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More Short Sales in the Triangle Means Less Foreclosures

by TeamForYOUrDreams

The more Short Sales in Raleigh, Cary, Wake Forest and the rest of the Triangle area of North Carolina the fewer foreclosures. Every Short Sales is one less foreclosure.   I hope we can do the same in every neighborhood in the United States.  My method to spread the message is to send a video to my friends, neighbors and clients asking for them to help save their neighborhood from foreclosures.  I hope they tell anyone they know who is in trouble about short sales.  I used this video http://www.youtube.com/watch?v=LBRaB6U_PTE on YouTube.  There are a lot of people in trouble do not know how much Short Sales can help them out of trouble.  Without this knowledge, they let their home head toward foreclosure.  For certain people, the video gets a better reaction as it presents the information more personally than my Short Sale website www.ShortSalesR.us .  The Short Sale website works for the people that prefer to study Short Sales in detail.  On the other hand, the video provides a face to face presentation.  The new short sale procedures are easier and faster, so they work better.  If you tell anyone you know who is in trouble, the real estate market will improve more quickly and America will recover faster.  Thank you for helping.

Help Raleigh Real Estate: Contact Your Senator!

by

Posted by Tim Burrell - The Senate Finance Committee has approved an economic stimulus package that does not include an increase in the limits for loans by Fannie Mae and Freddie Mac (commonly called GSE's), and does not include an increase in the limits of the guarantees allowed by the FHA.   The stimulus package passed by the House of Representatives in HR 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008,  includes increases in the amount of Fannie Mae and Freddie Mac loans to 125% of the median price for homes in high cost areas, with a cap of $729,750.  The House bill would also allow FHA to guarantee loans up to 125% of the median price in high cost areas, with the same cap.  This increase would be temporary, as it would expire at the end of they year.

Now is the time to contact your Senator and explain the obvious: THE PROBLEM IS REAL ESTATE LOANS, STUPID

The main source of the economic problems, and possible recession, is the lack of availability of real estate financing.  The exotic loans that used to allow a segment of the market to buy homes do not exist any more.  The standards for qualifying for nearly all loans have been raised, a second shrinking of mortgage funding.  With the increase in housing prices in many areas, conventional loans that are limited to $417,000 or less do not allow "regular folks" to buy a home in those areas.

The House bill would allow the limits on the conforming loans that "regular folks" need to go up.  This would allow more people to buy houses in the areas hardest hit by foreclosures.  The National Association of Realtors projects that this increase would prevent about 200,000 foreclosures nationwide.  Decreasing foreclosures would help consumer confidence, not only in the housing market but in the economy in general.

It is hard to imagine any reason for the action by the Senate.  The problem is a sudden decrease in the availability of real estate financing.  Why not deal with that problem by providing a short term increase in that financing?

The House bill would increase the availability of loans, and cost the consumer nothing.  The Sentate is concentrating on giving money from the US Treasury to taxpayers, and proposing amendments to give money to recipients of Social Security, both of which will eventualy cost taxpayers.  The money given to consumers will be used to buy consumer goods at WalMart and Best Buy.  We need something that will allow consumers to buy houses.  Also, the increase in loan limits is temporary, so that it is not a long term authorization which means any potential problems are limited in duration.

This difference between the House of Representatives and the Senate gives you a better appreciation for our form of government.  The Founding Fathers wanted to have a body in the legislature that was more in touch with the people, and they created the House of Representatives.  The Senate has only two members from each state, and focuses on larger pictures, but is less in touch with what is happening with "regular folks".

The National Association of Realtors is making an effort to have Realtors contact Senators to point out this mistake.   It would be even more important for consumers who are not Realtors to contact their Senators, so that the national importance of this mistake is felt, and the Senators cannot dismiss this as a self serving effort by Realtors.

This increase in the conforming loan limits is not as important to Raleigh real estate, and all of the real estate in the Triangle.  A loan of $417,000 will buy more than the average home in this area.  But increasing these limits will allow more people to buy the more expensive Raleigh real estate and Cary homes, and move into a Chapel Hill house.  More importantly, this increase will help the areas in the United States that have large amounts of foreclosures.  Decreasing foreclosures will be good for the entire economy, which will help our area.

Please contact your Senator and ask the Senate to face the problem head on.  Since the problem is a decrease in real estate financing, provide a temporary increase in that financing.

Posted by Tim Burrell - One of the reasons for the decrease in the number of home sales in California, Florida and other high priced areas is the decrease in available financing.  The Triangle homes and houses in of the rest of the country are selling using loans that are associated with Fannie Mae and Freddie Mac, as they are able to stay within the limits allowed for those loans, so called Conforming loans.  The loan limit is $417,000.   Other loans are guaranteed by the FHA, with a lower limit of $362,000.  These programs do not do much for buying a home in California and Florida, unless you have a huge down payment.   But, those are the areas with an abundance of foreclosures.

Last week, an agreement was reached between the leaders of the House of Representatives and the White House to raise the Conforming Loan limit.   Some of the people involved in the agreement must not have taken good notes, as House Republican Leader John Boehner said they were raising the limit to $625,000 while House Speaker Nancy Pelosi said the limit would go up to $729,750, so the conforming loan limit for GSE's (Government Sponsored Entities)could be one or the other or someplace in between.  They were on the same page when they said that the FHA loan guarantee program would be expanded to a new limit of $725,000.  The increase in the conforming limit was supposed to be for one year, while the increase in the FHA guarantee would be permanent.

However, they forgot this thing called two house legislature, an idea that Thomas Jefferson, Ben Franklin and James Madison thought was important.  What about the Senate, the other part of the legislature?   Senator Richard Shelby of Alabama, a prominent member of the Senate Banking Committee, wants to tie the increase to the passage of legislation to increase the oversight of the GSE's.  That may work out, as the House of Representatives has already passed HR 1427, a bill that would provide for that increase in oversight.  Senator Chris Dodd of Connecticut, the chairman of the Senate Banking Committee, has stated he will support passage of legislation that would reform the oversight of GSE's and expects it to pass later this year.  So, if the Senate passes legislation similar to HR 1427, the oversight may come into effect, and maybe all parties will follow through with the increase in the loan limits. 

But, Senator Dodd wants to go farther by creating the Federal Homeownership Preservation Corporation, and fund it with $20 billion to purchase loans from lenders, allow homeowners to refinance into fixed rate government backed mortgages.  This proposal is designed to prevent foreclosures and allow more homeowners to keep their homes.   However, the White House does not want this added to the Stimulus Package, which is what Senator Dodd would like to do.

What will the White House do?  In the State of the Union Message tonight, President Bush urged the Congress to pass the legislation that would reform Fannie Mae and Freddie Mack, and modernize FHA.  He did not include anything about increasing the Conforming Loan limit.  He also urged the Congress not to add additional costs to the Stimulus Package, indicating he would oppose Senator Dodd's efforts to ceate the Federal Homeownership Preservation Corporation.  So, will the loan limit increase go into effect, or will it get bogged down in confrontation over the items in the Stimulus Package and reform of the GSE's and FHA?

If the Senate will get the oversight it wants and the White House gets the Stimulus Package it wants, then maybe  the House will get the increase in the limits it wants.  What will the nation get?

The National Association of Realtors estimates that if the limit of conforming loans is raised to $625,000, it will prevent between 140,000 and 210,000 foreclosures, as well as have a positive effect of 2 to 3 percent on home prices.   Those who oppose this legislation say it will  weaken the ability of the GSE's to help low and moderate income families.  Others warn that if this legislation passes and the conforming loan limits were increased, then it would increase the risk to the taxpayers just to benefit the wealthy.

Most Raleigh real estate can be purchased with the current conforming loans, and those Raleigh homes do not need the increase in the loan limit.  However, there part of the Raleigh real estate market that is slow is the part that is priced over $400,000.  So, increasing the conforming loan limits will make more financing available for that price range, which will help to decrease our inventory of higher priced homes.

The other benefit to increasing the loan limits will be to aid the markets in the areas with the largest amount of foreclosures.  If this decreases the number of foreclosures in those area, there will be less doom and gloom about the real estate market, and that will help all of us.

If the biggest problem with the economy is the lack of financing for real estate, you would hope that the politician would pass some legislation that would provide for more real estate financing, particularly for states like California and Florida, where most of the foreclosures are occuring.  It is only logical that if what we need is more financing for these areas that the politicians would provide that.   But, logic and government frequently do not coincide.  Lets hope they do this time. 

I enjoy your opinions, so feel free to comment. 

Posted by Tim Burrell.  Many articles are appearing that analyze the Bush Administrations proposal to stimulate the economy.  Virtually all of the articles miss the most important point, which is the same point that the stimulus package misses.  It is claimed that the biggest problem in the economy is the sub-prime loan fall out, and its effect on limiting the availability of financing, which in turn effects the real estate market.  Without financing, would be buyers cannot buy the homes that are increasing the inventory of homes for sale,  particularly in areas other than the Triangle.  When the inventory is too large, the real estate market is out of balance and prices decline.  These other areas have an indirect effect on sales in the Triangle, as people trying to move here from depressed areas have a hard time selling their homes, so they cannot buy homes here.
 
Since the problem is a lack of financing, the solution is to provide more financing.  New regulations proposed by Congress restrict the type of financing that can be sold easily, basically eliminating sub-prime loans, so that most lenders and brokers favor loans associated with FHA and similar organizations.  The loan limit for these conforming loans is $417,000, which is too low to help the markets like California where foreclosures are high and the inventories have dramatically increased.  So, raise the loan limits for these loans at least to $625,000,  as suggested by the National Association of Realtors.  This will allow more loans to be available, which will allow more people to qualify for financing, and allow more homes to be sold.  It will cost the taxpayers nothing, instead of the $150 Billion proposed by the Bush Administration.
 
The House of Representatives has passed legislation that would allow this to happen.  The Bush Administration indicates it will only support this legislation if it includes a change in the way the FHA is run, and provide for more oversight.  The Senate is so opposed to this idea that the legislation needed to finish what the House of Representatives started has not even been introduced.  This ideological dispute over a theoretical problem is preventing a no cost solution from going forward.  So, people lose their homes to foreclosure, homeowners watch their equity erode, banks get into financial trouble as their inventory of Real Estate Owned (REO), as the administration and the Senate debate over this unimportant issue.  This reminds me of the debate in the 1960's over the shape of the table at the negotiations to end the Vietnam War.  While the politicians debated whether the table should be round or square (and they would not start negotiating until they agreed on the shape of the table), soldiers and civilians died in continued fighting.   Similarly, while the Bush Administration tries to force its agenda of FHA oversight on the Senate, the housing market in many areas of the United States suffers. 
 
It is hard to see how you can stimulate the real estate market using the indirect approach of giving consumers a tax rebate, which is a small amounts of money to millions of consumers, expecting they will spend it immediately.  Consumers will spend these little amounts on little things, for which WalMart and Best Buy will be thankful.  If there is a boom in Big Box stores, there may be more sales clerks hired, and maybe some of the new hires will make enough money to buy a house, but not in California or other high cost areas that are in the most need of assistance.
 
The best approach is to Keep It Simple.  If you want to help the real estate markets that are out of balance, do something that costs nothing which directly aids those markets by correcting the shortage of financing.  If you are a politician you might like the Administration's proposal as it may get you the vote of the consumer who just bought a big screen TV.  But it would be wiser to do a great deal more to solve the problem by providing more financing, and the most acceptable financing is FHA loans.  
 
We are fortunate in the Triangle that most of the homes can be purchased with a loan of $417,000 or less.  We are also fortunate that the real estate market in the Triangle is good, particularly for homes priced under $417,000.  But, it would be nice if the politicians stopped their petty squabbles to help the rest of the United States.
 

Displaying blog entries 1-4 of 4

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Team For Your Dreams, Inc.
REMAX United
7721 Six Forks Road, Suite 110, Raleigh, NC 27615
Raleigh NC 27615
919-846-3272
919-812-5111
Fax: 310-347-4041