HREU Students (and future students) as you know…we have been laser focused on reporting to you the future of the ‘First Time Home Buyer Credit”

A couple weeks ago on this blog we reported new evidence that the credit won’t be extended…..in it’s current form. Like many of you were were hoping that the program would be not only extended but, expanded.

Well, here is more evidence that the program may be extended but WON’T be expanded…

First a report from Bloomberg:

Oct. 26 (Bloomberg) — The U.S. Congress will probably phase out the tax credit for first-time home buyers, according to a note sent by ISI Group Inc.’s Washington research analysts.

Realtors, if the credit isn’t extended you need to expect more home value loss. That will result in more sellers needing to list their homes with agents who know how to do short sales. There will be a simply massive increase in the demand for agents who have this skill. Its too late for you to learn how to be a short sale specialist. Watch the FREE How-To Easily List and Sell Short Sale Video….and grab the FREE Agent Short Sale Secrets book.

“There could be an agreement reached as early today on the Reid/Baucus amendment that would PHASE OUT (not extend, as we originally understood when the idea was first proposed last week) the home buyer tax credit,” ISI analysts said in the note. “The phase out is worse than a straight extension and probably worse for housing than the consensus.”

Next, a report from (our favorite CNBC reporter and all aroundeal Estate Diva) Diana Olick:

More confusion today about what’s up with the first time home buyer tax credit extension.

Read people, read!

Bill Nelson (D-FL) made a comment as he boarded AF1 today that “We should be able to extend that later this week.”

He’s a member of the Senate Finance Committee, which is working on the phase-out plan I reported Friday.

Then supposedly the market gets spooked because Bloomberg reports a story that ISI Group says the tax credit would not be extended even though it then goes on to explain it would be phased out.

Anyway, here’s the most likely scenario, I believe, and I’ve been told by my sources, from Concept Capital’s Washington Research Group:

Legislative Course

The key vote will be Tuesday – as we discuss in today’s calendar note – as Senators need to approve a motion to proceed to the Unemployment Insurance bill. We believe there are enough votes to pass the motion, which means the Senate will then start considering amendments. Sens. Isakson and Dodd will then offer their amendment to extend the tax credit and open it to all buyers and to raise the income cap to $300,000 adjusted gross income for joint filers from the $150,000 AGI cap now in effect.

That bill would cost nearly $17 billion, which is why we expect the amendment to be defeated.

Then Senate Majority Leader Reid and Senate Finance Committee Chairman Baucus will offer the amendment to extend the homebuyer tax credit through 2010, though it would phase out starting April 1 by $2,000 per quarter. This also would include a modified expansion of net operating loss carrybacks and be paid for with a delay in the worldwide interest allocation rules. Senators will offer many other unrelated amendments. We would expect those to be defeated.

The goal is then to pass this bill in the Senate on Wednesday so the House may approve it Thursday.

Will This Happen

This is certainly a chaotic process but our conversations continue to lead us to believe that there is a window for success this week. Our view remains unchanged since Thursday that the Reid phase-out plan is the one that will be adopted. If it cannot get done this week, we expect lawmakers to return to it in November.

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Must watch new interview with the commissioner of the FHA…
A few of the highlights of this video interview:
1) FHA is not going broke. (how can it when it always go to Congress for more money)
2) They are ‘reviewing’ lending requirements…credit scoring etc.
3) FHA mortgages are now 30% of the mortgage market. That makes the FHA the largest home lender…by far.
4) FHA is hiring a new ‘Risk Officer’…translated, they are bringing on a new guy to evaluate the risk factors in their lending standards. This is the guy who will carry the weight of having to raise lending standards.

Here is the video….Remember, the THURSDAY we are providing a FREE How-To List REOs teleseminar. HERE IS THE INFO YOU NEED TO ATTEND THE CALL.

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Harris Real Estate University

From our favorite CNBC Real Estate Reporter Extraordinaire….Diana Olick….

You’ve probably never heard of it; I know I hadn’t until I read a New York Times article about it a few months ago, but think of it like that enormous warehouse you see at the end of “Raiders of the Lost Ark”, where important artifacts and documents go to die.

Then think of your home mortgage as the lost ark. It’s called MERS, short for Mortgage Electronic Registration Systems, and it is the keeper of your loan. Nope, not your bank, lender, broker, investor, but Virginia-based MERS.

In order to save tons of cash on all the legal mumbo jumbo involved in documenting your loan and how it gets bought and sold and traded, lenders hire MERS, which is a private database, emphasize private. It is currently used by about 3,000 financial services firms.

Since MERS is the final resting place for loans, it is also the name on the foreclosure documents. As the foreclosure crisis deepens, savvy lawyers are helping borrowers avoid foreclosure by demanding to know who owns the loan in question. Judges want to know as well, but MERS wouldn’t or couldn’t say…until now.

This week MERS unveiled a new program that will “inform 60 million borrowers of changes to the owner of their loan.” Why? Well they had to. Under the “Helping Families Save Their Homes Act of 2009,” signed by President Obama, the “Truth in Lending Act” was amended to require that when a loan is sold, transferred or assigned, the new owner of the loan must notify the borrower in writing within thirty days.

“We are excited to support Congress and the Obama Administration’s efforts to help distressed borrowers stay in their homes,” said R.K. Arnold, MERS President and CEO in a press release. “This program will be another tool for the real estate finance industry and the Administration’s efforts to bring greater transparency and accountability to the mortgage lending process.”

I call that progress.

Questions?  Comments? RealtyCheck@cnbc.com

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The days of home buying with little or no money down may be back—this time thanks to Uncle Sam.

Blamed for contributing to the housing bubble, zero-down-payment loans largely vanished when the market crashed and Congress blocked seller financing for government-backed loans. Now the federal government will be forking over cash at closing.

Buyers who haven’t owned a home for three years or longer are eligible for an $8,000 tax credit, thanks to a provision in this winter’s stimulus package. Now, under a little-noticed program announced May 29, the Federal Housing Administration will steer the funds to cover closing costs directly—in some cases even offsetting the 3.5% minimum down payment FHA loans require. That’s enough to cover most or all of the down payment and fees for homes up to the U.S. median price, now about $169,000.

Officials hope “monetizing” the tax credit will help revive the housing market, because meeting closing costs is one of the biggest hurdles for new home buyers. The National Association of Home Builders predicts it will add 40,000 to the 160,000 sales originally expected to be spurred by the tax credit. Supporters say the move avoids the worst effects of seller financing, in that the credit is essentially the buyer’s money, and government assistance doesn’t give sellers a perverse incentive to inflate prices in an unsustainable manner.

Realtors, Learn how to easily list and sell short sales. In this market…in YOUR MARKET….do you really have a choice? Watch the FREE Agent Short Sale Secrets video now and then download the FREE Agent Short Sale Secrets book…both are free!

Does Down Payment Aid Boost Defaults?

But while seller financing is riskiest, buyers who get down payment help have higher default rates, whether the money comes from government or other sources. That was shown in research by Austin Kelly—who oversees risk modeling at Fannie Mae and Freddie Mac for the Federal Housing Finance Agency—published late last year in the Journal of Housing Research. FHA data on foreclosures show the same pattern.

The new program lets home buyers apply the tax-credit advance against the FHA’s 3.5% down payment requirement only if the loan is handled through a state housing-finance agency; otherwise the tax advance may only be used to cover closing costs, to increase the down payment, or to buy down the mortgage’s interest rate. The FHA already allows down payment assistance from family, employers, and governmental agencies, but generally bars it from sellers, mortgage writers, or others who would benefit financially from the transaction.

Ultimately, critics complain that the new program transforms a tax credit meant to reward sidelined buyers for taking the plunge into a subsidy that could goose sales to those who otherwise couldn’t buy a home—and have little at stake if it doesn’t work out. “Didn’t we just have this big housing bust where people bought houses they can’t afford?” says Peter Schiff, president of brokerage firm Euro Pacific Capital and an economic adviser to Representative Ron Paul’s (R-Tex.) long-shot 2008 Presidential campaign. “We don’t want people buying houses without using their own money.”

Supporters counter that the benefits to the housing market and economy outweigh the risk to taxpayers. David Crowe, chief economist for the homebuilder’s group, says most buyers will stay in their homes if possible, even without much money at risk. “As long as they can make the payment they’ll stay, even if they’re under water,” he says. Still, he acknowledges that the new program “increases their likelihood of default, there’s no question.”

Source: BusinessWeek

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Housing Bubble Part 2?

Talk about a double edge sword….sure, Realtors want the FHA to have more lenient lending standards so more people can qualify to buy a home. Makes sense. After all, we are in the business to help folks buy and sell homes.

Of course the other side is that Realtors are suffering from the housing crash in a very real and personal way. Not only has the real estate industry contracted (and incomes along with it) but, agents own homes have also lost value. Talk about a double whammy!

Now, the FHA may be following the a perilless path that could cause the national housing mess to languish.

Read this article from the Wall Street Journal, share your comments….

Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.

Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.

The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent — nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in “serious delinquency,” which means at least three months overdue.

The FHA is almost certainly going to need a taxpayer bailout in the months ahead. The only debate is how much it will cost. By law FHA must carry a 2% reserve (or a 50 to 1 leverage rate), and it is now 3% and falling. Some experts see bailout costs from $50 billion to $100 billion or more, depending on how long the recession lasts.

How did this happen? The FHA was created during the Depression to help moderate-income and first time homebuyers obtain a mortgage. However, as subprime lending took off, banks fled from the FHA and its business fell by almost 80%. Under the Bush Administration, the FHA then began a bizarre initiative to “regain its market share.” And beginning in 2007, the Bush FHA, Congress, the homebuilders and Realtors teamed up to expand the agency’s role.

The bill that passed last summer more than doubled the maximum loan amount that FHA can insure — to $719,000 from $362,500 in high-priced markets. Congress evidently believes that a moderate-income buyer can afford a $700,000 house. This increase in the loan amount was supposed to boost the housing market as subprime crashed and demand for homes plummeted. But FHA’s expansion has hardly arrested the housing market decline. The higher FHA loan ceiling was also supposed to be temporary, but this year Congress made it permanent.

Even more foolish has been the campaign to lower FHA downpayment requirements. When FHA opened in the 1930s, the downpayment minimum was 20%; it fell to 10% in the 1960s, and then 3% in 1978. Last year the Senate wisely insisted on raising the downpayment to 3.5%, but that is still far too low to reduce delinquencies in a falling market.

Because FHA also allows borrowers to finance closing costs and other fees as part of the mortgage, the purchaser’s equity can be very close to zero. With even a small drop in prices, many homeowners soon have mortgages larger than their home’s value — which is one reason FHA’s defaults are rising. Every study shows that by far the best way to reduce defaults and foreclosures is to increase downpayments. Banks know this and have returned to a 10% minimum downpayment on their non-FHA loans.

In a rational world, Congress and the White House would tighten FHA underwriting standards, in particular by eliminating the 100% guarantee. That guarantee means banks and mortgage lenders have no skin in the game; lenders collect the 2% to 3% origination fees on as many FHA loans as they can push out the door regardless of whether the borrower has a likelihood of repaying the mortgage. The Washington Post reported in March a near-tripling in the past year in the number of loans in which a borrower failed to make more than a single payment. One Florida bank, Great Country Mortgage of Coral Gables, had a 64% default rate on its FHA properties.

The Veterans Affairs housing program has a default rate about half that of FHA loans, mainly because the VA provides only a 50% maximum guarantee. If banks won’t take half the risk of nonpayment, this is a market test that the loan shouldn’t be made.

These reforms have long been blocked by the powerful housing lobby — Realtors, homebuilders and mortgage bankers, backed by their friends in Congress. They claim FHA makes money for taxpayers through the premiums it collects from homebuyers. But keep in mind these are the same folks who said taxpayers weren’t at risk with Fannie Mae and Freddie Mac.

A major lesson of Fan and Fred and the subprime fiasco is that no one benefits when we push families into homes they can’t afford. Yet that’s what Congress is doing once again as it relentlessly expands FHA lending with minimal oversight or taxpayer safeguards.

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The Great Real Estate Shift

This was posted on our ActiveRain blog attracting dozens of great responses……

Chances are you are like most Realtors…you are sensing a need to change but, not sure which direction to go. You could always stay on the same old path you have been on….But, you know that you must make a change.

Simply put, you intutively know….you can feel that there is a shift taking place. A shift in our society, a shift in our economy…a shift in how people look at homes and being homeowners. Perhaps, a wholesale change in the very fabric of our nation.

Know this, you are not alone.

We are living in historical times. Our industry, our country is in the midst of a social and economic shift that historians will look back upon as one of the most significant turning points ever.

There have been historic times like these before…

During those times there were those whom embraced the opportunities that the changes created and those who couldn’t (or wouldn’t) evolve.

The end of one era marks the beginning of another.

Every week we provide literally tens of thousands of Realtors with coaching. Many of you are already involved in a Harris Real Estate University program.

From all of those agents we have noticed a decisive shift taking place. For many this shift is marked by a  powerful feeling of longing for something better. Something more complete.  These feelings can be exciting and for others is down right terrifying.

First lets take a closer look at the massive changes happening in the economy.

The Stock Market Crash of 2008-2009, which is now wiping out trillions of dollars of wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another. Millions of Americans are seeing their life savings greatly diminished or in some cases completely wiped out.

For millions of babyboomers the colossal loss in retirement savings will mean never being able to retire…at least not tradiational sense.

The new era will see a more sober and much diminished America. The “Omnipower” and “Indispensable Nation” we heard about in all the hubris and braggadocio following our Cold War victory is history. Our country is going to have to rethink how we interact with the rest of the world. Maybe being the one and only ‘Superpower’ isn’t all that its cracked up to be.

Seizing on the crisis, some will tell you we are witnessing the failure of capitalism.

This is nonsense. What we are witnessing is the collapse of Gordon Gecko (”Greed Is Good!”) capitalism. You know what I am talking about. Chances are you have lived this “lifestyle”.

Many of us have benchmarked our lives by the ‘buying of stuff’ lifestyle. For example, why is it that so many of us think that its our right…perhaps our purpose to be constantly “upgrading”. Do you mark your progress on this earth by the car you drive or the neighborhood you live in? Is your definition of a truly successful person someone who has many material things…the homes, the cars etc?

That’s 8 track thinking in a MP3 world.

Now, its time for you to think about what YOUR definition of success is.

You define what makes you successful. I bet once you think about this you will find that the very ‘things’ you have been spending your life paying for…in hopes that those things will make you feel successful…..have been a complete waste of your life’s energies.

You have been sold into believing that more stuff, different stuff will somehow make you feel successful. Think about who benefits from you believing that more stuff, being in debt is the preferred way of living.

Have you ever noticed that the very things you have pined away….the new car or country club home…have now become a burden. Are you fighting to maintain this ‘Lifestyle of Stuff’? Losing sleep over what might happen if you have to downgrade your S class Mercedes to a Honda? Would doing that mean you have failed?

Chances are if you have any of the above thoughts you need to take a seriously hard look at how you are spending your time on this earth.

What we are witnessing is what happens to a prodigal nation that ignores history and forgets and abandons the philosophy and principles that made it great.

Focus on what you are here to give… not what you are here to take.

The new era will be embraced by those who understand that our purpose on this earth is to be of service to others. Plan and simple. If you aren’t living the life of your dreams, if you don’t have the security and excitement in your life that you deserve its simply because you are not serving enough people at a high enough level.

There is a wonderful quote from one of our founding fathers Thomas Jefferson that is as relevant now as it was hundreds of years ago….

“At some point in every Man’s life he must decide to stand for the few or for the many”

You must start by making yourself free. Take a serious look at how much time and energy you are spending on serving debt and your ‘stuff’. Seriously, that boat that you are shoveling out money for every month…and rarely use. Is that boat worth the hours of your life’s energy? Is  that 6000 square foot home really worth the time and energy it costs to pay for it every month?

Think about this. Why did you buy all of that ‘stuff’ in the first place?

Perhaps your new definition of success should be cherishing prudence and believing in fiscal responsibility. Live from a balanced budget and be self-reliant. Believe in saving for retirement and a rainy day, in deferred gratification. Stop buying on credit what you cannot afford, in living within your means.

Yes, that means a radical shift in the way you relate to money. For most of us who will move towards this new paradigm there will be a new sense of freedom…and success.

The only true hope for homeowners is….caring, competent and skilled Realtors. Realtors are at the front lines of fixing this mess. We are the first responders to homeowners when they are in crisis.

The Government is NOT coming to save us. Don’t be fooled by all of these politically motivated ‘bail outs’. In all reality all these ‘plans’ are doing is pushing off the inevitable.

“Government must save us!” cries the millions of Americans. But, who got us into this mess if not the government — the Fed with its easy money, Bush with his profligate spending, and Congress and the President Obama seem to be carrying the same torch.

But, you (and me) we agreed to all of this. We could of said NO to the easy credit, the constant debt. We knew better, didn’t we?

For years, we Americans have spent more than we earned. We save nothing. There is an joke that an Americans idea of saving is shopping at Macys vs. Neiman Marcus. Americans don’t save. We have been spoiled (and fooled) into thinking that we didn’t need to save because there was always easy credit to be had. Another home sale to be made.

Last year on our blog www.TimandJulieHarris.com we helped to break the news story about HELOCs being canceled or reduced. The lenders quietly and with lightening speed summarily smashed millions of Americans ‘piggy banks’…their home equity lines of credit.

Credit card debt, consumer debt, auto debt, mortgage debt, corporate debt — all are at record levels. And with pensions and savings being wiped out, much of that debt will never be repaid. Millions of small businesses will fail. Millions of families will go broke.

Our standard of living is inevitably going to fall. For foreigners will not forever buy our bonds or lend us more money if they rightly fear that they will be paid back, if at all, in cheaper dollars.

Here is something fun I read not too long ago. One of the last rounds of ‘economic stimulus’ that the government arranged for our country….whereby millions of Americans received $600 checks in the mail. You will never guess where that money came from? Here is a hint..the US Government (remember, that’s you and me) had to…borrow it. From….any guesses? Yep, that’s right…we borrowed that money from the Chinese.

Here is the part I really like.

That borrowed money was then sent to millions of Americans…..what did they do with that money? The spent it on ‘stuff’ made in…..China.

The easy credit, greedy way of living is OVER.

So, what comes next?

Will you be part of the Great Real Estate Shift? How will you change so that you are not merely ‘relevant’ but, you become one of the leaders of the new emerging consumer lead real estate movement. Dont kid yourself. Business as usual is dead. Your real estate clients will expect you to represent a new set of values…they will expect you to possess a new set of skills.

Be excited! You have the historically unique opportunity to participate in reshaping the real estate industry.

Tim and Julie Harris are the founders of Harris Real Estate University(HREU). HREU is the nations largest online real estate University with nearly 40,000 Realtors participating in a HREU coaching program everyday. For more information on Tim and Julie and HREU visit their blog: Tim and Julie Harris or the main campus site Harris Real Estate University.

Thanks to Patrick Buchanan for inspiring this article.

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Harris Real Estate University.

HREU Students and future students….don’t say we didn’t tell ya so!

Breaking News: A new report was just released that disclosed the results of the much applauded Hope For Homeowners program. Harris Real Estate University students have been hearing from their coaches for months that the only true hope for homeowners is…..fellow Realtors.

No government program is ever going to replace the relationship between the homeowner and the Realtor. Realtors must do everything in their power to learn now what this market demands……so they can be the real….Hope For Homeowners.

Here is the article from CNN Money.

If HOPE for Homeowners, the foreclosure-prevention plan passed last summer, was a soft drink, it would be New Coke. If it was an automobile, it would be an Edsel. A movie? Howard the Duck.

In the five months since it has been in effect, HOPE has helped exactly one homeowner to avoid foreclosure. This despite Congress having made $300 billion available to back these loans and estimating that the program would benefit as many as 400,000 families.

“As it stands now, we’ve only gotten 752 applications,” said Federal Housing Authority spokesman Brian Sullivan. “And only insured one loan. Needless to say, the program isn’t working terribly well.”

Rep. Michael Castle (R – Del.), who sits on the House Financial Services Committee, agreed, calling HOPE “one of the most failed programs we’ve had in a long time.”

Nonetheless, the House of Representatives recently approved an updated version of HOPE as part of the bankruptcy-reform bill that is a keystone to President Obama’s Homeowner Affordability and Stabilization Plan. But it was no overhaul to the program; the changes are very subtle.

Will more government programs make a difference? Have they so far, NO. Realtors are the only true hope for homeowners. Learn how-to help homeowners avoid foreclosure. Watch this free Agent Short Sale Secrets video now. Learn how to easily list and sell short sales.

Castle is concerned that the new program will also be a waste of time and money. But Sen. Chris Dodd (D – Conn.), one of the chief architects of the earlier version of HOPE, supports keeping it in the bankruptcy bill, according to a source close to the negotiations. He hopes the changes will help convince more servicers to use the program.

The Senate is expected to vote on the bill in the next few weeks.

The original program called for lenders to voluntarily refinance delinquent mortgages by reducing the principal balance on loans to 90% of a home’s current market value. The new 30-year, fixed-rate loans would then be backed by the FHA. Under the new plan, lenders would only have to write it down to 93%.

Borrowers who owed $220,000 on a house valued at $200,000, for example, would need their mortgage balances reduced to $180,000 to qualify for an original HOPE for Homeowners refi. That’s a $40,000 write-off. Under the new plan, lenders would have to forgive $34,000.

Lenders simply won’t do that very often. They prefer to use term extensions or interest rate reductions to help make mortgage payments affordable for at-risk homeowners. As a result, most of the big lenders refused to participate in the program, which was strictly voluntary though heavily encouraged by the Bush and Obama administrations.

“Writing down principal is the last thing you want to do because you have to realize the loss immediately,” said Paul Leonard, a spokesman for the Housing Policy Council, a coalition of mortgage lenders.

The program has also failed, Leonard added, because of the conditions and limits the program imposed. Borrowers, for example, had to agree to pay the government 50% of any future profits they made from selling the property. Under the new version of HOPE, borrowers would no longer have to split any earnings with Uncle Sam.

Other changes include incentive payments to servicers of $1,000 to induce them to participate.

The Congressional Budget Office now projects that HOPE for Homeowners could help just 25,000 mortgage borrowers over the next 10 years at a cost of $675 million.

Despite those modest numbers, Leonard said that the members of Housing Policy Council want to keep HOPE for Homeowners on the table even though the administration’s Homeowner Affordability and Stabilization Plan does much more than HOPE.

Besides reducing mortgage payments through interest rate reductions or term extensions, HASP provides for lowering mortgage principals – the only thing that HOPE offers.

Still, the tool would be in the box even if “the administration’s plan would be the first thing [lenders] look at,” Leonard said. 

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