President Bush on Wednesday signed into law a housing bill that aims to boost the housing market and solidify mortgage finance giants Fannie Mae and Freddie Mac. Click here to read about Fannie & Freddie.

A larger role for the Federal Housing Administration: The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes’ current appraised value.

A permanent increase in “conforming loan” limits: The law will permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000.

A new home-buyer credit (more like a loan): The new law includes a tax refund for first-time home buyers worth up to 10% of a home’s purchase price but no more than $7,500.  BUT this is more like an interest-free loan, since it would have to be paid back. You get 15 years to do so.

A ban on down-payment assistance from sellers: The new law eliminates a program that has allowed sellers to provide down payment assistance for FHA loans. The law would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.

A new affordable housing trust fund: The law establishes a permanent fund to promote affordable housing. The fund will be paid for by fees from Fannie and Freddie.

Grants to states to buy foreclosed properties: The law grants $4 billion to states to buy up and rehabilitate foreclosed properties.

FHA foreclosure rescue: Development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008. Simple math:

VA loan limits: Temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.

Risk-based pricing: Stops FHA from using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.

Mortgage Revenue Bond Authority: Authorizes $10 billion in mortgage bonds for refinancing subprime mortgages.

New Loan Originator Requirements: Strengthens the existing mortgage originator licensing and registration system to prevent fraud and will require minimum licensing and education requirements.

The new housing rescue bill signed Wednesday takes aim to bolster Fannie Mae and Freddie Mac.  In a late additon to the bill, the law allows authority for the Treasury to lend a financial hand to Fannie Mae and Freddie Mac if it deems it necessary to help stabilize markets.

The law includes provisions that let Treasury offer Fannie and Freddie an unlimited line of credit and buy stock in the companies. The provisions expire in 18 months.

The riskier loans (enter any synonym for sub-prime here) went to Wall Street for investors.  And here’s where it hit the fan.  Take a company like Countrywide who’se modus operandi was sell a loan at any cost with no regard for the client. (watch video here)  Well, investors were well fed right up until many of the loans turned sour and they became less than a great investment - ask Bear Stearns how that worked out, and the money dried up.

So, if the sub-prime as we knew it is gonzo and Fannie and Freddie can’t write the prime loans…that doesn’t leave many mortgage options for most Americans.  And if we think this current little “hiccup” has torched the economy, wait until that happens.

So, no, the Treasury will never let Fannie & Freddie fall, hence the unlimited lines of credit, etc. 

While it is impossible to say this year has been less than encouraging as far as the real estate market goes, let’s move past the obvious and really look at the figures.  The fact remains, that while overall Rhode Island is considered a declining market, 1/3 of the state’s cities and towns are actually appreciating in value.  And, while the rest of the state’s areas are down as a whole, there are pockets of these towns that are more than holding their own.  Real estate is local.  There is no national weather forecast.  There is no national real estate market, and even within Rhode Island the same is true.

Comparing the first half of last year to the first half of this year shows an overall decline in homes sold as well as sold price.  But, suprisingly, we see a spike in the condo market.  Not only did more units sell (300), they closed for a higher amount than the previous year! 

Why the move to condos? There are a lot of reasons why condos have been so preferable.  First, there are more newer condos than newer homes on the market.  The ration of condos under five years old on the market is roughly 40% of the inventory compared to 16% of single family homes.  So, if less maintenance is a factor in buying, condos have that covered.  Also, downsizers and new home buyers have shifted attention to condos.  Condo prices are smaller than the single family homes, and the first time buyer stil gets the tax rewards of home ownership.  As most people in this economy are two incom families, the maintenance issue looms large.  This factor is echoed by the downsizers.  No more mowing, painting and snow shovelling has its rewards!

We’ll see how the rest of the year plays out.  As always, these figures will be updated monthly.

On the eve of the merger by Bank of America to bail out the shareholders of Countrywide, even more evidence of greed, self-serving, and morally bankrupt behavior from the nation’s largest lender reared its head.  In the following NBC video, a Countrywide employee pretty much confirms the worst fears of borrowers across the country; that their mortgage institution could not have cared less about them.  Closing deals was the only thing that mattered, regardless of who was placed in financial jeopardy to accomplish this.  For the record, Countrywide founder and Chief Executive Angelo Mozilo is being sued from every direction he turns.  From borrowers in California and Illinois looking for restitution, to the US Government looking for answers on how he had the “foresight” to sell millions of dollars in shares just before the bottom fell out and their value plummetted.

Original Airdate - April 2008. I featured a home in Cumberland, Rhode Island. A charming Colonial with some fantastic features. Wait until you see the master suite!

Ralf Cioffi and Matthew Tannin, now infamously former hedge fund managers at Bear Stearns are in no danger of being asked to appear on Jeopardy! any time soon.  These men haven’t exactly fallen prey to a Danny Ocean caliber plan to catch them in the act of looting their clients out of billions of dollars.  No, all someone had to do was check their email outboxes. Brilliant.   So, while Moe and Larry were telling their enormously high net worth clientele to stay the course with the volatile hedge funds that centered on sub prime mortgage investments, they were taking their own funds out. “The subprime market looks pretty damn ugly,” Tannin wrote to Cioffi in April 2007. If Bear’s internal reports were accurate, Tannin suggested, “I think we should close the funds now,” and “the entire subprime market is toast.” The situation became so dire that Cioffi pulled $2 million of his own cash from the fund, but the pair still told investors that they should stay in and that the outlook was good, prosecutors said.  The indictment describes a meeting of Cioffi, Tannin and two unnamed colleagues in which Cioffi confided the hedge funds had narrowly “averted disaster” in February 2007 — news that “led to a vodka toast to celebrate surviving the month.“The complaint says Tannin expressed doubt about Cioffi’s management in one e-mail last March to a third fund manager with only question marks in the subject line. The e-mail said, “Is Ralph doing what he should be doing right now?”Around the same time, Cioffi wrote to a Bear Stearns economist: “I’m fearful of these markets. … As we discussed it may not be a meltdown for the general economy but in our world it will be. Wall Street will be hammered with lawsuits.”Tannin and Cioffi were repeatedly telling investors and Bear Stearns brokers responsible for selling funds that the outlook was good.  In once instance, prosecutors said, Tannin encouraged an investor to add money to the fund and said he would do the same, but never did.The Bear Stearns hedge funds had more than $20 billion in assets before collapsing in June 2007. Just before the collapse, Cioffi fretted in an e-mail that “I’ve effectively washed a 30-year career down the drain” if he couldn’t turn things around, the indictment said.For the record, their attorneys are “perplexed” as to why their clients are being made into scapegoats.  I guess they aren’t on Cioff andTannin’s group email list.

The DEM estimates that 50,000 cesspools still exist and contribute to pollution of drinking water and water in beach areas, which is why it filed legislation to inspect and replace failed cesspools that are located near key water resources.  Cesspools are considered substandard systems. They don’t treat wastewater, they merely dispose of it.

In contrast, conventional INDIVIDUAL SEWAGE DISPOSAL SYSTEM, (ISDS) AKA septic systems place the wastewater well above the level of soils saturated by groundwater and they disperse over a large area, which results in substantial removal of pollutants. Although DEM has not yet written the regulations to enforce all provisions of the new law, if you are buying a property that is currently served by a cesspool – you should determine whether your property is subject to this law high risk areas include within 200 feet of a public drinking well, surface drinking water supply, or inland edge of a shoreline bordering a tidal water area.

The mandatory Disclosure form that sellers sign has been revised to inform buyers about the new cesspool law and their right to an inspection. Buyers will have 10 days to have a cesspool inspected if they wish. 

Failed cesspools in high risk areas must be replaced within one year after failure with an ISDS system or linked to a sewer system where available All non-failed cesspools that are located in high-risk areas, will need upgrade to an ISDS by 2013 if in a non-sewered area or, if located on a sewer stub, must tie into a sewer within one year of the sale of any property that is in a sewered area. Some communities, such as South Kingstown, Charlestown, and Block Island have adopted local ordinances that are stricter than this legislation, so make sure to check local requirements as well.

In studio with the boss - Sally Lapides, discussing condo alternatives for first time home-buyers, and pretty much everything related to Rhode Island real estate.  As we gear up for Green Week Sally interviews our guest, organizer expert and author Candita Clayton who just wrote a book titled, “Clean Your Home Healthy, Green Cleaning Made Easy“.  Click the play button below to hear a cut and you can listen to the entire podcast right here!

 

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Original Airdate - March 2008.  I featured a home in Cranston, Rhode Island.   A beautiful Colonial with an unreal amount of landscaping and upgrades!