Wednesday, December 31, 2008

Charlottesville Area Real Estate: Another Local Builder Faces Mass Foreclosures

Weather Hill Development is facing mass foreclosure on 27 properties on January 15, 2009, when an auction takes place on the steps of the County Courthouse. But the company says Hauser Homes is to blame. The property is part of Poplar Glen, off Rte. 250 just west of Charlottesville in Albemarle County.

Recently, Church Hill Homes faced mass foreclosure on 37 properties, and still owes subcontractors hundreds of thousands of dollars.

Tuesday, December 23, 2008

End of Year Report: 26 Months of Inventory in the Charlottesville Area

26 months of inventory.



And the 26 months inventory figure does not include "shadow inventory," properties that owners or banks want to sell, but which are not in the MLS because they are:

  • *Houses that have been pulled off the market for the winter or until the market "turns;"
  • *Foreclosures not yet put up for sale again;
  • *Houses that have been offered for sale but are now rentals due to lack of buyers.
Sales are down over last year:

Albemarle County - 33%
Charlottesville - 11%
The region - 25%

The 26 months and sales percentage figures (as well as the graph) are from Realtor/Blogger Jim Duncan of RealCentralVA. In his End of Year Market Report for the Charlottesville Area, he cautions that MLS information may be unreliable. But unless he's made a big error, as far as he can tell the number is 26--up from November's 18 months of inventory.

*What does 26 months of inventory mean for sellers?
It means there's a need to price aggressively lower than what "comparable" properties are priced.

It means that if a seller needs to "make" a certain amount on a sale (due to a HELOC or ARM, etc.) the seller is in a much less favorable position than a seller who has the ability to accept any offer.

*What may 26 months of inventory mean for buyers? Lowball offers. Nationwide, and in this area, houses will continue losing value over the next 12-24 months; Dr. Doom sees the bottom in 2010. There's just too much inventory, too many foreclosures on the way, and the jobs recovery is two years out from this recession.

Many economists believe the worst is yet to come. Additionally, the housing market's not coming back; the overvaluations seen in this decade are gone forever.

Our region is not protected. This recent post, about local economic troubles, contains merely the latest updates.

But the upside is that for those who do wish to buy right now, not only is there plenty of selection, but mortgage rates are hovering at historic lows. For those who are seeking a house for the sake of comfort, security, and as a reflection of habit, tastes, and predilection, there's plenty to choose from. If a lowball offer is declined, move right on. Next!

But for those who think of a house as an appreciating asset? No. That's the wrong reason to buy. Better to look into gold (and even then....)

Read the complete End of Year Market Report for the Charlottesville Area. This report has much more data, including availability figures, median prices for the surrounding Counties, number of properties under contract, and so forth.

After the holidays, we'll have more information on buying/selling in this shockingly slow market and troubled economy.

Sunday, December 21, 2008

Charlottesville Albemarle Economic Downturn, December 2008

"Insulated" economy? Sadly, no.

Like the rest of the United States, the Charlottesville / Albemarle area is suffering from the Recession, the housing downturn, and the world-wide credit crisis.

*Local bankruptcies have skyrocketed, according to the DP. Between Oct. 1 and Dec. 19, there were 175 families who filed for bankruptcy protection. During the same period in 2006, there were 22 filings.

That's an increase of 695.5%.

The DP article tells the story of someone who is filing due to "bad decisions" and "bad luck," including using credit cards and relying on a home-equity line of credit to make ends meet. Additonally, by the end of this year, this individual will have lost her job at a real estate firm.

*
The monthly job growth report shows that October was a month in which the Charlottesville area was ranked the worst out of all Virginia’s nine metropolitan areas again. The area has lost about 1000 jobs in the past year. [Thanks, Keith.]

*UVa is set to lose $23M in state funds over two years. What will this do to hiring and operating costs? Perhaps in response to this news and to the recent loss of $1 Billion from the endowment, as well as to the fact that 4th Quarter endowment investment losses will no doubt be shocking,

*UVa seems to be seeking a federal bailout.

*
The upcoming state legislature session seeks to close the $2.9B budget shortfall.

*
As part of the cost-cutting measures, state funding cuts $1.88M from City schools.

Nothing pretty in this picture.

Friday, December 19, 2008

"Housing Prices Always go UP!" - "Insulated/steady/different"

The RealCentralVA blog has a satirical video posted: "Housing prices always go 'UP'!" The featured "homeowner" can't believe his property has lost value.

Realtor blogger Jim Duncan knows the bubble is over, and crunches the numbers in a way no other blogger or agent seems to be willing or able to.

And there's perspective over there: From the RealCentralVA Twitter feed this morning: "Talked to a buyer yesterday who said all the Charlottesville Realtors he called still said our market is insulated/steady/different."

We hear the same thing from commentors and prospective buyers.

But most of us know this is no longer true. Even those in the housing industry.

We recently learned that a number of Realtors and lenders are themselves having troubles from declining values: they are facing bankruptcy or foreclosure, as described by CAAR President Judy Savage in C-ville Weekly.

As one of our commenters put it, "Public admission of Game Over."

This blog frequently looks at properties with Asking Prices that are 100, 200, even 300% higher than the previous selling price, with the sale typically within the past 1-10 years.

With 18+ months of inventory, one might expect the trend of climbing Asking Prices to change. But no. Some sellers and sellers' agents still do believe this market is "insulated, steady, protected." The asking prices, therefore, reflect
this optimistic belief.

The sellers/sellers' agents also must believe the market will come back. Sadly, it's not coming back in our lifetime.

Cases in point: the following properties came on the market last week, and the percentage increase is even more noticeable, ioho, because these are offered by the same seller. This material comes from public records.


605 Orange Street - $395K
Sale history: 12/2005 - $190K = 107% percent increase in three years

MLS# 460012
Locust Grove neighborhood near 250 Bypass
3 bed, 1 bath, 1065 sq. ft., ca. 1920.
Price/sq. ft.: $375
Assessment: $208K
Listing: "This home needs updating."


1105 Little High Street - $499K
Sale history: 7/2000 - $148.5K = 237% increase in 8 years

MLS #459973
East of Downtown
3 bed, 1 bath, 1800 sq. ft., ca 1925
Price/sq.ft.: $271.
Assessment: $322K
Listing: "Interior needs renovation."


1721 Jefferson Park Ave
- $549K
Sale history: 9/2005 - $240k = 129% increase in three years

MLS #459976
4 beds, 2 baths. 1,382 sqft, ca. 1959.
Price/sqft: $397
Assessment: $242K
Listing: "Currently under renovation."


1101 Little High Street - $595K
Sale history: 8/2000 - $226.5K = 163% increase in 8 years

MLS #457653
East of Downtown
Multi-unit. 2,905 sq. ft., ca. 1925.
Price/sq. ft: $205
Assessment: $359.7K

110 Kent Terrace - $599K
Sale history:
3/2007 - $212K = 182% increase in under two years

MLS #460010
Off JPA, in UVa student housing area.
4 beds, 2 bath. 1,673 sqft, ca. 1950.
Price/sq. ft: $358
Assessment: $250K.

And these properties in the Belmont Bubble, offered by the same seller, came on the market in October:

219 Douglas Avenue - $495K

MLS #457706
Duplex: 4 Bedrooms, 2 Baths. 2227 sq. ft., ca. 1900
Price/sq. ft. - $222
Assessment: $354,000.

128 Goodman Street - $575K

MLS # 457701
Duplex with Cottage
Sq Ft: 2254, ca. 1920.
$255 per sq. ft.
Assessment: $362.9K.

Thursday, December 18, 2008

935 Belmont Avenue - "Free" Rent

We first looked at 935 Belmont last May, when the price was $375K without the yard.

Now, after more than a year on the market, the price is $275K without the yard, which goes for an additional $125K.

The house needs extensive renovations. So now it's available for "free" rent--if you're a drywaller. In all seriousness.

Q: Why hasn't the price dropped further?
A: Seller doesn't need to sell. And must believe the market will come back.

MLS #453087
3 Bedrooms, 1 Bath
1,332 Sq. Ft.
Year Built: 1925
Acre: .09

Wednesday, December 17, 2008

Mortgage Modifications: HUD Head Calls "Hope for Homeowners" a Failure

From WaPo:

Secretary of Housing and Urban Development Steve Preston said the centerpiece of the federal government's effort to help struggling homeowners has been a failure and he's blaming Congress.

The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for
lenders and borrowers alike.

Many people are opposed to mortgage modifications, on the basis of "greed got them where they are," "why should I pay for others' stupidity," and so forth. The facts are, however, that there will be even more defaults and foreclosures occurring in 2009. Many mortgages cannot qualify for modifications because original applications relied on "stated income" and no documentation.

So if even a small percentage of these ailing mortgages can be modified, it will at least save certain individuals heartache/loss of personal fortune...and it may preserve home values in your very own neighborhood to some degree. Yes, many buyers behaved stupidly/greedily/unknowingly in the past few years...but we are where we are.
There will still be carnage even with the small amount of help that comes from mortgage mods. Time to deal.

WaPo article here.
Previous posts on mortgage modifications here and here and here.

Tuesday, December 16, 2008

$2 Trillion in House Values Lost in 2008

Zillow's latest projection for 2008 is that US home values lost more than $2 Trillion due to the collapse of the housing bubble.

One in seven of all homeowners, or 14.3 percent, were "underwater" by the end of the third quarter, the reports showed, meaning that they owe more on the mortgage than the house is worth.

That's 11.7 million homeowners.
More will be reported during the fourth quarter.

"The U.S. housing market is suffering the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures."

And unfortunately, there's still "second wave" of defaults expected during the mortgage meltdown, as the great Housing Price Correction continues into 2009 and 2010.

Read Zillow's latest.


Nationwide Median Home Price History:
(includes new homes and resale)

1968 $20,100
1969 $21,800
1970 $23,000
1971 $24,800
1972 $26,700
1973 $28,900
1974 $32,000
1975 $35,300
1076 $38,100
1977 $42,900
1978 $48,700
1979 $55,700
1980 $62,200
1981 $66,400
1982 $67,800
1983 $70,300
1984 $72,400
1985 $75,500
1986 $80,300
1987 $85,600
1988 $89,300
1989 $94,600
1990 $97,300
1991 $102,700
1992 $105,500
1993 $109,100
1994 $113,500
1995 $117,000
1996 $122,600
1997 $129,000

1998 $136,000

1999 $141,200

2000 $147,300

2001 $156,600

2002 $167,600

2003 $180,200

2004 $195,200

2005 $219,000

2006 $221,900

2007 $217,900

2008 $183,300

Source: NAR and US Census, via housingdecline.com

Sunday, December 14, 2008

Fannie Mae to Let Renters Remain in Foreclosed Houses

At issue in the recent C-Ville story "A Tale of Two Foreclosures" was that the owner of a house hadn't yet notified his tenant of the a foreclosure auction just weeks away.

In recent months, foreclosure rates have exposed as many as 70,000 renters to evictions, through no fault of their own, according to analysts.

Giant mortgage entity Fannie Mae is taking action and will sign leases with the tenants:

It is the first nationwide effort to provide widespread relief to renters ensnared by the unfolding mortgage crisis, and it will effectively transform Fannie Mae — a government-controlled mortgage finance company — into a national landlord.

Freddie Mac may adopt a similar program. Many banks, including JPMorgan Chase and Bank of America, have policies to evict renters after foreclosures. Renters' advocates hope the governments action will pressure private mortgage lenders to follow suit.

There is no law requiring an owner facing foreclosure to notify tenants.

Read the complete story here.

Friday, December 12, 2008

Mortgage Rates & Availability December 2008 Charlottesville / Albemarle and Beyond

Part II - Q&A - The Mortgage Buzz

We're fortunate to have Jason Crigler from Crown Mortgage Services contributing. Jason is a loan officer who, along with Michael Martin, writes The Mortgage Buzz, a blog about--you guessed it--all things mortgage.

Don't miss Part I, which ran on Tuesday, December 9. We're discussing recent actions by the Fed, buying $500B of mortgage-backed securities and injecting $100B of capital into banks. This immediately brought rates down to 5.5%, a level not seen in more than four decades.

8. Does the Fed's action bring jumbo mortgages down, too, and to what rate? (Could you first define a jumbo for readers who may not be aware of the distinction.) You mentioned on REALCentralVA that there seemed to be a slowdown in jumbo purchases around here...and there ARE a lot of properties available that need jumbos.


The term "Jumbo" is used to describe a loan amount that was higher than the conforming (Fannie/Freddie) maximum loan limit, which has been $417,000 since 2007. In March of this year Fannie and Freddie increased their conforming limit for many MSAs [Metropolitan Statistical Area - BB], up to a maximum of $729,750. Seventy counties across the US saw the conforming limit go to the max. The Charlottesville MSA’s limit was raised to $425,000. But what has happened is that the original $417,000 loan limit remained and the difference between that and the increased limit became “Conforming Jumbo” (and FHA/VA Jumbo). So now we have Jumbo and Conforming Jumbo.

But a basic Jumbo mortgage often can only go to $1m to $3m. Enter the Super Jumbo, where loans are anywhere from $2 or 3m plus. Both Jumbo and Super Jumbo are loans that are kept on the investor’s books (portfolio), whereas Conforming Jumbo can be sold to Fannie/Freddie or through Ginnie Mae.

Confused yet?

Right, I commented on Jim’s blog about jumbo mortgage availability. While there are still jumbo mortgage programs out there, they have diminished quite a bit. We have access to a number of jumbo programs, and banks offer them directly, but the credit freeze that intensified in September and October has lenders cutting back on all types of loans that they can’t easily sell (like to Fannie/Freddie).

I suspect that there are a lot of homes in the Charlottesville MSA that need jumbo mortgages ($425k+), but I couldn’t give you any numbers. [To search this, go to mycaar.com, click "Property" and then fill in your parameters. The system only has "$400k" and "$450k" options, so the following numbers are only estimates, from $450K and higher: In Charlottesville/Albemarle there are 410 properties, up to $18M; in the entire Central Va MLS there are 805 - BB]


How hard has it been to get jumbos? Will it continue to be hard? Has it been hard b/c people don't qualify or b/c lenders are afraid of such large amounts, or both? Or are there just no buyers for properties that need jumbos right now?

Well, gone are the days of stated income/asset loans, low or no doc and option ARMs. These mortgage types weren’t only for Joe the Plumber - they also catered to the jumbo market. But those programs ceased to exist months ago. What I mentioned above is what’s really restricting the market – the credit freeze. Investment firms and banks have been the lenders of Jumbo money.

Now that the investment bank model is nearly dead (Goldman Sachs & Morgan Stanley are holding on), that leaves the Jumbo market up to the banks. And as you know, banks are pretty shy right now about putting anything on their balance sheet except for cash. But again, it’s not that jumbo mortgages aren’t available altogether, but the cost for them has risen (anything for a price, right?). I think you have it right – fewer qualify and fewer banks want to lend. ARM rates are in the high 6% for loan amounts up to $1m, in the 7-8%+ range for over $1m. Fixed rates are 7%+. Of course, you’ll need 20-30% down and 720+ credit scores.


9. To shift gears a little: There are apparently 11.5 Million people underwater in their mortgages, according to Mark Zandi of Moody's Economy. These people can't qualify for re-fi's w/no equity. Do you have any opinion you'd like to share about the mortgage mod programs? And any opinion on the fact that 50+% of loan mods re-default?

Your questions touch on this fact – that the problem is immense and complicated.

As FDIC Chair Sheila Bair puts it, “it all started with housing and I think it won’t end until we get the housing market corrected” (CNNMoney). I agree with her and join many others in believing that loan modifications are critical to helping stem the foreclosure crisis. But certainly the way a loan is modified makes a difference on the success rate. Modifications can be as simple as a new payment plan to get current, or as complicated as a rate and/or principle reduction. Payment plans can be worked out at the servicer’s level, but rate and principle reductions affect the owner of the loan and are much more difficult to do. Your Monday post about the investor suing BofA is an example of the problems with mortgage modifications. (Didn’t BofA see this coming?)

I think the only way to effectively deal with foreclosures related to underwater mortgages is with principal reductions. But how this would be done is the real rub. Forcing principle reductions is nearly impossible. So I have to hand it to Bair – she’s trying to work with the system she’s got.


10. Could you give an explanation of the new HUD form? [Housing and Urban Development - BB]

Sure, I wrote about the new HUD ruling on existing RESPA [Real Estate Settlement Procedures Act - BB] in a November post. HUD had been working on revamping the GFE (Good Faith Estimate) and HUD-1 (Settlement Statement) for a number of years and finally came out with their revised forms. The agency changed the forms in order to make the mortgage process easier and more transparent for consumers. The effective date of the new GFE and HUD-1 is still over a year away so it will be a while until we can see if borrowers view the changes favorably.


11. A basic question: How far ahead of buying a house should someone get "pre-qualified" or actually qualified? Is there a chance that the rates will go up again soon? Or is this the "new reality" for a while?

Getting qualified isn’t a difficult process – basically just completing a mortgage application and having your credit checked, to see if you meet the requirements of the loan program you want/need.

A pre-approval, which many realtors like to see, requires additional steps for your loan officer but provides a more solid statement of ability to get a loan.

When should you get a pre-qual or pre-approval? You should get one before you start looking for a home you want to buy. You need to know if you can get a loan, for how much and on what terms, before you drag your realtor out looking at houses.

Rates: yes, there is a chance they will go up. Like one of YOUR comments on your own post (“Why?”) - If I knew when and where rates would be in the future, I’d be the most sought after financial guru in the world (ahh…daydreaming….).

Here’s the deal – not only is the market trying to digest the daily financials and assess the risks of future inflation, but it’s also trying to absorb the news coming out daily from our FED and Treasury and other central banks around the world, about how they’re responding to this and that crisis.

Last Tuesday’s market reaction, when rates dropped over ¼%, was based entirely on news of the FED’s MBS purchase plan. Tomorrow we could see Initial Claims reported better than the expected 540k, which would be bad for MBS prices and send mortgage rates higher. [Unemployement rates were terrible; mortgage rates didn't go higher. - BB]

Are the lower rates (sub 6%) the new reality for a while? I actually think so, mostly due to the FED pumping money in the MBS. They are trying to lower rates, and so far their accomplishing it. And by “a while” I mean 3-6 months.


12. Do people in your industry expect this to stabilize housing prices, as the Government hopes, or might it just be, as Bloomberg news says, "spitting in the wind"?

Good question. I’m hearing a wide range of expectations, but in general I think folks recognize that reduced mortgage rates can only go so far and are only one part of the solution.


13. Is there anything we've missed? Or that you'd like to add? Or links that you'd suggest for reading?


First of all, I want to say that I appreciate the time and energy you put into your blog. [Thanks - BB] You and all the local bloggers and commenters are engaging in the flow of ideas and are a great example of the open, transparent and free market in process…working. We can inform ourselves through the media (newspapers, tv, etc.) and directly from the sources (press releases, financials), but the insight we receive from our neighbors (local blogs) can be invaluable. Because after all, the world and national economic issues affect all of us, at a local level. And while we’re not all journalists or experts in all the fields we discuss, we each have points of view from which we can learn. I’m just amazed at the meaningful dialogue that goes on in our small community.

Second, just a comment about the economic crisis and the officials who are leading us through it.

I really think it’s in all of our best interest that the foreclosure crisis is brought under control and the housing market comes to a stabilization point. Personally, I hate bailouts (who likes them?) and I believe that moral hazard (with individuals, corporations & governments) is a real and serious issue. But I’m of the opinion that we should be doing everything we can to deal with the problems that face us. While there’s plenty of blame to go around, and the mortgage industry can claim a bunch of it, we need to address what’s directly in front of us. Certainly there are good policies/solutions and there are bad ones. In relation to the economy, that determination often comes in hindsight. And economic theories are just that – theories. Not every economic policy works in every situation.

I respect the leadership of the FED, Treasury, FDIC, etc, because

1) they are working their tails off to find solutions to our extremely complicated problems,
2) many of them have the knowledge and experience that makes them highly qualified to steer the USS Economy.

Call me na├»ve. But when one considers the expectations that have been placed upon them and the scrutiny under which they work, it’s hard to imagine how anyone could effectively deal with it. So I give them major credit for getting paid a government salary to deal with the one of the most challenging economic periods in the last 80 years. Additionally, our expectations are misplaced if we think that there won’t be mistakes (and major ones in some cases) along the way. Finding out what doesn’t work is part of the process in finding out what does.

And lastly, shouldn’t we all be rooting for Obama and the rest of the new administration? I know it’s tough for us to get over our political, social, economic & religious differences. But we’re talking about the trying to avoid a major recession or worse. It’s critical to debate over appropriate policies, yet at the end of the day we’re all working for the same end. This kind of thing doesn’t help (saw ad on Drudgereport yesterday.)


Many Thanks to Jason. He'll take questions in Comments (or if you have a private question, you can email him: Jason@crownva.com). Current mortgage rates for 30 year fixed will also be updated over the next couple of weeks in the Comments section.

Friday December 12 Econ Links

These links appeared in our sidebar on Friday, December 12, 2008.

White House may use TARP funds for auto bailout.

8 really, really scary predictions.

The 7th grader's guide to why housing values may take decades to recover.

Jumbo Prime Loans: Uh-Oh.

Economists: worst is still to come.

Retail sales cliff dive in November.

A failure of business leadership.

This is completely disconnected from housing, economy, finance.

Wednesday, December 10, 2008

"A Tale of Two Foreclosures" - What Will Foreclosure of 1216 Augusta Street Do to "Value" of Nearby Properties For Sale?

C-ville Weekly has an article by Will Goldsmith entitled "A Tale of Two Foreclosures" with the subtitle, And a look at their place in the scheme of things.

1216 Augusta Street in Charlottesvill
e is scheduled to be sold at foreclosure auction on January 6, and 332 Minor Ridge Road, in Albemarle County, is scheduled for foreclosure auction December 11.

The owner of both properties is Doug McGowan, a real estate agent at RE/MAX here in Charlottesville. One of his tenants is a staffer at C-ville--whom he did not bother to notify that the property was in peril. (Hey, guy was busy. Happens.)

Both houses, as well as a $962K primary residence the article describes as a "McMansion," were bought in 2005-2006 with little or no money out of pocket, with interest rates from 7% - 13+% using Adjustable Rate Mortgages or Option ARMs. He also re-fi'd the two rentals in order to pull money out--a practice common during the housing bubble, where owners used their properties as ATMs.

At one point the article states "It’s unclear what McGowan was thinking...."

We're going to suggest that among other things, McGowan was thinking:

1. Charlottesville is a protected market - that is, due to its unique geography and proximity to UVa, it will outperform anywhere else in the Commonwealth (or the USA, for that matter).

2. Real estate values always go up.

Oops.

Toward the end of the article, the potential impact of the foreclosures on others is made explicit:

The foreclosures are not only bad for McGowan. Likely, they will drop home assessments in the Rose Hill and Wynridge neighborhoods where his properties are located. That means less money for local government. If the neighborhoods are seen as distressed, it could make it harder to get loans to buy in those neighborhoods, creating a vicious cycle of declining value.

Additionally, a foreclosure sale can lower the price of houses currently offered for sale. Not that this is a bad thing in a bubble market: it's inevitable as part of the nationwide "correction."

In the Rose Hill neigh
borhood, there's already at least one foreclosure on the market a half mile away: 1404 Westwood Road, which we viewed in late September.

MLS #442361
, 4br/1.5 bath, 2600 sq. feet brick rancher o
n the market for about a year. The listing explicity states this is a foreclosure, and hollers in caps "PRICE REDUCTION!" Asking: $315K, then $278.9K, and NOW $244,900. The Bank paid $315K for this house and has resigned itself to a loss--er,writedown.


Now add in the foreclosure of 1216 Augusta to the area.

What will happen to the price of the house for sale directly across the street from 1216 Augusta?

Yes, directly across
the street.
MLS# 455468

1213 Augusta Street

Asking: $325,000

4 Beds, 2 baths, 2,406 sq ft. Acreage: 0.25, 1957.
Last sale: $141K, 1996.

Additionally, there are two houses just behind 1216 Augusta for sale, on Westwood Road. You can see 1216 Augusta from their yards. Both came on the market within the past two months, and are next door to each other:

MLS# 459232, 1516 Westwood Road, $399,500.
2 beds, 2 baths, 1700 sq. feet, ca. 1952. Last sale: 1997, $145.5K.

MLS# 458407, 1514 Westwood Road, $489,900. 5 beds, 3 baths, which includes an "in-law" apartment. 3,500 square feet, ca. 1956. Last sale/re-fi 1996, $121K.

Across the street:

MLS# 454843, 1505 Westwood Road, $375,000. The price started +/- six months ago north of $400K.) 3 beds, 2 baths, sq. feet: 1,524, ca. 1953. Last sold in 2006 for $196K, before major renovations.


On the other side of Augusta Street:

MLS# 457574, 1610 Amherst Street, $359,000. 4 beds, 2 baths, 2200 sq. feet, ca. 1960. Last sold in 2005 for $293K.

There are also a number of other houses for sale in this area whose price and "value" may be affected by this foreclosure.


Additionally, Mr. McGowan may face a "deficiency judgment." In Virginia, a bank has the right to sue the owner for the difference in what is owed and what is brought at auction (suit may be for other monies as well). A judgment lasts 20 years in Virginia.

Don't miss the Comments when you read the article in C-ville. There's a debate on whether or not Doug McGowan should have been named. Judy Savage, President of the Charlottesville Area Association of Realtors, weighs in and takes time to spank the writer and editors, though as one commenter points out, she doesn't identify her job or association position.

According to Savage, Realtors in this area are in dire straits. Among the information she imparts are these direct quotes:
  • "Many of us have seen our incomes fall 75% from just a few years ago."
  • "The Realtor in question is only one of many facing foreclosure and bankruptcy..."
  • "I know of several Realtors and Lenders who have now been foreclosed on because they relied on this bad loan product."
  • "Just about every restaurant and big box store in town has a Realtor working there part time just to keep their head above water."

We can't help but notice that this is all a lot less sunnier than what we've heard recently from CAAR CEO Dave Phillips.

With property sales declining since 2006, and the fact that there is currently 18+ months of inventory on the market, it's no wonder.

Tuesday, December 9, 2008

Mortgage Rates at 5.5 % (Possibly Lower By the Time You Finish Reading This....)


Q&A: The Mortgage Buzz blog - Answers to questions about mortgages in December, 2oo8.


Is it a good time to buy a house right now? In the Charlottesville/Albemarle area? Or anywhere else? Who knows. But mortgage rates are on the buyer's side.

Just before Thanksgiving, Treasury Secretary Henry Paulson announced that the Bush Administration and the Federal Reserve will do more to aid American consumers, including a new "program": The Federal Reserve will buy up to $500 Billion of mortgage-backed securities, and up to $100 Billion in bonds, entirely separate from the $700 Billion in TARP funds, which was voted into place by Congress.

Immediately, mortgage rates dropped to 5.5%, the lowest in 40+ years, with speculation that the rates could drop to about 5%. In the past week+, there's been a veritable re-fi frenzy.

We received emails asking for details, the what and why of the news, so we turned to the local resource for all things home loan: The Mortgage Buzz. This blog is written by two loan officers at Crown Mortgage Services in Charlottesville, Va: Jason Crigler and Michael Martin. During this Fall's "credit freeze," Jason did a Q&A about mortgage availability.

Then the news got bigger. Maybe. On December 4, there was a "leak." "Rumor" had it that Treasury was going to back a program to guarantee mortgages at a 4.5% interest rate, in an effort to stabilize the entire economy. And Ben Bernanke, Chair of the Federal Reserve, has come out in support of this idea.

For now, though, the rates are at 5.5 % (+/-) on a 30 yr fixed. These are the details from Jason, in PART I of a Q&A:


1. Please tell us a little bit about your company and UpFront mortgage brokers.


We are a Virginia mortgage broker, based in Charlottesville. As a broker, we work with a number of national and regional banks and mortgage lenders. This access to banks and lenders gives us the ability to provide our clients with a wide range of mortgage products at very competitive rates. Jack Guttentag, aka The Mortgage Professor, offers his detailed explanation of the difference between brokers and lenders on his website. The Mortgage Professor also helped develop the UpFront Mortgage Brokers Association, of which we are a member. As UpFront Mortgage Brokers (UMB), we are committed to a set of consumer protection principles, which include being fully upfront and transparent with our compensation.


2. Could you explain what the Fed has done and why this impacts mortgage rates so much and so quickly? Any comment about the fact that the Fed will be "printing" money?

The FED’s announcement that they will purchase $500b of MBS [mortgage-backed securities - BB] (from Fannie/Freddie/Ginnie) was BIG news for the mortgage market. While $500b represents less than 10% of Fannie/Freddie’s outstanding guaranteed mortgages, the Treasury and Fed obviously hope that the plan will have a significant impact on mortgage rates for the next several quarters (ie, lower rates).

As my Tuesday post indicated, MBS prices shot up within an hour or so of the announcement. And since prices and yields have an inverse relationship, the price increase we saw translated into an immediate decrease in mortgage rates. Whether the rally came from the announcement itself or if the FED actually put some of the $500b to work that morning (or both), it had the desired effect.

For those who are interested in learning a bit more about bonds and MBS:

Mortgage News Daily – MBS Basics, which links to PIMCO’s - Bond Basics [PIMCO = Pacific Investment Management Company, whose head, Bill Gross, readers may be familiar with from CNN or CNBC - BB]

As far as the Treasury printing money, that’s a loaded subject. Can’t take that bait tonight. Maybe some other time. ;0) [We were quoting from the above-linked NYT story! - BB]


3. Is the Fed going to buy mortgages just from banks, or from other entities as well? (GMAC, etc.)

According to the press release, the FED is purchasing MBS from Fannie, Freddie & Ginnie, not from individual banks. And this makes sense because it is separate from the Treasury’s TARP program, which was supposed to purchase assets (including MBS) directly from banks and other qualified institutions. The FED’s $200b ABS (asset backed securities – bonds related to car loans, credit cards, etc) purchase program is directed at the paper on the books of various institutions, which may include everyone from GMAC to American Express. While a goal of this program may be to reduce rates among loan products, it seems to be geared more at freeing up balance sheets to make it easier for lenders to continue to offer credit to customers.

As I mentioned above, the MBS program seems to be targeting yields (ie mortgage rates). The recent MBS yields have baffled the FED and Treasury, as they have remained relatively high compared to similar Treasury bonds. If GSE [GSE = "governement sponsored enterprise,' for instance Fannie and Freddie - BB] debt is “effectively guaranteed” by the US government, why the disparity between T-bonds & MBS? Whatever the reason, that’s what they wanted to address. And so far it has worked.


4. Why is there speculation that mortgage rates will go down to 5%?

Simply put, $500b can buy a lot of GSE & Ginnie MBS. The FED will act as a major buyer (higher demand) of the current supply of MBS and this will push prices higher and rates down. A big question is whether or not more investors will see this as an opportunity to be sellers of MBS at higher prices. If a lot of investors sell as the FED buys, it could diminish the rate effects of the MBS purchase program. In other words, the rates we’re seeing now could be the best we get. But of course the FED hopes that’s not the case.


5. Could you give some examples...comparisons between monthlies/entire mortgage at 6.5% vs. 5.5%. (We realize that people could use the calculator on either of our blogs, but it will be useful to see it in print).

Sure, let’s use the 30yr fixed for an example (fractions rounded):

A $200,000 loan at 6.5% has a principal & interest payment of $1,264/mo. That same loan at 5.5% has a monthly payment of $1,136, which is a $128/mo reduction. Translated in to loan qualification terms, a borrower could make $3,500 less (annual income) to qualify for the $200,000 loan at 5.5% versus 6.5%, based on a 45% debt to income ratio.

Over the full 30yr term, the $200,000 loan at 6.5% carries $255,086 in interest. At 5.5%, you’re looking at $208,807, a savings of $46,279 in interest.


6. Are you doing or seeing 97% LTV, or how much/little downpayment? Is 720 credit score still "acceptable"?

Yes, 97% is still available through Fannie/Freddie and FHA [Federal Housing Authority] (and the rare portfolio mortgage program). We’ve only done a few (along with 95% loans) through Fannie this year, as most of our clients have had 10% or more downpayment/equity and good credit scores.

Fannie and Freddie’s 97% works well for those with credit scores of 680 and higher, where rates and points are similar to that of FHA. But with scores 680 or less, FHA is by far the better deal. FHA has no minimum credit score requirement, although some banks maintain a minimum policy such as 580 or 600.

720 is still the level for the best conventional mortgages rates (Fannie/Freddie). Though slightly higher, FHA’s rates do not change based on credit score or LTV [loan-to-value, that is, how much of a mortgage needed and the amount it is for], which is attractive for those with lower scores and higher LTVs.

USDA and VA mortgage programs have been around for while, and they’re very unique in today’s world. They both go to 100%, have no mortgage insurance (each have a funding/guarantee fee), have no minimum credit scores, and both are limited to certain borrowers. VA (Veteran’s Administration) is only for eligible US military veterans and USDA (US Department of Agriculture) is for rural properties and eligible borrowers. There has been an increase in the use of these programs, but not on the order of what the GSEs and FHA have seen. This is obviously attributable to the fact that only certain borrowers (and properties for USDA) are eligible for the programs.


7. Are these 30 yr fixed mortgages? Are there still other kinds of mortgages available (interest only, option arm) with changed rates?

Fannie/Freddie & FHA have fixed and ARM [Adjustable Rate Mortgage - BB] products. VA also has fixed and ARM mortgages, but USDA is only available as a 30yr fixed.

Interest only is not available at 97%+ – maybe that’s assumed, but I thought I’d point that out.

Fannie/Freddie – 3, 5, 7, & 10yr ARMs.

FHA/VA – 1, 3, 5yr ARMs.


8. Does the Fed's action bring jumbo mortgages down, too, and to what rate? (Could you first define a jumbo for readers who may not be aware of the distinction.) You mentioned on REALCentralVA that there seemed to be a slowdown in jumbo purchases around here...and there ARE a lot of properties available that need jumbos.

The term "Jumbo" is used to describe a loan amount that was higher than the conforming (Fannie/Freddie) maximum loan limit, which has been $417,000 since 2007. In March of this year Fannie and Freddie increased their conforming limit for many MSAs [Metropolitan Statistical Area - BB], up to a maximum of $729,750. Seventy counties across the US saw the conforming limit go to the max. The Charlottesville MSA’s limit was raised to $425,000. But what has happened is that the original $417,000 loan limit remained and the difference between that and the increased limit became “Conforming Jumbo” (and FHA/VA Jumbo). So now we have Jumbo and Conforming Jumbo.

But a basic Jumbo mortgage often can only go to $1m to $3m. Enter the Super Jumbo, where loans are anywhere from $2 or 3m plus. Both Jumbo and Super Jumbo are loans that are kept on the investor’s books (portfolio), whereas Conforming Jumbo can be sold to Fannie/Freddie or through Ginnie Mae.

Confused yet?

Right, I commented on Jim’s blog about jumbo mortgage availability. While there are still jumbo mortgage programs out there, they have diminished quite a bit. We have access to a number of jumbo programs, and banks offer them directly, but the credit freeze that intensified in September and October has lenders cutting back on all types of loans that they can’t easily sell (like to Fannie/Freddie).

I suspect that there are a lot of homes in the Charlottesville MSA that need jumbo mortgages ($425k+), but I couldn’t give you any numbers. [To search this, go to mycaar.com, click "Property" and then fill in your parameters. The system only has "$400k" and "$450k" options, so the following numbers are only estimates, from $450K and higher: In Charlottesville/Albemarle there are 410 properties, up to $18M; in the entire Central Va MLS there are 805 - BB]


How hard has it been to get jumbos? Will it continue to be hard? Has it been hard b/c people don't qualify or b/c lenders are afraid of such large amounts, or both? Or are there just no buyers for properties that need jumbos right now?

Well, gone are the days of stated income/asset loans, low or no doc and option ARMs. These mortgage types weren’t only for Joe the Plumber - they also catered to the jumbo market. But those programs ceased to exist months ago. What I mentioned above is what’s really restricting the market – the credit freeze. Investment firms and banks have been the lenders of Jumbo money.

Now that the investment bank model is nearly dead (Goldman Sachs & Morgan Stanley are holding on), that leaves the Jumbo market up to the banks. And as you know, banks are pretty shy right now about putting anything on their balance sheet except for cash. But again, it’s not that jumbo mortgages aren’t available altogether, but the cost for them has risen (anything for a price, right?). I think you have it right – fewer qualify and fewer banks want to lend. ARM rates are in the high 6% for loan amounts up to $1m, in the 7-8%+ range for over $1m. Fixed rates are 7%+. Of course, you’ll need 20-30% down and 720+ credit scores.


9. To shift gears a little: There are apparently 11.5 Million people underwater in their mortgages, according to Mark Zandi of Moody's Economy. These people can't qualify for re-fi's with no equity. Do you have any opinion you'd like to share about the mortgage mod programs? And any opinion on the fact that 50+% of loan mods re-default?

Your questions touch on this fact – that the problem is immense and complicated.

As FDIC Chair Sheila Bair puts it, “it all started with housing and I think it won’t end until we get the housing market corrected” (CNNMoney). I agree with her and join many others in believing that loan modifications are critical to helping stem the foreclosure crisis. But certainly the way a loan is modified makes a difference on the success rate. Modifications can be as simple as a new payment plan to get current, or as complicated as a rate and/or principle reduction. Payment plans can be worked out at the servicer’s level, but rate and principle reductions affect the owner of the loan and are much more difficult to do. Your Monday post about the investor suing BofA is an example of the problems with mortgage modifications. (Didn’t BofA see this coming?)

I think the only way to effectively deal with foreclosures related to underwater mortgages is with principal reductions. But how this would be done is the real rub. Forcing principle reductions is nearly impossible. So I have to hand it to Bair – she’s trying to work with the system she’s got.

This is the end of Part I. Part II will appear later this week.

Many Thanks to Jason. He'll take questions in Comments (or if you have a private question, you can email him:
Jason@crownva.com).

Sunday, December 7, 2008

"Maybe It's Time to Buy That First House." Or is it?

The New York Times and The Washington Post both have opinion pieces about the current housing market.

Ron Leiber, who writes the weekly NYT "Your Money" column, wonders if we are in a "golden age" for first-time homebuyers. He cites declining home prices, mortgage rates at +/- 5.5% nationwide, the possibility that rates will go to 4.5%, and the huge selection of available houses.

He also mentions the need for a credit score of 720 or higher, a 10%-20% downpayment, and a desire to stay put for about 10 years, citing a survey from the National Association of Realtors that found first-time buyers stated they would do so (up from 7 a year ago).

Toward the end of the piece, Lieber warns that new buyers need to imagine what they'd feel like if their house lost an additional 10-15% of value over the next couple of years.

In the Comments section, Lieber is lambasted. The comments come from all over the US and from several foreign countries. The Commenters, including one from this area, offer all kinds of insight, information and extentuating issues that Lieber does not, including info on local and regional bubbles, inflation, price-to-income ratios, price-to-rent ratios, credit issues, unemployment, the recession. A couple of commenters actually wonder if this article was written by a NYT business writer or if it's just for amusement purposes only.

Don't miss it.


The Washington Post has taken a more considered approach to the issue. WaPo offers a "pro" buying piece v. a "sit tight" piece. Both concern not only purchasing a house, but also whether or not it's a good time to buy stocks. There's not a Comments function associated with these articles.

"Pro buying" is here.
"Wait to buy" is here.

For those who visit this blog regularly, you've noticed it hasn't been updated in a couple of days. We had a global collapse. We were finalizing a Q&A with Jason from The Mortgage Buzz when the blog went down; he assured us there's no connection. (In fact, it turned out to be an issue with Blogger, and impacted a random collection of blogs on an international scale.) The Mortgage Q&A will appear on Monday.

Since the blog was disabled, some important economic news transpired, and we're tossing in a couple of links to important recent news, below.

*President-elect Obama, on today's Meet the Press, warns the economy will get even worse.

Locally, Albemarle County has revised its budget deficit projection, again, now up to $7.2M. Libraries and Parks could suffer.

Nationally:

*One in 10 mortgageholders is experiencing some kind of trouble.

*Federal Reserve Chair Ben Bernanke goes on record saying that homeowners and potential buyers need assistance through foreclosure help, mortgage modifications, and Treasury's plan to initiate 4.5% mortgage rates, in order to stabilize the housing market and entire economy. (This is a significant shift from helping investment banks, brokers, insurance companies, possibly the auto companies, etc., which is where the $700B bailout funds have been directed.)

*The US loses 533,000 jobs, the biggest drop since 1974. However, this number doesn't include those who are simply no longer looking for work. Economists react to this news.

*November's retail sales, which included Thanksgiving weekend, of course, are the worst in 35 years. Prices are dropping in the luxury sector.

Thursday, December 4, 2008

Take A Look At This Mortgage Modification

Recently, a number of banks and mortgage guarantors announced they will suspend foreclosures for 90 days. Merry Christmas. Similarly, to help stem the tide of foreclosures, Fan and Fred, major banks, and the FDIC have announced plans for mortgage modifications.

But mortgage modifications anger many people. "Anger" is an understatement. "Turn apoplectic," "breathe fire," and throw large objects across the room is more like it. This is because mortgage modifications are often given to homedebtors who wouldn't have qualified for a loan in a market that wasn't insane--debtors who have low credit scores, didn't accurately report income, and made little or no downpayment, plus opted for Adjustable Rate Mortgages.

Responsible mortgage holders, whose house values have dropped along with those of the irresponsible, feel punished for doing the right thing--getting/earning a mortgage the "old fashioned" way: scrimping, saving, paying bills on time, managing credit cards. Why should these folks, as taxpayers, help bailout the idjits?

We're of at least two minds on this. On the one hand, yes, it's galling to consider a mortgage mod for someone who has made poor choices. On the other hand, there are folks who did not make poor choices, and are still in serious trouble. And on the third hand (hey, wait a minute...) the housing market isn't going stabilize until foreclosures go back to their "old" levels...and until the housing market stabilizes, the entire economy will be seriously impacted. So anything that can help should, IOHO, be considered.

But this isn't the way to go about "helping" mortgageholders facing foreclosure. Take a look at this "actual" mortgage modification. A debtor has to really be in love with a house in order to agree to this kind of financial insanity, which includes turning a $475K home into a money pit of $840K. It's 176% LTV. And includes a balloon payment of $245K in 2035.

Yikes.

Courtesy of Mr. Mortgage.

Wednesday, December 3, 2008

Treasury Considering Plan to Lower Mortgage Rates to 4.5%

Last week, on news that the Fed Gov would buy up $500 Billion of MBS (mortgage-backed securities), 30 year fixed rates dropped to 5.5%. We sent a Q&A over to The Mortgage Buzz blog, and it will be posted tomorrow.

Meanwhile, in the past week, there's been reports that foreclosures will continue to rise. Apparently in response to this, and in an effort to stabilize the housing market, there's more significant news about mortgage rates:

From the WSJ:

The Treasury Department is considering a plan to revitalize the U.S. housing market by reducing mortgage rates for new loans, according to people familiar with the matter.

The plan, which is in the development stages, would use mortgage giants Fannie Mae and Freddie Mac to bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages.

Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.

Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S.

See the original here.

The Most Expensive Small Towns in America

No, actually, Charlottesville is not on this list. Business Week teamed up with the real estate website Zillow.com to find towns with the smallest year-round populations and highest $ real estate. Only towns with 10,000 or fewer residents were considered. Read the story and view the slideshow.

Tuesday, December 2, 2008

"Why?"

We received an email on Sunday from a reader who signed off as Confused in Charlottesville. In the subject line was "Why?" In the body of the email was simply "MLS# 459636. New listing."

The details: 705 Montrose Avenue, a 1296 sq. ft. 2 bed, 2 bath aluminum-sided cottage, ca. 1953. Located in the Belmont area.

Asking Price: $197,400.

It's very simple, Confused in Charlottesville. The listing tells you everything you need to know: 705 Montrose is "Adorable" and a "2 Bedroom Ranch" and it's "in the City!" It also has "Off-Street Parking, Hardwood Floors, and Fenced Back Yard!"

All of this may be true. What the listing doesn't mention, of course, is that the last transfer was in the year 2000, for $82,500, that busy corridor Avon Street is a couple doors down, nor what the crime history is for the neighborhood.

Nationwide, real estate has increased in price on average 100% from 1998 to 2006, according to Robert Shiller of Standard & Poor's Case Shiller Index fame. And nationwide, prices have been declining since the bubble's peak in late 2006. Even, lately, in this area.

705 Montrose has "increased" by 139% since 2000.

That is, in money terms,
$114,900. In eight years.

Nearby are eight other cottages in Belmont. They're at a similar price point, on the market since July, and none have sold.

Woolen Mills: 401 Meade Avenue & 119 River Bluff Circle

New landlords:

MLS# 455614
- 401 Meade Avenue - Rehabbed farmhouse, ca. 1920, 3 beds, 1.5 baths, $299,000. A larger house among small cottages, at least four of which in a two block radius are for sale, near Meade Park. Corner of Little High Street.

Last transfer: 2004, for $206,000. Some upgrades since then.

Available immediately for $1250/month "short term rental." Gotta appreciate the optimism of that in this market. Hey, maybe it's under contract even as we type....


Or go for the contemporary. 119 River Bluff Circle - The "Grow Green House," featured recently in The Hook for sale for $429,000, ca. 2008.

See the Craigslist ad: $1,800 per month for rent. The description reads, "Designed from the ground up to change as your family changes, the house is easily and quickly adaptable to a variety of configurations. Move in as is, or select options to customize the house to your needs. Grow-Green can accommodate as many as four bedrooms and up to 3-1/2 baths."

Monday, December 1, 2008

Investor Sues to Block Mortgage Modifications

A lawsuit against Bank of America claims states and banks will short bondholders $8.4 billion and damage the market by cutting home payments. This is big.

(Read earlier posts about mortgage mod programs here and here.)

It's Not Even Winter and the News is Bitter Cold

Ugh and ugh.

Duh and duh.

This is as much eloquence as we can muster at the moment...but fear not. Plenty of properties to see this week.

Sunday, November 30, 2008

Sad News

Blogger Doris Dungey, who wrote under the pseudonym "Tanta" at CalculatedRISK, has passed away after a serious illness.

CalculatedRISK appears on our "live feed" in the sidebar. The mainstream media and the finance/economics/bubble blogosphere embraced, respected, and relied upon Tanta's genius, analysis, and wit in her writings.

Read the memorial post at CalculatedRISK and the article in The New York Times.

Our condolences to Tanta's family and to CR himself on this very sad day. Tanta will be sorely missed.

Wednesday, November 26, 2008

Links 11-26-2008 Thanksgiving Weekend

HOUSING PRICES AND SALES

October National Existing Home Sales Drop

October National New Home Sales Lowest Since 1982

The Case-Shiller Index, the widely-watched aggregator of prices 20 housing markets, has fallen 17% over the Third Quarter from 2007. This report comes from the period before the stock market crash in October.

LOCAL NEWS


The City of Charlottesville will have to cut Capital Improvement Projects for the 2010 budget. This impacts traffic, parks, trails, neighborhood improvements, and so on. The 2010 figure will be around $16 Million, roughly half of 2009's.

The County of Albemarle, which seems to grow poorer by the day, is looking for funds to keep its easement program going: buying up development rights from propertyowners to keep the County rural. The County also hopes some owners will just go ahead and donate.

The NYT reports on institutions of higher education suffering losses to endowments. UVa is mentioned several times, and COO Leonard Sandridge is quoted. Interestingly, there's no mention of the Missing Billion. Endowments of more than $1B typically have a 35% exposure to risky financial instruments; UVa's exposure is 75%. This detail is not mentioned in the NYT article.


NATIONAL NEWS

Holiday Shopping this Weekend? Maybe Skip the Giftcards

Worst Financial Calls of 2008

Where Was Treasury Secretary Nom Tim Geithner During All the Turmoil?

A Visual Guide to the Financial Crisis

American's Foodstamp Usage at All-Time High

A Wealth Effect in Reverse

The Collapse of Commercial Real Estate

The Worst is Yet to Come: Anonymous Banker Weighs in on Coming Debacle of Credit Card Debt

Fed Risks 'Spitting in the Wind' With Latest Bailout

The Latest Fed Bailout: $600B to Buy Mortgages

Latest Federal Bailout Sets Off Rush to Refinance Mortgages. The new lower mortgage rates--about 5.5% today, and expected by some to move as low as 5%, will help only those who actually have a credit score of 720 or better, and at least 20% equity in their homes. Moody's Economy estimates there are at least 11.5 Million homeowners who owe more than their houses are worth; these are the folks who can benefit from Mortgage Mods.

Former Federal Reserve Chair Paul Volcker named by President-elect Barack Obama to head a new White House panel to help create jobs and bring stability to the ailing financial system.

The first operational audit of the $700 billion financial rescue plan, to be delivered to Congress next Tuesday, is expected to be critical of the Treasury Department’s failure to set up ways to track how its bailout money is being used in the marketplace.