Existing Home Sales – a Mixed Bag….

Okay, this is another one of those “mixed bag” reports:

• The market was clearly expecting some pretty good numbers.   The report came in well below what the market expected and down 7.2% compared to December’s sales.
• This tends to lend credence to what happened with the cash for clunkers.   What happened?  It appeared to be a success, they extended it and it faltered after that.   If extending the homebuyer’s tax credit was a great thing, we’d see houses still selling well, wouldn’t we?
• Comparing sales in January 2009 vs. January 2010, sales are actually up from last year 11.5%.   This adds credence to the concept of a “muddle along” recovery.   Things aren’t good, but they are less bad than they were a year ago.

So, is it a good report, nope.    But is it an absolutely horrendous report?   Nope, not that either.

Existing-Home Sales Plunged Unexpectedly in January – CNBC

Sales of previously owned homes in the United States unexpectedly plunged in January, an industry survey showed Friday, fresh evidence the housing market has yet to find stable ground.

The National Association of Realtors said that sales fell 7.2 percent to an annual rate of 5.05 million units, sharply below market expectations for a 5.50 million unit pace.

December sales were revised slightly lower to 5.44 million pace from 5.45 million units. Compared to January last year, sales of existing homes were up 11.5 percent.

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

AIG and the USA

A couple of important things to note about this report on the $9 Billion loss that AIG experienced in the 4th Quarter of 2009:

• The loss that they experienced in the 4th quarter of 2008 was a little over 7 times larger than that amount.   That would create a pretty solid case for the fact that the world is no longer coming to an end, at least not as far as AIG is concerned.
• AIG had actually generated a profit in the 2nd and 3rd quarters.   The fact that it’s switched to a loss in the 4th quarter isn’t a good sign.

So, a big company, a big “investment” by the US, and a mixed bag in terms of the results.

AIG posts $9 billion loss – Feb. 26, 2010

AIG posts $9 billion loss
By David Goldman, staff writerFebruary 26, 2010: 9:47 AM ET

NEW YORK (CNNMoney.com) — AIG reported a substantial fourth-quarter loss Friday, largely due to costs associated with selling off large stakes in its insurance businesses to reduce the debt it owes to taxpayers.

The New York-based insurance company said it lost $8.9 billion, or $65.51 per share, during the three-month period ended Dec. 31. A year earlier, AIG lost $61.7 billion, the largest quarterly loss in history.

But recently, the company had begun to turn its financial situation around. Prior to the past quarter, AIG had recorded two profitable quarters in a row.

The fourth-quarter loss was due to billions of dollars in restructuring costs that AIG logged in the last three months of 2009.

In December, AIG sold large stakes in Alico and AIA, two giant foreign life insurance businesses, to the U.S. government. In exchange for those transactions, the Federal Reserve reduced the amount AIG has to repay taxpayers by $25 billion. AIG said it took a $5.2 billion charge for that sale last quarter.

Technorati Tags: AIG, Bailout

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

Banking Reform…..

I’ll be the first to admit that there’s almost always more to the story than what is reported on CNBC, but I have to say that I like this idea.   Let me lay it out briefly:

• If you are a bank that either gets FDIC insurance or gets any sort of Federal support, then you can’t engage in speculative activity unrelated to basic banking activity.
• If you don’t get government support, then go right ahead and do all of that speculative stuff.   But, if you lose money, don’t come crying to Uncle Sam for a bailout because it’s not going to happen.
• The big question to me is what the word “unrelated” means.    Banks can’t do speculative activity unrelated to basic banking.    What does that mean?

It’s a step in the right direction, but how big of a reform it is depends on what the word “unrelated” means.

Stay tuned…….

Ex-US Treasury Secretaries Back Volcker Rule – CNBC

Five former Treasury secretaries urged Congress Sunday to bar banks that receive federal support from engaging in speculative activity unrelated to basic bank services.

“The principle can be simply stated,” the five said in a letter to The Wall Street Journal. “Banks benefiting from public support by means of access to the Federal Reserve and FDIC insurance should not engage in essentially speculative activity unrelated to essential bank services.”

The Treasury secretaries said, however, that hedge funds, private-equity firms and other organizations engaged in speculative trading should be “free to compete and innovate” but should not expect taxpayers to back up their endeavors.

“They should, like other private businesses, … be free to fail without explicit or implicit taxpayer support,” said the former secretaries for both Republican and Democratic presidents.

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

TARP Money? Color me skeptical…..

Okay, color me a serious shade of skeptical…..

President Obama and his crew announce a plan to use $1.5 Billion (that’s a B) of TARP money (wasn’t TARP money supposed to bail out the banks?) to stabilize the housing market?    Okay, let’s take a look at a few facts:

• Between Fannie and Freddie, they control somewhere in the neighborhood of $4 Trillion in mortgage loans.     And they think that $1.5 Billion is going to stabilize the market?
• They describe how they are going to let the state housing agencies design programs that will address the urgent needs.     Am I the  only one who finds this statement ironic?  Since when has the Federal government let the state government design a program and it was fast enough to address an urgent need?

This next is a quote from the Whitehouse Blog (yes apparently even they blog!):

The types of programs that may be funded include: measures for unemployed homeowners, programs to assist borrowers owing more than their home is now worth, programs that help address challenges arising from second mortgages,; or other programs encouraging sustainable and affordable homeownership.

Okay, a couple of problems that I have with that statement:

1. Mesasures for unemployed homeowners?   The only thing that I can see where that would work is if the government started making house payments for unemployed borrowers?   How far do you think $1.5 Billion would go for that?
2. Assist Borrowers who owe more than their home is worth.   Let’s think about that one for a second.    The last statistics that I heard for Michigan showed that 45% of all homeowners who have mortgages are underwater.    How far is $1.5 billion going to go?
3. Challenges from second mortgages?   Like what?  How to pay them?

When the “Obama Refi Plan” came out, it was touted like it was going to save the housing market.   The same type of “spin” is being use for this one.

Don’t hold your breath.

Pelosi Says Obama’s New $1.5bn Plan Will Stabilize Housing « HousingWire

Friday, February 19th, 2010, 1:33 pm

[Update 1 adds program details.]

President Barack Obama is announcing a plan to allocate $1.5bn of Troubled Asset Relief Program (TARP) funds to aid homeowners in select states, to the support of the House Speaker.

Treasury Department policy adviser Sarah Apsel, in a posting on the White House blog, said the program will apply to states where house prices have fallen more than 20% from their peak.

“Such price declines, coupled with the effects of high unemployment, means that many working and middle-class families in these areas are facing serious challenges,” she wrote. “The effort we are announcing today will provide support for state housing finance agencies (HFAs) to design programs tailored to the urgent needs of particular communities.”

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

This CPI Report could be good for interest rates

Core inflation (the number that isn’t as volatile because of things like energy prices), fell in January.   That shows that inflation isn’t an immediate threat and typically if that’s the ONLY thing that’s affecting the markets, that would put downward pressure on mortgage rates.   But remember, there’s a LOT more going on than just inflation right now.

I’ll have more as the day progresses…….

Consumer Prices Rise Slightly, Easing Inflation Fears – CNBC

U.S. consumer prices rose less than expected in January, while prices excluding food and energy fell for the first time since 1982, supporting the Federal Reserve’s contention it would keep its benchmark interest rate low for an “extended period.”

The Labor Department said on Friday its seasonally adjusted Consumer Price Index rose 0.2 percent last month, lifted by a spike in energy costs, after rising 0.2 percent in December.

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

Predictions on Mortgage Rates – Will the World Come to an End on March 31?

Carolyn Said of the San Francisco Chronicle wrote a good story yesterday taking a look at a number of the possible scenarios that might play out in terms of interest rates.    A couple of thoughts:

• I’m reminded of the saying, “What will you get if you line up 52 economists against the wall and ask them what color the sky is?”   Answer – 104 opinions.
• The fact that all of them predict that rates will go up is a pretty good indication that rates are not going to go down any time soon.

My prediction is that we’re going to see an increase in rates, but not a dramatic overnight rise in rates.    Instead we’re going to see a gradual and steady increase in rates.    Why not a major jump?   A couple of reasons:

• The Fed has been announcing that they were stopping their purchasing of mortgage backed securities the end of March for many months.   It’s not a surprise.
• Because it’s not a surprise, the reaction in the investment community will be more focused and analytical rather than a “knee jerk” reaction.

But remember, these are all just opinions……

Mortgage rates poised to jump as Fed cuts funds

The Federal Reserve is poised to turn off a major money spigot that has helped sustain the ailing real estate sector, as an extraordinary program under which the Fed has pumped $1.25 trillion into the mortgage market is slated to end March 31.

“Housing has been on government life support, and without it the crash would have been much more severe,” said Mark Zandi, chief economist with Moody’s Economy.com in Pennsylvania. “This spring and summer as those policy efforts unwind, we most likely will see mortgage rates move higher and more house-price declines.”

Technorati Tags: The Fed, Mortgage Rates

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

National Association of Home Builders Index

Okay, a couple of things about this chart:

• Thanks to Calculated Risk for the great chart again.    Bill, you do great stuff!
• Yes, the chart is “off the bottom” compared to a year a go.  
• But anything less than 50 means that more builders think the market is tough than think the market is good.

So, that means that basically over 80% of the builders survey say it’s tough out there.Why?’  A number of issues, but one of them is the withdrawal of the “easy credit” drug that was fueling the housing boom.

More later,

”Sean”

Shadow Inventory – aka Why It’s Not Over Yet….

Okay, time to get back at it and talk about some of the not so pleasant things going on in the mortgage and real estate worlds (that is why it’s called Straight Talk!)

Below are excerpts of an article from over at Housing Wire Magazine.    Let me make a couple of main points in terms of what I agree with and what I don’t.

What I agree with:

1. I agree that the shadow inventory of homes is going to be an ongoing problem.   There are a lot of homes that are either already in process of foreclosure or heading that way and eventually the banks are going to have to deal with them.  
2. There are a lot of people who are currently “hanging on” by a thread and making their payments but are going to have something happen and end up defaulting on their mortgage.

What I don’t agree with:

1. I think it’s worse than a 33 month drag on inventory.   Why?   As best as I can tell, the 33 months assumes that no other homes would come on the market.    None?   What about the people who get transferred?   What about the couple living in a 2 bedroom condo who are expecting their third child?   It’s not realistic that there will be NO “regular” people putting their homes on the market.   So, how much longer will it be?   I wouldn’t dare venture a concrete guess, but I think 20% longer than what they say would be something we’d be fortunate to have.
2. They don’t seem to factor into consideration the modified mortgages that “go under” for a second time.    I’ve heard statistics that say anywhere from 40 to 70% of the loans that have been modified will end up redefaulting.    That’s going to add to the inventory.
3. The people who just “want to sell.”    I’ve read a number of articles about people’s intentions “when the market turns around.”    A survey by Zillow showed that upwards of 50% of people surveyed said that if they saw signs of the market turning around, they’d put their house on the market.   So there’s another “boost” to the inventory levels.

In summary, the concept of an elevated level of shadow inventory is not in question (if you don’t agree, let me know.)    The question is the degree and the level of drag that it’s going to be on the housing market.

It isn’t going to help matter.

“Kenny”

Shadow Inventory of Homes to Take Nearly 3 Years to Clear: S&P « HousingWire

The “shadow inventory” of bank-repossessed properties, as well as distressed mortgages facing foreclosure, will take nearly three years to clear at the current sales rate, according to a report from the credit rating agency Standard & Poor’s (S&P). ……..

The “shadow inventory” of homes includes all delinquent loans and real-estate owned (REO) property that has not reached the market. …….

……S&P estimates the inventory to equal a 33-month supply of homes. Analysts added the estimate is actually conservative, as they did not assume homes not showing signs of distress would default and push the overhang of supply even further……..

“Overall, it is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market,” according to the report.

Another credit rating agency, Moody’s, showed that the underwhelming performance of the Home Affordable Modification Program (HAMP), which the US Treasury Department launched in March 2009 to give incentives to servicers for the modification of loans on the verge of foreclosure, will drive down housing prices another 8% from Q409 to the end of 2010.….

“We believe that the recent constriction in the supply of foreclosed homes on the market is a temporary one,” claim the analysts.

“Loan modifications and the observed extension of time distressed loans remained as such may simply have delayed the inevitable, creating the demonstrated shadow inventory of troubled loans,” they wrote. “Ultimately, the majority of the properties these distressed loans represent will likely have to be liquidated.”

Write to Jon Prior.

Technorati Tags: Shadow Inventory, Real Estate, Straight Talk, Mortgage

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

A Picture is Worth a Thousand Words

Technorati Tags: Spending, Government, Budget Deficit

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.