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Senate approves revised version of Emergency Economic Stabilization
Act of 2008
The Senate on Wednesday evening approved a
revised version of the Emergency Economic Stabilization Act of 2008 in a 74
to 25 vote, clearing the way for full consideration by the U.S. House of
Representatives. The House voted down an earlier version of the plan on
Monday and is expected to consider the revised version by Friday.
MAKING SENSE OF THE STORY FOR CONSUMERS
· The revised plan, which is designed to shore up the nation's financial
markets, includes a temporary one-year increase in Federal Deposit
Insurance Corp. (FDIC) caps for bank and credit union accounts. The cap
increases are critical because they increase the funding backstop the
public relies upon should their banks fail. The plan also includes
extensions on several business tax breaks and adjustments to the
alternative minimum tax (AMT) for individual taxpayers. These, as well as
the FDIC cap changes, are amendments lawmakers believe will help bolster
approval by the House.
· If approved, the financial rescue plan would allow the government to buy
residential and commercial mortgage-related assets, including
mortgage-backed securities and loans, in an effort to ease current credit
constrictions impacting businesses across all sectors, including the
housing market. Also included in the revised plan are provisions to help
struggling homeowners avoid foreclosure; increased oversight of the plan;
and a limit on compensation for executives of the troubled financial firms
that receive assistance.
· Some analysts believe that the economy will worsen if lawmakers fail to
pass the bill, which will directly impact the housing market. As obtaining
credit becomes more difficult for many businesses, unemployment rates,
currently standing at 7.7 percent in California in August 2008, could rise,
hindering consumer spending and the demand for housing.
To view additional news stories about the plan, which also may be of
interest to clients, please visit:
What the bailout means to you (video)
http://www.cnn.com/video/#/video/bestoftv/2008/09/29/nr.bailout.velshi.cnn
Bailout Bill Sent Back to House After Senate
Passage
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=aNPG4f5Dlbsc
Bailout’s failure bad news for housing
market
http://www.mercurynews.com/business/ci_10594591
Troubled banks 101
Even though the majority of the nation’s 8,500 banks are considered safe,
the failure of Washington Mutual -- one of the nation’s largest banks,
which was recently purchased by JPMorgan Chase -- has led many consumers to
question if their money is secure.
MAKING SENSE OF THE STORY FOR CONSUMERS
· The Federal Deposit Insurance Corporation (FDIC) insures money in various
types of accounts. The most common account is a single account under one
person’s name, which is insured up to the FDIC-maximum limit of $100,000
per person per bank. Joint accounts, a separate type of account, also are
insured up to $100,000 per person per bank. So, if two individuals have a
joint account and each person is an equal co-owner with equal rights to the
account, they would have up to $200,000 insured by the FDIC.
· Some experts advise consumers whose accounts exceed the FDIC limit to
open additional accounts at separate banks and spread their money amongst
the different accounts to ensure that all of their assets are insured. It
is important that consumers who opt to open numerous accounts do so at
separate banks because if the bank fails, the FDIC will add together all
funds from all accounts at the bank in the consumer’s name to determine the
FDIC-insured amount. For example, if a consumer has $75,000 in one account,
and $50,000 in another account at the same bank, and the bank fails, the
consumer will only receive $100,000 instead of $125,000.
· The FDIC limits only apply to bank deposits including checking, savings,
money-market accounts, CDs and some trust deposit accounts. It does not
apply to investments available for purchase at the bank, such as mutual
funds or annuities, which fall under the insurance category. Retirement
accounts -- which must be legitimate retirement accounts such as IRAs,
401(k)s, etc. and not simply a savings account that the consumer considers
to be their retirement account – are covered up to $250,000.
· Although mutual funds are not insured by the FDIC, consumers who
investment in them will not necessarily lose their money. When a bank
fails, the U.S. Dept. of the Treasury examines the bank’s assets and
liabilities. Mutual funds are considered neither an asset nor a liability,
so consumers who have money invested in money market accounts likely will
receive the market value of the underlying securities, should their bank
fail.
To read the full story, please click here:
http://money.cnn.com/2008/09/25/news/economy/troubled_banks_101/index.htm?postversion=2008092522
The Credit You Deserve – Getting a loan is harder, but it’s not
impossible
In light of the current situation with the credit
market, obtaining financing has become more difficult than in previous
years. Because of this, some consumers incorrectly assume that it is
impossible to qualify for a mortgage loan, auto loan, or other financing.
However, consumers who have good credit should remain optimistic about
their loan choices.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Most lenders have reinstated high credit standards, many of which were
almost completely eliminated during the days of lax credit lending.
Nowadays, most lenders require that consumers prove their ability to
comfortably repay a loan, most often determined by their FICO scores. Most
lenders require a FICO score of at least 720 to qualify for a mortgage
loan. Consumers can receive a free credit report by visiting www.annualcreditreport.com. This Web site, created
by the three nationwide consumer credit reporting companies -- Equifax,
Experian and TransUnion -- provides consumers with their credit report,
excluding their FICO score. Consumers can request their FICO score, for
a fee of $16, by visiting www.myfico.com.
· Even though some consumers may qualify for a new loan, some experts
recommend that consumers who do not have emergency funds or are concerned
about job security not take on additional debt obligations. However,
consumers seeking to refinance a loan at a more favorable rate or repayment
option, or those who wish to purchase their first house may benefit from
the current low interest rates. Today’s rates, although higher than in
previous weeks, are still at or near historic lows. Some experts predict
that interest rates will remain low until the economy recovers.
· Consumers wanting to refinance their current mortgage, or purchase a home
under the new permanent conforming loan limit of $625,500 -- effective Jan.
1, 2009 -- may best be served by their small local bank or credit union.
These financial institutions often are in the best position to offer
consumers a favorable or competitive interest rate. Consumers in California
may qualify for conforming loans up to $729,750 until Dec. 31, 2008, as a
result of the Economic Stimulus Act of 2008.
· Consumers seeking to refinance a mortgage loan or purchase a home with a
jumbo loan -- loans greater than the prevailing conforming loan limit --
often will pay a percentage point or more than they would with conforming
loans, according to bankrate.com. It also can be more difficult for
consumers to find lenders offering jumbo loans. While consumers can
check with their local small banks or credit unions to see if they offer
jumbo loans, it is often best to work with a local mortgage broker or
large national brokers, such as eloan.com when applying for a jumbo loan.
To read the full story, please click here:
http://www.newsweek.com/id/161474
Wall Street’s Woes Hit Highest End
Some markets, such
as the Central Valley and the Inland Empire, experienced rapid median home
price declines and higher rates of foreclosure early in the housing market
decline, while areas with fewer foreclosures and higher median home prices
are just now feeling the effects. The impact on the high-end home market
can be directly attributed to the current financial turmoil on Wall Street,
because many buyers in this market rely on profit from their investments to
make large purchases.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Listing price continues to be a key factor in all markets, and the
high-end home market is no different. Some sellers of high-end properties,
especially those whose homes are priced at less than $10 million, are
reducing asking prices in hopes of attracting more buyers. However, some
luxury-home sellers still are asking their REALTORS® to list their homes at
prices exceeding what the current market will support. Although this area
of the market is faring better than most, buyers in the high-end market
also look for accurately priced homes and sellers who are willing to
negotiate. It is important that sellers work closely with a REALTOR® to
list their home at a competitive price that reflects the reality of today’s
market.
To read the full story, please click here:
http://online.wsj.com/article/SB122238856919977287.html
In Other News…
Does a furnished house sell faster than an empty
one?
To read the full story, please click here:
http://www.latimes.com/business/la-fi-lew28-2008sep28,0,7385802.story
California Home Prices Drop Record 41% Amid
Defaults
To read the full story, please click here:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aE6gHmeYAxcg
Foreclosures put county’s HOAs in financial
bind
To read the full story, please click here:
http://www.ocregister.com/articles/association-hoa-foreclosures-2169589-hoas-aliso
Remodeling activity down, giving clients upper
hand
To read the full story, please click here:
http://www.mercurynews.com/realestatenews/ci_10566982
Home prices post 16% annual drop in July
To read the full story, please click here:
http://www.latimes.com/business/la-fi-homes1-2008oct01,0,6892630.story
And then there were 3 superbanks
To read the full story, please click here:
http://www.pe.com/business/local/stories/PE_Biz_S_banks30.1784f9a.html#
Consumer confidence unexpectedly improves in
September
To read the full story, please click here:
http://www.mercurynews.com/breakingnews/ci_10598844
KB Home building smaller houses to lift sagging
sales
To read the full story, please click here:
http://www.latimes.com/business/la-fi-kbhome27-2008sep27,0,3606671.story
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