The bastards* at Standard & Poor’s that produce the Case-Shiller U.S. Home Price Index gleefully* announced yesterday that home prices have continued to drop. How much? The national average dropped 18% from the end of 2007 to the end of 2008.

That’s the largest drop in the index’s 21 year history. Nationally, we are now at 2003 price levels.

The markets that were hardest hit are as follows:

Phoenix————–34.0%
Las Vegas———— 33.0%
San Francisco——— 31.2%
Miami————— 28.8%
Los Angeles———-  26.4%
San Diego———— 24.8%
Tampa————–  22.0%
Detroit————– 21.7%
D.C.—————- 19.2%
Minneapolis———- 18.4%

WHAT DOES THIS MEAN FOR YOU?

For the record, by “you” I don’t mean all the sharks out there looking to buy distressed homes. There are already too many guys in Armani suits and perforated Italian shoes on the airwaves and the Net telling people they can get rich by taking advantage of distressed homeowners or buying foreclosed homes.

By “you” I’m referring to homeowners who are trying to pay off their mortgages and keep their homes.

The national average doesn’t mean much to you, since the only thing that matters is how much your home has dropped in value. And that number varies widely. For example, some markets like Dallas and Denver saw modest drops of 4%.

Moreover, within a city price drops vary by neighborhood. For example, in Los Angeles homes in less expensive neighborhoods have dropped by 50% from their peak, homes in middle class neighborhoods have dropped by 38%, and homes in expensive neighborhoods dropped 28%.

So, the best way to find out what your home is worth today isn’t to read about national trends in the newspaper. Instead, ask two of your local real estate agents to personally tour your home and give you an estimate. Alternatively, you can hire a professional appraiser. Either way, you will get more accurate information and can make informed decisions about what to do with your home.

*Okay, the Case-Shiller folks probably aren’t bastards, and there’s nothing to indicate they gleefully announced the drop in home values. Nevertheless, I’m noticing that some economists and statisticians, along with some renters, seem to be enjoying this housing meltdown a little bit too much.

“HOPE for Homeowners” is a federal lending program that was established in 2008 to much fanfare to help 400,000 homeowners refinance their mortgages to avoid foreclosure. So far, only 25 families have received home loans.

Meg Burns, HOPE’s Executive Director, claims that there are too many restrictions that prevent homeowners from qualifying.

Barney Frank (D-Mass.), Chairman of the House Financial Services Committee, claims that the program was flawed from the beginning, and will hold a vote today on a bill that would make it easier for homeowners to qualify for refinancing.

WHAT THIS MEANS FOR YOU

25 out of 400,000 is .00625 percent. That’s a pretty low success rate by anyone’s standards, even Uncle Sam’s.

How low? It’s the equivalent of getting 1 hit out of every 16,000 times at bat. It’s the equivalent of 4 inches out of a mile.

To say that this is a failed government program would be an understatement. You have to wonder how many taxpayer dollars went into setting up and running a program that was doomed to fail. What was the cost to us taxpayers on a per loan basis?

That said, I can understand how in the rush to pass legislation last year they choose a conservative path, albeit too conservative.

The fact that Congress is attempting to revise the program to loosen the standards is good news for you. Ms. Burns, who heads the residential housing programs at the Federal Housing Administration under HUD, seems committed to finding ways to make the program work.

This is part of a larger trend to help homeowners who are facing foreclosure. The legislation that was passed in 2007 and 2008 were steps in the right direction, but didn’t do enough fast enough. As we begin 2009 we expect to see existing plans reworked and new programs implemented.

If you are already in the foreclosure process these changes may be too little too late. If you are hanging on but worried about your ability to pay your mortgage in the future, then help may be on the way.

JP Morgan Chase & Co. announced on January 13 that it will expand its loan modification program to cover investor-owned mortgages.  The expansion affects $1.1 trillion in loans owned by groups of investors and serviced by Chase.  In some situations, Chase will need to obtain investor approval before modifications can occur.

In October 2008 Chase announced that it would work to modify mortgages on loans that it owned.  Since then, Chase has delayed foreclosure actions on more than 80,000 such loans.

By expanding the program to include investor-owned mortgages, MoneyHugger estimates that approximately 4 million additional homeowners may be covered under the program.  (Our estimate is based upon our calculation of Chase’s average mortgage amount.)

Chase stated that it has previously modified more than 300,000 loans.

WHAT THIS MEANS FOR YOU

This is a major development.  $1.1 trillion — that’s $1,100,000,000,000 for us civilians.  That’s a lot of zeros.

One of the big problems in the foreclosure fiasco is that the millions of loans are owned by investors, including foreign governments and financial institutions.  The companies servicing the loans, such as Chase, often lack legal authority to modify individual loans without investor approval.  Seeking approval from an investor on a loan-by-loan basis takes time and costs money.

It’s hard to see Bob Banker calling the Bank of Iceland to tell them that Johnny & Suzy Homeowner in Kokomo can’t afford their $1,500 a month mortgage because Johnny isn’t getting overtime anymore at the GM plant, but they can afford $1,000 a month, and the loan can be modified.  Then, the people at the Bank of Iceland have to analyze and approve each modification.  Now, multiply that process by 4 million.

I don’t see it happening fast enough.  It’s easier just to foreclose.

Interestingly, Chase has determined that in most cases it has a legal right to modify the loans WITHOUT the approval of the investors.  Chase’s attorneys reviewed their agreements with the investors and decided that in most cases they did not need investor approval after all.

This could potentially impact millions of homeowners.  You could be one of them.

On a macro level, this will put pressure on other servicing companies such as Indymac to expedite loan modifications on investor-owned loans as well.