Florida Housing Market

                            Market Update

Since our last newsletter home interest rates, particularly the 30 year fixed interest rates, have improved dramatically.  You can see on the above chart the FNME 30 bond gapped up on Monday after the Fed announced they were placing Fannie and Freddie into a conservatorship to be run by the Federal Housing Finance Agency (FHFA).

The reason the government stepped in is because investors, especially major foreign investors like the cental bank of China for example, where on the verge of not only not buying our mortgage bonds but possibly even selling them. With all the turmoil in the housing markets and the credit crises investors feel there is too much risk of these bonds going bad.

Fannie and Freddie need to continuously raise monies to fund new home loans and pay off the bonds as they become due. If they can not continue to raise new monies they basically become insolvent.

On Sunday the Fed stepped in and guaranteed Fannie and Freddie's bonds. This restored investor confidence and caused investors to buy the bonds hand over fist on Monday which can be seen on the above chart.

This has put the corresponding 30 year fixed interest rates at their best level in many months. they got as low as 5.75% on Tuesday the 9th. This has created a refinancing oportunity for many people.

This move by the Fed to take over Fannie and Freddie was something that had to be done and helped to restore investor confidence in the two entities. While this may have won the battle, the war on credit is far from over. There will be many banks going under in the next two years and liquidity and tighter lending restrictions will continue to be a problem.

What this means for you is that if you are paying cash for your next house a wait and see attitude is not a bad plan, but if you need to get a mortgage it may be prudent to be house shopping now.

Stay Tuned,
Todd Dawkins

========================================

                 Hope For Homeowners

Last month I went over the tax credit for first time homeowners in the new Housing Bill. This month I will go over the Hope for Homeowners portion of the bill.

The following question was sent to me via email:

Todd
Someone was telling me that a bill was passed which will enable the government to back loans which have to be renegotiated with the banks due to fallen values of our homes. 
 
Do you know anything about all this? can you explain this to me?

Sylvia Klein, General Agent

( By the way if you need Health, Life or Long Term Care Insurance visit Sylvia's website www.buyfloridahealthinsurance.com )

Here are the highlights for the new FHA program HOPE For Homeowners.

Please note that HUD is still going over this extensive Bill and should be clarifying their stance on it around the 1st of October.

 Current  lender(s)  to  write  down  mortgage  balance  to  90%  of  current  appraised  value to solve negative income and DTI issues.

 The borrower has to meet all of the requirements and they do not have to be late on their payments, but the bill states that the borrower must be in eminent danger.

This is one of the definitions that need to clarified by HUD. If a homeowner that is facing a adjusting interest rate upwards and they do not have the income/ability to make the payments, that would probably constitute eminent danger. I will bring you clarification once it is anounced.

 This program is designed to help stem the flow of forclosures and is by no means a free ride.

In exchange for lowering the loan amount borrowers  are to  share  future  equity  appreciation  with  government as follows:

• 100%  of  equity  appreciation  if  borrower  sells  or  refinances  within  1  year

• 90%  in  year  2

• 80%  in  year  3

• 70%  in  year  4

• 60%  in  year  5

• 50%  anytime  after  first  5  years  

In order to qualify for this program it must be:

•  a primary residence
• the current loan must have been originated on or before Jan. 1st, 2008
• Borrower must be unable to afford current payments
• The borrower must have the ability to repay new loan (based on tax returns)
• Greater than 31% DTI on old loan as of March 1st, 2008
• Borrower has not intentionally defaulted on loan.
• Borrower has not made any false statements on previous loan application.

The new loan modification will include the following:

• Must be a 30 year or longer fixed mortgage
• 3% up front single premium MI
• 1.5% annual MI premium based on outstanding loan amount
• No second liens for 5 years

This program is effective October 1st 2008 and expires on September 30th 2011. Strict eligibility standards mean that many homeowners will not benefit. For distressed homeowners other alternatives to consider are:

• Short Sales
• Sale / Lease backs
• Loan modification outside of this FHA proposal 

 To Your Financial Health,
Todd Dawkins

========================================

             Funny Bone

                       LITTLE TONY ON MATH (Part 2)
   
    Little TONY returns from school and says he got an F in arithmetic.
   
    "Why?" asks the father?
   
    "The teacher asked 'How much is 2x3,'" I said "6", replies TONY.

    "But that's right!" says his dad.
   
    "Yeah, but then she asked me "How much is 3x2?'"
   
    "What's the F#*ing difference?" asks the father.
   
    "That's exactly what I said!" said Tony.