What is happening with Mortgage interest Rates and how does it affect me?
Freddie Mac said Thursday the average rate on a 30-year fixed mortgage rose again this week. After hitting a 40-year low in November, the average interest rate on a 30 year fixed mortgage has risen almost 16%.
Why?
After falling for 7 months in a row, mortgage interest rates are rising because investors are shifting money out of Treasury bonds and into stocks largely on the expectation that the tax-cut plan approved by the U.S. Congress and a recovering economy will spur growth and potentially higher inflation. As investors flee treasury bonds, the U.S. Treasury has to raise the yield on its bonds to attract investors back who are selling their bonds and buying stocks hoping to cash in on the higher returns that stocks offer. Since mortgage rates are heavily tied to the 10-year Treasury note, that means that as the Treasury raises the yield on its bonds…it’s byproduct is higher mortgage interest rates.
Since most of the financial indicators are pointing to increased productivity and profitability in U.S. companies, this data lends weight to the idea opinion that the economy is recovering. Even in our own financially depressed market in the Central Valley we are beginning to see new signs of life as more businesses are having “Grand Openings” than at any time in the last 3 years. Over the last 3 years, the U.S. Government has been using our own tax dollars and “borrowed money” called “stimulus” money to purchase its own bonds in the effort to keep yields low and as such…keeping mortgage interest rates artificially low as they are tied so closely to the Treasury yield.
As the need for stimulus weigns, the U.S. Government will stop buying treasury bonds, just as they stopped buying Mortgage Backed Securities earlier this year and that will cause interest rates to return to rate that is supported by normal economic activity. The last time interest rates were left to the free-market, rates were in the mid 6% range.
What does that mean for the home buyer?
It means simply that if the economy continues to improve, interest rates will continue to rise. Since higher interest rates mean higher monthly payments, this means that the cost of home ownership will be going up if the economy continues to improve. What will be impacted the most with rising interest rates will be the amount that a borrower can spend on a house. Since borrowers are limited to roughly half of their gross income for housing expenses, credit card bills and installment loans, the higher the interest rate, the less money a borrower can afford. If a consumer can borrower less money because the payment on the borrowed money is higher, they will have less money to spend on a house. This means simply that if you wait to purchase a home until interest rates are higher, you will be buying a smaller house or a house that is in worse condition.
Now that you are armed with the understanding of what is happening, why it is happening and what may be in the future as far as interest rates go, it is time to give consideration to how you should proceed. If you have questions or would like to discuss your situation further, feel free to contact me, I'd be happy to discuss your plans with you.
Thursday, December 30, 2010
Monday, December 13, 2010
Case-Shiller's Index declined 2% in 3rd Quarter of 2010
New York, November 30, 2010 – Data through September 2010, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined 2.0% in the third quarter of 2010, after having risen 4.7% in the second quarter. Nationally, home prices are 1.5% below their year-earlier levels. While housing prices are still above their spring 2009 lows, the end of the tax incentives and still active foreclosures appear to be weighing down the market.
Modesto as Investment Opportunity - Money Magazine
Money Magazine (Sept 2010) has highlighted Modesto as one of the smarter investment opportunites. They estimate that prices have dropped 61% since their peak and estimate a good five year forecast of appreciation of 34% for single-family homes. Whether it be a rental property or a home for yourself it remains to be a great time to purchase. Please contact me at tcreKevin@gmail.com with any questions that you might have.
Tuesday, November 23, 2010
Existing home sales slightly down
NEW YORK (CNNMoney.com) -- Following a couple of months of gains, sales of existing homes retreated again in October, an industry report said Tuesday.
The National Association of Realtors reported that the number of homes sold fell 2.2% from September to an annual rate of 4.43 million. The rate was down 25.9% from 12 months earlier.
The report came in just about at expectations. A consensus of experts surveyed by Briefing.com had forecast an annualized sales rate of 4.42 million.
"The housing market is experiencing an uneven recovery," said Lawrence Yun, NAR's chief economist. "Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels."
Most (and least) affordable cities to buy a home
Home sales have been slow despite some of the best buying conditions in many years: interest rates near 4% for 30-year fixed-rate loans, the most affordable home prices in many years and a wide choice of homes available for house hunters.
The median price of all existing homes sold during the month was $170,500, down 0.9% compared with 12 months earlier. About a third of the market was in distressed properties, repossessed homes and short sales.
Mike Larson, a housing market analyst for Weiss Research, said that positive and negative forces have been offsetting each other, leaving a market in limbo.
"You have low home prices and interest rates on the one hand, but trouble getting financing on the other," he said. "And unemployment remains stubbornly high."
The struggling economy certainly has dampened housing market performance, with unemployment well above 9% nationally. The job outlook seems to have brightened a bit lately.
(to read the full article - http://money.cnn.com/2010/11/23/real_estate/home_sales_slow/index.htm
The National Association of Realtors reported that the number of homes sold fell 2.2% from September to an annual rate of 4.43 million. The rate was down 25.9% from 12 months earlier.
The report came in just about at expectations. A consensus of experts surveyed by Briefing.com had forecast an annualized sales rate of 4.42 million.
"The housing market is experiencing an uneven recovery," said Lawrence Yun, NAR's chief economist. "Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels."
Most (and least) affordable cities to buy a home
Home sales have been slow despite some of the best buying conditions in many years: interest rates near 4% for 30-year fixed-rate loans, the most affordable home prices in many years and a wide choice of homes available for house hunters.
The median price of all existing homes sold during the month was $170,500, down 0.9% compared with 12 months earlier. About a third of the market was in distressed properties, repossessed homes and short sales.
Mike Larson, a housing market analyst for Weiss Research, said that positive and negative forces have been offsetting each other, leaving a market in limbo.
"You have low home prices and interest rates on the one hand, but trouble getting financing on the other," he said. "And unemployment remains stubbornly high."
The struggling economy certainly has dampened housing market performance, with unemployment well above 9% nationally. The job outlook seems to have brightened a bit lately.
(to read the full article - http://money.cnn.com/2010/11/23/real_estate/home_sales_slow/index.htm
Monday, October 25, 2010
Market Update
The supply of homes rose in August but remains lean by historic standards and is responsible for the price gains of the past several months. The MLS-based unsold inventory index rose from 4.6 months supply a year ago to 6.1 months supply in August 2010. Calculated as the ratio of listings to sales for a given month, the unsold inventory index rose mainly because of the slowdown in sales in the aftermath of expiring homebuyer tax credits, but there was also an uptick in the number of listings. Sales in the first half of the year averaged 520,200 homes, but “borrowed” from the second half of the year, resulting in a July sales figure of 439,680 homes, with slight improvement in August to 447,530 sales. Since late 2007, California home sales have consistently exceeded the trough level of 255,000 homes that was experienced in September and October 2007.
Concerns about the housing market and the general economy abound in the news. U.S. sales of homes stalled out at new lows for this cycle in July and August and the supply of homes nationally is nearly double that of California. While the housing sector is an important cog in the economy in its own right, it also plays an important role in transmitting the effects of monetary policy actions into the consumer economy. In other words, policy makers know that if they can spur activity in housing, the rest of the economy should also pick up.
What does that mean for consumers and prospective home buyers in particular? Efforts by the Federal Reserve Bank to reduce long term rates in the coming months should result in historically low mortgage rates. With the median price in California back to 2002 levels, affordability will be at record-high levels over the foreseeable future. For those households that are in a position to buy a home, the coming months will offer a rare opportunity to get the most for their money by buying, whether as first-time buyers or trade-up homeowners. Their actions will also give the economy a much needed boost and contribute to general economic recovery. So as it turns out, what’s good for home buyers is also good for the economy.
(excerpt from http://www.car.org/marketdata/trendsarchives/markettrendsseptember2010/)
Concerns about the housing market and the general economy abound in the news. U.S. sales of homes stalled out at new lows for this cycle in July and August and the supply of homes nationally is nearly double that of California. While the housing sector is an important cog in the economy in its own right, it also plays an important role in transmitting the effects of monetary policy actions into the consumer economy. In other words, policy makers know that if they can spur activity in housing, the rest of the economy should also pick up.
What does that mean for consumers and prospective home buyers in particular? Efforts by the Federal Reserve Bank to reduce long term rates in the coming months should result in historically low mortgage rates. With the median price in California back to 2002 levels, affordability will be at record-high levels over the foreseeable future. For those households that are in a position to buy a home, the coming months will offer a rare opportunity to get the most for their money by buying, whether as first-time buyers or trade-up homeowners. Their actions will also give the economy a much needed boost and contribute to general economic recovery. So as it turns out, what’s good for home buyers is also good for the economy.
(excerpt from http://www.car.org/marketdata/trendsarchives/markettrendsseptember2010/)
Thursday, October 21, 2010
Mortgage Rates Inch Up
Fixed rates on home loans edged higher this week after three weeks of declines, Freddie Mac said in its latest survey.
Lenders told the big mortgage finance company that they were offering 30-year fixed rate mortgages at an average of 4.21% to well-qualified borrowers who paid 0.8% of the loan amount in upfront lender fees and discount points.
That was up from 4.19% the previous week, which Freddie said was the lowest long-term mortgage rate since 1951. A year ago, the average rate in the survey was an even 5%.
Lenders told the big mortgage finance company that they were offering 30-year fixed rate mortgages at an average of 4.21% to well-qualified borrowers who paid 0.8% of the loan amount in upfront lender fees and discount points.
That was up from 4.19% the previous week, which Freddie said was the lowest long-term mortgage rate since 1951. A year ago, the average rate in the survey was an even 5%.
Monday, October 4, 2010
Private Transfer Fees
Congress may soon weigh in on a controversial technique for financing the capital costs of new housing developments, with Rep. Maxine Waters, D-Calif., introducing legislation that would prohibit the collection of private transfer fees on all federally related mortgage loans.
The Federal Housing Administration has already said it won't insure loans encumbered by private transfer fees, and federal regulators have started a formal process that would ban Fannie Mae, Freddie Mac and the Federal Home Loan Banks from investing in loans backed by homes that carry the fees.
Private transfer fee covenants typically allow a third party, such as a developer, to collect a fee equal to 1 percent of a property's sale price every time its sold. The covenants are often in place for as long as 99 years.
The Federal Housing Administration has already said it won't insure loans encumbered by private transfer fees, and federal regulators have started a formal process that would ban Fannie Mae, Freddie Mac and the Federal Home Loan Banks from investing in loans backed by homes that carry the fees.
Private transfer fee covenants typically allow a third party, such as a developer, to collect a fee equal to 1 percent of a property's sale price every time its sold. The covenants are often in place for as long as 99 years.
Saturday, September 18, 2010
August sales and price report
California home sales edged up 1.8 percent from July, but were down 14.9 percent from August 2009, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported. The statewide median home price also increased 1.2 percent from July and was up 8.6 percent from a year ago.
“Buyers who are holding out should consider the opportunities in today’s market,” said C.A.R. President Steve Goddard. “Favorable home prices and interest rates at or near historic lows make housing affordability the best in recent memory. Anyone who is in a position to buy a home should do so before either of these key factors rise.”
Closed escrow sales of existing, single-family detached homes in California totaled 447,530 in August at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 14.9 percent from the revised 526,110 sales pace recorded in August 2009. Sales in August 2010 increased 1.8 percent compared with July.
“Buyers who are holding out should consider the opportunities in today’s market,” said C.A.R. President Steve Goddard. “Favorable home prices and interest rates at or near historic lows make housing affordability the best in recent memory. Anyone who is in a position to buy a home should do so before either of these key factors rise.”
Closed escrow sales of existing, single-family detached homes in California totaled 447,530 in August at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 14.9 percent from the revised 526,110 sales pace recorded in August 2009. Sales in August 2010 increased 1.8 percent compared with July.
Wednesday, September 1, 2010
FHA to Raise Monthly Insurance Premiums by over 63%
FHA Gives Home Buyers One-Month Window
September 1, 2010--The Federal Housing Administration (FHA) is giving homeowners and buyers until October 4 to lock in a low monthly insurance premium, according to Gibran Nicholas, chairman of the CMPS Institute, an organization that trains and certifies mortgage bankers and brokers. “After October 4, the monthly insurance premiums on FHA loans will increase by over 63%.”
What does this mean for home buyers?
A home buyer purchasing a $200,000 home using a $193,000 FHA mortgage before October 4 would pay an insurance premium of $88.46 per month. If the same home buyer waits until after October 4, the insurance premium would jump to $148.01.
“In this example, the home buyer would lose $59.55 per month, or $7,146 over a 10-year timeframe,” Nicholas said. “Although the upfront mortgage insurance premium is going down after October 4, the real impact to the home buyer is actually a net increase in their out of pocket costs because the monthly premium is going up by 63%. Remember, sellers can pay the upfront premium or it can be financed into the loan amount, so homebuyers rarely pay the upfront premium out of pocket. On the other hand, the increase in the monthly premiums will be paid right out of the home buyer’s pocket with their mortgage payment each month.”
September 1, 2010--The Federal Housing Administration (FHA) is giving homeowners and buyers until October 4 to lock in a low monthly insurance premium, according to Gibran Nicholas, chairman of the CMPS Institute, an organization that trains and certifies mortgage bankers and brokers. “After October 4, the monthly insurance premiums on FHA loans will increase by over 63%.”
What does this mean for home buyers?
A home buyer purchasing a $200,000 home using a $193,000 FHA mortgage before October 4 would pay an insurance premium of $88.46 per month. If the same home buyer waits until after October 4, the insurance premium would jump to $148.01.
“In this example, the home buyer would lose $59.55 per month, or $7,146 over a 10-year timeframe,” Nicholas said. “Although the upfront mortgage insurance premium is going down after October 4, the real impact to the home buyer is actually a net increase in their out of pocket costs because the monthly premium is going up by 63%. Remember, sellers can pay the upfront premium or it can be financed into the loan amount, so homebuyers rarely pay the upfront premium out of pocket. On the other hand, the increase in the monthly premiums will be paid right out of the home buyer’s pocket with their mortgage payment each month.”
Wednesday, August 25, 2010
Refi Protection for Purchase Money Debt
LOS ANGELES (Aug. 19) – The California State Assembly today approved SB 1178 (D-Corbett) by a 49 to 14 vote, extending anti-deficiency protection for consumers who have refinanced their original mortgage loans and now are facing foreclosure. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) is the sponsor of the consumer-protection legislation.
Under existing law, if a homeowner defaults on a mortgage used to purchase a home—commonly referred to as a “purchase money mortgage”—the homeowner's liability on the mortgage is limited to the property itself. However, homeowners who refinanced the original purchase debt, even if only to obtain a lower interest rate, were not extended the same protections. SB 1178 corrects this unfairness and extends the same protections to consumers who refinance their home loans.
“Cash-out” debt for home improvement or consumer expenses is not protected by SB 1178. Similarly, additional new debt secured by the home, such as a home improvement loan, is not protected—only original acquisition debt.
“Today’s vote was a victory for homeowners in California, but the fight is not yet finished,” said C.A.R. President Steve Goddard. “We are urging Gov. Schwarzenegger to swiftly sign into law this crucial piece of legislation. Passage of SB 1178 will ensure lenders underwrite refinance loans at least as carefully as purchase money mortgages and will provide much-needed consumer protection.”
SB 1178 now moves to Gov. Schwarzenegger for his signature. If signed, SB 1178 will become effective June 2011.
Under existing law, if a homeowner defaults on a mortgage used to purchase a home—commonly referred to as a “purchase money mortgage”—the homeowner's liability on the mortgage is limited to the property itself. However, homeowners who refinanced the original purchase debt, even if only to obtain a lower interest rate, were not extended the same protections. SB 1178 corrects this unfairness and extends the same protections to consumers who refinance their home loans.
“Cash-out” debt for home improvement or consumer expenses is not protected by SB 1178. Similarly, additional new debt secured by the home, such as a home improvement loan, is not protected—only original acquisition debt.
“Today’s vote was a victory for homeowners in California, but the fight is not yet finished,” said C.A.R. President Steve Goddard. “We are urging Gov. Schwarzenegger to swiftly sign into law this crucial piece of legislation. Passage of SB 1178 will ensure lenders underwrite refinance loans at least as carefully as purchase money mortgages and will provide much-needed consumer protection.”
SB 1178 now moves to Gov. Schwarzenegger for his signature. If signed, SB 1178 will become effective June 2011.
Thursday, August 12, 2010
Friday, August 6, 2010
5 Good Reasons to Buy NOW.
1)Low mortgage rates serve as an equity shock absorber. When buyers borrow at today's record-low rates they start building equity as soon as they close. That means they can absorb a few ups and downs as the still-recovering housing market gains traction.
2)Houses are in move-in condition. Many homes are available where home owners have continued to spend on maintenance and repair.
3)Terrific houses are coming on the market. Foreclosures are finally starting to clear the system, and they are being replaced by some very attractive properties.
4)Appraisal regulations are finally beginning to align with market conditions. Fannie Mae has adjusted its appraisal guidelines, giving appraisers more flexibility to set values that reflect the market more accurately.
5)Plenty of programs. Many programs, like FHA loans, that encourage middle-class families to buy homes continue to exist, despite market downturns.
2)Houses are in move-in condition. Many homes are available where home owners have continued to spend on maintenance and repair.
3)Terrific houses are coming on the market. Foreclosures are finally starting to clear the system, and they are being replaced by some very attractive properties.
4)Appraisal regulations are finally beginning to align with market conditions. Fannie Mae has adjusted its appraisal guidelines, giving appraisers more flexibility to set values that reflect the market more accurately.
5)Plenty of programs. Many programs, like FHA loans, that encourage middle-class families to buy homes continue to exist, despite market downturns.
Saturday, July 24, 2010
Top 10 "Don'ts" During Your Home Purchase
Leading nationwide credit expert and President of Credit Resource Corporation, Linda Ferrari, developed the top 10 credit don'ts during the loan process, to help you get your arms around those things that can unknowingly wreak havoc on your loan transaction.
1. Don't do anything that will cause a red flag to be raised by the scoring system (i.e. big purchases, atypical spending patterns, etc)
2. Don't apply for new credit of any kind
3. Don't pay off collections or charge offs
4. Don't max out or over charge on your credit card accounts
5. Don't consolidate your debt onto 1 or 2 credit cards
6. Don't close credit card accounts
7. Don't pay late
8. Don't allow any accounts to run past due-even one day!
9. Don't dispute anything on your credit report
10. Don't lose contact with your mortgage and real estate professionals
Please contact me anytime if I can help you...I'm happy to hear from you!
1. Don't do anything that will cause a red flag to be raised by the scoring system (i.e. big purchases, atypical spending patterns, etc)
2. Don't apply for new credit of any kind
3. Don't pay off collections or charge offs
4. Don't max out or over charge on your credit card accounts
5. Don't consolidate your debt onto 1 or 2 credit cards
6. Don't close credit card accounts
7. Don't pay late
8. Don't allow any accounts to run past due-even one day!
9. Don't dispute anything on your credit report
10. Don't lose contact with your mortgage and real estate professionals
Please contact me anytime if I can help you...I'm happy to hear from you!
Thursday, July 22, 2010
Accurate Pricing For Sale
Accurately pricing a home for sale continues to be one of the most important factors in determining whether a home sells or lingers on the market. In some cases, sellers may need to reduce their asking price to attract buyers and offers. Some homeowners may struggle with determining whether or not they should reduce their list price. Receiving the guidance of a REALTOR® may help sellers decide if they should reduce the asking price. Sellers also may want to consider reducing their asking price if the following applies:
The sales prices of recently sold homes in the area are
lower than the list price of the home listed for sale.
Feedback from buyers’ agents suggests the home is
overpriced.
The home isn’t receiving any showings, even though it is
well marketed.
There have been multiple offers, but they consistently have
been significantly lower than the list price.
The sales prices of recently sold homes in the area are
lower than the list price of the home listed for sale.
Feedback from buyers’ agents suggests the home is
overpriced.
The home isn’t receiving any showings, even though it is
well marketed.
There have been multiple offers, but they consistently have
been significantly lower than the list price.
Monday, July 12, 2010
Closing Deadline Extended for Federal Credit
President Obama signed a bill extending the closing deadline for the federal home buyer tax credit to Sept. 30, 2010. The bill is retroactive and covers the lapse period from June 30, 2010 to the date of enactment of the extension. Congress passed the bill earlier this week.
Nearly 180,000 home buyers would have missed out on the tax credit had Congress and the president not taken action to extend the deadline to close escrow. Estimates from NAR show as many as 17,700 home buyers in California would not have received the tax credit without the extension.
Nearly 180,000 home buyers would have missed out on the tax credit had Congress and the president not taken action to extend the deadline to close escrow. Estimates from NAR show as many as 17,700 home buyers in California would not have received the tax credit without the extension.
Friday, July 2, 2010
Pending Home Sales Drop as Expected
Following a surge driven by the home buyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to the NATIONAL ASSOCIATION OF REALTORS®.
The Pending Home Sales Index, a forward-looking indicator, dropped 30.0 percent to 77.6 based on contracts signed in May from a reading of 110.9 in April, and is 15.9 percent below May 2009 when it was 92.3. The falloff comes on the heels of three strong monthly gains as home buyers rushed to take advantage of the tax credit.
Yun noted the tax credit has broadly stabilized home prices. “Without the tax credit, there will be more aggressive price negotiations between buyers and sellers. The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year. We’ll also keep a close eye on market conditions on the Gulf Coast.”
Through May of this year 495,000 net private sector jobs have been created; NAR’s forecast for employment growth is about 1 million additional net new jobs over the balance of the year and another 2 million in 2011.
“If jobs come back as expected, the pace of home sales should pick up later this year and reach a sustainable level of activity given very favorable affordability conditions,” Yun said.
“In most areas of the country there will be no sharp snap back in home prices in the upcoming years, although some local markets have experienced double-digit gains this year,” Yun said. NAR forecasts the national median home price to rise only 4 percent cumulatively over the next two years.
“One factor that could lead to price acceleration in upcoming years for some markets is if the very low levels of new-home construction were to persist for another year or two,” he added.
The Pending Home Sales Index, a forward-looking indicator, dropped 30.0 percent to 77.6 based on contracts signed in May from a reading of 110.9 in April, and is 15.9 percent below May 2009 when it was 92.3. The falloff comes on the heels of three strong monthly gains as home buyers rushed to take advantage of the tax credit.
Yun noted the tax credit has broadly stabilized home prices. “Without the tax credit, there will be more aggressive price negotiations between buyers and sellers. The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year. We’ll also keep a close eye on market conditions on the Gulf Coast.”
Through May of this year 495,000 net private sector jobs have been created; NAR’s forecast for employment growth is about 1 million additional net new jobs over the balance of the year and another 2 million in 2011.
“If jobs come back as expected, the pace of home sales should pick up later this year and reach a sustainable level of activity given very favorable affordability conditions,” Yun said.
“In most areas of the country there will be no sharp snap back in home prices in the upcoming years, although some local markets have experienced double-digit gains this year,” Yun said. NAR forecasts the national median home price to rise only 4 percent cumulatively over the next two years.
“One factor that could lead to price acceleration in upcoming years for some markets is if the very low levels of new-home construction were to persist for another year or two,” he added.
Saturday, June 19, 2010
Is a Housing Shortage on the Horizon???
Some experts are saying that the next big real estate problem could be a shortage of homes.
Only 672,000 new homes were started in April. That’s less than half the number needed to meet the country’s average population growth.
In the past, an average of more than 1.3 million households have been built each year, creating demand for 1.5 million new homes. In 2009, only 398,000 new households were formed, according to the Census Bureau.
"The decline in household formation is artificial," says James Gaines, a real estate economist with Texas A&M. "The young are moving in with their parents. There's even doubling up among working-class people. There's a pent-up demand coming if and when the economy recovers."
Some economists believe this analysis fails to take into account the changing economy or the large inventory of vacant properties. But Gaines and others say these factors are unlikely to significantly drive down demand.
Source: CNNMoney.com, Les Christie (06/15/2010)
Only 672,000 new homes were started in April. That’s less than half the number needed to meet the country’s average population growth.
In the past, an average of more than 1.3 million households have been built each year, creating demand for 1.5 million new homes. In 2009, only 398,000 new households were formed, according to the Census Bureau.
"The decline in household formation is artificial," says James Gaines, a real estate economist with Texas A&M. "The young are moving in with their parents. There's even doubling up among working-class people. There's a pent-up demand coming if and when the economy recovers."
Some economists believe this analysis fails to take into account the changing economy or the large inventory of vacant properties. But Gaines and others say these factors are unlikely to significantly drive down demand.
Source: CNNMoney.com, Les Christie (06/15/2010)
Monday, June 14, 2010
House Hunting? 5 Things to Keep in Mind....
1. Expect stiff competition for some homes. There still seems to be an abundance of buyers and homes for sale are still receiving multiple offers. In most areas homes are selling on average at or just above (101-103%) of asking price. Bottom line is expect some competition and be proactive!
2. Getting a loan may be more complicated and time-consuming than you expect. With all of the questionable lending in recent years underwriters are being VERY cautious these days. Tax returns, pay stubs, verification of employment, and credit checks right before funds are drawn are not uncommon. Be VERY careful in escrow not to make any large purchases and do your homework ahead of time - GET PRE-APPROVED.
3. Buyers, be prepared to try, try again. It can be extremely frustrating for buyers right now. It feels as though foreclosure banks and short-sale servicers are holding all the cards and buyers are forced to play by their rules. Be patient, don't get emotionally attached to any one house, and be persistent. There are great deals to be had if you can survive the journey.
4. The appraisal process can throw a monkey wrench into a sale. Appraisals seem to be coming in lower than usual, possibly from increased scrutiny and the fear that lenders will crack down on any appraiser that causes them to lend more than the home is worth. If the home appraises at or above the offered price then everybody is happy. But if it comes in below the offered price then renegotiation must take place until funds are conceded to the appraised value.
5. Completing a "short sale" can be a hassle. Although programs like H.A.F.A. seem to be helping, the short sale process can still take months (depending on the servicer). There are typically savings to be had if one can stomach the ride and, in my opinion, short sales are worth the wait.
If you have any questions in regards to any of the above then I'd be happy to discuss things with you further. Please contact me anytime at tcrekevin@gmail.com with any questions or concerns.
2. Getting a loan may be more complicated and time-consuming than you expect. With all of the questionable lending in recent years underwriters are being VERY cautious these days. Tax returns, pay stubs, verification of employment, and credit checks right before funds are drawn are not uncommon. Be VERY careful in escrow not to make any large purchases and do your homework ahead of time - GET PRE-APPROVED.
3. Buyers, be prepared to try, try again. It can be extremely frustrating for buyers right now. It feels as though foreclosure banks and short-sale servicers are holding all the cards and buyers are forced to play by their rules. Be patient, don't get emotionally attached to any one house, and be persistent. There are great deals to be had if you can survive the journey.
4. The appraisal process can throw a monkey wrench into a sale. Appraisals seem to be coming in lower than usual, possibly from increased scrutiny and the fear that lenders will crack down on any appraiser that causes them to lend more than the home is worth. If the home appraises at or above the offered price then everybody is happy. But if it comes in below the offered price then renegotiation must take place until funds are conceded to the appraised value.
5. Completing a "short sale" can be a hassle. Although programs like H.A.F.A. seem to be helping, the short sale process can still take months (depending on the servicer). There are typically savings to be had if one can stomach the ride and, in my opinion, short sales are worth the wait.
If you have any questions in regards to any of the above then I'd be happy to discuss things with you further. Please contact me anytime at tcrekevin@gmail.com with any questions or concerns.
Monday, June 7, 2010
High Level of Pending Home Sales Continues
Pending home sales are at the highest level since last October when the index reached 112.4 and first-time buyers were rushing to beat the initial deadline for the tax credit. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, said this second round of surging sales from the tax credit extension looks as strong as the original tax credit. “There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension. But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales,” he said. “The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.”
Lawrence Yun, NAR chief economist, said this second round of surging sales from the tax credit extension looks as strong as the original tax credit. “There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension. But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales,” he said. “The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.”
Tuesday, May 25, 2010
Some good signs for a change....
Existing-home sales rose again in April with buyers motivated by the tax credit, improving consumer confidence and favorable affordability conditions, according to the latest survey. Existing-home sales increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Monthly sales rose 7.0 percent in March. Lawrence Yun, NAR chief economist, said the gain was widely anticipated. “The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” he said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low.”
Friday, May 14, 2010
Home appraisals still fraught with uncertainty despite new code of conduct
Last year, the Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and the New York State General Attorney created an agreement titled the Home Valuation Code of Conduct (HVCC), which prohibits lenders, mortgage brokers, and real estate agents from selecting and having any “substantive” communication with a home appraiser. HVCC was created to protect consumers against fraudulent appraisals, which some industry experts believe was a contributing factor to inflated home values. However, many lenders have turned to the use of third-party appraisal management companies and the practice has led to complaints.
MAKING SENSE OF THE STORY FOR CONSUMERS
HVCC, which may result in appraisers evaluating homes in areas with which they are not familiar and using comparables that are inaccurate, has caused delays in closing sales, and in some cases, undermined sales if the appraisals undervalue a home’s current worth.
HVCC applies to conventional, single-family loans that are sold to Fannie Mae or Freddie Mac. It does not apply to loans backed by the Federal Housing Administration (FHA) or the Veterans Administration.
Through HVCC guidelines, borrowers are entitled to receive, free of charge, a copy of the home appraisal at least three days prior to closing, giving the borrowers more time to contest what they view as an inaccurate appraisal.
Borrowers and/or sellers who believe a home valuation is too low may appeal the valuation or request a second option. It’s important to note that the second valuation must be more than five percent higher than the first--anything less is considered an acceptable difference.
Appraisers are required to view the inside of homes being valuated, but not homes used as comparables. More often than not, the appraiser’s knowledge of the property is based solely on the description in the MLS or on the public land records. Yet, the previous owners may have removed appliances and caused other damages to the property. To guard against appraisers using non-comparable homes in the valuation, borrowers can work with their REALTOR® to review comparable homes in the neighborhood for differences the appraiser did not know about or failed to consider.
To read the full story, please click here
MAKING SENSE OF THE STORY FOR CONSUMERS
HVCC, which may result in appraisers evaluating homes in areas with which they are not familiar and using comparables that are inaccurate, has caused delays in closing sales, and in some cases, undermined sales if the appraisals undervalue a home’s current worth.
HVCC applies to conventional, single-family loans that are sold to Fannie Mae or Freddie Mac. It does not apply to loans backed by the Federal Housing Administration (FHA) or the Veterans Administration.
Through HVCC guidelines, borrowers are entitled to receive, free of charge, a copy of the home appraisal at least three days prior to closing, giving the borrowers more time to contest what they view as an inaccurate appraisal.
Borrowers and/or sellers who believe a home valuation is too low may appeal the valuation or request a second option. It’s important to note that the second valuation must be more than five percent higher than the first--anything less is considered an acceptable difference.
Appraisers are required to view the inside of homes being valuated, but not homes used as comparables. More often than not, the appraiser’s knowledge of the property is based solely on the description in the MLS or on the public land records. Yet, the previous owners may have removed appliances and caused other damages to the property. To guard against appraisers using non-comparable homes in the valuation, borrowers can work with their REALTOR® to review comparable homes in the neighborhood for differences the appraiser did not know about or failed to consider.
To read the full story, please click here
Sunday, May 9, 2010
Job Gains Speed Up And More Seek Work
The Labor Department report, released Friday, showed jobs grew in a wide swath of the economy, from manufacturing to professional services, and offered reassuring signs that the U.S. economy is recovering. "We're on more solid ground after these data than we thought we were," said Alan Levenson, an economist for T. Rowe Price Associates. "That should reduce, at least at the margins, the concerns that ones might have had of the impact on our economy of what's going on in Europe."
The government said 290,000 jobs were created in April and it revised upward by a total of 121,000 the gains for the previous two months.
The jobless rate ticked up to 9.9% from 9.7% as 805,000 workers left the sidelines and entered or rejoined the labor force. The flood of new job seekers comes amid signs that employers are hiring, as often happens in the early innings of a recovery. "People are encouraged to come back in the labor force and start looking for jobs," said Julia Coronado, a BNP Paribas analyst. "It's good that they're not so discouraged anymore."
(more at http://online.wsj.com/article/SB10001424052748703338004575229932760855258.html)
The government said 290,000 jobs were created in April and it revised upward by a total of 121,000 the gains for the previous two months.
The jobless rate ticked up to 9.9% from 9.7% as 805,000 workers left the sidelines and entered or rejoined the labor force. The flood of new job seekers comes amid signs that employers are hiring, as often happens in the early innings of a recovery. "People are encouraged to come back in the labor force and start looking for jobs," said Julia Coronado, a BNP Paribas analyst. "It's good that they're not so discouraged anymore."
(more at http://online.wsj.com/article/SB10001424052748703338004575229932760855258.html)
Friday, April 30, 2010
Key Interest Rate Left Unchanged
Federal Reserve leaders left their target interest rate near zero on Tuesday and restated their intention to keep rates very low for an "extended period" Wednesday, even as they modestly upgraded their assessment of the economy.
Fed leaders left the federal funds rate in a range of zero percent to 0.25 percent, where it has been since December 2008, and said conditions are likely to justify leaving it at "exceptionally low" levels for "an extended period."
This is good news for those still looking to buy or refinance (if possible). However it is unclear how the market will adjust now that the Fed is no longer buying mortgage backed securities and word that a possible sell-off may be in the near future to shrink their balance sheets.
The point is interest rates are at historically low levels and as they begin to rise it might price you out of a home! If you're thinking of buying or are tired of renting contact me and we might be able to figure out a way for you to capitalize before rates begin to climb.
Fed leaders left the federal funds rate in a range of zero percent to 0.25 percent, where it has been since December 2008, and said conditions are likely to justify leaving it at "exceptionally low" levels for "an extended period."
This is good news for those still looking to buy or refinance (if possible). However it is unclear how the market will adjust now that the Fed is no longer buying mortgage backed securities and word that a possible sell-off may be in the near future to shrink their balance sheets.
The point is interest rates are at historically low levels and as they begin to rise it might price you out of a home! If you're thinking of buying or are tired of renting contact me and we might be able to figure out a way for you to capitalize before rates begin to climb.
Sunday, April 25, 2010
5 Things to Think About as a First-Time-Buyer
Here are 5 quick tips to keep in mind if you're a first-time-buyer. Being a first-time-buyer you don't have the experience you might need so here are a few good tips to try to help you out:
1. Low credit-score borrowers can pay thousands of dollars in interest over the life of the loan because they get charged a higher rate than someone with better credit.
2. Shopping for other things before closing. Lenders will continue to check credit scores right up to the closing date. Too much shopping could cause the lender to cancel the loan because they are worried you won't be able to pay the mortgage with your new added debt. Don't shop before your home closes...be patient.
3. Scrimping or opting out of inspections. Being surprised by things after you move in can be horribly frustrating. Know what you are getting into by having those who know what to look for find what might be wrong with the home during your inspection period. I cannot stress this point enough...GET INSPECTIONS!!!
4. Write an offer with contingencies. Buyers should leave themselves an opportunity to opt out if the inspections uncover problems that were not anticipated. Contingencies are your safety net so make sure your agent knows what they are writing in your offer.
5. Reserve fund for insurance, taxes and misc moving/home improvement. Insurance and taxes can be a surprise if you're not budgeting for them. I like impound accounts as you pay into it monthly and you don't have to worry about coming up with the money. Also, leave yourself a pad in case an appliance doesn't survive the move or you want to paint before you move-in. Plan ahead so that the moving experience is a good one.
There are obviously a thousand other things to keep in mind but I've found that these 5 seem to pop up most frequently. Contact me anytime if I can help you or someone you know with their Real Estate needs. Thanks!
1. Low credit-score borrowers can pay thousands of dollars in interest over the life of the loan because they get charged a higher rate than someone with better credit.
2. Shopping for other things before closing. Lenders will continue to check credit scores right up to the closing date. Too much shopping could cause the lender to cancel the loan because they are worried you won't be able to pay the mortgage with your new added debt. Don't shop before your home closes...be patient.
3. Scrimping or opting out of inspections. Being surprised by things after you move in can be horribly frustrating. Know what you are getting into by having those who know what to look for find what might be wrong with the home during your inspection period. I cannot stress this point enough...GET INSPECTIONS!!!
4. Write an offer with contingencies. Buyers should leave themselves an opportunity to opt out if the inspections uncover problems that were not anticipated. Contingencies are your safety net so make sure your agent knows what they are writing in your offer.
5. Reserve fund for insurance, taxes and misc moving/home improvement. Insurance and taxes can be a surprise if you're not budgeting for them. I like impound accounts as you pay into it monthly and you don't have to worry about coming up with the money. Also, leave yourself a pad in case an appliance doesn't survive the move or you want to paint before you move-in. Plan ahead so that the moving experience is a good one.
There are obviously a thousand other things to keep in mind but I've found that these 5 seem to pop up most frequently. Contact me anytime if I can help you or someone you know with their Real Estate needs. Thanks!
Monday, April 12, 2010
SB401 to forgive CA Cancelled Debt Income THROUGH 2012
Underwater homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification. Signed into CA law today, Senate Bill 401 generally mimics Federal tax treatment of Cancellation of Debt Income. For debt forgiven on a loan secured by a "qualified principal residence," borrowers will now be exempt from both federal and state income tax consequences. The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.
"Qualified principal residence" indebtedness is outlined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds if both were used in the same manner. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.
The tax breaks apply to debts discharged from 2009 through 2012!! Californians who have already filed their 2009 tax returns may still claim the exemption by filing a Form 540X amendment.
Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may however be exempt under other provisions. Taxpayers who are bankrupt or who are insolvent may also be exempt from debt relief income tax (please consult your tax attorney or CPA for consultation specific to your circumstance).
"Qualified principal residence" indebtedness is outlined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds if both were used in the same manner. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.
The tax breaks apply to debts discharged from 2009 through 2012!! Californians who have already filed their 2009 tax returns may still claim the exemption by filing a Form 540X amendment.
Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may however be exempt under other provisions. Taxpayers who are bankrupt or who are insolvent may also be exempt from debt relief income tax (please consult your tax attorney or CPA for consultation specific to your circumstance).
Wednesday, March 31, 2010
Up to $18,000 in Tax Credits Available for CA Buyers (for short time)
Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits. To take full advantage of both tax credits a first-time homebuyer must have an accepted contract for a home they plan on moving into before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010. Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they have lived in their existing homes for 5 years as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law. (contact me for more details)
This is a huge opportunity for those buyers out there to take advantage of some HUGE incentives. Keep in mind these are not deductions but actual credits!!! Use them for buying new appliances, a small remodel, or stash them away for a rainy day. But don't miss out on this opportunity if you are thinking of buying a home.
I'm here to help so please let me know how I can best do that for you!!!
This is a huge opportunity for those buyers out there to take advantage of some HUGE incentives. Keep in mind these are not deductions but actual credits!!! Use them for buying new appliances, a small remodel, or stash them away for a rainy day. But don't miss out on this opportunity if you are thinking of buying a home.
I'm here to help so please let me know how I can best do that for you!!!
Friday, March 26, 2010
$200 Million in Tax Credits for CA Buyers!!!
I’m glad to report that Gov. Schwarzenegger signed Assembly Bill 183, the Homebuyer Tax Credit legislation, into law.
AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).
AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).
Tuesday, March 23, 2010
CA Extended $10,000 First Time Buyer Credit
California lawmakers have voted to extend a $10,000 tax credit for first-time homebuyers. The credit will apply to first-time buyers who purchase new or existing homes between May 1 and Dec. 31 of this year. It is for 5 percent of the purchase price, or up to $10,000. The bill received bipartisan support in the Assembly and Senate on Monday and will be sent to Gov. Arnold Schwarzenegger. The governor, who proposed the extended tax credit as part of his job-creation initiative, is expected to sign the bill.
I will post more information as it becomes available so stay tuned!!!!
I will post more information as it becomes available so stay tuned!!!!
Friday, March 19, 2010
Avoid Foreclosure!!! HAFA Program Can Provide Help
Some of the highlights of the program:
- Allows borrowers to receive pre-approved short sale terms before listing the property.
- Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
- Uses a standard process, uniform documents, and timeframes/deadlines.
- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to a $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders.
- Allows at least 120 days to sell the home (extensions permitted up to one year)
- Within 10 business days the lender must approve or deny the offer!!!!
If you are facing a foreclosure or are behind in your payments the important thing to realize is that YOU HAVE OPTIONS. Short Sales are less harmful to your credit and allow you to sell you home respectfully with a "SOLD" sign in the front yard!!! Please contact me if you have any questions.
- Allows borrowers to receive pre-approved short sale terms before listing the property.
- Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
- Uses a standard process, uniform documents, and timeframes/deadlines.
- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to a $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders.
- Allows at least 120 days to sell the home (extensions permitted up to one year)
- Within 10 business days the lender must approve or deny the offer!!!!
If you are facing a foreclosure or are behind in your payments the important thing to realize is that YOU HAVE OPTIONS. Short Sales are less harmful to your credit and allow you to sell you home respectfully with a "SOLD" sign in the front yard!!! Please contact me if you have any questions.
Sunday, March 14, 2010
Important Tax Info for CA Short Sellers!!!
Legislators Vote to Extend CA State Tax Exemption on Cancellation of Debt Income. This is very important if you are involved in a Short Sale - the amount forgiven is normally to be included as income on your tax return as Cancellation of Debt Income (CODI). Federal Taxes are currently exempt from CODI through 2012 under the Mortgage Debt Forgiveness Act. CA homeowners are NOT yet exempt from CODI on their 2009 state taxes if they lost their home due to a short sale in 2009 (2008 and 2007 sellers are exempt). Write your governor if this is important to you!!!
CLICK HERE TO READ SAC-BEE ARTICLE
(I am not a tax professional - please consult your tax specialist or CPA for further information specific to your situation)
CLICK HERE TO READ SAC-BEE ARTICLE
(I am not a tax professional - please consult your tax specialist or CPA for further information specific to your situation)
Monday, March 8, 2010
New Foreclosure Alternative - A Plan that Pays Owners
In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. The administration is trying a new approach - offering incentives for some of them to leave.
This latest program, which allows a short sale in exchange for a little spending money, is one of the administration’s most aggressive attempts to work on a problem that has defied solutions.
More than five million households are behind on their mortgages and modification plans have helped only a small percentage of them - much more needs to be done. There is also the concern that millions of foreclosures could delay or even reverse the economy’s slow recovery.
Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”
Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.
For the borrowers, there is the likelihood of suffering less damage to credit ratings by doing a short sale instead of a foreclosure. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.
For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.
Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.
It is a step in the right direction and can offer help for many. There is a lot of work in a short sale for all involved so please make sure you qualify your agent first as the quality of the agent has a lot to do with the possibility of acceptance.
Please contact me for more information or if I can help in ANY way.
This latest program, which allows a short sale in exchange for a little spending money, is one of the administration’s most aggressive attempts to work on a problem that has defied solutions.
More than five million households are behind on their mortgages and modification plans have helped only a small percentage of them - much more needs to be done. There is also the concern that millions of foreclosures could delay or even reverse the economy’s slow recovery.
Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”
Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.
For the borrowers, there is the likelihood of suffering less damage to credit ratings by doing a short sale instead of a foreclosure. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.
For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.
Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.
It is a step in the right direction and can offer help for many. There is a lot of work in a short sale for all involved so please make sure you qualify your agent first as the quality of the agent has a lot to do with the possibility of acceptance.
Please contact me for more information or if I can help in ANY way.
Monday, March 1, 2010
Fed Announces: Interest Rates to Remain Low
Investors and potential buyers breathed a sigh of relief Wednesday when Federal Reserve Chair Ben Bernanke told Congress that interest rates are likely to remain low for an extended period. The economy, he said, "still requires support for recovery."
Investors see these low rates as a boon to a recovery of employment and business. Buyers obviously see this as a continued opportunity to lock in a great rate on a fixed loan which creates a stable payment for an extended period of time; essential for creating a financial plan for the future.
Bernanke’s announcement also helped soften the edge on the news that housing sales were down in January. With holiday spending, travel plans and modified banking hours I'm not sure this was unexpected, but hopefully not a trend.
I think a very telling indicator will be how the market reacts after the Homebuyer's Tax Credits expire on April 30th. We shall wait and see......
Investors see these low rates as a boon to a recovery of employment and business. Buyers obviously see this as a continued opportunity to lock in a great rate on a fixed loan which creates a stable payment for an extended period of time; essential for creating a financial plan for the future.
Bernanke’s announcement also helped soften the edge on the news that housing sales were down in January. With holiday spending, travel plans and modified banking hours I'm not sure this was unexpected, but hopefully not a trend.
I think a very telling indicator will be how the market reacts after the Homebuyer's Tax Credits expire on April 30th. We shall wait and see......
Wednesday, February 24, 2010
Financial Planning - For Your Home
You probably already have a financial plan for yourself in place. Most likely you sat down with an adviser at some point to set up a budget and diversify your investments. Or maybe you did it yourself online or at the dining room table. But what about your home specifically, probably the biggest investment you’ll ever make? Did you really take everything into account: repairs and upgrades, the mortgage, insurance, and taxes? Probably not.
You need a separate financial plan for your home. Spend a weekend creating one. Once you have a handle on your home’s expenses, you can devise a long-term strategy that’ll let you live there for years with maximum enjoyment and minimum anxiety.
The mortgage: Paying it—and then some
Yes, you already shell out a lot for your mortgage, but can you pay more? Even a little extra each month can add up. Let’s say you have $200,000 outstanding principal and a 20-year fixed-rate mortgage at 5%. Your monthly payment is $1,319.91. But if you can manage to pay another $100 a month, you’ll save $14,887 in interest. Run the numbers for yourself and check to make sure your loan does NOT have a pre-payment penalty in place. And don’t fret too much about losing the mortgage interest deduction come tax time. Toward the tail end of the life of a loan most of your payment is going to the principal, not the interest.
Nevertheless, the same extra $100 might also go into a retirement plan every month, or be put aside for the inevitable home repairs (more on those later). A debt-free life may be enormously important to your peace of mind, however an extra $1,200 toward your child’s college fund every year may feel even better. It’s about what’s ultimately important to you, both emotionally and financially.
Insurance: Protecting your property
You’ll want homeowners insurance with full replacement coverage in case your house is burned to the ground. This sounds simple, but be careful on the calculation. Remember that you own a house as well as the land on which it sits. So even though you bought your home for $300,000, it may cost only $100,000 to rebuild it. Your policy limits should reflect this.
The differences are regional. Where land is at a premium, like much of Southern California, a higher percentage of the purchase cost is for the property rather than the structure. Where land is cheap, like much of North Dakota, most of the value of a new house is the house itself. Don’t be deceived by shifts in market values. You may have bought a $1.2 million townhouse in Florida during the boom that now may only sell for $600,000. But the replacement cost of the townhouse hasn’t changed much, so you can’t cut insurance costs that way.
Do, however, try to cut costs by asking your insurance agent about discounts. Making structural improvements, such as adding storm shutters, can lead to lower rates. Membership is certain groups, such as AARP or veterans’ organizations, entitles some policyholders to breaks on premiums as well.
Repairs and renovations: By choice or necessity
Throughout the life of your house, you’ll be making two kinds of changes. The first is the fun kind, like a marble floor for the living room. The second is the essential, behind-the-scenes change: a new water heater. You don’t have a choice about when you’ll do the latter, but you can prepare for it financially.
It’s a good idea to have a rainy-day fund. Start with the inspection report you received when you bought the house. Did the inspector indicate that you would need a new roof in five years? A new furnace in 10? Get estimates on what these repairs will cost and start saving. Consider ongoing non-emergency maintenance too.
As for the discretionary upgrades, act prudently. According to Remodeling magazine, an upscale major kitchen upgrade, for example, could cost nearly $112,000, but only about 63% of that will be recouped in the home’s resale value. This isn’t to say you shouldn’t upgrade. If you can afford to redo your bathrooms, go ahead. Just don’t confuse your necessary repairs (new furnace—about $4,000) with your discretionary upgrades (Viking range—$6,000 and up).
Taxes: (Almost) no way around them
Taxes are an essential part of your home’s financial plan. The bank that holds your mortgage may already handle your real estate taxes with an escrow account. If so the expense is built into your monthly mortgage payment. Check your statements or call the lender. Otherwise create a dedicated fund for property taxes, which can run into the thousands of dollars annually.
You may be able to reduce your tax burden by getting a reassessment. Do your homework first. Are comparable houses taxed less than yours? Ask the local assessor what formula is used to set tax rates. If you’re in a special group, you might get some help from state or local programs. Check around to see what’s available in your area.
You need a separate financial plan for your home. Spend a weekend creating one. Once you have a handle on your home’s expenses, you can devise a long-term strategy that’ll let you live there for years with maximum enjoyment and minimum anxiety.
The mortgage: Paying it—and then some
Yes, you already shell out a lot for your mortgage, but can you pay more? Even a little extra each month can add up. Let’s say you have $200,000 outstanding principal and a 20-year fixed-rate mortgage at 5%. Your monthly payment is $1,319.91. But if you can manage to pay another $100 a month, you’ll save $14,887 in interest. Run the numbers for yourself and check to make sure your loan does NOT have a pre-payment penalty in place. And don’t fret too much about losing the mortgage interest deduction come tax time. Toward the tail end of the life of a loan most of your payment is going to the principal, not the interest.
Nevertheless, the same extra $100 might also go into a retirement plan every month, or be put aside for the inevitable home repairs (more on those later). A debt-free life may be enormously important to your peace of mind, however an extra $1,200 toward your child’s college fund every year may feel even better. It’s about what’s ultimately important to you, both emotionally and financially.
Insurance: Protecting your property
You’ll want homeowners insurance with full replacement coverage in case your house is burned to the ground. This sounds simple, but be careful on the calculation. Remember that you own a house as well as the land on which it sits. So even though you bought your home for $300,000, it may cost only $100,000 to rebuild it. Your policy limits should reflect this.
The differences are regional. Where land is at a premium, like much of Southern California, a higher percentage of the purchase cost is for the property rather than the structure. Where land is cheap, like much of North Dakota, most of the value of a new house is the house itself. Don’t be deceived by shifts in market values. You may have bought a $1.2 million townhouse in Florida during the boom that now may only sell for $600,000. But the replacement cost of the townhouse hasn’t changed much, so you can’t cut insurance costs that way.
Do, however, try to cut costs by asking your insurance agent about discounts. Making structural improvements, such as adding storm shutters, can lead to lower rates. Membership is certain groups, such as AARP or veterans’ organizations, entitles some policyholders to breaks on premiums as well.
Repairs and renovations: By choice or necessity
Throughout the life of your house, you’ll be making two kinds of changes. The first is the fun kind, like a marble floor for the living room. The second is the essential, behind-the-scenes change: a new water heater. You don’t have a choice about when you’ll do the latter, but you can prepare for it financially.
It’s a good idea to have a rainy-day fund. Start with the inspection report you received when you bought the house. Did the inspector indicate that you would need a new roof in five years? A new furnace in 10? Get estimates on what these repairs will cost and start saving. Consider ongoing non-emergency maintenance too.
As for the discretionary upgrades, act prudently. According to Remodeling magazine, an upscale major kitchen upgrade, for example, could cost nearly $112,000, but only about 63% of that will be recouped in the home’s resale value. This isn’t to say you shouldn’t upgrade. If you can afford to redo your bathrooms, go ahead. Just don’t confuse your necessary repairs (new furnace—about $4,000) with your discretionary upgrades (Viking range—$6,000 and up).
Taxes: (Almost) no way around them
Taxes are an essential part of your home’s financial plan. The bank that holds your mortgage may already handle your real estate taxes with an escrow account. If so the expense is built into your monthly mortgage payment. Check your statements or call the lender. Otherwise create a dedicated fund for property taxes, which can run into the thousands of dollars annually.
You may be able to reduce your tax burden by getting a reassessment. Do your homework first. Are comparable houses taxed less than yours? Ask the local assessor what formula is used to set tax rates. If you’re in a special group, you might get some help from state or local programs. Check around to see what’s available in your area.
Monday, February 15, 2010
Fourth Quarter Home Sales Up
Sales of existing homes were up 27.2 percent during the last three months of 2009 compared to the same period a year earlier, hitting a seasonally adjusted rate of 6 million, the National Association of Realtors reported.
That's a 13.9 percent increase from the 5.29 million annual rate seen during the third quarter, as homebuyers moved to take advantage of low interest rates and a tax credit that was set to expire but was ultimately extended and expanded by Congress, NAR said.
Sales increased from the third quarter to the fourth in 48 states and the District of Columbia, with 32 states seeing double-digit gains, NAR said. Year-over-year sales were higher in 49 states and Washington, D.C., and all but three states had double-digit annual increases.
Distressed property accounted for 32 percent of fourth-quarter transactions, down from 37 percent a year earlier.
The national median existing single-family price fell 4.1 percent year-over year to $172,900 -- the smallest price decline in more than two years, said NAR chief economist Lawrence Yun.
That's a 13.9 percent increase from the 5.29 million annual rate seen during the third quarter, as homebuyers moved to take advantage of low interest rates and a tax credit that was set to expire but was ultimately extended and expanded by Congress, NAR said.
Sales increased from the third quarter to the fourth in 48 states and the District of Columbia, with 32 states seeing double-digit gains, NAR said. Year-over-year sales were higher in 49 states and Washington, D.C., and all but three states had double-digit annual increases.
Distressed property accounted for 32 percent of fourth-quarter transactions, down from 37 percent a year earlier.
The national median existing single-family price fell 4.1 percent year-over year to $172,900 -- the smallest price decline in more than two years, said NAR chief economist Lawrence Yun.
Tuesday, February 9, 2010
Short Sales - A Buyer's Prospective
Intro to Short Sales
A short sale occurs when a property is sold for less than the amount owed on the mortgage and the lender agrees to accept that amount as satisfaction of the total amount owed to pay off the home loan. The lender determines if the seller is eligible to sell the home at less than the outstanding debt due to a hardship (divorce, unexpected hospitalization and medical expenses, job loss, death of a family member or a similar catastrophic situation). Additionally, a budget must show that the seller’s expenses exceed their income/assets, they are behind on their payments and there is no way to repay the lender. The risk with short sales is that the ultimate decision to sell the home lies in the lender’s hands. There are no guarantees in short sales.
Good News about Short Sales
Condition of home is generally better than a REO.
History of home is provided by seller in disclosures.
Generally only highest and best offers submitted to lender.
Not so Good News
Time. A buyer must be patient and not have any contingencies in regards to time.
No guarantee the lender will accept the home as a short sale.
The seller may not even qualify for a short sale if no legitimate hardship exists.
Short sales aren’t always a bargain - price set by listing agent.
Lenders will likely reject low offers. AND Lenders can change conditions after acceptance.
Lenders can raise buyer closing costs.
Loss of control of the transaction depending on professionalism of the listing agent.
Seller sometimes not motivated to sell.
A short sale is not for the faint at heart. But if you are patient and willing they can be a great option to get the home of your dreams - I can personally attest to that!!!
A short sale occurs when a property is sold for less than the amount owed on the mortgage and the lender agrees to accept that amount as satisfaction of the total amount owed to pay off the home loan. The lender determines if the seller is eligible to sell the home at less than the outstanding debt due to a hardship (divorce, unexpected hospitalization and medical expenses, job loss, death of a family member or a similar catastrophic situation). Additionally, a budget must show that the seller’s expenses exceed their income/assets, they are behind on their payments and there is no way to repay the lender. The risk with short sales is that the ultimate decision to sell the home lies in the lender’s hands. There are no guarantees in short sales.
Good News about Short Sales
Condition of home is generally better than a REO.
History of home is provided by seller in disclosures.
Generally only highest and best offers submitted to lender.
Not so Good News
Time. A buyer must be patient and not have any contingencies in regards to time.
No guarantee the lender will accept the home as a short sale.
The seller may not even qualify for a short sale if no legitimate hardship exists.
Short sales aren’t always a bargain - price set by listing agent.
Lenders will likely reject low offers. AND Lenders can change conditions after acceptance.
Lenders can raise buyer closing costs.
Loss of control of the transaction depending on professionalism of the listing agent.
Seller sometimes not motivated to sell.
A short sale is not for the faint at heart. But if you are patient and willing they can be a great option to get the home of your dreams - I can personally attest to that!!!
Monday, February 1, 2010
Avoid Foreclosure Rescue Scams
A record high 2.8 million properties were hit with foreclosure notices in 2009, according to realtytrac, putting even more Americans at risk of facing foreclosure rescue scams. Homeowners who fall behind on mortgage payments need to tread carefully when seeking assistance, since foreclosure rescue scams come in many guises. A day spent researching legitimate options, from a mortgage modification or principal forbearance to a short sale or deed-in-lieu, could keep you from becoming a scam victim.
Homeowners facing foreclosure are prime targets for scam artists. The U.S. Federal Trade Commission identified 71 companies running suspicious foreclosure rescue ads, and the Better Business Bureau counts foreclosure rescue rip-offs among its top 10 scams. Understanding how these scams work can help you avoid becoming a victim.
The variations are seemingly endless, but one popular foreclosure scam involves a representative of a so-called foreclosure rescue company promising to negotiate a deal with your lender. The rep, vowing to take care of everything, will instruct you not to contact your lender, lawyer, or credit counselor during the supposed negotiations. The more brazen ones will even tell you to pay your mortgage directly to them.
Once you pay an upfront fee ranging from $500 to $5000 or hand over a few months' worth of mortgage payments, the scam artist will disappear. You'll be left with an emptier wallet and a mortgage that's in even deeper trouble because no deal was cut and no payments were made on your behalf.
A bankruptcy foreclosure scam can involve a promise to fend off foreclosure in exchange for an upfront fee. Instead of getting you legitimate relief, the fraudster will pocket the fee and secretly file a bankruptcy case in your name. The scam may seem to work initially, because a bankruptcy filing will stop foreclosure proceedings temporarily, but they'll resume. Compounding your problems, a bankruptcy can mar your credit report for 10 years.
Another common scam, called the bait-and-switch, results in a scam artist taking ownership of your home. You sign documents supposedly for a new loan that will make your mortgage current. What's really happening is you're signing over the deed of your house. In this scenario you would still owe on your mortgage but no longer own the home.
In a rent-to-own scheme, you're told to surrender a home's deed as part of a deal that lets you stay put as a renter. The scam artist, perhaps claiming to be able to refinance at a better rate with you off the title, promises to sell the house back to you in the future. However, terms of the deal may make it all but impossible for you to repurchase the home, or the scammer may get you evicted by raising the rent beyond your means. Either way, you end up losing the home while remaining on the hook for the unpaid mortgage.
Being aware of the warnings signs can protect you from foreclosure rescue scams. Red flags include:
•Demands for high upfront fees.
•Guarantees to stop a foreclosure.
•Instructions to make mortgage payments to someone other than your lender.
•Pressure to sign over a deed.
Legitimate foreclosure counselors won't put on a full-court press, nor will they guarantee that you won't lose your home to foreclosure. What they will do is review your financial situation and offer up options. Foreclosure counselors approved (http://www.hud.gov/offices/hsg/sfh/hcc/fc/) by the U.S. Department of Housing and Urban Development won't charge you a fee either.
Homeowners facing foreclosure are prime targets for scam artists. The U.S. Federal Trade Commission identified 71 companies running suspicious foreclosure rescue ads, and the Better Business Bureau counts foreclosure rescue rip-offs among its top 10 scams. Understanding how these scams work can help you avoid becoming a victim.
The variations are seemingly endless, but one popular foreclosure scam involves a representative of a so-called foreclosure rescue company promising to negotiate a deal with your lender. The rep, vowing to take care of everything, will instruct you not to contact your lender, lawyer, or credit counselor during the supposed negotiations. The more brazen ones will even tell you to pay your mortgage directly to them.
Once you pay an upfront fee ranging from $500 to $5000 or hand over a few months' worth of mortgage payments, the scam artist will disappear. You'll be left with an emptier wallet and a mortgage that's in even deeper trouble because no deal was cut and no payments were made on your behalf.
A bankruptcy foreclosure scam can involve a promise to fend off foreclosure in exchange for an upfront fee. Instead of getting you legitimate relief, the fraudster will pocket the fee and secretly file a bankruptcy case in your name. The scam may seem to work initially, because a bankruptcy filing will stop foreclosure proceedings temporarily, but they'll resume. Compounding your problems, a bankruptcy can mar your credit report for 10 years.
Another common scam, called the bait-and-switch, results in a scam artist taking ownership of your home. You sign documents supposedly for a new loan that will make your mortgage current. What's really happening is you're signing over the deed of your house. In this scenario you would still owe on your mortgage but no longer own the home.
In a rent-to-own scheme, you're told to surrender a home's deed as part of a deal that lets you stay put as a renter. The scam artist, perhaps claiming to be able to refinance at a better rate with you off the title, promises to sell the house back to you in the future. However, terms of the deal may make it all but impossible for you to repurchase the home, or the scammer may get you evicted by raising the rent beyond your means. Either way, you end up losing the home while remaining on the hook for the unpaid mortgage.
Being aware of the warnings signs can protect you from foreclosure rescue scams. Red flags include:
•Demands for high upfront fees.
•Guarantees to stop a foreclosure.
•Instructions to make mortgage payments to someone other than your lender.
•Pressure to sign over a deed.
Legitimate foreclosure counselors won't put on a full-court press, nor will they guarantee that you won't lose your home to foreclosure. What they will do is review your financial situation and offer up options. Foreclosure counselors approved (http://www.hud.gov/offices/hsg/sfh/hcc/fc/) by the U.S. Department of Housing and Urban Development won't charge you a fee either.
Wednesday, January 27, 2010
Three Bits of Good News!!! (...for a change)
The FED announced today that they will leave the federal funds rate in the 0 percent to 0.25 percent range and expects economic conditions to warrant exceptionally low levels of the federal funds rate for an extended period of time.
According to C.A.R., the median price of an existing, single-family detached home in California during December 2009 was $306,820, an 8.4 percent increase from the revised $283,060 median for December 2008.
The Consumer Confidence Index rose in January to 55.9 compared with 53.6 in December, the Conference Board reported yesterday. The Present Situation Index increased to 25 in January from 20.2 in December, and the Expectations Index increased to 76.5 from 75.9 last month, according to the report.
According to C.A.R., the median price of an existing, single-family detached home in California during December 2009 was $306,820, an 8.4 percent increase from the revised $283,060 median for December 2008.
The Consumer Confidence Index rose in January to 55.9 compared with 53.6 in December, the Conference Board reported yesterday. The Present Situation Index increased to 25 in January from 20.2 in December, and the Expectations Index increased to 76.5 from 75.9 last month, according to the report.
FHA Suspends 90-day Rule for FHA Purchases
The Department of Housing and Urban Development (HUD) recently announced that it is instituting a one-year moratorium on the Federal Housing Administration (FHA) 90-day anti-flipping rule.
On most homes the FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. However, beginning February 1, buyers may use FHA-insured financing to purchase properties resold through private developers and investors, providing access to a broader array of recently foreclosed properties.
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
•All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
•In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
•The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
I consider this good news as it will immediately increase the inventory of homes and create more possibilties for the thousands of buyers who are looking to purchase before the April 30th tax credit deadline.
On most homes the FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. However, beginning February 1, buyers may use FHA-insured financing to purchase properties resold through private developers and investors, providing access to a broader array of recently foreclosed properties.
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
•All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
•In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
•The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
I consider this good news as it will immediately increase the inventory of homes and create more possibilties for the thousands of buyers who are looking to purchase before the April 30th tax credit deadline.
Wednesday, January 20, 2010
IMPORTANT - Announced FHA Policy Changes
WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.
1.Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
◦The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
◦If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
◦This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
◦The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2.Update the combination of FICO scores and down payments for new borrowers.
◦New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
◦This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
◦This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3.Reduce allowable seller concessions from 6% to 3%
◦The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
◦This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
4.Increase enforcement on FHA lenders
◦Publicly report lender performance rankings to complement currently available Neighborhood Watch data - Will be available on the HUD website on February 1.
■This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
◦Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
■Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
■This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
◦Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
■Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
◦HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
■Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
■Legislative authority permitting HUD maximum flexibility to establish separate "areas" for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches
In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.
1.Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
◦The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
◦If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
◦This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
◦The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2.Update the combination of FICO scores and down payments for new borrowers.
◦New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
◦This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
◦This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3.Reduce allowable seller concessions from 6% to 3%
◦The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
◦This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
4.Increase enforcement on FHA lenders
◦Publicly report lender performance rankings to complement currently available Neighborhood Watch data - Will be available on the HUD website on February 1.
■This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
◦Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
■Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
■This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
◦Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
■Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
◦HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
■Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
■Legislative authority permitting HUD maximum flexibility to establish separate "areas" for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches
In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.
Tuesday, January 19, 2010
Pending Home Sales Down But Still Up Over Last Year's Numbers
Contract activity for pending home sales fell after a surge of activity in preceding months to beat the original deadline for the first-time home buyer tax credit but remains comfortably above a year ago, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in November, fell 16.0 percent to 96.0 from an upwardly revised 114.3 in October, but is 15.5 percent higher than November 2008 when it was 83.1.
Lawrence Yun, NAR chief economist, said a drop was expected. “It will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit,” he said. “The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own. We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires.”
Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30, 2010, to finalize the transaction to qualify for the tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in November, fell 16.0 percent to 96.0 from an upwardly revised 114.3 in October, but is 15.5 percent higher than November 2008 when it was 83.1.
Lawrence Yun, NAR chief economist, said a drop was expected. “It will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit,” he said. “The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own. We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires.”
Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30, 2010, to finalize the transaction to qualify for the tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Tuesday, January 12, 2010
How to Determine Your Offer Price When Buying A Home
Decades ago, sellers priced a little high to leave room to negotiate down. Buyers typically offered 5 percent less. Then they negotiated and settled at a price in between. Today, there is so much variability in the housing market that it's impossible to use a pat formula for coming up with an offer price.
Your goal is always the same: You want to buy the best house for your needs and pay the lowest price. In many cases, you can start with a price that is less -- maybe even considerably less -- than the asking price and negotiate from there.
However, this strategy might not work in some California inland markets where housing prices have dropped about 50 percent in recent years. Some low-end housing markets plagued with foreclosures have heated up in recent months. Multiple offers are common, and some listings sell for more than the asking price.
Tailor your offer price to the specific house you want to buy. How much you offer should depend on how much you can comfortably afford to pay, which may be less than what the lender says you can afford. The price should be determined by current local market values, how well the listing is priced for the market, and whether or not you are in competition.
HOUSE HUNTING TIP: Buyers making offers in competition should try to make a rational decision regarding how much they're willing to pay. Don't get caught up in the frenzy of activity and offer more than your top price for the property. If you overpay, you could get cold feet and want to back out. In this case, your deposit might be at risk.
An appraisal contingency makes your offer contingent on the house appraising for the price you agreed to pay in the purchase agreement. If the property appraises for less than that price, you can withdraw from the contract and your deposit will be returned to you. That is, if your purchase agreement clearly stipulates this.
Bottom line - make sure you have a good agent!!
Your goal is always the same: You want to buy the best house for your needs and pay the lowest price. In many cases, you can start with a price that is less -- maybe even considerably less -- than the asking price and negotiate from there.
However, this strategy might not work in some California inland markets where housing prices have dropped about 50 percent in recent years. Some low-end housing markets plagued with foreclosures have heated up in recent months. Multiple offers are common, and some listings sell for more than the asking price.
Tailor your offer price to the specific house you want to buy. How much you offer should depend on how much you can comfortably afford to pay, which may be less than what the lender says you can afford. The price should be determined by current local market values, how well the listing is priced for the market, and whether or not you are in competition.
HOUSE HUNTING TIP: Buyers making offers in competition should try to make a rational decision regarding how much they're willing to pay. Don't get caught up in the frenzy of activity and offer more than your top price for the property. If you overpay, you could get cold feet and want to back out. In this case, your deposit might be at risk.
An appraisal contingency makes your offer contingent on the house appraising for the price you agreed to pay in the purchase agreement. If the property appraises for less than that price, you can withdraw from the contract and your deposit will be returned to you. That is, if your purchase agreement clearly stipulates this.
Bottom line - make sure you have a good agent!!
Monday, January 4, 2010
New "Good Faith Estimate" to help simplify shopping for loans.
Starting Jan. 1, new rules go into effect to help simplify and clarify exactly what mortgage lenders will charge for a loan. The initiative, originating from the Department of Housing and Urban Development (HUD), requires that a new "Good Faith Estimate" form be given to all applicants. The new form makes it easy to compare loans from different lenders creating transparency for the consumer.
The main purpose is to give consumers the ability to compare, line by line, the fees and costs that might make one loan more attractive than another. It forces prospective lenders to enter their terms and fees into standardized fields so that the consumer can see what the loan is actually costing them side by side with another lender. Until now borrowers might have focused their attention on interest rates or monthly payments to decide on a mortgage. But fees play a big part in total cost and the new form helps put all of the information in the consumer's hands.
By seeing what one lender is charging compared to another in a standardized, simplified form it is a good step in creating transparency in hopes to make the decision a confident one for the buyer.
The main purpose is to give consumers the ability to compare, line by line, the fees and costs that might make one loan more attractive than another. It forces prospective lenders to enter their terms and fees into standardized fields so that the consumer can see what the loan is actually costing them side by side with another lender. Until now borrowers might have focused their attention on interest rates or monthly payments to decide on a mortgage. But fees play a big part in total cost and the new form helps put all of the information in the consumer's hands.
By seeing what one lender is charging compared to another in a standardized, simplified form it is a good step in creating transparency in hopes to make the decision a confident one for the buyer.
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