Rates improved marginally this morning in spite of slight inflation reports (CPI up 0.3%), and positive Leading Economic Indicator reports (consumer confidence, in particular, is up for the first time in months).
The Median Home Price for the Bay Area fell almost 46% from January of 2008 to January of 2009 to $300,000. The President’s Housing Stabilization Plan is not expected to provide much relief for the Bay Area for several reasons. The Plan ostensibly will only apply to conforming loans backed by Fannie or Freddie, as we mentioned yesterday, and the Loan-to-Value must be less than 105%. Homes in the Bay Area that are under water are upside down by an average of $180,000, according to an article in this morning’s Contra Costa Times. Hence, most of the homeowners in need of relief have loan-to-values far in excess of 105%. In addition, a very large number of Bay Area homeowners have large loans not backed by Fannie and Freddie. This includes the thousands of Option ARMs from WAMU, Wachovia, Indy Mac and Countrywide. How those loans are dealt with remains to be seen, but our banking consultants believe these loans represent a potential tidal wave of foreclosures, and a major threat to the housing market overall.
In our own experience with our many hundreds of clients with OPTION ARMs, only a select few are having issues with their loans or loans amounts. The vast majority of our Option ARM clients are making their payments and are happy with how low their adjustable rates currently are. If the market can recover at all before their adjustable rates start to climb significantly, we suspect that the Option ARM problem may not be as severe as many expect.
The new $729,750 loan amounts are definitely on their way, it was announced today by the American Securitization Forum, but how the higher loan amounts will be priced remains to be seen.
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