Mortgage Rate News

One of the more interesting housing market trends that is becoming visible as unemployment continues to grow, and things move slowly toward recovery is the fact that foreclosures are moving up the housing market scale. We’re beyond the point where most of the foreclosures where subprime loans were made to people who maybe couldn’t really afford homes. Now we’re into prime loans, where those facing foreclosure are at a different place in the housing market. These are folks who were, by and large, responsible with their decisions, but are now in trouble due to economic factors.

Indeed, the Wall Street Journal pointed out that this past June, 30% of homes were in the top third of local housing values. Three years ago, only 16% of those homes were in the top third of the housing values. WSJ goes on to report on how this might cause problems in a housing market that has been stabilizing:

The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. “The slope of that curve in recent months is much sharper than it was recently,” said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.

The bottom line is that employment needs to show substantial improvement before the housing market can truly begin recovering in any solid and sustainable way. This is part of the reason that there is a debate over extending the first time home buyer tax credit — and maybe expanding it. There is concern that without government help, the economy won’t be able to sustain the gains made so far by the housing market.

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Recently, the news has got out that the FDIC’s bank fund is in the process of being depleted. As a result, the FDIC is meeting today to try and hash out issues related to replenishing its fund. Here is what MarketWatch reports about the situation:

The FDIC meets Tuesday to tackle the thorny issue of how to fund the coverage of insured depositors. Ninety-five banks have failed to date in 2009, up from 25 during 2008 and only three in 2007.

The FDIC will also reportedly consider other options to figure out how to raise enough money to keep depositors to failed institutions whole.

Complicating the situation, 50 institutions were closed in the third quarter for a total estimated cost to the FDIC of $14.9 billion, according to researchers at Keefe Bruyette & Woods.

One of the problems that the FDIC has with cash flow is the fact that between 1996 and 2006, many banks stopped paying their FDIC insurance premiums. So when the crisis hit, the FDIC’s bank fund wasn’t nearly as big as it could have been.

Prepayment from banks?

Considering this history, it is no surprise that the FDIC is mulling over the idea of prepayment from banks. The FDIC might ask banks to prepay three years’ worth of fees in order to help replenish the bank fund. Personally, I think the FDIC would be in line to create a payment plan — charging interest — for the banks to repay all of the fees that they didn’t pay for 10 years. Isn’t that what banks do to the rest of us when we’re delinquent on something? Jack up the interest rate and make us repay everything? They can even make a plan to help banks cope with the current economic conditions.

In any case, the FDIC needs more funds to cover the bank failures and ensure that our money is kept safe. And perhaps the banks need to step it up a bit.

Today is Labor Day. Many people in the U.S. have today off in commemoration of workers through the years. Now, though, it has mainly become a time for relaxation and one last holiday as the summer comes to a close. However, it is a fitting tribute to those who have gone before if we take a few moments to think about them. After all, they have provided us with a foundation for a number of benefits:

• Paid vacation time
• Paid holidays
• An eight-hour work day
• Overtime
• An end to child labor
• Efforts to end pay discrimination
• Minimum wage

There are a number things we have to be grateful for. Indeed, the policies that our forbears fought for are what allow many of us today to be able to afford homes and enjoy our time in them. Without some of the reforms fought for, many of us would still be working in squalid conditions, for long hours, to bring home very little. Part of the reason we even have a middle class is thanks to the reform efforts of those we celebrate on Labor Day.

In order to bring a bit of history to the Labor Movement and to the founding of Labor Day, The History Channel has this interesting presentation, seen below. It is a bit long at eight and a half minutes, but it is worth watching. And if you only have three and a half minutes, you can watch the first part, which is a summary of the Labor Movement through the years and the events that led to Labor Day as a federal holiday. Well worth a short investment of time.

At this time when unemployment is high, it is a worthy goal to remember those who have fought for us in the past, and to think about those who would like to be workers, but are unable to. Enjoy the day, but try and take a few minutes to remember others as well.

Happy Labor Day!