Many lenders may take the markets of the mortgage and privatize them.

Proponents of a private market want the government gradually to withdraw its support, allowing investors to regain confidence. They argue that interest rates would eventually settle into roughly the same patterns that held before the financial crisis.

Some supporters of government backing also like the idea, believing that it will demonstrate the need for a backstop.

“One of the reasons that American housing finance is in such bad shape right now is the 30-year mortgage,” he said, noting that such loans are not available in most countries. “For many people, it’s not at all clear that that’s the best product.” says Susan Wachter, a real estate professor at the University of Pennsylvania. She also said “a new government guarantee was needed to preserve a homogenous market.”

Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs.

Lenders could charge fees for popular features now taken for granted, like the ability to “lock in” an interest rate weeks or months before taking out a loan.

Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.

To read more about the article go here http://www.nytimes.com/2011/03/04/business/04housing.html?pagewanted=1&_r=1&partner=rss&emc=rss.

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The National Association of Realtors estimates that as many as 180,000 homebuyers have qualified for the tax credit and met the contract deadline of April 30, 2010, but might not be able to close their transaction by the June 30, 2010 deadline due to the sheer volume of loan applications in the pipeline.

At this point many homes are selling quickly in Santa Clara County, but this should help to create some more momentum in the industry and get some loans closed.

WASHINGTON – The Senate voted Wednesday night to give a tax break of up to $15,000 to homebuyers in hopes of revitalizing the housing industry, a victory for Republicans eager to leave their mark on a mammoth economic stimulus bill at the heart of President Barack Obama‘s recovery plan.

The tax break was adopted without dissent, and came on a day in which Obama pushed back pointedly against Republican critics of the legislation even as he reached across party lines to consider scaling back spending.

“Let’s not make the perfect the enemy of the essential,” Obama said as Senate Republicans stepped up their criticism of the bill’s spending and pressed for additional tax cuts and relief for homeowners. He warned that failure to act quickly “will turn crisis into a catastrophe and guarantee a longer recession.”

Democratic leaders have pledged to have legislation ready for Obama’s signature by the end of next week, and they concede privately they will have to accept some spending reductions along the way.

Sen. Johnny Isakson, R-Ga., who advanced the homebuyers tax break, said it was intended to help revive the housing industry, which has virtually collapsed in the wake of a credit crisis that began last fall.

The proposal would allow a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit. Current law provides for a $7,500 tax break for the purchase of new homes only.

Isakson’s office said the proposal would cost the government an estimated $19 billion.

Democrats readily agreed to the proposal, although it may be changed or even deleted as the stimulus measure makes its way through Congress over the next 10 days or so.

“This bill needs to be cut down,” Republican Mitch McConnell of Kentucky said on the Senate floor. He cited $524 million for a State Department program that he said envisions creating 388 jobs. “That comes to $1.35 million per job,” he added.

Republicans readied numerous attempts to reduce the cost of the $900 billion measure, which includes tax cuts and new spending designed to ignite recovery from the worst economic crisis since the Great Depression.

But after days of absorbing rhetorical attacks, Obama and Senate Democrats mounted a counteroffensive against Republicans who say tax cuts alone can cure the economy.

Obama said the criticisms he has heard “echo the very same failed economic theories that led us into this crisis in the first place, the notion that tax cuts alone will solve all our problems.”

“I reject those theories and so did the American people when they went to the polls in November and voted resoundingly for change,” said the president, who was elected with an Electoral College landslide last fall and enjoys high public approval ratings at the outset of his term.

Obama did not mention any Republicans by name, and most have signaled their support for varying amounts of new spending.

Even so, the president repeated his retort word for word in late afternoon, yet softened the partisan impact of his comments by meeting at the White House with senators often willing to cross party lines.

His first visitor was Sen. Olympia Snowe, R-Maine, a moderate GOP lawmaker. Later he met with Sens. Susan Collins, R-Maine, and Ben Nelson, D-Neb.

“I gave him a list of provisions” for possible deletion from the bill, Collins told reporters outside the White House. Among them were $8 billion to upgrade facilities and information technology at the State Department and funds for combatting a possible outbreak of pandemic flu and promoting cyber-security. The latter two items, she said, are “near and dear to her,” but belong in routine legislation and not an economic stimulus measure.

Collins and Nelson have been working on a list of possible spending cuts totaling roughly $50 billion, although they have yet to make details public.

The House approved its own version of the stimulus bill last week on a party line vote, but the political environment in the Senate is far different.

Democrats hold a comfortable 58-41 majority. But because the legislation would increase the federal deficit, any lawmaker can insist that 60 votes be required to add to its cost.

While the 60-vote threshold can impose a check on Democrats, it can also illuminate the cross-pressures at work on Republicans.

A Democratic attempt on Tuesday to add $25 billion for public works projects failed when it gained only 58 votes, two short of the total needed. But a few hours later, a proposed $11 billion tax break for new car buyers attracted 72 votes, including several from Republicans.

___

Associated Press writers Jennifer Loven and Andrew Taylor contributed to this story.

(This version CORRECTS the estimated cost of the homebuyer tax break to $19 billion, not $19 million.)

Copyright © 2009 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.

While strapped primary-home borrowers receive more — including unsolicited loan-modification offers, lenders and government agencies have started a number of programs to make loans easier to afford. Yet every plan has the stated goal of helping just homeowners borrowing for “owner-occupied” properties.

Investors are never mentioned, but own nearly a third of homes in the foreclosure process, data on default and auction-sale notices, bank repossessions and the like suggest.

It has led some observers to question whether the foreclosure tide can really be tamed, absent some aid to investors.

Players Sidelined

Rick Sharga, senior vice president at foreclosure marketplace RealtyTrac, thinks all borrowers should be eligible for loan modifications.

“I can’t think of a single reason that you wouldn’t extend these loan-modification programs to investors,” he said. “Why not extend the net out as broadly as possible, rather than flood the market with more bank repossessions?”

The latest RealtyTrac data show that in October, U.S. foreclosure filings rose 25% from a year ago to 279,561. Of those, 86,664, about 31%, were on investor-owned properties.

But investment properties are apt to comprise more like half of home foreclosures, in the view of mortgage auditor Moe Bedard, president of Loan Safe Solutions, in Corona, Calif. That’s because, he says, many borrowers don’t tell the lender that a property is an investment.

A few lenders offer to do short sales and deeds-in-lieu (of foreclosure) for some investment-property owners, says homeowners’ loan consultant Eric Rice, chief executive of DyerBeech Enterprises, in San Diego. But he says loan modifications — such as reducing an interest rate or extending the term — have been rare and slow to proceed.

Out of 100 housing investors looking for loan modifications, he says maybe 15 will receive them and it usually takes “five to six months.”

“It’s not helping anyone by not helping everyone,” he said.

But Mark Leyes, spokesman for the California Department of Corporations, says the foreclosure problem is so large, lenders and government agencies have had to focus their approach. The department has been working with 10 California lenders to encourage loan modifications.

“It’s not escaped our notice (that investors aren’t addressed), but our focus has been on owner-occupied properties. We’re trying to preserve people’s homes,” Leyes said.

Sharga thinks some lenders have wrongly shunned investors as scapegoats for housing’s bubble and bust.

The Federal Deposit Insurance Corp.’s primary focus has been on helping borrowers who are owner-occupants, thus “stabilizing neighborhoods,” according to Andrew Gray, a spokesman for the agency.

“These loans are well-suited for a streamlined process where the borrower’s income and property value can be readily documented,” he said. Investment homes “require more attention on a loan-by-loan basis.”

Numbers Game

In the view of some loan-modification specialists, halting as many foreclosures as possible is the best way to address the slide in real estate prices, and collateral damage such as reduced property-tax rolls, underfunded schools and destroyed neighborhoods.

Rice, for instance, says when an investor loses a home to foreclosure it hurts two parties — the renter who gets evicted from it and the investor.

He suggests that lenders temporarily reduce installment amounts investor-owners pay. “A permanent change isn’t deserved, but a three- to five-year plan would make sense to get payments down to a break-even level (with rents) while we get through this crisis,” he said.

Sometimes, getting borrowers to come forward and seek a loan modification can be a problem because they don’t want to admit they’re in trouble, says Salvatore Buscemi, managing director of Dandrew Capital Partners, a distressed-real-estate investment fund in New York.

Treading Water

Buscemi buys defaulted paper and repossessed properties from lenders. He says he’ll negotiate with any owner on a mortgage he holds — an investor or primary resident. But he says investors walk away more often than owner-occupants, as “it doesn’t hurt them emotionally.”

Bedard, who has many investor clients, calls aid bias toward owner-occupants unfair. Many investors “just want to work it out to where they’re not underwater,” he said.

An investor might hold five or 50 homes, he says, so saving those can have more market impact than saving one primary residence.

Investor Jae Kim, with four Arizona homes, is working with Bedard’s firm to seek aid. Four months into negotiating with his lenders, he still can’t tell if his loans will be modified.

“I think every borrower should be treated the same,” he said. “They’ve all put their hard-earned money in, whether it’s for a retirement home, investment or primary home.”