“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”   -Thomas Jefferson

What would he say if he were here today?

A lot of numbers get tossed around when the conversation turns to the bailout and the ultimate tax payer bill for the excesses of the aggressively deregulated, greed-is-good, free-market ideology of the past 40 years.  None of them are as startling and disconcerting as that claimed recently in an article from Bloomberg:

“The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago. The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.”

Think about that.  Can you even wrap your brain around those figures?

And the banking industry recipients of TARP funds, loans, and loan guarantees have responded to recent requests for some accounting of their employment of these funds with comments ranging from “we don’t keep track of that,” to “we’re not going to tell you.” Nice.

Then there is Bernard Madoff, former chairman of the NASDAQ stock exchange and crown prince of greed, whose own sons apparently tipped off investigators and brought down a financial empire with tentacles reaching around the globe.

What have we learned from all this?  I’m not sure yet.  But if there is one lesson that I hope we can all take away from this–from homeowners who gambled on housing to the Bernard Madoffs of Wall Street–it is that greed is in all of us, and it is not good.

Here’s to 2009 and to hope for wisdom, humility, and hope.  I wish you a prosperous new year.

Not that it ever proved itself viable to begin with, requiring as it did the voluntary participation of the troubled homeowner’s current lender, but HUD just announced that FHASecure is finished as of December 31st.  Kaput.

FHA stills does (and did long before FHASecure was announced in Sept of ‘07) 100%+ combined loan to value (CLTV) refinances, assuming of course that you can convince your current lender to assume that 100%+ risk by subordinating the balance of any current financing to the new FHA 1st loan.   That’s proven to be a grandiose assumption.

The main difference between the two programs is that while FHASecure required that you be in default, regular 100%+ FHA refinances require that you not be in default.   Go figure.  If that all sounds really stupid, like maybe the right hand didn’t know that the left hand had already spilled the beer, then I’m not alone.  To make FHASecure an even bigger joke, banks now imposed minimum Fico scores of 580 to 620 for all FHA loans, something impossible to maintain when you have defaulted on your mortgage.

Anyway, we can at least strike FHASecure from the list of pseudo solutions to the foreclosure mess.  The sooner we blow out all the legislative smoke, the sooner we can find and try to rekindle the spark of stability in housing.

I know I sound grumpy , but Merry Christmas anyway!

The new 2009 VA loan limits have been announced. Here is a link to those new limits by County.  Although somewhat lower than the temporary 2008 limits, they still offer much needed help in high costs areas.

VA Maximum Loan Limits

People sometimes ask if VA does Jumbo Loans.  Ummm…sort of.   As I wrote in a previous post, VA technically has no maximum loan limit.  What it does have is a maximum amount that it will guarantee; generally 25% of $417k.  However, in the high costs counties, that amount may be higher.

If you wish to buy a home beyond those limits, you must effectively make up the VA guarantee difference with a down payment.  For more explanation on that, read my previous post above or this one, or click this link to calculate that down payment for the home you are considering.

And give me a call when it’s time to get ready.  I can get you pre approved with either VA or CalVet if you are buying in California!

Sacramento mortgage rates continue their descent, briefly reaching 4.75% last week for a 30 year fixed rate.  This is certainly the time to lock in a delicious long term rate!

You will pay one “point” (an amount equal to one percent of the loan amount) to keep your rate under 5% now, but this is a better bargain that it’s ever been.  Normally, for each point paid, your rate will drop about one quarter of one percent.  In this market, that point will get you under 5%; the “no points” rate will be in the 5.5% to 5.75? range. 

Also, just know that banks are charging higher rates for everything from lower credit scores to “cash out” refinances, so these low rates are available only to the top tier borrower who just wants to replace her existing loan with a 30 year fixed rate.

Call me for help on your refinance!

While Wall Street banks and Detroit auto makers fight over trillions of dollars of taxpayer bailout funds, the largely ignored homeowner tightens her belt and trudges on as a new flock of vultures circles overhead.  Yep, the next “big boom” for underemployed mortgage industry professionals is Loan Modification.

Watch out.  So far, loan modification is a sham, a cruel joke, a mirage.  Talked up by politicians desperate to look good, lenders so far have not been required to participate.  Modifying loans is a good idea, but it isn’t working yet.  And until it does, don’t shell out money for something you can do yourself.

For now, just recognize that it’s being promoted as the next big industry opportunity, and you’re the target market.  The last wave was credit repair, which at its nadir was network-marketed like Amway.  This time it’s loan modification, a moral cousin of ambulance chasing.  And, as the Sacramento Bee’s Jim Wasserman reported, the scam artists are out in force.

“Home Front has heard countless stories from struggling borrowers of phone calls offering to mediate with banks for $2,000 to $4,000 or more. Many are so desperate and confused they pay for what they can do themselves or get for free from nonprofit loan-counseling firms. Some say they have paid their advance fees, then can’t reach the firm.

The California Department of Real Estate cites an “explosion” of for-profit loan-modification firms as the foreclosure crisis deepens. Former lenders and real estate agents have retooled, and jumped to the newest way to generate income.

“In some instances the licensees entered the business not appreciating or understanding what the rules were,” said department spokesman Tom Pool. “You have another group that’s just not licensed and looking to make a buck.”

There are no experts.  This is a brand new problem.

Besides, Modifications May Not Help

In addition to being elusive, loan modifications have so far been ineffective.  Evidence from the modifications done this year suggests that whatever lenders are doing isn’t enough.  The OCC reports reports this:

Comptroller of the Currency John C. Dugan said today that new data shows that more than half of loans modified in the first quarter of 2008 fell delinquent within six months.

“After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent,” the Comptroller said in remarks at the Office of Thrift Supervision’s National Housing Forum today.

This chart shows the effective 2008 Q1 & Q2 “redefault” rates.  The result are shocking.  While only more time and analysis will reveal the cause of the failure, the suspects are  a) loans too badly underwritten to be modifiable,  b) modifications that didn’t go far enough, and  c) consumers who replaced the attenuated mortgage payments with other debt.

Anyway, my point is this: don’t shell out a chunk of money to an expert who promises to fix everything.  Call or email me.  I’d be happy to share their “secrets” with you along with alternatives to consider when the lender won’t modify your loan.

I was recently chatting with Tonya Aldridge of New Start Credit Counseling who pointed out a couple of interesting things that may be valuable to those of you waiting for old collections and charge-offs to drop off your credit.  Conventional wisdom held that after 7 years, that stuff goes away and stops negatively impacting your credit. My experience is that old derogs are often reported by a successor collection agency and the problems starts again fresh.  Turns out, that’s because of the common and illegal practice of “re-aging”.

The Way It’s Supposed to Work

With each “tradeline” on your credit report, there is a little box that shows the date of “last activity” for that account.  Re-aging is the policy of putting a new, more recent date in that box, a practice Tonya says is flat out illegal per FCRA guidlines.  The law says that there is only one valid date that can go in that box:  the date of the last payment made to the original creditor.  Not all the credit bureaus put a date in there at all, but it’s important to insist that they do.  Tonya says Equifax usually reports the date, but the majority of the time Experian and TranUnion do not.

The 4 Year Statute of Limitations

The reason this date is so important is that after 4 years the law prohibits any creditor or collection company from calling to harass you about that bill.  While they can continue to write letters, they have no right to collect, and Guido can’t call and threaten you with a law suit or broken knee caps anymore.  Furthermore, the credit reporting agencies must drop those references after 7 years, although they might not if that date has been “re-aged”.  Tax liens and bankruptcies can still be shown for 10 years.

If You Need Help, Call Tonya

Tonya was my credit rep for years before starting her own credit consulting business.  She now helps many of my clients rebuild credit and improve their “Fico” scores the right way.  Most credit repair companies are a joke; they dispute “derogs” based on technicalities and their “fixes” are temporary.

Need help?  Give Tonya a call or email, and tell her I sent you.

Tonya Aldridge  916-300-9345  taldridgenewstartcc@gmail.com

This morning’s release of the Labor Dept. report for November jobs shows non-farm payrolls sliding by 533,000 jobs, just a smidge more than the expected loss of 350,000.     Despite this, bonds are selling off at the open…