Please take some time to comment to HUD during the comment period on “Required Use”.  I would also recommend reading this extremely informative blog from Bob Willett of Sacramento, CA: http://sacrelender.com/?cat=41

From National Association of Independent Housing Professionals (NAIHP):

Affiliated Business Arrangements:

“As many of you know, RESPA Reform originally contained a provision prohibiting the “required use” of specific settlement service providers, where discounts and/or incentives were offered. HUD was forced to withdraw that provision last year, after the National Association of Home Builders filed suit in objection.

HUD is again exploring language to clarify “required use” and is asking for your comments.

To be perfectly clear, NAIHP is NOT opposed to Affiliated Business Arrangements. Our concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs.

Please click on the link below and give HUD your comments. If you have personally witnessed harm to consumers, please give them this information. You can upload supporting document attachments.

We support consumer incentives and discounts, PROVIDED consumers are NOT required to use specific mortgage companies, title companies, or any other settlement service providers to obtain them. One stop shops often eliminate competition and provide no benefit to consumers.”

You can comment by clicking here to comment:  CLICK HERE

Here is what I wrote to HUD if you are looking for talking points:

“Required Use” Clarification -

My concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs.  Furthermore, this hinders competition which, in turn, leads to a reduction in consumer choice which ultimately leads to increased costs for the consumer.  One only needs to see the increased costs of appraisals due to the implementation of the Home Valuation Code of Conduct (HVCC) to see how lack of consumer choice increases costs and provides no benefit to the consumer.

In addition, if a home builder has “required use” for a lender that is a bank (IE: Wells Fargo, BofA, etc) then they are under even less scrutiny to provide transparency because the lending institution is not required to disclose the service release premium (SRP) to the consumer.  SRP is exactly the same thing as yield spread premium (YSP) which is credited to the consumer on broker transactions.  This is even more detrimental in providing accurate information and choices to the consumer.

Basically, if “Joe Schmo” seller trying to sell his home in the resale market cannot do it, why should a builder, bank (REO homes) or any other seller be allowed to dictate through “required use” incentives where any buyer receives their services?

This leveling of the playing field needs to happen on the services and lending side in order for consumers to get a truly fair deal from lenders and other service providers.  Providing consumer choice is the only way to truly protect the consumer.

This particular blog post is directed at real estate agents but I’m sure that anyone, including sellers, can see the logic!  And…I think we can all agree that 90% of marketing a piece of real estate in today’s housing market is coming on the market with a good, competitive price.  Therefore is it crucial for real estate agents to have a plan, up front, for making price reductions with their sellers.

With that in mind…

Have a “pricing reduction” system in place and explain it to your sellers up front.  Many sellers want to “test” the market and not start out so low with their home’s price and that’s fine but most likely that is not the price that will get the home sold.  So have a system in place.  IE: If you have 10-15 showings in a 3 month period and no offers, it’s probably over-priced.  Figure out your own system and implement it with your clients.  Be sure to even bring your listing modification form with you on your first appointment letting the seller know, up front, that you expect that there will be a price reduction in this housing market.

Set up clients with  an email search of their neighborhood.  Knowledge is power.  Agents, keep your sellers educated with detailed information from their neighborhood or subdivision.  Sellers will typically be able to understand the realities of their own market.  It’s easy!  Just use MLS!

Show them Internet traffic! If you are not posting your listings online with at least 3 or more real estate search engines like Trulia, Zillow, or Realtor.com then you are missing a large audience of technically savvy buyers.  90 percent of all home searches now begin online.  Provide clients with weekly reports to let them know that their home is being “seen” even when they’re not being seen.  In addition to using property search engines, use social networking sites to your advantage!  Post your listing to Craigslist, Facebook, Twitter, etc.

Keep your sellers motivated by keeping them on the buy side.  Sellers are going to be buyers, most likely, and a smart agent will already have set up an email drip of MLS listings that match the sellers buying criteria for their next home.  When sellers find something they like they can become much more motivated to sell their own home sooner.

Give ‘em what they want! Most clients truly appreciate open houses, they really do.  They will know that you’re working for them that day.  Sellers will be much more willing to adjust their prices when they know you are working hard for them.

Once you had made sure that you are the local real estate expert for the neighborhoods you market in, let the seller ask for the price reduction. Use a “passive aggressive” approach to sales.  Agents, you want your clients asking you to reduce the price.  Act as an adviser.  Provide them the raw data like the MLS neighborhood/subdivision information, the online traffic is good but the showings are low, feedback from those who have seen the home (feedback forms).  Most sellers will see the writing on the wall and realize that a price reduction might be the key to receiving an offer!

One of the best ways to incorporate online marketing into your overall marketing strategy is have a single property website.  Since 90% of new buyers are looking online, they want to see LOTS of information and pictures before stepping foot into a hot car to drive out and see a home.  A smart single property website can automatically feed property info to the major search engines, provide for unlimited media options like being able to show hundreds of pictures, virtual tour, a actual walk through video tour of the home, a panoramic tour and show city demographics & local schools as well as aerial views of the neighborhood.  Buyers want to know these things.  Pictures are worth thousands of words.  Make it easy for potential buyers to have the information all in one place!  This is the kind of stuff that might make price less of a driving factor for buyers.

Drive traffic to your single property website using print ads with the URL and text code or hanging a sign rider with that same info.  Include that URL info in your blogs and on your websites.  When anyone sees a new product on the market (or in this case a home’s website address or URL) they want to learn more about it before they invest any time to go and see it in person.  Give them that information through a dedicated website that only features one property.  Load the website up with as many pictures, videos and documents (positive inspection reports, completed appraisal supporting the homes listing price, etc) and when prospective buyers land on your listing’s website and sees ALL of that info, they are much more likely to find a picture, document or statistic about the home that makes them want to come out and see it.  We live in a Google age.  You can either embrace that and be successful or wither away…trust me on this.  Then you should post the property’s website URL into your Facebook, Twitter, MySpace, any social networking site and get some real traffic into the home!  If you still aren’t seeing offers after doing this much work marketing, then a price reduction is probably in order.

Post your own thoughts about pricing on your own blog or website and share that info.  Sellers will read it and they could easily turn into your clients!

I hope some of these tips work for you as well as they have worked for countless agents I work with that seem to get fantastic results from implementing these concepts.

Want more information about single property websites at no charge?

Check out www.AZRealtorAdvantage.com and watch the video.

Regards,

Spencer Anglin

Watch the presentation at:
www.AZRealtorAdvantage.com

Brought to you by Spencer Anglin, NMLS# 226533
Is YOUR loan originator licensed?
Find out here:  License Lookup
www.SpencerAnglin.com 602-705-6293

If you are looking for an older home and fixing it up, then the 203k might just be the route you are looking for.  The 203k Program is one of the most underutilized programs out there!

Ask your realtor or lender about this program. True, it can be viewed as “more work” for those involved, but if you have looked at 20 homes already and none of them seemed to fit, then exploring the possibilites with the 203k might just do the trick.

How I see it $:  Since so much of what happens in the U.S. is influenced by the rest of the world I thought I’d provide a few headlines from the week. The French Budget Minister said last weekend that maintaining France’s AAA rating is a “tough objective”. Monday the ECB said the potential loan losses for its banks could be as much as $240 billion in the next 18 months. Tuesday the Chinese Central bank said its housing problems are more severe than the U.S. faced before the financial crisis because the housing bubble is combined with “social discontent”. Thursday Hungary warned that its deficit could be higher than the 3.8% of GDP target set by the EU. The government blamed “fiscal skeletons” left by the previous Socialist administration. The deficit could go as high as 7.5%. Today the U.S. jobs report drove markets lower as market volatility continues to worry investors.

In the U.S. the state of New York continues to struggle with its budget as it delayed paying $2.5 billion in bills as a short term way to stay solvent but the state’s budget director warned it could get worse in August and September if things don’t change. If you have any comments or thoughts please e-mail me at burt@gosfm.com. 

Interest Rates

Retail rates remained below 5% for yet another week and it does not look like we will see upward movement any time soon. The bad news is that applications to purchase homes are down sharply even with great rates and beaten down home prices. Makes one wonder what it is going to take to get buyers back in the market.

When	Rate
This Week	4.78%
Month Ago	5.00%
Year Ago	5.29%
2 Years ago	6.09%

 Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

Mortgage Industry

·         Bank of America announced its “Principal Reduction Enhancement” program this week. The plan is an earned principal forgiveness loan for borrowers who are at least 20% underwater. The bank said its plan will be a first step toward reaching the federal loan modification target of housing expense being no more than 31% of income. The stated reason for the program is to combat strategic defaults. A bank executive said “There is a huge incentive for customers to walk away”. Ya think!

·         The Federal Home Loan Board (FHLB) of San Francisco may have losses on its $20 billion MBS portfolio of nearly $5 billion which would wipe out its $1.5 billion in equity. The FHLB system has 12 institutions across the country and if the San Francisco banks equity is wiped out it would only be the second time in the 77 year history of the system that a bank “failed” (Pluris Valuation Advisors/American Banker).

Good News

·         Pending home sales increased 6% in April the third consecutive monthly increase (NAR).

·         Construction spending increased by 2.2% in April from March. This was biggest monthly increase since August 2008 (Commerce Department).

·         U.S. service sector index of 55.4 in May indicated expansion for the fifth consecutive month (ISM).

Statistics of Interest/Concern

·         U.S. manufacturing index slipped to 59.7 in May from 60.4 in April (ISM).

·         Non-farm productivity rose at 2.8% for first quarter 2010 down from the previously announced 3.6% (Labor Department).

·         The U.S. budget deficit for FY 2010 will be 10.6% of our economy the largest since 1945 (White House).

Foreclosure Headlines

·         Fannie Mae delinquency of 90 days or more declined to 5.47% in March from 5.59& in February the first decline since early 2006 (Financial News Network).

·         The average borrower in foreclosure has been delinquent 438 days before eviction is final this is up from 251 days in January 2008 (LPS Applied Analytics).

Jobs Update

·         The May jobs report showed an increase of 431,000 jobs but only 20,000 were in the private sector with most of the jobs created by adding census employees. The jobless rate declined to 9.7% and the under employed rate also declined to 16.6% from 17.1% in April (Labor Department).

·         Initial weekly jobless claims declined by 10,000 to 453,000 (Labor Department).

·         Continuing jobless claims rose 31,000 to 4.67 million (Labor Department).

·         Four week moving average for jobless claims increased slightly to 459,000 (Labor Department).

·         The pace of job losses edged slightly higher in May as employers announced plans to cut 38,810 jobs just slightly higher than April (Challenger, Christmas & Gray).

Key Indicators

Indicator	5/28/10	6/4/10	Change
Dow	10,137	9,931	-206
10 year yield	3.30%	3.20%	-.10%
Crude oil	74.09	71.16	-2.93
Dollar (vs Euro)	1.2268	1.1971	-.02970
Gold	1213.7	1221.5	+7.8

Source: www.cnbc.com/markets/commodities

How I see it $:  The crisis in Europe continues over fears that one or more Euro-zone countries could have to restructure its debt or even default. One country in the spotlight this week is Spain and especially the stability of its banking industry. On Friday Spain’s credit rating was downgraded from AAA to AA+ by Fitch Ratings Service. Meanwhile Italy announced $30 Billion in budget cuts to show investors that Euro nations can trim budget deficits. The reductions included a three year wage freeze for civil servants and a crackdown on tax evasion.

Another related issue is the increasing LIBOR rate. This is the rate that European banks charge each other to borrow money on a short term basis. While the rate itself is very low it has increased for eleven straight days (as of Monday). Given all of the borrowing going on in the Euro Zone if as rates move higher the cost of repayment increases which among other things could cause banks there to tighten lending.

Finally, in honor of all of those who have given so much for our freedom please take a moment to remember them this weekend. Happy Memorial Day!

If you have any comments or thoughts please e-mail me at burt@gosfm.com.  Finally, if you would like to view any of the articles I have written click on the link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.

Interest Rates

Retail mortgage rates remained near the mid 4% range for the week and the average rate for a 30 year fixed rate mortgage of 4.78% (see chart below) approached the record of 4.71% set in early December 2009. In its annual report the Federal Reserve said it will not sell its MBS or mortgage financed agency debt until “the economy is clearly in a substantial recovery”. Some observers had suggested the Fed might start selling these assets sooner but apparently they will wait. What this means is that the concerns back in March that mortgage rates would increase are on the back burner for now.

When	Rate
This Week	4.78%
Month Ago	5.06%
Year Ago	4.91%
2 Years ago	6.08%

 Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

Mortgage Industry

·         In the first quarter of 2010 FHA insured $52.5 Billion in loans compared to the total loans by Fannie Mae and Freddie Mac of $46.5 Billion. When asked about the huge increase in FHA market share the head of the FHA said “This is a market purely on life support, sustained by the government”. FHA market share is typically 4% and before the current crisis had never been above 14%. According to the Mortgage Banker Association 12% of all FHA loans are at least one month behind on their payment (CNBC).

·         FHA loan modification update: FHA did 171 loan mods in April which includes trial and permanent/fully approved modifications. There are about 6 million FHA borrowers and one million of them are delinquent (HUD Neighborhood Watch).

·         A possible partial solution to Fannie Mae and Freddie Mac could be the covered bond. This is a debt security that is backed by the cash flow of a loan such as a mortgage. The loan is covered (secured) by a pool of assets that investors can claim rights to if the issuer (or originator like a bank) becomes insolvent. While not common in this country they are very common in Europe. For example, Bank of America and Chase have issues them and companies like Blackrock and Pimco have invested in them. Currently the Covered Bond Act is being discussed in Congress and may become part of the financial reform package soon to be passed into law (CNBC).

·         In 2009 Arizona Mortgage Fraud Index (MFI) was 158 placing it fourth in the country for mortgage fraud with Florida number one at 292. Nationwide the MFI increased by 7% in 2009 from 2008 (Mortgage Asset Research Institute).

Good News

·         Existing home sales increased 7.6% in April and the median home price increased 4% to 173,100 (NAR).

·         New home sales increased 14.8% in April to the highest level since May 2008 (Commerce Department).

·         Consumer confidence increased to 63.3 in May from 57.7 in April the April number was the highest since March 2008 (Conference Board).

·         U.S. consumer spending was flat in April but for the first quarter 2010 was up 3.5% twice fourth quarter 2009 number. Consumer spending is about two thirds of GDP (Commerce Department).

·         A key index of current business conditions in New York for May was 89.9 up from 62.2 in April. This was the fifth highest number since the index was created in 1993 (ISM).

Statistics of Interest/Concern

·         First quarter GDP was 3.0% compared to the 3.2% initial reading reported last month. State and local governments reduced spending at the steepest rate since 1981 (Commerce Department).

·         The U.S. economy is forecast to grow at 3.2% this year and next (NABE).

·         Home prices fell in March by .5% from February but have increased 3% since April 2009. In the first quarter 2010 prices declined by 3.2% compared to fourth quarter 2009 but are up 2% year over year (S&P Case-Shiller).

·         Durable goods orders decreased by 1% in April after increasing 4.8% in March (Commerce Department).

Foreclosure Headlines

·         Bank of America has implemented a new automated system for handling short sale applications which has reduced the average number of days to approve a short sale from 90 to 50. The bank approved 18,000 short sale applications in April but received more than 50,000 (AZ Central).

·         Lenders nationwide have repossessed 350,376 homes thru April 30, 2010 (RealtyTrac).

Jobs Update

·         Initial weekly initial jobless claims declined 14,000 to 455,000 (Labor Department).

·         Four week moving average for weekly jobless claims was up slightly to 465,500 (Labor Department).

·         Continuing jobless claims were down 49,000 to 4.61 million (Labor Department).

Key Indicators

Indicator	5/21/10	5/28/10	Change
Dow	10,193	10,137	-56
10 year yield	3.23%	3.30%	-.07%
Crude oil	70.24	74.09	+3.85
Dollar (vs Euro)	1.2579	1.2268	-.0101
Gold	1176.9	1213.7	+36.8

Source: www.cnbc.com/markets/commodities

How I see it $:  I don’t want to sound like an alarmist but what is happening in Europe scares the heck out of me. While there was some short term relief after the IMF and EU committed to a bailout package the enormous European debt load has been increased. Earlier this week the Euro against the dollar sank to a level not seen since before Lehman Bros. collapsed and it is quite evident that the bailout package did not relieve investor concerns. The head of the ECB (similar to Ben Bernanke as head of our Federal Reserve) has warned Europe is facing “severe tensions” and markets are fragile. Those sentiments played out this week as markets in Europe and the U.S. saw sharp declines over concerns about the EU and economy in general albeit with some improvement Friday. Finally, the German parliament approved its portion of the EU/Greek bailout package on Friday.

In a related story the IBD (International Institute for Business Development) reported that government debt will be a major problem for Japan until 2084 and Italy until 2060. It went on to say that the U.S. debt as percentage of GDP will be 60% by 2033 assuming we are deficit free by 2015. The IBD report also said that Germany, Great Britain and France would be at the U.S. level by 2028, 2028 and 2029 respectively. If you have any comments or thoughts please e-mail me at burt@gosfm.com.  Finally, if you would like to view any of the articles I have written click on the link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.

Interest Rates

The average 30 year fixed rate for a conforming loan was 4.75% at mid week based on a survey of a dozen wholesale lenders in the valley. By the end of the week rates had moved down to around 4.5%. Note that the 10 year Treasury yield declined by almost one quarter point this week which pushed mortgages rates down. For now all of the uncertainty in the world is really helping mortgage rates.

When	Rate
This Week	4.84%
Month Ago	5.07%
Year Ago	4.82%
2 Years ago	5.98%

 Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

Mortgage Industry

·         The Treasury Department released its April HAMP (loan modification) report this week. For the month of April 68,000 homeowners were converted to a permanent loan mod bringing the program total to 295,348. This brings the total permanent modifications to 24.6% of the eligible borrowers up from 19.8% in March. Still there were 122,000 trial modifications cancelled in April bring the program total of cancellations to 277,640. Note that there are two new initiatives coming later this year. One encourages servicers to reduce loan balances to 115% of the home’s value and the other will allow qualified borrowers who are current on their mortgage to refinance to 97.75% of the home’s value with a new FHA loan.

Good News

·         Housing starts were up 5.8% in April to the highest level in 18 months (Commerce Department).

·         CPI (aka core inflation rate) was down .1% in April the first monthly decline in a year. Also, compared to April last year core inflation rose only .9% the smallest year over increase since January 1966.

·         U.S. homebuilder confidence in May increased to 22 the highest level since August 2007 (NAHB/Wells Fargo Housing Market Index).

·         The Producer Price Index (PPI) declined by .1% in April after an increase of .7% in March (Labor Department).

·         Bank of America said that its delinquency on credit cards fell in April to the lowest level since November 2008 to 6.73%. Other large credit card issuers saw their rates decline as well (Bloomberg).

Statistics of Interest/Concern

·         The delinquency on U.S. Commercial Mortgage Backed Securities (CMBS) increased to 7.02% in April and was the second biggest increase on record (Moody’s Investor Services-DQT).  The value of CMBS loans in need of special servicing increased to $81.7 Billion in first quarter 2010 a new record from $74 Billion in fourth quarter 2009 (Fitch Ratings).

·         Housing permits for April were down 11.5% from March (Commerce Department).

·         The leading economic indicators index was down .1% in April the first decline since March 2009 (Conference Board).

·         Problem banks in the U.S. increased by 10% in the first quarter of 2010 over fourth quarter 2009 and the number of banks insured fell below 8,000 for the first time in 76 years (FDIC).

·         The Empire State Index fell from 31.86 in April to 19.1 in May. However, employment grew for the fifth consecutive month to the highest level since 2004 (NY Federal Reserve).

·         Household debt was 69% of GDP in 1998 but had increased to 97% of GDP by the end of 2009 (Commerce Department/Federal Reserve).

Foreclosure Headlines

·         There are 2.5 million homes in foreclosure today and the number of homes at least one month behind is 5.4 million. Half of the 5.4 million are 90 days behind that is on the verge of foreclosure (Capital Economics). 

·         Loans in foreclosure or at least 30 days delinquent declined to 14.01% in the first quarter of 2010 compared to 15.02% in fourth quarter 2009. Homes in foreclosure in the first quarter were a record 4.63% up from 3.85% a year earlier.

Jobs Update

·         Initial weekly jobless claims increased 25,000 to 471,000 (Labor Department).

·         The four week moving average for weekly jobless claims increased by 3,000 to 453,500 (Labor Department).

·         Continuing jobless claims fell 40,000 to 4.63 million (Labor Department).

·         In April 34 states had a decrease in their unemployment rates a modest improvement from March. Nevada saw its rate hit an all-time high at 13.7%. Michigan had the highest rate at 14.0% down slightly from March (Labor Department).

Key Indicators

Indicator	5/14/10	5/21/10	Change
Dow	10,620	10,193	-427
10 year yield	3.46%	3.23%	.23%
Crude oil	71.90	70.24	-1.66
Dollar (vs Euro)	1.2361	1.2579	+.0218
Gold	1232.3	1176.9	-55.4

Source: www.cnbc.com/markets/commodities

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How I see it $:  This week there were several important events that impact all of us and I feel like some extended commentary is appropriate. To see how dramatic the week was you may want to check out Key Indicators below.

 With all the talk about sovereign debt you may want to check out Statistics of Interest/Concern below. The tease is that as a percentage of GDP (the total of ALL the goods and services an economy produces) the U.S. is at only 96.5%. Can you guess which nation has the highest? Well, the U.K. is second at 425.9% and Ireland is first with a staggering 1312% of debt to GDP! This enormous debt caused at least in part a massive sell off on Wall Street Thursday where the Dow recorded the biggest intra-day decline in history of almost 1,000 points! Today it looks like the balance of the loss was due to some sort of “electronic trading” glitch.

Can the Greek or any nation’s debt crisis be solved with more debt? Are we witnessing the collapse of the “Socialized Democracy” form of government? The Greek bailout plan was agreed to last weekend by the EU and IMF but by Tuesday markets became concerned that fixing a debt crisis with more debt might not be a great idea. Thursday as the Greek Parliament officially approved the bailout plan the Geeks, I mean Greeks, took to the streets in protest. Of course, they did not appear to offer any solutions to the crisis which surprised no one. This is what happens when too many people are relying on the government for their pay, holidays, health care, etc and there is an economic decline. Pay attention to what the German Bundesrat (upper house) does late Friday and over the weekend. Hopefully they will approve their portion of the Greek bailout package. If not, Monday will be a wild day! All of this Greece business brings to mind my concerns about some of the policy decisions coming out of D.C. Lastly, some of our biggest banks have major European loan exposure.

As most of you know state budgets are taking some big hits and in FY 2011 and 2012 none will be bigger than the loss of “Stimulus” funding. As of mid April states had received about $109 Billion since the American Recovery & Investment Act of 2009 was passed in February according to the GAO. These funds helped state’s bridge the 30-40% budget shortfall they were facing due to declining tax receipts over the last two years. In the 2011 FY only about 20% of the gap will be filled and by FY 2012 there will be almost no funding. The impact of this loss of funding includes reduction in Medicaid funding, employee layoffs and possibly more. In addition, school districts alone are estimating a loss of 275,000 jobs wiping out the estimated 300,000 jobs saved by the stimulus money. My question is was the stimulus money spent wisely or could it have been put to better use? It would appear the data leads to the obvious answer.

If you have any comments or thoughts please e-mail me at burt@gosfm.com.  Finally, if you would like to view any of the articles I have written click on the link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.

Interest Rates

With all of the volatility in the market this week there was the anticipated “flight to safety” which drove 10 year yields down and long term mortgage rates as well. The week ended with retail rates just below 5%. Some believe the Fed will soon start unloading some of the $1.25 Trillion in MBS they hold which will move rates higher. The question continues to be timing.

When	Rate
This Week	5.00%
Month Ago	5.21%
Year Ago	4.84%
2 Years ago	6.05%

 Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

Mortgage Industry

·         Five percent down conventional loans are now available in Arizona but the minimum credit score is 720 and other strict qualifying criteria apply. Note that lenders may also have price adjustments for this loan product (MGIC/Radian).

·         Fannie Mae has announced tighter requirements for interest only loans. The new requirements are effective august 31, 2010 and include a minimum 30% down, minimum 720 credit score and 24 months reserves (CNN).

·         Government related entities backed 96.5% of all loans in the first quarter of 2010 and 90% of all loans in 2010 (Inside Mortgage Finance).

·         Freddie Mac asked Congress for $10.6 billion after reporting its third consecutive quarterly loss of $6.7 billion for the first quarter 2010. In January the Congressional Budget Office (CBO) estimated that Freddie Mac and Fannie Mae could need up to $319 billion by 2019 (Newsweek).

·         Countrywide has agreed to pay $624 Million to settle a lawsuit accusing it of misleading investors about its lending practices. A judge in Los Angeles has to approve the settlement.

Good News

·         Consumer spending rose .6% in March the biggest monthly increase in five months (Commerce Department).

·         Pending home sales rose 5.3% in March which was higher than forecast and follows an 8.3% increase in February (NAR).

·         Manufacturing index rose to 60.4 in April up from 59.6 in March (ISM).

·         New factory orders increased 1.3% in March following an upwardly revised 1.3% in February (Commerce Department).

·         Non manufacturing index (Service sector) for April was unchanged from March at 55.4 (ISM).

Statistics of Interest/Concern

·         Sovereign debt as percent of GDP looks like this: U.S. 96.5%, Australia 124.3%, Greece 170.5%, Germany 182.5%, Spain 186.1%, France 248%, The U.K. 425.9% and number one is Ireland at 1312% (CNBC)!

·         Non-farm production rose 3.6% in the first quarter of 2010 this following a brisk 6.3% increase in the fourth quarter 2009 (Labor Department).

·         Mortgage delinquency declined for the second month in a row in March but excluding foreclosures delinquency was up 15.7% from the previous March while foreclosures were up 32.9% for the same period.

Foreclosure Headlines

·         The housing market is set for a modest rebound in the next two years depending on where you live according to a new report from PMI Group. The complete report can be viewed at http://www.pmi-us.com/PDF/q2_10_pmi_eret.html.

·         Strategic defaults accounted for 31% of foreclosures in the first quarter of 2010 which is much higher than the Goldman Sachs number of 12% in February (Chicago Booth/Kellog School Financial Trust Index).

·         The average time from date of last mortgage payment until foreclosure and owner vacates the property is 14 months (Financial Times/Lender Processing services).

Jobs Update

·         The April job’s report showed the fastest rate of job additions in four years at 290,000 and both February and March data were revised upward by 120,000. However, the unemployment rate increased from 9.7% to 9.9%.

·         Initial weekly jobless claims were down 7,000 to 444,000 (Labor Department).

·         The four week moving average for weekly jobless claims was 458,500 down 4750 (Labor Department).

·         Continuing jobless claims were down 59,000 to 4.59 million. Those getting extended benefit increased 153,000 to 5.56 million (Labor Department).

·         Planned job cuts fell to 38,326 in April down 43% from March (Challenger, Gray & Christmas).

Key Indicators

Indicator	4/30/10	5/7/10	Change
Dow	11,009	10,378	-631
10 year yield	3.66%	3.43%	-.23%
Crude oil	86.18	75.28	-10.90
Dollar (vs Euro)	1.3296	1.2731	-.0565
Gold	1179.4	1208.4	+29.0

Source: www.cnbc.com/markets/commodities

How I see it $:  Another more contemporary Greek tragedy has played out this week and with any luck may be resolved by Monday. Early in the week the Greek financial rating was downgraded to below investment grade. The downgrade set off a series of events that will lead to severe austerity measures for Greek unions and the people at large. A bailout package of about $130 billion has been proposed which will keep Greece from defaulting on its debt. While this move will “save” Greece the unions are not too happy and promise to fight pay reductions and other elements being proposed. Further, in a Greek poll taken late this week two thirds of those responding said it was likely there would be civil unrest. You may want to keep an eye on further developments in Greece. Finally, how about those wacky guys from Goldman Sachs in their appearance before our beloved elected officials? While I cannot place all of the blame for our recent financial crisis entirely on them they certainly played a role and for them too not acknowledge it is amazing. Wonder if their tune will change when they get in front of a court and respond to the SEC charges? If you have any comments or thoughts please e-mail me at burt@gosfm.com.  Finally, if you would like to view any of the articles I have written please go to http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.

Interest Rates

A month after the Fed stops buying MBS most observers expected rates to show some signs of moving up. Guess what? So far there has been little impact on rates as they have continued around the 5.00% range. How long this will last is anyone’s guess.

When	Rate
This Week	5.06
Month Ago	5.08
Year Ago	4.78
2 Years ago	6.06

 Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

Mortgage Industry

·         Fannie Mae announced Tuesday the extension of its incentive program to purchase its existing inventory through the Home Path program. The program will now expire on June 30, 2010. See http://www.homepath.com for program details.

·         FHA loans that are 90 days or more delinquent dropped to 8.8% in March down from 9.2% in February. FHA now holds over six million mortgages with loan balances exceeding $800 Billion (FHA).

·         If you have a 30 day late on your credit report your score can go down between 10 and 110 points, a 90 day late 70 to 135, a foreclosure, short sale or deed-in-lieu 130-240 and bankruptcy 130-240. These are of course educated guesses and each consumer’s situation may cause the reduction in score to be different (TBWS).

·         An Arizona law professor argues that in Arizona (like most non-recourse states) lenders are charging all Arizona borrowers an additional $800 per $100,000 borrowed for the option to default on a purchase money loan without any recourse. There is no discussion on how the $800 was determined (Brent T. White, Law Professor, University of Arizona published in Arizona Republic on April 25, 2010).

Good News

·         First quarter 2010 GDP grew at 3.2% less than fourth quarter 2009 which was 5.6% forecast was for 3.4% increase but still a solid number (Commerce Department).

·         Consumer spending which accounts for about 70% of GDP grew 3.6% in the first quarter of 2010 compared to 1.6% in fourth quarter 2009 (Commerce Department).

·         Consumer confidence increased in April to 57.9 up from 52.3 in March the highest level since September 2008 when Lehman Brothers collapsed (Conference Board).

·         Home prices increased by .3% in February from the same month in 2009 the first increase in more than three years. However, it is expected that for February 2010 thru February 2011prices will decline by 3.4% (First American CoreLogic).

Statistics of Interest/Concern

·         Consumer sentiment fell to 72.2 in April from 73.6 in March (Reuters Thomson/University of Michigan).

·         U.S. home prices fell in February by .9% from previous month BUT were up year over year by .6% the first increase in more than three years (S& P Case-Shiller).

·         Phoenix had the seventh most foreclosures in the first quarter of 2010 with one for every 38 homes. Las Vegas was first at one out of 28 homes (Realty Trac).

Foreclosure Headlines

·         The Las Vegas metro area has the worst foreclosure rate in the nation at one in 28 homes while Phoenix metro is seventh at one in 38 (Realty Trac).

·         Strategic defaults on home loans were at 12% in February up from an estimated 4% in mid 2007. The Treasury Department is expected to announce changes to HAMP (Loan mod program) by September to help homeowners who owe more than 115% of the home’s value reduce principal (Bloomberg).

·         There could be another 1.6 million distressed sales in 2010 or about 30% of total sales and the same numbers are expected for 2011. The shadow inventory (homes at 90 days or more delinquent) is estimated at 4.6 million homes some of which will modify or work out the loan with their lender and some will be strategic defaults (Barclays Bank).

·         Apparently the State of Arizona has decided how it is going to spend the $125 million from Washington. $90 million will be used to reduce loan balances on 3,000 “deeply underwater” mortgage’s, $12 million will subsidize unemployed borrowers mortgages, $7.5 million will buyout second mortgages and $10 million will be for counseling (WSJ). Some of you math wizards out there may have noticed the total is not $125 but $119.5 million. More government accounting?

Jobs Update

·         Initial weekly jobless claims were down 11,000 to 456,000 (Department of Labor).

·         Four week moving average for weekly jobless claims increased 1500 to 462,500 (Department of Labor).

·         Continuing jobless claims declined 18,000 to 4.65 million (Department of Labor).

·         Since December 2007 Congress has extended the length of unemployment benefits three times. Apparently neither party has any interest in extending them further thus the maximum length to receive benefits will remain at 99 weeks. In the coming months about one million people will see their benefits end. This fiscal year we will spend $200 Billion for unemployment benefits or about six times what it was before the recession began (Bloomberg).

·         44% of jobless people have been unemployed at least six months or more (Bureau of Labor statistics).

·         At least 3.4 million people have been out of work at least one year (Pew Fiscal Analysis Initiative).

Key Indicators

Indicator	4/23/10	4/30/10	Change
Dow	11,204	11,009	-195
10 year yield	3.82%	3.66%	-.16%
Crude oil	85.11	86.18	+1.07
Dollar (vs Euro)	1.3369	1.3296	-.0073
Gold	1156.0	1179.4	+23.4

Source: www.cnbc.com/markets/commodities