Fannie and Freddie Not To Blame
November 18, 2008
As a follow up to my October 4 post, I present the following chart created using Federal Reserve data.
This chart is a screen capture of the original which appeared on the Mark Thoma’s blog The Economist’s View. See the original chart and post accompanying it.
Thoma has waaaay more understanding of this than I do. He’s got the nifty cool graphs and charts to back up what I tried to say on October 4.
Namely, Fannie and Freddie did not cause the foreclosure crisis. As the chart shows, The Two F’s got out of subprime loans in 2002 before things got really crazy. Watch the pink line – see how it dips sharply at the sime time the dotted light blue line makes a jump shot? That’s Fannie and Freddie getting the heck out of dodge, because the loans the market started demanding felt way too risky. The light blue line is “asset-backed securities issuers,” namely entitities like the investment banks that have failed so spectacularly of late.
The Two F’s were still giving out some loans more risky than their standard fare. But as Thoma explains (and my personal experience proves) Fannie and Freddie largely did 30-year fixed rate loans. They weren’t doing the “exotic” liar loans that have caused so much pain.
Thoma says, “There is no excuse for the actions of the management of Fannie and Freddie, and I’m not trying to defend them or their choices, but the idea that Fannie and Freddie caused the general credit crisis is wrong.” (emphasis mine).
By the way, I’m still browsing through Thoma’s blog, trying to study up on all the intricacies he and his colleagues discuss about economics in general and the housing/financial crisis in particular. It’s not for bare beginners, but is an excellent resource if you’ve done some reading on the basics elsewhere. Check it out!
All About Mortgage Insurance
October 27, 2008
All about Private Mortgage Insurance (PMI) by one of my favorite lenders, Jeannie Bolger of Suburban Mortgage.
It’s not a pretty looking link, but it IS helpful. Trust and click.
NorthPhoenixAgent in USA Today
August 5, 2008
Image courtesy of lusi at Stock Exchange
USA Today reporter Anna Bahney interviewed me recently about how buyers and sellers are being affected by the credit crunch. I’m quoted in today’s Money section of the USA Today. They even used a picture of my client George Nelson and I signing closing documents with escrow officer Dana Lane of First Arizona Title. (By the way, Dana’s a veteran title officer who’s great at her job. You can reach her at 602-385-2537).
The Thompson’s Realty agents get tapped by the local, national and even international media quite a bit. Here’s just a few recent examples:
- Jay Thompson on US News and World Report
- Chris Butterworth featured on Phoenix’s Channel 3 News talking about foreclosures
- Jay Thompson asked to be a guest author on HGTV’s new real estate blog
- Jay Thompson quoted by Saskatoon (Canada) newspaper
Are you looking for a savvy Realtor to help you through the crazy market correction we’re in? Contact Thompson’s Realty. We deliver superior customer service and practice The Power of Technology with a Personal Touch. We each specialize geographically and between us we cover the entire metro Phoenix region.
- Jay & Francy Thompson, Shannon Stephenson - jay@ThompsonsRealty.com, Francy@ThompsonsRealty.com, and shannon@thompsonsrealty.com or their website at The PhoenixRealEstateGuy
- Chris Butterworth & Steve Nicks - chrisB@ButterHomes.com or their website/blog at the Butter Homes Blog
- Heather Barr – Heather@NorthPhoenixAgent.com or www.NorthPhoenixAgent.com
- Michele Guss – NEvalleyAgent@cox.net
- Jamie Geiger – jamie_geiger@cox.net or The Real Estate Cactus
Home In Five Money Gone
July 31, 2008
Remember back just 2 days, when I wrote about the Home in Five program that makes Maricopa County buyer’s down payments? In 1 short day, the entire allocation of over $3 million was gone. Wow!
You can get the inside scoop on how fast this happened by reading my colleague Shailesh Ghimire’s Arizona Mortgage Guru post about the Home in Five money going fast.
The County seems to release more money periodically (usually 3 or 4 times a year), so hopefully they will do so again soon. I’ll keep you posted!
First National Bank of Arizona Fails
July 26, 2008
Photo credit to I Can Has Cheezburger
A Scottsdale-based bank has failed – The First National Bank of Arizona was shut down by the FDIC on Thursday, July 25. The foregoing link leads you to the FDIC’s website press release about the closure.
FNB-AZ merged with FNB-Nevada in late June. FNB-NV was shut down, but FNB-AZ was included in the closure.
Contrary to the graphic, not much changes right now for people who did business with FNB-AZ.
What Happens if You Had Less Than $100,000 In FNB-AZ
All deposit accounts have been transferred to Mutual of Omaha Bank, Omaha, Nebraska (“assuming institution”). All deposit accounts will be available as usual.
You may continue to use the services to which you previously had access, such as automatic teller machines (ATMs), safe deposit boxes, night deposit boxes, wire services, etc.
Your checks will be processed as usual.
Your automatic direct deposit(s) and/or automatic withdrawal(s) should be transferred automatically.
All your deposit account histories and records will be transferred.
If you had a loan with First National Bank of Nevada, you should continue to make your payments as usual. The terms of your loan will not change under the terms of the loan contract because they are contractually agreed to in your promissory note with the failed institution. Checks should be made to your former bank and sent to the same address until further notice.
What Happens if You Had More Than $100,000 in FNB-AZ
Contact thee FDIC at 1-866-674-8944 or 1-800-523-8089 or visit EDIE, the FDIC’s Electronic Deposit Insurance Estimator.
From the EDIE website: “If you or your family’s deposit accounts at one FDIC-Insured Institution total $100,000 or less, your deposits are fully insured. If you or your family has more than $100,000 at one insured institution, you can still be fully insured if your accounts meet certain requirements. You can use EDIE to determine your insurance coverage beyond the basic $100,000 amount.”
So there’s the scoop. Remember not to panic in the streets people. It’s messy.
Housing Stimulus Bill Passed, President Says He’ll Sign
July 24, 2008
President Bush lifted his veto threat and the House passed a housing stimulus package on Wednesday. Some key provisions of the bill include:
- $300 Million to help homeowners facing foreclosure refinance their mortgages into FHA loans. The lender would have to agree to take a loss on the original loan and lender participation in the plan is voluntary.
- $3.9 Billion in block grants to help local communities buy up (often vacant) foreclosed homes, rehab them, and resell them. Fred Karnas, Arizona’s Department of Housing director says Arizona can expect to receive about $100 million of that money, based on a formula that favors states with the greatest number of foreclosures. With the median home price in the Valley hovering the mid-$200’s, this will help the city buy about 500 homes. (AZ Republic)
- $15 Billion in housing tax breaks, including a $7,500 tax credit to first time home buyers. This provision applies only to buyers who purchase between April 9, 2008 and July 1, 2009. The full tax credit is available only to homeowners making less than $75,000 (or couples earning less than $150,000). Finally, the tax credit must be paid back, interest-free, over the next 15 years.
The bill addresses Fannie Mae and Freddie Mac’s recent woes. The bill will:
- Grant an unlimited line of credit to stabilize mortgage giants Fannie Mae and Freddie Mac and allowing the federal government to buy equity in those institutions. (AZ Republic). The Congressional Budget Office estimates that there’s a 50% chance F & F will weather this crisis without resorting to using this money. The two companies back or own $5 trillion in U.S. mortgages — nearly half the nation’s total. (NPR)
- Create an independent regulator to ensure sound management and operating standards for those lending institutions, including the power to limit the compensation o the companies’ executives. (AZ Repub and LA Times)
- Impose a new cap on the size of mortgages that Fannie or Freddie can buy or guarantee. In certain high priced locales, the cap will be $625,000, while other in areas the cap will be up to 15% of the median home price. (NPR)
Herbert Kaufman, a finance professor at ASU who used to work at Fannie Mae in Washington, said the legislation should help to lower mortgage interest rates. (AZ Republic). This is the most interesting to me. Metro Phoenix housing prices have dropped enough in many neighborhoods to be affordable again for folks who were priced out of the market during the boom-boom years of 2005-6. The combination of lower rates and lower prices could be just what the doctor ordered to get metro Phoenix real estate moving again.
The bill includes some important changes to the FHA loan program.
- The required down payment on FHA loans is increased from the current 3 percent to 3.5 percent.
- Another provision of the bill effectively shuts down AmeriDream and Nehemiah Corp, and nonprofits like them, who help sellers pay for buyer’s down payments. The bill bans federal insurance for mortgage loans if the seller pays the buyer’s down payment through a nonprofit intermediary. Can’t get mortgage insurance? You’re not getting a mortgage.
As big as AmeriDream is, they probably don’t have the financial wherewithal to insure mortgages by themselves, so in effect they’re out of business. But this could present an opportunity for a new breed of for-profit companies to issue PMI (private mortgage insurance) on loans where sellers made the buyer’s down payment. There is a documented slightly higher risk of default among buyers who didn’t save their own down payment. But there are probably also companies out there willing to underwrite that risk. Give it time.
Interestingly, neither AmeriDream nor Nehemiah has any press releases or other info posted on their websites today. As long time readers of my blog know, I’m a big supporter of these programs, and am very sad and discouraged to see them go. HUD has been trying to get rid of Down Payment Assistance programs since at least October of last year. I’m saddened, but somehow not at all surprised, that HUD very quietly used this popular housing stimulus bill to kill the programs when every other means they tried didn’t succeed. See my entries of October 21, November 1, December 30, March 3 and June 17 for more history.
Update, 5:30pm Jul 24: My colleague, blogging Realtor Jamie Geiger has more information about the demise of AmeriDream type programs. Jamie is a great resource for buyers and sellers on the far East side of the Valley. I can’t help you out east of Scottsdale Road, but Jamie can!
The following news sources were used in compiling this article:
Real Estate Road Signs – “We Pay Off, You Keep”
July 18, 2008
I’m noticing an uptick in the number of roadside cardboard signs that have something to do with real estate lately. You know the kind – here in Phoenix they’re usually hand-inked, on cardboard or oak tag, stuck in the ground with a stake.
Surely it’s a function of the bad economy, the looming recession, the credit crisis and the housing ‘bubble’. Whatever, I figured it would make a good blog post or two. Here’s today’s Real Estate Road Sign:
I didn’t call to find out exactly what scam they’re peddling, but rest assured it isn’t as good as it sounds. No one is going to pay off your mortgage out of the goodness of their heart and not expect something for it. Either they’ll refinance you under their own (probably dubious) terms, or they’ll pay off the mortgage and let you stay in it, as a tenant.
There are some instances where it might be beneficial to let someone buy your home from you and then arrange to stay in it as a tenant. But contact a trusted Realtor or mortgage lender to do it. Placing your single largest financial asset into the hands of someone who advertises on roadsides with hand lettered cardboard signs is not in your best interests.
If this is a refinancing “plan” it probably involves people who look and sound a lot like the Sopranos and there are a lot of other, better options for refinancing if you’re facing foreclosure.
If it’s a plan to buy your home and rent it back to you, be very careful. There are a lot of scams out there now that start out this way, and then whack you with huge penalties if your rent is even an hour late. Worse, some of those rent back to owner schemes allow the company you’re dealing with the evict you from your home without notice if you pay late.
If you’re having financial troubles large enough to even think about calling the number on this sign, you’re probably better off contacting someone about a refinance or a short sale.
Related Posts
-
How Your FICO Score Determines Your Mortgage Interest Rate by the XBroker (not light reading but highly worth your time)
Bank Run at IndyMac
July 14, 2008
People lined up twice around the block this morning at the Pasadena, California headquarters of IndyMac Bank. Folks were there to close their accounts and take the money to other banks. It was a old-fashioned bank run like we haven’t seen since the Depression.
Have you got money in an IndyMac account? There’s no need to panic, and no need to withdraw your funds from the bank either.
Yes, IndyMac failed. But the FDIC insures all bank deposits up to $100,000. Your money was insured by the US government. You’ll get it all back. In fact, it never went anywhere. Previous press releases have said that the ATMs are operational, the bank windows reopened this morning and folks with Indymac accounts under $100,000 (or retirement accounts under $250,000) have full access to their money. The only difference is that now the FDIC is running the bank. Essentially, it was nothing more than a management change.
Read the the Los Angeles Times today, on the IndyMac situation: “Customers with $100,000 or less in deposits or with $250,000 or less in a retirement account would have full access to their funds, which are insured by the federal government. . . . . For all depositors, interest rates on most individual accounts would remain unchanged until the accounts mature, the FDIC said.”
FDIC Shuts Down IndyMac Bank
July 11, 2008
Today it was announced that the FDIC (Federal Deposit Insurance Co) shut down IndyMac Bank after an old-fashioned ‘run on the bank’. IndyMac customers withdrew $1.3B from IndyMac branches since a June 26 letter written by Senator Schumer (D-NY) that said the bank posed “significant risks to taxpayers and borrowers” was leaked to the public.
What Happened to the Money?
There’ll be a name change, and a management change. For insured depositors (most average folk), their money isn’t going anywhere. They’ll still have have access to their money through the new name – IndyMac Federal Bank – and the new managment, courtesy of the FDIC.
From an InmanNews story: Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks.
Uninsured depositors will be contacted by the FDIC to meet with their claims people. The FDIC typically insures bank deposits up to $100,000.
The FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3 p.m. to 9 p.m. (PDT), and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, July 13, when the hours will be 8 a.m. to 6 p.m.
Or visit the FDIC website: http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.
More Woes for Fannie and Freddie
July 10, 2008
Fannie Mae and Freddie Mac stock prices took a serious tumble today, as the market digested fears and rumors that the two mortgage giants are undercapitalized.
photo credit, Duchessa at stock.xchng
Financial Times reports on Fannie & Freddie’s woes. Fed Chairman Ben Bernanke tried to calm everyone’s nerves by stating he feels that F & F are “well capitalized in a regulatory sense” but they should raise more capital. Which is it Bennie? Are F & F fine, or broke?
Ironically it was a politician who spoke most truthfully about the 2 F’s today. Republican Presidential candidate Senator John McCain spoke on the campaign trail, saying the two companies “are vital… they will not fail… we cannot allow them to fail.”
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Bloomberg Explains How F & F Affect Credit Default Swaps (for financiers only!)
Related Posts at the NorthPhoenixAgent
IndyMac Stops Making Home Loans
July 9, 2008
On Monday, Alt-A loan giant IndyMac Bancorp said that it will stop making most types of mortgage home loans, and layoff about 1/2 of its workforce. IndyMac says they’ll fund the loans already in the pipeline. Company execs also said they’ll continue offering their reverse mortgage product, and will continue operating their loan servicing division.
See the conservative take on the story from the Wall Street Journal, or try the perspective from the left at the Washington Post.
Consumer Tips
Have you got a loan approval from IndyMac? If you’re in escrow on a property already, talk to your Realtor and loan processer to make sure the approval is still good. It would probably be wise to get a backup loan approval from another source, just in case IndyMac pulls their approval of your particular loan package during your escrow period. Still shopping and haven’t settled on a home yet? Get your loan pre-approval from somebody other than IndyMac.
Does IndyMac service your current mortgage? All the press releases & media stories I saw said IndyMac intended to continue doing loan servicing, meaning they’ll continue to take and apply your monthly mortgage payments on existing home loans they’d been servicing before this announcement. It wouldn’t hurt to call them and make sure they’ve got your mailing address. Why? If they do sell the servicing of your loan to another company, they must notify you by mail. IndyMac’s website lists their Home Mortgage Customer Care line as 1-800-781-7399.
Real Estate Road Signs – “Buy A House for $500 Down”
July 6, 2008
I’m noticing an uptick in the number of roadside cardboard signs that have something to do with real estate lately. You know the kind – here in Phoenix they’re usually hand-inked, on cardboard or oak tag, stuck in the ground with a stake.
Surely it’s a function of the bad economy, the looming recession, the credit crisis and the housing ‘bubble’. Whatever, I figured it would make a good blog post. Here’s today’s Real Estate Road Sign:
Here’s the thing. A ton of people would qualify to buy a home – any home – with $500 down. The amount of the down payment is a function of 2 things – 1) the contract you negotiate with the seller, and 2) what sort of loan program you qualify for.
You don’t need to call somebody who advertises on the roadside to get a $500 down house. In fact, I submit that it’s probably not a good idea to get a home mortgage from somebody who advertises on the roadside with a cardboard sign. To buy a home with $500 down, you just need to speak with a reputable lender, and see if you qualify for a loan program that allows a low down payment.
Veteran? Done. You can buy a house with $500 down – use the VA loan program. eHow tells you how to figure out if you qualify, but I take no responsibility for their sponsored lender links.
First time homebuyer? Done and done, and then some. You can buy a house with only $500 down – use a standard FHA loan. Or use an AmeriDream loan. Or use Nehemiah Corporation to buy your slice of the American Dream. Go through Maricopa County’s Home In Five program and get your downpaymnet as a gift. Try the Down Payment Guy website, which advertises homes for sale on the regular MLS that are owned by seller who agree up-front to partcipate in a program like these. But note that the DownPaymentGuy steers buyers to their approved stable of lenders, and you can use any lender you choose.
Not a first timer, but still cash-strapped? There are FHA programs you qualify for too. My favorite blogging lender Shailesh Ghimire explains FHA loans.
When you see a road sign like this one, remember 2 things: 1) You can work with any lender you want and still potentially qualify for a $500 Down home purchase. 2) Doing business with a “lender” who advertises on the roadside is probably not a great idea. Buying a “new in plastic, pillow top” mattress off a road sign might be OK. But selecting the single most expensive financial asset you’ll ever own in your life off a road sign is potentially a recipe for disaster.
Related Posts at NorthPhoenixAgent
- How Much Do I Need for a Downpayment
- Earnest Money Defined
- Buyer Beware – Backing Out Can Be Expensive
- Why Your Lender Shouldn’t Be Your Friend
- No Money For a Down Payment?
Related Posts By Other Excellent Bloggers
- FHA Mortgage Insurance Rates Now Higher If Your Credit is Bad (AZ Mortgage Guru)
- How Your FICO Score Determines Your Mortgage Rate (by the XBroker ; not light reading but well worth your time)
Housing Bill Not Signed
June 26, 2008
You can read and hear the story of the latest Congressional foul up over the housing bill here, on National Public Radio’s show Marketplace or over at Reuters.
- See Bloomberg’s take on the story
- And see the New York Times article yesterday for background on the bill, which has a 3-pronged plan to:
- Help homeowners facing foreclosure by assisting them with a refinance, or getting banks to write down some loan balances,
- Offer incentives to first time home buyers who want to buy currently vacant homes (many foreclosure properties sit vacant and risk becoming blight in the community), and
- Implement some new regulatons on Fannie Mae and Freddie Mac, the government regulated lending behemoths
Apparently, our US Senators have not signed this bill today as originally thought and intended. Instead, they spent the day haggling over whether to add energy tax breaks to the bill. Democratic Senate Majority Leader Harry Reid wanted the bill passed today (and most sources say it would have), but Republican Senator John Ensign wouldn’t let the bill go to a vote without the addition of his pet project, $7 billion in renewable energy tax cuts.
Encouraging the use of renewable energy sources is a laudable, noble goal. But what has it to do with the foreclosure crisis? Nothing. Senator Ensign is trying to tack his tax credit bill onto the foreclosure assistance bill simply because he knows foreclosure assistance will pass, and his tax credits plan likely wouldn’t, unless it is attached to a popular, will-pass measure.
American homeowners are hurting, and badly in many places. I don’t often like to sound like I’m commenting on politics here. It isn’t the place. But this is just truly depressing news. It seems our elected officials still don’t get it. Some of them would still rather wrangle and scrap over pet projects with little chance of success than get behind a much-needed bill that was sure to pass anyway and will help tens of thousands of truly hurting Americans.
By the time the Senate returns from the Independence Day holiday to deal with this bill again, tens of thousands more Americans will have received a foreclosure notice on their home. The bill will almost certainly pass, even with Ensign’s tack-on tax credits. For shame, Senators. I wonder which of Ensign’s ‘close friends’ and business associates stand to benefit from the $7 billion he’s going to hand out for renewable energy sources?
Related Posts on The North Phoenix Agent Blog
Having Low Credit Score is Expensive
June 25, 2008
My mortgage lender friend Shailesh Ghimire posted a great little article recently that includes a chart showing how much extra you’ll pay for a home mortgage at varying credit scores. Having a FICO score below 620 will cost you about $5,500 extra in lender fees. Yikes! The same is true for car loans, credit cards and other consumer debt.
View the entire article on his website the AZ Mortgage Guru.
Updated – As of July 14, 2008, FHA loans have risk-based pricing on their mortgage insurance. Again, it’s more expensive to get a loan if your credit isn’t so good. Click to read the AZ Mortgage Guru’s explanation of risk-based PMI on FHA loans.
Related Posts from Other Bloggers
Dear HUD, Stop Being a Bully
June 17, 2008
HUD’s at it again, trying to ban down payment assistance programs. You can see the history of HUD’s efforts to squelch homebuyers’ efforts to catch hold of the American Dream in my previous blog entries and you can see AmeriDream’s reaction on their website or Nehemiah’s reaction in a Conde Nast online publication called Portfolio.com.
HUD’s contention is that down payment assistance artificially inflates the price of homes. They also point to the higher default rates of homeowners who used down payment assistance to buy their home. I have a lot more to say on this subject but have to run out momentarily – to show a home to a first time homebuyer, by the way, who’s struggling to save a down payment.
I say to HUD, why now? Congress is working it’s way through legislation to add further regulations to the down payment assistance programs. Why not let those efforts play out? If you’ve got a system with a few bugs, fix the bugs. Don’t scrap the system.
