The Federal Reserve cut its target for the federal funds rate, which is what banks charge each other for overnight loans. This key short-term interest rate is now at a record low range of zero to 0.25%, from the previous 1%. 

La Jolla bank owned real estate

In San Diego, one major mortgage lender's new FHA loan originations went from approximately 2% to approximately 60% of new loans! The low down payment (apprx. 3%) and relative availability of FHA home loans are helping to drive hoards of borrowers to the FHA. Many new homeowners with the most risk and fewest dollars are going to the FHA for loans. In 2007, they handled 3% of new loans. This year it's 26%.

However, these additional higher-risk loans are stressing the FHA insurance system. So, now the FHA's own somewhat lax standards are coming back to create a huge hit to their loan insurance fund. It has dropped the FHA insurance fund 39% since last year, raising concerns for the FHA requiring its own bailout.     La Jolla bank owned real estate

Related prior posts:

San Diego Housing Market … Hitting the Lottery (or not)

New Relief Program For Homeowners at Risk of Foreclosure

Hope For San Diego Homeowners

Real Estate - An Innovative Way of Not Filing Bankruptcy

An economist at Merrill Lynch has issued their The Flow of Funds report that showed household balance sheets shed almost $3 trillion in the third quarter, thanks in large part to a decline in stock prices. That loss, the largest 3-month drop on record, brings the total loss by U.S. households in 2008 to $10 trillion, or about 10 years worth of equity earnings.                                         San Diego real estate

This is a must watch video, with a lot of solid points.

This real estate bust is NOT fair! Already the California legislature is considering a four month moratorium on foreclosures. In July, a new California law requiring lenders to try a number of times to contact homeowners prior to filing a notice of default has delayed the foreclosure process by 30 days. Plus, Obama is said to be in favor of a 90 nationwide foreclosure moratorium. With the average mortgage payments in San Diego running about $2,000 a month, who is paying for these moratoriums? Just one guess! To help, consider that the Government owns or will be buying these bad loans.

Why not just cut to the chase, and give the poor, misguided, troubled homeowners the homes for free? After all, the Constitution guarantees happiness, which in these days can be construed only to mean a big house, new cars, and lots of cash for lavish vacations. The poor want nice stuff as much as the rich, and they should have it. The rich guys shouldn't be the only ones who have convertibles and summer homes. Everyone should have those things.

Why should troubled homeowners have to leave their homes and go back to renting? Why wasn't the government watching out for them? It is just because no one watched out for them that they are now in trouble. If the bank was willing to loan all that money, why should the borrower bear any responsibility? Why are only a few people allowed to have what everyone wants? It isn't fair that only those with money are allowed to have a nice life when everyone wants to have a big house and new cars.

San Diego troubled homeowners should hang on; the Obama administration will turn this mess around. It looks like a 90 day nationwide foreclosure moratorium is assured. That should be followed about 60 days later, with another 90 day moratorium extension. Plus, if this plays out right, California should have its 120 day moratorium in effect by then. To be fair, I would assume the California moratorium will be in addition to the Federal moratorium. Those projected foreclosure moratoriums will run to about November 2009. Naturally, the government would not want to spoil the holiday period, so, somehow the foreclosures will again be postponed until 2010!

I’m just kidding with the above scenarios. We all know the San Diego real estate market is really on the verge of an historic ‘V’ shaped market bottom. In San Diego, by mid-2009, most real estate values will be appreciating by double digits! It certainly feels good to go into a fantasy world when talking about the San Diego real estate bust!

San Diego real estate market

Interesting video on From the Wall Street Journal on line … Amity Shlaes, senior fellow at the Council on Foreign Relations, explains to Dow Jones Newswires' Simon Constable why the New Deal didn't work in the 1930s and why Nobel laureate Paul Krugman is wrong to think a similar stimulus will work this time. * To view the video, please visit the San Diego real estate market blog.