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Good News for California....

According to the Commerce Department, sales increased by a solid 24% from May to June in California. That still leaves us with a very weak level of sales, but the turnaround may prove meaningful.

The median selling price of a home in California, according to the California Association of Realtors, gained 13.6% May to June, resulting in a median price of $311,950. While that is a great distance from the price levels reached during the heat of the real estate boom, it is surely a move in the right direction. At the same time, the number of existing home sales in the state declined by only 4.2%, a gentle slowing that should cause no concern.

This is an indication of what it might look like when the $8,000 and $6,500 homebuyer tax credits finally ceases to be much of a factor in the markets. People aren't going to refrain from entering a transaction because they'll no longer get a check for $8,000 for buying something.

So we're beginning to get an idea of the health of the real estate market, which is probably better than most analysts have been declaring. It is beginning to appear that the California population is ready to buy. Doing so with such low rates as fuel is surely better than what most analysts had forecast many months ago.

And Speaking of Low Rates.

Jumbo loans are back in full force. I'm astounded at the great rates for loans of $1,000,000 and up. Look at the rates below for a sample. And, I have lenders going to $4,000,000 and beyond. Interest-Only loans are available too.

More Good News..$729,750 Limit to Stick Around?

Financial Reform! Or not?

All the talk in mortgage circles this week is about the sweeping Financial Regulation Bill that was passed yesterday in the Senate by a margin of 60-39 and will be signed by President Obama and become law.  The Bill calls for a new consumer protection agency and prohibits Banks from taking risky bets. 

From everything I read, this legislation.over 2000 pages worth.amazingly does nothing to address the core reasons for the financial collapse.  Past political policies promoting higher percentages of homeownership appear to have been misguided, but this new legislation pushes that agenda even further.  Fannie Mae and Freddie Mac are completely left out of this legislation.  The credit rating agencies, which may have played the largest role in the financial collapse, go unmentioned.  The legislation gives unions and politicians much more power.  Sadly, a very cursory view of this legislation appears to illustrate that the vast majority of this reform has far less to do with fixing the financial problems, and much more to do with pushing the political agenda of its authors, Barney Frank and Chris Dodd. 

What Greenspan said when asked on CNBC last week about the 2300 page FINREG Bill..was that this was the first time the Fed was not asked to write this regulation, and that it was basically written by junior staffers that have no clue about the complexities of these financial entities that they are trying to regulate.Greenspan said there are unintended consequences in every page of this bill.  He said that any banker dealing with Washington is very familiar with what is known as the 25 Cubed Rule..basically that the government is run by 25 year old staffers that are making $25,000 a year and work 2 5 hours a day...and a majority of them have never even financed a car.let alone a home, yet we are handing our regulatory oversight to these 25 year old staffers.

This is scary stuff. If anyone reading this has any other opinions, I'd like to hear them.

Mortgage Rate Update:

Who Would Finance Mortgages If Fannie, Freddie Disbanded?

Our Government has struggled with what to do with Fannie Mae and Freddie Mac. Remember, these are the two major providers of mortgage money in our country. They became nationalized about two years ago when they failed to remain solvent during the mortgage meltdown of 2008. Now the U.S would like to get rid of these two money-losing entities that are responsible for providing standard underwriting guidelines and are the source of money to almost every mortgage lender and borrower.

As the system works now with the two entities, Fannie and Freddie, banks write the mortgages, but they rarely hold them. The mortgages are sold off into pools, known as Mortgage-Backed Securities (MBS's). Fannie and Freddie guarantee the mortgage payments, so that the MBS buyer, be it the Chinese government or an American pension plan, has the security of the US government behind them. Their only risk is in the interest rate.

This system worked great for years. In fact, so great that Fannie and Freddie shareholders got rich because the companies borrowed money in the markets with an implied government guarantee.

But without the guarantees, there would be no securitization, no capital from the rest of the world for long-term fixed rate mortgages and banks would have to hold their mortgages indefinitely, decreasing the availability of mortgage money to others.

Our leaders have been meeting to decide how to ultimately divest the Government of these two entities. I'm sure it will be a long time before it's decided. First, the housing and the economy must recover. Earlier this year, Treasury Secretary Tim Geithner laid out a general outline for how the Obama Administration would reform Freddie and Fannie. "While the form of the housing finance system will change, government has a key role to play in shaping the future of the nation's housing finance system," said Geithner.

Other experts, including Edward DeMarco, director of the Federal Housing Finance Agency (FHFA), contend that ending the subsidies that Fannie and Freddie provide could cause a catastrophe if it's done too quickly or their functions are not replaced. Mortgage rates would go up 2% to 3% and home prices would drop precipitously-between 10 percent and 30 percent-according to some experts.

To avert problems and allow private firms to re-enter the $10 trillion mortgage market, DeMarco suggests a transition phase in which a new infrastructure for the home financing system is put in place.

In the meantime, while we don't necessarily like the stricter underwriting guidelines created by Fannie Mae and Freddie Mac over the past couple of years, we need these entities to continue providing liquidity and mortgage money to our fragile economy.

And while the fate of Fannie and Freddie are debated, Mortgage Rates are at an All-Time Low!

Mortgage Rate Update: