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Agents, I have a question for you…

What happens IF:

1) The ‘first time home buyer’ tax credit it not renewed?

2) Interest rates increase by…1+%?

3) Foreclosures INcrease…and the number of REO (bank owned) homes causes the inventory of unsold homes to double?

(4) FHA lending standards tighten..requiring more downpayments etc?)

If you are a HREU student…and you have been reading this blog….you already know that all 4 of those things are happening….and happening now.

Here is an article from Bloomberg.com. Not the complete article.

The recovering housing market may be heading for a relapse as President Barack Obama and Federal Reserve Chairman Ben S. Bernanke consider ending support for the source of the global financial crisis.

The Obama administration is studying whether to let a first-time home buyers’ tax credit expire as scheduled at the end of November. Bernanke and his Fed colleagues may continue talking this week about how to wind down purchases of mortgage- backed securities, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. The two programs have helped stabilize real-estate demand, with new-house sales rising 9.6 percent in July from the prior month, the most since 2005.

Many agents are in denial that the Fed would end this program….but, they will have to. Why? because if they continue the program it will become entitlement. The tax credit will go from being something that was meant to be a short term tool to a long term expectation. Remember cash-for-clunkers? That eneded. What happened to car sales post cash-for-clunkers? Car sales went back to the PRE-cash-for-clunkers levels. Will the same things happen with home sales?

“Things could get ugly,” said Lawler, an independent consultant in Leesburg, Virginia, who spent 22 years at Fannie Mae, a Washington, D.C.-based government-controlled mortgage- finance company. “We could be facing a triple whammy at the end of the year: the expiration of the tax credit, the end of the Fed mortgage-buying program and rising foreclosures.”

Major Test

This is the first major test of policy makers’ ability to coordinate exit strategies as they seek to wean the economy off government support, said Brian Bethune, chief financial economist of IHS Global Insight, a forecasting company in Lexington, Massachusetts.

They have already acted separately, with the administration ending its $3 billion “cash-for-clunkers” automobile trade-in program on Aug. 24 and the Fed starting to wind down its purchases of Treasury debt, which totaled $285.2 billion between March 25, when the initiative began, and Sept. 16.

The 55-year-old Bernanke and his colleagues, who meet tomorrow and Wednesday to map monetary strategy, discussed “tapering” off the Fed’s purchases of mortgage-backed securities and housing-agency debt at their last gathering in August, according to the minutes of that meeting. No decision was made by the central bank’s policy-making Federal Open Market Committee.

Translated: interest rates WILL increase.

Mortgage-Backed Securities

Under the current program, the Fed is scheduled to buy up to $1.25 trillion of mortgage-backed securities and $200 billion of agency debt by the end of the year. So far, it has purchased $862 billion of the former and $125 billion of the latter.

A trio of Fed presidents — Jeffrey Lacker of Richmond, James Bullard of St. Louis and Dennis Lockhart of Atlanta — has publicly raised the possibility the central bank might not spend all the money authorized for the mortgage-backed securities. Lacker questioned whether the economy needs the additional stimulus in an Aug. 27 speech.

New York Fed President William Dudley, who is vice chairman of the FOMC, has sounded more cautious.

“The market expects us to complete these programs,” he said Aug 31. “To contradict that market expectation is a pretty high hurdle.”

We expect to see rate increase to 5.5%-6% if the Fed pulls back. People are buying homes because owning is a better financial proposition vs renting. If rates increase that rationalization will go away. With the probability of short term appreciation it will be difficult to rationalize paying more for a home vs saving money and renting.

Abrupt Stop

An abrupt stop might push up mortgage rates by a half to one percentage point, said Hooper, a former Fed official. Tapering off — by reducing weekly purchases and stretching them beyond the end of the year — would have a more muted effect, pushing rates up by at least a quarter percentage point, he said, adding that the Fed may announce just such a strategy after its meeting this week.

Mortgage rates for 30-year fixed home loans averaged 5.04 percent in the week ended Sept. 17, down from 5.07 percent the previous week, according to McLean, Virginia-based Freddie Mac, a government-controlled mortgage-finance company.

Borrowing costs for home buyers are relatively high based on the historical relationship with the Fed’s target rate for overnight loans between banks, currently at zero to 0.25 percent.

Crucial Extension

A number of Washington-based organizations — the National Association of Home Builders, the National Association of Realtors and the Mortgage Bankers Association — say an extension of the buyer’s tax credit is also crucial.

Lawrence Yun, chief economist of the realtors’ group, estimates that about 350,000 home sales through August were directly attributable to the tax credit of up to $8,000 for first-time buyers. People buying their first homes accounted for 43 percent of sales since the credit became law, up from 32 percent in the six weeks prior to its passage, according to Washington-based Campbell Communications Inc.

Yes, the credit did motivate buyers to buy. Bo doubt.

But, we hear from students everyday about their ‘first time buyers’ having to overpay for homes because they are competing with ‘investors’ and other first time buyers. So, part of their motivation to buy was to get the tax credit ($8000 bonus for buying a home) and yet they end up overpaying for the home….by usually far more than the tax credit. At the end of the day, wouldn’t it of been better for the buyer to have bought the home at a better..lower price?

Treasury Secretary Timothy Geithner, 48, called signs of stabilization in the U.S. housing market “very encouraging” and told reporters on Sept. 17 that the Obama administration will take a “careful look” at extending the credit.

‘Slim’ Chances?

Congress may not pass an extension; the chances “seem slim,” said Mark Calabria, director of financial-regulation studies at the Cato Institute in Washington and a former staffer on the Senate Banking Committee. Public opposition to increasing the federal budget deficit is high, and there’s little appetite on Capitol Hill for finding spending cuts to offset the cost of the tax credit, he said.

Agents, you need to call ALL of your buyer leads and let them know that they better buy…and buy fast…if they expect to get the credit. If they are motivated to buy because of the credit..let them know that it probably won’t be extended and…and many are speculating….won’t be increased!

The deficit will total $1.6 trillion this year as revenue falls and the government spends at the fastest pace in 57 years, according to the nonpartisan Congressional Budget Office.

In a sign of the public’s concern about the deficit, 62 percent of people surveyed in a Sept. 10-14 Bloomberg News poll said they would be willing to risk a longer-lasting recession to avoid more government spending.

That is an interesting stat. In my mind, a hopeful stat. People are willing to overcome some short term ‘pain’ (continued recession) for long term gain (healthier economy).

The impact of terminating the tax credit will show up first in the new-home market, said David Crowe, chief economist of the home-builders’ association.

“It takes at least four months to build a house, and you need to buy it before Dec. 1 to qualify,” he said. “If you haven’t started building it by now, it’s too late.”

Recovery Signs

To be sure, some economists are betting the housing recovery is here to stay. The market has “clearly bottomed,” said Dean Maki, chief U.S. economist for Barclays Capital in New York.

Even some of the optimists are hedging their bets given how dependent the market has been on government and central bank support.

“I’m right in there with the rest of the cheerleaders, but there are no historical anecdotes, no historical data points to use for this,” said Lewis Ranieri, the 62-year-old mortgage- bond pioneer who is chairman of New York-based Hyperion Partners LP. The U.S. housing market is “still very fragile.”

In case you missed this today…..Meredith Whitney has a dire prediction for housing…..from CNBC:

Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.

“No bank underwrote a loan with 10 percent unemployment on the horizon,” Whitney said. “I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when.”

Local governments and states are chronically under-funded and “most states are under water,” adding to the problem of low private consumption, she said.

“If you look at the drivers for unemployment I don’t see that reversing very soon,” Whitney said.

If consumers were to decide to spend, “that would be a game-changer,” but it would be an unnatural thing to do in a recession, she said.

“A lot of themes are constant, which is the US consumer and the small business doesn’t have any credit, credit is still contracting,” Whitney said.

Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.

“Obviously that doesn’t bode well for spending,” Whitney said.

Who do we listen to when it comes to predicting what’s-next for the housing markets?….well, this guy.

He would know. He is the CEO of Fannie Mae. Meet Michael Williams…

Source: Bloomberg.

The U.S. housing market still has a “long road ahead” to recovery and investors and borrowers should remain cautious as the economy regains its footing, Fannie Mae Chief Executive Officer Michael Williams said.

Williams, in his first public address since he took the helm of the government-controlled mortgage-finance company in April, said the market has had a “very, very tough year.”

“Anyone looking objectively at the economy and the housing market sees hope,” Williams said in prepared remarks being delivered today at the Exchequer Club in Washington. “The patient is out of intensive care, but still has a very long road ahead to a clean bill of health.”

The mortgage market is still dependent on government- affiliated programs, with private banks providing just 10 percent of loan liquidity, down from about 60 percent in 2006, Williams said. Fannie Mae and Freddie Mac are responsible for about 70 percent of all new mortgages, while the Federal Housing Administration accounts for about 20 percent, Williams said.

Foreclosures will continue to climb this year, Williams said, putting pressure on home prices as mortgage companies work through a backlog of property seizures that had been suspended earlier this year as part of efforts to provide struggling homeowners with relief. While homes are selling faster, the inventory of foreclosed properties and unsold homes remain at “exceptionally high levels,” he said.

“There is no precedent for what borrowers are going through today,” Williams said.

Read this article about what Merredith Whitney has to say about the real estate markets…specifically 2010-2011..read that article now.

Ineligible Borrowers

One in every 10 mortgage borrowers is behind on their payments and one in every 25 homes is in foreclosure, he said. Homeowners have lost 40 percent of their equity, making it difficult for many to refinance, he said.

Translated: if the home owners needs to sell…and they want to avoid a foreclosure…..they will have to sell their home via a short sale! Agents, learn the new ways to close short sales in less than 45 days with only 4 forms. Stream lined short sales are finally here! Watch the free agent short sale secrets video and download the free agent short sale secrets book.

Some borrowers, as a result, are ineligible for government programs to refinance into lower rates. More than 1 million delinquent loans are ineligible for President Barack Obama’s loan modification program because the debt was used to finance second homes or exceeds the program’s loan limits of $729,750.

“And not every borrower is taking advantage of the program,” he said. Only 29 percent of the people who have received solicitation letters have responded, according to Williams. He said borrowers who aren’t participating are skeptical of the program, have only just learned about it, have lost their jobs or have already abandoned their homes.

Agents, learn how to mod your own home loan. If you want to lower your own house payment now…mod it! Next, learn how to mod mortgage for others. Loan mods can be a great way for you to help others and make money..watch the FREE Agent Loan Mod Secrets video now.

Fannie Mae’s Future

Regulators seized Fannie Mae and smaller rival Freddie Mac one year ago amid concern that their capital wasn’t sufficient to withstand a surge in mortgage delinquencies. The companies, surviving off a $400 billion lifeline from the U.S. Treasury Department, have since been thrust into a leading role in Obama’s homeowner rescue plans, which include offering low-cost mortgage refinancings and waiving some loan standards.

The companies, responsible for $5.2 trillion in U.S. residential mortgage debt, have booked a combined $165.3 billion in quarterly net losses in the past two years and have received or requested $95.6 billion in taxpayer aid since November.

Williams, when questioned after the speech, declined to discuss the future of Washington-based Fannie Mae, the potential status of shareholders or the company’s past consideration of a reverse stock split. The government owns 80 percent of Fannie Mae and Freddie Mac and has said it would consider options early next year for potentially restructuring the company.

“In dealing with the stock and the common shareholders, the administration will take that into the solution that ends up being developed in terms of what to do with the companies and the enterprises long term,” Williams told the audience after his speech. “I think that’s the time when that issue will be wrestled to the ground.”

Loan Resets

Williams also said that he is concerned about a second wave of resets for some adjustable-interest rate mortgages as well as rising delinquencies for loans on apartment buildings.

“We’ve seen challenges in terms of the rental capabilities of certain properties as well as the ability and fragility of lenders to sustain their investments,” Williams said after his speech.

Prices on homes financed by Fannie Mae and Freddie Mac were up last quarter, attributable to borrowers taking advantage of an $8,000 first-time homebuyer tax credit that expires in November and more affordable home values, Williams said.

Brian Wilson, HREU Superstar

Hello,
Listen to the replay of this weeks Superstar Interview:

Featured this week is Brian Wilson. Brian is not only a major in the army….not just a Realtor from Texas…he is also the founder of Zolve.com

Here is the information for your schedule:

Listen to replay NOW:
http://HarrisRealEstateUniversity.com/urlforward.php?job=nGqEvZ9oCv&link=2&recip=3dafadb6eeddc54

HREU Students (and future students)…be ready to have an answer to this question…

“When will homes be worth what they were in 2007?”

Some believe that the ‘recovery’ will take 10+ years…while others have the opinion that the recovery will happen much faster..

Read this post and let us know what you think…

Source:  Channel4.com

Recent increases in house prices are a “false dawn” and property values will not return to their 2007 peak for at least another five years, research has claimed.

There has been a run of positive data on the housing market during the past few months, with most major house price indexes showing price rises, while mortgage lending for house purchase has also picked up.

But the Ernst & Young ITEM Club said, while these figures indicated the property market may be stabilising, the recent rise in house prices could not be sustained beyond the spring of next year.

Instead the group said it expected renewed price falls during the first half of 2010, followed by two years of stagnant prices, after which the cost of property will gradually start picking up as the wider economy strengthens and credit conditions ease.

But it warned that it expected it to be at least five years before house prices returned to their autumn 2007 level.

Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club, said: “ITEM believes the current stabilisation in the housing market is a false dawn.

“Price rises largely reflect the acute shortage of available properties, with many homeowners either trapped in negative equity or reluctant to sell for fear of locking in the losses of the past two years.

“A small number of cash-rich buyers have supported prices, but the supply of these funds is limited, which means prices are likely to dip again in the first half of next year.”

The group said 56% of homeowners had a mortgage, so it would be difficult for there to be a sustained pick up in the market without a recovery in mortgage lending.

But it said such a recovery appeared to be some way off, as banks were continuing to restrict the amount of money they advanced, as they instead looked to strengthen their balance sheets.

As we predicted well over 2 years ago…short sales would be the de-facto solution for mortgage servicers. It only makes sense. After all, in many cases people simply don’t want their homes because of their negative equity situation.

EMERGENCY SHORT SALE TRAINING CALL THIS WEEK:

Here is the info: Agent Short Sale Secrets teleconference (or webinar) info.

Next step?

We expect to see the government ‘encourage’ the servicers/ banks to outsource their short sales to them. In other words, we expect that an FHA arm will be processing short sales by this time next year. Considering that the FHA ‘owns’ close to 70% of all existing mortgages it makes sense that they will want to process their own short sales. Will this make the process faster and smoother? We think so. (remember FHA short sales pay 6%)

Agents, are you finally ready to learn how to do short sales. Consider becoming a short sale specialist and have motivated sellers line up for your expertise. Watch the FREE Agent Short Sale Secrets video now and then download the FREE Short Sale book.

Source: HousingWire.com

The mortgage servicing industry in coming weeks will see details of an incentive program aimed to prevent foreclosures by encouraging servicers to pursue short sales and deeds-in-lieu of foreclosure.

US Treasury Department sources confirmed to HousingWire the Treasury expects to issue details on the short sale and deed-in-lieu program later this month.

The program is being finalized and will be announced as soon as possible, according to testimony Wednesday by Federal Housing Administration (FHA) commissioner David Stevens.

He said at a House Financial Services subcommittee hearing that the Making Home Affordable (MHA) Program is on track to provide modifications and refinancings to millions of homeowners, but noted other foreclosure alternatives exist.

“Because we know that the MHA program will not reach every at-risk homeowner or prevent all foreclosures, on May 14th the Administration announced the Foreclosure Alternatives program that will provide incentives for, and encourage, servicers and borrowers to pursue short sales and deeds-in-lieu (DIL) of foreclosure in cases where the borrower is generally eligible for a MHA modification but does not qualify or is unable to complete the process,” he said, according to prepared remarks.

EMERGENCY SHORT SALE TRAINING CALL THIS WEEK:

Here is the info: Agent Short Sale Secrets teleconference (or webinar) info.

He said the program will simplify the process of pursuing short sales and deeds-in-lieu, which will encourage more servicers and borrowers to participate in the program. The program will standardize the process, documentation and short performance timeframes.

“These options eliminate the need for potentially lengthy and expensive foreclosure proceedings, preserve the physical condition and value of the property by reducing the time a property is vacant, and allows the homeowners to transition with dignity to more affordable housing,” Stevens added.

Distressed sales — including short sales and foreclosures — accounted for nearly one-third of all house re-sales in recent months, leading to the National Association of Realtors to offer a short sales and foreclosure certification program to realtors.

At the same time, tech vendors and mortgage service providers are looking to fill the demand for short sale-related products and services. Equi-Trax Asset Solutions recently launched a new current listing search offering that searches a servicer’s portfolio to determine short sale and modification opportunities.

Speak with you tomorrow…..

Tim and Julie Harris