After several failed attempts to fix the country’s housing sector, the takeover of mortgage buyers Fannie Mae and Freddie Mac, $787 billion worth of economic stimulus money, a massive overhaul of America’s health care system, and the biggest re-write of finance rules in 70 years, the government says it’s finally getting serious about solving a root cause of this Great Recession, the housing crisis.

This Tuesday, 08/17, the Treasury Department hosted Washington’s biggest event of the week, a “Conference on the Future of Housing Finance.”  This is where government officials, policy makers and private sector bigwigs discuss winding down arrangements for Fannie and Freddie, which have soaked up at least $127 billion in taxpayer dollars since Uncle Sam put them into conservatorship in September 2008.

“It is not tenable to leave in place the system we have today,” said Treasury Secretary Timothy Geithner in his opening remarks to the conference. Says Shaun Donovan, the Secretary for the Department of Housing and Urban Development (HUD): “The government’s footprint in the housing market needs to be smaller than it is today.” See full remarks of  Secretary Shaun Donovan  - Housing Finance Conference.

If the Obama administration’s track record on these types of gatherings is any indication, legislation is likely to follow soon. (The White House held similar forums on health care and financial reform in the months before major bills—both of which passed—were considered on Capitol Hill.) In the meantime we should keep an eye on the lobbying. The Mortgage Bankers Association, the National Association of Homebuilders, Bank of America, PNC Bank, Morgan Stanley, the National Council of State Housing Agencies and the National Association of Affordable Housing Lenders were among the participants in Tuesday’s conference. They and other groups will have a lot to say about this issue in the coming months.

Nonetheless, it’s highly doubtful that Congress will tackle Fannie and Freddie this year because of  upcoming election and a “lame-duck” session in November.  But this reform we hope could become the legislative issue of 2011.

As reported by The Associated Press  07/20.10:

Home construction plunged last month to the lowest level since October as the economy remained weak and demand for housing plummeted. But driving the June decline was a more than 20 percent drop in condominium and apartment construction, which makes up a small but volatile portion of the housing market. Construction of single-family homes, the largest part of the market, was down slightly. It dropped 0.7 percent.

Overall, construction of new homes and apartments in June fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the Commerce Department said Tuesday. May’s figure was revised downward to 578,000. Homebuilders are struggling to compete with a glut of homes on the market, many of them foreclosures or deeply discounted properties.

The number of foreclosures could rise even faster, according to a new report on the Obama administration’s flagship effort to help those at risk of losing their homes. More than 40 percent of those of those who have enrolled have dropped out of the program, the Treasury Department said Tuesday.

One bright area of the new home construction report was an increase in building permit applications, which are a sign of future activity. They rose 2.1 percent from a month earlier to an annual rate of 586,000, however this was also driven by apartment construction. A slumping job market and competition from foreclosed properties have forced builders to limit construction, especially after tax credits that spurred sales expired at the end of April.

“The housing market remains the Achilles heel of the recovery,” said M. Cary Leahey, a senior economist at Decision Economics. “It is hard to imagine confidence recovering to healthy levels until the housing market experiences much less distress.” The lackluster housing report contributed to an early sell-off on Wall Street. The Dow Jones industrial average fell 120 points in morning trading.

In a typical economic recovery, the construction sector provides much of the fuel. Not this time. While developers have cut back on construction and the number of new homes on the market has fallen dramatically, they still must compete against foreclosed homes selling at deep discounts.

Builders may be turning their attention away from new projects to complete those already in progress. Housing completions rose 26.2 percent in June, noted John Ryding and Conrad DeQuadros, economists at RDQ Economics. That could be a positive sign for future activity.

“Our best guess is that housing construction activity continues to bottom out at low levels and that we will see some very modest growth in the second half of the year in new housing construction,” they said in a note to clients.

The National Association of Home Builders said on Monday that its monthly reading of builders’ sentiment about the housing market sank to 14 — the lowest level since March 2009. Readings below 50 indicate negative sentiment about the market. This is causing builders to feel increasingly pessimistic.

The rate of home building is still up about 15 percent from the bottom in April 2009, though it’s down 76 percent from the last decade’s peak in January 2006. New home sales in May dropped 33 percent to the slowest pace in the 47 years records have been kept. The drop-off came immediately after the tax incentives to sign a contract on a home ended on April 30.

Recently Congress passed two bills to extend the home buyer tax credit closing deadline and reauthorize the National Flood Insurance Program. Both bills, strongly supported by the National Association of Realtors®, NAR, cleared the House earlier and is now head to President Obama for his signature. The tax credit closing deadline and the NFIP reauthorization were extended to September 30. Extending the tax credit closing and flood insurance deadlines will help provide additional stability to real estate markets across the nation.

The passage of H.R. 5623, the Homebuyer Assistance and Improvement Act, applies the homebuyer tax credit closing deadline extension only to homebuyers who have ratified contracts in place as of April 30, 2010, but could not close before June 30. The legislation is designed to create a seamless extension of the new closing deadline for eligible transactions to September 30. There will be no gap between June 30 and the date the president signs the bill into law

About the Extended Home Buyer Tax Credit

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, in November 2009, Congress passed legislation that:

1.   Extended the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.

2.  Expanded the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Mortgage rates are the lowest they have been in more than 50 years making this a great time to buy a home. Mortgage-backed securities prices, which drive mortgage rates in the opposite direction, continue to perform well driving mortgage rates down even more. Panic about economic conditions at home and overseas, particularly in Europe, is credited with helping MBS prices and mortgage rates remain low.

FreeRateUpdate.com’s  research of  lenders’ rate sheets shows the following:

1. Conventional 30-year fixed mortgage rates are still at 4.25% for well-qualified borrowers paying 1 point origination and 15-year financing is available at 3.75%. Both fixed conforming interest rates are at all-time record lows.

2. Rates for FHA loans are just as good; however, APR on an FHA mortgage with the same note rate as a conforming loan is significantly higher because of MI and other FHA fees.

3.  Jumbo 30-year fixed mortgage rate is at an all-time record low as well, 5.25%.

4. Wells Fargo, the #1 originator of mortgages in the United States, is offering on their website a conventional 30-year fixed rate of 4.625, with an APR of 4.812%.

Financial Crimes Enforcement Network (FinCEN) latest report on 06/17/2010 shows the number of suspicious activity reports (SARs) from financial institutions related to foreclosure scams dramatically increased last year.

The report also noted that the type of foreclosure scams also evolved during the reporting period, which covered Jan. 1, 2004, through Dec. 31, 2009. FinCEN said foreclosure rescue scams increased substantially in the last eight months of 2009.

“The increase in reporting of suspected foreclosure rescue scam activity could mean that there is an increase in fraudulent activity, but it also reflects an increase in awareness among financial institutions of the fraud perpetrated,” said FinCEN Director James Freis Jr.

In addition to the increase in reported activity, the analysis shows that the nature of foreclosure rescue scams had shifted. Early SARs identified subjects pretending to be loan modification or foreclosure rescue specialists. and they target financially troubled homeowners with promises of help.

The scams involved the homeowners signing quit-claim deeds, and resulted in loss of equity in or title to their property. The scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan.

The scams described in later SARs reflect an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner’s mortgage for more favorable repayment terms. Following receipt of large advance fees, scammers rarely, if ever, provided any service. A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal.

The chart shows the top 10 metropolitan regions, ranked by the concentration of local subjects of all mortgage loan fraud SARs reported between Jan. 1, 2009, and June 10.

FinCEN, part of the Department of the Treasury, administers the Bank Secrecy Act. Its analysts research and analyze reports submitted under the Act. In addition, in the fall of 2009, FinCEN became a participant in the Obama Administration’s Financial Fraud Enforcement Task Force.

Of all of the foreclosures in the RealtyTrac online database, less than 50% have mortgages worth less than what is owed, said Rick Sharga, senior vice president at RealtyTrac, during a session at REO Expo, which concludes in Dallas  on Wednesday.

The RealtyTrac database covers foreclosure filings from notice of default to REO properties across more than 2,200 counties in the US. Sharga said while underwater borrowers are beginning to explore the possibilities of strategically defaulting, unemployment, not negative equity, is driving the current wave of foreclosures.

“We estimate there is one foreclosure to every six to 10 jobs lost,” Sharga said.

The overall unemployment rate dropped slightly to 9.7% in May, from 9.9% in April, mainly due to the labor force shrinking by 322,000, according to the US Department of Labor Bureau of Labor Statistics. This has caused foreclosures to increase in places previously thought safe from the crisis, including Provo, Utah and Portland, Ore.

There were 2.8m houses with foreclosure filings in 2009, and Sharga said that number would climb to 3.8m in 2010.

Even if underwater borrowers are not the main force behind the foreclosure wave, they remain a concern. The number of borrowers with negative equity declined slightly in Q110, but underwater mortgages and borrowers with less than 5% home equity accounted for 28% of all residential properties, according to the latest data from CoreLogic. Bank of America is even starting to forgive principal when modifying underwater mortgages eligible for the National Homeownership Retention Program (NHRP).

A Home Buyer Tip from Ira Freireich, an Exclusive Buyer Agent serving the Queens and Long Island , New York , home buyer:

After you have located “the home of your dreams”, spend some time on the internet finding out as much as you can about the address of the home. Below is an article about a “stigmatized property” (a home that has a negative history) that sold this past week. The point I am making is that New York State does NOT REQUIRE sellers to disclose if there was a murder or suicide on the property. Buyers should always research the property on google to find out if any negative information exists. (Check out what Pam Westhoff says) If you are not internet savvy, ask someone to do it for you.

Home remodelers are getting less bang for their bucks. For the fourth straight year, renovation jobs have added less to resale values relative to their costs, according to an annual Remodeling Cost vs. Value Report released  recently by the National Association of Realtors.

One common renovation, a mid-priced bath remodel, for example, runs an average of $16,142 and adds only $11,454 to the resale value of a house — recouping just 71% of its cost. In 2008, the same job cost less — $15,899 — and typically added $11,857 to the home's value, recouping 74.6%.

The most financially successful jobs are smaller-scale, lower-cost renovations that improve the exterior appearance of homes. In this down real estate market, curb appeal is king.

The major job that returns most in resale value is an upscale replacement of siding using fiber-cement. The job costs an average of $13,287 but increases home value by $11,112, or 83.6%. A vinyl siding replacement returns 79.9% of costs.

Adding a basement bedroom is also fairly cost effective, averaging $49,346 but adding $40,992 in value, an 83.1% return.

Among the remodeling jobs faring the worst in return on investment were large, upscale kitchen remodels. They cost an average of $111,794 in 2009 and added $70,641 in recoupable value, just 63.2%.

That was down a whopping 7.5 percentage points from their 70.7% return on investment in 2008 . At the height of the housing boom, in 2005, upscale kitchen renovations returned more than 80% of their costs.

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Best Buyer’s Broker Realty is an Exclusive Buyer Agent specializing in Long Island real estate (Nassau and Suffolk properties) and neighboring Queens County properties.

We don’t take any seller listings (yet we have more homes for you to see than most agents) and never have any potential conflict of interest like other agents who also represent sellers. We represent buyers only, 100% of the time. We can show you more homes for sale because we have access to MLS, FSBOs, Exclusives (homes that agents try to keep secret), foreclosures and homes not on the market that may be of interest to you.

We are not your traditional real estate agent. Our goal is to advise and protect home buyers and help them obtain the lowest price and best terms on their dream home. Call us at 516-887-6901 to see how we can help you save time and money. Or visit our sites at http://bestbuyersbroker.com or http://bestbuyerbroker.com.

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Everyone knows by now that Congress and the President passed an extension to the first time home buyer tax credits that were due to expire at the end of November. Now the questions are rolling in as to how to best take advantage of the new credits.

The measure continues giving an $8,000 tax credit to first-time buyers and now provides a $6,500 tax break to qualified homeowners looking to move up to middle-market homes that cost no more than $800,000.

In addition, the legislation raised the qualifying income levels to $125,000 for individual income tax filers and to $225,000 for joint filers.

For homeowners looking to move up, the legislation would require that they have lived in their current house for five consecutive years out of the last eight.

So you’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit.  Here's what you have to do to get your benefit:

Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract by April 30, 2010 and close by July 1, 2010.

Decide whether to: 
apply the credit to your 2009 tax return, filed on or before April 15, 2010;
file an amended 2009 return; or,
apply the credit on your 2010 return, filed on or before April 15, 2011.

Attach documentation of purchase to your return.

If you have questions about the home buyer tax credits that we have not covered on this site or in this article, use the comment link below and ask us anything you need to know. Your email address, while needed to post a comment (for purposes of filtering out spammers) is never published on this site with your comments. We'd love to hear from you.

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Best Buyer’s Broker Realty is an Exclusive Buyer Agent specializing in Long Island real estate (Nassau and Suffolk properties) and neighboring Queens County properties.

We don’t take any seller listings (yet we have more homes for you to see than most agents) and never have any potential conflict of interest like other agents who also represent sellers. We represent buyers only, 100% of the time. We can show you more homes for sale because we have access to MLS, FSBOs, Exclusives (homes that agents try to keep secret), foreclosures and homes not on the market that may be of interest to you.

We are not your traditional real estate agent. Our goal is to advise and protect home buyers and help them obtain the lowest price and best terms on their dream home. Call us at 516-887-6901 to see how we can help you save time and money. Or visit our sites at http://bestbuyersbroker.com or http://bestbuyerbroker.com.

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The Homebuyer Tax Credit is being extended to April 30, 2010 with different guidelines and provisions:
First-time Buyer

Amount of Credit
$8000 ($4000 married filing separate)

First-time Buyer Definition for Eligibility
May not have had an interest in a principal residence for 3 years prior to purchase

Current Homeowner Amount of Credit
$6500 ($3250 married filing separate)

Effective Date Current Owner
November 7, 2009

Current Homeowner Definition for Eligibility
Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years

Termination of Credit
Purchases after April 30, 2010

Binding Contract Rule
So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until
July 1, 2010 to close.

Income Limits (Note: Increased income limits are effective as of date of enactment of bill)
$125,000 – single
$225,000 – married
Additional $20,000 phase out

Limitation on Cost of Purchased Home
$800,000

Purchase by a Dependent
Ineligible

Anti-fraud Rule
Purchaser must attach documentation of purchase to tax return