From Realtor Magazine Online, Daily Real Estate News December 31, 2008
The number of mortgage applications filed last week was essentially unchanged from the week before – at least on a seasonally adjusted basis.
This week’s index stood at 1245.7, compared to 1245.4 the previous week, adjusted for the Christmas holiday. On an unadjusted basis, the index decreased 40 percent compared with the previous week and was up 155 percent compared with the same week a year ago.
The refinance share of mortgage activity declined to 82.3 percent of total applications, down from 82.9 the previous week. Mortgage rates declined slightly:
* 30-year fixed-rate mortgages decreased to 5.03 percent from 5.04 percent
* 15-year fixed-rate mortgages decreased to 4.79 percent from 4.91 percent
* One-year ARMs decreased to 6.15 percent from 6.36 percent
Source: Mortgage Bankers Association (12/31/2008)
Wednesday, December 31, 2008
Online Foreclosure Sites Come With a Price
From Realtor Magazine Online, Daily Real Estate News December 31, 2008
Buyers interested in foreclosures need a real estate professional’s help navigating the online listings unless they are willing to pay a substantial monthly fee to use heavily advertised sites like ForeclosureStore and ForeclosureToGo. \
Sites that are free, like Zillow.com and Trulia.com, just display filings culled from other sites, so users ultimately end up at the pay sites.
Users of the pay sites can often see a partial address and description, but if they want the whole enchilada, then they must cough up monthly fees that range from about $40 to $80.
RealtyTrac advertises free access, but often the addresses and other details are incomplete.
Source: The Associated Press, Alex Veiga (12/22/2008)
Buyers interested in foreclosures need a real estate professional’s help navigating the online listings unless they are willing to pay a substantial monthly fee to use heavily advertised sites like ForeclosureStore and ForeclosureToGo. \
Sites that are free, like Zillow.com and Trulia.com, just display filings culled from other sites, so users ultimately end up at the pay sites.
Users of the pay sites can often see a partial address and description, but if they want the whole enchilada, then they must cough up monthly fees that range from about $40 to $80.
RealtyTrac advertises free access, but often the addresses and other details are incomplete.
Source: The Associated Press, Alex Veiga (12/22/2008)
FHASecure Shut Down at Year-End
From Realtor Magazine Online, Daily Real Estate News December 31, 2008
Despite pleas from consumer advocates and trade groups, HUD will end its FHASecure program on Dec. 31, explaining that continuing the program, which insured refinancings for delinquent borrowers, would hurt the FHA financially.
FHASecure is a refinancing option that gives home owners with non-FHA mortgages the ability to refinance into a FHA-insured mortgage. With FHASecure, the lender will not automatically disqualify home owners because they are delinquent on their loan, and the lender may offer a second mortgage to make up the difference between the value of their property and what you owe.
The cost of keeping the initiative in place "would have to be offset by either substantial across-the-board single-family program premium increases or the suspension of FHA's single-family insurance programs altogether," according to Federal Housing Commissioner Brian Montgomery.
In a joint letter to HUD, consumer advocacy groups, along with the Center for Responsible Lending, insisted that the FHASecure program is more helpful than the Hope for Homeowners program because the absence of legislation governing the effort enables it to "adequately adapt to market evolutions."
The groups had hoped to win FHASecure an extension at least through 2009.
Source: American Banker (12/30/08) Marc Hochstein
Despite pleas from consumer advocates and trade groups, HUD will end its FHASecure program on Dec. 31, explaining that continuing the program, which insured refinancings for delinquent borrowers, would hurt the FHA financially.
FHASecure is a refinancing option that gives home owners with non-FHA mortgages the ability to refinance into a FHA-insured mortgage. With FHASecure, the lender will not automatically disqualify home owners because they are delinquent on their loan, and the lender may offer a second mortgage to make up the difference between the value of their property and what you owe.
The cost of keeping the initiative in place "would have to be offset by either substantial across-the-board single-family program premium increases or the suspension of FHA's single-family insurance programs altogether," according to Federal Housing Commissioner Brian Montgomery.
In a joint letter to HUD, consumer advocacy groups, along with the Center for Responsible Lending, insisted that the FHASecure program is more helpful than the Hope for Homeowners program because the absence of legislation governing the effort enables it to "adequately adapt to market evolutions."
The groups had hoped to win FHASecure an extension at least through 2009.
Source: American Banker (12/30/08) Marc Hochstein
Monday, December 29, 2008
Piggyback Loans Complicate Workouts
From Realtor Magazine Online, Daily Real Estate News December 29, 2008
Piggyback loans – given to borrowers who wanted to avoid paying mortgage insurance without making a down payment – are “one of biggest reasons for the last 14 months why the voluntary [loan] modifications haven't worked," said Kathleen Day, spokeswoman for the Center for Responsible Lending.
About 40 percent of home purchases in 2006 involved piggyback loans, according to a 2007 Credit Suisse report.
When there are two loans from different lenders, neither lender has much incentive to work with the buyer because any loan modification will benefit a competitor. Moreover, "Borrowers with second liens have a much higher tendency of being overextended on their ability to make payments," said Tom Deutsch, deputy executive director of the American Securitization Forum.
Potential solutions include:
* Providing incentives to secondary lenders to write off their loans
* Assign the Treasury Department to buy up lower-cost second mortgages and work with borrowers
* Allow judges to modify second liens in bankruptcy proceedings.
Source: Boston Globe, Jenifer B. McKim (12/26/2008)
Piggyback loans – given to borrowers who wanted to avoid paying mortgage insurance without making a down payment – are “one of biggest reasons for the last 14 months why the voluntary [loan] modifications haven't worked," said Kathleen Day, spokeswoman for the Center for Responsible Lending.
About 40 percent of home purchases in 2006 involved piggyback loans, according to a 2007 Credit Suisse report.
When there are two loans from different lenders, neither lender has much incentive to work with the buyer because any loan modification will benefit a competitor. Moreover, "Borrowers with second liens have a much higher tendency of being overextended on their ability to make payments," said Tom Deutsch, deputy executive director of the American Securitization Forum.
Potential solutions include:
* Providing incentives to secondary lenders to write off their loans
* Assign the Treasury Department to buy up lower-cost second mortgages and work with borrowers
* Allow judges to modify second liens in bankruptcy proceedings.
Source: Boston Globe, Jenifer B. McKim (12/26/2008)
Home Buyer Tax Credit: How It Works
From Realtor Magazine Online, Daily Real Estate News December 29, 2008
First-time homebuyers in 2008 can take an income-tax credit on their purchase, thanks to passage in Congress earlier this year of the first-time home buyer tax credit.
The definition of first-time homebuyer is generous. To get the credit, the homebuyer cannot have owned a home in the previous three years. The home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.
The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit.
Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don’t qualify.
If the amount of tax a homebuyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund.
The homebuyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full creditHomebuyers who sell their home before the credit is repaid must pay off the loan with any profits. If they sell the home at a loss, the loan is forgiven.
[Editor's Note: The credit is set to expire in mid-2009, although industry groups, including the NATIONAL ASSOCIATION OF REALTORS®, are encouraging Congress to extend it. NAR is also encouraging Congress to make the credit available to all buyers and to eliminate the repayment requirement. More detail on how the credit works is available from NAR on REALTOR.org.]
Source: Chicago Tribune, Mary Umberger (12/28/2008)
First-time homebuyers in 2008 can take an income-tax credit on their purchase, thanks to passage in Congress earlier this year of the first-time home buyer tax credit.
The definition of first-time homebuyer is generous. To get the credit, the homebuyer cannot have owned a home in the previous three years. The home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.
The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit.
Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don’t qualify.
If the amount of tax a homebuyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund.
The homebuyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full creditHomebuyers who sell their home before the credit is repaid must pay off the loan with any profits. If they sell the home at a loss, the loan is forgiven.
[Editor's Note: The credit is set to expire in mid-2009, although industry groups, including the NATIONAL ASSOCIATION OF REALTORS®, are encouraging Congress to extend it. NAR is also encouraging Congress to make the credit available to all buyers and to eliminate the repayment requirement. More detail on how the credit works is available from NAR on REALTOR.org.]
Source: Chicago Tribune, Mary Umberger (12/28/2008)
Wednesday, December 24, 2008
Amid Rate Drops, Mortgage Applications Soar
From Realtor Magazine Online, Daily Real Estate News December 24, 2008
With interest rates approaching reaching historic lows,the application volume for mortgages jumped a seasonally adjusted 48 percent last week compared with the previous week, according to the Mortgage Bankers Association's weekly survey.
Application activity for the week ending December 19th was 124.6 percent over the same period a year ago.
The spike in applications coincided with another drop in mortgage rates as the government's efforts to unfreeze the residential-mortgage market show further signs of having the desired effect.
Applications to refinance existing mortgages increased 62.6 percent on a week-to-week basis, while applications filed for mortgages to buy homes increased a seasonally adjusted 10.6 percent.
Refinancings made up 83.2 percent of all applications filed last week, up from 76.9 percent the previous week.
According to the MBA survey, interest rates fell across the board:
* Rates on 30-year fixed-rate mortgages averaged 5.04 percent last week, their lowest level in more than five years. This was down from 5.18 percent the previous week.
* Fifteen-year fixed-rate mortgages averaged 4.91 percent, down from 4.93 percent the week before.
* One-year ARMs averaged 6.36 percent, down from 6.63 percent.
Source: Mortgage Bankers Association and MarketWatch (12/24/08)
With interest rates approaching reaching historic lows,the application volume for mortgages jumped a seasonally adjusted 48 percent last week compared with the previous week, according to the Mortgage Bankers Association's weekly survey.
Application activity for the week ending December 19th was 124.6 percent over the same period a year ago.
The spike in applications coincided with another drop in mortgage rates as the government's efforts to unfreeze the residential-mortgage market show further signs of having the desired effect.
Applications to refinance existing mortgages increased 62.6 percent on a week-to-week basis, while applications filed for mortgages to buy homes increased a seasonally adjusted 10.6 percent.
Refinancings made up 83.2 percent of all applications filed last week, up from 76.9 percent the previous week.
According to the MBA survey, interest rates fell across the board:
* Rates on 30-year fixed-rate mortgages averaged 5.04 percent last week, their lowest level in more than five years. This was down from 5.18 percent the previous week.
* Fifteen-year fixed-rate mortgages averaged 4.91 percent, down from 4.93 percent the week before.
* One-year ARMs averaged 6.36 percent, down from 6.63 percent.
Source: Mortgage Bankers Association and MarketWatch (12/24/08)
Tuesday, December 23, 2008
Builders Don't Have to Pay if Buyer Changes Mind
From Realtor Magazine Online, Daily Real Estate News December 23, 2008
A federal appeals court ruling in Miami last week found that developers don’t have to give back down payments to buyers who are dropping out for fear that they’ll lose money.
The 11th Circuit Court of Appeals issued the first opinion in the country that sided with homebuilders on this issue. The court agreed that contractors, who have met all requisite disclosure requirements for their types of developments, don’t have to return a down payment when a customer changes his mind.
"This reversal is a major victory for developers, and will certainly impact many of the pending cases,” says Katherine Giddings, the attorney who handled the appeal on behalf of the National Association of Home Builders.
Source: Akerman Senterfitt (12/22/08)
A federal appeals court ruling in Miami last week found that developers don’t have to give back down payments to buyers who are dropping out for fear that they’ll lose money.
The 11th Circuit Court of Appeals issued the first opinion in the country that sided with homebuilders on this issue. The court agreed that contractors, who have met all requisite disclosure requirements for their types of developments, don’t have to return a down payment when a customer changes his mind.
"This reversal is a major victory for developers, and will certainly impact many of the pending cases,” says Katherine Giddings, the attorney who handled the appeal on behalf of the National Association of Home Builders.
Source: Akerman Senterfitt (12/22/08)
Fraud Grows, Despite More Consumer Protection
From Realtor Magazine Online, Daily Real Estate News December 23, 2008
Real estate fraud continues to grow, despite aggressive responses from federal regulators.
The Federal Bureau of Investigations has reported that incidents of mortgage fraud have tripled over the last two years to 21,994, with the value of the crimes quadrupling to $1.01 billion.
The crimes range from individuals lying on their applications to complex rings of identity thefts, straw buyers and appraisal fraud.
Harvard Law School professor Howell E. Jackson, who authored a study of mortgage brokers and yield spread premiums, blames the anonymity of the mortgage business. Thirty years ago, applicants went down to their local bank and dealt with a loan officer who they probably knew. Today, the business has grown and changed and most buyers never talk to a lender. Instead, they rely on a broker to get them the best deal.
Jackson estimated that brokers will earn an estimated $33 billion in commissions this year.
"People should ask their broker how much they're making, including both yield spread premiums and direct fees, and if it's over $2,000 they should question why," says Jackson. "No one says the broker has to make a certain amount. It's negotiable."
Source: Los Angeles Times, David Streitfeld (12/05/08)
Real estate fraud continues to grow, despite aggressive responses from federal regulators.
The Federal Bureau of Investigations has reported that incidents of mortgage fraud have tripled over the last two years to 21,994, with the value of the crimes quadrupling to $1.01 billion.
The crimes range from individuals lying on their applications to complex rings of identity thefts, straw buyers and appraisal fraud.
Harvard Law School professor Howell E. Jackson, who authored a study of mortgage brokers and yield spread premiums, blames the anonymity of the mortgage business. Thirty years ago, applicants went down to their local bank and dealt with a loan officer who they probably knew. Today, the business has grown and changed and most buyers never talk to a lender. Instead, they rely on a broker to get them the best deal.
Jackson estimated that brokers will earn an estimated $33 billion in commissions this year.
"People should ask their broker how much they're making, including both yield spread premiums and direct fees, and if it's over $2,000 they should question why," says Jackson. "No one says the broker has to make a certain amount. It's negotiable."
Source: Los Angeles Times, David Streitfeld (12/05/08)
Fannie Tightens Lending Rules on Condos
From Realtor Magazine Online, Daily Real Estate News December 23, 2008
Fannie Mae is tightening mortgage criteria on condos, particularly in Florida.
Fannie sent a memo Tuesday to lenders that the number of delinquent mortgages it owns or guaranteed that are secured by condos in Florida is at an all-time high. To combat the problem, it is requiring higher loan-to-value ratios for condos. It also increased the minimum share of condos that must be owner occupied in a new or newly converted building to 70 percent from 51 percent.
Fannie tightened criteria across the country as well. No more than 15 percent of the units can be 30 days or more past due on association payments.
Source: American Banker, Allison Bisbey Colter (12/18/08)
Fannie Mae is tightening mortgage criteria on condos, particularly in Florida.
Fannie sent a memo Tuesday to lenders that the number of delinquent mortgages it owns or guaranteed that are secured by condos in Florida is at an all-time high. To combat the problem, it is requiring higher loan-to-value ratios for condos. It also increased the minimum share of condos that must be owner occupied in a new or newly converted building to 70 percent from 51 percent.
Fannie tightened criteria across the country as well. No more than 15 percent of the units can be 30 days or more past due on association payments.
Source: American Banker, Allison Bisbey Colter (12/18/08)
Monday, December 22, 2008
Mortgage Applications Surge on Falling Rates
From Realtor Magazine Online, Daily Real Estate News December 22, 2008
Mortgage lenders are seeing a deluge of applications for refinancings as borrowing costs decline due to a recent cut in the federal funds rate by the Federal Reserve, and many are hiring temporary workers or reassigning employees to handle the swelling volume.
Some experts believe the jump in refis could signal a turning point in the market and reduce pressure on banks by the U.S. government to bolster lending following the distribution of millions of dollars in assistance.
However, it remains uncertain how many borrowers will qualify for loans, how long it will take to process loans under new documentation and credit standards, and whether borrowers will back down in hopes that mortgage rates will fall further.
Source: Wall Street Journal, Dan Fitzpatrick (12/22/08)
Mortgage lenders are seeing a deluge of applications for refinancings as borrowing costs decline due to a recent cut in the federal funds rate by the Federal Reserve, and many are hiring temporary workers or reassigning employees to handle the swelling volume.
Some experts believe the jump in refis could signal a turning point in the market and reduce pressure on banks by the U.S. government to bolster lending following the distribution of millions of dollars in assistance.
However, it remains uncertain how many borrowers will qualify for loans, how long it will take to process loans under new documentation and credit standards, and whether borrowers will back down in hopes that mortgage rates will fall further.
Source: Wall Street Journal, Dan Fitzpatrick (12/22/08)
Friday, December 19, 2008
Is Now a Good Time to Refinance?
From Realtor Magazine Online, Daily Real Estate News December 19, 2008
Refinancing now sounds appealing, but for lots of people, it isn’t all that easy.
Applications for refinances tripled earlier this month after the Federal Reserve promised to buy up $600 billion of mortgage debt. And rates for 30-year fixed mortgages are falling below 5 percent – the lowest in 50 years – but many home owners will have trouble doing the deal.
Having at least 20 percent equity in a home is important. A credit score of at least 720 and a debt ratio that is less than 43 percent are both essential.
Jumbo mortgages are still expensive. A 5/1 adjustable-rate with an initial interest rate for five years and an annual reset is averaging 6.6 percent. Traditional 30-year fixed are at 7.49 percent. Home owners in this situation may have to just ride it out.
Source: Business Week, Lauren Young (12/22/08)
Refinancing now sounds appealing, but for lots of people, it isn’t all that easy.
Applications for refinances tripled earlier this month after the Federal Reserve promised to buy up $600 billion of mortgage debt. And rates for 30-year fixed mortgages are falling below 5 percent – the lowest in 50 years – but many home owners will have trouble doing the deal.
Having at least 20 percent equity in a home is important. A credit score of at least 720 and a debt ratio that is less than 43 percent are both essential.
Jumbo mortgages are still expensive. A 5/1 adjustable-rate with an initial interest rate for five years and an annual reset is averaging 6.6 percent. Traditional 30-year fixed are at 7.49 percent. Home owners in this situation may have to just ride it out.
Source: Business Week, Lauren Young (12/22/08)
Economists Blame Housing Bubble on Tax Break
From Realtor Magazine Online, Daily Real Estate News December 19, 2008
Some economists are blaming the housing bubble on the tax break that passed in 1997, removing taxes on most home sales.
This tax treatment encouraged people to put more money into real estate because it could be a tax-free windfall. A recent study by the Federal Reserve found that 17 percent of the increase in home sales over the last decade is attributable to this tax change.
Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for ''fueling the mother of all housing bubbles.
''The law’s defenders say that it removed a tax incentive that pushed home owners to trade up because before 1997, people had to buy a house at a price that was at least as high as the cost of their previous home to avoid capital gains taxes. Now they can sell and buy a smaller property or rent.
Source: The New York Times, Vikas Bajaj and David Leonhardt (12/19/08)
Some economists are blaming the housing bubble on the tax break that passed in 1997, removing taxes on most home sales.
This tax treatment encouraged people to put more money into real estate because it could be a tax-free windfall. A recent study by the Federal Reserve found that 17 percent of the increase in home sales over the last decade is attributable to this tax change.
Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for ''fueling the mother of all housing bubbles.
''The law’s defenders say that it removed a tax incentive that pushed home owners to trade up because before 1997, people had to buy a house at a price that was at least as high as the cost of their previous home to avoid capital gains taxes. Now they can sell and buy a smaller property or rent.
Source: The New York Times, Vikas Bajaj and David Leonhardt (12/19/08)
Buyers Being Lured to 100% Loan Program
From Realtor Magazine Online, Daily Real Estate News December 19, 2008
More buyers in search of home loans are turning to an obscure program operated by the United States Department of Agriculture.
The program allows no-money-down purchases. In fact, including a mortgage insurance policy, a borrower can seek up to 102 percent.
To be eligible, buyers can’t have income that exceeds 115 percent of the median county income. The loans are restricted to low-density areas, generally towns of no more than 25,000 residents. The loans are made by private lenders, then insured by the government.
Some home builders are promoting the use of this program. "It's one of our main tools right now," says John Bargnesi, vice president for sales of Scottsdale, Ariz., home builder Meritage Homes.
Source: The Wall Street Journal, Nick Timiraos (12/16/08)
More buyers in search of home loans are turning to an obscure program operated by the United States Department of Agriculture.
The program allows no-money-down purchases. In fact, including a mortgage insurance policy, a borrower can seek up to 102 percent.
To be eligible, buyers can’t have income that exceeds 115 percent of the median county income. The loans are restricted to low-density areas, generally towns of no more than 25,000 residents. The loans are made by private lenders, then insured by the government.
Some home builders are promoting the use of this program. "It's one of our main tools right now," says John Bargnesi, vice president for sales of Scottsdale, Ariz., home builder Meritage Homes.
Source: The Wall Street Journal, Nick Timiraos (12/16/08)
Mortgage Rates Plunge to Record Lows
From Realtor Magazine Online, Daily Real Estate News December 19, 2008
In response to the Federal Reserve's cut in the federal funds rate to near zero, Freddie Mac reports that the 30-year fixed mortgage rate fell to 5.17 percent during the week ended Dec. 18--down from 5.47 percent last week and the lowest since the survey's inception in 1971.
Interest on 15-year fixed loans slipped to 4.92 percent from 5.20 percent.
Meanwhile, the five-year hybrid adjustable mortgage rate dropped to 5.6 percent from 5.82 percent; and the one-year ARM dipped to 4.94 percent from 5.09 percent.
A year ago, the 30-year fixed rate stood at 6.14 percent, the 15-year fixed rate at 5.79 percent, the five-year hybrid ARM at 5.9 percent, and the one-year ARM at 5.51 percent.
Source: The Wall Street Journal, Steve Kerch (12/19/08)
In response to the Federal Reserve's cut in the federal funds rate to near zero, Freddie Mac reports that the 30-year fixed mortgage rate fell to 5.17 percent during the week ended Dec. 18--down from 5.47 percent last week and the lowest since the survey's inception in 1971.
Interest on 15-year fixed loans slipped to 4.92 percent from 5.20 percent.
Meanwhile, the five-year hybrid adjustable mortgage rate dropped to 5.6 percent from 5.82 percent; and the one-year ARM dipped to 4.94 percent from 5.09 percent.
A year ago, the 30-year fixed rate stood at 6.14 percent, the 15-year fixed rate at 5.79 percent, the five-year hybrid ARM at 5.9 percent, and the one-year ARM at 5.51 percent.
Source: The Wall Street Journal, Steve Kerch (12/19/08)
Thursday, December 18, 2008
Can't Afford It! Can't Sell it! Can't Refinance It!
Foreclosures - Short sales - Bankruptcies; Answers to Those Tough Questions About Credit in Today's Environment…and how each affects credit scores. Compliments of the Home, James! ® team.
FORECLOSURE
Foreclosure is the legal process in which a bank or other secured creditor either sells or repossesses a parcel of real property, home or land, after the owner has failed to comply with the mortgage or deed of trust agreement with the lender. Most frequently, the violation of the mortgage agreement is the default of payment. The completion of the foreclosure process allows the lender to sell the property, and keep the proceeds to pay off the mortgage as well as any legal costs. The length of the foreclosure process varies from state to state.
If the foreclosed property is sold for less than the remaining primary mortgage balance, and there is no insurance to cover the loss, the court overseeing the foreclosure process may enter a deficiency judgment against the borrower. Deficiency judgments can be used to place a lien on the borrower's other personal property, obligating the borrower to repay the difference or suffer the loss of their property. It gives the lender a legal right to collect the remainder of debt out of borrower's other existing assets.
However, there are exceptions to this rule. If the mortgage is classified as "non-recourse debt," then the borrower has no personal liability in the event of foreclosure. This is often the case with residential mortgages. If so, the lender may not go after borrower's personal assets to recoup additional loss.
The lender's ability to pursue a deficiency judgment can be restricted by state laws. In California and some other states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans, however, refinanced loans and home equity lines of credit aren't.
If the lender chooses not to pursue deficiency judgment-or can't because the mortgage is non-recourse-and writes off the loss, the borrower may have to pay income taxes on the un-repaid amount if it can be considered "forgiven debt."
Any other loans taken out against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure (in the sense that they are no longer attached to the property), but the borrower is still obligated to pay them off if they are not paid out of the foreclosure auction's proceeds.
How Does a Foreclosure Affect Credit?
A foreclosure can be reported as a Foreclosure or Repossession and carries a derogatory payment status of 8 or 9 (M1, R1 and I1 being the best and R9, I9, etc. being the most negative) which is just under a Public Record. There is a misconception that foreclosures are considered Public Records to the scoring system, however, they are not. Although there is a Public Notice Record on file once a foreclosure is filed, but this record is completely different than a credit report public record.
A Foreclosure will remain on a credit report for 7 years from completion date. And the score will drop from 50-250 points. The difference in point loss depends on how many points your client has to lose in the payment history factor of their credit. So if someone has a 750 credit score, and they opt to foreclose, their score could drop up to 250 points. However, if someone has a 500 credit score, they may lose 50 points for the same derogatory.
If a Deficiency Judgment or Tax Lien is filed in connection with a Foreclosure, the credit score can drop an additional 100 points.
Fannie Mae Waiting Period
The current selling guideline from Fannie Mae has upped the previous 4 year period of how much time must elapse after a foreclosure to 5 years from the date the foreclosure proceeding is completed, not started.
The exception for extenuating circumstances has been increased from a 2 year to a 3 year waiting period.
Word of Caution: If you have a borrower going through a foreclosure due to circumstances of losing a job, a medical crisis, sub-prime mortgage crisis fall-out, I suggest that you advise them to fully document their experience now. Not to wait until later, because the details and emotional energy of what they are going through will be more difficult to document and prove down the road if they decide to apply for a loan in 2 years based on an extenuating circumstance claim.
In General: When it comes to foreclosure and how it affects the ability to obtain credit in the future, there are multiple points of extremely negative impact. Deficiency judgments for the amount not collected by the lender in the foreclosure sale can end up on the borrower's credit report as a derogatory mark. Additionally, there is a high risk that the borrower will be hit with a substantial tax penalty which can result in a tax lien, which also appears on the credit report. As a general rule, other than a bankruptcy, foreclosure is the least desirable of all of the options available when a borrower is upside down in a home mortgage.
DEED IN LIEU OF FORECLOSURE
An alternative to foreclosure is a "deed in lieu of foreclosure." In this scenario, the borrower turns the house over to the lender and walks away without owing anything. A deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The main advantage to the borrower is that it immediately releases him or her from most or all of the personal debt associated with the defaulted loan. The borrower also avoids a foreclosure proceeding and may receive more generous terms than he or she would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of repossessing the property.
However, the lender usually will not proceed with a deed in lieu of foreclosure if the outstanding debt on the property exceeds the current fair market value of the property. So in this market, this option probably won't be available to most homeowners who are upside down.
How Does a Deed in Lieu Of Foreclosure Affect the Borrower's Credit?
Most lenders report a deed in lieu of foreclosure as a foreclosure, so the credit scores will carry the same serious affect as if it were an actual foreclosure. However, what most borrowers don't know is that they can negotiate with the lender to report it differently in return for turning over the deed and avoiding foreclosure costs.
Many lenders will say that they cannot change the reporting status, but they can. Here are their options in preferred order:
* Paid As Agreed - Credit scores will have already dropped over 100 points due to default in payments, however, if reported as Paid As Agreed, the borrower will be able to purchase another home in a shorter time period.
* Paid Settlement - Credit scores could drop up to 150 points.
The item will remain on the credit report for 7 years from the completion date or the settlement date.
Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a deed in lieu of foreclosure proceeding is completed.
The exception for extenuating circumstances also remains the same at 2 years.
SHORT SALE (aka Pre-Foreclosure Sale)
In my opinion, the best option is a short sale, which occurs when a bank or mortgage lender agrees to discount a loan balance, due to an economic hardship on the part of the home owner. The home owner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove a proposed sale.
A short sale is typically executed to prevent a home foreclosure. Lenders often choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owners, the advantages include avoidance of having foreclosures on their credit histories. Additionally, a short sale is typically faster and less expensive than a foreclosure.
Junior lien holders, such as holders of second mortgages, HELOC lenders, and homeowner associations (special assessment liens), may also need to approve the short sale. Frequent objectors to short sales include those who hold tax liens (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale.
While it is frequently common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating the zero balance and settlement option on the mortgagor's credit report, or even flat-out refuse to do so "due to their financial loss."
The Mortgage Forgiveness Debt Relief Act Of 2007
When the lender decides to forgive all or a portion of the debt and accept less, the forgiven amount is considered as income for the borrower, like with a foreclosure, leaving it open to be taxed. However, The Mortgage Forgiveness Debt Relief Act of 2007 contains amendments to remove such tax liability, allowing the borrower and lender to work together to find a solution beneficial to both parties.
How Does a Short Sale Affect the Borrower's Credit?
The few reported short sales that I have seen have appeared as "Paid Settlements" on a mortgage account. In the wake of the current mortgage crisis, short sales are becoming extremely common, but legislation has not caught up with the tidal wave and there is no law on the books relating to them to date. As a result, there is an opportunity for the borrower to negotiate credit reporting with the lender. I've seen several successful negotiations, so be sure to let your borrower know that it is possible.
Our view - a short sale proves that the borrower is exhausting every effort to pay the loan. The borrower has willingly committed to taking on months of emotional and physical stress in a good-faith effort to sell the property to maintain a good relationship with that lender. Most likely, the reason they can't afford their current mortgage is because they were in an adjustable product and their mortgage payment has doubled. That doesn't mean that they can't afford a different loan program with a lower payment. Which leads me to wonder what the incentive is for lenders not to negotiate with the borrower on how the item is reported to the bureaus. All they would be doing is cutting off a pretty substantial future income stream if they put these types of borrowers out of the market for two years. In that light, negotiation for a non-report on short sales is well worth it.
Here are your options in preferred order:
* Paid As Agreed - Won't hurt the score at all as long as the borrower has kept payments current.Unrated - May drop a few points.
* Paid Settlement - Credit score will drop 50-150 points.
If reported, the item will remain on the credit report for 7 years from the completion date or the settlement date.
Fannie Mae Waiting Period
A few weeks ago, Fannie Mae was going to consider a short sale the same as a foreclosure, however, the current selling guideline from Fannie Mae has reduced the amount of time that must elapse after a short sale to 2 years from the date the short sale is completed, not started.
There is no exception for extenuating circumstances.
Bankruptcy Mortgage Relief
Currently, bankruptcy offers very limited protection to a homeowner who is upside down with their payments. The borrower can file a Chapter 7 which, depending on the state bankruptcy law, will most likely require him or her to surrender the property to the bankruptcy court, or file a Chapter 13 debt repayment plan to spread out prior delinquent payments over a number of months or years in the future. However, no bankruptcy proceeding can modify the terms of an existing home loan on a principal residence. Legislation is being proposed to Congress that would allow bankruptcy judges to modify the terms of an existing mortgage loan. I would not hold my breath. It could take years to make further substantial changes to the bankruptcy laws.
How Does a Bankruptcy Affect the Borrower's Credit?
My advice on this is to avoid Bankruptcy at all costs unless, your borrower is upside down on everything. Not only have the new bankruptcy filing requirements become more difficult and more costly, a public record will wreak havoc on credit scores and could stop someone from being hired or renting a place to live.
A Chapter 7 Bankruptcy will remain on the report for 10 years, and a Chapter 13 will remain for 7. The point loss could be from 100-350 points, depending on how many points the borrower has to lose in this factor.
Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a Chapter 7 Bankruptcy. The 4 year period can start on either the discharge or dismissal date.
The exception for extenuating circumstances is 2 years.
Again, the selling guideline from Fannie Mae has not changed. It is a 2 year period of how much time must elapse after a Chapter 13 Bankruptcy. The 2 year period can start on either the discharge or dismissal date.
In the case of multiple bankruptcies, the current selling guidelines that have just been added require a 5 year waiting period from the most recent discharge or dismissal date.
The exception for extenuating circumstances in the case of multiple bankruptcies is a 3 year waiting period from the most recent discharge or dismissal date.
What's the Good News?
Aging Out: In all instances above where I reference how many points will be lost in each scenario, it is important to make sure your clients understand that over time, all derogatory accounts age out. This means, the older the account becomes, the less it will hurt their credit scores.
7 Year Reporting Period: The law states that derogatory items "can be" reported for 7-10 years as outlined above. It doesn't state that they "MUST BE.' My experience proves over and over again that there is no need to wait out the 7 years. You don't have to. You can start seeking early removal of the item by disputing to the credit bureaus that are reporting it. In many instances, after 3-4 years, the item will be deleted.
You can Start Recovering and Rebuilding immediately. This is key information because many consumers feel doomed for the next 10 years. They have no idea that they can start rebuilding their credit immediately. Put together a Recover and Rebuild kit for your clients. If you are too busy to create the kit, click here to read about CRC's Recover and Rebuild Section of our From Loan To Loan Content Site.
In Conclusion
Unfortunately, there is no magic pill to make it all go away. There are distasteful consequences no matter which method you elect to mitigate your particular financial dilemma. If you are currently in a bind, or see yourself facing a credit and mortgage challenge in the near future, we urge you to contact your the holder of your current mortgage...the sooner, the better. If you need referral to a tax specialist, a lawyer, or mortgage consultant - or if you would like to see if you will qualify for refinancing - contact us.
FORECLOSURE
Foreclosure is the legal process in which a bank or other secured creditor either sells or repossesses a parcel of real property, home or land, after the owner has failed to comply with the mortgage or deed of trust agreement with the lender. Most frequently, the violation of the mortgage agreement is the default of payment. The completion of the foreclosure process allows the lender to sell the property, and keep the proceeds to pay off the mortgage as well as any legal costs. The length of the foreclosure process varies from state to state.
If the foreclosed property is sold for less than the remaining primary mortgage balance, and there is no insurance to cover the loss, the court overseeing the foreclosure process may enter a deficiency judgment against the borrower. Deficiency judgments can be used to place a lien on the borrower's other personal property, obligating the borrower to repay the difference or suffer the loss of their property. It gives the lender a legal right to collect the remainder of debt out of borrower's other existing assets.
However, there are exceptions to this rule. If the mortgage is classified as "non-recourse debt," then the borrower has no personal liability in the event of foreclosure. This is often the case with residential mortgages. If so, the lender may not go after borrower's personal assets to recoup additional loss.
The lender's ability to pursue a deficiency judgment can be restricted by state laws. In California and some other states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans, however, refinanced loans and home equity lines of credit aren't.
If the lender chooses not to pursue deficiency judgment-or can't because the mortgage is non-recourse-and writes off the loss, the borrower may have to pay income taxes on the un-repaid amount if it can be considered "forgiven debt."
Any other loans taken out against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure (in the sense that they are no longer attached to the property), but the borrower is still obligated to pay them off if they are not paid out of the foreclosure auction's proceeds.
How Does a Foreclosure Affect Credit?
A foreclosure can be reported as a Foreclosure or Repossession and carries a derogatory payment status of 8 or 9 (M1, R1 and I1 being the best and R9, I9, etc. being the most negative) which is just under a Public Record. There is a misconception that foreclosures are considered Public Records to the scoring system, however, they are not. Although there is a Public Notice Record on file once a foreclosure is filed, but this record is completely different than a credit report public record.
A Foreclosure will remain on a credit report for 7 years from completion date. And the score will drop from 50-250 points. The difference in point loss depends on how many points your client has to lose in the payment history factor of their credit. So if someone has a 750 credit score, and they opt to foreclose, their score could drop up to 250 points. However, if someone has a 500 credit score, they may lose 50 points for the same derogatory.
If a Deficiency Judgment or Tax Lien is filed in connection with a Foreclosure, the credit score can drop an additional 100 points.
Fannie Mae Waiting Period
The current selling guideline from Fannie Mae has upped the previous 4 year period of how much time must elapse after a foreclosure to 5 years from the date the foreclosure proceeding is completed, not started.
The exception for extenuating circumstances has been increased from a 2 year to a 3 year waiting period.
Word of Caution: If you have a borrower going through a foreclosure due to circumstances of losing a job, a medical crisis, sub-prime mortgage crisis fall-out, I suggest that you advise them to fully document their experience now. Not to wait until later, because the details and emotional energy of what they are going through will be more difficult to document and prove down the road if they decide to apply for a loan in 2 years based on an extenuating circumstance claim.
In General: When it comes to foreclosure and how it affects the ability to obtain credit in the future, there are multiple points of extremely negative impact. Deficiency judgments for the amount not collected by the lender in the foreclosure sale can end up on the borrower's credit report as a derogatory mark. Additionally, there is a high risk that the borrower will be hit with a substantial tax penalty which can result in a tax lien, which also appears on the credit report. As a general rule, other than a bankruptcy, foreclosure is the least desirable of all of the options available when a borrower is upside down in a home mortgage.
DEED IN LIEU OF FORECLOSURE
An alternative to foreclosure is a "deed in lieu of foreclosure." In this scenario, the borrower turns the house over to the lender and walks away without owing anything. A deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The main advantage to the borrower is that it immediately releases him or her from most or all of the personal debt associated with the defaulted loan. The borrower also avoids a foreclosure proceeding and may receive more generous terms than he or she would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of repossessing the property.
However, the lender usually will not proceed with a deed in lieu of foreclosure if the outstanding debt on the property exceeds the current fair market value of the property. So in this market, this option probably won't be available to most homeowners who are upside down.
How Does a Deed in Lieu Of Foreclosure Affect the Borrower's Credit?
Most lenders report a deed in lieu of foreclosure as a foreclosure, so the credit scores will carry the same serious affect as if it were an actual foreclosure. However, what most borrowers don't know is that they can negotiate with the lender to report it differently in return for turning over the deed and avoiding foreclosure costs.
Many lenders will say that they cannot change the reporting status, but they can. Here are their options in preferred order:
* Paid As Agreed - Credit scores will have already dropped over 100 points due to default in payments, however, if reported as Paid As Agreed, the borrower will be able to purchase another home in a shorter time period.
* Paid Settlement - Credit scores could drop up to 150 points.
The item will remain on the credit report for 7 years from the completion date or the settlement date.
Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a deed in lieu of foreclosure proceeding is completed.
The exception for extenuating circumstances also remains the same at 2 years.
SHORT SALE (aka Pre-Foreclosure Sale)
In my opinion, the best option is a short sale, which occurs when a bank or mortgage lender agrees to discount a loan balance, due to an economic hardship on the part of the home owner. The home owner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove a proposed sale.
A short sale is typically executed to prevent a home foreclosure. Lenders often choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owners, the advantages include avoidance of having foreclosures on their credit histories. Additionally, a short sale is typically faster and less expensive than a foreclosure.
Junior lien holders, such as holders of second mortgages, HELOC lenders, and homeowner associations (special assessment liens), may also need to approve the short sale. Frequent objectors to short sales include those who hold tax liens (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale.
While it is frequently common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating the zero balance and settlement option on the mortgagor's credit report, or even flat-out refuse to do so "due to their financial loss."
The Mortgage Forgiveness Debt Relief Act Of 2007
When the lender decides to forgive all or a portion of the debt and accept less, the forgiven amount is considered as income for the borrower, like with a foreclosure, leaving it open to be taxed. However, The Mortgage Forgiveness Debt Relief Act of 2007 contains amendments to remove such tax liability, allowing the borrower and lender to work together to find a solution beneficial to both parties.
How Does a Short Sale Affect the Borrower's Credit?
The few reported short sales that I have seen have appeared as "Paid Settlements" on a mortgage account. In the wake of the current mortgage crisis, short sales are becoming extremely common, but legislation has not caught up with the tidal wave and there is no law on the books relating to them to date. As a result, there is an opportunity for the borrower to negotiate credit reporting with the lender. I've seen several successful negotiations, so be sure to let your borrower know that it is possible.
Our view - a short sale proves that the borrower is exhausting every effort to pay the loan. The borrower has willingly committed to taking on months of emotional and physical stress in a good-faith effort to sell the property to maintain a good relationship with that lender. Most likely, the reason they can't afford their current mortgage is because they were in an adjustable product and their mortgage payment has doubled. That doesn't mean that they can't afford a different loan program with a lower payment. Which leads me to wonder what the incentive is for lenders not to negotiate with the borrower on how the item is reported to the bureaus. All they would be doing is cutting off a pretty substantial future income stream if they put these types of borrowers out of the market for two years. In that light, negotiation for a non-report on short sales is well worth it.
Here are your options in preferred order:
* Paid As Agreed - Won't hurt the score at all as long as the borrower has kept payments current.Unrated - May drop a few points.
* Paid Settlement - Credit score will drop 50-150 points.
If reported, the item will remain on the credit report for 7 years from the completion date or the settlement date.
Fannie Mae Waiting Period
A few weeks ago, Fannie Mae was going to consider a short sale the same as a foreclosure, however, the current selling guideline from Fannie Mae has reduced the amount of time that must elapse after a short sale to 2 years from the date the short sale is completed, not started.
There is no exception for extenuating circumstances.
Bankruptcy Mortgage Relief
Currently, bankruptcy offers very limited protection to a homeowner who is upside down with their payments. The borrower can file a Chapter 7 which, depending on the state bankruptcy law, will most likely require him or her to surrender the property to the bankruptcy court, or file a Chapter 13 debt repayment plan to spread out prior delinquent payments over a number of months or years in the future. However, no bankruptcy proceeding can modify the terms of an existing home loan on a principal residence. Legislation is being proposed to Congress that would allow bankruptcy judges to modify the terms of an existing mortgage loan. I would not hold my breath. It could take years to make further substantial changes to the bankruptcy laws.
How Does a Bankruptcy Affect the Borrower's Credit?
My advice on this is to avoid Bankruptcy at all costs unless, your borrower is upside down on everything. Not only have the new bankruptcy filing requirements become more difficult and more costly, a public record will wreak havoc on credit scores and could stop someone from being hired or renting a place to live.
A Chapter 7 Bankruptcy will remain on the report for 10 years, and a Chapter 13 will remain for 7. The point loss could be from 100-350 points, depending on how many points the borrower has to lose in this factor.
Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a Chapter 7 Bankruptcy. The 4 year period can start on either the discharge or dismissal date.
The exception for extenuating circumstances is 2 years.
Again, the selling guideline from Fannie Mae has not changed. It is a 2 year period of how much time must elapse after a Chapter 13 Bankruptcy. The 2 year period can start on either the discharge or dismissal date.
In the case of multiple bankruptcies, the current selling guidelines that have just been added require a 5 year waiting period from the most recent discharge or dismissal date.
The exception for extenuating circumstances in the case of multiple bankruptcies is a 3 year waiting period from the most recent discharge or dismissal date.
What's the Good News?
Aging Out: In all instances above where I reference how many points will be lost in each scenario, it is important to make sure your clients understand that over time, all derogatory accounts age out. This means, the older the account becomes, the less it will hurt their credit scores.
7 Year Reporting Period: The law states that derogatory items "can be" reported for 7-10 years as outlined above. It doesn't state that they "MUST BE.' My experience proves over and over again that there is no need to wait out the 7 years. You don't have to. You can start seeking early removal of the item by disputing to the credit bureaus that are reporting it. In many instances, after 3-4 years, the item will be deleted.
You can Start Recovering and Rebuilding immediately. This is key information because many consumers feel doomed for the next 10 years. They have no idea that they can start rebuilding their credit immediately. Put together a Recover and Rebuild kit for your clients. If you are too busy to create the kit, click here to read about CRC's Recover and Rebuild Section of our From Loan To Loan Content Site.
In Conclusion
Unfortunately, there is no magic pill to make it all go away. There are distasteful consequences no matter which method you elect to mitigate your particular financial dilemma. If you are currently in a bind, or see yourself facing a credit and mortgage challenge in the near future, we urge you to contact your the holder of your current mortgage...the sooner, the better. If you need referral to a tax specialist, a lawyer, or mortgage consultant - or if you would like to see if you will qualify for refinancing - contact us.
FDIC: No Mortgage Modifications, No Recovery
From Realtor Magazine Online, Daily Real Estate News December 18, 2008
Modifying mortgages to make them affordable is key to a recovery, says Sheila Bair, chair of the Federal Deposit Insurance Corp.
Bair, who spoke Wednesday at an event sponsored by the New America Foundation, emphasized that regulators’ top priority must be to stop the housing crisis.
"Using a combination of interest rate reductions – capped at a prime, conforming rate -– amortization extensions and, in some cases, principal deferment produces modifications that will last and, we believe, dramatically lower the re-default rate," Bair said.
Source: Dow Jones Business News, Ruth Mantell (12/17/2008)
Modifying mortgages to make them affordable is key to a recovery, says Sheila Bair, chair of the Federal Deposit Insurance Corp.
Bair, who spoke Wednesday at an event sponsored by the New America Foundation, emphasized that regulators’ top priority must be to stop the housing crisis.
"Using a combination of interest rate reductions – capped at a prime, conforming rate -– amortization extensions and, in some cases, principal deferment produces modifications that will last and, we believe, dramatically lower the re-default rate," Bair said.
Source: Dow Jones Business News, Ruth Mantell (12/17/2008)
Research: Good Loans Make Good Borrowers
From Realtor Magazine Online, Daily Real Estate News December 18, 2008
Properly structured programs to help low-income people buy homes can be sound public policy, according to a study that compares 4,000 low-income and minority homeowners with a similar group of renters.
The study by the University of North Carolina School of Social Work determined that loans with low monthly payments result in borrowers who stay current. They also participate in their communities and vote.
The problem is subprime loans, says Roberto G. Ouercia, director of the Center for Community Self-Help, a nonproft that partners with Fannie Mae and the Ford Foundation to lend mortgage money to low-income borrowers. The study found that borrowers with subprime loans are four times more likely to fall behind.
"If done right, lending to low-income and minority families is good business," says Quercia.
Source: News-Observer, David Ranii (12/18/2008)
Properly structured programs to help low-income people buy homes can be sound public policy, according to a study that compares 4,000 low-income and minority homeowners with a similar group of renters.
The study by the University of North Carolina School of Social Work determined that loans with low monthly payments result in borrowers who stay current. They also participate in their communities and vote.
The problem is subprime loans, says Roberto G. Ouercia, director of the Center for Community Self-Help, a nonproft that partners with Fannie Mae and the Ford Foundation to lend mortgage money to low-income borrowers. The study found that borrowers with subprime loans are four times more likely to fall behind.
"If done right, lending to low-income and minority families is good business," says Quercia.
Source: News-Observer, David Ranii (12/18/2008)
Buyers Increasingly Suspicious of Foreclosures
From Realtor Magazine Online, Daily Real Estate News December 18, 2008
Fewer buyers are willing to consider purchasing foreclosed property than they were seven months ago, according to a study commissioned by Trulia.com and RealtyTrac.
Seven months ago, 54 percent of adults surveyed said they would consider purchasing a foreclosed home. In November, only 47 percent of adults say they’d buy a foreclosure.
The chief turnoff is perceived risk, with 80 percent of those surveyed citing hidden repair costs, a tricky buying process, and the possibility that the neighborhood will lose more value and drag the property down with it.
To compensate for these risks, 75 percent say they expect at least a 25 percent discount and 30 percent say they would only buy if there is a 50 percent discount compared with a comparable home that isn’t in foreclosure.
Other findings:
* 56 percent of single/never married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 60 percent in April.
* 43 percent of married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent in April.
* 42 percent of divorced/separated/widowed adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent from April.
Source: Trulia.com (12/16/2008)
Fewer buyers are willing to consider purchasing foreclosed property than they were seven months ago, according to a study commissioned by Trulia.com and RealtyTrac.
Seven months ago, 54 percent of adults surveyed said they would consider purchasing a foreclosed home. In November, only 47 percent of adults say they’d buy a foreclosure.
The chief turnoff is perceived risk, with 80 percent of those surveyed citing hidden repair costs, a tricky buying process, and the possibility that the neighborhood will lose more value and drag the property down with it.
To compensate for these risks, 75 percent say they expect at least a 25 percent discount and 30 percent say they would only buy if there is a 50 percent discount compared with a comparable home that isn’t in foreclosure.
Other findings:
* 56 percent of single/never married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 60 percent in April.
* 43 percent of married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent in April.
* 42 percent of divorced/separated/widowed adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent from April.
Source: Trulia.com (12/16/2008)
Wednesday, December 17, 2008
Ten Real Estate Predictions for 2009
From Realtor Magazine Online, Daily Real Estate News December 17, 2008
2009 is likely to be a year of continuing adjustment to a changing real estate marketplace. Prepare yourself and your business with these predictions from HGTV’s FrontDoor.com Web site.
Sellers will continue to face falling home values in the new year because they’ll be competing with banks and builders who are slashing prices to sell off the still-huge inventory of foreclosures and new homes.
The Obama administration will act on its plan to crack down on abusive lending practices.
Mortgage holders in danger of losing their homes will receive more assistance from a variety of programs since the Senate's Joint Economic Committee has predicted two million foreclosures in 2009.
Banks' restructuring should bring increasing calm, making loan modifications and short sales easier to obtain. Eventually this will lead to a decrease in the number of bank-owned properties on the market.
Mortgage applications will continue to receive a comprehensive review, requiring borrowers to provide extensive income and debt documentation. Those with the best credit will get the best rates.
The foreclosure crisis has created wiser consumers, with a deeper understanding of real estate, mortgages, and credit enabling better decision-making going forward.
Green is good with increasing numbers of buyers opting for smaller homes that are within walking distance of school and work.
Buyers and sellers will be more and more tech savvy, relying on tools like video, webcasts, and mobile search. Consumers and practitioners will benefit from being ahead of the curve.
Prices will be low as will interest rates, creating great buying opportunities, and likely, inspiring reluctant buyers to make their move.
The recession will end and buyers will regain confidence in the market.
Source: Frontdoor.com (12/03/2008)
2009 is likely to be a year of continuing adjustment to a changing real estate marketplace. Prepare yourself and your business with these predictions from HGTV’s FrontDoor.com Web site.
Sellers will continue to face falling home values in the new year because they’ll be competing with banks and builders who are slashing prices to sell off the still-huge inventory of foreclosures and new homes.
The Obama administration will act on its plan to crack down on abusive lending practices.
Mortgage holders in danger of losing their homes will receive more assistance from a variety of programs since the Senate's Joint Economic Committee has predicted two million foreclosures in 2009.
Banks' restructuring should bring increasing calm, making loan modifications and short sales easier to obtain. Eventually this will lead to a decrease in the number of bank-owned properties on the market.
Mortgage applications will continue to receive a comprehensive review, requiring borrowers to provide extensive income and debt documentation. Those with the best credit will get the best rates.
The foreclosure crisis has created wiser consumers, with a deeper understanding of real estate, mortgages, and credit enabling better decision-making going forward.
Green is good with increasing numbers of buyers opting for smaller homes that are within walking distance of school and work.
Buyers and sellers will be more and more tech savvy, relying on tools like video, webcasts, and mobile search. Consumers and practitioners will benefit from being ahead of the curve.
Prices will be low as will interest rates, creating great buying opportunities, and likely, inspiring reluctant buyers to make their move.
The recession will end and buyers will regain confidence in the market.
Source: Frontdoor.com (12/03/2008)
Mortgage Applications Back on the Rise
From Realtor Magazine Online, Daily Real Estate News December 17, 2008
Mortgage applications climbed last week in response to falling interest rates, according to the Mortgage Bankers Association weekly mortgage applications survey.
The index increased 2.9 percent to 841.4 from 817.7 the previous week on an adjusted basis. On an unadjusted basis, it also increased 2.9 percent and was up 37.3 percent compared with the same week a year ago.
Most of the activity was in refinances, which increased to 76.9 percent of the total. "It doesn't solve the problem for people who owe more than their home is worth, but for the significant majority who are able to refinance, it is quite a boon," said Bob Walters, chief economist at Quicken Loans in Livonia, Mich.
Interest rates were down last week compared with the previous week, and are expected to decline still further in response to the Federal Reserve cutting its benchmark rate to a record low this week.Last week’s already low rates continued to decline:
* 30-year fixed-rate mortgages decreased to 5.18 percent from 5.44 percent;
* 15-year fixed-rate mortgages decreased to 4.93 percent from 5.08 percent
* 1-year ARMs decreased to 6.63 percent from 6.76 percent.
Source: Mortgage Bankers Association and Reuters News, Lynn Adler (12/17/2008)
Mortgage applications climbed last week in response to falling interest rates, according to the Mortgage Bankers Association weekly mortgage applications survey.
The index increased 2.9 percent to 841.4 from 817.7 the previous week on an adjusted basis. On an unadjusted basis, it also increased 2.9 percent and was up 37.3 percent compared with the same week a year ago.
Most of the activity was in refinances, which increased to 76.9 percent of the total. "It doesn't solve the problem for people who owe more than their home is worth, but for the significant majority who are able to refinance, it is quite a boon," said Bob Walters, chief economist at Quicken Loans in Livonia, Mich.
Interest rates were down last week compared with the previous week, and are expected to decline still further in response to the Federal Reserve cutting its benchmark rate to a record low this week.Last week’s already low rates continued to decline:
* 30-year fixed-rate mortgages decreased to 5.18 percent from 5.44 percent;
* 15-year fixed-rate mortgages decreased to 4.93 percent from 5.08 percent
* 1-year ARMs decreased to 6.63 percent from 6.76 percent.
Source: Mortgage Bankers Association and Reuters News, Lynn Adler (12/17/2008)
Key Interest Rate as Low as it Can Go
From Realtor Magazine Online, Daily Real Estate News December 17, 2008
The Federal Reserve on Tuesday lowered its benchmark federal funds rate to a range or zero to 0.25 percent and said it would likely keep rates low for an extended period.
"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the Fed said.
The Fed also said it was prepared to purchase more debt issued or guaranteed by Fannie Mae, Freddie Mac and other government-sponsored mortgage agencies. And it said it is considering purchases of longer-term U.S. Treasury debt.
"The focus of the committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level," it said.
Michael Woolfolk, senior currency strategist, at the Bank of New York-Mellon, applauded the Fed’s approach. "We think it's the best possible move for the U.S. consumer and for the financial market," Woolfolk said.
Source: Reuters News, Mark Felsenthal (10/16/2008)
The Federal Reserve on Tuesday lowered its benchmark federal funds rate to a range or zero to 0.25 percent and said it would likely keep rates low for an extended period.
"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the Fed said.
The Fed also said it was prepared to purchase more debt issued or guaranteed by Fannie Mae, Freddie Mac and other government-sponsored mortgage agencies. And it said it is considering purchases of longer-term U.S. Treasury debt.
"The focus of the committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level," it said.
Michael Woolfolk, senior currency strategist, at the Bank of New York-Mellon, applauded the Fed’s approach. "We think it's the best possible move for the U.S. consumer and for the financial market," Woolfolk said.
Source: Reuters News, Mark Felsenthal (10/16/2008)
Tuesday, December 16, 2008
Business Picks Up Where Prices Have Tumbled
From Realtor Magazine Online, Daily Real Estate News December 16, 2008
Sales are picking up in markets where prices are deflated, but the business is different than it was before the bubble burst, observers say.
The housing market in deflated markets--like Arizona, California, Florida, and Nebraska--are beginning to show signs of a rebound. Analysts say that prices have fallen to the point that those with average salaries can afford to buy once again.
"The buyers are returning," says Lawrence Yun, National Association of Realtors chief economist. "And in such a strong way that, now, we are hearing in some cases there is multiple bidding, which hints that maybe pricing is reaching a bottom point. But inventory remains high."
In California’s San Joaquin County, sales in September and October reached sales levels about equal to business at the height of the boom in 2005, says DataQuick, which provides property data.
But new buyers are primarily first-timers and investors looking to cash in. Local practitioners say the buyers are primarily local residents who have cash to spend.
“It's the couple down the street that has a nice nest egg and who wants to put it into something that will give them a good return," says Bev Marlow, head of the Central Valley Association of REALTORS®.
Source: The Christian Science Monitor, Ben Arnoldy (12/16/08)
Sales are picking up in markets where prices are deflated, but the business is different than it was before the bubble burst, observers say.
The housing market in deflated markets--like Arizona, California, Florida, and Nebraska--are beginning to show signs of a rebound. Analysts say that prices have fallen to the point that those with average salaries can afford to buy once again.
"The buyers are returning," says Lawrence Yun, National Association of Realtors chief economist. "And in such a strong way that, now, we are hearing in some cases there is multiple bidding, which hints that maybe pricing is reaching a bottom point. But inventory remains high."
In California’s San Joaquin County, sales in September and October reached sales levels about equal to business at the height of the boom in 2005, says DataQuick, which provides property data.
But new buyers are primarily first-timers and investors looking to cash in. Local practitioners say the buyers are primarily local residents who have cash to spend.
“It's the couple down the street that has a nice nest egg and who wants to put it into something that will give them a good return," says Bev Marlow, head of the Central Valley Association of REALTORS®.
Source: The Christian Science Monitor, Ben Arnoldy (12/16/08)
Monday, December 15, 2008
Where Will Housing Prices Go Next?
From Realtor Magazine Online, Daily Real Estate News December 15, 2008
How long will it take for home values to zoom back up. Some prognosticators predict decades. Others say there is a brighter picture.
"We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."
But Wachovia economist Adam York expects home values to recover fairly quickly, beginning in 2010. "The one saving grace is the population is growing by 3 million people a year," he says. "They need to live somewhere. That means more roofs.
"You be the judge, Here are some historic measures:
Rent. In the last half century, homes have on average sold for 20 times what it costs to rent them for a year. In 2006, at least in some places, they were selling for 32 times annual rent.
Income. From 1950 to 2000, home values sold for three times average household income. In 2006, average household income was $66,500, which should have put median home prices at $200,000. Instead the median was $301,000.
Appreciation. Existing home values rose 0.5 percent annually, adjusted for inflation, from 1950 to 2000. From 2000 to 2006, they rose at the annualized rate of 8.2 percent above inflation and peaked with a 12.3 percent rise in 2005.
Source: USA Today, Dennis Cauchon (12/12/2008)
How long will it take for home values to zoom back up. Some prognosticators predict decades. Others say there is a brighter picture.
"We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."
But Wachovia economist Adam York expects home values to recover fairly quickly, beginning in 2010. "The one saving grace is the population is growing by 3 million people a year," he says. "They need to live somewhere. That means more roofs.
"You be the judge, Here are some historic measures:
Rent. In the last half century, homes have on average sold for 20 times what it costs to rent them for a year. In 2006, at least in some places, they were selling for 32 times annual rent.
Income. From 1950 to 2000, home values sold for three times average household income. In 2006, average household income was $66,500, which should have put median home prices at $200,000. Instead the median was $301,000.
Appreciation. Existing home values rose 0.5 percent annually, adjusted for inflation, from 1950 to 2000. From 2000 to 2006, they rose at the annualized rate of 8.2 percent above inflation and peaked with a 12.3 percent rise in 2005.
Source: USA Today, Dennis Cauchon (12/12/2008)
Sam Zell Predicts Spring 2009 Housing Recovery
From Realtor Magazine Online, Daily Real Estate News December 15, 2008
Financial mogul Sam Zell, beleaguered owner of the Tribune Co., which declared Chapter 11 bankruptcy last week, told an Israeli business conference Sunday that the U.S. real estate market will be in recovery by spring 2009.
Zell pointed out that the U.S. population is growing and with fewer than 600,000 building starts in 2008, a million fewer than any of the last 10 years, demand for housing will rise.
Zell blamed the current crisis – at least in part – on ill-considered decisions.
"We are living through our first Blackberry recession where, literally, information is instantly disseminated around the world and people, in effect, respond to it, perhaps, often without any particular caution or attention,” he said.
Source: Reuters News, Ori Lewis (12/14/2008)
Financial mogul Sam Zell, beleaguered owner of the Tribune Co., which declared Chapter 11 bankruptcy last week, told an Israeli business conference Sunday that the U.S. real estate market will be in recovery by spring 2009.
Zell pointed out that the U.S. population is growing and with fewer than 600,000 building starts in 2008, a million fewer than any of the last 10 years, demand for housing will rise.
Zell blamed the current crisis – at least in part – on ill-considered decisions.
"We are living through our first Blackberry recession where, literally, information is instantly disseminated around the world and people, in effect, respond to it, perhaps, often without any particular caution or attention,” he said.
Source: Reuters News, Ori Lewis (12/14/2008)
Tips for Buying at a Foreclosure Auction
From Realtor Magazine Online, Daily Real Estate News December 15, 2008
If you’re thinking about buying a house at a foreclosure auction, here’s some advice from experienced auction buyers.
Pay cash. Most auctions require you to close in fewer than 30 days. That’s not enough time to get a bank loan. Hard-money loans are an option, but the going rate is 15 percent plus points, and refinancing right away is probably not an option.
Check the place out. Most auction companies working for banks will let you get in with an inspector a week or so before the sale.
Get a separate appraisal. A knowledgeable appraiser can keep you from getting caught up in the frenzy and paying too much.
Look for short sales. Instead of buying at a foreclosure auction, negotiate a short sale prior to foreclosure. Buying short takes patience, but you are likely to get a very good deal.
Source: Fortune, David Whitford (12/22/2008)
If you’re thinking about buying a house at a foreclosure auction, here’s some advice from experienced auction buyers.
Pay cash. Most auctions require you to close in fewer than 30 days. That’s not enough time to get a bank loan. Hard-money loans are an option, but the going rate is 15 percent plus points, and refinancing right away is probably not an option.
Check the place out. Most auction companies working for banks will let you get in with an inspector a week or so before the sale.
Get a separate appraisal. A knowledgeable appraiser can keep you from getting caught up in the frenzy and paying too much.
Look for short sales. Instead of buying at a foreclosure auction, negotiate a short sale prior to foreclosure. Buying short takes patience, but you are likely to get a very good deal.
Source: Fortune, David Whitford (12/22/2008)
Fed Expected to Cut Key Interest Rate Tuesday
From Realtor Magazine Online, Daily Real Estate News December 15, 2008
The Federal Reserve begins a two-day meeting today where it is expected to cut it's key interest rate, perhaps to an all-time low.
The Fed will likely announce Tuesday that it is cutting its key rate in half to just 0.50 percent. However, a few economists predict the Fed will go even further and cut the rate to one-quarter of a percentage point.
If that happens, it will be the lowest rate on record going back to 1954, when records tracking the monthly rates were first kept.
However deeply the Fed decides to cut rates, the prime rate for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate, currently at 4 percent, is used to determine rates on home equity loans, certain credit cards, and certain consumer loans, the Associated Press reports.
"It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.
Source: The Associated Press (12/14/12008)
The Federal Reserve begins a two-day meeting today where it is expected to cut it's key interest rate, perhaps to an all-time low.
The Fed will likely announce Tuesday that it is cutting its key rate in half to just 0.50 percent. However, a few economists predict the Fed will go even further and cut the rate to one-quarter of a percentage point.
If that happens, it will be the lowest rate on record going back to 1954, when records tracking the monthly rates were first kept.
However deeply the Fed decides to cut rates, the prime rate for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate, currently at 4 percent, is used to determine rates on home equity loans, certain credit cards, and certain consumer loans, the Associated Press reports.
"It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.
Source: The Associated Press (12/14/12008)
Friday, December 12, 2008
SEC Chief Defends Mark-to-Market Accounting
From Realtor Magazine Online, Daily Real Estate News December 12, 2008
Some financial professionals have blamed the economic meltdown on accounting procedures known as mark-to-market rules, which require that banks value the assets on their balance sheets at current market prices, even if the assets aren’t likely to be sold.
Mark-to-market critics have called for a revision in these rules.
Securities and Exchange Commission Chairman Christopher Cox says that would be a mistake.
“[Accounting rules] aren't just another financial rudder to be pulled when the economic ship drifts in the wrong direction," says Cox. "Instead they are the rivets in the hull, and you risk the integrity of the entire economy by removing them."
Instead, "We must endeavor to continue to develop robust best-practice guidance for auditors and preparers – particularly for fair value measurements of securities traded in inactive markets," Cox said in his address to the American Institute of Certified Public Accountants.
Source: The Associated Press, Marcy Gordon (12/08/08)
Some financial professionals have blamed the economic meltdown on accounting procedures known as mark-to-market rules, which require that banks value the assets on their balance sheets at current market prices, even if the assets aren’t likely to be sold.
Mark-to-market critics have called for a revision in these rules.
Securities and Exchange Commission Chairman Christopher Cox says that would be a mistake.
“[Accounting rules] aren't just another financial rudder to be pulled when the economic ship drifts in the wrong direction," says Cox. "Instead they are the rivets in the hull, and you risk the integrity of the entire economy by removing them."
Instead, "We must endeavor to continue to develop robust best-practice guidance for auditors and preparers – particularly for fair value measurements of securities traded in inactive markets," Cox said in his address to the American Institute of Certified Public Accountants.
Source: The Associated Press, Marcy Gordon (12/08/08)
30-Year Rates at Lowest in 4 Years
From Realtor Magazine Online, Daily Real Estate News December 12, 2008
Freddie Mac reports a decline in the 30-year fixed mortgage rate to 5.47 percent during the week ended Dec. 11 from 5.53 percent last week and 6.11 percent a year ago.
Some lenders are locking in even lower rates as they build on momentum started when the Federal Reserve announced plans last month to purchase a substantial number of mortgage-backed securities. HSH Associates and Inside Mortgage Finance are reporting interest on 30-year fixed loans at 5.33 percent and 5.09 percent, respectively.
Freddie Mac chief economist Frank Nothaft says mortgage rates also were driven downward by the recession and rising unemployment.
Source: The Washington Post, Dina ElBoghdady (12/12/08)
Freddie Mac reports a decline in the 30-year fixed mortgage rate to 5.47 percent during the week ended Dec. 11 from 5.53 percent last week and 6.11 percent a year ago.
Some lenders are locking in even lower rates as they build on momentum started when the Federal Reserve announced plans last month to purchase a substantial number of mortgage-backed securities. HSH Associates and Inside Mortgage Finance are reporting interest on 30-year fixed loans at 5.33 percent and 5.09 percent, respectively.
Freddie Mac chief economist Frank Nothaft says mortgage rates also were driven downward by the recession and rising unemployment.
Source: The Washington Post, Dina ElBoghdady (12/12/08)
One In Four Boomers Plan Move
From National Association of Builders
November 25, 2008 - One in four baby boom generation households (26%) expects to move from their current home in the future, with the majority looking for a single-level home that is more comfortable or convenient, according to a new survey prepared for AARP.
Echoing past surveys, most boomers (79%) say they would like to stay in their current home for as long as possible. Some – less than 10% -- said they would like to stay in their current home but don’t think they will be able to do so.
Many of those who expect to move said they will be looking for a better house, a better climate or a home that is closer to family and friends. More than half of those boomers (age 45-64) planning to move expect to look for a home that’s all on one level (59%). About half said they will look for a newer home (50%) or a smaller home (49%).
Older boomers are significantly more likely than younger boomers to think that they will move into a single level home (68% vs. 54% of those planning to move), but age is not the only factor that affects expectations. Boomer men are more likely than women to believe they will move into a newer home (61% vs. 42%) or move into a home in a warmer or better climate (41% vs. 25%).
November 25, 2008 - One in four baby boom generation households (26%) expects to move from their current home in the future, with the majority looking for a single-level home that is more comfortable or convenient, according to a new survey prepared for AARP.
Echoing past surveys, most boomers (79%) say they would like to stay in their current home for as long as possible. Some – less than 10% -- said they would like to stay in their current home but don’t think they will be able to do so.
Many of those who expect to move said they will be looking for a better house, a better climate or a home that is closer to family and friends. More than half of those boomers (age 45-64) planning to move expect to look for a home that’s all on one level (59%). About half said they will look for a newer home (50%) or a smaller home (49%).
Older boomers are significantly more likely than younger boomers to think that they will move into a single level home (68% vs. 54% of those planning to move), but age is not the only factor that affects expectations. Boomer men are more likely than women to believe they will move into a newer home (61% vs. 42%) or move into a home in a warmer or better climate (41% vs. 25%).
Tuesday, December 9, 2008
Before Investing in Long-Distance Properties
Some of the most successful real estate investors you'll ever meet will tell you one thing: Invest where you live. This is the advice I give to my students, especially if they're newbies. Though you may hear about hot areas a hundred miles or more away, think carefully before investing there. Why? Because it's difficult to gain thorough knowledge of a market area if you aren't living there. And even if you can get a snapshot of knowledge that can carry you through a successful purchase, you won't be around to notice the nuances of change that could signal the need to sell before problems set in.
Another obvious argument for investing where you live is that it gives you the ability to watch and manage your properties - a task that is neither easy nor inexpensive when they are a distance away. And that's the argument most seasoned investors focus on. Still, I know from experience that investing in far-flung areas can be profitable.
For example, I live in Arizona. But not long ago, I invested in properties in both Iowa and Illinois - more than a thousand miles away. At the time, job growth was strong and rental income was going through the roof. I have a student named Matt who lives in the Iowa/Illinois quad city area, and I partnered with him on a few deals.
A local quad city bank noticed that we were buying houses and came to us with a commercial property valued at $2.5 million. The bank had it in foreclosure, and wanted to get it off their books. They made us an offer that included a 5.5 percent interest rate for five years. One-third of the property was already rented to tenants, and the bank agreed to rent back the remaining rental space for us. After our back-and-forth counters, the sales price came down to $1,596,000. Right now, we get a cash flow of 20K a month, with the bank renting out the space. Once we get tenants in at market rents, our cash flow will more than quadruple.
Another deal Matt and I partnered on was a bank-owned foreclosure valued at $400K. We made an offer of $162K, they countered, and in the end we got it for $164K. The current market value is more than twice our purchase price. We can rent it or list it. Either way, we make a super profit.
If you know and trust someone who understands a "long-distance" area you're considering investing in, he may be able to help you gain - and maintain - the very thorough knowledge you need to make smart decisions. That would include an understanding of these five market factors:
Long-Distance Investing Factor #1. How does your market relate to the big picture?
Location is always important. Even in an economic downturn, certain areas of the country can be extremely attractive because of such things as job availability. Watch national real estate price indexes like the Case-Shiller Index and the OFHEO (Office of Federal Housing Enterprise Oversight) Home Price Index. When these indexes are improving or looking bleak, what are the factors causing the rise or slide? Are they factors that can also influence your micro-market, be it a neighborhood or a city?
Long-Distance Investing Factor #2. What makes your market special... or not?
You also need to ferret out local trends or strengths that make your market area different, unique, or robust. Is industry or commerce moving in? What will keep area values strong or appreciating?
Neighborhoods with a strong job base fare well even in a bad economy. Baby boomers needing healthcare keep communities that surround medical centers hopping. Companies that are going "green" are also attractive to live near. Is the local government providing tax incentives to lure business? There is a trend for people to want more clean, open space in their environment. Is your market area moving in that direction?
Be thorough and objective in your analysis, as it can make the difference between success and failure.
Long-Distance Investing Factor #3. Is local government helping or hurting your chances?
We touched on this in Investing Factor #2 - but, other than attracting new businesses and planning for more parks and green space, there are ways in which government, or even subdivisions, can influence market direction. In particular, there is a tendency for people to resist change, to maintain what they have even if it means throwing up obstacles to prevent growth in certain residential areas. This can sometimes be good for prices, sometimes bad. It's hard to predict which.
Here are some of the requirements imposed by governments and associations that added to the cost of building and, thus, helped prices rise during the real estate boom:
* An increase in minimum home sizes
* An increase in lot sizes
* Forcing builders to reserve green space
* Requiring wider streets, more street lights, etc.
Ultimately, requirements like these usually slow or impede growth. On the flip side, you don't want to see rampant growth allowed, with poor zoning and little attention to quality of life, traffic, and safety issues.
Long-Distance Investing Factor #4: What do the numbers say?
Real estate investment requires a great deal of diligence in analyzing purchase price versus value, rental outlook, and other financial factors. What are the rents maxing out at for comparable properties? What are these other properties experiencing in the way of vacancy rates or non-payment of rents? What are existing capitalization rates? (The cap rate is the ratio between the net operating income produced by the property and its original price or its current market value - and it is an indirect measure of how fast an investment will pay for itself.)
Are there condition factors that might be important? Are many of the multi-family properties in the area in poor condition or lacking amenities wanted by today's renters? If so, that isn't necessarily bad - especially if you're going to end up with a property that is in much better condition than others in the neighborhood.
Don't do the numbers only on the property you are considering. Have a firm grip on how your potential investment's numbers fit into the local market. Long-Distance Investing Factor #5: How firmly are you planted?
We started this discussion with the importance of investing where you live. And when you have a long-distance investment, you are, in a sense, "living" there. So, how does the area appeal to you? Add a sheet to your diligence file. Make it a pro and con assessment of the area as it relates to your own quality of life. If the other four market factors look good for a particular investment, knowing that you wouldn't mind being there for some time to come could seal the deal.
Another obvious argument for investing where you live is that it gives you the ability to watch and manage your properties - a task that is neither easy nor inexpensive when they are a distance away. And that's the argument most seasoned investors focus on. Still, I know from experience that investing in far-flung areas can be profitable.
For example, I live in Arizona. But not long ago, I invested in properties in both Iowa and Illinois - more than a thousand miles away. At the time, job growth was strong and rental income was going through the roof. I have a student named Matt who lives in the Iowa/Illinois quad city area, and I partnered with him on a few deals.
A local quad city bank noticed that we were buying houses and came to us with a commercial property valued at $2.5 million. The bank had it in foreclosure, and wanted to get it off their books. They made us an offer that included a 5.5 percent interest rate for five years. One-third of the property was already rented to tenants, and the bank agreed to rent back the remaining rental space for us. After our back-and-forth counters, the sales price came down to $1,596,000. Right now, we get a cash flow of 20K a month, with the bank renting out the space. Once we get tenants in at market rents, our cash flow will more than quadruple.
Another deal Matt and I partnered on was a bank-owned foreclosure valued at $400K. We made an offer of $162K, they countered, and in the end we got it for $164K. The current market value is more than twice our purchase price. We can rent it or list it. Either way, we make a super profit.
If you know and trust someone who understands a "long-distance" area you're considering investing in, he may be able to help you gain - and maintain - the very thorough knowledge you need to make smart decisions. That would include an understanding of these five market factors:
Long-Distance Investing Factor #1. How does your market relate to the big picture?
Location is always important. Even in an economic downturn, certain areas of the country can be extremely attractive because of such things as job availability. Watch national real estate price indexes like the Case-Shiller Index and the OFHEO (Office of Federal Housing Enterprise Oversight) Home Price Index. When these indexes are improving or looking bleak, what are the factors causing the rise or slide? Are they factors that can also influence your micro-market, be it a neighborhood or a city?
Long-Distance Investing Factor #2. What makes your market special... or not?
You also need to ferret out local trends or strengths that make your market area different, unique, or robust. Is industry or commerce moving in? What will keep area values strong or appreciating?
Neighborhoods with a strong job base fare well even in a bad economy. Baby boomers needing healthcare keep communities that surround medical centers hopping. Companies that are going "green" are also attractive to live near. Is the local government providing tax incentives to lure business? There is a trend for people to want more clean, open space in their environment. Is your market area moving in that direction?
Be thorough and objective in your analysis, as it can make the difference between success and failure.
Long-Distance Investing Factor #3. Is local government helping or hurting your chances?
We touched on this in Investing Factor #2 - but, other than attracting new businesses and planning for more parks and green space, there are ways in which government, or even subdivisions, can influence market direction. In particular, there is a tendency for people to resist change, to maintain what they have even if it means throwing up obstacles to prevent growth in certain residential areas. This can sometimes be good for prices, sometimes bad. It's hard to predict which.
Here are some of the requirements imposed by governments and associations that added to the cost of building and, thus, helped prices rise during the real estate boom:
* An increase in minimum home sizes
* An increase in lot sizes
* Forcing builders to reserve green space
* Requiring wider streets, more street lights, etc.
Ultimately, requirements like these usually slow or impede growth. On the flip side, you don't want to see rampant growth allowed, with poor zoning and little attention to quality of life, traffic, and safety issues.
Long-Distance Investing Factor #4: What do the numbers say?
Real estate investment requires a great deal of diligence in analyzing purchase price versus value, rental outlook, and other financial factors. What are the rents maxing out at for comparable properties? What are these other properties experiencing in the way of vacancy rates or non-payment of rents? What are existing capitalization rates? (The cap rate is the ratio between the net operating income produced by the property and its original price or its current market value - and it is an indirect measure of how fast an investment will pay for itself.)
Are there condition factors that might be important? Are many of the multi-family properties in the area in poor condition or lacking amenities wanted by today's renters? If so, that isn't necessarily bad - especially if you're going to end up with a property that is in much better condition than others in the neighborhood.
Don't do the numbers only on the property you are considering. Have a firm grip on how your potential investment's numbers fit into the local market. Long-Distance Investing Factor #5: How firmly are you planted?
We started this discussion with the importance of investing where you live. And when you have a long-distance investment, you are, in a sense, "living" there. So, how does the area appeal to you? Add a sheet to your diligence file. Make it a pro and con assessment of the area as it relates to your own quality of life. If the other four market factors look good for a particular investment, knowing that you wouldn't mind being there for some time to come could seal the deal.
Deadline Nears for Dropping Jumbo Loan Limits
From Realtor Magazine Online, Daily Real Estate News December 9, 2008
The deadline for getting what is known as a conforming jumbo loan is closing. As of Jan. 1, the maximum for loans that Fannie Mae and Freddie Mac are willing to buy will decline from $729,750 to $625,500 in the nation’s priciest areas.
Also, beginning Jan. 1, underwriting standards for these loans will rise, requiring that most buyers put down 20 percent and have a debt-to-income ratio as low as 30 percent, according to the trade publication Inside Mortgage Finance.
Observers say this makes it more likely that home prices in these upper ranges will fall, pushing down prices for less-costly properties in the process.
Source: Washington Times, David M. Dickson (12/09/08)
The deadline for getting what is known as a conforming jumbo loan is closing. As of Jan. 1, the maximum for loans that Fannie Mae and Freddie Mac are willing to buy will decline from $729,750 to $625,500 in the nation’s priciest areas.
Also, beginning Jan. 1, underwriting standards for these loans will rise, requiring that most buyers put down 20 percent and have a debt-to-income ratio as low as 30 percent, according to the trade publication Inside Mortgage Finance.
Observers say this makes it more likely that home prices in these upper ranges will fall, pushing down prices for less-costly properties in the process.
Source: Washington Times, David M. Dickson (12/09/08)
NAR: Pending Home Sales Holding Steady
From Realtor Magazine Online, Daily Real Estate News December 9, 2008
Pending home sales eased against a deteriorating economic backdrop but remain in a stable range, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September. It is 1 percent below October 2007 when it was 89.8.
“Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” says Lawrence Yun, NAR chief economist. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market.”
Conditions remain uneven around the country, but some areas that are showing healthy gains in pending home sales from a year ago include many Florida and California markets; Providence, R.I.; Lansing, Mich.; Oklahoma City; and Las Vegas.
By the Region
Here's what the PHSI showed across the country:
* South: jumped 7.8 percent to 95.9 in October but remains 2.9 percent below a year ago.
* Northeast: rose 0.6 percent to 68.1 but is 14.1 percent below October 2007.
* Midwest: declined 4.3 percent to 79.7 in October and is 6.8 percent below a year ago.
* West: fell 8.7 percent to 103.7 but is 17.4 percent higher than October 2007.The Economic
Forecast
New-home sales: for 2008 should total 486,000 this year, decline to 393,000 in 2009 and then grow to 446,000 in 2010. Housing starts, including multifamily units, are projected at 934,000 units in 2008 and 731,000 next year before rising to 772,000 in 2010.
Existing-home sales: looking at middle-ground assumptions, existing-home sales are forecast to total 4.96 million this year, and then increase to 5.19 million in 2009 and 5.55 million in 2010.
Home prices: “Price projections are challenging in an environment with so many variables and divergent local conditions,” Yun says. “The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration.” NAR’s housing affordability index is likely to remain quite favorable, averaging 138 in 2009.
Unemployment rate: is estimated at 7.2 percent in the first quarter, rising to 8.3 percent by the end of 2009.
Inflation: as measured by the Consumer Price Index, is seen at 0.7 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.5 percent in 2009.
GDP: Yun expects growth in the U.S. gross domestic product (GDP) to contract through the first half of 2009, then stabilize and expand in latter part of the year – lifted by a home sales recovery.
“Given the critical role of housing in an economic recovery, we’re confident sufficient stimulus will be offered to bring more buyers to the market,” he says.
Could a Drop in Interest Rates Help?
The 30-year fixed-rate mortgage will probably decline to 5.6 percent in the first quarter, rise slowly to 6 percent by the end of 2009, and average 6.2 percent in 2010.
NAR President Charles McMillan says he’s hopeful about considerations by the U.S. Treasury to help the housing market.
“Efforts to bring down mortgage interest rates demonstrate a clear understanding of the role housing plays in stabilizing the economy,” McMillan says. “We’re very encouraged by all of the proposals getting serious consideration in Washington to help home buyers. More sales will stabilize home prices by bringing down inventory, and would lessen foreclosure pressure.”
Source: NAR
Pending home sales eased against a deteriorating economic backdrop but remain in a stable range, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September. It is 1 percent below October 2007 when it was 89.8.
“Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” says Lawrence Yun, NAR chief economist. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market.”
Conditions remain uneven around the country, but some areas that are showing healthy gains in pending home sales from a year ago include many Florida and California markets; Providence, R.I.; Lansing, Mich.; Oklahoma City; and Las Vegas.
By the Region
Here's what the PHSI showed across the country:
* South: jumped 7.8 percent to 95.9 in October but remains 2.9 percent below a year ago.
* Northeast: rose 0.6 percent to 68.1 but is 14.1 percent below October 2007.
* Midwest: declined 4.3 percent to 79.7 in October and is 6.8 percent below a year ago.
* West: fell 8.7 percent to 103.7 but is 17.4 percent higher than October 2007.The Economic
Forecast
New-home sales: for 2008 should total 486,000 this year, decline to 393,000 in 2009 and then grow to 446,000 in 2010. Housing starts, including multifamily units, are projected at 934,000 units in 2008 and 731,000 next year before rising to 772,000 in 2010.
Existing-home sales: looking at middle-ground assumptions, existing-home sales are forecast to total 4.96 million this year, and then increase to 5.19 million in 2009 and 5.55 million in 2010.
Home prices: “Price projections are challenging in an environment with so many variables and divergent local conditions,” Yun says. “The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration.” NAR’s housing affordability index is likely to remain quite favorable, averaging 138 in 2009.
Unemployment rate: is estimated at 7.2 percent in the first quarter, rising to 8.3 percent by the end of 2009.
Inflation: as measured by the Consumer Price Index, is seen at 0.7 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.5 percent in 2009.
GDP: Yun expects growth in the U.S. gross domestic product (GDP) to contract through the first half of 2009, then stabilize and expand in latter part of the year – lifted by a home sales recovery.
“Given the critical role of housing in an economic recovery, we’re confident sufficient stimulus will be offered to bring more buyers to the market,” he says.
Could a Drop in Interest Rates Help?
The 30-year fixed-rate mortgage will probably decline to 5.6 percent in the first quarter, rise slowly to 6 percent by the end of 2009, and average 6.2 percent in 2010.
NAR President Charles McMillan says he’s hopeful about considerations by the U.S. Treasury to help the housing market.
“Efforts to bring down mortgage interest rates demonstrate a clear understanding of the role housing plays in stabilizing the economy,” McMillan says. “We’re very encouraged by all of the proposals getting serious consideration in Washington to help home buyers. More sales will stabilize home prices by bringing down inventory, and would lessen foreclosure pressure.”
Source: NAR
Friday, December 5, 2008
Low Loan Rates Aren't Reaching Pricey Areas
From Realtor Magazine Online, Daily Real Estate News December 5, 2008
Low home loan rates engineered by Fannie Mae and Freddie Mac aren’t helping borrowers in pricey areas or those who are upside down in their mortgages.
Jumbo loans remain at an average of 7.21 percent, according to financial publisher HSH Associates, which is 1.67 percentage points above rates for conforming loans.
The latest Fannie-Freddie/Treasury program "does not directly help jumbo mortgage borrowers, and it especially won't help the majority of delinquent, upside-down or poor-credit home owners who are going into foreclosure," says Greg McBride, senior financial analyst at Bankrate.com.
Source: Los Angeles Times, E. Scott Reckard and Maura Reynolds (12/05/08)
Low home loan rates engineered by Fannie Mae and Freddie Mac aren’t helping borrowers in pricey areas or those who are upside down in their mortgages.
Jumbo loans remain at an average of 7.21 percent, according to financial publisher HSH Associates, which is 1.67 percentage points above rates for conforming loans.
The latest Fannie-Freddie/Treasury program "does not directly help jumbo mortgage borrowers, and it especially won't help the majority of delinquent, upside-down or poor-credit home owners who are going into foreclosure," says Greg McBride, senior financial analyst at Bankrate.com.
Source: Los Angeles Times, E. Scott Reckard and Maura Reynolds (12/05/08)
Why Are Property Taxes Still Rising?
From Realtor Magazine Online, Daily Real Estate News December 5, 2008
Property taxes continue to rise across the country, despite steep declines in home values.
Property tax collections across the United States rose 3.1 percent this year, according to the U.S. Bureau of Economic Analysis (BEA). That means state and local governments will collect more than $400 billion in property taxes this year—a record amount.
Most states have caps that prevent taxes from rising rapidly in boom times. The same laws keep taxes from plummeting when home values decline.
"Property taxes aren't always popular, but they are a very stable tax, even in tough times," says Thomas Gentzel, executive director of the Pennsylvania School Board Association.
Source: USA Today, Dennis Cauchon (12/04/08)
Property taxes continue to rise across the country, despite steep declines in home values.
Property tax collections across the United States rose 3.1 percent this year, according to the U.S. Bureau of Economic Analysis (BEA). That means state and local governments will collect more than $400 billion in property taxes this year—a record amount.
Most states have caps that prevent taxes from rising rapidly in boom times. The same laws keep taxes from plummeting when home values decline.
"Property taxes aren't always popular, but they are a very stable tax, even in tough times," says Thomas Gentzel, executive director of the Pennsylvania School Board Association.
Source: USA Today, Dennis Cauchon (12/04/08)
Fed Chair: Reducing Foreclosures is Critical
From Realtor Magazine Online, Daily Real Estate News December 5, 2008
Federal Reserve Chair Ben Bernanke asked the federal government Thursday to increase efforts to put an end to foreclosures because they are driving other economic problems.
"Weakness in the housing market has proved a serious drag on overall economic activity," he said. "Steps that stabilize the housing market will help stabilize the economy as well."
In a question-and-answer session after his speech at a Fed housing conference, Bernanke rejected the notion of federal support for declining housing prices.
"I don't think we would be either willing or able to target house prices," he said. "I think that would probably be an impossible thing to do given the size of the national housing market."
Instead, he suggested more support for the mortgage market so more people are able to borrow.
Source: The Associated Press, Jeannine Aversa (12/04/08)
Federal Reserve Chair Ben Bernanke asked the federal government Thursday to increase efforts to put an end to foreclosures because they are driving other economic problems.
"Weakness in the housing market has proved a serious drag on overall economic activity," he said. "Steps that stabilize the housing market will help stabilize the economy as well."
In a question-and-answer session after his speech at a Fed housing conference, Bernanke rejected the notion of federal support for declining housing prices.
"I don't think we would be either willing or able to target house prices," he said. "I think that would probably be an impossible thing to do given the size of the national housing market."
Instead, he suggested more support for the mortgage market so more people are able to borrow.
Source: The Associated Press, Jeannine Aversa (12/04/08)
Mortgage Rates Take a Big Dip This Week
From Realtor Magazine Online, Daily Real Estate News December 5, 2008
For the week ended Dec. 3, Freddie Mac reported the lowest interest on 30-year fixed home loans since late January.
The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period.
Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.
Source: Realty Times (12/05/08)
For the week ended Dec. 3, Freddie Mac reported the lowest interest on 30-year fixed home loans since late January.
The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period.
Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.
Source: Realty Times (12/05/08)
Tuesday, December 2, 2008
Fed Chair: Cutting Rates Won't Help
From Realtor Magazine Online, Daily Real Estate News December 2, 2008
Federal Reserve Chair Ben Bernanke said lowering the key interest rate is “certainly feasible,” but probably won’t revive the sagging economy.
The Fed’s key interest rate is now set at 1 percent and many economists predict the Fed will lower it again when it meets on Dec. 15 and 16. But, obviously, the rate can’t go any lower than 0.
In a speech Monday to Austin, Texas, business leaders, Bernanke said there are other ways the Fed might bolster the economy. He cited buying longer-term Treasury or agency securities on the open market in substantial quantities, which would lower rates on these securities and “thus help to spur aggregate demand,” Bernanke said.
"We at the Federal Reserve and our colleagues at other federal agencies will carefully monitor the conditions of all key financial institutions and stand ready to act as needed to preserve their viability in this difficult financial environment," he said.
Source: Associated Press, Jeannine Aversa (12/01/08)
Federal Reserve Chair Ben Bernanke said lowering the key interest rate is “certainly feasible,” but probably won’t revive the sagging economy.
The Fed’s key interest rate is now set at 1 percent and many economists predict the Fed will lower it again when it meets on Dec. 15 and 16. But, obviously, the rate can’t go any lower than 0.
In a speech Monday to Austin, Texas, business leaders, Bernanke said there are other ways the Fed might bolster the economy. He cited buying longer-term Treasury or agency securities on the open market in substantial quantities, which would lower rates on these securities and “thus help to spur aggregate demand,” Bernanke said.
"We at the Federal Reserve and our colleagues at other federal agencies will carefully monitor the conditions of all key financial institutions and stand ready to act as needed to preserve their viability in this difficult financial environment," he said.
Source: Associated Press, Jeannine Aversa (12/01/08)
Delinquent Loans Likely to Double
From Realtor Magazine Online, Daily Real Estate News December 2, 2008
Credit bureau TransUnion predicts that delinquent mortgages will almost double in 2009, rising to the highest level in at least 16 years.
TransUnion, which analyzed 27 million consumer records in its database, predicted that the number of consumers who are late by 60 days or more will reach 7.17 percent in the fourth quarter of 2009. The delinquency rate in the fourth quarter of 2008 is expected to be 4.67 percent.
"There are a lot more loans that will be resetting throughout 2009 through 2011," says Ezra Becker, principal consultant in TransUnion's financial-services group. "There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now."
Source: The Wall Street Journal, Jane J. Kim (12/02/08)
Credit bureau TransUnion predicts that delinquent mortgages will almost double in 2009, rising to the highest level in at least 16 years.
TransUnion, which analyzed 27 million consumer records in its database, predicted that the number of consumers who are late by 60 days or more will reach 7.17 percent in the fourth quarter of 2009. The delinquency rate in the fourth quarter of 2008 is expected to be 4.67 percent.
"There are a lot more loans that will be resetting throughout 2009 through 2011," says Ezra Becker, principal consultant in TransUnion's financial-services group. "There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now."
Source: The Wall Street Journal, Jane J. Kim (12/02/08)
Monday, December 1, 2008
30-Year Mortgage Rates Drop Below 6%
From Realtor Magazine Online, Daily Real Estate News December 1, 2008
Mortgage Brokers’ phones rang off the hook last week as 30-year mortgage rates dropped below 6 percent. Some brokers say their rates are as low as 5.25 percent.
The rates are down because the Federal Reserve announced that it would buy $500 billion in mortgage-backed securities held by Fannie Mae and Freddie Mac. That would help the two increase the pool of money for new mortgages.
"This is really craziness," says Brian Koss, a managing director of Mortgage Network.
Koss advises borrowers who find an attractive rate to lock it in for 60 days. “Drop everything you are doing, get the mortgage professional all of the paperwork they need, so you don't run out of time," he says.
Source: USA Today, Anna Bahney (11/28/2008)
Mortgage Brokers’ phones rang off the hook last week as 30-year mortgage rates dropped below 6 percent. Some brokers say their rates are as low as 5.25 percent.
The rates are down because the Federal Reserve announced that it would buy $500 billion in mortgage-backed securities held by Fannie Mae and Freddie Mac. That would help the two increase the pool of money for new mortgages.
"This is really craziness," says Brian Koss, a managing director of Mortgage Network.
Koss advises borrowers who find an attractive rate to lock it in for 60 days. “Drop everything you are doing, get the mortgage professional all of the paperwork they need, so you don't run out of time," he says.
Source: USA Today, Anna Bahney (11/28/2008)
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