Okay, so Ben Franklin wasn’t one of our presidents. But he’s on our money. And in this commercial.

Happy Friday!

New home sales have hit a record low. In January, the sales of newly-built homes dropped by 10%. Builders are cutting back as they attempt to move the inventory they already have. CNN Money reports on the expectations for new home sales:

The decline in new home sales comes as builders continue to scale
back construction and work off an inventory of empty properties, said
Adam York, economic analyst at Wachovia Economics Group.

"We
expect sales activity will remain constrained over the coming months as
buyers struggle with access to credit and worry about their income
prospects and the U.S. economy," York wrote in a research report.

It may be a good time to buy — with low prices and even lower interest rates. However, many would-be buyers are having a hard time getting approved for home mortgage loans. With mortgage lenders requiring bigger down payments and better credit scores, many who would have qualified for a home two years ago are finding it increasingly difficult to get the financing they need.

Yesterday, President Barack Obama addressed Congress on a number of issues, including the economy. In his first address to Congress, he made it clear that America can (and will) rebuild its economy, and he outlined that he thought that investment in the future was the way out of this mess. Stock Market Funding offers this on Obama's remarks:

I think that he makes a good point. For too long our priorities have been in the wrong place. However, the sort of investment he talks about is expensive. It will be interesting to see how Obama plans to cut the federal deficit and fund the future tomorrow when he presents his 2010 budget preview.

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There is speculation that U.S. banks are likely to see higher insurance premiums for FDIC coverage. With banks continuing to fail (although no more large ones recently), there are concerns about the amount of money the FDIC is paying out to depositors.

As a result, in order to be insured with the FDIC, banks may have to start paying higher premiums. Of course, banks are likely to pass these costs on to customers — possibly in the form of fees. Additionally, the FDIC may extend its Temporary Liquidity Guarantee Program. Currently, it extends only three years, but the FDIC is considering extending it to 10 years to better help with the economic recovery.

Visit the FDIC Web site for more information on how the FDIC works.

One of the ideas being floated by the Obama Administration is the idea of a stress test for struggling banking institutions. Banks that appear very close to insolvency would then be candidates for some sort of bank nationalization. Here is what MarketWatch reports about the stress test — and its possible outcomes:

It is an interesting possibility, and one that has plenty of people concerned about what happens when the government takes over a private institution. Others, though, figure that we've already nationalized the risks associated with failing banks, so the government might as well potentially profit.

Do you think bank nationalization is a good idea?

With tax season upon us, there are some pretty decent commercials out there addressing the subject. I like this one from H&R Block.

Happy Friday!

Yesterday, Barack Obama and his administration unveiled a new foreclosure prevention plan. They estimate that as many as 9 million people could be helped by this plan. But I've had this question from several readers:

Well, fully fleshed details haven't been released (and they won't be until next month), but you can start preparing to apply for the foreclosure prevention plan benefit now.

Step 1: Talk to your mortgage lender

It is worth noting that the foreclosure prevention plan will only affect those whose loans are serviced or guaranteed by Freddie Mac or Fannie Mae. Since this covers nearly half of all home mortgage loans, there is a fairly decent chance that this includes you. Even if Fannie or Freddie isn't on your home loan papers, your bank may have your loan guaranteed by these government sponsored institutions, so you should talk to your mortgage lender.

If your home mortgage loan is, in fact, serviced or guaranteed by Freddie or Fannie, you can start figuring out whether you qualify for the foreclosure prevention plan.

Step 2: Do you qualify for the foreclosure prevention plan?

There are two main programs as part of this plan. The first is meant to help those homeowners with less than 20% equity, or who are underwater (up to 5% more than the home is worth). These folks may have made good decisions, and may be able to afford their mortgage payments right now, but they may be concerned about getting a better deal through refinancing. The second program is aimed directly at those who could be in danger of foreclosure if they do not get an affordable payment soon.

Mortgage lenders will be encouraged to offer lower interest rates or extended payment plans to help borrowers keep their mortgage payment to 31% of their income. Lenders can also lower the principal to achieve this — but I wouldn't hold my breath for that to happen.

If the property is an investment property, though, you do not qualify. This plan is aimed at those who live in their homes — and special precautions are being taken to help see that this plan doesn't benefit real estate flippers.

You should get your information together — tax info, pay stubs, etc. and check with your lender to let them know you plan to apply when it becomes possible next month.

What you might get out of the foreclosure prevention plan

For the refinancing portion of the foreclosure prevention plan, you can refinance to a 30 year fixed or a 15 year fixed loan at current rates. For a 15 year loan, that is 4.81%. Pretty good, eh? Balloon payments and prepayment penalties can't be included, though. Also, there is an incentive plan: If you stay current on your mortgage payments after loan modification, you could receive $1,000 a year for five years — applied to the principal of your home mortgage loan.

Yesterday's banking issues ended up being about more than just Eastern Europe and concerns about bank ties to emerging market countries. Mortgage insurers have been seeing rating downgrades as well.

Mortgage insurers are those that underwrite mortgages — especially those with less than 20% down, and many of them are starting to see substantial losses. Yesterday, it was MGIC and units of Radian that saw their Moody's rating cut.

The bad news in the financial sector continues to pile up. No wonder economic stimulus measures can't seem to inspire confidence.

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President Barack Obama signed the economic stimulus bill into law today, saying that is should help the economy on the road to recovery. But, focus in the mortgage industry and housing market is already shifting to tomorrow.

Right now, there are rumors of plans to create a mortgage subsidy plan to help with foreclosure prevention. The plan to be announced tomorrow is expected to have new pressure from the government with regard to mortgage lenders and decreasing payments for mortgage holders. The subsidies would be aimed at lower interest rates.

One of the main problems, though, is that mortgage lenders may not agree to loan modification of some of the borrowers. It will be interesting to see what sort of incentives — and threats — are offered tomorrow as the plan is announced.

The new homebuyer tax credit in the final version of the current economic stimulus bill is not nearly as generous as first conceived in the Senate. Instead of applying to every homebuyer the credit now only applies to first time homebuyers. And it ends being only $8,000, instead of $15,000. Here is what CNN Money reports about some of the details of the credit in the economic stimulus bill:

To qualify for the credit, the purchase must be made between Jan. 1,
2009 and Nov. 30, 2009. Buyers may not have owned a home for the past
three years to qualify as "first time" buyer. They must also live in
the house for at least three years, or they will be obligated to pay
back the credit.

Additionally, there are income restrictions:
To qualify, buyers must make less than $75,000 for singles or $150,000
for couples. (Higher-income buyers may receive a partial credit.)

This will be a bit of a comedown for many — especially those who were looking to buy a home, but may already own. And it doesn't appear to alter the payback requirement for the $7,500 credit issued in an earlier economic stimulus bill — but I could be wrong on that.