As you may be aware, on Wednesday President Bush signed the Stimulus Bill; besides the tax benefit of this bill, there is also the portion that is designed to jump-start the housing market as well as ward off a recession.

For our area (Ventura and Los Angeles Counties) we were granted the maximum for the conforming loan limit of $729,750, which allows consumers to purchase more home without the rates typically associated with a jumbo loan. However, there are still quite a few details that need to be ironed out, such as how to find the median price. This increase applies only to loans originated between July 2007 and December 2008, but there is a possibility that it could be extended.

Wall Street is still working out whether investors will want to bundle securitized loans above $417,000 with loans below that level or if they will invest in them separately. Rates for these loans may be higher due to the fact that banks may fear that the larger loans are riskier but they are more than likely going to be lower than the current jumbo loans (what would be the point of this if they weren't?). While the proposal does not apply to loans made before July 2007, borrowers with old mortgages can refinance into new loans that would then be sold to Frannie and Freddie, as these would then be considered new loans.

One thing to keep in mind is the value of your home today versus what you currently owe; while the Stimulus package is fantastic and will continue to assist in stabilizing the market, for those who owe more than their home is worth, it doesn't have any impact at all (however, see below regarding the "Project Lifeline" initiative unveiled this week) and some may find themselves in the same position. There are many who purchased in 2005 and 2006, and did so without putting any money down and thus now find themselves in the position of owing more than the current market value.

Project Lifeline - Stalling the Foreclosure Process?

Many buyers today are waiting for foreclosures to come on the market in order to get a "deal". However, with the new Project Lifeline initiative that was unveiled this week (6 mortgage lenders are participating), that wait may just have gotten a little longer. Under this new initiative, banks will "freeze" the foreclosure process for 30 days in order to help the homeowner work out alternatives. The program is targeting homeowners who are 90 or more days late on payments; they will receive a letter offering a "pause" in the foreclosure process to try to work out a repayment schedule. In the past, those who are delinquent have always had the option of calling their lender for help but the foreclosure process continued during these talks; however, under this plan, there will be a 30-day freeze in the process. Unlike the government-endorsed rescue effort announced last year, this new program is not just limited to subprime mortgage (loans given to those with weak credit), but it now also includes foreclosures triggered by home-equity loans, prime loans and second liens. Of course, modifications to loans are made on a case-by-case basis and not all eligible loans are expected to be salvageable. Homeowners in bankruptcy will not be eligible for the program, which also excludes vacant and investment properties. The offer also doesn't apply to those whose homes are scheduled for foreclosure sale within 30 days.

The program also won't help borrowers who put down little or no money and who don't want to continue to live in the house.

Countrywide Financial, Bank of America, Citigroup, J.P. Morgan Chase, Washington Mutual and Wells Fargo are participating in Project Lifeline. They are also members of the Hope Now Alliance, the industry-financed nonprofit group that has been coordinating efforts to reach struggling subprime mortgage borrowers.  

Critics say that the plan will probably assist only a small percentage of the estimated 425,000 homeowners who are 90 days or more delinquent on their loans. These homeowners are already under stress, and lenders would have to be willing to make significant changes, including reducing mortgage balances substantially in order for this program to be of any help. The mortgage industry has been fighting the perception that it is not doing enough to help troubled homeowners, pointing out that the number of loans modified, including freezing and lowering interest rates, has doubled in the past year. During the fourth quarter of last year, lenders modified 141,000 loans, up from 76,000 in the previous three months, according to the Hope Now Alliance. (Keep in mind that these numbers are nationwide and not for Ventura or LA Counties)

Those numbers are likely to increase as lenders implement the program announced last year to freeze the interest rates of qualified subprime borrowers, industry officials said yesterday.

More Industry News

Beginning this week and continuing through September, HUD's Federal Housing Administration (FHA) is mailing 850,000  letters to at-risk borrowers who have already faced or are experiencing the first reset of their adjustable rate mortgages, and live within geographic locations that are currently subject to FHA loan limits nationwide. If this has the intended effect of keeping those at risk out of foreclosure, it could help shore up the housing market and the state's economy.

It is more important than ever for potential home buyers to have a good credit score. Consumers should obtain a credit report and take care of any outstanding issues that can be fixed or improved prior to applying for a loan. According to a recent Federal Reserve survey, some 53% of lenders tightened requirements for prime-quality borrowers, 72% for subprime borrowers, and 85% for non-traditional mortgage borrowers, including PayOption ARMs, loans with interest-only payment structures, and other such products.

Whether or not they have children, consumers may want to consider a home in a neighborhood with excellent schools. Homes in good school districts typically are a bit more "recession proof" and appreciate faster than homes near weaker schools, according to MSN Money. Both the Conejo Unified as well as the Las Virgenes School Districts have the highest API scores in the nation! This is why our communities have not seen the dip in prices that most other areas have seen and is another reason why we are seeing properties selling with multiple offers once again.

Rates on 30-year mortgages dipped slightly last week, the fifth decline in the past six weeks. Fixed-rate mortgages averaged 5.67 percent last week, down from 5.68 percent the week before.

For more information on the programs discussed in this article and for current rates, I have been referring my clients to Francesco Foggia at CS Financial; he can be reached 24/7 on his cell phone 310-922-3363 or via email FFoggia@CSFinancial.com. Please feel free to visit http://www.thousandoaksdreamhomes.com/ for more information on our lending partner and the programs he has been designing for those who are in the process of refinancing or purchasing a new home. Based on the volume at CS Financial, you can be guaranteed a rate that is extremely competitive with programs to meet your every need.

Please feel free to call or email me as well; 805-341-4644 or csgrace@verizon.net. I, too, am here to help in any way that I can. Keep in mind that I offer a free Market Analysis for your home and this will let us know where you stand in today's market; if you are not in the market to buy or sell, remember to pass our information along to your friends and family who are - the highest compliment you can pay is to refer us and we thank you in advance for your trust and faith in our abilities!  

*the information and opinions in this article are the opinions of Suzanne Grace only and in no way imply that Prudential agents/brokers are of the same. Information was given as interpreted by Suzanne Grace and any errors are her own and in no way is this information intended to be misconstrued as advice and all buyers and sellers today should seek legal counsel if considering foreclosure and/or short sale options.