in the next year and help mitigate the foreclosure crisis by whittling down inventory at all levels of the housing market, setting the stage for a full recovery,” said Robson. “This stimulus alone would create nearly 350,000 jobs over the coming year, which is exactly what the economy needs right now.”

Robson added builders are losing sales because appraisals are being deflated by distressed property sales used to evaluate regional comparable sales.

“Any prospective buyer would recognize the differences in the value between a well-kept home and a distressed property that is damaged or not properly maintained. The same should be true of an appraiser,” Robson said.

As HousingWire previously reported, a survey conducted by Harris Interactive on behalf of Zillow.com showed nearly one-third of prospective first-time homebuyers said an extension of the tax credit would have “no influence” on their decision to purchase a home in 2010.

September 30th saw a proposal for mortgage assistance for homeowners considered at-risk for foreclosure being presented before the Senate. First time homeowner tax incentives and work to stabilize the lending markets have not been true solutions to the problem. A recent article in Housing Predictor gave more details as to what will be proposed.

A proposal to halt the record number of foreclosures and force lenders to work with homeowners to modify mortgages was introduced in the Senate Wednesday by Rhode Island Senator Jack Reed. Rhode Island is one of the worst 10 states to be affected by the foreclosure epidemic.

The bill would establish a new mortgage payment assistance program to aid families under the threat of foreclosure. The legislation is sponsored by three additional senators as the Preserving Homes and Communities Act of 2009, and is intended to help address the housing crisis by requiring that homeowners are evaluated for and offered loan modifications by bankers.

The plan would also provide incentives to states and local governments to create mediation programs and provide for homeowners to meet face to face with banking representatives. It would provide $6.3-billion in funding to offer homeowner grants and subsidized loans and $80-million in federal matching funds to states and local governments damaged by the foreclosure epidemic.

The Senate is looking ahead to help stabilize the economy by starting where many would like them to, at home.

The proposal is expected to receive broad support in Congress. "More and more households are finding that even with a fixed-rate mortgage that they could afford before the recession, they are just one pink slip away from losing their biggest investment," said Reed.

"Until we stabilize the housing market, we simply won't get a handle on the broader economic crisis," said Senator Dick Durbin (D-IL), a co-sponsor of the bill. "Voluntary efforts to keep families in their homes have failed. This bill will force lenders to modify qualified mortgages, create a homeowners assistance program and give states a bigger role in mediation efforts. It's long past time for the Senate to step up to keep families in their homes and to help lead the way toward economic recovery. This bill will help achieve those goals."

On a somewhat more positive side, pending home sales are on the increase. This, of course, does not completely reflect closed transactions but is a positive sign that Americans are not as scared by sensational reporting as some had feared they would be. MSNBC News had more to say on the subject.