Loren Johnson, CMPS

It's like leaving the closet light on all day and all night, all year. When 12 months are up, you will have spent between $50 and $70 to keep that light burning.

That's an undeniably wasteful way to blow 50 bucks, but that's how much energy is lost in an average household every year. The culprit: electronics sitting idle. But still, $50 in the grand scheme of things? But think of not just your home, but your neighbors.......and their neighbors......in town after town across America. The problem is more electricity being used, which leads to pollution. It forces the electrical grid to work a little harder than it needs to, all for energy that slowly seeps away.

Unlike a light bulb, which generally relies on a switch to provide power, most electronics and appliances are continually powered, even when they're off. Think of the clock on your coffeepot or VCR. It's off, but not all the way. In the last study I saw, the average home has 19 appliances that use standby power. Instead of one computer, you may have two. A TV in every room. It adds up.

And as it adds up, there goes your 50 bucks.

To combat the rise of wasted energy, I would advocate unplugging appliances and electronics that don't get used much. That includes cell phone chargers, radios and other small electronics that don't need to be constantly powered. The problem that comes into play is resetting the clock on some devices. If you don't mind doing that, it's a good way to save.

Devices like Kill A Watt can also help save money. Available for around $25 through a number of online retailers, the gadget measures power use in constant wattage and kilowatt hours. Many people are becoming more aware-more concerned-about how they're using energy.

Part of that concern involves replacing outdated technology. Older appliances suck down more power, mostly because of the way they were designed.

When purchasing new electronics or appliances, check for energy efficiency ratings. It's a given that some things are going to use a lot of power when they're in use, but that doesn't mean you need to keep paying for it after switching it off.

The national foreclosure moratorium imposed by Fannie Mae and Freddie Mac, major banks such as Citibank and Bank of America, and a host of state governments has created a "breather" for homeowners in default. By working with loan servicers, some homeowners will be able to modify their loan terms and stay in their homes. But many won't.

Not all borrowers will qualify for modified loans. Lenders are keenly aware of this, as well as the fact that foreclosing on a home is an expensive proposition: It can cost a bank $30,000 to $50,000 to foreclose on a home, plus carrying costs that equate to 1.0% to 1.25% of the value of each home per month. There is little enthusiasm for increasing bank-owned (REO) inventory in markets already saturated with foreclosed homes and falling prices.

As an alternative, lenders have new enthusiasm to ramp up the volume of short sales.

Short sales, as most know, are when the lender allows a distressed property to be sold at a price lower than the homeowner's mortgage indebtedness, with the difference forgiven. This relieves the homeowner of their ownership and debt burden without marring their credit report the way a foreclosure would. It also typically allows the new purchaser to buy into the neighborhood at a substantial discount ... much more in line with the property's true, current market value. In other words, short sales facilitate efficient clearing of the market.

Historically, short sales have not been very appealing to lenders. The short sale is a complex process that requires an agreement by all the lien holders to accept the lesser amount owed by the original borrower. The paperwork and number of players involved in short-sale transactions can easily overburden a servicer who is already dealing with hundreds of thousands of loan modifications, REO dispositions, etc.

But now with over four million new loans in default in this cycle and six million more expected in early 2009 due to coming interest-rate resets, lenders such as Citibank, Bank of America and Wells Fargo are fired up for short sales.

As they see it, if just 25% of current loans in default could be sold through short sales it would stave off one million foreclosures (good for homeowners) and replace one million nonperforming borrowers with one million performing borrowers (good for lenders).

The industry's challenge to accomplish this is two-fold: Evaluating their portfolios to determine which homes are well suited for short sales, and processing the high volume of bulk sales.

So lenders are now assessing a distressed borrower's situation early in the loan modification process, calculating the sensibility of modifying the loan versus offering the property in a short sale or letting it likely roll into foreclosure. In cases where short sales are the best route, lenders are proactively assigning loans in bulk to be put through the short-sale process. (This phenomenon is strangely new to homeowners; in the past it was incumbent on them and their agents to initiate the short-sale process, not the other way around).

The second part of the challenge is how to process the actual sales, considering legacy technology solutions weren't built to handle either the volume or the complexity of today's short-sale transactions.

Stocks, Treasuries, and Mortgage-Backed Securities(MBS) all showed significant losses today. Weaker than expected economic data was consistent with the decline in stocks, but Treasuries and MBS usually benefit from weak economic news. Bond markets continued to suffer for a second day after the Fed did not announce a definite plan to purchase Treasuries. December New Home Sales fell far more than expected to a record low level of 331K annual units. New Home Sales for 2008 dropped to the lowest level since 1982. The 5-yr Treasury auction received weaker than expected domestic demand, but foreign investors purchased a stronger than average 35% of the total. The House passed its version of the fiscal stimulus plan, and the Senate is expected to consider a different version next week. The Dow fell 200 points.

Tomorrow, GDP, Chicago PMI, and Consumer Sentiment will be released.

The Fed purchased $16.8 billion in agency MBS during the weekly period ending January 28, down from $19.0 billion the prior week.

It was a volatile session in the Mortgage-Backed Securities market today. First favorable and later unfavorable repricing took place. MBS prices fell after the release of the Fed statement, and Treasuries dropped far more. Investors were hoping for more clarity on the circumstances which would cause the Fed to purchase Treasuries in addition to MBS. The Dow rose 200 points. Tomorrow, Durable Orders, Jobless Claims, and New Home Sales will be released. There will be a 5-yr Treasury auction at 1:00 et.

As expected, the target for the Fed Funds rate remained unchanged, close to a level of zero. Heading into the announcement, the biggest question for investors was whether the Fed would begin to purchase Treasuries in addition to MBS. According to the statement, the Fed is ready to purchase Treasuries if conditions warrant. The vote was 8 to 1, and the dissenter was in favor of immediate Fed purchases of Treasuries. The statement also reported that the Fed would expand the program to purchase MBS if needed. Overall, the Fed expects to keep rates extremely low for "some time" and will "employ all available tools" to boost the economy.

Saw a news item in the morning paper that just made me cringe...and had nothing to do with the housing industry, for a change!!!

A Wisconsin State Supreme Court ruling yesterday says that a former Cheerleader cannot sue another cheerleader who had dropped he during a 'stunt' in 2004.

WHAT???

I have a daughter who dances, and sometimes she falls during practice, or strains something during a dance. Would I even think of suing the instructor?????NO.

In this case, a female cheerleader was dropped & injured her head during warmups for a High-School basketball game. She sued the boy who had dropped her, the school district, and the insurance company. (The story does not mention anything about any permanent injury...I'm assuming it would have if there were). The court ruled that she couldn't sue over an unintentional injury in a school-sponsored contact sport, of which they included competitive cheerleading.

Yes, I'm sorry that someone was hurt, and I hope she is well now. However, I've really had it with people who think it's always "someone else's fault" and want to sue. In my world, I see no clearer picture than, "I can't pay my mortgage, so I'm suing the bank!".

Things can happen that are accidents. I feel we need the courage to admit that some things just can't be 'blamed' on someone else. Just get up, brush off, and move on!