Would this be enough to stop the new FHA driven train wreck in its tracks ?

* Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent….
* Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.

Rents are falling across the bay area as the bad economy takes its toll on employment. Single digit drops in rent over one year are almost unheard of in this area.

In the San Jose-Sunnyvale-Santa Clara area, the average was $1,484, down 11.6 percent from a year ago, while occupancy stood at 94.6 percent compared with 95 percent a year ago.

Unreported cash transactions are a violation of the RESPA rules.

… Since many second lien holders are getting very little, they are now allegedly requesting money on the side from either real estate agents or the buyers in the short sale. …
(RESPA is the Real Estate Settlement Procedures Act, the 2008 law requiring that consumers receive disclosures at various times in the transaction. It outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD. Read more about it here.).

Does the housing market really need this ? What kind of recovery would result when flipping is encouraged by the FHA ?

This trend, which took hold more than a year ago, gained more ground last week when the Federal Housing Administration reversed a rule and decided to allow government-backed mortgages for homes sold and resold within 90 days. …Previously, the FHA refused to provide mortgage insurance for homes resold within 90 days to prevent fraud. A common scam was for investors to purchase a house, make minor repairs and sell it to a straw buyer who never planned to pay off their loan.

Some tips on taxes…

Indeed, there are circumstances that would permit you to have two principal residences. Say, for example, that you lived in Washington in 2008 and 2009, but that you lived in Vermont in 2006 and 2007. Each home will be considered your principal residence, but you can claim the exclusion only once every two years. So long as you have owned and used each property for the requisite two out of five years before sale, you can take the exclusion on both properties for the year in which each was sold. You must do the mathematics very carefully…

There are times when a homeowner wants to have the house considered as “investment” rather than principal residence. For example, if you have made a significant profit (more than $500,000) and are faced with a sizable capital gains tax, you may want to consider doing an exchange under Section 1031 of the Internal Revenue Code. Keep in mind that you can exchange only investment properties, not principal residences.

JP Morgan’s losses on prime mortgages tripled in the 4th quarter from last year and bear in mind this is with fanciful accounting standards.

Losses even on prime mortgages almost tripled to $568 million compared to a year earlier. The bank set aside a total of $4.2 billion to cover mortgage, home-equity and other consumer loan losses in the fourth quarter, up $653 million from the same quarter a year earlier.

To be sure, total credit losses excluding the impact of securitizations actually slipped to $7.8 billion from a high of $8.1 billion in the third quarter.

But much of that decline is due to a reduction in credit card losses related to a May offer allowing card customers to defer payments for a month. That deferral slowed the pace at which customers were delinquent at the end of last year, and pushes some customer defaults into the first quarter of 2010. Total credit losses were up 72 percent from the fourth quarter a year earlier.

In an eye popping statistic, the household employment survey says 661K additional employees were lost from Nov to Dec 2009 as those not in the labor pool (people giving up or dropping out) increased by 850K.

The series peaked at Oct 2008 at 154.8 million in the civilian work force, employed or not.

Table A.  Major indicators of labor market activity, seasonally adjusted
(Numbers in thousands)
_______________________________________________________________________________
                         |                 |                          |
                         |    Quarterly    |                          |
                         |     averages    |       Monthly data       |  Nov.-
        Category         |_________________|__________________________|  Dec.
                         |        |        |        |        |        | change
                         |  III   |   IV   |  Oct.  |  Nov.  |  Dec.  |
                         |  2009  |  2009  |  2009  |  2009  |  2009  |
_________________________|________|________|________|________|________|________
                         |
     HOUSEHOLD DATA      |                 Labor force status
                         |_____________________________________________________
                         |        |        |        |        |        |
Civilian labor force ....| 154,235| 153,544| 153,854| 153,720| 153,059|    -661
  Employment ............| 139,339| 138,138| 138,242| 138,381| 137,792|    -589
  Unemployment ..........|  14,895|  15,406|  15,612|  15,340|  15,267|     -73 

Not in labor force ......|  81,858|  83,195|  82,696|  83,022|  83,865|     843

The unemployed who find new jobs in these economy find themselves settling for lower salaries.  This could lead to stagnant wages.

Pay tends to stagnate during or immediately after recessions — and it’s often severe during “jobless recoveries,” when hiring remains weak long after the economy starts growing again, according to a 2005 study by Princeton University economist Henry Farber.

For example, workers who lost jobs and found new ones from 1981 to 1983 took average pay cuts of 10.8 percent once they found new jobs, the study found. But from 1983 to 1985, as hiring accelerated, that pay cut narrowed to less than 8 percent.

But those who lost jobs and were rehired from 2001 to 2003 averaged bigger pay cuts of 13.6 percent as hiring stagnated for nearly two years during a jobless recovery.

By contrast, formerly unemployed people who were rehired during the boom years of the late 1990s averaged a minuscule pay cut of 0.2 percent, according to the study, which examined pay data from the Labor Department.

Many housing and manufacturing related blue collar jobs appear to be lost and not coming back.

The downturn that started in December 2007 delivered a body blow to U.S. workers. In two years, the economy shed 7.2 million jobs, pushing the jobless rate from 5% to 10%, according to the Labor Department. The severity of the recession is reshaping the labor market. Some lost jobs will come back. But some are gone forever, going the way of typewriter repairmen and streetcar operators.

Many of the jobs created by the booms in the housing and credit markets, for example, have likely been permanently erased by the subsequent bust.

Are consumers getting a new cash based habit after decades of charging on credit ?

U.S. consumers in November reduced borrowing by the most on record, cutting credit card use by nearly 20% even as the economy recovers.
Consumer credit outstanding decreased at a seasonally adjusted annual rate of 8.5% to $2.465 trillion, the Federal Reserve said Friday.
The $17.5 billion tumble is the largest since the Fed began keeping records in 1943.