How Will it effect us ? If you are a tax payer it is good possibility that Fed will have to bail them out meaning either tax payers pays for it or the federal debt is increased and the buck is passed on to future generation. If you are the future homeowner or planning to refinance then you might have to pay a higher interest rate. Both Fannie and Freddie are paying higher yields to get the new money because investors are loosing confidence in them. Eventually they will have to pass the cost to the consumer.

Either way it is a no win situation for an ordinary citizen. He will pay for it unless the housing crisis are resolved quickly.

Eligibility Rules:

• The tax credit is available for first-time home buyers only.
• The maximum credit amount is $7,500 or 10% of the purchase price.
• The credit is available for homes purchased on or after April 9, 2008 and before July 1,2009.
• If you own a home now you are not eligible. If you sold your home more than 3 years ago and rent now you are eligible.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

Example 1:Assume that a married couple has a modified adjusted gross income of $160,00. The applicable phase out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0 the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.

Example 2:Assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.

Payback:Unlike other credits this must be paid back over period of 15 years. Starting from second tax year after the purchase and continuing upto 15 years, taxpayers are expected to pay back. Assuming you have taken full $7,500 tax credit over 15 years payback the cost will be $500 a year. In a way it is an interest free loan.

The Foreclosed or Bank Repo Signs

• What’s in the Bill 

Major provisions of the housing bill, which is designed to help homeowners stay out o foreclosure and keep mortgage giants Fannie Ma and Freddie Mac afloat:

Foreclosure avoidance

Will help an estimate 400,000 homeowners avoid foreclosure by refinancing into 30-year fixed rate loans backed by the FHA. To qualify, borrowers would have to be spending more than 31% of their monthly incomes on the mortgages and living in the homes. Borrowers would also to share any profit with the government if they later sell the homes. Any lender would have to write down loan principal. Will insure up to $300 billion in mortgages; program starts Oct.1 and ends Sept. 30, 2011.

Aid for buyers

First-time buyers are offered refundable tax credits of up to $7,500 for homes bought between April9, 2008, and April 1, 2009.

Counseling

Provides $180 million for financial counseling for homeowners facing foreclosure.

Loan limit

FHA loan limit is raised in high-cost areas from 95% to 115% of area median home price, up to $625,500

Neighborhood help

provides $4 billion in grants for buying and renovating foreclosed properties in hardest-hit areas.

New Manager

A new independent regulator is established for Fannie Mae and Freddie Mac and  federal home loan banks to strengthen their oversight.

More Credit

The Treasury Department is authorized to increase its credit line for Fannie Mae and Fredie Mac and buy stakes in them, if needed.

Higher debt

Raises federal debt limit from 9.8 trillion to $10.6 trillion.

Sources: U.S. Senate and House, Associated Press, Reuters

Financial Title Co. shuts down in California

San Francisco Business Times - by Sharon Simonson

Financial Title Co. has shut its doors across the state as part of a closure of multiple offices and title companies by its parent, Mercury Cos. of

Per E.P.A. and Nuclear Regulatory Commission average person is subjected to 360 millirem (a measure of energy absorbed by the body). A limit of 100 millirem additional radiation is allowed for people living near nuclear reactors. Additional amount of radiation you will get from granite counter depends upon how much time you spend near them. It may vary from household to household or person to person within household. Some granite counter-top may emit fraction of millirem per hour.

Where to Finsd Tests and Testers

To find the source of the radiation or radon you can contact American Association of Radon Scientist and Technologists (aarst.org). Testing costs between $100 to $300.

Information on certified technicians ans do-it-yourself radon testing kits is available from the EPA (epa.gov/radon) as well as from state or regional offices which can be found at  epa.gov/iaq/whereyoulive.html. kits test for radon only (Not Radiation) cost $20 to $30. They can be found at hardware stores and online.

On Sunday, Secretary of the Treasury Hank Paulson released a plan to save Fannie and Freddie, or the government sponsored entities (GSEs) .  He released a three prong plan:

1) As a liquidity backstop, the plan includes an 18 month temporary increase in Treasury’s existing authority to make credit available for the GSEs.

2) To ensure the GSEs have access to sufficient capital to continue to fulfill their mission, the plan gives Treasury an 18-month temporary authority to purchase – only if necessary – equity(shares in the stock market) in either of the two GSEs.

3) To help protect the financial system from future systemic risk, the plan adds further regulatory reform by providing the Federal Reserve authority to access information and perform a consultative role as a regulator for setting capital requirements and other prudent standards.

What does this plan mean for Fannie and Freddie?

Many analysts believe this move by the Federal government will save the GSEs from going bankrupt.  The debt of Fannie Mae and Freddie Mae are held by institutions and governments all over the world.  For the institutions to go bankrupt would be extremely devistating to the world economy and to the reputation of the United States.  Although the institutions won’t go bankrupt, the stocks of the two GSEs could eventually be left worthless in attempts to save them.

An interesting facet of this plan is that Treasury Secretary Hank Paulson is asking Congress for an unlimited credit line the Treasury can extend to the GSEs.  This has brought opposition to the plan from both Democrats and Republicans.  Many Congressman fear this unlimited credit line could put taxpayers on the line for billions.  Paulson believes if an amount is specified, then investors will bet against the GSEs and force the government to use that money.  Paulson made the analogy: If you carry a water pistol, you are going to have to use it.  If you carry a bazooka, chances are you won’t be challenged and forced to use it.

While Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke believe the GSEs are well-capitalized and will survive, the fact is that if opposition to this plan holds and the GSEs go bankrupt, there can be significant damage to the economy and system.
What does this mean for you?

If the GSEs don’t receive some kind of bailout, they could very well go bankrupt in a worst case scenario.  While they state they don’t need to raise money, the concern that they are under-capitalized is very real.  With the prospect of bankruptcy, it may be very hard to raise more money.  In a world where Fannie and Freddie go bankrupt, mortgage rates will go up about 1-2% from what is currently offered.  Moreover, there could be many more bank failures that arise.

While there may come a day where Freddie Mae and Fannie Mac no longer exist, letting them go bankrupt in this environment is not the solution.  Fannie and Freddie are crucial to the structure of the financial system and real estate markets.

The upward trend in mortgage application volume could continue if mortgage rates fall as they did last week (ending July 3), reversing a three-week rise, according to Freddie Mac’s weekly mortgage rate survey. The easing was due in part to economists’expectations that inflation will moderate later this year.

Employers cut payrolls by 62,000 in June, the sixth straight month of nationwide job losses, about what analysts expected, the Labor Department said July 3. So far this year, the economy has lost 438,000 jobs, an average of 73,000 a month. The unemployment rate held steady at 5.5%.

The Labor Department also reported that the number of new applicants filing for jobless benefits reached 404,000 for the week ending June 28, an increase of 16,000 from the previous week. Economists had expected initial jobless claims to total  385,000.

Those working saw average hourly earnings rise to $18.01 in June, a 0.3% increase from May, in line with economists forecasts.

The institute for Supply Management (ISM) reported on July 1 that its manufacturing  index came in at 50.2, a suprising expansion for the first time in five months. A reading above 50 indicates growth.

The ISM services sector index, which provides a snapshot of the U.S. service economy, slipped to 48.2 in June from 51.7 in May. A reading below 50 signals contraction. Economists had predicted a reading of 51.0. Weighing on the index were higher oil prices that curtail consumer spending everywhere from the local coffee shop to the neighborhood mall.

Due out July 11 is the Commerce Department’s report on the nation’s international trade balance.

Economic data compiled from government reports and news services Bloomberg.com, msnbc.com, cnbc.com, cnn.money.com, and Yahoo Economic Calender.

Sales of new homes dropped 2.5% in May to a seasonally adjusted rate of 512,000 units, the Commerce Department reported June 25. The median price of a new home slipped off 5.7% from a year ago.

Mortgage application volume fell 9.3% for the week ending June 20, according to the Mortgage Bankers Associations weekly application survey. Refinances were down 12.1% and purchase volume declined 7.4%.

Neither home sales nor application volume got much help from rates on 30-year mortgages, which rose to their highest level in nine months; Freddie Mac said June 26.

At the conclusion of its Federal Open Market Committee on June 25, the Fed left its benchmark Fed funds rate at 2%. Thats the rate at which banks loan short term funds to one another.

The Commerce Department said June 26 that the nations first-quarter gross domestic product or GDP, which measures the value of all goods and services produced in the United States, came down at 1%, slightly better than the government’s previous 0.9% estimate. Although sub par, the growth was better that the feeble 0.6% pace marking the final quarter of 2007.

Due out July 3 is the Labor Department’s employment’s employment report for June.

Economic data compiled from Government reports and news services Bloomberg.com, msnbc.com, cnbc.com, cnn.money.com, and Yahoo Economic Calendar. 

The Producer Price Index (PPI), which measures the cost of goods before they reach store shelves, rose 1.4% in May, the biggest increase since November, the Labor Department said June 17. However, core PPI, which strips out energy and food prices, increased 0.2% in May, an improvement from a 0.4% rise in April.

Housing starts slumped 3.3% in May to an annual pace of 975,000 units, a level not seen since March 1991, the Commerce Department reported June 17. Although May housing starts were down 25% in the Midwest, 10.3% in the West and 4.4% in the South, the Northwest saw a 61.5%  jump, led by a rebound in multifamily projects. Meanwhile, building permits in May fell to an annual rate of 969,000, slightly better than the 960,000 rate that economists expected.

Pressured by rising mortgage rates, mortgage application volume fell 8.7% for the week ending June 13, the Mortgage Bankers Association reported. For the week ending June 18, Freddie Mac said rates on 30-year mortgages continued climbing, reaching their highest level in nine months, reflecting more concerns about what the Federal Reserve will do to combat a growing inflation threat.

The number of newly laid-off workers seeking unemployment benefits for the week ending June 13 fell by 5,000 to 381,000, the Labor Department  reported June 19. The biggest increases for jobless benefits came from California (10,7 and Florida (6,164).

Economic news due out this week includes reports on new home sales on June 25 and existing home sales on June 26.

Economic data compiled from government reports and news services Bloomberg.com, msnbc.com, cnbc.com, cnn.money.com, and Yahoo Economic Calendar.

Buying or Re-Financing a home can be a confusing task if you are not familiar with the different types of loans that are available. Different types of loan suit different types of borrowers. One type of loan may be a good option for one borrower and a bad option for another.

First you should be familiar with the different kinds of loan programs.

• Fixed Rate Mortgage: The traditional fixed rate mortgage is the most common type of loan programs, where monthly principal and interest payments never change during the life of the loan.
• Adjustable Rate Mortgage (ARM): Adjustable rate mortgages (ARMS) are loans who’s interest rate can vary during the loans term. These loans usually have a fixed interest rate for an initial period of time and then can adjust based on current market conditions.
• Hybrid ARMs (3/1 ARM, 5/1 ARM, 7/1 ARM, 10/1 ARM): Hybrid ARM mortgages , also called fixed-period ARMs , combine features of both fixed rate and adjustable rate mortgages.
• Interest Only Mortgages: A mortgage is called “interest only” when it’s monthly payment does not include the repayment or principal for a certain period of time.
• Components of an ARM: To understand an ARM, you must have a working knowledge of it’s components.
• Commonly used indexes for ARMs: There is a list of the most commonly used indexes by ARM lenders.
• Balloon Mortgages: Balloon mortgages have a note rate that is fixed for an initial period of time, and then the remaining principal is due at the end of the term.
• Reverse mortgage: is a type of home equity loan that allows you to convert cash while you retain home ownership.
• Graduated Payment Mortgage: is a loan where the payment graduates (increases annually for a predetermined  period (e.g. five or ten years) and then becomes fixed for the duration of the loan.

 What kind of loan program is best for you?

 So what kind of mortgage is best for you ? Fixed rate ? Adjustable rate ? Government loans ? The truth is there is no one correct answer. It all depends on the borrower’s situation.

If you plan to remain in the home for a short time, an adjustable rate mortgage is less risky than if you plan to stay in the home for many years.

Make sure you understand the maximum amount that your mortgage can increase in any single adjustment period and over the life of a loan.

Be sure to ask if loan is convertible and what the cost is.

As you shop around for mortgage make sure you understand all the costs associated with it. A higher cost should equal a lower rate.

APR includes the interest plus points, broker’s fee and credit charges you may have to pay as part of yearly dates.

In a nutshell, the best mortgage will have the lowest total costs (including mortgage plus cost to acquire the loan) for the time you plan to own your home. If you plan to live in the home only 5 years then 5 yr Hybrid ARM may be a better option than 30 yr fixed Rate mortgage provided the total costs are lower in 5 years, Hybrid ARM.