Short Sales are happening all over Atlanta and people want to know what they are. This a great explaination by the Zac Team.

A short sale takes place when a home owner cannot afford to make their mortgage payments to the bank due to unforeseen hardship or extenuating circumstances. A request from the home owner must be made to the lending bank’s “loss mitigation department” and the bank must agree to a loan payoff typically less than the amount borrowed. Short sales are a way to help distressed homeowners, but not a way to simply get rid of a home in a difficult real estate market.

Below are a few situations that could justify the bank granting a short sale. These MUST be qualified and proven in writing to the lending bank. If you are facing one of the following situations and struggling to make your payments, please talk to your lender as soon as possible:

Ø       Illness of a borrower or co-borrower and, due to that illness, cannot continue to make payments. This would have to be accompanied by a doctor’s statement of permanent or long-term disability.

Ø       Death of a co-borrower who originally qualified for the loan.

Ø       Divorce or legal separation accompanied by legal documentation and attorney’s correspondence.

Ø       Involuntary loss of job or a significant modification in pay with documentation from employer and recent and past check stubs as verification.

Ø       Illness of a family member where borrower or co-borrower is the only one that can provide care; again, a doctor’s statement would be required.

 

Unjustified or trivial reasons will not be supported. A few examples of these include:

Ø       You quit your job or were fired for just cause.

Ø       You refinanced or obtained a loan with accelerating payments, high interest rate, or negative amortization.

Ø       You ran your credit cards up to the max and can’t afford all your payments.

Ø       You bought a new car or other large purchase and now can’t afford all of your payments.

Ø       You decided to separate from a spouse or significant other co-borrower without a divorce or legal separation.

Ø       You decided to or need to relocate and the value of the property is less than the outstanding balance of the loan. 

 
The title “short sale” can be slightly deceiving since these transactions can still involve a few months of dealing with the bank, they still tend to be less costly, quicker, and less damaging than foreclosures (for both the bank and home owners). If you plan on buying a short sale home, know that you may have to wait 60-90 days for the closing.

Get your Atlanta housing market statistics! Direct from the First Multiple Listing Service, these numbers are published by Smart Numbers with extensive research and statistics on the Atlanta market. The compilation shows November 2008 market statistics versus November 2007 numbers.

Units Closed:                     2008        2007
Single Family                           2,385         3,748
Condos/Townhomes                   362           725
Total                                        2,747         4,473 
(39% decline)                

New Listings:                     2008        2007
Single Family                           8,031         10,209
Condos/Townhomes                  1,521         1,983
Total                                        9,552         12,192
(22% decline)

Withdrawn:                          2008        2007
Single Family                             1,619         2,197
Condos/Townhomes                    511            372
Total                                          2,130         2,569
(18% decline)

Expired:                                2008        2007
Single Family                             5,429         5,882
Condos/Townhomes                    906            1,060
Total                                          6,335         6,942
(9% decline)

Current Inventory:              2008        2007
Single Family                             50,161       56,721
Condos/Townhomes                   10,399       11,506
Total                                          60,560       68,227
(11% decline)

Inventory:                              2008             2007
Single Family                        13.8 months      12.5 months
Condos/Townhomes               17.15 months    13.45 months

Sales Price to List Price:    2008        2007
Single Family                               93.0%       95.5%
Condos/Townhomes                      94.5%       96.3%

Average Days on Market:   2008        2007
Single Family                               88.0           92.4 (128.1 avg. total DOM)
Condos/Townhomes                      89.5           94.7 (125.7 avg. total DOM)

It is true mortgage rates are down and very low right now- a great opportunity to refinance and purchase a home! Down payment requirements are up and debit to income ratios are much lower and credit scores need to be much higher than in the past so purchases are still low even with these lowe interest rates.

By Inman News, Thursday, December 11, 2008.

Rates for 30-year fixed-rate mortgages are at a four-year low this week after a government report of massive layoffs in November pushed bond yields down, Freddie Mac reported.

New broadcasts last night responded to information released regarding the government’s initiative to inspire home sales by reducing interest rates to 4.5%. I have already received calls from customers inquiring about whether or not this will affect their financing. The challenge with releasing information before it actually happens is it may or may not actually go through. Even more important, if the plan does take effect the 4.5% rates will not likely apply to everyone. As with any government initiative we have seen recently, what is first introduced is not always the end result.

 

With this in mind it is important to keep our customers informed of the facts. While I can’t tell you if, when or how this 4.5% will play out in the market, I can say that it won’t likely happen until February 2009. In addition, it will likely only benefit those looking to purchase new homes. This will certainly be great news for new homebuyers in early 2009. At the same time my hope is current buyers won’t be deterred by a possible rate drop that may or may not occur until February of next year.

 

Attached is an article in the Wall Street Journal that you can forward on to anyone who may inquire about 4.5% interest rates. I hope you will find it helpful.

In the meantime, it is important to reinforce that interest rates are extremely low right now. The market is volatile and rates shift daily. Right now the 30 year is trading anywhere from 5.125%-5.375% depending on the loan structure and the 15 year is between 4.875%-5%. FHA rates are also in the low 5’s depending on credit score.

 

 

 

U.S. Eyes Plan to Lift Home Sales

REAL ESTATE

 

DECEMBER 4, 2008

Treasury Considers Encouraging Banks to Offer Mortgages at Rates as Low as 4.5%

By

 

DEBORAH SOLOMON and

DAMIAN PALETTA

WASHINGTON — The Treasury Department is considering a plan to revitalize

the U.S. home market that would push down interest rates for loans to purchase

a home, according to people familiar with the matter.

The plan, which is in the development stage, would temporarily use the clout of

mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates

as low as 4.5%, more than a full point lower than prevailing rates for standard

30-year fixed-rate mortgages.

Government officials are under pressure to address falling home prices and

mounting foreclosures, which underpin the financial crisis. The Treasury has

struggled for months to come up with a plan that would ease the strains on

borrowers without appearing to bail out homeowners and lenders.

The plan remains in discussion and may not be made final before the Bush

administration’s term ends in January. President-elect Barack Obama has said

repeatedly that his administration would do more than the current one to help

struggling homeowners but he has not offered specifics.

Treasury views this plan as potentially halting the slide in home prices by

enabling borrowers to afford bigger loans, thus increasing demand and pushing

up home values. The lower interest rates would be available only to borrowers

who are buying a home, not those refinancing a mortgage.

Borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie

or the Federal Housing Administration. Those guarantees apply to loans where

borrowers can document their income and afford their monthly payments,

steering the government away from backing loans considered risky.

The Treasury and the Federal Reserve are already working to bring mortgage

rates down through a program announced last week in which the Fed will buy up

to $600 billion of debt issued or backed by Fannie and Freddie, along with

Ginnie Mae and the Federal Home Loan Banks. That move helped push down

U.S. Eyes Plan to Lift Home Sales - WSJ.com Page 1 of 4

http://online.wsj.com/article_email/SB122833771718976731-lMyQjAxMDI4MjA4NDM… 12/5/2008

Benefit To Stocks

rates on 30-year mortgages, and applications to refinance have jumped, the

Mortgage Bankers Association said Wednesday.

In this climate, stocks of banks and home builders drew more investor attention

Wednesday, helping the Dow Jones Industrial Average rise 172.60 points, or

2.05%, to 8591.69, despite continued bleak economic news in the Fed’s “beige

book” survey of regional conditions.

The plan the Treasury is considering would encourage banks to issue new

mortgages at lower rates by offering to purchase securities underpinning the

loans at a price equivalent to the 4.5% rate.

The Treasury would fund the purchases by issuing Treasury debt at 3%,

suggesting the government could make a profit on the difference.

The average rate on 30-year fixed-rate mortgages conforming to Fannie’s and

Freddie’s standards was about 5.75% Wednesday, according to HSH Associates, a

financial publisher. That’s up from about 5.5% Monday but down from more

than 6% before last week’s announcement.

The plan is very similar to an idea floated in October by R. Glenn Hubbard and

Christopher Mayer, academics at Columbia University’s Business School. “I think

a program to substantially bring down rates for homebuyers would be an

incredibly valuable program, and I think it captures a real part of solving what

has been an incredibly challenging dislocation in the credit markets,” Mr. Mayer

said in an interview. He estimated the idea under consideration could quickly

help 1.5 million to 2.5 million people buy homes, giving a major boost to the

housing market and broader economy.

The plan also could be good news for banks hit hard by the housing slowdown. In

addition to having the government play the role of guaranteed buyer, financial

institutions could pocket fees for making loans to buyers able to afford homes at

the lower rates. That, in turn, could boost the economy and improve the weak

outlook for other consumer loans, such as credit cards, that also are weighing

heavily on the banking industry’s profitability.

Normally, the rates lenders charge consumers, including home buyers, are

determined by the secondary market, in which investors buy mortgages or

mortgage-backed securities. But Treasury Secretary Henry Paulson views

lowering mortgage rates as key to fixing the housing crisis; hence the mortgagesecurity-

buying program announced last week.

“The most important thing we can do to mitigate foreclosures and progress

through the housing correction,” Mr. Paulson said in a speech Monday, “is to

U.S. Eyes Plan to Lift Home Sales - WSJ.com Page 2 of 4

http://online.wsj.com/article_email/SB122833771718976731-lMyQjAxMDI4MjA4NDM… 12/5/2008

The Refinancing Picture

reduce the cost of mortgage finance, so more families can afford to buy a home

and so homeowners can refinance into more affordable mortgages.”

Fannie, Freddie, their regulator and the Department of Housing and Urban

Development — which oversees the FHA — all declined to comment. “The

Secretary has said repeatedly that we are looking at a number of options to help

homeowners,” said Treasury Spokeswoman Jennifer Zuccarelli.

On the refinancing front, the Mortgage Bankers Association said its index of

refinance applications had tripled from the previous week, the largest increase

since it began tracking such data in 1990. Applications to buy homes, which tend

to be less sensitive to interest-rate movements, also increased, by a smaller

amount.

Application volume remains lower than it was as recently as March. Last week’s

numbers are adjusted for a shortened holiday week, which can make

comparisons more difficult.

The Treasury plan is similar to ideas previously floated by the National

Association of Realtors and the lobby group for home builders, but has skeptics.

“I don’t think it’s the answer to the foreclosure problem because that problem is a

combination of negative equity with unemployment,” said Mark Zandi, chief

economist of Moody’s Economy.com.

Mr. Paulson has been wrestling for months with ways to stem foreclosures. The

Bush administration has supported mostly voluntary efforts to get the mortgage

industry to help borrowers in danger of losing their homes and has resisted calls

to use taxpayer money to bail out homeowners. Those voluntary efforts have had

only a limited impact as home prices continue to fall and foreclosures to rise.

The administration has been split about its approach, with Federal Deposit

Insurance Corp. Chairman Sheila Bair floating a proposal to use $24 billion from

the government’s $700 billion financial rescue fund to provide a federal

guarantee on roughly two million modified mortgages.

Her plan was a hit with Democrats and some Republicans on Capitol Hill but fell

flat with the White House, where some speculated the FDIC plan could cost $70

billion to $80 billion. Mr. Paulson has expressed reservations about the plan on

the ground that it would spend taxpayer money, instead of investing it, and that

it could encourage banks to foreclose and borrowers to halt payments. Treasury

staff have been working on a plan to improve Ms. Bair’s model, but Mr. Paulson

has so far resisted implementing it over concerns that it costs too much and

might not be all that effective.

U.S. Eyes Plan to Lift Home Sales - WSJ.com Page 3 of 4

http://online.wsj.com/article_email/SB122833771718976731-lMyQjAxMDI4MjA4NDM… 12/5/2008

—Robin Sidel, Ruth Simon and James R. Hagerty contributed to this article.

Resolving the crisis is likely to fall to Mr. Obama. He reiterated his position on

Wednesday, saying, “We’ve got to start helping homeowners in a serious way,

prevent foreclosures.” Some Treasury officials are frustrated that the Obama

team has not provided more specifics about what it would like the Treasury to do

to help homeowners.

Write to

 

Deborah Solomon at deborah.solomon@wsj.com and Damian Paletta

Some good news for buyers who are qualified to buy!

Treasury plan could offer home buyers government-backed loans with fixed rate of 4.5 percent.
By:Alison Rice

The Treasury Department is reportedly considering a plan to bolster the housing market with low-interest government-backed mortgages for home buyers.

The approach, first reported by the Wall Street Journal yesterday afternoon, would allow banks to offer fixed-rate 30-year home loans at interest rates as low as 4.5 percent to home buyers who qualify for government-backed financing. This would include home loans made through the Federal Housing Administration (FHA) or conforming mortgages eligible for purchase or guarantee by mortgage finance firms Fannie Mae or Freddie Mac. “Treasury views this plan as potentially halting the slide in home prices by enabling borrowers to afford bigger loans, thus increasing demand and pushing up home values,” according to the Journal’s story.

In a move that could be significant for builders, the plan would apply only to home purchases, not refinancing an existing mortgage. That means would-be home shoppers would now have two big reasons to finally buy a house: low interest rates and bargain prices.

Of course, those low, low prices also remind consumers of how much home prices have fallen in recent months, which also has made them reluctant to buy.

“In our view, confidence of potential home buyers that prices are unlikely to deteriorate further is the primary factor today as traditional affordability metrics are back to acceptable levels,” analyst Ivy Zelman said today in a report discussing the Treasury plan. “Unless the government can end the downward foreclosure spiral, we believe that consumers will be unwilling to purchase a home when there exists a high probability that their down payment could be eliminated in a short amount of time by further home price deflation.”

She added: “With that said, lower funding costs have to be considered an incremental positive and could further fuel foreclosure purchases that have been helping to clear excess inventory from the market.”

Reducing the number of both foreclosed and new inventory homes is critical to the health of the housing market, which is considered by many to be both the source of and a partial solution to the country’s current economic ills. As such, the Treasury continues to explore ways to stabilize the financial markets and residential real estate, as Neel Kashkari, interim assistant secretary for financial stability, said today in testimony before a Senate appropriations subcommittee.

“On December 1, Secretary Paulson underscored the critical priorities for the most effective deployment of remaining TARP funds, foremost of which is to ensure our banking sector has the necessary capital base to continue lending to consumers and businesses and support economic growth, and to help homeowners avoid preventable foreclosures,” Kashkari said. “… [W]e continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a necessary part of working through the necessary housing correction and maintaining the strength of our communities.”

Alison Rice is senior editor, online, at BUILDER magazine.

Here is a great article from the wall street journal that gives more information about what has happened with the Freddie Mac and Fannie Mae rolls for lending and such. Right now getting financing approved is the biggest challenge for any person in the real estate market.

The chief investment officer of UMB Financial Corp’s Asset Management division said Thursday at a talk in Denver that positive side effects will emerge from an economic slowdown that he characterized as a “recession.”

William Greiner, chief investment officer for UMB Asset Management, said some economists have stopped short of declaring a recession because the country hasn’t experienced a decline in gross domestic product (GDP) growth for two consecutive quarters.

But with financial institutions and manufacturers turning to the government for assistance and unemployment levels rapidly rising, Greiner said it’s clear the United States is immersed in a “macro recession” founded on debt.

“We as a society are basically condemned because as a nation, we’ve lived above our means for a number of years,” Greiner said.

He predicted that unemployment will rise to 8 percent nationally in the next four quarters. But he also expressed confidence that the country will emerge from the crisis.

Although the short-term outlook is “glum,” Greiner added the downturn could set the economy on a different course that will benefit Americans in the long term.

“The economy is way too tethered to consumption, so we’re looking at a major shift,” he said. “The growth is being passed to someone beside the consumer, and that someone is the government.”

Greiner said historically, the government has had a bigger portion of the “growth portfolio” than it has in recent years.

As a result, the government will become the real drivers of economic growth in the next four to five years — investing up to $1.85 trillion into the economy in the next 12 months.

Greiner said consumers — particularly those approaching retirement age — will invest more money into savings. The downturn also will result in less inflation pressure in the next 12 to 18 months, he said.

He said the stock market has fared better under Democratic-controlled administrations, but that inflation has been worse.

Greiner urged the audience to look closely at investment-grade corporate bonds.

He identified “winners” in the economy as alternative energy, construction companies (which are expected to benefit from a government push to improve infrastructure), and hospitals and health care supply companies (which will do well as the aging population utilizes the health care system).

Losers include “dirty” energy such as coal and oil, defense manufacturers and pharmaceutical and tobacco companies (which he said will be under “direct attack” from the incoming administration and the Democratic-controlled Congress).

 

The forum also featured remarks from Dennis Triplett, president of health care services for UMB Bank.

Triplett said that despite talk of comprehensive health care reform, he believes that only “incremental” changes will come from the new administration.

“There’s a strong feeling in Washington that we should ‘go for broke’ in health care, but personally, I think we’re already broke,” Triplett said.

He said to expect expansion of the federal program that provides insurance coverage for children as well as a greater investment in health care information technology, which President-elect Barack Obama said would help the system operate more efficiently.

“Obama talked about it a lot,” Triplett said. “Quite frankly, I think he oversold it.”

Triplett also expects that private insurers will come under greater scrutiny with the new administration and Democratic-controlled Congress.

Atlanta Business Chronicle by Bob Mook 11/20/2008

Credit scores have not been a big deal over the last few years- but now even those of us who have always been told we have great credit could have a problem getting a car loan, or get a higher interest rate for a home loan.

A credit crisis, also known as a “credit crunch” or “credit shock”, occurs when there is a rapid reduction in the availability of loans from banks. This is caused by loans going sour, forcing the banks to tighten up lending standards.

Credit shocks create both positive and negative effects in the economy. By examining these effects carefully, we can gain a greater understanding of how credit shocks work and what we can learn from them. Read on to find out more.

The Downside of a Credit Crisis

Credit shocks have several negative effects on both consumers and businesses. Some effects are felt right away, while others take time to be seen.

Consumers cut spending
As a credit crunch runs its course, the economy continues to slow. This creates a situation where consumers are less optimistic about the future prospects for the economy and cut back dramatically on their spending. Since consumer spending accounts for 70% of economic activity, even a slight cutback in spending can cause the economy to slow dramatically. (Learn what consumer spending can indicate about the market in Using Consumer Spending As A Market Indicator.)

Banks fear making loans
Credit shocks can create a situation where banks are afraid to make new loans. This fear causes many businesses and consumers to cut spending dramatically or even close their doors. This causes a ripple effect in the economy as more businesses have trouble surviving and consumer wealth erodes.

Businesses lose access to capital
When businesses do not have access to the capital they need to expand, pay expenses or pay bills, a liquidity squeeze can occur. This squeeze can force many businesses that have been thriving for years to shut their doors and let their employees go. (Find out how this economic cycle affects both small and big businesses in The Impact Of Recession On Businesses.)

Rising foreclosures may bring property values down for communities
If banks are forced to foreclose on too many borrowers, this can have dire consequences on communities. Not only do property values decline in communities where foreclosures are high, but there are several untold economic consequences as well. These include a loss of property tax revenues for both state and local governments, economic blight for areas being affected by waves of foreclosures and the failure of local businesses that are dependent on the community to survive. (Learn what you can do if your home is at risk in Saving Your Home From Foreclosure.)

The crisis may force the government to take emergency measures
As the economy becomes weaker and the credit shock spreads from Wall Street to Main Street, a cycle of economic weakness spreads throughout the country, creating rising unemployment and negative growth. This forces the government to take drastic measures to break the cycle once and for all by spending hundreds of billions of dollars to revive the economy.

A falling stock market eats away at wealth
The credit shock and uncertainty about future earnings cause many investors to sell their stock holdings and move into safer investments. This causes the equity market to go into a free fall that eats away the values of 401(k) plans, IRAs and pension plans. Diminished nest eggs force many who were planning on retiring to work longer. (Learn how understanding the business cycle and your own investment style can help you cope with an economic decline in Recession: What Does It Mean To Investors?)

Consumers and businesses feel panic and fear
Left unchecked, the credit shock can create a loss of confidence in the nation’s financial system. This causes many people to assume the worst and take drastic steps to protect what little wealth they have left. It is at this point that bank runs become more common and even more financial institutions collapse. (Learn how the SIPC and FDIC insure against personal financial ruin when banks or brokerages go belly up in Bank Failure: Will Your Assets Be Protected?)

The Upside of a Credit Crisis

Credit shocks can create many lasting, positive changes. These changes can be seen in the aftermath of the crisis. Some of the positive effects of a credit shock include the following:

The economy cleans out excessive debt and spending
During good economic times, many businesses and consumers increase their overall debt. This behavior is fuelled in part by businesses needing to expand and in part by consumers who are feeling good enough about the economy to make large purchases without worrying about what will happen in the future. (Read Five Signs That You’re Living Beyond Your Means to learn whether you’re in this risky group.)

But while the economy will continue to expand and debt levels consistently rise for a while, at some point the economy will slow down and many who overextended themselves during the good times will be forced to live within their means or may even fall behind. As businesses and consumers are forced to cut back, some will stop making payments on their debts, forcing financial institutions to write the bad loans off. These forced write-offs, either by the banks themselves or through government intervention, will cleanse the financial system so that businesses can have strong balance sheets and consumers who were once tapped out can increase their spending without being burdened by large amounts of debt.

Corporations clean up their balance sheets
Businesses can use debt to expand and increase their overall profits. However, debt can be a double-edged sword: during recessionary times, the amount of overall debt that businesses took out during the last expansion can cause the company to face liquidity problems. By writing off the bad debt on their balance sheets, businesses become leaner, can weather the slowdown and can expand even more when positive growth returns to the economy. (Learn about the role of debt in determining corporate health in Debt Reckoning.)

Transparency and regulation in the financial sector improve
A financial crisis can expose the loopholes in regulations that people were taking advantage of - loopholes that may have contributed to the crisis. The government then reacts by creating new regulations to address the situation. Over time, these laws bring confidence back to the U.S. financial system and investors feel secure again. (Learn about the role of confidence in the economy by reading Understand The Consumer Confidence Index.)

Hard times force consumers to regain control of their spending
During times of expansion, many consumers try to keep up with the Joneses by living a lifestyle beyond their means and accumulating more debt than they can handle. Credit shocks force consumers to rein in their spending and lead lifestyles that are more appropriate to their incomes. People then regain control of their finances and cause the national savings rate to increase. (Learn how to keep your spending under control every day in Squeeze A Greenback Out Of Your Latte and Nine Reasons To Say “No” To Credit.)

Declines in stock prices create great long-term valuations.
During the crisis, when everyone is panicking and selling both good and bad investments, many smart investors are buying those good investments and holding them long-term. Once the crisis is over and the chaos has died down, they make tremendous profits. Some of the more well-known investors that have employed this strategy, include Warren Buffett, Sir John Templeton and Benjamin Graham. (Bear markets can terrify even seasoned investors. Learn how to invest safely in Four Tips For Buying Stocks In A Recession.)

Conclusion
Credit shocks have many negatives, but they also create opportunities. During times of economic crisis, it is important to keep a clear head and not get caught up in the fear. Left unchecked, large-scale fear can wreak havoc on the world economy. But over time, the crisis will end and the economy will begin to expand once again.

For further reading, see Five Strategies For Surviving Tough Times, Taking Advantage Of Corporate Decline and How does a credit crunch occur?

by Chris Seabury, Investopedia