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I have some GREAT news. Government-chartered mortgage giant, Fannie Mae announced they are bringing back closing cost assistance to buyers of HomePath-eligible homes. People buying one of the Fannie Mae owned REO’s will receive a 3.5% credit towards closing costs. In most cases this 3.5% should be enough to cover 100% of the buyer’s costs, or even buy the interest rate down further! HomePath is already a GREAT program for local homebuyers, especially those with decent to above average credit. These loans already…
 A.) require a smaller down payment than even FHA (3% compared to 3.5%)
B.) require no appraisal, saving $400-$500 as compared to pretty much any other loan
C.) have no Mortgage Insurance premium added on to the payment, realizing a significant saving over other low-down options
To qualify for the credit the offer must be submitted by 4.11.10 and escrow has to close no later than 6.30.11. to be eligible for the incentive. Also, while HomePath is available to investors (with at least a 10% down payment) ,the 3.5% closing credit is only available to people intending to live in the property as their primary residence.
“Terry Edwards, VP of Fannie Mae’s Credit Portfolio Management team said “attracting qualified buyers to the market and reducing the inventory of vacant homes remains essential to stabilizing neighborhoods and helping the market recover. Since interest rates remain low, the incentive will go a long way toward helping even more families buy a new home so this is a great time for Fannie Mae to offer some assistance.”
To find a list of HomePath eligible homes give me a call/e-mail or check it out yourself at http://Homepath.com. You can also ask your Realtor to do a search for HomePath homes for you (if you need a referral to a top-quality Realtor in your area let me know). I see a lot of these properties in the Sacramento and Roseville real estate markets. The lists are updated with new properties as they come to the market.
Fannie’s Press Release
~Greg
Continued depreciation of property values in 2010 has made housing more undervalued relative to income than ever before. Using the latest Case-Shiller home price index American housing was 21% undervalued when compared with disposable income per-capita.
 This data includes the index published by the Federal Housing Finance Agency and shows that housing in the 4th quarter of 2010 was 15% undervalued as measured against American’s disposable income. The results point to the idea that housing is exceptionally undervalued, and the gap has gotten bigger.
Current low housing prices, coupled with historically low interest rates (the 20 year average is 7% but a minimum down FHA loan can be had for 4.5% today), explains why the monthly mortgage payment on a median priced house bought with a 20% down payment has fallen to an all-time low of 13% of the median income. Real estate costs now appears close to fair value when set against rents according to the numbers (and I have seen plenty of people buy for less than they were paying in rent recently).
These low prices and rates mean there is plenty of scope for housing to perform well in the near to mid-term. Also, the Sacramento market currently has MANY more buyers than there are properties to sell in this low-mid price range, so the demand is there to keep it moving.
Looking at the long term, as I have talked about a number of times recently, a sharp fall in the mortgage delinquency rate throughout 2010 means there will be fewer homes in the foreclosure pipeline, and as current foreclosure pipelines continue to shrink we should see a return to a more normal real estate market in the Sacramento region. This will not happen overnight but with less and less first payment defaults, there will be less and less foreclosures going forward.
So, with home prices as “undervalued” as any time in history, what are you waiting for?
~Greg
As of January 31, 2011; the FTC has banned consulting firms from charging up-front fees for negotiating modifications of residential mortgage loans. In Nevada, the Mortgage Lending Commissioner said the constraints of the federal rule “will have substantial impact” on the number of licensed consultants for mortgage loan modifications. His office counts 39 licensed loan modification firms with 185 licensed associates in Nevada (I would guess there was that many in the Sacramento area alone a year ago).
Critics say that the ruling favors large banks, which don’t want advocates representing homeowners. However while there might be a small grain of truth to that, the ruling really favors consumers in my opinion. As one would suspect, unethical mortgage modification firms often fail to do any work after collecting fees, and the FTC rule will prohibit mortgage modification firms from being paid in advance so this can not (legally) happen ever again. What some may not expect is the vast majority of these companies should be considered unethical. Most of them have little to no experience in the business and if they so it’s usually that they were mortgage originators for the predatory lenders than put so many people into very bad situations during the real estate boom of 2004-07, but couldn’t get the proper licensing required to originate mortgage loans in today’s regulatory environment. Taking advantage of people on their way in (giving them the predatory loan) and again on the way out (charging thousands up front to try and modify their mortgage)…
Greg
Good news? In this world? No way! I thought it was all doom and gloom…
For seven straight months mortgages delinquencies have fallen, even while the rate of homes in the foreclosure process and those repossessed by banks climbed. According to CoreLogic Systems, the firm that tracks the rate of delinquency for all homes with a mortgage in the four-county region, 10.47% of area homes are 90 days delinquent, including 3.21% that are in the foreclosure process and 1.04 percent that went back to the bank during August.
The foreclosure and repossession numbers were both up from July. But Sacramento’s 90-day delinquency figure of 10.47% is down from a high of 11.58% in January. The important number too look at here is that delinquencies are going down, seven straight months in a row at that. Even though foreclosures have gone up in that same time-frame, we can safely ignore that number because of how long it takes to foreclose on a home.
Those homes that were taken back by the bank in that period were from homeowners that were delinquent six months to a year before that, when delinquencies were higher. Now that delinquencies are going down, foreclosures six months to a year from now will also be lower.
This is good news for all of us, our local community, and economy. It’s not good news for those sitting on the fence about buying a home. I don’t think that home prices are going to skyrocket any time soon, not at all, but as foreclosure inventory goes down, prices will go up. If you haven’t bought a home you’re probably safe, probably safe for quite a while, but these trends show some strength for the Sacramento area real estate market down the road. Quite possibly sooner than some people think (remember the doom and gloom). With nine consecutive months of private-sector job growth, and seven straight months of mortgage delinquencies falling, I can see a more normal Sacramento market and economy. And it’s closer than I thought it would be…
~Greg
Fannie Mae is offering buyers up to 3.5% in closing cost assistance on HomePath® properties. HomePath homes are REO’s that have already been taken back by Fannie Mae and put on the market at a certain price as HomePath eligible. I did a complete breakdown of the HomePath on a previous post but here is a quick reference…
A HomePath home may offer the best financing possible today. The loan only requires a 3.0% down payment, instead of a 3.5% down payment as required by FHA. There is also no PMI or mortgage insurance required, a huge savings to the new homeowner. Better yet there is no appraisal so the buyer saves even more in closing costs and the escrow can close faster. Given this 3.5% closing cost assistance buyers can get their new home with only 3.0% down, no appraisal fee, and have the seller – Fannie Mae - pay 100% of the closing costs (if you’re paying more than 3.5% in closing costs it might be a good idea to call another lender)! Even if there was PMI required it would still be a great deal.
To be eligible for this incentive:
- Initial offers must be accepted on or after September 23, 2010;
- Property sales must close on or before December 31, 2010, and close within 60 days of offer acceptance; &
- Buyers must be owner-occupants and confirm that the property will be used as their primary residence by completing a certification form (investors are excluded)
Fannie Mae says that this incentive reinforces their commitment to stabilizing communities and assisting buyers. For more information about the incentive read the press release, or give me call/e-mail…
~Greg
According to the commissioner of the State Of California Department Of Real Estate (DRE), Short Sale fraud is on the rise. In a recently issued letter the DRE reached out to local mortgage lenders to advise them of the problem, as well as for help. Even though there are many ways short sale’s can be used for fraud they specifically outlined the most common ploys. Namely “short sale flipping” where real estate agents and other, non-licensed individuals, defraud lenders as to the value of a listed short sale property, withholding higher offers that came in from prospective buyers and then selling the property to a straw buyer working with the Realtor, only to sell the property at a profit the day after buying the property. Not only are these agents making a killing doing this (they make a profit on the sale as well as a LARGE commission on BOTH transactions) it is hurting well intentioned buyer in the process.
There are a number of other methods being used for this fraud but that is the most prominent. This is not only bad for the lenders – something the public is probably apathetic to – but to you and me every day. As it usually does, greed always has a victim, even if it’s not easily noticed. If you’ve been out there trying to get into your first home for months with no luck, only to see a home you made an offer on for sale again a month or two later, there’s a good chance you are victim to this fraud, albeit indirectly. I’m sure you can see the problem this can cause.
What can we do about this? The DRE asks that we (Realtors, mortgage professionals, and you) report possible fraud directly to them. Especially unlicensed induviduals perpetrating this fraud, something that is extreemely damaging to the consumer and the industry alike. Is it worth the time? I say yes. In a time that ethics is SOOOO imporant in real estate and lending we need to do all we can to stop fraud. It’s important to all of us, even if we don’t think about it every day.
~ Greg
As I wrote back in March, “Walking away” from your mortgage? Maybe think twice, contrary to popular belief it’s already impossible to “walk away” from your home unscathed and there are plenty of reasons not to. However today government-sponsored mortgage giant Fannie Mae announced a new policy designed to encourage borrowers to work with their current lender and pursue alternatives to foreclosure, giving homeowners even more incentive not to “walk away” from their home and mortgage.
Under the new rule: “Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.” Fannie Mae backs the vast majority of non-government loans (FHA, VA, USDA, etc) so this might be a big factor to a lot of people. As of right now it is possible for buyers to get a new Fannie Mae loan in as little as 2-3 years after a foreclosure, this rule more than doubles that time IF the homeowner/buyer falls under their new “walking away” rule.
“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president for Fannie Mae’s credit portfolio management. “Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.”
Due to the econpomy and current real estate climate they have not been going after those that choose to walk from their mortgage obligation over the Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.
Let me know if you have any questions..
-Greg
Today’s payroll flop — only 20,000 real jobs created in May — will take some time to settle all the way in. Immediately: 10-year T-notes are 3.22% (from 3.36% yesterday and 3.99% six weeks ago), and the best mortgages below 5.00%.
The payroll report has confirmation: new unemployment has held high for five months; May retail sales look soggy and auto sales flubbed in May.
In days ahead, the entire recovery camp from government to stock-pushers has more than explaining to do. It must change its mind.
All in one fur-ball: How can mortgage rates be so low, and home prices so low, home affordability the best ever measured, yet housing defies recovery? One unifying answer: credit. Not enough, and wildly too tight. The credit dearth is perfectly rational. At default rates like these, nobody knows what new loan is safe to make, and underwriting has been overtaken by hand-shaking, eye-glazed panic. The horrifying conundrum: new loans will inevitably produce new losses, yet without enough new loans, losses on existing ones will be greatly higher.
The good thing for us is hidden in the above. Rates are at all-time lows and home affordability has never been better, the perfect storm. And even though it may not seem like it, we’re lucky here in California. Throughout the rest of the country the loss of the $8,000 home buyer tax credit has taken it’s toll as purchase applications are down sharply from a month ago (even though prices are the same and rates are lower) but we have another $10,000 tax credit available to use here in California! The local Sacramento area market is actually looking up with an every so slight month-over-month and year-over-year price increases in housing. Uber-low rates, dropping unemployment rates, and value in home prices coupled with that free $10,000 tax credit available to many Californian homebuyers should help that continue until the economy and national housing starts to pick up as well.
The glass is half empty, but it’s actually more than half full. Somehow…
Fannie Mae HomePath Financing…. Have you heard of it? If not you’re in for a nice suprise. This is a little-known program recently rolled out by mortgage giant Fannie Mae that helps them get some of the foreclosed homes sold and buyers into those same homes with a fantastic mortgage for taking it off their hands.
Ask you Realtor about it. Any time you see this logo on a listing or on the MLS it means the home is already approved for HomePath financing. OK OK, what is HomePath and why do I want it anyways? Well, Homepath is probably the best loan out there for buyers with low down payments. The minimum required down payment is actually lower than FHA (3% to FHA’s 3.5%) and there is no MI (Mortgage Insurance) or appraisal required. Not only that, they may give 3.5% back to the buyer for closing costs so it really is the lowest down payment option in the Sacramento area for the majority of future homeowners. Here are a few of the benefits of Fannie Mae Homepath…
Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
You may qualify even if your credit is less than perfect
Available to both owner occupiers and investors
Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
No mortgage insurance*
No appraisal fees
* Ask your lender for cost details on loans without mortgage insurance
We have this incredible program in house here at Comstock Mortgage. Give me a call if you have any questions.
Sincerely,
Greg
News on the short-sale front? News straight from Washington? It looks like the long rumored short sale streamline process is finally on it’s way. This could be big news for Sacramento and the entire California Real Estate Market. Check out all the information in this article from the NY Times.
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