Feds change mind AGAIN now will buy bank assets

Okay so this sounds like a childrens playground sage we know, but the Feds now say they WILL buy the troubled assets with the TARP (trouble assets relief program) funds that they were given.

News on this development and the speed with which they announced they will try to put it onto the street drove mortgage rate strikingly low today. The market saw 5.25% par pricing on a 30 year fixed interest rate today! This is excellent news for everyone and shows just how quickly the market would be able to recover if only people would get off their overpaid behinds and make things happen.

With pricing flirting with the bottom range of 5% one has to wonder if it's too much to ask Santa for a mortgage note for christmas that start with a 4!

Feds change mind and WON'T buy troubled assets

So the single most important factor that the FED gave in passing the $750B bailout was to buy troubled mortgage assets off banks and sell them later for a profit.

Today they reversed the entire principle the bailout was based on!

Just when we think it's gotten so insanely crazy that there is no human way possible to get any more wild...

Now they claim they want to invest in credit card companies (they made American Express a bank so that they can claim easier money from the Gov) and auto companies. Incredible is all we can say about today's revelations.

"I believe we have taken the necessary steps to prevent a broad systemic event. Both at home and around the world, we have already seen signs of improvement," Paulson said in a speech at the Treasury Department.

This is the same guy that said at the very beginning that the economic troubles were confined to the subprime loan market only. He read that one a tad bid wrong when it spread to the entire US economy and eventually the world!

As an industry insider I can tell you that banks ARE NOT lending and have only further tightened their restrictions on borrowers. We look forward to seeing how this news will play out with interest rates, lending restrictions, and the overall health of the economy.

Obama Economic Policy that affects you part I

FORECLOSURES

Well we told you we would show you the plans of whoever was elected in laymens terms. this is part I of our look at the policies of our new President Elect Barack Obama.

The problem:

According to a report from Credit Suisse, 6.5 million loans were expected to fall into foreclosure over the next five years. That's based on home prices dropping 10% in 2008 and 5% in 2009, before rising 3% in future years.

The Center for Responsible Lending estimated in August that nearly 2.2 million foreclosures would occur due to defaults on subprime loans from late 2008 through the end of 2009. More than 40 million homes in neighborhoods surrounding those foreclosures would suffer price declines as a result, causing a $352 billion total decline in property values, or an average $8,667 per home.

All those extra homes on the market drives prices down which cripples lenders assets on the books and further aggrivates our economic woes.

Solutions:

Hope for Homeowners (H4H). This plan went into effect in October 2007 and it aims to allow a new lender to issue a government backed mortgage at 90% of the current appriased value. The old lender will have to write off the difference. This may be acceptable to them since they would loose even more if they had to foreclose.

Foreclosure Mortatorium - Obama has called for a few month stop on all foreclosures. During this time banks will be forced to look at homeowners that are attempting to make payments in good faith but need a modificaiton to the loan to help them keep the house.

Bankruptcy reform - Obama has called for bankruptcy reform that would allow a judge to modify a loan if a lender refuses to do so.

Regulations such as:

• Crackdown on mortgage fraud - crack down on mortgage fraud, create new criminal penalties for mortgage professionals guilty of fraud and require "industry insiders" to report suspicious activity
• Better loan disclosure - provide potential borrowers with a "Homeowner Obligation Made Explicit," or HOME, score which would give them an easier, standardized way to compare mortgage products and compare the full costs of the loans.
• Universal mortgage credit - His proposed 10% universal mortgage credit for homeowners who don't itemize their taxes could provide an average of $500 to 10 million homeowners, most of whom earn less than $50,000 per year
• Improve housing affordability. Obama has proposed creating an Affordable Housing Trust Fund to create "thousands" of new affordable housing units annually
• Build sustainable communities.

We hope this helps understand the stated goals of our new President. What is clear is that this is going to be his top priority when he gets into office. The above mentioned changes along with an aggressive stimulus package is expected early next year.

As always we'll keep you in the loop. Look for part II of his financial policies coming soon...