Daily Real Estate News  |   February 27, 2008

The U.S. Department of Housing and Urban Development is promoting rules that would force lenders to make closing costs easier to understand and reveal payments to mortgage brokers.

The proposal is less stringent than the one that failed in 2002, but still would require lenders to provide an accurate good faith estimate that doesn’t change by more than 10 percent.

The most controversial portion of the proposal would require any lender payments to mortgage brokers to be noted on the good faith estimate.

Marc Savitt, president-elect of the National Association of Mortgage Brokers, opposes the rule change because he says it would be confusing to borrowers. “HUD’s goal was to simplify the mortgage process, and what they are doing is anything but simplifying the process,” he says.

Source: Reuters News, Diane Bartz and Patrick Rucker (02/26/08)

Daily Real Estate News  |  November 15, 2007 

FHA and secondary mortgage market giant Fannie Mae are stepping up with significant efforts to reduce the pain from the subprime mortgage mess. But until Congress acts on long-delayed legislation backed by the NATIONAL ASSOCIATION OF REALTORS®, they’re limited in how much more they can do.

In just the last 12 months FHA has doubled its loan volume and is on track to reach some 240,000 borrowers in 2007, including 80,000 refinancings by borrowers with troubled subprime loans, says Brian Montgomery, FHA commissioner and assistant secretary for housing at the U.S. Department of Housing and Urban Development. Montgomery joined Daniel Mudd, president and CEO of Fannie Mae, at a Regulatory Issues Forum at the 2007 NAR Conference & Expo.

The large number of refi borrowers stems in part from a new HUD program, backed by NAR, that allows delinquent borrowers to refinance into FHA-backed loans. Previously, borrowers had to be current on their mortgage to qualify for FHA financing. Even with the change, borrowers still must be able to show a minimum 3 percent equity in their home, a requirement that Montgomery acknowledged is a problem for home owners who’ve found themselves underwater as a result of declining price appreciation.

Montgomery says the number of borrowers participating in this special refi program, known as FHA Secure, will grow next year.

For its part, Fannie Mae has worked with lenders to help about 45,000 borrowers, representing some $8.6 billion in loans, refinance into safer and more affordable financing, says Mudd. The company has also been developing incentives so that loan servicers will initiate workouts with defaulting borrowers. As a result, about 750 loans a week are getting restructured, Mudd says.

Fannie Mae has also been working with three state housing finance agencies — in Ohio, Massachusetts, and New York — to provide refi loans to troubled borrowers. Almost half a billion dollars has been refinanced under that effort, which will be extended to more HFAs in the future, Mudd says.

For the two entities to grow their assistance efforts further, though, federal legislation is needed. NAR-backed FHA reform, introduced two years ago, would give a huge boost to FHA competitiveness by allowing the agency to price mortgage-insurance premiums based on risk and offer loans with low downpayments. The legislation would also raise the loan limit, which at the current $417,000 is far too low to be useful in high-cost states like California. The House passed its version of the FHA reform legislation in September. The Senate could take up its own version shortly.

“The time to have moved on this was last year,” say Montgomery, who thanked REALTORS® for their help in getting the legislation this far.

Fannie Mae is advocating legislation, also with NAR backing, that would increase the amount of loans it could invest in for its own portfolio by 10 percent. Right now its investments are capped at between $10 billion collectively between Fannie and Freddie.

Whatever happens on the legislative front, the long-term prospects for housing remain good, thanks to household growth in the U.S. “Hang in there,” Mudd says. “We’ll get through this.”

— REALTOR® Magazine Online

 Daily Real Estate News  |  November 8, 2007

New York Attorney General Andrew Cuomo said Wednesday that he has subpoenaed Fannie Mae and Freddie Mac in his investigation into mortgage industry conflicts of interest.

Cuomo has sued eAppraiseIT, a subsidiary of First American Corp., accusing them of caving in to pressure from Washington Mutual Inc. (WaMu), the country’s largest savings and loan, to use a list of “proven appraisers” who he claims inflated appraisals.

So far this year, Fannie and Freddie have bought a total of nearly $33 billion in loans from WaMu.

“Fannie Mae and Freddie Mac cannot afford to continue buying Washington Mutual mortgages unless they are sure these loans are based on reliable and independent appraisals,” Cuomo says.

James B. Lockhart, director of the Office of Federal Housing Enterprise Oversight, which regulates Fannie and Freddie, says he will discuss the issue with Cuomo and cooperate with any investigation.

Source: The Associated Press, Michael Gormley (11/07/2007)

Daily Real Estate News  |  November 1, 2007

U.S. foreclosures doubled in the third quarter compared with a year earlier, mortgage data company RealtyTrac, reports.

There were 635,159 foreclosure filings in the quarter, or one for every 196 households. California, Florida and Ohio accounted for 44 percent of the total. Nevada had the highest foreclosure rate at one for every 61 households.

The foreclosure issue doesn’t appear to be going away anytime soon.

About 2.91 million subprime borrowers have adjustable-rate mortgages, some 90 percent of which will have reset at higher interest rates by the end of 2008, according to San Francisco-based First American Loan Performance, the research unit of the largest U.S. title company.

But these numbers alone make the situation sound worse than it is, says John Robbins, CEO of American Mortgage Network and former chairman of the Mortgage Bankers Association of America.

“Half of loans going to foreclosures never go completely through the process, and every major servicer has a dedicated group that does nothing but loan modifications,” Robbins says. “If you take that, and the Fannie Mae and Freddie Mac and FHA programs for subprime borrowers, there’s going to be an impact.'’

Source: Bloomberg, Dan Levy (11/01/2007)

Daily Real Estate News  |  October 10, 2007

New York insurance regulators are proposing that insurance companies be required to create a pool that would only be used to pay for hurricane losses.

This plan would mitigate financial shock, regulators say, reducing the need to raise premiums sharply.

Insurance consumer advocates J. Robert Hunter, director for insurance of the Consumer Federation of America, applauds the idea. ‘’If every state had a reserve like this, they could actually work together so that the money could flow to wherever a hurricane struck. This would help stabilize prices and might even lower prices,'’ he says

Money that is set aside to pay for damages is subject to federal taxes, which is a big reason insurers have argued against plans like this one. New York has no ability to change federal tax law. So the regulation would require the insurers to set aside the money after they had paid taxes on it. They would receive a tax deduction after they paid for hurricane damage. But in the meantime, they could not use the money for other purposes.

‘’No one wants to be at loggerheads over this,'’ says Robert P. Hartwig, the president and chief economist at the Insurance Information Institute, a trade group. ‘’But this becomes very difficult. The insurance department is basically asking business to spend hundreds of millions of dollars that they will not be able to record as an expense for perhaps many, many years.'’

Source: The New York Times, Joseph B. Treaster (10/09/2007)

Daily Real Estate News  |  October 2, 2007
Pending sales of existing-homes activity will be dampened near-term as mortgage disruptions continue to impact the housing market, according to the NATIONAL ASSOCIATION OF REALTORS^®.

The Pending Home Sales Index, a forward-looking indicator, fell 6.5 percent to a reading of 85.5 from an upwardly revised 91.4 in July, based on contracts signed in August. It was 21.5 percent below the August 2006 index of 108.9.

Lawrence Yun, NAR senior economist, says the mortgage market impact is quantifiable.

“Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments,” he says. “The volume of activity we’re seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can’t because of the credit crunch.”

The impact has been greatest in high-cost markets that are more dependent on jumbo mortgages, Yun says. In some areas, as much as 30 percent of signed contracts were falling through in August when the credit crunch problem peaked.

“The problem has since become less severe, though jumbo loan rates are still higher than they would be under normal conditions,” Yun says. “Therefore, sales activity in late fall will better reflect market fundamentals.”

Regional Numbers

Here’s what the index showed across the country:

• West: down 2.7 percent in August to 80.3, and is 27.1 percent below a year ago.
• Midwest: fell 2.9 percent from July to 78.1 and is 18 percent lower than August 2006.
• Northeast: dropped 8.3 percent in August to 77.3 and was 18.3 percent below a year ago.
• South: fell 9.5 percent in August to 97.8 and was 21.3 percent below August 2006.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

— REALTOR® Magazine Online

Daily Real Estate News  |  September 25, 2007

Existing-home sales fell in August, which coincided with the peak of mortgage availability problems, according to the NATIONAL ASSOCIATION OF REALTORS^®.

Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — were down 4.3 percent to a seasonally adjusted annual rate of 5.5 million units in August from a level of 5.75 million in July. That represents 12.8 percent below the 6.31 million-unit pace in August 2006.

“The unusual disruptions in the mortgage market, including a significant rise in jumbo loan rates, resulted in a fairly high number of postponed or cancelled sales, with many buyers having to search for other financing when loan commitments fell through,” says NAR’s Senior Economist Lawrence Yun. “Lower sales contributed to a build up of unsold inventory.”

Yun expects similar results for home sales in September. “Once we get through these disruptions, we’ll get a better sense of where the actual market is in late fall as conditions begin to normalize,” he says.

Better Times Ahead?

Total housing inventory rose 0.4 percent at the end of August to 4.58 million existing homes available for sale, which represents a 10-month supply at the current sales pace, up from a 9.5-month supply in July.

Nevertheless, NAR President Pat V. Combs says there is good news: The mortgage picture is showing signs of improving. “Mortgage interest rates have been declining and loan availability is improving,” she says. “Movements to enhance the FHA loan program and to raise the limits for conventional financing could provide additional relief, and it looks like the worse of the mortgage availability problem is behind us.”

Also, she notes, the abundant choice of homes is giving buyers an opportunity to better negotiate price and terms. “There are good opportunities in the market now, especially for first-time buyers,” Combs says.

A Closer Look at the Numbers

The national median existing-home price for all housing types was $224,500 in August, up 0.2 percent from August 2006 when the median was $224,000. The median is a typical market price where half of the homes sold for more and half sold for less.

“Price gains in the Northeast and Midwest were largely offset by a decline in the West, while the median existing-home price in the South was down slightly,” Combs says.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.57 percent in August, down from 6.7 percent in July; the rate was 6.52 percent in August 2006. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.34 percent.

Meanwhile, single-family home sales fell 3.8 percent to a seasonally adjusted annual rate of 4.81 million in August from a pace of 5 million in July. Sales are 13 percent below 5.53 million-unit level in August 2006. The median existing single-family home price was $223,900 in August, which is essentially even with a year ago.

Existing condominium and co-op sales also dropped, falling 8 percent to a seasonally adjusted annual rate of 690,000 units in August from 750,000 in July. They are 11.7 percent lower than the 781,000-unit pace a year ago. The median existing condo price was $228,500 in August, up 2.1 percent from August 2006.

Across the Region

Here’s what happened regionally in the United States with existing-home sales:

• Northeast: slipped 2 percent in August to an annual pace of 1 million, which is 5.7 percent below a year ago. Median price: $282,300, up 3.6 percent from August 2006.

• South: eased by 2.7 percent to a level of 2.2 million in August, which is 12.7 percent lower than August 2006. Median price: $183,500, down 0.7 percent from a year ago.

• Midwest: fell 5.2 percent to an annual rate of 1.28 million in August, and is 10.5 percent below a year ago. Median price: $177,100, up 3.1 percent from August 2006.

• West: dropped 9.8 percent in August to a level of 1.01 million, and is 21.7 percent below August 2006. Median price: $332,300, which is 3.8 percent below a year ago.

— REALTOR® Magazine Online

When a home owner goes through foreclosure or a short sale, the Internal Revenue Service considers the amount of the loan that was forgiven to be income for the debtor. That bill can come as a sickening surprise for those who believed that they had finally crawled out from under debt.

Some people in this predicament are fighting the IRS — and winning. And even borrowers who still have to pay can negotiate lower payments with the IRS, tax experts say.

The first step is to get knowledgeable legal and tax help, advises Kurt Eggert, a professor at Chapman University School of Law. This is not the time to file your taxes on your own, he says.

In some cases, an experienced tax attorney may able to show that the original loan process was so flawed that the borrower is not liable for taxes at all. Or a borrower who can demonstrate that she is insolvent also may be able to escape the tax, too.

Source: The New York Times, Geraldine Fabrikant (08/20/07)

Replace the flooring. Install laminate floor over old linoleum, vinyl or chipped tile. It costs just $1 to $5 a square foot and looks like wood, stone or tile.
Replace the lighting. A new ceiling fixture costs less than $100 and will brighten up the place. Adding some under-the-cabinet lights will illuminate work surfaces.
Give the cabinets a new life. A coat of paint and new knobs is the cheapest way to go. If you’re able to spend $4,000 to $6,000 on the project, hire a refacing company to replace the doors and drawerfronts.
Refinish the appliances. For a few hundred dollars, an appliance refinisher will re-enamel your stove, refrigerator and dishwasher door in the color of your choice, including a stainless steel look-alike.
Update the backsplash. Replace the space between your cabinets and the countertop with fashionable stone or inexpensive wallpaper.

Source: Money, Josh Garskof (07/01/2007)

U.S. home prices fell 1.4 percent in the first quarter compared with one year ago.

This is the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday.

The 10-city Case-Shiller price index fell 1.9 percent year-on-year through March, while the 20-city index dropped 1.4 percent.

Thirteen of 20 cities have seen falling prices in the past year, led by Detroit, which was down 8.4 percent, and San Diego, where prices fell 6 percent.

Prices in Phoenix and Las Vegas have fallen the most from their peak. After growing at a 49.3 percent pace in September 2005, home prices in Phoenix are now down 3 percent year-on-year. In Las Vegas, price gains went from 53.2 percent in September 2004 to negative 1.6 percent in March 2007.

Home prices are down 4.9 percent in Boston, down 4.8 percent in Washington, down 3 percent in Tampa, down 2.4 percent in Cleveland, and down 2.3 percent in San Francisco. Prices fell 2 percent in Denver, 1.9 percent in Minneapolis, 1.4 percent in Los Angeles, and 1.1 percent in New York.

Source: Dow Jones Business News (05/29/2007)