Finally, we’re seeing the balance tip in the financial press, with forecasts of a good—or at least tepid—selling season this spring.
But I’m sure you all know what it’s like when you’re driving a country road for the first time and it widens from nearly a one-lane experience of fright to a broad two-lane ‘highway’ that locals take at about 70 miles per hour. Then, suddenly and unexpectedly, the road goes from smooth concrete to asphalt to gravel, and you pull to the side, wondering what’s up ahead and whether you’ll survive it.
So it is with the economy today, at least where real estate is involved.
Many observers, whose words we find scattered through the financial press, are breaking out the champagne. Derek Kravitz and Alex Veiga, both of whom write prolifically for the Associated Press, recently had this to say, for example: “Five years after the U.S. housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery. Reduced prices, record-low mortgage rates, higher rents and an improving job market appears to be emboldening many would-be buyers. Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.”
Which is all pretty great—smooth driving on a newly-cemented road—but the patches of unimproved gravel continue to intrude on our progress and make the driving feel dangerous.
The most recent completed sales computations, given the apparent improvement in related indicators—especially jobs—were disappointing. For sales completed in March, existing home sales fell off 2.6%, while new home sales were off by 7.1%. Even pending sales brought little solace, since newly-signed contracts dropped by 0.5% in February. (The index for March will be released tomorrow, on Thursday, April 26.)
There are a few mitigating circumstances. For example, there was a striking annual decline of 2.5% in the number of existing homes on the market. And the new home sales looked especially weak because of upward revisions to the number of sales in prior months—40,000 in February, 11,000 in January. Still, these don’t appear to be the sorts of dazzling numbers that would usher in a certain and sustainable recovery.
If I may climb aboard another metaphor, we should recall that the real estate market—like an ocean liner—takes a lot of time to turn around and often brings to mind the surprises that greeted the Titanic, the unsinkable ship, long ago. Our progress toward a truly sustainable market, therefore, is almost always attended by some fits and starts.
But this is not a bad thing for everyone. Certainly, there are those of us who have about run out of the ability to keep holding our breaths, waiting for the ‘All Clear’ signal. Actually, I suspect this economy will continue to generate concerns and uncertainties for many months to come, if not until the cows come home.
Meanwhile, the good part. There is still time, brothers and sisters. We don’t have to rush into the market with our checkbooks in our back pockets, pens at the ready, trying to grab a great deal and good financing before they’re gone. What we have here is a window of opportunity when nearly all the ingredients have come together—even the amount of time needed to engineer a solid transaction. This will surely pass, so the time to act on all of this is now.
And there’s something to watch very closely. Even major financial houses are beginning to see that investing time and energy into streamlining the ‘short sale’ process can potentially save them a lot of money over the cost of disposing of a property in a foreclosure. If they can make this work…if the market moves in favor of short sales (there were apparently more of them in January than foreclosure sales for the first time ever)… we may eliminate the heavy, dark clouds with which imminent foreclosures continue to threaten the real estate recovery.
“I understand that on April 1, 2012 the FHA Interest rate will increase?”
No one can tell for sure what interest rates on any loan, FHA included, will be on any day. Interest rates for pretty much every type of loan fluctuates daily (sometimes more than once a day).
You may be referring to the FHA Mortgage Insurance premium… This is changing on April 9th and is going to increase; a.) The Up Front portion of FHA’s mortgage insurance premium by 0.75%. The Up Front MIP is generally financed into the loan, spread out over the entire term of the loan, and doesn’t have much of an effect on one’s payment, but it will increase most people’s loans by a least a few bucks. b.) the Annual or Monthly MIP is also going to increase by 0.10-0.15% depending on their loan scenario, and by another 0.25% for those with loan amounts that exceed $625,500.
This is going to increase every FHA borrower, that has their FHA case number pulled after April 9th, monthly payment by a bit. Quite a bit in some cases. But FHA is doing this to keep the fund solvent and ensure that FHA loans are always available for those that need them. They are still the best loan for many people and will be the only loan for many people for quite a while.
With more than 11 million homeowners underwater on their mortgages,2008’s HARP (Home Affordable Refinance Program) mortgage has been updated to allow more homeowners to refinance their mortgages, taking advantage of today’s historically low interest rates. AKA: HARP 2.0…
The first edition of HARP was a great idea, in theory anyways. If the banks, lenders, and servicers implemented the program exactly as it was written it would have helped many millions of homeowners refinance to lower interest rates, lowering their payments, and even probably had a positive effect on the national housing market and overall economy as less of those homeowners would have lost their homes and had more money in their pockets to spend.
But that’s not how it happened, the banks and servicers applied their own “overlays” to the program’s guidelines, making it hard for many underwater homeowners to qualify. Because of this only about 800,000 homeowners were able to take advantage and lower their rate/payment.
In comes HARP 2.0, with easier guidelines for borrowers to qualify, now unlimited Loan-To-Value ratios are allowed, as well as “Representation & Warrants” requirement waivers, relieving lenders of almost all Reps & Warrants of the original loan, making it much more likely that they participate. The Federal Housing Finance Agency estimates that at least another 1 million homeowners will benefit from a HARP 2.0 refinance before expiration of the program at the end of 2013.
Here are some important facts!
The current loan must be backed by Fannie Mae or Freddie Mac. You may not know your loan is backed by either of these entities because you make your payment to someone else (Bank of America or Wells Fargo for example) but in reality they are probably just the servicer of your loan and the security was at some point sold to Fannie/Freddie. I can quickly help you do this search to find out.
The current mortgage must have been originated before May 31st, 2009.
HARP loans are available for all occupancy types (primary residence, second home, and investment properties).
The mortgage must have not had a 30 day late payment in the past 6 months, and must have had no more than one 30 day late payment in the last year.
The current Loan-To-Value ratio must be over 80% (otherwise you may already qualify for a non-HARP refinance)
Except for a small exception for some of the earliest HARP refinances in March-May of 2009, those that have previously refinanced under the HARP program will not qualify.
Both Fannie and Freddie’s guidelines are nearly the same but Fannie Mae’s are actually a little bit more liberal (which is a good thing as they hold many more HARP-eligible loans than Freddie Mac does).
Loan-Level-Price-Adjustments (LLPA’s), fees added on that can increase closing costs, the interest rate, or both (depending on how your lender structured your scenario) have been drastically reduced for HARP 2.0 loans. This was one of the issues with HARP the first time around, LLPA’s would make it very tough to refinance as they would add up to a point that HARP borrowers were no longer eligible for the lowest rates. Under the new program it’s feasible for a HARP borrower to get a lower rate than an non-HARP borrower because of the LLPA cap.
Property Inspection Waivers (PIW’s) are the big one here. Under the new rules lenders will be issuing PIW’s allowing the HARP borrower to not have to have an appraisal at all. Not only making a lot of these refinances possible, but saving consumers a few hundred more dollars in the process! PIW’s will not be issued on all refinances, but they will be on many (I can tell you before you shell out $400 for an appraisal if your loan was issued a PIW).
This is great news for homeowners who have made it a point to keep up with their payments! With the updated guidelines rolling out in March eligible homeowners in this category may be able to take advantage of HAPR 2.0 in the very near future. And even if you did miss a payment this program is available through December 2013. If you can get and stay current for the next 6 months, you may be eligible too.
Some facts about the recent Mortgage Relief agreement between the banks and, well, us…
FACT#1: The main fact here is that mortgage servicers will be required to contribute $20 billion to various forms of relief to borrowers.
FACT #2: Of said $20 billion no less than $10 billion will be dedicated to reducing homeowner’s mortgage balance that owe more on their mortgages than their homes are worth and are either currently delinquent or at imminent risk of default.
FACT #3: At least another $3 billion will be dedicated to a new refinancing program for borrowers who are current on their mortgages but are underwater. All borrowers who meet some basic eligibility criteria will be eligible for the new refinance program, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate loans are due to have their rates increase in the near-term.
FACT #4: The servicers have also agreed to dedicate up to $7 billion in other forms of relief, including forbearance of principal for unemployed borrowers (something already given if your loan is backed by Fannie Mae or Freddie Mac), anti-neighborhood-blight projects, short sale assistance, and special programs for service members who are forced to sell their homes at a loss as a result of a permanent change in station…
FACT #5: As an enticement for servicers to provide relief more quickly, there are incentives for a tangible benefit provided within the first year, on top of that there are additional penalties for any servicer that fails to meet its obligation within three years.
FACT #6: Servicers will receive only partial credit for every dollar spent on some of the required activities, so the settlement will provide direct benefits to borrowers in excess of $20 billion.
FACT #7: In addition to the $20 billion for financial relief for homeowners servicers will make an additional $5 billion in cash payments to the Washington DC and all 50 participating states. That $5 billion will include…
A Borrower Payment Fund of $1.5 Billion providing cash payment to homeowners whose homes were foreclosed upon from 2008-2011 where the servicers did not follow proper procedures.
The remaining funds will go to state and federal governments to be used to refund taxpayer dollars lost as a result of servicer misconduct, fund housing counselors and legal aid, and other similar purposes to be determined by each state’s attorneys general. The funds coming to the federal government will mostly go to the FHA Mortgage Insurance Fund, with portions also going to the Veterans Housing Benefit Program Fund and to the Rural Housing Service (USDA).
FACT #8: As part of the deal servicers are agreeing to implement extensive new servicing standards, designed to correct the kinds of conduct that caused a need for this settlement in the first place.
Cease past foreclosure abuses such as robo-signing, improper documentation, and lost paperwork through new mortgage servicing standards.
Require strict oversight of foreclosure processing, including of third-party vendors.
Impose new standards to ensure the accuracy of information provided in federal bankruptcy court, including pre-filing reviews of certain documents.
Make foreclosure a last resort, by requiring servicers to evaluate homeowners for other loan mitigation options first.
Restrict banks from foreclosing while the homeowner is being considered for a loan modification.
Set procedures and timelines for reviewing loan modification applications, and give homeowners the right to appeal denials.
Create a single point of contact for borrowers seeking information about their loans and adequate staff to handle calls.
FACT#9: You probably are tired of all these facts! But it’s important to know that Californians are to receive the lion’s share of the relief, $18 billion of the $25 billion!
If you’re unemployed and in danger of going into default on your mortgage the nation’s Government Sponsored Enterprises (GSE’s), Fannie Mae & Freddie Mac, are making some important changes to their foreclosure and forbearance (when the bank suspends collection of payments for a period of time, kind of like a timeout on making payments) policies.
The new rules will direct mortgage servicers (who you make your payment to) go through a forbearance process when the homeowner has lost their job before moving into foreclosure territory. Under the new rules these services have automatic authority to grant homeowners on unemployment a full six months forbearance and can go to the GSE’s for approval of another six months if the homeowner’s unemployment income lasts for longer than six months.
That’s adding up to a year to get back on track before any sort of foreclosure process begins!
There are some exceptions to the new rules however. The house must be a primary residence, not an investment or second home. And the mortgage must be backed by one of the GSE’s themselves, not FHA or VA, and not a private/portfolio loan held by the bank themselves.
That covers the basics. But, of course, there are some more details that might affect you. If you have any questions, please ask! I’m always here to help…
Interest rates on homes continue their downward trend. GSE Freddie Mac reported that the average 30-year fixed-mortgage rate sank to 3.91% last week, setting an all-time record low. 15-year fixed rates settled in at a historic low at 3.21%.
To put the declines into perspective, today’s homebuyers are paying over $1,200 less per year on a $200,000, 30-year fixed-rate loan than they would have just a year ago today!
The Office of the Special Inspector General for the Troubled Asset Relief Program is waging a strong battle against mortgage and foreclosure rescue scammers that advertise online. The agency recently announced that it halted 85 online scams that promised to help homeowners pursue mortgage loan modifications.
Some scammers disguise themselves as government agencies by using government seals or adopting names that are similar to those of a government agency, the agency revealed. The agency also noted that scammers often ask homeowners for an upfront fee to help them pursue a modification through HAMP.
This is the kind of thing we REALLY need to stop and give those that are guilty the maximum sentence. Preying on those already in a hard place is the lowest of the low.
The gov recently announced some great changes to the Home Affordable Refinancing Program (HARP). The updates to the program are aimed at those who have spent the years since the recession began keeping up with their mortgage payments as others walked away (read why ”walking away” is a misnomer here and here) from their houses even though they can make the payments. The idea here is to help millions more homeowners save some money on their house payments by helping them take advantage of today’s historically low interest rates, even if they don’t have any equity to qualify for a standard conventional mortgage.
Eligibility:
1. Your loan must be guaranteed by Fannie Mae or Freddie Mac.
2. Your loan must have been acquired by Fannie or Freddie before April 1, 2009.
3. You haven’t already refinanced under HARP (or if you have it was between March and May of 2009).
4. Your Loan-To-Value ratio must be higher than 80%. This just means you have less than 20% equity. If you have 20% equity or more a standard conventional refinance is what you need.
5. You haven’t been late with a mortgage payment in the last six months. In the last year, you haven’t been 30 days late more than once. Because the program will last through Dec. 31, 2013, there’s still time for borrowers to get on track.
6. There must be a tangible benefit. You must end up with a lower payment or trade in an ARM (adjustable) for a fixed rate mortgage.
What about my home’s appraised value?
The biggest challenge to getting a HARP loan up until this point was, even though appraisal guidelines were relaxed, you still had to be close to having some equity. You could be underwater but not that much. The good news is some mortgage holders will be eligible no matter how much they owe or how much the house is worth when Fannie and Freddie rolls out the Property Inspection Waiver. For others, there is still a Loan-To-Value ceiling.
If you have a fixed-rate mortgage with a term of up to 30 years, there’s no maximum LTV ratio, meaning there’s no maximum amount you can owe on your home if you qualify for the Property Inspection Waiver.
If you have a fixed-rate loan but the term is over 30 years (very rare), you can only owe 105% of what the house is worth.
Do you have an adjustable rate loan? As long as you didn’t sign up to pay on it for more than 40 years, or fewer than 5, you can owe 105% of what your house is worth.
Have a recent bankruptcy or foreclosure?
The standard waiting period has been removed for folks who have those blemishes on their credit histories. You still have to qualify for the loan but a recent foreclosure or BK won’t automatically disqualify you for a refinance.
When can I apply?
The program begins on December 1st however many of the changes that will help a lot of people won’t roll out until next year. Of course I’ll keep everyone updated on the program as it rolls out, this is about to help A LOT of people save thousands on their mortgage payments and also give a little boost to Sacramento area real estate values as it saves some people from losing their home.
This month the FHA has reported to Congress that the MMI Fund (Mutual Mortgage Insurance Fund), the backbone of its mortgage programs and what makes FHA mortgages possible, is going to return to its mandated capital reserve level faster than previously expected.
Currently the MMI Fund’s capital reserve ratio is 0.24% but that it would return to its mandated sooner than actuaries last predicted. “As was the case last year, the new actuarial study shows that FHA is expected to sustain significant losses from loans insured prior to 2009, and thus its capital reserve remains below the congressionally mandated threshold of 2% of total insurance-in-force,” an FHA official said. “However, the actuaries’ report concludes that, barring a further significant downturn in home prices, the MMI Fund will start to rebuild capital in 2012, and return to a level of 2% by 2014; outpacing last year’s prediction.”
“In the midst of a tough housing market the FHA MMI Fund continues to be actuarial sound.
“Because of the Obama administration’s strategy to protect the FHA Fund – tightening of risk controls, increased premiums to stabilize near-term finances and expanded loss mitigation assistance to avoid unnecessary claims – this past year’s endorsements had the highest credit quality ever recorded and will yield historically high levels of net receipts in the years ahead.”
The availability of FHA loans is a high part of our housing market and economy, both nationally and locally, and the health of the MMI Fund is also an important part of the housing market and greater economy. This is good news for both of those thing as well and, while we won’t see a more normal real estate market or economy for a while still, more and more news like this tells us the tide is turning!
~Greg
P.S. The FHA has never received any sort of taxpayer bailout! The MMI Fund keeps it solvent and without the need for any sort of congressional assistance. Truly an American success story…
The Keep Your Home California program has increased benefits and expanded eligibility in order to help more homeowners having trouble making their mortgage payments keep their homes.
The program has not only relaxed some restrictions on who qualifies but has extended the length of time currently unemployed homeowners can receive assistance on their home loans to 9 months, from 6 (the program is intended to help people stay in their homes if they are temporarily unemployed by subsidizing some or all of their monthly payment for a period of months).
Claudia Cappio, Executive director of the California Housing Finance Agency said, “this expanded eligibility will allow more families to qualify and receive greater assistance.”
Program officials have also increased the cap on the mortgage reinstatement program from $15,000 to $20,000. The reinstatement program provides a one time assistance grant for homeowners that have fallen behind their payments due to financial hardship.
According to the agency Keep Your Home California has already helped more than 7,000 homeowners statewide and has provided more than $128 million in benefits since launching in February. The funds come from $2 billion in 2008 Federal Stimulus money and the state has until 2017 to use it for this purpose or the remainder is returned.
Finally, we’re seeing the balance tip in the financial press, with forecasts of a good—or at least tepid—selling season this spring.
