What a week this has been for the financial markets! I’ve been following the tumultuous events on Wall Street, and the actions of our Congress and the federal government. No doubt you have as well.

To recap what’s happened — so far — this week:

U.S. Dept. of the Treasury Secretary Paulson today announced that Congress and the administration intend to take poorly performing assets, primarily mortgage-backed securities, off the books of financial institutions.  These assets have been a prime impediment to the ability of financial institutions to lend money.

The government also prohibited the short sale of nearly 800 financial institutions for 10 days, and may extend this prohibition to 30 days.

The U.S. Dept. of the Treasury also plans to increase the amount of mortgage-backed securities bought from government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, in an effort to increase the GSEs’ role in the housing market.

The Federal Reserve and other major financial institutions worldwide also made hundreds of billions of dollars in loans available to commercial banks in an effort to improve liquidity.

My expectation is that Congress and the administration will work together to craft legislation as early as next week addressing these critical issues. I expect to have a good sense of what the legislation will contain by this weekend, prior to financial markets opening Monday morning. Stay tuned…this could be what our real estate market needs to improve.

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This fall could be a particularly great time for first-time or buyers long out of the market to jump in and make a purchase.

Here are the reasons why:

  • Interest rates are likely to decline as Freddie and Fannie get government help.
  • The Federal Housing Administration recently boosted its loan limits.

The FHA allows down payments of as little as 3 percent, but that will rise to 3.5 percent as of Oct. 1. People scraping dollars together for a down payment should try to set their closing for the end of this month.

  • The tax credit will shave $7,500 off a first-time buyer’s federal tax bill due April 15. Buyers who don’t owe tax, will get the money as a refund.

FYI: The government’s definition of a first-time buyer is anyone who hasn’t owned a home in the last three years.

 

Give me or any member of our team a call if you have any questions or if we can help you purchase a home.

 

 

 

 

Fannie Mae and Freddie Mac, the secondary  mortgage market giants that fund half the U.S. housing market loans, are about to become subsidiaries of the U.S. government.

Reports circulating Friday night have the two companies entering conservatorship, which would nearly wipe out equity holders but preserve the interests of debt holders. The chief executives of both companies would lose their jobs, but the companies could continue to operate, with quarterly infusions of capital from the Treasury depending on losses.

Any announcement would come just weeks before the two companies have to refinance $225 billion of mostly short-term notes. Fannie and Freddie sell debt to investors regularly, but concern about their financial position threatens to scare away those needed buyers, many of them foreign banks. A solid federal guarantee would allay investor fears and allow Fannie and Freddie to continue to raise funds as needed. Stay tuned….

U.S. House leaders Wednesday approved a colossal housing package that allows the federal government to back up to $300 billion in refinanced loans for at-risk borrowers, a measure that could save thousands of Southwest Florida homeowners from foreclosure.

President Bush backed down from his veto threat of the broad-based legislation, fast-tracking passage of a bill aimed at stimulating recovery and boosting confidence in housing markets. The House vote was 272-152, and the Senate is expected to agree by week’s end, bringing relief to about 400,000 homeowners nationwide. This bill also included tax credits of up to $7,500 for first-time home buyers.

The package also entails a plan to bolster the ailing government-sponsored mortgage giants, Freddie Mac and Fannie Mae, with emergency funding and enhanced oversight.

The two companies, which provide funding for or back roughly half the home loans written in the United States, have taken a beating from investors in recent weeks amid growing solvency concerns brought on by bad-loan losses. The proposal would allow the federal government to extend credit to the companies as they weather one of the worst housing meltdowns in recent history.

The bill sets up a permanent affordable-housing fund financed by Fannie Mae and Freddie Mac and allocates $3.9 billion in local government grants to preserve property values and provide affordable housing through the purchase of foreclosures.
Additionally, the legislation would provide $180 million for foreclosure prevention efforts, another area of need for South Florida agencies overwhelmed by borrowers seeking assistance.