Citigroup says it will expand its foreclosure prevention efforts and try to keep 130,000 troubled borrowers with $20 billion in mortgages in their homes.

The news follows similar initiatives announced earlier this year by IndyMac Bank, which was seized by the Federal Deposit Insurance Corp. last summer, as well as Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) each of which heralded enhanced housing rescue efforts.

Banks are undoubtedly feeling pressured to be more aggressive in aiding home owners, given how many billions of taxpayer dollars have poured into the industry to stem the credit crisis.

The Citi (C, Fortune 500) effort, dubbed the Citi Homeownership Assistance Program, targets 500,000 Citi borrowers. CitiMortgages CEO Sanjiv Das said he expects that more than a quarter of these people, with mortgages worth about $20 billion, will take advantage of the program over the next six months.

“We’re reaching out to borrowers in areas of steeper-than-usual falling prices and higher-than-average unemployment,” said Das, including California, Michigan, Florida, Nevada, Ohio and Arizona. “These areas are where the concentration of at-risk mortgages are the highest.”

The new initiative differs from Citi’s existing mortgage mitigation efforts in that it’s a much more proactive plan, said Eric Eve, Senior Vice President, Global Community Relations for Citi.

The company will determine where the need for mortgage modification is greatest, based on economic conditions, and send out letters to its borrowers in these areas to tell them that help is available should they need it.

Borrowers on the brink

This new initiative is open only to borrowers who are still current on their loans but are at risk of defaulting – particularly those borrowers who owe more on their mortgages than their homes are currently worth. Additionally, their loans must be owned by the bank, rather than sold off to investors.

Citi already has a program in place to work with borrowers who are delinquent, reducing interest rates to as low as 1% for as long as two years for borrowers who are judged capable of keeping up with lower payments. The bank says that its ongoing mortgage mitigation efforts have produced about 370,000 work outs since the beginning of 2007.

For borrowers who have yet to default, Citi will now aim to reduce their monthly mortgage payment, including property taxes and insurance, to 40% or less of their income. To do that, it will freeze or reduce interest rates, extend the lifetime of the loan or even reduce the loan principal.

Das said the new plan will be implemented immediately and the workouts will be handled in a very fast, streamlined fashion to aid as many homeowners as quickly as possible.

Each of these new foreclosure prevention efforts, from Citi, IndyMac, Bank of America and JPMorgan, represent a significant step forward in resolving the housing crisis, according to Jared Bernstein, senior economist with the Economic Policy Institute. But, he adds, the problem remains overwhelming.

“These programs are helping but the help is marginal – in the hundreds of thousands of homeowners,” he said. “But help is needed by millions.”

Even after taking these new bank programs into account, Mark Zandi, chief economist for Moody’s Economy.com, estimates that 1.6 million Americans will lose their homes this year either in a foreclosure or distressed sale. Some 1.9 million are projected to lose their homes in 2009.

It’s certainly doubtful that the banks’ housing relief programs will be as successful as they hope.

For example, IndyMac’s program was launched in late August, and slated to help as many as 40,000 borrowers. But in late October, FDIC chief SheilaBair told a congressional committee that the bank had only completed 3,500 work outs.

So Bank of America’s claim that it will help 400,000 homeowners, and JPMorgan Chase’s goal of rescuing another 400,000 borrowers should probably be taken with a grain of salt.

Bigger plans

Still, Bernstein welcomes every effort. “Let a thousand flowers bloom,” he said. “It’s like an experiment and, if we’re smart, we’ll see what plans work and what doesn’t.” Then, the best aspects of the various plans could be applied to as many at-risk mortgages as possible.

But the bottom line is that the bank programs won’t be nearly as effective as any massive foreclosure prevention effort that may yet be implemented by the U.S. government, according to Bernstein.

And there is a possibility that such a program may yet emerge. Congress already enacted its Hope for Homeowners initiative, which will allow borrowers to refinance their mortgages into loans backed by the Federal Housing Authority. Now there is talk of a new $50 billion plan that could bail out as many as 3 million homeowners.

“We can keep the number below a million [homes lost] next year with an effective government effort,” said Zandi. “It would be very doable but also very costly.”

The single best thing about the bank programs, according to Bernstein, is that they don’t cost the taxpayers anything.

“You have to be happy about that,” he said.

Credits: CNNMoney.com

Forget the old saw that all real estate is local. What’s pummeling housing prices in your nabe is the same thing that’s hurting them around the country: the credit crisis.

You know the drill – banks’ troubles have made it harder for many home buyers to get mortgages, and those who do qualify have to pay more. A borrower with good credit and a 20% down payment recently got charged an interest rate of 6.7%, on average, according to HSH Associates.

It’s true that this rate is not historically high (rates often surpassed 9% in the early 1990s). But it’s more than the 6.2% that the same borrower would have paid at the beginning of 2008.

The fact that mortgage rates have remained stubbornly elevated despite the government takeover of Fannie Mae and Freddie Mac leads some experts to believe that those rates are not headed down anytime soon.

What’s your forecast?

Then look at the fact that 18.6 million homes in this country are now sitting vacant, more than at any other time since the Census Bureau began tracking that figure in the 1960s. And that 2.8% of U.S. mortgage loans are now at least three months in arrears, up from 1.4% a year ago. That rate is projected to peak in early 2009.

But if a recession lasts for three-quarters of the year, as some economists are predicting, the number of foreclosures could remain high longer. Add it all up and you have another lousy year for real estate.

Home prices are down 20% nationwide since their peak in July 2006, according to the S&P/Case-Shiller home price index. Economist Nouriel Roubini of New York University, who accurately predicted the housing slide and credit crisis, expects another 20% decline in home prices next year. Patrick Newport of economic forecasting firm Global Insight projects a 15% drop.

The damage will likely hit even areas that have so far escaped many problems, such as New York City (see the chart on the previous page). “We don’t see the market turning until late 2009,” says Newport.
The wild card

* How much home values fall early in the year

If they go so low that investors can start renting out homes for enough to cover their mortgage payments, we could see a wave of people snapping up bargain houses in 2009 – which could push prices higher by the time the next 12 months draw to a close.

Lawrence Yun, chief economist of the perpetually optimistic National Association of Realtors, says he expects prices to rise 2.8% in 2009.
The action plan if you’re selling:

* Wait it out

In 2010, real estate should be stronger, with fewer homes clogging the market. So if you can wait until then to sell, do it. “I would,” says Barbara Brin, a real estate agent in Minneapolis. And if even realtors are saying that…

* Make your place shine

In many markets, sellers will face the toughest competition not from fellow homeowners but from banks and builders. Both will be willing to cut prices dramatically to sell a foreclosed or new home.

To convince buyers that your house is worth paying up for, make sure that it’s in move-in condition (foreclosures almost certainly won’t be). Point out unusual qualities like wide-plank floors or stained glass that cookie-cutter new construction lacks.

* Price it below market

Go to Zillow.com to see how much nearby homes fetched recently. Once you’ve figured out what a buyer might pay, price your house 5% below that.

Sound painful? A recent study by a New Jersey appraiser found that houses priced below market ended up selling for more than similar houses listed above market. That’s because lower prices attract more buyers.
If you’re buying:

* Look for homes that have been sitting around

In many areas of the country, such as Phoenix, San Diego and Washington, D.C., it’s common for perfectly good homes to linger on the market for six months or more. So start your search by looking for properties that have been up for sale for at least three months: At that point most sellers will be willing to deal.

Drive a hard bargain when you find a house you’re interested in. Sellers know you have a lot to choose from. They also know that if they wait they will probably get less. So offer less now.

Barry Miller, a buyer’s agent in Denver, suggests you make your first offer as much as 13% below the seller’s asking price. “You might not get the house for that, but it’s a good starting point,” he says.

* Improve your credit score

More than ever, that three-digit number could cost you. Lenders have begun imposing fees for everyone who doesn’t fall into the top tier of credit – and that’s a whole lot of people.

“Let’s say 680 got you the best rate on a mortgage 24 months ago,” says John Ulzheimer, a credit expert with Credit.com. “Today you need to shoot for 780 to 820 to get the best deal.”

Boosting your credit score from 660 to just 740 can lower your mortgage rate by a quarter of a point. To improve your score, focus on paying down debt, which will bring your crucial debt-to-credit ratio down.

Credits: CNNMoney.com

Sales of existing homes rose in September, but prices continued to drop, according to the latest reading on the battered housing market by an industry trade group released Friday.

The National Association of Realtors reported that sales by homeowners jumped in September to an annual pace of 5.18 million, up 1.4% from a year ago. It was the first time that sales rose compared to a year earlier since November 2005.

September sales were up 5% from the August reading of 4.91 million, marking the largest month-to-month increase since July 2003. Economists surveyed by Briefing.com had expected the report to show existing home sales rose to an annual pace of 4.95 million.

Though the numbers were encouraging, they do not yet suggest the problems in the housing market are behind us. September’s numbers represent contracts signed in July or August – before the mid-September credit crunch tightened the stranglehold on lending and sent confidence in the economy crashing. Sales figures for October and November are likely to reflect this credit freeze.

Furthermore, September 2007 was also a particularly disastrous month for the housing market, as the then-emerging credit crunch resulted in a steep dive in sales of existing homes.

Finally, experts say that foreclosed properties are driving this sales jump.

“Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35% to 40% of transactions,” said Lawrence Yun, chief economist with NAR. “These are pulling the median price down because many are being sold at discounted prices.”

So it’s unlikely that the worst is over.

“I think it’s premature to say we hit the bottom,” said Mike Schenk, senior economist for the Credit Union National Association. “One month of data doesn’t make a trend, and there are still some big issues hanging out there.”

Considering the recent slide in the stock markets, which continued Friday, combined with deteriorating labor markets, escalating debt and a zero savings rate, consumers may be reluctant to buy homes in a market that hasn’t yet hit a clear trough.

“People are extremely nervous,” Schenk said. “When they’re nervous, they don’t buy things, specifically big ticket purchases.”

Prices fall sharply

Sales got a boost last month because prices continued to fall. The median price of a single-family home fell 8.6% from a year ago to $190,600.

The median price of all homes sold during the month – including single-family homes, townhomes, condominiums and co-ops – fell to $191,600, down 8.8% from $210,500 a year ago. Before the start of the current housing slump, it had been 11 years since prices fell compared to a year earlier.

“The housing market is in bad shape in fundamental ways,” Schenk said. “The good news is that prices have come down, but the problem is that people expect prices to come down more.”

As prices continue to fall, potential buyers wait on the sidelines in an attempt to find a market bottom. But with more and more foreclosures on the market, the steep price decline may continue for a while.

Thursday, a RealtyTrac report showed that more than 81,000 homes were repossessed by lenders last month, up 104% from September of 2007.

The rate of existing home sales rose in every region of the country except the Northeast, where sales slipped by a seasonally adjusted 1.2%. Sales in the South rose 2.2%, while the Midwest saw an increase of 4.4%. The West saw the largest jump in sales, up a whopping 16.8%, as prices fell by 18.5% in that region.

Prices in the Northeast declined 5.4%, while the South saw a dip of 4.1%. Prices in the Midwest ticked 7.9% lower.

Inventory slipping

The report offered some encouraging news, with the excess supply of homes on the market falling in September. Realtors estimated that there are now 4.3 million homes available for sale, which represents a 9.9 month supply. That is down from the 10.6-month supply in August.

But that number could rise back above 11 months if sales begin to sink again and foreclosures continue to escalate.

“The current inventory is reflective of what happened a few months ago,” said Schenk. “It’s going to take a while to get back to the normal level of about six months.”

Credits: CNNMoney.com

The housing crisis still has a choke hold on America: In September, 81,312 homes were lost to foreclosure, according to a report released Thursday.

RealtyTrac, an online marketer of foreclosed properties, said that 851,000 homes have been repossessed by lenders since August 2007.

In September, 265,968 troubled borrowers received foreclosure filings – such as default notices, auction sale notices and bank repossessions. That’s a decline of 12% from the record high number of filings in August, but 21% more than in September 2007.

All told 765,558 foreclosure filings were made on U.S. properties in the third quarter of this year – up 3% from the second quarter and 71% from the same period last year.

“We have never seen a foreclosure cycle like this one before,” said Rick Sharga, Realty Trac senior vice president. Other periods of elevated foreclosure rates have been preceded by signs of economic weakness. However, “in this cycle, we have foreclosure problems that have caused an economic downturn.”

States step up

The most recent monthly dip in foreclosure filings was caused largely by decisions by several states to relax housing laws.

“Much of the 12% decrease in September can be attributed to changes in state laws that have at least temporarily slowed down the pace at which lenders are moving forward with foreclosures,” Realty Trac CEO James Saccacio said in a statement.

For instance, California – one of the states hardest-hit states in the housing crisis – has a new law that requires banks to contact struggling homeowners at least 30 days before delivering a notice of default. That’s helped to drastically slow the number of foreclosure filings in the state.

“In September, we saw California [defaults] drop 51% from the previous month,” said Saccacio. “That had a big impact on the national numbers since California accounts for a third of the nation’s foreclosure activity.”

North Carolina passed a similar law, and notices of default there fell by 66% in September.

Unfortunately, even these extensions aren’t saving most troubled borrowers. “The intention is very worthwhile, but I think the net result in most cases is simply delaying the inevitable,” said Sharga.

“If a few homeowners are able to stay in their homes as a result of the legislation, then it had a positive effect,” said Sharga. However, “the longer you are in foreclosure, the harder it becomes to pay the debt you owe to get out of foreclosure,” he added.

Circumstances in Massachusetts illustrate his point. That state enacted a law back in May requiring lenders to give troubled homeowners 90 days notice before initiating foreclosure, which pushed the number of foreclosure filings it reported way down for several months. But in September, when the law expired, filings spiked.

“Initial foreclosure filings in Massachusetts jumped 465% from August to September after being much lower than normal in June, July and August,” said Saccacio.

Nevada once again had the nation’s highest foreclosure rate, with one out of ever 82 homes in foreclosure. Florida had the second highest rate in September, with one in every 178 homes in default. California came in third, with one in every 189 homes there receiving foreclosure filling last month.

Waiting to see what’s next

As foreclosures continue to wreck havoc across the nation’s housing market, the U.S. government has announced unprecedented efforts to absorb toxic debt and shore up investor confidence. The “Hope for Homeowners” rescue bill went into effect Oct. 1 and will allow some troubled borrowers to refinance into mortgages backed by the Federal Housing Authority. And more recently, a massive financial rescue plan calls for Treasury to buy up troubled assets, mostly backed by bad loans, to stabilize the financial system.

However, as home buyers and lenders wait to see the effects of the plans, “there is a lot of uncertainty in the market right now,” said Sharga.

Still, he thinks that the market could be nearing a bottom, even as uncertainty remains high.

“If everything goes right, we will be done with almost all the subprime loans by sometime in the first quarter of 2009,” said Sharga. “The market could start to stabilize at that point.”

The bad news: The housing market will be flooded with bank-owned homes. “We are estimating that by the end of this year, between one quarter and one third of all homes for sale will be bank owned properties,” he said.

That could push down prices even more, perpetuating a vicious cycle, but it might also start to attract bargain hunters who may absorb some of the massive housing inventory.

Credits: CNNMoney.com

The Dow has shed thousands of points and the global economy is in crisis.

So who wants to buys a house right now? Not many people as it turns out.

The National Association of Home Builders (NAHB) for instance has seen its contract cancellations spike recently to as high as 30%, compared with an average rate of about 20%. During the housing boom, as few as 5% of sales were cancelled.

“The events of the past couple of weeks have people’s heads spinning,” said Steve Melman, NAHB’s director of economic surveys.

The National Association of Realtors (NAR) estimates that about 25% of the clients its members are working with are staying on the sidelines. They’re looking at homes and intend to buy at some point, but right now they’re worried about their jobs, their declining investments and falling housing prices.

“You have to have a lot of confidence to make this kind of big-ticket purchase in the current environment,” said NAR spokesman Walter Molony.

In Tucson, the average has has dropped 16% in vallue, from $220,000 at the market’s peak to about $185,000 now. With the high number of homes on the market and low number of willing and able buyers, it is definitely a market that can be taken advantage of by whoever has substantial amounts of capital. Just like how stocks can be bought at its bottom and flipped on its rise for a profit, real estate fits in the same equation.

Real estate agent Bob Rose was helping one couple look for an investment property in battered Contre Costa County, hoping to find a bargain that they could sell in a few years.

Then, on September 29 the Dow dove nearly 800 points and the couple decided not to buy. “They told me they had lost about a quarter of their retirement portfolio,” said Rose, and that they could no longer afford it.

Even some buyers who are already in contract are managing to pull out of sales amidst all the economic turmoil.

Deal or no deal

Two weeks ago, one Washington state couple, Sharif Tai and Gaby Ghafari, went into contract on a new $450,000, three bed, three bath, house in central Seattle. Soon afterwards, the stock market began its steep descent.

“It wasn’t that we lost money [in the market] or that we were worried about our jobs,” said Tai, a software developer in his mid-20s, “but we thought we could get a better deal, so we decided to wait.”

The couple backed out of the deal by citing problems with the inspection, but they haven’t given up on making a purchase.

“We’re keeping our eyes out,” said Tai. “We want to see how things shake out. If we see a great deal, we’ll take it.”

Other buyers are demanding sweeteners before they close a deal during such a rocky time. San Francisco agent Jim Holt had clients go into contract on September 29, on a $750,000 home in town. But by the end of the week the Dow had lost over 800 points and the buyer demanded a whopping $50,000 price cut.

“Buyers are seeing the [market implosion] as an opportunity to get concessions,” said Holt. In the end, the seller only agreed to reduce the price by $5,000 – but that’s better than nothing.

Other house hunters are managing to wring more concessions out of sellers even on top of existing discounts.

Rich Machado, an agent with the Smart Homebuyer Team in New Bedford Westport Mass., had already helped one buyer get a seller to take $9,000 off the price of a house listed for $229,000, and throw in $6,000 in closing costs, $1,800 for an electric upgrade and $400 for a home service contract.

The deal went into contract two weeks ago, but despite that impressive array of incentives, “the buyer is balking,” said Machado. “He’s asking for another $10,000 off the price.”

The seller hasn’t caved in yet – but with demand drying up, he may be forced to come around.

There are many things you can ask for from the sellers at times like this. You can get a price cut, assistance on the closing costs, get them to buy points from your mortgage rate, home warranties, upgrades… The list goes on. Whatever you can creatively think of, it can happen in a market like today’s. Although there is a risk of lowballing too hard to insult the seller, as long as you have good and fair judgement, everything can work out. The buyer’s market is now, and it’s going to be around for a while. It’s all a matter of time. Find out more on getting more home for your dollar with Tucson AZ Homes.

As the losses mount on Wall Street – the Dow lost 678 points on Thursday alone – things will undoubtedly become even more difficult for sellers.

“In the midst of such chaos, everyone is just shaking their heads,” said NAHB’s Melman.”

Credits: CNNMoney.com

Rates on 30-year mortgages fell from last week, while loan applications grew slightly in the face of turbulence in the banking and finance sectors.

Mortgage finance firm Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 5.94% this week. That’s down from 6.10% last week and well below 6.40%, where the rate stood a year ago.

“Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields,” said Frank Nothaft, Freddie Mac vice president and chief economist.

Meanwhile, mortgage applications for home purchases and refinancing grew slightly over the week ending Oct. 3, reversing a two-week decline, according to data from the Mortgage Bankers Association.

Rates on 15-year fixed-rate mortgages fell to 5.63%, from 5.78% last week. A year ago, that rate was 6.06%

The five-year adjustable-rate mortgage fell to 5.90%, down from last week at 6.00%. A year ago, the rate was 6.12%.

The rate on a one-year adjustable-rate mortgage increased slightly to 5.15%, compared to 5.12% last week. At this time last year, the rate was 5.73%.

In September, the government took control of the mortgage giants Fannie Mae and Freddie Mac with a rescue plan that could inject $200 billion into them to keep them afloat.

Financial markets around the world took a tumble today. The bubble has finally popped, and the good times have stopped rollin’. But you have to keep in mind that everything works in cycles, and you have to understand that it is possible to win in a downtime. Rockefeller made his fortunes in the Great Depression, and it’s likely that you’re not him but you can go that route. If you have capital to purchase a home, with the scare going on amongst the home sellers, it is possible to find a great deal, a property with a price as low as 60% of its value. With those kinds of deals at hand and with these great interest rates, you can have yourself a winning deal.

I’m here to serve you find a deal that you can see appreciate through time. I will not assist bottom feeders and predatory investors, but if you have a desire to purchase a house to make your home, I’m your man. During the boom, a 7th grader could have sold you a house, but now it matters who you have working for you. During these times, I can stand and deliver.

Credits: CNNMoney.com

Under a mortgage rescue plan announced at the debate Tuesday night by Senator John McCain, much of the burden of paying to keep troubled borrowers in their homes will shift to taxpayers.

If you watched the debate last night, you know that McCain’s words were sweet. He called us his “friends” after every two sentences, but reading into his policies’ fine print, how is this presidential candidate really out to help us? The banks who gave out these bogus loans were supposed to take the hit and make the whole ordeal right for American homeowners… But here McCain comes with his new economic plan, having the taxpayers footing the bill. Are you serious? How can he stand to the American people and actually accept us to believe that he’s for us? He’s going to suck our blood dry if he gets into office!

McCain’s original plan called for lenders to write down the value of these mortgages and take those losses. But the Republican presidential candidate unveiled a new $300 billion plan in response to the first question of the debate.

He said, “I would order the Secretary of Treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes, at the diminished values of those homes, and let people make those – be able to make those payments and stay in their homes.”

Not to mention that his choice for the Secretary of Treasury is Meg Whitman. Yeah, because eBay is a global power it is the occupation of millions of people, but eBay just let go 10% of its workforce. It’s not all milk and honey; I want to have a responsible, intelligent, and experienced financier to be the Secretary of Treasury, not someone who happened to have created a great corporation. And definitely not one of McCain’s advisors, he has some downright nasty people advising him.

The government would convert failing mortgages into low-interest, FHA-insured loans.

“Millions of borrowers” would be eligible for the program, dubbed the American Homeownership Resurgence Plan, according to McCain economic advisor Doug Holtz-Eakin.

To qualify, homeowners would have to be delinquent in their payments already, or be likely to fall behind in the near future. They would have to live in the home in question – no investment properties would be eligible – and have had demonstrated their credit-worthiness when they purchased the property by making a substantial down payment and by providing documentation of their income and assets – no liar loans.

Holtz-Eakin said on a conference call Wednesday that the McCain plan could be put into place quickly because the groundwork and the authority for it has already been provided by last week’s $700 billion bailout bill, the Hope for Homeowners program authorized by the housing rescue bill passed in July and the government takeover of mortgage giants Fannie Mae and Freddie Mac.

Okay. Running into something so quick is EXACTLY what I don’t want to see happen. There has to be responsible thought put into such a policy that entails so much money. C’mon now.

A change of heart

This proposal is strikingly different from both McCain’s original idea, and from the housing rescue bill adopted by Congress in July.

Congress struggled for months to pass the Hope for Homeowners rescue plan for mortgage borrowers – a bill that neither McCain nor Democratic candidate Senator Barack Obama voted on. To make it palatable to both conservative Republicans and ordinary taxpayers, Hope for Homeowners requires that lenders write down mortgage balances to 90% of a home’s current market value to qualify for a FHA-insured refinancing. The lenders would then take the loss on the difference between the current value and the mortgage balance.

“[McCain's] original plan relied on lenders taking the hit,” said Holtz-Eakin. “This bypasses that step.”

Instead, taxpayers pay for it, with the funding already provided by the $700 billion bailout bill.

That could prove to be very unpopular with homeowners who aren’t in trouble, as well as ordinary Americans who objected to the Hope for Homeowners plan as a bailout for delinquent borrowers and irresponsible lenders.

Look. You and I are already footing the bill for the 700 billion dollar bailout. Why on earth would you want to pay for more, where you don’t get anything in return? Did you have anything to do with the financial crisis? Did you get paid from the crooked corporate greed that lives in Wall Street? This is retarded. Yeah. I said it.

The Obama campaign issued its response to the plan Wednesday afternoon.

“Last night . . . [Senator McCain] threw out a proposal that appeared to give the Treasury authority it already has to re-structure troubled mortgages. But now that he’s finally released the details of his plan, it turns out it’s even more costly and out-of-touch than we ever imagined,” said the statement. “John McCain wants the government to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover.”

The statement claimed the biggest beneficiaries would be the “same financial institutions that got us into this mess, some of whom even committed fraud.”

Exactly. Don’t you see it too?

“Since this beginning of this crisis, Barack Obama has demanded that any rescue plan must protect taxpayers and ensure that they share in any profit once the economy recovers, and he worked to include that principle in the plan that passed Congress,” said Obama’s economic policy director Jason Furman.

Parsing the details

Some Washington analysts were perplexed by the McCain proposal.

“The proposal is hard to understand,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. For one thing, Baker pointed out, it provides even less help for targeted borrowers than the Hope for Homeowners program does. In that plan, lenders must lower mortgage balances down to 90% of the home’s current value, while McCain’s plan will reduce loans to 100% of a home’s current value.

And, of course, under McCain, the cost of the write-down is picked up by taxpayers rather than by the lenders. That is a radical departure from McCain’s earlier responses to the housing crisis.

“We have a very different set of risks facing the nation now, including the crisis in financial markets,” said Holtz-Eakin, “and it calls for a much more aggressive response.”

The plan is supported by Lawrence Yun, chief economist for the National Association of Realtors, who says it could help stabilize housing markets.

I’m sorry but I do not listen to whatever the NAR publishes, not only does it seem too overly optimistic, it’s kind of like John McCain. Out of touch with reality. Have you seen their commercials? During the subprime crisis’ beginning? They were airing commercials that said that now is the time to buy a home and have your investment work for you. Like I said, out of touch with reality.

“It’s certainly a positive for the foreclosure problem,” he said, “although it was already embedded in the Treasury’s bailout plan.”

Indeed, the bailout passed last week authorizes the Treasury to buy up as much as $700 billion in mortgage backed securities – but the bill also authorizes Treasury to buy mortgages directly.

Christopher Mayer, Paul Milstein Professor of Real Estate at Columbia Business School, isn’t convinced that the McCain proposal makes sense.

“As the plan stands now, it helps the people who got into the most debt, and it helps the lenders, but it doesn’t really help the housing market,” he said.

To help the market as a whole, according to Mayer, a plan has to target all mortgage borrowers rather than just at-risk homeowners. In an op-ed piece in the Oct. 2 Wall Street Journal, he and his Columbia colleague, R. Glenn Hubbard, he proposed that the government allow all residential mortgages to be refinanced into 30-year, fixed rate loans at 5.25% interest.

That would bring down payments for everyone, not just the borrowers most at risk, which would in turn help prop up house prices by lowering the monthly cost of homeownership. Many more people would benefit.

“A rescue has to be broad enough to help a great many Americans,” he said, “not just the ones that took on the most debt.”

Credits: CNNMoney.com

A plan announced today by Bank of America will be the most aggressive foreclosure prevention effort ever undertaken by a U.S. bank.

The program, scheduled to start in December, will be open to distressed borrowers who signed up with Countrywide Financial between January 1, 2004 and December 31, 2007. Countrywide was acquired by Bank of America in July.
It came in a legal settlement that the company entered into with the attorney general offices of 11 states, who had sued Countrywide over predatory lending practices, but the company stated that borrowers in all 50 states will be eligible to participate in the program.

This is definitely a good look for BoA; many investors and customers were angry at the fact that BoA bought a company with a long history of negativity. I believe that by BoA being the first bank to offer such services puts them in the forefront of a movement which will help our country’s people. If all banks can be responsible for their past 8 years in this manner, our country’s recession will not become a depression.

“The Countrywide settlement is a watershed moment for loan modification programs,” said Mark Pearce, North Carolina’s Deputy Commissioner of Banks and a member of the State Foreclosure Prevention Working Group. “This is, by far, the best [program ever], even better than the FDIC program with IndyMac Bank.”

As part of the initiative, Bank of America will cut monthly housing payments, including mortgage, property taxes and insurance, to no more than 34% of gross income. The move is expected to help keep as many as 400,000 troubled borrowers in their homes.

The program targets holders of subprime adjustable rate mortgage (ARMs), subprime fixed rate loans and option ARMs, but prime and Alt-A borrowers, who did not document their income, will be eligible as well.

No other foreclosure prevention effort has aimed to keep borrowers’ house payments so low.

“[The program's] affordability is far better than any other program out there,” said Rick Simon, spokesman for Bank of America.

By contrast, the much heralded foreclosure-prevention initiative announced in August by the FDIC for customers of IndyMac Bank, the subprime lender that the agency took over in July, said it will keep borrower payments to no more than 38% of gross income.

“This is the biggest mandatory modification of loans in U.S. history,” said Jerry Brown, attorney general of California, the state with the largest number of borrowers who may benefit from the settlement. “Of course, we never saw such a big rip-off by any other company either.”

According to Simon, the Countrywide program will proactively screen all of its borrowers for eligibility, and then contact them directly to offer loan workouts. No prepayment penalties or modification fees will apply. But the program can’t help every Countrywide borrower. Some, because of illness, divorce, job loss and the like, simply won’t be able to afford any reasonable mortgage payment.

Simon added that Bank of America is training personnel and putting systems into place that it hopes will enable staff to deal with a large number of mortgages all at once.

Cheaper than foreclosure

The new program comes with a price tag of $8.4 billion, but Simon says that it will cost much less than foreclosing on homes en masse.

As the credit crisis continues, more and more lenders and mortgage servicers are coming to grips with the fact that preventing a foreclosure is usually cheaper than going through the repossession process and then reselling the property in a declining market.

Depending on each borrower’s circumstances, Bank of America might freeze or lower a loan’s interest rate or even cut the principal loan balance. The bank said it will also participate in the government’s Hope for Homeowners program, a provision of the housing rescue bill which went into effect Oct. 1 and makes FHA-insured loans available for delinquent borrowers.

The announcement of the program came on the heels of Friday’s approval of the $700 billion Wall Street bailout, a measure which has been criticized for failing to address the foreclosure crisis head on.

The hope is that other lenders and servicers will follow Countrywide’s lead.

“Now that we’ve gotten this with Countrywide, I would expect that we’ll be talking with other major servicers to implement similar programs in the near future,” said North Carolina Deputy Commissioner of Banks Mark Pearce, who worked on this settlement.

But he and other members of the the State Foreclosure Prevention Working Group have been pushing other lenders to do something this drastic for months, without much luck.

“So far, they have failed to show the leadership required to get it done,” said Pearce. “I hope, having the market leader do this will spur the other servicers to greater action.”

It is great to see BoA take the lead in creating a foreclosure prevention package that stands out amongst the rest. It is true that Countrywide’s predatory practices were hideous, but I have to say it’s easier being bad than good when it comes to finances. It really comes down to being a win-win situation; a win for the bank from not having to foreclose on 100,000s of homes, and it’s a win to the homeowners who get to stay in their home, have their lives’ continue, and saves the economy some of the shock.

So if you have had your mortgage with Countrywide and you’re having trouble, remember to take advantage of this program this coming December.

Credits: CNNMoney.com

We’re not at the brink of an economical crisis, we are IN one. 750,000+ jobs were lost so far in 2008. Doesn’t that bother you? We need a change to take place for our country to stabilize.

Our country is in this condition because of 8 years of reckless governing by Bush, and right now all the McCain campaign is going to do for the next 4 weeks is smear Obama. Is that the best that he can do? Where is the change? Where are the solutions? I think Palin has made a grave mistake trying to tie up Obama with Ayers; not only is that association bogus and short-sighted, whoever is swayed by those charges are simply uninformed.

Obama has one house. McCain has 12. Obama doesn’t want to lose the only house that he has. McCain wouldn’t care if he lost half his houses, he’d still be a multi-millionaire. Let’s make choices that are important for us. Let’s make choices that are important for you and I, and neighbors of ours in neighboring states. We can’t have mediocre people in office. And we DEFINITELY cannot have trickster characters in office! McCain is involved in the largest savings scandal in this country’s history! The billions of dollars lost due to fraud in the Lincoln Savings and Loan scandal, it was settled with taxpayers’ money. OUR MONEY, FOLKS. We cannot make the same mistake.

If we do, we’ll end up paying for it. It’s your choice.

It was a wet monsoon, but don’t get used to the rain.

Forecasters are calling for warmer, drier weather through December on the heels of a monsoon that poured more rain than average into 90 percent of the reliable gauges in and around Tucson, according to one weather expert.

“A lot of them were significantly over – 50 percent over or 80 percent over,” said Gary Woodard, a University of Arizona researcher who tracks hundreds of rain gauges across the state.

It was enough rain to erase drought temporarily statewide. Only the western edge and northwest corner of Arizona are abnormally dry, according to the National Drought Monitor.

It is not the first time in recent years the monsoon quashed drought. But with the Pacific Ocean temperatures average, we are likely in for less rain and warmer temperatures through December, according to a monthly report from the Climate Assessment for the Southwest, a collaborative of scientists at UA.

“If that happens, we could be looking at drought creeping back in,” Woodard said. The monsoon was boosted by tropical storms Dolly and Julio.

“And maybe a little bit from Lowell,” said Gregg Garfin of CLIMAS.

But the picture for the next three months is a bit fuzzy, because weather resulting from neutral Pacific temperatures is harder to predict than from El Niño (warmer water) or La Niña (cooler water), Garfin said.

Though Tucson International Airport got just 5.52 inches of monsoon rain – just below the normal 6.06 inches – midtown got hit hard. The most rain fell in an area bounded by Alvernon Way and Craycroft Road and Speedway Boulevard and Fort Lowell Road. Several gauges in that area took in 10, 11 or 12 inches, Woodard said.

Marana gauges came in under 6 inches, though Green Valley hit 10 inches, he said.

Phoenix was also hit hard with 5.7 inches, or slightly more than twice normal. Flagstaff got less than Phoenix, at just 5.44 inches.

Woodard tracks local rainfall in more detail than has ever been done through Rainlog.org, a network of hundreds of volunteers with backyard gauges. Though their data is less reliable than a controlled, mechanical gauge individually, because there are more than 600 in Pima County, researchers can weed out anomalies in the data, Woodard said.

“If you have a dense enough network you see anomalies. At some point a dense network of volunteer scientists is better than a less dense network of tipping gauges maintained by the government,” he said.

His Rainlog system includes 619 Pima County volunteers, who report rainfall daily. It started in Sierra Vista, grew to Tucson and Phoenix and is now statewide.

Volunteers include retired weather professionals and ordinary homeowners, Woodard said. “We’ve also got Brownie groups.”

Credits: Tucson Citizen