Atlanta Real Estate Blog

Adapted from The National Association of Realtors Statement on the Government Takeover of Fannie Mae and Freddie Mac as published at www.Realtor.com

What the Government Takeover of Fannie Mae and Freddie Mac Means to the Housing Industry
Washington, D.C. (September 8, 2008) - The federal government’s takeover of secondary mortgage giants Fannie Mae and Freddie Mac should cause a drop in mortgage rates in the short term that benefits
home buyers, but the long-term outlook is too early to call. NAR fully supports the action of the U.S. Treasury and the Federal Housing Finance Agency.

The federal government had no choice. The capital situation of the two companies was not enough to handle the fallout from rising mortgage defaults in the near future. In addition, investors who purchase Fannie Mae and Freddie Mac debt have lost confidence in the two.

In a statement, NAR commended the Treasury’s action, announced yesterday, to bring stability and continued liquidity to the mortgage market. “The plan will help restore confidence in the secondary mortgage market,” said NAR President Richard F. Gaylord. “We appreciate the steps taken to calm the market, make mortgages more widely available and protect taxpayers. We look forward to working with the administration and Congress to ensure the continued vibrancy of the secondary mortgage
market.”

Summary of What the Treasury Did and What It Means
In the takeover, Treasury placed the two government sponsored enterprises (GSEs) into a conservatorship — similar to a Chapter 11 bankruptcy — which fully protects taxpayers from conflicts of interest between taxpayers and shareholders or current management.

The federal government is authorized to take up to an 80 percent stake in the companies, will review their financial condition quarterly, and inject money into the operations as needed. That means the market for GSE securities will be treated more like Treasury obligations, which should push mortgage interest rates down. That, in turn, is expected to speed up home sales and help stabilize home prices.

The GSEs will be allowed to increase their mortgage funding over the next year and a half to help stabilize markets. Starting in 2010, the plan calls for them to reduce their portfolios.

The heads of Fannie Mae and Freddie Mac have been relieved of their duties. Treasury selected Herbert Allison, former Merrill Lynch vice chairman, to lead Fannie Mae, and David Moffett, former U.S. Bancorp CFO, to guide Freddie Mac.

When it comes to remodeling your home, it’s recommended to put your money where your mouth is…. in your kitchen of course! A kitchen is the best room in your home to consider renovating. Whether you’re planning to stay in your home for a while or are looking to sell in a few years, a remodeled kitchen is the best way to increase the value of your home. Quantifying how much a renovated room will improve your quality of life is difficult to determine, but what percentage of each dollar spent on home improvements you’ll recoup when you sell, is easy.

According to Remodeling Magazine’s Cost vs. Value Report, 300 real estate professionals in 60 markets across the nation, determined the average return on investment for the following:

• A minor kitchen remodel with an average cost of $20,000 is 83%
• A major kitchen remodel with an average cost of $55,000 is 78.1%

What is included in a minor vs. a major renovation? A minor renovation includes leaving the cabinets in place and only replacing the fronts with new raised-panel wood doors and drawers, replace wall oven and cook top, replace countertops, sink and faucet, and paint walls and trim. A major remodel would include replacing the entire cabinet with semi-custom wood cabinets, new countertops; replace all appliances including the sink, replace flooring and paint walls and the trim.

What is a short sale?  Basically a short sale is where the seller's lender is accepting a discounted payoff to release an existing mortgage.  But, just because a property is listed with short sale terms and the seller accepts your offer, doesn't mean that the lender will.  Be aware that the seller will need to be in default, before a lender will consider a short sale.  Also, the seller might owe more than the home is worth, so a discounted price might bring the price in line with the market value, not below it.

The seller's lender is not going to agree to a short sale unless there is no equity in the property AND the seller is unable to repay the difference between the sales price and the existing loans.

Short sale transactions rarely close quickly.  Some lenders have to submit short sale offers to a loan committee, which can take two to three weeks.

Here's another reason to plug holes, stop gaps and otherwise winterize your home; pests that get in can be just as expensive as heat that gets out!

The National Pest Management Association (NPMA) says the last thing you want in your home for the holidays are the kind of unwanted guests that turn out to be real creeps!

Roaches can trigger asthma.  Mice can gnaw through electrical wires and insulation.  So can rats.  All three will get into your pantry.  Unfortunately, just as you want to stay inside where the warmth is delightful, so do vermin.  During the winter, rodents such as house mice become one of the most common invaders and can cause serious property damage in and around the home.  Mice can squeeze through spaces as small as a nickel.

NPMA experts offer these tips for winter pest proofing:

• Clean out gutters thoroughly after the majority of leaves have fallen.
• Don't let trash and debris pile up in outside bins.
• Pull back or remove shrubs and tree branches from the side of the house and roof to prevent them from serving as pathways into your home.
• Stack firewood and lumber at least 20 feet from the house and 5 inches off the ground to eliminate harborage for termites, rodents, spiders and centipedes.
• Keep up on home repairs such as restoring loose shingles and rotted boards, which can attract pests such as carpenter ants.
• Seal cracks and holes on the outside of your home including areas where utilities and pipes enter your home.
• Replace weather-stripping and repair loose mortar around basement foundation and windows.
• Repair facia, soffits, eaves and rotted roof shingles to ward off insects drawn to deteriorating wood.
• Screen vents and openings to chimneys
• Keep basement, attics, and crawl spaces well ventilated and dry.

Negative housing reports in the media have altered the public's perception of the value - and potential - of Atlanta's real estate market.  The truth is, there is still plenty of good news!  Consider the following facts:

• Interest rates remain at historic lows; today's consumers are not battling the interest (or inflation) rates of the 1970s and 1980s.
• Conventional financing remains available to many, and FHA loans are on the rise.
• The value of a home typically doubles every 10 years, on average.  How's that for a return on investment?
• Over the past 30 years, homes have appreciated an average of 6.6% per year, more than any savings account interest rate, and more than most CDs or other investment vehicles  And the return on the actual initial investment is even more significant when you consider that most homeowners invest only a small fraction of their home's total value in their down payment.  That's the power of leverage.
• The average homeowner today holds 36 times the wealth of the average renter.  Why?  Keep reading below....
• 60% of the average homeowner's wealth rests in their homes equity.  Homeowners who look at home ownership as a long-term proposition are the homeowners who most reliably build equity.  So putting down rots with home ownership can be the most important step in building your financial foundation.
• Home equity is the largest single source of wealth for most American/s.
• A house becomes a home...and that's more than an investment; it's a way to enjoy your life, and provide a stable environment for your loved ones.