President Bush is expected to announce policy changes and recommendations today designed to help homeowners who were caught in the subprime disaster avoid default on their loans.

The President is expected to allow the Federal Housing Administration to guarantee loans for delinquent borrowers, which will enable those who are at least 90 days behind in payments but still living in their homes avoid foreclosure by refinancing at better interest rates, according to the Wall Street Journal.

Bush is also expected to announce an initiative with the Treasury and Dept. of Housing and Urban Development that will identify borrowers who are in danger of defaulting over the next two years and work with lenders and others to come up with more favorable loan products for these homeowners.

Today's announcements will mark the first time the administration has taken public actions to help curb a fallout from the collapse in subprime lending and the credit crunch that has occured as a result. Bush is also expected to discuss ways to prevent a similar collapse in the future.

Federal Reserve Chairman Ben Bernanke also spoke this morning on whether the central bank will make more short-term rate cuts in an attempt to lower borrowing costs. In his prepared remarks, Bernanke said the Fed "stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets," but he gave no hints that the agency intends to slash rates.

Bernanke also said: "It is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences of their financial decisions." But he followed that remark by saying that if the problem spread further the Fed would have to consider that as well.

Read Bernanke's prepared testimony here.

More from the Web:

Bush moves to aid homeowners (Wall Street Journal)
Bush to outline subprime mortgage initiative (Washington Post)
Bush to expand government role to deal with subprime (Bloomberg)

In case you're wondering how to keep the income rolling in during a slow real estate market ...

Tammy Wing Yan Tsui, 31, a Realtor for Macdonald Realty Westmar in Richmond, British Columbia, and her husband were arrested by the Royal Canadian Mounted Police and charged with growing marijuana for sale. The charges relate to a seizure of 1,126 marijuana plants from one home and 584 plants from an apartment.

A criminologist at the University College of the Fraser Valley who studies so-called "grow-ops" in British Columbia, said it's not surprising to see Realtors involved with grow-ups, according to a news report by Canada's The Province newspaper. "I would say they would know where most of the best properties are that could hold the grow. If you are a Realtor who is sort of connected to growers, you would also be mindful of what would be the most suitable property that would be exposed to the least likelihood of detection. Some Realtors seem to have a disproportionate number of grows related to their sales records."

In September 2006, Inman News reported that a mortgage broker in British Columbia was sentenced to a year in jail "for submitting forged documents with loan applications, some of which were used to buy homes that were used in indoor marijuana-growing operations"

Also that month, Inman News reported that Kevin Parker, a real estate agent with Prudential California Realty who was a "top producer" in 2005 at the company's Antioch office, reportedly had acted as a buyer's agent for 16 homes in the Sacramento, Calif., area that were allegedly converted for use in marijuana-growing operations. Parker had told a Sacramento-area news station that he was "shocked" to hear about drug raids at the homes and the homes' use in growing marijuana.

Federal Reserve Chairman Ben Bernanke has been careful not to say if he favors a cut in the federal funds rate when the Fed's Open Market Committee meets Sept. 18. It's a committee, and its members are supposed to cast their votes objectively, based on the latest economic data and not public pronouncements made in the days leading up to the meeting.

But when you hear what Bernanke had to say today at an economic symposium in Jackson Hole, Wyo., you might hesitate to place a bet on his support for such a move. After acknowledging the problems that the disruption of the mortgage lending industry has caused to housing markets, the Fed chair embarked on a history of the industry dating back to 1890.

It's well worth reading, but if you don't have time, the upshot is this: because most mortgage loans these days are securitized and sold to Wall Street investors -- rather than held in the portfolios of banks and other institutions -- the Fed's actions to influence short-term rates just aren't as crucial as they used to be.

With "a much-reduced role for deposits as a source of housing finance, the availability of mortgage credit today is generally less dependent on conditions in short-term money markets, where the central bank operates most directly," Bernanke said.

Not only that, but there's also less correlation between the housing cycle and the business cycle, Bernanke said -- meaning that a downturn in housing isn't automatically cause for alarm. The "sharp slowdown in housing has been accompanied, at least thus far, by relatively good performance in other sectors," the Fed chair pointed out.

Bernanke said plenty of other stuff that's been interpreted as an indication that he'll support a cut in the federal funds rate. Stocks are having a nice rally today on his speech, and also President Bush's new plan to help some subprime borrowers refinance out of risky ARM loans.

But neither Bernanke or his boss seem at all concerned about what happens to the investors who financed subprime loans, as long as there's no broader impact on the economy.

At a press conference announcing a plan to let the FHA insure refinance loans for delinquent borrowers, Bush said the government's role should be limited. A federal bailout of lenders, he said, "would only encourage a recurrence of the problem. It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford."

Here's how the press conference ended:

"Q: Sir, what about the hedge funds and banks that are overexposed on the sub-prime market? That's a bigger problem. Have you got a plan?

THE PRESIDENT: Thank you."

In concluding his speech, Bernanke said pretty much what he's been saying all along -- let the market take care of things.

"In recent months we have seen a reassessment of the problems of maintaining adequate monitoring and incentives in the lending process, with investors insisting on tighter underwriting standards and some large lenders pulling back from the use of brokers and other agents," Bernanke said. "We will not return to the days in which all mortgage lending was portfolio lending, but clearly the originate-to-distribute model will be modified -- is already being modified --  to provide stronger protection for investors and better incentives for originators to underwrite prudently."

While Bernanke might be right in the long run, there's also the chance that leaving the federal funds rate alone on Sept. 18 will unnerve investors, delaying the return of some semblance of normalcy to the mortgage lending industry.

In case you missed it - this week on InmanTV:

Landing good leads - today and tomorrow

Lead generation on the Internet is a hot topic these days as more Realtors look to the Web for new clients. Dave Wengel of TargusInfo discusses some of the ways agents can get leads, what good leads look like and where lead generation is heading in the future.

Konstantin Guericke was the co-founder of the popular social network LinkedIn and he joins InmanTV to talk about his latest project, Jaxtr.com - a web-based click to call widget you can embed on your web site or blog to connect your visitors directly to your telephone.

Teresa Boardman is a REALTOR® and licensed broker with Keller Williams Integrity Realty in St. Paul, Minnesota. She is the author of The St. Paul Real Estate Blog a “hyper local” blog that focuses on St. Paul and on real estate with hundreds of articles and more than a 1000 photos.

While the President today offered up fixes for some of the foreclosure problems resulting from the collapse in subprime mortgage lending, a UCLA professor took a deeper look at housing's role in the nation's economy and recessions.

Edward Leamer, a professor with UCLA Anderson School of Management presented his paper, "Housing and the Business Cycle" at the Federal Reserve Bank of Kansas City's annual Economic Symposium this morning in Jackson Hole, Wyo.

Leamer, who also serves as director of the well known UCLA Anderson Forecast, gives a starkly different view of housing's role in economic recessions. While many economists would say the economy is guided by business cycles, Leamer argues that the economy is guided by a consumer cycle that's driven especially by the ups and downs of housing.

He also argues that the Fed's opposing view of housing's role and its handling of interest rate cuts layed the foundation for today's problems.

"By neglecting the critical role that housing plays in U.S. recessions, our Federal Reserve has let our recessions be more frequent and more severe then they need to be," said Leamer. "In particular, the subprime mortgage crisis is a direct consequence of short-term interest rates held too low for too long by the Fed."

Leamer examines statistics back to World War II to highlight how weaknesses in housing and consumer durables make significant contributions to economic recessions.

More from his paper: "The historical record strongly suggests that in 2003 and 2004 we poured the foundation for a recession in 2007 or 2008 led by a collapse in housing we are currently experiencing. Only twice have we had this kind of housing collapse without a recession, in 1951 and in 1967, and both times the Department of Defense came to the rescue, because of the Korean War and the Vietnam War. We don't want that kind of rescue this time, do we?"

Some in the housing and financial industries are hoping the Fed will respond to current problems by lowering the federal funds rate, which can trigger lower borrowing rates for home buyers and stimulate housing activity. Leamer, however, concludes his paper by asking the Fed to do more.

Leamer would like to see the Fed:

--Smooth the business cycle.
--Keep us working productively.
--Limit the redistribution of wealth caused by financial market disruptions.
--Keep our balance sheets accurately reflecting reality.

Click here to read Leamer's full 73-page report.

And in case you missed the Bush Administration's first steps today -- catch up at this link, "Bush promises help for homeowners, but not lenders."

If the rooms are emptier at mortgage lending conferences this fall, that may be because those bodies have fled to default services or REO events.

A default servicing news publication says this week that its fourth annual conference on the topic has swollen to the largest number of attendees yet. Some 2,200 people are expected to trek to The Fivestar 2007 Default Servicing Conference in Dallas, Sept, 9-12.

What will the crowds be like at the Mortgage Bankers' and National Association of Realtors' annual conferences this fall? Neither group has said they expect low attendance, but slow markets could end up impacting turnout, up or down.

I won't be attending the MBA show in Boston in October -- I'm leaving that up to Matt Carter, who's done a fine job reporting on this mortgage mess. But I imagine the mood will be in stark contrast to the first MBA show I attended in 2003. That year, the underlying theme that emerged at the end of the week was no news is good news and all's well at this national mortgage party.

The most memorable piece of news that year was that the MBA had dropped "of America" from its name (formerly the group was called the Mortgage Bankers Association of America) to convey its mission to target "emerging markets," which was the industry's term for minorities and immigrant buyers. Oh, and they changed their logo.

News was so scarce that Fannie Mae cancelled its usual press conference for lack of anything to talk about. That was a year before Fannie got caught up in an investigation that found dicey accounting practices at the mortgage company.

It was kind of a bummer for a young reporter looking for story leads and exciting news to send back to the office. There wasn't a lot of new innovation because everyone was so buried in business in those days.

I'm certain this year will be quite different. With discussion topics like "What Is the Future of Subprime?" and "The buyback Epidemic: What's Fraud Got to Do With It?" there should be plenty of lively discussions and blog fodder for us to sort out.

Stay tuned for coverage of the event, Oct. 14-17.

And if you're planning to attend and cover in your blog, let us know so we can follow you.

Phoenician Properties Realty, a real estate company that caters to move-up buyers in the Phoenix area, was the fastest-growing residential real estate brokerage company and ranked 286th on the Inc. 5,000 list of the fastest-growing private companies. The company was seventh among fastest-growing companies in the real estate category. Phoenician Properties Realty, founded in 2001, had 2006 revenue of $8.8 million in 2006, compared to revenue of $897,241 in 2003, according to a report at Inc.com.

Ranking first in the real estate category and 20th overall was Noble Investment Group, a real estate firm founded in 1993 that had 2006 revenue of $54.9 million. The company "uses private equity financing from state pension funds, a university endowment and 12 company principals to purchase, develop and operate hotels."

Second on the real estate list and 53rd overall was Great American Title Agency, based in Phoenix, Ariz. This company, founded in 1998, had 2006 revenue of $8.8 million and 66 employees. The description states, "For six years, the company did strictly title work. When it added escrow services in 2004 it was able to get an even bigger piece of Phoenix's housing boom. Now that the market has slowed, growth is again coming from the title side of the business -- especially in the foreclosure market."

Highland Homes of St. Louis, Mo., which specializes in building and selling "environmentally friendly" condos and homes, ranked eighth among fastest-growing real estate companies.

City Financial Home Loans of Pompano Beach, Fla., ranked 15th in the real estate category and First Madison Mortgage of Rockville, Md., ranked 16th. City Financial Home Loans specializes in "nationwide mortgage refinancing of loans averaging $250,000 for residential and commercial properties, helping subprime borrowers with blemished credits obtain financing," according to the Inc.com report. "While more than 100 banks nationwide have gone out of business in the past five months, the Florida-based company has expanded by opening a title company and consolidating its number of employees."

Francisco Linares, a Rolling Hills Estates, Calif., homeowner, is being jailed 1 day for each foot of illegal fencing he erected around his property. Since the fence is 180 feet long, that equals 6 months in prison. It's not even a new fence, but replaces an older fence that was on the property when he bought it. 

Two and a half years ago, officials filed misdemeanor charges against Linares, alleging that he had refused to tear down remove the offending fence, that he had erected a too-tall retaining wall and that his stone columns just don't fit in. 

They gave him time to get the proper permits or tear down the offending structures, neither of which he did, and now Linares faces six months behind bars, starting September 10th.

Building a Fence is His Big Offense / L.A.Times

If subprime lending represents only about 13 percent of the $10.4 trillion U.S. mortgage market, and only 5 percent of subprime loans totaling $67 billion in loans are in foreclosure, what's the big deal? At least half those losses will be recovered when foreclosed properties are sold, so we're looking at losses of maybe $34 billion -- or less then 1 percent of the total market. The problems in subprime lending are playing havoc with the stock market in a way that's out of proportion to their real impact on the economy.

That's the argument economist Ben Stein made in an Aug. 12 New York Times column (watch him delivering the same message the following week on CBS Sunday Morning).

Mortgage broker and columnist Peter G. Miller offers a more in-depth analysis on DS News today, explaining how the use of derivatives can greatly magnify these losses for hedge funds and other investors.

Hedge funds -- and just about everybody with large amounts of capital to invest, including mortgage lenders -- use derivatives to manage risk. These are essentially bets, which companies cover like sports bookies. Interest rate and credit default swaps, for example, allow lenders to share risk (and potential profits) with others.

Whatever the outcome all their bets, their losses and gains on various derivates are supposed to balance out -- or leave them ahead of the game. Computer models can also be used to exploit tiny anomalies in the marketplace, Miller notes, allowing profits to be wrung out of what started out as a risk hedging strategy.

But derivatives are highly leveraged, meaning that a hedge fund like the infamous Long-Term Capital Management was, at the beginning of 1998, able to hold derivative contracts worth $1.3 trillion with just $4.8 billion in capital, Miller explains.

"If one hedge fund with $4.8 billion in capital can hold derivative contracts worth $1.3 trillion, then how much is held by 8,500 hedge funds as well as other investors?" Miller asks. "The worry is that huge investors have borrowed from banks and other financial sources and then placed many of their leveraged bets on the movement of mortgage-backed securities. With a growing volume of foreclosures the value of mortgage-backed securities are less than they were six months or a year ago, meaning once-profitable computer models are no longer on target."

The real fear among investors, RealtyTrac.com CEO Jim Saccacio tells Miller, "is not so much that we're having a subprime debacle, rather it's that rising foreclosure levels throughout the U.S. mortgage system will set in motion a series of bigger problems in related financial  instruments."

A team of RE/MAX real estate agents in the Greater Washington, D.C., area have launched a new Web site, HomeZill.com, that offers to refund to buyers up to two-thirds of a traditional 3 percent commission that is received on the buyer's side of a real estate transaction.

David Dowies, a Realtor with RE/MAX Choice in Fairfax, Va., who is also CEO and founder of HomeZill, said the site launched on Aug. 23 and is targeting tech-savvy Gen-X and Gen-Y consumers who prefer to perform the bulk of the home search on their own.

"More and more consumers and home buyers are able to find their property online," he said, even before they contact a real estate professional.

The site taps into MLS property information from the regional Metropolitan Regional Information Systems (MRIS) MLS, and the site also features a unique database of new-construction properties.

The URL for the Web site is intended to be catchy but doesn't have any meaning and doesn't have anything to do with Zillow, Dowies said.