HELOCs go Bye Bye

It seems that home equity lines and lines of credit are disappearing. Here is what is being reported:

When HEL Freezes Over -- Who's out in the cold with the HELOC freeze?

Banks spent the last decade trying to persuade everyone who came through their doors to take out a home equity loan (HEL) or a line of credit (LOC). Now they've changed their minds. Sort of.

Financial institutions are still marketing these products, but they've also started freezing accounts of current customers.

Countrywide suspended 122,000 accounts.

USAA pulled or reduced 15,000.

Chase, National City, Washington Mutual and Suntrust have mailed out HELOC Freezes

And the pending freezes list includes Bank of America and CitiGroup.

I haven't read of any lenders calling the loans due. What they are doing is tightening their lending practices. Loans that were already approved and in place, with the home as collateral, are riskier now that home values have fallen almost everywhere.

Who´s in trouble? Anyone who has an outstanding HELOC, or is trying to get one, whose outstanding mortgage loans would then exceed 80% of their equity. Let´s look at an example. The Browns bought a $300,000 home. Between their down payment and the monthly payments they´ve made, their loan is now only $200,000. They took out a $50,000 Home Equity Line of Credit last year to provide some major maintenance to the structure.

and

Banks Closing Doors to Home Equity Loans

When bankers use such catchphrases as "liquidity crisis" and "tightened lending standards," what they really mean is that it's tougher to get a loan. That's certainly true for home-equity lending. Until recently, borrowing against soaring home values was almost as easy as getting a new credit card. Now, prospective borrowers find it more difficult to meet lenders' increasingly stringent requirements.

Big Trouble

The housing market is officially in BIG TROUBLE. The top tier law firms are scaling back hiring of new associates! Who will buy $600,000 2 bed condos now?!

Law Firms Curtail Associate Programs As Economy Slows

By ASHBY JONES
April 14, 2008; Page B1

For associates at law firms, how quickly things have changed.

This time last year, salaried lawyers at many of nation's largest firms had just scored a pay bump, as business was blazing and firms were scrambling to keep talent. Now, due largely to a slowdown in work relating to mortgages, real estate, mergers and private equity, some firms are taking such measures as rescinding offers to incoming associates and summer associates, asking first-year lawyers to start several months later and shortening their summer programs to save money.

I can hear Lincoln Pk and River North screaming right now.

No Way, Jose!

Most Americans Oppose Federal Bailout for Homeowners

I most definitely agree.

Fifty-three percent (53%) of Americans say that the federal government should not help out homeowners who borrowed more than they could afford. A Rasmussen Reports national telephone survey found that 29% disagreed and believed that federal action is appropriate. Seventeen percent (17%) are not sure.

There is even stronger opposition to federal help for banks that made bad loans. By a 4-to-1 margin (61% to 15%) Americans reject that approach to resolving the current mortgage crisis.

My hard earned tax dollars should not be going to save idiots from themselves. Anyone who did not see this train wreck coming is a fool. Those who actually stopped in front of the train thinking that they would be immune to physics need to be taught a lesson. Any kind of bailout would tell fools and idiots that its OK to make bad moves because the whole country will drop what they are doing to dig them out of the mess that they made. Guess what will happen? Those same people will do the same stupid things all over again.

No. No way.

Wishing Price

Be It Ever So Illogical: Homeowners Who Won’t Cut the Price

Falling on deaf ears.

In the wake of the biggest housing boom on record, it’s understandably hard to accept a new reality. Robert Glinert, a real estate agent in the Los Angeles area, said he has recently been saying no to almost half the sellers who have asked him to represent them. Their initial asking price is just too unrealistic.

“People say, ‘I don’t care about the market — my home is still worth what I paid for it in 2006,’ ” Mr. Glinert told me. “And I say, ‘To you. Only to you.’ ”

Some one needs to inform the Greedy Sellers that down payments are required now.

** BREAKING **

I just got an email from a friend of mine that is very explosive for the housing market. As of March 14, 2008:

FHLMC recently announced that they would no longer purchase loans with LTV/TLTV/HTLTV's greater than 97%. This announcement affects all FHLMC products except Home Possible and Barrier Buster LPMI. Any FHLMC product that previously had maximum LTV or TLTV or HTLTV of greater than 97%, is now reduced to a maximum of 97%.

This means that Freddie Mac will no longer accept Zero Down loans. Buyers will have to muster up 3% or more to qualify for a home loan. So to get a $500,000 loan the buyer must pony up at least $15,000 cash.

I would say that this will put a damper on the market even more. Sellers will have to realize the higher their asking price the higher out of pocket cash the buyers will need. Some houses simply will not sell.

That's No Deal

Buying in a Rocky Housing Market

by Aleksandra Todorova
Tuesday, March 4, 2008

Indifferent to the bleak real estate headlines, 26-year-old Michael Klauer and his fiancée recently bought a two-bedroom condo in the desirable Lake View neighborhood in Chicago. They weren't in a rush to buy, but when an opportunity presented itself only a month after they started looking, they jumped on it.

The apartment, listed at $519,000, was theirs for only $480,000 — an initial offer they didn't back down from, even though they knew the seller had bought the place 10 months earlier for $512,000. Factoring in the broker's fee and sales taxes, the seller lost more than $44,000 on that deal, according to the couple's realtor, Jay Michael, owner of the Estate Property Group in Chicago.

WOW! What a steal. $480,000 for a 2 bed room apartment?! Lucky there was no bidding war...

And even though the condo's value may drop further, the couple wasn't concerned since they plan to live in the place for at least three to five years. "It was a good time to buy," he notes. "Prices are on the down low, and it's something I could sit on for a while."

I hope they can because they will not see $480,001 or more five years from now. Are they not aware this bubble was a historic event, none the likes of man has seen before? Chances are no person alive will see price growth of this magnitude in their lives again.

Stay away from foreclosures

Foreclosures are touted as great deals (especially by services that sell foreclosure listings). In some areas, real estate agents have even started taking potential buyers on "foreclosure tours."

In reality, however, buying a foreclosed property — or even one in a neighborhood plagued by foreclosures — is risky. "A heavy concentration of foreclosures indicates that there's some sort of economic problem in the region that will keep your home value from at least remaining stable," says Miller. "Or that there was some speculation and there may still be some air left to come out of that market."

The author should look at ReatyTrac.com's map function. After reviewing the Chicagoland area tell me what neighborhood DOES NOT have forclosures? I'll clue her in: None.

Don't Forget Chicago, Mr, Stein!

Ben Stein How Not to Ruin Your Life

The High and the Low

First, as I see it (and I'm often mistaken), the real estate market still has some serious falling to do. I base this on the fact that real estate in some of the most overpriced markets -- like Manhattan and the west side of Los Angeles -- have yet to fall dramatically.

I, your humble servant, have been looking for a condo here in L.A. for my son, and I've been floored by how high the asking prices are for these dwellings. Yes, they've fallen, but they're still far higher than they were four or even five years ago.

Keeping asking prices high may make sellers feel good, but it won't sell their homes. Consider this: On one hand, brokers tell me that prices haven't fallen much, and that they think that's a good sign. On the other hand, they complain that sales volume is way down.

Both Sides Now

Well, friends, the former has a lot to do with the latter. Volume isn't going to pick up until prices fall to accommodate the fact that we're in the midst of a real estate collapse. And buyers aren't going to step up to the plate in large numbers until it's clear that prices have fallen to reflect the new realities of the real estate market.

This means that if you're a seller, don't count on selling unless you have a price that makes sense in early 2008. Prices that made sense in early 2006 just aren't going to fly.

If you're a buyer, my advice is to still try to buy the house of your dreams, because they come along so rarely. But try to drive the hardest bargain you can; sellers should be very flexible. I would even say that if a seller isn't flexible, wait for a better mood to strike him or her.

Again, the real estate collapse has a long way to run yet, and it'll end when sellers get realistic. That could take four years, and maybe longer. But if you need to sell, there's no shame in asking a sensible price.

Very sensible article. However, LA and NY are not the only expensive cities in the country.