RealtyTrac tells us that foreclosures fell in January compared to December.  Good news?  Not so fast…

For several years, January foreclosures have been lower than December, so this is not necessarily an indicator of a reversal in the foreclosure problem in America.  Furthermore, January’s foreclosure rate was 15% lower than it was last January, which is simply astounding and not a positive indicator.

Along with that news, Zillow tells us that a little more than 1 of every 5 homes in the United States is currently “under water” (debt is greater than property value leading to negative equity).  These types of properties have a high probability of increasing the foreclosure problem in the immediate future.

Still, I believe optimism is in order.  Not because of foreclosure rates (which are still horrible) or unemployment statistics (which are abysmal) or government policies (which are utterly laughable)…

…but because of you and other individuals like you.  America is successful economically BECAUSE of all of the “little people” out there - just like you and me.  Fundamentally, it’s all about your focus - do you have a clear idea of what you want to accomplish financially?  Remember - times are tough right now, but they won’t be tough forever.  This difficulty might be the biggest opportunity you have ever had.

One of the things that I’m focused on is providing information to my subscribers (if you’re not on my email list yet, please use the space in the right side of this page) to both inform and encourage them.  There’s a lot of news that reflects poorly on the state of our economy - but that doesn’t have to be the same thing as “bad news” for you.  In fact - it shouldn’t.

It’s a great time to be alive, and a great time to be an American.  The future is bright!

Thanks for reading http://realestate.BryanEllis.com - and feel free to leave your comments or other words of encouragement for your fellow investors in the space below.

Last week's jobs report is the latest data point to drag down rates for today's home buyers and would-be refinancers.

As reported by the government, the national Unemployment Rate rose to 9.5 percent in June -- a 25-year high.

As the percentage of out-of-work Americans grows, households have less disposable income to pump back into the economy.

And so, because consumer spending accounts for two-third of the economy, the growing ranks of the unemployed are forcing markets to change expectations about when the U.S. economy will reach its full recovery.

Inflation is the enemy of mortgage rates. The perceived absence of inflation, therefore, can be its friend.

With fewer working Americans, we can expect slower economic growth plus a smaller probability for inflation over the medium-term. This is why mortgage rates are lower of late, off by as much as a half-percent from the peak.

The Federal Reserve meets next week for a policy-setting meeting.

It's one of 8 scheduled Fed meetings this year in which the Federal Open Market Committee votes on whether to raise, lower, or leave unchanged the Fed Funds Rate.

Based on data compiled by the Federal Reserve Bank of Cleveland, Wall Street's expectations of the Fed Funds Rate post-meeting are as follows:

• 97 percent probability that the Fed Funds Rate holds at 0.000 to 0.250%
• 3 percent probability that the Fed Funds Rate is raised to 0.750%.

There is no expectation for a 0.500% Fed Funds Rate.

The Fed Funds Rate influences the economy by changing borrowing costs for banks, businesses, and consumers. When the Fed Funds Rate is lowered, "cheaper money" is meant to speed the economy forward. When the Fed Funds Rate is raised, by contrast, costly borrowing tends to slow the economy down.

Changes to the Fed Funds Rate do not directly correlate to changes in mortgage rates.

Because Wall Street is nearly unanimous in its Fed Funds Rate prediction, though, expect the market's FOMC focus to be on what the Fed says rather than what it does.

If Ben Bernanke & Co. express concerns about long-term inflation and the need to contain growth, mortgage rates will rise in response. On the other hand, if the Fed says that growth is expected to be within a tolerable range, mortgage rates should idle.

In other words, there's little benefit in waiting for the Fed's meeting to make your "Float or Lock" mortgage rate decision. In a worst-case scenario, mortgage rates rise. In a best-case scenario, they likely stay the same.

The Fed's two-day meeting adjourns Tuesday, April 29 at 2:15 PM ET.

All of the discussion about a new Resolution Trust Corporation (RTC) is extremely speculatory in nature since there is currently no legislation to support this notion.  However, something in the model of a new RTC seems likely to happen since it’s a model with which the government is familiar and comfortable.

The key to watch for is the government’s guidelines for which assets (houses) they will take over, and the standards which the current lenders will need to meet in order to qualify.

There are three really big issues you should pay attention to:

• Property Valuation:  How will the government assess the value of properties they take over?  What safeguards will be involved to prevent appraisal fraud?
• Exchange Valuation:  Related to but different than property value, exchange value will be the actual amount of money that lenders will receive from the government for their distressed properties.
• Buyer Restrictions:  Who can buy these properties and what are the limitations?

For the record, I am opposed to the bailout program.  Nevertheless, it’s prudent to prepare.

Property Valuation

I have no idea how the government will go about establishing property value for all of the distressed properties.  In all probability, properties will be sold to the government by the failed lenders as “packages” and not individually, but that does not negate the need to have a good grasp of the value of each property since virtually all of them are valued in the 6-digit range, and therefore financially significant on an individual basis.

One thing I know for sure:  It is not safe to rely on the appraisers that have worked with the lenders who are being bailed out. Very little action has been taken against unscrupulous appraisers, even though they are as complicit in this problem as unscrupulous mortgage brokers.  And let’s be clear:  If a lender is responsible for their own property valuations, those valuations will in all probability be skewed highly in favor of the lenders, even if the lender’s properties are appraised by theoretically “independent” appraisers.

Bryan’s Suggestion:  At the very least, the government must be responsible for establishing property values for itself, and appraisers who have been directly or indirectly involved with the lender who owns a specific property should be disallowed from being involved in appraisal for that property.  This is merely a starting point, as there are few businesses with as much room for manipulation as the real estate appraisal business.

Exchange Valuation

Once the value of a property is established as “X”, how much of that value will the government have to pay the lenders to take over those properties?  For example:  Will the government have to pay 90% of the value, or will they pay 40% of the value?

I hope that the government extracts a HUGE pound of flesh from the lenders.  Frankly, these lenders are getting off easily and they need to suffer for their incredibly poor decision making.  A great way to make that happen would be to make sure that the government pays only a small percentage of the value of the property so that the lenders still take a beating.

Serious, intense financial pain for the lenders is the only thing that will prevent this from happening again.

Bryan’s Suggestion:  The government should pay no more than 60% of the value of the property, and maybe less for properties in very illiquid areas/circumstances.  Additionally, the mortgage companies should not be able to completely push off their losses on mortgage insurers.  At the very least, the mortgage companies must share the burden of their poor decisions.

Buyer Restrictions

The original RTC made it very difficult for small investors to get involved in the bidding/buying process after the first round of RTC transactions completed, and this is not reasonable.  The goal here should be to facilitate the resale of these properties to U.S. citizens who need a place to live or provide housing to others, and any policy which slows that process - for either owner-occupied or investor-owned property - should be prevented.

Bryan’s Suggestion:  At no time should any company who sells property to the RTC be allowed to be a buyer of any other RTC-owned property.  It would be shameful for a mortgage company to sell off billions of dollars of real estate, only to be able to go back and repurchase other properties at favorable prices.  Additionally, the bidding/buying procedures should be favorable to individuals and small investors at all times.  After all, the problem we face is because of horrible government policy and terrible corporate management, not because of the activity of individual investors.

That’s enough for now.  Your thoughts are welcomed here on FreeRealEstateTraining.com

This morning, the S&P/Case-Schiller national home price index was released for the first quarter of 2008 and indicated that pricing for “American” housing had declined by 14.1% (year-over-year) in that time.

The bigger problem is that the media is reporting this to you as news, when there are three well-known facts that expose this “news” to be nothing more than a PR stunt (and a dishonest one at that): …..click here to read more