All good things...

I received my Weekly Mortgage Market Update today from Victor Samaan, our Bank of America rep and as anticipated the threat of higher interest rates on home loans could be just around the corner. It's been my contention that one of the best reasons to buy now, even with the specter of further devaluation in coming months is interest rates. How much would a point add to your payment?


"ALL GOOD THINGS MUST COME TO AN END..."

Or so the popular saying goes. And last week, the Fed reiterated once again that their Mortgage Backed Security (MBS) purchase program...the program that has helped keep home loan rates low for much of the last year...will end on March 31, 2010 as previously stated. Here's the lowdown on what this means, and all the latest news impacting home loan rates and the markets.

Last Wednesday during their regularly scheduled meeting of the Federal Open Market Committee, the Federal Reserve kept the Fed Funds Rate unchanged. But history has shown that when the Fed has left rates too low for an extended period of time, there is a price to be paid, via higher inflation. Yet if the accommodation is removed too early, it can derail an already fragile recovery. The Fed continues to walk this tightrope, trying to get it "just right."

Along with this decision, the Fed emphasized and reminded that their MBS purchase program will still end on their already revised deadline date of March 31, 2010. Why is this significant? Let's look at the numbers from last week to get an idea. The Fed purchased $16B in MBS in the latest week bringing the year-to-date total to $1.087T. This means there is $163B left to purchase before March 31, which in turn means the Fed will purchase about $11.5B on average each week through the end of the buying program. This is less than half of what the Fed was buying regularly throughout 2009 and a 1/3 less than what the Fed has been buying in recent weeks.

So why does this point to higher rates around the corner? When there is lots of supply and diminishing demand, the price of that item will subsequently go down - it's Economics 101. So, when Bond prices start to decrease from the diminishing demand of the Fed's purchases, home loan rates will naturally be likely to increase.

Source: Victor Samaan at Bank of America

Home construction rebounds!?

OK, I'll bite. Because in the end I want to believe that the formula exists to work through all this. You'll note, however that all this new construction "jumped" by only 1.9% here in the West verses 16.4% in the Northeast. So in our micro southern California market housing starts are nearly nonexistent.

And although I partly agree with the comment (love the comments) by Brian Javeline about getting some focus on revitalizing the 128 million existing homes in need, there will always be new construction and Yousuf points out at the end of the piece that Wall Street banks need to help the taxpayers who funded their bailouts with improved lending practices.


Home construction rebounds from 6-month low

By Hibah Yousuf, staff reporter
December 17, 2009: 10:41 AM ET

NEW YORK (CNNMoney.com) -- Home building rebounded from a six-month low in November, with improvement in new home construction in all sections of the nation, according to a government report issued Wednesday.

Construction of new homes rose to an annual rate of 574,000 during the month, 8.9% above the revised October rate of 527,000. The rate was still 12.4% below the 655,000 rate during November 2008.

A consensus estimate of economists surveyed by Briefing.com expected 574,000 housing starts during the month.

New construction jumped the most in the Northeast, with a 16.4% rise from the previous month. Housing starts rose 12.3% in the South, 3% in the Midwest and 1.9% in the West.

The number of building permits issued during November rose to a seasonally adjusted annual rate of 584,000. That was 6% above the revised October rate of 551,000, and 7.3% below the November 2008 estimate of 630,000.

One reason for the October downturn was concern that an $8,000 homebuyer's tax credit -- part of the Obama administration's economic stimulus -- was going to expire on Dec. 1.

At the start of November, the credit was extended through the end of June and expanded to apply to more buyers. But David Crowe, chief economist at National Association of Homebuilders, said the bill hasn't had a chance to impact the housing market.

"This is a recovery from the prior month," said. "But we're still seeing a tapering off toward the end of the year. During the middle of this year, we saw a nice buildup through the late summer as a result of the homebuyer's tax credit."

Housing starts peaked this year in July with an annual rate of 593,000.

"We're in a bit of a lull, but the new (extended) credit will have an impact as we move into 2010 and consumers plan for that credit availability, and builders begin to answer expected demand in the spring," he said.

Crowe added that the tight credit market has also made it difficult for builders to borrow money to start building projects.

"Builders are ready to begin restocking their inventories to prepare for the selling season, but they can't get production credit from the banks," Crowe said. "Banks are effectively making carte blanche decisions without recognizing projects that are in decent markets with viable futures."

Crowe said he hopes President Obama's recent pressure on Wall Street banks to help taxpayers who funded their bailouts will improve lending practices.

Source: CNNMoney.com

Citigroup to suspend foreclosures/evictions for holiday season

I’m not sure exactly how I want to position this… and as much as I want to be professional and not have an opinion, walk the fence (so-to-speak) I can’t help myself on this one.

OK so Citibank is saying “why don’t you folks take an additional 30 days because we’re not going to do anything with your home for the next 30 days anyway and really there are way too many functions on our schedule to sign all the docs until mid January.” The truth is that tens of THOUSANDS of REOs are sitting vacant and will be indefinitely. Much of this inventory is not even being marketed!

Citibank says it’s working on an alternative to foreclosure, so why not work on an alternative to evicting these owners, mid winter 30 days from now? In reality this is a drop in the bucket… The numbers of foreclosures reported in the third quarter were more than 900,000 and that is approximately 23% higher than a year ago. See map at Where Foreclosures Cluster.

Considering the magnitude of this crisis, for an organization the size of Citibank to do a press release about this weak concession is nothing but a publicity stunt to garner “good will” during the holidays. I’m embarrassed for them and ashamed that MSNBC posted it (seriously)… Can I get a WHOOP-DEE DOO!?


Citigroup to suspend foreclosures for 30 days
Bank is working on ‘long-term fundamental alternatives’ to foreclosure

WASHINGTON - Citigroup Inc. will suspend foreclosures and evictions for 30 days in a temporary break for about 4,000 borrowers during the holiday season.

The New York-based bank said Thursday the suspension will run from Friday through Jan. 17. It applies only to borrowers whose loans are owned by Citi. Borrowers who make payments to Citi but whose loans are owned by other investors are out of luck.

"We want our borrowers to have a much less stressful time, to spend their time with their families during the holidays as opposed to worrying about their homes," Sanjiv Das, head of the company's mortgage division, said in an interview.

The suspension means Citi will halt foreclosure sales and stop evicting homeowners from properties it has already seized. The company projects it will help 2,000 homeowners with scheduled foreclosure sales and another 2,000 that were due to receive foreclosure notices.

Das also said the company is working on "some long-term fundamental alternatives" to foreclosure, but declined to be specific. "We know that moratoriums are not permanent solutions," he said.

Most major lenders suspended foreclosures last winter while the Obama administration developed its $75 billion loan modification program. Foreclosures picked up again after those suspensions lifted. In recent months, they have fallen as banks evaluate whether borrowers qualify for the government program.

Citi has enrolled about 100,000 borrowers in the Obama program, but had made only about 270 of those modifications permanent as of the end of last month, according to a Treasury Department report. But Das said the low number resulted from a "reporting error" and said it will rise dramatically by year-end.

"I have put a lot of pressure on my team to make sure that there is almost nothing left in the pipeline," he said.

Short-Sale standards could help troubled homeowners

Bravo! Standardizing the short sale process is a fantastic move…

What’s missing from this proposal is requiring that agents be qualified to work in the Short Sale arena. These transactions are much more problematic and time consuming then a standard sale and require an entirely new skill set.

There are agents, with short sale listing who probably shouldn’t have a real estate license and yet they are representing owners in dire straits, where time is of the essence and they (the agent) are all that stands between a successful short sale and foreclosure.

When one or the other is the only option, there’s a big difference. The credit score hit alone is at least a couple hundred points higher, foreclosure verses short sale and a foreclosure stays on your record for a minimum of 7 years verses just a couple with a short sale. There are other issues as well.

If you’ve followed the content I’ve posted recently, you’ll probably agree that we need to assure that more of this “pre-foreclosure” property is successfully marketed. Perhaps the holders of these second liens will need to decide between $3,000 guarantee and the prospect of pursuing more money, over time by legal means. We all know who end up with the lion share in that scenario.

In the end, if we can cut the number of foreclosures then it’s a win. The banks do not need more property and the short sale process needs to be less of a hassle with a higher rate of success. As someone focusing more and more on short sales, parameters and timeline are welcomed.


Obama's standardized short-sale plan could help troubled homeowners

The Los Angeles Times
By Kenneth R. Harney
December 13, 2009

Reporting from Washington - If you're in trouble on your mortgage and can't get a loan modification, check out the Obama administration's standardized short-sale plan that's scheduled to roll out in the next several months.

The program, outlined Dec. 1 by the Treasury Department, is an attempt to streamline what has traditionally been a contentious, time-consuming process by requiring lenders and others to use nationally uniform documents, timelines and financial incentives.

A short sale involves a lender or investor agreeing to collect less than the balance owed on a mortgage debt out of the proceeds of a negotiated sale of the property. Often a short sale is the last alternative to foreclosure available to distressed homeowners and banks. Say you've lost your job and fallen behind on mortgage payments. With little or no income, you can't qualify for a modification program.

In this situation -- grim as it is -- your best move may be to see whether your lender will accept a short sale. Though the idea sounds straightforward, in practice it is not. First, the bank needs to be convinced that a short sale would yield it more money at the bottom line than a foreclosure would.

This usually means you need to bring in a real estate agent who knows the ropes and can pull together the key information needed by the bank: recent comparables on closed sales, local market trends and the likely selling price of your house.

You'll also need a buyer for the house -- one who'll pay a price acceptable to the bank and has financing to close the deal. If you happen to have a second mortgage or home equity credit line on the property, you'll also need to negotiate how much that lender will receive from the sale proceeds.

That can be tricky. In depressed real estate markets, the second-lien lender may be holding a note that's worthless in a foreclosure because plummeting property values have wiped out the collateral. Yet that same bank is in a pivotal position: It has the legal power to block the short sale by refusing to sign on to the deal.

Equally troublesome in short sales is the fact that banks, mortgage servicers and bond investors often have conflicting requirements for documentation and financial yields that can complicate and drag out the haggling for months.

Enter the Obama administration's new streamlining plan. Besides requiring lenders and servicers to use uniform documentation, pre-approved short-sale terms and accelerated turnaround times, the plan provides financial incentives for key players:

* Homeowners who successfully complete a short sale under the program receive $1,500 to defray relocation costs.

* Mortgage servicers can receive $1,000 per case.

* Investors get $1,000.

* Second-lien holders receive up to $3,000 from the sale proceeds.

Even real estate agents get something: The rules prohibit banks from forcing them to cut their commissions from the listing agreement as part of the final deal.

Sounds like a formula for encouraging a lot more short sales, right? The jury will be out on that for months, and most major lenders are still studying the fine print of the Obama program. But early reactions from big banks appear to be positive.

Dave Sunlin, a senior vice president for Bank of America Corp., said: "We're very pleased. We welcome any effort to reach standardization for all parties" involved in short sales.

Faith Schwartz, executive director of Hope Now -- a Washington-based group representing the country's largest banks, mortgage servicers, bond investors and consumer counseling organizations -- said the plan should bring "uniformity and standards" to a process usually characterized by "mayhem" among the negotiating parties.

Scott Brinkley, a senior vice president for First American Corp., a firm that provides market data for banks, said, "You're going to see a lot of cooperation" by lenders and investors.

But there could be a major pothole: The Obama plan tilts to consumers by requiring second-lien holders to drop all financial claims against short-selling borrowers beyond the $3,000 they take out of the deal.

Travis Hamel Olsen, chief operating officer of Loan Resolution Corp., a Scottsdale, Ariz., consulting firm, says the $3,000 payment won't be enough for many second-mortgage lenders. Today they frequently obtain additional short-sale compensation from sellers as the price of their participation -- in cash or through promissory notes -- far beyond $3,000.

"I'm concerned that that could limit participation" by second-lien holders, Olsen said.

Bottom line for homeowners who might benefit: Don't have wild expectations, but definitely ask your servicer whether it plans to participate and whether the forthcoming standardized plan for short sales might work for you.

Source: Los Angeles Times

Short Sales: The 5 Stages of residential dispossession Pt. 1

The 5 Stages of residential dispossession
Part 1: Short Sales

The process through which a home becomes Bank Owned or an REO (real estate owned) consists of approximately five stages.

1. Short Sale
2. NOD (notice of default)
3. Foreclosure
4. Auction
5. REO (real estate owned)

Over the next several weeks I will attempt to shed some light on this topic and hopefully provide some information or guidance that might help some homeowners avoid losing their home or at least minimize the impact of the inevitable.

Topic one (where a loan modification has failed) is the Short Sale and according to a recent article in the LA Times, the rate of foreclosure among outstanding mortgage loans in the Los Angeles metro area was 3.69% this October, compared with 1.75% in 2008. Those familiar with the real estate market in Q1 and Q2 of this year (2009) can appreciate what that could mean moving into the first part of next year... The national foreclosure average is 3% according to data released by First American CoreLogic, which tracks the mortgage market.

Delinquent loans 90 days or more past due constituted 10.9% of all mortgage loans in the Los Angeles area, up from 5.86% during the same month the year before. So it is likely that we’ll see a lot more short sales and foreclosures in 2010.

Please note that although I am a licensed real estate agent and member of the California Association of Realtors I am NOT and attorney, accountant or loan officer. If you need advice in any of these areas you should contact the appropriate professional. The information herein is meant to offer general information and although deemed to be accurate is not guaranteed.


The Short Sale

In the current real estate market, short sales and foreclosures represent a new traditional real estate transaction. It’s an unfortunate fact of life that over the past several years many homes were purchased for substantially more than their current value. In a recent Wall Street Journal piece “One in Four Borrowers Is Underwater “, writers’ Ruth Simon and James R. Hagerty state that nearly 10.7 million households , or about 23% of homeowners with mortgages had negative equity in the third quarter of 2009. It is estimated that more than 520,000 of these borrowers have received a notice of default.

A short sale is a lender approved sale of real estate in which the sale price is less than (or short of) the mortgage balance.

For agents, knowing how to maneuver the complexities of a short sale, on either side of the transaction is not merely a good skill to have in today’s market, it’s critical.

Distressed homeowners’ are in a race against the clock to avoid foreclosure and buyers need to identify sound real estate opportunities quickly to avoid wasting time and missing opportunity. In either case the agent must be able to evaluate all available options and identify or establish the components of an effective short-sale package.


Anatomy of a Successful Short Sale

Successful short sales require 3 elements:

1. Seller opportunity to get out of a bad situation with minimal credit damage.
2. Buyer gets a deal, purchases property below the true market value.
3. Lender nets more money than a foreclosure action would bring.


Sellers

It’s important to note that Short Sales will not work if the property has sufficient equity for the lender to foreclose, sell as an REO and at least break even. The homeowner must be "upside-down" in their loan for the lender to approve a short sale.

When a homeowner experiences a hardship and can no longer pay the mortgage the first and best option is a lender approved short sale to attempt to avoid foreclosure. Whereas there are still negative credit implications associated with a short sale, they are much less severe.

The first step is valuation, what is the current market value of the subject property? As stated above, if there is sufficient market value in a home a lender will not approve a short sale and perhaps a quick standard sale (even if it requires some money out of pocket) is the best solution.

Establishing the current market value of a home involves measuring the subject property against other properties in the neighborhood that have sold recently. An experienced agent, with working knowledge of an area can put together a Current Market Analysis or CMA or there are tools available online to get a rough idea of value. Understand the there are many factors from square footage, lot size and the age of a structure to amenities like pools, views and location in a given community etc. that can affect the value of one home as compared to another.

If it is determined that the current market value is significantly below the amount owed, then the second step is to contact the lender(s) for a short sale application and instructions specific to their policy. If the seller is working with an agent (and in most cases they should be) they need to execute the proper documentation to authorize the agent to deal directly with the lender and the initial call to the loss mitigation department or the person named in demand letters should be placed together. This is the best way to establish a working relationship, answer questions, verify information and get outline of what they want and how they will make a decision on a short sale.

Beyond these initial steps, any successful shot sale will require a properly prepared Short Sale Packet which can easily be in excess of 50 pages. Closing statements, purchase contracts, market statistics, financial documentation, disclosures and a plethora of other forms, agreements and miscellaneous information must be provided, however one of the more critical elements of the packet is the Hardship Letter.

The numbers are the only thing that a lender cares about, so the hardship letter should NOT be a sob story. It MUST be a factual description of a financial hardship that is leading to bankruptcy, foreclosure or both. The lender needs be convinced that the only other option is foreclosure, at which point they will analyze the situation and determine whether a short sale is a preferable direction.

It must be made evident that the borrower is headed for foreclosure or bankruptcy. The letter needs to give a clear picture of the financial condition and be backed up with documentation (pay stubs, medical bills, termination letters etc).

The average cost for a lender to foreclose is approximately $50,000 and there are the reserves that lenders are required hold to back up non-performing loans. Lenders don’t like to tie up resources to back up these loans and are generally open to alternatives.

Certainly there is more to consider. Pursuing a short sale is a complex process and in some cases, if caught in time it can be avoided. In others foreclosure is inevitable. If you are concerned about maintaining your mortgage or have questions about the process please call or email at your convenience


Buyers

A true Short Sale opportunity is where a homeowner owes more on their home than they will receive from a standard sale and a situation where the lender will approve a price that meets your budget.

Obviously for the buyers’ part, a purchase at the lowest possible price, that the lender will approve is the goal. Priorities for a buyer would be to establish that the homeowner is upside-down in their loan, that the target property is worth less than the total amount owed and that true hardship for the seller exists to convince the lender that a short sale is necessary. Also to be sure of clear title, that there are no prohibitive liens or other claims against the property that will stall the process or cause it to fail. If the loan is VA or FHA, the situation needs to meets their specific criteria for a short sale.

Buyers beware! All homes advertised as "Short Sale" are not necessarily short sales and potential buyers need to verify if and when the paperwork was filed with the lender(s) and whether that paperwork was properly completed. If not, you may end up wasting a lot of time and energy, the home will be foreclosed and you'll be back to square one. Considering that most short sales involve property that is already in default, time is of the essence. There must be enough time to complete the process before a foreclosure action is completed. This requires a willingness and cooperation from the seller and the lender as well as the motivation to work to avoid foreclosure.

Of course I'll suggest that you are best served by working with a licensed agent or Realtor who has short sale experience, however if you choose to go it alone, do your homework and remember that the sellers agent was retained by the seller, is working against the clock in an attempt to find a qualified buyer and to strike a deal with the lender. Many agents listing short sales are handling several at once. Your best interest may be best served by you being informed or using an experienced agent focused on you alone.

Los Angeles-area foreclosure rate up in October

Along the lines of what I’ve been posting, we’re all just passengers on this one… see LA Times piece "Los Angeles-area foreclosure rate increases in October" below.

The bright side in South Bay, Palos Verdes Peninsula and the beach cities is that more-than-likely, as with the last round we will not experience the same degree of depreciation (if any) as areas inland or across the country.

Inventory: Active/Sold

On the Palos Verdes Peninsula 90274 and 90275, inventory is currently low with 253 properties (SFRs, condos and town houses) available for sale. Per the MLS, there have been 74 closed sales November 1st through today (16 since December 1).

In the beach cities (Manhattan Beach 90266, Hermosa Beach 90254, South Redondo Beach 90277 and the Hollywood Riviera) there are 364 active listings and 126 sales since the 1st of November (39 so far in December).

Torrance (not including the Hollywood Riviera) 91 listed currently, 76 sold November 1 to present (19 of those since December 1st).

If you’d like numbers on additional areas, please send a request via email.

The slow-down in December is expected, interest rates (see below) are still outstanding and although prices in general may drop further during 2010 (most likely during Q1/Q2) the best properties are still selling.


Rates as of Friday, December 11, 2009

Conforming 30 Year Fixed
Rate Disc. Points APR
4.625% 0.750% 4.813% Details

Conforming Jumbo 30 Yr Fixed
Rate Disc. Points APR
4.875% 0.750% 5.049% Details

FHA 30 Yr Fixed
Rate Disc. Points APR
4.750% 0.608% 5.077% Details

FHA Jumbo 30 Yr Fixed
Rate Disc. Points APR
4.875% 0.950% 5.216% Details

Rates complements of: Andre Hemmersbach
American/California Financial (310) 713-3100


Los Angeles-area foreclosure rate increases in October
December 10, 2009 2:40 pm

While home prices in the Los Angeles area have steadily increased in recent months, indicating strengthening in the housing market, more and more people are finding themselves falling behind on their mortgage payments, according to a report out today.

In the Los Angeles metro area, the rate of foreclosure among outstanding mortgage loans was 3.69% in October, compared with 1.75% for the same month a year earlier. That compares with a 3% national foreclosure rate, according to data released by First American CoreLogic, which tracks the mortgage market.

Delinquent loans 90 days or more past due constituted 10.9% of all mortgage loans in the Los Angeles area, up from 5.86% during the same month the year before.

Whether a new wave of foreclosures will hit the market next year remains a matter of debate among experts. Some believe a glut of properties could flood in, pushing down prices, while others argue that lenders and the federal government are both determined to keep such a situation from occurring.

Source: L.A. Times by Alejandro Lazo
Photo: Associated Press

Interest rates far from the only answer

"The miserable have no other medicine but only hope” Measure for Measure by William Shakespeare (Act III, Scene I)

My intension is not to paint a picture of doom and gloom. I remain cautiously optimistic that with conscience and care, we can weather the storm. There are, however those who are quick to say we're in recovery, the worst has past and by this time next year our real estate troubles will be a distant memory. That’s a classic example of ignoring the elephant in the room...The posted article “Low interest rates are no panacea for region's housing” describes a dynamic that exists in hard-hit Inland Southern California. Although interest rates are low there's a lack of inventory creating fierce competition and many buyers are getting frustrated. Builders cannot justify building. Statistics nationally on NOD's and REO's indicate that there should be plenty of inventory, however the manner in which these properties are released on to the market is critical. Too much, too fast and we upset the apple cart, prices freefall again and buyers pull back. It’s been said again and again that low interest, tax breaks and lower home prices have created this surge in buying, but it's not on a solid foundation. As expressed by economist Esmael Adibi (below) until we put people back to work and stimulate other aspects of the economy we're still very much at risk. At this point what's most important is managing the over 7.5 million homeowners who are either at risk or in foreclosure and the banks will ultimately determine how this unfolds. Get it right and we get through the next several months and perhaps 2010 with positive momentum. One can only hope.


Low interest rates are no panacea for region's housing

By LESLIE BERKMAN
The Press-Enterprise

Although the interest rate on a 30-year mortgage is the lowest it has been in almost four decades, it is not the medicine that will revive Inland Southern California's housing market, real estate experts said Thursday.

Mortgage rates for fixed 30-year loans in the U.S. dropped to a record low amid indications the housing market is showing signs of life. A 30-year fixed mortgage fell to 4.71 percent for the week ended Thursday, the lowest since mortgage buyer Freddie Mac began compiling the data in 1971.

The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make home buying more affordable and prop up the housing market.

But Inland experts say a shortage of inventory is suppressing sales of existing homes. Also, the high cost of land that home builders acquired makes it impossible for most of them to construct houses that can sell cheaply enough to compete with the foreclosure-ridden resale market.

"The interest rates being as low as they are today are not promoting more sales because of the lack of homes for sale," said Wil Herring, owner of Mtg Experts in Moreno Valley.

While the rate of mortgage defaults remains high, fewer foreclosed houses are coming on the market, a trend that some experts say reflects an effort by lenders to modify mortgages for financially troubled homeowners and to control the number of foreclosed homes for sale to prop up prices.

Herring said there is "sheer frustration" among would-be first-time buyers who have to compete for the limited number of bank-owned homes, frequently having to make multiple offers and losing out to all-cash buyers.

Chapman University economist Esmael Adibi said the lower mortgage interest rate is a positive development because it makes homes more affordable and will be welcomed by someone who is currently house hunting. But he said it won't be enough to overcome the negative impact of a soft economy on home sales.

"The job outlook and overall economic condition trumps any improvement we will get on the mortgage front because if a person doesn't have a job or is not confident about his or her job, even with the improved affordability, that person will not commit to purchasing a house," Adibi said.

Alan Nevin, director of economic research for MarketPointe Realty Advisors in San Diego, a firm that advises home builders, said lower mortgage rates will do "virtually nothing for new home building because it is not sufficient to cause developers to risk breaking ground."

OVERPRICED LAND

The basic problem, Nevin said, is the cost that developers paid for land -- most likely purchased at the height of the housing boom in 2005 or 2006 -- is "almost higher than what they can sell the homes for."

Nevin said recently he studied the Hemet-San Jacinto area and discovered that most of the sales offices in housing developments were closed because the builders couldn't compete with the resale market. He said significant home building will not occur until the banks resell land in the failed projects at discounted prices to a new group of builders.

"I suspect over the course of 2010 you will begin to see new homes being built in small quantities but not by the guys who built them before," Nevin said.

Bloomberg News and The Associated Press contributed to this report.

Source: The Press-Enterprise Online

More Government pressure on the mortgage industry

It is certainly unfortunate that some of those with the greatest need are failing to provide the necessary paperwork… Some homeowner’s do not understand the loan modification process, while other are actually opting for a short sale or foreclosure rather than wait out any potential recovery. A two percent mortgage for five years sounds pretty attractive to me!

With the Fed’s forcing the issue perhaps those still waiting for a decision (1/3 of applicants according to the article) will get an answer. In the end, it seems the only real leverage the government has is this dreaded “laggers’ list” that will be made public knowledge in an attempt to shame financial institutions into doing a better job. With 14% of homeowners behind or already in foreclosure it’s going to take a Herculean effort. RD

Homeowners who may be eligible for assistance can call 888-995-HOPE, or visit http://www.makinghomeaffordable.gov/.


Gov't increases pressure on mortgage industry

By ALAN ZIBEL, AP Real Estate Writer
Monday, November 30, 2009

WASHINGTON - Faced with sluggish progress in its foreclosure-prevention effort, the Obama administration will spend the coming weeks cracking down on mortgage companies that aren't doing enough to help borrowers at risk of losing their homes.

Treasury Department officials said Monday they will step up pressure on the 71 companies participating in the government's $75 billion effort to stem the foreclosure crisis. They will start this week by sending three person "SWAT teams" to monitor the eight largest companies' work and requesting twice-daily reports on their progress.

The mortgage companies, also known as loan servicers, have had a hard time getting borrowers to complete the needed paperwork for the administration's loan modification program. Nearly 60 percent of the 375,000 borrowers who qualify to have their loan modifications completed by year-end have either submitted incomplete paperwork or none at all.

"Borrowers must understand the urgency of getting their completed paperwork in so they do not miss out on the opportunity for more affordable mortgage payments," said Phyllis Caldwell, who recently was named to lead the Treasury Department's homeownership preservation office.

The program, announced by President Barack Obama in February, allows homeowners to have their mortgage interest rate reduced to as low as 2 percent for five years.

The administration is feeling intense pressure from lawmakers and consumer advocates to speed up progress. As of early September, only about 1,700 homeowners had finished all the paperwork and received a new permanent loan. About one-third of borrowers who have submitted complete applications are still waiting for a decision.

In an effort to shame the companies into doing a better job, Treasury will publish a list next week of the mortgage companies that are lagging. While big lenders like Citigroup and Wells Fargo have made double-digit gains in the percentage of eligible borrowers they have signed up for trial modifications, other companies like Ocwen Financial and American Home Mortgage Servicing have only increased their borrower participation by 6 percentage points or less since July.

Paul Koches, executive vice president of Ocwen, said his company had already saved 90,000 of its roughly 370,000 distressed homeowners from foreclosure before the government program began. As of October, Ocwen had started trial modifications for 11 percent of its borrowers, up from 5 percent in July.

At American Home, spokeswoman Christine Sullivan said the company has a "large, dedicated team" working on the Obama plan, but also noted that the company modified more than 60,000 loans outside the Obama plan over the past year.

"We are addressing the needs of distressed borrowers and are confident that we are doing all that we can reasonably do to avoid foreclosure," she said in an e-mail.

Some companies have barely made any inroads. HomEq Servicing, a division of Barclays Capital, only signed up in August. As of October, it had only started 91 trial modifications out of a pool of nearly 41,000 eligible homeowners.

"We have solicited thousands of borrowers for the financial information and documentation necessary ... and expect the number of trial modifications to increase substantially in the coming weeks," company spokesman Brandon Ashcraft said, noting that the company has modified 45,000 loans outside the government program over the past two years.

The participating mortgage companies signed contracts earlier this year that give the government the right to withhold incentive payments or end their contracts with Treasury. But mortgage companies don't receive those payments until they make a modification permanent, so there is little leverage over companies that aren't performing well.

That difficulty, consumer advocates say, highlights the program's key flaw: Since participation was voluntary, the government has little it can do besides shaming the industry into doing better.

"There's no meaningful accountability," said Diane Thompson, counsel at the National Consumer Law Center. "If you just aren't doing the loan mods, so what?"

And then there's lender limbo. About one-third of borrowers have submitted complete applications but haven't received a decision.

"In our judgment, servicers to date have not done a good enough job" of making the modifications permanent, said Michael Barr, an assistant Treasury secretary. Companies, he said, "that don't meet their obligations under the program are going to suffer consequences."

Industry executives acknowledge there have been problems.

"The documents were confusing. Borrowers did not understand the process wasn't closed until the documents came in," Sanjiv Das, chief executive of Citigroup's mortgage unit, said earlier this month. "Even when the documents came in, they were not always complete."

Mortgage finance company Freddie Mac has hired an outside company, Titanium Solutions Inc., to send real estate agents around the country to knock on borrowers' doors and help them complete the paperwork.

"It can be a little bit intimidating," said Patrick Carey, Titanium's chief executive. "They don't, in many cases, understand exactly what is being asked of them."

Analysts, meanwhile, say the foreclosure crisis is likely to persist well into next year as rising unemployment pushes more people out of their homes.

About 14 percent of homeowners with mortgages were either behind on payments or in foreclosure at the end of September, a record level for the ninth straight quarter, according to the Mortgage Bankers Association.

Homeowners who may be eligible for assistance can call 888-995-HOPE, or visit http://www.makinghomeaffordable.gov/.

Source: The San Francisco Chronicle

Ten Questions on the Volatile Housing Market

Great article in today's WSJ. Recommended and MUST read for existing or prospective homeowners… RD

Have a Happy Thanksgiving!

Ten Questions on the Volatile Housing Market

-Lower Prices Have Spurred Home Sales, but Looming Foreclosures and High Unemployment Are Clouding the Outlook-

The U.S. housing market has been in a slump for the past four years. When will it ever end?

In recent years, real estate has proven as jittery and unreliable as any other market. The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has fallen about 30%. The drop has been 53% in the Las Vegas metropolitan area and 39% in Miami, where about a quarter of all households with mortgages are behind on their payments or in foreclosure. The value of your home might be determined more by whether the neighbors keep their jobs than whether the house has ample light and closet space.

Here is a guide to navigating a fractured and volatile market:

1. Is the housing market getting better?

It has shown some signs of healing this year, but the much-touted recovery is tentative and fragile.

Home sales have increased from the severely depressed levels of 2008. The inventory of unsold homes listed for sale also is down. Bidding wars are breaking out for foreclosed homes in the sorts of neighborhoods (near jobs and decent schools) that attract both first-time buyers and investors seeking rental properties.

But more than 6.7 million U.S. households with mortgages, or about 13%, are behind on their payments or are in the foreclosure process, according to the Mortgage Bankers Association. Eventually, many of them will lose those homes, sending more supply onto the market. Unemployment has continued to rise, and the housing market is unlikely to show a sustained recovery until job growth resumes.

While the supply of middle-class homes on the market has declined somewhat, it remains ample in most places. And there is a huge glut of high-end houses for sale in many areas. That means prices of high-end homes might still have a long way to fall.

2. When will housing bottom out?

There probably won't be any clear turning point. Monthly indicators, such as home sales and prices, tend to bounce erratically from month to month, making it hard to discern the underlying trend. And the housing bust will end at different times in different places. House prices already might have bottomed out in the coveted Virginia suburbs with short commutes into Washington, D.C., for instance. But it probably will be years before all of the unsold condos find buyers in parts of Florida.

Generalizations about states or metropolitan areas don't say much about what is happening in your neighborhood. In Summit, N.J., known for good schools and an easy, 45-minute train commute to Manhattan, the median home price in September was up 1.2% from a year earlier, according to Otteau Valuation Group, an appraisal company. In Atlantic City, N.J., which suffers from too much speculative building of condominiums and weak demand for vacation homes, the median price is down about 12% from a year ago.

3. What signals should I watch to determine whether my local market is improving?

One way to get a sense of supply is to ask a good local real estate agent for stats on how many homes are listed for sale in your town and how many months it would take at the current sales rate to absorb that supply. Anything over about six months generally is considered high, meaning that sellers might have to cut prices. Another way to get a sense of a neighborhood's health is to count the number of for-sale signs and vacant houses. If there are more than a couple vacant homes in a block, that might be a bad sign, particularly if no one is taking care of them.

The supply of homes listed for sale has fallen very sharply in some areas. But the supply is likely to balloon again in many areas with a renewed surge in foreclosures. Many local newspapers provide information on foreclosure filings.

Demand depends heavily on the job market. The U.S. Bureau of Labor Statistics provides unemployment rates by metropolitan area. In September, they ranged from 2.9% in Bismarck, N.D., to 30% in El Centro, Calif. State and local agencies provide job-market data, too. Celia Chen, a housing economist at Moody's Economy.com, says help-wanted signs can be a useful local indicator; if you start seeing more of them around your neighborhood, that is a sign that business in your area could be starting to recover.

4. How can I figure out the value of my home?

You never know for sure what a home will fetch until you put it on the market, and then it is partly a matter of luck. Will the eager buyer who shares your taste in home style and neighborhood show up on day one or day 200?

Some Web sites -- including Zillow.com, HomeGain.com and Cyberhomes.com -- provide estimates of individual home values. These estimates are largely based on recent sales of nearby homes, and in some cases they are wildly off the mark. But they often provide a ballpark idea of a home's value.

You might come closer to the real value by talking to a local agent and looking at recent prices for homes that you know are very similar to yours. If you want to be more scientific and don't mind paying a few hundred dollars, hire a professional appraiser.

5. Does it matter whether I'm "under water"?

At least you have plenty of company. About 20% of owners of single-family homes with mortgages owe more than the current estimated value of their homes, according to Zillow.com.

If you can afford your monthly payment and don't need to move soon, that might not be a big problem. But it is hard, and sometimes impossible, to refinance a mortgage if you are under water, and you will take a bath if you have to sell the home now. Some people who can afford to make their monthly mortgage payments are deciding it doesn't make sense to do so because they don't expect their home values ever to recover to past peaks, and they could rent similar houses for much lower monthly costs.

6. If I lose my home to foreclosure, how long will it take to repair my credit record?

It probably will be three to five years before you can qualify for a home mortgage insured by the government, depending on your circumstances, and that assumes you have re-established a record for paying your bills on time. The foreclosure will remain a blot on your credit record for seven years, likely raising your interest costs even if you do get another loan. If you pay bills on time, keep your credit-card balances low and don't apply for too many cards, you can make a "slow, gradual improvement" in your credit score, says Tom Quinn, a vice president at Fair Isaac Corp., which provides tools for analyzing credit records.

7. If I'm renting, is now a good time to buy a house?

It may well be. Prices in most areas are well below their peaks, even if they haven't hit bottom. Don't kid yourself that you can time the bottom of the market perfectly. But don't feel any pressure to buy in a hurry, because the supply of housing is likely to remain ample for years in many areas.

Generally, it doesn't make sense to buy unless you expect to remain in the house for at least four or five years, because the transaction costs -- including commissions for real estate agents and mortgage fees -- are heavy.

But now is clearly a good time to rent. Many landlords need tenants badly. The national apartment-vacancy rate in the third quarter was 7.8%, the highest in 23 years, according to Reis Inc., a New York research firm. So landlords are cutting rents and offering such sweeteners as free flat-screen televisions or several months of free rent to retain or attract tenants. Some owners of condos will "cut their throats to get some kind of rental income to cover part of their expenses," says Jack McCabe, a real estate consultant in Deerfield Beach, Fla.

8. Can I get a tax credit if I buy a home now?

Under an expanded and extended program approved by Congress earlier this month, tax credits are available to many people who buy or sign a contract to buy a principal residence by April 30 and complete the purchase by June 30. The tax credit is up to $8,000 for first-time home buyers and $6,500 for people who already have owned a home for at least five consecutive years during the previous eight years. The credit is available for individual taxpayers with annual incomes of up to $145,000 or joint filers with incomes up to $245,000.

9. Can I get a mortgage on attractive terms?

Only if you have a good credit record, a moderate amount of debt in relation to your income and the ability to fully document your income. That last requirement is fairly easy for people who work for a salary and have had the same employer for more than two years, but it can be tough for self-employed people with incomes that vary substantially from year to year.

A borrower with a strong credit score of 740 or higher (on the scale of 300 to 850) and the ability to make a down payment of at least 20% could get an interest rate of about 5% with no origination fees on a 30-year fixed-rate mortgage, says Lou Barnes, a mortgage banker in Boulder, Colo. But if your credit score is 680, the rate jumps to about 5.5%.

People who can't make a down payment of at least 20% generally are being funneled into loans insured by the Federal Housing Administration. That means paying extra fees for the FHA insurance.

Borrowing costs are steeper at the high end of the housing market. For so-called jumbo loans -- those above $729,750 in areas with the highest housing costs or $417,000 in places with the lowest costs -- interest rates on 30-year fixed-rate mortgages last week averaged 5.95%, according to HSH Associates, a financial publisher.

10. Should I invest in foreclosed homes?

Probably not. A lot of investors chase these properties, and only the most experienced know how to deal with all of the pitfalls. Homes auctioned at trustee or sheriff sales are sold on an as-is basis, and there is no provision for an inspection before you take ownership. If after buying you find out that termites have been treating the floor joists as an all-you-can-eat buffet, that is your problem. You must pay for the full price within a day or two, so you need a lot of cash or access to special short-term loans for investors that come with interest rates of around 18%. This is a pursuit best left to people with a lot of time, nerve, cash and knowledge of the local market.

Source: WSJ.com by JAMES R. HAGERTY

Home prices rise for 4th month in a row

Although this is great news, it does not give a complete picture. Most current sellers need to sell or the property being marketed is bank owned (REO). For those in a position to buy, this is a great opportunity and there certainly will be no shortage of inventory (Short Sales and REOs) during the coming year… Plus the value of standard sales is influenced by the distressed market.

A piece today in the WSJ “One in Four Borrowers Is Underwater“ states that nearly 10.7 million households , or about 23% of homeowners with mortgages had negative equity in the third quarter. It is estimated that more than 520,000 of these borrowers have received a notice of default.

On the bright side, the article goes on to say “Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage…” Some experts expect values to drop again in the coming year and it’s likely they will. We should definitely see values flat-line or drop over the next month and into Q-1 of 2010 due to the holidays and extension of tax credits to April 30th. My guidance is, if you’re buying a home and you plan to live there for 5 years or more, it’s hard to go wrong at 5% interest. If you don’t need to sell, don’t. Or consider leasing the property if you can. Speculators’ (flippers’) must understand that smart money is buying at a percentage of replacement cost and has the cash to carry if necessary. RD

PS - Also at WSJ.com, check out "Negative Equity by State" chart. California is actually slightly better off than Florida, Nevada and Arizona.

Home prices rise for 4th month in a row

WASHINGTON – The summer's trend of rising home prices is flattening as the traditional home shopping season ends, two reports Tuesday showed.

The Standard & Poor's/Case-Shiller home price index of 20 major cities rose 0.3 percent to 144.96 in September, the fourth monthly increase in a row. The seasonally adjusted index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in April 2006.

Another reading of home prices published by the Federal Housing Finance Agency held steady from August to September. Analysts expect prices to dip again this winter as foreclosures increase.

"As long as the unemployment rate stays elevated, you're going to see pressure on the pace of foreclosures, which are going to find their way back onto the market, depressing prices," said Dan Greenhaus, chief economic strategist with Miller Tabak & Co.

Home prices are a key ingredient to rebuilding the economy. Homeowners feel wealthier when their property appreciates in value and are more likely to spend money. Rising prices also help millions of homeowners who owe more to the bank than their homes are worth.

Currently, roughly one in four homeowners are in that situation, according to First American CoreLogic.

While prices nationally are likely to keep rising through November, "we are very worried about the potential for a huge wave of supply next year, both from private sellers and banks," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. "Prices could easily reverse their recent gains."

Home prices rose in 11 major cities with the strongest gains in San Francisco and Minneapolis, according to the Case Shiller report. Prices fell by the most in Las Vegas and Cleveland.

Compared with a year earlier, the 20-city index was down 9.4 percent, the smallest year over year decline since January 2008.

"With housing remaining an albatross around the economy's neck, nothing would perk things up more than some increases in home prices," wrote Joel Naroff, chief economist at Naroff Economic Advisors. "That seems to be happening."

The price reports came a day after the National Association of Realtors said home resales surged by more than 10 percent in October as buyers took advantage of a special tax credit for first-time owners.

Source: Yahoo! News by ALAN ZIBEL, Associated Press Real Estate Writer

October home sales rise 10.1% from September

Obviously this is based on National sales and South Bay in general; the beach cities, Palos Verdes Peninsula and surrounding communities are affected to varying degrees as well, however we are somewhat different when compared to the country as a whole. For instance median home value in Torrance alone is $492k, more than twice the national average. You can nearly double that again for Rancho Palos Verdes. There are currently 24 financially “distressed” properties (Short Sale, REO, NOD) listed on the MLS on the Palos Verdes Peninsula and 102 in the western extreme of the area from El Segundo south to the peninsula. RD

October home sales rise 10.1% from September

From the Associated Press
November 23, 2009 7:40 a.m.

WASHINGTON -- Home sales far exceeded expectations last month, surging to the highest level in 21/2 years as first-time buyers rushed to take advantage of an expiring tax credit.

The National Association of Realtors said today that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.

The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. People who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.

The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. "There was a lot of rush and hurry to complete sales" before the deadline, said Lawrence Yun, the trade group's chief economist.

But sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline.

The new deadline means that "we're going to see some good activity coming out of the spring," said Pat Lashinsky, chief executive of online real estate brokerage ZipRealty Inc.

Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.

The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.

In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.

The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That's a 7 month supply at the current sales pace, and close to a healthy stock of about six months.

Nationwide sales are up nearly 37 percent from their bottom in January, but are still off about 16 percent from the peak in autumn 2005.

Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.

But experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.

A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.

Source: The Los Angeles Times

Rates on 30-year mortgages remain below 5 percent

As a point of reference, interest rates on 30-year fixed conventional mortgages went double digit in late 1978 and peaked at nearly 19% in late 1981. It wasn't until early 1986 that rates dipped (briefly) below 10% again and were not permanently in single numbers until late 1990… RD

Rates on 30-year mortgages remain below 5 percent

The Associated Press - Published: Thursday, Nov. 19, 2009 - 8:57 am

McLEAN, Va. -- Rates on 30-year mortgages stayed below 5 percent this week but remained above the record set earlier this year, Freddie Mac said Thursday.

The average rate for a 30-year fixed mortgage fell to 4.83 percent, down from 4.91 percent last week, the mortgage company said. Last year at this time, 30-year mortgages averaged 6.04 percent.

Rates hit a record low of 4.78 percent in the spring, and remain attractive for people looking to buy a home or refinance their existing mortgage. Still, credit standards remain tough, so the best rates usually are available only to borrowers with solid credit and a 20 percent down payment.
The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities to try to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.

Low fixed rates in the third quarter led to about $1.1 trillion in refinancing activity, saving borrowers about $10 billion in monthly payments over the first 12 months of their new loan, said Frank Nothaft, Freddie Mac's chief economist.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.

The average rate on a 15-year fixed-rate mortgage fell to 4.32 percent from 4.36 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.25 percent, down from last week's 4.29 percent. Rates on one-year, adjustable-rate mortgages declined to 4.35 percent from 4.46 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 point for 30-year loans. The fee averaged 0.6 point for 15-year, five-year and one-year loans.

Source: The Sacramento Bee

New $6,500 federal tax credit for 'MOVE-UP' Home Buyers

If you fit the criteria and are considering buying another house in the coming year, you might want to speed up the process and close by the June 30 expiration date.

Reporting from Washington - Take a close, hard look at the new $6,500 federal tax credit for so-called move-up home buyers that passed the Senate and House recently. Though it's been getting second billing to the original $8,000 credit for first-time purchasers -- now extended by Congress through June 30 -- the $6,500 credit for current homeowners just might have your name on it.

How does it work? When will it be available?

The new credit is available now. It took effect Nov. 6, the day President Obama signed the legislation that created it. This means that if you fit the key criteria -- you've owned and lived in your home for a consecutive five out of the last eight years, and your adjusted household income doesn't exceed $125,000 if you file taxes singly or $225,000 if you are married filing jointly -- you can claim the credit as soon as you close on a qualifying house.

That could be next week, next month or next spring. There is no "move-up" requirement in the new credit. In fact, homeowners who plan to downsize into a smaller dwelling may prove to be significant users of the credit, along with people who are moving because of employment changes.

If you fit the criteria and are considering buying another house sometime in the coming year, you might want to speed up the process and sign a contract by April 30 and close by the June 30 expiration date. Think of it this way: If the government is willing to give you $6,500 to act a little faster than you had planned, hey, why not?

Some other key features of the $6,500 credit you ought to know about:

* Whatever you intend to buy, the house cannot cost more than $800,000.

* The replacement house must become your main home. There is no requirement in the legislation that you sell your current home. You could rent it out, turn it into a second home or list it for sale later in 2010 when prices might be higher. If you plan to retain it, however, make sure that you move into the new house on the day you close so that there is no question it was your principal residence at that time.

* Like the first-time buyer credit, the $6,500 version permits a variety of dwelling types for your purchase. These include new or existing single-family homes, condominiums, manufactured or mobile homes, and boats that function as your principal residence. You cannot claim the credit if you are buying a second home or an investment property.

* The Internal Revenue Service is required by Congress to scrutinize claims for tax credits -- both for the $6,500 and the $8,000 credits -- far more closely in the coming months than it did earlier this year. This is because federal investigators have documented significant instances of fraud -- supposed home buyers who were as young as 4, and "sales" that were fabricated. Investigators also found numerous cases of technical violations, such as purchase transactions among immediate family members, which are prohibited.

The revised rules require taxpayers to submit copies of their settlement statements (HUD-1 forms), along with their requests for credits using IRS Form 5405. Congress' new rules also prohibit individuals under the age of 18 or who are counted as dependents on another taxpayer's filings from claiming the credit.

* Home buyers in 2009 -- those who go to closing after Nov. 6 but no later than Dec. 31 -- can claim the $6,500 credit on their 2009 federal tax returns, or amend their 2008 returns. Similarly, eligible buyers in 2010 will be able to file for the credit on their 2009 returns or 2010 returns. Talk to your tax advisor regarding timing decisions.

* If you aren't sure if you can make the deadlines established for the new credit -- a binding contract by April 30 and a settlement by June 30 -- do not assume that Congress will provide another extension. All the political and budgetary signs point the other way, and some of the primary authors of the credit insist that this is it -- no more extensions next year. Take them at their word.

One consumer resource that answers frequently asked questions about both the $6,500 and $8,000 extended credits is www.federalhousingtaxcredit.com, sponsored by the National Assn. of Home Builders.

Source: LA Times.com November 15, 2009 by Kenneth R. Harney

Fannie Mae to allow borrowers in foreclosure to lease back homes

The mortgage giant's move is part of an attempt by lenders to keep a wave of foreclosed properties from slamming a housing market that has shown some signs of recovery.

Mortgage giant Fannie Mae said Thursday that it would throw a lifeline to some people losing their homes to foreclosure by allowing them to lease those properties back for up to a year at market rental rates.

The move is the latest in a series of steps by lenders trying to manage inventories of foreclosed homes on their books in an attempt to keep a wave of properties from slamming a housing market that has shown some signs of recovery.

The news came as Fannie Mae reported a net loss of $18.9 billion in the third quarter ended Sept. 30, compared with a $14.8-billion loss in the second quarter and a $29.4-billion loss in the third quarter last year.

The latest loss pushed Fannie Mae's government regulator Thursday to request $15 billion from the Treasury Department. It was the fourth time the Washington company had drawn on its federal financial lifeline since Fannie and its sister firm, Freddie Mac, were seized and placed under government stewardship.

By reducing the supply of cheap foreclosures on the market, Fannie Mae's Deed for Lease Program would add to other efforts by the federal government to aid the housing market, analysts said.

Jay Ryan, Fannie Mae's vice president of equity investments, said the program would help to stabilize neighborhoods. The firm said Thursday that the program would qualify only those borrowers who had exhausted other options, such as a loan modification.

"If you keep more people in their homes, it's better for the community, and hopefully fewer vacant homes on the market will help stabilize those communities," Ryan said. "If someone still wants to live in their home, be it for the kids wanting to stay in the school district or the family wanting to remain embedded in their community, this gives them another opportunity."

The program also would allow Fannie to produce some income from the properties -- many worth less than their mortgages, or "underwater" in industry terms -- as it waits for home prices to recover.

"This is a very wise business decision because these loans are underwater, and they are not going to get all of the money," said Richard Green, director of the USC Lusk Center for Real Estate. "Fannie has an incentive to keep the homes reasonably maintained because they are going to want to sell them one day."

Bruce Marks, a housing activist and critic of the lending industry, said the program was a distraction from efforts to push lenders to modify loans.

"Their mission is to provide homeownership and yet now they want to get into the landlord business. It is outrageous," said Marks, executive director of the housing nonprofit Neighborhood Assistance Corp. of America. "The issue has to be to force these banks to restructure mortgages, not let them off the hook."

Fannie didn't say how many homeowners it expected would qualify for the program. To participate, a borrower must agree to convey all interest in a property to the lender. The company recorded 1,996 people agreeing to such a transaction in the first nine months of the year, according to a filing Thursday with the Securities and Exchange Commission. In California, Fannie held $475 billion in loans at the end of the third quarter, of which 5% were "seriously" delinquent.

The home must be a borrower's primary place of residence. A borrower-turned-tenant would have to document that the new market rental rate is no more than 31% of his or her gross income and be released from any subordinate liens on the property.

The efforts mirror a program by Freddie Mac of McLean, Va., which offers month-to-month leases to people who have lost their homes to foreclosure. Tenants must agree to allow the home to be shown to potential buyers and allow the company to market it for sale.

Fannie's program isn't for everyone. Some borrowers would be better off pursuing loan modifications or other solutions.

Scott Hempel, 38, said he was underwater on a home he owns in Riverside but he has kept up his mortgage payments. Hempel, a production manager for Dow Jones&Co. in Dallas, said he was forced to relocate to his new job in October 2007. He tried to sell his Riverside home but the plunge in home values made it impossible. Hempel said he would like to conduct a short sale -- selling the home for less than the value of the mortgage -- but was told by Bank of America that Fannie guidelines required him to be in default.

"I could walk away and do what everybody else is doing, but I am trying to get out of the house without doing that," Hempel said.

To make matters worse, he said, he will lose his $90,000-a-year job as the plant he works at winds down its operations.

A Bank of America spokeswoman confirmed that Hempel was denied a short sale based on Fannie Mae's guidelines.

Complaints that lenders won't negotiate with borrowers unless they go delinquent on their mortgages have been common during the unfolding housing bust and economic meltdown. The loan modification plan sponsored by the Obama administration this year was designed to encourage lenders to reach out to borrowers heading for trouble before they actually defaulted.

Source: LA Times, November 6, 2009 by Alejandro Lazo

Federal Homebuyers Tax Credit EXTEDNDED!

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,

2. Right to obtain legal title upon full payment of the purchase price,

3. Right to construct improvements,

4. Obligation to pay property taxes,

5. Risk of loss,

6. Responsibility to insure the property, and

7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer's situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from "step-relatives.")

• They do not use the home as your principal residence.

• They sell their home before the end of the year.

• They are a nonresident alien.

• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.(This does not apply for a home purchased in 2009.)

• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)

• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

Source: Andre Hemmersbach, Mortgage Planner at American/California Financial Services, Inc. (310) 792-7539

Fannie, Freddie, & FHA conforming loan limit extension law signed

President Obama late Friday signed a congressional resolution to extend through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including many in California. The resolution was part of a broader piece of budgetary legislation that will prevent a government shutdown.

Both C.A.R. and NAR have long advocated making permanent higher conforming loan limits. As a result of C.A.R.'s and NAR's efforts, a provision of the Housing and Economic Recovery Act of 2008 included temporarily raising the conforming loan limits. Last week's actions effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.

The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, and the Federal Housing Administration (FHA) can buy or "guarantee." Non-conforming or "jumbo loans" typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.

Source: NAR

Credit account dispute could stall mortgage application

It sure seems as if there are a lot of tripwires and landmines out there when attempting navigate through the finance market these days.

Many of these measures are established with the best intentions however in the haste to implement safeguards, innocent people suffer and the process of tweaking them is excruciatingly slow... The best defense is to be informed.

Read the piece from the New York Times (below) and if you are working on a mortgage or refinance be sure to check your credit report prior to submitting your loan application. RD


Credit account dispute could stall mortgage application

Fannie Mae and Freddie Mac, seeking to prevent fraud, have been kicking such applications back to lenders for manual underwriting.

Reporting from Washington - Could a little-known and potentially controversial practice by mortgage giants Fannie Mae and Freddie Mac kill or stall your next loan application? Absolutely.
Picture this scenario: You've got outstanding credit scores close to 800 and solid equity in your home. All you want is to refinance your mortgage to take advantage of today's rock-bottom interest rates.

Your application should rocket through your lender's system and get you a great rate. But your bank says: Sorry, we can't do your loan. Fannie Mae's automated underwriting system won't accept any application where there is a notation in the credit report that a consumer has disputed an account or "tradeline."

You explain that the dispute -- over a medical bill or a credit card charge -- was valid. The account was closed. The creditor promised to remove the dispute notation but apparently didn't. Your loan officer won't budge. Policy is policy, he says. Your refi application is dead.

What's going on here? Under the Fair Credit Reporting Act, consumers are guaranteed the right to dispute erroneous information on any account in their credit files. Once a consumer challenges that information, a notation to this effect must be made on the file. As long as it remains, most credit-scoring systems generally will not factor the disputed account into the computation of the consumer's score.

Does Fannie Mae deny loans to consumers simply because they exercised their legal rights? In an e-mail response, communications director Amy Bonitatibus confirmed that the firm's automated underwriting system -- used by virtually all lenders doing business with Fannie Mae -- sends applications with "consumer disputed" items on credit reports back to the lender for what is known as "manual underwriting."

Bonitatibus said the company does "not prohibit delivery of a loan . . . where the borrower has disputed information" on his or her credit report. Through manual underwriting, she said, "our policy requires the lender to determine and document whether or not the disputed information is accurate and underwrite the borrower's credit accordingly."

What's the practical effect of bucking back applications to lenders for potentially lengthy discussions with applicants and their creditors? According to consumer postings on FiLife, a financial education website, the net result often is that the bank brushes you off and blames it on Fannie Mae.

Christopher Cruise, a Maryland mortgage originator and founding member of the National Assn. of Responsible Loan Officers, said, "There's no question -- when there are lots of other applications and business is good," applications requiring extra time and research "just aren't going to move."

Evan Hendricks, author of the book "Credit Scores and Credit Reports" and publisher of Privacy Times, a newsletter that outlined Fannie Mae's policy in a recent report, calls it "extremely unfair to honest consumers who are simply doing what they should -- challenging misinformation."

Freddie Mac's policy on disputed tradelines is broadly similar to Fannie Mae's, spokesman Brad German said.

Why are Fannie and Freddie so uptight about applications with disputed accounts? Mainly because credit repair companies have been gaming automated systems tied to credit scores by disputing accurate but negative items. When tradelines in a consumer's files contain a "disputed" notation, most scoring software ignores them for the purposes of computing the score.
A seriously delinquent account that could legitimately depress a FICO score might be taken out of the equation -- at least temporarily -- if a "consumer disputed" notation is in the file. Fannie and Freddie are trying to protect themselves from fraud.

For the time being, it's tough luck for all applicants with disputes in their credit files.
Fannie Mae, however, says it is reviewing its policy, so maybe there's a chance for a change.

Source: New York Times, October 25, 2009 by Kenneth R. Harney