Assist2Sell

Freddie Mac said Tuesday that its home price index for conventional mortgages it purchased last year registered a 0.4 percent decline from the fourth quarter of 2008 to the fourth quarter of 2009.

The GSE was quick to point out that this was a much smaller decline than the 9.5 percent drop in home prices recorded in 2008, perhaps signaling much needed stabilization in the marketplace. In the final quarter of 2009, the index was down 1.4 percent relative to the third quarter, on a non-seasonally adjusted basis.

“We normally see a seasonal effect in the fourth quarter price index that reduces its value. A year-over-year comparison largely controls for this,” said Frank Nothaft, Freddie Mac’s chief economist and VP. “Over 2009, the national index dipped slightly – -0.4 percent – and four-of-nine regions posted price gains.”

Full Story here

The Fed has been buying mortgage-backed securities since late 2008. But next month it plans to finish its purchase of $1.25 trillion in mortgages, and that could be bad news. There is wide agreement that the removal of this support will mean higher mortgage rates, which could hit housing prices and sales hard. Some even worry that it could cause the broader economic recovery to stall.  The program was the largest single injection of cash into the economy by the Fed during the financial crisis, and it will be the longest-lasting source of funds as well. Even though the Fed intends to stop buying mortgages, few people expect that the central bank will start selling them to private investors any time in the next few years.  even if the Fed holds onto the mortgages it has already purchased, the act of no longer buying additional mortgages is likely to raise mortgage rates in the coming weeks.

Experts say a jump of at least a quarter to a half percentage point is likely.  San Francisco Federal Reserve President Janet Yellen warned of higher rates in a speech Monday.  Fed Chairman Ben Bernanke is likely to take questions about the Fed's mortgage program when he testifies about economic conditions on Capitol Hill Wednesday and Thursday.  The worries about the Fed pulling back support for housing are compounded by the end of up to $8,000 in tax credits for home buyers. To qualify, buyers face an April 30 deadline to sign a sales contract.  Dean Baker, co-director of the Center for Economic and Policy Research, argues that the Fed's program and tax credit for home buyers "ended the free fall in home prices."  But he thinks that the removal of this support could mean that home prices could start to drop by as much as 1% a month again. He also thinks mortgage rates could climb by as much as a percentage point in the coming months.

Yesterday the Federal Reserve left interest rates near zero and vowed to keep them there for a while to nurture an economic recovery held back by stubbornly high unemployment.  The policy statement reflected a somewhat brighter tone than it had at the previous meeting in December.  "Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating,'' the Fed said.  In the December statement, the Fed had said economic activity "has continued to pick up.''  The decision to hold rates steady was 9-1, with Kansas City Federal Reserve Bank President Thomas Hoenig dissenting because he wanted the central bank to eliminate a phrase vowing to keep rates exceptionally low for an extended period.  However, the Fed dropped a reference that had been included in December's statement which said the housing sector ''has shown some signs of improvement over recent
 months.  ''The Fed repeated its intention to allow purchasing of some $1.43 trillion in housing-linked debt to conclude as scheduled by the end of March, but added: "The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.''

So far, the White House has resisted calls by Republicans to bring Fannie's and Freddie's obligations onto the government's books, a move that could boost the federal deficit by tens of billions of dollars. At a time when the deficit is already at a postwar high, that could create added urgency for Congress and the administration to address the companies' future.  The Congressional Budget Office has reiterated its support for bringing the companies onto the federal budget—and onto the government books—which would effectively mean accounting for their operations in the federal budget as if they were federal agencies.  "Recent events clearly indicate a strengthening of the federal government's commitment to the obligations of Fannie Mae and Freddie Mac," the CBO said in a report.

The CBO pegged the government's total costs of bailing out the two companies at $291 billion and said the government's takeover could cost an additional $99 billion in the coming decade. White House officials have said it wasn't necessary to bring Fannie and Freddie onto the government books until the administration decided what to do in the long term with them, but some Republicans say the arrangement has become more than temporary. "These are organisms that have now become a direct arm of the U.S. government and I assume that people who are now buying these securities are looking at them that way," said Sen. Bob Corker (R., Tenn.), in an interview. He asked Treasury Secretary Tim Geithner in a letter earlier this month to explain the rationale behind the "effective nationalization" of the companies, a move that he said "should absolutely be reflected on the balance sheet of the U.S. Treasury."  While such a move would raise the federal deficit sharply, critics of the compan
 ies argue it would reflect Fannie's and Freddie's actual risks to taxpayers. "It should have been done years ago," says David Kotok, chairman of Cumberland Advisors, a Vineland, N.J., money-management firm.

If you live in the Reno Sparks area and have had some contact with real estate sales, you have probably heard the term SHORT SALE.  So what does a short sale actually mean? The simple definition is your mortgage balance is greater than the current value of your home. For example, if you bought your home for $250,000 a few years back and got a mortgage for say $230,000.  For some reason you now have to sell your home. Unfortunately, if you sell your home today it will only sell for $150,000. This means the proceeds (selling price) will be “short” $80,000.

Here is an entry from wikipedia. A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.^[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.                                                                                                               

So why would a bank be willing to take less than the home is worth? First of all, to even be considered for a short sale, you would have to have a signification “financial hardship.” Loss of a job, escalating mortgage payments, pay cuts, etc.. So the way the bank looks at it is if you are going to quit making payments on your home, we are going to have to foreclose on the house.  The foreclosure process is lengthy and costly for a mortgage company. In addition, after the foreclosure the house will sit vacant and may get vandalized, the lawn will dye, and a stigma will be attached the property. In the end the foreclosure cost more and the property will end selling for less, not to mention the negative impact on the neighborhood. This is a loose-loose scenario for the bank/mortgage company.

With a short sale, the costs are much less, the property remains occupied, maintenance is kept up, and the property will normally sell for a higher price. The bank/mortgage companies will still loose money, but on a short sale the loss will be reduced.

Short sales are usually much better for the homeowner as well. The impact on credit is much less, you are able to stay in the house until it sells, and the neighborhood is saved from foreclosure.

If you are experiencing a financial hardship and are having trouble making your payments, a short sale might be a good option. As always, you should seek guidance from real estate professionals, attorney, and your CPA before you make a decision.

Fannie Mae has quietly announced a deed for lease program that enables homeowners who are in financial trouble and face foreclosure to turn into tenants by leasing the property from Fannie Mae and turning the property deed over to the lender, basically giving the house back.

According to Fannie Mae anybody who is not eligible for loan modification can take advantage of this program. It will keep families in their homes during a transitional period, and helps to stabilize neighborhoods and communities.

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. With the deed for lease program, borrowers transfer their property to the lender by way of a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens (2nd mortgages, equity lines of credit) on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must qualify and be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for lease property that is sold includes an assignment of the lease to the buyer.

You can download full details and instructions here. Fannie_Deed_For_Lease.pdf

1. The full $8,000 Tax Credit is for first-time-home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase. Ownership of vacation property or rental property does not disqualify home buyers from this program.

2. The maximum credit is $8,000 or 10% of the home purchase, whichever is less.

3. The credit is available for homes purchased on or after November 6, 2009 and before June 30, 2010. However contracts must be fully ratified before May 1, 2010.

4. To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $225,000 (up from $150,000) and single filers' MAGI should be less than $125,000 (up from $75,000). Partial tax credits may be available for married couples with MAGI incomes of over $225,000 but under $245,000 and single filers with incomes over $125,000 but under $145,000. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns.

5. There is no recapture or repayment clause IF the home is owned for at least 36 months.

6. Current Homeowner: An individual (and, if married, an individual's spouse) who has owned and used the same residence as a principal residence for any 5-consecutive-year period during the 8 year period ending on the date of the purchase of a new principal home will be eligible for a $6,500 tax credit ($3,250 married filing separate).

7. The full amount of the eligible tax credit is refunded to the buyer, regardless of whether the buyer has paid an equivalent amount in taxes.

8. Home purchase cap of $800,000 (no cap in previous version).

9. Special exemptions and extensions for military, members of the Foreign Service of the United States, and employees of the intelligence community: If such individual serves on official extended duty outside of the United States for at least 90 days between December 31, 2008 and May 1, 2010 the deadline for entering into a binding contract to purchase a home will be extended to April 30, 2011. Closing must be before July 1, 2011.

10. Credit is only available to purchasers who are at least 18 years old.

I listen to my Ipod in my car on the way to work, when I travel, and even before bed. Ok, addict may be a bit over the top.

 It's not the Ipod devise itself (although it's hands down the best), it is the content you can get. You can download/listen to incredible information from just about any topic you can imagine. If you need to improve your sales skills, change your attitude, find out what the markets are doing, learn how to market your business on the internet, and more.

Some wise people once told me, your car should be your university. My Ipod has turned into my master program for advanced education. I figure an Ipod doctorate is not far behind. Best of all, I'm not drowning in student loans.   

We have all heard the sayings, "learners are earners" and "readers are leaders." And one of my favorite quotes.

"In times of change, the learners will inherit the earth, while the knowers will find themselves beautifully equipped to deal with a world that no longer exists."    

                                                                                                            Eric Hoffer

Learning, growing, and improving your skills has never been more important. So if you have an Ipod, stock it up with some great info.

Here are a few of my favorite Podcast.

Get Real Real Estate Inventing

Market Watch-Real estate Roundup

Internet Business Mastery - Business Development and Internet Marketing for Web 2.0

Sales Gravy-Power Principles

Harvard Business Idea Cast

Inspiring Words-Zig Ziglar

Manager Tools

If you are more of a visual learner, you can down load video podcasts.

The information will keep you very interested. When you read it, think about how your Assist-2-Sell office fits with the long tail.

A big thanks to Dave Crumby in Phoenix for recommending this book.

One thing I have learned over the years is business is all about relationships. As the saying goes, it isn't what you know but who you know that is important. People like to do business with people they know and can trust. In real estate we like to do business with Lenders, Title Officers, Inspectors, Appraisers, and other agents we know will do the job right.

We also need to establish long lasting relationships with our clients. Establish good connections with your clients and the business and referrals will pour in. The beautiful thing about Assist2Sell is you have more opportunities to serve more clients and establish more relationships.

This is a great book that will open your eyes to the connections all around you.