10 Things That Will Change In the Financial Market Per Kiplinger Report

10 Things That Will Change What will U.S. regulatory and financial climate will look like in a few months from now? It may look remarkably like the climate of five or 10 years ago. By Jerome Idaszak, Associate Editor, The Kiplinger LetterRenuka Rayasam, Associate Editor, The Kiplinger Letter September 26, 2008 When the smoke clears on the current financial and legislative turmoil -- the economic landscape will look considerably different than it did just a few months ago. Here's what we see ahead: 1. A much less leveraged economy. Cash will be king. In practical terms, that means: Little financing of speculative building and higher pre-leasing hurdles for commercial real estate. More money up front on merger and acquisition deals. Bigger mortgage down payments. Lower limits on credit cards. And higher capital reserves for banks. And less risk-taking in other ways as well. Borrowers will need squeaky-clean track records. Financial deals at publicly traded firms will be more transparent. Buyers will demand a much clearer understanding of exactly what they're getting. 2. More modest rewards -- the natural consequence of less risk taking. Fewer stocks racking up double-digit gains. Slower appreciation of property values. Smaller returns on endowments for universities and nonprofits. For consumers: Fewer second homes, boats, new cars and so on. More households will live within their means. 3. A feast for bottom fishers. Investors with cash, the patience to wait out a gradual recovery and a heart stout enough to withstand periodic wild swings, will be in the catbird seat. They're positioned to make a bundle, snapping up undervalued assets -- businesses, real estate, securities, etc. Even out-of-work talent will go cheap to employers savvy enough to nab it. 4. Fewer financial firms, as big universal banks swallow up midsize regionals. 5. More government oversight of financial markets. Better communication and coordination among regulatory agencies. Increased disclosure requirements. A tighter rein on short-selling. Closer supervision of credit rating agencies. And more. 6. But a revival of private financial firms -- investment banking partnerships and boutique merger and acquisition houses, for example. Their allure: minimizing regulatory burdens and filling a need for investors willing and able to take larger risks for larger returns. 7. Simpler forms of securitizing debt -- plain vanilla ways to spread risk. Secondary markets for mortgages and other assets won't vanish. But the instruments bought an sold will be less exotic. 8. Greater scrutiny of executive compensation, whether mandated by Congress or not. Shareholders are sure to take on the issue more aggressively in the near term. 9. Higher taxes and/or a bigger federal deficit as Uncle Sam shoulders the load of Wall Street's toxic debt. Although eventually the government may make money on the deal, in the short term, the Treasury -- and therefore, the taxpayers -- will pony up billions. 10. Higher long-term interest rates. Treasury yields must rise to lure capital -- foreign or domestic -- driving up mortgage and corporate bond rates. Short-term rates will slide, though, as the Federal Reserve tries to keep the economy afloat and put banks back on solid ground. In reality, the change isn't to a new environment. It's a return to traditional norms of the past, before cheap money inflated asset values, undermined lending standards and encouraged excess risk. It's bitter medicine, but it's necessary.

FHA-New Guidelines Converting Existing Home to Rentals, When Can You Have Two FHA Loans, Reflection of This Market, My visit with HUD in DC This Week

I was in Washington the first part of this week because of an invitation to attend a roundtable with HUD. For the first time since 1934 (when FHA was initiated), FHA is in a deficit. But right now, FHA is our best hope for the housing market and they are committed to come out strong. Below I have listed some of the updates/changes that we are to expect with FHA in the next three months (and have also spelled out the New FHA Guidelines for Converting Existing Homes to Rentals), but first I wanted to share with you a reflection of this market. My hope is that you understand where we are, but also that “this too shall pass”- We will be here for the long haul- Let us know when we can be of assistance. Linda Today as we know it-As the nation stands amidst one of the largest financial crisis’s since the stock market crash/great depression, I like many Americans stand a bit numb and shell shocked. I ask myself, “Am I just in a bad dream or is this really happening?” We are living through a time when our children/grandchildren will look back and say “WOW, that must have really been rough living through those years.” We will be referenced in history and Economics books about the blunders of the US financial markets & how never to repeat it”. Let’s face it; we grew up seeing our country as the invincible Super Power US. We live in an EGO-filled world. The rug was pulled out from under us the first time with 9/11 and the myriad of recent events is yet another reminder that our nation does not have a bullet proof vest. The entitlement view-I think as Americans, we all suffer from a bit of entitlement to some degree. The general feeling is, “I have worked hard, I have earned it, and I deserve it- I want it all (as the commercial says)”. So when something gets taken away from us leaving our lives just a bit more uncomfortable then we were yesterday, there is a quick opportunity for resentment and anger to build. This then erodes our thinking and our view on life and how we respond to those around us. It is easy to wallow in a world of self-pity and get lost and stuck in it. This thinking self perpetuates causing emotional paralysis and negativity can leak into all facets of our life. Bad things happen to good people. Life has its ups and downs- it is what it is. There is much that can be taken from us in life that we have no control of. There is no explanation of WHY this happens. Right this minute, thousands of people are suffering a loss. Some are losing their job, others are losing their home, some are losing their family (the number 1 reason for divorce is financial stress). Worst of all, some will take their own life (suicide will inevitably be up this year). Choosing how to react- Although many things can be taken from us in life, no one can take away our right to decide how to react to a situation. This choice remains exclusively ours. I encourage you to reflect on this a bit in your own life. Are you going to let bitterness erode your heart as we move through these next few tough years or are you going to choose to persevere and focus on what you do have vs. what you do not? You can get up every morning and count your blessings (the love of family, friends, health, the gift of food and shelter) or you can get up grumbling about what you do not have. As I have said before, someone will be purchasing a home and needing a mortgage loan officer… why not me! It is a choice every day to take action plans to make certain that business still comes in. Realties of our Industry- For most of us, we lived through the “glory days” of our industry, we rode the wave of prosperity. Every industry is cyclical and we are now finally experiencing the downturn of our own. I encourage you to ask yourself, “Do I like the core of this business?” If the answer is yes, then you need to put your best foot forward and say “this too shall pass. “ We will experience what feels like normal times again in a few years and as I keep saying, there will be no competition at that juncture. If you were in this business for the money and have no passion for what we do on a daily basis, I encourage you to get out and start looking for something that will ignite excitement in your life. Embracing Change- 98% of people do not like change. It is uncomfortable; it pushes us outside of our comfort zone. Interestingly I have found that all of my personal growth does not come when I am in the confines of my own happy ideal world. It is when I get pushed outside these walls that the opportunity for growth flourishes. Change builds character. Consider viewing these current times as a unique opportunity that will make you a better & stronger person even though it doesn’t feel so fabulous as you are actively walking through these life trials. Change is inevitable- The Davidson Mortgage Group and Service First Mortgage will continue to make changes daily, weekly, monthly to stay ahead of the curve and to ensure our safe delivery through the industry storm. Higher ground and prosperity awaits all of us committed to staying the course. Thanks for your continued commitment to us and allowing us to be a part of your team. We are here for the long- haul for you and your clients. Linda From the FHA Home Front (HUD Round Table in DC) It was my pleasure this week to meet some really sharp people from FHA/HUD as well as strong mortgage professionals who really care about our industry. The round table was attended by 100 mortgage leaders and I came back with a new appreciation of HUD employees as well as those who strive to keep our industry strong. Here were some of the major subjects: · As we stated. for the first time since 1934, HUD is in a deficit. Changes have been made to turn this deficit around, but FHA is very concerned about the next 12-24 months. Will HUD need a bailout like Freddie/ Fannie? Time will tell. · The good news is because of the major tightening in Freddie/Fannie and the implosion of the subprime world, FHA business has increased. Right now it is taking HUD 60+ days to approve test cases for bankers/ brokers that are trying to get their ability to originate FHA loans. A minimum of 10 test cases must be approved by HUD in order to obtain their designation. Over 3200 mortgage companies have applied for the FHA licenses so far from January 2008 through August 2008. HUD states that over 50,000 appraisers that have also applied this year for their FHA designation. It is important to realize that a lot of “practicing” is going on by inexperienced loan officers. · In 2007 there was a total of 13 Mortgagee Letters issued by FHA (mortgagee letters are HUD announcements of a guideline change). So far in 2008(through Friday, September 26) there has been 25 Mortgagee Letters written and FHA is anticipating up to 15 more by the end of the year. · The “new and improved” FHA call center should be up by the end of this year. Changes will be made that underwriters can access the HOC centers without going through the call center (that was my suggestion :)). · FHA states that 87% of their Home Retention claims successfully avoided foreclosure due to their aggressive Home Retention and Disposition Options. It is also estimated that there has been over 340,000 homes saved due to the FHA Secure Program. In addition, HUD states that it is costing them an average of 30% to foreclose on a property. The Customer Service Help Desk can be reached at 888-297-8685. · There have been 10,529 Originators that have been caught in the last five years to have criminal records and still handling mortgages (typically the largest transaction their clients will need guidance). And those are the ones that have been caught. We should see some (more) major changes in FHA as well as Freddie, Fannie and PMI over the next three months. Our commitment to you is to make certain that you stay up to date and we will continue to communicate these changes and updates to you. FHA- New Guidelines Converting Existing Homes to Rentals- IMPORTANT READ! Not wanting to be involved in financing "buy and bail" home purchases, the Federal Housing Administration will no longer count rental income when home buyers choose to vacate, rather than sell, their principal residence. Home buyers seeking to rent out their existing home and buy another with an FHA-backed mortgage must now demonstrate they have sufficient income to pay both mortgages. The FHA won't allow lenders to count rental income for the home being vacated unless borrowers have a 25 percent equity stake or can prove they are relocating for employment and obtain a one-year lease on the home being vacated. The new rules are intended to prevent the practice known as "buy and bail," where the buyer purchases a more affordable dwelling with the intention to cease making payments on the previous mortgage. See link for HUD’s mortgagee letter http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-25ml.doc Because FHA will insure principal residences only, and not income properties, the property being vacated by definition could not have an FHA-insured mortgage (unless it falls under the exception ruling*). But FHA feels that if the property ended up in foreclosure, it might have an impact on the value of nearby homes with FHA-guaranteed mortgages as well as the industry as a whole. The new rules took effect Sept. 19 (we are given a four hour notice!), and are temporary pending a determination whether a permanent rule change is needed. The rules apply only to a principal residence being vacated in favor of another principal residence, and not to existing rental properties disclosed on the loan application and confirmed by tax returns (with at least a year of being reported on Schedule E). *When can you have two FHA loans at the same time? A buyer cannot have two FHA loans at the same time unless: 1) The second FHA loan is for a primary residence and the old home which has the current FHA financing is not in a "reasonable driving distance to the first one" from the new one. An example would be: First home with FHA financing is in New Mexico and they are being transferred here with their company. Since the first home with FHA financing is not in a "reasonable driving distance" from the next home, the buyer can obtain another FHA loan. Note that they would have to qualify for both payments or have a 12 -month lease agreement against the first one (The 12-month lease can only be used to offset the mortgage payment provided that there is 25% equity in the first one OR they are relocating for employment). 2) The second exception of when a buyer can have a second FHA mortgage has two parts (and both parts must be satisfied): A) Current home with FHA must have 25% equity into the home (as per an appraisal) AND (not OR) B) must be able to prove increase of family size (i.e., births of additional children) so that the current home does not now adequately fit the family needs. Note that they would have to qualify for both payments or have a 12 -month lease agreement against the first one. 3) And third exception of when a buyer can have a second FHA mortgage at the same time is if they are non-occupying co-signing for someone. If the parents already had an FHA loan on their current property and they are Non-Occupying co-signing, that is OK. 4) The forth exception would be if a husband and wife are on an FHA mortgage and they get a divorce. The divorce decree specifically awards the home to one spouse. This would release the other spouse (the one not awarded the original home) to obtain their own FHA financing on another home. Obviously in any situation, if a buyer has FHA financing on their current home and it is sold, then that would release them to obtain an FHA loan again. Have a blessed weekend. When we can be of assistance to you and your buyers, please don’t hesitate to contact us at 972-278-3400. Linda

A historical Friday (three huge annoucements that will change financial markets around the world), 30 Great Websites to share with your clients

A historical Friday (three huge annoucements that will change financial markets around the world), 30 Great Websites to share with your clients As you read this, I am in Washington DC attending a HUD round table for a couple of days. I promise that I will do my best to straighten them out :). I am excited-seriously - however, of being able to "have an ear" with HUD and will let you know at the end of the week how it went. In the meantime, my team is at the office to assist you when you need us. As you may know, every person on my team (including myself) holds their DE Underwriting designation and would love the opportunity to work with your buyers or answer any questions that you have. Let us know when we can be of assistance. Linda A historical week was capped off last Friday with an incredible day of three news events, all with an enormous impact. Thank goodness the economic calendar was quiet on Friday, as government announcements took center stage. These three huge announcements Friday will change the financial markets around the world. First, we have been talking about the fear over the safety of money in savings for many Americans. Banks are either folding or on the brink of collapse, bonds are losing some or all of their value, and stocks are dropping at an alarming rate, all causing tremendous fear and anxiety for investors. This fear caused a flight to quality of such magnitude that the return on Treasuries was actually negative. People were actually willing to pay money in order not to lose money...forgetting all about any type of return for their investment. This panic lead to a modern day "run on the bank". There was $180 Billion taken out of money market funds due to a lack of confidence. This resulted in a "breaking of the buck", which means that the Net Asset Value or NAV of some money market funds dropped below $1. Virtually all investors consider money market funds very safe and do not expect any change in the principal value, so a $1 invested will always result in a $1 balance plus any interest. But once the $1 valuation was broken investors panicked and the flood gates opened. This caused the Treasury to step in. Friday morning, Treasury Secretary Hank Paulson announced that the US government will guarantee money market funds. It should be noted that this does not include high yield, enhanced type, or riskier money market funds. This action is helping settle the markets and as a result stocks around the world are marching higher. Another big announcement that is helping to calm the global markets and regain confidence is the Fed's decision to create a market place for illiquid mortgage debt. As we know, the mortgage mess has buried many companies, some were previous giants with long histories like Lehman, Bear Stearns, Fannie & Freddie. The big problem is that there are no buyers for this debt in the current marketplace. So the Fed is stepping in to create a vehicle to make these purchases of mortgage debt and provide a liquid marketplace. This is a brilliant move which has been very well received and should do a lot of long term good to help the housing and lending environment. Stocks around the world responded very favorably to this on Friday. But wait... there was more J...As a student of the market I can tell you first hand that there is a very dark side to stock shorting. The amount of greed is incredible. Many short sellers have used currently illegal tactics such as "naked" short selling. This means they are shorting a stock without the required step of first borrowing it. This has exacerbated the problem in financial stocks as they get unmercifully beaten down. This in turn hurts their balance sheet which also limits their ability to take on credit. And this is the vicious cycle we have been witnessing. Worse yet are the short sellers who sent armies of individuals to use scare tactics on message boards to convince people the sky is falling. The SEC has placed a ban on short selling in 799 financially related stocks. This ban will last through October 2nd and can be extended if needed in 30 day increments. Some other countries around the globe are also instituting similar bans. There are some very foolish politicians and others who are commenting on what a negative move this is, as well as saying there are legitimate short sellers. The problem is that they have failed miserably in policing this problem for a very long time. It is the equivalent of an electronic store saying, "pay for what you take with the honor system". While some will actually pay what is due, there is no doubt that the store will wiped out in a short period of time. The SEC did the right thing here and hopefully this will add another level of calm to the current financial crisis. These 3 steps will not fix everything, but it sure looks like a step in the right direction. The health of our financial system and confidence that our hard earned savings will not be wiped out is far more important. What good is earning a paycheck if there is no place to safely save that money. Prices will undoubtedly continue their volatile ride..... Forecast for the Week ...and the ride isn't over...the coming week may see more wild movement in the markets, as the financial sector responds to all the recent action, along with several reports due in the latter part of the week. We'll get a read on the housing market with Wednesday's Existing Home Sales Report and Thursday's New Home Sales Report. And we will get a read on the economy with Friday's Gross Domestic Product Report (GDP is the broadest measure of economic activity) and Thursday's Durable Goods Report. What are "durable goods"? Simply put, they are items that are durable (i.e. cars, furniture, appliances, games, cameras, business equipment, etc), and are made to last longer than three years. This report shows a good measure of consumer and business consumption and buying behavior, and depending on the health of the report, could add to the volatility we have seen. The Mortgage Market View Five Fantastic Freebies These days, many people are looking for new ways to cut costs and save money. Here are five great ideas from the editors of Kiplinger: Free TV & Movies: Full episodes of more than 300 shows from NBC Universal and Fox stations are available on www.hulu.com. The site also offers over 165 free full-length movies in a variety of genres. In addition, other networks like ABC and CBS are also starting to post full episodes of various shows on their Web sites. Free College Savings: Sign up at www.Upromise.com and you can turn everyday purchases into college savings. You'll earn cash rewards for eligible purchases of groceries, gas, dining out, travel, and online shopping. The money is then automatically transferred to your child's 529 account. In addition, your family and friends can help, too, by linking their rewards to your Upromise account. Free Directory Assistance: The next time you need to call 411, dial 1-800-FREE-411 instead for free directory assistance for both residential and business listings. While you may have to listen to a short advertisement after the voice prompts, you will still save a few dollars. Free Credit Report: By law, you can receive one free credit report once a year from each of the three main credit bureaus. Visit www.annualcreditreport.com to request your report. Free Recipes: Need some inspiration in the kitchen? Check out www.allrecipes.com and www.Epicurious.com where you can access over 100,000 recipes for all kinds of meals...no matter your level of expertise. You can search by meal, occasion, or ingredient, and there are plenty of user reviews and cooking demonstration videos to help. For twenty-five more great freebies, visit www.kiplinger.com/features/archives/2007/08/free.html. These are awesome to send to your clients to let them know and give you a reason to follow up.

August 2008 Foreclosures Jump 80 Percent

August Foreclosures Jump 80 Percent: Report By: PAUL JACKSONSeptember 8, 2008 Nearly 102,000 homeowners lost their properties to foreclosure in August, up nearly 6 percent from July and more than 80 percent higher than in August 2007, according to data released Monday morning by real estate information data aggregator ForeclosureS.com. So far this year, lenders have repossessed a record 656,545 properties nationwide, and remain on track to repossess more than 1 million nationwide by year-end, the company reported. Year to date, 1.45 million homeowners — or 19.6 of every 1,000 U.S. households — faced pre-foreclosure actions by lenders, almost double the number a year ago. There is some good news: pre-foreclosures actions by lenders slowed slightly from July and more than half of the pre-foreclosure as well as REO activities can be attributed to just three states — Arizona, California and Florida. As she has throughout the crisis, ForeclosureS.com president Alexis McGee continued to suggest that the housing market was showing signs of stabilization; it’s a position she has taken for at least the past four months in the face of rising foreclosures. “While we continue to see record numbers of foreclosures and actions that may lead to foreclosure, and despite the higher 6.1 percent August unemployment rate, it does appear that the overall situation is beginning to stabilize,” McGee said. “Importantly, many regions of the country — particularly the Northeast and Midwest — have seen less-dramatic increase in foreclosures and pre-foreclosure activity in 2008 compared with 2007.” The Southwest region, in contrast, reported by far the most foreclosed property filings year-to-date, 348,019 or 12.7 filings per 1,000 households. The Southeast, meanwhile, leads the nation in pre-foreclosure actions filed year to date with 477,177, or 27.5 filings per 1,000 households. For more information, visit http://www.foreclosures.com

Most Expensive Housing Market in the Nation

La Jolla Tops List as Most Expensive Housing Market in Nation By: PAUL JACKSONSeptember 9, 2008 Although both are waterfront cities, something besides the salt water separates La Jolla, Calif. on the Pacific Ocean from Sioux City, Iowa on the Missouri River — like a $1.7 million dollar difference in the cost of homes, according to a study released Tuesday morning. In an annual comparison of similar homes in 315 U.S. markets, La Jolla topped the chart as the most expensive real estate market in the nation with a $1,841,667 average home price. Sixteen hundred miles away in America’s heartland sits Sioux City, the most affordable real estate market in America, where a similar home would cost $133,459, the study found. The study, released by real estate brokerage Coldwell Banker, compares the cost of similar 2,200 square foot, four-bedroom, two-and-a-half bath homes in 315 markets across the United States. See more study results. La Jolla and Sioux City are not alone in representing California and the Midwest, either. In fact, eight out of ten of the country’s most expensive housing markets are in California, according to the study, and eight Midwestern cities make the list of the nation’s 10 most affordable home markets. “This year’s study comes at an interesting time in our nation’s history with the impact of the housing correction and mortgage financing serving as critical economic issues in the presidential election,” said Jim Gillespie, president and chief executive officer of Coldwell Banker Real Estate. The cumulative average sales price of the four-bedroom homes surveyed in the 315 U.S. markets covered in the Coldwell Banker HPCI was $403,738, a 4.4 percent decline from the $422,343 reported one year ago. La Jolla edged out perennial most-expensive contender Greenwich, Conn. ($1,787,000) and other West Coast markets as the most expensive U.S. market in the study, which should be telling; the housing mess has been centered in California. Beverly Hills was the most expensive studied in the U.S. market last year at $2.21 million, Coldwell Banker said; the study does not include Manhattan, however, citing a lack of relevant data. The Northeast Corridor (from Maine to Washington, D.C.) and California dominate all but five of the most expensive “top 40″ U.S. markets slots, according to the study — with just one town from those regions (Augusta, Maine) appearing among the top 40 most affordable markets. Texas, led by Arlington, has six of the study’s 40 most affordable markets. For more information, visit http://www.coldwellbanker.com.

FHA 3.5 Downpayment Effective 1/1/09

Effective January 1, 2009 on all new FHA case number assignment on purchase transaction will require a down payment of 3.5 percentages. Summary of the Memo Purchases Borrower will be required to have paid a down payment in cash or its equivalent (Grant, Bond, Government Funded 2nd Liens) an amount equal to 3.5 percent of the lesser of the Sales Price or the Appraised Value (No longer closing cost may be consider in the down payment calculation.) Seller Concession exceeding 6% of the sales price and/or inducements to purchase (Gift Card, Refrigerator, Car, etc.) must be subtracted form the lesser of the Sales Price or the Appraised Value before calculating the 3.5 percent down payment

Freddie Mac and Fannie Mae Bailout

Freddie and Fannie Bailout September 7 will now be remembered as the day the U.S. government took over the mortgage market. What that means for financial markets going forward has never been less certain. This is no longer the worst mortgage crisis since the Great Depression; this could be the worst mortgage crisis, period. It’s also the end of an era. The U.S. Treasury on Sunday announced a takeover of both Fannie Mae a move that has nearly no precedent in U.S. history. Together, the companies own or guarantee roughly $5.3 trillion* in home loans, roughly half of all outstanding U.S. mortgages. The bailout will involve as much as $200 billion in capital and credit lines to both GSEs, according to documents released Sunday afternoon by the Treasury. This is following a report by the Mortgage Bankers Association last week that more than 4 million American homes- 9% of all homes with a mortgage (i.e. 9 homes out of 100) - were either behind on their payments or in foreclosure at the end of June. A combination of $3.1 billion dollars was lost by Fannie and Freddie Mac between April and June. It is predicted that half of those credit losses are from loans with ballooning or adjustable monthly payments. It is also predicted that a government bailout could cost taxpayers between $25 billion and $200 billion dollars according to the Congressional Budget Office which would make it one of the most sweeping government interventions in the workings of financial markets in U.S. history. Putting that in perspective, it is estimated that the airline bailout after 9/11 cost tax payers $15 billion dollars. So what is $1 billion dollars? If the US Treasury spent $1 million dollars every single day, it would take 2.8 years to spend $1 billion. So if this bailout takes $100 billion dollars (just to estimate in the middle of the predictions), then we (the tax payers) will be paying $100 million dollars every single day for the next 2.8 years to cover the bailout. It almost takes your breath away doesn’t it? What does this mean to your buyers and sellers? Time will tell. Right now we are seeing bonds soaring (i.e., rates will come down), but stocks are trying to rebound so it will be interesting to see how the week plays out. My prediction is that we will see even more tightening in the guidelines as Fannie, Freddie and investors will want to make certain that they don’t continue the cycle. Yesterday was very interesting for me. I was interviewed by Channel 4, 5, 11, 33, WBAP and Sirrus 147 on this bailout. Had a lot of fun (my neighbors were teasing me as we had news stations in the house all afternoon), but obviously it was a big subject. If we can get any clips, we will send them out to you. In the mean time….. stay tune… it should be a bumpy ride this week!

The likelihood that the government will do some type of takeover was increased following a report by the Mortgage Bankers Association last week that more than 4 million American homes- 9% of all homes with a mortgage- were either behind on their payments or in foreclosure at the end of June. A combination of $3.1 billion dollars was lost by Fannie and Freddie Mac between April and June. It is predicted that half of those credit losses are from loans with ballooning or adjustable monthly payments. It is also predicted that a government bailout could cost taxpayers $25 billion dollars according to the Congressional Budget Office which would make it one of the most sweeping government interventions in the workings of financial markets in U.S. history. Putting that in perspective, it is estimated that the airline bailout after 9/11 cost tax payers $15 billion dollars. Freddie and Fannie have played a larger role in the US mortgage market over the past year as the subprime and Alt A lenders have shut down. According to the trade publication Inside Mortgage Finance, the companies guaranteed about three-quarters of all new mortgages in the second quarter of this year, up from under 40 percent in 2006. It is thought that the government could place quarterly infusions of money (instead of one big capital investment) as losses warrant in an attempt to minimize the upfront cost of the rescue. According to MSNBC, placing the companies in conservatorship, rather than receivership, could signal that the government does not intend to nationalize or liquidate Fannie Mae and Freddie Mac. Instead, under the terms of a federal law passed this summer, conservatorship is designed to allow the government to restructure the companies and return them to private control. Treasury officials have previously compared the process to Chapter 11 bankruptcy. MSNCB further reports that if the government plan succeeds, uncertainty in the markets around Fannie Mae and Freddie Mac could subside, making it easier for the companies to get access to funding at cheaper rates. That, in turn, could have a spillover effect in the overall market for mortgages, lowering interest rate and helping the battered housing market recover.

Garland Tx First Time Home Buyer Program/ DAPs

City of Garland now has funds for 17 families for $10,000 each towards buyer's down payment, closing costs and prepaids. The buyer must purchase in the city of Garland and be a First Time Home Buyer. Do You Realize??????? Do You Realize that this is the LAST month in which your buyers can do a Downpayment Assistance Program (and have the seller pay their cost) AND get their $7500 Tax Credit? Downpayment Assistance Programs are GONE as of 9/30- Time to Act Now! Let us close your buyers before DAPs are gone.... Call us today at 972-278-3400. We have in-house processing, underwriting and closing AND because everyone on my Team is an underwriter (including myself), we can underwrite the loan upfront! Best places to live 2008 - Top 100: 1-25 - from MONEY Magazine (link) Did you know that there were nine (9) cities in North Texas that were ranked by Money Magazine on the Best Places to Live of America's Small Cities in 2008! #14- McKinney; #15- Carrollton; #18- Richardson; #34-Euless; #38-Frisco; #57-Denton; #67-Garland; #69-Lewisville; #96- Grand Prairie Great Talking Points As of 9/4/08: Countdown to the first presidential debate: 22 daysCountdown to the vice presidential debate: 28 daysCountdown to the second presidential debate 33 daysCountdown to the third presidential debate: 41 daysCountdown to Election Day 2008: 62 daysCountdown to Inauguration Day 2009: 139 days More Talking Points HOME PRICES - The average home in the USA declined in value by 1.7% over the 1-year ending 6/30/08. Over the last 10 years, home prices have increased +6.2% per year. Over the last 20 years, home prices have increased +4.7% per year nationwide (source: Office of Federal Housing Enterprise Oversight). ASSET STATS - 2.7 million US taxpayers have gross assets worth at least $1.5 million. Of that group, 357,000 taxpayers have assets worth $5 million or more (source: Internal Revenue Service). HARD WORK IS MORE IMPORTANT - The median college grade point average (GPA) for US millionaires is 2.9 on a 4.0 scale (source: SmartMoney.com). BIG GARAGE NEEDED - 35% of US households own 3 or more automobiles and/or trucks (source: Experian Automotive). FOR SALE - As of 7/31/08, there were 4.7 million unsold existing homes in the USA (i.e., not counting new homes on the market that have not been previously occupied). 3 years earlier (7/31/05), there were 2.8 million existing homes for sale (source: National Association of Realtors). GREEN ACRES - Farm real estate values nationwide reached a record high of $2,350 per acre (including land and buildings) as of the beginning of this year (source: Department of Agriculture). LABOR DAY HOLIDAYS- An estimated 16 million Americans flew on US airlines during the current Labor Day holiday, a decline of 1 million passengers from a year earlier (source: Air Transport Association). GENDER EQUALITY - American men won 53 medals at the Beijing Olympics, the same number of medals as won by American women. 4 additional medals were won by Americans in mixed-gender sports. A total of 43 world records were set during the summer games in all sports (source: Wall Street Journal, Financial Times).

Last Month for DAPS + $7500 Tax Credit- ACT NOW!, FHA Funds to Close, Prevent ID Theft

Happy Labor Day! I hope that your holiday and week is blessed. As a new school year is beginning across the country, I thought you would enjoy the facts about education in America. See further below in this newsletter. Do You Realize??????? Do You Realize that this is the LAST month in which buyers can do a Downpayment Assistance Program (and have the seller pay their cost) AND get their $7500 Tax Credit? Downpayment Assistance Programs are GONE as of 9/30- Time to Act Now! Call us today at 972-278-3400 when we can be of assistance to close. We have in-house processing, underwriting and closing AND because everyone on my Team is an underwriter (including myself), we can underwrite the loan upfront! FHA Funds To Close In our commitment to continue to give you more ways to close, we are starting a The Davidson Group (TDG) Mortgage Tube audio/video on the 22 ways that FHA allows funds to close. Visit us for a detailed explanation : http://www.youtube.com/watch?v=LuZWzgLe1DM PART 1 I will send PART 2 of Funds to Close this week (having technical webcam issues). Stay tune! Available By Request: Per popular demand, the following forms are available by request (just send us a quick email to ldavidson@servicefirstmtg.com or call 972-278-3400): - The 22 Ways Buyers Can Obtain Funds to Close on a FHA loan - Quick Reference Guide to the $7500 Tax Credit (Ready- Made Flyer for clients) Interesting Facts on America Education Gotta Go Back... Back... Back to School Again The cast of Grease 2 began the movie with an ode to the end of summer and the beginning of the school year. As we head into the first week of September, parents and students across the country are singing the same tune. In honor of the new 2008-09 school year, here are some interesting facts about education in America: 56 million students are expected to enroll in kindergarten through high school this year. 3.3 million students are expected to receive high school diplomas this year. 10.9 million school age children who speak a language other than English at home - 7.8 million of them speak Spanish at home. Over 30 million children participate in the national school lunch program (based on 2007 data). This is 54% of the students. There are 7.1 million teachers in the United States, with 2.9 million of them teaching elementary and middle school. More than 18 million students are enrolled in colleges and universities this year, which is up from 13 million students 20 years ago. · More than 3 million students are expected to earn their college degrees this year. Did you know that Texas is the No. 2 in ID theft? Here is a great site to help prevent ID theft. Share it with those you know: http://www.texasfightsidtheft.gov/ Have a blessed week. When we can be of assistance to you, please call us at 972-278-3400. Linda