Taylor, Bean and Whitaker Mortgage Corporation shut down

As most know by now, Taylor, Bean and Whitaker Mortgage Corporation (a massive wholesale lender) was raided on Monday by the FBI as the Troubled Asset Relief Program had two search warrants. When asked, TBW's Chairman Lee Farkas, replied that the warrants were for dealings with Colonial Bank. According to ocala.com: "In April, TBW signed a agreement to put up half of a $300 million equity investment to help infuse the troubled Colonial BancGroup, holding company of Colonial Bank, with headquarters in Montgomery, Ala., and help the bank meet a regulatory deadline. Farkas said that deal ended Friday. At the time of the agreement, Colonial, which has suffered from heavy loan losses, had applied for funding under the U.S. Treasury's TARP. To be eligible for TARP funds, Colonial was required to come up with $300 million in private equity." An independent auditor indicated that there were "irregular transactions that raised the suspicion of fraud"

On Tuesday, the Federal Housing Administration suspended Taylor, Bean and Whitaker Mortgage Corp. from making FHA insured loans. The federal housing administration said this suspension was caused by TBW not filing a mandatory annual report.

There is speculation this could cause interest rates to rise as Taylor, Bean and Whitaker Mortgage Corp. was previously FHA's third largest wholesale lender!

Keller Willimas ranks #1 in JD Power and Associates...

Keller Willimas ranked #1 in JD Power and Associate's 2009 Home Buyer/Seller Study in the home buying category. In the home selling category Keller Williams ranked #2, just behind Coldwell Banker.

The 2009 Home Buyer/Seller Study includes more than 3,100 evaluations from 2,801 respondents who bought or sold a home between April 2007 and June 2008.

Among the related findings:

* Home sellers report that, on average, 3.2 open houses were conducted for their property in 2009, compared with 4.5 in 2008.
* Approximately 64 percent of home sellers used a Web site listing to market their home in 2009, up from 61 percent in 2008.


Here are the home buyer rankings on a 1,000-point scale. (The home buyer average score was 791.)

* Keller Williams, 806
* Coldwell Banker, 801
* RE/MAX, 798
* Century 21, 795
* Prudential, 781
* ERA, 744
* GMAC, 731


Here are the home seller rankings on a 1,000-point scale. (The home seller average score was 786.)

* Coldwell Banker, 815
* Keller Williams, 801
* RE/MAX, 784
* Century 21, 770
* Prudential, 753

Housing market comeback?

I thought this was an excellent article, "Home sales rise as housing market tries to make a comeback:"

By ALAN ZIBEL and ALEX VEIGA, AP Real Estate Writers Alan Zibel And Alex Veiga, Ap Real Estate Writers – Mon Jul 27, 5:45 pm ET

WASHINGTON – New home sales rose last month at the fastest clip in more than eight years as buyers eagerly took advantage of bargain prices — a clear sign, economists said, that the real estate market may finally be bouncing back.

Historically low interest rates and a federal tax credit for first-time homeowners also helped push home sales to their highest level since November, the Commerce Department reported Monday.

While home prices are still falling around the country, sales have now risen for three months in a row. Construction of new homes is at the busiest level since last fall. And home resales rose in June for the third straight month.

"The worst of the housing recession," said David Resler, chief economist at Nomura Securities, "is now behind us." And as with the overall economy, the "recovery" is likely to be slow and arduous, he said.

Put in perspective, the improvement in sales is modest. The pace of sales for new homes in June was still 72 percent below the peak of four summers ago, and there is still an enormous inventory of homes lingering on the market.

"There's been signs of improvement, but we're a long ways off from being back to a normal market," said Corey Barton, president of CBH Homes in Meridian, Idaho. Sales were up there in June, but Barton stressed: "It wasn't our biggest jump in eight years."

But there were clear signs the housing market is showing more than life than it has at any point since the recession began. Keystone Custom Homes of Lancaster, Pa., which was founded in 1992, had its best June ever. July is looking good, and president Larry Wisdom expects an even stronger August.

"We doubled our sales in May, and then in June it took off," he said.

New home sales for June clocked in at a seasonally adjusted annual rate of 384,000, blowing past the expectations of economists surveyed by Thomson Reuters, who were looking for 360,000.

The figure is up 11 percent from May, and May's number of 346,000 was higher than previously thought. The increase is the largest since December 2000, when investors scarred by the tech-stock bubble were looking for more stable places to put their money.

Sales were strongest in the Midwest, where they jumped 43 percent from May's total. Sales climbed 29 percent in the Northeast and 23 percent in the West. They declined slightly in the South.

The median sales price was $206,200, down from $234,300 a year and $219,000 from May. Economists expect home prices to continue falling until the competition from low-priced foreclosures ebbs sometime next year.

To drum up sales, CBH Homes has had to slash prices by up to 10 percent from last year's levels. The new homes CBH builds have to compete with the glut of foreclosures, which are drawing many first-time homebuyers.

In addition to lower prices, buyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price or up to $8,000 for first-time buyers. Home sales must be completed by the end of November for buyers to take advantage.

"There's definitely more first-time homebuyers in the market than what we've seen in the last several years," Barton said.

Fallout from the housing crisis played a central role in the U.S. recession, now the longest since World War II. Mortgages went bad, homebuilders pulled back and fired thousands of workers, foreclosures spiked and lenders were shuttered by the dozen.

Although the real estate market appears to be starting a recovery, that doesn't mean it will instantly become a powerful economic engine. Construction is weak because builders still have too many unsold homes sitting vacant.

At the current sales pace, there are enough new homes for sale to last nearly nine months. That's slightly less time than in May but still much longer than the six-month mark that indicates a balanced market.

Falling prices mean homebuilding companies won't be making much money anytime soon, but their stocks soared nonetheless on the impressive June sales. Beazer Homes USA gained 13 percent, and shares of Centex and Hovnanian Enterprises rose 9 percent.

Investor alert: New financing option

Most homeowners in today's market are beside themselves when they think about how much their home has declined in value over the last few years. Investors, however, are thinking about what an opportune market it is for purchasing investment properties. Although many real estate investors are wealthy and have the assets to purchase more properties, they aren't able to because of debt to income requirements.

Enter... stock-secured loans. These loans allow borrowers to use their stocks, CDs, mutual funds, bonds, treasure notes, etc as collateral for a home loan up to 85% of loan-to-value. Circumventing DTI requirements is the main draw for these type of loans although other benefits include: property need not be appraised, borrower doesn't have to furnish tax returns, borrower doesn't have to furnish employment records, and there is no credit check. All that is required for these loans is a stock or securities portfolio to use for collateral.

Loans are currently available with ranges between $50,000-$2,000,000 with interest rates hovering around 4.3% (currently). Terms are usually short-- between 5-7 years, but those looking to turn properties over quickly can best take advantage of this program. Please contact me with further questions; I'm always happy to help.

Real estate market recovering in many cities

Radar Logic, a real estate data and analysis company, reported an average rise of 2.1% from April to May in 22 of the 25 metropolitan statistical areas they track.

Here are the 10 metropolitan areas where prices increased the most from April to May of this year:

1. Milwaukee, Wis., 4.9 percent
2. Charlotte, 4.7 percent
3. Boston, 4.6 percent
4. Cleveland, 4 percent
5. Washington, D.C., 3.7 percent
6. St. Louis, 3.3 percent
7. Columbus, Ohio, 3.2 percent
8. Seattle, 2.8 percent
9. Denver, 2.3 percent
10. Philadelphia, 1.8 percent

What does this mean to us? Many of the cities that were hit first are beginning to bounce back and their markets are showing strong signs of recovery. As one the later cities to get hit, we are going to be behind places like Las Vegas and Washington D.C. The old adage, "by low, sell high," certainly applies here! We are still in the trough of the boom and bust cycle and now is the time to buy.

Difference between Fannie Mae and Freddie Mac

A client asked me yesterday what the difference between Fannie Mae and Freddie Mac is. I thought the following article from http://www.bankingmyway.com provided a nice summary, please see the article below:

"A lot as been made of the role mortgage giants Fannie Mae (Stock quote: FNM) and Freddie Mac (Stock quote: FRE) have played in the current economic crisis, but many Americans have little understanding about what these two entities are and how they affect the housing market. Understanding the purpose and function of Fannie and Freddie is essential to understanding what has happened in the mortgage market.

Fannie Mae, the common name for the Federal National Mortgage Association (FNMA), and Freddie Mac, the common name for the Federal Home Loan Mortgage Corporation (FHLMC), are both congressionally authorized government-sponsored enterprises (GSEs). They are hybrids in that they are privately owned by shareholders but enjoy government backing. The U.S. Department of Housing and Urban Development (HUD) is charged with regulating both Fannie and Freddie.

The mission of Fannie and Freddie is virtually the same -- "to provide liquidity and stability to the U.S. housing and mortgage markets," according to the Fannie Mae web site, and "to provide liquidity, stability and affordability to the housing market," according to the Freddie Mac web site. They both pursue this mission buy purchasing residential mortgages that conform to certain standards from lenders. They then either hold these mortgages or use them to issue mortgage-backed securities to be traded in the capital markets. Currently, Fannie and Freddie hold or guarantee about 50% of the nation’s outstanding home mortgages.

The major difference between these two enterprises is in how and when they were created. Fannie Mae was created in 1938 during the Great Depression. Originally it was a government agency charged with making mortgages more affordable for low-income families to help improve the economy. It was made private in 1968 at which time it stopped guaranteeing government-issued mortgages. In 1970, Congress created Freddie Mac to help improve the secondary mortgage market by adding competition. Freddie has always been a privately owned company, but it still enjoys the same government backing as Fannie Mae.

Fannie and Freddie do not operate directly with consumers. Their role is to work only with lenders in the secondary market. Consequently, most homeowners do not know if Fannie or Freddie owns their home loan. A large percentage of conforming mortgages are owned by Fannie or Freddie, however.

The major problems with Fannie and Freddie started as a result of falling home prices and rising mortgage defaults. Because lenders could depend on Fannie and Freddie purchasing their mortgages, lending standards were severely relaxed. Consequently, many borrowers who could not conservatively afford mortgages received them anyway often using subprime and exotic loans. When these borrowers began to default on their mortgages, the housing market began a downward spiral. Because all of Fannie and Freddie’s assets are tied to mortgages, these two firms suffered major losses.

In September 2008, the government initiated a rescue plan to deal with Fannie and Freddie and prevent these two firms from failing. Both firms were placed into the conservatorship of the Federal Housing Finance Agency (FHFA). U.S Treasury promised capital support of up to $100 billion for each firm in exchange for $1 billion of senior preferred stock with a 10% coupon.

Recently, the administration announced the Making Homes Affordable program targeted at preventing foreclosure. This program is available for Fannie and Freddie mortgages and offers a refinancing opportunity for homeowners who owe more than 80% of their home’s current value. By refinancing at lower interest rates, monthly payments will decrease. Homeowner’s can check with their mortgage servicers or with Fannie or Freddie directly to see if they are eligible."

Investment Ideas: FHA Reverse Mortgage

FHA is now allowing seniors (62 and older) to purchase residential real estate using a reverse mortgage. Some creative people have found a way to bring in income while living at no cost. Here's how: Seniors can purchase a multifamily property (up to four units) and rent out the units that they don't live in. With no principal and interest payment to make every month, the income coming from the other units can pay for living expenses. If you would like further information regarding reverse mortgages, drop me a line!