The Justice Department gave a boost Tuesday to online real estate brokers - and potentially their clients - by forcing new industry policies that give Internet-based agents access to home listings they were previously denied.

The tentative settlement, which still requires court approval, could save consumers thousands of dollars when buying a home.

Online real estate agents often charge discounted commission fees and let buyers review listings at their own pace.

For years, however, Internet-based brokers have complained that the National Association of Realtors wanted to let real estate agents exclude some of their listings from their online competitors, many of whom offer discounted prices. More than 800 multiple listing services nationwide are affiliated with the Realtors group.

In a September 2005 lawsuit, government lawyers said such policies discriminated against online brokers. The settlement, filed in U.S. District Court in Chicago, opens the MLS databases to online and traditional residential property agents.

“It really does free brokers generally to engage in whatever they feel is the most efficient and effective way to compete,” Deputy Assistant Attorney General Deborah A. Garza of the Justice Department’s antitrust division told reporters.

She said the settlement “should lower the cost of the transaction for buying a house.”

While I believe that everyone has the right to make a decent buck, it’s hard to argue that the current default method of buying or selling a house benefits the buyer or seller in any way, which is a pretty unusual scenario in the free market system embraced in the US.

But with home prices falling and families losing their homes to foreclosure, some people who under other circumstances would be looking to buy their first home now see greater security in renting.

One such person is Lisa Chesnut, who lives in Tucson, Arizona, and works as an information systems coordinator. With a good job and two young sons, 29-year-old Chesnut and her husband, Bryan, look like classic first-time buyers.

They had considered it, until the market started to slide a year ago.

“At first we thought, prices are falling, that’s good,” she said in a phone interview.

“Then we started reading about the foreclosures and the ARM rates and people losing their homes,” she said. “We thought, what if something happened where we could lose our house?”

Her big fear is falling behind on a mortgage. Having read about people who face higher payments on their adjustable-rate mortgages (ARM), she realizes that being approved for a loan does not guarantee it will be affordable.

As a home owner three times over, I have to say that articles like that don’t exactly strike fear in my heart. Pretty much all of the evidence is anecdotal at best, based on conversations someone had with someone else, etc. And even the “hard” data isn’t that convincing, as far as rental turnover being basically flat and some mysterious 700,000-800,000 people who are neither renting nor buying.

The conclusion is a bit ironic, though, as far as recommending that people only consider buying if they plan on living in the home for at least five years, with dreams of big-time appreciation in just a year or two forever gone. To which I can only respond, “Good riddance”, as the expectation that one might see a substantial return in just a year or two from a home purchase is one of the key reasons we’re in the current mess we’re in right now.

Treasury Secretary Henry Paulson said Thursday that many proposals being put forward to deal with the housing slump would do more harm than good.
While he still believes that the housing problem remains the biggest downside risk to the economy, Paulson said the issue needed to be put in perspective. He said 93 percent of all mortgages are being paid on time and that less than 2 percent are in foreclosure.

“So while some in Washington are proposing big interventions, most of the proposals I’ve seen would do more harm than good,” the secretary said in remarks prepared for delivery Thursday night before the Economic Club of Chicago.

At the risk of sounding very Grinch-like, with a cold, shriveled heart, I have to say that I completely agree. With the media beating it’s doom and gloom drum as hard as it can, it’s easy to forget that amidst all the foreclosure talk we’re still only really talking about a tiny, tiny fraction of households and mortgages out there.

Bailout plans may be good for short-term pops in the stock market, but by and large they’re pretty much completely ineffective and more window dressing than anything. Until we get a widespread correction in prices and more transparency as far as the worst being behind us on the lender/debt side of things, any bailout plan that’ll be proposed is pretty much peeing in the wind.

The Mortgage Bankers Association in its quarterly snapshot of the mortgage market released Thursday said that the percentage of all mortgages nationwide that started the foreclosure process jumped to a record high of 0.78 percent during the July-to-September period. That surpassed the previous high of 0.65 percent set in the prior quarter.

The delinquency rate for all mortgages climbed to 5.59 percent in the third quarter. That was up from 5.12 percent in the second quarter and was the highest since 1986, the association said.

All signs point to things getting worse before they get better, so expect the next few quarters to continue to set more “record highs”.

News like this probably bolsters the arguments that mortgage bailout plans are necessary to keep the overall economy from sliding into a recession, but plenty of folks believe that attempts to stem the forecoslure tide are just sticking your finger in the dam.

I’m still a bit baffled that people seem to believe that we can have a wild speculative run-up in home prices throughout much of the country, reap those benefits (whee, money), yet somehow avoid the inevitable consequences when the correction comes (i.e. lots and lots of foreclosures).

Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.

Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes — as a way to make sure that the break is not granted to real estate speculators.

The administration plan is designed to deal with the crisis by allowing subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is occurring in many parts of the country.

With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.

Call me cynical, but I can’t help but view plans like this as political posturing, plain and simple. There are always going to be exceptions to the rule, but I’d hazard a guess that at least 50% of the people facing foreclosure due to ARMs resetting are also up to their eyeballs in consumer debt, and that the possibility of foreclosure isn’t a result of predatory lending but of their own inability to avoid the lure of using credit to spend money they don’t have.

Giving someone who can’t balance their spending or don’t have enough common sense not to buy a house they can’t afford a five year reprieve isn’t going to accomplish much in the end. And putting any faith in the fact that prices will rebound and shoot upwards again, producing enough equity in their home to refinance with ease is, at the very least, wildly optimistic, if not out and out crazy talk.