Avoidable Financial Crisis

According the conclusions in a report by the Financial Crisis Inquiry Commission, government failings as well as corporate greed & ineptitude by several financial institutions are the greatest contributors to what was an 'avoidable" disaster, the financial collapse of 2008. The Federal inquiry casts blame upon the Federal Reserve for allowing shoddy mortgage lending excessive packaging of loans in order to sell them to investors taking risky bets on securities backed by those loans. The report points blame to several financial institutions as well as the Fed.

Fault lies with Fed Chairmen Alan Greenspan for failing to stem the flow of toxic mortgages and Ben Bernanke for failing to foresee the crises calling the actions of both Fed Chairmen negligent. Treasury secretary Tim Geithner was also cited for failing to recognize signs of trouble while he was president of the Federal Reserve Bank of New York.

- “The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public." In one of the reports findings it quotes bank executives admitting that they paid little attention to risks or the inevitable consequence of those risks that the American public continues to suffer and endure. When housing collapsed, risky short term loans and assets collapsed resulting in financial chaos and panic.

The commission interviewed 700+ witnesses and will post the report online as well as transcripts of the testimonies.

George Sinacori 



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Homebuyer Tax Credit Causing Chaos

Sept 18, 2009

It seems as though the Federal Homebuyer Tax Credit in 2008 & 2009 did it's job to help boost home sales, although hundreds of thousands who took advantage of the credit are now be told by the IRS that they'll have to give it all back.

In it's typical fashion, the Fed has created confusion, and chaos with misunderstood stipulations, changes mid stream and language that even those who wrote it would be hard pressed to understand.

Over 2.6 million supposedly eligible buyers bought homes and filed for the credit receiving a total of approximately 19 billion dollars in tax breaks. Nearly half of those who received money for the credit on 2009 tax returns will have to return it according to a Federal audit by the U.S. Treasury. Additionally a recording error may cause the IRS to seek repayment from tens of thousands more even though they are entitled to it.

Part of the chaos is a result of Congress enacting 2 different types of credits according to when a homebuyer purchased a home. The rules in 2008 required repayment of the credit up to $7500 over 15 years. A zero interest loan. Congress later changed the program for buyers in 2009 eliminating the repayment requirement, although those who purchased in 2008 are still obligated to repay. (See my blog Homebuyer Tax Credit Changes.)

Confused yet? Don't be it gets better ! Apparently the IRS contributed to the chaos by recording the wrong purchase dates for approximately 73000 homebuyer in 2009, meaning that they will be asked to repay as if they purchased in 2008 under the first version of the bill.

If you purchased a home recently and took advantage of the credit, as many of my own clients did keep good records and have your accountant review the credit requirements with you. There so many variances and stipulations related to this tax credit that I would be all day listing them and in the end listing them in vein. After all the IRS, Treasury and Congress can create confusion whenever and wherever they choose to now can't they?

See my blog on Homebuyer Tax Credit Changes for more on the differences between the credits, purchase dates etc.

George Sinacori

GES Real Estate, LLC

561-306-6736

rebuygeorge@yahoo.com

Federal Mortgage Campaign Set To Expire

According to Freddie Mac rates on mortgages dropped below 5% again last week, just a few weeks before a government program designed to help keep rates low is scheduled to end.

The average rate on a 30 year fixed rate mortgage was 4.97% last week or down from 5.05% a week earlier. Rates had been as low as 4.71% in December of 2009 but have hovered close to 5% since then being held pretty much in check by a Federal Reserve program hoping to spur more home buying by lowering the cost of obtaining a loan.

The Fed set aside $1.25 trillion to buy mortgage backed securities. That campaign is scheduled to end or expire on March 31. Questions remain as to how effective the program has been. Most home buyers did not see any significant change in the cost of obtaining a new mortgage, although guidelines for lenders making mortgages have changed.

The other part of the equation of course, to encourage more lending by banks into the mortgage markets has not seemed to work at all. Data provided by the National Association of Realtors shows that pending sales, (homes in contract) of existing homes dropped 7.6% in January from December. That is the lowest reading since April 2009 and a disappointment. That index had declined for 2 of the past 3 months and was widely expected to improve.

Some market analysts think that mortgage rates may begin to rise once the Federal program ends later this month. This may be a good indication that potential home buyers and sellers should get into a contract and lock rates now.

If you or someone you know have been considering buying or selling a home in Southeast Florida please call me directly at 561-306-6736 or drop me an email at rebuygeorge@yahoo.com.

For more info on buying and selling visit www.ges-realty.com . It's easy to use and totally free. What could be better than free in this economy?

Changes To Mortgage Originators Compensation Ahead

Radical changes in loan officer pay practices laid out by the Federal Reserve Board in late August mean that major alterations in how the industry works could be around the corner.

“Yield-spread premiums [YSPs create a conflict of interest between the loan originator and consumer,” the Fed states in its rule proposal. A 120-day public comment period is slated to end Dec. 25, 2009.

In its 195-page rule rewrite, the Fed asserts that consumers don’t know what they’re paying loan originators, and as a result they are often being taken advantage of. “Creditors’ payments to mortgage brokers are not transparent to consumers and are potentially unfair to them,” adds the Fed.

Payments from lenders to brokers often include a YSP, which results in a higher rate for the borrower. “Yield-spread premiums … present a significant risk of economic injury to consumers,” notes the Fed in its rule proposal. “Currently, consumers typically are not aware of the practice or do not understand its implications and can't effectively negotiate its use.”

The Fed adds, “The Board’s recent consumer testing suggests that many consumers do not shop for mortgages and often rely on one broker or lender because of their trust in the relationship.” By not shopping a consumer may not get a competetive rate, according to the Fed.
Under the proposal, consumers still could choose a higher rate loan if they want to finance closing costs. However, the Fed rule would “prohibit any person from basing a loan originator’s compensation on the loan’s rate or terms.”

For more on mortage loans, and current rates contact me directly at 561-306-6736 or rebuygeorge@yahoo.com

Visit my website at http://www.ges-realty.com to search for properties anywhere in SE Florida

Taxpayers $700,000,000,000 Handout

"Wall Street" has never translated to "housing". Try as they may to make them synonymous it isn't so just because someone says it is or want us to believe it. Looking at the players in the current economic debacle, this madcap comedy of errors, I'm reminded how much the Secretary of the Treasury and the Chairman of the Federal Reserve emulate a classic cartoon comic strip of old. Cartoonist Jeff Fisher's characters Mutt and Jeff were business men, almost smart enough to be con men. Mutt was tall and lanky, slightly bent forward while Jeff, his partner, was shorter, a stockier physical makeup and balding with a mustache and beard. I'll give you a moment here to visualize. OK! See any similarity yet? If not here's a link to Mutt and Jeff. Almost uncanny I think.

These two energetic little lunatics were always looking for the easy way to get something. They would attempt the craziest most hair brained schemes and act on them, believing that they couldn't or wouldn't fail. Mutt and Jeff were always surprised to be tossed on their butts, from wherever they were trying to sell their junk by much more sane level headed people.

Our Treasury Secretary and Chairman of the Federal Reserve however have achieved what the fictional Mutt and Jeff only aspired to. They've somehow convinced the most advanced, most sophisticated and supposedly most intelligent government in the world that they need $700,000,000,000. Is that enough zero's? Congress is busy running around convincing each other to vote one way or the other. The House and Senate have each already voted, one no and the other yes to give. What they've forgotten is that the real issue with the economy is still housing. How does Wall Street translate to housing? I just don't get it. A recent First Time Homebuyer tax rebate has not stimulated people to buy houses. A $300,000,000,000 FHA initiative designed to help refinance "troubled mortgages" has done little. Although that was made available only last week I don't see any rush on FHA refinancing. Federal takeovers of both Fannie Mae & Freddie Mac have cost us tens of billions of dollars and still banks and industry giants continue to fail under multi million dollar leadership.

Corporate greed, corruption and politics as usual have put us all on the edge of our seats waiting to see or hear whether or not Mutt & Jeff have made the ultimate score. A taxpayer handout to rescue Wall Street. What happened to rescuing housing? The aforementioned Homebuyer Tax Credit, FHA plan and Corporate bailouts were all initiatives of our Treasury and Fed leaders. These guys weren't thrown out like Mutt & Jeff, they just haven't worked. Hey here's another hair brained scheme. Give them $700B to try to bail out Wall Street. It may not work but heck if you guys are in a giving mood and your pockets keep getting deeper give it up. No guarantees, no need for oversight or regulation, Mutt & Jeff will let you know when it fails. In the meantime Mr. and Mrs. Taxpayer keep watching and keep waiting. Something good may happen someday.

Like the more sane, level headed business minded people that kept throwing Mutt & Jeff out on their backsides, I want to remind everyone of a little word seldom used anymore when it comes to doling out billions of dollars in response to tantrums born of greed and overindulgence.

Just say NO. Say no to the Wall Street power brokers, say no to the corruption, say no to the partisan politics that have lead us to a dark place in our country's history and say No to any more Mutt & Jeff like schemes. Let the corporations and their overpaid CEO's wallow in not being rescued by taxpayers. Let's get the ball back on the court and concentrate efforts on straighten out the housing crisis.

Push the First Time Homebuyer Tax Credit, pressure banks to employ forbearance efforts for troubled borrowers, move forward with the already in place FHA reforms that as of Oct. 1 are available, and let's take a long look at the arbitrary actions of HELOC lenders in capping or eliminating lines of credit in order to accommodate their own selfish greed.

Mutt & Jeff my answer is NO !