Reform Bill Summary

I received an email from our Coldwell Banker Mortgage advisor today and thought it was a much better summary than I could provide. Feel free to contact him directly - his info is at the end...

From Steve Guenza:
As most of you have already heard, President Bush signed the Mortgage reform bill this morning. I confess, I have not read the entire 700 pages, but below is my take on the import issues that will affect all of our business.

The most important aspect of the bill is that is gives the federal government the authority to step in and infuse money into Fannie Mae and Freddie Mac to keep them from going under. Over the last month, investors were selling off Fannie and Freddie stocks and not buying the mortgage backed securities for fear that they would lose money. Fannie and Freddie have bought over half of the mortgages in the US and their stocks have taken a huge hit due to the mortgage market mess.

In order for Fannie and Freddie to make their mortgage backed securities more attractive to investors. They started offering them at a higher yield to investors. They can’t offer a higher yield unless they get a higher yield themselves; hence, interest rates have gone up.

I believe this bill will calm investors down a little knowing that Fannie and Freddie won’t go under. That coupled with the new lending guidelines and rules set into place, should bring rates down as investors come back to the table. I have already seen rates drop twice already today.

The second most important thing is the new FHASecure loan. By now most of you know of Short Sales. Think of this as a ‘Short Sale’ refi. The current lender has to agree to take a 90% of the current value payoff and write off the rest, and FHA will come in and buy the reworked loan from the lender. Of course there are some conditions such as profit sharing of additional equity when the home is sold, and the lenders have additional fees to pay FHA. It is estimated that the lenders will save billions by accepting the ‘Short Sale’ refinance by not letting it go to foreclosure, but they will have to do a better job than they are doing now with all the problems we currently face with the Short Sale process.

What doe’s this mean for us?

It is estimate that this will help 400,000 U.S. homeowners currently facing foreclosure and that potentially means that we could have 400,000 less foreclosures and short sales on the market, and that’s a good thing.

A few other things included in the Bill:

- 10% or up to $7,500 tax credit for first time homebuyers (Although this needs to be paid back over 15 years with 0 interest)
- $7,000 tax credit for buyers that buy an REO
- Elimination of down payment assistance programs, such as Nehemiah, Ameridream and Genesis
- Tighter loan qualification guidelines
- Keeps the higher conforming and FHA loan limits, instead of just through this year.
- Increases FHA loan down payments from 3% to 3.5%.
- 4 billion dollars for states to buy and rehabilitate foreclosed properties
- Creates a national licensing system for Mortgage Brokers and lenders.

All in all, I really think that this is going to help. With all the good buzz in the media, I am even hearing more and more analyst piping up that this may well be the bottom……..Hang On!!!

Steve Guenza
Mortgage Advisor
Coldwell Banker Mortgage

707-765-4453 office
707-326-0814 cell

http://steveguenza.coldwellbankermortgage.com

Harbour View Update

It appears that the affordable housing units are about to rented and the developer is taking applications. There are some income restrictions but the rents are very attractive and the location is great. No word yet on when they'll begin building the single family units for sale but there hasn't been much activity for a while.

You can get more info on the rentals at www.theharborviewvillage.com

Fast Facts

Calif. median home price - May 08: $384.840(Source: C.A.R.)
Calif. highest median home price by C.A.R. region May 08: Santa Barbara So. Coast $1,199.000(Source: C.A.R.)
Calif. lowest median home price by C.A.R. region May 08: High Desert $200,740(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - First Quarter 08: 44 percent (Source: C.A.R.)
Mortgage rates - week ending 07/10/08 30-yr. fixed: 6.37 Fees/points: 0.6% 15-yr. fixed: 5.91 Fees/points: 0.6% 1-yr. adjustable: 5.17 % Fees/points: 0.5% (Source: Freddie Mac)

Finally, here's the current list of median prices in Bodega Bay over the last 8 years.

Bottom's Up

This article from Barron's give us a rare optimistic view of the current housing situation. The author points to several indicators that the bottom of the market is (or is about) here and that we're actually poised for recovery, albeit slowly.

"An ebbing tide of new delinquencies strongly hints that the worst may soon be over for the housing market, at least in terms of burdensome supply. The pig, in other words, is well along the python's alimentary canal.

In hindsight, the housing bust hasn't been nearly as calamitous as depicted in the media, or as Wall Street's woes might suggest. Yes, people have lost their homes, but more than a few were mendacious mortgage applicants and mere speculators, who eagerly sought out 100% margin loans, only to fold just as quickly when prices turned against them.

It is important to remember, as well, that even after a steep drop in the S&P/Case-Shiller Indices, long-term buyers in the top 20 U.S. metro markets have seen their properties appreciate by 70% since 2000. Home prices often take five to 10 years to recover fully from severe declines such as this. But at least the available data suggest the scary dive in home prices soon will be over."

For the entire article, click here.