Real Estate Information

Mortgage plan gaining steam

WASHINGTON – Oct. 9, 2009 – The Obama administration touted progress on its foreclosure-prevention program Thursday after hitting an interim target of signing up 500,000 borrowers three weeks ahead of schedule. But in a report to be released Friday, a congressionally appointed oversight panel questioned whether reaching that goal would be enough to slow down the foreclosure crisis.

The program, known as Making Home Affordable, got off to a bumpy start when it was launched in March with homeowners and consumer advocates complaining about the difficulty of reaching lenders, long telephone wait times and documents that were repeatedly lost. But senior administration officials said Thursday that the program is now gaining momentum.

Under the $75 billion government program, lenders are paid to lower borrowers’ mortgage payments; the administration has said the program was aimed at helping up to 4 million borrowers before expiring in 2012. It is part of a larger government effort to revive the housing market that senior administration officials said has also kept mortgage rates low and prompted millions of borrowers to refinance their loans.

“The broad signs that you see in the housing market … are encouraging,” said Treasury Secretary Timothy F. Geithner. It is still early, and “we’re still living with some risks that housing is going to be a source of weakness for the broader economy and that you still face a … large number of families across the country still at risk of losing a home they can afford to stay in.”

The industry trumpeted its progress so far. Wells Fargo nearly doubled the number of modifications it started last month to 62,989, or about 20 percent of its delinquent borrowers eligible for the program, according to government data released Thursday. Bank of America helped about 95,000, or 11 percent of its eligible borrowers, and company officials said the bank is on track to help 125,000 by November.

“We feel really good about the momentum,” said Steve Bailey, Bank of America’s home retention strategies and policy executive.

Despite the recent progress, economists expect millions of borrowers to lose their homes over the next few years. The government program has likely reduced the number of foreclosures by about 7 percent to 8 percent during the past six months, said Paul Dales, U.S. economist for Capital Economics. But some of the borrowers helped by the program may have been able to avoid foreclosure on their own while others may still default on their loans later, said Dales.

“What it won’t do is stop foreclosures from rising,” Dales said. “It will just rise by less.”

A draft report by the Congressional Oversight Panel, which is monitoring the government’s Troubled Assets Relief Program, noted that the foreclosure effort is not set up to tackle two of the most pressing causes of mortgage delinquencies: rising unemployment and risky home loans known as option adjustable-rate mortgages, which reset to significantly higher payments. Over the next few years, millions of those loans are scheduled to shift to potentially higher interest rates, creating the prospect of a new wave of foreclosures.

“It increasingly appears that [the government program] is targeted at the housing crisis as it existed six months ago, rather than as it exists now,” the report said. Acknowledging the Treasury’s near-term goal of reaching 500,000 borrowers, the report said, “The achievement is relatively small in relation to the magnitude of the foreclosure crisis.”

The modifications started so far have lowered borrowers’ median interest rates to about 2 percent from 6.85 percent, according to the report, and reduced their payments by $500, to $849.31.

In a statement, Treasury spokeswoman Meg Reilly said “constructive feedback” from the panel is welcome and noted that the administration is already studying more ways to help unemployed homeowners. “The housing crisis was never going to be fixed overnight. Instead, it requires a comprehensive strategy focused on providing sustained support for American homeowners,” she said. “We believe that the Making Home Affordable program is an important part of that strategy.”

Not all parts of the government program are operational. After announcing in April that borrowers with a second mortgage could see payments on those loans reduced significantly as part of the program, the administration has yet to sign contracts with lenders to implement it. Homeowners and consumer groups continue to complain that qualified borrowers are being rejected by lenders and that there isn’t a clear appeals process.

The government program “had many obstacles, problems, and operational and technological challenges getting started and . . . is just now gaining momentum,” Richard H. Neiman, superintendent of banks for the New York State Banking Department, said in a statement included in the report.

It is also unclear how many borrowers will make enough payments to survive the trial period of a modification, the first three months, or might redefault on their loans later. The conversion rate to permanent modifications has been low so far, according to the report, and the Treasury has not released data on how many redefaults it expects.

“Redefaults mean that foreclosures have been delayed, rather than prevented,” the report said.

Florida’s existing home, condo sales up in August 2009

ORLANDO, Fla. – Sept. 24, 2009 – Florida’s existing home sales rose in August – marking a full calendar year (12 months) that sales activity increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®.

Existing home sales rose 28 percent last month with a total of 13,850 homes sold statewide compared to 10,813 homes sold in August 2008, according to Florida Realtors. The state association also reported a 45 percent increase in last month’s statewide sales of existing condos compared to the previous year’s sales figure.

Sixteen of Florida’s metropolitan statistical areas (MSAs) reported increased existing home sales in August; 18 MSAs also showed gains in condo sales. A majority of the state’s MSAs have reported increased sales for 14 consecutive months.

“For a year now, statewide sales of existing single-family homes in Florida have increased each month compared to the year-ago figures,” says 2009 Florida Realtors® President Cynthia Shelton, CCIM, CRE, a broker and director of investment sales with Colliers Arnold in Orlando. (CCIM stands for Certified Commercial Investment Member and CRE is the Counselor of Real Estate designation). “This is encouraging news, and while it shows the beginnings of recovery, the housing market still needs time to continue its gradual absorption of housing inventory that will help stabilize home prices. That is why it is critical for Congress to extend the first-time homebuyer tax credit into 2010. And, because it’s now taking longer to finalize a home sale, first-time buyers who want to take advantage of the $8,000 federal tax credit need to act quickly, or they may miss the closing deadline of Nov. 30, 2009.”

Florida’s median sales price for existing homes last month was $147,400; a year ago, it was $188,500 for a 22 percent decrease. Housing industry analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in July 2009 was $178,300, down 14.6 percent from a year earlier, according to NAR. In Massachusetts, the statewide median resales price was $310,000 in July; in California, it was $285,480; in Maryland, it was $273,769; and in New York, it was $205,000.

Signs point toward continued positive momentum in the housing sector, according to NAR’s latest industry outlook. NAR Chief Economist Lawrence Yun predicts existing home sales will rise through the fourth quarter. “Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year,” he said. “However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later,’ to ‘I don’t want to miss out on a recovery.’”

In Florida’s year-to-year comparison for condos, 4,674 units sold statewide compared to 3,222 units in August 2008 for a 45 percent increase. The statewide existing condo median sales price last month was $107,500; in August 2008 it was $158,100 for a 32 percent decrease. The national median existing condo price was $178,800 in July 2009, according to NAR.

Interest rates for a 30-year fixed-rate mortgage averaged 5.19 percent last month, down significantly from the average rate of 6.48 percent in August 2008, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s larger markets, the Daytona Beach MSA reported a total of 686 homes sold in August compared to 573 homes a year earlier for a 20 percent increase. The market’s existing home median sales price last month was $132,700; a year ago it was $164,200 for a 19 percent decrease. A total of 135 condos sold in the MSA in August, up 27 percent over the 106 units sold in August 2008. The existing condo median price last month remained level compared to a year ago at $184,300.

© 2009 Florida Realtors®

Report: 1 in 3 loan applications denied

WASHINGTON – Oct. 1, 2009 – Nearly one in three borrowers who applied for a mortgage last year was denied as lenders kept their standards tight as the mortgage crisis accelerated, the government reported Wednesday.

In its annual look at mortgage practices among lending institutions, Federal Reserve said the denial rate for all home loans was about 32 percent last year – about the same as in 2007, but up from 29 percent in 2006. The denial rates for blacks and Hispanics were more than twice as high as the rate for white borrowers.

The report highlights massive changes in the lending industry after the housing market bust. Overall loan applications were down by a third from a year earlier, and were half the level in 2006.

Loans backed by the Federal Housing Administration soared to 21 percent of all loans made last year from less than 5 percent in both 2005 and 2006.

For black borrowers, more than half of all loans were FHA-insured, more than triple a year earlier. For Hispanics, that number shot up to 45 percent, more than four times as high as in 2007. That was troubling news for consumer advocates.

“I’m hard-pressed to believe that many of those borrowers couldn’t have been served by the private sector,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington. “It implies that the industry has shut down in serving this population.”

High-priced loans with rates at least 3 percentage points above the rate for prime loans shrunk to nearly 12 percent of the market from a high of 29 percent in 2006. But that figure mainly reflects unusually low interest rates during the recession, the report said, and understates the disappearance from the market of high-priced subprime loans made to borrowers with poor credit.

Last year, about 17 percent of blacks and 15 percent of Hispanics got high-priced loans, compared with about 7 percent of whites. Even controlling for factors that might widen that discrepancy, there is still a gap of almost 8 percentage points between the number of blacks and whites who got high-cost loans.

The mortgage industry says lenders are not discriminating by race, and are making adjustments based on borrowers’ risk profile – such as their credit score and the size of their down payments.

“You still have a certain degree of risk-based pricing in the market,” said Jay Brinkmann, the Mortgage Bankers Association’s chief economist.

Lenders also scaled back dramatically on the amount of so-called “piggyback” mortgages, in which borrowers used second mortgages to avoid making a 20 percent down payment. Those loans have virtually disappeared from the market: Only 98,000 were made last year, down from 1.3 million annually in 2006.

Tampa Florida Real Estate Market Trends

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GO TO THE GARDEN!

The human mind is like a garden. It directly reflects the care and attention given to it. Consider two gardens side-by-side, in the same soil.

The first is bursting with color, gives off the most delicate of fragrances, is free of weeds, and forest green. New buds continually replace each other, and it's a delightful place to spend a sunny day.

Just a few feet away, you encounter a musty patch of stunted leaves, few blooms, parched soil, and insect infestation. The few plants remaining beg for a kind word and attention of any kind. They look sad from their days of inattention.

Why is there such a disparity between the two gardens? The first has a gardener, while the second has been totally ignored. And just as an untended garden will fail to prosper, so will an untended mind.

Imagine how easy it is for the mind to wither and atrophy when attention is not paid to its simplest needs. The mind can be so creative, unless it is fed passive TV drivel hour after hour. The mind can be so enthusiastic, unless powered by a body nourished by fast food, chips, sugar-filled cereal, and caffeine-packed soft drinks.

Just as a vibrant garden inspires, a well-tended mind can bring forth the best in others. It deserves our attention. It should be watered and fertilized with foods filled with the proper nutrients. It can be expanded greatly through the stimulation of education. It can remain viable only through the practice and application of solid principles.

When the care given is incongruous with the results desired, the garden is a disaster. When the mind's actions do not match its stated objectives, chaos is the result. Our minds have the potential to bloom more abundantly than any garden. They deserve our utmost attention.

With three months until the $8,000 first-time homebuyer tax credit is set to expire, many real estate markets are starting to heat up again as buyers rush to close their deals before the deadline. The credit, created earlier this year as part of the economic recovery stimulus package, has had a visible impact on the housing markets, and many are wondering what will happen when the credit disappears on December 1, 2009.

By the time the program ends, according to estimates from the National Association of Realtors, roughly 1.8 million homebuyers will apply for the tax credit, and 350,000 of those would not have been able to afford to buy without the help. The pressure to file before the deadline has also likely helped boost recent sales increases of new and existing homes, an important economic indicator of the market bottom and revival.

How Does It Work?

Anyone who has not owned a primary home in the past three years can qualify for this credit, as long as they fit within the income requirements. For single taxpayers, the income limit is $75,000 and married couples can earn up to $150,000 together. For homes purchased between the set period of January 1, 2009 and December 1, 2009, this tax credit is the greater of 10 percent of the home's price or $8,000, and unlike previous credit it does not need to be repaid.

What Will Happen When It Expires?

Congressman Johnny Isakson, R-GA., has been working to extend the tax credit into next year as well as make it more accessible by allowing all homebuyers to participate, regardless of income or current ownership, and by increasing the credit amount to $15,000. His plan is certainly very popular with many inside the housing sector. In a recent interview with U.S. News & World Report, Jerry Howard, President and CEO of the National Association of Home Builders, said he was worried about digression in the markets when the credit ends.

"It is the first-time homebuyer market that represents any positive signs in the industry, and if this credit expires at the end of November," Howard said, "we're really concerned about what that will mean to the market going forward."

He believes Isakson's extension plan would finally allow the market to bottom out, creating price stability and decreasing the number of foreclosures. He also thinks an expanded tax credit would help move inventory at the middle and top levels of the market, not just the starter and fixer-upper homes, leading to a need for more home building.

Home Sales Pace

July was another great month for existing U.S. home sales. For the fourth month in a row sales rose, climbing 7.2 percent to 5.24 million units, up from 4.89 million in June. Sales were even up on a yearly basis, rising 5.0 percent from the 4.99 million homes sold in July 2008.                                                                                                                     

A story in "Inside Mortgage Finance" from August 31^st stated, "The Federal Housing Administration is not considering adopting the Home Valuation Code of Conduct appraisal system now in place at Fannie Mae and Freddie Mac. Coming from a recent meeting with FHA executives, top officials of the National Association of Mortgage Brokers said they were assured by FHA Commissioner Dave Stevens that the HVCC is not in the agency’s plans."

Friday, however, the FHA Commissioner announced that after January 1, the FHA will require appraisals to be ordered via HVCC, and that instead of a net worth of $250,000 lenders must have a net worth of $1 million sometime in the next year. The FHA sent out a Mortgagee Letter to all lenders that they are adopting HVCC in most of its current form – the same one adopted by Fannie & Freddie in May. Mortgage originators will no longer be able to order appraisals from appraisers, but instead use AMC’s, which contributed to some of the popularity of FHA loans. Appraisers stand to make a little more, brokers will have less control, FHA appraisals will only be good for 4 months and not 6, and the FHA will allow appraisals to be transferred to another lender. Realtors can still give appraisers comparable sales data, but just not value: a fine distinction. In addition, the FHA said it may fall below its mandated capital level (2% reserves) for the first time in its history, but it will not require a taxpayer bailout, and that they will be hiring a chief risk officer. (Talk about a piece of cake job, right?)

Mini-eagle questions? “Lenders seeking approval to originate, underwrite, or service an FHA loan must meet the eligibility criteria for a supervised or non-supervised mortgagee. Mortgagees with this approval status must assume liability for all the loans they originate and/or underwrite. Loan Correspondents (mortgage brokers) will continue to be able to originate FHA-insured loans through their relationships with approved mortgagees; however they will no longer receive independent FHA approval for origination eligibility. Check it all out at: http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/HUDNo.09-177

Why the changes? According to the MBAA, almost 20% of FHA loans are delinquent in some form. The number of loans that they insure has grown from slightly more than 4 million 3 years ago to almost 5 ½ million now. Many originators view FHA loans as a substitute for the subprime loans from days gone by and some analysts feel that these loans will cause a huge negative impact on the industry and on the taxpayer. (Not everyone deserves a home loan, right? Why allow DTI’s above 36%? 3.5% or less down?) 

  
PMI made some adjustments to their Distressed Markets List, at the same time increasing the maximum debt-to-income (DTI) ratios to 45% for all loans.  While this will allow more borrowers to qualify, “we caution our customers to carefully analyze the borrower’s ability to repay the loan using a higher ratio.  We will require that your submissions represent a balanced range of DTI ratios.” 

Lennar, the third-largest U.S. homebuilder, lost more money in their 3^rd quarter than analysts had expected. Revenue dropped and interest costs increased... a bad combination. The company reported a loss for the three months which ended Aug. 31 of almost $172 million versus $89 million from a year earlier. Lennar has reported 10 straight quarterly losses.

GMAC Bank Correspondent Funding reported that effective immediately, GMAC Bank will not underwrite closed loans, and that all loans must be underwritten prior to closing. Closed loans currently in pipeline, submitted to GMAC Bank for underwriting, will be underwritten but may be subject to additional conditions by the underwriter including but not limited to updated credit documents.

 GMAC updated their jumbo program. (Not jumbo conventional, but real-live jumbo loans!) Most of the programs require a FICO above 700 and even 720, but LTV's can go as high as 80% for loans up to $2 million. (3-4 units have a maximum LTV of 70 %.) LTV's are reduced for Declining Markets, as one would expect, but an upgrade of 5% LTV/CLTV “is permitted if the loan meets all of the criteria listed here. The LTV/CLTV may not exceed the maximum permitted for the product: minimum 720 FICO, maximum DTI 35%, SFR (condos not permitted), purchase or rate/term only, two full appraisals, full amortization, and a maximum combined loan amount of $2 million.

GMAC also adjusted some of their other lending criteria. For example, they stated that properties that have recently been listed for sale are eligible for rate and term refinances and cash out refinances if the property listing has been cancelled at least six months prior to the application date. Also, concerning VOE’s, a verbal VOE dated within 10 calendar days of the Note date for employment income or within 30 calendar days for self-employment income, whether manually underwritten or underwritten by Desktop Underwriter is required on all transactions. GMAC’s bulletin states their verbal VOE requirements (independently obtaining the phone number and address, documenting the call, etc.) For self-employed borrowers, the lender is required to verify the existence of the borrower's business within 30 calendar days prior to the Note date from a third party, such as a CPA, regulatory agency, or the applicable licensing bureau, if possible; and by verifying a phone listing and address for the borrower's business using a telephone book, the internet, or directory assistance.

Flagstar, known to buy a mortgage or two, announced that the New York Stock Exchange gave them notice that it did not satisfy one of the NYSE's standards for continued listing applicable to the company's common stock. (Unlike the stock of other financial institutions, which have been doing well lately, Flag’s stock has been below $1 per share for a consecutive 30-day trading period.) “Under NYSE policy, in order to cure the deficiency for this continued listing standard, the company's common stock share price and the average share price over a consecutive 30-trading-day period both must exceed $1.00 within six months following receipt of the non-compliance notice.” Flagstar will need to tell the NYSE what they plan to do to correct the price deficiency.

Maybe offering 125% LTV loans will help them, maybe not. Starting today, Flagstar Bank is offering the Fannie Mae DU Refi Plus Program. “Loans meeting the guidelines of the Fannie Mae DU Refi Plus Program will now be eligible up to 125% loan-to-value (LTV). Loans with an LTV between 105.01-125% must be registered under one of their new product codes. Loans being refinanced must have been sold to Fannie Mae, and if the new loan requires the existing
mortgage insurance be modified, Flagstar Bank must be the current servicer.

Wells Correspondent told patrons that after October 1, Standard Renegotiations – The cost of an initial renegotiation for standard renegotiations is current market, less .500, capped at original price, and that multiple renegotiations will not be offered. A minimum market movement of 1.00 is required to exercise the “free float to current with PerformanceWorks” option. Wells will require reimbursement of the full SRP recapture amount if the loan is refinanced and sold to Wells Fargo Funding by the original seller of the loan that is being paid off.

Back to the economy! We have the Conference Board’s Leading Economic Indicators today at 10AM EST, but after that there is no scheduled economic news until Thursday. In its place we have the $112 billion Treasury auction (starting with the 2-yr tomorrow, then the 5-yr Wednesday and the 7-yr Thursday), along with the FOMC meeting. Don’t look for any change in overnight rates (remember that they do not set mortgage rates – supply & demand does that). Later in the week we have Existing Home Sales, New Home Sales, Durable Goods, and Consumer Sentiment. The prices for 30-yr mortgages are roughly unchanged from Friday afternoon, and the yield on the 10-yr is at 3.44%.