NHLA Blog

Freddie Mac's recent survey showed the average 30-year fixed mortgage at 5.20% on July 9th, down from 5.32% the week earlier (and down from 5.875% in mid June).

Of the respondents to their survey, 81% believe rates will remain stable to lower over the next 30-45 days.

44% anticipate mortgage rates will remain stable.

37% anticipate rates to fall further.

19% anticipate rates to rise.

The service we collaborate with to forecast rates shows the following for average rates on a 30-year fixed as drifting lower over the next 90 days.

July    5.15%

Aug    5.03%

Sep    4.90%

Forecasting is an interesting game in the current economic climate.  The above forecasts have a plus or minus delta of 1.05%... meaning, you could forecast for the next 90 days as well as we can!

The thesis for the forecasts above is for a realization by the broader investment community that the economy will not be recovering quickly and that stocks will retreat up to 10% from today and a flight to a more quality investment, like bonds, will drive bond demand and bring lower yields.

Stay tuned as volatility will be sure to reign.

The following is a blog we posted on June 22 and is a reminder of the changes that go into effect for Regulation Z of the Truth-in-Lending Act.

Congress passed the Mortgage Disclosure Improvement Act last year.  As part of this Act and in May of this year, the Fed approved a new rule to ensure that consumers receive cost disclosures earlier in the mortgage process and it goes into effect on July 30.  This applies to home equity loans, refinance loans, as well as loans to finance the purchase of a home.

Starting with applications taken on July 29, lenders must comply with this new law and deliver the Truth In Lending documentation to the customer within three (3) business days (which was already law).

Highlights Of What Is New:

1. Lenders cannot collect any fees before the delivery of disclosures- except for the credit report.

2. Lenders must give borrowers loan cost estimate disclosures within three (3) business days of the application for all types of loans... this once only applied to primary home loans.

3. Disclosures must clearly state that the consumer does not have to go through with the loan just because they are receiving these disclosures. 

4. Lenders must wait a minimum of seven (7) business days after delivery of the TIL before closing the loan.  Borrowers can waive this if they have personal finance emergencies, such as foreclosure. 

5. If the finance charge or annual percentage rate (APR) changes by more than .125%, the lender must provide a new disclosure and wait another three (3) business days to close the loan.  This applies to all types of loans and was originally only slated to impact purchase transactions.

An Associated Press analysis of 45 metro areas found the gap between the monthly mortgage payment on a median-priced home and the median rent has shrunk from a high of $777 gap three years ago, to just $221 today. 

In some metro areas, including Cleveland, Atlanta, Indianapolis, and St. Louis, the gap is less than $100 per month.  Still, in cities like San Francisco and Los Angeles, it is still typically much more affordable to rent.

A quick refresher of the three pillars of housing we look at:

1)    Incomes vs Home prices

2)    Rent vs Mortgage payments

3)    Housing Inventory

Over the last several weeks we have had positive reports on declining housing inventory and now this week a positive report on mortgage payments versus rental payments, along with a positive Case-Schiller report yesterday.

Housing markets do well when mortgage payments are only slightly higher than what would be paid to rent an apartment or home.  Once mortgage payments move closer to rental payments, renters are motivated toward homeownership... not only for the mere fact that most prefer to own a piece of the american dream, but to also benefit from the potential tax advantages.

While this analysis found the gap shrinking, it also found that renters with jobs in education, retail, and transportation don't earn enough to rent the average two-bedroom apartment in these major cities. 

With tightening lending standards, it also found that the average renter is having difficulty scraping together the down payments required in today's more historical lending standards.

Nevertheless, homes in some parts of the country are more affordable than they have been in decades at current mortgage rates.  Certainly a signal that we should be nearing the bottom of the downturn in the housing market.

According to data released by ZipRealty on July 20, the housing market is showing signs of stabilization.

A quick refresher.  The three pillars we look at in determining the health of housing markets is:

1)  Incomes vs Median Prices

2)  Cost of Renting vs Cost of Mortgage

3)  Housing Inventory

The data from Zip Realty is pointing to #3 above as moving in a direction that would contribute to a stabilizing housing market.  Their data shows that the number of homes listed in MLS has dropped for the 12th consecutive month.

Las Vegas, Los Angeles, and Phoenix all recorded a decline in inventory and multiple offers common at the lower price points.  LA showed the most dramatic inventory decline at -54% year over year.  We would remind you, however, that with lender and state instituted foreclosure moratoriums, these numbers are likely somewhat exaggerated for now.

Las Vegas, Phoenix, San Francisco Bay Area, and Los Angeles showed median list prices flat or slightly higher. 

As we continue to blog about over the last few months, there are good signs typical in the early stages of a recovery or stabilization in the housing markets.

In fact, just this morning new home construction inventory reached a low of 8.8 months not seen since 10/2007.  We would like to see that under 5 months supply.  And, we are still concerned about the "shadow inventory" or foreclosures in the que by lenders, but not yet released on the market.

A recession is hard on almost everybody. But many consumers have benefited from one aspect of these tough times – an almost unprecedented run of bargain shopping opportunities. These are high times for those looking for a good deal on items ranging from books to clothing and big ticket items such as hotel fare, cars, houses and more.

Due to a slump in U.S. consumer spending, a number of retail businesses have been forced to close and many more could follow. From well-known chain stores (like the electronics giant Circuit City) to neighborhood boutiques, consumers are finding bargains that have not been seen in a long time. It creates a lot of opportunity for buyers and a significant amount of temptation.

After years of mostly steady economic growth and, among some product and service lines, climbing demand that sent prices skyrocketing, the retail environment has changed completely. This has made it more affordable for consumers to make purchases. On the other hand, a number of individuals have been forced to scale back their own budgets due to job losses or a slowdown in sales (for business owners or the self employed). As in any economic environment, it is a balancing act to be an opportunistic consumer and exercise caution. If economic weakness persists, your own pocketbook could be affected in the months to come.

Good opportunities in today’s environment

One of the most visible opportunities in today’s market is a result of the dramatic increase in home foreclosures. A record number of borrowers have been unable to keep up with their mortgage payments, contributing to a glut in the housing market. The spike in supply, coinciding with historically low interest rate levels has helped to make housing more affordable. Be careful not to rush into buying a property simply because the deal is “too good to pass up.” One basic real estate rule has not changed: the house and the location must be right for you, not just the price.

The slowdown in automobile sales has also created a more favorable environment for buyers. Car purchases are big-ticket items so be sure to do your research and test drive comparable vehicles to determine what is most suitable for your needs. A car available at the best price today may, in the long run, cost you more if it requires more investment in parts and service down the road.

Checking out the stores and beyond

A drive by any downtown street or strip mall provides evidence of retailers are being affected. Shuttered storefronts are sprouting up all over the nation. Discounts are easy to find, most notably at stores that are forced to close their doors and liquidate inventory. If you like shopping for bargains, this may be the greatest opportunity ever.

This can also be a time when the temptation to buy on impulse reaches a fever pitch. Many retailers are pulling out all the stops to get you to buy certain items. Like many impulse purchases, the biggest risk is that you will spend too much money on items that you don’t really need. Make sure you stay within a reasonable budget and avoid purchasing items that will end up collecting dust and never be used. It is not a true bargain if you can’t really use the item you purchased.

Look for deals on those items you really want or need. Whether it be a flat screen television or your fantasy trip to a far off country, this might be the time to make your dream a reality (for example, cruise lines have been offering particularly attractive deals). For most types of retail purchases, this is a buyer’s market. Along with checking out “brick and mortar” retailers, be sure to comparison shop online as well.

At times when bargains are commonplace, you can take advantage of deals so low, we may not see them again for a long time. Consult with your financial advisor to create a budget and a financial plan.

Jim Larkin, CFP^®, CRPC^®

Financial Advisor

CERTIFIED FINANCIAL PLANNER™ practitioner

Ameriprise Financial Services, Inc.

1308 Village Creek Drive | Suite 2000 | Plano, TX 75093

Bus: 469.865.1050 | Fax: 469.865.1010

E-mail: James.k.larkin@ampf.com

Website: www.ameripriseadvisors.com/james.k.larkin

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This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

© 2009 Ameriprise Financial, Inc. All rights reserved.

File # 86130 7/09

This communication is published in the United States for residents of Texas, Louisiana, Arizona, Colorado, Florida only; and this advisor is licensed only in the states of Texas, Louisiana, Arizona, Colorado, Florida.

The latest housing construction report showed new construction jumping 3.6% overall in June.  This sends the annual rate of construction to 582,000 homes (up from the 530k forecast) and up from just over the 400k pace last month.  Even 582k new homes is still all-time lows.  We have consistently built over 1.0m homes per year since tracking began in the late 50's

To put this in perspective: 

1)  June 2008 we were building homes at an annual rate of 1.1m

2)  June 2005 we were building homes at an annual rate of over 2.1m

Good news and bad news in our opinion.

Good:  Building more homes puts more people to work.  More people working pushes more money through the economy.. creating more jobs in other industries.. creating more money in the economy... etc.. 

Bad:  Building more homes puts more homes on the market just as more foreclosures are being released from lender and state moratoriums.  This will assuredly continue to apply downward pressure on homes... in our opinion for at least the next 12 months.  At least we are only building 500k homes annualized, but we could really use no new construction for 6-12 mos to allow the market to absorb the excess supply and stabilize home prices.  The excess supply is estimated at over 1 million homes and the current supply of overall homes stands at a historically high 9.6 months.

The Consumer Mortgage Audit Center (CMAC) warns consumers of mortgage violations.  According to CMAC, the vast majority of mortgage violations tend to be in the form of:

1)  Missing documents

2)  Bad Good Faith Estimates

3)  Bad Truth in Lending Documents

4)  Hidden or misrepresented payments and fees

5)  Lack of income documentation for borrowers

6)  Double-dipping brokers

In fact, CMAC estimates that 98% of all mortgages are potentially eligible for renegotiation due to just the Truth in Lending Act violations.  CMAC advises that some of these violations appear to be mistakes, while many still appear to be intentional.

CMAC advises borrowers to pay attention to their documentation, while that may not always "be fund to deal with".  They advise that an attorney might be in order if you are seeing varying Good Faith Estimates from lenders.

Unfortunately, in our dealings with consumers, most cannot navigate this process safely.  An average consumer engages the mortgage process only 4.3 times during their homeownership years... while we do it everyday.  It pays to get have an expert - like our Personal Home Loan Advocates - help through the process.

–Missing paperwork. The federal Truth in Lending Act states that lenders must clearly disclose key loan terms and costs at time of mortgage application and home closing; however, if paperwork is missing, buyers may never see the final mortgage terms and costs. Ninety-eight percent of mortgages CMAC reviews include this violation.

–Bad “good-faith” estimates. Good faith estimates are supposed to be documentation of mortgages and costs for buyers to compare and contrast one mortgage offer to another. However, some brokers write low-ball good faith estimates as a “bait and switch” by showing homeowners they’ll offer lower costs and mortgage terms, then later inserting higher interest rates, higher closing costs or mortgages that some homeowners can’t afford. CMAC sees 21 percent of this violation in its mortgage reviews.

–Incorrect payment representations that drive up APRs. Unscrupulous lenders play a bit of a shell game with Truth In Lending Disclosure Statements, which are estimations of the cost of borrowing money to buy a home, the expected payments for a mortgage and other related details. When lenders fill out these documents with incorrect information-particularly in the payment section–the Annual Percentage Rate for the loan changes with each error, leaving homeowners with unexpected payment increases that can lead to foreclosures, if not paid. One-quarter (26 percent) of mortgages CMAC reviews include this violation.

–Double-dipping brokers. Within three days of offering a good faith mortgage estimate, brokers are supposed to reveal income to be paid outside closing, often referred to as the yield-spread premium. Unsavory brokers do not disclose the income to the borrower on the GFE. The borrower finds out about the YSP at closing on the HUD-1, which he/she is paying for indirectly in the form of a higher interest rate

–No documentation of income. Initially designed to help the self-employed who don’t often have a paper trail to show income history, mortgages written with little-if any- documentation of the buyer’s income enable deceitful brokers to fill in false income data that allows borrowers to qualify for larger loans and brokers to make higher commissions. One third (33 percent) of mortgages reviewed by CMAC include this violation.

The Consumer Mortgage Audit Center (CMAC; www.truthinaudits.com) is a due diligence and consulting company specializing in the field of mortgage forensic research and analysis. CMAC boasts a highly specialized team of mortgage experts who are also members of the American College of Forensic Examiners Institute and represent a combined experience of over 80 years in mortgage finance and law.

Employer-sponsored retirement benefits, along with other employee perks, are experiencing tough times. The traditional, defined benefit pension plan is facing extinction, leaving more workers to fend (and fund) for themselves to provide for their retirement. The decline can be blamed in part on the Pension Protection Act of 2006, which introduced tougher guidelines to strengthen pension funding rules and improve transparency and accountability. The PPA was created with good intentions; however, the new guidelines also put pressure on employers to build pension funding at a time when coffers have been dwindling.

The fact is, pension plan retirement income, generously calculated based on years of service and attained earnings and adjusted to account for the cost of living, is simply too expensive for most businesses to maintain. The increased requirements around pension plan funding combined with a brutal stock market, shrinking profits and stockholder demand have created an extremely unfavorable environment for the continuation of employer-funded retirement plans.

How bad is it? According to a recent study by Watson Wyatt, the majority of current Fortune 100 companies no longer provide a traditional pension plan to new employees, opting instead to offer 401(k) plans to help employees save for retirement¹. And even 401(k) plans are shrinking. With the recent recession, many employers have discontinued the practice of providing a company match contribution for 401(k) plans they offer. However, some employees are concerned about putting all their retirement eggs in the stock market, given the recent depreciation of stock values.

If your employer does offer a pension plan and you are concerned about your company’s future, you do have some protection. The Pension Benefit Guaranty Corporation (PBGC) was created under the Employee Retirement Income Security Act (ERISA) to function as America’s pension insurance program. Funded by employer premiums, the PBGC helps to protect American workers by encouraging the continuation and maintenance of private-sector defined benefit pension plans. The question is, will the PBGC hold up under the weight of excessive claims?

The PBGC covers almost one and a half million Americans whose employers have gone out of business. The recent demise of Circuit City provides an example: 21,000 former workers and retirees of the nationwide electronics retailer based out of Richmond, Va., will receive their pension benefit even after the company’s bankruptcy and liquidation, thanks to the PBGC². Fortunately, according to current calculations, the PBGC can manage the current burden of claims, but it will have to address a projected shortfall in the future³.

There are limitations on PBGC guarantees. If you have a sizable pension, a good portion of it may not be protected. For plans terminating in 2009, the maximum guaranteed monthly benefit for a 65-year old is $4,050 for a joint payout and 50 percent for a survivor payout.

Jobs in the public sector are noted for their generous retirement plans, but PBGC does not cover state and local pension plans. Testimony before the Joint Economic Committee indicates most states have sufficient assets available to fund their liabilities right now, and those that are struggling may still have sufficient time to recover and maintain their obligations for the future⁴.

If we can’t count on a pension plan or our 401(k), there’s always Social Security, right? For the time being, anyway. The Social Security Administration has reassured the public that Social Security is funded sufficiently to provide full benefits through 2037. However, unless changes are made, Social Security benefits will be reduced by 24 percent or more beginning in 2038, creating another compelling reason to take charge of your own retirement savings⁵.

What can you do to improve your financial position heading into retirement? First and foremost, consult an expert in money matters. A financial advisor can help you evaluate your personal financial situation and identify appropriate retirement strategies, including how to deal with disappearing pension funds. Another helpful step is to contribute to your retirement savings plan that is offered at work, even if your employer no longer offers a company match. The discipline of regular investing and the benefit from compounding savings can work in your favor. Look for ways to diversify your income, savings and investments and reduce your expenses so you are better prepared to live on less. As you continue to save, also consider insurance and investment products to help reduce risk. Market volatility is real, but history has shown us markets do rebound in time.

^{Jim Larkin, CFP®, CRPC®}

^{Financial Advisor}

^{CERTIFIED FINANCIAL PLANNER™ practitioner}

^{Ameriprise Financial Services, Inc.}

^{1308 Village Creek Drive | Suite 2000 | Plano, TX 75093}

^{Bus: 469.865.1050 | Fax: 469.865.1010}

^{E-mail: James.k.larkin@ampf.com}

^{Website: www.ameripriseadvisors.com/james.k.larkin}

1 Majority of Fortune 100 Companies Offer Only Defined Contribution Plans to New Salaried Employees, Watson Wyatt Analysis Finds, watsonwyatt.com, May 11, 2009.

² PBGC Assumes Circuit City Retirement Plan, PBGC.gov, May 27, 2009.

³ U.S. Insurer of Pensions Sees Flood of Red Ink, nytimes.com, May 20, 2009.

⁴ State and Local Government Pension Plans: Current Structure and Funded Status, Statement of Barbara D. Bovberg, Director of Education, Workforce, and Income Security, United States Government Accountability Office, July 10, 2008.

⁵ Frequently Asked Questions About Social Security’s Future, ssa.gov, May 11, 2009.

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This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

© 2009 Ameriprise Financial, Inc. All rights reserved.

File # 85931 7/09

This communication is published in the United States for residents of Texas, Louisiana, Arizona, Colorado, Florida only; and this advisor is licensed only in the states of Texas, Louisiana, Arizona, Colorado, Florida.

As home loan delinquencies continue to rise, property values continue to sink, and unemployment continues to climb, Reuters reported on July 13th that the Obama Administration is reviewing more ways to delay foreclosure for jobless homeowners and are unable to keep up with their mortgage payments.

An official told Reuters that they are considering options for loan forbearance which would allow borrowers to delay, defer, or skip payments as the Administration becomes increasingly frustrated with the rate at which the private sector is providing solutions to homeowners in tough situations.

The official did reportedly advise that it is a very early stage and evolving notion that is difficult from a policy perspective and can carry potential unintended hazards.  It can help people, but it can also create "perverse incentives" that distort the housing market. 

The S&P's/Case-Shiller index released earlier this month showed home prices in the 20 metro areas it tracks, fell an average of .6%.  This is a nice improvement from the 2.2% decline the prior month and the third month in a row that shows the price declines are slowing.

19 of the 20 markets showed a slowing pace.

14 of the 20 markets had price gains, led by Dallas, Denver, and Cleveland, where prices rose 1% or more from the previous month.

This is a step in the right direction, but it remains to be seen (in my opinion) whether we are actually starting to see a housing turnaround.  I believe we are starting the bottom discovery process in the price depreciation - on a national basis.  We would expect some positive noise in the market data this time of year as the spring and summer buying seasons will have a positive impact. 

The overall health of the economy, unemployment, and backlog of foreclosures yet to come will likely continue to weigh on a housing recovery.

As I have said before , positive data points- both empirical and anecdotal- start to appear anywhere from 6-18 months ahead of an actual turn in any market.  If that thesis holds, we should see a very clear housing bottom by this time next year.

With the positive news in the data, there were still a few data points worth noting on either end of the spectrum:

1)  Phoenix and Las Vegas are off more than 50% from their peak.

2)  By comparison, one of the lightest hit markets, Dallas, is down 9.6% from the peak.  Dallas did not participate in major appreciation during the housing boom.

It is worth noting that this index does not include some of the country's most populous areas:  Houston, Philadelphia, San Antonio, and San Jose.

Along with a mortgage and taxes, another common ongoing expense tied to owning a home is the cost of energy – heating, cooling and electrical power. That expense can become more significant over time if, as many expect, energy costs rise in the future. Thanks to this year’s American Recovery and Reinvestment Act, homeowners have the opportunity to reduce the net cost of investments in energy-efficient home improvements.

The result for many homeowners is that the “payback period,” the amount of time it takes to recoup the investment in home improvements related to long-term energy savings, can be shortened considerably.

Many of the incentives from the newly enacted legislation are in the form of tax credits based on the investment you make in energy-saving home improvements. This is generally considered the most valuable form of a tax break, as each dollar of tax credit reduces your tax bill for the year by the same amount.

Credits for common home improvements

A number of home improvement incentives relate to more affordable and somewhat typical improvements that homeowners may make. This includes the installation of energy-efficient windows and doors, including exterior windows and skylights, storm windows, exterior doors and storm doors.

Other qualifying improvements include insulation and certain types of metal and asphalt roofs. New air conditioning and heating equipment that meet government specifications can also qualify for the tax credit as do energy-efficient water heaters.

Credits for these types of improvements apply to existing homes. If you have already made these improvements since Jan. 1, 2009, you will be able to claim the credit on your 2009 tax return (filed by April 15, 2010, for most taxpayers). The maximum $1,500 credit for all of these types of improvements is generally 30 percent of the cost and applies to any qualifying improvements put into service by Dec. 31, 2010.

Renewable energy tax credits

Some improvements require a much more significant investment for instance, revamping a home’s heating and cooling system or energy source. Provisions of the American Recovery and Reinvestment Act allow a full 30 percent tax credit, except for fuel cell property, for the installation of renewable energy systems that can dramatically reduce the use of traditional energy sources. Note that the tax credit for renewable energy improvements applies to both existing homes as well as new construction.

Credits are included for the installation of solar energy systems. Homeowners who choose to install solar electric systems or a solar water heater can qualify. Also included in the tax credit program are residential wind-power systems, geothermal heat pumps and residential fuel cell and property. Under this program, qualifying renewable systems must be placed in service before 2017.

Be clear on meeting specifications

All qualifying home improvements and installations must meet certain specifications, many tied to the government’s ENERGY STAR criteria. If you are working with contractors, make certain they can verify that purchased products qualify for the tax credit by providing you with a Manufacturer’s Certification Statement. You can find more specifics about qualifying products at the government’s official Web site, energystar.gov (click on the link to Tax Credits.) Be sure to consult your tax advisor for more information about how your home improvements may affect your taxes. Your financial advisor can help you establish a budget and advice for managing your mortgage and expenses.

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This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

Jim Larkin, CFP^®, CRPC^®

Financial Advisor

CERTIFIED FINANCIAL PLANNER™ practitioner

Ameriprise Financial Services, Inc.

1308 Village Creek Drive | Suite 2000 | Plano, TX 75093

Bus: 469.865.1050 | Fax: 469.865.1010

E-mail: James.k.larkin@ampf.com

Website: www.ameripriseadvisors.com/james.k.larkin

© 2009 Ameriprise Financial, Inc. All rights reserved.

File # 85929 7/09

This communication is published in the United States for residents of Texas, Louisiana, Arizona, Colorado, Florida only; and this advisor is licensed only in the states of Texas, Louisiana, Arizona, Colorado, Florida.

HOW CAN YOU KNOW FOR CERTAIN IF YOU ARE RECEIVING A FAIR AND HONEST  DEAL ON YOUR MORTGAGE?

When the economy turns downward consumers are more diligent about saving money, not making wasteful purchases, comparison shopping, and ensuring they are getting a good deal on items they must buy.  At expensive price points (such as grocery items) this process is relatively simple:  you shop at the grocery store that has the cheapest prices on identical items; you buy your gas from the service station that advertises the cheapest price on gas.  Many consumers may spend hours on Sunday morning going through the newspaper to clip coupons in order to save a few bucks.  All good habits, but what happens when the time comes to buy or refinance a home?

A mortgage is typically the largest and most complex financial transaction that any consumer will make.  With the large numbers involved, the unfamiliar terms, the excitement to get into a new house or get the refinance complete, as well as pressure from a real estate agent, banker or mortgage broker, many people end up throwing away 
thousands of dollars (at best) or being the victim of a predatory loan (at worst).  In the last decade as money for mortgages became easy and cheap, combined with qualification requirements for borrowers being relaxed, most people (even those who are well educated and financially (savvy) simply did not put in the time, effort and research required 
for such a large financial transaction.

It is important to always remember that the real estate agent, banker, and/or mortgage broker is not working for you- they are working for themselves and their goal is to make money off your transaction.  This is not to say that everyone is dishonest and will cheat you out of money- simply a reminder that you must look out for yourself and not 
rely exclusively on these professionals.

So how does a consumer ensure they are receiving a fair and honest deal?  National Home Loan Advocates is an objective, third party source that will review your transaction from start to finish and act on your behalf to make sure everything is done legally, ethically, and that all rates and fees are within fair market range.  With the amount 
of paperwork involved, the varying state laws regulating terms and fees, and the multitude of complex products offered (Adjustable Rate Mortgages, Balloon Loans, Reverse Mortgages), it is impossible for a consumer to have access to all information required to know for sure if you are getting a fair deal (much different than driving around 
comparing the price of gas on service station signs).

Don’t get taken advantage of in the biggest financial transaction of your lifetime.  Get the peace of mind provided by NHLA and make sure that you are not throwing away thousands of dollars on your mortgage transaction; or worse- getting stuck with a predatory loan.

About Kevin Dilday:

Kevin is a tenured and accomplished mortgage banking executive.  Kevin is a Director and Board Member of National Home Loan Advocates.  He can be reached at: Kevin.Dilday@NationalHomeLoanAdvocates.com

As potential new homebuyers and move up buyers look to take advantage of the falling home prices, historically low rates, and tax credits there are 5 markets that may have further to fall (as reported by Smart Money).

1.)  Detroit:  Housing prices fell 4.9% in March, marking the cities largest monthly decline since January 1991.  Houses in Detroit are currently selling at 1995 levels.

2.)  New York City:  New York avoided price declines early, but the city saw its largest monthly decline in March, at 2.5%. Many expect New York to be the last city to see a turnaround given that it was late to the price declines and the impacts of the layoffs on Wall Street.

3.)  Phoenix:  Home prices in this city have dropped 53% from their peak in June 2006.  In March alone, prices dropped another 4.5%.  The biggest problem now facing the southwest is the glut of housing inventory to be absorbed.

4.)  Portland:  This city dropped by 2.1% in March.  The Pacific Northwest was amount the last to burst as well and most expect it to be one of the last to join a housing recovery.

5.)  Minneapolis:  Prices in this city dropped a whopping 6.1% in March, the largest drop of any metro area since data racking began in 1987.  More than half of the sales in Minneapolis in March were due to foreclosures or short-sales.  A glut of foreclosures will certainly weigh on home prices in this city for months to come.

A CA law - The Foreclosure Prevention Bill -  prohibiting home foreclosures for the next 90 days went into effect this week. 

This new law only applies to loans that were originated between 2003 and 2007.

Loan servicers can earn an exemption if they can prove that they are modifying loans and it appears that several companies have already applied.

Clearly the state is trying to do what it can to support home prices by delaying any new home inventory that might be hitting the market via foreclosure. 

Remember, the big lenders and servicers had their own moratoriums in place through April or May this year and the anticipated new foreclosure inventory has been seen by many experts as a threat to the recovering housing market.

Review this blog post from 5/30/2009 for more on the CA housing market and what it could mean for the broader national housing market.

http://www.nationalhomeloanadvocates.com/CA+Is+Trying+To+Tell+Us+Something

The Wall Street Journal had an interesting opinion article by Professor Stan Liebowitz, an economics professor at University of Texas, Dallas who explains that the mortgage crisis can't really be blamed on subprime borrowers or interest rate resets, as is the common drum beat. Instead, he blames mortgage products where borrowers had little, or even negative equity in their homes as the bigger problem 

Let's start with a great chart that Liebowitz includes:

The same data in pie format:

From this data, he concludes:

The analysis indicates that, by far, the most important factor related to foreclosures is the extent to which the homeowner now has or ever had positive equity in a home. The accompanying figure shows how important negative equity or a low Loan-To-Value ratio is in explaining foreclosures (homes in foreclosure during December of 2008 generally entered foreclosure in the second half of 2008).

A simple statistic can help make the point: although only 12% of homes had negative equity, they comprised 47% of all foreclosures.

It's pretty clear that the red and purple pieces make up about 55% -- more than half. Those are, in fact, the two pieces that specifically show low or negative equity. It seems that Liebowitz is right.

Moreover, subprime mortgages make up only 19% of those foreclosures.  Subprime mortgages, though more widespread than ever before, were still not that widespread. This point becomes more dramatic by recreating this chart one more time. This time removing unemployment-based foreclosures, as those are less attributable to poor mortgage underwriting practices.

It is clear that negative equity/low downpayments are the the bigger problem, accounting for more than 75% of the foreclosure pie.

Investing: How to Get Started

To the novice investor, the increasing number of investment choices available can seem confusing. Most financial advisors, however, agree that you should follow a few basic steps when just getting started with investing:

1. Determine your financial objectives. There are many reasons for investing. Some of the most common are earning more current income; building your net worth; saving for a home, college education for your children, or your retirement; and reducing your tax burden.

Each of these objectives suggests different investment strategies and different types of investments. For example, if you want more current income, you might do better with a fixed-income investment, such as a bond, rather than a growth-company stock that offers long-term potential but may fluctuate more than a bond.

2. Understand your current financial position. Calculate your net worth by adding up all of your assets (such as the value of your home, personal property, investments, bank accounts and pension or profit-sharing plans) and then subtracting your liabilities (money you owe for such things as mortgages, car loans, credit-card debt and other bills).

If most of your assets are in real estate (which is true for many people), you may need to convert your investments to cash in an emergency. Therefore, you may not want to invest in long-term instruments. However, if you have assets that can be converted easily to cash (like money-market funds or stocks), you may want to invest longer-term in search of higher return potential.

Similarly, you should calculate an annual household budget by adding up all of your income for the year (salary, interest and dividends on investments, distributions from pension or profit-sharing plans, alimony) and then subtracting your regular, essential expenses (such as mortgage or rent payments, food, utilities and clothing). The balance is the amount you have to spend on personal uses, such as vacations and gifts, or to invest.

3. Understand your tolerance for risk. Most investments have some measure of inherent risk. If you have sufficient assets and income, you might be willing to accept greater risk in exchange for a potentially larger gain. However, if you cannot afford to risk your investment principal, you probably should consider lower-risk investments — which, while relatively safe, usually do not earn high returns.

4. Understand your investment. Before you invest, you should understand how the investment works. If, for example, you are thinking about buying the common stock of a company, take the time to learn about the company and the industry (or industries) in which it operates by reading the company’s annual report or analysts’ research reports about the company.

A mutual fund may seem to be a simple investment because your money will be managed by professionals. However, you should know such things as the fund’s short- and long-term performance compared with that of other funds. The fund’s investment objective and strategy (what the fund invests in — stocks, government bonds, municipal bonds, etc.), and the fund’s charges, expenses and risks. These, and other questions on the investment company, are answered in the fund’s prospectus, which can be obtained from your financial professional. Read and consider it carefully before investing.

5. Seek professional advice. As briefly outlined above, there are many things you should know before you invest. An experienced financial advisor can help you — from setting financial goals and understanding various investments to monitoring the success of your account.

As with your investments, be sure you understand how a financial advisor will charge for services, and select an advisor who is comfortable with your objectives. Some advisors work only with aggressive, high-risk investors, while other advisors are well suited to long-term, security-conscious investors.

If you take the time to understand your financial situation, set reasonable goals and work with a qualified financial advisor, your experience with investing has a better chance of success.

This article was written by Wachovia Securities and provided to you by Justin Latvenas CRPC®, Financial Advisor in Marlton, NJ at 800-395-8537. For More information please visit the team website at www.harmandharm.wbsec.com

You can also reach Justin at Justin.Latvenas@Wachoviasec.com

Wachovia Securities is the trade name used by two separate, registered broker-dealers and nonbank affiliates of Wachovia Corporation providing certain retail securities brokerage services: Wachovia Securities, LLC Member, NYSE/SIPC, and Wachovia Securities Financial Network, LLC (WSFN), Member FINRA/SIPC.

The accuracy and completeness of this article are not guaranteed. The opinions expressed are those of the author(s) and are not necessarily those of Wachovia Securities or its affiliates. The material is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Provided by courtesy of Justin Latvenas, a financial advisor with Wachovia Securities in Marlton, NJ for more information, please call Justin Latvenas at 800-3958537. Wachovia Securities LLC, member FINRA and SIPC, is a separate nonbank affiliate of Wachovia Corporation. ©2008 Wachovia Securities, LLC.

Investments in securities and insurance products: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE