Friday, November 28, 2008

A Week for Giving Thanks

At a time when "unprecedented" is being used to describe numerous economic events, an $800 Billion stimulus package was announced this week. The intent is clear enough: to encourage spending on new mortgages with interest rate reductions, and easing the terms by which Americans can incur more consumer debt. There is something curious to me about the premise. Interest rates were already quite attractive, hovering around 6% when historically the number to beat was 7%. In working with first-time buyers in particular, I see the dramatic differences between those who have been able to save money, and hence have had the 20% down payment required in this newly conservative lending environment, vs. those who have been unable to save.

Encouraging additional spending is clearly what economists feel is required at this juncture to reenergize an economy traumatized by huge swings in major indicators. We’ve grown eerily accustomed to the stock market being either up or down several hundred points each day, oil prices that were in "unprecedented" territory falling to half those amounts within a few months, foreclosures dominating sales in many areas and unemployment at levels not seen for decades. The intensity of the news and the volatility of major indicators are truly enough to have all of us on edge, uncertain, cautious.

I would love to assist buyers in purchasing homes in our wonderful East Bay area with its continued strength. So while I would normally welcome measures that would make it easier for buyers to enter our housing market, I can't help but feel that this latest measure, including $200 Billion set aside to make it easier for consumers to get further into debt with credit cards, is contrary to the best long-term interests of families as well as the over-all economy.

Some of those would-be buyers are convinced that our housing market will devalue further, and are unwilling to enter it until prices even in Berkeley, Rockridge and Albany are in bargain territory. It almost seems that some of these folks must be sure that the seller is experiencing pain before they are willing to buy. So far no precipitous drop in sales prices has occurred, and without that mythical crystal ball no one knows for sure if it will. My personal belief is that we may see a bit more softening, reflecting itself primarily in homes taking longer to sell. My guess is that we'll see much more optimism in our housing market after the inauguration. Bargain hunters might want to take advantage of these last months of a lame-duck administration and seasonal slowness mixed with the likely interest rate advantages from these latest stimulus attempts.

I'm currently in contract with buyers who wanted to establish a home together and were actively looking over the past few months. They know there is some risk that the value of their new home could go down soon after they purchase, but they are confident in the long-term stability of this area. They are looking forward to painting the walls something other than white, and planning a garage conversion to add space when they eventually have children. In this week of Thanksgiving I thank them for injecting some optimism in my daily experience. I thank them for being clear that buying a home is something quite different from buying stocks, and that while it is an important financial commitment, the emotional commitment is just as important, if not more.

So while this year has already brought us economic upheaval unseen since the Great Depression, even as we enter into the Not-so-great Recession we still have much for which to be thankful. We do see foreclosures in our area, but still in small numbers, especially as compared to some neighboring counties where the majority of properties are foreclosures or short sales. We live in an area of intense natural and architectural beauty. We are surrounded by an endless variety of delicious items. The life of the mind is active here. And let us not forget, even as the sun forces its way through the fog, it sets behind the Golden Gate, in this area that trully is paradise.

Thursday, November 20, 2008

Fannie, Freddie Suspend Forclosures

Fannie, Freddie Suspend Foreclosures
Carrie Bay | 11.20.08

Fannie Mae and Freddie Mac announced this afternoon that they are suspending all foreclosures on mortgages that the two companies own.

Both companies have ordered their national networks of mortgage servicers and foreclosure attorneys to halt all foreclosure sales and evictions involving occupied single-family properties. Freddie Mac is also including 2-4 unit occupancies as part of the suspension. The foreclosure moratoriums will take effect November 26 and go through January 9, 2009.

The suspensions will give servicers time to implement the Streamlined Modification Program announced by Fannie Mae, Freddie Mac, and their conservator, the Federal Housing Finance Agency (FHFA). The agencies' fast-track plan for getting seriously delinquent borrowers into more affordable mortgages was announced on November 11 in conjunction with the HOPE NOW Alliance and is scheduled to launch on December 15.

The temporary suspensions are also expected to give servicers more time to help troubled borrowers avoid foreclosure. Fannie Mae's attorneys and servicers plan to reach out to more than 10,000 borrowers the company estimates will be affected during the suspension period. Freddie Mac said its representatives will contact an estimated 6,000 borrowers.

“By working closely with FHFA and our servicers, Freddie Mac is on track to help three out of every five troubled borrowers with Freddie Mac-owned loans avoid foreclosure this year,” said Freddie Mac CEO David M. Moffett. “Today’s announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays.”

The chiefs of both orga
nizations emphasized that lenders servicing mortgages they own will continue to work with distressed borrowers to consider all workout options available, such as permanent rate reductions and mortgage term extension modifications, “even if previous workout efforts have been unsuccessful,” Fannie Mae said in a written statement. This year, Freddie Mac said it expects to approve 84,000 workouts for the estimated 140,000 who are delinquent on its wholly-owned mortgages. Sister financier, Fannie Mae, did not release its workout estimates.

“Fannie Mae is committed to working with FHFA to implement the streamlined modification program as quickly as possible to help prevent unnecessary foreclosures,” said Herb Allison, Fannie Mae's CEO. “We must and will do more.”

Thanks to Gwen and Rhoda from Holmgren and Associates for this information:

REAL ESTATE FINANCE
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