For the commercial real estate market in South Florida and around the country to recover, buyers and sellers need to come to terms on the new price reality.
“The quicker we get there, the better off we are all going to be,” said Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M University.
“We’ve got to create an environment where business people have confidence in the future.”
Dotzour delivered the economic outlook Thursday at the South Florida chapter meeting of NAIOP chapter, the commercial real estate development association.
The good news Dotzour predicted is that equilibrium is getting closer, and when it does there will be an influx of new money that has been sitting on the sidelines waiting.
“There’s a lot of demand out there,” Dotzour said. “There’s a lot of people that want to buy real estate. They just won’t because they’re convinced it’s not priced properly.”
Holding this up are the banks that don’t want to write down the value of the assets on their books and continue to play the game of “extend and pretend.” That’s when a bank extends the loan coming due rather than accept the new reduced value of the real estate.
Overall the current prices for commercial real estate have dropped between 35 percent and 50 percent compared to 2007 values, Dotzour said.
“Those prices should never have been paid and those loans should never have been made. The prices are getting back to the reality level where tenants can make a profit and survive.”
Improvement in the real estate market will begin in 2010 with a stronger recovery by 2011, at which point there will be an increase in absorption of vacant space, rents will start to rise and property values will increase, Dotzour predicts.
But he also warns that buyers waiting for fire sale prices on distressed properties, like those seen during the savings and loan crisis of the 1980s, are going to be disappointed.
“A lot of people think they are going to get real steals,” Dotzour said, “but your government is going to prevent that.”
Copyright © 2010 The Miami Herald, Elaine Walker
Friday, January 29, 2010
Administration shifts gears on mortgage modifications
Conceding that its initial mortgage relief program has been less than successful, the Treasury Department Thursday announced new rules to simplify and speed the decision-making process for struggling borrowers trying to modify the terms of their distressed mortgages.
The changes to last year’s Home Affordable Modification Program announced by the Treasury take effect on June 1, and are designed to address the continuing problem with borrower documentation that’s frustrated both homeowners and mortgage servicers, who act as bill collectors for investors that own pools of U.S. home loans.
The new HAMP requirements will force servicers to have in hand all the needed documents from borrowers before they extend a three-month trial modification. Currently, trial modifications can begin after authorization by phone, with related paperwork only needed sometime within the three-month trial period.
Servicers complain that borrowers often provide incomplete applications or lack sufficient proof of income, and that lack of upfront documentation provides false hopes that a solution is coming.
Borrowers counter that servicers routinely lose their paperwork and then use the lost paperwork as a reason to refuse to modify a mortgage and help them stay in their homes.
The confusion has led to a slow start for the administration’s effort, which began picking up speed in December. Several million homeowners may qualify for loan modifications, but as of December, only 110,000 permanent modifications had taken place, a fraction of the 3 million to 4 million sought by 2012.
“We’ve learned a lot along the way,” said Assistant Treasury Secretary Herb Allison, acknowledging that the program to help struggling borrowers stay out of foreclosure got off to a difficult start.
By getting the paperwork to servicers before the trial “mod” process begins, borrowers are likely to benefit, because once a HAMP trial begins, they’re guaranteed a permanent modification as long as they make the three trial payments on time. Right now, many are turned down even after making three trial payments.
“It’s clear they were having problems taking the initial mods and making them into permanent, sustainable mod, so something clearly needed to change,” said Evan Fuguet, senior policy counsel for the Center for Responsible Lending, a consumer advocacy organization in Durham, N.C.
The administration plan seeks to lower payments for troubled borrowers to 31 percent of before-tax income for five years, after which the interest rate on the mortgage begins rising. More than 900,000 trial modifications were offered through December, and to date some 43.2 percent of the permanent modifications have involved extending loan terms, many of them stretching the life of a loan to 40 years.
On the web:
Treasury announcement: http://www.ustreas.gov/press/releases/tg516.htm
Latest program numbers: http://www.ustreas.gov/press/releases/tg508.htm
Government modification program: http://makinghomeaffordable.gov/
Supplemental Directive 10-01 is available at https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1001.pdf
Copyright © 2010 McClatchy-Tribune Information Services, Kevin G. Hall
The changes to last year’s Home Affordable Modification Program announced by the Treasury take effect on June 1, and are designed to address the continuing problem with borrower documentation that’s frustrated both homeowners and mortgage servicers, who act as bill collectors for investors that own pools of U.S. home loans.
The new HAMP requirements will force servicers to have in hand all the needed documents from borrowers before they extend a three-month trial modification. Currently, trial modifications can begin after authorization by phone, with related paperwork only needed sometime within the three-month trial period.
Servicers complain that borrowers often provide incomplete applications or lack sufficient proof of income, and that lack of upfront documentation provides false hopes that a solution is coming.
Borrowers counter that servicers routinely lose their paperwork and then use the lost paperwork as a reason to refuse to modify a mortgage and help them stay in their homes.
The confusion has led to a slow start for the administration’s effort, which began picking up speed in December. Several million homeowners may qualify for loan modifications, but as of December, only 110,000 permanent modifications had taken place, a fraction of the 3 million to 4 million sought by 2012.
“We’ve learned a lot along the way,” said Assistant Treasury Secretary Herb Allison, acknowledging that the program to help struggling borrowers stay out of foreclosure got off to a difficult start.
By getting the paperwork to servicers before the trial “mod” process begins, borrowers are likely to benefit, because once a HAMP trial begins, they’re guaranteed a permanent modification as long as they make the three trial payments on time. Right now, many are turned down even after making three trial payments.
“It’s clear they were having problems taking the initial mods and making them into permanent, sustainable mod, so something clearly needed to change,” said Evan Fuguet, senior policy counsel for the Center for Responsible Lending, a consumer advocacy organization in Durham, N.C.
The administration plan seeks to lower payments for troubled borrowers to 31 percent of before-tax income for five years, after which the interest rate on the mortgage begins rising. More than 900,000 trial modifications were offered through December, and to date some 43.2 percent of the permanent modifications have involved extending loan terms, many of them stretching the life of a loan to 40 years.
On the web:
Treasury announcement: http://www.ustreas.gov/press/releases/tg516.htm
Latest program numbers: http://www.ustreas.gov/press/releases/tg508.htm
Government modification program: http://makinghomeaffordable.gov/
Supplemental Directive 10-01 is available at https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1001.pdf
Copyright © 2010 McClatchy-Tribune Information Services, Kevin G. Hall
Thursday, January 28, 2010
Fed holds rates at record low to aid recovery
The Federal Reserve pledged Wednesday to hold rates at record lows to nurture the economic recovery and lower unemployment. But its decision drew a dissent from one member, signaling the Fed’s challenge in deciding when to pull back stimulus money it pumped into the economy.
The Fed’s statement sketched a mixed picture of the economy. Pointing to weakness, it noted that bank lending is contracting. And it dropped a reference in its previous statement to an improving housing market.
But on the positive side, the Fed said business spending on equipment and software seems to be rising. And it said economic activity “continues to strengthen.”
The Fed said it still expects to end a $1.25 trillion program aimed at driving down mortgage rates as scheduled on March 31. Yet it reiterated that it remains open to changing that timetable if necessary.
Reports on home sales this week pointed to a still-fragile housing market.
The Fed member who opposed the decision to retain a pledge to keep rates at record lows for an “extended period” was Thomas Hoenig, president of the Federal Reserve Bank of Kansas City. Hoenig said the economy has improved sufficiently to drop the pledge, which has been in place for nearly a year.
With the economy on the mend, the Fed this year can focus on how and when to pull back the stimulus money pumped out to fight the financial crisis. Fed Chairman Ben Bernanke will lead that effort now that his prospects for another four-year term have improved. The Senate is slated to vote on his confirmation on Thursday. Bernanke’s term expires Jan. 31.
Bernanke and his colleagues will need to tread delicately. Reeling in the stimulus too soon risks short-circuiting the recovery, sending unemployment higher. If they move too late, they could unleash inflation.
On Wall Street, stocks reversed an early slide and ended higher after the Fed’s statement. The Dow Jones industrial average rose 41.87, or 0.4 percent. It had been down 40 points ahead of the Fed’s statement. Broader stock averages also rose.
Taking stock of the economy, Fed policymakers said the deterioration in the job market is easing and consumers are spending moderately. But they warned that double-digit unemployment, lackluster income growth and tight credit could crimp that spending.
Against that backdrop, the Fed kept its target range for its bank lending rate at zero to 0.25 percent, where it’s stood since December 2008.
In response, commercial banks’ prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will remain about 3.25 percent. That’s its lowest point in decades.
Super-low interest rates are good for borrowers who can get a loan and are willing to take on more debt. But those same low rates hurt savers. They’re especially hard on people living on fixed incomes who are earning measly returns on savings accounts and certificates of deposit.
In its statement, the Fed says it can keep rates low because inflation shouldn’t be a problem. It said “slack” in the economy – referring to factories operating at less than full throttle and the weak labor market – will prevent companies from jacking up prices.
Nonetheless, the Fed “sees the light at the end of the tunnel for the economy,” said Sung Won Sohn, economist at California State University. “Uncertainties in the economy have diminished.”
With credit clogs easing, the Fed said Wednesday that it plans to wind down by March 8 an emergency lending program – dubbed the Term Auction Facility – that provides banks with low-cost loans.
It also repeated its intentions of dismantling a handful of other emergency lending programs set up during the financial crisis on Feb. 1, when they are set to expire.
Most of them haven’t been used in months by banks or other firms as credit conditions have improved. Those programs include Fed efforts to backstop the “commercial paper” market. This involves short-term financing used by companies for expenses such as salaries and supplies. Another program slated to end bolstered the money market mutual fund industry.
Fed programs to provide emergency loans to investment firms and another program for financial institutions to swap risky securities for super-safe Treasury securities also will end Feb. 1. The Fed also made clear that it will be wind down by then a “swap” program with the European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank to provide them with U.S. dollars, which had been in high demand during the crisis.
The end of these programs shouldn’t have much economic impact because most have fallen out of use.
A recovery from the worst recession since the 1930s is under way, helped by the enormous government stimulus aid. But some question whether the recovery can last once those supports are pulled. And unemployment, now at 10 percent, is likely to remain high and drag on the recovery. Meanwhile, lending is still not back to normal. Banks are still failing.
On Thursday, the Senate has scheduled a vote on confirmation for Bernanke’s second term. The vote requires a 60-vote majority in the 100-member Senate to overcome procedural obstacles from Bernanke’s Senate critics. But Bernanke appears to have solidified his support in the Senate after the White House stepped in to quell rising opposition late last week.
Opponents – a mix of Democrats and Republicans – are angry over the Fed’s role in bailing out Wall Street firms. They also blame Bernanke for failing to detect and address problems, especially a housing bubble, that led to the crisis.
Copyright 2010 The Associated Press,
The Fed’s statement sketched a mixed picture of the economy. Pointing to weakness, it noted that bank lending is contracting. And it dropped a reference in its previous statement to an improving housing market.
But on the positive side, the Fed said business spending on equipment and software seems to be rising. And it said economic activity “continues to strengthen.”
The Fed said it still expects to end a $1.25 trillion program aimed at driving down mortgage rates as scheduled on March 31. Yet it reiterated that it remains open to changing that timetable if necessary.
Reports on home sales this week pointed to a still-fragile housing market.
The Fed member who opposed the decision to retain a pledge to keep rates at record lows for an “extended period” was Thomas Hoenig, president of the Federal Reserve Bank of Kansas City. Hoenig said the economy has improved sufficiently to drop the pledge, which has been in place for nearly a year.
With the economy on the mend, the Fed this year can focus on how and when to pull back the stimulus money pumped out to fight the financial crisis. Fed Chairman Ben Bernanke will lead that effort now that his prospects for another four-year term have improved. The Senate is slated to vote on his confirmation on Thursday. Bernanke’s term expires Jan. 31.
Bernanke and his colleagues will need to tread delicately. Reeling in the stimulus too soon risks short-circuiting the recovery, sending unemployment higher. If they move too late, they could unleash inflation.
On Wall Street, stocks reversed an early slide and ended higher after the Fed’s statement. The Dow Jones industrial average rose 41.87, or 0.4 percent. It had been down 40 points ahead of the Fed’s statement. Broader stock averages also rose.
Taking stock of the economy, Fed policymakers said the deterioration in the job market is easing and consumers are spending moderately. But they warned that double-digit unemployment, lackluster income growth and tight credit could crimp that spending.
Against that backdrop, the Fed kept its target range for its bank lending rate at zero to 0.25 percent, where it’s stood since December 2008.
In response, commercial banks’ prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will remain about 3.25 percent. That’s its lowest point in decades.
Super-low interest rates are good for borrowers who can get a loan and are willing to take on more debt. But those same low rates hurt savers. They’re especially hard on people living on fixed incomes who are earning measly returns on savings accounts and certificates of deposit.
In its statement, the Fed says it can keep rates low because inflation shouldn’t be a problem. It said “slack” in the economy – referring to factories operating at less than full throttle and the weak labor market – will prevent companies from jacking up prices.
Nonetheless, the Fed “sees the light at the end of the tunnel for the economy,” said Sung Won Sohn, economist at California State University. “Uncertainties in the economy have diminished.”
With credit clogs easing, the Fed said Wednesday that it plans to wind down by March 8 an emergency lending program – dubbed the Term Auction Facility – that provides banks with low-cost loans.
It also repeated its intentions of dismantling a handful of other emergency lending programs set up during the financial crisis on Feb. 1, when they are set to expire.
Most of them haven’t been used in months by banks or other firms as credit conditions have improved. Those programs include Fed efforts to backstop the “commercial paper” market. This involves short-term financing used by companies for expenses such as salaries and supplies. Another program slated to end bolstered the money market mutual fund industry.
Fed programs to provide emergency loans to investment firms and another program for financial institutions to swap risky securities for super-safe Treasury securities also will end Feb. 1. The Fed also made clear that it will be wind down by then a “swap” program with the European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank to provide them with U.S. dollars, which had been in high demand during the crisis.
The end of these programs shouldn’t have much economic impact because most have fallen out of use.
A recovery from the worst recession since the 1930s is under way, helped by the enormous government stimulus aid. But some question whether the recovery can last once those supports are pulled. And unemployment, now at 10 percent, is likely to remain high and drag on the recovery. Meanwhile, lending is still not back to normal. Banks are still failing.
On Thursday, the Senate has scheduled a vote on confirmation for Bernanke’s second term. The vote requires a 60-vote majority in the 100-member Senate to overcome procedural obstacles from Bernanke’s Senate critics. But Bernanke appears to have solidified his support in the Senate after the White House stepped in to quell rising opposition late last week.
Opponents – a mix of Democrats and Republicans – are angry over the Fed’s role in bailing out Wall Street firms. They also blame Bernanke for failing to detect and address problems, especially a housing bubble, that led to the crisis.
Copyright 2010 The Associated Press,
Tuesday, January 26, 2010
Clearing up confusion regarding tax credits
Federal tax credits for homebuyers have certainly boosted the Tampa Bay area real estate market.
The incentives have prompted nervous buyers to get off the fence, and that has helped the area shed thousands of homes from the region’s inventory of unsold properties.
But as these buyers prepare to cash in on their purchases by filing their tax returns, many are finding they may not qualify after all or don’t know how to file.
“There’s a lot of confusion,” said Greg Armstrong, a Coldwell Banker broker in Pasco County. “It’s so complex that if you’re not living it every day, like a CPA, you’re not in a position to direct someone.”
Even if the case seems straightforward, Armstrong encourages clients to seek guidance from an accountant.
There have been so many changes to the credit that IRS spokesman Michael Dobzinski had to consult his notes often to answer questions. Here are some helpful things the IRS wants you to know about the credits.
• The credits are available only to buyers purchasing primary residences. The IRS defines this has the residence where you spend most of your time.
• There are two credits available. One is for first-time buyers, or those who have not owned a home in the past three years. The maximum for this credit is $8,000 and, unlike a previous credit, this one does not have to be paid back. It applies to purchases made this year between Jan. 1 and April 30.
• The government broadened the credit in November to include some buyers who already own houses. Those buyers are eligible for a credit worth up to $6,500 for purchases made between Nov. 7 and April 30. In order to qualify, the buyer must have owned a primary residence for at least five consecutive years out of the past eight years. This credit also does not need to be paid back.
• There are income and price requirements. If the home was purchased after Nov. 6, it can cost no more than $800,000. Also, if purchased after that date, individuals cannot earn more than $125,000 and married couples filing jointly cannot earn more than $225,000.
• You don’t have to wait until 2010 to claim your credit, even if you buy this year. Purchase a home before the April 30 deadline and the credit can be claimed on this year’s taxes.
• If you’re claiming the credit, a paper filing is necessary. Only taxpayers not claiming the credit can file electronically. Dobzinski said buyers can still use electronic forms, but must print them out and mail them in, along with form 5405.
• Unlike last year, buyers claiming the credit must prove they are eligible. This is because some people filed for the credit last year, even though they had not purchased a home. You’ll need to send the HUD settlement statement along with the tax form. If you’re claiming the longtime owner credit, also include proof, such as copies of mortgage interest statements, property tax records or homeowner’s insurance records.
• Keep in mind that the credit is for your primary home. If you decide to rent or sell the home within three years, the credit must be repaid.
• Buyers claiming the credit will have to wait longer than usual to get the credit because of the need to file by paper. Expect to wait four to eight weeks, instead of the typical two weeks when filing electronically.
Copyright © 2010 Tampa Tribune, Fla.
The incentives have prompted nervous buyers to get off the fence, and that has helped the area shed thousands of homes from the region’s inventory of unsold properties.
But as these buyers prepare to cash in on their purchases by filing their tax returns, many are finding they may not qualify after all or don’t know how to file.
“There’s a lot of confusion,” said Greg Armstrong, a Coldwell Banker broker in Pasco County. “It’s so complex that if you’re not living it every day, like a CPA, you’re not in a position to direct someone.”
Even if the case seems straightforward, Armstrong encourages clients to seek guidance from an accountant.
There have been so many changes to the credit that IRS spokesman Michael Dobzinski had to consult his notes often to answer questions. Here are some helpful things the IRS wants you to know about the credits.
• The credits are available only to buyers purchasing primary residences. The IRS defines this has the residence where you spend most of your time.
• There are two credits available. One is for first-time buyers, or those who have not owned a home in the past three years. The maximum for this credit is $8,000 and, unlike a previous credit, this one does not have to be paid back. It applies to purchases made this year between Jan. 1 and April 30.
• The government broadened the credit in November to include some buyers who already own houses. Those buyers are eligible for a credit worth up to $6,500 for purchases made between Nov. 7 and April 30. In order to qualify, the buyer must have owned a primary residence for at least five consecutive years out of the past eight years. This credit also does not need to be paid back.
• There are income and price requirements. If the home was purchased after Nov. 6, it can cost no more than $800,000. Also, if purchased after that date, individuals cannot earn more than $125,000 and married couples filing jointly cannot earn more than $225,000.
• You don’t have to wait until 2010 to claim your credit, even if you buy this year. Purchase a home before the April 30 deadline and the credit can be claimed on this year’s taxes.
• If you’re claiming the credit, a paper filing is necessary. Only taxpayers not claiming the credit can file electronically. Dobzinski said buyers can still use electronic forms, but must print them out and mail them in, along with form 5405.
• Unlike last year, buyers claiming the credit must prove they are eligible. This is because some people filed for the credit last year, even though they had not purchased a home. You’ll need to send the HUD settlement statement along with the tax form. If you’re claiming the longtime owner credit, also include proof, such as copies of mortgage interest statements, property tax records or homeowner’s insurance records.
• Keep in mind that the credit is for your primary home. If you decide to rent or sell the home within three years, the credit must be repaid.
• Buyers claiming the credit will have to wait longer than usual to get the credit because of the need to file by paper. Expect to wait four to eight weeks, instead of the typical two weeks when filing electronically.
Copyright © 2010 Tampa Tribune, Fla.
Monday, January 25, 2010
Impact of tighter FHA rules on home loans debated
Tighter lending requirements for loans insured by the Federal Housing Administration may leave some borrowers unable to get mortgages, but economists are divided on the impact they could have on housing’s recovery.
The changes, aimed at strengthening the FHA’s reserves in the face of rising foreclosures, shouldn’t hurt too many borrowers, officials say.
“We don’t expect this to have a significant impact on the housing market,” says FHA Commissioner David Stevens, adding that “the moves are designed to get the reserves back up.”
The FHA is playing a greater role in the mortgage market, insuring about 30 percent of new loans, up from 3 percent in 2007. Growing defaults have cut its reserves below the level mandated by Congress, leading to fears that it might need a taxpayer bailout.
FHA-insured mortgages are attractive to borrowers, however, because down payments are only 3.5 percent. That won’t change under the new policies the FHA announced Wednesday, which are to take effect in spring or early summer. Among them:
• New borrowers will have to have a minimum credit score of 580 to qualify for a 3.5 percent down payment. Those with lower scores will have to make at least a 10 percent down payment. The average credit score of FHA-insured borrowers is 693.
• Allowable seller concessions will be reduced from 6 percent to 3 percent of the sale price. The change is intended to discourage inflated appraisals.
• Buyers will have to pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from 1.75 percent now. A $150,000 mortgage would require a payment of $3,375, or $750 more.
“It will slow the growth in demand,” says Joel Naroff, of Naroff Economic Advisors. “Any time you put up roadblocks, fewer people will qualify. This is just the beginning of clearer and more specific requirements so we don’t get into the mess we got into again. In the short term, it will have an effect, but it won’t be a huge effect.”
Dean Baker, co-director of the Center for Economic and Policy Research, says he expects the new FHA requirements will have a significant impact on borrowers, especially first-time homebuyers. Those who are denied FHA-insured loans, he says, are usually unable to qualify elsewhere.
“It’s a big deal,” Baker says. “Some will be unable to get loans. This will have a big hit on the market.”
Baker says it’s not surprising that FHA needed to take such steps, because it’s risky for lenders to issue loans with 3.5 percent down during a time of declining home values and rising unemployment.
While the stiffer requirements may leave some borrowers out of the marketplace, some economists say the measures are necessary to protect the FHA from losses.
Lawrence Yun, chief economist at the National Association of Realtors, says very lax lending and FHA insolvency could hurt the housing market worse in the future.
He says he doesn’t believe the requirements will stall the housing market in light of current low interest rates and a federal tax credit for first-time and repeat home buyers.
Mark Zandi, of Moody’s Economy.com, agrees the changes won’t have significant impact.
“It does highlight more broadly that policy support for the market is starting to wane. The tax credit will end in April; now, the FHA rule changes,” he says. “Policymakers are slowly exiting from their unprecedented support of the housing market to see if it can function on its own.”
Copyright © 2010 USA TODAY
The changes, aimed at strengthening the FHA’s reserves in the face of rising foreclosures, shouldn’t hurt too many borrowers, officials say.
“We don’t expect this to have a significant impact on the housing market,” says FHA Commissioner David Stevens, adding that “the moves are designed to get the reserves back up.”
The FHA is playing a greater role in the mortgage market, insuring about 30 percent of new loans, up from 3 percent in 2007. Growing defaults have cut its reserves below the level mandated by Congress, leading to fears that it might need a taxpayer bailout.
FHA-insured mortgages are attractive to borrowers, however, because down payments are only 3.5 percent. That won’t change under the new policies the FHA announced Wednesday, which are to take effect in spring or early summer. Among them:
• New borrowers will have to have a minimum credit score of 580 to qualify for a 3.5 percent down payment. Those with lower scores will have to make at least a 10 percent down payment. The average credit score of FHA-insured borrowers is 693.
• Allowable seller concessions will be reduced from 6 percent to 3 percent of the sale price. The change is intended to discourage inflated appraisals.
• Buyers will have to pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from 1.75 percent now. A $150,000 mortgage would require a payment of $3,375, or $750 more.
“It will slow the growth in demand,” says Joel Naroff, of Naroff Economic Advisors. “Any time you put up roadblocks, fewer people will qualify. This is just the beginning of clearer and more specific requirements so we don’t get into the mess we got into again. In the short term, it will have an effect, but it won’t be a huge effect.”
Dean Baker, co-director of the Center for Economic and Policy Research, says he expects the new FHA requirements will have a significant impact on borrowers, especially first-time homebuyers. Those who are denied FHA-insured loans, he says, are usually unable to qualify elsewhere.
“It’s a big deal,” Baker says. “Some will be unable to get loans. This will have a big hit on the market.”
Baker says it’s not surprising that FHA needed to take such steps, because it’s risky for lenders to issue loans with 3.5 percent down during a time of declining home values and rising unemployment.
While the stiffer requirements may leave some borrowers out of the marketplace, some economists say the measures are necessary to protect the FHA from losses.
Lawrence Yun, chief economist at the National Association of Realtors, says very lax lending and FHA insolvency could hurt the housing market worse in the future.
He says he doesn’t believe the requirements will stall the housing market in light of current low interest rates and a federal tax credit for first-time and repeat home buyers.
Mark Zandi, of Moody’s Economy.com, agrees the changes won’t have significant impact.
“It does highlight more broadly that policy support for the market is starting to wane. The tax credit will end in April; now, the FHA rule changes,” he says. “Policymakers are slowly exiting from their unprecedented support of the housing market to see if it can function on its own.”
Copyright © 2010 USA TODAY
FHA to provide early relief to struggling homeowners
At-risk homeowners with FHA-insured mortgage loans are now eligible for loss mitigation assistance before they fall behind on their mortgage payments. Previously, homeowners weren’t eligible until they missed payments.
The Helping Families Save Their Home Act of 2009 expanded FHA’s authority to use its loss mitigation tools to assist FHA borrowers avoid foreclosure, including those facing “imminent default” as defined by the Secretary.
“Loss mitigation assistance is beneficial to both borrowers and FHA because it helps borrowers retain their homes while protecting the FHA insurance fund from unnecessary losses,” says FHA Commissioner David Stevens. “Now servicers will have additional options for those borrowers who seek help before they go delinquent.”
The change is effective immediately under FHA’s Home Affordable Modification Program (FHA-HAMP) (http://www.hud.gov/offices/hsg/sfh/nsc/rep/hampfact.pdf) with the following rules:
• FHA defines “FHA borrower facing imminent default” to be current or less than 30 days past due on the mortgage obligation and experiencing a significant reduction in income or some other hardship that will prevent him or her from making the next required payment on the mortgage.
• A forbearance agreement allows the loan servicer to postpone, reduce or suspend payments due on a loan for a limited and specific time period.
• FHA-HAMP allows qualified FHA-insured borrowers to reduce their monthly mortgage payment to an affordable level by permanently reducing the payment through the use of a partial claim combined with a loan modification. The partial claim defers the repayment of a portion of the mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. The remaining balance is then modified through re-amortization and, in some cases, an interest rate reduction.
The borrower must be able to document the cause of an imminent default, which may include, but is not limited to, one or more of the following types of hardship:
1. A reduction in or loss of income that was supporting the mortgage loan, e.g., unemployment, reduced job hours, reduced pay, or a decline in self-employed business earnings. A scheduled temporary shutdown of the employer, (such as for a scheduled vacation), would not in and of itself be adequate to support an imminent default.
2. A change in household financial circumstances, e.g., death in family, serious or chronic illness, permanent or short-term disability.
Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer’s documentation must also include information on the borrower’s financial condition.
Additional information and guidance can be found on HUD’s website. (www.hud.gov).
© 2010 Florida Realtors®
The Helping Families Save Their Home Act of 2009 expanded FHA’s authority to use its loss mitigation tools to assist FHA borrowers avoid foreclosure, including those facing “imminent default” as defined by the Secretary.
“Loss mitigation assistance is beneficial to both borrowers and FHA because it helps borrowers retain their homes while protecting the FHA insurance fund from unnecessary losses,” says FHA Commissioner David Stevens. “Now servicers will have additional options for those borrowers who seek help before they go delinquent.”
The change is effective immediately under FHA’s Home Affordable Modification Program (FHA-HAMP) (http://www.hud.gov/offices/hsg/sfh/nsc/rep/hampfact.pdf) with the following rules:
• FHA defines “FHA borrower facing imminent default” to be current or less than 30 days past due on the mortgage obligation and experiencing a significant reduction in income or some other hardship that will prevent him or her from making the next required payment on the mortgage.
• A forbearance agreement allows the loan servicer to postpone, reduce or suspend payments due on a loan for a limited and specific time period.
• FHA-HAMP allows qualified FHA-insured borrowers to reduce their monthly mortgage payment to an affordable level by permanently reducing the payment through the use of a partial claim combined with a loan modification. The partial claim defers the repayment of a portion of the mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. The remaining balance is then modified through re-amortization and, in some cases, an interest rate reduction.
The borrower must be able to document the cause of an imminent default, which may include, but is not limited to, one or more of the following types of hardship:
1. A reduction in or loss of income that was supporting the mortgage loan, e.g., unemployment, reduced job hours, reduced pay, or a decline in self-employed business earnings. A scheduled temporary shutdown of the employer, (such as for a scheduled vacation), would not in and of itself be adequate to support an imminent default.
2. A change in household financial circumstances, e.g., death in family, serious or chronic illness, permanent or short-term disability.
Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer’s documentation must also include information on the borrower’s financial condition.
Additional information and guidance can be found on HUD’s website. (www.hud.gov).
© 2010 Florida Realtors®
House panel to suggest abolishing Fannie, Freddie
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said on Friday that the government-backed mortgage finance giants Fannie Mae and Freddie Mac are likely to be abolished and replaced with a new system for housing finance.
“The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance,” said Frank, once a big proponent of the firms. “That’s the approach, rather than a piecemeal one.”
Fannie Mae and Freddie Mac are two vital cogs in the nation’s mortgage market, buying loans from lenders, insuring them against default and supplying fresh cash to make more loans. The two companies are behind most home loans. Because of mounting losses on those loans that threatened their collapse, Washington-based Fannie Mae and McLean-based Freddie Mac were seized by the federal government in September 2008 and are now run by regulators.
Frank said no decision has been made about what future model he will propose, and aides said no action is imminent. He has said it’s important for the government to continue to play a role in fostering housing affordability.
Treasury Secretary Timothy F. Geithner said Thursday that Congress likely won’t be able to take up housing finance reform this year. The administration will release principles for reform next month.
“We are committed to propose a set of detailed reforms beginning this year,” Geithner said in an interview on “PBS News Hour.” “I don’t think we’re going to be able to legislate that until that process (starts) next year, because it’s just a complicated thing to get right.
“But we are completely supportive and agree completely with the need to make sure that we take a cold, hard look at what the future of those institutions should be in our country,” he said in the interview.
Copyright © 2010 washingtonpost.com
“The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance,” said Frank, once a big proponent of the firms. “That’s the approach, rather than a piecemeal one.”
Fannie Mae and Freddie Mac are two vital cogs in the nation’s mortgage market, buying loans from lenders, insuring them against default and supplying fresh cash to make more loans. The two companies are behind most home loans. Because of mounting losses on those loans that threatened their collapse, Washington-based Fannie Mae and McLean-based Freddie Mac were seized by the federal government in September 2008 and are now run by regulators.
Frank said no decision has been made about what future model he will propose, and aides said no action is imminent. He has said it’s important for the government to continue to play a role in fostering housing affordability.
Treasury Secretary Timothy F. Geithner said Thursday that Congress likely won’t be able to take up housing finance reform this year. The administration will release principles for reform next month.
“We are committed to propose a set of detailed reforms beginning this year,” Geithner said in an interview on “PBS News Hour.” “I don’t think we’re going to be able to legislate that until that process (starts) next year, because it’s just a complicated thing to get right.
“But we are completely supportive and agree completely with the need to make sure that we take a cold, hard look at what the future of those institutions should be in our country,” he said in the interview.
Copyright © 2010 washingtonpost.com
Thursday, January 21, 2010
FHA announces policy changes
Federal Housing Administration (FHA) Commissioner David Stevens yesterday outlined the new set of policy changes created to strengthen FHA’s capital reserves.
The FHA proposed the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and downpayments for new borrowers; reduce seller concessions to three percent from six percent; and implement a series of measures to increase lender enforcement. U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.
Announced FHA policy changes:
1. The mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
• The first step is to raise the upfront MIP by 50 bps to 2.25 percent and request legislative authority to increase the maximum annual MIP that FHA can charge.
• If this authority is granted, the second step is to shift some of the premium increase from the up-front MIP to the annual MIP.
• This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing.
• The initial upfront increase is included in a Mortgagee Letter to be released today, Jan. 21, and will go into effect in the spring.
2. Update the combination of FICO scores and downpayments for new borrowers.
• New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5 percent downpayment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent.
• This change will be posted in the Federal Register in February and, after a notice and comment period, go into effect in the early summer.
3. Reduce allowable seller concessions from 6 percent to 3 percent
• FHA says the current level exposes the FHA to excess risk by creating incentives to inflate appraised value.
• This change will be posted in the Federal Register in February, and after a notice and comment period, go into effect in the early summer.
4. Increase enforcement on FHA lenders
• Publicly report lender performance rankings to complement currently available Neighborhood Watch data will be on HUD’s website on Feb. 1. This is an operational change to make information user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
• Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
• Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process.
• HUD is pursuing legislative authority to increase enforcement on FHA lenders.
In addition to these changes, FHA says it will continue to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards.
© 2010 Florida Realtors®
The FHA proposed the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and downpayments for new borrowers; reduce seller concessions to three percent from six percent; and implement a series of measures to increase lender enforcement. U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.
Announced FHA policy changes:
1. The mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
• The first step is to raise the upfront MIP by 50 bps to 2.25 percent and request legislative authority to increase the maximum annual MIP that FHA can charge.
• If this authority is granted, the second step is to shift some of the premium increase from the up-front MIP to the annual MIP.
• This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing.
• The initial upfront increase is included in a Mortgagee Letter to be released today, Jan. 21, and will go into effect in the spring.
2. Update the combination of FICO scores and downpayments for new borrowers.
• New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5 percent downpayment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent.
• This change will be posted in the Federal Register in February and, after a notice and comment period, go into effect in the early summer.
3. Reduce allowable seller concessions from 6 percent to 3 percent
• FHA says the current level exposes the FHA to excess risk by creating incentives to inflate appraised value.
• This change will be posted in the Federal Register in February, and after a notice and comment period, go into effect in the early summer.
4. Increase enforcement on FHA lenders
• Publicly report lender performance rankings to complement currently available Neighborhood Watch data will be on HUD’s website on Feb. 1. This is an operational change to make information user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
• Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
• Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process.
• HUD is pursuing legislative authority to increase enforcement on FHA lenders.
In addition to these changes, FHA says it will continue to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards.
© 2010 Florida Realtors®
Wednesday, January 20, 2010
Some lenders skirt GFE requirements
Some lenders are avoiding the requirement that they lock in the good faith estimate by providing something loan officers are calling “worksheets” or “loan scenario forms” that don’t have to meet a government accuracy standard.
The worksheets contain some of the information provided by a good faith estimate. They are typically given to shoppers who don’t provide – and often aren’t asked to provide – key information, such as the address of the property to be financed.
Loan officers defend the worksheets, saying that it is impossible to provide completely accurate estimates. But Vicki Bott, a deputy assistant secretary for the Department of Housing and Urban Development, says if these worksheets turn out to be a way for lenders to avoid meeting their obligations, the department will respond by tightening the guidelines.
Meanwhile, buyers should ask for the good-faith estimate by name, so they get an accurate estimate of costs.
Source: Washington Post Writers Group, Kenneth Harney (01/15/2010)
© Copyright 2010 INFORMATION, INC. Bethesda, MD
The worksheets contain some of the information provided by a good faith estimate. They are typically given to shoppers who don’t provide – and often aren’t asked to provide – key information, such as the address of the property to be financed.
Loan officers defend the worksheets, saying that it is impossible to provide completely accurate estimates. But Vicki Bott, a deputy assistant secretary for the Department of Housing and Urban Development, says if these worksheets turn out to be a way for lenders to avoid meeting their obligations, the department will respond by tightening the guidelines.
Meanwhile, buyers should ask for the good-faith estimate by name, so they get an accurate estimate of costs.
Source: Washington Post Writers Group, Kenneth Harney (01/15/2010)
© Copyright 2010 INFORMATION, INC. Bethesda, MD
Federal Housing Administration to raise fees
The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout.
The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.
The changes, which will go into effect in the first half of the year, “are among the most significant steps to address risk in the agency’s history,” FHA Commissioner David Stevens said in a prepared statement.
The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price – and that didn’t change.
The new policies, to be announced Wednesday, are designed to bring more revenue into the agency, while at the same time keeping loans available.
Under the changes, homebuyers will:
• Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.
• Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.
The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.
Mortgage lenders “will find the new rules painful but necessary,” said Howard Glaser, a mortgage industry consultant and former housing official during the Clinton administration.
There also have been fears that unscrupulous operators have shifted their business to the FHA after the subprime business went bust. Last week, the agency served subpoenas on 15 mortgage companies with suspiciously high default rates for FHA loans, part of a broad crackdown on dubious lenders.
The agency has already taken action against several problem lenders. One of the nation’s biggest mortgage bankers, Taylor, Bean & Whitaker Mortgage Co. of Ocala, Fla., was banned from the FHA program in August and filed for Chapter 11 bankruptcy protection. Another mortgage company, Lend America, was kicked out in November.
Copyright 2010 The Associated Press, Alan Zibel (AP Real Estate Writer)
The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.
The changes, which will go into effect in the first half of the year, “are among the most significant steps to address risk in the agency’s history,” FHA Commissioner David Stevens said in a prepared statement.
The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price – and that didn’t change.
The new policies, to be announced Wednesday, are designed to bring more revenue into the agency, while at the same time keeping loans available.
Under the changes, homebuyers will:
• Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.
• Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.
The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.
Mortgage lenders “will find the new rules painful but necessary,” said Howard Glaser, a mortgage industry consultant and former housing official during the Clinton administration.
There also have been fears that unscrupulous operators have shifted their business to the FHA after the subprime business went bust. Last week, the agency served subpoenas on 15 mortgage companies with suspiciously high default rates for FHA loans, part of a broad crackdown on dubious lenders.
The agency has already taken action against several problem lenders. One of the nation’s biggest mortgage bankers, Taylor, Bean & Whitaker Mortgage Co. of Ocala, Fla., was banned from the FHA program in August and filed for Chapter 11 bankruptcy protection. Another mortgage company, Lend America, was kicked out in November.
Copyright 2010 The Associated Press, Alan Zibel (AP Real Estate Writer)
Tuesday, January 19, 2010
New rules curb closing surprises
Buying a home should be a joyful experience, but all too often, the mortgage settlement process leaves consumers confused, angry and paying more than they anticipated.
The reason? Closing costs and fees that are significantly higher than the lender’s original estimates. Borrowers find themselves faced with two unappealing choices: Pony up or walk away and start searching for another house.
Now, after years of wrestling with different factions of the mortgage industry, the Department of Housing and Urban Development has adopted rules designed to prevent last-minute closing surprises. The rules, which took effect Jan. 1, will reduce closing shocks and save homebuyers money, says Timothy Dwyer, CEO of Entitle Direct Group, a title insurance company. In addition, he says, “You’ll be better informed and educated.”
The biggest change involves the good faith estimate, the form lenders give consumers when they apply for a mortgage. The good faith estimate isn’t new, but in the past, the document wasn’t particularly helpful to consumers, says Sylvia Alayon, vice president of operations at the Consumer Mortgage Audit Center. What has changed:
Consistency. Lenders are now required to use a uniform three-page document when they give prospective borrowers a good faith estimate, says Vicki Bott, deputy assistant secretary for single-family housing at HUD.
Lenders also are required to provide the document within 72 hours after prospective borrowers apply for a loan.
This will allow consumers to figure out a loan’s total cost, including fees, and compare loan offers on an apples-to-apples basis, Bott says. “We encourage consumers to shop for the best rates and fees, and not just the best rate,” she says.
Transparency. Many borrowers who bought homes during the housing boom later discovered that their loans contained hidden bombs that made their mortgages unaffordable. The new good faith estimate requires lenders to disclose features that could drive up costs. For example, the document requires lenders to disclose whether your interest rate will rise – as would be the case with an adjustable-rate mortgage – and if so, by how much. Lenders will also be asked whether the loan includes balloon payments or imposes penalties for paying the loan off early.
“All of these are really important questions,” says Helene Raynaud, vice president of housing for the National Foundation for Credit Counseling. “It will be able to raise red flags for consumers.”
Trade-offs. Some lenders offer borrowers a lower interest rate in exchange for higher upfront costs -- or vice versa. A new table in the good faith estimate (see box) helps borrowers compare how different interest rates and settlement charges will affect monthly payments.
Reliability. Lenders are required by law to give mortgage applicants a copy of their settlement costs, known as a HUD-1, at least one day before closing. In the past, though, many borrowers discovered that the costs shown on the HUD-1 bore little connection to those provided in the good faith estimate.
The new rules will make it much more difficult for lenders to depart from their good faith estimates, Bott says. The new HUD-1 includes a line-by-line comparison to the good faith estimate, making it easy to identify any change in costs.
Lenders are prohibited from increasing costs they control, such as origination and processing fees. Fees for third-party services, such as appraisals and title insurance, can increase no more than 10% from those provided in the good faith estimate, as long as the borrowers use providers selected by the lender. The limit doesn’t apply if borrowers select their own third-party providers.
Other costs that aren’t subject to the 10% limit include the initial deposit for the borrower’s escrow account, daily interest charges and homeowner’s insurance.
HUD has published a guide for homebuyers, Shopping for Your Home Loan: HUD’s Settlement Cost Booklet. You can find it at www.hud.gov.
Copyright © 2010 USA TODAY,
The reason? Closing costs and fees that are significantly higher than the lender’s original estimates. Borrowers find themselves faced with two unappealing choices: Pony up or walk away and start searching for another house.
Now, after years of wrestling with different factions of the mortgage industry, the Department of Housing and Urban Development has adopted rules designed to prevent last-minute closing surprises. The rules, which took effect Jan. 1, will reduce closing shocks and save homebuyers money, says Timothy Dwyer, CEO of Entitle Direct Group, a title insurance company. In addition, he says, “You’ll be better informed and educated.”
The biggest change involves the good faith estimate, the form lenders give consumers when they apply for a mortgage. The good faith estimate isn’t new, but in the past, the document wasn’t particularly helpful to consumers, says Sylvia Alayon, vice president of operations at the Consumer Mortgage Audit Center. What has changed:
Consistency. Lenders are now required to use a uniform three-page document when they give prospective borrowers a good faith estimate, says Vicki Bott, deputy assistant secretary for single-family housing at HUD.
Lenders also are required to provide the document within 72 hours after prospective borrowers apply for a loan.
This will allow consumers to figure out a loan’s total cost, including fees, and compare loan offers on an apples-to-apples basis, Bott says. “We encourage consumers to shop for the best rates and fees, and not just the best rate,” she says.
Transparency. Many borrowers who bought homes during the housing boom later discovered that their loans contained hidden bombs that made their mortgages unaffordable. The new good faith estimate requires lenders to disclose features that could drive up costs. For example, the document requires lenders to disclose whether your interest rate will rise – as would be the case with an adjustable-rate mortgage – and if so, by how much. Lenders will also be asked whether the loan includes balloon payments or imposes penalties for paying the loan off early.
“All of these are really important questions,” says Helene Raynaud, vice president of housing for the National Foundation for Credit Counseling. “It will be able to raise red flags for consumers.”
Trade-offs. Some lenders offer borrowers a lower interest rate in exchange for higher upfront costs -- or vice versa. A new table in the good faith estimate (see box) helps borrowers compare how different interest rates and settlement charges will affect monthly payments.
Reliability. Lenders are required by law to give mortgage applicants a copy of their settlement costs, known as a HUD-1, at least one day before closing. In the past, though, many borrowers discovered that the costs shown on the HUD-1 bore little connection to those provided in the good faith estimate.
The new rules will make it much more difficult for lenders to depart from their good faith estimates, Bott says. The new HUD-1 includes a line-by-line comparison to the good faith estimate, making it easy to identify any change in costs.
Lenders are prohibited from increasing costs they control, such as origination and processing fees. Fees for third-party services, such as appraisals and title insurance, can increase no more than 10% from those provided in the good faith estimate, as long as the borrowers use providers selected by the lender. The limit doesn’t apply if borrowers select their own third-party providers.
Other costs that aren’t subject to the 10% limit include the initial deposit for the borrower’s escrow account, daily interest charges and homeowner’s insurance.
HUD has published a guide for homebuyers, Shopping for Your Home Loan: HUD’s Settlement Cost Booklet. You can find it at www.hud.gov.
Copyright © 2010 USA TODAY,
Monday, January 18, 2010
HUD takes action to speed resale of foreclosed properties to new owners
In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan announced a temporary policy that will expand access to FHA mortgage insurance to allow for a quicker resale of foreclosed properties. The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties or properties resold through private sales.
“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” says Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.
“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan says.
Acquiring, rehabilitating and reselling foreclosed properties to prospective homeowners often takes less than 90 days in today’s market; and FHA’s 90-day rule can adversely impact buyers if a seller is unwilling to hold a property 90 days thanks to holding costs and the risk of vandalism.
“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” says FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”
The waiver will take effect on Feb. 1, 2010, and be effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping,” the waiver is limited to those sales meeting the following general conditions:
• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
• Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website:
http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf
© 2010 Florida Realtors®
“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” says Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.
“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan says.
Acquiring, rehabilitating and reselling foreclosed properties to prospective homeowners often takes less than 90 days in today’s market; and FHA’s 90-day rule can adversely impact buyers if a seller is unwilling to hold a property 90 days thanks to holding costs and the risk of vandalism.
“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” says FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”
The waiver will take effect on Feb. 1, 2010, and be effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping,” the waiver is limited to those sales meeting the following general conditions:
• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
• Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website:
http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf
© 2010 Florida Realtors®
Only 8,405 in Fla. get mortgage modification
Fewer than 3,000 South Floridians have a permanent loan modification under President Obama’s nearly year-old program to stem home foreclosures.
In the Treasure Coast, just 111 troubled borrowers have seen permanent relief from the $75 billion plan announced in February.
The dismal performance of the program marketed as a helping hand for the nation’s more than 3.3 million delinquent home loans was released Friday in a Treasury Department progress report.
Throughout Florida, which by every measure is one of the states hardest hit by the real estate crash, there are 8,405 permanent modifications. In Palm Beach, Broward and Miami-Dade counties combined there are 2,987 permanent modifications.
Another 96,703 Florida loans are on trial modifications.
The Making Homes Affordable program gives incentives to banks to modify loans in three basic ways; reducing interest rates to as low as 2 percent, increasing the life of the loan, and reducing the principal owed on the loan.
“You keep hearing about this wonderful program the government is doing but it’s not working,” said Joel Bienvenu, who owns a home west of Boca Raton and has been trying to get a loan modification through Wells Fargo since August. “I keep getting excuses that they are just overwhelmed.”
Nationwide, 66,465 permanent modifications have been approved, less than 2 percent of the total loans that are 60 or more days delinquent. Another 46,056 permanent modifications have been approved by the lender, but not yet by the borrower.
The median monthly decrease to mortgages that received permanent modifications was $516, according to the Treasury Department.
From the beginning of the program, homeowners have complained about having to send lenders the same paperwork multiple times, while banks say borrowers provide the wrong documents or fail to meet the requirements for the permanent modification.
Anthony DiMarco, executive vice president of government affairs for the Florida Bankers Association, said Friday that lenders have been on a learning curve, but are improving.
“I think the industry is working hard,” he said. “You can’t ramp up a program like this overnight.”
Fort Lauderdale real estate attorney and foreclosure mediator Shari Olefson said the more than 1.1 million trial modifications offered to borrowers nationwide shows lenders are making an effort.
The fact that just 66,465 have become permanent points to a fundamental problem with the program, she said.
“The program itself is a failure,” said Olefson, author of Foreclosure Nation, Mortgaging the American Dream. “It’s trying to put a square peg in a round hole.”
To qualify for a modification, a person’s monthly housing expenses must be more than 31 percent of gross monthly income. But you also must prove that you can pay for the modification.
Olefson believes high unemployment and a steep loss in housing equity is keeping the plan from working.
“The whole program was crafted before we correctly identified the problem,” she said.
Copyright © 2010 The Palm Beach Post, Fla
In the Treasure Coast, just 111 troubled borrowers have seen permanent relief from the $75 billion plan announced in February.
The dismal performance of the program marketed as a helping hand for the nation’s more than 3.3 million delinquent home loans was released Friday in a Treasury Department progress report.
Throughout Florida, which by every measure is one of the states hardest hit by the real estate crash, there are 8,405 permanent modifications. In Palm Beach, Broward and Miami-Dade counties combined there are 2,987 permanent modifications.
Another 96,703 Florida loans are on trial modifications.
The Making Homes Affordable program gives incentives to banks to modify loans in three basic ways; reducing interest rates to as low as 2 percent, increasing the life of the loan, and reducing the principal owed on the loan.
“You keep hearing about this wonderful program the government is doing but it’s not working,” said Joel Bienvenu, who owns a home west of Boca Raton and has been trying to get a loan modification through Wells Fargo since August. “I keep getting excuses that they are just overwhelmed.”
Nationwide, 66,465 permanent modifications have been approved, less than 2 percent of the total loans that are 60 or more days delinquent. Another 46,056 permanent modifications have been approved by the lender, but not yet by the borrower.
The median monthly decrease to mortgages that received permanent modifications was $516, according to the Treasury Department.
From the beginning of the program, homeowners have complained about having to send lenders the same paperwork multiple times, while banks say borrowers provide the wrong documents or fail to meet the requirements for the permanent modification.
Anthony DiMarco, executive vice president of government affairs for the Florida Bankers Association, said Friday that lenders have been on a learning curve, but are improving.
“I think the industry is working hard,” he said. “You can’t ramp up a program like this overnight.”
Fort Lauderdale real estate attorney and foreclosure mediator Shari Olefson said the more than 1.1 million trial modifications offered to borrowers nationwide shows lenders are making an effort.
The fact that just 66,465 have become permanent points to a fundamental problem with the program, she said.
“The program itself is a failure,” said Olefson, author of Foreclosure Nation, Mortgaging the American Dream. “It’s trying to put a square peg in a round hole.”
To qualify for a modification, a person’s monthly housing expenses must be more than 31 percent of gross monthly income. But you also must prove that you can pay for the modification.
Olefson believes high unemployment and a steep loss in housing equity is keeping the plan from working.
“The whole program was crafted before we correctly identified the problem,” she said.
Copyright © 2010 The Palm Beach Post, Fla
Tuesday, January 12, 2010
New rules could speed short sales of distressed homes
The federal government is setting guidelines for short sales of homes, giving lenders a 10-day limit to respond to offers, freeing borrowers from debt and providing financial incentives to lenders.
The new rules seek to address the many criticisms of short sales and figure to play a significant role in South Florida, where distressed properties dominate the market as the housing slump meanders into a fifth year.
“The cloud could be lifted,” said Domenic Faro of the Fort Lauderdale Real Estate firm. “This could bring us back to some normalcy.”
In a short sale, the homeowner unloads the property for less than what’s owed on the mortgage, and the lender forgives the difference. Nearly half of all single-family mortgage holders in Palm Beach, Broward and Miami-Dade counties are “under water,” meaning they owe more than their homes are worth, according to third-quarter data from Zillow.com, a Seattle-based real estate firm.
While short sales are considered the perfect solution for “underwater” homeowners on the verge of foreclosure, the deals often drag on as lenders take weeks or months to respond to offers. Frustrated buyers walk away during the delays. In some cases, lenders insist that borrowers share in the financial loss, holding up the transactions even longer.
To speed up the process, the U.S. Treasury is calling for lenders to respond to short sale offers within 10 business days. Sellers are eligible for $1,500 moving allowances, and they will not be on the hook for repayment of any debt.
Also, lenders will get $1,000 to cover administrative and processing costs, while investors owning the mortgages will receive a maximum $1,000 for allowing up to $3,000 in short sale proceeds to be distributed to less senior lenders. Loan servicers participating in the Obama Administration’s Home Affordable Modification Program are required to follow the guidelines.
The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which represent about half of all U.S. mortgage debt. The two government-run mortgage companies are working to finalize their own guidelines.
The Treasury plan, which must be implemented by lenders no later than April, is meant to help sellers like Dawn Sclafani, who has been waiting since October for her lender to approve a short sale offer on her Margate home. A buyer has offered $155,000, and she owes $233,000.
Sclafani, a 50-year-old psychologist, said she’s eager for the bank to approve the deal so she can put the experience behind her.
“I want to move on ... but I can’t until somebody gives me permission to,” she said. “I’ve heard that this is a horrendous process. The banks are just not very cooperative. I do believe these new rules will help.”
U.S. Rep Ron Klein, D-Boca Raton, agrees, saying the guidelines are meant to make short sales “a more usable tool.” Klein points out the rules provide standardized paperwork for all short sales and give buyers and sellers a more reasonable time frame for whether or not the sales will happen.
But Klein and others say the government may have to increase the financial incentives. The $3,000 cap on short sale proceeds is not sitting well with second lien holders, who have been demanding more money from sellers, the first lenders and real estate agents in exchange for releasing their claims and allowing the short sales to proceed.
“This is a great program if all these mortgages had only one lien holder,” said Travis Hamel Olsen, chief operating officer for Loan Resolution Corp., an Arizona company that helps lenders complete short sales. “But many of these properties have two liens.”
Meanwhile, some local real estate agents remain skeptical of the guidelines.
Broward County agent Ron Rosen, who urged Klein last summer to push for new regulations, said he thinks “the banks will still play their little games with people and make life difficult for everyone.”
Edward Goldfarb of RE/MAX PowerPro Realty in Davie doubts the Treasury will enforce the new rules. “There’s no teeth to them,” he said.
A spokeswoman for the Treasury says it will hand down “substantial” penalties to lenders that don’t comply. They can include the withholding or reduction of payments and requiring improperly rejected loans to be modified.
Lenders have blamed short sale delays on the complicated nature of the transactions, sheer numbers of deals and on borrowers who don’t submit proper paperwork in a timely manner.
In many cases, the banks are not to blame, said Ward Kellogg, chief executive of Boca Raton-based Paradise Bank. Still, he thinks the guidelines are necessary to force lenders to clear the market of so many distressed properties.
“I think the pressure on (the banks) is a good thing,” Kellogg said.
Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla
The new rules seek to address the many criticisms of short sales and figure to play a significant role in South Florida, where distressed properties dominate the market as the housing slump meanders into a fifth year.
“The cloud could be lifted,” said Domenic Faro of the Fort Lauderdale Real Estate firm. “This could bring us back to some normalcy.”
In a short sale, the homeowner unloads the property for less than what’s owed on the mortgage, and the lender forgives the difference. Nearly half of all single-family mortgage holders in Palm Beach, Broward and Miami-Dade counties are “under water,” meaning they owe more than their homes are worth, according to third-quarter data from Zillow.com, a Seattle-based real estate firm.
While short sales are considered the perfect solution for “underwater” homeowners on the verge of foreclosure, the deals often drag on as lenders take weeks or months to respond to offers. Frustrated buyers walk away during the delays. In some cases, lenders insist that borrowers share in the financial loss, holding up the transactions even longer.
To speed up the process, the U.S. Treasury is calling for lenders to respond to short sale offers within 10 business days. Sellers are eligible for $1,500 moving allowances, and they will not be on the hook for repayment of any debt.
Also, lenders will get $1,000 to cover administrative and processing costs, while investors owning the mortgages will receive a maximum $1,000 for allowing up to $3,000 in short sale proceeds to be distributed to less senior lenders. Loan servicers participating in the Obama Administration’s Home Affordable Modification Program are required to follow the guidelines.
The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which represent about half of all U.S. mortgage debt. The two government-run mortgage companies are working to finalize their own guidelines.
The Treasury plan, which must be implemented by lenders no later than April, is meant to help sellers like Dawn Sclafani, who has been waiting since October for her lender to approve a short sale offer on her Margate home. A buyer has offered $155,000, and she owes $233,000.
Sclafani, a 50-year-old psychologist, said she’s eager for the bank to approve the deal so she can put the experience behind her.
“I want to move on ... but I can’t until somebody gives me permission to,” she said. “I’ve heard that this is a horrendous process. The banks are just not very cooperative. I do believe these new rules will help.”
U.S. Rep Ron Klein, D-Boca Raton, agrees, saying the guidelines are meant to make short sales “a more usable tool.” Klein points out the rules provide standardized paperwork for all short sales and give buyers and sellers a more reasonable time frame for whether or not the sales will happen.
But Klein and others say the government may have to increase the financial incentives. The $3,000 cap on short sale proceeds is not sitting well with second lien holders, who have been demanding more money from sellers, the first lenders and real estate agents in exchange for releasing their claims and allowing the short sales to proceed.
“This is a great program if all these mortgages had only one lien holder,” said Travis Hamel Olsen, chief operating officer for Loan Resolution Corp., an Arizona company that helps lenders complete short sales. “But many of these properties have two liens.”
Meanwhile, some local real estate agents remain skeptical of the guidelines.
Broward County agent Ron Rosen, who urged Klein last summer to push for new regulations, said he thinks “the banks will still play their little games with people and make life difficult for everyone.”
Edward Goldfarb of RE/MAX PowerPro Realty in Davie doubts the Treasury will enforce the new rules. “There’s no teeth to them,” he said.
A spokeswoman for the Treasury says it will hand down “substantial” penalties to lenders that don’t comply. They can include the withholding or reduction of payments and requiring improperly rejected loans to be modified.
Lenders have blamed short sale delays on the complicated nature of the transactions, sheer numbers of deals and on borrowers who don’t submit proper paperwork in a timely manner.
In many cases, the banks are not to blame, said Ward Kellogg, chief executive of Boca Raton-based Paradise Bank. Still, he thinks the guidelines are necessary to force lenders to clear the market of so many distressed properties.
“I think the pressure on (the banks) is a good thing,” Kellogg said.
Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla
Monday, January 11, 2010
Realtors learn about Chinese drywall
Homebuyers shopping the real estate market have plenty to consider before they commit to a purchase.
There’s the mortgage, financing, property taxes and now, making sure the dream home they want to buy doesn’t have Chinese drywall.
Officials in the local real estate industry are doing what they can to alert homeowners on the much-publicized issue of Chinese drywall.
Chinese-made drywall has been alleged to have high levels of sulfur that can cause corrosion on piping and wiring. Those with the tainted drywall also have reported health concerns such as upper respiratory issues and nosebleeds.
Realtors and mortgage brokers are advising homebuyers to take precautions such as home inspections. Some in the industry are getting educated on Chinese drywall so they can better guide clients through the house-hunting process.
Real estate officials say it’s all in an effort to help prevent more homeowners from joining a list of at least 40 Manatee County residents who have homes with tainted drywall.
“Definitely homebuyers are concerned about Chinese drywall because there has been so much attention on it, especially in our area where we’ve had problems with it,” said Polly Gaar, vice president of Wagner Realty. “That definitely makes them very aware of it and anxious about it.”
Last year, construction consultant Michael Foreman of Foreman & Associates began hosting educational seminars to help real estate agents in the area better understand the problem.
The seminars address common signs of corrosion in homes with tainted drywall, the importance of homeowners getting multiple drywall analysis conducted and what a proper analysis to detect Chinese drywall entails.
“We’re educating the Realtors because they’re the first line of defense or the first line of contact to the client,” Foreman said. “We’re trying to make them understand the details that need to be looked at.”
Foreman & Associates, which specializes in Chinese drywall analysis, hosted at least six seminars last year, the most recent about two months ago in which 120 agents from the Sarasota Association of Realtors attended.
The firm explains to Realtors its home analysis starts with a questionnaire for the previous homeowners that looks for potential health issues. Then the firm inspects the home’s copper piping and components, electrical wiring and outlets and takes interior and exterior wall readings to examine for Chinese drywall.
“We’re explaining to the buyer and agent they should never accept one report and analysis from the seller, they need to have their own analysis done,” Foreman said.
A Chinese drywall analysis from Foreman & Associates costs $275 for condominiums and $375 for houses with one air-conditioning unit. Homebuyers are given a six- to 10-page report along on the structure.
Realtors such as Leland Wallace said his agency Keller Williams Manatee has similar internal education programs for agents to make sure they’re aware of the signs of Chinese drywall.
Wallace added agents also make an effort to inform homebuyers that most home inspectors aren’t licensed or certified to test for Chinese drywall. Instead, a home inspector who finds a concern may tell the buyer to get an analysis done by a Chinese drywall expert.
“We’re cautious of it and we need to be sure we advise our buyers and sellers to take precautions,” Wallace said.
Karen Blondin, of Blondin Mortgage, said aside from recommending home inspections, the brokerage company is urging clients to be present for such inspections.
“It’s a good idea to be present because if they’re there, they can actually see what the issues are and understand better what’s going on with the property,” Blondin said. “It’s never a waste of time.”
Copyright © 2010 The Bradenton Herald, Fla
There’s the mortgage, financing, property taxes and now, making sure the dream home they want to buy doesn’t have Chinese drywall.
Officials in the local real estate industry are doing what they can to alert homeowners on the much-publicized issue of Chinese drywall.
Chinese-made drywall has been alleged to have high levels of sulfur that can cause corrosion on piping and wiring. Those with the tainted drywall also have reported health concerns such as upper respiratory issues and nosebleeds.
Realtors and mortgage brokers are advising homebuyers to take precautions such as home inspections. Some in the industry are getting educated on Chinese drywall so they can better guide clients through the house-hunting process.
Real estate officials say it’s all in an effort to help prevent more homeowners from joining a list of at least 40 Manatee County residents who have homes with tainted drywall.
“Definitely homebuyers are concerned about Chinese drywall because there has been so much attention on it, especially in our area where we’ve had problems with it,” said Polly Gaar, vice president of Wagner Realty. “That definitely makes them very aware of it and anxious about it.”
Last year, construction consultant Michael Foreman of Foreman & Associates began hosting educational seminars to help real estate agents in the area better understand the problem.
The seminars address common signs of corrosion in homes with tainted drywall, the importance of homeowners getting multiple drywall analysis conducted and what a proper analysis to detect Chinese drywall entails.
“We’re educating the Realtors because they’re the first line of defense or the first line of contact to the client,” Foreman said. “We’re trying to make them understand the details that need to be looked at.”
Foreman & Associates, which specializes in Chinese drywall analysis, hosted at least six seminars last year, the most recent about two months ago in which 120 agents from the Sarasota Association of Realtors attended.
The firm explains to Realtors its home analysis starts with a questionnaire for the previous homeowners that looks for potential health issues. Then the firm inspects the home’s copper piping and components, electrical wiring and outlets and takes interior and exterior wall readings to examine for Chinese drywall.
“We’re explaining to the buyer and agent they should never accept one report and analysis from the seller, they need to have their own analysis done,” Foreman said.
A Chinese drywall analysis from Foreman & Associates costs $275 for condominiums and $375 for houses with one air-conditioning unit. Homebuyers are given a six- to 10-page report along on the structure.
Realtors such as Leland Wallace said his agency Keller Williams Manatee has similar internal education programs for agents to make sure they’re aware of the signs of Chinese drywall.
Wallace added agents also make an effort to inform homebuyers that most home inspectors aren’t licensed or certified to test for Chinese drywall. Instead, a home inspector who finds a concern may tell the buyer to get an analysis done by a Chinese drywall expert.
“We’re cautious of it and we need to be sure we advise our buyers and sellers to take precautions,” Wallace said.
Karen Blondin, of Blondin Mortgage, said aside from recommending home inspections, the brokerage company is urging clients to be present for such inspections.
“It’s a good idea to be present because if they’re there, they can actually see what the issues are and understand better what’s going on with the property,” Blondin said. “It’s never a waste of time.”
Copyright © 2010 The Bradenton Herald, Fla
Friday, January 8, 2010
Fannie to ease condo mortgage restrictions
Fannie Mae announced yesterday that it would comprehensively review hundreds of condominium projects in Florida. Through a new “Special Approval” designation, Fannie hopes to streamline mortgage approvals for projects that don’t currently fit Fannie Mae guidelines even though they present limited risk to the company.
Florida Realtors strongly urged Fannie Mae to revisit its lending program in the condo market, and it consulted a number of Florida Realtors as it developed the program, including Florida Realtors® Vice President Summer Greene, regional manager with Prudential Florida 1st Realty in Fort Lauderdale.
“This is good news for Florida and a step in the right direction for the state’s condominium market,” Greene says. “Hopefully, with the special approval designation process, we can begin to get our condo inventories reduced and absorbed as more condo buyers receive a green light from lenders for loans. This will help boost confidence in the market.”
Fannie Mae and its cousin, Freddie Mac, back more than half of all U.S. mortgages. As the Fannie Mae initiative develops and gains momentum, Greene hopes it provides incentive for Freddie Mac to follow suit.
While Fannie Mae currently has boilerplate guidelines for approving condo loans, it will sometimes grant a mortgage to a non-conforming condo if requested by a lender. The Special Approval designation takes that a step further by approving exceptions before a lender request has been submitted.
A dedicated team of six Fannie Mae professionals based in Florida will now examine statewide condominium projects that may not currently meet Fannie Mae’s standard eligibility criteria and assessing specific criteria more closely. The team will look at a condo project’s occupancy level, association dues, financial stability and property condition. If a project is deemed sufficiently stable following a closer examination, it will be granted the Special Approval designation, freeing lenders to originate and deliver mortgage loans secured by Fannie Mae. Projects deemed eligible will be listed on www.eFannieMae.com, and qualified borrowers will be eligible for financing.
“NAR applauds Fannie Mae for taking this important step to make condo loans more readily available in Florida,” says Moe Veissi, National Association of Realtors® first vice president and broker-owner of Veissi & Associates Inc. in Miami. “Our state is probably the hardest-hit as far as the condo market is concerned, and Fannie Mae’s new effort to take a closer look at project eligibility could go a long way to putting projects back on a healthy financial track.”
A Special Approval designation will be effective for a period between 9 and 18 months, and lenders must confirm a project’s Special Approval designation on the date of the loan application. The Special Approval initiative applies to established condominium projects only.
© 2010 Florida Realtors®
Florida Realtors strongly urged Fannie Mae to revisit its lending program in the condo market, and it consulted a number of Florida Realtors as it developed the program, including Florida Realtors® Vice President Summer Greene, regional manager with Prudential Florida 1st Realty in Fort Lauderdale.
“This is good news for Florida and a step in the right direction for the state’s condominium market,” Greene says. “Hopefully, with the special approval designation process, we can begin to get our condo inventories reduced and absorbed as more condo buyers receive a green light from lenders for loans. This will help boost confidence in the market.”
Fannie Mae and its cousin, Freddie Mac, back more than half of all U.S. mortgages. As the Fannie Mae initiative develops and gains momentum, Greene hopes it provides incentive for Freddie Mac to follow suit.
While Fannie Mae currently has boilerplate guidelines for approving condo loans, it will sometimes grant a mortgage to a non-conforming condo if requested by a lender. The Special Approval designation takes that a step further by approving exceptions before a lender request has been submitted.
A dedicated team of six Fannie Mae professionals based in Florida will now examine statewide condominium projects that may not currently meet Fannie Mae’s standard eligibility criteria and assessing specific criteria more closely. The team will look at a condo project’s occupancy level, association dues, financial stability and property condition. If a project is deemed sufficiently stable following a closer examination, it will be granted the Special Approval designation, freeing lenders to originate and deliver mortgage loans secured by Fannie Mae. Projects deemed eligible will be listed on www.eFannieMae.com, and qualified borrowers will be eligible for financing.
“NAR applauds Fannie Mae for taking this important step to make condo loans more readily available in Florida,” says Moe Veissi, National Association of Realtors® first vice president and broker-owner of Veissi & Associates Inc. in Miami. “Our state is probably the hardest-hit as far as the condo market is concerned, and Fannie Mae’s new effort to take a closer look at project eligibility could go a long way to putting projects back on a healthy financial track.”
A Special Approval designation will be effective for a period between 9 and 18 months, and lenders must confirm a project’s Special Approval designation on the date of the loan application. The Special Approval initiative applies to established condominium projects only.
© 2010 Florida Realtors®
Thursday, January 7, 2010
Foreclosure mediation no guarantee of loan modification
The Florida Supreme Court order requiring mediation on all homesteaded foreclosures is a boon for troubled borrowers.
But mediators warn that homeowners shouldn’t think it’s a fail-safe to a loan modification that will keep them in their house.
While information supplied to a statewide task force that studied solutions to the traffic jam of foreclosure court cases touted a 73 percent settlement rate for mediations, that could mean a short sale or a deed in lieu of foreclosure.
In fact, some mediators caution foreclosure cases aren’t even true mediations. There’s little to no negotiation that occurs at the table, said Fort Lauderdale real estate attorney and foreclosure mediator Shari Olefson.
In many cases, a homeowner’s finances are simply uploaded into a lender’s computer system, which spits out whether the person’s debt-to-income ratio qualifies for a loan modification. The computer doesn’t haggle.
And, something as small, or large, as an iPhone bill could push a borrower’s monthly debt over the limit. In mediation, it’s not the mediator’s role to defend the borrower, or make suggestions on how to cut expenses to qualify for a loan modification, Olefson said.
“Mediators are not supposed to advise. They may ask probing questions, but it’s a slippery slope,” said Olefson, author of Foreclosure Nation, Mortgaging the American Dream. “This isn’t really a mediation. It’s like a meeting with a baby sitter there.”
Monday’s Supreme Court of Florida administrative order requiring mediation on all homesteaded property foreclosure cases was penned by Chief Judge Peggy Quince. The order estimates there is an inventory of approximately 456,000 pending foreclosure cases statewide.
In Palm Beach County, more than 27,550 foreclosures were filed between January and November.
“You want to get the cases that are going to settle to settle early before they use up a lot of judicial resources,” said Miami-Dade Circuit Court Judge Jennifer Bailey, who was on the task force that recommended mandatory mediation. “The dysfunction has been an inability to communicate between the borrower and the lender.”
The order requires non-profit mediation providers to walk homeowners and lenders through the process.
Currently, foreclosure mediations are voluntary in Palm Beach County.
The order doesn’t set a deadline for implementation, saying instead that it is up to the chief judge in each court circuit to approve their own order.
Attorney Cathleen Scott, co-owner of A.R.C. Mediation, said her company has created a course focusing on foreclosure mediations.
“Mediation works when the parties show up and the right people are there with the necessary information and authority to make decisions,” said Scott, who estimates 75 percent of foreclosure mediations handled by her company result in a settlement.
But Olefson said mediation is really just accomplishing getting two people to sit down and talk. “It’s kind of silly because that should already be happening.”
Copyright © 2010 The Palm Beach Post, Fla.,
But mediators warn that homeowners shouldn’t think it’s a fail-safe to a loan modification that will keep them in their house.
While information supplied to a statewide task force that studied solutions to the traffic jam of foreclosure court cases touted a 73 percent settlement rate for mediations, that could mean a short sale or a deed in lieu of foreclosure.
In fact, some mediators caution foreclosure cases aren’t even true mediations. There’s little to no negotiation that occurs at the table, said Fort Lauderdale real estate attorney and foreclosure mediator Shari Olefson.
In many cases, a homeowner’s finances are simply uploaded into a lender’s computer system, which spits out whether the person’s debt-to-income ratio qualifies for a loan modification. The computer doesn’t haggle.
And, something as small, or large, as an iPhone bill could push a borrower’s monthly debt over the limit. In mediation, it’s not the mediator’s role to defend the borrower, or make suggestions on how to cut expenses to qualify for a loan modification, Olefson said.
“Mediators are not supposed to advise. They may ask probing questions, but it’s a slippery slope,” said Olefson, author of Foreclosure Nation, Mortgaging the American Dream. “This isn’t really a mediation. It’s like a meeting with a baby sitter there.”
Monday’s Supreme Court of Florida administrative order requiring mediation on all homesteaded property foreclosure cases was penned by Chief Judge Peggy Quince. The order estimates there is an inventory of approximately 456,000 pending foreclosure cases statewide.
In Palm Beach County, more than 27,550 foreclosures were filed between January and November.
“You want to get the cases that are going to settle to settle early before they use up a lot of judicial resources,” said Miami-Dade Circuit Court Judge Jennifer Bailey, who was on the task force that recommended mandatory mediation. “The dysfunction has been an inability to communicate between the borrower and the lender.”
The order requires non-profit mediation providers to walk homeowners and lenders through the process.
Currently, foreclosure mediations are voluntary in Palm Beach County.
The order doesn’t set a deadline for implementation, saying instead that it is up to the chief judge in each court circuit to approve their own order.
Attorney Cathleen Scott, co-owner of A.R.C. Mediation, said her company has created a course focusing on foreclosure mediations.
“Mediation works when the parties show up and the right people are there with the necessary information and authority to make decisions,” said Scott, who estimates 75 percent of foreclosure mediations handled by her company result in a settlement.
But Olefson said mediation is really just accomplishing getting two people to sit down and talk. “It’s kind of silly because that should already be happening.”
Copyright © 2010 The Palm Beach Post, Fla.,
Tuesday, January 5, 2010
Modified loan on home can hurt
The last thing many troubled homeowners want to hear is that they could be denied a car loan after they get a chance to modify their home loan.
But credit scores can get dinged after a home loan modification, making it more costly or tougher to get a loan or credit card.
Hundreds of thousands of homeowners find themselves in a financial squeeze, thanks to the recession and the meltdown in the housing market. Lenders have offered trial loan modifications to more than 700,000 eligible borrowers. As of late November, about 31,000 trial loans have been made permanent, which requires at least three on-time payments under the trial program and proof of income.
What these troubled homeowners don’t realize is that these attempts to avoid foreclosure may result in their credit scores taking a hit.
A potentially damaged credit score is one of those hidden costs of home loan modification – and it varies significantly depending on your lender, as well as when you received your loan modification, your credit history and how your loan was altered.
“They need to tell people up front that this could happen,” said James Sperr, 46, of Belleville, Mich.
Sperr and his wife, Carol, received a trial modification through Bank of America that cut their house payment, including taxes and insurance, to $957 a month from $1,140 a month.
But it came with a hit to the credit score.
“Our credit rating has gone from the 800s to 750,” Carol Sperr said.
“It’s punitive to a consumer who is already scared, frustrated, mad,” said John Ulzheimer, president of consumer education for Credit.com.
The Sperrs said they had never been late or missed a mortgage payment, but their bank had reported them as being behind on payments.
Their credit score took a hit, falling from the 800s to 750.
“They tell us that once the paperwork ‘catches up’ and the new loan is finalized, they will correct the credit reporting agencies,” Carol Sperr said.
No one saw this coming.
“I didn’t find out about our credit until they did a check on this van we bought,” James Sperr said.
He said his wife was able to provide more documentation that their mortgage was in compliance so they did not have to pay a higher rate or get shut out of a loan.
Others aren’t so lucky.
Loan modifications remain a good thing, but they often come with that consequence.
Homeowners who face hardships but cannot traditionally refinance their mortgages can try to get a loan modification. A modification temporarily reduces the monthly payment, which can be helpful if someone’s dealing with a pay cut. Typically, the principal amount owed on the loan is not reduced or changed and the amount of debt owed is not forgiven.
The federal government has programs, and banks and credit unions have proprietary programs as well.
Yet many homeowners feel blindsided when they discover that their credit score has dropped by 50 to 100 points or even more after they entered a trial modification.
“What’s the point of the additional credit damage? What have they just accomplished by doing that to the borrower?” asked John Ulzheimer, president of consumer education for Credit.com.
Good question.
In the first few months after receiving a trial modification, Ulzheimer said, it is possible that the initial payments would show up as a “partial payment plan” on a credit report, which turns into a negative hit to a credit score. This can be a problem even for homeowners who never have missed a mortgage payment.
“It really depends on how the mortgage company decides to report this to a credit agency,” said Julie Bos, group manager and certified credit counselor for GreenPath Inc. in Grand Rapids, Mich.
A homeowner who is behind on payments will see credit score damage, and that won’t change from a modification.
“If you’re already delinquent, your credit is already impacted,” said John Snyder, manager of foreclosure programs for NeighborWorks America.
But consumers who are making their mortgage payments are getting modifications, too, perhaps because wages were cut or jobs were lost. They may be struggling to stay current, but their credit may not be bad when they start a modification.
At Bank of America, consumers who are current on mortgage payments could show up as being delinquent in the bank’s system after a trial modification period begins because they’re paying less than the actual mortgage payment during that trial period.
At the end of the trial period, the bank said it brings its system up to date when the loan is converted to a permanent modification.
Some might argue that it’s not a wise move to take on more debt, such as a car loan, if a person saw a cut in pay and needed a home loan modification. But many consumers often cannot control when their car breaks down.
On top of that, lenders benefit from home loan modifications because potential foreclosures can be avoided.
Unknowingly though, many consumers discover themselves boxed in later when they try to get approved for credit.
“They’re concerned about the damage to their credit. They’re not happy about it,” said Bos.
“If you go out and try to purchase a car in two months, you could be denied,” she said.
Or you might have to get a co-signer or put down a bigger downpayment or accept a higher interest rate to get a loan.
What’s stranger is that not all home loan modifications will hit consumers in the same way on their credit reports.
Consumers who modify their mortgages under federal programs, such as the Making Home Affordable and the Home Affordable Modification Program, now can do so without hurting their credit scores since those modifications are listed as a “loan modified under a federal plan” as of Nov. 1.
Here’s the sticking point: If you are able to modify your loan through an individual bank or credit union’s program and not a government plan, it’s likely your credit score will be hurt.
To complicate matters further, eventually a “loan modified under a federal plan” on your credit report could hurt your score, too.
Ulzheimer noted that the only reason the new reporting guidelines do not damage your credit scores is because FICO, the company that created the FICO credit score, hasn’t had a chance to study the long-term predictive value of loan modifications to credit risk.
Still, homeowners who are in trouble must realize that a foreclosure or a short sale would be listed as a charge-off or settlement on a credit report and last seven years, Ulzheimer said, while a modification would typically last a few years.
If you do receive a loan modification, ask questions and be more careful about how you handle your credit elsewhere to try to combat any potential damage.
Before making any moves, talk to a nonprofit housing counselor. See www.findaforeclosurecounselor.org.
How to keep up your credit score
These days, a good score is around 720 points or higher. Here are some tips to help you maintain or improve your credit score:
• Do not apply for several credit cards. Applying for a store credit card could cut 10 points off the credit score of some consumers with good credit.
• Pay all bills on time – utilities, mortgage, credit cards, etc. Lenders customarily don’t report you as late to the credit bureaus until you have missed the original due date by at least 30 days. Being a month late with all payments, for example, might lower a credit score by from 60 to 110 points.
• Missing a payment on one account that wasn’t already late could slice 40 to 75 points from some credit scores.
• Keep your credit card balances low on all cards, much lower than half of the available limit on your credit cards. Maxing out can cut credit scores by 45 to 100 points.
• Negotiating a debt settlement with creditors can lower some credit scores by 45 to 125 points. A short sale on a home would be reported as a debt settlement.
• A loan modification to get a lower mortgage payment and stay in your home could impact your credit score. In some cases, consumers could see credit scores drop by 100 to 150 points.
• Having your home foreclosed on could knock 45 to 100 points off your credit score, depending on where your score started.
• Filing for bankruptcy will hurt some credit scores by 195 to 255 points.
© 2010 Detroit Free Press, Susan Tompor
But credit scores can get dinged after a home loan modification, making it more costly or tougher to get a loan or credit card.
Hundreds of thousands of homeowners find themselves in a financial squeeze, thanks to the recession and the meltdown in the housing market. Lenders have offered trial loan modifications to more than 700,000 eligible borrowers. As of late November, about 31,000 trial loans have been made permanent, which requires at least three on-time payments under the trial program and proof of income.
What these troubled homeowners don’t realize is that these attempts to avoid foreclosure may result in their credit scores taking a hit.
A potentially damaged credit score is one of those hidden costs of home loan modification – and it varies significantly depending on your lender, as well as when you received your loan modification, your credit history and how your loan was altered.
“They need to tell people up front that this could happen,” said James Sperr, 46, of Belleville, Mich.
Sperr and his wife, Carol, received a trial modification through Bank of America that cut their house payment, including taxes and insurance, to $957 a month from $1,140 a month.
But it came with a hit to the credit score.
“Our credit rating has gone from the 800s to 750,” Carol Sperr said.
“It’s punitive to a consumer who is already scared, frustrated, mad,” said John Ulzheimer, president of consumer education for Credit.com.
The Sperrs said they had never been late or missed a mortgage payment, but their bank had reported them as being behind on payments.
Their credit score took a hit, falling from the 800s to 750.
“They tell us that once the paperwork ‘catches up’ and the new loan is finalized, they will correct the credit reporting agencies,” Carol Sperr said.
No one saw this coming.
“I didn’t find out about our credit until they did a check on this van we bought,” James Sperr said.
He said his wife was able to provide more documentation that their mortgage was in compliance so they did not have to pay a higher rate or get shut out of a loan.
Others aren’t so lucky.
Loan modifications remain a good thing, but they often come with that consequence.
Homeowners who face hardships but cannot traditionally refinance their mortgages can try to get a loan modification. A modification temporarily reduces the monthly payment, which can be helpful if someone’s dealing with a pay cut. Typically, the principal amount owed on the loan is not reduced or changed and the amount of debt owed is not forgiven.
The federal government has programs, and banks and credit unions have proprietary programs as well.
Yet many homeowners feel blindsided when they discover that their credit score has dropped by 50 to 100 points or even more after they entered a trial modification.
“What’s the point of the additional credit damage? What have they just accomplished by doing that to the borrower?” asked John Ulzheimer, president of consumer education for Credit.com.
Good question.
In the first few months after receiving a trial modification, Ulzheimer said, it is possible that the initial payments would show up as a “partial payment plan” on a credit report, which turns into a negative hit to a credit score. This can be a problem even for homeowners who never have missed a mortgage payment.
“It really depends on how the mortgage company decides to report this to a credit agency,” said Julie Bos, group manager and certified credit counselor for GreenPath Inc. in Grand Rapids, Mich.
A homeowner who is behind on payments will see credit score damage, and that won’t change from a modification.
“If you’re already delinquent, your credit is already impacted,” said John Snyder, manager of foreclosure programs for NeighborWorks America.
But consumers who are making their mortgage payments are getting modifications, too, perhaps because wages were cut or jobs were lost. They may be struggling to stay current, but their credit may not be bad when they start a modification.
At Bank of America, consumers who are current on mortgage payments could show up as being delinquent in the bank’s system after a trial modification period begins because they’re paying less than the actual mortgage payment during that trial period.
At the end of the trial period, the bank said it brings its system up to date when the loan is converted to a permanent modification.
Some might argue that it’s not a wise move to take on more debt, such as a car loan, if a person saw a cut in pay and needed a home loan modification. But many consumers often cannot control when their car breaks down.
On top of that, lenders benefit from home loan modifications because potential foreclosures can be avoided.
Unknowingly though, many consumers discover themselves boxed in later when they try to get approved for credit.
“They’re concerned about the damage to their credit. They’re not happy about it,” said Bos.
“If you go out and try to purchase a car in two months, you could be denied,” she said.
Or you might have to get a co-signer or put down a bigger downpayment or accept a higher interest rate to get a loan.
What’s stranger is that not all home loan modifications will hit consumers in the same way on their credit reports.
Consumers who modify their mortgages under federal programs, such as the Making Home Affordable and the Home Affordable Modification Program, now can do so without hurting their credit scores since those modifications are listed as a “loan modified under a federal plan” as of Nov. 1.
Here’s the sticking point: If you are able to modify your loan through an individual bank or credit union’s program and not a government plan, it’s likely your credit score will be hurt.
To complicate matters further, eventually a “loan modified under a federal plan” on your credit report could hurt your score, too.
Ulzheimer noted that the only reason the new reporting guidelines do not damage your credit scores is because FICO, the company that created the FICO credit score, hasn’t had a chance to study the long-term predictive value of loan modifications to credit risk.
Still, homeowners who are in trouble must realize that a foreclosure or a short sale would be listed as a charge-off or settlement on a credit report and last seven years, Ulzheimer said, while a modification would typically last a few years.
If you do receive a loan modification, ask questions and be more careful about how you handle your credit elsewhere to try to combat any potential damage.
Before making any moves, talk to a nonprofit housing counselor. See www.findaforeclosurecounselor.org.
How to keep up your credit score
These days, a good score is around 720 points or higher. Here are some tips to help you maintain or improve your credit score:
• Do not apply for several credit cards. Applying for a store credit card could cut 10 points off the credit score of some consumers with good credit.
• Pay all bills on time – utilities, mortgage, credit cards, etc. Lenders customarily don’t report you as late to the credit bureaus until you have missed the original due date by at least 30 days. Being a month late with all payments, for example, might lower a credit score by from 60 to 110 points.
• Missing a payment on one account that wasn’t already late could slice 40 to 75 points from some credit scores.
• Keep your credit card balances low on all cards, much lower than half of the available limit on your credit cards. Maxing out can cut credit scores by 45 to 100 points.
• Negotiating a debt settlement with creditors can lower some credit scores by 45 to 125 points. A short sale on a home would be reported as a debt settlement.
• A loan modification to get a lower mortgage payment and stay in your home could impact your credit score. In some cases, consumers could see credit scores drop by 100 to 150 points.
• Having your home foreclosed on could knock 45 to 100 points off your credit score, depending on where your score started.
• Filing for bankruptcy will hurt some credit scores by 195 to 255 points.
© 2010 Detroit Free Press, Susan Tompor
File early for tax exemptions
It’s not too early to file for a property tax exemption for next year, according to Polk County Property Appraiser Marsha Faux, Faux said filing now will allow property owners to beat the rush that normally occurs early in the year as people try to beat the March 1 deadline.
Faux said her staff is accepting applications for homestead, portability, widow, widower, disability, veterans, senior, religious and charitable exemptions as well as applications for agricultural classification, also known as greenbelting.
Applicants filing for homestead exemption for the first time must apply in person and bring their recorded deed and proof of residency, which includes Florida driver license, Florida vehicle registration, Florida voter registration or resident alien card.
Persons filing for any exemption are required to present their Social Security cards.
A husband and wife must both have Florida driver licenses, if both drive.
Homestead exemptions are allowed on mobile homes if the landowner also is the owner of the mobile home. The mobile home registration must be provided at the time of filing.
A widow or widower must provide a copy of their late spouse’s death certificate.
Applicants for the disability exemption must provide a letter from a certified Florida physician verifying a total and permanent disability.
Veterans exemption applicants must provide documentation of percentage of service-connected disability from the U.S. Department of Veterans Affairs.
Copyright © 2010 The Ledger, Lakeland, Fla.
Faux said her staff is accepting applications for homestead, portability, widow, widower, disability, veterans, senior, religious and charitable exemptions as well as applications for agricultural classification, also known as greenbelting.
Applicants filing for homestead exemption for the first time must apply in person and bring their recorded deed and proof of residency, which includes Florida driver license, Florida vehicle registration, Florida voter registration or resident alien card.
Persons filing for any exemption are required to present their Social Security cards.
A husband and wife must both have Florida driver licenses, if both drive.
Homestead exemptions are allowed on mobile homes if the landowner also is the owner of the mobile home. The mobile home registration must be provided at the time of filing.
A widow or widower must provide a copy of their late spouse’s death certificate.
Applicants for the disability exemption must provide a letter from a certified Florida physician verifying a total and permanent disability.
Veterans exemption applicants must provide documentation of percentage of service-connected disability from the U.S. Department of Veterans Affairs.
Copyright © 2010 The Ledger, Lakeland, Fla.
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