Okay, so there's a new government plan.  Yes, I asked the same question you are thinking...another one??  I'm all in for helping our economy and helping struggling homeowner's negotiate terms that are fair across the board with the lenders, but not at the expense of tax dollars and plans that appear to be government guinea pigs.  The Treasury Department and Federal Deposit Insurance Corp., are close to being finalized. Estimated to cost between $40 billion and $50 billion, the plan would have the government agree to share a portion of any losses on a modified mortgage offered by lenders.  Sound similar?  Yes.  It was the plan in July with the 300 Billion dollar bailout that passed. 

How Will it be Funded?

Funding may come out of the $700 Billion rescue plan authorized by congress earlier in October 2008.  Treasury spokeswoman Jennifer Zuccarelli said "the administration is looking at ways to reduce foreclosures."  FDIC Chairman Shelia Bair, who first suggested this plan has stated "Everyone in Washington now agrees that more needs to be done to help homeowners,"

JP Morgan Helps in a Huge Way

Jp Morgan has launced a huge plan on October 31st aimed at modifying the terms of $70 billion in mortgages of borrowers who are behind in their payments or who may be headed that way.  As many as 400,000 borrowers will soon receive a reduction in interest rate, smaller principal loan amounts or different terms that will may their mortgage payment more affordable.

JP Morgan inheririted $54 billion in adjustable or adjustable type loans from Washington Mutual in September and they have chosen to do something about it.  Hopefully banks are beginning to realize that this problem is not going away and it makes sense to improve their loan portfolios' value rather than increase non-performing assets. 

What's the Outlook on Foreclosures?

Nationwide, 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010, about triple the usual rate, according to Moody's Economy.com, a research firm. Some 4.3 million of those are expected to lose their homes.

MORTGAGE BANKERS TALK FORECLOSURE:

As expected, the Government is expected to take over Fannie Mae and Freddie Mac this weekend due to reports of billions of dollars in loss.  CEO Daniel Mudd of Fannie Mae and CEO Richard Syron of Freddie Mac will be excused from their duties.  There is a potential that this take over could cost taxpayers billions of dollars. 

Fannie Mae's shares plunged $1.54, or 22 percent, to $5.50. Freddie Mac's shares fell $1.06, or almost 21 percent, to $4.04. Common stock in the companies will be worth little to nothing after the government's actions.

Fannie Mae and Freddie Mac Losses a Combined 3.1 Billion

Fannie Mae and Freddie Mac lost a combined $3.1 billion between April and June. Half of their credit losses came from these types of risky loans with ballooning monthly payments.

The Congressional Budget Office has stated that this intervention could cost taxpayers $25 billion dollars.  

Record 9 Percent in Foreclosure

The Mortgage Bankers Association reported on Friday that more than 4 million American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June.  This is a record 9 percent.

Freddie Mac and Fannie Mae together hold or guarantee $5 trillion in mortgages.  This is almost half the nation's total.

On Friday, Nevada regulators shut down Silver State Bank, the 11th failure this year of a federally insured bank and let us not forget the Government takeover of investment bank Bear Stearns by JP Morgan Chase.

How it Affects Charlotte Real Estate

Expect an increase of foreclosures in the Charlotte area over the next 2-3 months.  There has been some transitions in loss mitigation departments and real estate owned departments in the processing of short sales, REO contracts and outsourced REO departments.  We have witnessed bulk property assignments to local Realtors. 

If you would like information on "homes to watch" that are slated to be released for public sale prior to the property being entered into the public market, register here.

After employers have shed 51,000 job, the unemployment rate has climbed to a four-year high of 5.7 percent.  According to data released by the U.S. labor department, lack of credit affected employers the greatest by decreasing their willingness to hire and plans to expand.  That brings the total of lost jobs to 463,000 for 2008.

Summer has usually been a time when teenagers were able to enter the job market for summer employment.  Not so this year.  The unemployment rate for teenagers has climbed to 20.3 percent.  This is the highest since 1992. 

Company Cuts

General Motors filed a report on Friday showing the third-worst quarterly loss in its history.  General Motors posted losses of of $15.5 billion on Friday. General Motors will reduce production by another 300,000 vehicles and lose thousands of hourly and salaried workers.

Other cuts include:

• More than 700 Bennigan's restaurants, owned by privately hel Metromedia Restaurant Group are closing.

• Some cuts at Chrysler

• Some cuts at Wachovia

• Some cuts at Pfizer
  
  

What does this mean for the Housing Industry?

There is no doubt that we will see a relationship start to exist between these new job losses and foreclosures.  This will mean that homeowners affected by job losses and other hardships will need to seek out information and assistance earlier.  Forums and information to help include:

Neighborhood Works - Free foreclosure counseling at HUD approved agencies

HUD Foreclosure Information - A free resource to give tips to homeowners facing foreclosure.

Hotline for N.C. Homeowners Facing Foreclosure - Help for North Carolinians who are at risk of losing their homes to foreclosure is now just a telephone call away

If you need additional assistance and numbers for avoiding foreclosure, give us a call at (704) 559-5988 x 5.

How can the pending Housing Rescue Bill help you if you are facing foreclosure?    The House on Wednesday passed a 300 billion housing rescue bill.  President Bush withdrew his threat to veto the bill that can potentially help thousands of at-risk borrowers to refinance their old mortgages into a new low-cost fixed FHA loan.

There are an estimated 400,000 borrowers with $68 billion in loans that may benefit from the program. 

Who Qualifies for the Program?

To qualify, borrowers must:

Have lived in thier homes and have loans issued between January 2005 and June 2007.

Must be spending at least 40% of their gross monthly income on all household debt.

Prove they can't continue to pay for their existing mortgage.

Must retire any debt such as home equity loans or lines of credit on their home.

Total debt cannot exceed 95% of the home's appraised value.

A voluntary Program

This is a voluntary program, so lenders may be very cautious as to who will be given a rework.  The bill requires lenders to write down the value of the loan to 90%.  This is helpful in areas where prices have dropped in value.  If you originally had a $200,000 home, the refinanced loan will be based on $180,000 at a considerably lower rate.

What is Will Cost the Borrower?

Borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually.

Borrowers will also share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

Borrowers will agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs.

What if You Do Not Qualify?

If you feel you do not qualify for the program, still call your lender and inquire about the possibility of a rework on your loan.  If you are still having problems, contact us today and speak with me at (704) 559-5988 X 5.  As a licensed loan officer and contract loss mitigation specialist with lenders who fund loans in NC, I may be able to assist you with some options to help you if you are facing foreclosure in the Charlotte North Carolina area.

Federal Reserve Chairman Ben Bernanke has endorsed major changes to regulations in the financial system.  Bernanke believes that by giving the Fed more responsibility for guarding against financial crises, great power will be given to regulate the activities of key financial players.

In a speech at the Federal Deposit Insurance Corp, Bernanke says "Regulators must consider what can be done to make the U.S. financial system itself more stable without compromising the dynamism and innovation that has been its hallmark,"

Bernanke also partially endorsed a proposal, first made by Treasury Secretary Henry M. Paulson Jr., to give the Fed more explicit power to combat financial crises.  This would allow the Fed to come to the aid of any financial crisis that poses a risk to the system as a whole.

New Rules to Ban Misleading Lending Practices

New rules to ban deceptive lending practices are being vowed by the Fed.  "Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers," Bernanke said at an open Fed board meeting.

Bernanke wants a ban on prepayment penalties on such loans if the monthly payment can rise during the initial four years and non-verification of borrower's income and assets.  The new rules also require lenders to establish an escrow account for property taxes and insurance payments. No more no escrow loans.

Reaction to Bernanke