James Lockhart’s successor as director of the agency that regulates Fannie Mae and Freddie Mac will hold much of the US mortgage market in his hands when he takes the helm.

Government-backed mortgage financiers Fannie and Freddie own or guarantee 73 per cent of new mortgages in the country and 56 per cent of all existing single-family mortgages. The companies were taken into their regulator’s “conservatorship” last autumn, after mounting mortgage losses eroded their capital cushions and raised fears of collapse.

The government has pledged up to $400bn of taxpayer funds to keep the two companies afloat.

The replacement for Mr Lockhart, who on Wednesday announced his resignation, will thus have a central role in shaping the future of the giant mortgage financiers and of the US mortgage market writ large.

The White House has said it will unveil a plan for Fannie and Freddie when it releases its 2011 budget in February.

An administration official said it was still considering a long list of options for the so-called government-sponsored enterprises (GSEs) and that “no one option is under strong consideration at this time”.

Edward DeMarco, chief operating officer at the Federal Housing Finance Agency, will serve as acting director until President Barack Obama’s administration appoints a permanent successor. Fannie and Freddie have tapped $85bn of the Treasury’s lifeline so far, while the Federal Reserve has bought more than $1,000bn worth of their debt and mortgage-backed securities to try to push mortgage rates down.

The GSEs have also become the engine of government policies to modify or refinance mortgages for struggling borrowers, helping to fuel further losses at the companies.

Fannie on Thursday reported a $14.8bn loss for the second quarter and asked Treasury for a further $10.6bn of bail-out funds.

Many are asking how the government plans to extricate itself from such heavy involvement with the housing market when the crisis subsides.

One option could be a gradual wind-down of their operations and liquidation of their assets in a good bank-bad bank split. Other options include incorporating the GSEs’ functions into a federal agency, breaking them up into many smaller entities, returning them to their previous structure or conversion to a public utility model.

Fannie and Freddie were for decades shareholder-owned companies with a public mission to ensure the broad availability of mortgage financing.

The administration official said: “It should come as no surprise that the Administration is thinking through GSE reform, a commitment we made to Congress in the regulatory reform white paper, but we are in the preliminary stage of the process, the systematic development of options has not taken place and no decisions have been made.”

In an interview this week – just days before he announced his departure – Mr Lockhart said he was against nationalisation of the GSEs and that, while the old government-sponsored model could be made to work, “it would have to be structured a lot differently”.

Regulators would need power to restrict the size of their portfolios and make them conserve more capital, particularly “countercyclical capital” which would make them set aside more in the good years and less in the bad, said Mr Lockhart. This would also dampen housing bubbles.

“If you want to keep the 30-year mortgage… and you want to keep the money flowing in from the rest of the world to help fund our housing market, then you have to have a very robust secondary mortgage market,” said Mr Lockhart.

“You have to decide what you want that market to look like and how much government involvement you want in it. But you really have to draw the line very sharply, and it wasn’t in the past.”

Alternatively, he suggested they could be privatised and perhaps broken up into smaller chunks, but made to buy insurance from a government-run “catastrophe insurer” which would pay out if they incurred “giant” losses, but would leave them on the hook for smaller ones.

Mr Lockhart was wary of what legislators would ultimately come up with, however.

“It’s difficult to create those kinds of things up on Capitol Hill,” he said. “I don’t see a lot of appetite for nationalisation, but I think there’s going be a lot of tension between the ‘put it totally in the private sector’ [camp] versus the new GSE model.”

Defunct investment bank Lehman Brothers will get 325,000 euros ($459,100) for losing its role on a big European mortgage bond after the bank collapsed.

The payout, for being replaced as security agent on the 1.1 billion euro Windermere XIV securitisation, could eat into the returns for holders of the bond’s riskiest slice, Windermere said in a statement to holders of the commercial mortgage-backed securities (CMBS) on Wednesday.

The cost to Windermere, a special purpose company set up for the securitisation, of the replacement is estimated to be 700,000 euros, of which about 325,000 euros will be paid to Lehman Brothers International (Europe), the issuer said.

The payment to Lehman will be made “as a contribution to its costs in relation to the termination of its role”, it added.

PricewaterhouseCoopers, administrators to Lehman in Europe, said it would receive the payment and add it to the pot of funds to be distributed to the bank’s creditors.

The cost of replacing the security agent, an administrative role within the securitisation structure, may end up jeopardising payments to bondholders, Windermere added.

“Payment of the security agent’s replacement costs is likely further to affect the ability of the issuer to make payments in full of interest in respect of the notes,” the issuer said.

On Aug 7 rating agency Standard & Poor’s downgraded tranches of four Windermere bonds where Lehman acted as security agent, including Windermere XIV, due to uncertainties about the cost of replacing the failed bank.

Bank of America asked for a temporary restraining order, debarring Colonial from selling certain proceeds it received from Freddie Mac (FRE.N) (FRE.P) in return of mortgage loans, and certain other loans that the company held, which were owned by Ocala Funding LLC, court documents show.

Bank of America, which was the collateral agent for the Ocala Funding loans, sought an emergency injunctive relief in a complaint filed with a U.S. federal court in Florida on Wednesday.

Colonial held the loans as a custodian, agent and bailee through bailee letters, but even when the bailee letters were terminated, Colonial refused to return the proceeds and the loans to Bank of America, the U.S. banking giant alleged.

Colonial said last Friday it faces a criminal probe by the U.S. Department of Justice on accounting irregularities at its mortgage lending unit, and warned it may be put under receivership. [ID:nBNG433906]

It had also said the Alabama State Banking Department may appoint the Federal Deposit Insurance Corp as receiver or conservator for its banking unit after Aug. 12.

However, Alabama banking regulators said their scheduled meeting on Wednesday with Colonial Bank (CNB.N) had been canceled, but did not cite any reason. [ID:nN8C121593]

Colonial has been badly battered by the credit crisis, as higher charge-offs and rising foreclosures in the bank’s Florida construction-loan portfolio continue to strain its balance sheet.

The company operates 355 branches in Florida, Alabama, Georgia, Nevada and Texas and has over $25 billion in assets. If it fails, it would be the largest failure this year.

Indeed, when it comes to living space, people in the South East of England have to endure some of the most cramped conditions in the developed world.

Research by the Commission for Architecture and the Built Environment (Cabe), a government advisory body, has found that owners of new homes in the South East do not have enough space to prepare food easily, to have friends round for dinner or even to find a quiet place to relax.

Moreover, more than 50 per cent of people living in flats, bungalows and houses built between 2003 and 2006 said that they did not have enough storage space; 47 per cent did not have enough room for all of their furniture and 44 per cent said that there was not enough space for children to play safely in the kitchen while a meal was being prepared. Almost three quarters had nowhere to keep three small recycling bins to separate out household waste.

The findings will add to pressure on housebuilders to switch to building larger homes, after they came under fire for supplying too many small flats in high-density urban developments during the property boom.

The Government, too, is likely to be under pressure to set minimum space requirements for all housing. Boris Johnson, the Mayor of London, began a campaign last year to rid the capital of so-called “hobbit homes”, but plans published last month by the Greater London Authority apply only to publicly funded schemes.

Richard Simmons, the chief executive of Cabe, said: “This research brings into question the argument that the market will meet the demands of people living in private housing developments. We need planning authorities to ensure much higher space standards before giving developments the go-ahead.”

The average newly built home in the UK is smaller than in any other European country, at 76 square metres, according to the most recent figures, compiled in 2004. In Japan, the land of the micro-home, the average property was 94.8 square metres in 2003. A typical new-build in Australia is 239 square metres.

Mr Cabe said that lack of space was a particular problem for low-income households. In 2006, when the Government last compiled the figures, the average household, old or new, measured 91 square metres. In deprived areas, that figure fell to 83. Insufficient demand for small flats has led to price falls of up to 40 per cent for such property in the downturn.

Steve Turner, of the Home Builders Federation, said: “In an ideal world, everyone wants space for a grand piano, but if you increase the size of homes without more land becoming available, the cost to the end user will go up, which contradicts the aim of offering affordable housing.”

Pressure to build as many new homes as possible has resulted in overcrowded developments, as well as smaller homes. The average number of new dwellings per hectare in the England has risen from 22 in 2002 to 44 last year, according to official figures.

We cant see a recovery to the new housing market if the builders cant give the consumers what they want.  People need to feel comfortable in their homes and the builders will need to adapt to their needs.

I hope  people get the word out,

Sandy Hutchens

According to research from the Financial Services Consumer Panel (FSCP), 41% of those having difficulty paying their home loans struggle on unaided, even though seven out of eight borrowers in this group defined their problems as “serious”.

Of those who did seek advice, 65% contacted their mortgage lender and 25% approached the Citizens’ Advice Bureau.

The Panel, which aims to be an independent voice for consumers of financial services, reported a mixed response from lenders.

Some were described by borrowers as “unhelpful and inflexible”, whereas others did all that could reasonably be expected.

The research also found that the most significant driver for those not seeking advice was their perception of the advice sector and their own situation.

In some cases this led consumers to believe that seeking advice was either unnecessary or inappropriate for them.

FSCP chairman, Adam Phillips, comments: “There is an urgent need for more investment in publicising and supporting sources of information and advice in this area. We need to do much more to encourage consumers in difficulty to get advice early.”

He adds: “Debt advice agencies must not be seen as a last resort when all else has failed.”

Bringing you more of whats happening in the mortgage world is Sandy Hutchens a industry specialist.

Posted by Sandy Hutchens

New accounting standards effective at the beginning of 2009 will impact the accounting for mergers and acquisitions (M&A). The new standards, effective for all acquisitions consummated in the first fiscal year beginning on or after December 15, 2008 (for calendar year-end companies, beginning in 2009), will have an impact on deal negotiations and deal structure, in addition to accounting implications.

Fair Value Accounting
The focus of the new accounting standards is the use of fair value accounting. All assets acquired and liabilities assumed in an acquisition are to be measured at their fair values at the date of acquisition (called the acquisition method). By contrast, the former standards, although they applied fair value accounting, focused more on an accumulation of costs related to the acquisition (called the purchase method).

Transaction Costs
M&A transaction costs typically include payments to investment bankers, attorneys, accountants, appraisers and other advisors. Previously, these costs were capitalized as part of the overall purchase price for an acquisition. Under the new standards, these costs will be expensed as incurred (negatively impacting earnings in the prior period) because these are considered incremental costs to the transaction and not a component of the fair value of the business acquired.

Restructuring Costs
Under the new standards, costs to restructure the operations of an acquired company can be recognized as part of the acquisition accounting only if certain conditions are met – that is, the acquirer’s restructuring plan must be in place at the date of the acquisition. The cost of these restructurings will be charged to earnings in the post–acquisition period, not recorded as a liability at the time of acquisition.

Earn-Outs
(Contingent Consideration)
Previously, earn-outs were considered part of the acquisition cost. Under the new standards, earn-outs and other contingent consideration are to be recorded at fair value at the date of the acquisition, regardless of the likelihood of payment. Subsequent changes in the fair value of most contingent consideration will be recorded in earnings. However, if the contingent condition is classified as equity, it would not be adjusted for changes in fair value in subsequent periods.

In-Process Research and Development (IPR&D)
IPR&D will continue to be measured at fair value at the acquisition date. However, these assets will no longer be written off as a one-time expense immediately after the acquisition. Instead, IPR&D will be capitalized and recorded as an indefinite-lived intangible asset, subject to impairment until completion. Abandoned projects will be written off as an expense.

Acquisition Date and Valuation Date
The acquisition date is the closing date of the M&A transaction. If equity securities are issued as all or a part of the purchase price, these will be measured on the closing date of the transaction, rather than the announcement date. Therefore, changes in the value of the acquirer’s stock after the announcement date and before closing will have an impact on the amount of the purchase price for accounting purposes.

Adjustments to Acquisition Accounting
Companies will continue to have a one-year period of time to recognize adjustments to the provisional values that are recorded. However, the new standards require that prior period financial statements be revised to record any material adjustments of the estimated provisional amounts recorded at the acquisition date, likely increasing due diligence efforts.

In summary, fair value accounting is pervasive throughout the new standard. The resulting changes, which may not appear dramatic at first blush, are indeed significant.

Mortgage-backed securities (MBS) are debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property. Mortgage loans are purchased from banks, mortgage companies, and other originators and then assembled into pools by a governmental, quasi-governmental, or private entity. The entity then issues securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool, a process known as securitization.

Most MBSs are issued by the Government National Mortgage Association (Ginnie Mae), a U.S. government agency, or the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), U.S. government-sponsored enterprises. Ginnie Mae, backed by the full faith and credit of the U.S. government, guarantees that investors receive timely payments. Fannie Mae and Freddie Mac also provide certain guarantees and, while not backed by the full faith and credit of the U.S. government, have special authority to borrow from the U.S. Treasury. Some private institutions, such as brokerage firms, banks, and homebuilders, also securitize mortgages, known as “private-label” mortgage securities.

Mortgage-backed securities exhibit a variety of structures. The most basic types are pass-through participation certificates, which entitle the holder to a pro-rata share of all principal and interest payments made on the pool of loan assets. More complicated MBSs, known as collaterized mortgage obligations or mortgage derivatives, may be designed to protect investors from or expose investors to various types of risk. An important risk with regard to residential mortgages involves prepayments, typically because homeowners refinance when interest rates fall. Absent protection, such prepayments would return principal to investors precisely when their options for reinvesting those funds may be relatively unattractive.

Sandy Hutchens shows how the Mortgage-Backed Securities work.

It said that while “economic activity is likely to remain weak for a time”, it had begun to “level off”, suggesting the worst of the recession is over.

The central bank added that the current low levels of interest rates will likely continue “for an extended period” to aid the recovery.

Its comments come amid growing signs of an upturn in the US economy.
While US unemployment rose again last month, the 247,000 job cuts were far fewer than analysts had expected.

Other recent official figures showed that US consumer spending had risen in June for a second successive month, while worker productivity had increased at its fastest annual pace for nearly six years in the second quarter of 2009.

In addition, figures on Wednesday showed that US exports had risen by 2% to $125.8bn (£76bn) in June, a sign that the manufacturing sector was improving.

Analysts broadly welcomed the Fed’s comments.

“It is not all that surprising, it acknowledges a lot of what we have been seeing, that conditions are stabilising and the recession may be ending,” said Mark Vitner, an economist at Wells Fargo.

Stimulus measures

The Fed and the US government have carried out a number of measures to help stimulate the US economy since the end of last year.

The main two have been President Obama’s $787bn economic stimulus package, which was signed into law in February, and October’s $700bn Troubled Assets Relief Program for the banking sector.

In March, the Fed also announced a $1.2 trillion programme of buying government debt to boost lending and promote economic recovery – a policy known as quantitative easing.

US interest rates were cut to the current level of between 0% and 0.25% in December last year, where they have remained ever since.

Before then rates had fallen steadily from a high of 5.25% in September 2007.

Sandy Hutchens is happy The Federal Reserve decided to keep US interest rates on hold at between 0% and 0.25%.

Only some of us can ever DREAM of owning our own mansion. . Some of us want the really profligate mansion complete with all the facilities that most people don’t think is possible to put in a home. There are many mansions for sale out there, but finding the right one in Los Angeles for the right price can be difficult. Most of the time it isn’t about the price which makes it the best, it is about the location and surrounding area.

Buying a mansion in Los Angeles is definitely a complicated process that needs attention and thought. Buying any house for that matter takes more than just paying for the mansion and you getting it instantly. You need to spend a lot of time carefully considering the type of mansion you want, since this is one of the most important decisions you will ever be making. When buying a mansion, one of the first questions you need to ask yourself is “What is the maximum amount of money I am willing to spend”? Sure, you have been saving for your beautiful mansion, but you must remember not only are you buying shelter, but there is other things such as food to eat, the clothes you wear, medicine, doctor visits, etc…Which is why it is very important to have an almost exact dollar amount that you can spend. You cannot spend your ENTIRE life savings buying your dream estate.

When buying any estate (mansion), make sure you inspect it very carefully before you make the purchase. Some of these luxurious estates look beautiful on the outside, but may no longer be safe on the inside. You need to make sure you check the houses entire history. Also if you need a lender, choose a lender that is protected from foreclosures especially in today’s society where the housing market is slumping. Right now is definitely the best time to buy that estate of your dreams. The housing market is at one of its all time lows, which means you can find steal deals on your next new home. If you invest in a home right now, in a few years you can earn a lot of money just by investing in that next new house!

Buying a home is a very tedious process, so using the right steps in order to secure your next dream home is a must. Do your research and homework before buying your next dream house as it is going to be one of the biggest decisions you will ever make in your entire life. Living in the Los Angeles area is one of the best places you can ever live in your entire life. There is never a dull moment and no one can get enough of the beautiful and gorgeous weather. I wish you the best of luck in buying that next dream house. It takes a lot of time and careful consideration when buying that new dream house but buying a mansion in Los Angeles will be one of the best decisions you have ever made!

Posted by Sandy Hutchens

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million-unit pace in December 2007.

For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.

Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”

Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply at the current sales pace, down from a 11.2-month supply in November.

Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”

The national median existing-home price for all housing types was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s an excellent time for first-time home buyers with good jobs. “The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”

McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.

Single-family home sales rose 7.0 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.

The median existing single-family home price was $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.

Existing condominium and co-op sales increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.

The median existing condo price was $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.

Regionally, existing-home sales in the Northeast slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.

Existing-home sales in the Midwest increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.

In the South, existing-home sales rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8.0 percent from a year ago.

Existing-home sales in the West jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.

“The housing market is coming back with big gains” said Sandy Hutchens.