Existing Home Sales Up, Rates Slightly Better, Down Payment Assistance Overview

Those clever FDIC/Indymac folks! They are sending out letters to their HELOC borrowers, saying, “IndyMac Federal Bank will be selling your home equity line of credit to a third party within the next 90 days.” (Who? We’d all like to know!) “To help facilitate this transaction, IMFB is willing to pay the greater of $500 or 2% on your outstanding unpaid balance as of the date of this letter if you pay off and close your account.” A cynic would suggest that rather than sell someone’s HELOC for 30 cents on the dollar, they’ll pay a borrower $500 smackers and be done with it. Nice! Maybe I should let them handle my credit card bills…

Down Payment Assistance Programs for FHA Loans
The Housing and Economic Recovery Act of 2008 eliminates seller-funded DAPs as an acceptable source of funds for FHA loans. It applies to funds provided by nonprofit organizations, government agencies, and Indian tribes, and others: the seller, any person or entity who financially benefits from the transaction, any party that is directly or indirectly reimbursed by a seller who financially benefits from the transaction, etc. I have not seen any exception to investors saying that any DAP loans must fund by the end of September, with no exceptions. Two options to seller-funded DAPs remain available. The first is down payment assistance programs that do not require a seller contribution (HUD will continue to allow DAPs offered by state/county municipalities and non-profit organizations not requiring a donation or contribution for use with FHA financing). The second is gifts: HUD will continue to allow individual gifts. Whether or not investors allow these is open to debate – one should check with that particular investor.

Wachovia Closing Commercial
Wachovia is rumored to be formally announcing the closure of their small balance commercial department (this includes multifamily). They will still be doing $5+ million deals under Fannie/Freddie guidelines, but they are no longer accepting apps, and no extensions on existing commercial deals.

Accredited Closing Wholesale
Brokers selling to Accredited? “Accredited Home Lenders will be ceasing the acceptance of new locks on all wholesale current product line until further notice. We will honor existing approved loans and accept rate locks for such approved floating loans with an upfront 1% lock fee due at time of rate lock. All unapproved floating loans will be withdrawn. If 1% lock fee is not received by 8/28, the loan will be withdrawn.”

Market Overview
The week before the Labor Day weekend is typically quiet. Looking back to last Friday, Bernanke’s speech focused on how to avoid future financial crises, recommendations on strengthening the financial sector’s policies, and broadening the scope of oversight. Basically more government is needed, not less, to get the credit markets working again. He had no major implications for monetary policy in the near term, so the market was happy and rates actually improved slightly. The “encouraging” recent decline in commodity prices has probably increased the FOMC’s comfort level, though Bernanke acknowledges the difficulty of forecasting commodity prices, suggesting that they will be cautious of putting too much weight on moves in either direction. The Federal Reserve’s annual retreat this weekend did not yield much, and there was little agreement on much aside from the crisis is not over, and there will be continued turmoil in housing and banking.

This morning we had Existing Home Sales: it rose in July to a 5 million-unit annual rate, according to the National Association of Realtors. Prices dipped and the inventory of homes hit a record high. The inventory of homes for sale rose to a record 4.67 million homes (that’s a lot!) which equals a 11.2 months’ supply at the current sales pace, matching a record set in April, and the median national home price was -7.1% from a year ago. Tomorrow we have New Home Sales & Consumer Confidence, Wednesday we’ll see Durable Goods at 5:30AM PST, Thursday Jobless Claims & GDP, and on Friday Personal Income and Consumption, the Chicago PMI, and the University of Michigan Consumer Sentiment survey. And if all that wasn’t enough, the Treasury will be selling $52 billion of 2-yr and 5-yr notes. With that in mind we start off the week with the 10-yr yielding 3.79% and mortgage prices about .125 better than Friday afternoon.

JOKE OF THE DAY
A woman walked into the kitchen to find her husband stalking around with a fly swatter.
“What are you doing?” she asked.
“Hunting flies,” he responded.
“Oh. Killed any?” she asked.
“Yep, 3 males and 2 females,” he replied.
Intrigued, she asked. “How can you tell them apart?”
He responded, “3 were on a beer can, 2 were on the phone.”