Buyer’s Choice Realty blog

The Federal Reserve announced today that over the next year (18 months at most), they will be buying up mortgage-backed securities to the tune of $500 billion.

This is what the Fed had to say in a statement, per a Bankrate.com article,

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.”

What a nice Thanksgiving-week treat! Rates have immediately dropped today, and are likely to drop slightly over the next few weeks barring any unforeseen financial collapses or other major news. If you are currently in the market for a home loan, experts suggest you lock in your rate to take advantage of the recent drop. 30-year mortgage rates are back below 6%.

If you are interested in purchasing real estate in Massachusetts, feel free to contact me to discuss what this will mean for your prospects. While I am not in the mortgage industry, I can assist you in shopping for loans and finding an advantageous rate with few or no junk fees, and I know the questions to ask any potential lender. At Buyer’s Choice Realty, we are on the buyer’s side 100% of the time.

call 800.25.BUYER (ask for John) or email me

My main man Hank Paulson, head of the HPHF, has changed his mind about spending some of the $700 billion that he hopes to soon access. As of today, Paulson has roughly $60 billion left of the initial $350 billion which has been spent buying preferred shares of banks and insurer AIG.

Remember the Troubled Asset Relief Program (TARP)? The initial plan was to buy illiquid/mis-priced mortgage securities in order to get them off the balance sheets of huge companies in order to stabilize the market/economic system. The Treasury is the only entity that could afford to hold them for a couple years in hopes that the housing market would level out and the price of these securities could return to normal/par. Well, that is not going to happen.

Hank announced today that he wants to go in a different direction. Read all about it. My favorite part of this Bloomberg article is as follows,

“Paulson’s remarks are an acknowledgment that the centerpiece of the $700 billion bailout request to lawmakers was ill-conceived.”

Anyway, Hammerin’ Hank now plans to throw money at consumer lenders so that Joe Q. Public can get a car loan, credit card, or student loan more easily. How will that happen? There is plenty of illiquidity in the consumer lending sector, and adding billions of dollars to that sector will ease pressures. Well, maybe.

So much for helping the housing market. Unfortunately, Paulson essentially has carte blanche regarding how he wishes to spend TARP money, and is not even required to announce plans for spending tax dollars.

The motto of this bailout and associated plan(s) of action? Ready, Fire, Aim…

James Lockhart, Director and Chairman of the Federal Housing Finance Agency (FHFA), announced a large loan modification plan today.

How big is it? According to Lockhart, tens of thousands of mortgages can be renegotiated. Servicers of these loans have agreed to this plan and will receive $800 for each loan modified by the program. Unfortunately, it appears that the only folks eligible at this point are borrowers who are at least three months delinquent in their mortgage payments, and the loans must be owned or securitized by Fannie Mae or Freddie Mac. The plan is designed to get homeowners into mortgages they can afford. Mortgages may be extended, and Lockhart mentioned a 3% rate for 40 years. Naturally, many questions remain about actual plan implementation. Lockhart wants to renegotiate mortgages so that borrowers will have no more than 38% debt-to-income ratio.

The Chairman of the Federal Deposit Insurance Corporation (FDIC), Sheila Bair, when asked for her thoughts regarding this plan, called it a, “step in right direction, but falls short in what is needed to address widescale mortgage issues.”

Why should mortgages be renegotiated? Why bail out people who made bad decisions? Lockhart answered those questions and stated that foreclosure is extremely expensive for Fannie and Freddie. It often costs them 50% of the loan, and renegotiating should only cost 20%. He went on to say it’s good for homeowners in general because it will start to stem price declines in neighborhoods where there are foreclosures. He believes this program will hopefully help in the overall market to stabilize home prices.

While this is only a first step, it is sure to be hotly debated in the days to come. What are your thoughts?

Ben Clark will be leading NAEBA in 2010. If you are unaware, all members of NAEBA work exclusively on behalf of real estate buyers. I encourage you to help me welcome Ben to the role of President of this organization, and take a moment to read some of his salient thoughts about our side of the industry.

Here is what the man himself has to say: I’ll be President-Elect through all of 2009 in preparation for 1 year as President in 2010 and 1 year as Immediate Past President in 2011.

Also, I view the postition of President to be “Chairman of the Board” which means that although I may be the “face” and/or “voice” of NAEBA, the Board will be what truly is leading NAEBA. That doesn’t mean I won’t do my best to lead and inspire the Board to good things, though!

Thanks for the words of congratulations everyone!

John Sullivan will be the President in 2009. Good man with great plans and a great Board of Directors behind him.

Good things are on the horizon for Exclusive Buyer Agency!

If you are thinking about purchasing a home in Massachusetts, talk with someone who only works for buyers and only has your interests in mind. Call 1.800.25.BUYER and ask for John, or email me.