Charlotte Real Estate, Foreclosures, Short Sales

As we grow closer to the end of 2008, the main question for homeowners, homebuyers and everyone alike is what is in store for 2008's real estate market?  An interested article by Valuation Review predicts the following:

1. We will continue to see market adjustments.
We are not at the bottom yet and we will continue to see sellers facing challenges for 2009 as the inflated pricing from years ago continues to normalize.  Sellers will be competing against many foreclosed properties and builders cutting prices on their inventory to reduce holding costs.

2. Our New President's Plan.
President-Elect Obama will include a plan to help the housing sector includes a 10 percent mortgage tax credit for homeowners who don't itemize their taxes and a crackdown on abusive lending practices.

3. More foreclosure help.
A report released by the Joint Ecomomic Committee predicts 2 million foreclosures in 2009.  Expect more talks of bailouts program assistance and foreclosure prevention programs.

4. More Lending Regulations.
What got us into this mess will be fixed with stricter regulations.

5. Close reviews of mortgage applications.
Lenders now and in the future will be requiring borrowers to prove their income and eligibility.  Expect extensive income documentation.

Now is the time to get ready for bumps and fast and slow rides in 2009's real estate market.  Pricing your home correctly, and having good credit with strong documentation to prove your income will allow you to take advantage of a time when some will hate what is happening and some will love it.  Which one will you be?

On December 10, the House passed a plan to provide the auto industry will a $14 billion dollar loan to carry them into the new year, or into the next President.  Capitol Hill thinks differently as Republicans look to filabuster anything that resembles what has passed in the House. 

What Must Be Considered?
What must be considered in the December 5th report showing a 30 year low in employment as we have loss 533,000 positions in November and the unemployment rate rose to 6.7% from 6.5%. 
Major employers include layoffs being announced last week from:
DuPont - 5,000 staff positions and 6,000 contract workers
AT&T -   12,000 positions
Sony - 8,000
Office Depot, 2,200

Some say that without an auto industry bailout, over 3 million potential positions may be loss.  This estimate would be along with our already existed decline in employment.

What's Ahead?
Business Week's information from top economists from Wall Street, academia, labor and business predictions include optimists who see growth as soon as spring, with the economy losing an additional 750,000 more jobs between now and then.  Pessimists predict continued job loss until next year or 2010 with additional jobs loss of well over 2 million to 4 million.

How it Can be Contained?
Alot depends on how effective Washington is in helping our dire credit crunch dilemma.  Many economists believe that the President-Elect's plan of a $500 billion dollar stimulus could shorten the recession and reduce job loss.  The skill the new administration will have to acquire is balancing the short term goals with the long term effects.  Make shifts to get us through this phase will only cause disasterous consequences in the long run.

We will wait to see how it all fares for the Charlotte area and real estate.

William Frey, a private investor mortgage-backed securities, filed a lawsuit in NY State Supreme Court on
12/1/2008 alleging that modifiying some 400,000 home loans originally underwritten by the lender
Countrywide Financial is illegal.

The lawsuit, a class-action status was filed against Bank of America who bought Countrywide in late 2007.
Frey claims that loan modifications will short bondholders $8.4 billion by reducing borrower payments.  These
loan adjustments may help struggling homeowners, but they may also run the risk of permanently damaging
the secondary market for housing financing.

This is how it works.  Once a loan is originated, it is sold off to investors. These securities become Mortgage Backed Securities.  Mortgage Backed Securities are purchased by trusts put together by Wall Street Bankers. Payments go the trusts when borrowers pay their mortgage, not the lender.

A Bank of America spokeswoman Shirley Norton says "We have not yet received a filing and, therefore, we
we cannot comment on specific claims.  We are, however, a disappointed in this attempt to halt a program
intended to keep as many as 400,000 at-risk families in their homes and, together with similar programs
across the industry, stabilize the nation's housing market.

Frey's suggests that the Government to buy all the troubled loans from the mortgage-backed securities. 
He estimates that the cost could run the Government $500 billion. 

According to the National Bureau of Economic Research, the recession really started in December 2007.  The NBER based their assesment on monthly statistics, not quarterly.  Jobs peaked in December of 2007 and then have been declining ever since then.   Duration of recessions can change.  The The last expansion lasted 73 months and prior expansion lasted 120 months.  The average expansion since the end of World War II has lasted 57 months. The typical postwar recession has lasted 10 months.  According to financial economic researchers this recession has the possibility of lasting longer.  The good news is that we have been in a recession longer than we have realized.

The committee's definition of a recession is as follows: "A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators."

A Second Stimulus Plan

CNBC predicts an equal stimulus for "mainstreet" once the new administration is in place.  This does not mean checks in hand, but funding to government office to keep programs alive such as unemployment, food stamps, medicaid and medicare, bridges and roads.

Will there also be checks going out to the American public?  Possibly.  Even before the election, President-Elect Obama was in favor of emergency energy rebate", $500 to every worker or $1000 for every family, paid for by a tax on the oil companies.  Obamas representatives want the checks to arrive before tax returns are filed in April According to the Economist, the $92 billion in tax rebates which Americans received in July led to a growth in consumer spending of 1.7%.

Buyers needing to purchase a home and grab a great deal during this long-run buyers market are applying for FHA loans.  Many first-time homebuyers are doing their homework and taking advantage of Non-Traditional Credit eligibility to qualify for loans.  Borrowers and others who do not use traditional credit must have the lender develop a credit history from utility payment records, rental payments, automobile insurance payments, or other means of direct access from the credit provider. The lender must document that the providers of non-traditional are legitimate verify the credit information. Documents confirming the existence of a non-traditional credit provider may include a public record from the state, county, or city records, or other means providing a similar level of objective confirmation.

How Lenders Verify Non-Traditional Credit

To verify the credit information, lenders must use a published address or telephone number for that creditor. As an alternative, the lender may elect to use a non-traditional mortgage credit report developed by a credit-reporting agency, provided that the credit reporting agency has verified the existence of the credit providers and the lender verifies that the non-traditional credit was extended to the applicant. The lender must verify the credit using a published address or telephone number to make that verification.

You May Need to Shop Around

Some lenders due to our current credit crunch are trying to avoid using non-traditional credit because it is so hard to sell the loans in the secondary market.  You may see "pricing hits", or add-ons.  Lenders are allowed to implement their own underwriting guidelines. 

How to Get an FHA Loan