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

Effort designed to encourage principal write-downs for responsible borrowers 

WASHINGTON - In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain 'underwater' non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth - or 'underwater' - because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.

"We're throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined," said FHA Commissioner David H. Stevens. "This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product."

Today, FHA published a mortgagee letter to provide guidance to lenders on how to implement this new enhancement. Participation in FHA's refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner's primary residence. And the borrower's existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower's combined loan-to-value ratio to no greater than 115%.

In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal.

To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.

Over the past week, Congress has taken quick action and passed H.R. 5981. The bill gives FHA the authority to adjust its annual mortgage insurance premium, yielding approximately $300 million per month in value to the FHA Mutual Mortgage Insurance Fund at a time when its reserves are perilously low.

As I have previously stated in my testimony before Congress, FHA will lower its upfront premium simultaneously with the increase to the annual premium¹. It is our intention that effective on September 7, 2010, FHA's upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years². A Mortgagee Letter will be forthcoming once President Obama signs the bill into law, but with today's passage of H.R. 5981 and our expedited implementation schedule, I wanted to immediately inform the industry of our plans so the lending community can begin preparing for the operational and system changes required to implement FHA's new mortgage insurance premium structure on all new case numbers by September 7, 2010.

With this authority, FHA is in a better position to address the increased demands of the marketplace and return the MMI fund to congressionally mandated levels without disruption to the housing market.

While we appreciate and applaud this recent action, there is still work to be done. HUD remains steadfast in its commitment to comprehensive FHA reform legislation, similar to the FHA Reform Act passed earlier this year by the House, which would further enhance FHA's lender enforcement capabilities and risk management efforts. We hope Congress will take swift action to pass a broader FHA reform bill when they return from the August recess. FHA's risk management efforts will not be complete without the ability to monitor lender performance and ensure compliance with our rules.

Although the transition timeframe is short, implementation by September is critical. Thank you in advance for the efforts of you and your organization to make this change happen on such short notice. We appreciate your hard work and continued partnership.

¹The upfront and annual premium changes do not apply to the following FHA Programs: Title I, HECM, HOPE for Homeowners (H4H), Section 247 (Hawaiian Homelands), Section 248 (Indian Reservations), Section 223 (e) (declining neighborhoods), Section 238(c) (Military Impact areas in Georgia and New York).

² LTV's <= 95% will increase to 85bps and LTV > 95% will increase to 90 bps

The Home Affordable Foreclosure Alternatives (HAFA) Program provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.

In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage. Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer - provided title is free and clear of mortgages, liens and encumbrances. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation.

• Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents, and timeframes/deadlines.
• Provides the following financial incentives:
  • $3,000 for borrower relocation assistance;
  • $1,500 for servicers to cover administrative and processing costs;
  • Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.
• Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

There are also specific forms that must be used with HAFA...

• Home Affordable Modification Program - designed to enable borrowers that meet eligibility requirements to avoid foreclosure by modifying loans to a level that is affordable for borrowers and sustainable for the long-term.
• Second Lien Modification Program - designed to enable borrowers struggling with their mortgage to lower payments on second mortgages.
• Home Affordable Foreclosure Alternatives Program - provides borrowers that do not qualify for a HAMP modification with options to avoid foreclosure through a short sale or deed-in-lieu.
• Treasury FHA-HAMP - designed to enable borrowers with FHA-insured first lien mortgage loans, that are modified under FHA-HAMP, eligible for certain incentive payments under HAMP.

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

This week our industry lobby group met with staff for the Housing subcommittee in Congress to discuss our concerns regarding the Rural Housing guarantee program, and the imminent shortfall in funding authority. This follows up our letter to Congress of last week.

Here are the key points:

1. Members of the Committee understand the issue and want to resolve it.
2. There is no support for a supplemental appropriation -- (i.e. additional spending bill). Congress is "spent out", and there simply is no major spending bill on the horizon to which an RHS amendment might be added.
3. The Committee appears open to a resolution in which the guarantee fee would be raised -- perhaps to 3.5% from the current 2%. While this would add costs, the advantage would be that it would allow the program to operate self sufficiently without having to go back to Congress again.
4. The sudden increase in the use of the RHS program is drawing scrutiny, including concerns by the administration about the zero down-payment feature of the program. There is concern that RHS is becoming a backdoor way to get around FHA in some areas. While this does not mean the administration would oppose self funding for the program, they may want to tie it to new program restrictions.

Real Estate professionals' feedback and reaction to the prospect of an increase in the guarantee fee, as well as any other comments you may have are very welcome and encouraged. Please respond to this blog post below.

December 15, 2009 (The Bookings Institute) - Nationwide, the recession is technically over. Or at least that is the view of most economists. They note that real U.S. gross domestic product (GDP) finally expanded in the third quarter of 2009, growing at a 2.8 percent annual rate after four consecutive quarters of contraction. They point to a significant slowing of job losses in November, rising housing prices, and a slight downtick in unemployment as other positive signs. Their conclusion: Economic recovery is at last underway.

And yet, the pace of renewal seems tentative and its geography patchy. Most notably, the aggregate national story of recovery and expansion overlooks the fact that just as the American economy varies from region to region, and metropolitan area to metropolitan area, so does the recovery.

Consider, for example, the economic landscape of the Intermountain West and its metros, as depicted in this inaugural edition of the Mountain Monitor-a companion product to Brookings' national MetroMonitor and a production of the new Brookings Mountain West initiative, a partnership between Brookings and the University of Nevada at Las Vegas.

Drawing on data covering the third quarter of 2009 (ending in September), the new Monitor documents that no multistate region has been hit harder by the last year's economic crisis than the six-state Intermountain zone.

Across the region, the deflation of a massive housing "bubble," widespread job losses, and the onset of a significant public-sector fiscal crisis have wreaked havoc on many communities. In many Intermountain region locations, the sheer abruptness of the shift from hyper-growth early in the decade to a severe contraction in the last year has spawned a sense of almost existential whiplash.

As the findings below highlight, even within the region the effects of the recession and recovery have not been uniformly felt. Phoenix, Boise, and Las Vegas, for example, remained three of the most troubled metropolitan areas in the entire nation in the third quarter, with all residing in the weakest quintile of metros on a combined measure of overall economic performance. Still, metros like Colorado Springs, Albuquerque, and Denver have only been moderately affected by the recession and seem poised to renew their upward trajectory as the pace of recovery quickens. The upshot: While the Intermountain West is an increasingly distinct region in national affairs, it remains disparate-a still-loosely linked network of individual metropolitan economies, some of which remain mired in recession and many of which are clearly recovering.

Which is the point of the Mountain Monitor. Designed to serve as a barometer of the health of the Intermountain West's metropolitan economies, this Western monitor looks beneath the single account of the national statistics to draw into clear light the diverse metropolitan landscape of America's New Heartland as originally highlighted in the Brookings report "Mountain Megas." In this fashion, the Mountain Monitor aims to distinguish the particular contours of the Great Recession and its aftermath in the Mountain region from those elsewhere, and so contribute to the region's growing self-understanding.

To that end, we examine data on employment, unemployment, output, home prices, and foreclosure rates for the region's 10 large metropolitan areas, the nation's 100 largest metros, and 17 smaller metros dispersed around the Intermountain region. This exercise finds that:

• In aggregate, the 10 large Intermountain West metros have suffered disproportionately in the Great Recession compared to the rest of the country and other large metros. Average percentage job loss for the region's metro areas ran to 7.0 percent from pre-recession employment peaks through the third quarter of 2009, as compared to just 4.3 percent for the largest 100 metros across the nation. Gross metropolitan product (GMP) has also declined more among Mountain West large metros than in the typical large metro, while home prices have also slid inordinately. On that front, the average real price of a home in the 10 large metros of the Intermountain region declined by 8.5 percent between the third quarters of 2008 and 2009, compared to the 3 percent average decline registered in the 100 largest metros nationwide. Put it all together, and the region is struggling more than most in terms of job loss, loss of output, and declines in housing prices. Despite that, the aggregate unemployment rate across the 10 big Mountain metros remained a percentage point lower than that across the largest 100 metros nationally and has not increased as much during the recession.

• In terms of recovery, the region also lags but is largely moving in the same direction as the rest of the country in that GMP rose from the second quarter to the third in every metro, though job growth remains elusive. GMP expanded during the third quarter in every metro, with output growth ranging from Denver's tepid 0.3 percent increase to Ogden's robust 1.7 percent growth. However, employment growth has yet to materialize in the region. Not one of the largest 10 metros in the region posted employment gains in the quarter (only 13 major metros did nationally), and in fact job losses proceeded twice as fast as the national average. Ogden and Phoenix, for example, were hit especially hard with new job losses of over 1.5 percent in the quarter, and for their part, metropolitan Salt Lake City, Las Vegas, and Boise each saw employment slide by another point. With that said, nine of the 10 larger Mountain metros (Ogden was the exception) were losing jobs at a slower rate in September than they had been in the quarter before. In short, recovery seemed on its way in September but had not fully begun.

• Overall the major metros of the Intermountain West have been registering highly uneven economic performance even as the nation began an economic recovery. Las Vegas, Boise, and Phoenix have all seen massive job losses and contend with the highest unemployment rates in the region, languishing among the bottom quintile among large U.S. metros in terms of overall performance during the recession. On the more fortunate side, Colorado Springs and Denver escaped a collapse in housing prices and have seen only modest increases in unemployment. Albuquerque has maintained its pre-recession level of output and has lost a smaller share of its jobs than most metros. Colorado Springs and Ogden, UT, have also weathered the downturn better than the average U.S. metro.

• Heavily influencing the region's below-average aggregate profile on economic performance is the severe distress afflicting Las Vegas, Phoenix, and Boise-three metros that have been heavily hit by the collapse of the housing bubble. These westernmost large metros in the region remain three of the most severely distressed metros in the nation, and they inordinately define the region's recession landscape. Each of these metros has been devastated by the bursting of the housing bubble inflated by years of easy credit and a proliferation of exotic and usually subprime mortgages. Without these locales' acute distress, the region would still look hard-hit on employment loss, but it would appear rather typical on GMP and housing price declines, and it would actually look better than average on foreclosures. Construction and real estate industry concentration tells the story. Specifically, the share of employment in the main construction industries and real estate ran to 13.4 percent of all non-farm jobs in Las Vegas in 2006, and 12.8 percent for both Phoenix and Boise. By comparison, the average for large metros around the country on this remained just 8.0 percent, and it was 10 percent for the other Intermountain West metros.

• More broadly, metropolitan education levels and concentration in such industries as health services and related social services seem to have protected some metros from the worst economic stress. Most notably, those metros with a more educated workforce-such as Denver and Colorado Springs-have weathered the recession significantly better than other Mountain metros on almost every measure. High concentrations in health and social related services have also protected areas against economic decline on a variety of measures, with Albuquerque and Tucson being indicative. These findings underscore the critical roles human capital levels and sectoral composition play in regional economic performance.

• House prices have not yet stabilized in the Intermountain West, and the region's aggregate rate of bank owned properties remains high, although it is highly concentrated in Las Vegas and Phoenix. To be specific, only metropolitan Denver and Colorado Springs among the 10 large Mountain West metros had registered slim year-over-year home price increases by the end of the third quarter, while in September the incidence of real estate-owned (REO) properties remained disturbingly high. On this front, the region's aggregate large-metro REO rate (measured in REO properties per 1,000 mortgageable properties) of 8.15 nearly doubled the large-metro rate nationally. However, it bears noting that that showing was largely driven by the difficulties of Las Vegas and Phoenix, where the REO rates continued their upward trend-albeit at a slower rate-to 17.40 and 12.19 REOs per 1000 properties, respectively, in the third quarter while elsewhere the variation was on a more moderate plane.

• Patterns of recession and recovery among the smaller metropolitan areas of the region, finally, generally track with those engulfing their larger neighbors. Job losses and output declines were at once varied and inordinately severe in some of the West's smaller places, and unemployment rates continued to trend upwards. On the one hand, employment and output were off their pre-recession peak only modestly in the third quarter in places like Fort Collins, CO or Las Cruces, Farmington, and Santa Fe in New Mexico, but these indicators were hugely diminished in places like Lake Havasu-Kingman, AZ; St. George, UT; and Reno-Sparks, NV as these metros contended with double-digit losses on multiple indictors. Here as elsewhere, variations in industry composition and educational attainment are significantly affecting local performance. Smaller metros that have avoided the worst dislocations of the Great Recession-such as Las Cruces, Santa Fe, or Fort Collins-have frequently benefited from high industry concentrations in sectors like medical services, nursing care, and social assistance, or the arts, as well as high educational attainment. By contrast, the hardest hit metros have frequently been those most heavily specialized on real estate, construction, and the building trades (Reno, Prescott, and St. George) or those with low educational attainment (Lake Havasu, Yuma).

In sum, the arrival of widespread output growth among the metropolitan areas of the Intermountain West in the third quarter of 2009 reflected the arrival in the region of the nascent national recovery. However, the strength and durability of the nascent recovery remain uncertain. Quarterly job gains have yet to materialize, and large inventories of foreclosed homes and vast differences in performance levels (not to mention a major slump in household consumption and interstate migration) weigh heavily on the region's resilience.

These difficulties are going to require patience and creativity and also require that careful attention be paid in Washington-as Congress and the Obama administration consider new proposals to improve the nation's dismal jobs picture-to the particular stamp of the recession in the metropolitan areas of the Mountain West.

Link to story (click here)

Dec. 16 (Bloomberg) -- Housing starts in the U.S. rose in November and a gauge of consumer prices was unchanged, supporting forecasts for an economic recovery that will generate little inflation.

Builders broke ground on 574,000 homes at an annual rate in November, an 8.9 percent increase from the prior month, the Commerce Department said in Washington. A Labor Department report showed consumer prices excluding food and energy were unchanged, compared with a median forecast for a 0.1 percent increase in a Bloomberg News survey of 79 economists.

Permits for future construction climbed to the highest level in a year, signaling builders expect sales to rise as homebuyers are lured by lower prices, tax credits and mortgage rates near record lows. Federal Reserve policy makers meeting today may indicate the recovery is gaining strength while repeating a pledge to keep the benchmark interest rate almost at zero for an "extended period" to push down an unemployment rate that's forecast to exceed 10 percent through June.

"The housing market is stabilizing at very low levels, which of course is better than plunging," said Harm Bandholz, an economist at UniCredit Research in New York who correctly forecast no change in the so-called core consumer-price index. "The Fed will be a little more upbeat about the economy, but core inflation will continue to trend lower. The Fed does not want mortgage rates to rise right now or in the near future."

The Standard & Poor's 500 Index was up 0.7 percent to 1,115.11 at 11:10 a.m. in New York. The S&P's Supercomposite Homebuilding Index rose 3 percent to 237.51.

Projected Gain

Housing starts matched the median estimate of 78 economists surveyed by Bloomberg News and followed a 10 percent drop the prior month. The government revised October's reading down to a 527,000 pace from the 529,000 previously estimated.

Building permits increased to a 584,000 pace, the highest level since November 2008, from 551,000 the prior month. Permits were forecast to rise to 570,000.

Toll Brothers Inc., the largest U.S. luxury homebuilder which reported a 42 percent surge in fiscal fourth-quarter orders, is anticipating a gradual recovery in the market, said Chief Executive Officer Robert Toll during a Bloomberg Television interview on Dec. 11.

"There is a pretty good reservoir of pent-up demand," he said in New York City. "We don't know how fast we're coming back, but we do know we're coming back."

Weather Factor

Favorable weather may have played a role in boosting construction last month, said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. November was the third warmest in 115 years of record keeping, according to the National Climatic Data Center, giving builders an opportunity to keep working. By contrast, October was the wettest in the past century.

President Barack Obama's extension last month of a first- time homebuyers' tax credit of as much as $8,000 until April 30 will also give builders reason to speed up projects over the next couple of months.

Any sustained recovery will require gains in employment, economists said. The economy has lost 7.2 million jobs since the recession began, and economists surveyed by Bloomberg early this month forecast joblessness will average 10 percent next year.

Fed Chairman Ben S. Bernanke, in comments Dec. 7 at the Economic Club of Washington, listed a weak labor market and tight credit as among the "formidable headwinds" that he said would probably "keep the pace of expansion moderate." The Fed's decision on interest rates is due today at about 2:15 p.m. New York time.

Shelter, Clothing

The so-called core consumer price index that excludes food and energy showed no increase last month for the first time this year, restrained by a drop in rents and cheaper clothing.

Overall, consumer prices rose 0.4 percent, matching economists' forecasts and up from a 0.3 percent gain in October, today's Labor Department report showed.

Compared with a year earlier, consumer prices were up 1.8 percent. Core prices rose 1.7 percent from November 2008, matching the year-over-year gain in October.

After rising 4.1 percent in November, fuel costs have retreated so far this month, and comments from companies such as Best Buy Co. indicate unemployment close to a 26-year high is prompting retailers to discount merchandise.

Computer Discounts

Best Buy, the largest electronics retailer, said yesterday that its fourth-quarter gross profit rate will be lower than anticipated because of discounted laptop computers and $299.99 flat-screen TVs to attract customers.

Construction of single-family houses, which accounted for 84 percent of the industry last month, increased 2.1 percent to a 482,000 rate. Work on multifamily homes, such as townhouses and apartment buildings, jumped 67 percent to an annual rate of 92,000.

All four regions showed a gain in starts in November, led by a 16 percent increase in the Northeast.

A separate Commerce Department report today showed the U.S. current-account deficit widened to $108 billion in the third quarter from a seven-year low of $98 billion in the previous three months, reflecting a larger shortfall in trade as imports rose faster than exports.

Last Updated: December 16, 2009 11:18 EST

First-time home buyers reached the highest market share on record during the past year, according to the latest consumer survey of home buyers and sellers. The study was released here today at the 2009 REALTORS® Conference & Expo.

The 2009 National Association of Realtors® Profile of Home Buyers and Sellers is the latest in a series of large national NAR surveys evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers. Among national surveys, NAR's Profile of Home Buyers and Sellers is unprecedented in size and scope.

Paul Bishop, NAR vice president of research, said several factors have been at play. "Tax incentives, record high affordability conditions and a pent-up demand brought a record share of first-time home buyers into the market," he said. "These buyers are critical to housing and a general economic recovery because the market always heals from the bottom up - they absorb inventory, free existing owners to make a trade and stimulate related goods and services."
The number of first-time home buyers rose to 47 percent of all home sales from 41 percent of transactions in last year's study, and was the highest on record dating back to 1981. The previous high was 44 percent in 1991. "It's interesting to note the last cyclical peak of first-time home buyers was during the last noteworthy economic downturn, with first-time buyers starting the chain reaction that led the nation out of recession," Bishop said.

Aided by the home buyer tax credit, the outlook for housing and the economy appears headed for a sustainable recovery, according to the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said the projections are enhanced by a tax credit expansion to more home buyers through the middle of 2010. "Given the success of the first-time buyer tax credit to date, and the need for qualified buyers to continue to absorb inventory that will include additional foreclosures over the coming year, we are hopeful about the impact of the expanded tax credit because it will stabilize home prices," he said. "In fact, the credit is working better than first projected - it now looks like we'll have 2.3 to 2.4 million first-time buyers this year."
A large consumer study being released later today, the 2009 National Association of Realtors® Profile of Home Buyers and Sellers, shows first-time buyers accounted for a record 47 percent share of home sales over the past year, up from 41 percent in the 2008 survey. The share has risen steadily since a cyclical low of 36 percent in 2006.
Existing-home sales are expected to total 5.01 million in 2009, a gain of 2.0 percent over last year, and then are forecast to rise 13.6 percent to 5.69 million in 2010. "A steady draw down of inventory will help home values to turn positive in 2010, but risks such as unemployment remain in the economy," Yun said.
New-home sales are projected at 397,000 this year, recovering to 549,000 in 2010. Housing starts, including multifamily units, should total 564,000 units this year but grow to 752,000 in 2010.
The 30-year fixed-rate mortgage will probably average 5.3 percent in the fourth quarter, rising gradually to 5.8 percent by the end of next year. NAR's housing affordability index will set a record in 2009, averaging 30 percentage points higher than 2008. Affordability will decline from record highs next year but will remain at historically attractive levels for home buyers.
"We've seen a steady downtrend in housing inventory for well over a year and home prices appears to be in the early stages of stabilizing. With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3 and 5 percent in 2010, but with wide geographic differences," Yun said.
He expects growth in the U.S. gross domestic product to be at a pace of 2.5 percent in the current quarter, with GDP up 2.8 percent in 2010.
The unemployment rate is close to peaking and is projected to ease to 9.5 percent by the end of next year.
"The size of the U.S. budget deficit is a concern going forward, and carries the risk of higher inflation. At this point, that risk appears to be restrained," Yun said. Inflation, as measured by the Consumer Price Index, is seen contracting 0.4 percent this year, then rising 1.6 percent in 2010. Inflation-adjusted disposable personal income is estimated to grow 0.4 percent this year and 1.2 percent next year.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Some really good news. This bill also includes a provision for move up buyers.

RISMEDIA, November 6, 2009-After the Senate gave final approval last night without a dissenting vote, the House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.

The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in the process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.

For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.

The legislation takes effect December 1 and is not retroactive. Both credits are available only for primary residences, not second homes or investment properties.

In the House debate, Speaker Nancy Pelosi (D-Calif.) took the floor to say the homebuyer tax credit was helping a new generation of Americans live out their dream of homeownership and financial independence. Debate on the homebuyer credit was overwhelmingly positive and the legislation passed 403 to 12.

However, several leading economists have voiced concern about the $16.7 billion cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales and White House support for extending the credit has been lukewarm at best. However, it is virtually certain that the President will sign the legislative package, which contains an expansion of unemployment benefits as well as the tax changes.

In the Senate, the homebuyer tax credit was amended to a bill expanding unemployment benefits by 20 weeks for those who have exhausted their benefit. The latest unemployment numbers are due out tomorrow and Congressional leaders are rushing the unemployment bill to the White House so that the President can show compassion by signing on the same day more job losses are announced.

The legislation included provisions added to address complaints of fraud. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department's Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.

The legislation also contains a provision supported by the National Association of Home Builders which will help larger companies strapped for cash with net operating losses (NOL). Ordinarily these companies can carry back these losses for only two years to qualify for a tax refund. The provision would make this process extend the carry-back to five years for either 2008 or 2009. The tax break will now apply to losses in either 2008 or 2009, and the income cap will come off.

Release Date: November 4, 2009

For immediate release

Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.