JUST WHEN YOU THOUGHT IT WAS SAFE TO GET INTO THE MORTAGE/HOUSING MARKET...MOST MORTGAGES PREDICTED TO BE UNDERWATER!

The recession is finished....it's turning around...etc....NOT! Spokesmen for the government keep saying this is the end of the crisis.

Housing values are falling, housing values are predicted to be below the mortgage loan values even for the best credit clients. Homes are falling in value even though their owners may be current in the payments.

How do you sell a home when you need to sell for any reason? If you have a $300,000 mortgage, buy your home will only fetch $250,000 in a sale, the buyer will not be able to get a mortgage loan due to the "upside down" value to mortgage.

So this will affect home sales, home financing and may force more and more short sales that will affect lenders and borrowers negatively for years!

The housing crisis is far from over.

Reuters reported, the percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be "underwater" by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties' value, up from 29 percent, it said.

"The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," the analysts said. Prime jumbo loans make up 13 percent of the total market.

Deutsche's dire assessment comes amid a bolt of evidence in recent months that point to stabilization in the U.S. housing market after three years of price drops. This week, the National Association of Realtors said pending home sales rose for a fifth straight month in June. A widely watched index released in July showed home prices in May rose for the first time since 2006.

Covering 100 U.S. metropolitan areas, Deutsche Bank in June forecast home prices would fall 14 percent through the first quarter of 2011, for a total drop of 41.7 percent.

The drop in home prices is fueling a vicious cycle of foreclosures as it eliminates homeowner equity and gives borrowers an incentive to walk away from their mortgages. The more severe the negative equity, the more likely are defaults, since many borrowers believe prices will not recover enough.

Homeowners with the riskiest mortgages taken out during the housing boom have seen the greatest erosion in equity, in part because they were "affordability products" originated at the housing peak, Deutsche said. They include subprime loans, of which 69 percent will be underwater in 2011, up from 50 percent in March, Deutsche said,

Of option adjustable-rate mortgages -- which cut payments by allowing principal balances to rise -- 89 percent will be underwater in 2011, up from 77 percent, the report said.

Regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011, it added.

"For many, the home has morphed from piggy bank to albatross," the analysts said.

HOUSING RECOVERY????? WHAT HOUSING RECOVERY?-OVER 25% OF ALL USA RESIDENTIAL REAL ESTATE IS WORTH LESS THAN ITS MORTGAGE!

Let's get real-did we really think that the GOVERNMENT could fix the housing market turmoil? Therefore as expected by us "regular " people, nothing that the government is doing has any noticeable effect on housing prices, house refinancing or financing other than normal market reaction.

Home prices are still declining-they are declining because every buyer has got to be nuts not to make a bid that is lower, or much lower, than the asking price of any hose he wants to buy.

That makes sense, that is the way it works in a "buyer's" market. The buyer is king, he sets the market price. The market is overvalued-let's face it when you see the wild prices points for the homes in markets like Florida and California, they become unsustainable.

It is not possible for a working average family to afford a home when it reached price levels that are no longer financially prudent.

The financing options which existed a year or two ago are no longer available, thus with financing options being limited, home sales MUST decline. That is just common sense.

The average FICO credit scores have declined across the country to 620-670, thus further causing an erosion of the availability of financeable consumers. Less consumers/buyer now quality for a mortgage, and many do not want to go with a government backed option, further reducing the financing possible.


Financing options such as the stated income loan is gone....and this option produced the most mortgage financing applications in the past. Of course it also created abuses simply by having the applicant overstate his income in order to qualify for a loan, and then at the first sign of a problem like smaller income or job loss, he was unable to pay the mortgage.

After reading the requirements of how to qualify for a mortgage or how to qualify for the government assisted plans put forth, they are clearly not meant to do what they were described as doing.

The payments to lenders who help homeowners are paltry, carry lots of conditions and the homeowners most affected will not see any real help either due to onerous conditions and requirements.

So, nothing really changed, other than the government's meddling has caused a further reduction, not increase in mortgage money availability.

How can there be an improvement if very few qualify, and the financing options are stifled?

So how can the housing situation change?

Mortgage applications in the U.S. fell last week by the most since February, defying efforts by President Barack Obama’s administration to revive the housing market.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan dropped 19 percent to 444.8 in the week ended June 26 from 548.2 the prior week. The group’s refinancing gauge declined 30 percent to the lowest in seven months, while the index of purchases fell 4.5 percent.

Unemployment, which touched a 26-year high in May, and rising borrowing costs have discouraged homeowners from refinancing, while rising foreclosures thwart builders’ efforts to clear a glut of unsold houses. It would take about 9.6 months to sell the nation’s 3.8 million unsold homes at the current sales pace, according to the National Association of Realtors.

“The worst is behind us but we’re a long ways off from a recovery in housing,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. “Inventories are still elevated. We’re not expecting any strength in housing until the second half of 2010.”

The mortgage bankers’ refinancing gauge decreased to 1,482.2, the lowest reading since November, from 2,116.3 the previous week, today’s report showed. The purchase index fell to 267.7 last week from a two-month high of 280.3.

The share of applicants seeking to refinance loans plunged to 46.4 percent of total applications last week from 54 percent.

The average rate on a 30-year fixed-rate loan fell to 5.34 percent from 5.44 percent the prior week. The rate reached 4.61 percent at the end of March, the lowest level since the group’s records began in 1990.

Mortgage Rates

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $558, or about $62 less than the same week a year earlier, when the rate was 6.33 percent.

The average rate on a 15-year fixed mortgage dropped to 4.81 percent from 4.93 percent the prior week. The rate on a one-year adjustable mortgage decreased to 6.52 percent last week from 6.54 percent, according to the mortgage bankers.

Home loan rates tracked by McLean, Virginia-based mortgage buyer Freddie Mac climbed along with Treasury yields through late May and early June on investor concern that a greater supply of government debt being sold to fund federal spending would fuel inflation.

Falling Home Values

In February through April, the Federal Reserve purchases of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae brought down the yields on those securities, allowing lenders to reduce rates on new loans and still sell them at a profit.

Still, falling home values and rising foreclosures are sidelining many would-be buyers. This year the number of foreclosures may rise to 2.5 million, the highest on record, according to Lawrence Yun, chief economist of the Realtors’ group.

About 20.4 million of the 93 million houses, condos and co- ops in the U.S. were worth less than their loans as of March 31, according to Seattle-based real estate data service Zillow.com.

Builders including Los Angeles-based KB Home are slashing prices and reducing the size of houses to compete with foreclosures.

KB Home’s revenue fell 40 percent last quarter to $384.5 million and net orders dropped 31 percent to 2,910 homes, the company said June 26.

“Although key economic indicators remain mixed, we are beginning to see signs that some negative housing market trends may be moderating,” Chief Executive Officer Jeffrey Mezger said in a statement last week.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

STIMULUS SPENDING SEEMS TO BE STIMULATING RISE IN FORECLOSURES! WAS IT NOT SUPPOSED TO STOP THEM?

We all heard all the great stories from the politicians and their sound-bites. "We will help the little people, we will get their mortgages refinanced, we will get their loans modified, we will help them stay in their homes", yadda, yadda yadda.

The facts are however not as represented, and there is nothing in the announced plans that will change that for now. Until people are working, there will be foreclosures. By the way, have you noticed the similarity in the statistics that the foreclosures tend to move in sync with the unemployment rate?

Foreclosures in April exceeded even March's blistering pace with a record 342,000 homes receiving notices of default, auction notices or undergoing bank repossessions, according to a regular industry report.

One of every 374 U.S. homes received a filing during the month, the highest monthly rate that RealtyTrac, an online marketer of foreclosed properties, has recorded in four-plus years of record keeping.

"April was a shocker," said Rick Sharga, a spokesman for RealtyTrac. "I would have bet on a dip because March foreclosures were so high.

Instead, filings inched up 1% from March and rose 32% compared with April 2008.

There were 63,900 bank repossessions, the last stop in the foreclosure process. More than 1.3 million homes have now been lost to foreclosure since the market meltdown began in August 2007.

The increasing foreclosures will force RealtyTrac to rethink its forecasts, according to Sharga. "We had been predicting 3.4 million filings for the year," he said, "but we'll blow those numbers out of the water."

The lion's share of April's filings were ones in the early stages of the process, such as notices of default, according to James Saccacio, RealtyTrac's CEO.

Bank repossessions actually fell 11% for the month, compared with March. That's due, according to Saccacio, to the many legislative and company moratoriums that have prevented the foreclosure process from starting on delinquent loans.

Because fewer loans entered the process in past months, there had been fewer getting all the way to repossession. But now that those moratoriums are over, the volume of foreclosure filings is increasing.

"It's likely that we'll see a corresponding spike in [repossessed properties] as these loans move through the foreclosure process over the next few months," Saccacio said in a prepared statement.

Ten states accounted for 75% of all foreclosure activity, and they fell generally into two categories: one-time bubble markets and the rust belt.

California, which easily outpaced every other state with with 96,560 filings. Other hard-hit former boom towns were Florida, Nevada and Arizona.

Those rust belts towns with the most filings were Illinois, Ohio and Michigan. Georgia, Texas and Virginia filled out the rest of the top 10 list.

Nevada, with one filing for every 68 households, had the highest foreclosure rate in the land. Florida, with one for every 135 households, ranked second; and California, with one for every 138, was third.

Las Vegas continued to be the worst-hit metro area. It had more than 14,000 filings in April, one for every 56 households and 20% more than in March.

The Cape Coral-Fort Myers, Fla., area was second with one in 57, a 31% month-over-month rise. Merced, Calif., where home prices have plunged almost two-thirds from their peak, had the third-highest rate.

Five other California metro areas ranked in the top 10: Modesto was fourth, Riverside-San Bernardino fifth, Bakersfield sixth, Vallejo seventh and Stockton eighth. Miami and Orlando rounded out the list.

Raised expectations

Not helping, of course, is the steady erosion of home prices. The National Association of Realtors reported record home price losses Tuesday.

"[The home price decline] will lead to more foreclosures," said Mike Larson, a real estate analyst for Weiss Research.

The loss of home values put many more mortgage borrowers underwater, meaning they owe more on their loans than their homes are worth. That increases foreclosure rates in two ways: Underwater borrowers have no home equity to draw on should to pay for unexpected expenses such as big medical bills or major car or home repairs. That's makes them more likely to miss payments. And when home values fall far below mortgage balances, homeowners often walk away from their loans.

"There has been much more 'deed-in-lieu-of foreclosure' activity lately," said Sharga. This is a transaction in which borrowers simply tell their banks that they're not going to pay their mortgage and hand back their keys, and deeds, to their lenders. "People are making the rational financial decision to walk away from underwater homes," he said.