JohnsBlog (articles, news, thoughts, advice)

President Bush officially signed HR3211, the new housing bill, which is the largest and most intricate bill of its kind to come out in this generation.  There are some good things included in this bill, as well as some negative highlights. 

The Good
-$7500 tax credit to first time homebuyers, which will act as a write-off

-Increased conforming loan limits.  $625,000 is the new limit, which will allow many borrowers with what are now "Jumbo loans" to take advantage of lower interest rates, and may actually spur a mini-refinance boom for these borrowers who have faced higher interest rates over the past 12 months.

-FHA refinance options for borrowers in trouble with sub-prime and adjustable rate mortgages.  New bill allows for a lowered interest, fixed rate for many borrowers

-$4billion state grants, allowing for states to purchase and rehab foreclosed properties

These seem like some good points, and will surely benefit some people, potentially many people, but before everyone gets excited, there are negatives as well....

THE BAD
-The $7500 tax "credit" operates like an interest free loan, and will be paid back in equal increments over 15 years.  In a debt-addicted country, our government offering "take the money now and pay us back later" credits is ludicrous in my opinion.  How bout a $7500 stimulus check rather than the $500 joke that was supposed to "spur the economy"?

-For FHA refinances, lenders will have to reduce their principal to 90% of the appraised value of the home.  In addition, lenders will pay a 3% fee to FHA for taking over the servicing rights.  In addition, borrowers will pay an annual 1.5% premium.  Lenders must also waive late fees and prepayment penalites, in effect granting complete forgiveness and voiding the note to borrowers who got in over their heads (Hey, I feel for borrowers in trouble, but I dont think people who took out more than they could handle should just be let off the hook...thats financial irresponsibility.).  Also, borrowers will have to split profits made from refinancing or selling their home if they do so within a 5 year time period from their new loan. 

-$4 billion to allow states to buy foreclosed homes and fix and sell them?  Since when did the government become a professional house flipper?  This may give business to contractors and stimulate work for a lot of people for a while, but do you think the state's going to really pay market value for property?  The government is the biggest cash hog I can imagine, would you want the value of your home based on the sale of the home next door that the government bought at a discount? 

-Complete bailout of Fannie Mae and Freddie Mac, giving the secretary of the treasury power to buy stock in these companies and fuel their stabilization after their irresponsible lending practices over the past several years.  This is in my belief the biggest mistake of this bill....an utter slap in the face of what America is all about....you're taking capiltalism and the free market idea, and saying that the government will bail out certain companies because they deem them important or too important to let go under?  Completely unfair, and a bailout for Wall Street and all the people making their millions in the stock "game" of these enterprises. 

-While the estimate is that the tax burden on Americans will only be about $400million (which is not much per person), please remember what the estimate was for the cost of the war......keep this in mind, because to prevent public outcry, these numbers are often underestimated, most times drastically.  Wouldn't surprise me to see a billion dollar bailout or so.

-Business credit card transactions will be reported to the IRS, and if the IRS cannot find a tax ID come tax time, due to clerical errors or anything else, small business owners may have 28% of their sales withheld for an unspecified amount of time while the government sorts it out (and we all know the wheels of beurocracy are some SLOW moving wheels)

Overall I think this bill has more negatives than positives, and while surely there will be success stories of people being bailed out of financial trouble by the FHA, it's not easy enough to qualify to save everyone.  Also, its up to the lenders to take the aforementioned losses in order for a borrower to take advantage.  The largest piece of negativity in this bill is the bailout of financially and ethically irresponsible lenders, in effect injecting millions if not billions into them, when according to economics, they should, and would, fail and be out of the market.

You can read more about this bill at http://www.npr.org/templates/story/story.php?storyId=92826335 or the Library of Congress website, at http://www.loc.gov/index.html

Volatility has continued as the financial sector keeps running into more and more turmoil...there's a crazy mix of a slow economy and a high rate inflation which seem to be battering mortgage bonds and stocks over and over again.  Rates are in the mid-high 6% range for fixed rate mortgages for even the best borrowers, which is crazy because it wasn't that long ago when we could offer low-mid 5's.

I expect this to continue in the near future, but there have been some signs of the ship righting itself.  Hopefully we'll get some more, oil will continue to fall easing inflationary pressure.  If inflation is held in check, bonds should improve, resulting in lowered rates, especially with the stock market in trouble.

On a seperate note, I've set up a home office in Pike Creek, DE.  I will have new phone number for that line shortly, and still have all the same e-mail info.  My other office numbers are still open, and calls to the office are usually forwarded directly to my cell phone, so I am still accessible 24/7, but will now have yet another channel through which to be reached.

Back down! : )

Seems like a while (and it has been) since we've seen reasonable rates, but mortgage bonds have made substantial gains over the past 2 days, bringing about some reasonable pricing.

The programs which are GREAT in pricing right now are the FHA 3-yr fixed rate ARM loan, 5/1 conventional ARM loan, and 7/1 conventional ARM loan.   While 15 year loans are still at a good rate, the 30 isn't looking too wonderful, at least compared to where it was a few months ago.  Historically speaking, however, we're still at an all-time low, so people should be thankful they're not being rewarded for their good credit and financial responsibility with a rate in the 9's ; )