MARKET UPDATE - MAY 2010

BAILOUTS AND BONUSES – BUT NOT FOR HOMEOWNERS


On Tuesday, April 27th, Goldman Sachs executives testified before a Senate subcommittee on investigations into potential acts of unethical and even fraudulent activities committed by Goldman Sachs.

Goldman Sachs sold pools of mortgages (which included a high percentage of subprime mortgages) which at the time were rated as high as AAA investments to investors. Goldman Sachs sold these investments “long” (meaning the investor would make money if the loans performed as they were rated). At the same time Goldman Sachs was selling those AAA mortgage pools to investors, Goldman Sachs was “shorting” (betting the investment would drop in value or default) those very same mortgage pools in anticipation that those mortgage pools would suffer losses through loan default. It was a great bet. Those mortgage pools rated AAA by Moody’s and Standard and Poor’s defaulted at an alarmingly high rate.

Creditors were wiped out. Stock holders suffered substantial losses. Millions of homeowners lost (and continue to lose) their homes. Several European countries are on the verge of default. The global economy is now awakening from a U.S. housing boom hangover.

Goldman Sachs on the other hand made billions of dollars betting against those mortgage pools they were selling to investors. The U.S. Government even paid $13 billion to Goldman for bets it made against the mortgage bonds that AIG insured, but was unable to repay. AIG was bailed out by the U.S. government to the tune of $180 billion dollars.

As Goldman Sachs gets grilled by the Senate subcommittee on unethical and fraudulent activity, Goldman Sachs stock price closed up $1.01 on April 27th as the Dow Jones falls $213.04. Shares finally tumble 9% on Friday as Goldman Sachs rating is finally cut.

Lehman Brothers and Bear Sterns were allowed to fail, but most of the large Wall Streets banks were bailed out or broker off by the U.S. Government. CEOs and top executives in most cases were not fired, and still received huge year end bonuses; for making disastrous bets.

As the dust begins to settle and the U.S. housing market begins to show some signs of recovery, there will be no bailouts or bonuses for homeowners. Tax payers will simply float the bill for one of the largest financial disasters to hit the U.S. economy; as Wall Street firms continue to make billions. A broken system or capitalism at its finest?

NEWS FROM THE ARIZONA ASSOCIATION OF MORTGAGE PROFESSIONALS

FHA has announced they are considering raising the annual fee from .55 to 1.5 percent. This is basically triple the current level.

HR 5107 Rural Housing Bill is taking shape in Congress. It has proposals taking the up front fee from 2% to 3.5% and adding an annual fee of .5%. This will allow them to be self funded.

The Dodd bill for Restoring American Financial Stability Act of 2010 has legs. The recent epiphany by Congress to investigate Goldman Sachs has pushed the odds of passage to over 80%. This is a very bad bill. There is language supporting the idea that no company can sell 100% of their originations. They must retain at least 5% just as the FED is considering. Next, there would be a great possibility that a new agency would be formed to take the place of the FED, OCC, FDIC, HUD and others. This could prove disastrous for community banks and small regional banks. The MBA (Mortgage Bankers Association) does not support this bill and put out a warning to the Senators. The Arizona Chapter of the MBA recently secured a meeting with both Senators Kyl and McCain to listen to their concerns about the bill. It is amazing that they can get both Senators to appear together in one room on the same day to speak with 50 bankers. They must be living right and writing big checks!

-Information provided by Jody Davis of the Arizona Association of Mortgage Professionals

FAIRWELL HOMEBUYER TAX CREDIT

The homebuyer tax credit is no more; at least for those not under contract as of April 30th. Those that are in contract must close by the end of June 30th.

There is no evidence that the government plans to extend the homebuyer credit beyond the June 30th date.

Those that are still interested in purchasing a home, but were unable to meet the deadline, do not fret. Homes are still very reasonably priced, and interest rates are hovering at historic lows. However, both home prices and interest rates are expected to rise in the near future.

NEW HOME SALES SKYROCKET

“New home sales improved in March at the fastest single-month rate in 47 years, according to a government report released Friday. New-home sales rose 26.9% to a seasonally adjusted annual rate of 411,000 last month, compared to an upwardly revised annual rate of 324,000 in February, the Census Bureau said.” – cnnfn.com

HOME PRICES ON THE RISE

“February home prices posted their first year-over-year increase since December 2006. The best performing market in February was San Francisco, which posted a double-digit gain over the past 12 months of 11.9%. San Diego home prices jumped 7.6% and Los Angeles gained 5.3%. The biggest loser continued to be Las Vegas, where prices dropped 14.6% over the past 12 months.” – cnnfn.com

EXISTING HOME SALES ON THE RISE

“Existing home sales jumped 6.8% in March. The National Association of Realtors reported that existing home sales rose last month to a seasonally adjusted annual rate of 5.35 million units, up from the revised rate of 5.01 million in February. Sales year-over-year was up 16.1%. Price and inventory: The median price of homes sold in March was $170,000, up 0.4% from March 2009. Distressed properties made up 35% of the houses sold during the month.” – cnnfn.com

INTEREST RATE UPDATE – AMAZING ARM RATES

Mortgage Type Interest Rate APR

30 Year Fixed 4.875% 5.011%
15 Year Fixed 4.250% 4.480%
5/1 ARM 3.250% 3.373%

Call today for your individual scenario rate quote.

Interest rates as of 04/30/10. Conforming interest rates. Not applicable for FHA and VA loans. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify.

HOME OWNERS SEEKING HELP

If you owe more than your home is worth and do not know what to do, please give us a call. Geneva Financial, LLC offers federally funded mortgage options that may allow you to refinance your current mortgage into a lower monthly payment. We do not do loan modifications.

Need help with a short sale. Geneva Real Estate & Investments, LLC has many seasoned short sale real estate specialists that will help sell your home at no cost to you.

Our two companies are working hard to help distressed homeowners. Contact us at anytime with any questions.

MARKET UPDATE brought to you by:

Aaron VanTrojen

PRESIDENT
Geneva Financial, LLC
Mortgage Banker licensed in:
AZ: BK-0910215, CA: 603G564, ID: MBL6976, NM: 3693, NV: 3195, OR: ML4799, WA: 510-MB-49323
Geneva Financial, LLC NMLS License: 42056
Loan Officer NMLS License:15420
http://www.genevafi.com/

PARTNER
Geneva Real Estate & Investments, LLC
Real estate brokerage licensed in AZ, CA, WA.
http://www.genevare.com/

Office: 480-368-2000
Cell: 602-793-6383
Email: aaron@genevafi.com
Facebook: www.facebook.com/vantrojen