Hot off the Press

Washington, DC – The Office of Federal Housing Enterprise Oversight (OFHEO) today released the maximum conforming loan limits that will be in effect through year-end as a result of The Economic Stimulus Act of 2008. That legislation permits Fannie Mae and Freddie Mac to raise their conforming loan limits in certain high-cost areas. The new jumbo limits are a function of median home prices as estimated by the U.S. Department of Housing and Urban Development (HUD).

The maximum for temporary jumbo conforming loan limits, which apply to loans originated in the period between July 1, 2007 and December 31, 2008, are as high as $729,750 for one-unit homes in the continental United States. Two, three and four-unit homes have higher limits as well. Alaska, Hawaii, Guam and the Virgin Islands also have higher maximum limits.

There are two data sources reflecting the new maximum limits. The first, on OFHEO’s Web site, available at www.ofheo.gov/media/hpi/AREA_LIST.pdf, reports only those counties and Metropolitan Statistical Areas (MSAs) that are affected by the new loan limits. Data for all areas are available on the HUD Web site at https://entp.hud.gov/idapp/html/hicostlook.cfm.

Seventy-one Metropolitan and Micropolitan Statistical Areas are affected including 245 counties and cities not in counties. In addition, there are 21 counties outside of Metropolitan or Micropolitan areas that show increases, plus Guam and four municipalities in the Marianas Islands. The newly increased limits range from $417,500 in Greeley, Colorado to the highest of $793,750 in Honolulu, Hawaii.

In support of HUD’s calculation of county median home prices, OFHEO provided HUD rural house price indexes for 48 states. HUD used these indexes, which reflect price changes for homes outside of Metropolitan Statistical Areas, to estimate median prices in counties for which sales price data were sparse. OFHEO has made these indexes available at: /hpi_download.aspx.

FORECLOSURE ACTIVITY INCREASES 8 PERCENT IN JANUARY

Foreclosure Activity Up 57 Percent From January 2007
Bank Repossessions (REOs) Up 90 Percent Year Over Year

IRVINE, Calif. – Feb. 26, 2008 – RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its January 2008 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, auction sales notices and bank repossessions — were reported on 233,001 properties during the month, an increase of 8 percent from the previous month and an increase of nearly 57 percent from January 2007.

RealtyTrac publishes the largest and most comprehensive national database of foreclosure and bank-owned properties, with over 1 million properties from nearly 2,500 counties across the country, and is the foreclosure data provider to MSN Real Estate, Yahoo! Real Estate and The Wall Street Journal’s Real Estate Journal.

“January’s foreclosure numbers demonstrate that foreclosure activity is continuing on its upward trend, substantially increasing from a year ago in many states,” said James J. Saccacio, chief executive officer of RealtyTrac. “However, the 8 percent monthly increase in January is not as precipitous as the 19 percent spike we saw in January of 2007, and several key states actually experienced decreasing foreclosure activity from the previous month. It could be that some of the efforts on the part of lenders and the government — both at the state and federal level — are beginning to take effect. The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term or if they are just temporarily forestalling the inevitable for many beleaguered borrowers.”

Nevada, California, Florida post, top state rates. Despite a month-over-month drop in foreclosure activity, Nevada continued to document the highest foreclosure rate among the 50 states. Foreclosure filings were reported on a total of 6,087 Nevada properties during the month, a 45 percent decrease from the previous month but still a 95 percent increase from January 2007.

California’s January foreclosure rate ranked second highest among the states, and Florida’s January foreclosure rate ranked third highest. Other states with foreclosure rates ranking among the top 10 were Arizona, Colorado, Massachusetts, Georgia, Connecticut, Ohio and Michigan.

California, Florida, Texas report highest foreclosure totals
Foreclosure filings were reported on a total of 57,158 properties in California in January, the most of any state. The state’s foreclosure activity was up 7 percent from the previous month and up 120 percent from January 2007.

Despite a 3 percent month-over-month decrease in foreclosure activity, Florida’s total of 30,178 properties with at least one foreclosure filing was the nation’s second highest state total. The state’s foreclosure activity was up nearly 158 percent from January 2007.

The nation’s third highest January total was in Texas, where foreclosure filings were reported on 14,698 properties — a nearly 20 percent increase from the previous month, but a slight decrease from January 2007. The state’s monthly foreclosure rate was below the national average and ranked No. 13 among the states.

Ohio, Michigan and Georgia all documented totals of more than 10,000 properties with foreclosure filings reported in January. Other states in the top 10 in terms of total properties with foreclosure filings reported were Arizona, Massachusetts, Illinois and Colorado.

California and Florida cities dominate top metro foreclosure rates. California and Florida metro areas accounted for eight of the top 10 metro foreclosure rates in January. The Cape Coral-Fort Myers, Fla., metro area documented the highest January foreclosure rate among the 229 metro areas tracked in the report. The other Florida metro area in the top 10 was Port St. Lucie-Fort Pierce, which ranked No. 10.

The Stockton, Calif., metro area documented the second highest metro foreclosure rate. Other California metro areas in the top 10 were Riverside-San Bernardino at No. 3, Modesto at No. 4, Merced at No. 5, Vallejo-Fairfield at No. 7 and Bakersfield at No. 9.

Other cities in the top 10 were Las Vegas at No. 6 and Greeley, Colo., at No. 8.

Report methodology

The RealtyTrac Monthly U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing reported during the month — broken out by type of filing at the state and national level. Data is also available at the individual county level. RealtyTrac report incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is filed against a property during the month — which is extremely rare — only the most recent filing is counted in the report.

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U.S. Foreclosure Market Statistics by State – Jan 2008 

		Properties with Foreclosure Filings
Rate Rank	State Name	NOD
NTS	NFS	LIS	REO	Total	%HH (rate)	%Change from Dec 2007	%Change from Jan 2007
1	United States	52,321	60,101	19,662	55,590	45,327	233,001	0.187	8.00	56.98
2	California	38,148	8,482	0	0	10,528	57,158	0.440

Financial Market Overview

Bonds finished the week with a winning session on safety flows and technical support following losses at the long end of the market in the last few sessions. Stocks struggled against negative inflation and economic data but the Dow and NASDAQ managed to finish with modest losses while the S&P 500 made a nominal gain.

In late trading, the 10-Year Treasury Note was up by 11/32, lowering its yield to 3.77%; the Dow was down by 28.77 points to 12,348.21; and the Nasdaq was down by 10.74 points to 2,321.80.

The inflation pressure stemming from international trade rose more than expected in January with import prices jumping by the largest amount in over a year-and-a-half. Export prices saw their biggest leap in nineteen years.

The economic attention-grabber was an exceptionally weak manufacturing indicator from the New York Fed region. The report on industrial production indicated sluggish output growth but the news was expected.

But another surprise was provided by the preliminary Consumer Sentiment Index for the month. It came in at its lowest level since February of 1992, worrying stock traders that people may tend to postpone major purchases until their assessment of the economy improves.

Oil prices vacillated on the New York Mercantile Exchange as traders weighed the prospects of diminishing demand as the economy slows and the possibility of diminished supply due to a freeze on exports to the U.S. by Venezuela. But by the end of today's session, the price of a barrel of light crude for March delivery was up by just $0.04 to $95.50.

Yet, the price has risen in six of the last seven sessions and today's closing price was the highest for a front-month contract in over a month. High energy prices put a crimp in business and consumer spending in other areas of the economy.

Despite the negatives for stocks, by the end of trading, the Dow had slipped by only 0.23% and the Nasdaq by 0.46%. The S&P 500 edged up by 0.08%. All three made gains for the week with the Dow rising by 1.36%, the S&P 500 by 1.40%, and the Nasdaq by 0.74%. The intermediate and long end of the bond market lost ground this week with the yield of the benchmark 10-Year Note rising by 13 basis points (yield moves inversely to price). This marks a third straight weekly loss for the 10-Year Note for a cumulative increase in yield of 21 basis points.

Next week's economic calendar is light. The markets and all government offices will be closed on Monday and there are no major economic releases slated for Tuesday. But a key inflation indicator will be released on Wednesday. This is the Consumer Price Index (CPI), a gauge of price changes at the retail level. In the news release for December, the Labor Department said that the index rose that month by 0.3% following a 0.8% jump in November (the largest surge in two years).

A large but volatile contributor to December's index was the category of energy prices, the index for which rose by 0.9%. This was a large increase but the smallest in three months. Another volatile category is food and its price index rose by just 0.1% in December. Excluding the energy and food categories, the so-called core index was up by 0.2% l after a 0.3% rise in November. The increase was in-trend and in line with predictions. Moreover, of the core components, the biggest increase was in the energy-dependent transportation category. Its index rose by 0.5%.

On a year-over-year basis, the CPI was up by 4.1%. While this was better than the previous month's 4.3% increase, it was the largest December to December gain in seventeen years. But for all of 2007, the index was up over 2006 by 2.8%, the lowest increase in three years.

At the core level, the index was in December by 2.4% over the previous December -- the largest monthly Y/Y increase since last March. But for the whole year, the index was up by 2.3%, down from the 2.5% Y/Y increase between 2005 and 2006.

Most analysts predict that January's CPI numbers will show the same level of increases as December's; that is, a 0.3% overall rise and a 0.2% increase at the core level.

Also scheduled for release on Wednesday morning is the report on housing starts for last month. In December's report, the Commerce Department said the seasonally adjusted, annualized pace of new home construction fell by 14.2% to 1.006 million from November's revised rate of 1.173 million (originally reported as 1.187 million). The percentage drop was the largest in thirteen months and the pace was the lowest since May of 1991.

The decline was wide-spread with lower rates in all regions of the country. Moreover, the report suggested continued weakness in the near term as the rate of building permit issuance fell in December by 8.1% to 1.068 million. This has been subsequently revised to a drop of 7.1% to 1.080 million but it is still the lowest rate since March of 1993.

Forecasters are looking for little change in January's starts rate. Some feel it may have slipped to 1.000 million, but some feel it may have edged up slightly from December's level. The permit issuance rate is expected to have fallen once again.

On Wednesday, afternoon, the Federal Reserve will release the minutes of its last, regular monetary policy meeting (January 29 and 30). The minutes of the emergency meeting of

January 22 will also be released.

The domestic financial markets were closed on January 21st for Martin Luther King Day but recent economic data had been bearish and the stock market had fallen sharply (at that time the Dow was down by over 1,100 points since the beginning of the month). Global stock markets went into a steep dive on the 21st and were continuing to fall on the 22nd prior to the opening of the U.S. market.

These developments were thought to have motivated the Fed action. The monetary policy committee (Federal Open Market Committee or FOMC) cut its target for the short-term borrowing rate between banks (fed funds rate) by 0.75% to 3.50%. The discount rate, the interest rate charged to banks for loans directly from the Fed, was also cut by 0.75% to 4.00%.

When the regular meeting concluded on the 30th of the month, the Fed announced another round of cuts. The fed funds rate was cut by 0.50% to 3.00% and the discount rate was cut by 0.50% to 3.50%. Although the recent Fed actions have been aggressive, in light of Fed chief Ben Bernanke's congressional testimony this week, the minutes will not likely reveal much new information on the policy committee's positions.

The next regular FOMC meeting is scheduled for March 18. With Mr. Bernanke suggesting that weakness remains the dominant threat to the economy and that financial institutions will likely continue to write down large losses due to their exposure to mortgage-related holdings, most

Fed watchers are anticipating more rate cuts at the March meeting.

On Thursday, the jobless claims report will again address the employment situation. In yesterday's report, the Labor Department reported that the seasonally adjusted level of initial claims for state unemployment benefits fell by 9,000 last week to 348,000. The data series has been particularly volatile lately due to the holidays. In the last week of December and the first two weeks of January, the claims level fell by 57,000. They then rose in the next two weeks by 78,000. In the last two weeks, the level has fallen by 30,000.

Despite the recent declines, the level remained elevated. The four-week moving average, which smoothes out some of the short-term volatility, rose by 12,000 last week to 347,250, the highest reading since October of 2005. The average weekly claims level for all of 2007 was 322,135.

The report said that continuing claims for the week ending February 2 (continuing claims must be at least a week old) edged down by 9,000 to 2.761 million. Despite the decline, the reading was the second highest in over two years. The four-week average rose by 3,500 to 2,727,500 -- also the highest reading since October of 2005. The average weekly continuing claims level in 2007 was 2,551,231.

Following two week's of declines, the level of initial claims is expected to have risen slightly this week.

The Index of Leading Economic Indicators for last month will also be released on Thursday. Not surprisingly, the index has been sending bearish signals for some time now. The index posted eight negative readings in 2007 including three consecutive contraction indicators in the last three months of the year.

In December, the index fell by 0.2% with the heaviest contributors being a decline in the rate of building permit issuance, a reduction in average weekly manufacturing hours, and a decline in new orders for nondefense capital goods.

Building permit issuance has continued to decline, manufacturing hours were unchanged, and the latest data on nondefense capital goods orders showed an increase. Analysts predict that the index fell in January by 0.1% but it may well be an even weaker reading since initial jobless claims surged in January, stock prices fell sharply, and the consumer expectations index declined.

The final major economic news item of the week is Thursday's release of the Philadelphia Fed Index, a gauge of manufacturing activity in the region. January's index caught observers by surprise. It came in at -20.9, the largest contraction reading since October of 2001. Like the New York Index, any reading below 0.0 indicates a reduction of activity relative to the preceding month. December's reading was -1.6 and the last two were the first back-to-back contraction indicators since early 2003.

The House and the Senate have agreed on the stimulus package that will allow the conforming loan limits to be raised by FNMA and FHLMC. President Bush is expected to sign the bill as early as next week. However, there are many details to be worked out and I would like to point out a few of the unresolved questions that still need to be answered.

1) The loan limit based upon 125% of the area medium would allow Orange County to be raised to $729,750.

2) Who will have access to the new higher limits? Currently the bill passed says any new purchase from the date of implementation to December 31st, 2008. There is a real question on refinancing. As it reads today only loans closed after July 1st, 2007 will be allowed to use the higher limits to refinance. Again, this may change.

3) Even though the limits are raised that doesn't mean that rate will be the same for all loans from $417,000 to $739,500. FNMA and FHLMC have stated the rates could be higher the higher the loan amounts even though they are all conforming. An example is $417,000 to $550,000, $550,000 to $625,000 and $650,000 to $729,750. They feel the risk will be greater and these are still jumbo loans in the minds of the investors buying the securities.

4) As FNMA and FHLMC have to set money aside in reserves for each loan made they are in question as to whether they have the ability to finance all of the new loans.

5) Any new borrower wanting to refinance must comply to the standard guidelines which means they must have the required amount of equity. If they owe more than their home is worth they will not have access to the program.

6) Orange County is now considered a Category 4 area. That means whatever the loan to value guidelines are with FNMA and FHLMC we are required to cut that back by 5% for Orange County properties. What was 95% is now 90%. What was 90% is now 85% and so on. This went into effect 1/18/2008.

This will not be a cure all by any stretch but it will help those clients of yours wanting to purchase now and take advantage of the value propositions out there at better terms that what is currently available....at least until December 31st, 2008. I will keep you informed as the details materialize.

Another Take On The Situation

The great news in the market this week is, once again, that we're getting closer to the increase of the Conforming Loan Limit to $729,750, for one year, in our high-cost market!!  That will give us much greater flexibility for our home buyers!

As we head into the new year, be sure to take a look at my effective new "Co-branded" mortgage scenario presentation program, that is quick and effective for your new or prospective home buyers!  I can add your marketing information to all of our loan estimates!

The major economic release of the day was perceived to be bearish. Wholesale inventories rose more than expected in December but sales declined, meaning there is less pressure to replenish supplies. Bearish news is welcomed by the rate-sensitive bond market because it keeps the Federal Reserve in a rate cutting posture.

While lower rates are a plus for stocks as well (more borrowing and spending by companies and consumers), the bleak economic picture suggests that corporate earnings will decline before the rate cut stimulus can pick them up again.

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Avoid Foreclosure with a Deed-in-lieu

A common way to avoid your property being taken away by the lender on account of non-payment of your mortgage is a deed-in-lieu of foreclosure.

Deed-in-lieu is a process in which the borrower failing to satisfy the loan obligation hands over his property to the lender. The lender may then sell the property in order to retrieve a part or whole of the amount borrowed from the sale proceeds.

What is the process all about?

The process involves the signing of legal documents - the Agreement in Lieu of Foreclosure and a Warranty deed, quit claim deed or a grant deed. The first document reveals the terms and conditions of the deed-in-lieu, and is signed by both the lender and borrower. The second document, which is the deed, conveys legal ownership of the property to the lender.

The lender marks the borrower's note as "paid" and provides the latter with two forms - one which states that the debt is canceled and the other which refers to the waiver of the right to a deficiency judgment (the lender's right to ask for the unpaid debt amount if it is not recovered totally by the property-sale).

The agreement for deed-in-lieu is executed through an escrow company which receives the borrower's note (marked as "paid") from the lender. The escrow then records the deed used for transferring legal ownership of the mortgaged property and sends the note to the borrower. The borrower is thus released from the liability of the mortgage payments.

Does a borrower need to pay tax in the process?

Once a borrower gets a release from the loan, he needs to pay the deed tax on account of the deed-in-lieu. In this process, if the lender cancels the debt, the deed tax is calculated on the basis of the unpaid loan amount along with any accrued interest which is forgiven. However, if the borrower goes for a deed-in-lieu and pays a certain amount towards the unpaid debt, the extra cash serves to reduce the amount of unpaid debt which is the basis of the deed tax.

It may happen that the lender pays the borrower a certain sum of money in return for the deed-in-lieu when there is some equity in the property. In such a case, the cash offered to the borrower is added to the unpaid debt in order to determine the basis of the deed tax.

A deed-in-lieu may have a negative affect on a borrower's credit report thereby lowering his score. Even then, it has certain advantages both for the borrower and for the lender. Most often, the borrower gets the chance to free himself from the indebtedness associated with the loan. And, at the same time, he can avoid foreclosure which has greater negative impact compared to a deed-in-lieu. The lender, on the other hand, can avoid spending his time and money in completing the foreclosure.