Billings, MT

You can see the rush to use the $8,000 first time buyer tax credit in the number; everyone thought it was going to expire. Congress fooled you. Now the months of March and April 2010 will repeat what happened in September and October 2009. So even if we have winter I'll bet $10 against your $1 that the first four months of 2010 exceed the first four months of 2009 in terms of pending sales activity. Our friends in the construction business have benefited also by the governments largess with the tax dollar as you can see from the numbers. They builders have responded in spades adjusting their product to the market place and moved down in their price to sell homes, the market at work. Of course there is one segment that is taking a hit due to all the first time buyers flooding the purchase marker and you can see that in what's happening to the rental availability and price declines in the rental market. When you're robbing peter to pay Paul that is what happens, there is always collateral damage some where in the market place.

Market update at glance	11/30/2009	Year	Percentage Increase
Yellowstone County		2008	2009	or -Decrease
Residential Closed Sales Units		1837	1820		-1%
Residential Pending Sales Units	131	210		60%
Residential Active Property Units For Sale	858	802		-7%
Average sales price Single family Home	$208,560	$199,960		-4%
Average Square feet Single family Home	2321	2252		-3%
Median sales price Single family Home	$185,000	$180,200		-3%
Median Square feet Single family Home	2214	2144		-3%
Average Days on Market Till Offer Received
Single Family Home			61	63		3%
Absorption rate -	TIME IN DAYS
Time it would take for all existing		161
properties to sell with no new inventory coming
into the market place - residential
SINGLE FAMILY PERMIT ISSUED FOR MONTH	9	29		222%
SINGLE FAMILY PERMIT ISSUED FOR YEAR	252	228		-10%
Average Number of Rentals Advertised Sundays	301	397		32%
Average Asking Price for a Rental Home	$1,114	$1,028		-8%
Average Asking Price for a Rental Apartment	$678	$672		-1%

Making Home Affordable
Update: Foreclosure Alternatives and Home Price Decline Protection Incentives
On Feb.18th the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the US housing market and offer assistance to up to 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures.
As promised, two weeks later on March 4th, the Administration published detailed program guidelines and authorized servicers to begin modifications and refinancings under the plan immediately. On April 28th, the Administration announced additional details related to the Second Lien Program and strengthening Hope for Homeowners. Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.
Today we are providing a program update, including additional details on Foreclosure Alternatives and Home Price Decline Protection Incentives. Foreclosure Alternatives will help to prevent costly foreclosures by providing incentives for servicers and borrowers to pursue short sales and deeds-in-lieu of foreclosure in cases where a borrower is eligible for a MHA modification but unable to complete the modification process. This program will assist homeowners who cannot afford to stay in their homes by helping them to avoid foreclosure and relocate to a home they can afford. Building on insights developed by the FDIC, Home Price Decline Protection Incentives will provide additional payments based on recent home price declines, and therefore will incentivize additional modifications in areas where home prices have been falling. By increasing MHA modifications and the use of alternatives to foreclosure, we will reduce the negative impact of foreclosure, minimizing damaging costs for financial institutions, borrowers and communities.
Home Price Decline Protection Incentives and Foreclosure Alternatives, together with the other comprehensive elements of the Making Home Affordable program, will help to stabilize property values for homeowners in neighborhoods hardest hit by foreclosures. Based on estimates of the relationship between foreclosures and home prices, the Home Affordable Modification program could help to bolster home values for the average homeowner by as much as $6,000.
Foreclosure Alternatives and Home Price Decline Protection Incentives
1. Foreclosure Alternatives for Borrowers Eligible for MHA

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Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
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Incentives for servicers to pursue alternatives to foreclosures
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Borrower incentives to cover relocation expenses to homes that are affordable
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Streamlined process combining short sales and deed-in-lieu transactions
2. Home Price Decline Protection Incentives to Protect Against Falling Home Prices

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Incentives to support modifications in markets hardest hit by falling home prices
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Provides incentives for modifications by providing payments based on recent declines in home prices to reduce the risk of loss to lenders from modifications compared to alternatives that could result in the loss of homeownership
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Foreclosure Alternatives for Borrowers Eligible for MHA but Unable to Sustain a Modification: For eligible borrowers unable to retain their homes through a Home Affordable Modification, MHA will provide incentives to borrowers, servicers and investors to encourage short sales and deeds-in-lieu. Both allow families and servicers to avoid the costly foreclosure process, and to minimize the negative impact of foreclosures on borrowers, financial institutions and communities.
Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the servicer may consider a short sale, and if that is unsuccessful, a deed-in-lieu (DIL).
Both a short sale and a DIL provide an opportunity for borrowers and servicers to avoid the foreclosure process. In a short sale, a servicer allows the borrower to sell the property at its current value, even if the sale nets less than the total amount owed on the mortgage. Approval of a short sale requires the borrower to list and actively market the home at its fair value. The sale must be an arms length market transaction with all proceeds (after selling costs) applied to the discounted mortgage payoff. If the borrower actively markets the property but is unable to sell it within the agreed upon time period, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer - provided the title is free and clear.
Short sales and DILs are complex transactions involving careful coordination and close cooperation among a number of parties -- servicers, appraisers, borrowers, purchasers, real estate brokers, title agencies and often mortgage insurance companies and junior lien holders. A short sale or DIL usually provides a better outcome for borrowers, investors and communities. However, due to the complexity of and time required for completion of these transactions, servicers historically have often opted to pursue foreclosure instead, even where a short sale or DIL would have provided a substantially better outcome for borrowers, investors and communities.
The MHA Foreclosure Alternatives Program simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. To compliment a standardized approach, Treasury provides incentives to borrowers, servicers and investors to pursue short sales and DILs.
How The Home Affordable Short Sale/DIL Program Works:

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Borrower Eligibility. Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification. Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor's recovery through foreclosure Incentive Payments.
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Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.
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Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.
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Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.

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Standardized Documentation: The program will publish streamlined and standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter. These documents will outline specific marketing terms, describe the rights and responsibilities of all parties and establish clear timeframes for performance. Creating one standard set of documents that the industry can use is expected to minimize the complexity of these transactions and significantly increase use of the short sale option.

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Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions. The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.

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Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.

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Selling Commissions and Fees: Reasonable and customary real estate commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement. The Servicer will agree not to negotiate a lower sales commission after an offer has been received.

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Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.

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Property Eligibility: Any junior liens, mortgages or other debts against the property must be cleared for the property to be sold as a short sale or deeded to the servicer. The servicer can proceed with a short sale or deed-in-lieu if there is a reasonable belief that all liens on the property can be cleared.

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Program Expiration: Eligible borrowers will be accepted until December 31, 2012. Program payments will be made upon successful completion of a short sale or DIL.

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Deed-in-Lieu: At the servicer's option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.
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Home Price Decline Protection Incentives to Protect Against Falling Home Prices: This initiative provides lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. These incentives will encourage servicers to undertake more modifications by assuring that incremental investor losses will be partially offset.
To encourage the modification of more mortgages and enable more families to keep their homes, the Administration, building on insights pioneered by Chairman Bair and the FDIC, has developed an innovative payment that provides compensation based on recent home price declines, structured as a simple cash payment on every eligible loan. Home Price Decline Protection (HPDP) incentives are designed to address investor concerns that recent home price declines may persist. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed. HPDP payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market.

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Increases Number of Loans that Are Modified: Making Home Affordable will make payments totaling up to $10 billion to to encourage lenders, servicers and investors to modify rather than foreclose by addressing concerns that home price declines will persist in the future. This should increase the number of modifications completed under the MHA program in markets hardest hit by falling home prices.
How The Program Works:

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Payments will be based on the total number of modified loans that successfully complete the modification trial period and remain in the modification program.

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Each successful modification will be eligible for a HPDP incentive, up to a cap for HPDP incentives of $10 billion.

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If the trial modification remains successful, 1/24th of the HPDP incentive will accrue to the lender/investor each month for up to 24 months. HPDP incentive payments will be made at the end of the first and second year of the modification.

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Calculation of HPDP Incentives: HPDP incentive amounts will be calculated based on a formula incorporating:
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Declines in average local market home prices over recent quarters prior to the quarter in which the loan was modified based on housing price indices; and
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The average price of a home in each particular market, since the potential loss due to a given rate of home price decline will be larger in higher cost areas

Thought it might be interesting to look at what was happening when people refinanced their home green is the financing the loan was before they refinanced the red is the financing product they moved to when looking at the chart the thing that jumps out is the move toward 30year fixed rate financing. Only those already in a 15 year fixed rate choose another 15 year fixed rate in a higher percentage than a 30 year fixed rate. The positive of this information is that people refinancing are putting themselves in a defensible position with increased cash flow which in the long term with be good for both them as individuals and the economy as a whole. As a side note with out the Federal Reserve supply all the money to mortgage market forcing interest rates down this would could not have occurred

QUARTERLY PRODUCT TRANSITION STATISTICS
	New Product
Quarter	Old Product	1-Year ARM1	ARM - Hybrid2	Ballon3	FRM 15yr4	FRM 20yr5	FRM 30yr6
200903	1-Year ARM	0%	1%	0%	17%	6%	76%
	ARM - Hybrid	0%	4%	0%	8%	1%	87%
	Balloon	0%	3%	0%	30%	2%	66%
	FRM 15yr	0%	0%	0%	64%	1%	34%
	FRM 20yr	0%	0%	0%	47%	8%	45%
	FRM 30yr	0%	0%	0%	13%	3%	83%

Now look at what was happening in the second quarter of 2006 and compare to today. 88% of those refinancing in 2006 were taking out a higher loan amount with a higher interest rate and look at the difference in the appreciation rate. My how times have changed

Quarterly Refinance Statistics
	Percentage of Refinances Resulting in:	Descriptive Statistics on Loan Terms and Property Valuation
Quarter	5% Higher Loan Amount1	Lower Loan Amount	Median Ratio of New to Old Rate2	Median Age of Refinanced Loan (years)	Median Appreciation of Refinanced Property
200903	36%	17%	0.83	3.5	0%
200602	88%	4%	1.08	3.2	34%

The next you might want to consider is in the second quarter of 2006 consumers withdrew an extra $62 billion to spend, what type of effect might that have all the way through the economy. What a change a couple of years make

Quarterly Cash-Out Volume for All Prime Conventional Loans
Year	1. Total Cash-Out Dollars as a Percentage of Aggregate Refinanced Originations UPB	2. Total Home Equity Cashed Out ($ billions)	3. Volume of 2nd mortgage and HELOC consolidation ($billions)	4. Total Combined Volume of Cash-out and 2nd Mortgages/HELOC Consolidation ($ billions)
200903 (E)	8.4%	$19.6	$8.2	$27.8
200602	31.0%	$83.6	$5.9	$89.5

HERE IS THE INTERNAL REVENUE SERVICE GUIDANCE ON THE THE TAX CREDITS AVAIABLE

First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify

IR-2009-108, Nov. 24, 2009 WASHINGTON - A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers. The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The maximum credit amount remains at $8,000 for a first-time homebuyer -- that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. But the new law also provides a "long-time resident" credit of up to $6,500 to others who do not qualify as "first-time homebuyers." To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return. A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405. Income Limits Rise The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. New Requirements Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law: Dependents are not eligible to claim the credit. No credit is available if the purchase price of a home is more than $800,000. A purchaser must be at least 18 years of age on the date of purchase. For Members of the Military Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011. For more details on the credit, visit the First-Time Homebuyer Credit page on IRS.gov. Related Items: IRS YouTube Videos New Homebuyer Credit, November 2009

The Economic Status of the Home Building Sector
Without a doubt, businesses in the home building sector, including related companies in construction supply, home furnishings and other elements of the construction sector, are experiencing the most painful economic downturn since the Great Depression. A review of industry statistics demonstrates the historic and dramatic nature of the ongoing recession.

• Total housing starts were down 80% from 2.273 million in 2006 to 454,00 as of April 2009
• Single-family starts were down 80.4% from 1.823 million in 2006 to 357,000 as of February 2009
• Multifamily starts were down 80% from 450,000 in 2006 to 90,000 in April 2009
• New home sales were down 76.3% from 1.389 million in 2005 to 329,000 in January 2009
• 1.04 million jobs have been lost in the home building sector since February 2006 (30.2%)
• As a share of the economy, residential fixed investment (home building) has fallen from 6.2% in 2006 to 2.4% in the second quarter of 2009
• This decline in housing's share of the economy has in the last two years routinely subtracted a point or more of GDP growth or added a point to GDP decline

Despite recent signs that these declines are slowing and some evidence of stabilization in home building, access to capital remains restricted. Without access to credit, home builders will struggle to survive when the economy rebounds. In this regard, an expanded NOL carryback rule is key to the survival of many home building businesses. Without access to refunds of prior overpayment of taxes, these businesses will be forced to continue layoffs and shutdown businesses, many of which are multi-generational family-owned small businesses.