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The mortgage industry can feel a little more patriotic this 4th of July holiday now that President Obama has signed two bills to re-start the flood insurance program and extend the closing deadline for homebuyers seeking a tax credit.
The National Flood Insurance Program has been shut down for the past month (as it had expired earlier in the year and congress had not managed to get an extension through yet), which has tied up mortgage closings in many flood-prone areas. The bill – H.R. 5569 - President Barrack Obama signed authorizes FEMA to approve new flood insurance policies through September 30. It also allows FEMA to approve flood insurance applications and renewals that have been pending since the June 1 shutdown.
The second bill – H.R. 5623 - extends the closing deadline for the homebuyer’s tax credit program by three months to September 30. Originally, homebuyers who signed a sales contract by April 30 had until June 30 to close and qualify for the tax credit. But a tax credit-driven jump in home sales caused closing delays. The National Association of Realtors warned that up to 180,000 buyers could miss the deadline and lose their tax credit — $8,500 for first time homebuyers and $6,500 for repeat buyers. Real Estate agents noted that changes in mortgage settlement rules and lapses in the flood insurance program and Rural Housing Service single-family loan program contributed to closing delays.
The state of California has rewritten and re-established last year’s $10,000 home buyer tax credit, allocating $200 million to the credit for homes purchased between May 1, 2010 and August 1, 2011. The credit is worth up to 5% of the purchase price, up to a maximum of $10,000, and is spread out over three years ($3,333 per year). As opposed to the federal home-buyer tax credit this is not a refundable credit.
California Association of REALTORS® president, Steve Goddard, said the tax credit will help create even more incentive for first-time home buyers to purchase abandoned and foreclosed homes. “It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities.”
“The tax credit will help push prospective buyers off the fence, clear out inventory, and jump-start the home-building industry, which will help create jobs and reinvigorate the state’s economy,” said Liz Snow, CEO and president of the California Building Industry Association, in a statement.
With this move California helps ensure the state’s real estate market, and with it the already fragile economy, doesn’t take a nosedive when the federal tax credit runs out this Summer. But like that tax credit is running out of time the state’s may run out well before it is set to expire at the end of next August. The California credit is first come, first served. Once the $200 million is used up, it’s gone. And while this pool of funds is twice as much as the last one it still promises to go very fast. Especially considering how many home-buyers will now be eligible for the credit that were not last time…
~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.
For some people it may get a little harder to get an FHA mortgage in the near future. Looking to shore up its weakened finances, the Federal Housing Administration has announced stricter standards. The FHA, who insured nearly a third of new mortgages in 2009, is going to increase the premium it charges for its mortgage insurance and increase the required minimum down payment for those borrowers with lower credit scores. The agency will also reduce the amount of money a seller can provide a buyer towards closing costs from 6% to 3%, as well as tighten its enforcement of lenders.
Is this bad news? Well no, not for most people. FHA will still be available and the best choice for those with low down payments or troubled credit. The increase in the mortgage insurance premium is financed over the life of the loan and will have a very minor impact on monthly payments (for most people it will amount to the price of lunch on Wednesday). The 6% to 3% cut on seller contributions is no big deal either. At least not int he Sacramento – Roseville markets. In my business I see purchase contracts every day and I can’t remember the last time I saw one with the seller giving more than 3% back to the buyer for closing costs (if your closing costs are more than 3% YOU’RE WORKING WITH THE WRONG LENDER!!!!!).
~Greg
Doom and gloom no more Sacramento homeowners, for the first time in almost three years home prices in the Sacramento area (Sacramento & Placer Counties) are on the rise. Now, this isn’t to say things will get crazy again like earlier in the decade but it is giving us a really good idea that the bottom of the market was formed this Summer and we’re not likely to go back there.
Of course all things are relative… Prices are not up much, in some areas it’s hard to tell they are even up at all, but they are up and it’s a trend that has been proven since early Summer. Giving a real sign of stability and, most likely, the signal that the future will have more “normal” growth (1-5% a year, averaging about 3% a year) in home values over the comming years. As far as I’m concerned that is more than good enough. Some normalcy is what is needed in these times! We’re looking at what would be considered a normal income-to-home-price ratio for the first time in many years, one of the most important signals of a healthy, but normal, real estate market.
~Greg.
Last Friday the House and Senate both voted to extend the higher loan limits for FHA as well as GSE’s Fannie Mae and Freddie Mac for another year. Going forward the loan limit for these loans will stay at their 2009 levels, 125% of the local median sales price but no more than $729,750 for a single family home. This will hel keep interest rates for loans over $417,000 in higher priced areas down so that those areas can still be financed. If that pool of funds dried up, the economy in those areas would suffer, or at least that’s the idea. Coupled with the extension of the $8,000 tax credit this should help bolster the housing market through at least the first half of 2010.
The $8,000 FTHB tax credit has been a great success in America. Many first time buyers have taken advantage of this great tax credit and given an indirect boost to the economy through the housing market. However, some people have taken advantage in a different way. Fraud…
I’ve come to find out that $8,000 has been going here and there to people that have not even bought a house, or did buy but we’re 100% ineligible. For the fourth time this year the IRS’ watchdog group has warned that fraud is running rampant in the multi-billion dollar tax credit program. Of almost 1.5 million tax credit claims already filed the inspector general has found at least 70,000 claims, totalling almost half a million dollars, granted to people that do not appear to qualify for the credit. That’s almost 5% of all FTHB tax credit’s claimed and those are only what have been found so far.
The IRS has stated they plan on vigorously pursuing those that have filed fraudulent claims and already has opened 107,000 civil cases related to the credit and identified 167 criminal schemes. When you think about it, this is barely scratching the surface as most of the credits already filed were for people that bought in the first half of the year or those that filed amended returns to get the credit back. When we start filing our 2009 returns next year, we’ll really see the credits requested. Hopefully by then more people will understand they shouldn’t be committing tax fraud, especially on this subject. Because everyone has been warned…
~Greg
Amidst all the bad there is some good news in California Real Estate… Housing prices are on the way up! According to MDA DataQuick, the median price in the Bay Area was $352,000 in June, up 3.1% from May but still down 27.4% from a year ago. In Southern California the median price was $265,000, up 6.4% from May but down 26.4% from a year ago. Foreclosures are becoming a smaller factor in home sales, and mortgage financing isn’t as difficult to get as it was in the fall and winter. Home sales appear to be on the rise, increasing steadily over the last ten months. Buyers are returning with the belief that the bargains won’t get any better.
H.R. 627: , The Credit Card Accountability Responsibility & Disclosure Act of 2009. A new law to stop many of the predatory practices of the credit card industry, strongly supported on both sides of the aisle and signed about six weeks ago by president Obama, imposes stricter rules on interest rate and fee changes. Some of the basics include…
- No longer allowing creditors to charge interest on the “double cycle billing” method.
- Putting a stop to interest rate increases during the first year after opening a credit card account.
- Ensuring promotion or “teaser” rates stay in place for at least six months.
- Making sure any increase in interest rate is only applied to new balances. Any previous balance on the card will be charged at the same interest rate it was prior to the rate going up.
- Issuers of the cards must now disclose at least 45 days in advance of any rate increases, three times the 15 day minimum currently in place.
- Should a cardholder’s rate increase due to late or missed payments they banks will no longer be allowed to keep the high rate in place should the user establish a stable payment history. In this case the new law requires the interest rate to go back to the lower rate being paid by everyone else.
That is the basics when it comes to interest rates. Over-the-limit and other fees have also been reduced greatly in the amount and frequency they can be charged. They are also major changes to billing and payment processing aimed at making sure certain credit card companies and banks (hello Criminal One, errr Capital One) can no longer hold on to payments on purpose to make them late in order to levy more fees and increase interest rates on their card holders…
All in all this seems like a very good thing. And over time it should help bring some of the predatory practices into line and make the credit card industry work like it should. But what will be the immediate impact? We shall see but already some of these companies are ramping up rates and fees on their best customers to prepare for the loss of income coming when the law goes into effect. A byproduct of bringing a generally unregulated industry back into line I guess???
`Greg :: Roseville Loan Expert
What do you think when I say “CHDAP”? Probably nothing and that’s totally normal if you’re not in the mortgage business (might even be normal if you are in the business but don’t pay attention). CHDAP used to be a way to get low and no down-payment loans… A super low rate simple interest second mortgage you don’t make payments on and don’t pay off till you sell or pay off your house used to cover all or part of down payment requirements or closing costs.
The CHDAP program was the baby of CalHFA, basically California’s own little FHA. A Sacramento-based quasi-government entity with the sole purpose of making a higher number of California’s population a homeowner. CalHFA’s programs covered a lot of ground and helped A LOT of Californians achieve home-ownership over the last decade plus. Then came our current recession and the pool of bond funds used to fund all of the most popular programs dried up and the programs went bye-bye. Including the CHDAP.
The good news came today, CHDAP is back! It’s going to take a couple days to evaluate the effect of the new version of CHDAP. All the details and guidelines will have to be hashed out over the next few days (and as usual of course you’ll hear about it HERE first) but it sounds promising. If the new CHDAP is like the previous CHDAP that went away at the end of 08′ we’ll be looking at a tool that will allow even lower down payments on FHA loans and/or help cover closing costs, helping Sacramento area home-buyers get into their new home with thousands less dollars out of pocket. A pretty big deal!
As always if you have any questions please don’t hesitate to call or e-mail. Until next time…
~Greg Cowart :: Roseville Loan Expert .Com
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