Talk to lenders before seeing homes

by Deniece Watkins Smith

As home buyers prepare themselves for the bottom of the real estate market, they are attending open homes consistently. There are many potential buyers who are beginning to look at purchasing their first home in the near future. As a conscientious Realtor, I worry that Buyers are still using a method which presents unnecessary risk to their purchasing process. So how does a buyer minimize risk in today's market? Call some lenders first, yes first, before going to open homes.

Seeing homes first seems very logical. You might say, "Let's go see if we can find a house we like. If we do, maybe we'll make an offer on it." Again, seems logical. If you are a buyer who has thought this, you are part of the ninety percent of buyers who sees homes first, quickly chooses an agent, then makes an offer on a home, then talks to a lender. This is a big trap! Be very careful when doing this.

To explain, the home purchase process has many details, which when overlooked can be risky for Buyers. Buyers think that logic will be the primary tool they'll use to analyze if home purchase is appropriate for them. However, once they find the place they love, emotions take over and they'll do almost anything to live in the home they found was just right.

A smart Buyer must remember that the decision to move effects lifestyle, family, income, investments, stability, they way others see us, our ego, our pride..shall I go on?

So you say, "Hey, I'd like to be prudent in my purchase. What should I do?" The answer: Talk to lenders before seeing homes.

The average consumer hears a lot about interest rates, but doesn't hear about all of the other factors that are involved with a loan. Loan variables can include, but are not limited to: length of the loan; amortization schedule; interest rate; available loan products; income; credit score; pre-payment penalties; reserves; down payment (starting equity); family health situation; how long you plan on living in the home; will it be your primary residence? .
Again, these are only some of the variables to consider when getting your loan.

Lenders frequently change what types of loans they are marketing. This week Bank A may be offering a special on an adjustable rate loan, and Bank B may not even have that product available. Next week Bank A may raise the rates on that product because they are promoting a different product this week that makes more profit for them.

In this volatile lending atmosphere, there is that possibility that Bank A may no longer be around the week after that. So be sure to become familiar with Bank A, Bank B, and Bank C to add certainty to your purchase.

Understanding everything you can about loans should be done before you consider seeing homes. The pressure of working full time, taking care of your family, and finding time to know all you should about your loan is very difficult to do in the time frame allotted in your contract. In Silicon Valley, this time frame (or financing contingency period) is extremely short. Buyers can propose anything in a contract with regard to a financing contingency. However, Sellers feel most confident with Buyers who have already done their homework and won't be using the Sellers' time to do their learning. Having done your lending homework decreases risk to you and makes a Seller more sure of you, which in turn can give you a great advantage on the price you offer, the terms you propose, or even (yes, it's still happening locally) being the winning bid over another Buyer's offer.

Take your time to learn about loans, choose a lender you like, then find your home.

A list of recommended professionals with whom I do business, including reputable lenders, can be found on my website www.dsoldit.com.

Deniece Watkins Smith's Market Update 10/8/08

I remember when Space Mountain in Disneyland was first introduced. The idea of slowly being pulled up higher and higher to a certain point, then being dropped, unable to see in the dark, speeding through a myriad of twists and turns was exciting. The riders of this coaster were aware of a few things, however. The ride lasted approximately one minute. The riders would be out of the situation soon after that minute. There was some kind of track that helped guide the ride.

Even the X-Scream ride above the Stratosphere in Las Vegas, a huge teeter totter mounted 866 feet above the ground that propels riders 27 feet over the edge of the Stratosphere building with nothing below, has certainty that the economic roller coaster (specifically the stock market) of this week has not been able to provide. So, if one wanted to get off of the blindfolded, stomach turning ride of the stock market, may I suggest they consider investing in our local real estate?

Local real estate has continued to remain relatively strong despite such volatility. The report below will show you that more than 30% of available homes in cities like Palo Alto and Sunnyvale are under contract, also known as "pending" sale.

Even more shocking to the news watcher who hears of all gloom and doom in the real estate market, will be the fact that four cities of the six that I report on show properties continuing to sell OVER the asking price. Specifically, the percentage of properties which have closed escrow in the past two weeks over the asking price are: Mountain View - 30%; Los Altos - 13%, Palo Alto - 36%, Sunnyvale - 43%! Yes, to repeat, those are the percentages of homes that have closed escrow in the past two weeks OVER the asking price in each city respectively.

It is still extremely important to be ready when you look for your home in our area. Have yourself qualified by an experienced lender, and work with a Realtor who knows your local market so you can make your purchase and selling decisions based on FACTS. You can find many more closed sales facts on my website.

Here is the October 2, 2008 version of the Deniece Watkins Smith's market update: (You may need to scroll down a little way)

Change since
Los Altos	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	78	8	$ 1,145,000	$ 19,900,000
Pending Show	4	-2	$ 1,298,000	$ 2,595,000
Pending Release	2	1	$ 1,795,000	$ 1,828,000
Pending	15	2	$ 1,149,000	$ 4,259,000
Total Pending	21	1
Total Listings	99	9
Percent Pending	21%
		Change since
Los Altos Hills	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	51	6	$ 1,579,000	$38,000,000
Pending Show	2	-1	$ 2,098,000	$ 2,150,000
Pending Release	1	0	$ 2,295,000
Pending	4	2	$ 1,749,000	$ 1,895,000
Total Pending	7	1
Total Listings	58	7
Percent Pending	12%
		Change since
Menlo Park	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	120	10	$ 299,900	$ 5,450,000
Pending Show	3	0	$ 399,999	$ 3,245,000
Pending Release	3	-1	$ 349,000	$ 1,200,000
Pending	18	-5	$ 299,000	$ 4,495,000
Total Pending	24	-6
Total Listings	144	4
Percent Pending	17%
		Change since
Mtn View	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	64	2	$ 599,000	$ 4,400,000
Pending Show	9	-1	$ 809,000	$ 3,298,000
Pending Release	3	0	$ 639,000	$ 897,000
Pending	12	-5	$ 599,000	$ 1,399,000
Total Pending	24	-6
Total Listings	88	-4
Percent Pending	27%
		Change since
MV Townhomes	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	72	-1	$ 184,500	$ 1,245,000
Pending Show	9	-3	$ 339,000	$ 1,129,000
Pending Release	3	0	$ 295,000	$ 599,000
Pending	16	0	$ 309,000	$ 1,055,000
Total Pending	28	-3
Total Listings	100	-4
Percent Pending	28%
		Change since
Palo Alto	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	79	4	$ 899,000	$ 12,500,000
Pending Show	9	5	$ 799,950	$ 2,995,000
Pending Release	4	2	$ 899,000	$ 1,280,000
Pending	25	7	$ 849,000	$ 2,999,800
Total Pending	38	14
Total Listings	117	18
Percent Pending	32%
		Change since
Portola Valley	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	24	-2	$ 975,000	$ 8,395,000
Pending Show	3	2	$ 1,299,000	$ 1,795,000
Pending Release	0	0
Pending	0	0
Total Pending	3	2
Total Listings	27	0
Percent Pending	11%
		Change since
Sunnyvale	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	139	18	$ 399,900	$ 1,988,888
Pending Show	27	-7	$ 429,900	$ 999,888
Pending Release	9	-4	$ 400,000	$ 1,015,000
Pending	25	-15	$ 400,000	$ 1,350,000
Total Pending	61	-26
Total Listings	200	-8
Percent Pending	31%
		Change since
SV Townhomes	10/6/2008	9/12/2008	Lowest Price	Highest Price
Active	91	3	$ 295,000	$ 849,950
Pending Show	10	-8	$ 319,900	$ 685,000
Pending Release	3	-2	$ 309,900	$ 375,000
Pending	9	-10	$ 307,000	$ 765,000
Total Pending	22	-20
Total Listings	113	-17
Percent Pending	19%

Information extrapolated from reil.com deemed reliable, not guaranteed.

More information about Deniece Watkins Smith can be found on her website www.DSoldIt.com. References can be found here. You can also call her directly at 650-483-2055.

Deniece Comments on Bailout

As I dedicatedly educate myself on the process of voting for a method of distribution of a proposed $700Billion to stimulate our financial system, I support congress' ability to stand up for the right to study the recommendation, add provisions to a blank check, and continue to strongly oppose the pressure being handed down from the executive offices to act quickly and recklessly. Quickly they understand. Recklessly they do not. I agree.

Infusing available money into the home mortgage market will allow more buyers to qualify for home loans than could qualify previously this year. More available money equals less stringent qualification guidelines. It is not that responsible buyers don’t want to buy. It is that current guidelines, in reaction to previously over-lax guidelines, have made it impossible for so many to buy. This does not mean we return to the over-lax qualifications that caused people who could not afford payments to get money. This means we make money available to responsible institutions that will use fair guidelines to qualify more buyers. Who will determine which guidelines are considered fair is what I believe must be the current behind doors debate.

Taxpayer money is being used for this (available money) bailout. It is fair that taxpayers insist that if their money is used to buy assets and a profit is made on those assets that the profits return to the taxpayer.

For the first time that I can remember, the average American family striving for the American dream is starting to be seen as an entity with influence on the global economy such as that of Wall Street. For the first time, “Main Street” has become a unit that has gained recognition. This recognition has been both bad and good.

Unfortunately, when lied to and deviously manipulated by large corporations who take advantage of loopholes exploiting the average want-to-be homeowner, the corporations can take dreams and turn them into nightmares. Such was the case recently when banks allowed people who could not prove income, or job history, to purchase as large an asset as a residential property. Banks made profits as they did this.

As the American family is dislocated, instability and certain fear are created in the lives of adults and children alike. The vulturous actions of the ethically irresponsible placed a rug underneath these families, only to pull it out from under them. These are people. These people are Main Street.

Now, that there is an option for Main Street to do something about it, we must act. Congress is hearing us. Over and over again Representatives and Senators have spoken of the input they have received from their constituents this week. There has been enough Main Street input to thwart, at least temporarily, a blind decision to put an exorbitant and unprecedented amount of money into the control of one person's hands (Treasury Secretary Paulson, appointed by the Bush Administration).

I believe that to reduce the amount of carnage created by the self-serving interests of corporations, congress should strongly consider options to infuse liquid into markets which will make home loans more readily available. There must however, be assurances that as the money is distributed, regulation of the money is clear, so as not to take advantage of Main Street one more time for banks’ benefit while simultaneously creating an even more precarious situation. I applaud congress for not being bullied into their decision of what to do with $700Billion with the same dangerous haste as those who got us into this position in the first place.

Note: This article assumes an understanding that we are in a financial crisis and that government and private interventions have been made to try and positively affect our currency value as well as help failing corporations. The deregulated free for all encouraged in the past years has not proven positive for all people. Although not an end-all for repairing the country’s current financial challenges freeing the housing market’s stagnation could positively affect work towards “un-gumming” our country’s frozen financial state by at least infusing some available monies to decrease the current inventories of available homes. It is with high hopes that this be done much more responsibly than has currently been done.

WaMu becomes biggest bank to fail in US history

By MADLEN READ, AP Business Writer 22 minutes ago

As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks — Washington Mutual Inc. — has collapsed under the weight of its enormous bad bets on the mortgage market.

The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.

Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse the $40 billion of Continental Illinois National Bank, which failed in 1984, and the $32 billion of IndyMac, which the government seized in July.

One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.

Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion — a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.

"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.

WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.

JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.

JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital.

The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.

WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.

The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed.

WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.

Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.

At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.

As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.

At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.

In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.

The bank in July reported a $3 billion second-quarter loss — the biggest in its history — as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.

JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.

JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.

The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.

"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.

___

AP Business Writers Marcy Gordon in Washington and Sara Lepro in New York contributed to this report.

Frank blames House GOP for breakdown of deal

By CHARLES BABINGTON, Associated Press Writer 1 minute ago

WASHINGTON - The chairman of the House Financial Services Committee declared Friday that an agreement on legislation to relieve a spreading financial crisis depends on House Republicans "dropping this revolt" against President Bush.

Rep. Barney Frank said leading Democrats on Capitol Hill were shocked by the level of divisiveness that surfaced at a White House meeting Thursday, not long after key congressional players of both parties declared they'd achieved the broad outlines of an agreement on a bill implementing the administration's proposed $700 billion bailout plan.

Bush planned another public statement on the situation from the White House Friday morning. He had delivered a speech to the nation Wednesday night urging support for the plan, but members of Congress say they've been hearing a lot of opposition from constituents to a public-financed bailout.

Frank said he did not think that Democrats were going to see a substantially different proposal from the plan the administration has been trying to sell to lawmakers and which had been the focal point of closed-door talks for days. He called the rival proposal being pushed by House conservative Republicans "an ambush plan."

Participants in a meeting late Thursday afternoon that Bush had at the White House with congressional leaders and presidential candidates John McCain and Barack Obama said it descended into arguments. The disagreements were so deep-seated that some lawmakers wondered aloud just who — and how many — would show up for the resumption of talks later Friday morning at the Capitol.

"I didn't know I was going to be the referee for an internal GOP ideological civil war," Frank, D-Mass., said on CBS's "The Early Show."

McCain headed to the Capitol Friday after Democrats put responsibility on him and Bush for getting House Republicans back into the negotiations.

Sen. Richard Shelby, an Alabama Republican who appeared on the same show, said many GOP lawmakers dislike the proposal that has been pushed on the administration's behalf principally by Treasury Secretary Henry Paulson.

"Basically, I believe the Paulson proposal is badly structured," Shelby said. "It does nothing basically for the stressed mortgage payer. It does a lot for three or four or five banks . ... "

The political infighting happened even as Washington Mutual Inc., one of the country's largest banks, collapsed under the weight of its bad bets on the mortgage market. The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.

As if that wasn't enough bad news, the Commerce Department reported Friday that the spring rebound the economy enjoyed earlier wasn't as healthy as first thought. The gross domestic product, or GDP, increased at a 2.8 percent annual rate in the April-June period, not as good as the 3.3 percent growth rate first reported a month ago.

Even for a party whose president suffers dismal approval ratings, whose legislative wing lost control of Congress and whose presidential nominee trails in the polls, Thursday was a remarkably bad day for Republicans.

The White House summit meeting had been called for the purpose of sealing the deal that Bush has argued is indispensable to stabilizing frenzied markets and reassuring the nervous American public. But it quickly revealed that Bush's proposal had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.

Paulson begged Democratic participants not to disclose how badly the meeting had gone, dropping to one knee in a teasing way to make his point according to witnesses.

And when Paulson hastily tried to revive talks in a nighttime meeting near the Senate chamber, the House's top Republican refused to send a negotiator.

"This is the president's own party," Frank said at the time. "I don't think a president has been repudiated so strongly by the congressional wing of his own party in a long time."

The presence of McCain and Obama at the White House session indeed lent a greater aura of urgency — and personal intensity — to the discussion.

McCain's leadership in the negotiations "is to try to stop us from yelling at each other, announcing deals that don't exist, to actually talk to the House and the Senate and get agreement and then go to the press," Sen. Lindsey Graham, R-S.C., said on NBC's "Today" show.

What caught some by surprise, either at the White House meeting or shortly before it, was the sudden momentum behind a dramatically different plan drafted by House conservatives with Minority Leader John Boehner's blessing.

Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them. Rep. Paul Ryan, R-Wis., a chief sponsor, said it was clear that Bush's plan "was not going to pass the House."

But Democrats said the same was true of the conservatives' plan. It calls for tax cuts and insurance provisions the majority party will not accept, they said.

At one point in the White House meeting, according to two officials, McCain voiced support for Ryan's criticisms of the administration's proposal. Frank, a gruff Massachusetts liberal, angrily demanded to know what plan McCain favored.

These officials also said that as tempers flared, Bush struggled at times to maintain control.

At one point, several minutes into the session, Obama said it was time to hear from McCain. According to a Republican who was there, "all he said was, 'I support the principles that House Republicans are fighting for.'"

Some at the table took that to mean the conservatives' alternative proposal, which stands little chance of passage.

___

Associated Press reporters Julie Hirschfeld Davis and David Espo contributed to this report.

C.A.R. Market Blast Sept. 25, 2008

Thursday, September 25, 2008 Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
Welcome to the Market Matters Advisory, your weekly guide to responding to the market. To access a version specifically formatted for consumers that you can print, share via e-mail, or post on your Web site, please click here. CALIFORNIA ASSOCIATION OF REALTORS® Proposed $700 billion plan moves forward A proposed rescue plan that was initially submitted by the U.S. Dept. of the Treasury last Friday and received numerous edits and additions throughout the week appears to have made significant progress today, with members of both parties announcing they have reached general agreement to move forward with a $700 billion federal rescue plan. If the plan announced today is approved, it would allow the U.S. Dept. of the Treasury to purchase troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans – up to $700 billion, which would promote stability in the U.S. financial markets. C.A.R. strongly supports the intent of Congress and the federal government to calm the financial markets, address liquidity issues and begin to restore confidence in our financial system as outlined by Congress this afternoon. C.A.R. looks forward to examining the proposed plan in greater detail as more information becomes available, and wants to be certain that the needs of Californians are addressed in the final legislative package, and that housing’s critical role is recognized in the legislation. C.A.R. also is encouraged by reports of additional provisions providing a greater level of protection to both consumers and taxpayers, and the addition of stricter oversight protocols than what was initially proposed by the Treasury Dept. Some of the key components of the current federal rescue plan as outlined today include: . Providing the U.S. Dept. of the Treasury authority to issue up to $250 billion of treasury securities to finance the purchase of troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans, right away. If needed, the Treasury could request an additional $100 billion; however, the Treasury would need Congressional approval to receive the remaining $350 billion; . Cash received from liquidating the assets will be returned to the Treasury’s general fund for the benefit of taxpayers; . Funding for the program will be provided directly by the Treasury from its general fund by increasing its debt by $700 billion; . Help for troubled homeowners to avoid foreclosure; . Limiting compensation to executives of troubled firms receiving assistance; . Greater oversight than the limited bi-annual reporting mechanism in the current proposal; and . Allowing the government to take an ownership stake in companies; MAKING SENSE OF THE STORY FOR CONSUMERS . Although the rescue plan is not yet finalized, lawmakers and the Treasury would appear to agree on provisions that would provide assistance to many homeowners facing foreclosure. Earlier this week, the National Association of REALTORS® announced the creation of a Presidential Advisory Group to address this critical issue. Five California REALTORS® (NAR) were appointed to the 20-person Presidential Advisory Group. Both C.A.R.’s and NAR’s Leadership Teams are in close contact with elected officials and other key leaders in Washington to ensure that interests of the real estate industry are represented. . One of Congress’ primary goals as this proposal moves forward is to minimize the financial impact of this rescue on the U.S. taxpayers. The current proposal would allow the Treasury not only to sell the acquired mortgage assets at a later date, but also to acquire an equity stake in the companies that participate in the program. The stocks could be sold at a later date, which could enable Congress to recoup some – if not all – of the $700 billion. To view articles about the plan, please visit: Lawmakers agree on outline of bail http://www.nytimes.com/2008/09/26/business/26bush.html?hp How we got here: It's housing, stupid http://money.cnn.com/2008/09/17/news/economy/housing/index.htm?postversion=2008091809 Bloomberg News Video http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/v.MGBzI6_8rM.asf# Lenders to FHA: Thanks but no thanks for your help http://money.cnn.com/2008/09/17/real_estate/Hope_for_homeowners_hearing/index.htm?postversion=2008091716 Giant Investment Banks Grasp for Government Safety Net http://www.washingtonpost.com/wp-dyn/content/article/2008/09/21/AR2008092102340.html?hpid=topnews CNN Money Can’t anyone afford my home? Although affordability set a record high in the second quarter of this year, when 48 percent of the state’s households could afford to purchase an entry-level home in California, factors other than price – primarily tighter lending standards and availability of credit -- are influencing consumers’ confidence and ability to purchase homes. MAKING SENSE OF THE STORY FOR CONSUMERS . The median price an existing home has decreased approximately 40 percent in California from its peak in 2006; however, many potential home buyers still view asking prices as too high compared with their annual household incomes. Despite the decline in home prices, many homes in California are still priced 33.5 percent higher than they were in 2001. During the previous real estate cycle, the ratio of home prices to income hovered at approximately 10:1, meaning that consumers were paying approximately 10 times their annual salary for homes. The current ratio of home prices to income is approximately 6:1, indicating that home prices are better aligned with incomes today than they have been in the past. . Tighter loan underwriting guidelines by lenders worried about declining home prices and the rising rate of foreclosures have led to many consumers finding it difficult to secure loans. Approximately 85 percent of lenders have tightened their requirements for borrowers in the past three months, according to the Federal Reserve Board. In November, Fannie Mae and Freddie Mac, which set the lending criteria for most loans, will require a credit score of 740 or higher – an increase from the previous credit score of 680 – for borrowers to avoid a loan surcharge that generally increases their interest rate. Consumers can raise their credit scores numerous ways, including reducing their credit card debt to less than 50 percent of their available credit; making payments on time; and minimizing credit inquiries. Experts recommend that consumers check their credit profile annually to ensure accuracy and to clear up any mistakes. Consumers are entitled to one free credit report each year from each of the three major credit reporting bureaus. Reports can be requested by contacting each bureau. . The majority of lenders are requiring a full 20 percent down payment in order to qualify for a fixed-rate mortgage loan. Additionally, some lenders are restricting a homeowner’s monthly principal, interest, taxes and insurance (PITI) to 32 percent or less of a family’s pre-tax income. If a lender determines that a home’s PITI will exceed 32 percent of the family’s income, the loan often will not be approved. As a result of the Housing and Economic Recovery Act of 2008, beginning Oct. 1, 2008, home buyers with loans insured by the Federal Housing Administration will no longer be eligible for seller-funded down-payment assistance. However, home buyers still can receive assistance from family, friends, and employers. Many first-time home buyers also can receive down-payment assistance from non-profit organizations. Borrowers with good credit, who issue a down payment higher than 20 percent, will likely qualify for a home loan, often with lower interest rates. . Some economists believe that owning a house is a risky asset, but in reality, homeownership historically has provided homeowners with long-term value, and often can be a consumer’s best investment. According to statistics gathered by C.A.R. over the last 40 years, homeowners who purchase a house and keep it for at least five years have an average annual rate of return of nearly 12 percent. For a complete assessment of the long-term value of homeownership, please visit www.car.org/economics/marketsnapshot. To read the full story, please click here: http://money.cnn.com/2008/09/19/real_estate/afford_myhome.moneymag/index.htm?postversion=2008092210 USA Today Anxiety rises as the era of easy credit comes to an abrupt end Many consumers, some who acquired high levels of debt compared with their repayment capabilities, are feeling the effects of the tightened lending standards, and are concerned that the new standards will negatively impact their 401 (k) savings plans, credit cards, and ability to secure new loans. MAKING SENSE OF THE STORY FOR CONSUMERS . Many consumers, especially those who rely on their 401(k) savings plans for retirement, may be discouraged by recent shakeups on Wall Street. The initial reaction of some consumers is to stop contributing to their 401(k)s or to move their money out of stocks and into money funds. Analysts often offer three tips to consumers about retirement accounts: keep contributing, even in a down market; do not transfer all money out of stocks and into money funds, which could result in missed profits when the market rebounds; and rebalance stocks and bonds so they are better aligned with the consumers’ target for investments. . As obtaining new lines of credit becomes more difficult, many consumers are turning to the use of their existing revolving lines of credit, especially credit cards, for everyday needs such as gas and groceries. Aside from racking up high levels of debt, some consumers inadvertently may be increasing their interest rates, even though they are making their payment on time. If balances suddenly increase to higher levels than in previous months, or if balances remain at a high level for consecutive months, some credit card companies – concerned that the borrower may not repay the debt -- may raise the credit card’s interest rate. Those who miss a payment, make a late payment, or exceed their credit limit may receive a penalty rate as high as 32 percent. To read the full story, please click here: http://www.usatoday.com/money/perfi/credit/2008-09-17-tight-credit_N.htm?loc=interstitialskip In Other News… The Mercury News Home prices fell 5.3 percent in July, now at 2005 levels To read the full story, please click here: http://www.mercurynews.com/breakingnews/ci_10537508?nclick_check=1 Wall Street Journal The Finest Foreclosures To read the full story, please click here: http://online.wsj.com/article/SB122177752165254337.htm CNN Money Builder sentiment rises from record lows To read the full story, please click here: http://money.cnn.com/2008/09/16/news/economy/bc.builder.sentiment.ap/index.htm Los Angeles Times Census: Housing costs eat up half of more than 7 million Americans’ incomes To read the full story, please click here: http://www.latimes.com/business/nationworld/wire/ats-ap-cash-strapped-homeownerssep23,1,1396136.story Press Enterprise Inland home prices fall steeply as number of sales jumps To read the full story, please click here: http://www.pe.com/business/local/stories/PE_Biz_S_dataquick18.1784bac.html Los Angeles Times California unemployment rate rises sharply to 7.7% To read the full story, please click here: http://www.latimes.com/business/la-fi-caljobs20-2008sep20,0,2251371,print.story C.A.R. e-Blasts are published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing nearly 200,000 REALTORS® statewide. Executive offices: 525 South Virgil Ave., Los Angeles CA 90020 phone (213) 739-8200; fax (213) 480-7724 Legislative offices: 980 Ninth Street #1430, Sacramento CA 95814 phone (916) 492-5200; fax (916) 444-2033 To view C.A.R.'s Privacy Policy click on this link: http://www.car.org/aboutus/privacypolicy You are receiving this in HTML. To receive it in text format, Click here To be removed from this mailing list please do not respond to this e-mail. Simply Click Here To contact C.A.R., click on this link: http://www.car.org/?view=ContactUs
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Lawmakers: Financial bailout agreement reached

By JULIE HIRSCHFELD DAVIS, Associated Press Writers Julie Hirschfeld Davis, Associated Press Writers 22 mins ago

WASHINGTON – Warned of a possible financial panic, key Republicans and Democrats reported agreement in principle Thursday on a $700 billion bailout of the financial industry and said they would present it to the Bush administration in hopes of a vote within days.

Emerging from a two-hour negotiating session, Sen. Chris Dodd, D-Conn., the Banking Committee chairman said, "We are very confident that we can act expeditiously."

"I now expect that we will indeed have a plan that can pass the House, pass the Senate (and) be signed by the president," said Sen. Bob Bennett, R-Utah.

The bipartisan consensus on the general direction of the legislation was reported just hours before President Bush was to host presidential contenders Barack Obama and John McCain and congressional leaders at the White House for discussions on how to clear obstacles to the unpopular rescue plan.

Tony Fratto, the White House deputy press secretary said the announcement was "a good sign that progress is being made."

"We'll want to hear from (Treasury) Secretary (Henry) Paulson, and take a look at the details. We look forward to a good discussion at the meeting this afternoon," he said.

On Wall Street, financial markets grew more upbeat as the Dow Jones industrial average at times rose more than 300 points.

Key lawmakers in Washington said at midday that few difficulties actually remained, although no details of their accord were immediately available.

"There really isn't much of a deadlock to break," said Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee.

But there were fresh signs of trouble in the House Republican Caucus. A group of GOP lawmakers circulated an alternative designed to attract private capital back into the credit markets with less government intrusion.

Under the proposal, the government would provide insurance to companies that agree to buy frozen assets, rather than purchase them directly as envisioned under the administration's plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.

"The taxpayers haven't done anything wrong," said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative "pretty much puts the burden on Wall Street over time."

Rep. John A. Boehner, R-Ohio, the minority leader, was huddling with McCain on the rescue. Earlier, asked whether the GOP presidential nominee could corral restive Republicans to support the plan, Boehner said, "Who knows?"

And Rep. Spencer Bachus of Alabama, the only House Republican in the bargaining meeting, did not directly say he agreed with the other lawmakers who emerged describing an imminent deal.

"There was progress today," said Bachus, the senior Republican on the Financial Services panel.

Bush told the nation in a televised address Wednesday night that passage of the package his administration has proposed is urgently needed to calm the markets and restore confidence in the reeling financial system. His top spokeswoman, Dana Perino, had told reporters earlier Thursday that "significant progress" was being made.

House Speaker Nancy Pelosi, D-Calif., said Bush's agreement with Democrats on limiting pay for executives of bailed out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.

The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.

It was not yet clear how lawmakers had resolved lingering differences over how to phase in the eye-popping cost — a measure demanded by Democrats and some Republicans who want stronger congressional control over the bailout — without spooking markets. A plan to let the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also was a topic of intense negotiation.

Bush acknowledged Wednesday night that the bailout would be a "tough vote" for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.

"Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold," Bush said as he worked to resurrect the unpopular bailout package. "Our entire economy is in danger."

Obama and McCain called for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.

Presidential politics intruded, nonetheless, when McCain on Wednesday asked Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead.

___

On the Net:

White House: http://www.whitehouse.gov

House Financial Services Committee: http://financialservices.house.gov

Bernanke answers congress' questions (Deniece's Notes - Part III)

Bernanke: Doing complete regulatory reform will go into difficult scheduling for congress. He urges action on step one today with a promise for step two.

Mr. Hinchey: Sees similarity now to depression, but understands bigger complexity. Concerned with more money in fewer hands. Aren't these things congress should be focusing on as well? Bush has been opposed to domestic spending for education, infrastructure and more.

Mr. Hill: Last seven days he had a message from administration that economy is strong. On Thursday learned there was a crisis. Over weekend learned that congress would be appropriating $700 Billion. He has received over 200 calls from his constituents saying don't do it. You are asking us to appropriate this much money to make better car loans and make credit more available. There's got to be a better answer.

Bernanke: Two front answer. Fiscal net cost less than $700Billion because it is acquiring assets. Second, credit will be squeezed farther which will affect income, jobs, credit, much more than just car loans. Choking credit takes away the lifeblood of the economy. Cannot say it will be like the depression. It is likely that stock portfolios will decrease and 401K's will devalue with no action.

Mr. DeMint: Concerned casualty will be belief in free enterprise system. Says you cannot solve a problem without understanding the root causes. Feels this problem was caused by government. Cheap money with wink and nod guarantee. Low risk, big rewards to mortgage companies and now they are embedded in all areas of our credit market. Free markets are being blamed for this. Do you believe this is a failure of the free enterprise system or an example of how government destroys the dynamics of free enterprise.

Bernanke: Inadequate risk management had something to do with it. Regulatory system needs reform. It is patchwork and needs restructured. There are historical and economic reasons for that. It may be less regulation, but smarter regulation.

Bernanke answers congress' questions (Deniece's Notes - Part II)

Mr. Paul comments: Price fixing is to be avoided. That is what prolonged the depression. Where is the $700 Billion coming from? He says prices should go down, rather than fixing them irregularly high. Asks where is the authority to buy illiquid assets?

Bernanke agrees that price fixing was bad during the depression. Federal reserve system took no action in the depression.

Ms. Klobuchar: How will the huge debt hurt our long term economy?

Bernanke: Agrees critically important to have a stable, responsible fiscal plan including considering not fully funded programs. He is unhappy by the fiscal implications of this, but feels doing nothing is even worse.

Klobuchar: Ways to pay for it rather than putting it on the backs of the middle class. If we have been talking about being an extraordinary time, why can't we consider taxing those who make more than $1MM per year for the first time as an extraordinary position?

Bernanke: That is congress' job to consider. We need sane fiscal programs.

Klobuchar: Paulson doesn't support executive pay decreases. Can there be terms to them taking the money?

Bernanke: There are issues of golden parachutes and others that need to be addressed. He hopes they do not cause the time for action to take so long as to change the house. Buying simple mortgages of the past is not the same as buying complex securitized mortgages of today.

Mr. Brady: More specific about consequences if no action. Is there a range you can give us with the loss?

Bernanke: Credit not working normally. Corporations not being able to finance themselves through commercial paper. It will affect he broad economy through lack of available credit. A significant deterioration in the broad economy. This is the most significant financial crisis in the post war period that is having a global effect.

In Japan growth was suboptimal for half of a decade.

Brady: We are being asked to walk away from every principal we have in considering a solution. Constituents do not want to reward risky behavior. Why don't we let free markets correct themselves?

Bernanke: The pain would be very significant. It would be very costly to average people. Better solution to recognize things went wrong. Taxpayers can be protected in doing that. Second part of program is to look at regulatory system to assure it does not happen again.

Senator Bingham: Hears that getting more capital into financial institutions is best solution now. Taking troubled assets off of books is a good option. When Warren Buffet invests, he gets preferred stock. That is seen as a good thing, as an infusion of capital, it helps the stockholders, it is a good investment for Warren Buffet. Concerned way this is being presented to congress, they are being asked to take assets off of company hands, with taxpayer hands. There may be a profit to the taxpayer, as there would to Buffet.

Bernanke: There is a concern that investors might view this as a prelude to forceable capital injections which would wipe out regular stockholders. Hears that there is concern about effective capitalization with this solution and suggests we talk with white house about a more investment point of view. There is nothing wrong with discussing this option with the treasury.

Mr. English: Architecture outlined gives extraordinary power in making extraordinary power in the economy and has political implications. Do we risk politicizing this issue?

Bernanke: If we don't want to stigmatize those participating in asset sales, it is appropriate that congress have oversight over this program. There should be principles it is based on. It should give comfort to taxpayers conveying that it is being handled in a concerned and trustworthy manner. Agrees needs oversight.

Derivitives played an important role in the turbulence of financial markets. Chopping up mortgage products was supposed to distribute risk. Transparency was decreased. Credit rating agencies also need to be looked at who were blessing opaque lending habits.

Mr. English: Were rating agencies too casual in making their assessments? Is it a regulatory failure? Is it a congressional oversight?

Bernanke: There has been a number of domestic and international studies who have put everything mentioned on the list for blame. Regulators not sufficiently attentive to risks of derivative instruments. Private sector in its zest for financial innovation underestimated risk for uncertainty.