Bail Outs ******

'Bailouts' Always Spark Controversy
The controversy surrounding the U.S. government’s potential role in "fixing" the current housing crisis makes historians examine Washington’s role in economic crises of the past."In both the United States and Britain, policymakers have long sought to distinguish between the so-called deserving and undeserving," says Harvard University economic historian David A. Moss, author of When All Else Fails: Government as the Ultimate Risk Manager.But in practice, he adds, "it's often difficult to distinguish reliably between the two. By pushing too hard on this distinction, policymakers run the risk of punishing everyone, rather than just the supposed bad apples. As James Madison once observed in another context, 'Some degree of abuse is inseparable from the proper use of every thing.' "

NAR: Existing-Home Sales to Level Off Little change is expected in existing-home sales over the next few months, before improving notably during the second half of the year, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.Lawrence Yun, NAR chief economist, says the market will come into clearer focus this summer. “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he says. “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, slipped 1.9 percent to 84.6, from an upwardly revised reading of 86.2 in January. The index was 21.4 percent lower than the February 2007 index of 107.6. “The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” Yun says.By the RegionHere’s what the index reveals across the nation with existing-home sales:
Northeast: rose 3.2 percent in February to 71.8 but remains 25.4 percent below a year ago.
Midwest: declined 3.7 percent to 82.7 and is 17.4 percent lower than February 2007.
South: fell 5.5 percent in February to 85 and is 30.3 percent below a year ago.
West: dropped 9.8 percent in February to 84.6 and is 17.1 percent below February 2007.Home Sales ForecastExisting-home sales are likely to rise from an annual pace of 4.9 million in the first quarter to 5.9 million in the fourth quarter. With relatively weak activity in the first part of the year, existing-home sales for all of 2008 is forecast at 5.39 million, increasing 6.6 percent to 5.74 million in 2009. “Exceptionally weak home sales related to jumbo loans problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year,” Yun says.The aggregate existing-home price will probably ease by 1.4 percent to a median of $215,800 for all of 2008 before rising 3.7 percent to $223,800 next year. Yun says that there will continue to be wide variations in regional housing market conditions. “Some parts of the country that can expect improvement include the Northeastern region and the oil-patch states of Texas, Oklahoma, Louisiana, and Arkansas,” he says. With lower interest rates and flat home prices in many areas, NAR’s housing affordability index is forecast to rise 14 percentage points to 127 in 2008.New-home sales are projected to fall 25.7 percent to 576,000 in 2008 before rising 4.6 percent to 602,000 next year. Housing starts, including multifamily units, are estimated to drop 26.3 percent to 999,000 this year, and slip another 0.5 percent to 994,000 in 2009. The median new-home price will probably fall 3.6 percent to $238,400 in 2008, and then rise 4 percent next year to $247,800.Other predictions on factors that can impact the housing market:
Mortgage rates: 30-year fixed-rate mortgages, which has fluctuated recently, should average 5.8 percent in the second and third quarters, but trend up to an average of 6.3 percent in 2009.
Growth in the U.S. gross domestic product: expected to be 1.4 percent in 2008 and 2.4 percent next year.
Unemployment rate: forecast to average 5.4 percent this year and 5.6 percent in 2009.
Inflation: (as measured by the Consumer Price Index) is projected at 3.4 percent in 2008 and 2.2 percent next year. Inflation-adjusted disposable personal income is likely to grow 1.2 percent this year and 3.0 percent in 2009.“The economy will not grow in first half of the year,” Yun says. “However, the combination of recent fiscal stimulus enactment and the lagged impact of monetary policy will help jump start the economy in the second half.” —REALTOR® magazine online
For more economic news and research reports, visit NAR's Research division at REALTOR.org.

Home Price Lawsuit...Typical Finger Pointing

Couple Sue Associate Over Home Price
Vernon and Marty Ummel, who purchased a $1.2 million home in Carlsbad, Calif., three years ago, will go before a California Superior Court this week to argue that their real estate practitioner Michael Little of RE/MAX Associates, defrauded them. They say he failed to inform them that similar houses on the same block were selling for more than $100,000 less than the Ummels paid.Court papers indicate that the couple had available to them more than 40 comparable sales and that an appraisal priced the home at $1.2 million. Originally included as defendants in the Ummel suit were John Contento, who handled the appraisal for the loan, and Horizon Pacific Financial, the broker for the Ummels' loan. Earlier this year, Contento and Horizon Pacific Financial settled with the Ummels for $10,000 each. Neither was available to comment.George Lefcoe, a professor of real estate law at the University of Southern California, said he doubted this would be a groundbreaking suit. "The real estate [practitioner] has an obligation in good faith to tell the buyers what he knows about pricing information and that there were houses selling for less than what the buyer was prepared to buy. And the buyers have an obligation to wake up and smell the roses before they buy and get as much information as they can,” he said.Source: The San Diego Union-Tribune, Lori Weisberg (03/31/2008)

Tax Credit, Loan Hikes in Senate Plan

Tax Credit, Loan Hikes in Senate Plan
The Senate late Wednesday night announced that it had reached a bipartisan compromise on a plan to aid families facing foreclosure.The lawmakers have been at a stalemate, unable to reach agreement on key provisions that have already been approved by the House.The Senate didn’t approve a provision that would allow bankruptcy judges to reduce mortgage debt.The compromise includes:Foreclosure aid. A $4 billion package to aid communities hard hit by foreclosures and mortgage delinquencies. Local governments could use the funds to buy and rehabilitate foreclosed homes at a discount.Government-backed mortgages. Increased loan limits for FHA- guaranteed mortgages.Financial counseling. About $100 million in new funding for housing counseling for troubled families.Tax credit. A $7,000 tax credit, over two years, for buyers of foreclosed homes or properties on which foreclosure action has been filed.Business tax relief. Authority for home builders and other firms that are losing money to reclaim taxes paid up to four years ago vs. two years now.The Mortgage Bankers Association applauded the plan, saying it would "keep at-risk borrowers in their homes."Source: USA Today, Sue Kirchhoff and Kevin McCoy (04/03/2008)

Credit Standards Raised

Daily Real Estate News April 2, 2008
Fannie Mae Raises Credit StandardsFannie Mae has tightened standards for the home mortgages it guarantees or buys.The government-sponsored provider of home loan funding told lenders Monday it will require a minimum credit score of 580 for most loans it buys on an individual basis. Credit scores range from 300 to 850. In the past, Fannie had no minimum score.Fannie also told lenders it will increase the period needed for borrowers to re-establish credit history after a foreclosure from four years to five. Fannie said it would allow shorter recovery periods for borrowers with "documented extenuating circumstances" that caused the foreclosure.In a separate memorandum, Fannie, told loan services last week that it could extend forbearance periods on delinquent borrowers to as long as six months to allow borrowers time to find an alternative to foreclosure.