For those of you who thought you may have missed out, momentum appears to be building to extend the $8k tax credit.

There are two things that have made this extremely appealing to buyers.  First, it is a refundable tax credit.  That simply means that you get back $8k, even if you paid (or owe) less than that in taxes.  Second, you can amend your 2008 tax returns to claim the credit as if you had purchased the home in 2008, making it possible to get your money faster.

Here’s a link to a site to review the details.  Any extension could also change the amount or terms, so stay tuned. I’ll update as more news come through.

The Buyer’s Choice Act (AB 957/Gagliani) was signed into law by Governor Schwarzenegger on the 12th of this month.  Thanks to the efforts of California Assemblymember Cathleen Calgiani (D-Tracy), when buying foreclosed homes buyers may now use the title company of their choice.

This was desperately needed reform.  In recent times, a few title companies had developed relationships with banks that had large foreclosure inventories.  Those banks frequently used these S. California title companies to handle N. California escrows.  Aside from the obvious disadvantages of trying to work with an out-of-town escrow officer, practices above and below our sunshine state Mason-Dixon line are often different. Add to that the lack of existing relationship, the accountability that comes from working within your community, and the unlikelihood that those title companies will get future business from here in the north, and you have  recipe for indifference, at least on the buyer’s side of the transaction.

Where it really became a problem was in the fees.  S. California title companies frequently charge inordinately high escrow fees, doc prep fees, loan-tie in fees, and escrow pads that raise buyer’s last minute costs and make for unpleasant delays.   And although Assembly Member Gagliani may not have considered this, the requirements of new Mortgage Disclosure Improvement Act (MDIA) may well have mixed with these last minute overcharges to cause even further delays in closing and inconviences for all.

What we must wait to see is whether the selling banks will select from the many offers received the one that concedes the choice of title companies back to the bank. In other words, will the AB957 do nothing more than put this issue back into the pot of negotiable items?  Even if that happens, the banks’ advantage will last only as long as does the dearth of inventory.

So, in a complicated market unsure of its own direction and replete with poorly conceived, knee-jerk regulation, we should take a moment to celebrate one simple, clear-eyed piece of legislation that really does help consumers.

As wave after wave of empty loan modification promises and false homeowner rescue plans wash over us like the hot breath of a Southern Baptist preacher, precious little help arrives from on high.  It’s the dichotomy of consequence.  Americans on Main St. fight for scraps while those on Wall Street sip champagne and caviar purchased with tax payer dollars.

Amidst the wreckage of the mortgage industry, no real help for homeowners has materialized.  Legislators talk about helping Main St. Americans, but little actually trickles down.  It turns out that we were only invited to the poker game to make the pot bigger.  And as many have discovered, you can’t beat the house.  Now, as the banking industry brags about all the loans it has modified, it hides the ugly truth that the majority of these modified loans end up right back in default.  Why? Because lowering the interest rate for a few years or tacking a few payments on to the end of the loan aren’t designed to fix the problem.  These are palliative measures designed to relieve the legislative pressures.

From the excellent FHA Mortgage Guide:

“After three months,” says Comptroller John C. Dugan, “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.”

Too little, and much too late.

Ironically, very few of the people I talk with took risky loans or speculated in the same way Wall Street Bankers did.  Their moral crime was to have pursued the American dream and bought a home at the peak of the market. Timing is everything.  Many of them qualified for and chose responsible fixed rate mortgages.  But the collapse vaporized their remaining equity and savings, and in many cases claimed their jobs or took a big bite out of their income.  Under those circumstances it doesn’t matter what kind of mortgage you have.   You’re done.

And as they go over the cliff with their families in tow and their American dream in pieces, the morally righteous shake an angry finger and preach the gospel of personal responsibility.  “If we bail you out, you’ll just do it again!”  Why doesn’t somebody say that to Wall Street

And yet, it took only the slightest hint of improvement in this train wreck economy to start the banking industry calls for halting the stimulus, dumping proposed reregulation, and getting back to business as usual.

According to Bloomberg, Morgan Stanley analysts report that

“A remarkable change in investor sentiment has doubled the price of some collateralized loan obligation securities in the past month.”

Does that term sound familiar?  It should.

“CLOs are a type of collateralized debt obligation that pool high-yield, high-risk, or junk, loans and slice them into securities of varying risk and return.”

In other words, CLOs are kissing cousins to the collateralized debt obligations at the core of the global economic meltdown.  Cooked up by the greedy Wall Street alchemists to juice yields and fees while burying and passing the hidden risk  of incomprehensible derivatives along to foreign investors, this toxic stew of credit garbage finally boiled over and ripped apart the lab.  But hey, that was soooo last year. For now, bailouts, loans, and loan guarantees safely in place, it’s time to start pushing for this quarter’s multi-million dollar bonus.