Ron Brown FHA & VA Home Loan Specialist

I just received an email from one of my past military borrowers who has a loved one in Iraq. I thought it was a fabulous idea worth sharing with all the good folks on Active Rain.

Xerox is sponsoring a Thank You card drive for the men & women of our armed forces stationed overseas this holiday season. It will only take a minute of your time, and will definitely brighten their day. All you have to do is visit the Lets Say Thanks web site, follow the 3 easy steps (give your name, pick a design, and choose a pre worded thank you message, or create your own), and Xerox will print and deliver the card to one of our troops.

It does not matter what your stance is on our politics, or foreign policy, these people are serving our country, and deserve everyone's support. From a completely selfish standpoint, this is a great way to get in front of your database in a positive way. Who knows, you might just get some business out of being a nice person.

The big news of the day in Real Estate surrounds the potential failure of FHA. I have seen a few blogs that are trying to put a positive spin on the situation, saying that FHA is fine, and these reports are being blown out of proportion. I remember hearing almost identical statements with regard to Fannie, & Freddie 14 months ago; or in other words, just before we had to bail them out with public money.

I went to a link on a blog for a video created at Think Big Work Small where they made the case that FHA actually has plenty of money, and they were not going to be in need of any bailout. Here is a link to their work TBSW Video . After watching the video I think they make a few incorrect assumptions. The reserve account is for potential losses, and is at 0.53%, which IS Well Below the mandated minimum of 2% (and by the way, 2% reserves means you are leveraged at 50 to 1, which would potentially trigger the FDIC to shut you down if you were a bank). Here is a link for any of you who would like to read the actual HUD Report. The TBWS guys on the video seem to be relying on the idea that the projected losses are not accurate because they are based on 2007 & 2008 results. They say that those were anomaly type of years, and we will never see a repeat of them, and we did not go through the predicted Armageddon many thought those years portrayed.

I have news for you. As bad as 2007 & 2008 were, we did not have OFFICIAL Unemployment above 10%! The problem with FHA is that the buyer has an LTV of 96.5% (loan balance is actually higher due to Up Front Mortgage Insurance Premium rolled in), and if 10% of those borrowers lose their job the default rate will be FAR HIGHER than it was in 2008. One of the positive statements in the HUD Report is that the average FHA borrower FICO is now in the 690's versus the 630's in '07 & '08. I hate to say it, but even if your credit score is 800, you're going to have a tough time paying your mortgage for long if you don't have a job.

That is why there is such a concern. Currently, over 8% of all FHA loans are over 30 days late (that's 1 in 12, look around your block), and unemployment is not predicted to get well soon. The stimulus is slow to create the promised jobs, and the unemployment number is as artificially low as mortgage rates. Just as the Fed has artificially held down loan rates, people going over the limit of unemployment "fall off" the books. That is why true unemployment and underemployment rates are reported as closer to 20%. If FHA does not increase their reserves, they will need a bailout sooner than later.

Today the Senate finally passed H.R. 3548, the bill extending unemployment benefits, and with it comes an Amendment extending the Tax Credit for First Time Home Buyers as well as an exception allowing for move up buyers to get their own credit.

In its current form the bill extends the $8,000 Tax Credit for First Time buyers as long as they are under contract before May 1, 2010, and close on the home before July 1, 2010.

The exception for move up buyers reads "In the case of an individual (and if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8 year periodending on the date of the purchse of a subsequent principal residence, such individual shall be treated as a first-time homebuyer..."

The bill goes on to state that in that circumstance, that individual shall receive a $6,500 tax credit rather than the $8,000 for a true first time buyer.

The final vote by the Senate was 98 to 0 in favor, and the House is expected to make this bill a priority, possibly leading to a vote next week. Let's hope this gets done quickly so we can all stop playing the "rumor game" when it comes to the extension of this credit.

Today the Federal Government is reporting some of the results achieved from the $787 Billion Stimulus package with regard to employment. Depending on the source you choose to listen to, anywhere from one quarter to one-half of the $787 Billion has been distributed.

In Puyallup, using my office zip code of 98372, there has been one contract reported with a value of $192,000, and it has resulted in in 0.5 (yes, that is one half) jobs created. I'm not sure how you calculate half of a job, maybe it is a 20 hour per week job? For the greater Puyallup area (zip codes 98371, 98372, 98373, 98274, & 98375) there have been two contracts awarded at a total cost of $574,825, and the published result of jobs created equals 1 (both contracts apparently created/saved one half of one job). Forgive me for feeling underwhelmed that our government spent over half a million dollars to save, or create one job.

Today the Federal Government is reporting some of the results achieved from the $787 Billion Stimulus package with regard to employment. Depending on the source you choose to listen to, anywhere from one quarter to one-half of the $787 Billion has been distributed.

In Puyallup, using my office zip code of 98372, there has been one contract reported with a value of $192,000, and it has resulted in in 0.5 (yes, that is one half) jobs created. I'm not sure how you calculate half of a job, maybe it is a 20 hour per week job? For the greater Puyallup area (zip codes 98371, 98372, 98373, 98274, & 98375) there have been two contracts awarded at a total cost of $574,825, and the published result of jobs created equals 1 (both contracts apparently created/saved one half of one job). Forgive me for feeling underwhelmed that our government spent over half a million dollars to save, or create one job.

Interestingly, I found a project listed with a cost of $999,310 that is attributed to Milton, WA just north of us by a couple of miles. The Recipient Company is the Boart Longyear Company, and their subsidiary Holt Drilling. While these funds did not save or create any jobs, at least the money was filtered through our area?

For Washington State as a whole, the claim is 2,909 jobs were created, or saved at a cost of $228,820,000 received so far. that averages out to $78,659 per job. From the various news articles I have read so far, the national average cost of each job created or saved so far varies from $250,000 to as much as $600,000. Washington State appears to be on the bargain end of the spectrum at $78,659 when compared to South Carolina, which has received $219,560,000 in order to create/save 146 jobs (roughly $1.5 Million per job).

All in all, I am very impressed with the transparency of the spending. I have never before been able to find out what my government does with our money at nearly the same speed as they spend it!

To see how the money is being spent in your area visit Recovery.gov