Mortgage Rates Hit 37-Year Low

By STEVE KERCH
The benchmark 30-year fixed-rate home mortgage in the U.S. fell to a national average of 5.17% this week, the lowest since Freddie Mac began its weekly rate survey in 1971.
With the Federal Reserve cutting its interest rates to near 0% and a continued decline in rates on the long-term Treasury notes that mortgages closely track, rates on other types of mortgages dropped again, though not as much as the 30-year.
"Interest rates for 30-year fixed-rate mortgage rates fell for the seventh consecutive week, moving these rates to the lowest since the survey began in April 1971," said Frank Nothaft, Freddie Mac chief economist. "The decline was supported by the Federal Reserve announcement on Dec. 16, when it cut the federal-funds target to a record low and stated it stood ready to expand its purchases of mortgage-related assets as conditions warrant."
The 30-year mortgage fell for a seventh consecutive week, from 5.47% a week ago. A year ago the 30-year averaged 6.14%.
The 15-year fixed-rate mortgage averaged 4.92%, down from last week when it averaged 5.20%. A year ago the 15-year loan averaged 5.79%. The 15-year mortgage hasn't been lower since April 1, 2004, when it averaged 4.84%. Click HERE to view the whole article.

Fed Cuts Target for Key Rate to Record Low

WASHINGTON (AP) -- The Federal Reserve has cut its target for a key interest rate to the lowest level on record and pledged to use "all available tools" to combat a severe financial crisis and prolonged recession.
The central bank on Tuesday said it had reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October. Many analysts had expected the Fed to make a smaller cut to 0.5 percent.
The Fed's aggressive move was greeted enthusiastically by Wall Street. The Dow Jones industrial average rose about 350 points in late-afternoon trading.
The Fed's action and statement made clear that economic conditions have worsened since its last meeting in October.
Federal Reserve Chairman Ben Bernanke and his colleagues said they will use unconventional methods to try to contain a financial crisis that is the worst since the 1930s and a recession that is already the longest in a quarter-century. For example, the Fed last month said it planned to purchase up to $600 billion in direct debt and mortgage-backed securities issued by big financial players including Fannie Mae and Freddie Mac in an effort to boost the availability of mortgage loans.
That move was one of a series the central bank has taken to increase its loans by hundreds of billions of dollars as a way to deal with the worst financial crisis to hit the country in more than 70 years.
The Fed on Tuesday also made clear that it intends to keep the funds rate at extremely low levels.
"The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," the central bank's panel that sets interest rates said in a statement.
Even before the announcement of a lower target, the funds rate has been trading well below the old target of 1 percent. For November, the funds rate had averaged 0.39 percent. Analysts said it was likely to fall further with the Fed setting the new target as low as zero.
The Fed's decision was matched by a reduction in the prime lending rate, the benchmark rate for millions of business and consumer loans. Banking giant Wells Fargo and Co. said it was cutting its prime rate to 3.25 percent, down from 4 percent before the Fed action. Other banks are expected to quickly match Wells Fargo's move. To View the whole article CLICK HERE

Mortgage Rates Fall for 6th Straight Week

The average 30-year fixed home loan rate falls to 5.47%, a four-year low, in a sign that the government's efforts to break up the credit market logjam are working.
By Tom Petruno December 12, 2008
Mortgage rates are down for a sixth straight week, a sign that the government's latest efforts to break up the credit market logjam are working.The average 30-year fixed home loan rate fell to 5.47% this week -- a four-year low -- from 5.53% last week, mortgage giant Freddie Mac said. Click Here for the full article.

Winterizing Your Home

(CBS) If you’re feeling a chill in the air, it’s a good time to think about winterizing your home to reduce your heating bills. Danny Lipford, host of “Today’s Home Owner,” has five cash-saving tips for viewers of The Early Show that he says can really add up. Lipford says inspecting insulation, sealing gaps, and maximizing the heating and hot water systems all will save money. According to the Dept. of Energy, the cost to heat an average home is approximately $1,400. Lipford says you can save close to 50 percent of that, if your home is winterized the right way. Lipford uses a total home approach and looks at various areas where heat may escape or not be used efficiently. Whether you live in one of the coldest areas of the country or in a milder climate, any or all of the following steps will help reduce heating bills. Inspect Your Insulation Since warm air rises, the single most effective way to save on heating is to have adequate attic insulation. If you don't know how to tell, look for your ceiling joists. If you can see them, you need more insulation. Lipford uses the new "Miraflex Insulation" for homes. It is the first new glass-fiber insulation to be developed in nearly 60 years. Traditional insulation, known for being scratchy and irritating to the skin, costs approximately 25 cents per square foot. Miraflex is about twice as much, but Lipford estimates the yearly savings from using it could be as much as $150 to $200. Click HERE to view the complete article.

It's a Good Day for Rates

This morning we received some economic data. First the jobless claims, economists where expecting 525,000 but we got a better number of only 509,000. This would be a negative for mortgage backed securities as we missed the estimate on the positive side; however the continuing claims came in worse at 4.087million after last weeks 3.962 and the highest level since 1982 causing a push. Next we got factory orders and economists where expecting -4.5%, but this came in worse at -5.1% which is a positive for mbs. On this news, mbs started to rally and currently we are up on the day about 3 ticks but off the highs.
Yesterday there was some news about a new plan by the Treasury to lower rates to 4.5%. This is a rumor from unnamed sources and there are conflicting reports. I read some of the reports which said this would be for purchase loans only, and I read other reports that this would be for purchase and refinance transactions. Until we get an official announcement from the Treasury, I do not consider this to be relevant.
Lenders are starting to pass along the improvements we have be seeing onto their rate sheets and we should see very good pricing this morning with rates at 5% or lower. We are approaching some resistance overhead, so stay tuned and we will alert if you should lock, but for now float club is in session.

Mortgage Rates Fall

NEW YORK - Mortgage rates fell for the second day in a row Wednesday, and could be heading toward levels home buyers and owners haven’t seen this year.
That drop is what the Federal Reserve was aiming for when it announced a plan Tuesday to buy $600 billion in mortgage-related securities in an effort to slow falling home prices and rising foreclosures, while kick starting demand among fearful homebuyers.
The average interest rate on a 30-year fixed-rate mortgage Wednesday was 5.76 percent, the lowest it has been since February, according to HSH Associates, which publishes mortgage information. The lowest daily figure this year was 5.47 percent on Jan. 23. CLICK HERE to view the rest of the article.

Good News For Texas

Four major Texas metros were ranked among the least likely in the country to experience home-price depreciation in the next two years, all with less than a 1 percent chance.
On the list of 50 major U.S. metro areas, San Antonio placed fifth from the bottom with a 3.95 volatility rate and a 4.02 price appreciation in the second quarter of 2008.
Ranking third from last was Houston-Sugar Land-Baytown, which had a 1.74 volatility rate and a 4.44 price appreciation.
Dallas-Plano-Irving came in second to last, showing a 0.93 volatility rate and a price appreciation of 2.06.
Fort Worth-Arlington came out best with a 0.89 volatility rate and a 3.07 price appreciation.
All Texas MSAs had less than a 10 percent chance of prices decreasing in the next two years.

Service First Mortgage

Despite the media’s grim outlook, Service First Mortgage still has MONEY to lend. Give me a call about our 100% LTV loan products. Interest rates are still low, so now is a great time to buy the home of your dreams.
Office 817-447-7300
Cell 817-233-9226
Website www.lisakeese.com

Rescue Plan Changes Direction

For mortgage markets, the biggest news of the week came from Treasury Secretary Paulson during an update on the $700 billion TARP rescue plan. Paulson surprised investors with the news that the Treasury has scrapped the original plan to purchase troubled assets from banks and will use the funds in other ways to support the still "fragile" financial system. Lawmakers and investors were provided few details about the anticipated future use of the funds, and this abrupt shift in plans added to the uncertainty confronting investors in recent weeks.
While mortgage rates ended the week nearly unchanged from the prior week, daily volatility remained high. During October and November, movements in mortgage rates have been much larger than usual, primarily due to the high degree of uncertainty facing investors. Will there be a second major government stimulus package and what form will it take? What will be the impact of the extra debt issued to fund the government programs? Will other countries such as China have less money available to invest in US bonds, including mortgage backed securities, while they stimulate their own economies? Finally, how will the Treasury use the remaining funds from the $700 TARP rescue plan (discussed above)? Once investors have answers to these and other questions, we should see less volatility in mortgage rates.
To view this article online, click here.

How to Save Your Retirement

(Money Magazine) -- Without a doubt, the past few months have ranked as the most tumultuous - and scariest - times that I've seen in the more than 20 years I've been at Money magazine. We've witnessed events that up to now had been almost unimaginable: the stock market fluctuating wildly and governments around the globe taking extraordinary steps to unlock frozen credit markets. And it's still unclear when the economy and the markets will hit bottom.
Given the unprecedented level of fear and uncertainty, it's no surprise that readers of my Long View column in Money and my Ask the Expert column on CNNMoney.com have inundated me with retirement planning questions. These five common ones cover your biggest concerns.
Should I put less money into my 401(k)?
Q. I am contributing 15% of my salary to my 401(k). With the crisis taking a toll on the stock market, would it be a good idea to reduce my contribution to 10% and place the additional 5% somewhere else? --Verona, Savannah, Ga.
A. I can understand why you're tempted to scale back. But reducing your 401(k) contributions now would be a mistake. Click here to view the rest of the article.

JP Morgan to Revise Loans

JPMorgan will modify mortgages
In an effort to avoid foreclosures on $70B worth of loans, the bank will review each mortgage, including those from WaMu and EMC.
NEW YORK (AP) -- JPMorgan Chase & Co. said Friday it is expanding its program to modify mortgages in an effort to avoid foreclosures on up to $70 billion in loans.
The enhanced program will include the opening of 24 regional counseling centers, the hiring of 300 additional loan counselors, new financing alternatives, reaching out to borrowers with pre-qualified modification terms and a new process to independently review each loan before it is moved into foreclosure.
Chase said the changes are expected to be implemented in the next 90 days, and until those changes can be made, it will not put any loans into foreclosure.
The loan-modification program will also be offered to customers with loans held by Washington Mutual Inc. and EMC. JPMorgan (JPM, Fortune 500) acquired Washington Mutual last month after the bank became the largest in the nation's history to fail. EMC was a mortgage unit of Bear Stearns Cos., which JPMorgan acquired in February.
When JPMorgan acquired Washington Mutual and EMC, it also acquired portfolios of mortgages that included option adjustable-rate mortgages. Option ARMs allow customers to choose from multiple payment options each month, including paying less than the interest owed on the loan, thereby increasing the balance on the loan. JPMorgan said modifications for those loans would eliminate the monthly options and not allow for the minimum payments.
View the rest of the article by clicking here.

History of the Great Depression

It is a common misconception that the stock market crash of October 1929 was the cause of the Great Depression. The two events were closely related, but both were the results of deep problems in the modern economy that were building up through the “prosperity decade” of the 1920s.
As is typical of post-war periods, Americans in the Roaring Twenties turned inward, away from international issues and social concerns and toward greater individualism. The emphasis was on getting rich and enjoying new fads, new inventions, and new ideas. The traditional values of rural America were being challenged by the city-oriented Jazz Age, symbolized by what many considered the shocking behavior of young women who wore short skirts and makeup, smoked, and drank.
The self-centered attitudes of the 1920s seemed to fit nicely with the needs of the economy. Modern industry had the capacity to produce vast quantities of consumer goods, but this created a fundamental problem: Prosperity could continue only if demand was made to grow as rapidly as supply. Accordingly, people had to be persuaded to abandon such traditional values as saving, postponing pleasures and purchases, and buying only what they needed. “The key to economic prosperity,” a General Motors executive declared in 1929, “is the organized creation of dissatisfaction.” Advertising methods that had been developed to build support for World War I were used to persuade people to buy such relatively new products as automobiles and such completely new ones as radios and household appliances. The resulting mass consumption kept the economy going through most of the 1920s.
But there was an underlying economic problem. Income was distributed very unevenly, and the portion going to the wealthiest Americans grew larger as the decade proceeded. This was due largely to two factors: While businesses showed remarkable gains in productivity during the 1920s, workers got a relatively small share of the wealth this produced. At the same time, huge cuts were made in the top income-tax rates. Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, but workers’ wages grew by only 8 percent. Corporate profits shot up by 65 percent in the same period, and the government let the wealthy keep more of those profits. The Revenue Act of 1926 cut the taxes of those making $1 million or more by more than two-thirds.
http://encarta.msn.com/encnet/refpages/refarticle.aspx?refid=761584403

Dow Jumps 936 as Government Pledges Bank Aid

By TIM PARADIS, AP Business Writer

NEW YORK - Wall Street stormed back from last week's devastating losses Monday, sending the Dow Jones industrials soaring a nearly inconceivable 936 points after major governments' plans to support the global banking system reassured distraught investors. All the major indexes rose more than 11 percent.
The market was likely to rebound after eight days of precipitous losses that took the Dow down nearly 2,400 points, but no one expected this kind of advance, which saw the Dow by far outstrip its previous record for a one-day point gain, 499.19, set during the waning days of the dot-com boom.
Still, while the magnitude of Monday's gains stunned investors and analysts, no one was ready to say Wall Street had reached a bottom. The market is likely to have back-and-forth trading in the coming days and weeks — and may well see a pullback when trading resumes Tuesday — as investors work through their concerns about the banking sector, the stagnant credit markets and the overall economy.
John Lynch, chief market analyst for Evergreen Investments in Charlotte, N.C., said Monday's rally was encouraging but he doubted it signaled the worst has passed.
"My screen in completely green and I love that, but I'm not doing any backflips yet. We still have many challenges up ahead," Lynch said, noting the ongoing strains in credit markets and forecasts for poor corporate earnings for 2009.
Denis Amato, chief investment officer at Ancora Advisors, said it's too soon to say whether the market has started to carve out a bottom and that the credit markets where many companies turn for day-to-day loans will need to loosen for stocks to hold their gains. With the U.S. bond markets and banks closed Monday for Columbus Day, it was difficult for investors to gauge the reaction of the credit markets to actions by major governments.
He said the severity of the selling last week was one possible signal that the market might be nearing a bottom and that the stepped up intervention of the government is a welcome sign for the markets.
"I think we had enough negatives last week that if the government steps in we could have a pretty nice run. Is it off to the races? No, I don't think so. We have a lot of stuff to work through."
The market did appear to take heart when the Bush administration said it is moving quickly to implement its $700 billion rescue program, including consulting with law firms about the mechanics of buying ownership shares in a broad number of banks to help revive the stagnant credit markets and in turn get the economy moving again.
Neel Kashkari, the assistant Treasury secretary who is interim head of the program, said in a speech Monday officials were also developing guidelines to govern the purchase of soured mortgage-related assets. However, he gave few details about how the program will actually buy bad assets and bank stock.
A relatively tame finish to Friday's session and a weekend off gave analysts and investors some time to reassess last week's tumultuous trading. And stock prices that were decimated by frenetic selling are now looking attractive.
Jim King, chief investment officer at National Penn Investors Trust Co., said the fear that took hold of the markets last week was overwrought and could signal that a bottom is near. When selling turns so frenetic that it hits a broad swath of stocks indiscriminately, as it did last week, many market watchers say a market low is at hand. That creates opporunity, King noted.
"We have exceptional companies at fire sale prices," he said.
Still, King cautioned that any market rebound likely will be choppy.
"Even if this is the beginning of a recovery we're not just going to have up markets from here on in," he said. "We're not through the woods. We think there is collateral damage from this debacle." King pointed to an increase in unemployment and nervousness among consumers that could, for example, hurt retailers and in turn, take stocks lower.
According to preliminary calculations, the Dow Jones industrial average rose 936.42, or 11.08 percent, to 9,387.61. It was the Dow's largest-ever point gain during a session, surpassing the jump of 503.45 points seen on Sept. 30.
The Dow's previous record for a point increase by the time the closing bell sounded occurred March 16, 2000, when the blue chips closed up 499.19, or 4.93 percent.
Broader stock indicators also jumped Monday. The Standard & Poor's 500 index advanced 104.13, or 11.58 percent, to 1,003.35, and the Nasdaq composite index rose 194.74, or 11.81 percent, to 1,844.25.

Summary of The "Emergency Economic Stabilization Act of 2008"

I. Stabilizing the Economy

The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit, which is vital to a strong and stable economy. EESA also establishes a program that would allow companies to insure their troubled assets.
II. Homeownership Preservation

EESA requires the Treasury to modify troubled loans – many the result of predatory lending practices – wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.

III. Taxpayer Protection

Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. The legislation also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program by charging a small, broad-based fee on all financial institutions.

IV. No Windfalls for Executives

Executives who made bad decisions should not be allowed to dump their bad assets on the government, and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits “golden parachutes” and requires that unearned bonuses be returned.

V. Strong Oversight

Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, then requires the President to certify that additional funds are needed ($100 billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse

Who's Afraid of a Big, Bad Bailout?

"A tournament, a tournament, a tournament of lies.
Offer me solutions, offer me alternatives and I decline.
It's the end of the world as we know it and I feel fine.
(It's time I had some time alone.)"

- Lyrics from R.E.M., 1987

Flying last Tuesday, overnight from Cape Town in South Africa to London, I read in the Financial Times that Republican Congressman Joe Barton of Texas was quoted as saying (this is from memory, so it is not exact) that he had difficulty voting for a bailout plan when none of his constituents could understand the need to bail out Wall Street, didn't understand the problem, and were against spending $700 billion of taxpayer money to solve a crisis for a bunch of (rich) people who took a lot of risk and created the crisis. That is a sentiment that many of the Republican members of the House share.

As it happens, I know Joe. My office is in his congressional district. I sat on the Executive Committee for the Texas Republican Party representing much of the same district for eight years. This week, Thoughts from the Frontline will be an open letter to Joe, and through him to Congress, telling him what the real financial problem is and how it affects his district, helping explain the problem to his constituents , and explaining why he has to hold his nose with one hand and vote for a bailout with the other. Click here for more: http://www.frontlinethoughts.com/gateway.asp?ref=reprint

Should the Government Intervene?

At the end of the day, government intervention is going to be a necessity here. Why?

Too much at stake. With the size of the financial institutions that are failing keeping them afloat may be worth the investment of taxpayer dollars.

Media coverage. With so much coverage of this financial turmoil politicians and regulators will be under tremendous pressure to do something about it.

Mortgage lending still makes sense. So much of today’s problems have been caused by a lack of good judgment shown by both lenders and borrowers over the last few years. At the end of the day American homeownership will survive and credit worthy, responsible borrowers will be able to obtain credit.

The possibility of a recession is still out there and regulators will do everything they can to avoid letting that happen on their watch.


Looking for Advice on Your Mortgage Situation?

With all of the turmoil we recommend making a thorough financial check up including:

Talk to your banker: check the rates on checking and savings accounts to ensure you get the best pricing.

Talk to your financial advisor: Make sure your investment strategy doesn’t need to change based on current events.

Talk to your insurance agent: It never hurts to ask if you can save money on home, auto or health insurance.

Talk to Trusted Mortgage Advice: Don’t let a mortgage company convince you to take a deal that doesn’t feel right. We will help you evaluate your loan and make sure you are getting the best deal possible.

History on Lehman Brothers

Henry Lehman, an immigrant from Germany, opened his small shop in the city of Montgomery, Alabama in 1844. Six years later, he was joined by brothers Emanuel and Mayer, and they named the business Lehman Brothers.
Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private investment management, asset management and private equity. The Firm is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world. In a nutshell they provide cash liquidity to our state and local governments, large corporations that now will have difficulty getting funded for projects.
Lehman Brothers started in the 1840’s and survived the:

• railroad crash of the 1890’s,
• the tock market crash of 1929,
• World War I of 1917,
• World War II of 1939,
• the 1980s real estate crash
• the tech bubble of the 1990’s during the Clinton administration
• 911.

We can all agree that these events listed and many more crises not listed were significant events in history. This might put in perspective at really how bad our current credit crunch. A company with a proud history that has been brought down by poor leadership and greed.

For more details go to: http://www.lehman.com/who/

U.S. Rescue Seen at Hand for 2 Mortgage Giants

By STEPHEN LABATON and ANDREW ROSS SORKIN

WASHINGTON — Senior officials from the Bush administration and the Federal Reserve on Friday called in top executives of Fannie Mae and Freddie Mac, the mortgage finance giants, and told them that the government was preparing to place the two companies under federal control, officials and company executives briefed on the discussions said.
The plan, which would place the companies into a conservatorship, was outlined in separate meetings with the chief executives at the office of the companies’ new regulator. The executives were told that, under the plan, they and their boards would be replaced and shareholders would be virtually wiped out, but that the companies would be able to continue functioning with the government generally standing behind their debt, people briefed on the discussions said.
It is not possible to calculate the cost of any government bailout, but the huge potential liabilities of the companies could cost taxpayers tens of billions of dollars and make any rescue among the largest in the nation’s history.
The drastic effort follows the bailout this year of Bear Stearns, the investment bank, as government officials continue to grapple with how to stem the credit crisis and housing crisis that have hobbled the economy. With Bear Stearns, the government provided guarantees, and the bulk of its assets were transferred to JPMorgan Chase, leaving shareholders with a nominal amount.
Under a conservatorship, the common and preferred shares of Fannie and Freddie would be reduced to little or nothing, and any losses on mortgages they own or guarantee could be paid by taxpayers. Shareholders have already lost billions of dollars as the stocks have plunged more than 80 percent this year.
A conservatorship would operate much like a pre-packaged bankruptcy, similar to what smaller companies use to clean up their books and then emerge with stronger balance sheets. It would allow for uninterrupted operation of the companies, crucial players in the diminished mortgage market, where they are now responsible for nearly 70 percent of new loans.
The executives were told that the government had been planning to announce the decision as early as Sunday, before the Asian markets reopen, the officials said.
For months, administration officials have grappled with the steady erosion of the books of the two mortgage finance giants. A fierce behind-the-scenes debate among policy makers has been waged over whether to seize the companies or let them work out their problems. Even after the companies are put under government control, debates will continue over whether they should be independent and how they should operate over the long term.
The declines in the housing and financial markets apparently forced the administration’s hand. With foreign governments increasingly skittish about holding billions of dollars in securities issued by the companies, no sign that their losses will abate any time soon, and the inability of the companies to raise new capital, the administration apparently decided it would be better to act now rather than closer to the presidential election in two months.
Just five weeks ago, President Bush signed a law to give the administration the authority to inject billions of dollars into the companies through investments or loans. In proposing the legislation, Treasury Secretary Henry M. Paulson Jr. said that he had no plan to provide loans or investments, and that merely giving the government the authority to backstop the companies would provide a strong shot of confidence to the markets. But the thin capital reserves that have kept the two companies afloat have continued to erode as the housing market has steadily declined and the number of foreclosures has soared.
As their problems have deepened — and the marketplace has come to expect some sort of government rescue — both companies have found it difficult to raise new capital to absorb future losses. In recent weeks, Mr. Paulson has been reaching out to foreign governments that hold billions of dollars of Fannie and Freddie securities to reassure them that the United States stands behind the companies.
In issuing their quarterly financial statements last month, the two companies reported huge losses and predicted that home prices would fall more than previously projected.
The debt securities the companies issue to finance their operations are widely owned by mutual funds, pension funds, foreign governments and big companies.
Officials said the participants at the meetings included Mr. Paulson, Ben S. Bernanke, the chairman of the Fed, and James Lockhart, the head of both the old and new agency that regulates the companies. The companies were represented by Daniel H. Mudd, the chief executive of Fannie Mae, and Richard F. Syron, chief executive of Freddie Mac. Also participating was H. Rodgin Cohen, the chairman of the law firm Sullivan & Cromwell, who was representing Fannie.
Officials and executives briefed on the meetings said that Mr. Mudd and Mr. Syron were told that they would have to leave the companies.
Spokesmen at the two companies did not return telephone calls seeking comment.
The meetings reflected the reality that senior administration officials did not believe they could wait for some kind of financial tipping point, as happened with Bear Stearns, which was saved from insolvency in March by government intervention after its stock plummeted and lenders withheld their capital.
Instead, Mr. Paulson has struggled to navigate through potentially conflicting goals — stabilizing the financial markets, making mortgages more widely available in a tightening credit environment, and protecting taxpayers from possibly enormous losses.
Publicly, administration officials have tried to bolster the companies because the nation’s mortgage system relies on their continued ability to purchase mortgages from commercial lenders and pull the housing markets out of their slump.
But privately, senior officials have been critical of top executives at the companies, particularly Freddie Mac. They have raised concerns about major risks to taxpayers of a bailout of companies whose executives have received huge compensation packages. Mr. Syron, for instance, collected more than $38 million in compensation since he joined the company in 2003.
Although Mr. Syron promised regulators earlier this year that he would raise $5.5 billion from investors, he has failed to make good on that promise — even as Fannie Mae raised more than $7 billion. Mr. Syron was slated to step down from the chief executive position last year, but that was delayed when his appointed successor, Eugene McQuade, chose to leave the company.
With the possible removal of the top management and the board, it is no longer clear who would appoint new management.
Mr. Paulson had hoped that merely having the authority to bail out the two companies, which Congress provided in its recent housing bill, would be enough to calm the markets, but if anything anxiety has been increasing. The clearest measure of that anxiety has been the gradually widening spread between interest rates on Fannie- or Freddie-backed mortgage securities and rates for Treasury securities, making home mortgages more expensive. The stock prices of the companies have also plunged.
After stock markets closed on Friday, the shares of Fannie and Freddie plummeted. Fannie was trading around $5.50, down from $70 a year ago. Freddie was trading at about $4, down from about $65 a year ago.
With Fannie and Freddie guaranteeing $5 trillion in mortgage-backed securities, and a big share of those held by central banks and investors around the world, Mr. Paulson appears to have decided that the stakes are too high to take chances.
The Treasury Department is required by the new law to obtain agreement from the boards of Fannie and Freddie for a capital infusion. The exception is if the companies’ regulator, Mr. Lockhart, determines that the companies are insolvent or deeply undercapitalized it could take the companies over anyway.
Charles Calomiris, a professor of economics at Columbia Business School, said delaying a rescue would only increase the risks and costs.
“The last thing you want to do is give a distressed borrower more time, because when people are in distress they tend to take a lot of risks,” he said. “You don’t want zombie institutions floating around with time on their hands.”

Fannie and Freddie Mac Update

There is a story out this morning about Fannie & Freddie not needing an injection of capital from the US government, and that they have enough saved to weather the current problems. Wouldn’t that be nice? I imagine that government and finance officials have found out that these companies, and their financing, are so much more complicated than anyone ever imagined. The public and banks own huge numbers of shares, with the banks holding preferred stock. If the preferred stock’s value goes to 0, it would put many of these banks out of business. So news like this morning’s is welcome.

First Time Home Buyer Credit

Opportunity of a Lifetime for First-Time Buyers

For aspiring home owners who find their goal stubbornly elusive, newly enacted legislation providing a tax credit of as much as $7,500 for first-time home buyers might just be the opportunity of a lifetime.But like so many of the good things in life, time is of the essence for buyers who want to take advantage of this outstanding opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible. Use the links below to learn more about the tax credit. http://www.federalhousingtaxcredit.com/

CREDIT: THE DEBT COLLECTION PROCESS

Source: Credit Resource Group

· WHAT HAPPENS TO A CREDIT SCORE WHEN A DEBT GOES TO COLLECTIONS?
* A single collection can “ding” a credit score up to 100 points.

· HOW AND WHEN DO ACCOUNTS TURN INTO COLLECTIONS?
* A debt that goes unpaid for a specified period of time is considered past due and can turn into a collection. Each creditor has there own credit policy, but it is usually 120 days for a credit card and 90 – 180 days for medical bills and other types of accounts.
* Many major credit card companies have an internal collection department. They will try to make payment arrangements, but if unsuccessful will charge off the debt thus showing on a credit report as a “Charge off”
* If there is not an internal collection department some creditors will assign the debt to an outside collection agency or law firm who will pursue the debt for a commission. If the initial assignee is not successful collecting on the debt the original creditor may recall the debt and reassign. This can go on for many years (sometimes past the statute of limitations).
* A third and most common way to handle a collection is for the original creditor to sell the debt directly to a collection agency for pennies on a dollar. At this point communication with the original creditor stops completely. Endless turmoil arises when a consumer has to re-trace the parties and attempt to explain the problem.

* What is the difference between the Original Creditor and a Collection Agency?
* The original creditor is more difficult to work with because they don’t care much about collecting. They receive a salary, unlike the collection agent who only gets paid when they collect. It is actually better to work with a collection agency because they are always looking for fast cash.

· Do your research.
* Learn as much as you can about the collection agency because they may not have a license to
collect in a particular state or may have a suspended license.

* What are your rights?
* There are rights to protect your credit from further damage and rights to protect yourself. Go to http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm to find out more information regarding The Fair Debt Collection Practices Act (FDCPA)

· Statute of Limitations vs. 7 Year Rule.
* Each state has a statute of limitations on time legally allowed to enforce a debt. In some states its 3 years for open-ended credit (credit card) and 6 years for a written contract. If you have an expired debt and make a payment the statute is renewed. Once the statute has run, the debt is “expired”. This means the creditor can no longer collect. However despite the fact that the statute has expired the debt can remain on your credit report for 7 years as a charge off and with a balance. Negotiations with the creditor at this time to have the item deleted can really pay off. Raise the issue Statute of Limitations has run out, and then negotiate 20 – 30 cents on the dollar for FULL DELETION.
Visit the State Attorney General’s Office at http://www.naag.org/ to find out the statute of limitations in a particular state.

· Validation of Debt.
* A validation of debt (VOD) should be used before paying or negotiating a payoff for any charge-off or collection. A VOD is a formal request for proof that all the information relating to the debt is correct. Time is critical to use a VOD when a collection appears on your credit report otherwise a “no response” can be construed as an admission of valid debt.

Always be proactive regarding collections. It is critical to stay on top of your bills both financially and organizationally.

Where service comes first….

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