Portage, Valparaiso and NW Indiana Mortgage Company

With Congress taking a rushed vote to "fix" mortgage markets, guess what?  Interest Rates are not responding positively for consumers.   Why would this be?  

Republicans propose alternative free market solution

With Congress knotted over the $700 Billion plan to bailout problem bonds, based on sub-prime mortgage problems ... President Bush called John McCain and Senator Obama to the White House for a meeting with leaders on Thursday. Interestingly enough Obama agreed to this meeting, which could frame him as supportive of the President. I believe that meeting takes place late this afternoon, so the markets will probably wander around in waiting today.

In the meantime Republicans have proposed an alternative plan, much more free market based, that eliminates the capital gains tax and the "mark to market" requirement that is causing healthy banks to become unhealthy in the eyes of investors. See WSJ op-ed.

The RSC plan is chock-full of measures to remove barriers to economic growth and market-distorting subsidies. It would suspend capital gains taxes to put trillions of dollars of capital in the economy, and set Fannie Mae and Freddie Mac, which as CEI has documented were at the root of this crisis, on the road to full privatization.

Most importantly for the crisis at hand, the RSC plan would make regulatory agencies suspend the mark-to-market accounting rules that a range of experts agree are spreading the contagion by forcing solvent banks’ to “write down” their assets, based on the last fire sale of a highly leveraged bank. As Gary Gorton, finance professor at Yale and member of the National Bureau of Economic Research has written, “With no liquidity and no market prices, the accounting practice of ‘marking-to-market’ became highly problematic and resulted in massive write-downs based on fire-sale prices and estimates.”

Although I am highly supportive of President Bush, I am worried that Democrats will take any chance they can get to create massive agencies that won't go away down the road. I'm willing to listen to alternatives today, but understand the brevity of the situation and that today and tomorrow a decision has to be made. If Republicans can't get support for the alternative, then I'd like to see John McCain seal the deal today and make Bush's plan happen. If Republicans start to get some support, I'd love to see the Maverick jump in with them and dare Obama to back Bush's plan over a market based plan. What an amazing day today is.

Last year when the "sub prime" problem became a national reality, I mentioned in a few places that one problem was pricing that didn't reflect the true underlying risk. I would suggest we should still have sub-prime loans, who's to say that a willing lender and borrower can't strike a deal? But, the price needs to reflect the true and liquid risk of the loan.

Calculated Risk, a rather negative toned economic blog, shows that the current gap in pricing is now roughly 3% when moving from a conforming loan to a jumbo loan. Is the risk on a higher priced house actually that much higher? Or, as a positive look, is the affordable range of homes becoming a much healthier niche in the market ... while higher priced homes are still a bit sluggish.

Here's my worry, with all the credit markets jitters, will affordable homes also get penalized and rates rise to 9%? I hope not, but because we're in new territory, I'd highly suggest you refinance or purchase now and not wait.

In this week of crazy talk about government money and bailouts, I can catagorically say that a program that allowed sellers to help buyers purchase homes will do more, and do more today. Why did we take that right away? Sellers need to have the ability to negotiate and use all the tools possible to sell their homes, and help buyers along the way. This is a reprint with permission:

Via G-II Varrato II:

By now, everyone, or almost everyone, is aware that the Housing and Economic Recovery Act of 2008 was signed into law by President Bush on July 30th, 2008. The bill was strongly supported by the NATIONAL ASSOCIATION OF REALTORS® (NAR). What many don't know is that NAR did not oppose SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT, a component of this bill that ripped away Down Payment Assistance Programs and increased the minimum down payment requirement of FHA buyers. I have searched everywhere to try and find an answer to why NAR would not take a stand on this very important issue but with little or no success. Now... here's a bit of trivia for you. It has been suggested that it was President Bush 1 who made DPA available to FHA buyers in 1999. And while it is true that it was his son, President Bush 2 who embezzled DPA from the FHA buyers on July 30th 2008, in an attempt to place blame for the current mortgage crisis on DPA type loans, DPA actually got it's birth in 1996 when... reportedly... Nehemiah's founder, Don Harris, who is also a real estate lawyer, found a mechanism within the statutes, that let charitable organizations make such gifts.

Section 2113 was inserted into H.R. 3221 at the eleventh hour, by the "Good O'l Boy's network on Capital Hill" just days before the President was to sign the bill into law; a typical underhanded trick perpetrated by many Washington "me first... you last" politicians.

To their credit, a group of honorable men and women, in the House of Representatives, launched an attack on Section 2113 of H.R. 3221. Less than 24 hours after President Bush signed H.R. 3221 into law and barely allowing the ink to dry, Al Green, U.S. Congressman for the 9th District of Texas along with Gary G. Miller, U.S. Congressman for the 42nd District of California, Maxine Waters, U.S. Congresswoman for the 35th District of California and Christopher Shays, U.S. Congressman for the 4th District of Connecticut sponsored H.R. 6694. H.R. 6694 is a bill intended to revise the requirements for seller-financed down payment assistance for mortgages for single-family housing insured by the Secretary of Housing and Urban Development. The bill does not address the increased down payment requirement but the bill does take an enormous step toward overturning the Down Payment Assistance regulation set forth in H.R. 3221.

H.R. 6694, FHA borrowers would need to meet a set of criteria that would help lay to rest the concerns expressed by the HUD over loans being granted to borrowers who have not demonstrated the necessary credit skills to maintain a mortgage payment. For example, the borrower would have to have a FICO credit score of not less than 680. However there are provisions where the buyer/borrower could have a FICO score as low as 620. You can read more about H.R. 6694 by CLICKING HERE.

There has been a lot of dispute leveled at the DPA programs, alleging that FHA DPA loans have a higher rate of foreclosure than those FHA loans that did not contain a DPA component. These allegations are simply not true. In fact a GAO (U.S. Government Accounting Office) study found that 91% DPA homebuyers were successful homeowners and were not in default on their mortgage! Contrast the DPA statistic with the current Fannie/Freddie crisis. Since late 2006 over 282 major lenders have gone bankrupt due to failed conventional Freddie/Fannie hybrid loans using either 80/20, 80/15/5, 80/10/10 and/or 100% LTV mortgages. Now... you tell me... which program has a better track record-the goofy NINJA (No Income, No Job, No Asset) loans of yesteryear or the FHA DPA loans? It really isn't rocket science!

When Brian D. Montgomery, the F.H.A. commissioner made the claim that FHA had to withdraw $4.6 Billion from it's $21 Billion capital reserve fund in May to cover the costs of losses, claiming that those losses were primarily due to the agency's seller-financed down payment assistance mortgage program, he would not and could not assign any figures to sustain his claim. One can only conclude that Mr. Montgomery was simply pandering to the fears of Congress and to the National Press Club he spoke to in June 2008.

There have been allegations that DPA loan programs placed an unrealistic and over-burdensome strain on our economy. In fact, this is far from the truth. DPA programs helped to add over $24 billion to the economy from 2000 through 2005. Additionally, DPA composes over 40% of FHA business and uses NO tax-payer dollars to fund their programs. In reality, tax revenues generated to State and local governments by new home construction bought with DPA: 150,000 x $82,269 (amount in tax revenue generated from an average single family unit) was in excess of $12.3 Billion (that's BILLION with a "B") between 2000 and 2005. Now... contrast that track record with the multi-trillion dollar bailout of Freddie Mac and Fannie Mae, that will use your/our tax dollars. Where is the logic to strike at the very heart of the buyer pool who has demonstrated the most stable and responsible component of our mortgage economy? Over 1 million home owners have been created through the use of DPA FHA loans since its inception.

Between January 1st 2008 and August 31st 2008, the real estate industry saw record sales, depleting the swollen reservoirs of unsold inventory. According to ARMLS (Arizona Regional Multiple Listing System) over 80% of the closed transactions, in this time period, occurred in the price range under $346,250. Lenders who processed FHA loans reported that over 80% of their pipe line was DPA type FHA loans. If this is any kind of bell weather for the rest of the nation then the end of DPA can only spell a resurgence of unsold inventory and a depletion of the buyer pool. It has been projected, by AmeriDream, that the real estate market could lose 25,000 buyers per month from the national real estate landscape.

In 2008, two different federal courts took the rare step of striking down the HUD regulation which would have banned seller-funded down payment assistance (DPA). The courts' decisions were NOT made on technical grounds, but for fundamental substantive reasons-the courts ruled that the HUD regulation violated the most basic principles of the Administrative Procedures Act (APA), that is, that an agency which issues a regulation must present at least some "reasoned decision-making" in support of its position.

The APA sets a very low threshold for an agency to meet for a regulation to be valid if it is challenged in court. An agency does not need to convince a court that a regulation is correct. An agency merely needs to present a plausible rationale and minimal evidence supporting the regulation. Yet the courts held that HUD failed to articulate any plausible policy rationale or provide verifiable data in support of its position.

The courts ruled in the Civil Action No. 07-1282 (PLF), AMERIDREAM, INC., Plaintiff, v. ALPHONSO JACKSON, Secretary, United States Department of Housing and Urban Development, Defendant. that;

"HUD's reliance on such flimsy anecdotal evidence ‘is not sufficient to enable [the Court] to conclude that the [Final Rule] was the product of reasoned decision-making.' Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co.,

After HUD had it's head handed to them by the courts, HUD again proposed a rule to ban charitable DPA, but this time sought legislation which would impose a ban without HUD having to present any rationale or data supporting that policy.

The choice is clear. We all must rally to the aid of the DPA programs. The data, presented by HUD and all pundents who are proponents of stealing DPA from FHA buyers, is flawed... and twisted to strike fear in the hearts of the American tax payers and congress.

Please help put DPA back on-line for worthy and qualified FHA home buyers. CLICK HERE to locate your state House Representative and CLICK HERE to locate your US Senator and tell him or her that you want them to support and vote for H.R. 6694 before September 26th 2008... before Congress adjourns for the rest of the year.

You have our permission to copy and paste this BLOG post into the eMail body of any post you send to your representatives. You also have our permission to republish this BLOG or any portion of the BLOG to your own BLOG, as long as you do not alter our text. If you wish to add your own text to our copy, please feel free to do so.

Thanks for your support... you can copy and paste the following text into the representatives eMail section of each of their web sites.

*********************************************

Dear (Enter Name of Representative here)

I ask your support of H.R. 6694. Please pass this bill before you adjourn on September 26th 2008. The passage of H.R. 3221, this past July 30th 2008, included a component that disallowed Down Payment Assistance for FHA buyers. This was, I trust, an inadvertant oversight on the part of our legislaters.

There has been a lot of dispute leveled at the DPA programs, alleging that FHA DPA loans have a higher rate of foreclosure than those FHA loans that did not contain a DPA component. These allegations are simply not true. In fact a GAO (U.S. Government Accounting Office) study found that 91% DPA homebuyers were successful homeowners and were not in default on their mortgage! Contrast the DPA statistic with the current Fannie/Freddie crisis. Since late 2006 over 282 major lenders have gone bankrupt (source www.mortgageimplode.com) due to failed conventional Freddie/Fannie hybrid loans using either 80/20, 80/15/5, 80/10/10 and/or 100% LTV mortgages. Now... you tell me... which program has a better track record, the goofy NINJA (No Income, No Job, No Asset) loans of yesteryear or the FHA DPA loans? It really isn't rocket science!

There have been allegations that DPA loan programs placed an unrealistic and over-burdensome strain on our economy. In fact, this is far from the truth. DPA programs helped to add over $24 billion to the economy from 2000 through 2005. Additionally, DPA composes over 40% of FHA business and uses NO tax-payer dollars to fund their programs. In reality, tax revenues generated to State and local governments by new home construction bought with DPA: 150,000 x $82,269 (amount in tax revenue generated from an average single family unit) was in excess of $12.3 Billion (that's BILLION with a "B") between 2000 and 2005. Now... contrast that track record with the multi-trillion dollar bailout of Freddie Mac and Fannie Mae, that will use your/our tax dollars. Where is the logic to strike at the very heart of the buyer pool who has demonstrated the most stable and responsible component of our mortgage economy? Over 1 million home owners have been created through the use of DPA FHA loans since its inception.

Between January 1st 2008 and August 31st 2008, the real estate industry saw record sales, depleting the swollen reservoirs of unsold inventory. According to ARMLS (Arizona Regional Multiple Listing System) over 80% of the closed transactions, in this time period, occurred in the price range under $346,250. Lenders who processed FHA loans reported that over 80% of their pipe line was DPA type FHA loans. If this is any kind of bell weather for the rest of the nation then the end of DPA can only spell a resurgence of unsold inventory and a depletion of the buyer pool. It has been projected, by AmeriDream, that the real estate market could lose 25,000 buyers per month from the national real estate landscape.

Additionally, with the aftermath of the devastation reaped upon the America by the past three hurricanes, Hanna, Gustov & Ike, FHA DPA, as modified by H.R. 6694, could become a logical and pivotal real estate purchase tool as our communities rebuild.

I appreciate your support in passing H.R. 6694 before Congress adjourns on September 26th 2008.

YOUR NAME
REALTOR

Mortgage Market for Conservatives

Brian, sorry I didn't get anything posted until now, much crazier weekend than I expected, hope your trip is going well.

As a former home builder, and current partner in a mortgage company and consultant to a few real estate related companies, I have an avid interest in what has been happening over the last 18 months in housing and especially mortgages. I have been saying over at Northwest Indiana Real Estate, for months now that the problem is too much regulation. Of course this position isn't held in very high esteem, Presidential candidates are scared to even suggest that the government is getting in the way ... and regulators would lose their jobs if we found that they actually caused the problem.

But they did!

I read The Foundry most every day on my reader, and regularly post from those terrific posts to my numerous sites, including my Northwest Indiana Mortgages site. (Sorry for all the self links, but I'm trying to build a case that I actually understand a little bit). The key question in my mind at the end of last week's craziness? WHAT IS A FAIR POSITION FOR A CONSERVATIVE WHO ACTUALLY CARES ABOUT HOMEOWNERSHIP?

Some exerpts from today's awesome post at the Open Market.org $700 Billion for Disastrous Financial System Bailout. Not the Foundry but a well written article with great links:

Either the mortgages are just as worthless as their current market price suggests, in which case the banks that hold them, rather than taxpayers, should pick up the tab (and any insolvent banks should be closed, so that they cannot gamble with depositors’ and taxpayers’ money in the future).

"Or, the mortgages are worth much more than they are currently valued — their current value being set under federal “mark-to-market“ accounting regulations, which require that assets like mortgages be conservatively valued at what they can currently be sold for at the moment, rather than what they would be worth if held to maturity. If that’s the case, then federal accounting regulations need to be immediately relaxed by federal agencies like the SEC that enforce them — as John Berlau argues today in the Wall Street Journal, and as former FDIC Chairman William M. Isaac urged yesterday in a Journal editorial attacking the federally-enforced Fair Value Accounting Rules and Basel II capital rules. (This would also be a good time to revisit the truly senseless accounting regulations imposed by the Public Company Accounting Oversight Board, which cost the U.S. economy over $35 billion per year, and were used by sub-prime mortgage lender Countrywide Financial as a smokescreen to hide its risky business practices)."

Bankers need a reason to start lending again. Sure the government can buy all the junk bonds which have small percentages of sub-prime loans with even smaller percentages of unperforming loans. Imagine, the government buying $700 Billion worth of loans ... at 20 cents on the dollar ... they may actually make money on this investment! But all they really needed to do was relax regulations that don't make sense and cost us billions in overhead and management.

Anyone know a politician with the guts to step up and say that? I'm a little frustrated with John McCain this week for not stepping into the Maverick role and telling Americans what they need to hear. Barack Obama is predictably suggesting more and more government, which is not what we need. I'm waiting ...

Mortgage applications surged last week as borrowers moved refinance their loans to take advantage of lower interest rates, which continued to fall this week as turmoil in financial markets prompted investors to seek safer investments.

Mortgage loan applications were up a seasonally adjusted 33.4 percent from a week ago for the week ending Sept. 12, the Mortgage Bankers Association said, driven by an 88.1 percent surge in refinance applications. An index tracking purchase loans rose a more modest 2.4 percent, driven by a 5.3 percent increase in applications for conventional purchase loans. Applications for government backed purchase loans, largely FHA, fell 4.5 percent.

From Inman News it would appear there is no better time to get that home refinanced, perhaps even get rid of a credit card or a car loan.

Freddie Mac: 30 Year Fixed Mortgage Rate Drops to 5.78%

A rundown on what mortgage experts are saying about the market this morning:

I kinda like this one, need to do some research:

Perhaps you've heard of Sir. Richard Branson's most recent venture, Virgin Money. It's a concept my grandfather employed in the 1960' and 1970's when he owner financed homes that he owned for employees. Virgin says:

"A Family Mortgage is a private loan from someone you know that is typically used toward the purchase of a home, or to refinance an existing bank mortgage. Imagine: Aunt Sarah as your mortgage lender!"

There's another Social Lending Company that might offer help for folks who are trying to scrape up the cash for a purchase, or need help getting on with life via a short sale. Zopa, says it's "FaceBook meets Lending." It's a new concept that would, for instance, allow me to help pay for my nephew's college tuition, $20.00 a month. If I sign up for $20 a month, and my folks agree to $20.00 and another aunt and uncle agree... well, pretty soon that student loan payment is almost nothing. These unsecured loans are for $25,000 or less, and you must have a 640 credit score.

From Active Rain:

Government Bailout: Impact on Rates

According to Tom Millon of the Capital Markets Cooperative, in his article entitled The Week Ahead in the Capital Markets--September 8. 2008, mortgage rates are positioned to possibly drop in the coming future. We have already seen an impact as of today in rates, despite the increase in the Treasury Bond Yield. This is because the spread in yield between mortgage rates/MBS rates and the 10 Year Treasury Bond has been at an unprecedented high. The expectation is that the spread between tresury yields and mortgage yields will be reduced by approximately 1/2 percent, which is significant. Treasury yields may rise in the meantime, lessening this impact. But rates should drop in the near future.

Secondly, the government is enacting the GSE Mortgage Backed Securities Purchase Program, which will aloow the government to purchase MBS'. How much and how much this will help is too early to tell.

This will be an interesting upcoming month in the secondary mortgage market.

Michael Byrne

From

Rates this Week : September 2, 2008

Tiffany Taylor

For the first time in 4 weeks, mortgage rates closing a week lower than where they opened it

Markets shrugged off uncertainty about Hurricane Gustav and chose to rally on the backs of strong economic data.

Overall, rates were down by about 0.125 percent, or $96 per year per $100,000 borrowed.

Markets were influenced by a handful of positive news last week -- two pieces of housing data gave markets reason to celebrate, as did an upbeat consumer confidence survey.

• Sales of "new" homes is reducing the glut of builder homes
• Sales of "used" homes is showing stability
• Americans, in general, are feeling better about the economy

In addition, equally-important-but-less-well-known data from last week points to similar conclusions -- the U.S. economy may be on more solid footing than many people had believed.

This week, markets re-open Tuesday after being closed for Labor Day. Early in the week, there isn't much data for markets to digest so expect oil markets to take center stage.

Go to link above for all the stats that she relates.