Thomas Davis Group

President Obama launched his official housing recovery platform yesterday as the Making Home Affordable Program guidelines were unveiled. The Making Home Affordable Program is designed to help 7 to 9 million homeowners prevent foreclosure and keep responsible families in their homes. The plan is for primary resident loans only and is split into two types of financial programs, Home Affordable Refinance Program and the Home Affordable Modification Program.

The Home Affordable Refinance Program is geared for those borrowers that currently cannot qualify for a traditional refinance due to the tightened banking guidelines but have been responsible homeowners. If the homeowner can qualify for a traditional conventional, FHA, or VA mortgage they will not be allowed to participate in the program therefore traditional methods of refinancing are to be explored first. The low-cost refinance program is offered to anyone that has a loan that is owned or guaranteed by Fannie Mae or Freddie Mac. The interest rate on the new mortgage would be a 30 year fixed rate at approximately 5.16%. However, one of the guidelines will be very difficult to accommodate for many homeowners. The program states that a homeowner cannot owe more than 105% of the value of their home. This will eliminate most individuals right away as many individuals and families that need this type of interest rate and payment reduction are "under water" on their property. This will only help a small percentage of individuals that fit into the programs "little box" of guidelines.

The Home Affordable Modification Program is designed to help those individuals and families that are considered "at-risk" homeowners who cannot qualify for the Refinance Program and need to modify the terms of their existing mortgage to keep them from losing their home to foreclosure. An "at-risk" homeowner is defined as someone that is either currently in foreclosure proceedings, behind on their mortgage, or current on their mortgage but are suffering from serious financial hardships now or in the future due to interest rate adjustment, decreases in income, increases in expenses, etc.

The program is great for establishing set rules and regulations for a specific type of modification. Previously there have been no set rules for banks to go by which has made modifications very difficult to obtain as banks have been unwilling to increase their liability. The main guidelines are as follows:

•1. Banks are to lower the interest rate to as low as 2.0% on a principal and interest payment in order to achieve a 31% front end debt to income ratio (DTI) for the homeowner. If a 2% rate does not lower the DTI to 31% then the amortization or term of the loan is to be extended to 40 years, and finally if necessary a principal forbearance at no interest will be used until the target DTI of 31% is achieved.

•2. Interest rates will be fixed for 5 years and will be gradually stepped up 1% per year until the original loan interest rate is achieved or the conforming loan survey rate at time of loan modification is reached, whichever is less.

•3. The Treasury will share the monthly cost dollar for dollar for the difference in the 38% DTI payment verses the targeted 31% DTI to help offset some of the banks monthly losses.

•4. Banks are being given an up- front $1000 incentive for each successful modification and an additional $1000 per year for three years for each homeowner that continues to make all their new mortgage payments on time.

•5. Homeowners receive a one-time incentive payment of $1500 to modify their loan. In addition, homeowners receive a $1000 principal reduction on their loan each year that they remain current on their mortgage for a maximum of five years.

•6. No restriction on amount owed verses property value

•7. Principal reduction is an option left up to the bank or servicer, however, it is unfortunately not a requirement of this program.

Banks and servicer's are not required to modify loans and take advantage of this program. It is also unfortunate that there is no guideline helping homeowners reduce their principal balance which will not deter homeowners severely "under water" on their home from walking away. However, it will help many homeowners avoid losing their home as banks will now be more inclined to modify mortgages with the government helping cover the cost and liability. In addition, this will reduce the level of foreclosures nationwide and help stabilize the prices of homes. We will still need the credit markets to open the lending gates and new loan programs will need to be created. However, this is a step in the right direction and hopefully more is to follow.

There are many other guidelines in the plan that cover items such as: protecting banks from individuals who walk away from their homes due to declining home values, second lien holder extinguishing, modification counseling, servicer incentives to take alternatives to foreclosure such as short sales, and Judicial modifications during bankruptcy. I have attached the full guidelines for your review or you can view them on www.financialstability.gov.

www.thomasdavisgroup.com

Market Stats brought to you by The Thomas Davis Group of Re/Max Homes and Investments

Agents, Affiliates, & Clients;

Take a look at our most recent statistics for January... The positive changes seen from last month are progressing! Although not all ‘Solid' upturns, what's important is recent direction! Take a look....

The perspective views below are not a representation of fact, but only considered as professional opinion. Reports are from current, residential MLS information - good through January 31^st, 2009... Also showing continued market trends from the last 2 years.

** Compiled information represents MLS residential properties, located within the local MLS region. Information does not reflect raw land, commercial, or multifamily units.

Following the attached reports, in respective order:

• Supply & Demand Listings - Interesting... The seasonal trend (last few years) is for January's listings to substantially increase, compared to the previous year's ending. But, last month did not reflect that... We've maintained a close distance with the number of new listings over the last 4 months. Click Here for Chart

• Supply & Demand #of units ‘Under Contract' & ‘Sold'' - The number of homes ‘Under Contract' are dramatically increasing, but those actually ‘Sold' have decreased. Both of these trends are seasonal adjustments, typical for the beginning of the year. Click Here for Chart

• Median Price of properties ‘Listed', ‘Sold', & ‘New Listings' - As the median sales price continues to decline, take a look at the listings (both old & new). They're attempting to hold a higher listing price (especially ‘New' listings to the market), despite the continued decrease in ‘Solds'. Ultimately, could they slow the drop in median prices?? Average ‘Sold' is now at $130,000. Two years ago it was $251,000!! Does buying now get much better? Click Here for Chart

• Months Supply of Inventory - Look at this drop in the average ‘Month's Supply of Inventory'! Although slightly seasonal, the last 2 months have been our largest % drop in years! This is strongly heading in a great direction... & at a great pace! Click Here for Chart

• Percent of homes ‘Under Contract' - Another great trend. In the last 2 months, the % of homes that are ‘Under Contract' has nearly doubled from 5.8% to 10.1%! Another positive (& dramatic) trend! Click Here for Chart

• Basic Absorption of homes ‘Under Contract' (both old & new) & ‘Residual Inventory' - More great info showing on this chart. While both Old and New ‘Under Contract' properties are steadily increasing, our standing ‘Residual' Inventory (remaining on the market) is declining! Click Here for Chart

NOTE - If you're looking for other MLS perimeters to these statistics (ie. specific area(s), property types, or ‘wider' perimeters), please feel free to contact us at www.thomasdavisgroup.com or 480-248-9175

January 28, 2009

T.C. Luigi

Investor RoundTable

Roundtable Mission

Our mission is to create a network of Real Estate Investors from novice to the seasoned expert to support each other thru a forum for discussion, goal setting, deal review and encouragement. We pride ourselves on offering something for everyone so no matter your experience level your are encourged to come and idscuss today's Hot Real Estate topics

Getting the Most our to the Roundtable

The roundtable provides a framework to identify its attendee's needs, while supplying enriched opportunities for feedback and other ideas with high take home value. The roundtable would like to provide a decision review environment and discernment can be obtained from the objective counsel of peers. Also the roundtable povides instant access to a wealth of resources and idea exchange network through its attendee's

Typical Roundtable Agenda

• 6:30 - 7:00 P.M. - Introductions, Networking, Grab Something to Eat
• 7:00 - 7:30 P.M. - I have / I want - Grounp Deal Review - Market Discussion - Any issues that people may be Facing
• 7:30 - 8 P.M. - Guest Speaker - Questions
• 8 - 8:15 - Review and Wrap up

Is there any situation where banks simply won't accept an offer? Maybe. With the current influx of available short sale properties, investors and buyers should maximize their efforts on those most likely to lead to positive outcomes; especially those attempting to maximize their investment portfolio while the buying is good.

To that end, there are some situations that may be best left to those with more time on their hands:

1. Not late or in default. Homeowners currently in a negative or upside down position in their home may desire to sell but as long as they are current on payments and not in default, it is less likely the lender will be motivated to wheel and deal. Negative equity alone doesn't cut it...as far as the bank is concerned the homeowner is still a performing asset...and let's face it, the banks need all of those they can muster right now. Instead, focus your attention on those homeowners that are currently late and either nearing or already in default. General wisdom holds 90 days is the prime time when it comes to capturing the lenders attention but with extensive back-logs that number is beginning to grow even longer. Important note: NEVER tell a homeowner to stop making their payments to qualify for a short sale. That could be considered tortuous interference with the bank's agreement with the seller, putting you on the hook!

2. Bankruptcy. If your homeowners is late on payments but already filing for bankruptcy then you may have waited too long to successfully negotiate with the bank. While it may initially appear counter-intuitive, keep in mind the simple act of negotiating the short sale is considered a violation of the bankruptcy rules since it falls under "collection activities" which are strictly forbidden once someone files bankruptcy. So banks stop talking, and then you need to get the bankruptcy trustee to take the property out of the bankruptcy. It gets messy. Our advice: if your seller must do a bankruptcy, try to wait until after the short sale is complete.

3. Uncooperative sellers. They might claim they want the deal to go through but sometimes a seller simply finds reason to stall. Learn to recognize the tactics then take swift action to stop it before it kills the deal; failure to supply necessary data, financial statements, signatures and other actions may indicate a dubious seller.

4. Unrealistic market values. Do your homework and make it easy on the bank to obtain a realistic market value based upon today's criteria - not last years. This is especially important when dealing with unique properties or those with few comp's in a given area.

5. Financing falls through. Make sure you have alternative financing in place. With banks merging and going under at unprecedented rates, it pays to have more than one available source of funding. Should one become difficult to work with then simply switch to your "plan b" bank to make sure the deal closes on time. The Thomas Davis Group has a great list of resourses if you need a plan "b"

See you at the top!

Looking to buy Short Sales or know anyone that needs help listing there home please feel free to contact The Thomas Davis Group

Operation Financial Freedom

Presents

FREE Real Estate Investment Seminar

Jan 24th 2009

10 am till 12:30 pm

Topics that will be covered

• Basic Principles for success in the Fix & Flip / Fix and Hold arena
• Common Mistakes to avoid
• How are profits calculated
• Formula's the pro's use
• What are the "hot" Areas
• Current market trends and hold times
• Types of financing available
• Reasons why today is a great time to invest
• Hands on evaluation of a fix and flip property
• How to put together your power team
• Should I start my own LLC?
• Contractor or Do it yourself?

And much more!!!

Bring Your clients and get them educated

RSVP

For more information on up coming events or speakers please go to our website

www.operationfinancialfreedom.net

Location

Southeast Valley Assoc. of Realtors

1363 S. Vineyard Rd

Mesa, AZ