Prison survival tips for Madoff
Experts don't see a 'camp cupcake' for Madoff as they offer suggestions to keep out of danger.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: June 24, 2009: 1:43 PM ET
NEW YORK (CNNMoney.com) -- When Ponzi scheme mastermind Bernard Madoff is sentenced on Monday, he'll be sent to a real prison with real bars and violent offenders, not a "country club" for white collar crooks, consultants say.
Madoff, age 71, faces a maximum sentence of 150 years in the federal prison system. This is based on his confession to 11 felony counts for orchestrating the largest Ponzi scheme of all time. For decades, Madoff stole billions of dollars from thousands of victims, while masquerading as a legitimate businessman through his investment firm.
The length of Madoff's maximum sentence, which is based on the sweeping magnitude of his crimes, gives him an incentive to escape and virtually ensures that he'll be sent to a prison instead of a minimum-security camp, according to prison consultants.
"Madoff, he's not going to a camp, ever," said Larry Levine, founder of Wall Street Prison Consultants and a former inmate of the federal prison system. "His sentence is too long, so he becomes a flight risk. And then it gets into the severity of his crime. If you have more than 10 years, you can't get a camp."
No camp for Madoff
Camps are generally preferred by convicts, because they're deemed as safer, with fewer restrictions, consultants said.
"Prison camps are open facilities," said Alan Ellis, an attorney, prison consultant and author of the "Federal Prison Guidebook." "They are not surrounded by a fence. They generally house first-time offenders, non-violent offenders, people who are not going to be troublemakers."
Larry Levine speaks from first-hand experience. During his 10-year sentence for ties to organized crime, he said he served in 11 federal facilities, including high, medium and low security prisons, and minimum-security prison camps.
He said his favorite facility was Federal Prison Camp Nellis, on an air force base near Las Vegas. That's where Martha Stewart's co-conspirator in insider trading, Peter Bacanovic, served five months. The facility has since closed.
Madoff will most likely serve time in a medium-security prison, consultants believe -- his non-violent history will keep him out of maximum-security, but his sentence is too long to justify low-security.
Madoff's next home
Madoff's lawyer, Ira Lee Sorkin, would not comment on whether he'll request a specific prison for his client. The Federal Bureau of Prisons has the final say in such matters. BOP spokeswoman Felicia Ponce said the bureau tries to place inmates within 500 miles of their families, but she would not comment on where Madoff will be sent.
But Alan Ellis believes Madoff will probably land in one of the closest medium-security prisons to his family in Manhattan, where he lived in a $7 million apartment until his March 12 guilty plea. Since then, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a temporary federal facility, prior to his prison transfer.
Ellis identified the most likely prisons for Madoff's term as Federal Correctional Institution Otisville, about 70 miles northwest of New York City, and FCI Fairton in nearby New Jersey. He said that Madoff might also be sent to FCI Ray Brook in upstate New York and FCI McKean in northwestern Pennsylvania. All are medium-security.
In a medium-security prison, prisoners are fenced behind a double-layered razor-wire perimeter with electronic detection systems, according to Felicia Ponce of the BOP. Inmates share cells, which are closely monitored after lights-out by patrolling officers, she said. They are subject to cell searches and pat-downs in the near-constant search for weapons and other contraband. They work menial jobs, often in kitchens or laundry rooms, where they are paid 12 to 40 cents an hour.
Madoff's prison survival strategy
"You're going to find a lot of people in medium who have a violent background," said Ellis, noting that the top concerns of his soon-to-be-incarcerated clients are "fear of prison assault" and "fear of the unknown."
Levine said that Madoff might be targeted by other prisoners as "an economic terrorist" and blamed as a general scapegoat for the financial woes of family members on the outside, even if they had nothing do with his Ponzi scheme.
"There will be people who think that Bernie can give them stock tips, but I don't see anyone being his big pal," said Levine. " I believe he'll be treated like an outcast."
Levine said that Madoff should always "maintain high visibility" as a security precaution.
"Try to stay in an area where there's a lot of people watching you, where the guards are watching you," Levine said, when asked what his advice would be for Madoff. "Do not become confrontational with anybody. Respect people; be polite. Don't borrow anything from anyone.
Don't become beholden to anyone."
If Madoff feels that he's in danger, then he can report the threat to correctional officers and request protective custody, said Ponce. If that happens, he would be separated from the general inmate population and put into a special housing unit while the prison staff investigated his claims, she said.
In this regard, Madoff's fame -- or infamy -- might actually help keep him out of danger, the consultants said.
"If he gets assaulted while he's in there, that's big news, and the BOP hates publicity," said Levine. "If anything comes down on Madoff, it's going to come down on the warden."
re-posted by Joseph Sloboda
Wednesday, June 24, 2009
Monday, June 22, 2009
Foreclosures grind on as lenders fail to modify loans
After reading this article in Fridays USA Today I felt ill - it is amazing how many people are unable to get through this process because of the unwillingness of the lenders and servicers to help the homeowners. If you find yourself in a position like this, please call our offices as soon as possible for a "no cost" telephone consultation where we will hopefully be able to assist you and get you on the right track and eventually help save your home. (however to be clear, if you choose to retain us for our services there will be fees asscoiated with our service beyond the initial consultation)
Original Article from Thursday, June 18, 2009
By Stephanie Armour, USA TODAY
The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.
Details of the plan were unveiled in early March. The goal is to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments.
Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.
Homeowners who apply for mortgage modifications are finding that banks typically are taking 45 to 60 days to respond to inquiries, according to a report this month by NeighborWorks America, a provider of foreclosure-prevention counseling.
Some homeowners who applied for mortgage modifications five months ago still have no answer on whether they will be able to arrange smaller monthly payments, leaving them uncertain whether they'll keep their homes or lose them shortly.
"Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff at Naroff Economic Advisors. "No one will admit they're doing this."
Naroff also says banks today are dealing with even more demand for mortgages, including refinancings, than during the peak of the housing bubble in 2006, and the backlog is likely to get worse as more homeowners lose their jobs. Mortgage delinquencies have been growing in areas where unemployment has been rising fast, and even homeowners who successfully get modified mortgages could face trouble later if their incomes or home values fall.
Lenders say they're doing the best they can with a tsunami of requests, but some industry officials say delays are hampering efforts to revive the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," says Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
This month, Sen. Jack Reed, D-R.I., and 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan and called for a new strategy to get lenders to respond to homeowners faster.
"Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer," it said.
Robin and Craig Doyle of Woodland Hills, Calif., have been trying to get a loan modification through their lender, JPMorgan Chase, since February.
Robin, who does freelance writing from home, said she initially was told to send a letter describing her hardship, paycheck stubs, tax returns and other information.
She assembled a 200-page file and sent it along. A month later, she was told she had to redo the information because the file she'd sent had become outdated.
Another time, Robin says, she was told her file had been mistakenly closed altogether. On another occasion, she was told the request couldn't be processed because she hadn't included information about a homeowner association fee, even though her family doesn't belong to such an association.
"I've had to resend it four times," says Robin, 35. "It's making me sick. It's been five months. I've spent hours and hours on this and sleepless nights. It's foremost on my mind. I look at my beautiful home and wonder if I'll have it next month."
The Doyles pay $5,031 a month on a mortgage of $947,000. They have an interest-only loan at a 6.3% rate that will reset in about seven years. On interest-only loans, borrowers pay only interest for a specific period to temporarily reduce the payments. After that, they pay interest and principal.
Craig, a writer in the television and movie industry, is still finding work but not as much as before. This is the first month the family has failed to make its mortgage payment.
"I feel like Obama's plan has done absolutely nothing," says Craig, 38.
Jennifer Zuccarelli, a Chase spokeswoman, says there were miscommunications in the Doyles' case, and the bank is working to resolve the situation. It also has added about 950 loan counselors the past six months.
"We're hiring hundreds more every month," Zuccarelli says.
After USA TODAY contacted Chase for comment, the Doyles say the bank told them the next week to resubmit their application. They later were told they don't qualify for the Obama plan because their loan amount is too high.
Bonuses for mortgage collectors
Other major lenders say they are beefing up staffing to process modification requests. Some say it has taken time because details of the Obama administration's plan weren't outlined until March.
Under the plan, if the borrower's monthly payment is reduced by 6% or more but not below a 31% mortgage-debt-to-income ratio, the servicer can receive success payments of up to $1,000 for three years, provided the borrower stays current.
Once a three-month trial period is complete and loan documents are signed, the servicer is entitled to a one-time $1,000 incentive payment and the investor receives a $1,500 check.
The investor incentive is important because the program is targeted mainly at hard-to-modify loans in certain mortgage-backed securities.
Loan modifications can help borrowers by reducing mortgage principal, the interest rate or the term of the loan. The government also has set aside money to help up to 5 million families refinance into safer long-term mortgages from risky kinds of adjustable mortgages whose payments could soar to unaffordable levels.
Those who don't qualify for either refinancing help or loan modifications under the government's program are counseled on other alternatives to foreclosure, such as short sales where lenders agree to a home's sale for less than the mortgage balance.
Bank of America reports that it modified about 232,000 mortgages last year. During the first four months of this year, it has completed about 157,000 modifications — all before the Obama housing rescue plan went into effect.
To settle claims brought by attorneys general in 11 states, Bank of America last year agreed to modify loans for homeowners holding riskier loans that often balloon into larger monthly payments later. The claims involved mortgages that originated with Countrywide Financial, which Bank of America took over in 2008.
Bank of America expects to begin processing applications from homeowners who are current with their mortgage within a few weeks.
Treasury Department officials say 16 mortgage servicers — the companies that collect homeowners' monthly payments — have signed up to participate in the program. They say they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a Treasury spokeswoman.
Lenders say they need to take time to review each application so that the modifications are meaningful. Some economists also warn that rushing approvals could result in modifications that only delay foreclosures rather than prevent them.
'I don't know who to trust'
Some applicants who were turned down say they don't understand why.
Judy Lederman, 49, of Scarsdale, N.Y., a freelance writer after losing her full-time job in public relations a year ago, says she tried to get a modification with Chase about three months ago. She has an interest-only loan at 5.25% that resets in one year. How high it will rise depends on interest rates then.
She says Chase denied her request a few weeks ago because she has an adjustable-rate mortgage, but other borrowers with ARMs are getting modifications under the Obama plan.
"They kept me on hold and waiting for months. I bent over backwards to get them what they needed, but it was like no one was home," Lederman says. "I really don't know what else to do. I don't know who to trust."
The day after USA TODAY called Chase for comment, Lederman says the bank called her. She says the representative told her she was turned down because of missing information and that new forms to apply for a modification were being expedited to her home. "There was some miscommunication, but we have reconnected with the borrowers and are working on finding solutions for them," Zuccarelli says regarding the complaints about Chase
After reading this article in Fridays USA Today I felt ill - it is amazing how many people are unable to get through this process because of the unwillingness of the lenders and servicers to help the homeowners. If you find yourself in a position like this, please call our offices as soon as possible for a "no cost" telephone consultation where we will hopefully be able to assist you and get you on the right track and eventually help save your home. (however to be clear, if you choose to retain us for our services there will be fees asscoiated with our service beyond the initial consultation)
Original Article from Thursday, June 18, 2009
By Stephanie Armour, USA TODAY
The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.
Details of the plan were unveiled in early March. The goal is to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments.
Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.
Homeowners who apply for mortgage modifications are finding that banks typically are taking 45 to 60 days to respond to inquiries, according to a report this month by NeighborWorks America, a provider of foreclosure-prevention counseling.
Some homeowners who applied for mortgage modifications five months ago still have no answer on whether they will be able to arrange smaller monthly payments, leaving them uncertain whether they'll keep their homes or lose them shortly.
"Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff at Naroff Economic Advisors. "No one will admit they're doing this."
Naroff also says banks today are dealing with even more demand for mortgages, including refinancings, than during the peak of the housing bubble in 2006, and the backlog is likely to get worse as more homeowners lose their jobs. Mortgage delinquencies have been growing in areas where unemployment has been rising fast, and even homeowners who successfully get modified mortgages could face trouble later if their incomes or home values fall.
Lenders say they're doing the best they can with a tsunami of requests, but some industry officials say delays are hampering efforts to revive the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," says Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
This month, Sen. Jack Reed, D-R.I., and 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan and called for a new strategy to get lenders to respond to homeowners faster.
"Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer," it said.
Robin and Craig Doyle of Woodland Hills, Calif., have been trying to get a loan modification through their lender, JPMorgan Chase, since February.
Robin, who does freelance writing from home, said she initially was told to send a letter describing her hardship, paycheck stubs, tax returns and other information.
She assembled a 200-page file and sent it along. A month later, she was told she had to redo the information because the file she'd sent had become outdated.
Another time, Robin says, she was told her file had been mistakenly closed altogether. On another occasion, she was told the request couldn't be processed because she hadn't included information about a homeowner association fee, even though her family doesn't belong to such an association.
"I've had to resend it four times," says Robin, 35. "It's making me sick. It's been five months. I've spent hours and hours on this and sleepless nights. It's foremost on my mind. I look at my beautiful home and wonder if I'll have it next month."
The Doyles pay $5,031 a month on a mortgage of $947,000. They have an interest-only loan at a 6.3% rate that will reset in about seven years. On interest-only loans, borrowers pay only interest for a specific period to temporarily reduce the payments. After that, they pay interest and principal.
Craig, a writer in the television and movie industry, is still finding work but not as much as before. This is the first month the family has failed to make its mortgage payment.
"I feel like Obama's plan has done absolutely nothing," says Craig, 38.
Jennifer Zuccarelli, a Chase spokeswoman, says there were miscommunications in the Doyles' case, and the bank is working to resolve the situation. It also has added about 950 loan counselors the past six months.
"We're hiring hundreds more every month," Zuccarelli says.
After USA TODAY contacted Chase for comment, the Doyles say the bank told them the next week to resubmit their application. They later were told they don't qualify for the Obama plan because their loan amount is too high.
Bonuses for mortgage collectors
Other major lenders say they are beefing up staffing to process modification requests. Some say it has taken time because details of the Obama administration's plan weren't outlined until March.
Under the plan, if the borrower's monthly payment is reduced by 6% or more but not below a 31% mortgage-debt-to-income ratio, the servicer can receive success payments of up to $1,000 for three years, provided the borrower stays current.
Once a three-month trial period is complete and loan documents are signed, the servicer is entitled to a one-time $1,000 incentive payment and the investor receives a $1,500 check.
The investor incentive is important because the program is targeted mainly at hard-to-modify loans in certain mortgage-backed securities.
Loan modifications can help borrowers by reducing mortgage principal, the interest rate or the term of the loan. The government also has set aside money to help up to 5 million families refinance into safer long-term mortgages from risky kinds of adjustable mortgages whose payments could soar to unaffordable levels.
Those who don't qualify for either refinancing help or loan modifications under the government's program are counseled on other alternatives to foreclosure, such as short sales where lenders agree to a home's sale for less than the mortgage balance.
Bank of America reports that it modified about 232,000 mortgages last year. During the first four months of this year, it has completed about 157,000 modifications — all before the Obama housing rescue plan went into effect.
To settle claims brought by attorneys general in 11 states, Bank of America last year agreed to modify loans for homeowners holding riskier loans that often balloon into larger monthly payments later. The claims involved mortgages that originated with Countrywide Financial, which Bank of America took over in 2008.
Bank of America expects to begin processing applications from homeowners who are current with their mortgage within a few weeks.
Treasury Department officials say 16 mortgage servicers — the companies that collect homeowners' monthly payments — have signed up to participate in the program. They say they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a Treasury spokeswoman.
Lenders say they need to take time to review each application so that the modifications are meaningful. Some economists also warn that rushing approvals could result in modifications that only delay foreclosures rather than prevent them.
'I don't know who to trust'
Some applicants who were turned down say they don't understand why.
Judy Lederman, 49, of Scarsdale, N.Y., a freelance writer after losing her full-time job in public relations a year ago, says she tried to get a modification with Chase about three months ago. She has an interest-only loan at 5.25% that resets in one year. How high it will rise depends on interest rates then.
She says Chase denied her request a few weeks ago because she has an adjustable-rate mortgage, but other borrowers with ARMs are getting modifications under the Obama plan.
"They kept me on hold and waiting for months. I bent over backwards to get them what they needed, but it was like no one was home," Lederman says. "I really don't know what else to do. I don't know who to trust."
The day after USA TODAY called Chase for comment, Lederman says the bank called her. She says the representative told her she was turned down because of missing information and that new forms to apply for a modification were being expedited to her home. "There was some miscommunication, but we have reconnected with the borrowers and are working on finding solutions for them," Zuccarelli says regarding the complaints about Chase
Searching for a bottom in the housing market
Sales look like they could rebound soon, but you can't say the same for prices.
By Janet Morrissey, contributor
June 19, 2009: 4:23 AM ET
NEW YORK (Fortune) -- Sales in the decimated housing market may finally be bottoming, but don't expect home prices to stop dropping before mid-2010 at the earliest, analysts and economists say.
Indeed, prices in the battered housing market could get a lot worse before they get better as an avalanche of specialized adjustable rate mortgages, known as option ARMs and Alt-A mortgages, are slated to reset over the next 18 to 24 months, and rising unemployment causes a surge in the number of prime mortgages going into default. All of this is expected to trigger another round of foreclosures and cause home prices to tumble at least another 20% before the market rebounds, according to market analysts and economists.
Market bulls believe home prices could bottom in the second half of 2010, but the bears warn it could be 2013 before they finally trough. And once prices do reach a low, it could be years before they significantly rebound.
"This is clearly the worst housing crisis since the Depression," says John Burns, president of John Burns Real Estate Consulting. Losses from the housing meltdown totaled $3.6 trillion at the end of 2008, and will likely approach $5 trillion by the time the crisis ends, predicts Lawrence Yun, chief economist with the National Association of Realtors.
Nevertheless, there have been signs in recent months that the industry may be stabilizing -- at least when it comes to sales. Consumer confidence in May shot up to its highest level in eight months, housing starts jumped more than 17% in May from the previous month, and most importantly, a recent report by the National Association of Realtors shows sales of existing homes climbed 2.9% in April.
"We are at or near bottom in terms of sales," says Yun. "We are seeing strong buying activity, particularly in those boom and bust markets, where prices have declined significantly. Buyers are coming in and fighting over properties -- there is multiple bidding in California and Florida."
"Sales are the first indicator" of a bottom, concurs Elliot Eisenberg, a senior economist with the National Association of Home Builders. "Even though there's more pain to come in certain markets and the prices may go down further and there's more defaults ahead," sales are going up, he says.
Bob Curran, managing director at Fitch Ratings, is a lot more cautious, noting that one month of gains doesn't make a trend -- existing home sales are still off 3.5% from a year ago. "You'd want to see a string of months -- ideally three months -- to say with confidence that a bottom has been reached," he says.
Buying off the bottom
Much of the recent sales increase is related to distressed homes, as a stampede of homebuyers snap up properties in foreclosure or through short sales on the cheap. "Foreclosure sales have picked up pretty dramatically in the past four months," says Alex Barron, a senior research analyst at Agency Trading Group Inc.
Yun estimates about 50% of current sales involve distressed properties, and he expects this trend to continue as foreclosures soar in the months ahead. About 2 million properties were in foreclosure in 2008, and he expects this number to climb to 2.5 million this year.
The foreclosure floodgates are expected to swing wider in the second half of the year as rates reset on option ARMs, and high unemployment triggers defaults on prime mortgages. Many of the option ARMS issued over the past few years were in markets that saw the biggest run-up in home prices and are now seeing the biggest corrections.
At the end of the first quarter, one out of eight U.S. households with a mortgage was either late on its monthly loan payment or in the foreclosure process, according to the Mortgage Bankers Association. Jay Brinkmann, chief economist with the MBA, says defaults among prime mortgages accounted for 50% of the increase in foreclosures in the last quarter.
The pending flood of foreclosures could mean buying opportunities for bargain hunters -- as long as they're prepared to hang onto the house for a number of years. "If you're a renter who just missed this cycle and didn't get in, right now is a great time to buy if your issue is the monthly mortgage payment," says Burns.
Although prices may fall further, low mortgage rates and President Obama's $8,000 first-time homebuyer tax credit make current prices attractive, especially in heavily-beaten down areas, such as California, Arizona, Nevada and California. "I think there are great deals out there," says UBS analyst David Goldberg. "But you have to have a long-term time horizon."
Some speculate that the pending surge in foreclosures and recent uptick in mortgage rates could push fence-sitting homebuyers, worried about rising rates, to jump into the market. Also, some home seekers may rush to score a bargain before the Obama Administration's $8,000 credit for first-time homebuyers expires at year end. The tax credit has already helped to boost sales, especially in states, such as California, which are offering their own tax credit in addition to the federal one, says Curran.
Sales vs. prices
While sales may be increasing, home prices are a different story, in part because of rising interest rates and surging unemployment. The average rate on a 30-year fixed rate mortgage climbed to 5.59% last week -- its highest since Dec. 11 -- but retreated slightly to 5.38% this week, according to Freddie Mac. The nation's unemployment rate spiked to its loftiest level in more than a quarter of a century in May at 9.4%. Burns is predicting the jobless rate will hit 12% by 2011.
National home prices plunged 19.1% in the first quarter, according to the Standard & Poor's/Case-Shiller National Home Price index -- the biggest quarterly decline in the index's 21-year history. Home prices are off 32% on average from their peak in mid-2006. Average prices have not been this low since the fourth quarter of 2002, the Case-Shiller report says.
"We're about two-thirds of the way through the pricing correction on a percentage basis," says Joshua Shapiro, chief U.S. economist with MFR Inc., an economic consulting and analysis firm. He expects prices to slide at least another 20% over the next 18 months.
"There's still pain to come in parts of Florida, California and Michigan, where there's still a tremendous amount of oversupply," says Eisenberg. "Prices will have to come down further and it will take a while to burn off the excess inventory that's floating around there."
Brinkmann expects to see prices start to rebound in 2011. While a bottom may be reached within the next year, it will be many months, and possibly years, before prices significantly come back. "I think that once prices bottom out, they're going to stay flat for several years," says Burns
Re-posted by Joseph Sloboda
Sales look like they could rebound soon, but you can't say the same for prices.
By Janet Morrissey, contributor
June 19, 2009: 4:23 AM ET
NEW YORK (Fortune) -- Sales in the decimated housing market may finally be bottoming, but don't expect home prices to stop dropping before mid-2010 at the earliest, analysts and economists say.
Indeed, prices in the battered housing market could get a lot worse before they get better as an avalanche of specialized adjustable rate mortgages, known as option ARMs and Alt-A mortgages, are slated to reset over the next 18 to 24 months, and rising unemployment causes a surge in the number of prime mortgages going into default. All of this is expected to trigger another round of foreclosures and cause home prices to tumble at least another 20% before the market rebounds, according to market analysts and economists.
Market bulls believe home prices could bottom in the second half of 2010, but the bears warn it could be 2013 before they finally trough. And once prices do reach a low, it could be years before they significantly rebound.
"This is clearly the worst housing crisis since the Depression," says John Burns, president of John Burns Real Estate Consulting. Losses from the housing meltdown totaled $3.6 trillion at the end of 2008, and will likely approach $5 trillion by the time the crisis ends, predicts Lawrence Yun, chief economist with the National Association of Realtors.
Nevertheless, there have been signs in recent months that the industry may be stabilizing -- at least when it comes to sales. Consumer confidence in May shot up to its highest level in eight months, housing starts jumped more than 17% in May from the previous month, and most importantly, a recent report by the National Association of Realtors shows sales of existing homes climbed 2.9% in April.
"We are at or near bottom in terms of sales," says Yun. "We are seeing strong buying activity, particularly in those boom and bust markets, where prices have declined significantly. Buyers are coming in and fighting over properties -- there is multiple bidding in California and Florida."
"Sales are the first indicator" of a bottom, concurs Elliot Eisenberg, a senior economist with the National Association of Home Builders. "Even though there's more pain to come in certain markets and the prices may go down further and there's more defaults ahead," sales are going up, he says.
Bob Curran, managing director at Fitch Ratings, is a lot more cautious, noting that one month of gains doesn't make a trend -- existing home sales are still off 3.5% from a year ago. "You'd want to see a string of months -- ideally three months -- to say with confidence that a bottom has been reached," he says.
Buying off the bottom
Much of the recent sales increase is related to distressed homes, as a stampede of homebuyers snap up properties in foreclosure or through short sales on the cheap. "Foreclosure sales have picked up pretty dramatically in the past four months," says Alex Barron, a senior research analyst at Agency Trading Group Inc.
Yun estimates about 50% of current sales involve distressed properties, and he expects this trend to continue as foreclosures soar in the months ahead. About 2 million properties were in foreclosure in 2008, and he expects this number to climb to 2.5 million this year.
The foreclosure floodgates are expected to swing wider in the second half of the year as rates reset on option ARMs, and high unemployment triggers defaults on prime mortgages. Many of the option ARMS issued over the past few years were in markets that saw the biggest run-up in home prices and are now seeing the biggest corrections.
At the end of the first quarter, one out of eight U.S. households with a mortgage was either late on its monthly loan payment or in the foreclosure process, according to the Mortgage Bankers Association. Jay Brinkmann, chief economist with the MBA, says defaults among prime mortgages accounted for 50% of the increase in foreclosures in the last quarter.
The pending flood of foreclosures could mean buying opportunities for bargain hunters -- as long as they're prepared to hang onto the house for a number of years. "If you're a renter who just missed this cycle and didn't get in, right now is a great time to buy if your issue is the monthly mortgage payment," says Burns.
Although prices may fall further, low mortgage rates and President Obama's $8,000 first-time homebuyer tax credit make current prices attractive, especially in heavily-beaten down areas, such as California, Arizona, Nevada and California. "I think there are great deals out there," says UBS analyst David Goldberg. "But you have to have a long-term time horizon."
Some speculate that the pending surge in foreclosures and recent uptick in mortgage rates could push fence-sitting homebuyers, worried about rising rates, to jump into the market. Also, some home seekers may rush to score a bargain before the Obama Administration's $8,000 credit for first-time homebuyers expires at year end. The tax credit has already helped to boost sales, especially in states, such as California, which are offering their own tax credit in addition to the federal one, says Curran.
Sales vs. prices
While sales may be increasing, home prices are a different story, in part because of rising interest rates and surging unemployment. The average rate on a 30-year fixed rate mortgage climbed to 5.59% last week -- its highest since Dec. 11 -- but retreated slightly to 5.38% this week, according to Freddie Mac. The nation's unemployment rate spiked to its loftiest level in more than a quarter of a century in May at 9.4%. Burns is predicting the jobless rate will hit 12% by 2011.
National home prices plunged 19.1% in the first quarter, according to the Standard & Poor's/Case-Shiller National Home Price index -- the biggest quarterly decline in the index's 21-year history. Home prices are off 32% on average from their peak in mid-2006. Average prices have not been this low since the fourth quarter of 2002, the Case-Shiller report says.
"We're about two-thirds of the way through the pricing correction on a percentage basis," says Joshua Shapiro, chief U.S. economist with MFR Inc., an economic consulting and analysis firm. He expects prices to slide at least another 20% over the next 18 months.
"There's still pain to come in parts of Florida, California and Michigan, where there's still a tremendous amount of oversupply," says Eisenberg. "Prices will have to come down further and it will take a while to burn off the excess inventory that's floating around there."
Brinkmann expects to see prices start to rebound in 2011. While a bottom may be reached within the next year, it will be many months, and possibly years, before prices significantly come back. "I think that once prices bottom out, they're going to stay flat for several years," says Burns
Re-posted by Joseph Sloboda
Wednesday, June 17, 2009
Senator wants to sweeten home buyer tax credit
Posted by Carla Fried
June 16, 2009 2:59 pm
Last week Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia — who made his fortune as a real estate broker, I should point out — wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.
“The first-time home buyer tax credit has made a difference,” said Isakson when announcing the bill. “First-time home buyers used it and the market stabilized, but we don’t have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can.”
There’s just one big catch. If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers. Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.
A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson’s bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.
re-posted by Joseph Sloboda
Posted by Carla Fried
June 16, 2009 2:59 pm
Last week Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia — who made his fortune as a real estate broker, I should point out — wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.
“The first-time home buyer tax credit has made a difference,” said Isakson when announcing the bill. “First-time home buyers used it and the market stabilized, but we don’t have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can.”
There’s just one big catch. If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers. Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.
A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson’s bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.
re-posted by Joseph Sloboda
Thursday, June 11, 2009
Government readies emergency small biz loans
Starting next week, struggling companies will be able to apply for up to $35,000 in debt-relief loans through a new stimulus program.
By Emily Maltby, CNNMoney.com staff writer
Last Updated: June 8, 2009: 6:13 PM ET
NEW YORK (CNNMoney.com) -- One week before its emergency loan program is slated to launch, the Small Business Administration issued guidelines for banks and borrowers on how the new loans will work.
Called "America's Recovery Capital," ARC loans are designed to make up to $35,000 available to struggling small business owners to temporarily help them keep up with payments on existing loans, including credit card debt. Authorized as part of February's stimulus bill, the program has been under development for four months. Many banks were waiting for the SBA's procedural guidance, released Monday, before deciding whether or not to participate.
Here's a primer on how the emergency loans will work.
Eligibility: Sorry, startups, this isn't for you. ARC loans are only open to businesses that have been in operation for at least two years and have been profitable in at least one of the last two years. (Startup businesses can apply for financing through other SBA programs, including the agency's flagship 7(a) loan program.)
Borrowers can use ARC loans to make payments for up to six months on their existing debt, with no repayment due on the loan for another year. After that, the business has five years to pay back the loan principal. The government covers the interest payments.
Applicants must prove they are experiencing financial hardship, as evidenced by declining sales (a drop of at least 20% over the past year), frozen credit lines, rising business costs (again, 20% or more in the past year), or difficulty meeting payroll, paying rent or making loan payments.
But borrowers also have to be running a "viable" business. The SBA wants to see cash-flow projections for at least the next two years illustrating that the business will be able to repay its ARC loan and other debt obligations. Borrowers must have "acceptable" business credit scores, and they can't be more than 60 days past due on any loan they'd like ARC funds to help cover. Lenders may also require collateral to back up the loan.
Qualifying debt: Because of arcane government rules, ARC loans can't be used to make payments on loans backed by the SBA before Feb. 17, 2009, the date the stimulus bill took effect. However, borrowers can use the loans for relief from virtually any other business debt, including a commercial mortgage or lease, home equity loans used to finance business operations, bank loans made outside the SBA program, notes payable to suppliers, and credit card debt.
That last one is a key feature. Borrowers can use ARC loans to cover payments on their personal credit cards if the money was borrowed for business expenses. "We do recognize the merging of the owners' and businesses' finances," says Eric Zarnikow, the SBA's associate administrator for capital access.
How to apply: The SBA won't make ARC loans directly. As with most of its lending programs, it will instead offer guarantees on loans made by banks. If the business owner defaults, the SBA pays off the debt. (The business owner still takes a hit on their credit report.)
Each bank will set its own procedures and timeline for issuing loans, so business owners looking to apply should contact a participating bank. For a list of banks that make SBA loans, click here. Each business can receive only one ARC loan, for a maximum of $35,000, but that loan can be used to make payments on more than one debt.
The SBA will begin processing applications for the loans on June 15, but individual banks may take longer to draft their own application procedures.
What's in it for banks: ARC loans are a sweet deal for borrowers: They carry no fees, require no payments for at least a year, and have their interest payments fully subsidized by the government.
That, and the fact that they're specifically targeted at businesses in trouble, makes them especially risky. Banks have been wrangling with the SBA for years about underwriting standards for their small business loans: The government can penalize lenders for high default rates in their portfolios, which has made some banks nervous about participating in the ARC loan program. Collecting the government guarantee on a loan gone bad can be onerous, and banks have to absorb the administrative costs of pursuing delinquent loans and liquidating those that default. The SBA says it expects ARC loans to default at a higher rate than its other programs, and will adjust its expectations for lenders accordingly.
Because the loans are fully guaranteed by the government, ARC loans are fairly safe for banks. But the interest rate on them isn't very competitive. The SBA has set the interest rate it will pay for the loans at prime plus 2%. For June, that rate would be 5.25%.
That's a lower interest rate than the SBA sets for its other loan programs. However, unlike ARC loans, those programs don't offer a 100% loan guarantee -- on a traditional SBA loan, if a business defaults, banks would be stuck with some of the loss.
Availability: The SBA estimates that around 10,000 small businesses will receive ARC loans, but it's uncertain how quickly the loans will be dispersed. "It's a little challenging to anticipate what the demand will be," Zarnikow says. "There will be ramp-up time as lenders train operators."
In the Recovery Act, Congress allocated $255 million to support the ARC loan program. That money covers only the program's subsidies, for interest payments and defaults, allowing the money to stretch to support a larger dollar-volume of lending. Each lender will be limited to 50 loans per week. If a bank makes less than 50 loans, they can carry the unused allocation over to other weeks, but lenders will be capped at a maximum of 1,000 loans through the program's duration.
The ARC loan program is scheduled to run through Sept. 30, 2010, or until its funding runs out, whichever comes first.
First Published: June 8, 2009: 6:01 PM ET
Re-Posted by Joseph Sloboda
Starting next week, struggling companies will be able to apply for up to $35,000 in debt-relief loans through a new stimulus program.
By Emily Maltby, CNNMoney.com staff writer
Last Updated: June 8, 2009: 6:13 PM ET
NEW YORK (CNNMoney.com) -- One week before its emergency loan program is slated to launch, the Small Business Administration issued guidelines for banks and borrowers on how the new loans will work.
Called "America's Recovery Capital," ARC loans are designed to make up to $35,000 available to struggling small business owners to temporarily help them keep up with payments on existing loans, including credit card debt. Authorized as part of February's stimulus bill, the program has been under development for four months. Many banks were waiting for the SBA's procedural guidance, released Monday, before deciding whether or not to participate.
Here's a primer on how the emergency loans will work.
Eligibility: Sorry, startups, this isn't for you. ARC loans are only open to businesses that have been in operation for at least two years and have been profitable in at least one of the last two years. (Startup businesses can apply for financing through other SBA programs, including the agency's flagship 7(a) loan program.)
Borrowers can use ARC loans to make payments for up to six months on their existing debt, with no repayment due on the loan for another year. After that, the business has five years to pay back the loan principal. The government covers the interest payments.
Applicants must prove they are experiencing financial hardship, as evidenced by declining sales (a drop of at least 20% over the past year), frozen credit lines, rising business costs (again, 20% or more in the past year), or difficulty meeting payroll, paying rent or making loan payments.
But borrowers also have to be running a "viable" business. The SBA wants to see cash-flow projections for at least the next two years illustrating that the business will be able to repay its ARC loan and other debt obligations. Borrowers must have "acceptable" business credit scores, and they can't be more than 60 days past due on any loan they'd like ARC funds to help cover. Lenders may also require collateral to back up the loan.
Qualifying debt: Because of arcane government rules, ARC loans can't be used to make payments on loans backed by the SBA before Feb. 17, 2009, the date the stimulus bill took effect. However, borrowers can use the loans for relief from virtually any other business debt, including a commercial mortgage or lease, home equity loans used to finance business operations, bank loans made outside the SBA program, notes payable to suppliers, and credit card debt.
That last one is a key feature. Borrowers can use ARC loans to cover payments on their personal credit cards if the money was borrowed for business expenses. "We do recognize the merging of the owners' and businesses' finances," says Eric Zarnikow, the SBA's associate administrator for capital access.
How to apply: The SBA won't make ARC loans directly. As with most of its lending programs, it will instead offer guarantees on loans made by banks. If the business owner defaults, the SBA pays off the debt. (The business owner still takes a hit on their credit report.)
Each bank will set its own procedures and timeline for issuing loans, so business owners looking to apply should contact a participating bank. For a list of banks that make SBA loans, click here. Each business can receive only one ARC loan, for a maximum of $35,000, but that loan can be used to make payments on more than one debt.
The SBA will begin processing applications for the loans on June 15, but individual banks may take longer to draft their own application procedures.
What's in it for banks: ARC loans are a sweet deal for borrowers: They carry no fees, require no payments for at least a year, and have their interest payments fully subsidized by the government.
That, and the fact that they're specifically targeted at businesses in trouble, makes them especially risky. Banks have been wrangling with the SBA for years about underwriting standards for their small business loans: The government can penalize lenders for high default rates in their portfolios, which has made some banks nervous about participating in the ARC loan program. Collecting the government guarantee on a loan gone bad can be onerous, and banks have to absorb the administrative costs of pursuing delinquent loans and liquidating those that default. The SBA says it expects ARC loans to default at a higher rate than its other programs, and will adjust its expectations for lenders accordingly.
Because the loans are fully guaranteed by the government, ARC loans are fairly safe for banks. But the interest rate on them isn't very competitive. The SBA has set the interest rate it will pay for the loans at prime plus 2%. For June, that rate would be 5.25%.
That's a lower interest rate than the SBA sets for its other loan programs. However, unlike ARC loans, those programs don't offer a 100% loan guarantee -- on a traditional SBA loan, if a business defaults, banks would be stuck with some of the loss.
Availability: The SBA estimates that around 10,000 small businesses will receive ARC loans, but it's uncertain how quickly the loans will be dispersed. "It's a little challenging to anticipate what the demand will be," Zarnikow says. "There will be ramp-up time as lenders train operators."
In the Recovery Act, Congress allocated $255 million to support the ARC loan program. That money covers only the program's subsidies, for interest payments and defaults, allowing the money to stretch to support a larger dollar-volume of lending. Each lender will be limited to 50 loans per week. If a bank makes less than 50 loans, they can carry the unused allocation over to other weeks, but lenders will be capped at a maximum of 1,000 loans through the program's duration.
The ARC loan program is scheduled to run through Sept. 30, 2010, or until its funding runs out, whichever comes first.
First Published: June 8, 2009: 6:01 PM ET
Re-Posted by Joseph Sloboda
Wednesday, June 10, 2009
With the rates on the 10yr Treasury at 7 month highs we are seeing rates for 30yr Fixed Mortgages on the rise. If you are in the market to purchase a home or to refinance your current mortgage I strongly suggest that you look into locking your rates. Contact me directly for more information (see this story below)
Treasury yields at 7-month highs
Government debt prices tumble as stocks rally, new debt is prepped for auction and Russia says it will sell some of its holdings.
By Catherine Clifford, CNNMoney.com staff writer
June 10, 2009: 9:28 AM ET
NEW YORK (CNNMoney.com) -- Treasury yields soared to 7-month highs Wednesday as global stocks rallied, the government prepared to sell $19 billion in 10-year notes and Russia said it would reduce its share of U.S. debt.
The benchmark 10-year note fell 10/32 to 93-23/32, and its yield rose to 3.90% from 3.86% late Tuesday.
The benchmark yield reached as high as 3.93% before retreating. The yield was at its highest levels since settling Nov. 3 at 3.96%. Bond prices and yields move in opposite directions.
The 2-year note dipped less than 1/32 to 99-5/32, and its yield was 1.32%. The yield on the 3-
month note held steady at 0.18%.
The 30-year bond sank 27/32 to 92-21/32, after being down more than a point earlier. Its yield jumped to 4.71% from 4.65%.
Stock rally: Stocks were higher throughout the world, and were set to open with gains in the United States. Asian indexes ended up between 2% and 4% and European markets were up between 1% and 2% at midday.
Investors tend to buy rallying stocks because they offer greater returns than government debt.
Debt sale: The government continued to sell large amounts of debt to fund the stimulus aimed at boosting the economy. On Wednesday, $19 billion in a reopened 10-year note was slated for auction.
The government sold $35 billion in 3-year notes Tuesday in an auction that met with strong demand from investors.
But one analyst said the performance of the 3-year sale was not necessarily a harbinger of the 10-year reopening.
The 7-year gap in maturity "changes the landscape," said Nick Kalivas, vice president of financial research at MF Global. "Furthermore it has been noted that investors have been rolling down the curve," or putting a premium on shorter dated notes.
Debt prices have fallen under the weight of supply. As prices have fallen, however, yields have shot higher, boosting home mortgage rates with them.
In an effort to combat the mortgage rate rise, the government is buying back debt. The Federal Reserve was scheduled to purchase an undisclosed amount of debt Wednesday as part of its $300 billion quantitative easing campaign.
Russia: Also weighing on Treasury prices was Russia's announcement that it will reduce the share of U.S. debt in its forex reserve holdings, according to Reuters.
About 30% of its $404 billion in reserves are held in Treasurys, Reuters reported. A Russian official said the Treasurys were purchased as a safe haven during the height of the international banking crisis, and will be sold in order to purchase International Monetary Fund bonds and investments in commercial bank deposits.
Lending rates: One key bank-to-bank rate moved lower. The 3-month Libor edged to 0.64% from 0.65%, according to Bloomberg.com.
The overnight Libor rate ticked down to 0.26% from to 0.27% the day prior.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money. The closely-watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor.
reposted from cnnmoney.com by Joseph Sloboda
Treasury yields at 7-month highs
Government debt prices tumble as stocks rally, new debt is prepped for auction and Russia says it will sell some of its holdings.
By Catherine Clifford, CNNMoney.com staff writer
June 10, 2009: 9:28 AM ET
NEW YORK (CNNMoney.com) -- Treasury yields soared to 7-month highs Wednesday as global stocks rallied, the government prepared to sell $19 billion in 10-year notes and Russia said it would reduce its share of U.S. debt.
The benchmark 10-year note fell 10/32 to 93-23/32, and its yield rose to 3.90% from 3.86% late Tuesday.
The benchmark yield reached as high as 3.93% before retreating. The yield was at its highest levels since settling Nov. 3 at 3.96%. Bond prices and yields move in opposite directions.
The 2-year note dipped less than 1/32 to 99-5/32, and its yield was 1.32%. The yield on the 3-
month note held steady at 0.18%.
The 30-year bond sank 27/32 to 92-21/32, after being down more than a point earlier. Its yield jumped to 4.71% from 4.65%.
Stock rally: Stocks were higher throughout the world, and were set to open with gains in the United States. Asian indexes ended up between 2% and 4% and European markets were up between 1% and 2% at midday.
Investors tend to buy rallying stocks because they offer greater returns than government debt.
Debt sale: The government continued to sell large amounts of debt to fund the stimulus aimed at boosting the economy. On Wednesday, $19 billion in a reopened 10-year note was slated for auction.
The government sold $35 billion in 3-year notes Tuesday in an auction that met with strong demand from investors.
But one analyst said the performance of the 3-year sale was not necessarily a harbinger of the 10-year reopening.
The 7-year gap in maturity "changes the landscape," said Nick Kalivas, vice president of financial research at MF Global. "Furthermore it has been noted that investors have been rolling down the curve," or putting a premium on shorter dated notes.
Debt prices have fallen under the weight of supply. As prices have fallen, however, yields have shot higher, boosting home mortgage rates with them.
In an effort to combat the mortgage rate rise, the government is buying back debt. The Federal Reserve was scheduled to purchase an undisclosed amount of debt Wednesday as part of its $300 billion quantitative easing campaign.
Russia: Also weighing on Treasury prices was Russia's announcement that it will reduce the share of U.S. debt in its forex reserve holdings, according to Reuters.
About 30% of its $404 billion in reserves are held in Treasurys, Reuters reported. A Russian official said the Treasurys were purchased as a safe haven during the height of the international banking crisis, and will be sold in order to purchase International Monetary Fund bonds and investments in commercial bank deposits.
Lending rates: One key bank-to-bank rate moved lower. The 3-month Libor edged to 0.64% from 0.65%, according to Bloomberg.com.
The overnight Libor rate ticked down to 0.26% from to 0.27% the day prior.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money. The closely-watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor.
reposted from cnnmoney.com by Joseph Sloboda
Friday, June 5, 2009
Mortgage rates have been rising steadily over the last few weeks and if ever there was a time to "lock in" your rate then that it is NOW.
With current CPI, PPI and Unemployment reports being surprising optimistic and the belief on Wall Street that "the worst is over" the rates on the 10yr Treasury have started to sky rocket. This in turn is forcing mortgage rates to move up by more than a full % point in the last 4 weeks.
There has never been a better time for a qualified buyer or a homeowner looking to refinance than right now. it is my belief that rates will continue to increase over the year (they always do in the Summer anyway) additionally I believe that inflation will continue to rise through the year which will also have a negative on interest rates on mortgages, credit cards, car loans . . . everything.
Interested in purchasing a home or refinancing out of your high rate or adjustable rate mortgage, then please contact Joe Sloboda @ (954) 557-4653 if you have questions on how I may help you - or you can email me at jsloboda@hgmortgage.net
You can also visit my website at www.fastneasyhomeloan.com
see a recent article from CnnMoney below that really puts this into perspective
Mortgage rates soar
30-year fixed jumps to 5.65%; ARMs mostly higher.
By Julianne Pepitone, CNNMoney.com
June 4, 2009: 4:24 PM ET
NEW YORK (CNNMoney.com) -- Home mortgage rates jumped in the most recent week, with the average 30-year fixed rate rising to 5.65%, according to a report released Thursday.
The 30-year fixed rose from 5.45% last week, according to a weekly national survey from Bankrate.com.
"Mortgage rates posted another strong move higher this week, as the focus among bond investors has shifted to concerns about budget deficits and inflation," the report said.
Mortgage rates move in tandem with Treasury yields. In particular, the 30-year fixed mortgage rate tracks the benchmark 10-year Treasury yield.
"The Federal Reserve, with more than $1 trillion remaining in their stated mortgage- and government-bond buyback program, could accelerate or possibly increase those purchases in an effort to bring rates lower," the report said.
A separate Wednesday report showed U.S. mortgage applications fell last week, reflecting a plunge in demand for home refinancing loans. A report last week showed the largest quarter-over-quarter increase in troubled mortgages since record-keeping began in 1972.
Even as mortgage rates continue to rise, they still remain much lower than last year, when the average 30-year fixed mortgage rate was 6.52%, according to Bankrate.com.
To translate the difference in mortgage rate into dollars for a homeowner, consider a $200,000 loan. At 6.52%, the monthly payment would come out to $1,266.77, or $112 higher than the $1,154.47 monthly payment at 5.65%.
Other rates: The average 15-year fixed rate mortgage jumped to 5.06% from 4.86% the week prior.
The average jumbo 30-year fixed rate ticked up to 6.68 % from 6.6%. Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). They have higher rates than smaller "conforming" loans, which do have guarantees.
Adjustable-rate mortgages were mixed, the report said, with the average 1-year ARM slipping to 5.01% and the 5-year ARM jumping to 5.2%.
re-posted by Joseph Sloboda
With current CPI, PPI and Unemployment reports being surprising optimistic and the belief on Wall Street that "the worst is over" the rates on the 10yr Treasury have started to sky rocket. This in turn is forcing mortgage rates to move up by more than a full % point in the last 4 weeks.
There has never been a better time for a qualified buyer or a homeowner looking to refinance than right now. it is my belief that rates will continue to increase over the year (they always do in the Summer anyway) additionally I believe that inflation will continue to rise through the year which will also have a negative on interest rates on mortgages, credit cards, car loans . . . everything.
Interested in purchasing a home or refinancing out of your high rate or adjustable rate mortgage, then please contact Joe Sloboda @ (954) 557-4653 if you have questions on how I may help you - or you can email me at jsloboda@hgmortgage.net
You can also visit my website at www.fastneasyhomeloan.com
see a recent article from CnnMoney below that really puts this into perspective
Mortgage rates soar
30-year fixed jumps to 5.65%; ARMs mostly higher.
By Julianne Pepitone, CNNMoney.com
June 4, 2009: 4:24 PM ET
NEW YORK (CNNMoney.com) -- Home mortgage rates jumped in the most recent week, with the average 30-year fixed rate rising to 5.65%, according to a report released Thursday.
The 30-year fixed rose from 5.45% last week, according to a weekly national survey from Bankrate.com.
"Mortgage rates posted another strong move higher this week, as the focus among bond investors has shifted to concerns about budget deficits and inflation," the report said.
Mortgage rates move in tandem with Treasury yields. In particular, the 30-year fixed mortgage rate tracks the benchmark 10-year Treasury yield.
"The Federal Reserve, with more than $1 trillion remaining in their stated mortgage- and government-bond buyback program, could accelerate or possibly increase those purchases in an effort to bring rates lower," the report said.
A separate Wednesday report showed U.S. mortgage applications fell last week, reflecting a plunge in demand for home refinancing loans. A report last week showed the largest quarter-over-quarter increase in troubled mortgages since record-keeping began in 1972.
Even as mortgage rates continue to rise, they still remain much lower than last year, when the average 30-year fixed mortgage rate was 6.52%, according to Bankrate.com.
To translate the difference in mortgage rate into dollars for a homeowner, consider a $200,000 loan. At 6.52%, the monthly payment would come out to $1,266.77, or $112 higher than the $1,154.47 monthly payment at 5.65%.
Other rates: The average 15-year fixed rate mortgage jumped to 5.06% from 4.86% the week prior.
The average jumbo 30-year fixed rate ticked up to 6.68 % from 6.6%. Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). They have higher rates than smaller "conforming" loans, which do have guarantees.
Adjustable-rate mortgages were mixed, the report said, with the average 1-year ARM slipping to 5.01% and the 5-year ARM jumping to 5.2%.
re-posted by Joseph Sloboda
Thursday, June 4, 2009
Countrywide's Mozilo charged with fraud
Securities and Exchange Commission charges Countrywide founder with fraud.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: June 4, 2009: 4:27 PM ET
NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission on Thursday said it had filed securities fraud charges against former Countrywide Chief Executive Angelo Mozilo and two other former executive.
The trio are being charged with deliberately misleading investors about the significant credit risk Countrywide took to build and maintain its market share.
Mozilo was also charged with insider trading for selling his Countrywide stock for nearly $140 million in profits while knowing that Countrywide's business model was deteriorating.
The SEC alleges that Mozilo, along with former COO and President David Sambol and former CFO Eric Sieracki, misled the market by falsely assuring investors that Countrywide was primarily a prime-quality mortgage lender.
"This is the tale of two companies," said Robert Khuzami, director of the SEC's Division of Enforcement. "Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk."
From 2005 to 2007, Countrywide engaged in an unprecedented expansion of its underwriting guidelines and was writing riskier and riskier loans, according to the SEC. The senior executives knew that defaults and delinquencies would rise.
"Angelo Mozilo privately described one Countrywide product as 'toxic,' and said another's performance was so uncertain that Countrywide was 'flying blind,' " Khuzami said.
An attorney for Mozilo could not be reached immediately for comment.
Responding to reports of an investigation last month, the lawyer told CNNMoney.com that the "persistent innuendo" that Mozilo sold Countrywide shares because he knew of problems within the mortgage lender is "scandalous" and "inconsistent" with the facts.
"We do not believe there is any fair basis for allegations to be made against Mr. Mozilo," attorney David Siegel said in an e-mail on May 13. "All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time."
Mozilo, who founded the company in a New York apartment, built Countrywide into the nation's largest mortgage lender. But Countrywide buckled during the housing meltdown and was acquired last year by Bank of America (BAC, Fortune 500).
Mozilo became a poster boy for the subprime crisis. He reportedly stood to collect a windfall of $115 million in the $4 billion sale to Bank of America. But after facing heavy criticism from lawmakers, Mozilo said he would forfeit $37.5 million in payments tied to the deal.
CNN Senior Producer Scott Spoerry contributed to this report.
First Published: June 4, 2009: 3:37 PM ET
Securities and Exchange Commission charges Countrywide founder with fraud.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: June 4, 2009: 4:27 PM ET
NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission on Thursday said it had filed securities fraud charges against former Countrywide Chief Executive Angelo Mozilo and two other former executive.
The trio are being charged with deliberately misleading investors about the significant credit risk Countrywide took to build and maintain its market share.
Mozilo was also charged with insider trading for selling his Countrywide stock for nearly $140 million in profits while knowing that Countrywide's business model was deteriorating.
The SEC alleges that Mozilo, along with former COO and President David Sambol and former CFO Eric Sieracki, misled the market by falsely assuring investors that Countrywide was primarily a prime-quality mortgage lender.
"This is the tale of two companies," said Robert Khuzami, director of the SEC's Division of Enforcement. "Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk."
From 2005 to 2007, Countrywide engaged in an unprecedented expansion of its underwriting guidelines and was writing riskier and riskier loans, according to the SEC. The senior executives knew that defaults and delinquencies would rise.
"Angelo Mozilo privately described one Countrywide product as 'toxic,' and said another's performance was so uncertain that Countrywide was 'flying blind,' " Khuzami said.
An attorney for Mozilo could not be reached immediately for comment.
Responding to reports of an investigation last month, the lawyer told CNNMoney.com that the "persistent innuendo" that Mozilo sold Countrywide shares because he knew of problems within the mortgage lender is "scandalous" and "inconsistent" with the facts.
"We do not believe there is any fair basis for allegations to be made against Mr. Mozilo," attorney David Siegel said in an e-mail on May 13. "All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time."
Mozilo, who founded the company in a New York apartment, built Countrywide into the nation's largest mortgage lender. But Countrywide buckled during the housing meltdown and was acquired last year by Bank of America (BAC, Fortune 500).
Mozilo became a poster boy for the subprime crisis. He reportedly stood to collect a windfall of $115 million in the $4 billion sale to Bank of America. But after facing heavy criticism from lawmakers, Mozilo said he would forfeit $37.5 million in payments tied to the deal.
CNN Senior Producer Scott Spoerry contributed to this report.
First Published: June 4, 2009: 3:37 PM ET
Joseph Sloboda
Tuesday, June 2, 2009
Pending home sales rebounding
Number of signed sales contracts continues bounce off record lows for third consecutive month.
By Les Christie CNNMoney.com staff writer
Last Updated: June 2, 2009: 10:05 AM ET
NEW YORK (CNNMoney.com) -- The number of home sales contracts signed in April continued to bouce back from record lows hit last winter, according to a widely watched industry report.
This is the third consecutive month of gains.
The Pending Home Sales Index from the National Association of Realtors rose 6.7% in April after jumping 3.2% in March. That was far above the forecasts of experts surveyed by Briefing.com, who predicted a 0.5% increase. The index was 3.3% higher than 12 months earlier.
Pending home sales are a forward-looking indicator since many of the contracts don't result in completed deals for many weeks or months.
"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, NAR's chief economist in a prepared statement. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers."
The credit allows many homebuyers who have not owned a home in the past three years to claim up to an $8,000 refund on their taxes. The result has been a flood of first-time homebuyers even into lukewarm markets like Indianapolis, according to Glenn Bill, an agent there for Century 21 Sheetz.
"Our first-time homebuyer market is exploding," he said. "That's one good thing to come out of the stimulus package."
Low prices
Also driving sales is falling home prices. The national median home price is down more than 30%, according to the S&P/Case-Shiller Home Price Index. That has drawn many bargain-hunting homebuyers back into the market.
Mortgage rates in April were also very favorable, averaging well under 5% for a 30-year, fixed-rate loan. However, rates have risen recently.
All those factors have raised NAR's index of affordability to near record highs. It went up to 174.8 in April from an upwardly revised 171.9 in March, its second highest monthly reading ever. This index measures the relationship between home prices, mortgage interest rates and family income.
Regionally, the biggest improvement in home sales came in the Northeast, where they shot up 32.6%. Sales ramped up 9.8% in the Midwest, inched up 1.8% in the West and cooled 0.2% in the South.
Also boosting sales, according to NAR president Charles McMillan, a Coldwell Banker broker in Dallas, is that some states and non-profit agencies are helping first-time homebuyers come up with down payments.
"Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location," he said.
The Department of Housing and Urban Development announced last week an additional program that enables homebuyers to add the tax credit to their down payments on FHA mortgages at closing, which should also help to enhance affordability and give a push to home sales.
First Published: June 2, 2009: 10:00 AM ET
Joseph Sloboda
Number of signed sales contracts continues bounce off record lows for third consecutive month.
By Les Christie CNNMoney.com staff writer
Last Updated: June 2, 2009: 10:05 AM ET
NEW YORK (CNNMoney.com) -- The number of home sales contracts signed in April continued to bouce back from record lows hit last winter, according to a widely watched industry report.
This is the third consecutive month of gains.
The Pending Home Sales Index from the National Association of Realtors rose 6.7% in April after jumping 3.2% in March. That was far above the forecasts of experts surveyed by Briefing.com, who predicted a 0.5% increase. The index was 3.3% higher than 12 months earlier.
Pending home sales are a forward-looking indicator since many of the contracts don't result in completed deals for many weeks or months.
"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, NAR's chief economist in a prepared statement. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers."
The credit allows many homebuyers who have not owned a home in the past three years to claim up to an $8,000 refund on their taxes. The result has been a flood of first-time homebuyers even into lukewarm markets like Indianapolis, according to Glenn Bill, an agent there for Century 21 Sheetz.
"Our first-time homebuyer market is exploding," he said. "That's one good thing to come out of the stimulus package."
Low prices
Also driving sales is falling home prices. The national median home price is down more than 30%, according to the S&P/Case-Shiller Home Price Index. That has drawn many bargain-hunting homebuyers back into the market.
Mortgage rates in April were also very favorable, averaging well under 5% for a 30-year, fixed-rate loan. However, rates have risen recently.
All those factors have raised NAR's index of affordability to near record highs. It went up to 174.8 in April from an upwardly revised 171.9 in March, its second highest monthly reading ever. This index measures the relationship between home prices, mortgage interest rates and family income.
Regionally, the biggest improvement in home sales came in the Northeast, where they shot up 32.6%. Sales ramped up 9.8% in the Midwest, inched up 1.8% in the West and cooled 0.2% in the South.
Also boosting sales, according to NAR president Charles McMillan, a Coldwell Banker broker in Dallas, is that some states and non-profit agencies are helping first-time homebuyers come up with down payments.
"Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location," he said.
The Department of Housing and Urban Development announced last week an additional program that enables homebuyers to add the tax credit to their down payments on FHA mortgages at closing, which should also help to enhance affordability and give a push to home sales.
First Published: June 2, 2009: 10:00 AM ET
Joseph Sloboda
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