“There should be no confusion: Banks will not be able to bid on their own assets,” Bair said today at a Washington news conference.

The FDIC is helping the Treasury Department set up and run the PPIP, which will use $75 billion to $100 billion of Troubled Asset Relief Program funds to entice private investors to buy as much as $1 trillion in distressed mortgage-backed securities and other assets.

Banking groups and the Clearing House Association LLC, a group of 10 lenders including JPMorgan Chase & Co. and Bank of America Corp., are pressing the FDIC to let them use the program to buy their own troubled assets, the Wall Street Journal reported today.

Meanwhile, it seems that enthusiasm may be waning entirely for the proposed PPIP sales, which may be called-off altogether for lack of seller interest. Pressure for the banks to sell the assets has evaporated with changes in the mark-to-market accounting rules and the demonstrated ability of big banks lately to raise capital in the private markets.

It remains to be seen how much interest the fund managers who have applied to take part in the scheme actually bring to the program. While the government subsidies are attractive, fund managers may be leery of making too big a profit in a government program, or being involved at all.

“A significant and growing obstacle to private participation in government bailout plans is that many investors are wary of political backlash and the imposition of additional restrictive conditions post-investment,” wrote accounting firm PriceWaterhouseCoopers in an analysis published this week.

At a Congressional hearing last week, Columbia University economist Jeffrey Sachs urged the government to abandon PPIP. He contrasted the murky program with the much more desirable clarity of an FDIC seizure and resolution.

Sales were still down 3.5 percent compared with a year earlier.

Purchases increased 2.9 percent to an annual rate of 4.68 million from 4.55 million in March according to the National Association of Realtors. The median price was down 15 percent from a year earlier, the second-biggest drop on record.

The average price of a U.S. home fell 7.1 percent in the first quarter, slower than the fourth quarter’s 8.3 percent drop that was the largest on record, the Federal Housing Finance Agency said in Washington.

A pick-up in sales may eventually help trim the glut of unsold homes and eventually stem the slump in property values. But the number of houses on the market climbed 8.8 percent to 3.97 million in April. At the current sales pace, it would take 10.2 months to sell those homes, up from 9.6 months in March.

Distressed properties accounted for 45 percent of all existing-home sales, but this was down a bit from March, the NAR report showed. First-time buyers accounted for about 40 percent of April sales, also down from March.

Foreclosure filings in the U.S. rose to a record in April for the second consecutive month, Realtytrac Inc., a seller of foreclosure data, said May 13, as the jobless rate climbed to its highest in more than a quarter century. Foreclosure filings jumped 32 percent from a year earlier, the group said.

Recent increases in mortgage rates have hurt owners looking to lower monthly payments. Mortgage applications declined 14 percent last week, led by a plunge in refinancing, a report today from the Mortgage Bankers Association also showed. Still, the group’s purchase measure rose 1 percent, indicating rates are still low enough to spur sales.

Lower mortgage costs are also helping to make buying more affordable. Rates on 30-year fixed loans fell to 4.78 percent in April, the lowest level since Freddie Mac began keeping records in 1972. Federal Reserve purchases of mortgage securities have contributed to bringing down rates, economists said.

“The housing market is beginning to stabilize,” Fed Chairman Ben S. Bernanke said in congressional testimony on May 5. “We continue to expect economic activity to bottom out, then to turn up later this year.”

There is also a fight brewing between the government, banks, and mortgage security holders over provisions in new legislation that would immunize loan servicers from lawsuits by investors in mortgage-backed securities.  The government wants to encourage loan modifications, allowing these to happen almost automatically in cases of bankruptcy, where they were traditionally not allowed.  To date all mortgage modification programs have been aimed mainly at those current on their loans which includes an entire class of homeowners who don’t really need loan modifications to stay in their homes.  So the government is doing the right thing, so to speak, but with typical governmental lack of finesse.

The banks hated this idea until they figured out that it would allow them to reconfigure $441 billion in second mortgages THEY hold.  Citibank was the first to see this logic.  So the banks can improve their positions as loan holders, can improve their positions as loan servicers, but of course the mortgage security investors hate this and the government sits in between.  The result of this conflict will only be more delay and confusion in the marketplace, neither of which is good for homeowners.  Sorry.

The S&P Case-Shiller index data for February, 2009 show home prices continue to decline (20
city composite index is down 18.6% year-over-year), but the rate of decline did slow in most regions during the month. Home prices seem likely to fall further (future prices suggest another 10 percent or so this year for the 20 city index), but lower mortgage rates and improving consumer sentiment could help limit the declines, providing some additional support to the economy.

So here’s the big question: if home prices have only another five percent or so to drop nationally, is it still worth waiting to buy?  Clearly not if you are also selling in the same or a similar market, but it may still be worth waiting if you are a new buyer or new to the market and there seem to be a lot of available properties that meet your needs.

Another five percent drop in prices could have significant impact on your down payment.  Instead of putting-down $7,500 (five percent on a $150,000 home for a $142,500 mortgage) you could put down that same $7,500 (5.45 percent on a $142,500 home for a $137,500 mortgage) and save thousands in interest over the life of the loan.  For some purchasers, then, it may still be worth waiting, especially in distressed markets like Las Vegas and Miami.

The 20-city composite index showed a 2.2 percent decline from January (compared to a 2.8 percent decline in January and 2.55 percent decline in December). This index is now 30.7 percent lower than its peak level (July, 2006) and has fallen back to August, 2003 levels. While the year over-year-decline in for the 20-city composite at 18.6 percent is slightly lower than the 19 percent yr/yr decline reported in January, it is equal to December’s, the second largest ever. Since 2000, the index has now increased at a compound annual rate of about 4.05 percent.

The 10-city composite index was 18.8 percent lower yr/yr and 2.1 percent lower sequentially. It is 31.6 percent below its peak levels reached in June 2006. Over the past 10 years, despite the recent decline, this index has still risen at a compound annual rate of about 6.2 percent.

All 20 metropolitan areas showed a sequential and year-over-year decline in February. But for 16 the January/February percent change was smaller than the December/January decline.

The worst year-over year decline in January was in Phoenix (-35.2 percent y/y, -50.8 percent from peak) followed by Las Vegas (-31.7 percent y/y, -48.4 percent from peak) and San Francisco (-31 percent y/y, -44.9 percent from peak).

Several markets showed modest year-over year declines, including Dallas (-4.5 percent y/y, -11.1 percent from peak), Denver (-5.7 percent y/y, -14.3 percent from peak) and Boston (-7.2 percent y/y, -18.5 percent from peak). Along with

the 10 and 20 city composite indices, only Charlotte, Washington DC, Cleveland, and New York
experienced greater declines from January to February than from December to January.

FHFA’s (formerly OFHEO’s) purchase-only house price index (non-seasonally adjusted) increased
1.13 percent in February, but declined 6.43 percent from a year ago. The year-over-year decline in February was lower than that in January and December.

Data from the National Association of Realtors on existing median home prices showed a 2.1 percent
increase in February and 4.2 percent increase in March. Year-over-year declines were 14.1 percent in February and 12.4 percent in March.

Brokers may include table funded lenders who do not actually underwrite the loan directly. They act as agents or have lines of credit with the lenders. Correspondent lenders sell their loans to servicers, national examples include Quicken Loans and Lending Tree.  Lender-servicers underwrite and keep the loans on there books, while collecting ongoing loan payments.  This includes such lenders as Countrywide, Wells Fargo, or Bank of America.

Home-Account’s lenders currently are considered Super regional correspondent lenders.  They operate as direct lenders without working through a broker, either servicing the loans themselves or re-selling the loan to a larger servicer.  Home-Account will be dealing with the banker who is funding the mortgage and at the same time either able to service the loan or sell the mortgage to a larger servicer resulting in lower interest rates (i.e. better value) for our members. 

These specialized lenders are able to handle numerous applications and mortgages, on average able to close over 2,000 mortgage per month.  Over a billion dollars of mortgage loans were funded in 2008 by just our initial five lenders.

Here are some additional links you might find interesting:

htttp://www.sideroad.com/Mortgage/home-financing-correspondent-lender.html

http://mortgage-x.com/library/lender_types.htm

http://www.bankaholic.com/finance/what-are-correspondent-lenders/

http://www.mtgprofessor.com/A%20-%20Type%20of%20Loan%20Provider/what_is_a_correspondent_lender.htm

Yogi Berra said, “It’s not over ‘til it’s over,” but there’s a hint at least in recent housing numbers to suggest we’ll have a real bottom to the real estate market later this year.

It all comes down to supply and demand, with supply being the number of new and existing homes for sale and demand being the number of sales actually completed. Families are started even in a recession so housing units are continually being absorbed. Unfortunately the housing bubble created too many new housing units causing the market to collapse. The question this week is when will that collapse end, housing prices will firm, and existing homeowners can start to recover from their underwater mortgages? Based on housing inventory numbers from the National Association of Realtors we have another six months or so to go.

That’s how long it will take, at current building and sales levels for the inexorable population increase to absorb enough excess housing inventories to return us to historic norms. What even allows us to get back to those norms is the steep decline in builders of new homes, many of which are no longer in business.

The number of new and existing houses on the market historically is enough to last 3-4 months, which is to say at current sales rates without replacing any of those homes all would be sold in 3-4 months. But right now housing inventories stand at 9.7 months. With only a marginal influx of new homes the difference between 9.7 and 3.5 (6.2 months) is the best predictor of when the market will hit BOTTOM, after which prices will finally start to increase on a national basis.

Does this mean yu should wait six months to buy a house?  NO!  It means this is an ideal time to be shopping for a house because it is a buyer’s market.  But the perfect house is hard to find.  When you find yours, BUY IT!

The new programs for mortgage refinancing and modification sound ideal on paper, often requiring no mortgage insurance and allowing loan-to-value ratios as high as 105 percent and requiring no specific credit rating at all as long as homeowners have remained current to date on their mortgage payments. But the devil is in the details and looking into the conforming rate sheets just published by major lenders we see new risk-based pricing adjustments (generally called “loan level pricing adjustments” in the mortgage industry) that can add up to four basis points to the mortgage principal for homeowners with LTV’s above 95 percent and credit scores below 620 – the very heart of the homeowner group in the greatest trouble.

While the government claims the programs can help 7-9 million homeowners, that doesn’t seem likely under the current rules.

On top of other pricing adjustments for property type and loan amount these new programs can add thousands to the loan balances of homeowners with low equity and less-than-perfect credit, with the increased costs often enough to price many homeowners out of the programs entirely.

A homeowner trying to refinance a loan with a 100 percent LTV and poor credit, for example, might easily see the required risk-based points take that loan beyond the 105 percent LTV limit. While it is possible to take the points from savings or investments rather than roll them into the loan, most homeowners in this group don’t have such savings or investments available.

While the new programs are good for homeowners with credit ratings above 680 and LTVs in the 80s or lower, this does not describe most of today’s conforming mortgage holders who truly need a refi or modification.

Jumbo mortgages, those in excess of $417,000 or $729,000 depending on the market, practically disappeared with the burst of the housing bubble, but now they are coming back with major lenders like Bank of America and ING putting some real effort into the segment. But that doesn’t mean people are actually buying homes that require jumbo mortgages, according to lenders. There is a jumbo REFI boom of sorts, but nobody seems to be buying big houses that aren’t short sales or foreclosures.

Jumbo mortgages have stringent requirements, including hefty down payments. Buyers are still waiting to see if the real estate market has bottomed out, and few people these days want to commit to a big down payment if it means selling securities that are already down..

Rates for 30-year fixed-rate jumbo mortgages have dropped from an average of 7.28 percent a year ago to 6.44 percent last week, the lowest since April 2007, according to HSH Associates, which tracks consumer loan information. Rates for smaller 30-year mortgages were averaging 4.97 percent last week.

Jumbo mortgages are those too large to be backed by the federal government through Fannie Mae and Freddie Mac. Mortgages that are under those limits — $417,000 or $729,000 depending n the market — are so-called “conforming” loans.

Jumbo rates are also higher because the secondary market — where mortgages are sold to generate new funds — has dried up. Now, lenders need to keep loans on their own books, assuming the risk themselves.

Keith Gumbinger of HSH, which is based in New Jersey, said the difference between conforming and jumbo mortgage rates used to run around one-fourth of a percentage point, or 25 basis points. “So if a conforming rate was 5 percent, a jumbo would be around 5¼. Right now, that gap is extraordinarily wide. Last week, it was exactly 150 basis points.”

The Federal Reserve’s influence to lower conforming mortgage rates has produced the larger gap, he said. “The gap remains extraordinarily wide, not because jumbos aren’t doing their part. They are. But because other prices have been artificially influenced lower.”

He advised anyone looking for a mortgage or to refinance to shop around more than ever. “Some lenders are in a better position to make you a competitive loan than others. You’ve got to go out and scour around your marketplace. Shop it effectively.”

Some large lenders, including Bank of America, are starting to promote jumbo rates below 6 percent.

In time the combination of falling home prices and lower mortgage rates will improve the affordability of higher-end properties and sales will start to rise. The concern about waiting for the bottom is the only way you know you’ve hit bottom is when it is on the way up.

One of the lessons of the current mortgage crisis has been that home ownership probably isn’t for everyone. At Home-Account we work tirelessly for the interests of homeowners and would-be homeowners, but that doesn’t mean we’ve never seen a buyer or a mortgage we didn’t like. Our objective is home OWNERSHIP – actually owning your home outright. And toward that goal we try to encourage our subscribers to work toward legitimate loan qualification, which means buying a home you can actually pay for. The recent mortgage bubble, in contrast, was often based on lenders giving mortgages to people who shouldn’t have qualified and honestly couldn’t afford the houses they were buying. The fact that the system encouraged that was because lenders were paid fees for closing loans and loans were securitized in such a way that the inevitable default was someone else’s problem. Though it turned out, of course, to be a problem for us all.

The goal of responsible home ownership then requires us to point out that there is a move afoot to return, somewhat, to the bad old days of subprime mortgages. Specifically there is a bill in Congress – H.R. 600 – which will allow seller-funded down payments for FHA mortgages. Couched as allowing friends or relatives or foundations or charities to GIVE FHA mortgage applicants the 3.5 percent minimum FHA down payment, in practical terms it allows the seller to do so, too.

Under H.R 600 it is possible under certain circumstances to get an FHA mortgage for no money down. This technique has been used before and it usually comes down to the purchase price being inflated by the amount of the down payment, which is then transferred from the seller to the buyer. This is not good.

The point of having a down payment is for buyers to be at risk a bit – to have some skin in the game — which ought to encourage them to be reliable mortgage payers. That’s our goal here at Home-Account, too – to help our subscribers to be reliable mortgage payers. But giving sellers a way to finance the down payment is for the most part a return to the slippery slope of subprime lending and will hurt us all in the long run.

H.R. 600, as it is presently written, is a bad bill and should be defeated.