Aaron Cullen - Brokers Inc.

NEW YORK (CNNMoney.com) -- Pressure is mounting on loan servicers and investors to reduce troubled homeowners' loan balances... but the two largest owners of mortgages aren't getting the message.

Fannie Mae and Freddie Mac, which are controlled by the federal government, do not lower the principal on the loans they back, instead opting for interest rate reductions and term extensions when modifying loans.

But their stance is out of synch with the Obama administration, which is seeking to expand the use of principal writedowns. In late March, it announced servicers will be required to consider lowering balances in loan modifications.

And just who would tell Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) to start allowing principal reductions? The Obama administration.

Asked whether they will implement balance reductions, the companies and their regulator declined to comment. The Treasury Department also declined to comment.

What's holding them back is the companies' mandate to conserve their assets and limit their need for taxpayer-funded cash infusions, experts said. If Fannie and Freddie lower homeowners' loan balances, they are locking in losses because they have to write down the value of those mortgages. Essentially, that means using tax dollars to pay people's mortgages.

The housing crisis has already wreaked havoc on the pair's balance sheets. Between them, they have received $127 billion -- and recently requested another $19 billion -- from the Treasury Department since they were placed into conservatorship in September 2008, at the height of the financial crisis.

Housing experts, however, say it's time for Fannie and Freddie to start reducing principal. Treasury and the companies have already set aside $75 billion for foreclosure prevention, which can be spent on interest-rate reductions or principal write downs.

"Treasury has to bite the bullet and get Fannie and Freddie to participate," said Alan White, a law professor at Valparaiso University. "It's all Treasury money one way or the other."

Though servicers are loathe to lower loan balances, a growing chorus of experts and advocates say it's the best way to stem the foreclosure crisis. Homeowners are more likely to walk away if they owe far more than the home is worth, regardless of whether the monthly payment is affordable. Nearly one in four borrowers in the U.S. are currently underwater.

"Principal reduction in the long run will lower the risk of redefault," said Vishwanath Tirupattur, a Morgan Stanley managing director and co-author of the firm's monthly report on the U.S. housing market. "It's the right thing to do."

Meanwhile, a growing number of loans backed by Fannie and Freddie are falling into default. Their delinquency rates are rising even faster than those of subprime mortgages as the weak economy takes its toll on more credit-worthy homeowners. Fannie's default rate jumped to 5.47% at the end of March, up from 3.15% a year earlier, while Freddie's rose to 4.13%, up from 2.41%.

On top of that, the redefault rates on their modified loans are far worse than on those held by banks, according to federal regulators.

Some 59.5% of Fannie's loans and 57.3% of Freddie's loans were in default a year after modification, compared to 40% of bank-portfolio mortgages, according to a joint report from the Office of Thrift Supervision and Office of the Comptroller of the Currency. This is part because banks are reducing the principal on their own loans, experts said.

So, advocates argue, lowering loan balances now can actually save the companies -- and taxpayers -- money later.

"It can be a financial benefit to Fannie Mae and Freddie Mac and the taxpayer," said Edward Pinto, who was chief credit officer for Fannie in the late 1980s.

What might force the companies' hand is another Obama administration foreclosure prevention plan called the Hardest Hit Fund, which has charged 10 states to come up with innovative ways to help the unemployed and underwater.

Four states have proposed using their share of the $2.1 billion fund to pay off up to $50,000 of underwater homeowners' balances, but only if loan servicers and investors -- including Fannie and Freddie -- agree to match the writedowns. State officials are currently in negotiations with the pair.

"We remain optimistic that we can get a commitment from Fannie, Freddie and the banks to contribute to this strategy," said David Westcott, director of homeownership programs for the Florida Housing Finance Corp., which is spearheading the state's proposal. 

NEW YORK (CNNMoney.com) -- It's prime time for house hunters. Nearly anyone with a decent job and a good credit score can afford to buy in their home towns.

More than 72% of American families making the nation's median income of $63,800 a year, could afford to buy a home during the first three months of 2010, according to a report from the National Association of Home Builders (NAHB) and Wells Fargo (WF).

The national median home price for the quarter was $175,000.

"Homeownership continues its more than year-long trend of remaining within reach of more households than it has for almost two decades," said NAHB chairman Bob Jones. "With interest rates still hovering at low levels, companies starting to hire new employees and the economy beginning to rebound, this should encourage more home buyers to enter the market and help further stabilize housing and the economy."

The NAHB judges a home to be affordable if a family making the metro area's median income could devote no more than 28% of their take-home pay toward housing costs.

Many of the old industrial outposts of the Northeast and Midwest are among the most affordable places to live. Indianapolis, where the median home price sold during the first quarter was only $96,000, had led the list of most affordable large cities for five consecutive years. This time it shared the lead with the gritty industrial enclave of Youngstown, Ohio. Nearly 95% of all homes sold in both metro areas were affordable to households earning the local median income.

Dayton, Ohio, Syracuse, N.Y., and Grand Rapids, Mich., finish off the list of the five most affordable major metro areas.

The opposite end of the affordability spectrum is dominated by more glamorous bi-coastal venues, with New York being the least affordable metro area in the nation; fewer than 21% of homes are affordable for median earning households there. San Francisco, Honolulu, Santa Ana and Los Angeles followed Gotham. 

Courtesy of Reuters 5/27/10

U.S. mortgage rates continued their downward trek in the past week, edging closer to a record low set in early December, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.

Lower interest rates on mortgages should buoy home loan refinancing activity, putting more cash into consumers' hands to funnel into the U.S. economy. It also makes homes more affordable during the most important period, the spring selling season.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.78 percent for the week ended May 27, down from the previous week's 4.84 percent, according to the survey.

That is below the year-ago level of 4.91 percent and also the lowest the rate has been since the week ended Dec. 3, 2009 when it hit a record low of 4.71 percent. Freddie Mac started the survey in 1971.

"These low rates will help to elevate home-buyer affordability and soften the effects of the sunset of the home-buyer tax credit," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

Coutesy of The Real Estate Channel

According to the California Association of Realtors (C.A.R.), home sales decreased 8.1 percent in April in California compared with the same period a year ago, while the median price of an existing home rose 21 percent.

Quick Facts:

• Existing, single-family home sales decreased 8.1 percent in April to a seasonally adjusted rate of 483,830 units on an annualized basis compared with April 2009.
• The statewide median price of an existing single-family home increased 21 percent in April to $306,230, compared with April 2009.
• C.A.R.'s Unsold Inventory Index rose to 5.1 months in April compared with five months in April 2009.

"It's likely that the state tax credit that went into effect May 1 created an incentive for many buyers to postpone closing escrow so they could take advantage of both the state and federal tax credits that were available," said C.A.R. President Steve Goddard.  "We should see the pace of closed sales edge up in May and June as these tax-incentivized transactions close.

"Sales dipped below the 500,000-unit level for the first time in 19 months also because of supply issues - the demand for attractive foreclosed properties well exceeds the number of properties on the market," he said.  "At the same time, mortgage interest rates continue to hover near their historic lows, and many buyers are out in force to take advantage of the combination of low interest rates and affordably priced homes. It's an ideal time for many families to purchase their first home even though they may face stiff competition."

Closed escrow sales of existing, single-family detached homes in California totaled 483,830 in April at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local Realtor associations statewide. Statewide home resale activity decreased 8.1 percent from the revised 526,720 sales pace recorded in April 2009. Sales in April 2010 decreased 6.4 percent compared with the previous month.

The statewide sales figure represents what the total number of homes sold during 2010 would be if sales maintained the April pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The median price of an existing, single-family detached home in California during April 2010 was $306,230, a 21 percent increase from the revised $253,110 median for April 2009, C.A.R. reported. The April 2010 median price increased 1.5 percent compared with March's $301,790 median price.

"The strong demand for distressed properties continued unabated last month, and overall, inventory remains constrained in most segments of the market," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  "Listings in April increased compared with a month earlier, typical for this time of year, as more sellers entered the market. At the $300,000 and below price point, the number of homes for sale is at a 3.3-month supply, well below the historical average of seven months."

Highlights of C.A.R.'s resale housing figures for April 2010:

• C.A.R.'s Unsold Inventory Index for existing, single-family detached homes in April 2010 was 5.1 months, compared with five months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
• Thirty-year fixed-mortgage interest rates averaged 5.10 percent during April 2010, compared with 4.81 percent in April 2009, according to Freddie Mac. Adjustable-mortgage interest rates averaged 4.16 percent in April 2010, compared with 4.82 percent in April 2009.
• The median number of days it took to sell a single-family home was 39.4 days in April 2010, compared with 48.1 days (revised) for the same period a year ago.
• Statewide, the 10 cities with the highest median home prices in California during April 2010 were: Manhattan Beach, $1,572,500; Saratoga, $1,440,000; Los Altos, $1,428,750; Mill Valley, $1,200,000; Laguna Beach, $1,162,500; Cupertino, $1,120,000; Newport Beach, $1,037,500; Los Gatos, $1,034,000; Calabasas, $925,000; and Santa Monica, $870,000.
• Statewide, the cities with the greatest median home price increases in April 2010 compared with the same period a year ago were: Richmond, 63.2 percent; Pittsburg, 56.7 percent; Tulare, 37 percent; San Bernardino, 37 percent; Cupertino, 35.7 percent; Monterey Park, 33.9 percent; Tustin, 31.6 percent; Highland, 29.2 percent; Manteca, 28.1 percent; Lancaster, 27.6 percent; and Seaside, 26.9 percent.

Here is the monthly update on mortgage rates in the Western US for February 2010. 

Average Western Rates 02/04/10:  30 Yr. fixed - 5.00%,  15 Yr. fixed - 4.37%,  5 Yr. ARM - 4.29%

Average Western Rates 03/04/10:  30 Yr. fixed - 4.95%,  15 Yr. fixed - 4.29%,  5 Yr. ARM - 4.10%

If you would like to see the weekly compilations for the US and each region individually, visit freddiemac.com.

Need a loan?  Looking to buy a home?  Give me a call or send an email and I'll give you a hand. 

As we near the end of March 2010, spring is in the air, the little-leaguers are in full swing and the home buying & selling season is underway. 

On the horizon: 

•  April 5th - The federal Home Affordable Foreclosure Alternatives (HAFA) program will be launched.
•  April 5th - FHA Loan costs will increase.  Upfront mortgage insurance rising to 2.25% of loan amount.
•  April 30th - The federal $8,000 First-time and $6,500 Repeat Home Buyer tax credits will expire.
•  May 1st - California's new $10,000 Home Buyer state tax credit program will begin.

Locally, March was the 2nd month in a row where the number of closed short sales equaled or exceeded the number of bank owned home sales.  Under the HAFA program, expect this trend to continue and expect the process of banks foreclosing on home owners to slow even more than we have seen in the past year.  Those who have been considering buying a short sale, or selling their home via a short sale, your time has come!

National Real Estate Market Watch

Washington D.C. is making way for short sales (HAFA program)
Private loan modifications out-numbering government loan modifications
Bank of America sued for not modifying mortgages
Bank of America to start reducing mortgage principal

Regional Real Estate Market Watch

Spring weather brings Sacramento house browsers out in force
California legislators vote to extend tax relief for 2009 home short sales
California approves new $10,000 home buyer tax credit: begins May 1st

Folsom Real Estate Market

The average sales price in February was $349,000 and the average dollars per square foot was $181.  There were 42 sales, 10 were bank owned homes, 12 were short sales.  In all, entering March, there are 254 homes for sale, 31 are bank owned homes, 114 are active short sale listings and there is a 6 month supply of home inventory.

El Dorado Hills Real Estate Market

In February the average sales price was $483,000 and the average dollars per square foot was $157.  There were 39 sales, 12 were bank owned homes, 12 were short sales.  At month's end there were 300 homes for sale, 24 were bank owned homes, 136 were active short sale listings and inventory stood at 7.50 months.

Mortgage Watch

30-Year Mortgage Rate Remains Under 5 Percent
More struggling & underwater borrowers to be offered refi's
Shopping for a loan? New laws, effective 1/1/10, protect borrowers: Must Read!
March 2010 Mortgage Rate Watch - Western Region

Short Sales

2010: The year of the short sale
Facing a foreclosure? Consider a short sale

Home Sellers

Government program pays homeowners to sell at a loss
Pay a commission as low as 1% of the sales price when selling your home

Homes Buyers

The federal tax credit for home buyers: Ends April 30^th, FAQ's answered
California approves new $10,000 home buyer tax credit: beginsMay 1st
I will give you up to $2,500 cash back when you buy your next home

Aaron Cullen is a Realtor, Real Estate Broker, and Owner of Brokers Incorporated Residential Real Estate.  Aaron lives in Folsom, CA and specializes in representing home buyers and sellers in Folsom, El Dorado Hills and the Greater Sacramento Region.  Having relocated from the Bay Area in 2004, Aaron continues to work with home buyers in all cities lying between the Bay Area and Sacramento Area.

As Washington D.C. keeps realizing, nothing it does so far seems to really take the big bite out of the mortgage crisis. Negative equity, defaults and unemployment are still with us. 
 
So now the federal government is turning its hopes to short sales. Those are where the lender takes a sales price below what it's owed to avoid foreclosing. It gives the seller a more graceful exit than foreclosure and is proving a sort of back door way of writing down principal. They're already big in Sacramento: nearly one in four January sales were short sales, according to the Sacramento Association of Realtors.

April 5 is the big rollout of the Obama Administration's Home Affordable Foreclosure Alternatives. There are incentives to lenders and borrowers to make more of these happen. Many questions can be answered in the Treasury Department fact sheet link just above.

One of the big obstacles is the holders of second-lien loans. They're balking at having to absorb their loss  and making it harder for the first-lien holder to do the short sale. House Financial Services Committee Chair Barney Frank recently sent a letter to big banks telling them to get out of the way and write off these "seconds"

If you are looking for a good overview of the newest regulatory dance over short sales and second-lien loans? This Wall Street Journal piece explains it well.

Written by Jim Wasserman - SacBee

The home buyer tax credits just keep on rolling!  When the federal $8,000 and $6,500 home buyer tax credits expire on April 30, 2010, California will step in and offer a $10,000 home buyer tax credit of their own.

Sacramento-area buyers can begin claiming $10,000 tax credits starting May 1 under a bill expected to be signed soon by Gov. Arnold Schwarzenegger

The legislation allocates $200 million for more state tax credits - twice what was offered last year to 10,659 buyers of new, unoccupied homes. The state's newest housing stimulus will grant $100 million in tax credits to first-time buyers of existing homes and $100 million to anyone who buys a new, unoccupied home.

The state Franchise Tax Board on Tuesday estimated nearly 32,000 homeowners statewide might get the tax breaks. Buyers must close escrow or reserve a credit on or after May 1 and before or on Dec. 31 to qualify.

The bill, AB 183, passed both houses of the Legislature by near unanimous votes. But one local lawmaker, Assemblyman Roger Niello, R-Fair Oaks, voted against it.

"I think it's a lot of money in a deficit situation that doesn't have the desired benefit," Niello said Tuesday, noting that housing prices are still depressed despite earlier credits designed to stimulate the market.

Niello's view was clearly a minority one, however.

"This tax credit has a proven track record," said Assemblywoman Anna Caballero, D-Salinas, who authored the bill along with Sen. Roy Ashburn, R-Bakersfield. Caballero said California's construction industry reported a 39 percent increase in building permits after the first round of tax credits began in March 2009 and proved more popular than expected. It ran out last July 2.

Schwarzenegger spokesman Mike Naple said Tuesday the governor supports the bill "and is expected to sign it."

The governor signaled his intent Monday while signing two other budget bills. In a signing message, he commended the Legislature for approving the tax credit bill, saying it will stimulate "the housing industry, creating jobs for thousands of Californians."

Schwarzenegger proposed the housing stimulus in his January State of the State Address to help revive the California economy. The new state tax credit would take effect one day after expiration of a federal $8,000 tax credit for first-time homebuyers.

As was the case last year, buyers won't be eligible for the full $10,000 credit if they owe the state less than that amount over a three-year period. Buyers can get up to $3,333 off their tax obligation in each of the three years after buying a house.

Buyers must be at least 18 years old and be unrelated to the seller. They must live in the home they buy. First-time buyers are defined as those who have not owned a home in the past three years.

The Franchise Tax Board estimates the tax credit will cost the state $6 million for the fiscal year ending June 30 and $69 million next year. For three years after that, it will cost the state treasury $67 million, $54 million and $4 million.

This year's legislation is different in that it allows buyers of new homes to reserve a tax credit in advance. A buyer signing a sales contract in June can claim the credit in November when the house is completed, a capital-area building industry official said Tuesday.

"In our parlance, that allows dirt sales," said Dennis Rogers, a vice president at the Roseville-based North State Building Industry Association. "We'll be able to build new houses now and get jobs going."

Written by Jim Wasserman - SacBee

Welcome to 2010 - "The Year of the Short Sale"   For nearly four years, various elements of a perfect storm have been brewing and gaining strength as they have swept across the real estate landscape, leaving the hopes and dreams of home owners in their wake.  Entering the New Year, these forces will continue to swirl and intertwine, while the market players continue to react.  Look to 2010 to be "The Year of the Short Sale."

• Since the market's retreat began in 2005/2006, lenders were in denial as to the depth and severity of the housing crisis.  Foreclosure was used as a threat and a weapon to gain leverage with home owners.  Foreclosures are now being pursued only as a means of last resort, and short sales are being encouraged by the lender(s).
• Lenders in second, third and fourth position used their worthless debt as a way to hold up the short sale by not giving their approval.  If they were not going to get some money out of the deal, they'd rather hurt everyone else and force the home in to foreclosure.  This type of negotiating caused many deals to take months and months to gain approval (I had one take 7 months) before someone caved or the home was foreclosed on.  Bigger lenders are now creating policy which defines what they will pay and accept when considering a short sale.
• Home buyers looking for financing found that half the sources of funds had gone out of business, the underwriting guidelines and requirements for obtaining a mortgage had gone old-school and now they would have to do more than "fog a mirror" to get a loan.  Home buyer qualifications are now better defined and government insured loans and low interest rates have helped bouy the market.
• For home buyers, and their agents, attempting to buy a short sale was not an attractive option.  As the lender(s) dragged their feet, they typically took four-plus months to gain approval and close escrow. As a result, one attempt to buy a short sale was typically enough to deter even the most interested and patient home buyer.  "Hurry up and wait" is still the short sale mantra, but there is hope for the future.
• Many home sellers, not fully understanding their options, sat idly by, waiting for their day of reckoning and for the lender(s) to foreclose and remove them from their homes.  Now agents such as myself are extending a helping hand to distressed home owners and acting as their advocate to make the best of their bad situation.
• More and more home sellers, who were not in a distressed situation, decided to pull their homes from the markets as they were not willing to compete with the foreclosures and short sales and sell their homes at what they perceived to be give-away prices.  Home prices have fallen to a point where home sellers do not casually enter the market and do so only if they HAVE to sell, or have decided to UPSIZE in this down market.

The above elements, and many more, have swirled out of control and have pressured home prices lower and lower for the past four years.  Currently, it is not uncommon for 50% or more of the active listings on the MLS to be short sale listings.  Time will tell, but analysis suggests the percentage of short sale offerings is likely to continue to grow.  Our government is now implementing regulations and attempting to rein in the past challenges by establishing some form of standardization to the process.  In the mean-time, 2010 will become the year of the short sale and all participants in the real estate business, buyers, sellers, agents, lenders and closing servicers will be forced to come together, adapt and participate.  

What is a Short Sale?  A "short sale" is a home sale transaction where a home is sold for less money than what is owed on the mortgage.  When the circumstances are right and your real estate agent possesses the expertise, your home can be sold and the lender(s) will agree to accept less money than you owe. (ie., you paid $550k for your home, you owe $495k and your home is worth $400k). A short sale, when properly handled, will not cost you any money, will relieve you from additional mortgage payments, will settle your debt with the lender(s), will help preserve your credit rating and the forgiven debt will not be taxed by the Internal Revenue Service.

A short sale cannot be performed by all agents and requires specialized knowledge and experience.  In 2009, 100% of my short sale listings closed escrow and spared my clients from a foreclosure.  Short sales can often provide lucrative opportunities for home buyers as well...

Want to learn more?  Read Part #2 of this article, then visit http://www.BrokersCorp.com.

Client Testimonials

Aaron Cullen is a Realtor , Real Estate Broker , and Owner of Brokers Inc. Residential Real Estate.
Aaron lives in Folsom, CA and specializes in representing home buyers and sellers in Folsom,
El Dorado Hills and the Greater Sacramento Region.  Having relocated from the Bay Area in 2004,
Aaron continues to work with home buyers in all cities lying between the Bay Area and Sacramento Area.

U.S. fixed mortgage rates held steady under 5 percent over the past week, Freddie Mac said on Thursday, amid signs that winter storms overcame low borrowing costs to quell housing activity.

The average 30-year mortgage rate was 4.96 percent in the week ended March 18, little changed from 4.95 percent a week earlier and 4.98 percent a year ago, the second-largest U.S. home funding company said.

Lenders charged 0.7 point in fees, on average, the same as the prior week.

The housing market is not without some bright spots, as stabilizing or even rising prices are helping current owners slowly rebuild equity in their houses, Frank Nothaft, Freddie Mac chief economist, said in a statement.

"After losing almost $7.9 trillion in home equity since the end of 2006, homeowners regained almost $1.1 trillion over the past three quarters ending in 2009," he said, citing Federal Reserve figures.

The Fed-the U.S. central bank-this week restated its pledge to keep benchmark interest rates low for an extended period, part of sweeping efforts to restore health to the battered housing market and the economy, which is recovering from the worst recession in decades.

Mortgage rates are seen trending higher once the Fed ends its more than $1.4 trillion in mortgage-related securities purchases at the end of this month.

In its March housing and economic outlook, Freddie Mac forecast a 30-year mortgage rate rise to 5.6 percent in the fourth quarter.

Distributed by Reuters News.