May 2010 Existing Home Sales Is Better Than The Headline Data Suggests : Neeti Arndt

Of course there’s a flip-side to everything. If you’re a buyer right now, you may be able to snag a better deal now, even without the tax credit, than you could have before April 30th.

Mortgage Applications Plummet To 13-Year Low As Tax Cuts Expire - Yahoo Finance

Just thought of the real estate application for this: you could use this app to charge a delinquent tenant for rent while you’re standing with them at their unit! No more, my check is in the mail, or bouncing checks!

Check out their site: About Square

Fannie Mae Tightens Guidelines On ARMs And Interest Only Products : Neeti Arndt

CNA Capital will allow its clients to use their self-directed IRAs to invest in one of our offerings - just know that this requires extra planning. Contact us if you want more information on how to setup a self-directed IRA for yourself.

This is great news as flippers no longer need to hold a property for 90 days before they can turn around and sell to a buyer who’s using FHA financing. Honestly, I’m not sure why HUD even had this rule to begin with! Please enlighten me…

The primary problem with the subprime mess was/is insufficient equity on the borrowers’ part. Sure, many borrowers ended up not being able to pay the monthly mortgage payments when the teaser rate ARMs reset. But, the more interesting (i.e. scary) situation is when borrowers who can pay their monthly mortgage perform a “strategic default” and decide to just walk away instead of paying on a property that is way underwater. This is precisely what is happening right now.

Congress created the FHA in 1934 to help the housing industry recover from the Great Depression. At that time, the US consisted primarily of renters as lenders would only lend up to 50% of the value of the property. The FHA stepped in to insure mortgages that were created with a higher LTV ratio, thus enabling more people to buy property.  Today, you can get an FHA loan insured with only 3.5% down!

Therein lies the problem…what happens when the property value falls 20%? (a modest decline compared to many areas today) The borrower is now paying a mortgage that is worth 17% percent more than the property! Why not just walk away and rent for a year or two. Then go buy a new place at a cheaper price! Sure, you may have a little harder time qualifying the second time around, but with all the current foreclosure, I guarantee lenders won’t ding you as much as they used to for this being on your credit history.

My prediction - the FHA will have to be bailed out by taxpayers in the near future, even with these fee increases. Oh, did I mention that their “fees” can be rolled up into your mortgage?! Brilliant!

The author to the article that I link to below, Jon Markman, suggests that the financial activities of US and China have become so commingled that neither have any way, even if they would want, to divorce this dysfunctional financial marriage.

On one hand, you have the US that is drunk off of China’s cheap exports but has no means to settle up the tab. All the US does is issue IOU’s (Treasury bonds) for these cheap products - IOU’s which may not even be worth the paper they’re written on.

On the other hand, you have China that owns $2 trillion (yes with a  ‘T’) of these IOU’s but can’t cash them in. China’s options?

1. If they were to sell these bonds, the increase in supply of Treasuries would send the price into a nose-dive; this would cause China’s remaining Treasuries to be worth much less.
2. China could stop buying future Treasuries so that the US’s tab doesn’t get larger - this would cause the US to have to pay higher interest rates on the Treasuries to attract other investors to buy future Treasuries (i.e. debt) instead of China. This would cause the Treasuries that China holds to become worth much less as well because China’s IOU’s are at a much lower interest rate than what these new investors would be getting. The only way to compensate would be for China to sell their IOU’s at a discount.
3. Or, China could hold their existing IOU’s to maturity to receive full payment (to avoid the problem in #2). Unfortunately, the full payment will also be worth much less at that time because of higher inflation in the US - the US dollars that China would receive later would be worth less than today’s US dollars.

Of course, the US could slowly start climbing out from under this mountain of debt and solve the problem for everyone. But let’s be honest, the spending in the past six months doesn’t look too promising.
The US-China Ponzi scheme - MSN Money

The author discusses a program that is being currently considered by the government that keeps jobless homeowners in their house. They would do this by allowing homeowners not capable of paying their mortgage on a house that is underwater, to give up control of their house to the bank, but be able to remain in the house afterward. The old homeowner would now be a renter, paying a rent to the bank much lower than what the old mortgage payments were.

Of course this causes all sorts of problems, which the author highlights (read article Housing Bubble, The Sequel — Seeking Alpha)

I am especially impressed with the author’s comment regarding the deflationary effect on CPI. He says that the CPI would be artificially low as it would be affected by these below market rents being charged to the new renters. The government would continue to provide easy money to counter-act this “deflation” that appears from the reduced CPI number.

Of course, the government loves to report that inflation is much lower than actual so that they can keep interest rates on Treasuries low.  This way they can pay back everyone’s debts later on using dollars that are worth less (because inflation really is present) and still keep borrowing costs low because of the artificially low CPI!

Housing Bubble, The Sequel — Seeking Alpha