Fannie and Freddie Ask for $45 Billion

Fannie Mae and Freddie Mac are expected to ask the Federal government for at least $45 billion in the next few weeks so they can continue to operate despite increasing losses.

Rising delinquencies and falling values of bonds cause the need for the cash infusion.

Freddie Mac is likely to be the hardest hit. It said late last week that it would probably have to seek $35 billion in capital from the Treasury.

Fannie Mae will probably need $10 billion, although it has been reported that it will ask for as much as $16 billion.

The losses underscore the need to break the downward spiral in the housing market, economists say.

Source: Reuters News, Al Yoon (01/26/09)

Mortgage Rates Remain Below 5%

The weekly average rate borrowers were quoted on Zillow for 30-year mortgages rose slightly last week to 4.96 percent, up from 4.92 percent the week prior, according to the Zillow Mortgage Rate Monitor.

Meanwhile, rates for 15-year fixed mortgages increased to 4.72 percent, up from 4.58 percent and 5-1 adjustable rate mortgages decreased to 5.22 percent from 5.35 percent.

Rates for 30-year fixed mortgages rose slightly on Monday evening, with the average rate on Zillow Mortgage Marketplace at 5.01 percent.
At a state level, the 30-year fixed rate in Michigan was the only rate decrease recorded, dropping from 5.05 percent to 5 percent. Rates on 30-year fixed mortgages were lowest in the states of Oregon (4.87 percent) and Florida (4.88 percent), while Colorado (5.06 percent) and Tennessee (5.06 percent) had the highest rates.

The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates quoted on Zillow Mortgage Marketplace by mortgage lenders to borrowers who have submitted loan requests. Zillow Mortgage Marketplace is a lending marketplace where borrowers can anonymously receive mortgage quotes directly from lenders.

Source: Zillow.com

Tax Credit Changes Could Unleash Home Sales

If all home buyers become eligible for a tax credit without a repayment feature, it could result in an additional 555,000 home sales, enough to meaningfully draw down excess housing inventory, the NATIONAL ASSOCIATION OF REALTORS® says.

An evaluation of options for a home buyer tax credit by NAR shows wide ranging implications and benefits. A full credit to all buyers means an additional 2.22 million households would meet the income requirements for purchasing a home, but only one in four of those households would actually make a purchase.

Under the current $7,500 first-time home buyer tax credit, which must be repaid over 15 years, 264,000 households meet the purchase requirements. Using the same assumptions, with plans to hold their home for a median 10 years, it would mean only 66,000 additional sales.

Lawrence Yun, NAR chief economist, said NAR is advocating a tax credit for any home purchase meeting qualifying underwriting standards. “A home buyer incentive is critical to help reduce housing inventory and stabilize home prices,” he said. “The bigger the incentive, the faster housing can help pull the economy out of recession. The cost to the Treasury would be far less than the additional costs of a prolonged recession with insufficient housing stimulus.”
Analysis of other options shows that if only first-time buyers are eligible and the repayment feature is dropped, it could mean an additional 202,000 home sales. If extended to all home buyers but the repayment feature is retained, the gain would be 181,000 home sales.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said a flexible approach to the tax credit would have added benefits. “A home buyer tax credit also should be allowed to be used as a part of downpayment. This would instantly add an equity cushion for homeowners – a vested financial interest provides the foundation for sustainable homeownership, which helps improve economic stability,” he said.

NAR estimates only 25 percent of newly eligible households would become homeowners, and does not capture the effect of increased trade-up buying activity. As such, these projections may understate the full impact of a home buyer tax credit.

Source: NAR

Mortgage Applications Climb as Rates Fall

Mortgage loan applications bounced back last week as rates fell and end-of-the-year holiday hoopla faded.

The Mortgage Bankers Association weekly index of application volume rose to 1,324.8, an increase of 15.8 percent on a seasonally adjusted basis from 1,143.8 the previous week.

On an unadjusted basis, the index rose 95.7 percent compared to the previous week and was up 52.4 percent compared with the same week a year ago.
Refinances continued to dominate the applications with 85.3 percent of the loans being refinances, up from 79.8 percent the previous week.

Lenders have nearly stopped offering adjustable rate mortgages with the ARM share representing 1.1 percent compared to 0.9 percent the previous week.
Interest rates continued to decrease:

• 30-year fixed-rate mortgages decreased to 4.89 percent from 5.07 percent;
• 15-year fixed-rate mortgages decreased to 4.63 percent from 4.67 percent;
• 1-year ARMs decreased to 5.89 percent from 5.90 percent.

Source: Mortgage Bankers Association (01/14/09)

NAR Reiterates Plan to Jumpstart Housing Market

To move the country out of this economic crisis, Congress and the next administration must place significant emphasis on restoring confidence in the housing market, Charles McMillan, the National Association of Realtors® president, testified to the House Financial Services Committee Tuesday.

“The housing sector is at the core of the current economic crisis,” McMillan says. “A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth.”

McMillan said he was glad to see that Chairman Barney Frank, D-Mass., introduced last week H.R. 384, the TARP Reform and Accountability Act. Many points in this bill reinforce NAR’s proposed recovery plan to stimulate housing investment, mitigate foreclosures, help current home owners, and provide needed liquidity to commercial mortgage markets to ensure that financing is available.

The principle focus of NAR’s plan is to ensure that the Troubled Asset Relief Program does what it was originally intended to do—end the credit crisis and jumpstart mortgage lending.

“It is imperative to get TARP back on track by targeting funds for mortgage relief, which will help lower mortgage rates and reduce foreclosures,” McMillan said. “In addition, eliminating the repayment feature of the first-time home buyer tax credit and expanding it to all home buyers; reinstating the higher mortgage loan limits for FHA, Fannie Mae and Freddie Mac; and lowering mortgage interest rates through a buy-down program will meaningfully impact the housing industry.”

NAR’s plan also includes keeping mortgage interest rates low, boosting home buyer confidence, and reducing the current foreclosure rate. NAR has also asked that regulators be encouraged to help financial institutions resolve problems in the short-sale process, make it easier for servicers to modify existing loans, remove unreasonable underwriting guidelines and insist that credit reporting agencies correct errors promptly.

“Low interest rates are only effective if people can get a loan,” McMill said. “We hear every day from our members that even home buyers with good credit are having trouble getting mortgage loans. We must all work together to unclog the housing and financial system.”
NAR called on Congress to use current TARP dollars to not only reduce interest rates, but also fix operational issues that are preventing consumers from getting or modifying home loans.

“These are critical steps that must be undertaken quickly if we are to right our nation’s housing and financial markets,” McMillan said.

NAR hailed the House of Representatives’ actions and called on the Senate to move quickly in adopting its proposal. NAR also expressed hope that the new administration will focus on a housing recovery as it moves forward with a larger stimulus package.

Source: NAR

Study Predicts Riskiest Markets for Price Drops

Home prices are likely to fall still more, according to a new study by mortgage insurer PMI Group Inc.

The study predicts that home prices will be lower than they are now in 97 percent of 381 metro areas by the third quarter of 2010.

The riskiest markets for falling home prices are California’s Inland Empire; the greater Miami, Fla., area; Lake Havasu City-Kingman, Ariz.; and the Cape Coral-Fort Myers, Fla., areas.

The cities with the lowest risk of further declines include the Dallas-Fort Worth area, greater Houston and Pittsburgh.

Home prices showed signs of recovery in the third quarter of 2008, but with rising unemployment rates, home prices fell further in the fourth quarter, says PMI chief economist David Berson.

Source: The Wall Street Journal, Ruth Simon (01/13/09)

Fed Official: Housing is Key to End Recession

While the current recession will be longer and more severe than predicted, housing will help lead the country out of the downturn, Boston Federal Reserve Bank President Eric Rosengren told the Massachusetts Mortgage Bankers Association at its annual meeting.

Rosengren said the housing market could stabilize this year, which he sees as a prerequisite for recovery.

“The recent reductions in mortgage rates, in part due to monetary policy actions, have enabled more borrowers than would otherwise have done so to purchase or refinance homes,” Rosengren said.

“Expansion of this effort and encouraging greater [Fannie Mae and Freddie Mac] participation, should encourage borrowers who have equity and reasonable credit scores to purchase or refinance homes,” he added.

Once the market stabilizes, mortgage securitization should be restructured to prevent future upheavals, Rosengren said.

Source: Reuters News, Kristina Cooke (01/08/09)

Shop Carefully for Home Warranties

Home warranties can reassure nervous buyers and help a real estate practitioner seal the deal, but if ultimately the buyer feels cheated by the insurer, the policy could be more trouble than it is worth.

The key to consumer satisfaction is picking a reputable insurer and reading the fine print.

“Any industry that deals with the public is going to have complaints,” says Art Chartrand, a lawyer for the trade organization, National Home Service Contract Association. “It’s important for people to understand these are limited benefit contracts.”

Home owners who are about to purchase a home warranty contract should consider these issues, says Georgia Insurance commissioner John Oxendine.

• Get an opinion from the state insurance commission. While most state insurance commissions don’t police these kinds of policies, they are usually aware of companies that have a poor reputation.

• Read the contract carefully before signing. If the company won’t give the customer a contract in advance, don’t buy.

• Pre-existing conditions. If the system or appliance wasn’t working when the policy was purchased, the insurer won’t cover it.

• Is there proof that required maintenance was done? Most insurers have clauses in their contracts that require specific routine maintenance for the systems or appliances to be covered.

• Who will do the work? Find out how many approved contractors there are and where they are located.

• Ask about service fees. Fees to determine the extent of the problem and whether it is covered can be high and buyers should know that in advance.

Source: The Atlanta Journal-Constitution, Alison Young (01/11/09)

9 Architecture Projects That Stand Out

The American Institute of Architects has selected nine projects for the 2009 AIA Institute Honor Awards for Architecture.

The types of projects range from cathedrals to trend-setting residential projects, but all of them have a tremendous impact on the social and physical fabric of the communities they serve, AIA says.

Here’s a list of the 2009 winners:

Project: Basilica of the Assumption, Baltimore
Architecture Firm: John G. Waite Associates, Architects PLLC
Details: Restoration of the Basilica of the Assumption (also known as the Baltimore Cathedral), a major architectural landmark and masterpiece of the Federal style, removes a century and a half of obscuring alterations to bring back Benjamin Henry Latrobe’s concept of luminosity and spatial configuration. The now fully functioning cathedral again serves the people of Baltimore while reclaiming one of America’s most brilliant architectural designs, by its first professional architect; one that greatly influenced the development of the country’s architecture.

Project: Cathedral of Christ the Light, Oakland, Calif.
Architecture Firm: Skidmore, Owings & Merrill LLP
Details: The Cathedral of Christ the Light resonates as a place of worship and conveys an inclusive statement of welcome and openness as the community’s symbolic soul. The glass, wood, and concrete structure ennobles and inspires through the use of light, material, and form.

Project: Charles Hostler Student Center, Beirut, Lebanon
Architecture Firm: VJAA
Details: The Hostler Center integrates social gathering spaces for students and faculty with sports facilities, a theater, and underground parking. Challenging the idea of a single large-scale building and similarly scaled open plaza, the project instead proposes multiple building volumes interconnected into a continuous field of habitable space by its gardens and green roofs.

Project: The Gary Comer Youth Center, Chicago
Architecture Firm: John Ronan Architects
Details: This 74,000-square-foot youth center, located in one of Chicago’s poorest neighborhoods, demonstrates a commitment to social progress in providing a constructive environment for area youths to spend their after-school hours. The center provides support for the programs of a 300-member drill team/performance group for children of ages 8 to 18 and provides space for various youth educational and recreational programs for disadvantaged children to better their chances of success in life.

Project: Horno³: Museo del Acero, Monterey, Mexico
Architecture Firm: Grimshaw Architects
Details: Horno3: Museo Del Acero comprises a full restoration of a once-derelict 1960s blast furnace. The abandoned furnace structure and cast hall are the centerpiece of the museum, housing an interactive exhibit that brings the old furnace to life, allowing visitors the unique experience of touring inside this piece of industrial history.

Project: The Lavin-Bernick Center for University Life, New Orleans
Architecture Firm: VJAA
Details: The challenge was to transform a rigidly compartmentalized and environmentally inefficient building into a dynamic, sustainable new university center. Only the existing concrete structure was retained, saving roughly $8 million in construction cost. The project was successfully completed for $189/SF, 14 months after Hurricane Katrina. Many of the sustainable design strategies used (canopies, shutters, balconies, and fans) were adapted from climate-responsive architecture traditional to New Orleans.

Project: The New York Times Building, New York City
Architecture Firm: Renzo Piano Building Workshop and FXFowle Architects
Details: The New York Times Building incorporates many transcendental themes in good architecture—volume, views, light, respect for context, relationship to the street—with a design that is open and inviting, providing its occupants with a sense of the city around them.

Project: Plaza Apartments, San Francisco
Architecture Firm: Leddy Maytum Stacy Architects
Details: Located on a prominent corner in an improving San Francisco redevelopment area, this new, mixed-use project provides permanent housing for the chronically homeless as a pilot project of Mayor Gavin Newsom and the Dept. of Public Health’s “Housing First” program, which is a cornerstone of the city’s 10-year plan to end homelessness. The sustainably designed 9-story building provides 106 highly efficient studio apartments with on-site mental and physical health services for the residents.

Project: Salt Point House, Salt Point, New York
Architecture Firm: Thomas Phifer and Partners
Details: Constructed of elegantly efficient and economical materials, this 2,200-square-foot house in New York’s Hudson Valley is sited on a meadow with views to a small private lake. The house is carefully sited to take advantage of the prevailing summer breezes. Strategically placed operable windows and ventilating skylights allow the breeze to flow through the home.

Source: American Institute of Architects

4 Things to Consider When Picking a Floor Plan

Factors that dictate what floor plan will work best for a home buyer include how old their children are, how they entertain, and whether they have pets, says Jeff Benach, a principal with Lexington Homes in the Chicago area.

Here are some issues Benach suggests considering when buying a home:

• Mudrooms. A spacious mud-room can make managing a young family’s comings and going much easier. They are also good for pet owners.

• Over-sized kitchen/family-room combinations. These rooms work for some people, but they aren’t good for party givers because large spaces are noisy and don’t lend themselves to intense cooking and food staging.

• Fireplaces and windows. Filling more than one wall with windows and occupying another with a fireplace makes it difficult to position furniture.

• Consider that things change. Designing areas so they can be retooled to meet new and different needs down the road is a smart approach.

Source: Chicago Tribune, Allison E. Beatty (01/02/09)

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