Long Beach California Real Estate Loans

Long Beach, Ca.  Well, if we could just isolate all the bad prisoners and put them in a place that has high walls, surrounded by machine guns and moats, extra guards with tear gas we just might be safe....in the current financial world and credit crisis, that high security prison would be the new, BAD BANK.   I really like that name, it sounds cool and dangerous.  And who do you think would be the CEO, Shaft? Just kidding.

President Obama may appoint the FDIC to run a "Bad Bank" which will buy the toxic assets that are clogging up bank balance sheets, in hope that it will subsequently free up lending. The FDIC would probably issue guaranteed bonds to finance the undertaking. Stocks around the world are rallying off of the news that this plan may finally be the answer in solving the credit crisis.  After all, in the early 90's the RTC was created for all of the failed Savings and Loans.  It did work then and has a strong possibility of working again.    However, George Soros seems to think it is a bad idea. "That (the "bad bank" proposal) will help relieve the situation, but it will not be sufficient to turn it around," Soros said during a live interview at the Davos economic conference in Switzerland. Instead, Soros said he would create a "good bank" and re-capitalize the good assets.  He admitted his alternative plan is not likely to get support because it too closely approaches nationalization. "The political will to do that is not there," Sorry George, remain in Europe please. 

The Fed announces their rate decision today, the market is pricing in an 100% chance that they leave rates unchanged. Right now, the futures market is pricing in an 85% chance that the Fed keeps rates somewhere between 0 and .25% until at least April 29th, 2009. Currently, the Ten Year yield is at 2.57% (2.62% yesterday) 30 year fixed rate mortgages had a great rally yesterday in the afternoon and some investors are reflecting the improvement today.   However, I know  many of you are frustrated with the government rates and price reflecting rebates.  Ginny Mae II pricing is in the tank, so stay away from government note rates that end in eighth's. 

Tomorrow morning brings us the release of December's Durable Goods Orders. This data helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years. The data often is quite volatile from month to month, but is currently expected to show a decline in orders of 2.0%. A larger than expected drop would be good news for bonds and mortgage rates.  December's New Home Sales report, the sister release to Monday's Existing Home Sales, will be posted late tomorrow morning. It is expected to show another decline in sales of new homes, but is not important enough to heavily influence mortgage pricing.

The Federal Reserve plans to reduce principal balances and make other modifications to mortgages it owns in an effort to keep the number of foreclosures from rising. The billions of dollars worth of loans come from investment bank Bear Stearns, which the Fed rescued in March, and insurance company American International Group, which the central bank took over in September. Congressional Democrats praised the plan and believe a successful program could serve as a model for other holders of mortgage loans.  An aggressive loan modification program will limit refinance activity and reduce the number of homes on the market.  Real estate markets that have a diminishing supply will help stabilize housing prices for that area.

The House Judiciary Committee has approved a bill that would allow bankruptcy judges to change the terms of a mortgage by reducing its interest rate, extending its length, or lowering the principal or loan balance. The key congressional panel okayed the legislation in a 21-15 vote, although Republicans tried to restrict its impact by offering an amendment--which ultimately failed--that would limit modifications to sub prime mortgages or other types of risky home loans. As we have said, this move is designed to put pressure on servicers to be more aggressive with loan modifications.  However, it will clearly drive up the cost of our future mortgages.

Kirk Mulhearn, a real estate broker and professional mortgage planner, can be reached at 562-989-4608 ext.110