Hope for Homeowners…Really?
The most discouraging thing about the recent bailout is that it has done nothing to help troubled homeowners, while passing gobs of tax payer money to Wall Street so that Goldman Sachs can pay huge executive bonuses and surreptitiously reopening tax loopholes that provide $25b in tax incentives for Wells Fargo to buy Wachovia Bank. Coming on the heels of a year’s worth of hollow promises, this is unconscionable.
Peter Miller of the FHA Mortgage Guide offers some updated statistics.
“Meanwhile, in case anyone missed it, RealtyTrac.com reports that homeowners received 279,561 foreclosure filings in the month of October. That’s up 25 percent when compared with October 2007.
While foreclosure numbers are going through the roof — or they would go through the roof if more people had such things. HUD reports that during the last two weeks of October it refinanced 54 — FIFTY-FOUR — delinquent conventional borrowers, about one per state.
read comments (2)Sacramento Mortgage Rates: Volatility & Rising Rates
Market volatility, and especially the gloomy retail sales numbers shook the market enough to create a small flight-to-safety rally and improvement in mortgage rates. Freddie Mac’s Primary Mortgage Market Survey showed an average this week of 6.10% with .8 points out West. The 5/1 arm is only slightly better at 5.8% with .7 points.
Volatility characterizes the market with wild price swings each day as bonds react (or don’t) to the stock market. Banks reprice mortgage rates so frequently that it becomes difficult to keep up with the rate sheets anymore.
Are You Waiting for Rates to Drop?
Don’t. Here’s the thing. If you are in the middle of a refinance or the purchase of a home, don’t play the market with the hope of catching a lower rate. Anything you thought you knew or have heard about why rates rise or fall no longer applies. Just lock your rate and don’t look back.
People still occasionally spew nonsense like, “it’s an election year, so rates have to…” or “if the Democrats win, rates are gonna…”. These are old wives tales. The more saavy among us follow the 10 yr Treasury note or watch the inflation numbers. But even these tea leaves no longer reveal the direction of mortgage rates.
Just Announced: New Conforming Loan Limits for 2009
For most of 2008 we have operated with temporarily increased conforming loan
limits, $580,000 here is Sacramento. As we near the end of the year, the question we’ve all asked is what will the 2009 limits be?
Yesterday, the announcement came. On January 1, 2009, most of the country will return to the 2007/2008 limit of $417,000. However for High Cost areas of the country, the new maximum loan amount will be
“calculated as 1.15 times the median house price for the highest priced county in the property’s metropolitan or micropolitan area or the median house price for the property’s county if it is in a rural county. “
In Sacramento that translates to $474,950 for a single family home, higher for 2-4 units of course. If you’re not in Sacramento and wish to check your area, click here for the list of High Cost areas and their loan limits.
100% Financing: Focusing on VA
As 100% evaporates, first-time home buyers are left scrambling for down payment funds again in order to buy a homes. This full scale lending retreat was caused by the perfect storm of declining real estate values, defaulting borrowers, and the attack on seller-funded down payment assistance programs like Nehemiah.
However, you’ll be glad to know that there are a few survivors, and I’ll be covering those in coming posts. For now let’s take a closer look at one terrific option.
Qualifying for a VA Home Loan
VA loans are available to honorably discharged veterans or those still on active duty in one of the branches of the military. Here are some highlights:
- 100% purchase financing
- 90% LTV refinances (100% for distressed veterans with subprime mortgages)
- No mortgage insurance
- No reserves required
- No “front end” ratio maximum
- Up to 4% seller credit
- Owner occupied only
- 1 to 4 unit properties
- VA Funding Fee can be financed into the loan, and is waived for disabled Vets
- 30 & 15 yr fixed rate loans available, with more options on the way
An Epic Day in U.S. History
I had to give myself the day today to digest what just transpired and to reflect on the significance of this event. After watching a quarter of a million people gather in the streets of Chicago and people around the country and the world celebrating the election of this country’s first African American president, I began to realize the magnitude of the hope it has inspired.
I was also thinking about this: it was only 44 years ago that the Civil Rights Act was signed into law. It’s passage overcame a 54 day filibuster led by Richard Russell the Georgian democrat and the “Southern Bloc” of former confederate state senators. Said Russell at the time,
We will resist to the bitter end any measure or any movement which would have a tendency to bring about social equality and intermingling and amalgamation of the races in our (Southern) states.
Wow. What a long way we’ve come.
This election doesn’t solve the world’s problems. But for many, it’s a reason to hope.
You Are Going to Vote Today Aren’t You?
While I don’t personally need any additional motivation to propel me to the polls in the morning, I worry about the effects of apathy, disinterest, and inconvenience on the rest of you. So I went in search today for thoughts about voting and democracy, and I found some inspirational quotes. Here are a few of my favorites.
ON INDIVIDUAL EFFORT AND INVOLVEMENT
“Politics ought to be the part-time profession of every citizen who would protect the rights and privileges of free men.” -Dwight Eisenhower
“Nobody makes a greater mistake than he who does nothing because he could do only a little.” -Edmund Burke
“All tyranny needs to gain a foothold is for people of good conscience to remain silent.” -Thomas Jefferson
“The tyranny of a prince is not so dangerous to the public welfare as the apathy of a citizen in a democracy.” Montesquieu 1748
“We preach the virtues of democracy abroad. We must practice its duties here at home. Voting is the first duty of democracy.” -Lyndon Johnson
“The only title in our democracy superior to that of President is the title of citizen.” -Louis Brandeis
IT’S A TEAM SPORT
“The citizen can bring our political and governmental institutions back to life, make them responsive and accountable, and keep them honest. No one else can.” -John Gardner
“The survival of democracy depends on the renunciation of violence and the development of nonviolent means to combat evil and advance the good.” -A.J. Muste
“Experience hath shewn, that even under the best forms (of government) those entrusted with power have, in time, and by slow operations, perverted it into tyranny.”-Thomas Jefferson
THE DANGERS OF APATHY
“Those who seek absolute power, even though they seek it to do what they regard as good, are simply demanding the right to enforce their own version of heaven on earth. And let me remind you, they are the very ones who always create the most hellish tyrannies. Absolute power does corrupt, and those who seek it must be suspect and must be opposed.” -Barry Goldwater
“A democracy which makes or even effectively prepares for modern, scientific war must necessarily cease to be democratic. No country can be really well prepared for modern war unless it is governed by a tyrant, at the head of a highly trained and perfectly obedient bureaucracy.” -Aldous Huxley
“A society that will trade a little liberty for a little order will lose both, and deserve neither.” -Thomas Jefferson
“If once the people become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions.” Thomas Jefferson
FAMOUS PEOPLE WEIGH IN
”If liberty and equality, as is thought by some, are chiefly to be found in democracy, they will be best attained when all persons alike share in the government to the utmost.” -Aristotle
“An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” -Plato
“In a time of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell
“Democracy is never a final achievement. It is a call to an untiring effort.” -John F. Kennedy
“In a democracy, dissent is an act of faith.” -J. William Fulbright
FUNNY IF WASN’T SO TRUE
“The two greatest obstacles to democracy in the United States are, first, the widespread delusion among the poor that we have a democracy, and second, the chronic terror among the rich, lest we get it. [1941]” -Edward Dowling
“The best argument against democracy is a five minute conversation with the average voter.” -Winston Churchill
On the eve of this election, I hope you will vote tomorrow, regardless of your choice. Support and encourage everyone to exercise their right and duty. Give thoughtful consideration to the issues and discard the ugly and the superficial. We will be living with these decisions long after the name-calling of his election have faded from memory.
Picking through the pile of offerings that claim to help struggling homeowners, there is still sadly very little of substance. Billowing columns of smoke, but no fire. I do have some hope that after all the cash we’ve thrown at the banks, somebody will be embarrassed enough to figure out a way to stop the foreclosure hemorrhage before the patient dies. As much as it makes common sense, the prevailing logic–that banks will lose less money helping homeowners than they will foreclosing–just isn’t playing well with that audience.
Sure, there is a moral hazard to contend with, along with the potential for gross inequity. How do we distinguish the deserving from the undeserving? Everyone is struggling right now. So how will the responsible homeowner feel if help ultimately goes to the profligate neighbor who sucked out their home equity to buy more toys? So I understand this is a tough one, but meanwhile…
THE BAILOUT: BANKS BUYING BANKS
We all have misgivings about the bailout. How could things have suddenly gotten so bad that we needed to cough up $700b in two days or the sky would fall in. After it didn’t fall in and after the EU’s decisive action forced Paulson to restructure from “bailout” to “buy in”, the immense cash infusion still failed to restore investor confidence and unfreeze the credit markets.
And there was Allen Greenspan claiming “shocked disbelief” at the banks’ failure to self regulate and admitting that the whole greedy affair represents a failure of the ideology of unregulated free markets. Don’t get me wrong. Capitalism is good. But adult supervision is needed to avoid the Lord of the Flies ending we have just witnessed.
And finally to my point. One of the things that the bailout did very quietly was to open a tax window that allows profitable companies to buy unprofitable companies and write off the latter’s losses to avoid taxes. The estimated $25b in tax savings may have induced Wells Fargo to pay only $13b for Wachovia. But that corrupts the intent of the bailout and costs the taxpayers more.
And in the long run, further consolidation in the banking industry is exactly what should not be allowed to happen. Fewer, larger banks mean more of the same kinds of trouble. What comes after “too big to fail”? Maybe “too big to save”. Now that’s scary.