Obama To Announce Housing Plan This Week

(Wall St Journal) The Obama administration this week will announce a "good, solid" plan with the goal of stemming mortgage foreclosures and putting a floor under falling real estate prices, a senior White House aide said on Sunday.

Speaking on "Fox News Sunday," senior adviser David Axelrod said the plan that President Barack Obama plans to announce on Wednesday will aim to stem foreclosures, provide immediate help to homeowners who are "right on the edge" of foreclosure, and ultimately help in "raising home values that have been plummeting."

David Axelrod speaks on "Meet the Press." Mr. Axelrod pressed the Obama administration's housing plan on the Sunday morning talk shows.

Mr. Obama plans to unveil his housing plan during a visit to Phoenix. As part of his swing through western states, he is set to stop in Denver Tuesday, when he will sign the $787 billion economic-stimulus plan just passed by Congress.

Mr. Axelrod provided few details of the housing plan, but said a government investment of $50 billion to $100 billion to fund foreclosure prevention "is obviously a necessary part." He promised that the plan would contain "a lot of aspects."

In a later appearance on NBC-TV's "Meet the Press," he cited a letter Mr. Obama recently read from an Arizona homeowner as an illustration of the problem. "He showed me a letter the other day that was just heart wrenching from a woman in Arizona whose husband lost his job," Mr. Axelrod said. "He now has a job that's one-third the pay and they're really struggling to make their payments and meet their responsibilities. And she was emblematic of people all over this country."

One likely element of the plan would reduce Americans' payments on troubled mortgages, people familiar with the discussions said late last week, possibly through a cut in the interest rate, the costs of which would be shared by the government and mortgage servicers. Government officials would make the reduction available to people who are at risk of defaulting. A loan-modification program at government-backed Fannie Mae and Freddie Mac currently calls for holding monthly housing-related payments to 38% of pretax income. The new formula is likely to be as low as about 31%, according to some people.

In addition, the administration is expected to endorse a plan to allow judges to modify mortgages during bankruptcy proceedings in some circumstances, a move long opposed by the mortgage industry. And it could push measures that would remove some contractual obstacles that hinder mortgage servicers from modifying troubled loans. Pending any announcement, the country's three largest mortgage lenders are putting a temporary halt on foreclosures.

In his Sunday TV appearances, Mr. Axelrod reiterated the Obama administration's commitment to keeping the U.S. auto industry alive, but underscored that all parties involved in negotiations over restructuring need to be open to making concessions. General Motors Corp. and Chrysler LLC must submit their plans for returning to financial viability on Tuesday, as a condition for having received federal loans.

The companies also are seeking more money to help them get through the current recession. However, GM and the United Auto Workers union have not made much progress so far in their negotiations to reduce the auto makers' labor-related costs.

Mr. Axelrod suggested that investors in the auto makers should also make concessions. "We need a thriving auto industry in this country," he said on Fox, citing the "millions" of jobs that depend on the sector. "We have a vested interest." But he added that "everyone is going to have to continue to work toward a solution. … There is going to have to be a restructuring."

Mr. Axelrod celebrated the stimulus bill's passage, saying it reflected the president's goals and his initial $775 billion target. But he also sought to lower expectations that the stimulus bill would have a big impact immediately, repeating the administration's message that the economy "is likely to get worse before it gets better."

On "Meet the Press," he held out hope that the just-passed legislation ultimately could prevent the unemployment rate from reaching 10%, as some economists expect. "The trajectory is horrible," he said. "This should help put the brakes on that and slow it down."

Mr. Axelrod also defended the administration's plans for shoring up the financial system. Treasury Secretary Timothy Geithner last week unveiled the plan, which provides a fresh round of capital injections for banks, more Federal Reserve lending and the establishment of a public-private venture that would buy troubled assets from banks. But critics and the markets were disappointed in its lack of detail. Mr. Axelrod said Mr. Geithner will be developing specific tactics to implement the plan "in the coming weeks."

"We're going to get this right," Mr. Axelrod said. "We can't gauge our success on one day of fluctuations in the stock market."

In response to a question about a possible government takeover of major U.S. banks, he didn't rule out deeper government intervention. "We will do what we need to do, but our long-term goal is to have a strong private sector banking and financial system," he said on Meet the Press.

On ABC's This Week, Sen. Lindsey Graham (R., S.C.) suggested that nationalization isn't out of the question.

"I think if you put most of our major banks under a stress test" as the administration plans, "they're going to fail," he said. "I would not take off the idea of nationalizing the banks."

But Sen. Charles Schumer (D., N.Y.) said government takeover is not a good idea. "I would not be for nationalizing," he said. "I think government's not good at making these decisions as to who gets loans and how this happens."

As part of the economic-stimulus plan, Congress inserted sharp limits on compensation for executives whose firms receive government bailout funds. Mr. Axelrod said the administration would revisit those limits; other officials have said the administration wants to make the limits less onerous so that banks could retain talented executives.

Mr. Axelrod suggested that the president would soon sign an executive order lifting the ban on federal funding for embryonic stem cell research, which had been imposed by former President George W. Bush.

Senate Proposes $15K Tax Credit For 1st Time Homebuyers

$15,000 Tax Credit as Part of Senate Approved First Time Home Buyer Stimulus Package

A $15,000 First Time Home Buyer Tax Credit is Part of newly approved Senate Proposal. Read the full article here.

A New Type of Credit Score

A New Type of Credit Score
What's this new VantageScore credit score I've started to hear a lot about? Will that replace the FICO score?

By Kimberly Lankford

The three credit bureaus -- Experian, Equifax and TransUnion -- introduced the VantageScore last week to compete directly with the FICO score. But it will take a while before the new score takes over the marketplace.

Most lenders continue to use the FICO score -- developed by Fair Isaac -- when setting your interest rates. You actually have three versions of the FICO score, based on your credit report from each of the bureaus. Most mortgage lenders look at all three of your scores and use the middle one. That's why it's important to get a copy of all three of your credit reports to make sure they're accurate, which you can do free every 12 months at AnnualCreditReport.com.

But those credit reports don't include your score -- you'll have to pay extra for that. Plus, most don't provide your FICO score. Instead, they send out their own proprietary scores that are on a different scale. These scores are based on similar criteria to the FICO score and can give you a general idea how your credit history stacks up, but they aren't the same score that most lenders use (although some credit card and auto lenders are starting to use Experian's PLUS score). TransUnion sends its own credit score, called the TrueChoice score. And Equifax is the only credit bureau to provide the FICO score from its Web site. You also can order your FICO score, based on all three reports, from.

Having all of these different scores became confusing, so the three credit bureaus came together recently to offer one score, the VantageScore, which they hope will compete with the FICO score.

The VantageScore is on an easy-to-understand letter grade scale -- with scores ranging from 501 to 990, the higher the better. A score of 901 to 990 equates to a grade of A, 801 to 900 equals a B, and so on down to 501 to 600, which is an F. The score can vary a bit based on each of your credit reports, so it's still important to check out all three reports for errors. But the methodology will be the same across all three credit bureaus.

The new score was just introduced last week, and adoption is gradually moving along. The credit bureaus plan to replace the proprietary scores at their Web sites with the VantageScore over the next few months, but right now they're focusing on marketing the score to lenders. Keep an eye out on the VantageScore Web site over the next few months for more details and an explanation of how the score works and what to do to improve it.

The FICO score continues to dominate the market, though, so it's a good idea to check out MyFico.com to see what you can do to improve your score. Also check out my column archives online, Ask Kim, such as Boost Your Score, for strategies on improving your financial standing.

Home Prices Post 18 Percent Annual Drop

NEW YORK — A closely watched index shows home prices dropped by the sharpest annual rate on record in October.

The Standard & Poor's/Case-Shiller 20-city housing index released Tuesday fell by a record 18 percent from October last year, the largest drop since its inception in 2000. The 10-city index tumbled 19.1 percent, its biggest decline in its 21-year history.

Both indices have recorded year-over-year declines for 22 straight months. Prices are at levels not seen since March 2004.

Prices in the 20-city index have plummeted more than 23.4 percent from their peak in July 2006. The 10-city index has fallen 25 percent since its peak in June 2006.

None of the 20 cities saw annual price gains in October _ for the seventh consecutive month.

Mission Critical: Support for Government-Supported Mortgage Entities, Exec Says

As homeowners and home buyers struggle through today’s tumultuous housing market, government support for the mortgage market is needed, now more than ever, to take the lead in stabilizing the turbulence of this market.

This is particularly true given the apparent demise of the Government-Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. Unlike private lenders who have all but abandoned the nation’s housing markets, now and historically, the GSEs have stepped up to become the only reliable source of funding for home loans.

Even with enormous amounts of fresh capital, the surviving private mortgage conduits have totally failed to provide any meaningful flows of jumbo mortgages-the results have been record spreads to the treasury rates and rationed or unavailable loans. Fortunately, despite their financial difficulties and an antagonistic administration, Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) are still providing mortgages and now account for an unprecedented proportion of home loans in today’s market.

Going forward, the role of such government-supported mortgage entities will be critical. If in the past, Fannie and Freddie’s role was muted due to their propensity to help lenders at the expense of borrowers, they still always made a market and acted as a counter-cyclical weight to housing downturns. The successor to today’s GSEs must be successfully positioned to fulfill this role as well.

Some argue that GSEs, or any government support for housing, poses too great a risk to the overall economy. Certainly, the massive leverage of the recent past, when coupled with unsafe instruments and totally insufficient underwriting, cannot be condoned. Yet, it is also clear that the growth in homeownership opportunities for millions of American families were a direct outgrowth of the strength of the GSEs.

The new entities need to avoid the mistakes of the recent past, yet continue to focus on the mission of creating homeownership opportunities, particularly for the underserved and for those aspiring to purchase their first home. Simply put, the successors to Fannie and Freddie need to focus on originating affordable and safe purchase money loans and steer clear of complex exotic capital instruments. Any subprime lending must be accompanied by responsible, realistic underwriting and clear consumer understanding.

The basic question is, where would the economy be if there was an even more restricted supply of capital for today’s housing market? Ask any Realtor or real estate professional and they will tell you that buyers today have a tremendous opportunity to find and purchase the right home, yet their only realistic hope for financing is through a GSE- or an FHA-insured loan.

Without GSEs, today’s housing market woes would be amplified several times over and would stretch into the foreseeable future. The critical issue now is how the GSEs are restructured. Our greatest challenge is to ensure the availability of mortgage capital.

We are optimistic that, with the assistance and support of their new regulator and the U.S. government, a viable successor to Fannie and Freddie will emerge from these trying times stronger than ever.

Mortgage Aid Plan Is Praised

(Omaha.com) A national plan outlining ways lenders can more swiftly renegotiate delinquent home loans should help stem local foreclosures, said two Omahans who assist struggling homeowners.

Federal officials on Tuesday announced a simpler and quicker procedure for modifying loans held by mortgage giants Fannie Mae and Freddie Mac. The officials expressed hope that it would be adopted by the entire industry.

The plan is to begin by Dec. 15.

"I'm very grateful that they are moving this quickly, because the other stuff that has been available has not reached the majority of borrowers," Julie Kalkowski said.

Kalkowski is managing director of the nonprofit Financial Stability Partnership, an initiative sponsored by United Way of the Midlands and the University of Nebraska at Omaha. She also is co-founder of Go! Hope, the Greater Omaha Home Ownership Preservation Effort.

In recent weeks, major mortgage lenders such as Citigroup, JPMorgan Chase and Bank of America have announced their own plans to address delinquencies. Hope Now, an alliance of mortgage companies, was organized last year by the Bush administration.

But the federal plan announced Tuesday is the most sweeping effort yet to help troubled homeowners.

"I think the thing that is different about this (from previous efforts) is it's a consensus and it's coming down from higher up — it's actually coming down from housing officials," said Don Leu, president and chief executive of Consumer Credit Counseling Service of Nebraska.

Leu said the program will help inject stability into the system and give consumers a plan they can understand. For example, he said, individual lenders handle attempts to work out delinquent loans differently, so agencies such as his don't know what to expect and find inconsistent results.

In some cases, the outcome depends on the person at a lending company who answers the phone, Leu said. He cited a recent example in which someone at a lender's service department provided a payment plan that was impossible for the homeowner to meet. A follow-up call to a different person in a different department yielded a "wonderful" plan that worked for the homeowner, he said.

The federal plan aims to reduce the paperwork and other documentation required to rework mortgage loans, said James B. Lockhart, director of the Federal Housing Finance Agency, which runs Fannie Mae and Freddie Mac since the government took them over in September. To encourage mortgage services to participate, they will receive $800 for each loan that is modified.

The plan targets people who have missed three or more mortgage payments, live in the home and have not filed for bankruptcy protection.

The goal is to make the payments more affordable — defined as no more than 38 percent of a household's monthly gross income — by reducing the interest rate, deferring payments on part of the principal and extending the term of the loan to as long as 40 years.

Struggling homeowners who don't meet the guidelines would be eligible for a special review, although anyone who intentionally defaults on a loan in order to get it modified would be disqualified, officials said.

Fannie and Freddie own or guarantee about half of U.S. home loans.

More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.

Leu said it is difficult to know how many people locally the work-out plans could affect. "Nobody knows for sure — they are hard numbers to get," he said.

Available numbers indicate that Nebraska and Iowa continue to have some of the lowest foreclosure filing numbers nationally.

According to mortgage research company RealtyTrac, Nebraska ranked 50th in the nation in September in the number of foreclosure filings, with 38. That was a 91 percent drop from the same month a year ago. Iowa ranked 42nd with 386 foreclosure filings in September, a nearly 50 percent drop from the same month a year ago.

Nationally, foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 265,968 properties in September, a 12 percent decrease from the previous month but still a 21 percent increase from September 2007, according to RealtyTrac.

"Much of the 12 percent decrease in September can be attributed to changes in state laws that have at least temporarily slowed the pace at which lenders are moving forward with foreclosures," James J. Saccacio, chief executive officer of RealtyTrac, said in a press release.

Despite the slower pace, the nation continues to struggle with the worst housing recession in decades.

Kalkowski of the Stability Partnership and Go! Hope said she was relieved that federal officials decided to make the plan effective in December rather than waiting until the new administration is in place in January or later.

"It's better to be pro-active," she said.

Leu agreed.

"I'm happy with the timing of it," he said. "I wished they would have done it even earlier. But when you're working with such a large problem, you have to take it one step at a time."

However, Federal Deposit Insurance Corp. Chairman Sheila Bair said the new plan " falls short of what is needed."

Bair has said the government needs to do more to help tens of thousands of home borrowers avert foreclosure.

Regulators urge banks to fight crisis by lending

WASHINGTON – (AP) Federal bank regulators, seeking to address criticism about the government's $700 billion bailout plan, have issued new guidance to banks encouraging them to continue lending to credit worthy borrowers.

The guidelines, issued Wednesday by the Federal Reserve and three other federal banking regulators, also encourage institutions to work with mortgage borrowers to avoid defaults. In addition, the guidelines encourage the banks to set dividend payments for shareholders and compensation for executives with the current crisis in mind.

The guidelines seek to address criticism that banks obtaining funds from the $700 billion rescue plan could simply use the money for their own purposes rather than helping struggling homeowners and the overall economy.

Critics are concerned that banks, which are getting $250 billion through government purchases of their stock, are not using the money to boost lending to customers, one of the main reasons why the economy is in a crisis.

"If underwriting standards tighten excessively or banking organizations retreat from making sound credit decisions, the current market conditions may be exacerbated, leading to slower growth and potential damage to the economy," according to the regulators' guidance.

The Fed, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and Office of Thrift Supervision said all financial institutions were expected to follow the new guidelines, even those not receiving federal assistance.

Citigroup Imposes Moratorium On Foreclosures

NEW YORK – (AP) Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes — making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages.

Citi said late Monday it won't initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower's principal residence, the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.

Citi said it is also working to expand the program to include mortgages the bank services but does not own.

Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.

Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout.

Of the four biggest U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. — Citi has been on the shakiest footing as a result of the mortgage crisis, reporting losses in the past four consecutive quarters while its rivals have managed to post profits. The steps announced Monday are designed to stem those losses.

"Typically the lender loses the most money when a house goes into foreclosure," said Barry Zigas, director of housing policy at the Consumer Federation of America. "(The lender) takes some kind of loss that's usually much greater than what they sacrificed through some kind of workout."

Sanjiv Das, chief executive of CitiMortgage, said, "It is in our interest that borrowers stay in their homes and actually make the payments."

Citi is targeting homeowners in geographic areas with higher-than-average unemployment and foreclosure rates, primarily in Arizona, California, Florida, Michigan, Ohio and Indiana, Das said. The program is expected to affect about $20 billion in mortgages.

"As the unemployment rate is starting to creep up on us, there is going to be increasing distress in the marketplace," Das said in an interview with The Associated Press. "It's not going to distinguish between what type of mortgage they have."

"There is a huge amount of anxiety among borrowers," he said. "We will reach out to them before they become delinquent."

Since early last year, Citigroup has helped about 370,000 families avoid foreclosure, representing more than $35 billion in loans, the bank said.

Citi has avoided negative amortization loans, option adjustable-rate mortgages, and other types of risky mortgages, defaults on which have skyrocketed since the start of the housing bust in the middle of last year. Still, the bank has nonetheless been hurt by the relentless downturn in housing that fed the mortgage and credit crisis, and in turn, the near-breakdown of the financial system.

With defaults mounting, other lenders, including JPMorgan and Bank of America, have also become more aggressive about modifications to mortgage agreements.

But a moratorium only solves so much, according to Zigas. "A moratorium on foreclosure will be effective at stopping foreclosure, it won't be effective at stopping the underlying reasons of why people are in trouble," he said.

By taking a proactive approach, Citigroup isn't waiting until it's too late to deal with delinquent borrowers, said Steve Curnutte, president of InsBank Mortgage in Nashville, Tenn. However, the problem is growing faster than most banks can handle, he said.

"It's nearly an insurmountable undertaking," said Curnutte. "The number of bad loans that they can modify using their resources is being quickly outstripped by the number of new loans that need to be modified."

More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.

Late last month, JPMorgan expanded its workout program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

JPMorgan also said it will not put any loans into foreclosure as it implements the expanded program over the next 90 days.

Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with state officials in early October.

The government is also working on an ambitious plan to help around 3 million borrowers avoid foreclosure, but details have yet to be released.