Paul's Blog

Renovation / Rehab Loans - FHA 203k streamlined explained

2008-10-15T13:16:30Z

I think this product deserves some more attention so I decided to repost. We've had much success with it in the last recent couple months. The closings don't appear to be delayed much if any because of the product. We've been running into 45-60 day escrows because of last minute problems with buyer paperwork or banks not responding. Other than that, smooth sailing! It's proven that when working with buyers not only do they need their own down payment, but they also should have monies available for expenses incurred on top of what's financed through the loan as problems arise mid project. Just a word of caution.

203k STREAMLINE

Used for minor cosmetic work
Should ideally be used for no more than 3 jobs total
No consultant / engineer / architect required
Property cannot be vacant for more than 30 days.
Work must be completed within six months.
Work must be professional.
If job requires a permit, borrowers must get a permit and a sign-off.
Work must commence within 30 days from closing.

Eligible Repairs & Improvements

Roofs, gutters and downspouts
HVAC systems (heating, venting and air conditioning)
Plumbing and electrical
Minor kitchen and bath remodels
Flooring: carpet, tile, wood, etc.
Interior and exterior painting
New windows and doors
Weather stripping & insulation
Improvements for persons with disabilities
Energy efficient improvements
Stabilizing or removing lead-based paint
Decks, patios, porches
Basement completion and waterproofing
Septic or well systems
Purchase of new kitchen appliances or washer / dryer

Repairs Not Permitted

Landscaping or yard work
Major remodeling
Moving a load-bearing wall
Room additions or add-ons to the home
Fixing structural damage

Disbursement of Payments

Maximum of two payments to each contractor, including the borrower, providing the borrower works under a "self help" plan.
No more than a 50% advance is allowed.
Do-it-yourself allowances do not include labor; only materials costs are allowed.
Final payment is paid after submission of evidence of payment to sub-contractors / suppliers or other possible lien claimants.

Good Luck and as always feel free to contact me directly with any questions you might have regarding my postings or products!

FHA down payment clarification - SACRAMENTO

2008-09-23T12:57:23Z

I'm coming across many buyers and agents asking about what can be used for down payment now that the seller assisted down payments are gone. I have copied below from the HUD handbook as to what are acceptable down payments. As you can see, buyers can "borrow" these funds as logn as they are ones that are allowed.

Collateralized Loans. Funds can be borrowed for the total required investment as long as satisfactory evidence is provided that the funds are fully secured by investment accounts or real property. Such assets may include stocks, bonds, real estate (other than the property being purchased), etc.

In addition, certain types of loans secured against deposited funds, such as signature loans, the cash value of life insurance policies, loans secured by 401(k)s, etc., in which repayment may be obtained through extinguishing the asset; do not require consideration of a repayment for qualifying purposes. However, in such circumstances, the asset securing the loan may not be included as assets to close or otherwise considered as available to the borrower.

An independent third party must provide the borrowed funds. The seller, real estate agent or broker, lender, or other interested third party may not provide such funds. Unacceptable borrowed funds include signature loans, cash advances on credit cards, borrowing against household goods and furniture and other similar unsecured financing.

HARD MONEY USING ARV

2008-09-23T00:44:23Z

I was curious to see what people have out there when it comes to hard money. I am interested to see what LTV private money lenders will finance using After Repair Value. I heard that there are lenders out there that will actually let you do 100% purchase off sales price based on the ARV. The #s have to work of course. I am interested to see what you guys have out there! Please Post!

Record 1.2 million homes hit by foreclosure

2008-09-05T10:13:27Z

I think these numbers were expected. On a positive side, we should continue to see activity from first time home buyers and investors trying to take advantage of the more affordable market.

Loans in foreclosure have doubled over the past year, while delinquency rates continue to soar.

A record 1.249 million homes were in foreclosure during the second quarter of 2008, according to a report released Friday by the Mortgage Bankers Association.

And new foreclosure proceedings were started on about 490,000 of the 45 million home mortgages serviced by MBA members. That's up 9% from the 448,000 starts recorded in the previous quarter.

Mortgage delinquencies continued their grim rise during the three months ended June 30, with 2.9 million homeowners falling behind on their loan payments, apart from those already in foreclosure. Compared with a year ago, delinquencies are up more than 25%, while loans in foreclosure have nearly doubled. Both levels were the highest ever recorded by the survey.

"The national foreclosure numbers continue to be driven by the hardest hit states continuing to get much worse," said Jay Brinkmann, MBA's Chief Economist. "The increases in foreclosures in California and Florida overwhelmed improvements in states like Texas, Massachusetts and Maryland."

California and Florida accounted for 39% of all foreclosures started during the quarter. Those two states as well as six others - Nevada, Arizona, Michigan, Rhode Island, Indiana, and Ohio - all had foreclosure start rates higher than the national average.

Subprime still sinking

Once again, subprime adjustable rate mortgages (ARMs) weighed heavily on the down side. Subprime ARMs, which represent only 6% of all loans outstanding, accounted for 36% of all foreclosures started during the quarter. In other words, 6.63% of all subprime ARMs went into foreclosure during the period - nearly 20 times the rate for fixed rate prime mortgages.

"Even if subprime stabilizes," said Mike Larson, a real estate analyst with Weiss Research, "I would anticipate that prime loans would start to play catch-up. We're not just confronting a credit crisis any more, we're dealing with broad economic problems that are contributing to delinquency rates."

On the bright side, Larson says the deterioration in home prices has slowed in the last couple of months, which could help delinquencies level off as well.

"They'll continue to worsen," he said, "but not at the pace of the last year."

Nevertheless, Jay Brinkmann warned that it would be fruitless to try an call a bottom in this market any time soon.

GMAC to cut 5,000 mortgage related jobs

2008-09-03T18:43:21Z

The trend has been steadily pointing towards mortgage brokers being fazed out. I think many major companies will follow suit and reduce retail and completely shut down wholesale divisions. Hopefully in the process we don't hit more of a slump due to transition in lending practices.

The lender says it plans to shrink its mortgage lending business because of the weak housing market.

Lender GMAC Financial Services said Wednesday it will close all of its 200 retail offices and lay off about 5,000 employees as part of plan to reduce its mortgage lending and servicing because of the housing market downturn.

The majority of the layoffs are slated for GMAC's mortgage lending division, Residential Capital LLC, known as ResCap, and will reduce work force at the unit by 60%, the company said.

In the first half of the year, ResCap's U.S. mortgage loan production was valued at about $35.7 billion, down nearly 39% from the same period in 2007.

"While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment," Tom Marano, ResCap's chairman and CEO, said in a statement. "Conditions in the mortgage and credit markets have not abated and, therefore, we need to respond aggressively by further reducing both operating costs and business risk."

Some 3,000 employees may get their pink slips this month. The rest are expected to lose their jobs by the end of the year, the company said.

ResCap is also the latest in a long list of lenders that have stopped using external, wholesale brokers to originate loans. Wachovia Corp. (WB, Fortune 500) exited the wholesale mortgage lending business in July, for example, while rival Bank of America Corp. (BAC, Fortune 500) got out of the business several months ago.

Richfield, Minn.-based ResCap will continue lending through brands such as Ditech or GMAC Mortgage Direct, which customers can reach online or through call centers, said spokeswoman Jeannine Bruin.

"We're not going to have a retail presence where customers walk in the door," Bruin said. (But) "we are very much still originating loans and servicing the customer."

To cover severance costs, ResCap will take a charge of $90 million to $120 million against earnings.

In July, GMAC said ResCap's second-quarter losses widened to $1.86 billion from $254 million in the prior-year period. To try to reverse the trend, ResCap took steps to cut back the size and risk of its balance sheet, and boosted loan loss provisions.

Like many lenders have done since the credit market dried up, ResCap has focused on originating home loans that it can resell to government-sponsored mortgage companies Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

ResCap has also virtually abandoned the market for subprime loans. In the first half of this year, ResCap made just 13 subprime loans, compared with nearly 26,000 in the same period a year earlier.

At the end of June, 14.6% of ResCap's U.S. home loans were at least 60 days past due. That's up slightly from the close of the first quarter, but down from 15.5% on June 30, 2007.

New York-based GMAC is controlled by Cerberus Capital Management, but automaker General Motors Corp (GM, Fortune 500). still holds a 49% stake in the business.

CalHFA Matrix - guidelines

2008-08-21T12:21:16Z

I wanted to followup on my last post about CalHFA. I have attached a link to the lending matrix for secondary financing.

http://www.calhfa.ca.gov/homeownership/insurance/ug-sub_matrix.pdf

Program Eligibility Information

Borrower Requirements

In order to qualify for a CalHFA loan, certain eligibility requirements must be met. They are:

Be a first-time homebuyer, which is defined as a person(s) who has not had an ownership interest in their primary residence during the previous three years.
(Requirement is waived if property is located in a Federally designated "Targeted Area*". To find the boundaries of an eligible Targeted Area go to http://nkca.ucla.edu/Master.cfm?Content=Map&ZoomTo=tract. Select County, then enter the six-digit census tract number. A map outlining the boundary streets will appear. (Note: do not enter the decimal point and use leading zeroes, e.g. Alameda- 407500; Los Angeles- 570603 San Diego- 010012; Tulare 002202))

Have an annual household/family income that does not exceed income limits for the family size and county in which the home is located.

Have enough money to cover the required down payment (usually 3% to 5%) plus closing costs. Some restrictions apply to gifts.
- To help with this requirement, CalHFA offers down payment assistance programs and programs to help with closing costs. Plus, these programs can be combined with the first mortgage programs. A list of these and other programs can be found at www.calhfa.ca.gov/homeownership/programs.

Property must be owner-occupied for the term of the loan or until sold.

Meet credit, income and loan requirements of the CalHFA lender and the mortgage insurer.

Be a citizen or other national of the United States or a qualified alien as defined by the federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA)

*Targeted Areas: Census tracts in which 70% or more of the families have income, which is 80% or less of the statewide median family income.

Update on down payment assistance - CalHFA

2008-08-20T17:09:13Z

I don't know how many of you noticed the changes to CalHFA lately but since the dissolution of Nehemiah and other seller sponsored DAPs, CalHFA tightened their guidelines a bit. It seems now if you have ltv of less then 95% to put down, you will need a 620. If your LTV is going to be higher than 95%, then you will need a 680 credit score.

Also, if you have DU approval, your max DTI is 55% regardless if you have an approval at higher ratio. Manual underwrites limit you to a max DTI of 45%.

I would recommend checking out the pricing matrix yoruself to make sure your borrower qualifies. Also, from my understanding the amount of available funds is NOT unlimited.

Good luck!

Beware the $7,500 'tax credit'

2008-08-18T11:24:38Z

There are a few key points to get out of this tax credit. First, it is an interest free loan that HAS to be repaid over 15 years, starting after 2 years of initially acquiring it. Second, and most relative, it is more of a REFUND at tax time and does not provide money up front to first time homebuyers as a down payment assistance. So, all in all I really don't see this being very helpful in lieu of DAPs out there now and clearing what is already a mountain high of inventory. I'm keeping my fingers crossed for Nehemiah to come back....

A $7,500 credit may push some new buyers into the market. But the money must be repaid, and the program probably won't be enough to jump start the housing markets.

Washington policy makers and housing industry insiders hope a new tax credit for first-time home buyers will get the moribund housing market moving again.

But most analysts agree that the program is more of a band-aid than a cure-all for the battered real estate market. What's more, others are quick to point out that the credit must be repaid, which means it's actually an interest-free loan that could get some homeowners in trouble.

"It's one of those things that are more complicated than it seems at first blush, said Allen Fishbein, director of housing and credit policy for the Consumer Federation of America. "Consumers have to make sure they understand the credit thoroughly.

The $7,500 credit is for people buying their first homes, and was passed as part of the Housing and Economic Recovery Act of 2008 and signed into law in July. To qualify for the full $7,500, individuals must earn less than $75,000 annually, while couples may earn up to $150,000. Buyers with income of between $95,000 and $170,000 are eligible for a partial credit.

The Senate Finance Committee estimates that about 1.6 million people will use the credit.

The housing industry pushed for the program. "Breaking the log jam of unsold homes is something we are very much behind," said Richard Dugas, president of builder Pulte Homes, at a news conference to discuss the program. First time home buyers represented about 20% of the market for new homes in 2007.

Realtors are also behind the credit. "[It] will help chip away at inventory levels, stabilize prices and spur [sales] activity," said Richard A. Smith, CEO of Realogy, the parent company of both Coldwell Banker and Century 21.

The industry has had success with tax credits in the past. In 1975, Congress passed a $2,000 credit for home buyers (about $8,200 in today's dollars).

"Buyers flocked to market and cleared out a then-record inventory of homes," said NAHB president Sandy Dunn. But that credit did not have to be repaid.

And the impact should extend beyond first time home buyers, according to Lawrence Yun, chief economist for the National Association of Realtors. A boost in demand for starter homes means that those sellers will be able to trade up to bigger, more expensive places, and so on up the chain.

How it works

Buyers who have not owned a home in the past three years can take a tax credit worth 10% of a home's sale price, up to $7,500, whichever is smaller.

The credit is good for homes closed on after April 9, 2008 and before July 1, 2009, and can be taken on taxes filed during 2008 or 2009. Even buyers who bought a home before the bill passed, but after April 9, can claim the credit.

Unlike tax deductions, which only offset taxes by lowering taxable income, the tax credit is a straight dollar-for-dollar deduction of your tax bill. So a buyer who would ordinarily pay $8,000 in taxes would pay just $500.

It's also "refundable," which means if a buyer's taxes are less than $7,500, the government will send them a check for the difference. For example, if a couple's income generates a tax bill of $5,000, the government will refund all of that plus $2,500.

Buyers must to start paying back the loan within two years, at a rate of no more than $500 a year for 15 years. When the the home is sold, any outstanding balance will be repaid from the profit; if it's sold at a loss and the difference will be forgiven.

And some argue that mortgage lenders will take the credit into consideration, making it easier for buyers to get a loan.

"[The $7,500 reserve] will make borrowers less likely to fall into default," said Ken Goldstein, an economist with the Conference Board, since it gives them a nest egg should they run into trouble. Still, that assumes that buyers will sock the $7,500 away rather than spend it.

No cure

Indeed, the credit comes with plenty of caveats from economists and industry analysts.

"It's not going to provide first-time home buyers with cash up front," said the Consumer Federation of America's Allen Fishbein. "You have to apply to get the credit after the fact. There's a delay before you get the financial advantage."

And there are concerns that borrowers may treat the credit as a windfall, spending it as if it doesn't have to be repaid.

"It may appear to be free money," said Fishbein. "Consumers have to have their eyes open about how this works."

Other economists caution that while the credit may be helpful, it's hardly a solution to the crisis.

"It will not turn things around," said Jared Bernstein, an economist with the Economic Policy Institute. "Given the economy, it will only push a precious few first-time home buyers over the edge right now."

Plummeting home prices will blunt any impact that the credit may have, according to Nicholas Retsinas, director of the Harvard University's Joint Center for Housing Studies. As far as he's concerned, the market is simply too soft right now for a modest measure like this to make a big difference.

"The challenge right now is as much willingness to buy as affordability," he said. "The market still has this psychological barrier because people think prices will be lower tomorrow. I don't think this can overcome that barrier."

Death of Sacramento based Nehemiah / other seller assisted down payments

2008-08-15T18:21:16Z

So here is the scoop on Nehemiah and such. Most people think that the program ends on October 1st. Let me hint you in. Most banks already dropped the program as of last week. Wells Fargo will not take any DAP applications after the 18th. So, if you have someone telling you that you have until Oct 1st to close, make sure they have a banking line that doesn't leave them and you hanging. What good is Nehemiah on Sept 30th if there is no more banks to fund the loan. Thought everyone could use this info as I am scrambling to finish all my transactions before the 29th of this month to ensure I have a bank on the secondary market that will buy the loan.

Will keep everyone posted if we figure out another way for down payment assistance.

The next wave of mortgage defaults

2008-08-13T11:47:09Z

I think many peopel were waiting for this news to come out. It's not uncommon to see people that have never defaulted with A+++ credit to start defaulting here in CA.

More borrowers with good credit are defaulting on their home loans, and that's going to make it even harder for the staggering housing market to recover.

Prime mortgages are starting to default at disturbingly high rates - a development that threatens to slow any potential housing recovery.

The delinquency rate for prime mortgages worth less than $417,000 was 2.44% in May, compared with 1.38% a year earlier, according to LoanPerformance, a unit of First American (FAF, Fortune 500) CoreLogic that compiles and analyzes residential mortgage statistics.

Delinquencies jumped even more for prime loans of more than $417,000, so-called jumbo loans. They rose to 4.03% of outstanding loans in May, compared with 1.11% a year earlier.

And prime loans issued in 2007 are performing the worst of all, failing at a rate nearly triple that of prime loans issued in 2006, according to LoanPerformance.

"The extent of how bad these loans are doing is very troubling," said Pat Newport, real estate economist with Global Insight, a forecasting firm.

Washington Mutual (WM, Fortune 500) CEO Kerry Killinger said last month that the bank's prime loan delinquencies are on the rise. As of June 30, 2.19% of the prime loans issued by WaMu in 2007 were already delinquent, compared with 1.40% of prime loans issued in 2005.

Also last month, JP Morgan Chase (JPM, Fortune 500) CEO Jaime Dimon called prime mortgage performance "terrible" and suggested that losses connected to prime may triple. For the second quarter, the bank reported net charges of $104 million for prime rate delinquencies, more than double the $50 million recorded three months earlier.

The latest shoe

Prime loans are just the latest class of mortgages to suffer a spike in failure rates. The first lot to go bad was, of course, subprime mortgages, whose problems set the housing meltdown in motion. Next were the Alt-A loans, a class between prime and subprime loans that doesn't require strict documentation of a borrower's assets or income.

Now, as prime loans are added to the mix, the resulting foreclosures could haunt the housing market for a long time, according to Global Insight's Patrick Newport.

"Home prices will drop for quite a while - maybe several years," he said.

Prices are already off nearly 20% from their 2006 highs, according to the S&P/Case-Shiller Home Price index.

And there's a strong inverse correlation between home prices and defaults, according to Lawrence Yun, chief economist for the National Association of Realtors.

"It's a feedback loop," he said. "Price declines lead to more defaults, which leads to more price declines."

More foreclosures will add to an already massive oversupply of homes on the market. Inventories are up to about 11 month's worth of sales at the current rate.

Indeed, about 2.8% of all homes for sale were vacant as of June 30, according to Census Bureau statistics. That's up about 50% from three years ago, and near historic highs.

More foreclosures, fewer loans

The failure of prime mortgages will also make it more difficult for new borrowers to find affordable loans - and that will slow sales even more. Lending standards have been tightening for months, but if prime loans start to look risky, lenders will be even more conservative about who gets a mortgage.

About 60% of the loan officers surveyed reported that they tightened lending standards for prime mortgages during the first three months of 2008, according to the April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve, which is released quarterly.

That number will likely be even higher for the second quarter, according to Mike Larson, a real estate analyst for Weiss Research. "It's already harder and more expensive to get loans," he said. "Lenders pull in their horns when things go south."

While easy credit fueled the housing boom, restricted credit is certainly contributing to the bust.

"Eventually," said Newport, "time will break the cycle. Pricing will drop enough to attract more buyers, and inventories will decline."

But there will probably more hard times ahead before markets come back into balance and recovery begins.

Update To The Wells Fargo Self Insurance Option

2008-08-11T13:02:13Z

Looks like Wells Fargo just came out stating they are not taking anything over 55% debt to income ratio as well as any loans with Downpayment Assistance after the 18th of August. So much for Nehemiah's deadline of October 1st. Below you will find the Newsflash from Wells for Correspondent lenders.

Update To The Wells Fargo Self Insurance Option

Maximum Debt to Income of 55% for loans with Self Insurance

Effective with Mandatory registrations and Best Effort locks on or after Aug. 18, 2008, Wells Fargo Self Insurance will

no longer be available for conventional conforming loans submitted utilizing either a Loan Prospector® (LP) Feedback

Certificate or Desktop Underwriter® (DUSM) Underwriting Findings report with a Debt To Income (DTI) ratio greater than

55%.

Seller Guide Sections 850 and 545.14 will be updated to include DTI requirements for LP/DU loans with Wells Fargo

Self Insurance.

All impacted loans must be purchased no later than Sept. 1, 2008. Any loan that has not funded on or before this date

cannot be purchased due to unavailability of Mortgage Insurance (MI) coverage.

Self Insurance no longer available for Downpayment Assistance Programs (DAPs)

Effective with Mandatory registrations and Best Effort locks on or after Aug. 18, 2008, Wells Fargo's Self Insurance

(Seller Guide Section 545.14) will no longer be available for loans originated in conjunction with Affordable or

Community Second Programs. These include, but are not limited to Downpayment Assistance Programs (DAPs), Up-

Front Cost Assistance Programs (UCAPs) and Housing Assistance Programs (HAPs) as outlined in Seller Guide Section. Loans locked prior to Aug. 18, 2008, must be purchased by Sept. 1, 2008.

820.35

Changes To The Home OpportunitiesSM, MyCommunityMortgage® And Home Possible®

Programs

Effective with Mandatory registrations and Best Effort locks on or after Aug. 18, 2008, the following changes are

effective for loans originated under the Home OpportunitiesSM, MyCommunityMortgage® and Home Possible®programs.

• Fixed-rate 40-year amortization terms will no longer be allowed.

• 7/1 and 10/1 LIBOR ARM will no longer be allowed.

• Home OpportunitiesSM program only: The area median income will be reduced from 120% to 100%.

The area median income for the MyCommunityMortgage and Home Possible programs remains at 100%.

Loans must fund in original commitments; relocks will not be allowed.

ATTENTION: All Correspondent Clients Aug. 11, 2008

Page 2 of 2

This information is for use by mortgage professionals only and should not

be distributed to or used by consumers or other third-parties. Information

is accurate as of date of printing and is subject to change without notice.

C08-062

Condominium Eligibility In Florida

Effective with Mandatory registrations and Best Effort locks on or after Aug. 18, 2008, the following changes are

effective for condominiums in Florida:

• Conforming condominium transactions, including the High Balance Conforming Loan Program, will no longer be

allowed with LTVs greater than 80%.

• Non-conforming condominium transaction will no longer be allowed.

Loans locked prior to Aug. 18, 2008, must be delivered by Sept. 30, 2008. Relocks will not be allowed.

‘At Risk Markets' To Be Referred To As ‘Market Classification' - Effective 8/18/08

To more appropriately reflect the purpose of the Wells Fargo At Risk Markets policy, it will be renamed ‘Market

Classification policy.' The policy is not changing; only the name, associated references, messaging and documentation

are being revised.

Loans in pipeline prior to, but re-decisioned on or after Aug. 18, 2008, as well as new registrations, will receive the new

Market Classification terminology.

FHA One-year Treasury Adjustable Rate Mortgages (ARMs) No Longer Allowed

Effective with Mandatory registrations and Best Effort locks on or after Aug. 18, 2008, FHA one-year treasury ARMs will no longer be allowed. Loans must fund in original commitments; relocks will not be allowed.

Mortgages get more expensive - again

2008-08-11T11:14:09Z

In wake of huge losses, Fannie Mae announces changes that will make home loans harder and more expensive to obtain.

The good news: Mortgage giant Fannie Mae is taking steps to shore up its finances. The bad news: You're going to pay for it when you take out a mortgage.

Fannie plays a central role in the market for home mortgages by purchasing loans, securitizing them and selling them to investors. In announcing announcing a $2.3 billion loss on Friday, it also said it would make major changes that could have a significant effect on mortgage liquidity and pricing.

The company said it will increase its fees, stop buying certain high-risk loans and charge a higher risk premium for buying loans in the declining market.

"[These actions] have raised the costs of mortgage credit and reduced its availability," said Mark Zandi, chief economist for Moody's Economy.com. "Policy makers had been hoping they would move forward to provide more credit and now they're just hoping they don't pull back."

The increases were inevitable, according to Keith Gumbinger of HSH Associates, a publisher of mortgage loan information.

"The cost of mortgage credit is getting pushed higher by the issues in the marketplace," he said. "They can't reduce their market exposure and that means more expensive mortgages."

Point taken! Times are tough

Fannie increased fees for some loans by a quarter of a percentage point, based on borrowers' credit scores and the amount of their down payments. It will charge, for example, 1% (up from 0.75%) for a buyer with a credit score of 680 paying 20% down.

And Fannie (FNM, Fortune 500) doubled its "adverse market delivery charge" to 0.5%. That is an across-the-board fee assessed against every loan Fannie buys, according to a Fannie spokeswoman. Fannie first instituted the charge this spring.

"It's very negative," said Lawrence Yun, chief economist for the National Association of Realtors. "Any time there's an additional imposition of fees in obtaining a mortgage, it knocks some potential buyers out of the market."

Fannie's smaller cousin, Freddie Mac (FRE, Fortune 500), which also announced a big loss this week, has been taking similar steps to shore up in finances and reduce its exposure to risky loans.

The additional fees imposed by Fannie will hit newcomers particularly hard, according to Yun. First-time buyers are usually most on the margins and struggling to afford a home purchase. The added fees will be passed on to borrowers and could mean quarter-point increases in interest rates.

Reducing the number of first-time buyers can have a domino effect on the market. Existing homeowners looking to trade up to bigger, more expensive homes may postpone doing so because they can't sell their present home.

Bye-bye to Alt-A loans

Fannie will also eliminate buying Alt-A loans by the end of 2008. Alt-A loans, a category between prime and subprime, accounted for about 11% of the company's loans during the last years of the boom. They have been used mostly by people who couldn't or wouldn't document their incomes, their assets or both. These buyers will find it harder to obtain financing once Fannie stops buying the loans.

According to Yun, however, the cutback in Alt-A will hurt people buying second homes to rent out or resell, rather than first time homeowners.

"These are people who often rely on their good credit to buy investment properties putting little or no money down," he said.

But removing some of them from the market will decrease demand in a market already struggling with high inventory.

Fannie and Freddie, as private companies created and sponsored by the government, have to foster home ownership while satisfying their shareholders. They have to maintain profitability or risk triggering a government rescue.

Time to lock in your mortgage rate

2008-08-05T10:03:44Z

Looks like the fed is looking to control inflation by thinking about raising or at least halting the fed rate while fears of inflation are making mortgage rates head higher. Are double digits interest rates in 12 months possible?

Home buyers may find big savings in locking in mortgage interest rates.a

Since mortgage interest rates are on the rise, home buyers can save considerable cash by locking in a reasonable rate when they find one.

During the housing boom, interest rates were extremely low - generally between 5.5% and 6.5% - and very stable. So borrowers often didn't bother to ask lenders to lock in their rates regardless of market fluctuations. If one good interest rate deal disappeared, another one was generally right around the corner.

But today the mortgage market is very volatile, and rates are trending upwards. So losing out on a good deal may mean it's gone forever. If buyers see a bargain, say experts, they should pounce.

"If you hear of a rate that seems to be much better than the rest of market, get it in writing and lock it in," said Steve Habetz, a veteran mortgage broker in Connecticut.

Mortgage giant Freddie Mac (FRE, Fortune 500) reported Thursday that the average rate for a 30-year fixed stood at 6.52%, up from less than 6% in May.

Rates on the rise

A panel of analysts surveyed by Bankrate.com - including Cameron Findlay, the chief economist for LendingTree.com; Mick Larson, real estate analyst at Weiss Research; and Dan Dowling, president of United Mortgage Capital Corp. - expects rates to go up in the next six weeks.

With the threat of inflation growing and investors wary of buying mortgage securities, other forecasters have predicted rates will hit at least 7% by the end of the year.

For every half point interest rate increase, the monthly payment on a typical mortgage of $200,000 jumps nearly $70. That adds up to more than $800 a year, and $8,000 in the first 10 years of a 30-year mortgage alone.

Locking in a rate is easy, as long as you have a contract or at least a binder on a home. Just tell your mortgage broker and he or she will give you a commitment in writing. Locks are available for as long as 60 days, according to Habetz, at very low cost.

Locking in for 60 days may cost only an eighth of a point extra, turning a 6.5% loan into a 6.625% one. Paying that extra eighth of a percent makes sense if the locked rate is below market, or if you expect rates to rise.

"More than 60 days and the lender is usually looking for cash up front," said Habetz.

Habetz had an offer from Wells Fargo (WFC, Fortune 500) several weeks ago that beat anything else available. It was for a 5-year adjustable rate mortgage with an introductory rate of 4.875% - at least a full percentage point lower than competing offers.

"It lasted only two or three days," he said, "and all we had time to do was to get the customers we were already working with into the loan."

Those customers probably saved themselves $5,000 or so for every $100,000 they borrowed over the first five years. The amazing part of this story, to Habetz, was that not all his clients took advantage of the offer.

"Some of my customers said, 'That's an attractive offer. If it's that good, it will probably get better,' " he said.

Wrong. It only got worse, and those people locked themselves out of a great deal.

But locking in your rate isn't entirely risk-free. After all, rates might actually go down.

"When rates go down," said Habetz, "most lenders won't take [your rate] down with them unless rates drop substantially. Then they may give you the new rate plus an eighth of a point."

Certainty in an uncertain market

But that scenario appears unlikely.

Concerns about inflation are helping to push rates higher. "Inflation has gone from the back burner to the front," said Greg McBride, a senior financial analyst for Bankrate.com.

At the same time, nervous investors in mortgage backed securities, are demanding higher rates for buying these bonds in what they deem a very risky market. That translates into higher rates for borrowers.

So locking in a good deal now should mean a lower rate for most borrowers. And besides saving them money, a lock should take some of the uncertainty out of financing a home purchase, since buyers can determine exactly what their monthly home ownership expenses will be several weeks before closing.

"There are times in your financial life when you should be aggressive and there are times when you should be conservative," said McBride. "When you're buying a house and looking at mortgage rates, that's a time to be conservative."

Falling oil prices: The downside

2008-08-04T19:36:18Z

Found a really good article on what's happening with the recent dip in oil prices and how it affects the economy. Enjoy!

Lower prices mean less pain at the pump - but tougher times ahead for the economy.

Oil prices are falling sharply, and that's good news. But not nearly as good as you might think.

No doubt the drop, down to $120 by mid-day Monday, gives strapped consumers relief at the gas pump. Prices have dropped below $4 a gallon and could be headed toward $3.50, going by trading in wholesale futures markets. Any decline will be welcomed by Americans struggling under the burden of falling house prices, rising layoffs and stagnant wages.

But falling oil prices also suggest that the recession the U.S. has so far avoided is well on its way, as consumers pull back from the spending spree that drove economic growth earlier this decade. A weakening economy will mean more layoffs, further pressuring already reduced spending.

"There is no doubt that with gasoline prices dipping below $3.90 a gallon we have a bit of a reprieve on the energy front," Merrill Lynch economist David Rosenberg wrote in a report Monday, "but the reality is that this is a chicken and egg game because the decline is reflecting the consumer recession."

Energy use down

Perhaps the biggest factor behind the recent 18% drop in the price of a barrel of crude is sinking North American demand. Federal Highway Administration data show the number of miles driven in the U.S. dropped from year-ago levels for the seventh straight month in May.

May's decline was the third-largest monthly drop on record since 1942, says Stephen Schork, editor of the Schork Report energy and shipping newsletter in Villanova, Pa.

Americans are driving 4% less now than they were a year ago, Rosenberg writes, while energy use in inflation-adjusted terms has dropped 2% - an event he calls "extremely rare."

The pullback comes after the recent crude-price surge - the cost of a barrel doubled between Labor Day of 2007 and July 11 - seriously damaged the industrial economy, which despite its long decline remains a crucial source of better-paying jobs.

General Motors (GM, Fortune 500) on Friday posted a $15.5 billion second-quarter loss, as sales plunged 18% from a year ago. The company and rival Ford (F, Fortune 500) have slashed truck production, laid off thousands of workers and refocused on smaller cars as buyers flee the light trucks that had made the companies so much money.

Americans' decision to drive less comes at a time of rising stress. The economy has been hemorrhaging jobs and real wages, adjusted for inflation, have been flat to lower for a decade. Americans have enjoyed a rising standard of living in the meantime by borrowing - but with banks choking on subprime mortgages gone bad, the loan window is closing. Rosenberg calls a recent rise in the savings rate "a vivid sign that frugality is now replacing frivolity."

Meanwhile, the weak economy is spurring more companies to cut back. Outplacement firm Challenger Gray & Christmas said Monday that layoff announcements jumped 26% from a month ago in July. The unemployment rate recently hit a four-year high at 5.7%.

How low can it go?

One unhappy fact is that a drop in the price of oil won't bring back many of the jobs lost over the past year to the energy-cost surge. Even were gas to fall to $3 a gallon - a move that is by no means assured - no one is going to beat a path to the dealership to buy pick-ups and SUVs that are now, in many cases, being phased out. GM recently announced plans to shut four SUV plants.

On a happier note, there is hope that the decline in oil prices has just begun. While Schork says it's anyone's guess where crude will trade - "By the end of the third quarter, there's a good chance oil could be below $100 a barrel, and a good chance it could be above $150," he says - others see a chance that the commodity, having enjoyed a head-spinning runup, could also drop more than anyone expects. Economist Jim Griffin notes at the ING Investment Weekly that crude's rally earlier this year became "nearly parabolic" - a sign that the decline could be steep.

Now a return to double-digit oil may not rescue the Hummer. But as the government's fiscal stimulus program did earlier this year, it could give consumers a little more change in their pockets, either to spend, salt away - or pay down their debts.

State workers lose jobs amid Calif. budget crisis

2008-08-01T15:14:36Z

I wonder how and if this will fuel the already hot foreclosure/default housing market in California. I can't imagine that placing so many state workers on a minimum wage of $6.55 even for a month or two will ease our situation. Hopefully this is not anything long term!

SACRAMENTO, Calif. - Thousands of state workers were told to stay home Friday under an order by Gov. Arnold Schwarzenegger aimed at cutting expenses for California's cash-strapped government, but a lawsuit filed by a union claims the governor is overstepping his authority.

Schwarzenegger's order, signed Thursday as he struggled with a budget stalemate, eliminated 10,300 seasonal, contract and part-time positions. It also ordered that up to 200,000 permanent, full-time state workers will receive the federal minimum wage of $6.55 an hour in their paychecks until the budget is passed. They would then be reimbursed.

The lawsuit by the Service Employees International Union - California's largest state-employee union - said laying off workers without notice violates the state Constitution and numerous laws, including those governing seniority.

Schwarzenegger cannot decide such sweeping employment actions by "executive fiat," according to the lawsuit filed in Sacramento County Superior Court.

"The governor did an end run around the labor process and the government code," union attorney Paul Harris said.

The SEIU and another union representing state attorneys also filed unfair labor practices allegations saying the administration is trying to illegally influence ongoing contract talks.

The governor's biggest headache, however, is coming from another state elected official, state Controller John Chiang. His office cuts the paychecks for state employees and is refusing to comply with the part of Schwarzenegger's order related to wages, which would save the state far more money than the layoffs.

Schwarzenegger spokesman Aaron McLear said the governor will do whatever is necessary to make sure the state can pay its bills.

"The state Constitution and a Supreme Court decision clearly support the governor's action," he said. "He is prepared to defend this in court if necessary to protect the state's ability to meet its obligations."

Schwarzenegger said his order was needed to avoid a financial crisis until the state passes a budget. Democratic and Republican lawmakers are divided on how to deal with a $15.2 billion deficit for the fiscal year that began a month ago.

To solve the crisis, Democratic lawmakers want to raise taxes on corporations and the wealthy by about $8.2 billion, while Republicans are pushing for long-term reforms that include a spending cap and a rainy-day fund.

Schwarzenegger's order for layoffs covers retired state employees who work under contract, temporary and part-time workers, seasonal employees and student assistants. Many in those categories may be exempted if they are deemed crucial to public safety, but officials said 10,300 would receive pink slips immediately.

"Now I can't pay my mortgage. I can't pay anything - lights, gas, food," said Celeste Knox, a mother of two who made $15.98 an hour as a temporary office assistant with the Department of Consumer Affairs. "I've just been crying and trying to find a way to make it work. So far I haven't found one."

The administration estimates the layoffs and suspending overtime will save the state as much as $80 million a month, and that the deferred wages would save $300 million to $1 billion a month. The administration gave state agencies until Friday to compile lists showing how many of their employees were crucial to public safety and should be exempted from layoffs or the minimum-wage order.

Schwarzenegger's administration may have to sue the state controller's office to force it to comply with the part of the order paying employees minimum wage.

The governor and the controller are clashing over a 2003 state Supreme Court ruling allowing the state to pay workers the federal minimum wage during a budget impasse. Schwarzenegger cited the ruling in his executive order, but Chiang interprets it differently, saying it's his job to decide how much to pay employees.

"The controller will continue to pay full salaries," said Hallye Jordan, a spokeswoman for the controller's office.

She said even if Chiang felt the order was legal, it would take months to reprogram the office's outdated computer systems to handle the across-the board pay cut. "This is a system that's over 25 years old," Jordan said.

Schwarzenegger insisted that his action was designed to avoid a fiscal crisis as the state remains without an approved spending plan. But it also was hoped to pressure state legislative leaders into brokering a budget deal.

California is the only state with a fiscal year beginning July 1 that remains without a budget.

Legislative leaders were not meeting to discuss the budget on Friday, but the governor's office said Schwarzenegger knows they are working to get it done as quickly as possible. Schwarzenegger's schedule said he was holding private meetings in Los Angeles.

"I think the leaders share the governor's sense of urgency in getting a budget as soon as possible," McLear said.

Jobless rate rises to 4-year high of 5.7 percent

2008-08-01T11:28:10Z

Looks like unemployment keeps pushing ahead just as expected. Upside is that it's not as bad as it was forecasted. However, I think this 51k figure will get revised and end up closer if not higher than the 71k projected. Whatever has to be done to keep consumer confidence up is being done the way I see it.

The nation's unemployment rate climbed to a four-year high of 5.7 percent in July as employers cut 51,000 jobs, dashing the hopes of an influx of young people looking for summer work.

Payroll cuts weren't as deep as the 72,000 predicted by economists, however. And, job losses for both May and June were smaller than previously reported.

July's reductions marked the seventh straight month where employers eliminated jobs. The economy has lost a total of 463,000 jobs so far this year.

The latest snapshot, released by the Labor Department on Friday, showed a lack of credit has stunted employers' expansion plans and willingness to hire. Fallout from the housing slump and high energy prices also are weighing on employers.

The increase in the unemployment rate to 5.7 percent, from 5.5 percent in June, in part came as many young people streamed into the labor market looking for summer jobs. This year, fewer of them were able to find work, the government said. The unemployment rate for teenagers jumped to 20.3 percent, the highest since late 1992.

The economy is the top concern of voters and will figure prominently in their choices for president and other elected officials come November. The faltering labor market is a source of anxiety not only for those looking for work but also for those worried about keeping their jobs during uncertain times.

Job losses in July were the heaviest in industries hard hit by the housing, credit and financial debacles. Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs. Temporary help firms - also viewed as a barometer of demand for future hiring - eliminated 29,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.

In May and June combined, the economy lost 98,000 jobs, according to revised figures. That wasn't as bad as the 124,000 reductions previously reported.

GM, Chrysler LLC, Wachovia Corp., Cox Enterprises Inc. and Pfizer are among the companies that have announced job cuts in July.

GM Friday reported the third-worst quarterly loss in its history in the second quarter as North American vehicle sales plummeted and the company faced expenses due to labor unrest and its massive restructuring plan.

On July 15, GM announced a plan to raise $15 billion for its restructuring by laying off thousands of hourly and salaried workers, speeding the closure of truck and SUV plants, suspending its dividend and raising cash through borrowing and the sale of assets.

GM also said it would reduce production by another 300,000 vehicles, and that could prompt another wave of blue-collar early retirement and buyout offers.

Meanwhile. Bennigan's restaurants owned by privately held Metromedia Restaurant Group, are closing, driving more people to unemployment lines.

All told, there were 8.8 million unemployed people in July, up from 7.1 million last year. The jobless rate last July stood at 4.7 percent.

More job cuts are expected in coming months. There's growing concern that many people will pull back on their spending later this year when the bracing effect of the tax rebates fades, dealing a dangerous blow to the fragile economy. These worries are fanning recession fears.

Still, workers saw wage gains in July.

Average hourly earnings rose to $18.06 in July, a 0.3 percent increase from the previous month. That matched economists' expectations. Over the past year, wages have grown 3.4 percent. Paychecks aren't stretching as far because of high food and energy prices.

Other reports out Friday showed stresses as companies cope with a sluggish economy.

Spending on construction projects around the country dropped 0.4 percent in June as cutbacks in home building eclipsed gains in commercial construction, the Commerce Department reported.

And, manufacturers' business was flat in July. The Institute for Supply Management's reading of activity from the country's producers of cars, airplanes, appliances and other manufactured goods hit 50, down from 50.2 in June. A reading above 50 signals growth.

The news forced Wall Street to reassess its initial positive reaction to the jobs data. The Dow, which opened higher, slid about 80 points by midmorning.

The Federal Reserve is expected to hold rates steady next week as it tries to grapple with dueling concerns - weak economic activity and inflation.

In June, the Fed halted a nearly yearlong rate-cutting campaign to shore up the economy because lower rates would aggravate inflation. On the other hand, boosting rates too soon to fend off inflation could hurt the economy.

California judge rules early cell phone termination fees illegal

2008-07-31T15:46:37Z

In one of the most significant legal rulings in the tech industry this year, a Superior Court judge in California has ruled that the practice of charging consumers a fee for ending their cell phone contract early is illegal and violates state law.

The preliminary, tentative judgment orders Sprint Nextel to pay customers $18.2 million in reimbursements and, more importantly, orders Sprint to stop trying to collect another $54.7 million from California customers (some 2 million customers total) who have canceled their contracts but refused or failed to pay the termination fee.

While an appeal is inevitable, the ruling could have massive fallout throughout the industry. Without the threat of levying early termination fees, the cellular carriers lose the power that's enabled them to lock customers into contracts for multiple years at a time. And while those contracts can be heinously long, they also let the carriers offer cell phone hardware at reduced (subsidized) prices. AT&T's two-year contract is the only reason the iPhone 3G costs $199. If subsidies vanish, what happens to hardware lock-in? Could an era of expensive, but unlocked, hardware be just around the corner? It's highly probable.

Of course, the carriers aren't going to take this lying down. Early termination fees are seen as critical to business, so carriers are expected to look for ways to reclassify the fees (such as by calling them "rates," part of the arcane set of laws that covers the telecommunications industry). The industry is also pushing for the federal government to step in and claim oversight over the early termination fee issue, which would invalidate any state ruling. The FCC is generally more tolerant of such fees, though Chairman Kevin Martin has proposed a plan whereby the fees are decreased the closer you are to the end of your contract.

The FCC may also buy the argument that, since carriers are nationally based (and consumers can use their phones anywhere in the country), that a single policy should apply across the nation, rather than creating a patchwork of legislation that could lead to confusion and chaos caused by having 50 different policies.

Is the early termination fee dead? Not yet, but it's looking a little haggard.

Frequently Asked Questions About the First-Time Home Buyer Tax Credit

2008-07-31T14:46:19Z

Information about the nex tax credit bill that was passed the other day.

Frequently Asked Questions
About the First-Time Home Buyer Tax Credit

The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before July 1, 2009. The following questions and answers provide basic information about the tax credit.

Who is eligible to claim the $7,500 tax credit?
First time home buyers purchasing any kind of home-new or resale-are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.
What is the definition of a first-time home buyer?
The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.
What types of homes will qualify for the tax credit?
Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses, and condominiums.
Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after April 9, 2008 and before July 1, 2009.

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
What is "modified adjusted gross income"?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $7,500 are available for some taxpayers whose MAGI exceeds the phaseout limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.

Here's another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
Does the credit amount differ based on tax filing status?
No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as "married filing separately" (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns.
Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?
In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.
I heard that the tax credit is refundable. What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed).
What is the difference between a tax credit and a tax deduction?
A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer's tax liability would be reduced by $1,125 (15 percent of $7,500), or lowered from $7,500 to $6,375.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
No. The tax credit cannot be combined with the MRB home buyer program.
I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?
No. You can claim only one.
I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
Does the credit have to be paid back to the government? If so, what are the payback provisions?
Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.
Why must the money be repaid?
Congress's intent was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and, eventually, increasing future housing prices.
Because the money must be repaid, isn't the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.
If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Urgent. Housing Bill Ends Downpayment Assistance

2008-07-30T12:52:33Z

I wanted to post a memo from Nehemiah Corporation sent out today. Looks like they're really making an effort to try and keep Nehemiah up and running. See below.

Dear Paul,

This week the President signed H.R. 3221, Housing and Economic Recovery Act of 2008, into law. The bill contains a provision (SEC. 2113) which forbids FHA from insuring mortgages in which the borrower's downpayment comes from a private downpayment assistance provider, beginning October 1, 2008. As of this date, the minimum downpayment will be increased from 3% to 3.5%.

The consequences will be devastating! By FHA's own estimates, DPA comprises nearly 40% of FHA's volume. This means more than 300,000 working class families will be locked out of homeownership in the next year alone. Communities across America will take the brunt of the $50 billion in lost real estate sales, not to mention the indirect impact on the real estate, mortgage and building sectors that will be forced to shed tens of thousands of jobs due to this dangerous legislation.

In order to save downpayment Assistance, we need to come together NOW to convince Congress to introduce and pass a bill that allows downpayment assistance to continue indefinitely.

Two Ways To Take Immediate Action...

Write Your Elected Officials

Please take a minute to submit your comment regarding the urgent need for legislation that allows for downpayment assistance to continue indefinitely.

Submit your comments through our Legislative Alerts and Updates <http://capwiz.com/nehemia/utr/1/ARXTJAQXZZ/IDCHJATFOA/2245072116> page.

Call Your Elected Officials

A phone call to your U.S. Senators and House Representatives will make a huge impact to save private downpayment assistance programs.

Locate your elected officials

1. Go to Elected Officials <http://capwiz.com/nehemia/utr/1/ARXTJAQXZZ/FLQKJATFOB/2245072116>

2. Enter Your Zip Code and click "Go".

3. Click on the link of the Representative you would like to call and then click on the Contact tab to find their Washington D.C. and District office phone number.

Stay Informed

Sign up <http://capwiz.com/nehemia/utr/1/ARXTJAQXZZ/IHVXJATFOC/2245072116> to receive future email updates as they become available.

Should you have any questions, our Customer Service Department is available at 877-634-3642 from 9:00 a.m. - 8:00 p.m. EST to answer your questions.

Nehemiah Corporation of America

424 N 7th Street, Suite 250

Sacramento, CA 95811

Toll Free: 1-877-634-3642

(877) NEHEMIAH

getdownpayment.com <http://www.getdownpayment.com>

Bush signs housing rescue law

2008-07-30T11:30:10Z

President enacts controversial measure that aims to help borrowers, bolster the housing market and provide a fail-safe for Fannie and Freddie.

President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac.

The Senate voted 72-13 in favor of the bill on Saturday, after the House passed it three days earlier.

"We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. "The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes."

The new law, one of the most far-reaching on housing in decades, marks the centerpiece of Washington's efforts to address the nation's housing meltdown.

The legislation has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator.

The White House last week reversed its long-standing threat to veto the bill. In fact, the administration still objects to parts of the legislation, including aid to states to buy foreclosed properties.

But the president decided to sign it since "oversight of the housing government sponsored enterprises (GSEs) and the new temporary authorities requested by [Treasury] Secretary [Henry] Paulson are urgently needed now, and they'll contribute to confidence and stability in housing and financial markets," Fratto said last week.

Helping at-risk borrowers

Provisions that will most directly affect consumers and communities include:

A larger role for the Federal Housing Administration. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value.

The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - will be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.

While the law authorizes the FHA to insure up to $300 billion in loans, the CBO estimates that the agency is only likely to insure up to $68 billion and help keep roughly 325,000 people in their homes. Those estimates were based on the CBO's assessment of who is likely to qualify under the program and accounts for a certain number likely to default anyway.

(Here are more details on this provision.)

A stronger regulator for the GSEs. The new regulator will have a greater say over how well funded the two government sponsored enterprises (GSEs) are - a major concern in the markets that has sent stocks in both companies plunging in the past two months.

A permanent increase in "conforming loan" limits. The law will permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000.

The FHA maximum loan limits for high-cost areas would also increase to a maximum of $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because those mortgages are more likely to be traded if they are considered conforming.

A new home-buyer credit. The new law includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.

A ban on down-payment assistance from sellers. The new law eliminates a program that has allowed sellers to provide down payment assistance for FHA loans.

The law would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.

A new affordable housing trust fund. The law establishes a permanent fund to promote affordable housing. The fund will be paid for by fees from Fannie and Freddie.

Grants to states to buy foreclosed properties. The law grants $4 billion to states to buy up and rehabilitate foreclosed properties. The White House has opposed such funding, contending that it will benefit lenders and not homeowners.

Bolster Fannie and Freddie

A late and controversial addition to the new housing law provides temporary authority for the Treasury to lend a financial hand to Fannie Mae and Freddie Mac if the Treasury deems it necessary to help stabilize markets.

Concerns over whether Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) will have enough money to weather future losses in the housing market has sent shares plummeting in recent weeks. Since the beginning of June, Fannie's stock price has dropped 55% and Freddie's plummeted 64%. For the past year, they're both down over 80%.

Fannie and Freddie guarantee the purchase and trade of mortgages and own or back $5.2 trillion in mortgages.

The law includes provisions that let Treasury offer Fannie and Freddie an unlimited line of credit and buy stock in the companies. The provisions expire in 18 months.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the companies could leave taxpayers with a fat bill to pay.

Treasury Secretary Paulson has said that merely having the powers in place may boost confidence in the two companies enough to preclude the need for Treasury to step in.

The Congressional Budget Office last week estimated the potential cost of a rescue could be $25 billion. CBO said there is probably a better than 50% chance that Treasury would not need to step in. It also said there is a 5% chance that Freddie's and Fannie's losses could cost the government $100 billion.

Home prices drop record 15.8%

2008-07-29T12:22:23Z

The S&P/Case-Shiller Home Price Index of 20 cities fell for the 22nd consecutive month.

May home prices dropped a record 15.8% from a year ago, according to the S&P/Case-Shiller Home Price Index of 20 cities. It was the 22nd consecutive month of decline recorded by the index. Prices fell 0.9% from April to May.

Each of the 20 metro areas covered by the index posted annual declines; nine posted record lows and 10 cities recorded double-digit drops.

The Case-Shiller 10-city Index posted a year over year decline of 16.9%, and a 1% month over month dip. Both the 10-City Composite Index and the 20-City Composite Index are reporting record annual declines.

"Since August 2006, there has not been one month where we have seen overall price increases, as measured by the two Composites," said David Blitzer, Chairman of the Index Committee at Standard & Poor's.

Losing streak

Case-Shiller has been tracking the 20-city index for 19 years, while the 10-city index is 21 years old. The current streak of price declines has been unprecedented in both its length and depth. The last extended decline began in in April 1990, when the 10-city index sank for 10 consecutive months. But that total loss was just 6.5%.

Since the 10-city index peaked in July 2006, it has plunged 19.8%. The 20-city is down 18.4% from the peak.

The 20-city index's Sun Belt cities, which recorded the biggest price gains during the boom, have led the charge down. Las Vegas prices have plummeted 28.4% during the past 12 months; Miami prices fell 28.3%; and Phoenix homes lost 26.5% of their value.

Midwest metro areas, which have endured tough economic times for years, are also feeling the pain. Detroit prices are off 17.4% for the 12 months, and Cleveland is down 8%.

Northeast cities like Boston, down 6.2% for the 12 months, and New York, off 7.9%, have been less volatile than the Sun Belt.

The smallest year-over-year declines were recorded by Charlotte, N.C. (down 0.2%), Dallas (down 3.1%), and Denver (down 4.8%).

The soaring numbers of foreclosures are helping to push down prices. Banks tend to slash prices when selling repossessed homes, since they lose money every month a house sits vacant. They must pay property taxes, maintenance expenses and utility costs while getting nothing back in return.

Those sales, in turn, tend to bring down prices in the rest of a given neighborhood, creating a vicious cycle.

Foreclosures accounted for a large - and growing - share of all existing homes sold in some markets. In California, for example, 40% of the existing homes sold during the three months ended June 30 were foreclosures, according to DataQuick, a real estate information provider. That's up from just 5.4% during the same period in 2007.

Rays of light

Optimistic observers might point out that price declines appear to be slowing. The 10-city index's 1% month to month dip in May was less than April's, when it registered a 1.5% decline, while the 20-city index fell just 0.9% in May after dropping 1.3% in April.

Can this be a sign of better times to come?

"Recent home buyers just entering the markets may be seeing price stabilization," said Lawrence Yun, the usually optimistic chief economist for the National Association of Realtors.

He pointed out that in places like Las Vegas and Phoenix, drastically lower prices have led to an uptick in sales volume, a sign that conditions may stabilize.

But Patrick Newport, an economist with Global Insight, an economic forecasting firm, thinks there are more hard times ahead. He points out that seasonal variations may account for what appears to be a slowdown in the pace of the May decline.

"You can't go by monthly numbers," he said. "What I look at is the Census Bureau's inventory of vacant homes on the market. That hasn't budged much, although it dropped to 2.8% [of total homes for sale] in the second quarter from 2.9%."

Historically, vacant homes have made up about 1.7% of housing inventory.

"What's worrying me is that foreclosures are adding to inventory, and the inventory numbers tell you what to expect for the next couple of years," says Newport. "They're saying home prices will drop."

And Yun expresses concern over mortgage rates, which have been on the rise. Higher rates can cancel out more affordable prices by increasing monthly mortgage payments.

The new housing rescue bill that just cleared Congress over the weekend may help, however. "The tax credit for first-time home buyers will offset the slight rise in mortgage rates," he said.

Gas: Under $4 a gallon and falling

2008-07-28T11:34:45Z

Fuel prices decline for 11th consecutive day. We'll see if they stay down. My opinion is that this is just a minor correction before gas prices head even higher.

Gas prices declined for the 11th straight day on Monday, falling to a level not seen since May, according to a nationwide survey of filling station credit card swipes. Other fuel prices also continued to fall.

Gasoline: The price of regular unleaded gasoline at the pump slipped 1.2 cents to $3.958 a gallon on average, a daily survey from motorist advocacy group AAA revealed.

A second report from Lundberg Survey, Inc. showed that gasoline prices had slipped 12 cents over the past two weeks to an average of $3.9959 a gallon.

The latest Lundberg survey was conducted on July 25th.

High fuel prices have strained on American consumers and businesses, making transportation and shipping more expensive.

Average gasoline prices first crossed the $4 mark on June 7 when they hit $4.005 a gallon, according to the AAA survey. Prices rose to $3.952 a gallon on May 29 and continued to trend upward to a record high of $4.114 on July 16.

Prices stayed there for two days before beginning their retreat, following a double-digit decline in oil as investors worried that the high cost of fuel was leading to a slowdown in demand.

Ethanol: High fuel prices have caused many drivers, particularly those in states with strong agricultural industries, to switch to ethanol as their fuel of choice.

The price of E85, an 85% ethanol blend, which burns cleaner than pure gasoline and is made primarily from corn, fell 1.8 cents to $3.222 a gallon on average, AAA reported.

While ethanol is derived from renewable sources, it is less efficient than gasoline. As a result, a car running on E85 would pay the equivalent of $4.24 per gallon to get the same mileage as gas, the AAA survey estimated.

Diesel: The average price of diesel fuel, which is used to power most trucks and commercial vehicles, fell to $4.736 a gallon from $4.748, according to the AAA survey.

Diesel remained more than 60% higher than last year. And because of its use in transporting goods, high prices for diesel have affected the prices of other items.

Local prices: The AAA survey averages data from credit card swipes at 85,000 fuel stations around the country. The survey found that the number of states that suffer from gas prices above $4 a gallon fell to 14 on Friday.

Gas in Alaska, the state with the highest prices, fell to $4.643 a gallon from $4.68 last week Friday, according to AAA. The Lundberg survey, which measures gas prices by city, found the highest urban gas prices in Anchorage, Alaska at $4.43.

Hawaii, the state with the second highest prices, saw average prices fall to $4.479. California prices dipped to $4.316 on average, the AAA survey said.

Drivers in Oklahoma, the state with the cheapest gas, saw prices fall to $3.686 from $3.769 a gallon on Friday, AAA said. In Minnesota, the next cheapest state for gas, drivers paid $3.714 on average, followed by Ohio at $3.73.

Lundberg found the cheapest gas in Wichita, Kan. at $3.61 a gallon.

Drivers in Hawaii, the state with the most expensive diesel, saw prices fall to $5.372 a gallon, while diesel was cheapest in Oklahoma at $4.51, according to the AAA survey.

Senate passes housing bill

2008-07-26T10:53:50Z

Sweeping and controversial legislation aims to help troubled borrowers, bolster the housing market and provide a fail-safe for Fannie and Freddie.

The Senate on Saturday overwhelmingly passed a landmark housing bill that will offer up to $300 billion in loans for troubled homeowners and establish a government rescue plan for mortgage finance giants Fannie Mae and Freddie Mac.

The House passed the bill on Wednesday just hours after President Bush reversed his long-standing vow to veto the bill. Bush is expected to sign it soon.

The legislation, one of the most far-reaching housing bills from Congress in decades, marks the centerpiece of Washington's efforts to address the nation's housing meltdown.

"This legislation won't perform miracles. But as others have said, it's a step - and I hope an important step - to putting our nation on the road to economic recovery," said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee and a principal author of the bill.

Though the Senate vote was 72 to 13, the bill was not without its staunch opponents. In a floor statement before the vote, Sen. Jim DeMint, R-S.C., said that lawmakers "may compromise the future of America" by approving the bill.

The White House also objected to parts of the bill, including aid to states to buy foreclosed properties. But White House Press Secretary Tony Fratto said the measures concerning Fannie and Freddie are "urgently needed now ... President Bush will sign this bill when he receives it, despite our concerns with some provisions."

The bill has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator.

Helping at-risk borrowers

Provisions in the 700-page bill that would most directly affect consumers and communities include:

Increase the Federal Housing Administration's role. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value.

The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - would be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.

Establish a stronger regulator for the GSEs. The new regulator will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.

Permanently increase "conforming loan" limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000.

The FHA maximum loan limits for high-cost areas would also increase to $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.

Create home-buyer credit. The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.

Bar down-payment assistance for FHA loans. The bill eliminates a program that has allowed sellers to provide down payment assistance.

The bill would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.

Create an affordable housing trust fund. The bill establishes a permanent fund to promote affordable housing. The fund would be paid for by fees from Fannie and Freddie.

Give grants to states to buy foreclosed properties. The bill would grant $4 billion to states to buy up and rehabilitate foreclosed properties. The funding had been opposed by the White House, which said it would benefit lenders and not homeowners.

Bolster Fannie and Freddie

Concerns over whether Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) will have enough money to weather future losses in the housing market sent shares plummeting in recent weeks. Since the beginning of June, Fannie's stock price has dropped 57% and Freddie's plummeted 66%. For the past year, they're both down roughly 85% as of the end of trade on Friday.

Fannie and Freddie guarantee the purchase and trade of mortgages and own or back $5.2 trillion in mortgages.

To help stabilize markets, Treasury Secretary Henry Paulson asked Congress to temporarily empower Treasury to offer the companies a backstop if needed. Consequently the housing bill now includes provisions that let Treasury over the next 18 months offer Fannie and Freddie an unlimited line of credit and the authority to buy stock in the companies.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the companies could leave taxpayers with a fat bill to pay.

The Congressional Budget Office on Tuesday estimated the potential cost of a rescue could be $25 billion. CBO said there is probably a better than 50% chance that Treasury would not need to step in. It also said there is a 5% chance that Freddie's and Fannie's losses could cost the government $100 billion

Housing bill not just for those on edge

2008-07-25T14:26:33Z

If you think the housing bailout bill in Congress benefits only troubled homeowners, you may miss out. Millions of people could potentially benefit from the legislation, which is expected to become law soon. Some highlights (minus all of the fine print, of course):

New mortgages

Some people would be eligible to cancel their old mortgage loans and replace them with new fixed-rate loans lasting at least 30 years. The amount of the new loans would be no more than 90 percent of what their property is actually worth now. You would need to have originated your troubled loan or loans on or before Jan. 1, 2008. The loans must be on your primary residence. Lenders, however, are not required to give you a better deal. They may not be willing to negotiate unless they think you are truly on the cusp of foreclosure. If you manage to get a new loan, you would not be able to take out a home equity loan for at least five years after you get the new mortgage.

Break for beginners

If you are buying a home for the first time, and it is your primary residence, you would be eligible for a federal tax credit of $7,500 or 10 percent of the purchase price, whichever is smaller. There are two big catches, though. First, the credit starts to phase out for those with higher incomes. Second, you'd have to pay back the credit over the next 15 years, in equal amounts each year when you pay your federal taxes. That makes this more like an interest-free loan than a true credit. The tax credit is retroactive to home purchases on April 9, 2008, and expires on July 1, 2009.

Foreclosure filings up 120%

2008-07-25T11:16:04Z

220,000 homes were lost to bank repossessions in the second quarter, and the annual forecast for 2008 will have to be revised upward.

As foreclosures continue to soar, 220,000 homes were lost to bank repossessions in the second quarter, according to a housing market report Friday issued by RealtyTrac.

That's nearly triple the number from the same period in 2007.

A total of 739,714 foreclosure filings were recorded during that three-month period, up 14% from the first quarter, and 121% from the same period in 2007. That means that one of every 171 U.S. households received a filing, which include notices of default, auction sale notices and bank repossessions.

"Most areas of the country are seeing at least some increase in foreclosure activity," said James Saccadic, CEO of RealtyTrac, an online marketer of foreclosed homes. "Forty-eight of 50 states and 95 out of the nation's 100 largest metro areas experienced year-over-year increases in foreclosure activity."

Because foreclosure filings are growing so quickly, RealtyTrac will have to reevaluate its foreclosure forecast for the year, according to spokesman Rick Sharga.

"We've been saying foreclosures will total 1.9 million to 2 million this year," he said. "But midway through the year, we're already at 1.4 million so we're going to be raising our projections."

And there is more bad news: Bank repossessions are up as a proportion of total filings, representing 30% of the notices issued during the quarter, up from 24% a year ago.

"I don't think that's a surprise if you look at the general conditions out there," said Brian Bethune, chief financial economist for Global Insight. "There have been six straight moves of weaker employment this year. The ongoing problems in the housing market are compounded by a generally weaker economy. Foreclosures won't go down until we start to see employment move up again."

Sun Belt front and center

California's Central Valley remains ground zero for foreclosure filings. Stockton, which is just east of San Francisco, had the highest rate of foreclosure filings of any metro area, one for every 25 homes. That's seven times the national average.

Riverside/San Bernardino, which is east of Los Angeles, had the second highest rate in the nation with one filing for every 32 households. Las Vegas, Bakersfield and Sacramento rounded out the top five.

Detroit continued to suffer more than any other non-Sun Belt area, with one filing for every 66 households. And several Ohio cities were also hard hit, led by Toledo (one in 92 households), Akron (one in 93) and Cleveland (one in 108).

On the other hand, there were a handful of metro areas that remained relatively unscathed. Honolulu, at one filing for every 1,331 households had the lowest rate of all, followed by Allentown, Pa. (one for every 972) and Syracuse, N.Y. (one for every 880).

At the state level, Nevada had the highest rate with one filing for every 43 households, while California had the highest total number of filings - 202,599.

The report came as more negative news for the housing market this week. On Thursday, a report form the National Association of Realtors revealed that existing home sales had declined again as the number of homes for sale continued to rise. On Tuesday, a government agency reported home prices registered another drop in May.

All this is happening as Congress struggles to pass a housing rescue bill that will make FHA-insured loans available to many at-risk borrowers. The measure, which is expected to be enacted, would take effect until Oct. 1.

One of the sponsors of the bill, Rep. Barney Frank, D-Mass., said in a statement Thursday that he encourages lenders and mortgage servicers to delay taking action against delinquent borrowers before the new law takes effect.

"I am urging the mortgage servicers to hold off on foreclosures in applicable cases," he said, "so borrowers can take advantage of the program."