Archive for October, 2008
REVERSE MORTGAGES LIMIT RISES
Related Posts: Credit & Finance, Government
hiOn Nov. 1, the limit on FHA-backed reverse mortgages, dubbed Home Equity Conversion Mortgages (HECMs), rises to $417,000 nationwide. The new rules will institute a 2-percent cap on origination fees for the first $200,000 of the loan amount or a 1-percent ceiling for higher amounts, with a $6,000 inflation-adjustable limit. Additionally, seniors will be allowed to use such loans to purchase a new property and extract equity from co-operative properties, and lenders will no longer be allowed to sell annuities and other financial products along with the mortgage.
Source: Christian Science Monitor, Margaret Price (10/27/08)
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Fannie Mae and Freddie Mac’s conforming loan limit increases
Related Posts: Credit & Finance, Government, Real Estate News
hiTo stimulate activity in the housing market, the Mortgage Bankers Association plans to request a permanent increase in Fannie Mae and Freddie Mac’s conforming loan limit to $625,500 from $417,000. Speaking at the MBA meeting on Oct. 20, Garry Cipponeri of Chase Home Finance LLC said liquidity is critical, noting that jumbo loans are hard to come by in pricey markets such as California and New York. Recently, Congress temporarily increased the loan limit to $729,500, where it will stay until the end of 2008.
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U.S. working on plan to help homeowners refinance
Related Posts: Real Estate News
hiWASHINGTON – Oct. 24, 2008 – Federal regulators told Congress Thursday they’re working on a plan that could help many distressed homeowners escape foreclosure in a global financial crisis that Federal Reserve Chairman Alan Greenspan warned will get worse before it gets better. Greenspan called the banking and housing chaos a “once-in-a-century credit tsunami” that led to a breakdown in how the free market system functions.
Accused of contributing to the meltdown, but denying that it was his fault, Greenspan told a House panel the crisis left him – an unabashed free-market advocate – in a “state of shocked disbelief.”
Neel Kashkari, who is overseeing the government’s $700 billion financial rescue effort, told the Senate Banking Committee that the new plan could include setting standards for changing mortgages to make them more affordable and giving loan guarantees to banks that meet them.
“We are passionate about doing everything we can to avoid preventable foreclosures,” he said.
“Loan guarantees could be used as an incentive for servicers to modify loans,” Bair said. “By doing so, unaffordable loans could be converted into loans that are sustainable over the long term.”
The FDIC is working “closely and creatively” with the Treasury Department on such a plan, she said.
Greenspan told the House Oversight Committee he was wrong in believing that banks would be more prudent in their lending practices because of the need to protect their stockholders.
Some critics have blamed him for contributing to the problem by leaving interest rates too low for too long and for failing to regulate risky banking practices.
Committee Chairman Henry Waxman, D-Calif., suggested that Greenspan contributed to “irresponsible lending practices” by rejecting appeals that the Fed intervene to regulate a surging subprime mortgage industry. Waxman proved himself to be a poartison hack rather than a problem solver.
“The list of regulatory mistakes and misjudgments is long,” Waxman said of oversight by the Fed and other federal regulators overseen by the democratic congress.
Committee members accused present and past federal regulators for not doing more to stop abusive practices or to go after wrongdoers.
Christopher Cox, chairman of the Securities and Exchange Commission, acknowledged to the House panel that “somewhere in this terrible mess, laws were broken.”
He said the government was doing the best it could to identify and pursue lawbreakers.
In the hearing before the Senate panel, Kashkari, the Treasury official overseeing the government’s over $850 billion bailout program, said the administration was making “tremendous progress” in carrying out the bailout program enacted earlier this month.
As a result, there have been “numerous signs of improvement in our markets and in the confidence in our financial institutions,” he asserted.
Still, Kashkari cautioned that “while there have been recent positive developments, the markets remain fragile.”
The administration must move to resolve the deepening financial crisis swiftly and aggressively, said Banking Committee Chairman Sen. Christopher Dodd, D-Conn. Otherwise, “volatility and paralysis” will reign in the markets, he warned.
So far, the government has dealt only with the symptoms of the debacle, Dodd,. part of the problem, argued.
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Warren Buffett says Buy Now ….and Buy American!
Related Posts: Credit & Finance, Real Estate News
hiWarren Buffett wrote an article on Friday in the New York Times. It’s very simple, direct, and to the point which is typical of his style for sure. Here’s a quote from the article that gets to the heart of it…
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense.
He makes his point using examples from history including the depression of the 1930s. During that season, “the bottom” of the market happened 9 to 12 months BEFORE most people actually “felt good” about it. The market had risen over 30% before most investors re-entered the market.
Buffett’s article was focused on stock investments in US companies, but the same logic clearly applies to real estate investments as well. This is one of the most difficult times in the last 100 years of US history, BUT you can make huge gains in this market if you make your wise investments now.
Florida Real Estate and especially the Tampa Bay Area no exceptions. If you look forward 5 t 7 years from now, home values in Sunny Florida will have likely doubled from their current low levels. If you are in a position to look at the long term at all, a huge gain awaits.
Here’s a link to the entire Warren Buffett Article.
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Government Takes $250 Billion Stake in Banks
Related Posts: Credit & Finance, Government, Real Estate News
hiThe U.S. Treasury announced plans today to purchase up to $250 billion in preferred stock from the nation’s top banks. The move is part of a plan that President Bush says will help prevent recession and preserve the free market.
“Government owning a stake in any private U.S. company is objectionable to most Americans – me included,” Treasury Secretary Henry Paulson said in a statement. “Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable. When financing isn’t available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop.”
Nine major financial institutions have already agreed to the voluntary plan. Combined, these institutions will receive $125 billion in capital from the government. The banks are:
- Goldman Sachs Group Inc.
- Morgan Stanley
- J.P. Morgan Chase & Co.
- Bank of America Corp.
- Citigroup Inc.
- Wells Fargo & Co.
- Bank of New York Mellon
- State Street Corp.
As part of the voluntary program, the government will buy stock “on attractive terms that protect the taxpayer,” according to a joint statement by the Treasury, Federal Reserve, and FDIC.
The shares be non-voting, unless the matter directly affects the government’s rights as a shareholder. Banks that agree to be part of the program will accept restrictions on executive compensation while the government is holding the stock.
Paulson said taxpayers should expect a “reasonable return” from the stock and said the government will also receive warrants to buy additional stock from institutions participating in the program.
“The actions today are aimed at restoring confidence in our institutions and markets and repairing their capacity to meet the credit needs of American households and businesses,” Federal Reserve Chairman Ben Bernanke said in a statement.
Source: U.S. Treasury, Wall Street Journal
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