Amid Rate Drops, Mortgage Applications Soar

With interest rates approaching reaching historic lows,
REALTOR®Magazine
the application volume for mortgages jumped a seasonally adjusted 48 percent last week compared with the previous
week, according to the Mortgage Bankers Association's weekly survey.

Application activity for the week ending December 19th was 124.6 percent over the same period a year ago,
the Washington, D.C-based MBA said. The spike in applications coincided with another drop in mortgage rates,
as the government's efforts to unfreeze the residential-mortgage market show further signs of having the desired effect.

Applications to refinance existing mortgages increased 62.6 percent on a week-to-week basis, while applications filed
for mortgages to buy homes increased a seasonally adjusted 10.6 percent.

Refinancings made up 83.2 percent of all applications filed last week, up from 76.9 percent the previous week.

According to the MBA survey, interest rates fell across the board:

·  Rates on 30-year fixed-rate mortgages averaged
  5.04 percent last week, their lowest level in more than five years.
  This was down from 5.18 percent the previous week.

· Fifteen-year fixed-rate mortgages averaged 4.91 percent, down from 4.93 percent
  the week before.

· One-year ARMs averaged 6.36 percent, down from 6.63 percent.

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Is Now a Good Time to Refinance?

Refinancing now sounds appealing, but for lots of people, it isn’t all that easy.
REALTOR®Magazine
Applications for refinances tripled earlier this month after the Federal Reserve promised to buy up $600 billion of mortgage debt.
And rates for 30-year fixed mortgages are falling below 5 percent – the lowest in 50 years – but many home owners will have trouble doing the deal.

Having at least 20 percent equity in a home is important. A credit score of at least 720 and a debt ratio that is less than 43 percent are both essential.

Jumbo mortgages are still expensive. A 5/1 adjustable-rate with an initial interest rate for five years and an annual reset is averaging 6.6 percent. Traditional 30-year fixed are at 7.49 percent. Home owners in this situation may have to just ride it out.
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U.S. property recovery to start by spring: Zell

Sam Zell Predicts Spring 2009 Housing Recovery.
By: Ori Lewis: Reuters.com
A revival in the U.S. real estate market, key to a recovery in the world economy, should begin by next spring, property mogul Sam Zell told an Israeli business conference on Sunday.

"I believe that in a country that continues to grow and where the population continues to grow, we will see the first signs of equilibrium in the housing market in the spring of 2009 and I will expect by spring 2010 the housing market in the U.S. will look a lot better," Zell said.

Zell is the owner of Tribune Co, publisher of the Chicago Tribune and the Los Angeles Times, which filed for Chapter 11 bankruptcy protection last week.

He declined to comment on his plans to sell the Chicago Cubs baseball team and its Wrigley Field stadium.

Zell said that with the U.S. population continuing to grow and with fewer than 600,000 building starts in 2008, over a million fewer than in each of the past 10 years, demand for houses would soon rise.

He added that after the U.S. housing market begins to stabilize over the next 12 months growth would return to other markets, as the balance of supply and demand evened out "and the staggering amount of fiscal stimulation that has been enacted around the world will have its impact."

Zell said he currently saw four global areas with a chance for investments because demand was continuing -- Brazil, China, the Middle East, and parts of eastern Europe.

"The have growth, they have political stability, they have natural resources ... and a relatively low cost of entry today," he said.

He added that the crisis was also in part due to hasty decisions being taken in the marketplace.

"We are living through our first Blackberry recession where, literally, information is instantly disseminated around the world and people, in effect, respond to it, perhaps, often without any particular caution or attention."
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Obama Team Backs Paulson Plan to Spur Homebuying Through New Securities

Obama Team Interest Encourages Treasury Mortgage Plan (Update1)
By: Robert Schmidt and Craig Torres: Bloomberg.com
President-elect Barack Obama’s economic team is expressing interest in a U.S. Treasury plan to spur homebuying through new securities aimed at driving down mortgage rates.

Incoming White House economic chief Lawrence Summers is seeking details of the proposal from Columbia Business School Dean Glenn Hubbard, who put together the plan’s foundation with Columbia’s Christopher Mayer. Mayer has briefed Federal Reserve Bank of New York staff. Timothy Geithner, head of the New York Fed, is Obama’s Treasury-secretary designate.

Obama’s encouragement is important for the program to proceed because the Treasury doesn’t want to start projects that could be abandoned after January, a Bush administration official said. The proposal, now on a fast track at the Treasury, would be the most comprehensive government effort yet to stimulate the housing market. It would accelerate the decline in mortgage rates already sparked by a Fed commitment to buy $600 billion of debt linked to home loans.

“This proposal is all about putting out the fire,” said Mayer, real-estate professor at Columbia in New York who is a visiting scholar at the New York Fed. “There is nothing else on the table that even has the possibility of preventing a large, further decline in house prices.”

4.5% Goal

The program Treasury Secretary Henry Paulson and his aides are considering would use Fannie Mae and Freddie Mac, the federally chartered mortgage financers seized by the government in September, to reduce 30-year fixed home-loan rates to around 4.5 percent, from an average of about 5.54 percent currently.

Fannie and Freddie, already the biggest sources of funding for U.S. housing, would buy mortgages at the lower rate from lenders. The government would then purchase securities issued by Fannie and Freddie that were backed by the loans.

Transition spokeswoman Stephanie Cutter said “we’re looking at a range of options targeted at foreclosure relief in the housing area.” Obama takes office Jan. 20.

While Paulson’s team is only exploring an initiative for new purchases, the incoming administration wants to go beyond that and address the record surge of foreclosures. Some industry lobbyists have urged the inclusion of refinancing for existing homeowners, up to one-fifth of whose loans are bigger than the value of their properties, estimates show.

“We’ve got to start helping homeowners in a serious way, prevent foreclosures,” Obama said in a Dec. 3 press conference in Chicago. “The deteriorating assets in the financial markets are rooted in the deterioration of people being able to pay their mortgages and stay in their homes.”

BlackRock Lobbying

BlackRock Inc. Chief Executive Officer Laurence Fink said yesterday he’s proposing to Obama that the Treasury buy new mortgages issued by Fannie and Freddie, with rates ranging from 4 percent to 4.5 percent. New York-based Blackrock was among the companies seeking to manage assets under a previous Paulson plan to purchase toxic debt, mainly linked to mortgages, under the $700 billion financial-bailout fund.

The Treasury’s new plan would be outside that fund, known as the Troubled Asset Relief Program. The department has authority to buy mortgage-backed securities, and the Fed last month pledged to purchase as much as $600 billion of debt issued or backed by government-chartered housing-finance companies.

Some analysts said that expanding the Paulson proposal to include refinancing existing mortgages would be too great a cost for the aid it would offer the housing market.

Community Activists

“It’s a much more efficient use of the government’s balance sheet to do this as a purchase program” only, said Nicholas Strand, a mortgage analyst at Barclays Capital Inc. in New York. He estimated the cost of a plan to buy 4.5 percent loans for new purchases at about $300 to $400 billion. Adding the refinance option could cost up to $3 trillion, he said.

Community activists argue that the government must step up aid for Americans at risk of losing their homes to halt the cycle of defaults and depreciating property values.

House prices nationwide began falling in the third quarter of 2006, and have continued dropping since, according to figures from S&P/Case-Shiller. Through September 2008, values were down 21 percent from the peak. One in 10 U.S. home loans was past-due on payment or in foreclosure in the third quarter, Mortgage Bankers Association figures show.

Those numbers could worsen as joblessness climbs. The unemployment rate may reach 8.2 percent next year, from 6.7 percent in November, a monthly Bloomberg News survey of economists shows.

House Prices

“The problem I’m having is, so what,” said John Taylor, president of the National Community Reinvestment Coalition in Washington. “In other words, what does this have to do with the foreclosure crisis?”

Mayer, who used to work at the Boston Fed, countered that “there is no evidence whatsoever that reducing foreclosures will help house prices.” Mayer and Hubbard say that if the government was able to lower mortgage rates by 1 percentage point it would raise housing demand by about 10 to 17 percent, “blunting” projected declines in property values.

Other government proposals have aimed at adjusting current mortgages to head off foreclosures. Federal Deposit Insurance Corp. Chairman Sheila Bair has pushed to use TARP funds for such a modification plan.

“Policy makers are coming around to the idea that these modification proposals aren’t going to have much of an effect on home prices,” said Andrew Laperriere, managing director at International Strategy & Investment Group in Washington. “So then, you look at the demand side.”
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Maybe It’s Time to Buy That First House

Time to buy a first home?
Now could be the right time to buy a first home.
By: RON LIEBER: yahoo.com newyorktimes.com
With house prices and mortgage rates down, the time may be right to buy a first home.
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.

Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.

That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.

Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.

If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.

But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.

As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.

This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.

Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.

When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”

The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.

Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.

You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.

John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.

While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”

For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.

Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”

One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.

Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.

Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.

Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.

“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
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Bernanke urges action to halt foreclosures

Federal Reserve Chairman Ben Bernanke on Thursday urged more aggressive steps to halt home foreclosures and said government-funded programs could help strapped homeowners.
By: Mark Felsenthal: Reuters.com
"Despite good-faith efforts by both the private and public sectors, the foreclosure rate remains too high, with adverse consequences for both those directly involved and for the broader economy," he said at a Fed conference on housing and mortgage markets. "More needs to be done."

Bernanke said evidence that homeowner equity is an important determinant of default rates points to a need to write down loan principal to help people stay in their homes.

"Principal write-downs may need to be part of the toolkit that servicers use to achieve sustainable mortgage modifications," he said.

The U.S. economy has been in recession since December 2007, experts determined this week, with little hope for a speedy recovery as losses and defaults continue to roil housing and financial markets.

Bernanke painted a grim picture of strains for homeowners. As many as 20 percent of borrowers owe more than their homes are worth, he said. Lenders appear to be on track for 2.25 million foreclosures in 2008, compared with an annual pace of 1.0 million before the crisis, he added.

Government rescue efforts to date have emphasized stabilizing financial markets with capital infusions aimed at restoring bank health. But those measures have failed to stimulate any significant rebound in lending, and momentum is growing for relief for strapped homeowners.

Bernanke said that steps that stabilize the housing market will help stabilize the broader economy.

The Fed chairman said a number of proposals, all using public funds, hold promise for slowing foreclosure rates.

These include a Federal Deposit Insurance Corp plan that would reward participating lenders by sharing the cost of defaults on restructured loans. The FDIC, the bank regulatory agency that manages the fund that insures bank deposits, says the plan would prevent 1.5 million foreclosures.

The plan has the merits of standardizing the loan restructuring process and of keeping the restructured loans in the hands of the company collecting payments, meaning the government would only be involved only when a re-default occurs, he said.

Bernanke also said a program aimed at putting delinquent borrowers into new home loans insured by the Department of Housing and Urban Development's Federal Housing Administration might attract more participants if the Treasury Department bought securities issued by Ginnie Mae.

Those purchases could bring down the interest rate for those loans, currently around the relative high rate of about 8.0 percent, but would require Congress to raise the federal debt ceiling, he said.

Other proposals that have potential include having the government share the cost of reducing monthly payments for borrowers or buy delinquent or at-risk mortgages in bulk and refinance them through the FHA, Bernanke said.

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U.S. Eyes Plan to Lift Home Sales

Treasury Considers Encouraging Banks to Offer Mortgages at Rates as Low as 4.5%
By: DEBORAH SOLOMON and DAMIAN PALETTA: wsj.com
The Treasury Department is considering a plan to revitalize the U.S. home market that would push down interest rates for loans to purchase a home, according to people familiar with the matter.

The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full point lower than prevailing rates for standard 30-year fixed-rate mortgages.

Government officials are under pressure to address falling home prices and mounting foreclosures, which underpin the financial crisis. The Treasury has struggled for months to come up with a plan that would ease the strains on borrowers without appearing to bail out homeowners and lenders.

The plan remains in discussion and may not be made final before the Bush administration's term ends in January. President-elect Barack Obama has said repeatedly that his administration would do more than the current one to help struggling homeowners but he has not offered specifics.

Treasury views this plan as potentially halting the slide in home prices by enabling borrowers to afford bigger loans, thus increasing demand and pushing up home values. The lower interest rates would be available only to borrowers who are buying a home, not those refinancing a mortgage.

Borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie or the Federal Housing Administration. Those guarantees apply to loans where borrowers can document their income and afford their monthly payments, steering the government away from backing loans considered risky.

The Treasury and the Federal Reserve are already working to bring mortgage rates down through a program announced last week in which the Fed will buy up to $600 billion of debt issued or backed by Fannie and Freddie, along with Ginnie Mae and the Federal Home Loan Banks. That move helped push down rates on 30-year mortgages, and applications to refinance have jumped, the Mortgage Bankers Association said Wednesday.

Benefit To Stocks
In this climate, stocks of banks and home builders drew more investor attention Wednesday, helping the Dow Jones Industrial Average rise 172.60 points, or 2.05%, to 8591.69, despite continued bleak economic news in the Fed's "beige book" survey of regional conditions.

The plan the Treasury is considering would encourage banks to issue new mortgages at lower rates by offering to purchase securities underpinning the loans at a price equivalent to the 4.5% rate.

The Treasury would fund the purchases by issuing Treasury debt at 3%, suggesting the government could make a profit on the difference.

The average rate on 30-year fixed-rate mortgages conforming to Fannie's and Freddie's standards was about 5.75% Wednesday, according to HSH Associates, a financial publisher. That's up from about 5.5% Monday but down from more than 6% before last week's announcement.

The plan is very similar to an idea floated in October by R. Glenn Hubbard and Christopher Mayer, academics at Columbia University's Business School. "I think a program to substantially bring down rates for homebuyers would be an incredibly valuable program, and I think it captures a real part of solving what has been an incredibly challenging dislocation in the credit markets," Mr. Mayer said in an interview. He estimated the idea under consideration could quickly help 1.5 million to 2.5 million people buy homes, giving a major boost to the housing market and broader economy.

The plan also could be good news for banks hit hard by the housing slowdown. In addition to having the government play the role of guaranteed buyer, financial institutions could pocket fees for making loans to buyers able to afford homes at the lower rates. That, in turn, could boost the economy and improve the weak outlook for other consumer loans, such as credit cards, that also are weighing heavily on the banking industry's profitability.

Normally, the rates lenders charge consumers, including home buyers, are determined by the secondary market, in which investors buy mortgages or mortgage-backed securities. But Treasury Secretary Henry Paulson views lowering mortgage rates as key to fixing the housing crisis; hence the mortgage-security-buying program announced last week.

"The most important thing we can do to mitigate foreclosures and progress through the housing correction," Mr. Paulson said in a speech Monday, "is to reduce the cost of mortgage finance, so more families can afford to buy a home and so homeowners can refinance into more affordable mortgages."

Fannie, Freddie, their regulator and the Department of Housing and Urban Development - which oversees the FHA - all declined to comment. "The Secretary has said repeatedly that we are looking at a number of options to help homeowners," said Treasury Spokeswoman Jennifer Zuccarelli.

The Refinancing Picture
On the refinancing front, the Mortgage Bankers Association said its index of refinance applications had tripled from the previous week, the largest increase since it began tracking such data in 1990. Applications to buy homes, which tend to be less sensitive to interest-rate movements, also increased, by a smaller amount.

Application volume remains lower than it was as recently as March. Last week's numbers are adjusted for a shortened holiday week, which can make comparisons more difficult.

The Treasury plan is similar to ideas previously floated by the National Association of Realtors and the lobby group for home builders, but has skeptics. "I don't think it's the answer to the foreclosure problem because that problem is a combination of negative equity with unemployment," said Mark Zandi, chief economist of Moody's Economy.com.

Mr. Paulson has been wrestling for months with ways to stem foreclosures. The Bush administration has supported mostly voluntary efforts to get the mortgage industry to help borrowers in danger of losing their homes and has resisted calls to use taxpayer money to bail out homeowners. Those voluntary efforts have had only a limited impact as home prices continue to fall and foreclosures to rise.

The administration has been split about its approach, with Federal Deposit Insurance Corp. Chairman Sheila Bair floating a proposal to use $24 billion from the government's $700 billion financial rescue fund to provide a federal guarantee on roughly two million modified mortgages.

Her plan was a hit with Democrats and some Republicans on Capitol Hill but fell flat with the White House, where some speculated the FDIC plan could cost $70 billion to $80 billion. Mr. Paulson has expressed reservations about the plan on the ground that it would spend taxpayer money, instead of investing it, and that it could encourage banks to foreclose and borrowers to halt payments. Treasury staff have been working on a plan to improve Ms. Bair's model, but Mr. Paulson has so far resisted implementing it over concerns that it costs too much and might not be all that effective.

Resolving the crisis is likely to fall to Mr. Obama. He reiterated his position on Wednesday, saying, "We've got to start helping homeowners in a serious way, prevent foreclosures." Some Treasury officials are frustrated that the Obama team has not provided more specifics about what it would like the Treasury to do to help homeowners.

—Robin Sidel, Ruth Simon and James R. Hagerty contributed to this article.
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Paulson Considers New Plan to Resuscitate U.S. Housing Market

Treasury Secretary Henry Paulson is considering a new plan to reduce mortgage rates in another bid to revive the U.S. housing market, a government official said.
By: Robert Schmidt and Dawn Kopecki: Bloomberg.com
The Treasury, which already has a program to buy mortgage- backed securities issued by Fannie Mae and Freddie Mac, could step up those purchases to drive down interest rates on some loans to 4.5 percent, the official said on condition of anonymity. The plan is preliminary and could change.

The deliberations come as President-elect Barack Obama pledges fresh action to help American homeowners, and follow a $600 billion initiative announced by the Federal Reserve last week to buy mortgage debt. Mortgage applications surged by a record last week and the average rate on a 30-year fixed-rate loan dropped to 5.47 percent, the lowest level since June 2005, the Mortgage Bankers Association said yesterday.

“Lower mortgage rates will allow households to fortify their balance sheets, and we will likely see consumer spending come back a little quicker than it would otherwise,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. At the same time, “it’s not going to be an instant panacea for what ails the economy,” he said.

While lowering mortgage rates to 4.5 percent would allow most homeowners to refinance into a cheaper loan, far fewer will actually qualify, said Rajiv Setia and Nicholas Strand at Barclays Capital in New York.

Can’t Force Banks

“Over 90 percent of the mortgage universe out there would be refinancable, but you can’t force banks to lend to people,” said Setia, a fixed-income strategist for Barclays.

The Bush administration has been faulted by Democrats and consumer advocates for failing to take sufficient steps to stem record home-loan foreclosures this year. Federal Housing Finance Agency Director James Lockhart has been prodding private mortgage servicers and bond investors to cooperate with government efforts to modify or refinance loans for troubled borrowers.

Treasury “keeps nipping at the edges to come up with a wholesale response, but always ends up with a partial response,” said John Taylor, president and chief executive officer of the National Community Reinvestment Coalition in Washington. “Regardless of whatever rhetoric Paulson keeps throwing around, foreclosures continue to go up.”

Brookly McLaughlin, a Treasury spokeswoman in Washington, declined to comment.

Paulson’s Deals

Paulson last December brokered a deal with banks and mortgage servicers to fix interest rates on some subprime loans for five years. He put together an industry-led coalition called “Hope Now” to help Americans at risk of losing their homes. He first resisted, then accepted, foreclosure relief as part of the $168 billion economic-stimulus package passed in February.

House prices in 20 U.S. cities declined in September at the fastest pace on record. The S&P/Case-Shiller home-price index dropped 17.4 percent from a year earlier. Foreclosure filings in October were up 25 percent from a year ago, according to RealtyTrac Inc., a seller of default data.

Washington-based Fannie and McLean, Virginia-based Freddie, seized by FHFA on Sept. 6 after examiners found the companies’ capital to be too low or of poor quality, own or guarantee about $5.2 trillion of the $12 trillion U.S. home-loan market.

Only Helps Agencies

Strand, Barclay’s head of agency mortgage bond strategy, said between 20 percent and 25 percent of U.S. loans originated in 2006 and 2007 are currently under water and wouldn’t qualify for refinancing through Fannie and Freddie, which require borrowers to maintain at least 3 percent equity in their homes.

“So this would help, but it only helps agency borrowers,” Strand said. “I don’t see how this would help other non-agency borrowers who essentially can’t even get a mortgage at this point.”

Agency mortgage securities are guaranteed by federally chartered Fannie or Freddie, or by government agency Ginnie Mae.

Yields over benchmarks on agency mortgage bonds have widened as mortgage rates tumbled. The difference between yields on Washington-based Fannie’s current-coupon 30-year fixed-rate mortgage bonds and 10-year Treasuries widened to as high as 208 basis points yesterday, the closing level the day before the Fed’s announcement. A basis point is 0.01 percentage point.

Bloomberg current-coupon indexes represent the average of yields for the two groups of mortgage bonds with prices just above and below face value, the ones lenders typically package new loans into. The spread helps determine the rates offered to homeowners on new prime mortgages of $417,000 or less in most areas, and up to $625,500 in high-cost locations.

Increasing Portfolios

When taking over Fannie and Freddie, the largest U.S. mortgage-finance companies, Paulson said that he would direct the firms to increase their $1.5 trillion mortgage-asset portfolios and have his department start buying their home-loan bonds to help lower the cost of home financing.

Last week, the Fed announced plans to buy as much as $500 billion of agency mortgage securities, as well as $100 billion of Fannie, Freddie and Federal Home Loan Bank corporate debt.

Amid Congressional criticism of “Hope Now,” Paulson asked lawmakers in July to authorize him to purchase equity stakes in Fannie Mae and Freddie Mac as a way of boosting confidence in the mortgage lenders and expanding credit. At the time, he told Congress he wouldn’t need to use the authority because simply having it would be enough - less than two months later he was forced to take the two over.

Paulson then pushed Congress to pass a $700 billion plan to buy toxic mortgage investments from banks, recognition that previous plans to aid the financial and housing markets had failed. He has used almost half of the Troubled Asset Relief Program to inject capital into financial firms, which has yet to result in an increase in bank lending.

Lawmakers criticized his announcement last month to abandon the original intent of the TARP, saying Paulson had failed to use the funds to aid homeowners. The Treasury chief last week reiterated that his department was studying ways to use TARP money to stabilize the housing market.
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Obama vows to green the White House

He hopes to show the American people that gaining greater energy efficiency in your home is "not that hard."
By: Megan Treacy: Yahoo! Green
In his interview with Barbara Walters, Barack Obama said one of his first tasks when he moves into the White House is to make it green.

Obama said he plans to sit down with the chief usher and evaluate the mansion's energy efficiency. He hopes to show the American people that gaining greater energy efficiency in your home is "not that hard."

A lot of people have proposed ideas on how Obama could make the White House eco-friendly, like turning the lawn into an organic garden, but this step that he is taking is most important. If he's going to ask the American people to conserve and make changes in their homes, he also has to do it.

I'd personally like to see him install energy and lighting-management systems, which have been proven to go a long way in cutting energy use and costs. Also, installing some renewable energy sources like solar PVs or rooftop wind turbines would be a great example.

We'll be watching closely to see what changes he ultimately makes.
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Top 10 Things to Expect in the Housing Market in 2009

Prepare yourself for the challenges - and opportunities - of 2009 by getting familiar with what to expect in the housing market.
By: FrontDoor.com
Following the too-good-to-be-true housing boom in the first half of this decade, 2008was a dose of reality. The subprime mortgage crisis and the collapse of major financial institutions made this year a tough one for real estate. Expect 2009 to be filled with more change and adjustment in home values and expectations.
On a positive note, help is on the way from the Feds, and some experts say a slow recovery could begin in late 2009. Prepare yourself for the challenges - and opportunities - of 2009 by getting familiar with what to expect in the housing market.

1. Continued market adjustments.
With home prices in some markets having reached astronomical levels, it was inevitable a reset button be pushed. Sellers will continue to be challenged in 2009 as the inflated pricing of years past adjusts to normal levels. With banks and builders willing to slash prices to sell a backlog of foreclosures and new homes, individual sellers will have to price their homes competitively.


2. Action from the Obama administration.
Obama's plan to help the housing sector includes a 10 percent mortgage tax credit for homeowners who don't itemize their taxes and a crackdown on abusive lending practices.


3. More assistance programs for homeowners in danger of foreclosure.
While the federal government is attempting to reduce foreclosures, a report released by the Joint Economic Committee predicts 2 million foreclosures in 2009. Homeowners who are at risk should take steps to avoid foreclosure.


4. Some calm to the chaos of the banks' restructuring.
This should cause loan modifications and short sales to get easier, and will also (eventually) decrease the number of bank-owned properties on the market.


5. Thorough reviews of mortgage applications.
Before the subprime mortgage debacle, you didn't have to prove you could afford to borrow $200,000 for a home and you didn't need a down payment. Those days of sketchy lending practices are gone. Lenders now require potential borrowers to provide extensive income and expense documentation. Homebuyers with the best credit will get the lowest interest rates. Take steps now to get your finances in order and boost your credit score.


6. Low prices and low interest rates.
2009 could be the time for reluctant homebuyers to act, as this is perhaps the last year of the best buying opportunity in recorded economic history.


7. Cool tech tricks and tools for the real estate obsessed.
As homebuyers turn to the Web more and more for their real estate needs, video, webcasts and mobile search tools are becoming more prevalent. Sellers should consider using these cutting-edge tools to make their homes stand out.


8. Wiser consumers.
After facing this foreclosure crisis, buyers, sellers, real estate agents and even tenants will have a deeper understanding of real estate, mortgage and credit, which they can use to make better decisions and be more self-protective in the future.


9. Leaner, greener homebuying.
Across the board, homebuying is becoming more eco-friendly, from transactions being conducted digitally to buyers opting for smaller homes within walking distance of school and work.


10. An increase in consumer confidence.
As the year goes on and we near the projected end of the recession, sellers can breathe a sigh of relief as buyers regain confidence in the market.
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