Marc's Mortgage Matter's

Subject: How to start each day with a positive outlook


1. Open a new file in your computer.
2. Name it "Barack Obama."
3. Send it to the Recycle Bin.
4. Empty the Recycle Bin.
5. Your PC will ask you: "Do you really want to get rid of "Barack Obama?"
6. Firmly Click "Yes."
7. Feel better?      GOOD!

The latest fallout from Bank of America’s Countrywide acquisition is that the trustee for a securitization is suing BofA to repurchase $1.75 billion in loans. The suit involves an original Countrywide pool of 4,484 loans, a stunning 46% of which have defaulted or are now 60 days or more late. The trustee also states that over 65% of the loans didn’t conform to the underwriting guidelines.

This raises the question: (a) Was Countrywide really bad at establishing sound credit standards, or (b) were the standards okay but there were too many exceptions? A third possibility is that (c) the guidelines were okay and the exceptions okay, but they were just victims of a collapsing housing market. Countrywide did so many things well for so long that it’s hard to understand what went wrong at the end. Yes, housing prices collapsed, but lots of mortgage lenders survived. The housing crash was a big part of what happened, but it wasn’t the only thing.

For millions of homeowners, the bursting of the housing bubble seems like a never-ending nightmare. But in just another month, a new chapter of that saga may begin for homeowners and potential buyers in high-priced real estate markets.

The latest bad news for housing comes from the federal government, which is reducing the size of mortgage loans that are eligible for government guarantees. Although everyone knew the move would come eventually, hopes that the market would already have recovered by the time limits moved back down have proven overly optimistic.

Make it a jumbo
In 2008, Congress temporarily raised the upper limit on government-backed loans to $729,750. That allowed Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) to cover homes in many high-priced areas where the former limits were inadequate.

But on Oct. 1, the limit will drop back to $625,500. If you live in an average real estate market, that may not sound like a huge hardship, as it may cover only the most expensive homes in your area. But in the highest-cost areas of the country, that limit isn't nearly as extravagant as it sounds -- and the move will force many would-be homebuyers to turn to the more expensive jumbo mortgage market to get financing. And with many banks taking 60+ days to process and fund new mortgages, that effectively means that time has just about run out to take advantage of the higher limits.

Watch out
As tough as the housing market has been in the past several years, it seems like new obstacles keep coming up. With the new lower jumbo-loan limits approaching, it may be a matter of time before some broad new initiative attempts to tackle the fundamental question of making today's low mortgage rates available to anyone who wants to refinance. Until that happens, homeowners may have to keep waiting for a home-price recovery.

If you bought Bank of America stock in 2003, you’ve lost about 81% of your money. If you’d bought stock in Apple, you be up 4,680%, for an average annual gain of 56%. If you’d put $10,000 into BofA, it would be worth about $1,800, but if you’d put $10,000 into Apple, it would be worth a bit over $500,000.

Is it possible that tiny Napa Community Bank ($167 million in assets) is the strongest bank in California, and maybe the entire U.S.? It is! This little wine country bank is owned by Dutch banking giant Rabobank, one of the only banks in the world with a Triple-A rating from all three rating agencies.

David Sandwith has been trying to unload his seven-bedroom house on Mercer Island, Washington, since 2009, listing it first for $32 million, then cutting the price to $28.8 million last year. After not receiving any acceptable offers, he’s putting it up for auction.

“I have a growing family and I have opportunities that I want to pursue in my life, and that doesn’t necessarily mean that I will be located here in the greater Northwest,” Sandwith, 41, said in a telephone interview. “The time is right for us to sell the home.” Wealthy Selling Homes Con't. 

Last weeks update on disposable personal incomes reminded me of some charts on household income seen at a conference

My data source is the Census Bureau, which publishes a quintile breakdown of data from 1967 through 2009 (see Table H.3).

 The pie chart here shows that the top fifth of households in 2009 took home 50% of the nation's income. The middle fifth received 15% and bottom fifth a mere 3%.

The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five percent of households.

Most people think in nominal terms, so the first chart below illustrates the current dollar values across the 42-year period. (The phrase "current dollar" is econospeak for the nominal value of a dollar at the time received — not adjusted for inflation.)

All twenty metro areas with monthly house price increases in Case-Shiller

On a month-to-month basis, all metro region in the Case-Shiller Home Price Index for June 2011 showed price increases. On the other hand, we saw year-on-year housing declines across 20 major US metro areas of 4.5%. This is slightly better than the 4.6% registered last month. In the narrower Composite-10 series, year-on-year declines also declined slightly to 3.8% from 3.9%.

Below are charts with more information.

Changing demographic patterns and a rapidly aging population have “major implications” for policy and politics, says a Pew Center on the States infographic. The oldest states, which include Maine, Vermont , West Virginia and New Hampshire may be even more pressed for time when it comes to preparing for long-term care and other challenges that come with the aging baby boom.

To give some magnitude to the aging of the baby boom population, Pew produced a series of “population pyramids” to show exactly how age stacks up state by state, and which states will bear the largest aging burdens as the median age moves away from 30s and into the next decade.

With the U.S. median age just over 37 and the median age in older states such as Maine at nearly 43, the infographic shows each state by the ages and male to female ratio of its residents. The complete breakdown also includes a comparison between the U.S. and several other countries, finding that the U.S. has a high median age and defined baby boom when compared with developing nations such as Afghanistan and Mexico.

View the complete infographic.

Labor Day came and went this week, and the administration has turned an eye toward at least one of the two most intractable problems facing the economy: joblessness. The other problem is the poor state of the housing market, and there are some rumors that a new plan may be afoot, either from the administration or perhaps in conjunction with other agencies, to promote a refinance plan for potentially millions of borrowers. The Federal Reserve is thought to be pondering a new plan to foster economic growth. Meanwhile, the European debt crisis bombed stock markets and drove investors back to the safety of US Treasury offerings, pressing interest rates down to record lows.

In other words, things are about the same as they have been on a number of occasions over the past three years. The more things change, the more they seem to stay the same.

There are few signs that the economy is building the kind of momentum needed to significantly lower unemployment, and time is running short on hopes of seeing aggregate GDP growth near 3% for the year. The third quarter comes to a close in just a few weeks' time, and there has been little strength to talk about, but only perhaps less-bad-than-feared figures as growth stumbles along.

Low rates remain only an attractive mirage for many borrowers, and rumblings about various refinancing plans are back in play, from academics and others. So many ideas and plans to assist homeowners have been devised and then shelved or ignored. How many homeowners would be on more solid ground now if the plan had been running for a 1-2 years already?

This week, President Obama outlined a near-half-trillion dollar plan to put Americans back to work. We'll see how that all plays out, given the contentious Congress and fiscal trouble in which we find ourselves. In the meanwhile, some 414,000 new applications for unemployment benefits were filed during the week ending September 3, a figure which may increase somewhat as the effects of Hurricane Irene and tropical storm Lee continue to trouble much of the east coast. We have dropped below the important 400K threshold just once since late spring -- and only by 1,000 applications -- and are in a pretty flat holding pattern at a poor level.

No Joke this week here - 9/11 is too damn bad and too darn sad! 

Have we corresponded or spoken in past 60 days? If not, call me for updated information and options on 15 year fixed terms. It might make big time "cents" - can't hurt to ask... email me!