The old 80/20 loans are gone for a while.  Most lenders require Mortgage Insurance is you have less than 20% down payment when you take out a loan for a house.  Most first time buyers don’t have 20% down payment, so they can avoid this by taking out one loan for 80% of the purchase price, and an addtional loan for 20% of the purchase price (which is then used as a ‘down payment’).  The problem is that the 20% loan is usually at a higher interest rate and many times is an adjustable loan.  Which is part of the reason why there are so many short sales and foreclosures on the market right now.  Those 20% loans are now adjusting upward and people can’t afford the payments. 

So if those 80/20 loans are a thing of the past, what does a buyer with not too much cash,  but a decent income and credit score,  do if he wants to buy a house in today’s market?  Go FHA.  It’s a lot less complicated than people think and in many cases it’s about the only loan that can work.  It is the loan with the lowest requred downpayment right now…that I know of.

So what are the parameters of an FHA Loan? 

1)  3% down payment (going up to 3.5% on Jan.1, 2009).  Must be paid by the purchaser (or can be gifted by anyone but the seller).
2)  Up to 6% of the buyer’s closing costs can be paid by the seller
3)  Minimum credit score of 620 required.
4)  There is no income limit.
5)  FHA Loans are assumable to anyone who qualifies for the loan.  (An asset when selling)
6)  Co-Borrower is allowed.
7)  Loan limits for Portland area are $418,750.

When you look over these requirements you’ll see this is one of the easiest loans for a purchaser to qualify for and still get a good interest rate.  Shop around with different lenders and find one who handles FHA loans.  I know Umpqua Bank does and I love them because they are local.  I know they do because I learned a lot of this at a refresher course for Realtors at their Tigard branch just last week.

“Theresa Brigleb is a real estate agent who knows what needs to be done and when to do it.  She came to us in our final hour and pulled off nothing short of a miracle.  Her perseverance and dedication made all of the difference when it came to selling our house.  Theresa would get our recommendation to any that asked.

Thank you very much, Theresa”.

Sent by Steve M. in Portland

I read this article in Sundance Channel’s Greenzine today (9/16/08).  The title caught my attention, but read on, the title is deceptive!

Bush Officials Sued for Steering $350M to Forest Foundations….Posted September 15, 2008 02:00PM

SEATTLE, Washington, September 11, 2008 (ENS) - A coalition of conservation organizations filed a lawsuit Wednesday against the Bush administration alleging that federal officials diverted $350 million from the public treasury to forestry foundations “dominated by the timber industry.”

The suit alleges that the administration violated federal appropriations law when, in September 2006, without any public process or congressional approval, the administration steered $350 million from Canadian lawsuit settlement funds to the foundations.

The plaintiff organizations - the Forest Stewardship Council-US, Conservation Northwest, and the Center for Biological Diversity - say they filed the lawsuit because they are committed to promoting sustainable forestry in the United States.

The Washington Forest Law Center, a public interest law firm based in Seattle, filed the suit on behalf of the plaintiffs in federal court in Seattle.

The defendants are the U.S. Trade Representative, the Department of Commerce and the Bureau of Customs and Border Protection.

“Once again the Bush administration has made up its own rules,” said Joe Scott, International Programs director of Washington-based Conservation Northwest.

“Here, the administration illegally gave away hundreds of millions of public dollars to organizations whose programs are not clearly established to advance the public interest,” said Scott.
An example of Georgia’s upland maritime
forest. (Photo courtesy U. of Georgia)

The groups are asking the court to declare that the Bush administration violated the law and asks the court to take reasonable and fair steps to ensure that the money is safeguarded until the administration follows the law.

One of the co-plaintiffs in the lawsuit, represents a forest certification system.

Corey Brinkema, president of the plaintiff Forest Stewardship Council-US, said the organization joined the lawsuit because, “FSC-US and our partners work tirelessly to develop and promote the highest standards for forest management, as well as provide the public the opportunity to reward responsible forestry through choosing FSC-labeled products. The administration’s action is a huge setback that, if left unchecked, could significantly lower the bar for what is represented as sustainable forestry.”

The suit alleges that money the Bush administration earmarked to the two timber industry-dominated organizations, the U.S. Endowment for Forestry and Communities, Inc. and the American Forest Foundation, should instead have gone into the US Treasury.

“How this money is spent should have been up to Congress, not timber industry executives in a backroom deal with the administration,” said Bill Snape, senior attorney for the plaintiff Center for Biological Diversity.
Forested land in northern Idaho
(Photo by Terry Gray)

The U.S. Endowment for Forestry and Communities is a not-for-profit corporation established in September 2006, at the request of the governments of the United States and Canada in accordance with the terms of the Softwood Lumber Agreement between the two countries and endowed with $200 million. The Endowment is one of three entities designated to share in a one-time infusion of funds to support “meritorious initiatives” in the United States.

The American Forest Foundation is a nonprofit organization that works with family forest owners. It was chartered in 1981 “to encourage the long-term sustainability of America’s forests, restore wildlife habitat, and develop quality environmental education programs.”

The AFF Board of Trustees includes officials of the National Audubon Society, the Aldo Leopold Foundation, and the American Bird Conservancy as well as packaging company MeadWestvaco and timber company Weyerhaeuser, as well as keyboardist Chuck Leavell, known for his work with The Rolling Stones, Eric Clapton, George Harrison, and The Allman Brothers Band, among others.

The AFF adheres to the sustainability standards of the Programme for the Endorsement of Forest Certification PEFC, based in Geneva, Switzerland, a rival of the plaintiff Forest Stewardship Council.

Sunday we all heard on the news about the Feds taking over Freddie Mac and Fannie Mae.  I see this as a giant step toward boosting the sagging real estate market.  This article by Kimbrough Gray which I found in “Broker Agent News” gives a better explanation that I ever could.  Hope you find it as interesting as I did:
                                                      * * * * * * * * * *

So on Friday it was leaked that the government is taking over Freddie Mac and Fannie Mae.  On Sunday it was official.  Freddie Mac and Fannie Mae have now been taken over by the federal government.  But what does it mean for the real estate market, mortgage interest rates, and the US economy.

First let’s look at what it means for mortgage rates.  I would expect that the government takeover will result in lower mortgage rates, possibly a full point lower.  Why?  Basically the Fed has been struggling to lower mortgage rates for the last year in an attempt to assist the troubled real estate market.  The Fed has lowered prime rates several times in an attempt to pull down mortgage interest rates.  In spite of this over the last 8 months mortgage interest rates have mostly risen.  Now with full control of Freddie Mac and Fannie Mae (which provides insurance for most mortgages in the US) they will have much more control over the mortgage market and mortgage rates.  As long as their objective stays the same, we can expect lower rates. 

What does the takeover say about the current situation in the real estate market?  This should have been obvious from all the events that preceded this but the takeover shows that the real estate market is in serious trouble.  The federal government doesn’t just take over large companies on a whim, especially an administration with a Republican president that believes strongly in free markets.  This is not simply a government takeover.  This is the largest takeover in US history.  Basically the takeover happened because it was believed if nothing was done we were headed for economic catastrophe. 

How is this going to effect the real estate market?  Although the takeover is a bad sign about our current situation it should have a positive effect on the real estate markets moving forward.  First lowering mortgage interest rates should be quite a boon for the real estate market.  Lowering rates lowers the effective cost of a house.  And historically lowering rates has a positive effect on real estate values. 

Additionally, if the Fed is smart they will reduce some of the mortgage restrictions Freddie Mac and Fannie Mae have created in the last year.  While I would not like to see the mortgage market return to the free-wheeling lending of a few years ago, some of the current rules are bizarrely restrictive.  The lending environment typically works like a pendulum moving from one extreme to another.  Currently lending restrictions are not just stricter than what we saw during the real estate boom a few years ago but they are more restrictive than anything we have seen in the last 15 - 20 years.  Hopefully a federally controlled Fannie Mae and Freddie Mac can help return us to normal as far as lending restrictions.

Lastly the government takeover could put taxpayers in the lurch for billions in loan losses.  In the short term the government is going to have to infuse money into Freddie Mac and Fannie Mae.  They have been losing money for quite some time and that is not going to change overnight.  The government will have to around 20 to 30 billion into Fannie Mae and Freddie Mac to get them back to financial solvency.
 

Does this mean the federal government is insane?  It depends on how you look at the issue.  While taking over Fannie Mae and Freddie Mac will be very costly for the government and taxpayers, allowing them to fail could have led the US economy into a depression.  In a depression those that keep their jobs have to make up for all the lost tax revenues for the large number of people that lose their jobs.  So taxpayers could have been in a lurch if the Feds had decided to stay on the sidelines.  So in summary the federal government found itself in a tight spot and decided to bet that they can fix the real estate market.  We will find out if they were correct over the next several months.

Green Building Products are in the Big-Box game now.

Most spring Saturday mornings at The Home Depot, a steady stream of customers comes to peruse cabinets, countertops and showerheads; rose bushes, tomato plants and compost; barbecues, lawn chairs and weed whackers. Trying to be all things to all do-it-yourself-ers, The Home Depot introduced its Eco Options label in 2007 as a way to meet a growing demand from customers that had begun adding “energy-efficient,” “low-VOC,” and “organic” to their home improvement shopping lists.

Through a reportedly stringent process of elimination, the company pinpointed about 3,000 items ranging from compact fluorescent light fixtures (CFLs) to organic plants it deemed had less impact on the environment than their conventional counterparts. The campaign paid off. In 2007, Eco Options products sold as well or better than similar products, exceeding sales goals and reaching $3 billion.

With a goal of increasing the number of products in the Eco Options line to 6,000 by 2009, the company is scrambling to find products that fit the green mold. But not all manufacturers of green building products are viewing the big-box retailer or its largest competitor, Lowe’s as a silver bullet. 

As U.S. home sales and the value of the dollar continue to decline, market analysts are predicting more homeowners will opt to stay closer to home in 2008, spending more than $170 billion remodeling their homes. Even more, spending on home improvements is likely to increase 44 percent between 2005 and 2015, according to “State of the Nation’s Housing 2007,” published in June 2007 by the Joint Center for Housing Studies at Harvard University. The center cites U.S. homeowners’ growing desire to invest in energy-efficient retrofits as a key factor driving such spending.

Despite an increasing number of environmental building supply stores opening up along the West Coast, most homeowners end up at big-box retailers to meet their home improvement needs. A 2007 survey conducted by Germantown, Tenn.–based Consumer Specialists showed customers slightly prefer shopping at Lowe’s. However, with a total of 2,234 retail stores worldwide, The Home Depot ranked significantly higher for its convenient locations, which was the strongest factor in determining where respondents chose to spend their money.

The world’s largest home improvement retailer, The Home Depot reported net earnings of $4.4 billion in fiscal year 2007. While a significant drop from its 2006 net earnings of $5.8 billion, the figure was almost double that of Lowe’s, which reported 2007 net earnings of $2.81 billion. Its buying power makes the retailer highly regarded by manufacturers vying for prominent shelf space, including companies serving the green building sector.