February 2nd 2009 Rochester MN Market Update

There are currently 812 homes for sale in Rochester, Minnesota. The average asking price for these properties is $227,055 (median $178,000) and average market time is 193 days.

Last week (January 26, 2009 through February 1, 2009) there were 839 residential properties for sale in Rochester, MN, with an average list price of $227,321 (median $177,900) and average market time of 188 days.

There were 30 new listings and 13 that came back onto the market last week. Average list price was $226,063 (median $189,900) and $199,942 (median $157,900) respectively.

The 28 homes that went to pending (under contract) last week averaged 124 days on the market and $168,562 asking price (median $159,900). The average sold price for the 14 homes that closed was $178,678 (median $152,400), 95.94% of the original list price, 99.57% of the asking price. Average market time for these homes was 118 days.

Last week one listing was withdrawn, 12 canceled, 8 expired and 24 were extended.

January 26 2009 Rochester MN Market Update

There are currently 823 residential properties for sale in Rochester, Minnesota. The average list price for these properties is $224,992 (median $175,000) and average market time is 190 days. Last week (January 19 to January 25, 2009) there were 846 residential properties for sale (average list price $225,607, median $175,000, 186 days on the market).

Last week 22 homes went to pending (under contract) with an average price of $163,045 (median $159,900) and 111 days on the market. There were 37 new listings, averaging $223,754 (median $164,900), and 17 listings came back on the market (average $271,723, median $249,900, 334 days on the market). Six listings expired, 3 cancelled, and 4 were withdrawn.

The average sold price of $165,870 for the 12 homes that sold (closed) last week was 88.71% of the list price, 81.59% of the original asking price, underscoring the need for realistic pricing in the current market. These properties had an average of 94 days on the market. The average list price was $186,979 (median $130,900).

MasterCard Inc.

MasterCard Incorporated (MasterCard) is a global payment solutions company that provides a variety of services in support of the credit, deposit access (debit), electronic cash and automated teller machine (ATM) payment card programs, travelers check programs and related payment programs of over 25,000 financial institutions that are its customers. Through its three-tiered business model as franchisor, processor and advisor, the Company develops and markets payment solutions, processes payment transactions, and provides consulting and information services to its customers and merchants. The Company manages a family of payment card brands, including MasterCard, MasterCard Electronic, Maestro and Cirrus, which it licenses to its customers. The Company conducts its business principally through MasterCard's principal operating subsidiary, MasterCard International Incorporated. In January 2009, the Company acquired Orbiscom Ltd.

Executive Pay

Shareholders and their advocates have increasingly viewed the escalation in executive compensation with concern and sometimes anger. In 2007 and 2008, numerous proxy resolutions were introduced to address the subject. Congress held several hearings on excessive pay and heard calls for action.

The burgeoning ire has two roots. For one thing, toward the end of 2006 the Securities and Exchange Commission set tighter rules for corporate proxies requiring more information about the methods used to compile pay packages for top management. But by early 2008, as many proxies came in with a maximum of verbiage masking a minimum of information, some shareholders rebelled.

The sinking economy also stoked shareholder discontent -- especially when executive pay rose even as share prices plummeted. It was hard to find a link between pay and performance; indeed, often the opposite was true. A study by Equilar, a compensation research firm, showed that even as the number and value of performance-based bonuses dropped in 2007, the value and prevalence of discretionary bonuses — ones not tied to performance at all — were up.

And earned or not, paychecks remain high. The average overall compensation in 2007 for chief executives at 200 large companies that had filed proxies by the following March 28 approached $12 million. — Claudia Deutsch (April 4, 2008)

Lawrence H. Summers

Lawrence H. Summers, former chief economist at the World Bank and the president of Harvard University from 2001 to 2006, is the director of the National Economic Council for the Obama administration.

He was treasury secretary from 1999 until the end of the Clinton administration. Known equally for his brilliance and his blunt manner, Mr. Summers has a deep understanding of global economic issues, at a time when the American mortgage crisis has leaped borders to become a worldwide contagion.

"In the current circumstances, the case for fiscal stimulus — policy actions that increase short-term deficits — is stronger than at any time in my professional lifetime," he wrote in his monthly column in The Financial Times in September. "Unemployment is now almost certain to increase — probably to the highest levels observed in a generation."

His tenure at Harvard was not always a calm one. His aggressive personal style and sharp-edged remarks — including an observation that women might lack an intrinsic aptitude for math and science — provoked a bitter clash with the faculty, forcing his resignation after five years. Though Mr. Summers apologized for the remark about women, women’s groups were expected to object if he was nominated for a cabinet position.

After leaving Harvard, he turned his attention back to economics, making his debut as a monthly Financial Times columnist with a column titled “The Global Middle Cries Out for Reassurance.” He has said that dealing with this anxiety — making globalization work for the masses — has become the central economic issue of the day.

Born Nov. 30, 1954, Mr. Summers graduated from M.I.T. and earned a Ph.D. at Harvard. He married a Harvard English professor, Elisa New, in 2005, and has three children with his first wife, Victoria Perry.

Federal Deposit Insurance Corporation

In 1983, the Federal Deposit Insurance Corporation celebrated its 50th anniversary by issuing a history that began with this passage:

" 'On March 3 banking operations in the United States ceased. To review at this time the causes of this failure of our banking system is unnecessary. Suffice it to say that the government has been compelled to step in for the protection of depositors and the business of the nation.'

"As President Franklin D. Roosevelt spoke these words to Congress on March 9, 1933, the nation's troubled banking system lay dormant. More than 9,000 banks had ceased operations between the stock market crash in October 1929 and the banking holiday in March 1933. The economy was in the midst of the worst economic depression in modern history.

"Out of the ruins, birth was given to the FDIC three months later when the President signed the Banking Act of 1933. Opposition to the measure had earlier been voiced by the President, the Chairman of the Senate Banking Committee and the American Bankers Association. They believed a system of deposit insurance would be unduly expensive and would unfairly subsidize poorly managed banks. Public opinion, however, was squarely behind a federal depositor protection plan.

"By any standard, deposit insurance was an immediate success in restoring stability to the system. The bank failure rate dropped precipitously, with only nine insured banks failing during 1934. During the 30-year period beginning with World War II,the workings of the economy and the conservative behavior of bank regulators and the banking industry created a situation that posed few risks to the financial system, and the importance of deposit insurance in maintaining stability declined. Indeed, Wright Patman, the then-Chairman of the House banking committee, argued in a speech in 1963 that there were too few bank failures - that we had moved too far in the direction of bank safety. ''

In 1997, a follow up volume had a very different focus -- "the extraordinary number of bank failures in the 1980s and early 1990s.'' The wave of failures that came to be know as the savings and loan crisis and led to a reshaping of the F.D.I.C. and new attention to the importance of tight regulation of banks holding federally insured deposits.

Changes in the marketplace and in the legal landscape kept banking in turmoil, but few banks were failing. The collapse of the housing market and the credit crunch that followed in 2007 raised new worries, however, and by the spring of 2008 the F.D.I.C. was warning that the banking sector was facing alarming new strains. In July 2008 Indymac, a California-based bank, was seized by the agency as its mortgage-related losses mounted. Suddenly, the notices posted in financial institutions that they are "F.D.I.C. insured'' -- meaning that deposits are covered up to $100,000 -- were of interest again.

Home Equity Loans

Home equity lines of credit and home equity loans allow homeowners to borrow against the value of their homes. In recent years, as housing prices soared, this tax-deductible borrowing exploded in popularity.

These days, however, many homeowners now owe more on their houses than the houses are worth, and home equity borrowing standards are tightening. Find out how you can tap into home equity with these articles and tools. MANY homeowners who have taken out home equity lines of credit have learned in recent months that these loans are not as useful as they initially seemed.

Lenders are struggling to minimize risk, and because they are especially at risk to lose money on residential real estate loans, they are cutting back on homeowners’ credit lines or freezing them altogether.

Many people who took out home equity credit lines of $100,000 on their home and used only, say, $20,000 have received letters informing them they can no longer borrow additional money, just as their stock portfolios are dwindling. The banks’ reasoning, typically, is that area property values are dropping, so the equity does not actually exist.

To challenge the bank’s valuation of a home, a homeowner has little recourse but to spend his or her own money to order an appraisal — a potentially costly and futile approach.

But a new countermeasure is emerging: take out the money before the bank puts it out of reach. In this strategy, borrowers draw the maximum amount even if they don’t need it, then place the cash in a liquid, and safe, investment vehicle.

“I categorize this as liquidity protection,” said Oded Ben-Ami, a senior loan officer with the Sterling National Mortgage Company, based in Great Neck, N.Y.

Mr. Ben-Ami said he had suggested to mortgage clients that they consider drawing down the maximum amount possible from their home equity credit lines.

Which leads to a question: where to put the money?

Home equity credit lines usually carry interest rates equal to or slightly lower than the prime lending rate, which banks charge their best customers. Last week, that rate fell to 4 percent as the government looked to stimulate the economy.

Those who withdraw their home equity should consider putting the cash into a certificate of deposit, a savings account or a money-market account, Mr. Ben-Ami said.

These financial instruments are typically insured by the Federal Deposit Insurance Corporation. Borrowers can withdraw the money on short notice and pay no penalties in the case of savings or money market accounts, or marginal penalties for early withdrawals from C.D.’s. (Unlike money market accounts, money market funds are not protected if the depository fails.)

Short-term liquidity is a key advantage, as borrowers may well be using their credit lines for college tuition bills or as emergency funds if they lose a job or face a major home repair.

Interest rates paid by C.D.’s were at least 3 percent last month, Mr. Ben-Ami said. “So on an equity line of $100,000, the annual cost of this strategy is approximately $1,000” — the difference between a cost of 4 percent and income of 3 percent, he said.

“The question then is, is it worth it to you to pay $1,000 a year to ensure $100,000 worth of liquidity against the worst of circumstances? For many people, the answer is yes.”

There are some risks for borrowers who follow this approach. First, if the value of a home drops significantly and the borrowers have spent the cash from their equity line, they can end up owing more money than their property is worth. (In industry parlance, the borrower is then “under water” or “upside down.”)

The prospect of easy money is also a temptation that some borrowers will find difficult to resist. But for those with enough self-restraint not to spend more than they need, withdrawing the full credit line may be easier than having a credit line rescinded and then finding another bank.

Federal National Mortgage Association (Fannie Mae)

Fannie Mae is the nation’s largest mortgage buyer and a financial juggernaut that affects the lives of tens of millions of home buyers. It was taken over by the federal government on Sept. 8, 2008, along with Freddie Mac, as the two mortgage giants struggled with deep losses and investors lost confidence in the pair.

Fannie Mae was created during the Depression to make sure that sufficient funds were available to mortgage lenders, then rechartered by Congress in 1968 as a publicly traded company. Fannie Mae, like Freddie Mac, which was created by Congress in 1970, buys mortgages from lending institutions and then either hold them in investment portfolios or resell them as mortgage-backed securities to investors.

The two companies play a vital role in providing financing for the housing markets, but have struggled in recent years. After significant accounting problems, the companies since 2004 were required to hold 30 percent more capital than the minimum previously required, in effect capping their ability to purchase mortgages.

As the housing market has soured, both companies reported steep losses. But the mortgage meltdown also made the companies more important. When the credit markets seized up, Fannie and Freddie regained their central role in mortgage finance after losing significant market share to investment banks during the housing boom. They issued most of mortgage securities sold in the last six months, because investors have lost confidence in deals put together by big investment banks.

In February, federal regulators announced that they were easing some restrictions on lending by Fannie and Freddie. Then on March 19, 2008, the federal government announced that it was easing those restrictions in an effort to calm the turmoil afflicting the mortgage markets. Officials said the change could allow the two companies to invest $200 billion more in mortgages.

But on July 13, even as top officials continued to insist that the companies had adequate cash to weather the current financial storm, the Bush administration asked Congress to approve a sweeping rescue package that would empower officials to inject billions of federal dollars into the companies through investments and loans.

And the government did just that in early September, when the Treasury secretary, Henry M. Paulson Jr., announced the takeover over of Fannie and Freddie after advisers poring over the companies’ books concluded that Freddie’s accounting methods had overstated its capital cushion. The move to place the companies into a conservatorship also grew out of concern among foreign investors that the companies’ debt might not be repaid.

The rescue represented an extraordinary federal intervention in private enterprise and could become one of the most expensive in history. The plan commits the government to provide as much as $100 billion to each company to backstop any shortfalls in capital. It enables the Treasury to ultimately buy the companies outright at little cost. It also eliminates dividend payments while protecting the principal and interest payments on the debt, now held by foreign central banks, financial institutions, pension funds and others.

Eventually, under the plan, both companies will shrink their portfolios. In addition, the government plans to buy significant amounts of their mortgage-backed securities on the open market.

Credit Scores: What You Need to Know

Because of the economic turmoil, consumers are having an increasingly hard time getting loans. How lenders view your creditworthiness is critical to determining how you live your life. Luckily, your credit score is something you can control. It's a good idea to focus on improving it, and this section provides advice on how to do that. You may not have checked your credit score lately, but there’s a good chance someone else has.

If you have applied for a mortgage or a loan — or even received a credit card offer in the mail — someone accessed that three-digit number to help determine the amount you can borrow and the interest you’ll owe on it.

So what goes into this all-important score? And how can you make sure you’ve got a good one?

The term credit score usually refers to your FICO score, a number based on a formula developed by the Fair Isaac Corporation. Fair Isaac looks at a summary of all your credit accounts and payment history. If you’ve got a mortgage, a MasterCard or a Macy’s account, it will be included in the report, as will late or missed payments. FICO scores range from 300 to 850, and Fair Isaac calculates them for each of the three big credit-reporting agencies: Equifax, Experian and TransUnion. That’s one reason why your FICO score with each may differ slightly. Generally speaking, the higher your score, the more money you can borrow and the less you’ll pay for the loan.

Here’s how your score is determined:

¶ 35 percent is determined by your payment history. Do you regularly pay your bills or fines on time to any creditor that submits your information to the credit bureau? Even unpaid library fines, medical bills or parking tickets may appear here.

¶ 30 percent is based on the amounts you owe each of your creditors, and how that compares with the total credit available to you or the total loan amount you took out. If you’re maxing out your credit cards, your score may suffer.

¶ 15 percent is based on the length of your credit history, both how long you’ve had each account and how long it’s been since you had any activity on those accounts. The fewer and older the accounts, the better (assuming you’ve made timely payments).

¶ 10 percent is based on how many accounts you’ve recently opened compared with the total number of your accounts, as well as the number of recent inquiries on your report made by lenders to whom you’ve applied for credit. Your score can drop if it looks as if you’re seeking several new sources of credit — a sign that you may be in financial trouble. (If a lender initiates an inquiry about your credit report without your knowledge, though, it should not affect your score.) Shopping around for an auto loan or mortgage shouldn’t hurt, if you keep your search to six weeks or less. But every inquiry you trigger when you apply for a credit card can affect your score, says Craig Watts, a spokesman for Fair Isaac. So be selective.

¶ The final 10 percent is determined by the types of credit used. Having installment debt — like a mortgage, in which you pay a fixed amount each month — demonstrates that you can manage a large loan. But how you handle revolving debt, like credit cards, tends to carry more weight since it’s seen as more predictive of future behavior. (You can pay off the balance each month or just the minimum, for example, charge to the limit of your cards or rarely use them.)

For the best rates on a loan or credit card, you want a score that’s above 700, at least. To achieve that, make sure to pay all your bills on time. It’s also a good idea to have at least one credit card you plan to use for a long time, but not too many. Keep a low balance — generally less than one-third of your total credit limit. Of course, it’s best to pay off your balance entirely each month. And stay on top of the information in your reports.

You can get a free copy of your credit report from each of the three major credit agencies once a year. Be sure to order it through annualcreditreport.com, the only authorized online site under federal law. If you notice information that’s inaccurate, you can submit a request for removal online at Equifax, , Experian or TransUnion. Or submit your request by mail. Be sure to specify what information you think is inaccurate and why, and include any documents that support your argument. Ask in writing that the information be corrected or removed from your report. By law, the bureaus must investigate your complaint, usually within 30 days, and give you a response in writing (or via e-mail, if your request was made online) and a free copy of your report, if the information is changed as a result. Your score should reflect that change shortly after.

To see your actual score, you’ll generally have to pay. You can go through Equifax, Experian or TransUnion directly, but be aware that the score you order may be one developed by the agencies themselves, like the TransUnion TransRisk New Account Score, Experian Plus or VantageScore. These are different than the FICO scores lenders generally use when they evaluate your loan applications. Myfico.com offers two reasonably priced options on its site. The $15.95 FICO Standard package (as of December 2008) gives you 30-day access to one FICO score and a credit report from one of the three major credit agencies. The $47.85 FICO Credit Complete package gives you 30-day access to your FICO scores and credit reports from all three major agencies. Myfico.com and other sites also offer services that monitor your score and report for a monthly fee (ranging from about $4.95 a month for myFico’s quarterly report to $6.65 a month for TransUnion’s Credit Monitoring Service).

Whether you need to monitor your credit that often is debatable. For most, a close look at the free annual reports from each bureau is probably enough. But if you plan to apply for a loan or credit card, check your score and report at least a couple of months beforehand. Not only will you be aware of how creditworthy you are, you’ll also have time to remove any errors you spot and make sure your score reflects the changes before you fill out any applications.

Freddie Mac

Freddie Mac, a publicly traded company that operates under a federal charter, is the nation’s second-largest mortgage buyer. Along with its larger rival, Fannie Mae, Freddie Mac was taken over by the federal government on Sept. 8, 2008, as it faced steepening losses, new questions about its accounting and a flight by investors.

Freddie Mac and Fannie Mae buy mortgages from lending institutions and then either holds them in investment portfolios or resells them as mortgage-backed securities to investors. The two companies play a vital role in providing financing for the housing markets.

As the housing market soured, both companies reported steep losses. But the mortgage meltdown also made the companies more important. When the credit markets seized up, Fannie and Freddie regained their central role in mortgage finance after losing significant market share to investment banks during the housing boom. They issued most of mortgage securities sold in the first half of 2008, after investors lost confidence in deals put together by big investment banks.

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In February 2008, federal regulators announced that they were easing some restrictions on lending by Fannie and Freddie. Then on March 19, the federal government announced that it was easing those restrictions in an effort to calm the turmoil afflicting the mortgage markets. Officials said the change could allow the two companies to invest $200 billion more in mortgages.

But on July 13, even as top officials continued to insist that the companies had adequate cash to weather the current financial storm, the Bush administration asked Congress to approve a sweeping rescue package that would empower officials to inject billions of federal dollars into the companies through investments and loans.

And the government did just that in early September, when the Treasury secretary, Henry M. Paulson Jr., announced the takeover of Fannie and Freddie after advisers poring over the companies’ books concluded that Freddie’s accounting methods had overstated its capital cushion. The move to place the companies into a conservatorship also grew out of concern among foreign investors that the companies’ debt might not be repaid.

The rescue represented an extraordinary federal intervention in private enterprise and could become one of the most expensive in history. The plan commits the government to provide as much as $100 billion to each company to backstop any shortfalls in capital. It enables the Treasury to ultimately buy the companies outright at little cost. It also eliminates dividend payments while protecting the principal and interest payments on the debt, now held by foreign central banks, financial institutions, pension funds and others. Eventually, under the plan, both companies will shrink their portfolios. In addition, the government plans to buy significant amounts of their mortgage-backed securities on the open market.