Bend Oregon Real Estate

FHA foreclosure bailout

2008-04-28T13:57:00.000-07:00

Some members in Congress are proposing the Federal Government help out those people who cannot afford their mortgage payments by offering up to $300 billion in loan guarantees from FHA. They want FHA to refinance peoples existing loans (if they qualify) as long as the original lender reduces the principal on the loan to 85% of the current market value. The thought behind this is that the borrowers would get out from unworkable debt and the original lenders would receive more than they would by foreclosing. It would prevent many more foreclosures from flooding our markets.

My opinion is FHA is already stretched to the limit. Unless I am mistaken it is one of the only government programs that is financially self-sufficient since the funds to run the department come from mortgage insurance premiums. If FHA insures these loans they would have the probably a larger portfolio of insured loans that the 5 private MI companies have now. This would transfer the majority of risk billions of dollars for future foreclosure from the banks and private MI companies to the Federal Government (tax payers).

Would this really stop foreclosures or just slow it down? Will it bring the real estate market back to a balanced supply and demand with realistic home values? I believe home prices when adjusted for inflation increased 85% from 1997 to mid-2006. How much did rental prices increase during that period. Will lower prices stimulate demand again? If so with the current mortgage environment who will be able to buy? If the government attempts to put a band-aid on the housing market will it lead to inflation in other parts of the economy reducing the dollar more and driving up prices for everything else we buy?

I think the members in congress is setting us up for future problems and untimely it will be the tax payers that have to foot the bill. I am sorry so many people are loosing their homes and don't mean to sound jaded about hit. We now know that greed was the driving factor in the institutional lending arena. Some of the blame should be directed to the people who bought homes that should not have bought homes. We all know the reasons why so many did. Should the people who decided to wait until they saved some money and worked on improving their credit and decided to rent instead of buy until they were ready have to foot the bill. Should the banks and investment houses get a bail out plan paid by the hard working Americans that did not jump into the frenzy?

Some of the people that will pay for this mess are the future homeowners of America. After the recession of 1982 FHA raised their Upfront Mortgage Insurance Premium to 3.2 percent of the mortgage so FHA could payoff the previous losses they had incurred. The past 10 years as FHA has had to pay off less claims it has dropped to its present level of 1.500%. FHA will probably increase the premium in the future...they have already increased the premium on Condos recently.

Shouldn't we just let the market run its course and correct itself? Real estate runs in cycles and has down years and up years. Buying a home is still an investment and has risk involved. Maybe I should contact Senator Dodd and ask him if I could get some of my money back on the bank stocks I own that are worth less than I paid for them. After all the stock prices are a direct result from the banks making bad loans with my money.

Have a comment?

CNN

2008-03-17T12:45:00.000-07:00

I'm sitting here in my living room watching CNN. They have a young couple on who lost their home and are now living in a trailer park. The wife is comparing her current living conditions to the home she once owned.
The story talked about the equity they once had. It said their home almost doubled from the time they purchased it. He was a casino employee, she an executive assistant. She lost her job and they took out a loan to help cover expenses. Apparently they put their home on the market and received an offer, only to have it fall through. After that they took out another loan. They were foreclosed on and had to move to the trailer park.
The interviewer asked several times if they had read the fine print. They said the person on the phone told them their payments would only go up $100 dollars. They seemed adamant that they were swindled by the lender. Should consumers be liable for their own actions, or should the government bail out all these debts. I still have some questions about this. Did they qualify for the new payment solely on her husbands income? Did they go "stated" and claim they made more money than they did? Is the moral of the story, use a lender you can find if you feel like you were cheated? (no internet loans).

Thank You Lee For This Perspective

2008-03-09T15:23:00.000-07:00

Lee Spangler is the Principal Broker of Area Properties in Astoria Oregon. I found this very thought provoking.

This week I read several articles about scams as a result of the housing crisis. The first concerned itself with people who preyed on distressed homeowners by offering, at a fee, to negotiate with the lender to save the property from foreclosure. In the end, some homeowners either lost the property anyway or were milked for a service which could have been done for free with a simple phone call to the lender. In some cases the scammer actually ended up with the deed.
Likewise I enjoyed an article by Ralph Roberts, a renowned real estate agent and author, who listed a series of new and innovative ways in which sellers were funneling money back to buyers in order put home purchases together without regard to lender disclosure or, in some cases, state regulations. The result was that some people were able to buy homes who otherwise couldn't qualify, but the lender was duped. It is easy to take the high moral ground against such activities in which allegedly innocent parties are duped. Yet, it is worth mentioning, people are continuously taken advantage of legally as well. What is to be said to those people lured by flowery letters offering teaser interest rates on loans, especially on credit cards, and then later shocked when the small print of a subsequent letter revealed that the borrower was now subject to usurious rates? Were these people not also, to some degree, scammed? Of course those with power rationalize that such loan offers are a result of good marketing and included full disclosure. In fact, the product offered even fulfilled a demand in the marketplace. Such actions are viewed as good business, whereas other similar actions outside the legal system are considered sneaky and a scam. These devious ideas can be refined and often become legal once those in power find a way to make a buck on the idea.
It is difficult to sort out the knights from the dragons, the innocent from the guilty, the gullible from the stupid. This economic time is really no different from any other. Perhaps this housing crisis reminds us, in some poignant way, that there have always been those that are fed snake oil and those that feed it. Like the barker at the sideshow says, "Step right up, ladies and gents, see for yourselves." Lee

Realtytimes Article Finds Bend Oregon

2008-03-09T15:13:00.000-07:00

Realty Viewpoint: The Bubble Is In Housing Prognosticators
by Blanche Evans
An index that has been tracking new home sales since 2005 says its historical data dates as far back as 1830. Winans International has patented a combination of housing studies to provide a continuing data set without the scaling and gapping problems found in other studies, it says.

The index found that from its all-time record of 296,000 set in March of 2007, housing prices have declined -16.8% to its current level of 246,300. That's the worst price decline in U.S. new home prices since the 17-month decline of -17.8% from May 1969 to October 1970, says the index.
It could get worse. The worst decline of U.S. new home prices in the last 100 years was the 55% decline from 1929 to 1932 during the Great Depression.
This is just the latest in predictions from housing prognosticators, who are looking backward not forward.
We all know that housing price predictions are about handicapping stocks, so it's no surprise that investors can only get a sniff of what's happening. To get to the meat, they usually have to buy the full report. So the bottom line is, it's about sales and sales improve in a climate of fear.
If you don't want to pay to be scared, you can look at the National Association of Home Builders' useful Housing Information Center. There you can find essentially the same information for free.
The latest NAHB forecast is for housing sales to drop 22 percent in 2008. Housing is in its "deepest, most rapid downswing since the Great Depression," says David Seiders, chief economist for the NAHB. "More and more of the country is now involved in the contraction, where six months ago it was not as widespread."
That sobering tidbit was just verified by the Federal Reserve Beige Book report in which eight of the twelve Fed regional bank districts reported a "weakening in the pace of business activity."
And the other four reported "subdued, slow or modest growth."
The housing sector isn't going to see improvement any time soon. All 12 districts reported overall drops in home prices, suggesting that the mortgage market flu is airborne. The reason is tight credit, where standards are being set making it harder to obtain a mortgage loan. That's causing sales to slow down even in healthy markets.
However, there are reasons to hope things will get better for sellers and buyers. The Beige Book noted that foot traffic is increasing to homes for sale, as buyers sniff around for bargains.
The national malaise has caused some areas to be undervalued, according to a report by National City Corporation and Global Insight. That report found that 88 percent of 330 housing markets surveyed showed price declines but that translates into improved affordability.
The most overvalued city wasn't in California or Florida, for a change. That dubious honor went to Bend, Oregon, where prices were judged to be overvalued by 59 percent. On the other end of the spectrum, homebuyers can find serious bargains in Louisiana and Texas. Dallas, for example, is undervalued by 30 percent.
So you see -- all the prognostication in the world doesn't matter. It boils down to what's happening in the local marketplace.