FDIC Helps Citigroup Acquire Banking Ops From Wachovia

Unable to recover from its ill-advised acquisition of mortgage lender Golden West Financial Corp. in 2006, Wachovia Corp. said it will sell its banking operations for $2.1 billion to Citigroup Inc., which agreed to absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio.


The Federal Deposit Insurance Corp. (FDIC) agreed to cover any losses beyond that.

Upon the completion of the transaction, Citigroup will have more than 4,300 U.S. branches and $600 billion in deposits, reserving a place alongside Bank of America Corp. and JPMorgan Chase & Co. in dominating the banking industry.

Citigroup will reclaim its spot as the biggest U.S. bank by total assets with $2.91 trillion.

However, the deal forces Citigroup to cut its quarterly dividend in half to 16 cents and dilute existing shares by selling off $10 billion in common stock to bolster its capital position.

In addition to assuming $53 billion worth of debt and up to $42 billion of loan losses from Wachovia's portfolio, Citigroup will issue $12 billion in preferred stock and warrants to the FDIC for the risk it agreed to take on.

Wachovia has not been acquired outright, although it is effectively stripped of much of its core business.

The Charlotte, North Carolina-based company will still maintain its asset management, retail brokerage and certain select parts of its wealth management businesses.

It will continue to be a publicly traded company under the Wachovia brand.

The FDIC noted that Wachovia did not fail, declaring that all depositors are protected and the Deposit Insurance Fund will not be affected by any immediate costs.

The deal remains subject to approval by Wachovia's shareholders and regulators, and must close by the end of the year.

Wachovia shares have plummeted more than 80% in recent months, closing Monday at $1.84 in comparison to 52-week high of $52.25.

Meanwhile, Citigroup has reported losses over three straight quarters totaling $17.4 billion.

During that period, the New York-based bank has written down its assets by roughly $46 billion, the deepest writedown by a U.S. bank.

Much of Wachovia’s struggle stemmed from the $24.3 billion acquisition of Golden West Financial after the housing boom had already crested.

Golden West came with a $122 billion portfolio of Pick-A-Payment loans which allows borrowers to skip monthly payments, leading to a costly deterioration of the portfolio’s value.

Wachovia posted a $9.11 billion loss for the second quarter and announced plans to cut 11,350 jobs, largely from in its mortgage operations.

The company’s wholesale lending operation known as Vertice was included as part of the acquired operations going to Citigroup.

Trends in Garage Space

We often hear about trends in home design and efficiency, but what about trends in garage spaces? For many homeowners that's a space that is often neglected. But if you're in the market to sell your home, you should get familiar with what buyers are looking for these days in garages.

First of all, garages are making a comeback. For a while, many homeowners decided to convert that space into an office, extra bedroom, or studio. But according to Elizabeth Weintraub with About.com, many homes with similar remodels are lingering on the market, because discriminating buyers are looking for true garage spaces.

The obvious use for a garage is for car storage, and in today's world it isn't uncommon for there to be 3 or 4 cars per family. As a result new homebuilders are making new construction garages bigger, not only in how many cars they can accommodate, but also in dimensions since cars have been growing in size over the years.

But older homes still have options for how many cars they can fit. Auto elevators are becoming increasingly popular. It costs less than a used sedan, and it can be very helpful especially if you live in a community that restricts parking cars on the streets. Here's how it works, you drive into the garage space and after you get out of the car, simply push a button and the car rises, making space underneath for another car to park. If that seems a bit lavish, there are simpler ways to make your space more useful, and appealing to buyers.


First, finish it out. This includes having finished walls, ceilings and floors. It gives the room a cleaner, fresher look.

Next, redecorate. It's amazing what a new coat of paint can do, for any room, including the garage. And don't forget about the flooring. You can stain the existing concrete, add sealed polypropylene tiling, and other more residential looking, yet durable flooring. It can make the room feel like a true extension of the home.

And finally, get organized. Organizational systems are widely available and include cabinets, shelves, workbenches, wall hooks, even closets to hide your clutter.
Just a few small changes to the garage space and your home may look better to buyers, and hopefully be easier to sell.
by Tara Darby

Please visit the site

http://realtytimes.com/rtpages/20080924_garagespace.htm

The turmoil in the financial markets

Financial crisis tough on homebuyers, sellers
The turmoil in the financial markets has rates on a roller coaster. And with tighter lending standards, fewer people are able to secure financing.

By Melinda Fulmer, MSN Real Estate

The rapidly unfolding crisis in financial markets could make it harder for many buyers to get loans, and could make some types of loans more expensive, experts say.

The nation's credit crunch had started to show some small signs of relief recently, with the number of mortgage applications edging up on declining rates and a government bailout of Fannie Mae and Freddie Mac.

But that glimmer of hope was dashed this week as investors around the world watched the U.S. financial markets stumble badly: Lehman Brothers Holdings filed for bankruptcy protection; Wall Street icon Merrill Lynch agreed be acquired by Bank of America; the federal government agreed to bail out insurer AIG to the tune of $85 billion; and the Fed declined a rate cut.

The most recent news – Treasury Secretary Henry Paulson's proposal to establish a government entity to absorb lenders' bad debt – contributes to the confusion over what will happen in the housing market. "They haven't really addressed how that's going to affect the mortgage market," says Jon Eisen, a San Diego mortgage broker and certified financial planner.

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And analysts say there could be even further fallout: Lending standards could get even tighter and rates on nonconforming or jumbo loans could jump.

"The rules have changed so much," says Eisen. "Every few days I get new memos from lenders about how the standards are changing."

Roller-coaster rates
The spiral of bad news initially sent mortgage rates lower before pushing them up.

Rates on 30-year fixed conforming mortgages averaged 6.07% on Sept. 18, according to financial publisher HSH Associates, after dropping below 6% the previous week.

That's still a historically low rate, economists say, but increasingly fewer people actually qualify for it, because of weaker credit scores or low down-payment amounts.

"The ability to have a down payment matters more than ever … and purchasing at a price that gets under the conforming limit," says Susan Wachter, a real-estate professor at the University of Pennsylvania's Wharton School.

For those who do qualify, these conforming rates should remain relatively stable, says Holden Lewis, who covers the mortgage industry for Bankrate.com. He doesn't expect conforming 30-year loans to spike to 8%, for example, or drop considerably.

link to Story
http://realestate.msn.com/Buying/Article2.aspx?cp-documentid=10479096

Builder sentiment rises from record low

WASHINGTON (AP) -- Battered housing developers are getting a bit more optimistic about their prospects for the next six months, an index of the sector's confidence showed Tuesday.

The National Association of Home Builders/Wells Fargo housing market index rose two points to 18 this month from an all-time low of 16 in July and August.

The survey was taken in the first 10 days of September, and for the most part doesn't reflect the fall in mortgage rates since the government's takeover of mortgage finance companies Fannie Mae and Freddie Mac. It also doesn't take into account this week's Wall Street turmoil, which may push rates downward as nervous investors move into government bonds.

Immediately after the Fannie and Freddie seizure, "the positive impact on mortgage rates was probably not apparent to many builders," the trade group's chief economist, David Seiders, said in an interview.

Average rates on 30-year fixed-rate mortgages dipped to 5.93% last week, down from 6.35% on the Thursday before the takeover, according to Freddie Mac's weekly survey. Rates had been bouncing between 6% and 6.5% since late May.

Treasury takes over Fannie and Freddie

On Sunday morning the new GSE regulatory agency placed congressionally chartered mortgage giants Fannie Mae and Freddie Mac into separate conservatorships, as the government committed $100 billion to each while removing their CEOs and laying the groundwork for a radical and historic restructuring of the entire U.S. mortgage market.
This is going to be a very good thing for the mortgage market and in turn for the Real Estate market overall.
The funding of these two companies opens up much needed liquidity for lenders. This liquidity will ease some lending guidelines, decrease rates, and eliminate the financial sector's worry about Fannie and Freddie failing. The Bond market, which controls interest rates and the strength of the US Dollar, will become a place where investors will place their money due to the FDIC basically guarantying those investments. The dollar will also get much stronger due to the money pouring into bonds.
What does all this mean to the real estate markets.


1) There will be lower interest rates to help boost sales.

2) More borrowers will qualify for loans.

3) The dollar will be stronger, which will help the economy.

4) More people purchasing homes means we all increase our businesses.

Joe Phillips
AMR manager
386-615-7977

Positive Real Trends

Resales of existing houses jumped by 3.1 percent in last month to the highest level in nearly half a year.

On top of that -- and to the near total surprise of Wall Street analysts -- new home sales also rose 2.4 percent, according to the Commerce Department.

New home sales showed a similar pattern: Up an amazing 39 percent in the Northeast, 10 percent in the West, 8.2 percent in the Midwest and down by 2.5 percent in the South.

Most notable of all were the strong rebounds in sales in areas that had seen the biggest drops following the boom years -- especially in California and Florida.

Now, in fairness, before we get too enthusiastic about these sales gains, let's be frank about what's pushing this trend: The large numbers of short sales and foreclosures in many once-booming markets are cutting prices to the bone.

But rock bottom prices are also bringing in a flood of first time buyers, fence-sitters and investors who've been waiting for hard, statistical evidence that the cycle is flattening out.

Well, it looks like that hard evidence has finally arrived.

Sales in places like Riverside-San Bernadino, California, and Fort Myers, Florida -- once the West and East Coast symbols of boom and bust -- are now seeing strong growth in sales, according to the National Association of Realtors.

Keep this in mind too: The July resale numbers represent transactions closed before the passage of the new $7,500 federal tax credit. When the impact of the credit begins kicking in during the coming several months, you can bank on even higher sales numbers ... and a turnaround in prices.

In other key economic developments this week: Mortgage applications rose nationally for both conventional and FHA loans to buy houses. Interest rates dropped for the third straight week -- hitting an average 6.44 percent for 30 year fixed rate loans and 5.94 percent for 15 years.

Also the federal government's monthly survey of home prices in more than three hundred markets around the country found that although the national average of prices was down slightly, prices rose in 20 states … and are up year to year in 30 of the 50 states.