Real Estate Home Loans in Boise Idaho, Waterstone Mortgage - Prime Equity Group: January 2010

The U.S. economy expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines, indicating the recovery may be strong enough to be weaned from government support.

The 5.7 percent increase in gross domestic product at an annual rate reported by the Commerce Department in Washington today exceeded the 4.8 percent median forecast of economists surveyed by Bloomberg News. Separate reports showed consumer sentiment and a barometer of business activity rose more than forecast in January.

The dollar rallied as the data signaled the momentum generated by the world's largest economy last quarter will carry into the new year. Rising investment in equipment and software is boosting sales at companies including Intel Corp. and may help bring the jobless rate down from close to a 26-year high as employers add staff to meet demand.

"We are getting on to something that is pretty sustainable," said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York, who correctly forecast the gain in GDP. "Both consumers and businesses are beginning to increase spending. To get validation, we need to see a return in hiring, which we think we are going to get over the next few months."

Consumer spending, which comprises about 70 percent of the economy, rose at a 2 percent pace following a 2.8 percent increase in the previous three months. Economists projected a 1.8 percent gain, according to the survey median. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades.

By Timothy R. Homan, Bloomberg.com (more)    

By Dean Tucker, Waterstone Mortgage - Prime Equity Group in Boise Idaho

It appears that starting February 1^st, 2010, HUD / FHA is going to loosen their guidelines pertaining to property flips.

THIS IS HUGE!!! According to HUD's Shaun Donovan, some of the restrictions will be temporarily lifted beginning February 1st to further promote home sales. Here are some basic guidelines we have been able to research:

• The transaction must be "Arms Length".

• The seller MUST hold title to the property at the time of the sale.

• There shall be no pattern or previous property flipping in the past 12 months.

• The property must be marketed openly and freely (i.e. MLS).

• If the home being "flipped" has a new sales price that is 20% + greater than the previous purchase price, then the seller must document any repairs and rehabilitation performed on the home and/or a 2nd appraisal will be needed and requested. (In these cases it should be expected that a home inspection will be required as well. Currently, FHA does not require home inspections OR termite / WDO inspections unless the contract calls for them. FHA only recommends the buyer order these services.)

I sincerely hope you found this update both timely and informative. If you have any questions please feel free to call Dean at 208-388-0500.

By Dean Tucker, Waterstone Mortgage - Prime Equity Group in Boise Idaho

This morning the FHA announced a series of changes designed to protect the federal agency that has emerged as the cornerstone of the mortgage market as the housing sector wobbles toward recovery. 

Consumers, Lenders and Realtors may find some of these new rules painful - but necessary.  With FHA hovering around 40% of all new loan originations, even these small changes have a major impact on the continued health of the housing market.

Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending.

• The first step will be to raise the up-front MIP from 1.75% to 2.25% and request legislative authority to increase the maximum annual (paid monthly) MIP that the FHA can charge.

• If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.

• This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing

• The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

Update the combination of FICO scores and down payments for new borrowers.

• New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

• This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.

• This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

Reduce allowable seller concessions from 6% to 3%

• The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.

• This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

We sincerely hope you found this update both timely and informative. If you have any questions please feel free to call Dean at 208-388-0500.

For the last six months I have been working on a CRM drip system that will automatically email clients and referral partners with loan status updates. I expect to turn it on this week. I'll be sure to let you know how it goes.

Dean Tucker, Waterstone Mortgage - Prime Equity Group, 2535 W State Street, Boise Idaho 83702 208-388-0500 www.fhaboise.com www.homeloanboise.com www.refinanceboise.com www.primeequity.com

Some Federal Reserve policymakers last month were conflicted over whether to expand or cut back a program intended to drive down mortgage rates and bolster the housing market, according to a document released Wednesday.

Minutes of the Fed's closed-door meeting on Dec. 15-16 revealed that a "few members" thought that the Fed's $1.25 trillion program to buy mortgage securities from Fannie Mae and Freddie Mac might need to be expanded and extended beyond its current end date of March 31. Such an additional dose of stimulus would be especially needed if the economic recovery were to weaken, they argued.

However, one member thought the program could be "scaled back" given the improvement in economic and financial conditions.

The debate over the future of the program comes amid uncertainties about the vigor of the budding economic recovery.

At the December meeting, Fed policymakers decided not to make any changes to the program. At their September meeting, they opted to slow the pace of the purchases, wrapping them up by the end of March, rather than the end of 2009.

The minutes don't identify speakers by name but seeks to provide a more detailed account of the Fed's private discussions.

Some Fed officials remained concerned about the economy's ability to mount a self-sustaining recovery once government supports are removed. To that end, those officials worried that improvements seen in the housing market might be "undercut" this year as the Fed's mortgage-buying program winds down, the government's home buyer tax credits expire at the end of April and home foreclosures grow.

Getting the housing market back on firm footing is a key ingredient to a lasting recovery. The collapse of the housing market, which dragged down home prices with it, was the catalyst for the longest and worst recession to hit the country since the 1930s.

"Generally the outlook was for gains in housing activity to continue. However, some participants still viewed the improved outlook as quite tentative and again pointed to potential sources of softness," the minutes said.

To nurture the recovery, the Fed at the December meeting kept its key bank lending rate at a record low near zero and pledged to hold it there for an "extended period." The goal: low interest rates will entice people and businesses to boost spending, which will fuel economic growth.

RATES REMAIN NEAR ZERO: Fed left rates unchanged at Dec. meeting

Economists said the Fed is all but certain to leave rates at record lows at its next meeting on Jan. 26-27 and probably for a good chunk of this year.

"Overall, there is nothing here to suggest that interest rates will rise for quite some time," Paul Ashworth, economist at Capital Economics., said of the Fed minutes. Ashworth is among the economists predicting economic growth will slow in the second half of this year as President Barack Obama's $787 billion stimulus package of tax cuts and increased government spending fades.

Most Fed officials don't currently see inflation as a problem because companies have "little ability to raise their prices" in the fragile economic environment. But they had mixed views about inflation risks.

Some noted that rising prices of oil and other commodities could boost inflation pressures down the road. Others thought investors' expectations of inflation could edge up because of large federal government budget deficits and vast sums of money the Fed pumped into the economy to fight the financial crisis.

However, others predicted that the sluggish recovery and "slack" in the economy - meaning factories operating well below capacity and the weak labor market - would keep inflation under wraps.

At the December meeting, Fed staff gave several presentations on research into "inflation dynamics."

The biggest challenge facing Fed Chairman Ben Bernanke and his colleagues is to decide when to start boosting interest rates. Moving too soon could short-circuit the recovery. Waiting too long could unleash inflation.

The Federal Reserve made a record profit of $46.1 billion last year, reflecting money made off its extraordinary efforts to rescue the U.S. from the worst economic and financial crisis since the 1930s, the central bank announced Tuesday.

The windfall gets turned over to the Treasury Department.

It marks the biggest profit on record dating back to 1914 when the Fed was created. The previous record profit - of $34.6 billion - was registered in 2007. In 2008, the Fed reported a profit of $31.7 billion.

The Fed says the bigger profit was primarily due to increased income from the securities it held last year.

Such income went up as the Fed's holdings of securities mushroomed.

The Fed launched several securities-buying programs last year to help revive the economy. Its goal is to drive down rates on mortgages and other consumer debt.

Under one program that ended last year, the Fed snapped up $300 billion worth of government debt. Under another program, the Fed is on track to buy $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac, and an additional $175 billion in debt issued by the mortgage giants. Those programs have boosted the value of securities held by the Fed.

The Fed faces a risk, however. The Fed could lose money if the central bank had to sell those securities and their prices were to fall. The Fed might need to sell the securities to sop up some of the unprecendented amount of money pumped into the economy during the crisis.

The Fed is funded from the interest earned on its vast portfolio of securities. It is not funded by Congress.

After covering its expenses, the Fed gives what is left over to the Treasury Department.