The U.S. House of Representatives voted Thursday to extend the first-time home buyers tax credit through 2010 as well as offer a credit to more seasoned home buyers. The vote was 403-to-12 and was widely expected to pass.

The current tax credit has been in effect since January as a piece of President Obama’s economic stimulus plan and has allowed first-time home buyers an $8,000 tax credit. It has been credited with jumpstarting the fallen national housing market, resulting in increases in existing homes over the past several months. Many feared that if it were allowed to expire as it was set to on December 1, that the real estate market would see a dramatic drop again.

Here’s how the extension works:

Buyers must be entered into a mortgage contract for a home purchase by midnight on April 30, 2010 and must close on their sale by midnight of June 30, 2010. First-time home buyers will still receive $8,000 in tax credits, while previous homeowners (specifically those who have owned their current homes for at least five years) will be allowed $6,500 in credits.

The purchased homes must be principal residences and may not exceed $800,000 in price. Those with an income of $145,000 or more ($245,000 if married filing jointly) are not eligible for the credit and those with incomes between $125,000 and $145,00 would receive a reduced credit.

Many hope that this extension will get things moving in not only the lower-priced end of housing but all in the middle-priced range as well. Lawrence Yun, chief economist for the National Association of Realtors believes that it might stem potential buyers’ fears about falling home prices.

“Once the consumer fear factor disappears, then housing can move into a sustainable recovery,’’ Yun said. “I think we will be there by the middle of next year.’’

I like how Patti Ketcham put it, a Tallahassee real estate firm owner, as quoted in the Boston Globe :“It’s huge. I think it’s going to have a big impact. I hope I’m right. Golly, I hope I’m right.”

Here’s a riveting story from The New York Times that should fascinate people feeling threatened that they might lose their home in the current housing market meltdown.

In a nutshell, the Times story by Gretchen Morgenson suggests that a home dweller being threatened by a bank with foreclosure on a first or second mortgage should demand proof that the bank still holds the loan paper.

Crazy as that sounds, Ms. Morgenson reports at least two homeowners have been able to continue living in their houses despite foreclosure threats because the banks couldn’t produce the paperwork which would show a mortgage had been issued.

If a bank has “lost” the paperwork associated with a loan, it can’t foreclose on that loan, Ms. Morgenson’s story suggests, and she reports on two cases in which that argument has held up in court.

How can banks “lose” paperwork associated with a loan?

The New York Times reporter suggests - none too delicately - that it could have to do with the speed with which banks “shoveled” secondary and subprime loan paperwork into securitization trusts which were peddled on the assurance that enough of the paper was good to warrant the price of the whole wad.

If you think banks couldn’t operate in such a haphazard manner you probably haven’t been reading the newspapers for the last year or so.

Now, according to The New York Times, judges are telling bankers to “go fish.” In other words, if you can’t find the paper that says you made a loan because that paper was dumped haphazardly into a bucket and sold God knows where, you have no claim on the property which was used as collateral and you can darn well quit hassling the people who live there.

As Ms. Morgenson put it, “Bookkeeping is such a bore, especially when there are billions to be made shoveling loans into trusts like coal into the Titanic’s boilers. You can imagine the thought process: Assigning notes takes time and costs money, why bother? Who’s going to ask for proof of ownership of these notes anyhow?

“But…bankruptcy judges across the country are increasingly asking these pesky questions.”

The tables have really turned in the past couple years in terms of why American homeowners are refinancing. During the height of the housing boom, homeowners were borrowing against their equity like crazy, as their home values appeared to be headed quickly upward indefinitely.

Now, however, Americans are house poor and many are and have been at the mercy of high adjustable interest rates. In the most recent study from mortgage finance giant Freddie Mac, it looks like homeowners are overwhelmingly using refinance loans to lower those rates and cut their monthly payments.

Freddie Mac reported that in the third quarter of 2009, refinanced loans netted up to a total $3 billion in payment savings for the first year of the new mortgages for participating homeowners. One half of all those who refinanced conventional mortgages lowered their annual mortgage interest rate by 17 percent or more!

“Homeowners are benefiting from an extended period of very low interest rates. In the first nine months of 2009, interest rates on 30-year fixed-rate mortgages have averaged 5.1, the lowest such average in the 38-year history of Freddie Mac’s Primary Mortgage Market Survey,” noted Frank Nothaft, Freddie Mac vice president and chief economist. “At the beginning of the year, only borrowers who still had a solid equity cushion could take advantage of the low mortgage rates, but through the Homeownership Affordability Refinance Program that got underway in April, borrowers who have a loan owned by Freddie Mac or Fannie Mae can refinance that loan even if they have no home equity. As of August 31st, over 93,000 borrowers had taken advantage of this opportunity according to the Federal Housing Finance Agency, with the bulk of those occurring in July and August.”

And 64 percent of prime (good credit) borrowers who refinanced conventional loans in the third quarter retained the same principal balance or actually reduced it. That is the highest recorded percentage in six years. Only 36 percent of borrowers refinanced with “cash-out” loans. In total they pulled out $20 billion of home equity, the lowest amount in almost a decade.

Bottom line: If you can qualify, refinance now for payment savings. Interest rates are likely to rise starting sometime in 2010 and may not reach today’s lows for a long time to come.

Mortgage interest rates moved a little higher during the past week, but overall this has been a great year for rates according to mortgage finance giant Freddie Mac on Thursday.

The average rate on a 30-year fixed rate mortgage inched up to 5.03 percent, excluding points, from 5.00 percent the week before. One year ago, however, the average rate was more than a point and a half higher at 6.46 percent.

The average rate on a 15-year FRM grew to 4.46 percent, up from 4.43 percent last week and one-year adjustable rate mortgages carried an average rate of 4.57 percent, up slightly from 4.54 percent.

“Interest rates for 30-year fixed mortgages have averaged just below 5 percent this year, which is the lowest 10-month average since the survey began in 1971,” said Frank Nothaft, Freddie Mac vice president and chief economist. “As a result, refinance activity has accounted for almost seven out of ten mortgage applications on average this year.”

So why didn’t rates move much this week? According to a survey from BankRate.com, the incoming economic data sent mixed signals to the mortgage markets, as investors quickly bought up securities at a government debt auction early in the week, then consumer confidence and new home sales were down.  But then again, existing home sales showed strong gains, jumping up 9.4 percent in September from the previous month.

And although it is anyone’s guess what will happen to interest rates in the coming week and month, by historical standards there is no doubt that rates are fabulously low. If you are a potential homebuyer sitting on the fence, pre-boom home prices coupled with today’s rates make now a really good time to buy.

Home buyers again saw mortgage rates rise this week alongside word that the economy is beginning to improve. According to the Wall Street Journal, rates for a 30-year home loan rose above 5 percent for the first time since September, rising to 5.03 percent. Rates for 15-year fixed rate and five and one-year adjustable rate loans also saw a rise in numbers. 15-year fixed rate mortgages climbed from 4.43 percent to 4.46 percent, while five-year adjustable rate loans rose from 4.42 percent to 4.40 percent. The rates for one-year adjustable rate mortgages are at 4.57 percent, up from 4.54 percent a week ago.

While the fact that the Federal Reserve felt confident enough to raise the rates is encouraging, the drop in mortgage applications and refinances put a damper on this news. According to the Washington Post, new home purchases dropped to a 402,000 annual pace, or 3.6 percent, in September. It was the first time since March that new home sales declined from month-to-month. The number of mortgage applications fell 5.2 percent in the third week of October, while lenders saw a 16 percent drop in applications from homeowners looking to refinance.

The news of the decline in mortgage applications for new home purchases is a bit discouraging for the housing industry. The $8,000 tax credit for first-time home buyers had helped provide an incentive to purchasers and drive new home purchases. However, with the tax credit ending and no definite word yet on an extension combined with the continuing rise in mortgage rates, the numbers may not improve for a while.

Rising home prices may also be playing a part in the declining number of applications. While an increase in home prices does signal growing buyer confidence and an economic upswing, it may be discouraging some buyers from purchasing a new home. Even as economists state they are beginning to see improvement in the economy, the public has not yet tended to agree, and rising home prices are likely to play a contributing factor in the decline of buyers applying for mortgage loans.

The mortgage rates for this week are still significantly below where they were a year ago, and are considered to be very low when compared to longer-term historical numbers. The low mortgage rates are a positive for the housing industry as buyers lock in their loans at lower rates. Unfortunately, with consumer confidence still not lining up with increasing economist confidence, the rise in rates may mean a dip in sales until confidence increases.

The Federal Housing Administration is set to implement a new set of rules November 2,  pertaining to mortgages made for condo-buyers. The new guidelines are aimed at protecting the FHA from mortgage fraud as well as minimize its risk of loss on condo foreclosures, but they will probably have the undesirable effect of preventing many buyers from entering the housing market.

Here’s what the FHA plans to change:

“Spot Approvals”  -  it used to be that the FHA would approve individual condo units for mortgages, without having to approve the entire condominium building/project. Now the whole thing will have to check out before someone can get an FHA-approved loan. The FHA said in a statement that the “processes have been streamlined, eliminating the need to approve units on a ’spot loan’ basis,” but lenders say that this could seriously reduce the available condo choices for buyers.

Maximums on FHA-Loan Holders in a Condo Project - In the past there was no limit, but now the FHA plans to only allow a maximum of 30 percent of condo owners to have the government-backed loans. This means that some buyers, especially those with lower credit scores and smaller down payments, may be kept out of certain condo projects because there are already too many of such homeowners in the building. Again, this will limit available condo options.

Requirements for Sold Units - Although there have been no limitations, the FHA will now require that half of the units in a condo project be sold before it will insure any loans for that building. While this protects the FHA against loss, it creates a catch-22. FHA buyers cannot buy until 50 percent of the project is sold, but it will be hard in many cases for condo builders to sell 50 percent of the units without FHA loan-backing for that first half. This requirement is still more lenient than that of Freddie Mac and Fannie Mae, which require that 70 percent of the project must be sold before they will make loans to new buyers.

Owner-Occupancy Rules - Now only 50 percent of a condo projects’ units must be owner-occupied, instead of the former 51 percent rule. This change doesn’t promise to make a huge difference in the condo market.

Overall, if these new rules go into effect on schedule, they will probably slow the housing market recovery by many months.

According to Diane E. Thompson of the National Consumer Law Center, homeowners, lenders and investors usually lose money when a home forecloses but mortgage servicers (those that manage mortgages and collect mortgage payments) do not. She says:

“Servicers may even make money on a foreclosure. And, usually, a loan modification will cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified and no penalty, but potential profit, if the home is foreclosed.”

The National Consumer Law Center argues that mortgage companies have more incentives and reason to foreclose on homes when homeowners have difficulty making payments than they have reason to modify the loan. Thompson indicates that this comes from the ability of private rule makers to decide how the servicer can account for potential losses and profits. According to data from the Inside Mortgage Finance publication, more than 2/3 of mortgages issued since 2005 have been securitized; and private rule makers have great influence over securitized mortgages owned by investors. In this situation, a servicer can manage the mortgage from the collection of the monthly payment to the foreclosure proceedings and have the ability to decide whether a foreclosure or loan modification is “in the best interest of the investors” of the mortgage.

According to the Huffingtonpost :

When a homeowner is delinquent on a mortgage that’s been securitized, the servicer must front the late payment to the investors. When a home is foreclosed, the servicer is typically first in line to recoup losses. But if a mortgage is modified, the servicer typically loses money that isn’t necessarily recoverable. That’s part of the reason why the Obama administration created a $75 billion program to limit foreclosures. The money is to be distributed to servicers who successfully modify home loans, with the hope that the incentives to modify outweigh the incentives to foreclose.

Today, the Obama administration announced two new programs to help a small segment of the U.S. housing industry get back on its feet, all with the promise that the taxpayer will not have to foot the bill.

HFAs Getting Help:
State and local housing finance agencies, also known as HFAs. They originate home loans for first-time homebuyers and lower-income buyers. They also provide refinance loans for rental properties. According to National Council of State Housing Agencies President Susan Dewey, the HFAs create between 100,000 and 200,000 new mortgages every year (this represents about 1 percent of the total mortgage market). They are also known for making very safe long-term loans with very low default rates. “Performance of HFA loans has materially outperformed most other loan types, especially when controlling for borrower profile,” according to a Treasury Department fact sheet. They create tax-exempt bonds based on their mortgage securities to pay for their operations.

Why HFAs Need Help:
Dewey says the HFAs have only issued $4 billion in bonds this year. In 2008 they issued $10 billion and in 2007 the total was $16 billion.

“With the market upheaval, we’ve been unable to sell new mortgage bonds for a year,” Bob Kucab, the executive director of the North Carolina Housing Finance Agency, said in a statement accompanying the release. “Despite all the ingenuity we can muster, we’re now helping only about a quarter as many first-time buyers as normal.”

The Obama/Treasury Plan:
1. The Treasury Department will buy HFA-backed securities issued by government controlled finance giants Freddie Mac and Fannie Mae.
2. Freddie and Fannie will provide the HFAs with a credit program to refinance the debt from their existing bonds at better rates and terms.

The hope is that these measures will provide the HFAs will the money needed to fund more new mortgages.

The Cost:
The HFAs will pay fees to participate in the new programs, which will supposedly cover the costs, but some reports have said that the initiative could cost taxpayers as much as $35 billion.

Treasury Assistant Secretary for Financial Institutions Michael Barr said there are some risks involved, but he didn’t expect taxpayers to take any losses for these programs.

“The expected cost to the government is zero,” Barr said of both programs. It seems unlikely, but perhaps…

International credit ratings agency Fitch Ratings improved its outlook on the U.S. housing market in its recent “Chalk Line” report, but that’s not saying much considering it still expects housing starts and new home sales to continue to plunge downward through the end of the year.

“During the first 12-15 months off the bottom, the housing recovery may appear jaw-toothed as substantial foreclosures now in the pipeline surface as distressed sales, while meaningful new foreclosures arise from Alt-A and option adjustable-rate mortgage resets,” wrote managing director and lead U.S. homebuilding analyst Bob Curran.

The new forecast includes a 36.7 percent decrease in total housing starts in 2009, up from a previous prediction of 43.3 percent. The new projection calls for a 21 percent decline in new home sales, up from the earlier forecast of 30 percent. And existing home sales are now expected to move up 1.1 percent this year to almost 5 million, a change from Fitch’s last prediction of flat sales.

Why the more “upbeat” outlook? Fitch says it took into consideration increased affordability, a slowing of builder cancellation rates, shrunken builder inventories, an uptick in consumer confidence and an increased demand for new homes from those who have been sitting on the sidelines.

Why are the numbers still trending downward though? According to Fitch there is still a great risk of a new wave of foreclosures on the way, home prices continue to decline, and the first-time homebuyers tax credit that has artificially inflated sales for the past two quarters is due to expire in December.

“There is also a negative psychology that remains relatively pervasive. For many, the expectation or fear is that home prices are vulnerable to further declines and buying now might be a mistake,” Curran wrote. “This psychology applies to all types of buyers but especially applies to trade-up and second-home buyers.”

So, we may be in for many more ups and downs across the market for at least the foreseeable future!

According to Reuters, First American CoreLogic has announced their development of the largest National Fraud Data Repository. This revolutionary collection of records can assist clients, either businesses or individuals, with the ongoing battle against mortgage fraud, while continuing to improve and build the best performing anti-fraud programs available.

Here are some of the highlights of what their data base includes and offers:

1. 65% of annual loan applicants’ information which totals over 80 million.
2. The largest compilation of fraud data reports and records; this data is received from nearly 40 investors and lenders having applicant records from 2005 to date.
3. The only fraud data compilation of foreclosures, repurchase indicators, default, and charge-offs that is strong and accurate enough to establish exact scoring models of pattern-recognition.
4. 17 different lenders contribute daily updates on lien information and applications that are part of the Multi-lien Closing Alert Program of First America.
5. The mortgage industry’s most reliable collection of payoff, title, and lien release data which assists with targeting different methods of fraud for first and second liens.
6. Foreclosure records plus community and property fraud reports.
7. Exclusive third-party loan information from numerous retail branches, appraisers, account executives, brokers and loan officers.

First American CoreLogic’s Fraud Data Repository is being hailed by some experts as one of the most reliable analytical and scoring products available or ever established.