How to Buy a Foreclosed Home

There is a major sale going on in the housing market, and with real estate appraisals coming up with comparables that are lower than ever, it may be the perfect time to buy. One of the questions my real estate appraisers in Valley Village are getting is how to buy a foreclosed home. This is also a big issue for real estate appraisers in North Hollywood. Though there are a lot of bank-owned properties available these days, trying to buy one can be risky. With a conventional home purchase, you have all sorts of protections against being taken, but in a foreclosed deal, its buyer bewares. There are, however, steps you can take to protect yourself and get a great bargain. Keep in mind that one of the best ways to find out what a house is worth is by checking on the comparables of the surrounding neighborhood and what their home appraisals were valued at.

 

The first thing you want to look out for is if the website you are going through to find out how to buy a foreclosed home is charging a fee. There are free ways to find out about foreclosures in your area like calling local brokers, real estate appraisers and agents. Like I said, my real estate appraisers in Valley Village as well as my real estate appraisers in North Hollywood are constantly out in the field doing home appraisals, so they have some of the most up-to-date information. The same is true for real estate agents and brokers; and because they want more business, they are more willing than ever to dole out free advice and information.If that’s a concern, try to negotiate to have the utilities turned on for inspection before you close on the home. A home inspection usually runs from $250 to $400 and can save you a lot of money if something is wrong with the home’s structure or systems. You need to know what repairs you’re on the hook for to determine whether the price is fair. This is also where a home appraisal comes in, because they document all of these factors in their official real estate appraisals that get used to determine the value of the home.

 

 One important thing to keep in mind is the fact that if the property has been on the market for less than 30 days, lenders are usually looking for full-price offers. After 30 days they may be willing to accept a lower price. After 60 days you can offer even less. So this is basic economics and supply and demand. Logically, the general rule is the longer the house has been vacant, the lower the price will be. So, one of the best things you can do when you’re trying to figure out how to buy a foreclosed home is find out which homes in your area have been on the market the longest.

 

Once you’ve found a home you want to purchase, you’ll want to invest in a full home inspection. This is always a good idea when buying a home and my real estate appraisers in Valley Village along with the real estate appraisers in North Hollywood recommend this to all of our clients, but it is especially important when buying a foreclosed home. Vandals may have stripped fixtures and appliances. What’s more, the utilities have probably been shut off, making it impossible to gauge the shower pressure or test for leaky pipes.

 

If you are looking at how to buy a foreclosed home, you also want to beware of the fact that s0me states have a redemption period that lets the original homeowner satisfy his or her debt and take back the foreclosed home during a specified period after a foreclosure. This is especially true right now, with all the steps President Obama is taking to try and save homes from foreclosure. You’ll also need to be patient because banks may take 60 days or more to decide whether to accept your offer on a foreclosed home. These lenders are looking at things like your finances, the home appraisal of the house and other competing offers. In fact, one of my real estate appraisers in North Hollywood just saw one of our clients go through a bidding war on a foreclosed house in the area.

While the housing market is clearly a mess right now, there is an upside to it; the fact that homes haven’t been this affordable in years. That being said, you want to be smart about your purchase and learn everything you can about how to buy a foreclosed home such as what the home appraisals in the area are going for. Find yourself professional and trustworthy real estate appraisers, lenders and agents and get as much information as they are willing to offer. Once you have done all that and researched as much as possible, you’ll be ready to go out and find your dream home.

Help From Home Foreclosure is Finally Here

With President Obama’s foreclosure prevention program in place, home owners may now start to begin the process of saving their homes. This is especially good news for homeowners in the San Fernando Valley, where my real estate appraisers in Valley Village as well as real estate appraisers in North Hollywood have seen the price of homes drop dramatically over the past year. Keep in mind that one of the biggest components to a home appraisal is finding what the comparable prices of surrounding homes are selling for, and when you see foreclosure signs peppered throughout a neighborhood, everybody’s home value goes down. This is one of the reasons so many people are now seeing their homes underwater, which means they owe more than what the house is worth and this makes it very difficult to get a loan modification.

With the help of President Obama’s foreclosure prevention program, many homeowners may get a chance to apply for a loan modification, which will better suit their current economic condition. The plan, which is a multipronged fix, calls for companies to help as many 4 million struggling borrowers by modifying loans so monthly housing payments are no more than 31% of monthly gross income. Separately, homeowners who haven’t missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners. This will help stop the foreclosures that are steamrolling through cities and towns like the San Fernando Valley, and that in turn will help raise the value on a home appraisal.

The $75 billion foreclosure prevention plan will allow for loan modifications that will provide incentives to borrowers and loan servicers and investors to spur mortgage modifications, even if your home is underwater. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments. More than likely this will mean that you will need to reappraise your home to find out what it is currently worth, and for real estate appraisers in Valley Village as well as real estate appraisers in North Hollywood, this is most welcome news as their cities have been two of the hardest hit in the housing market crash.

“This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans,” said Housing Secretary Shaun Donovan. This is more than just great news for homeowners, it’s great news for everybody because, as Mr. Donovan states, declining home prices have played a huge roll in the recession we find ourselves in. A rise in home appraisals is one of the signs that things are beginning to improve for everybody, not just people in jeopardy of losing their home, which is why President Obama’s foreclosure prevention plan is a huge part of the stimulus package and good for us all. This will also help raise the value of homes underwater, and bring prices to a reasonable level.

As of today, borrowers can start contacting their servicers to see whether they are eligible for assistance, and they may want to begin to look around for a professional to do their home appraisal so they know what their home is currently worth when they begin the loan modification process. Federal officials will promote the program at homeownership events nationwide, and real estate appraisers are getting up to speed on the new loan modification guidelines. I know, for example, that many real estate appraisers in Valley Village along with their counterparts, real estate appraisers in North Hollywood, are in constant contact with lenders so that they are all on the same page when their customers are ready to begin the process.

There are, however, eligibility criteria you need to meet. For example, the loan modification plan focuses on people who are behind in their payments or are at risk of default, which Federal officials clarified as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default. But if you fit into these categories, the foreclosure prevention plan may be the Godsend you need.

If you or anybody you know is thinking about applying for a loan modification and need help finding out what your home is worth, please visit our real estate appraisers in Valley Village and our real estate appraisers in North Hollywood at www.iappraiseforyou.com and we can help you get the fair market value of your home. You may also want to check out www.hud.gov for more information on who qualifies for President Obama’s foreclosure prevention plan.

Is the Drop in Home Prices Your Chance to Get in?

Good news for people that are looking to purchase a new house; home appraisals show that prices declined at a record pace around the nation in the final three months of 2008, according to an industry report released Tuesday. This is based, in part, on residential appraisals done by professionals in the field. In fact, many real estate appraisers in Valley Village, CA as well as real estate appraisers in North Hollywood, CA know this first hand. While this is bad news for our economy, it may be the one bright spot for people that have waited many years to get into the housing market. Even better is the fact that if these people can get a loan with the new plan for TARP funds, the economy will start to perk up. But, before your pour your hard-earned money into that new house, make sure you employ the services of a reputable real estate appraiser, because with thorough real estate appraisals, you can make sure you are buying a house for the fair market value.

 

I say this is good news because residential appraisals had been showing over-inflated prices for so long that potential home buyers were left out in the cold. If you look at what many home appraisals were going for over the past five years or so, you would wonder how anybody could afford to buy. Then again, we all know by now that most of those home owners couldn’t really afford those homes at all, and got into them through unfair lending practices and sheer greed. In fact, many of the real estate appraisers in Valley Village, CA as well as real estate appraisers in North Hollywood, CA were shocked to see comparables of surrounding homes go up and up while the condition of many of them were seriously lacking. That’s why having a professional real estate appraiser is so important, because they can tell you exactly what the range of prices are in any given market through real estate appraisals.

 

Now depending on how you look at it, the fact that real estate appraisals show that the decline in home prices does not seem to be slowing down it’s either a good thing or a bad thing. It’s a bad thing if you are trying to sell, because residential appraisals reflect the decline; however, it’s a good thing if you are looking to buy because you now may finally be able to afford a home of your own. One of the reasons for the falling home prices is that rising foreclosure activity is putting pressure on prices, as lenders are increasingly pursuing a ‘take what we can get’ selling strategy. Again, this is good news for people looking at home appraisals and seeing the real price of the homes they are trying to purchase.

 

Many experts predict that prices are going to continue to fall; they have to reflect economic reality. But that doesn’t mean you should hedge your bet and wait for the bottom. Sadly, many real estate appraisers in Valley Village along with some real estate appraisers in North Hollywood have seen many of their clients miss out because of this and lose their dream house to the next guy. Hiring a real estate appraiser to help you determine the fair price for a house is a first step. If you find that the house you want appraises for a price within your budget, you should grab it as fast as you can.  

 

The Obama Administration Announces New Plan for TARP Funds

The Obama Administration rolled out its much awaited foreclosure-prevention plan they will use the second half of the TARP funds for on Wednesday, saying it could help as many as 7 million to 9 million homeowners meet their mortgage payments. Some of the Key components include modifying the terms of delinquent loans, refinancing underwater mortgages and putting more money into the federal housing agencies in order to keep mortgage rates low. But will it work?

The fact of the matter is that while the housing market may have started the devastating decline of our economy, we now have a record number of people out of work, and even more on the horizon. However, this plan may be a good start as it is a series of targeted interventions designed to help specific groups of borrowers and by doing that, it’s hoped, limit the damage caused by foreclosures both to neighborhoods and to the overall economy.

The idea in this new plan is to use TARP funds to restructure the loans of homeowners who are behind on their mortgages or, and here is where the plan may do some real good, those who are an imminent danger of falling behind. The Obama Administration is keenly aware that up until now, only homeowners that were already behind on their payments qualified for government assistance, which only made the problem bigger. Now, those of you that have been struggling to keep up and have somehow managed to scrape by have a chance of reducing your mortgage as well. Up to now, homeowners had to wait to default before they could even get a return phone call from their bank. However, some people are saying that this new plan won’t do a lot of good because it gives much of the power to make the decision on who gets help and who doesn’t to the lenders.

The Obama Administration accounted for this though and added incentives to lenders that cut the interest rate on loans to help reduce homeowners’ monthly payments. The plan is to pay lenders $1,000 every time they do this, but they have to reduce the borrowers’ payment down to 38% of their gross income, which is quit a bit. But the $1,000 will be paid out for three and five years for keeping the loan current. This doesn’t sound like much of an incentive, but given the economic pressure banks and lenders are under, every little bit helps.

Another criticism of this plan for the second half of the TARP funds is the fact that the Obama Administration didn’t make it mandatory for lenders to make these deals, and with the lack of help many homeowners are getting, the fear is banks won’t spend a lot of their time on these restructured mortgages. But given the fact that policymakers had to walk a fine line between helping borrowers who have been caught off guard by tricky mortgage products and falling house prices and those who simply made imprudent decisions and genuinely can’t afford their homes, it is at least a step in the right direction. In order to avoid propping up the second group, Treasury won’t subsidize loan modifications that reduce the interest rate below 2%. If you can’t afford a 2% mortgage, in the eyes of the government, you can’t afford your house. The plan also doesn’t apply to investors or people with jumbo mortgages — those, historically, larger than $417,000. Loans for homes that would be more valuable to lenders if repossessed won’t get modified.

As to how much the Obama Administration’s new plan will help, that remains to be seen. However, we all know how dismal the results were for the first half of the TARP funds, so we should at least be better off than we are now. Mortgage lenders will have to really get on the ball in order for it to work, because deciding who gets the reduced interest is in their hands. How about you homeowners? Do you think this plan will help you out? How about the lenders out there; do you think it’s too much pressure on you? I really want to know what the rest of you think about this plan, and if you believe there was any better alternative. Please leave your comments, questions and suggestions, and let’s keep the conversation going.

The Foreclosure Process; Can it be Stopped?

The foreclosure process is still steamrolling through America. While President Obama has promised to put the second half of TARP funds to better use than the first half, it still may take a while before the real estate industry and homeowners see any relief from what has become a long, arduous journey. Until things begin to improve, here are a few things you need to know, to stall or prevent going into foreclosure.

Mortgage lenders naturally want to recover as much money as they can from the loans they provided homeowners. While a foreclosure isn’t ideal and won’t get them even half the money they originally put out, something is better than nothing…at least that’s the way they look at it. So in order to save your home from the foreclosure process, you have to show them the money. But before you do that, keep in mind what Mike Himes, a housing counselor for the nonprofit group NeighborWorks Homeownership Center in California has to say; “troubled homeowners need to be realistic about their ability to pay. He says that there have been many borrowers who have swiped their cards for $20,000 on their credit cards only to be forced out of their homes later on.” Trying to appease the mortgage lenders this way can end up costing you more than you can ever repay, in the end.

If you don’t have the money to give to your mortgage lender to save your home from foreclosure, the best move is for you to call them weeks before your next amortization is due. The reason for this is that you will be considered delinquent the day after the due date if it is not paid, so you want to take control of the situation before you become part of the nasty real estate statistics that are out there right now. That being said, homeowners usually have grace periods of up to 15 days to pay what’s due.

When the call comes from your mortgage lender regarding delinquency depends on your payment history with them. I know as a homeowner that this is not the call any of us wants to get, especially when it comes to something as sacred as our personal real estate. But, if they do, here’s what you can expect according to Wells Fargo Home Mortgage executive Joe Ohayon, “if you frequently pay in the middle of the grace period, you will not be called before that point. If you have been a good payor, the calls will just be reminders and not direct collection calls.” So there does appear to be some consideration for the type of customer you have been.

If the worst does happen, and a homeowner receives a notice of default of foreclosure, they still have 90 days to negotiate with the lender to save their real estate. For example; you could still negotiate a loan modification, a short sale or a temporary moratorium. While these are some of the things you can expect when your home is under threat of foreclosure, every situation is different and every mortgage lender is different. Ultimately, until we begin to see some results from the second half of the TARP money, homeowners are going to continue to lose their homes, and banks are going to continue to lose money, which is the vicious cycle that got us into this mess in the first place. What about all of you, what have you done or heard of other people doing to save themselves from foreclosure? Is there any real help out there, or is it just a bunch of smoke and mirrors? Please share your experiences with the rest of us and post any comments, questions or suggestions you may have.

If you are in jeopardy of losing your home, visit www.hud.gov for guidance on what you can do. 

Fannie Mae and Freddie Mac Roll Out New Deal for Homeowners

There’s finally some good news on the real estate front; “Fannie Mae and Freddie Mac have directed their network of servicers to halt all foreclosure and eviction proceedings between Nov. 26 2008 and Jan. 9, 2009, meant to give a recently announced rescue plan time to work,” according to money.cnn.com. It’s been a few months since these mortgage giants got bailed out by the government, and this is the first sign that they are finally doing something to try and at least help, if not fix, the problem they helped create in the housing market.

This action is meant to keep homeowners afloat while they await the start of the Streamlined Modification Program, which begins Dec. 15, and will allow homeowners behind in their mortgage to get a modified mortgage to no more than 38% of their gross incomes. Some people may feel as though this is bailing out those who never should have gotten into the real estate market to begin with, but the fact is that home foreclosures hurt us all, by lowering home values and draining our economy.

Notification to the homeowners who have already received eviction notices and/or have homes up for auction, should begin immediately, which should make for a much brighter holiday season. Unfortunately, homeowners who are in jeopardy of eviction between Nov. 20 and Nov. 26 will not get to benefit from this new deal; however, they may qualify for other deals offered by FHA.

This is good news, to be sure; however, it will boil down to a small percentage of homeowners in the shaky real estate market, even though Fannie Mae and Freddie Mac hold the mortgage for approximately half of the people currently in the housing market.

There are several factors that will go into the eligibility of this new deal. First, homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy. Again, it’s a good offer, but will only end up helping a small percentage of people, so I wouldn’t say it’s going to put a huge dent in the housing crisis.

On the up side, something has to be done and at least this is a start. The real estate industry is a vital part of our economy, and even the global economy as a whole. Things will get better in the housing market, but it may take a bit longer than we originally thought. Holding off on at least some of the foreclosures out there, is a good first step.

 

     

How Will an Obama Administration Help the Housing Market?

Barack Obama has a lot on his plate, now that he has won the presidential election. Between rising foreclosures and falling home prices, housing issues are probably the number one thing on many American’s minds. Because of the continuing crisis in the housing market, it is likely that President elect Obama will hit the ground running once he takes office, and for many people in the current real estate market, it will be none too soon.

 

 

In fact, a full slate of complex housing market problems need to be addressed, from the restructuring of mortgage giants Fannie Mae and Freddie Mac to the

modernization of the Real Estate Settlement and Procedures Act, which governs home sales.

But foreclosures are likely the No. 1 concern, because that problem is a big one for everybody in or out of the real estate market and housing industry. According to a report from Credit Suisse, 6.5 million loans were expected to fall into foreclosure over the next five years. That’s based on home prices dropping 10% in 2008 and 5% in 2009, before rising 3% in future years. And the problem affects the entire global economy, not just homeowners.

 

President elect Obama made proposals involving the housing crisis, which included among other things a three-month moratorium on foreclosures for banks or lenders getting money from the $700 billion federal rescue plan — if the customer is making a good-faith effort to make payments and renegotiate the mortgage. Obama also called for bankruptcy reform, which could help at least some homeowners ride out the current housing market crisis and make it through the other side. This proposal would allow bankruptcy courts to modify an individual’s mortgage payments; currently, bankruptcy judges are prevented from making these alterations. But there are many people who think this is just a crisis to those who own real estate, therefore, it is facing opposition.

 

Analysts from the National Association of Realtors also expect an Obama administration to focus on regulatory reform of the country’s financial-services industry. There will likely be examination of what went wrong, and changes so there is proper regulation of mortgage- and other asset-backed securities, according to an NAR report. As to how many of these proposals we will see enacted once President elect Obama takes office, well that remains to be seen.

 

As we all know, the President doesn’t work in a vacuum and there has to be cooperation on both sides of the isle to make much of this work. That being said, I think there are many signs that the future will start looking brighter for the housing market and real estate industry. However, change takes time, so don’t expect anything to take shape the minute after Obama takes office.

 

 

     

Nervous Home Buyers May Miss Their Chance at Cashing in

Is now the right time to get into the housing market? That’s what many people are asking themselves. With the price of real estate falling on a daily basis and more and more homes going into foreclosure, the future is looking bright for people who couldn’t afford to buy a house when the market was more favorable for sellers. While it is true that many mortgage lenders out there have either decided to stop giving out new mortgage loans or tightening up their qualifications for a mortgage loan, there are still mortgage lenders out there who are willing and able to take a chance on a qualified buyer.

 

The key word there is qualified. You probably won’t find those no down payment loans, or interest only loans anymore, mortgage lenders are already taking a bath on those. But the truth is that those should never have been offered in the first place. Because of the creative and sneaky financing that was going on during the first part of the new millennium, the housing market is in a sour tasting pickle right now. However, if you are a buyer who was just biding your time, and waiting for the price of real estate to come back down to earth, you may be in luck. That being said, many buyers are still very wary of getting into a new home right now, fearing that prices will go down even further.

 

For those of you who want to get into the housing market, right now may the best time ever because, according to the National Association of Realtor, “the market is expected to turn around, over the next year,” which means, “existing home sales are expected to rise 50% in 2009.” That means hitting a mortgage lender and getting your own piece of real estate right now may end up bringing you high dividends by the end of 2009. Not only are home sales expected to rise but so are the rates for a 30-year fixed loan, which is still extremely low based on historical data, but much higher than we saw over the past eight years or so.

 

I understand that with all the bad news coming from mortgage lenders across the nation it’s hard to imagine making money off of real estate anymore, but remember that real estate is cyclical. That means it will bounce back and forth between a buyer’s market and a seller’s market, and if you do your research you can hit the housing market at the right time and get the biggest bang for your buck. Mortgage lenders are still in business, so if you think you can qualify with their tighter restrictions, I say jump in while you still can.

 

    

Increase the Value of Your Home Without Breaking the Bank

Real estate is still one of the best investments you can make. Whether you want to get a fixer upper you can turn around and sell for a profit, which believe it or not is still possible even in this housing market, or a home you can move yourself and your family into and plant roots. Either way you go, it’s always a good idea to spruce up your little corner of the world; it will help increase the value of your home and make you feel like you are living in a little piece of heaven. One more plus is the fact that mortgage lenders hire real estate appraisers to research the value of your home, and the better it looks, the more money you can get for it.

 

 

The good news is that you don’t even have to put in a lot of money to add value to your home and do well in this housing market. Even the smallest improvements can add a significant amount of cash to your pocketbook. In the world of real estate, the three key words you should know are location, location, location. To that end, before you even hit that mortgage lender up for your loan, decide the most advantage area to purchase a home in. That’s even more important in today’s housing market, because certain areas are starting to show signs of a rebound, so if you can get in now, you can make out big.

 

Another thing you want to keep in mind, storage is king when people are looking to buy. Even if you plan on staying in the home you purchase, adding more storage will make your life more manageable and add value to the real estate appraiser’s report when you get ready to sell. One great and affordable idea you can implement to add more storage is hanging wall units. Places like Target and Wal-Mart sell great looking wall units for prices even people on a tight budget can afford.

 

Another easy way to improve the value of your real estate is to bring those old

cabinets into the 21^st century by repainting them and replacing those old rusty handles with bright shiny new ones. Again, these are easy things to do, they are cheap things to do and you would be amazed by how much more attention your house will get in a competitive housing market. While mortgage lenders won’t necessarily tell you about these things, real estate agents will. But doing these things before you even get to the stage of hiring a real estate agent or real estate appraiser will put you ahead of the game.

 

Look around at the home you are thinking about purchasing and search for any latches bolts and hinges that may need a bit of work. If you are a purchaser looking for your dream home, you can ask the seller to fix these before you move in. In today’s housing market you can get sellers to do a lot work for you that they may not have been willing to do when real estate was booming. If you are a seller, these little touches will give you the edge over others trying to sell right now.

 

Here’s another often overlooked fix that can make a world of difference, change the filters in your air-conditioner. This will help avoid musty smells during your walkthrough and avoid any hostility with your buyer when they find out their air-conditioner is spewing out dust. While you’re at it, try hanging a large mirror in the living room, as it will help create a feeling of space in the room. Another simple way to add space is by applying window boxes and hanging baskets around the house. I can’t say this enough, the housing market is very competitive for sellers right now, so all those extra added touches will add value, help the mortgage lender find quality buyers, add value to your real estate appraiser and make your home more attractive than the others trying to sell in your neighborhood.

 

If you can, try adding rooms to your house. It may sound like a huge undertaking, but if you already have a patio or attic, it’s simple and cheap to turn those into separate rooms. Why not turn that attic into a game room, or extra bedroom. Create a cozy breakfast nook in your patio. Again, these can be as small or big a renovation as your budget allows, and will bring you extra cash in the end.

 

It’s a difficult time in the housing industry right now, but as you can see, there are ways of improving your chances of getting out ahead. Real estate is now and will always be a good investment, especially to your personal future. This cycle will eventually turn back around, so if you apply what you’ve learned here now, you will be ahead of the game when the right time to sell comes around.

 

If you or anybody you know is thinking about buying a house, selling a house, refinancing a house or simply want to find out the current value of your house, please visit us at Mahler & Associates for all your appraisal needs.

 

    

Why the Future Now Looks Bright for Freddie Mac

Freddie Mac has a plan to stay in business and save taxpayers money. One of the nation’s top mortgage lenders, Freddie Mac, has been facing some serious financial problems of late, which has had severe implications for the housing market and real estate industry. But, on Friday, Freddie Mac announced plans to raise $5.5 billion by selling common and preferred stock, in order to bolster their economic outlook.

 

This announcement may help aleve fears the housing market has of another government bailout. Freddie Mac had previously said it would raise that money, but on Friday it finally registered its stock with the Securities & Exchange Commission, a move that allows the company to proceed. This is good news to home buyers who count on Freddie Mac to purchase their first piece of real estate as well as people who fall in the higher-rick category. The housing market has definitely taken a downward spiral, but mortgage lenders may be the ones hurt the most in this situation because they run their businesses off giving people loans.

 

Raising, say, $2.75 billion by selling common stock at current prices would entail issuing more than 300 million shares – reducing current investors’ stake in the company by a third. Freddie would presumably raise the rest of the money by selling preferred stock, but that won’t come cheap either. Even though it is nice to see Freddie Mac trying to get themselves out of the hole they are in, they may still end up needing help from the government. That being said, the housing market needs Freddie Mac to stay in business, so it will behoove us all to root for a good outcome for this mortgage lender.

 

Selling this stock could help this company put itself in better position to weather the housing market meltdown and resume making money when the economy and real estate industry rebounds. It’s been a tumultuous few weeks for Freddie Mac, and the companies’ shares lost more than half their value last week, amid fears that falling house prices will lead to big losses on the mortgages the companies own and on the mortgage-backed securities they insure.

 

Even though this new plan of mortgage lender Freddie Mac is a sign of better days ahead, there are some who believe Freddie Mac should be nationalized, wiping out shareholders and putting an explicit government guarantee behind the companies’ obligations. But Treasury Secretary Paulson has said he believes the company should continue to be shareholder-owned. One of the reasons for this, according to experts, is that they “see a parallel in the Chrysler bailout of the early 1980s, in which the government took warrants in the automaker in exchange for providing an emergency loan guarantee, and when Chrysler returned to health later in the decade, the government was able to cash in the warrants, allowing taxpayers to share in the fruits of the company’s recovery.”

 

Whether or not Freddie Mac’s new financial plan works remains to be seen, but it does show that the mortgage lender is at least trying. The housing market needs mortgage lenders to survive this crash; otherwise we could all see ourselves renting for the rest of our lives. Real estate is cyclical, so there is no doubt there will be a rebound. The only question now, is when and how big?