C.A.R Update on Economic Situation

Tuesday, Oct 28, 2008

Brought to you by the California Association of Realtors

Oct. 28, 2008

Dear C.A.R Member:

Much has happened since passage of the Emergency Economic Stabilization Act earlier this month. 

N.A.R has urged U.S Treasury Secretary Paulson to take advantage of the extensive experience of local commercial and residential real state professionals in the management and disposition of real property as the U.S Treasury Dept. implements the Troubled Asset Relief Program (TARP) as part of the Emergency Economic Stabilization Act.

Congress has held a number of hearings over the past few weeks looking into multiple factors that contributed to the current financial situation. Last week, Congress heard testimony from Securities and Exchange Commission Chairman Christopher Cox, Federal Reserve Board Greenspan, former U.S Treasury Secretary John Snow, and other leading players. The hearings are laying the groundwork to inform legislation expected to address regulatory reform of the finance and lending industries as well as safeguards to prevent a recurrence of the current financial crisis. It is our expectation that the legislation will be introduced early next year. 

Additional hearings are covering the implementation of a second stimulus package. As the U.S economy continues to struggle, politicians on both sides of the aisle are feeling pressure from their constituents, creating a strong incentive for Congress to pass meaningful legislation as the national elections near and the country heads into the holiday season. The Senate, House of Representatives, and the White House have stated their willingness to work through a lame-duck session to pass a second economic stimulus package prior to the end of the year.

While many ideas have been circulated, few, if any, appear certain to be included in a second stimulus package, according to C.A.R policy analysts.  Some of the ideas under discussion include: An additional round of stimulus checks; extending the temporary loan limit of $729,750 for Government Sponsored Enterprises (GSE) and Federal Housing Administration (FHA); infrastructure spending; financial aid for states; a temporary increase in block grants; and an extension of unemployment and welfare benefits. 

One important factor determining what, if anything, will be done during a lame-duck session is the outcome of the upcoming presidential election. Should the Democrats take the White House and secure a filibuster-proof majority in the Senate, they may choose to wait till after Jan. 20 before proposing or enacting legislation. Should the Republican nominee take the White House, Democrats may feel the Bush administration will be more willing to compromise in order to pass last-minute initiatives prior to leaving office. C.A.R and NAR will continue to strongly advocate for making permanent the $729,750 loan limit as part of any investigation that is forthcoming.

The Hope for Homeowners (H4H) initiative that was part of the July stimulus package began to be implemented Oct 1. The H4H program allows troubled homeowners to keep their home, while enabling lenders to receive a Federal Housing Administration (FHA) guarantee on the loans. Under terms of the voluntary program, lenders agree to refinance the existing mortgage at 90% of the current appraised value and assume the loss on the remaining balance; the new loan is an FHA guaranteed 30-yr, fixed-rate, fully amortized, fully documented loan; and the homeowner must forego a portion of the home's future appreciation to the FHA when it is sold. 

The FHA has posted a list of lenders participating in the HOPE for Homeowners program. When contacting the lenders, the FHA is strongly encouraging consumers to also contact their servicing lender and any subordinate lien holders as their participation is vital in order to refinance into a H4H mortgage. The program is voluntary and servicing lenders may offer different solutions for avoiding foreclosure. The FHA plans to update the list weekly on Fridays. The list is available HERE. 

C.A.R will continue to report additional news, useful information and analysis to you as the evolving situation warrants.

Sincerely,

William E. Brown

2008 President 

CALIFORNIA ASSOCIATION OF REALTORS

Home Modifications

Modifying your home to suit your changing needs can often be done quite cheaply--and the benefits to making sure your home fits your lifestyle can't be underestimated. For seniors and people with special needs, sometimes a few adjustments are all it takes to ensure a home's safety and to allow seniors to stay in their homes as long as they'd like.  A recent article in the Palo Alto Weekly says modified homes allow seniors to "age in place." For those of you worried about your parents or noticing a change in your health that is affecting your comfort at home, consider consulting with someone about the options you can take to design your house for safety and ease. Studies from the Palo Alto Weekly article (called Designed for Safety and written by Susan Golovin), reveal alarmingly high statistics for the number of people over 65 who suffer from falls in their homes; over 1/3 of them will fall, and those falls could have been easily prevented with some simple remolding action. Sometimes all it takes is removing some rugs! If you're worried about the safety of your home, get a safety assessment. Nothing is more important than your health! 

Steve Papapietro's Weekly Mortgage Bulletin: De-Lever US From Evil

Provided by Steve Papapietro

Relationship Manager

MetLife Home Loans

For the Week of Oct. 20, 2008--Vol. 6, Issue 43

Last Week in Review

"I'm always making a comeback but nobody ever tells me where I've been." Billie Holiday. Making a comeback was exactly what Bonds and home loan rates attempted last week, after approaching some of their worst levels this year.

While the Bond market was closed last monday in Observance of Columbus Day, the early part of the week wasn't short of market-impacting news. On Tuesday, the Bush Administration, including Secretary Henry Paulson, Federal Chairman Ben Bernanke, and FDIC Chariman Sheila Bair announced a plan to use $250 billion of the $700 billion financial rescue bill recently passed by Congres to buy directly into American banks. The government will begin by buying up stock in nine of the largest banks including Bank of America, JPMorgan Chase, and Citigroup.

Why did the government do this? Because the financial crisis is due to over-leverage... that means the ratio of outstanding loans to capital is too high. If left unchecked, this can lead to the failure of institutions. And it has already taken a great toll. The only way to repair this is by reducing the leverage ratio, or "de-leveraging". That means sell of loans or increase capital. The Fed's plan helps this on both sides as they can be a buyer of some loans as well as an investor in some banks.

Another result of the current financial crisis is that economic reports are taking a back seat to market dynamics in ways that have never been seen before. In the past, fund managers or institutional traders would typically contemplate which direction would best favor the market, and position their portfolio in Stocks if the outlook was favorable, or Bonds if the outlook was cloudy. So we have come to expect Bond prices to move in the opposite direction from Stock prices much of the time, as money flows out of one and into the other. But the pressure to "de-leverage" has all but removed the thought process, and forced settling of all types of securities to raise capital. And while this situation should stabilize and return to normal (which we saw some evidence of on Friday as Stocks and Bonds alternated going up and down), it is one I will continue to monitor as the weeks and months progress.

And after all the ups and downs of the week, Bonds and home loan rates did manage a comeback, ending the week a bit better than they began. 

HAVING A MEDICARE CLAIM DENIED IN WHOLE OR IN PART DOESN'T MEAN YOU CAN'T COMEBACK AND ACHIEVE A DIFFERENT OUTCOME! CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR SOME GREAT SUGGESTIONS FOR APPEALING A DENIAL. 

Forecast for the Week

This week is a slow week when it comes to economic reports, but as we have seen, that doesn't mean we should expect the volatility to slowdown. One important report to watch for is Friday's Existing Home Sales Report. Last week's New Home Sales Report showed that new home sales were at their lowest level since January 1991. Since sales of existing homes make up around 84% of all houses sold, it will be important to see how existing home sales are fairing in these economic times... and what kind of comeback is needed in the housing market.

Another important point to note is that we are in the middle of earning season for the Stock market. While poor economic news typically causes money to flow from Stocks into Bonds, helping home loan rates improve, as I described above, Bonds and home loan rates may not necessarily benefit from weak economic news given the current economic environment. I will be watching closely to see how both Stocks and Bonds react to the earnings reports.

And speaking of comebacks, as you can see in the chart below, Bonds and home loan rates managed to bounce back after last week's worsening trend. I will let you know if Bonds and home loan rates can make an even bigger comeback this week.

The Mortgage Market View...

Fighting Medicare Claim Denials

When an insurance company denies a claim in whole or in part, it is possible to appeal their decision. The same is true with Medicare claims... and in fact more than half of Medicare appeals are successful. If you, a family member, or a friend have had a Medicare claim denied, the following information can help you successfully appeal the decision:

Time Frame: If your Medicare claim is denied for less than the full amount, you can ask for a "redetermination" but you must do so within 120 days. Download the Medicare Redetermination Request form HERE, or call 8006334227 to request a copy. 

Common Denials: The denial you received will include an explanation, which you will need to contest your appeal. Ask your doctor to write a letter addressing the reasons in the denial and include this letter with your appeals form. Common denials include:

1. The treatment, prescription, or medical service is unlikely to cause your health to improve: Fight this by having your doctor write a letter explaining why the care is necessary. Medicare is required to look at your total condition, not just your chance for a full or partial recovery. 

2. You are likely to require care for a very long time: Medicare coverage is not limited to treatments that work quickly, so ask your doctor to write a letter explaining that the treatment is making some positive difference or is expected to.

3. The prescription dosage level is greater than what is normally prescribed, or the drug prescribed is not normally prescribed for your health problem: Have your doctor write a letter explaining why the unusual drug or dosage is medically necessary. For instance, you may be allergic to the medicine normally prescribed.

4. You do not qualify for Medicare-covered home care because you are not homebound. Under Medicare rules, home bound does not mean that you are completely unable to leave your home or that you are confined to a bed. It does mean that you require assistance and that it takes considerable effort for you to leave your home. Ask your doctor to write a letter describing in detail how difficult it is to leave your home.

Be Persistent: If your first appeal is denied, you can file as many as four more appeals. And the more appeals you file, the greater your odds of success. While your first appeal is made to the same group that denied your initial claim, subsequent appeals are made to independent arbiters. 

Click here for more info

Bay Area Highlights, Oct 21-Nov 5

The Peninsula and South Bay Edition

Music and Comedy:

Jimmy Buffett and the Coral Reefer Band, 8:00PM-10/21

Rock/Pop Shoreline Ampitheatre, Mountain View

Disney on Ice: 100 Years of Magic, 8:00PM-10/23

HP Pavilion, San Jose

Craig Shoemaker, 8:00PM-10/23

Comedy Improv Comedy Club, San Jose

Palo Alto Philharmonic Orchestra, 8:00PM-10/25

Cubberley Community Center Theater, Palo Alto

Neil Young, Norah Jones, Wilco, ZZ Top, Death Cab for Cutie, Cat Power, Pegi Young, 9:00PM-10/25

Rock/Pop Shoreline Ampitheatre, Mountain View

San Jose Chamber Ochestra, 7:00PM-10/26

World premiere of Mimi Dye's One Beautiful Light. 

Le Petite Trianon Theatre, San Jose

The Assads, 6:00PM-10/28

Brothers Sergio & Odair amaze on Brazilian guitar. 

Community School of Music and Arts at Finn Center, Mountain View

English Beat, 7:00PM-11/1

Dave Wakeling tours across the States, Canada, & the UK.

Paris Piano Trio

Former Prize-winning students at Paris Conservatoire, 7:00PM-11/2

Classical Kohl Mansion, Burlingame

Phil Markowitz Trio, 4:40PM-11/12

Jazz Piano Bach Dancing and Dynamite Society, Half Moon Bay

More Things To Do:

Zappe Family Circus

An Italian Theatrical Circus since 1842

10/24-10/26, 4:00PM-6:00PM

Circus Tent, Redwood City

Haunted Hostel Halloween Festival

The 6th annual Haunted Halloween Festival at the Point Montara Lighthouse is a once-a-year spooktacular for kids of all ages! 

10/25, 2:00PM--Point Mantara Lighthouse Hostel, Montara

Book Group Expo

Meet authors, eat chocolate, attend lively discussions, taste wine, have books signed, and savor fine tea.

10/25, 10:00AM--McEnery Convention Center, San Jose

Trick or Treat on Twin Pines Lane

Trick or treat room, carnival games, crafts, snacks.

10/31, 6:00PM-9:00PM, Twin Pines Community Center, Belmont

Halloween Bash!

Biggest Bash in San Jose. Listen to the sounds of Latin Affect, Jammin, Tortilla Soup, & special guest GQ

10/31, 6:30-12:00AM. Mexican Heritage Plaza, San Jose

Bail us out! How we can tell if the bailout's working

Congress has started tossing buckets of water overboard, but we still seem to be sinking. In the wake of the newly passed bailout bill, many people are left wondering if the bill really will help revitalize the economy. But before we get that far, it's important to know the answer to the question of what exactly the bailout is trying to achieve.

In last Sunday's San Francisco Chronicle, Kathleen Pender says of the bailout, "Although lawmakers tried to rebrand it an 'economic rescue bill,' experts say its real purpose is to create a more active and transparent market for mortgage-related securities and thereby help restore confidence in the financial system. It won't restore the balance in your 401k plan in short order or guarantee you won't get laid off." 

Using clear, easily digestible language, Pender deconstructs the bailout plan and helps us understand why it happened, what the plan's intention is, and how we can tell if it's working. 

This article is the best one I've read on the bailout, and it's a must-read for everyone worried about their finances in this difficult economic moment. 

CLICK HERE FOR THE FULL ARTICLE 

C.A.R Market Matters, October 16

Thursday, October 16, 2008

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS

Wall Street Journal

Mortgage Lending for Sellers

Due to stricter loan underwriting standards and increased difficulty for some borrowers to qualify for a loan, even for those who are well-qualified, more sellers are offering financing to potential home buyers, which some believe can be mutually beneficial to both buyers and sellers, and can give sellers a competitive edge.

MAKING SENSE OF THE STORY FOR CONSUMERS

In addition to sellers receiving a steady flow of income by providing financing to home buyers, sellers also can profit from the interest payments. Sellers also may be able to sell the mortgage on the secondary market, thus reducing their risk. However, seller-financing is not always the best option. Sellers who need the equity from their current home to purchase their next one are advised to not offer seller financing. 

Buyers, especially those who are self employed, work on commission, or have lower credit scores, but can explain the circumstances that led to it, also may benefit from seller financing. often times, these buyers do not qualify for traditional, conforming loans, reducing their ability to become homeowners. 

To reduce the risk of possible loan default, most real estate professionals recommend that sellers request a down payment of at least 10%, especially if the buyer does not have an ideal credit score. Buyers who do not have a large financial stake in the home may be more likely to default than those with a more substantial down payment. It is also recommended that sellers work with a real estate attorney to draft a contract that includes possible implications if the buyer issues a late payment, defaults on the loan or neglects to adequately insure the property. Sellers also should work with an experienced loan servicer who can collect payments and keep records.

FULL STORY

Los Angeles Times

California REALTORS forecast lower home prices, rising sales in 2009

The California Association of Realtors on WEdnesday presented its "2009 Housing Market Forecast," at California Realtor Expo 2008 in Long Beach, Calif. The annual forecast drew a crowd of more than 1,200 real estate industry professionals who learned what consumers and the real estate industry can expect for California's housing market next year. 

MAKING SENSE OF THE STORY FOR CONSUMERS

Sales of existing family homes are expected to increase in 2009 by 12.5 percent, to 445,000 units. In August, sales were 85% above the monthly for the current cycle and for the first time this year were ahead of 2007 in year-to-date terms.

Although the median home price is expected to decline by 6% in 2009, to $358,000, the lower home price likely will increase the state's affordability rate, currently at 48%, enabling more first-time home buyers to enter the market. C.A.R anticipates home prices will stabilize once inventory thins out. In August, the Unsold Inventory Index stood at 6.7 months, down from 16.9 months in January 2008, meaning that it would take approximately 6.7 months to deplete the market at the current sales rate. 

The ability of consumers to obtain financing continues to play a vital role in stabilizing home prices. Currently, buyers with at least 10% available for a down payment, proof of income and excellent credit scores may qualify for conforming loans--mortgage loans that are $729,750 or less.

FULL STORY

Wall Street Journal

No quick fix for Housing Prices

The recently enacted government rescue plan, which includes the U.S government taking stakes in major financial institutions and temporarily guaranteeing new bank debt, is expected to stabilize the economy. However, some economists believe that additional measures are needed to help stimulate the demand for housing and reduce mortgage delinquencies and foreclosures. 

MAKING SENSE OF THE STORY FOR CONSUMERS

In July, the government approved a permanent loan limit increase--from $417,00 to $625,000--on mortgages backed by the Federal Housing Administration (FHA), which some analysts believe is helping more homeowners obtain mortgages, especially in high-cost areas like California.  In September, 28% of home purchases were financed with FHA mortgages, an increase from 19% in August. This year, more than twice as many home buyers sought government-backed mortgages than did those who did so last year.

Although the government program, Hope for Homeowners, aims to assist homeowners by helping them refinance their current mortgage loans into more affordable ones in exchange for the homeowners sharing price appreciation with the government, some experts believe that the program will not assist enough homeowners. Hope for Homeowners will help 400,000 homeowners who are in default or foreclosure; however, some estimates show that there are nearly 12 million Americans who owe more on their mortgages than their homes are currently worth. Homeowners at risk of defaulting on their mortgage should contact their mortgage company as soon as possible to explore options including loan modification.

Some economists believe that mortgage rates, although still at historic lows, need to decline to 5.25 percent in order to attract more home buyers and deplete the current supply of homes on the market.

FULL STORY

In Other News...

San Francisco Chronicle

Mortgage last loan people pay, study finds

Sacramento Bee

Local builders find few looking to buy new homes

CNN 

Credit tight, but key lending rate eases

Los Angeles Times

Errors in loan documents can save strapped homeowners

Wall Street Journal

California officials try to avoid second housing hit

C.A.R Market Matters, October 09, 2008

Thursday, October 09, 2008

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS

New York Times

Central Banks Coordinate Global Cut in Interest Rates

Hoping to thaw the current credit freeze, the Federal Reserve, the European Central Bank, the Bank of England, and the central banks of Canada and Sweden reduced their primary lending rates by a half percentage point on Wednesday. The Chinese central bank also reduced its key interest rate and lowered bank reserve requirements, while the Bank of Japan's rates remained unchanged.

MAKING SENSE OF THE STORY FOR CONSUMERS

The purpose of the rate cut is to increase consumer confidence, which in turn should help stimulate the economy. When consumers and businesses have more confidence in the economy, they usually spend more money, which bolsters the economy by enabling retailers to increase sales and prevent future layoffs.

The Federal Reserve controls the interest rate that banks charge each other for short-term loans. Usually this leads to banks lowering the rates they charge consumers and businesses. The short-term loan-rate reduction, from 2 percent to 1.5 percent, should have an almost immediate effect on credit card rates, according to financial analysts. Interest rates on automobile and business loans also should decline. Generally, the short-term loan-rate reduction also leads to reduction in mortgage rates; however, it is too soon to predict if that will happen in this case given the way the market has reacted to recent economic news.

Some credit card companies already have reduced their credit card rates. Although there may be room for further reductions for some consumers, many experts believe that only consumers with the best credit scores and payment history will benefit from the rate reduction.  Most credit card companies deem consumers with high credit scores as providing the least amount of risk.

Consumers with fixed-rate mortgages will not benefit from the rate cut; however, those with adjustable-rate mortgages (ARMs) may. When banks receive an interest rate cut, they may pass along the savings to consumers. Homeowners with ARMs could receive a payment reduction.

Click here for the full story

MSN

Sell your home fast in any market

Due to the large number of available homes on the market, and the fact that the traditional home-buying season is coming to a close, sellers need to be aware of key factors that can determine whether their home sells quickly or lingers on the market.

MAKING SENSE OF THE STORY FOR CONSUMERS

Accurately pricing a home continues to be the number one factor to conclude a successful sale. Most REATLORS guide sellers in determining an accurate listing price for their home by tracking comparable properties in their neighborhood that have sold within the previous three to four months. Since the market can greatly fluctuate from one neighborhood to another, some REALTORS believe that setting a price based on comps older than three to four months will not accurately reflect the current market and could result in pricing a home at odds with current market conditions.

Even in today's market, sellers do have some control over many contingencies. Some buyers may request that their contracts include contingencies based on their ability to obtain financing. To avoid risks associated with this contingency, some REALTORS advise their clients to request buyers to provide a pre-approval letter from a well-established lender; a financial information sheet outlining the buyer's employment history, income, assets and liabilities; and a recent bank statement showing that the buyer has enough funding reserves for the required down payment. This ensures that the buyer is likely to be approved for a mortgage loan, and reduces the risk to the seller.

Some buyers may use a home's inspection report as a bargaining chip to negotiate a lower price. When this occurs, some sellers offer buyers a lump sum of money so the buyer can make the repairs, rather than the seller repairing each item listed on the report. Sellers may be able to avoid paying a lump sum to the buyer by having the home pre-inspected prior to listing. This enables the seller to obtain accurate estimates for the cost of repairs ahead of time and provides the seller with the option of making the repairs before listing the home.

Click here for full story

CNBC

Brokerage Asks Sellers to Cut 10% off Home Prices

In an attempt to lure potential buyers off the sidelines, a nationwide real estate brokerage is asking its approximately 25,000 sellers who have homes listed with its brokers to reduce their listing prices by as much as 10% for its first national, 10-day sales event. 

MAKING SENSE OF THE STORY FOR CONSUMERS

According to a recent Coldwell Banker survey, more than half of its real estate agents said listing prices in their market are still too high to attract qualified buyers. The brokerage is hoping that the 10-day price reduction will entice home buyers to venture back into the market and help reduce the current supply of unsold homes. In California, C.A.R's Unsold Inventory Index for existing single-family detached homes in August 2008 was 6.7 months. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Buyers who are uncertain if now is the right time for them to purchase a home should consider the price of the home, along with the recent reduction in mortgage rates, which could reflect a sizable savings. According to the primary Mortgage Market Survey, 30-year fixed-rate mortgages averaged 5.94% with an average .6 points for the week ending Oct.9. This is a decline from the previous week when fixed-rate mortgages averaged 6.10%. Last year at this time, the 30-yr fixed-rate mortgage averaged 6.4%.

Click here for full story

In Other News...

Los Angeles Times: Countrywide mortgage pact may be worth $3.5 billion to California loan holders? 

Los Angeles Times: How much foreclosure relief will homeowners get from bailout plan?

Sacramento Bee: Rescue bill won't curb region's foreclosures, experts say 

Mercury News: Forecast calls for continued drop in home prices

Mercury News: Freddie, Fannie cut back mortgage fees

Wall Street Journal: California Officials Try to Avoid Second Housing Hit

CNN Money: Consumers rein in borrowing 

C.A.R e-Blasts are published by the California Association of Realtors

Steve Papapietro's Weekly Mortgage Bulletin: Rescue Bill Passes to Protect Economy; Protect Yourself from a New Kind of ID Theft

For the week of Oct 06, 2008-- Vol. 6, Issue 41

Last Week in Review

TO PASS OR NOT TO PASS? That was indeed the question of the week.... and the final answer came on Friday, as the House of Representatives followed the Senate's lead and passed the $700 billion rescue plan.

The week began with the House initially voting against the plan on Monday, causing Stocks to plunge in their final minutes of trading to their single worst loss in the 112-year history of the Dow Jones. However, on Wednesday, the Senate passed a revised rescue plan that included some tax breaks and an increase in FDIC protection from $100,000 to $250,000. This was the version the House subsequently passed and President Bush signed into law on Friday.

Why was it important for the plan to pass? Simply put, the plan frees up some of the frozen credit that consumers and small businesses across the country need to survive. As examples, even auto loans were becoming harder for consumers to qualify for... and on the business side, many retail operations have had difficulty in financing their inventory. Credit issues like these are not good for the economy, confidence, and consumer spending, and the rescue plan was passed to help matters.

In other news from Friday, the Labor Department reported that 159,000 jobs were lost in September, which is much worse than the 105,000 lost jobs that economists were expecting. So far in 2008, we have lost 760,000 jobs. And while Bonds and home loan rates would have typically improved this weak economic news (remember weak economic news usually causes money to flow from STocks to Bonds, helping home loan rates improve), talk that the Fed and other Central Banks around the world may start cutting their benchmark rates kept Bonds and home loan rates from making a big improvement. Remember, a cut in Fed Funds Rate is inflationary, and therefore bad for Bonds and home loan rates.

When all was said, done and passed during this incredibly  volatile and historic week, Bonds and home loan rates ended the week only slightly improved from where they began. I will continue to monitor this situation closely in the days and weeks ahead.

Just when you thought you had a handle on protecting your identity... there's a brand new kind of identity theft in town. This week's Mortgage Market View gives you the scoop, as well as tips to protect yourself--so don't let this opportunity to stay safe pass you by! 

Forecast for the Week

With a light schedule of economic reports on the calendar this week, the financial news and headlines will likely have the biggest impact on the markets this week--particularly as we see how the markets react to the newly signed rescue bill. In addition, late breaking news from last week that Wells Fargo will acquire Wachovia, undoing a prior deal that had Citigroup acquiring Wachovia, and that Citigroup may file for a lawsuit, could impact the markets as well.

Another big news item will be the Meeting Minutes of September 16 Fed meeting, which will be released on Tuesday. If these Minutes give evidence that the Fed may cut rates at its next meeting on October 28-29, Bonds and home loan rates could worsen due to the inflationary implications.

Remember when Bond prices move higher, home loan rates move lower....and vice versa. As you can see in the chart below, Bonds and home loan rates managed to remain above an important floor of support. It will be important to see if this floor of support can hold through any news or possible hints of inflation.

SEE CHART AT TOP OF POST

The Mortgage Market View...

Medical Identity Theft 

With identity theft on the rise these days, most of us are already taking steps to protect ourselves.  But did you know that there's no a growing form of identity theft known as "medical identity theft" that can not only devastate victims' finances, but also compromise their health, too. According to Joy Pritts, JD, author of  Your Medical Record Rights, here's what you need to know. 

What is Medical Identity Theft?

Medical identity theft occurs when criminals access victims' medical records. Since medical records contain a person's social security number and credit card information (if bills have been paid via credit card), criminals can open accounts and make fraudulent charges. However, criminals can also gain access to victims' health insurance policy information and medical histories, and they can create forged health insurance cards to sell to people who are uninsured and need expensive medical treatment. A person who buys a fake health insurance ID card would then seek treatment using the victim's name and policy number, and then disappear, leaving the victim with the bills to pay.

Why Should You Be Concerned?

Victims of medical identity theft not only have to repair their credit and convince credit agencies and service providers that bills are fraudulent, they also have to correct inaccurate medical information that becomes part of their health records. Victims could be denied life insurance or individual health insurance if their records show treatments they didn't have. In addition, victims could receive treatments or medicines that could be harmful to them on the basis of inaccurate content in their medical records.

Steps to Take If You Suspect a Medical Identity Theft

1.  Read all bills and "Explanation of Benefits" statements from your insurance company to verify they are for treatment you received. 

2. If a bill or statement refers to treatment you did not receive, contact the employee in charge of investigating fraud at your insurance company and at the medical facility involved and explain the situation.  Follow up with a letter sent via registered mail with return receipt once again explaining the situation, asking for any bills to be voided, and asking that your medical record be amended to state that you did not have this health problem or receive this treatment.

3. Report the identity theft to the police department and the state's attorney general's office.

4. Contact health providers you use, explain the situation, ask if the erroneous information has been added to the providers' records, and if so, ask them to correct the records.

5. Report the fraud to the major credit card bureaus and set up fraud alerts. Also, request free copies of your credit reports to make sure no new fraudulent accounts have been opened. 

6. Review your medical records every few years to make sure there are no errors. 

CLICK HERE to learn more about your medical record rights. 

Brought to you Exclusively by Steve Papapietro

Bay Area Highlights, Oct 6-20

Enjoy October by taking advantage of some of the great events happening this week in the Bay Area!

Music--

7:30PM, 10/7

Earth, Wind, & Fire, Rock/Pop, Mountain Winery, Saratoga

8:00PM, 10/9

David Byrne, Mountain Winery, Saratoga

9:00PM, 10/10

New Kids on the Block, Lady Gaga, Rock/Pop, HP Pavilion, San Jose

7:00PM, 10/12

Classical Pianist Garrick Ohlsson, McAfee Performing Arts and Lecture Center, Saratoga

9:00PM, 10/16

Russ Barenberg and Byron Sutton, Bluegrass/Country, Little Fox, Redwood City

8:00PM, 10/17

Jeffrey Siegal plays Grieg, This celebrated pianist returns to kick off Peninsula Symphony's 60th Season, San Mateo Performing Arts Center, San Mateo

7:00PM, 10/19

Tina Turner, HP Pavilion, San Jose

More Things To Do--

26th Annual Chocolate Fest

Twenty different vendors of chocolate wares: ice cream, gelato, brownies, cakes, cookies, truffles, and candy. 

10/11. 7:30--10:00PM. First Congregational Church of Belmont, Belmont

San Carlos Art and Wine Faire

The San Carlos Chamber of Commerce's Art and Wine Faire will celebrate its 18th year. 

10/11-10/12. 11:00AM, Downtown San Carlos

Campbell's Oktoberfest

Many cities across the U.S and world celebrate Oktoberfest. Campbell might well be mistaken for a German village during this event. 

10/18-10/19. 10:00AM-5:00PM. Downtown Campbell.

Half Moon Bay Art and Pumpkin Festival

Pumpkins reign supreme on the picturesque terrain surrounding the charming coastal areas. 

10/18. 9:00AM-5:00PM. Downtown Half Moon Bay

3rd Annual Midtown Fun Festival

Games giveaways, and fun for the family.

10/18. 11:00AM-4:00PM. Midtown Shopping Center, Palo Alto

Bay Area Highlights is brought to you by Cindy Solomon at North American Title Company. 

Enjoy your week! 

Why Should Anyone Buy a Home in This Market?

Owning a home can get complicated. Your home is often your biggest investment, a tax shelter, and that first giant step into adulthood. The most important and most overlooked aspect of home ownership is emotional--homes are the centerpieces of lives and families. Your home is your castle, a place to be with family, friends, and pets. It's where you make your mark on your internal world, not your mark on the outside world. 

The values of home ownership aren't debatable--but in today's market, it's more important than ever to reflect on the pros and cons before making the big decision. Should anyone buy a home in this market? Is the economy too unpredictable? Should you wait? 

These issues are plaguing many families right now, and there is no simple answer. 

I've put together a list of essential questions to help you discover if now is a good time for you to buy. First there are the simple mathematical questions, and then there are the more existential ones:

1. Can you afford to put 20% down and carry a 30yr mortgage, or put 10% down, carry a 30yr mortgage, and pay PMI (private mortgage insurance), or put 5% down and get an expensive FHA loan? There are some shorter fixed periods than the 30yr fixed which may be good in some circumstances, but I am going to take the conservative route and ask you if you can afford payments on a 30yr fixed loan. Can you weather the economy's ups and downs? If no, then you should not try to buy now. If yes, move on to the next question. If you do not know, search out a good lender and talk with them. DON'T use internet calculations. They won't provide a dependable answer.

2. Are you planning on staying in this home for at least 5 years and maybe longer? If you have to move can you afford to to keep your home as a rental? If you don't know, don't buy. At this moment in the Silicon Valley I can't think of any homes worth less than they were 10 years ago. Most are still worth more than they were 5 years ago. If you can't commit to at least 5 years stop here. If not, move on to the next question. 

3. Do you have a very specific goal in mind that can be achieved in a specific location? For example, are you trying to buy a home in Palo Alto so your children can attend schools there? Has the soft market enabled you to do that? If so, then this is a great time to buy. If you do not buy soon prices or interest rates could conceivably go higher and lock you out. It's also possible that prices could go lower, but are you willing and able to take that gamble with your children's education? If you are willing and able, then wait, and you might get a better deal.

4. Are you easily pleased, or specific about what you want and need in a home? If you are flexible regarding what you want in a home, and are more interested in getting the best prices, then there is no reason to rush into buying if you think prices will drop or inventory will skyrocket. However, if you are very picky or have specific needs that aren't found in many homes, when you find what you want, BUY IT. For example, if you're sound sensitive and find an affordable home where noise is not an issue in an area that has few quiet places to live, then you are a good candidate for buying now. Are you looking for a one story town home that has central air, a nice patio, and an attached garage? Trust me, these are not a dime a dozen. If you find what you want, buy it! 

5. Do you want a new home in an area where there is not a lot of room to build? Right now there is a large inventory of new homes. If you live in a city where there is little room to expand this is probably a great time to buy a new home. Builders are very generous with their upgrades and a few years from now there may not be as many developments to choose from in centrally located areas. There are a number of new developments in San Mateo and Santa Clara counties right now, but there is not a lot of empty land. There may not be as much new inventory in coming years.

We're still left with the question: Why should anyone buy in this market? Clearly, the answer isn't simple, although hopefully my guide brought you closer to understanding your options. With some soul-searching and advice from a trusted Realtor and Lender, the answer will get clearer for you. Good luck! 

Emergency Economic Stabilization Act--Letter from C.A.R

Friday, October 03, 2008

Brought to you by the California Association of Realtors

Dear C.A.R Member;

Earlier today, the U.S House of Representatives approved the Emergency Economic Stabilization Act by a 263 to 171 vote. The legislation was quickly signed into law by President Bush, capping what has been a very tumultuous two weeks for the credit and financial markets.

This was a difficult decision for our elected representatives to make, especially given the abbreviated time period for review and debate that the gravity of the situation warranted. While passage of the Act should enable the credit markets and the U.S financial system to set the stage for their eventual recovery, this was only the first step in what will likely take weeks and even months to wend its way through the system before reaching Main Street. 

But it was an important first step. The health of the nation's housing market is critical to the financial well being of every household in the country, and is front and center here in California.

Here's what the legislation does:

Helps American families keep their homes by requiring the Treasury Dept. and any federal agency that owns or controls troubled mortgages to modify those mortgages wherever possible; this may include reducing the principal or interest rate; and extends till the end of 2012 the exclusion from federal income tax of mortgage debt forgiveness. 

Addresses the credit crisis by allowing financial institutions to immediately sell $250 billion in troubled assets to the U.S Treasury Department under the newly created Troubled Assets Relief Program (TARP). Another $100 billion would be made available upon the President's request.  Should the President deem it necessary, and with Congressional review, the Treasury Dept. may utilize the remaining $350 billion;

Protects taxpayers by allowing the Treasury Dept. to take an ownership stake in participating companies. In addition, if after five years TARP has incurred a net loss, the President must propose legislation that would force participating companies to reimburse the government to make up the difference;

Sets up an insurance program, funded by the financial industry, to guarantee companies' troubled assets, including mortgage-backed securities purchased prior to March 14 this year;

Curbs executive pay for companies utilizing TARP;

Sets up two oversight committees, a Financial Stability Board, and a congressional oversight panel, to which the Financial Stability Board would report;

Creates renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels; as well as continuing other tax breaks that were set to expire; and extends relief from the Alternative Minimum Tax (AMT by another year;

Allows the SEC to suspend the required mark-to-market accounting standards and orders a study to be done on the rule's impact on financial institutions;

Shields bank deposits by temporarily raising the FDIC insurance cap to $250,000 from $100,000; and temporarily increases the federal insurance level for credit union savings to $250,000, both till the end of 2009.

We're appreciative of the efforts of our congressional leaders in both houses as well as of our peers at NAR. Their efforts helped secure adequate protections for both consumers and taxpayers, as well as stricter oversight protocols than what were initially contained in the legislation. C.A.R will continue to study and report to you additional information and analysis through our weekly e-mail newsletters.

Sincerely,

William E. Brown

2008 President

California Association of Realtors

Market Matters Advisory, Thursday Sept 25th

Brought to you by California Association of Realtors: Welcome to the Market Matters Advisory, your weekly guide to responding to the market. 

Proposed $700 billion plan moves forward

A proposed rescue plan that was initially submitted by the U.S Dept. of the Treasury last Friday and received numerous edits and additions throughout the week appears to have made significant progress today, with members of both parties announcing they have reached general agreement to move forward with a $700 billion federal rescue plan.

If the plan announced today is approved, it would allow the U.S Dept. of the Treasury to purchase troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans--up to $700 billion, which would promote stability in the U.S financial markets.

C.A.R strongly supports the intent of Congress and the federal government to calm financial markets, address liquidity issue and begin to restore confidence in our financial system as outlined by Congress this afternoon. C.A.R looks forward to examining the proposed plan in greater detail as more information becomes available, and wants to be certain that the needs of Californians are addressed in the final legislative package, and that housing's critical role is recognized in the legislation.

C.A.R also is encouraged by reports of additional provisions providing a greater level of protection to both consumers and taxpayers, and the addition of stricter oversight protocols than what was initially proposed by the Treasury Dept.

Some of the key components of the current federal rescue plan as outlined today include;

• Providing the US Dept. of Treasury authority to issue up to $250 billion of treasury securities to finance the purchase of troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans, right away. If needed, the Treasury could request an additional $100 billion; however, the Treasury would need Congressional approval to receive the remaining $350 billion;
  
• Cash received from liquidating the assets will be returned to the Treasury's general fund for the taxpayers;
• Funding for the program will be provided directly by the Treasury from its general fund by increasing its debt by $700 billion;
• Help for troubled homeowners to avoid foreclosure;
• Limiting compensation to executives of troubled firms receiving assistance;
• Greater oversight than the limited bi-annual reporting mechanism in the current proposal; and
• Allowing the government to take an ownership stake in companies;

MAKING SENSE OF THE STORY FOR CONSUMERS

Although the rescue plan is not yet finalized, lawmakers and the Treasury would appear to agree on provisions that would provide assistance many homeowners facing foreclosure. Earlier this week, the National Association of REALTORS announced the creation of a Presidential Advisory Group to address this critical issue. Five California REALTORS were appointed to the 20-person Presidential Advisory Group. Both C.A.R's and NAR's Leadership Teams are in close contact with elected officials and other key leaders in Washington to ensure that interests of the real estate industry are represented. 

One of Congress' primary goals as this proposal moves forward is to minimize the financial impact of this rescue on the U.S taxpayers. The current proposal would allow the Treasury not only to sell the acquired mortgage assets at a later date, but also to acquire an equity stake in the companies that participate in the program. The stocks could be sold at a later date, which could enable Congress to recoup some--if not all--of the $700 billion. 

Articles about this plan--

Lawmakers agree on outline of bail

How we got here; It's housing, stupid

Bloomberg News video

Lenders to FHA: Thanks but no thanks for your help

Giant Investment Banks Grasp for Government Safety Net

CNN Money

Can't anyone afford my home?

Although affordability set a record high in the second quarter of this year, when forty-eight percent of the state's households could afford to purchase an entry-level home in California, factors other than price--primarily tighter lending standards and availability of credit--are influencing consumers' confidence and ability to purchase homes.

MAKING SENSE OF THE STORY FOR CONSUMERS

The median price an existing home has decreased approximately 40 percent in California from its peak in 2006; however, many potential home buyers till view asking prices as too high compared with their annual household incomes. Despite the decline in home prices, many homes in California are still priced 33.5 percent higher than they were in 2001. During the previous real estate cycle, the ratio of home prices to income hovered at approximately 10:1, meaning that consumers were paying approximately 10 times their annual salary for homes. The current ratio of home prices to income is approximately 6:1 indicating that home prices are better aligned with incomes today than they have been in the past.

Tighter loan underwriting guidelines by lenders worried about declining home prices and the rising rate of foreclosures have led to many consumers finding it difficult to secure loans. Approximately 85 percent of lenders have tightened their requirements for borrowers in the past three months, according to the Federal Reserve Board. In November, Fannie Mae and Freddie Mac, which set the lending criteria for most loans, will require a credit score of 740 or higher--an increase from the previous credit score of 680---for borrowers to avoid a loan surcharge that generally increases their interest rate. Consumers can raise their credit scores numerous ways, including reducing their credit card debt to less than fifty percent of their available credit; making payments on time; and minimizing credit inquiries. Experts recommend that consumers check their credit reports annual to ensure accuracy and clear up any mistakes. Consumers are entitled to one free credit report each year from each of the three major credit reporting bureaus. Reports can be requested by contacting each bureau.

The majority of lenders are requiring a full 20 percent down payment in order to qualify for a fixed-rate mortgage loan. Additionally, some lenders are restricted a homeowner's monthly principal, interest, taxes, and insurance (PITI) to 32 percent or less of a family's pre-tax income. If a lender determines that a home's PITI will exceed 32 percent of the family's income, the loan often will not be approved. As a result of the Housing and Economic Recovery Act of 2008, beginning Oct. 1, 2008, home buyers with loans insured by the Federal Housing Administration will no longer be eligible for seller-funded down-payment assistance. However, home buyers still can receive assistance from family, friends, and employers. Many first-time home buyers also can receive down-payment assistance from non-profit organizations. Borrowers with good credit, who issue a down payment higher than 20 percent, will likely qualify for a home loan, often with lower interest rates.

Some economists believe that owning a house is a risky asset, but in reality, homeownership historically has provided homeowners with long-term value, and often can be a consumer's best investment. According to statistics gathered by C.A.R over the last 40 years, homeowners who purchase a house and keep it at least five years have an average annual rate return of nearly 12 percent. For a complete assessment of the long-term value of homeownership, please CLICK HERE. 

USA Today

Anxiety rises as the era of easy credit comes to an abrupt end

Many consumers, some who acquired high levels of debt compared with their repayment capabilities, are feeling the effects of the tightened lending standards, and are concerned that the new standards will negatively impact their 401k savings plans, credit cards, and ability to secure new loans.

MAKING SENSE OF THE STORY FOR CONSUMERS

Many consumers, especially those who rely on their 401k savings plans for retirement, may be discouraged by recent shakeups on Wall Street. The initial reaction of some consumers is to stop contributing to their 401(k)s or to move their money of out stocks and into money funds. Analysts often offer three tips to consumers about retirement accounts; keep contributing, even in a down market, do not transfer all money out of stocks and into money funds, which could result in missed profits when the market rebounds; and rebalance stocks and bonds so they are better aligned with the consumer's target for investments.

As obtaining new lines of credit becomes more difficult, many  consumers are turning to the use of their existing revolving lines of credit, especially credit cards, for everyday needs such as gas and groceries. Aside from racking up high levels of debt, some consumers inadvertently may be increasing their interest rates, even though they make their payments on time. If balances suddenly increase to higher levels than in previous months, or if balances remain at a high level for consecutive months, some credit companies--concerned that the borrower may not repay the debt--may raise the credit card's interest rate. Those who miss a payment, make a late payment, or exceed their credit limit may receive a penalty rate as high as 32 percent.

FULL STORY

In Other News...

The Mercury News

Home prices fell 5.3 percent in July, now at 2005 levels 

Wall Street Journal

The Finest Foreclosures

CNN Money

Builder sentiment rises from record lows

LA Times

Census: Housing costs eat up half of more than 7 million Americans incomes

CA unemployment rate rises sharply to 7.7%

Press Enterprise 

Inland home prices fall steeply as number of sales jumps

C.A.R e-blasts are published by the CALIFORNIA ASSOCIATION OF REALTORS, a trade association representing nearly 200,00 REALTORS statewide

Steve Papapietro's Weekly Mortgage Bulletin: Iron Hank and Super Ben Take Path to Save the World

For the week of Sept 22, 2008-- Vol. 6, Issue 39

Last Week in Review

"The path to success is to take massive, determined action." Anthony Robbins. And success in stabilizing the markets and the economy is exactly what the government is hoping will happen as a result of the massive, determined actions they took late last week in response to unprecedented happenings in the financial markets. 

Treasury Secretary Hank Paulson announced that the US government will guarantee money market funds, after panic led to a "run on the bank" type of environment. A whopping $180 billion was withdrawn from market funds on Thursday alone. And the fear was so great that a premium to put money into Treasury securities was paid, which actually exceeded the rate of return. So effectively, the return was negative! People were actually paying for a place to put their money that would be safe because they had fears of losing principle. The government guarantee helped to ease these fears and stabilize the markets.

The Fed announced plans to create a market place for liquid mortgage debt. This should do a lot of long-term good to help the housing and lending environment. As if that weren't enough, the Securities and Exchange Commission also placed a temporary ban on the short selling of 799 different financially related stocks.

What prompted these dramatic actions? Very dramatic happenings earlier in the week.

After 158 years in existence, Lehman brothers filed for bankruptcy last Monday due to overexposure of high-risk loans in the mortgage arena. Then, the Fed gave insurance giant AIG an $85 billion lifeline to keep it from going into bankruptcy, after initially stating it would not intervene. Then it was announced that Merrill Lynch is being acquired by Bank of America, which will save them from the same fate as Lehman brothers, and now troubled bank Washington Mutual is looking for a buyer as well. 

Also playing a role was the fact that the Fed left its benchmark Fed Funds Rate (the rates banks charge each other for overnight lending) unchanged on Tuesday, not wanting to counter the recent improvements the US economy has made in the way of inflation. While this benefited Bonds and home loan rates earlier in the week, Stocks felt heavy selling pressure on the news... which added to the reasons for the actions taken late last week.

The government's announcements on Friday are great news for the overall health of our financial system, though they did cause Bonds and home loan rates to move away from their best levels of the week. All in all, Bonds and home loan ended the week slightly worse than where they began. Additionally, stocks had their most volatile week in history--but ended the week almost exactly where they started.

The path to smart spending definitely involves taking advantage of great deals! Check out this week's mortgage market view for five fantastic freebies... and a link to 25 more! 

Forecast for the Week

The ride isn't over---the coming week may see more wild movement in the markets as the financial sector responds to all the recent action, along with several reports due in the latter part of the week. We'll get a read on the housing market with Wednesday's Existing Home Sales Report and Thursday's New Home Sales Report. And we will get a read on the economy with Friday's Gross Domestic Product Report (GDP is the broadest measure of economic activity) and Thursday's Durable Goods Report.

What are "durable goods"? Simply put, they are items that are durable (i.e cars, furniture, appliances, games, cameras, business equipment, etc.) and are made to last longer than three years. This report shows a good measure of consumer and business consumption and buying behavior, and depending on the health of the report, could add to the volatility we have seen.

Remember when Bond prices move higher, home loan rates move lower... and vice versa. AS you can see from the chart at the top of the post, Bonds and home loan rates are still much improved from several weeks ago, despite giving up some recent gains. This could be a great time to take a close look at your home loan financing needs, as rates remain at historic lows. As always, I will be watching closely to see how Bonds and home loan rates continue to respond in these volatile times. 

CHART ABOVE: Fannie Mae 5.5% Mortgage Bond 

The Mortgage Market View

Five Fantastic Freebies

These days, many people are looking for new ways to cut costs and save money. Here are five great ideas from the editors of Kiplinger.

Free TV& Movies: Full episodes of more than 300 shows from NBC Universal and Fox stations are available on www.hulu.com. The site also offers over 165 free full-length movies in a variety of genres. In addition, other networks like ABC and CBS are also starting to post full episodes of various shows on their sites. 

Free College Savings: Sign up at www.Upromise.com and you can turn everyday purchases into college savings. You'll earn cash rewards for eligible purchases of groceries, gas, dining out, travel, and online shopping. The money is then automatically transferred to your child's 529 account. In addition, your family and friends can help too, by linking their rewards to your child's account. 

Free Directory Assistance: The next time you need to call 411, dial 1-800-Free-411 instead for free directory assistance for both residential and business listings. While you may have to listen to a short advertisement after voice prompts, you will still save a few dollars.

Free Credit Report: By law, you can receive one free credit report once a year from each of the main credit bureaus. Visit www.annualcreditreport.com to request your report.

Free Recipes: Need some inspiration in the kitchen? Check out www.allrecipes.com and www.Epicurious.com where you can access over 100,00 recipes for all sorts of meals... no matter your level of expertise. You can search by meal, occasion, or ingredient, and there are plenty of user reviews and cooking demonstration videos to help.

For twenty-five more great freebies, CLICK HERE. 

Archives, Archives, Archives

If you're new to this blog, welcome! I'd like to encourage you to spend some time investigating the site. Make sure to take a look at archived blog posts--often the articles and information posted on this blog include timeless tips for buyers, sellers, real estate investors, and people just plain interested in Bay Area real estate. I've spent a lot of time here answering many of the common questions people have about the process of buying a home, mortgage issues, and the burst of the housing bubble. Chances are, if you have a question, you'll be able to find the answer here!

And if you can't, please please please email me or leave a comment! The blog is updated frequently and we'll get back to you ASAP.

Worried your bank might fail?

Since paraphrasing might leach this important article of its helpfulness, I've decided to post it here in its entirety.  Economy woes have left many of us worrying that our banks might fail--The Mercury News published an article recently by Pete Carey that lays out in simple terms the ways our money is safe-guarded and how it isn't. 

Worried your bank might fail? Here's how you're protected--and how you're not

Pete Carey

The Mercury News

We've all got the jitters these days. Will the bank fail? Is our money safe? What about our investment accounts, and the IRAs we have at our bank or credit union?

The bad news is that not all investments are protected by federal insurance, and there are limits on what is protected. The good news is that quite a lot is covered, and there are strategies for gaining more protection. 

Experts say there's no need to pull your money out of the bank. But here is how your money is insured at various financial institutions, and how you can increase your protection.

BANKS

In the event of a bank failure, the Federal Deposit Insurance Corporation insures deposits, including money market accounts, up to $100,000.  The vast majority of banks, including all state-chartered banks in CA and many foreign-owned banks, are FDIC insured. To make sure your bank is an FDIC member, go to "Bank Find" on the FDIC web site at www.fdic.gov/deposit/index and type in your bank's name and state.

The FDIC also insures certain retirement accounts up to $250,000. These include all IRAs and self-directed defined-contribution accounts, such as 401ks and Keogh plans for the self-employed. This is in addition to the $100,000 per-account protection for bank accounts.

Here are a couple of ways to increase your coverage:

• Co-owners of an account are each insured up to $100,000, so they can have up to $200,000 in a joint account with the full amount protected by the FDIC. Or, they can open three accounts- one joint and two individual accounts--for $400,000 coverage. 
  
• For a living or revocable trust with multiple owners, the FDIC provides up to $100,000 of insurance per qualified beneficiary (parents, siblings, spouse, children and grandchildren). A trust with six owners is insured for $600,000.

Thus, a couple with no children could be insured for up to $1.1 million by having a joint account, two individual accounts, two retirement accounts and two revocable trust accounts naming one another as beneficiaries. 

• Another strategy is to spread your money to many different banks. You and your spouse could have $600,000 in joint accounts at three banks, for example, all of it protected by the FDIC. There is no maximum number of banks where accounts can be held.
  

"Some banks have utilized creative mechanisms for insuring that their depositors can gain even more deposit insurance than that offered by the FDIC," notes William Heraf, commissioner of the California Department of Financial Institutions. He advised checking with your bank to find out if it has done that.

If one of your banks merges with another, the FDIC allows a six-month grace period in which coverage continues as though the money were still at separate banks. 

If your bank fails, the FDIC will find a healthy bank to step in and take over its operations. That usually happens on a Friday, and the bank reopen on Monday with full access to your accounts. Over the weekend, you would still have access by using checks, debit cards and ATM cards.

To learn more about how to structure accounts for maximum coverage, go to www.fdic.gov and click on the "deposit insurance" tab. 

CREDIT UNIONS

Accounts in credit unions are insured by National Credit Union Administration, which operates in essentially the same way as the FDIC.

BROKERAGES

Cash and securities such as stocks and bonds held in a brokerage account are protected by the Securities Investor Protection Corp, or SIPC. That includes 401k plans and investment accounts at banks, as long as they are registered with the Securities and Exchange Commission. 

SIPC, created by Congress in 1970, insures accounts up to $500,000, with a maximum of $100,000 for cash. Of course, you aren't insured against losses incurred by your investments because the stock market is tanking.

You can find out if your brokerage is an SIPC member at www.sipc.org.

Brokerages are required by the SIPC to segregate cash and securities owed to customers, so that in the event of a failure they are safe and can be returned to the customer. If for any reason the failed brokerage didn't segregate the securities, SIPC liquidates the brokerage to pay the customer.

"In this instance, customers are assured they'll get their assets back," said SIPC President Stephan Harbeck. "If there's anything missing, SIPC can use its funds to replace any missing securities," he added. 

In the case of Lehman Brothers, the investment bank that filed for bankruptcy last week, the account segregation "is in good shape" and no customer assets are missing "as far as we know." For technical reasons, however, SIPC may file liquidation proceedings to help facilitate an account transfer to Barclays Bank. Individual accounts are now at a Lehman subsidiary. 

Make sure to check out other great resources at The Mercury News website. 

Market Matters Advisory, Thursday Sept 18th

Welcome to the Market Matters Advisory, your weekly guide to responding to the market.

LA Times

Has the housing market hit bottom? 

In some areas, foreclosures are increasing, housing inventories are higher than normal, and even well-qualified borrowers cannot receive mortgage loans. Many homeowners and home buyers are also becoming increasingly concerned about when the housing market will reach bottom. Although some areas, such as the Inland Empire and the Central Valley, appear to already have experienced the bulk of their price declines, other markets, such as the San Francisco Bay Area and Southern California may still see home values decrease further, according to some analysts.

MAKING SENSE OF THE STORY FOR CONSUMERS

Some economists are comparing the current real estate cycle to the 1990s but the origin of this cycle is different from that of the last decade. During the 1990s, a higher rate of unemployment and many other economic factors triggered the downturn, contributing to weak sales for a five-year period. The current real estate market is different in that sales declined at a quicker pace during 2006 and 2007, but have shown marked improvement in 2008. In July home sales remained above the 400,000 level for the third consecutive month. 

Although home prices in California appear to be high compared with incomes, the current cycle has allowed home prices in CA to become realigned with incomes. Affordability increased dramatically in the second quarter of this year, and is currently at 48%, meaning that nearly half of the state's households can afford to purchase an entry-level home in CA. Some economists predict that the housing market will have several "false starts" meaning that there may be periods when home prices reach a plateau or may even increase for a brief period, and then decrease again. Although home prices have not yet stabilized, home sales are increasing. It is also important to note that real estate is cyclical and prices will eventually rebound, correcting the market.

FULL STORY

Wall Street Journal

U.S to take over AIG in $85 billion bailout; central banks to inject cash as credit dries up

American International Group Inc. (AIG), one of the world's biggest insurers, signed an $85 billion deal with the federal government earlier this week. This deal prevents AIG from entering bankruptcy and in turn the government receives a 79.9 percent equity stake in the company.

MAKING SENSE OF THE STORY FOR CONSUMERS

Because of the unusual nature of AIG bailout--AIG is not directly regulated by the federal government---some consumers may not fully understand the terms of the agreement, and may view it as another burden to taxpayers. However, the agreement with AIG differs from the life line provided by the Federal Reserve to Bear Stearns earlier this year. Under terms of the AIG agreement, the federal government is providing AIG with a two-year, $85 billion loan at 11.5% interest. In return, the Fed is receiving a 79.9% equity stake in the company, providing an opportunity for taxpayers to benefit if AIG should return to profitability.

Because AIG owns more than two dozen companies licensed to transact insurance in CA, some consumers may be concerned about the ability of the company to pay its claims. However, it appears that AIG's reserves are more than adequate at this time. In the unlikely even that the subsidiaries are unable to pay claims, the state's insurance regulator will take control of the firm assume responsibility for the necessary payments.

FULL STORY 

Sacramento Bee

Short sales a win-win--or a minefield

With more homes going to default, and more homeowners unable to qualify for loan modifications, short sales are becoming a viable alternative for many. However, these transactions can be complicated and often require more paperwork and time than a more traditional sale.

MAKING SENSE OF THE STORY FOR CONSUMERS

Short sales are designed to offer homeowners and banks an alternative to foreclosure. Generally this tactic is employed during real estate downturns, when it becomes more difficult for a homeowner to sell the property for an amount equal to or greater than the amount owed on the original loan. Short sales can be a win-win because they allow sellers to avoid foreclosures and can be less damaging to the seller's credit score than a foreclosure. With a short sale, buyers have an opportunity to purchase a home at a more affordable price.

Short sales are often more time intensive than a traditional transaction and often require more paperwork. Because some banks are overwhelmed with short sale offers, it is important that the seller working closely with their REALTOR to provide all of the necessary paperwork to ensure that the bank can accurately assess the situation and make a decision that benefits all parties. Sellers who opt for a short sale may best be served by a REALTOR who has experience working with short sales and is familiar with the required paperwork.

FULL STORY

In Other News....

Sacramento Bee: Amid bank woes, insured deposits safe

LA Times: Hitting bottom? What the experts say

30-yr mortgage rates drop below 6%

San Francisco Chronicle: State's home buyers seek bargains, move slowly

Wall Street Journal: Supply of homes for sale declines in metro areas

The Mercury News: mortgage rates falling, but nervous home buyers may stay on sidelines

CNN Money: New housing construction at 7-yr low

Talking Points--Here's What to Tell Consumers

Although the nation's banks appear to be in less danger of failing today than they were during the savings and loan crisis of the late 1980s and early 1990s, some consumers may need reassurance that their loan or bank account is secure. Financial institutions report their financials to regulators, who in turn rate their soundness. Regulators do not disclose their ratings to the public, but there are a wide variety of private firms that analyze the data reported to regulators and generate their own ratings for consumers. The ratings are based on a variety of factors, including the institution's net worth, problem loans, profit or losses, cash on hand and reserves for losses.

Although some companies charge for their ratings, others such as Bankrate Inc. and BauerFinancial Inc. provide free access to their ratings on all 17,000 US banks, savings and loans, and credit unions, using the Star System, where one star indicates the lowest rating possible and five stars the highest. The Federal Deposit Insurance Corp's site also lists 11 private firms that provide reports online, by mail or by phone. 

C.A.R e-Blasts are published by the California Association of Realtors

Upsides to Owning

Making the decision to purchase a home is nothing to scoff at. Before you make this life-altering choice, there are a few things to take into consideration.

First of all, when you own a house, it's yours. If you want to paint the walls fuschia and orange, no one can stop you. If you've always dreamed of covering a wall with family photos, there's no need to hesitate and wonder how your landlord will react. Your house is literally an empty canvas. If you always wanted a studio where you could try your hand at painting, owning a home is your chance to build one. 

This freedom and permanence is often the first reason people migrate from renting to owning. It extends beyond the realm of paint colors and layout choices--when you own, you also take care of maintenance, which can either be a blessing or a curse. If you're sick of dealing with landlords and leases, your credit score is good, and you know you'll be in the same place for a while, it might be time to start looking for a house to buy. 

Another huge upside to owning is financial. When you pay rent, you're essentially not making any progress toward owning anything--you're simply paying for the privilege of occupying space that's owned by someone else. When you own a house, every mortgage payment you make takes you one step further up the ladder towards ownership. Plus, if you hit a financial roadblock or you need to make a major purchase, you can always refinance your home or borrow against your equity (the amount of money you've payed toward the price of your house.... so if your house costs five hundred thousand and you've payed one hundred thousand in mortgage payments, your equity is one hundred thousand and you can borrow against that money). 

Just Listed! 2 Bedroom/2 Bath Condo for Rent in Mountain View!

Conveniently located on 280 Easy St in Mountain View, this two bedroom, two bathroom condo for rent has everything you're looking for. Great location near Steven's Creek Trail, downtown Mountain View, and major transportation routes. New carpet and paint, huge balcony, pool, spa, and lots of trees and grass make this a peaceful retreat despite its center of everything location. The unit is 967 square feet. Cats are permitted and small dogs negotiable. 

PRICE: $2,000

Contact me, Marcy Moyer, for more information. 

marcy@marcymoyer.com

Market Matters Advisory, Thursday Sept 11th

Welcome to the Market Matters Advisory, your weekly guide to responding to the market. 

Fannie Mae and Freddie Mac Placed into Government Conservatorship

Fannie Mae and Freddie Mac, government sponsored enterprises (GSEs), were placed into a conservatorship Sunday by the U.S Dept. of the Treasury. The Federal Housing Finance Agency (FHFA) will serve as the conservator, and the CEOs of each company were relieved of their duties. Replacing them are Herbert Allison, former Merrill Lynch vice chairman, and David Moffett, former U.S Bancorp CFO, who will now lead Fannie Mae and Freddie Mac, respectively.

MAKING SENSE OF THE STORY FOR CONSUMERS

Under the conservatorship, the FHFA has the authority to take up to an 80% stake in the companies, and will review both GSEs' financial condition quarterly. The federal government may inject capital into Fannie Mae and Freddie Mac if needed. Both GSEs will be allowed to increase their mortgage funding over the next year and a half, and their stock will continue to trade, with stockholders retaining all rights in the stock's financial worth. However, the plan does call for a 10% reduction per year to GSEs portfolios, beginning in 2010, until they have been reduced to 250 billon.

Although the conservatorship has resulted in lower interest rates for consumers, and restored investor confidence, C.A.R is concerned that the Treasury and new CEOs will change the mission of role of GSEs. Without GSEs, mortgage capital eventually will be less predictable and more expensive. This may result in adjustable-rate mortgages becoming the standard for home buyers, as well as higher down payment requirements, and the possible disappearance of the 30-yr fixed rate mortgage.

C.A.R supports a structure that maintains GSEs in their current countercyclical roles and is urging lawmakers to support continued government involvement in supporting the institutional secondary market. As a result of these concerns, C.A.R will be asking Congress to enact legislation to ensure GSEs continue to fulfill their congressional mission of supplying an affordable and stable flow of capital for home loans.

C.A.R PRESS RELEASE ABOUT CONSERVATORSHIP

Additional Articles

How the Fannie and Freddie Takeover Affects You

It's a hard time to get new credit

Fannie and Freddie 101

Q%A about mortgage giants Fannie Mae, Freddie Mac

What rescue means for mortgage rates

CNN Money

Your home: When it's wise to downsize

As a result of reaching retirement age and becoming empty nesters, more baby boomers are choosing to downsize from large, multi-room homes to ones with less square footage. While some buyers are choosing to downsize to save money, others--especially those still in the workforce--are opting for a lifestyle change, such as a shorter commute; the convenience of an onsite fitness center, often found in condominium communities; or energy savings.

MAKING SENSE OF THE STORY FOR CONSUMERS

Some buyers are choosing to downsize to condominiums, as they are often located in close-proximity to sops, restaurants, transportation; and everyday needs such as grocery stores, dry cleaners, or the pharmacy. Although this is convenient, buyers who wish to save money by downsizing should weigh all the facts before making the decision to downsize. While most single-family homes incur costs such as property taxes, utilities, and home maintenance, most condominium communities require owners to pay monthly homeowner association (HOA) fees, and sometimes special assessments. The monthly dues and special assessments are generally used for items such as replacing a swimming pool, upgrading the community clubhouse, or adding new amenities. Buyers concerned about these costs should ask how much HOA fees have risen over the past five years, and whether the association has plans for new assessments in the near future. 

Even with the added costs, many buyers will realize an annual savings when downsizing. Some experts estimate that the average annual savings in utility costs and property taxes could be as high as $3,900 if a buyers downsizes from a 2,800 sq-ft residence to one that is 1,800 sq ft. 

Buyers who are at or near retirement should consider acquiring a mortgage loan with a 15 yr maturity or a traditional 30-yr fixed rate loan that does not charge a prepayment penalty. Although payments on a 15-yr mortgage are higher and the interest rate is only about .10% lower than a traditional 30-yr fixed rate loan, borrowers can save approximately $141,000 in interest over the life of the loan.

If a borrower elects for a traditional, 30-yr fixed rate loan, they should consider one without a pre-payment penalty. This allows the borrower to make extra payments each month and pay off the mortgage more quickly, without adding additional pressure should their financial situation change.

Full Story

San Francisco Chronicle

Negotiating Skills Vital to Home Purchase

With the high inventory of homes on the market, and an average time on the market of about 50 days for an existing single-family home in CA, buyers have more room to negotiate. Although sale price is a large factor during the negotiation process, many REALTORS are advising their clients that the motto of "it doesn't hurt to ask" can be used to negotiate other contingencies, such as inspection reports, closing costs, and the like.

MAKING SENSE OF THE STORY FOR CONSUMERS

While there are many homes to choose from, buyers should understand that homes in many affluent neighborhoods are still selling quickly and in some cases also are garnering multiple offers. Experts advise that a buyer should work with their REALTOR when negotiating the sale price, and also to ensure that the offer is realistic when serious about purchasing a home in one of those communities. 

Buyers who are looking for the best-deal possible should consider homes that have been on the market for longer than is typical for their area and whose listing price has remained unchanged. Buyers also should consider making second offers on homes that the seller may have intitially rejected. Due to seasonality and the length of time the home has been on the market, some sellers may accept a lower offer than they originally planned.

In addition to the sale price, some REALTORS are advising sellers to negotiate on inspection reports. In today's market, some sellers may be more willing to pay to repair, or negotiate credit for repairs that arise during home inspection. 

Full Story

IN OTHER NEWS...

LA Times

Pending home resales fall 3.2%

Foreclosures accelerate to fastest pace in almost three decades

The Mercury News

House hunting with a mobile phone

Market Snapshot

This week C.A.R is introducing Market Snapshot, a new feature that will appear monthly in Market Matters. Created by C.A.R's research and economics team, Market Snapshot offers REALTOR information about the current market, and provides consumer-friendly charts and graphs.  CLICK HERE to visit C.A.Rs website, where you can view Market Snapshot. 

brought to you by California Association of Realtors (C.A.R)