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.
Wednesday, January 27, 2010
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The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.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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