What’s going on in the economy?

 GDP was -.5% in the 3rd quarter, Consumer Confidence moved up from 38.8 in October to 44.9 in November, and the Case Shiller Home Price Index for 20 U.S. Cities Declined 17.4% in September from a year earlier. But the big news yesterday was the Fed’s announcement mentioned above. This morning we’ve seen that MBA mortgage applications are out with a 1.5% increase last week. Purchases were +5.3% and refinances were -2.1%. Durable Goods orders (items lasting 3 or more years) plummeted in October by 6.2%, double what was expected, and was the largest drop since October of 2006. Jobless Claims fell by 14,000 last week to 529,000 in the week ended Nov. 22 from an upwardly revised 543,000 the previous week. And consumers cut spending during October by 1.0%, the steepest rate in more than seven years. Given that consumer spending accounts for two-thirds of economic activity in the US, this is significant.

 

Thanks to Bob Hagerty of the Wall Street Journal for the great stats.

FHA new down payment and loan limits

 2009 FHA Loan Limits

The 2009 FHA loan limits are calculated at 115% of the area median sales price.  For 1-unit, the FHA floor remains at $271,050 and the ceiling is now at 150% of the conventional floor, or $625,500.  Below is a table illustrating the 2009 FHA loan limit Floor and Ceiling:

 

2009 FHA Loan Limits
	1 – Unit	2 – Units	3 – Units	4 – Units
Minimum (Floor)	$271,050	$347,000	$419,000	$521,250
Maximum (Ceiling)	$625,500	$800,775	$967,950	$1,202,925
Alaska & Hawaii	$938,250	$1,202,150	$1,451,925	$1,804,375

 

 In order to determine the FHA Loan Limit for your area, please follow the link below, type in County where your property is located and click on the “down arrow” next to “Limit Year” and select “CY2009” before you click on “Send”.  This will bring up the FHA Mortgage Limit in your desired area for 2009.

 

https://entp.hud.gov/idapp/html/hicostlook.cfm

 

 FHA Down Payment Requirements

Effective with new case number assignments on or after January 1, 2009, the minimum down payment requirement on purchase transactions increases to 3.5% (from 3%) of the lesser of the appraised value or sales. This amount is in addition to any borrower closing costs.

 This change eliminates the previous loan-to-value limits that varied by property value and average closing costs for the state.

 For all refinance transactions, including streamline refinances, the maximum loan-to-value is 100% of the appraised value, including the financed upfront mortgage insurance premium.

 The new down payment requirements only apply to FHA 203(b), 234(c), and streamline refinance loan programs.

When is Bankruptcy the Answer?

Filing for bankruptcy becomes a viable option when an individual’s cash flow is “upside down” with no reversal in sight. But before proceeding, it’s important to first look at the structure of one’s assets and liabilities. For many homeowners, an experienced and qualified mortgage professional may be able to help them restructure debt and avoid bankruptcy altogether.

If this isn’t possible, then it’s critical not to let negative cash flow go on for too long. Instead, quickly seek references for a reputable bankruptcy attorney and a credit counselor. One of the worst mistakes consumers make is to borrow more money in an attempt to pay off debts.

When declaring bankruptcy, it is important to be very accurate and honest in one’s filing, especially when it comes to any recent changes in income. Remember, a bankruptcy hearing is a federal proceeding, complete with courts, judges, and representatives who coordinate with the Department of Justice, the FBI, and the IRS.

During the proceeding, homeowners should develop a budget and try to live below their means. They should use this time to save cash as well as examine the causes of their bankruptcy. Also, they should keep organized, saving all their paperwork and taking note of their discharge date. Having this information on hand will prove extremely useful in the future.

Once the bankruptcy is final, it’s time to begin rebuilding credit. Secured credit cards are an excellent place to start. This is also a good time to hire a reputable credit repair specialist who can offer advice regarding the best ways to re-establish credit. There is definitely life (and credit) after bankruptcy. The trick is to get the help and advice you need from professionals you trust.

Credit Markets loosing??? Kinda

Funny thing happened Friday on Wall Street.  There were 240,000 jobs lost in October, bringing the unemployment rate to a 14-year high of 6.5%. That was up from 6.1% the month before as the decline in October payrolls marked the 10th consecutive monthly loss.  But somehow stocks managed to rally despite the weak economic data and some poor earnings reports.  Friday’s surge comes after the worst two day drop since 1987 on Wednesday and Thursday.   

The carnage in the automobile sector continues.  Ford Motor Co. (F, $2.02, +0.04) reported a $129 million third-quarter loss and announced plans to cut more than 2,000 additional white-collar jobs. General Motors Corp. (GM, $4.36, -0.44) said it lost $2.5 billion in the quarter and warned it could run out of cash in 2009. The struggling automaker also said it has suspended talks to acquire Chrysler. 

 

The real story is the cash burn rate for the two automakers.  Ford said that it burned through $7.7 billion in cash during the quarter, leaving its reserves at $18.9 billion.  GM had a cash burn rate of $6.9 billion for the quarter and has $16.2 billion in reserves.  That money won’t last long if the losses persist, just do the math.  Take a look at the sock prices. 

 

Crude oil fell almost 10% this week closing at $61.04/barrel as demand continues to slow around the globe given the current recession.  The drop in oil has contributed towards lower gasoline prices as they fell for the 52nd straight day, according a survey released Saturday by the motorist group AAA.  The average price of regular unleaded decreased to $2.282, a 3.2 cent drop from Friday.  Prices have dropped 44.5%, or $1.83, from their record high of $4.11 a gallon set July 17. 

 

Gold closed at $734.20 up almost 3% for the week.  The yield on the 10 Year T Note, which moves opposite its price, was 3.79% 

 

Libor fell again suggesting that banks are more willing to lend to one another — a positive signal for the tight credit markets. The Libor, for three-month loans in dollars dropped for the 20th straight day by 0.10% to 2.29%, the lowest level since November 2004.  Futures on the Chicago Board of Trade showed a 97% probability that the Fed will cut the Fed funds Rate to .50% from 1% percent at its Dec. 16 meeting, compared with 55% odds a week ago.

 

Thanks to the Mortgage Market Guide for the great info.  A must have for all advisors.

Ways to improve credit score

With identity theft on the rise, consumers are becoming increasingly aware of the importance of reviewing their credit reports. However, their thoughts about credit and its long-term impact upon their financial future typically end there until it’s time to apply for a home loan. A credit score is used to evaluate how likely a borrower is to repay their loan. There are several actions a person can take to impact their score. Here are a few to keep in mind.

If someone has a credit card which has a high balance, while their remaining credit cards have low or zero balances, it’s best to distribute the debt across the cards in order to change the ratio of debt to available credit.

Many consumers believe that they should close an existing credit card account if the card is inactive. It’s better to keep the account open and use it periodically in order to take advantage of its contribution to their long-term credit history.

With the flood of credit card offers that come in the mail, it may be tempting to open new accounts. However, these “pre-approved” offers are not approved until the companies run a credit report which will temporarily impact the applicant’s credit score. In addition, experts recommend that a person maintain between two to five credit card accounts, total, so it’s best to avoid accumulating too many.

There are several factors that contribute to a credit score. But by observing the tips above, as well as making payments on time and keeping balances as low as possible, a consumer is sure to achieve superior results