President Bush signed on Wednesday into law a new housing 'rescue' bill that may provide some relief to a-risk Sarasota real estate/home owners.

Specifically FHA has been authorized to insure up to 300 Billion in new mortgages for at-risk home owners. There is a caveat attached to the bill and not all property owners will qualify..amongst them

• The home owner must have lived in the property since 2007 and the property musts be their primary residence
• The current lender must agree to a principal reduction/pay-off down to 90% of appraised value
• The home owner must be spending a minimum of 30% of his/her current income on their current mortgage/housing
• The home owner must demonstrate that he/she cannot afford their current payments and will lose their property if the loan is not reworked
• After the 'rescue' the home owner will not be able to take out any second mortgages for some time, or refinance the property and if the property is subsequently sold for a gain then that gain may be shared with the government.

Naturally this means for starters that the vast number of properties in distress, namely the 'investments' bought by flippers, which constituted over 40% of our Manatee and Sarasota real estate market activity in 2003-2005 DO NOT QUALIFY.

Nor is there any relief for home sellers who are trying to sell their current home, but find themselves severely 'upside down' and to whom a short sale may be the only option other than foreclosure.

There is also a question of how willing current lenders will be to drop their loan balances to 90% of appraised value, particularly when there have been no foreclosure proceedings initiated and/or the home owner is not past due on the loan.

I guess the coming months will be telling. In the meantime I expect a number of "FHA experts", i.e. mortgage brokers 'specialising' in this new program to crawl out of the wood works in an attempt to capture this opportunity. Amongst them undoubtedly will be a fair share of scammers.

Caveat emptor: If someone is trying to charge you an upfront fee to 'workout' your loan then run as fast as you can! Also, study your good faith estimates and closing statements carefully as many FHA loan originators are collecting unreasonably high yield spread premiums, some as much as 4 or 5%, meaning that the borrower is overpaying severely on their new loan.

I'd love to hear your thoughts and your first hand experiences if you have any;

To Your Success!

Thomas Heimann, President & CEO
BRAVO REAL ESTATE

The S&P/Case-Shiller Home Price Index of 20 cities fell for the 22nd consecutive month in a row.

Numbers released today certainly do not give much rise to optimism. In Florida, Miami posted a 28.3% decline vs. last year, and Tampa posted a 20.2% decline vs. last year. No numbers were available for the Sarasota Real Estate market area.

I am copying below a story that just appeared on CNN/Money (money.cnn.com).

Personally I do not think these numbers represent a big surprise to anyone 'in touch' with the realities of today's real estate markets. Foreclosures - which increased by over 120% over the past year - are beginning to have an impact on market values, both in terms of lower prices due to short sale activity, as well as the increasing number of bank owned / REO properties offered for sale.

Here is the CNN/Money article:

NEW YORK (CNNMoney.com) -- May home prices dropped a record 15.8% from a year ago, according to the S&P/Case-Shiller Home Price Index of 20 cities. It was the 22nd consecutive month of decline recorded by the index. Prices fell 0.9% from April to May.

Each of the 20 metro areas covered by the index posted annual declines; nine posted record lows and 10 cities recorded double-digit drops.

The Case-Shiller 10-city Index posted a year over year decline of 16.9%, and a 1% month over month dip. Both the 10-City Composite Index and the 20-City Composite Index are reporting record annual declines.

"Since August 2006, there has not been one month where we have seen overall price increases, as measured by the two Composites," said David Blitzer, Chairman of the Index Committee at Standard & Poor's.

Case-Shiller has been tracking the 20-city index for 19 years, while the 10-city index is 21 years old. The current price decline streak has been unprecedented in both length and depth. Starting in April 1990, the 10-city index streaked down for 10 consecutive months. But that total loss was just 6.5%.

Since the 10-city index peaked in July 2006, it has plunged 19.8%. The 20-city is down 18.4%.
The 20-city index's Sun Belt cities, which recorded the biggest price gains during the boom, have led the charge down. Las Vegas prices have plummeted 28.4% during the past 12 months; Miami prices fell 28.3%; and Phoenix homes lost 26.5% of their value.

Midwest metro areas, which have endured tough economic times for years, are also feeling the pain. Detroit prices are off 17.4% for the 12 months, and Cleveland is down 8%.

Northeast cities like Boston, down 6.2% for the 12 months, and New York, off 7.9%, have been less volatile than the Sun Belt.

The smallest year-over-year declines were recorded by Charlotte, N.C. (down 0.2%), Dallas (down 3.1%), and Denver (down 4.8%).

The soaring numbers of foreclosures are helping to push down prices. Banks tend to slash prices when selling repossessed homes, since they lose money every month a house sits vacant. They must pay property taxes, maintenance expenses and utility costs while getting nothing back in return.

Those sales, in turn, tend to bring down prices in the rest of a given neighborhood, creating a vicious cycle.

Foreclosures accounted for a large - and growing - share of all existing homes sold in some markets. In California, for example, 40% of the existing homes sold during the three months ended June 30 were foreclosures, according to DataQuick, a real estate information provider. That's up from just 5.4% during the same three months in 2007.

Optimistic observers might point out that price declines appear to be slowing. The 10-city index's 1% month to month dip in May was less than April's, when it registered a 1.5% decline, while the 20-city index fell just 0.9% in May after dropping 1.3% in April.

In the biggest bank failure of the housing downturn to date, federal banking regulators on Friday afternoon closed IndyMac Bank FSB, naming the Federal Deposit Insurance Corp. (FDIC) as conservator.

Based on preliminary estimates, the total cost of this failure to the FDIC will be anywere from $4 Billion to $8 Billion.

For an excellent story please visit Inman News at: http://www.inman.com/news/2008/07/11/feds-close-down-indymac-bank

I just returned from a vacation to Ireland, where last week it was officially declared that Ireland (formerly the fastest growing economy in Europe) is now in a recession.

The real estate market in Ireland, which - fueled by speculation and easy credit - experienced a similar rise to that of the RE market here in the US is also in a sharp decline. Median home values in Dublin are at 353,000 Euros, down 45,000 Euros from the year before. Financing is extremely difficult to come by, with interestingly enough first time buyers having the hardest time getting financing.

Similar reports from all over the EU, Spain especially also very hard hit.

On a global scale it seems the only bright areas are Dubai and Abu Dhabi, both in the United Arab Emirates where prices are still rising rapidly, amid warnings of a bubble.

I think it is fair to say that the current crisis is far from a local one but rather and clearly one of global proportions.

When it comes to real estate investments however, the US may be in a position to reap the benefits of a low US Dollar which makes investments in the US very desirable and with an overall consensus that our real estate market may not be at the very bottom, but certainly 'near the bottom' investing in US real estate is slowly becoming a more and more exciting preposition.

Particularly with respect to bank owned properties and short sales we find both great opportunity for foreign investors as well as the need for an experienced partner to assist foreign investors in their purchase.

Our extensive experience with foreign investors shows that they are not in the least interested in overpaying for traditional MLS listings. Rather they are very sophisticated and knowledgeable about the market and specifically looking for extraordinary 'deals'.

Point in case, last week we closed on a transaction where an investor from Norway found a listing on the Internet for a short sale, and purchased the property sight unseen (other than photos and virtual tour), paying in cash.

I would love to hear your thoughts, and or similar experiences if you are a real estate professional. Clearly the Sarasota Real Estate market offers many great opportunities to investors and I think personally that we will see many more of these types of transactions in the months and year to come.

To Your Success!

Thomas Heimann, President & CEO
Bravo Real Estate Solutions
Bravo Brokers/Bravo Title/Bravo Lending
www.BravoBrokers.com

The following is an excerpt from an article published in the NY Times and reprinted in the Sarasota Herald Tribune. I think that this will be a true landmark case (similar to the first suits against tobacco companies) with more to follow. The question that presents itself is "how much responsibility do lenders like Countrywide have for the current mortgage and real estate crisis"? Your thoughts are as always welcome.

Thomas Heimann, President & CEO
Bravo Real Estate Solutions
Bravo Brokers/Bravo Title
http://www.bravobrokers.com/

Here is the full article:

The Illinois attorney general is suing Countrywide Financial, the troubled mortgage lender, and Angelo R. Mozilo, its chief executive, contending that the company and its executives defrauded borrowers in the state by selling them costly and defective loans that quickly went into foreclosure.

The Illinois attorney general is suing Countrywide Financial, the troubled mortgage lender, and Angelo R. Mozilo, its chief executive, contending that the company and its executives defrauded borrowers in the state by selling them costly and defective loans that quickly went into foreclosure.

The lawsuit, which is expected to be filed on Wednesday in Illinois state court, accused Countrywide and Mr. Mozilo of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its heavily advertised “no closing costs loan.” Countrywide also created incentives for its employees and brokers to sell questionable loans by paying them more on such sales, the complaint said.
In reviewing one Illinois mortgage broker’s sales of Countrywide loans, the complaint said the “vast majority of the loans had inflated income, almost all without the borrower’s knowledge.”
The civil lawsuit asks for an unspecified amount of monetary damages and requests that the court require Countrywide to rescind or reform all the questionable loans it sold from 2004 through the present. The attorney general, Lisa Madigan, also asked that Mr. Mozilo contribute personally to the damages and that the court give her office 90 days to review loans serviced by Countrywide that were in foreclosure or soon would be.

“People were put into loans they did not understand, could not afford and could not get out of,” Ms. Madigan said. “This mounting disaster has had an impact on individual homeowners statewide and is having an impact on the global economy. It is all from the greed of people like Angelo Mozilo.”

The lawsuit adds to the considerable legal risks facing Bank of America as it prepares to absorb Countrywide in a takeover announced in January. Countrywide and its executives have been named as defendants in shareholder lawsuits, and the company’s practices are the subject of investigations by the Securities and Exchange Commission, the F.B.I. and the Federal Trade Commission, which oversees loan servicing companies.

The United States Trustee, a unit of the Justice Department that monitors the bankruptcy system, has also sued Countrywide, contending that its loan servicing practices represent an abuse of the bankruptcy system.

Countrywide did not respond to an e-mail message seeking comment. A Bank of America spokesman declined to comment.

Countrywide, once the nation’s top mortgage lender, has watched its fortunes plummet as the housing crisis has spread across the country. In the last three quarters, the company reported $2.5 billion in losses, and in the first quarter of 2008, total nonperforming assets reached $6 billion, almost five times that of the same period last year.

When Bank of America announced its stock-for-stock deal to buy Countrywide, the acquisition was valued at more than $4 billion. Because shares of both companies have fallen, the transaction is worth $2.8 billion.

The Illinois complaint was derived from 111,000 pages of Countrywide documents and interviews with former employees. It paints a picture of a lending machine that was more concerned with volume of loans than quality.

For example, former employees told Illinois investigators that Countrywide’s pay structure encouraged them to make as many loans as they could; some reduced-documentation loans took as little as 30 minutes to underwrite, the complaint said.

The lawsuit cited Countrywide documents indicating that almost 60 percent of its borrowers in subprime adjustable rate mortgages requiring minimal payments in the early years, known as hybrid A.R.M.’s, would not have qualified at the full payment rate. Countrywide also acknowledged that almost 25 percent of the borrowers would not have qualified for any other mortgage product that it sold.

Even more surprising, Ms. Madigan said, was her office’s discovery of e-mail messages automatically sent by Countrywide to its borrowers offering complimentary loan reviews one year after they obtained their mortgages from the company.

“Happy Anniversary!” the e-mail messages stated. “Many home values skyrocketed over the past year. That means that you may have thousands of dollars of home equity to borrow from at rates much lower than most credit cards.”

Ms. Madigan said, “I was just struck that on the first anniversary of these people’s loans they would get these e-mails luring them into a refinance, into another unaffordable product to generate more fees and originate more loans.”

The complaint also described dubious practices in Countrywide’s huge servicing arm, which oversees $1.5 trillion in loans. For example, an Illinois consumer whose Countrywide mortgage was in foreclosure came home to find that the company had changed her locks and boarded up her home, the suit said, although no judgment had been entered and no foreclosure sale conducted. It took a week for the homeowner to regain access to her home, the complaint said.
Ms. Madigan began investigating Countrywide after her office sued One Source Mortgage, a Chicago mortgage broker that shut down last year. Countrywide was One Source’s primary lender, according to that lawsuit. Ms. Madigan also said that her office had received 200 customer complaints about Countrywide.

For 2004 through 2006, Countrywide was the largest lender in Illinois, selling about 94,000 loans to consumers in the state, the complaint said. The company operated about 100 retail branch offices in Illinois and its loans were offered by many mortgage brokers licensed to do business there. Countrywide also purchased loans through a network of 2,100 correspondent lenders in the state.