Inmates are running the asylum at Bank of America

Bank of America is starting a program to offer homeowners who owe significantly more than their homes are worth the opportunity to have their loan balances reduced. The program, which starts in May, would potentially help about 45,000 homeowners nationwide. In launching the effort, Bank of America is jumping into the debate about how to address the millions of homeowners whose mortgages exceed the value of their homes and who have complicated industry and government efforts to prevent foreclosures. The Bank of America plan is limited in scope. Borrowers MUST have missed at least TWO mortgage payments and be severely underwater to qualify, owing 20 percent more than their homes are worth. It is also limited to borrowers with certain types of risky loans, including subprime mortgages or other loans with a two-year adjustable rate. Bank of America expects to forgive about $3 billion in principal on loans as part of the program. The effort expands a settlement agreement that th
e bank made with several state attorneys general in 2008 to modify thousands of mortgages and settles a Massachusetts investigation of lending practices by Countrywide Financial, which Bank of America acquired in 2008. So what happens now? Joe Sixpack, who up till now has managed to make all his payments in time, reads that he doesn’t qualify precisely BECAUSE he has made all his payments on time, and guess what he does? This is pure insanity.

Initial job claims down

The Labor Department said today that initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 442,000. report included annual revisions to the weekly unemployment claims seasonal factors going back to 2005. Using the old seasonal factors, claims would have dropped only to 453,000, a Labor Department official said. Analysts polled by Reuters had expected claims to slip to 450,000 from a previously reported 457,000 the prior week. The decline in initial claims last week pushed them into a range that analysts reckon signals labor market stability. The labor market has lagged the economy's recovery from its worst downturn since the 1930s, but payrolls are expected to grow this month as the government steps up hiring for the 2010 census. About 8.4 million jobs have been lost since December 2007, when the recession started. The number of people still receiving benefits after an initial week of aid fell 54,000 to 4.65 million in the week ended March 1
3, the lowest since December 2008, the Labor Department said. The so-called continuing claims data included the household survey week, from which the unemployment rate is derived.

Mortgage rates up

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.99 percent for the week ended March 25, up from the previous week's 4.96 percent, according to a survey released by Freddie Mac the second-largest U.S. mortgage finance company. Mortgage rates are expected to rise when the Fed—the U.S. central bank—stops buying mortgage-related securities at the end of March. The rate for the latest week is also above the year-ago level of 4.85 percent and the record low of 4.71 percent in early December. Freddie Mac started the survey in 1971. "Mortgage rates inched up slightly this week as bond yields rose even further," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Exit is dangerous

John Taylor, a Stanford University economist and author of a key central banking rule of thumb, will testify before the House Financial Services Committee that the Federal Reserve has not been clear enough about how it intends to unwind its unprecedented monetary easing campaign, and some of the tools it expects to use may not work. He says the Fed's unorthodox approach has not only threatened its independence but also made policy making more difficult. "By taking these extraordinary measures, the Fed has risked losing its independence over monetary policy," said Taylor, arguing that such steps veered too far into the arena of fiscal policy. "Unwinding them involves considerable risks," said Taylor, who was a Treasury official during the Bush administration, in prepared testimony made available on the House committee's website on Wednesday. Federal Reserve Chairman Ben Bernanke will be the first to testify before the committee, starting at 10 am ET. The Fed has taken pain
s to assure investors and the public that it can and will pull back on its zero percent interest rate policy when the times comes, probably through a mixture of draining credit from the banking system, raising the interest it pays on bank reserves, and selling some of its assets. But this approach has serious shortcomings, Martin Goodfriend, a professor of economics at Carnegie Mellon University, will testify.

Social Security underwater

Social Security will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office. Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual. The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax. Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency, unless Congress strengthens the program’s finances. �€
œWhen the level of the trust fund gets to zero, you have to cut benefits,” Alan Greenspan, architect of the plan to rescue the Social Security program the last time it got into trouble, in the early 1980s, said yesterday.

Now on to our real estate investing educational section...

Online Real Estate Research

Whether you are interested in buying a short sale across town or across the nation, learning how to use online resources to perform basic research is simple and cost effective. Here are some of the most popular and easy to use sites that buyers and agents alike tend to use when evaluating potential properties.

1. Request a copy of the Homeowners Association guidelines (or condo). Not only will you find out important information about community restrictions, limitations and use patterns but many HOA packages include a welcome letter informing newcomers about utilities, cable, phone and other service providers as well as neighborhood clubs and events. Make a copy to present to potential buyers.

2. Obtain crime statistics. Without a doubt, one of the most important predictors of property value over the long term is the safety of the community. Contact the local police department to request an up-to-date report on types of crime (property crimes, violent crimes etc…) for the zip code in question. Follow up by performing a predator search courtesy of the free search tool at www.familywatchdog.com.

3. Contact the Chamber of Commerce to request a Calendar of Events and learn about local tourist attractions, restaurants, entertainment and other amenities.

4. Rate the schools or request a school report card by visiting www.greatschools.net. Homes in preferred school districts sell for an average of 10% more than comparable homes in less desirable districts!

5. Rate hospitals. Easy access to preferred hospitals also increases the desirability of homes by an average of five to ten percent compared to similar homes in other areas. Determine how good the hospitals are in your new area by visiting non-profit organizations like www.LeapFrog.org or www.HealthGrades.com.

6. Sign-Up for State and Local Website Information. It's important to keep up with local trends, events and other pertinent information. Most communities have online newspapers and city/county government websites tend to post everything from tax information to information about small business concerns. Learn about bank branches, major employers, recreation and parks plus much more by having it fed directly to your email or phone.

See you at the top!