While Congress deliberates on the future of the nation’s mortgage market, some within the government are calling for restraint in regulatory reform. Housingwire.com reports William Emmons, an economist at the St. Louis Fed, is calling for patience and social support as the clearest way to economic recovery.

Emmons makes the argument that government intervention, particularly measures aimed at postponing or eliminating the foreclosure process, will only serve to further tighten the credit crunch that already holds the nation’s economy in its teeth. Instead, he believes Federal funds and regulations should be aimed at helping foreclosed homeowners recover from their unsuccessful forays into homeownership. By focusing on the “cause,” rather than the “symptoms” of our current economic woes, and by allowing markets to sort themselves out, Emmons argues prudent, forward-looking regulatory reforms offer us the fastest route to economic health.

Whatever your opinion on upcoming regulatory reforms, it is clear the actions of the government in the coming months will have a massive impact on housing markets and the economy as a whole. Reforms that promote a healthy and functioning mortgage market while protecting borrowers from the types of abuses so prevalent during the boom will allow investors and homeowners alike to make the right choices in the coming years.

In further evidence of the ongoing credit contraction, Mortgagedaily.com reports Lehman Brothers is shuttering its Small Business Finance unit. The division made small commercial mortgage loans to individuals and corporations. The closure is the latest in Lehman’s efforts to shrink its mortgage business and reduce exposure to the US housing market.

Lenders everywhere are reducing access to credit, even as struggling consumers need it most to make ends meet. As banks and other financial companies delever, credit-dependent Americans will find it harder and harder to maintain their spend-happy ways.

Click here for details on this House of the Day

Value: $120,000
Projection: Depreciating

Stockton is arguably the most publicized declining real estate market in the United States. Foreclosure and REO (Real Estate Owner, or Bank Owned) activity is very high, and values have declined precipitously in the past 12 months. The subject’s neighborhood itself is aging, with many new developments in the vicinity providing an alternative to these older homes.

The subject property has not been immune to these declines and is further hampered by its location on a major four-lane street on the Northeast side of the city. This section of the city is dominated by 2 bedroom, 1 bathroom properties, compared to the property’s 3 bedrooms, 1.5 baths.

1901 Bradford Ave sold in January for $105,000, but is inferior to the subject based on its smaller lot and one fewer bedrooms. 1220 Sycamore St sold in April for $150,000 but is superior to the subject based on location and curb appeal.

1240 Wilson St is currently listed at $109,900 but is inferior to the subject based on its larger lot size.

The subject has bars and windows on its doors, reducing curb appeal and forcing us to be more conservative than normal. We value the property at $120,000 to reflect a middle ground between the two sales listed above, erring on the side of caution.

This morning’s property’s is located in Stockton, CA — what more needs to be said? Guess the value by adding a comment at the bottom of this post.

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Home Details:
- 1740 West Lane, Stockton, CA 95205
- 3 bedrooms
- 1.5 bathrooms
- 1,224 square feet
- 0.23 acres
- Built in 1951
- Recent sale: 4/6/06 for $300,000

“This 1/4 lot with a huge backyard w/ alley access. RV access and storage. Must see!! Do not disturb occupants – sold as is, sellers not providing any reports or clearances.”

Good luck!

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From time to time, Cirios Real Estate posts a home listed in California as its “House of the Day.” We then post a valuation assessment completed by our team of property value experts. We encourage our readers to post comments and participate in a discussion about the home’s value.

Cirios Real Estate has no buying or selling interest in any of the homes we evaluate, they are posted here for the benefit of our community. This analysis is a broker’s opinion of value and is not to be construed as an appraisal.

Click here for details on this House of the Day

Value: $250,000
Projection: Depreciating

Fallbrook is located in Eastern San Diego County, just south of Temecula along Interstate 5. The city and the surrounding area are being adversely effected by the economic slowdown, as much of the growth in the area was due to new home construction. High gas prices are also weighing on consumer spending in an area dominated by commuters. As a result, home prices have fallen dramatically from their peak in late 2005 and continue to fall.

Our property is centrally located, making it more desirable than those on the outskirts of town. There are, however, many listings in the subject’s immediate vicinity. The property also requires some “TLC,” which indicates its condition is likely inferior to its neighbors. Listings in the area range from $273,900 – $549,000. Only three properties have sold in the area since April 15th, all of which are superior in quality to the subject.

515 Shady Glen road – aside from having a suspect address – is a similarly sized home, but in turn key condition. It sold for $265,000 on 6/19/08. The subject is on a slightly larger lot, but the inferior condition, combined with the weak local economy, high gas prices and an oversupply of houses place the value of the subject property at $250,000. Further declines are likely in the near future.

The real estate and mortgage industries are busy battening down the hatches for the inevitable tidal wave of regulatory reform. Meanwhile, Housingwire.com reports government officials are already hard at work trying to outdo each other as the protector of the “everyday common household victim” of our “national crisis.”

Two illustrative examples of regulatory restructuring have been rolled out in last two months. In New York State, legislators passed a series of measures essentially placing a one-year moratorium on foreclosures. Under the program, borrowers already in default will pay a nominal monthly sum and be eligible for state funds to supplement existing mortgage obligations.

In California, lawmakers passed legislation that would require more extensive notification for delinquent borrowers before the foreclosure process can begin. Homeowners would be entitled to meetings with servicers to learn their restructuring options, placing a greater onus of responsibility on servicers to reach out to borrowers prior to beginning foreclosure proceedings.

Both measures are designed to ease pressures on distressed borrowers, but the New York plans go well beyond those in California. The California laws are designed to ensure increased communication between borrower and lender. The New York law is designed to put a halt to the process of foreclosure, presumably to await more extensive reforms or bailout plans still to come.

In both states, these measures mark the tip of the iceberg in the process of reforming regulatory frameworks for mortgage lending. In this election year, public support is swelling for pieces of legislation like these and even larger moves are likely on their way.

The challenge for regulators — and the lobbyists so generously pleading their case — is to enact rules and enforcement schemes that prevent fraud and predatory lending, without being too constrictive to legitimate business. Many such rules already exist; it remains to be seen if the fallout from the collapse of the mortgage industry can convince regulators to enforce their own rules.

Click here for the results of this House of the Day

This morning’s House of the Day is located in the inland hamlet of Fallbrook, CA. Guess the value by adding a comment to this post.

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Home Details:
- 968 La Vonne Ave, Fallbrook, CA 92028
- 3 Bedrooms
- 2 Bathrooms
- 1,755 square feet
- 0.23 acres
- Built in 1982

“Located at the end of cul-de-sac, quiet street, close to village but far enough with country feel. Open floor plan. Master bedroom has large walk-in closet and spacious bath. Lots of potential, needs some TLC. This is a great buy for a first time buyer. Bank owned.”

The Cirios Real Estate Zip Code Report can be found by clicking the image below.

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From time to time, Cirios Real Estate posts a home listed in California as its “House of the Day.” We then post a valuation assessment completed by our team of property value experts. We encourage our readers to post comments and participate in a discussion about the home’s value.

Cirios Real Estate has no buying or selling interest in any of the homes we evaluate, they are posted here for the benefit of our community. This analysis is a broker’s opinion of value and is not to be construed as an appraisal.