Real Estate Information

I learned a long time ago that “common sense is NOT common practice“. This is especially the case during the emotional time that surrounds buying a home, when people tend to do some non-commonsensical things. Here are a few that I’ve seen over the years that have delayed (and even killed) deals:

1. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with your loan officer.
2. Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios…higher ratios make for riskier loans…and sometimes qualified borrowers are no longer qualifying.
3. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. With that obligation comes higher ratios, as well. Even if you swear you won’t be making the payments, the lender will be counting the payment against you.
4. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Frankly, before you even transfer money between accounts, talk to your loan officer.
5. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
6. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more approvable. Wrong. A major component of your score is your length and depth credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.

The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. Any blip in income, assets, or credit should be reviewed and executed in a way to keep your application in the most positive light.  By Dean Hartman, KCM Blog

The Federal Housing Administration rescinded and will delay a rule that as of April 1 prohibited borrowers with more than $1,000 in disputed collections accounts from getting a federally backed mortgage, according to a notice sent late Friday.

FHA postponed the rule until July, and will take public comment from lenders, builders and others in the industry until then to clarify guidance.

"There is clearly a bigger ripple effect here than the Department of Housing and Urban Development might have anticipated going into this revision," said Lisa Jackson, senior vice president of research and business development with John Burns Real Estate Consulting. "Any measure that impacts even 10% of sales is meaningful and our analysis shows it would be far greater in some markets."

The FHA attempted to ease the original proposal, allowing borrowers to provide written documentation on "life event" disputed accounts with them, such as bills stemming from illness, divorce or unemployment in order to obtain an exemption.

Borrowers could previously show the lender they arranged a payment plan to settle other accounts too in order to qualify, including credit card and utility bills.

According to the alert sent Friday, the FHA ensured lenders they would not be in violation of the new rule for loans written between April 1 and April 8.

Until July, the old guidance will be put back into place.

Analysts from JPMorgan Chase ($44.34 -0.07%) said the rule would affect many first-time homebuyers the most, those most likely to carry such debt. The analysts estimated the rule could cut FHA demand by up to 20%, and the damage would affect home builders differently depending upon how much of their business hinged on these borrowers.

Many questioned the timing and the murkiness of the rule. The FHA previously said it adopted the rule in order to reduce default risk for newer books of business. Mortgages written during the housing bubble continue to haunt the agency. The FHA emergency Mutual mortgage Insurance fund dropped to nearly 0.2% last year was in danger of needing a bailout from the Treasury Department if insurance premiums were not hiked and some lucrative settlements were not struck.

"There are two positives to this latest decision: HUD is willing to analyze the real implications of the housing market before they put a new measure in place, plus they are engaging feedback on the issue," Jackson said.

By Jon Prior - Housing Wire

A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues:

Short sale volumes may not have experienced the boom many predicted, but they're certainly moving up.

Late last week, the Office of the Comptroller of the Currency issued a report on year-end loss mitigation activity for most of the mortgages serviced by the nation's largest banks.

The 227,570 new short sales completed in 2011 was a 12% increase from one year ago and more than double the 112,000 measured in 2009, according to the report.

As the robo-signing freeze thaws, and new requirements under the attorneys general settlement are enforced, short sales may continue upward in 2012.

The single-family delinquency rate on the Fannie Mae portfolio dropped to its lowest level in nearly three years, according to its February book of business report released late Friday.

The rate declined to 3.82% from 3.9% the month before. The delinquency rate is also down from 4.44% one year prior.

The GSE continues to lose billions every quarter from the mortgages guaranteed between 2005 and 2007, but it is working steadily through modifications, short sales and in some cases even foreclosures to clear out the backlog.

Meanwhile, it continues to be one the largest home loan financiers in the U.S. Fannie issued $56.7 billion in mortgage-backed securities in Feburary, up nearly 5% from the same month last year.

Analysts at JPMorgan Chase ($45.98 0%) found in an investor survey that major purchases of mortgage-backed securities from the private market are unlikely and the possibility of the government doing so through QE3 is even dimmer.

Therefore, the biggest buyers of MBS in 2012 could be real estate investment trusts.

"Typically REIT purchases have coincided with equity raises, which have generally occurred when price/book ratios are over par," the analysts said. "Based on changes in REIT equity prices and mortgage performance we estimate that REIT equity issuance could reach $5 billion in the second quarter, possibly resulting in $20 billion to $30 billion of MBS purchases."

The Federal Deposit Insurance Corp. reported the 16th bank failure Friday.

The Michigan Office of Financial and Insurance Regulation closed Fidelity Bank of Dearborn, Mich. The Huntington National Bank, based in Ohio, will assume all $747.6 billion in deposits and agreed to purchase essentially all $818.2 million in assets.

The closing is expected to cost the FDIC fund $92.8 million.

By Jon Prior - Housing Wire jprior@housingwire.com

Housing starts will nearly double and home prices will begin to rise in 2013, with prices increasing significantly in 2014.

Those rosy predictions come from a new semi-annual survey of 38 of the nation’s leading real estate economists and analysts by the Urban Land Institute’s Center for Capital Markets and Real Estate. The economists foresee broad improvements for the nation’s economy, real estate capital markets, real estate fundamentals and the housing industry through 2014, including:

• The national average home price is expected to stop declining this year, and then rise by 2 percent in 2013 and by 3.5 percent in 2014.;
• Vacancy rates are expected to drop in a range of between 1.2 and 3.7 percentage points for office, retail, and industrial properties and remain stable at low levels for apartments; while hotel occupancy rates will likely rise;
• Rents are expected to increase for all property types, with 2012 increases ranging from 0.8 percent for retail up to 5.0 percent for apartments.

These strong projections are based on a promising outlook for the overall economy. The survey results show the real gross domestic product (GDP) is expected to rise steadily from 2.5 percent this year to 3 percent in 2013 to 3.2 percent by 2014; the nation’s unemployment rate is expected to fall to 8.0 percent in 2012, 7.5 percent in 2013, and 6.9 percent by 2014; and the number of jobs created is expected to rise from an expected 2 million in 2012 to 2.5 million in 2013 to 2.75 million in 2014.

The improving economy, however, will likely lead to higher inflation and interest rates, which will raise the cost of borrowing for consumers and investors. For 2012, 2013 and 2014, inflation as measured by the Consumer Price Index (CPI) is expected to be 2.4 percent, 2.8 percent and 3.0 percent, respectively; and ten-year treasury rates will rise along with inflation, with a rate of 2.4 percent projected for 2012, 3.1 percent for 2013, and 3.8 percent for 2014.

The survey, conducted during late February and early March, is a consensus view and reflects the median forecast for 26 economic indicators, including property transaction volumes and issuance of commercial mortgage-backed securities; property investment returns, vacancy rates and rents for several property sectors; and housing starts and home prices. Comparisons are made on a year-by-year basis from 2009, when the nation was in the throes of recession, through 2014.

While the ULI Real Estate Consensus Forecast suggests that economic growth will be steady rather than sporadic, it must be viewed within the context of numerous risk factors such as the continuing impact of Europe’s debt crisis; the impact of the upcoming presidential election in the U.S. and major elections overseas; and the complexities of tighter financial regulations in the U.S. and abroad, says ULI Chief Executive Officer Patrick L. Phillips. “While geopolitical and global economic events could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvement over the next three years. These results hold much promise for the real estate industry.”

A slight cooling trend in the apartment sector—the investors’ darling for the past two years—is seen in the survey results, with other property types projected to gain momentum over the next two years. By property type, total returns for institutional quality assets in 2012 are expected to be strongest for apartments, at 12.1 percent; followed by industrial, at 11.5 percent; office, at 10.8 percent; and retail, at 10 percent. By 2014, however, returns are expected to be strongest for office, at 10 percent, and industrial, at 10 percent; followed by apartments at 8.8 percent and retail at 8.5 percent.

The forecast predicts a modest increase in vacancy rates, from 5 percent this year to 5.1 percent in 2013 to 5.3 percent in 2014; and a decrease in rental growth rates, with rents expected to grow by 5 percent this year, and then moderate to a growth rate of 4.0 percent for 2013 and 3.8 percent by 2014. This may be indicative of supply catching up with demand.

For the housing industry, the survey results suggest that 2012 could mark the beginning of a turnaround—albeit a slow one. Single-family housing starts, which have been near record lows over the past three years, are projected to reach 500,000 in 2012, 660,000 in 2013, and 800,000 in 2014. The overhang of foreclosed properties in markets hit hardest by the housing collapse will continue to affect the housing recovery in those markets. However, in general, improved job prospects and strengthening consumer confidence will likely bring buyers back to the housing market.

Posted By susanne On March 31, 2012 @ 12:03 am In Business Outlook,Consumer News and Advice,finance and Economy,Home Owner News,Real Estate Information,Real Estate News,Real Estate Trends,Today's Top Story,Today's Top Story - Consumer

It's going to be tougher to get a government-backed mortgage on Monday.

Next week, home buyers with ongoing credit disputes over $1,000 will no longer be approved for a mortgage backed by the Federal Housing Administration. Buyers with collection accounts will either have to pay the debt off or enter into a documented payment plan.

buyers will also have to show that three payments have been made toward the debt. The payment will be factored into the buyer's debt-to-income ratio, which could lower the amount that can be borrowed.

Andy Wood of American mortgage Services in Tampa doesn't expect a drop in mortgage applications because of the new rule. He expects that buyers with disputed accounts will rectify them before applying for a loan.

"It will make people wait longer to apply," Wood said. "It will also create more paperwork."

Before the new rule, an underwriter could determine whether the collection accounts would impact the approval of a mortgage. The new rule comes as belt-tightening for the federal agency, since it had no earlier requirement that disputed credit accounts be paid off.

Since the housing market tanked and banks tightened lending standards, more buyers have sought government-backed loans because they only require a down payment of 3.5 percent. Conventional loans generally require higher down payments.

Credit accounts more than 2 years old or those related to identity theft will not be factored into the new rule. The lender, however, must document the fraudulent charge with a police report. If the outstanding balance of all collection accounts is less than $1,000, borrowers are not required to pay off the debts to get mortgage approval, the FHA says.

Mark Puente can be reached at mpuente@tampabay.com or (727) 893-8459. Follow him at Twitter at twitter.com/markpuente. By Mark Puente, Times Staff

Writer

Mark PuenteTampa Bay Times In Print: Tuesday, March 27, 2012

If you or someone you know needs Short Sale Assistance please go to our Short Sale Toolbox.  We can help you as we have helped many others with their short sales and distressed properties.  

As part of a settlement with state attorneys general, the five largest mortgage servicers are adopting new requirements for short sales, which is expected to speed-up what has been known as a lengthy process.

Here are some of the new requirements for servicers under the settlement:

• Servicers must provide borrowers with a decision within 30 days after receiving a short sale package request.
• Servicers will be required to notify a borrower, also within 30 days, if any necessary documents are missing to process the short sale request.
• Servicers must notify a borrower immediately if a deficiency payment is needed to approve the short sale. They also must provide an estimated amount for the deficiency payment needed for the short sale.
• Servicers are also required to form an internal group to review all short sale requests.
• Banks will be considered in violation of the settlement requirements if they take longer than 30 days on more than 10 percent of the short sale requests. Violations can carry fines of up to $1 million and $5 million for repeat offenses.

"If a real estate broker can get a checklist from the bank detailing what documentation is needed, everything can be provided up front, and the bank will be required to give a thumbs-up or a thumbs-down within 30 days,” short sale specialist Chris Hanson with the Hanson Law Firm told HousingWire. “That's not a bad deal.”

Source: "AG Settlement Starts the Clock on short sales” HousingWire (March 14, 2012)

For more information about short sales and how we can help you with yours Visit Us on line:

The Short Sale Toolbox  

It might be as easy as opening your mail to find out if you qualify for Cash Incentives to Short Sale your home.  I often visit homeowners who have stacks of mail sitting on their desk or countertop that they have not opened only to find out that they are being offered incentives from their lender.  

Government incentives are available to distressed homeowners who opt to do short sales. Such programs include the Home Affordable Foreclosure Alternatives (Certified HAFA Specialist) program, which provides up to $3,000 to assist the borrower with relocation fees.

In recent news, major publications including USA TODAY and CNNMoney have spotlighted the incentives provided by banks. These incentive programs, which offer anywhere from around $2,000 to upwards of $35,000, are intended to provide homeowners with the resources and motivation to pursue a short sale.

As banks look to ramp up short sales, such incentives are becoming more frequent. JPMorgan Chase began their incentive program last year, for example, and Bank of America (which plans a 60-70% increase in short sales this year) piloted a program in Florida this past December. Wells Fargo offers incentives as well, though primarily in states where the foreclosure process is particularly lengthy.

For banks, short sales can be a cheaper alternative to foreclosure. The foreclosure process is lengthy and costly, so much so that providing up to a $20,000 alternative for a short sale is still a cheaper option.

In USA TODAY’s article “Lenders paying borrowers to do short sales,” Jim Gillespie, chief executive of Coldwell Banker, is quoted as saying “It’s a lot cheaper to shell out $10,000 or $20,000 to someone than it is to go through a long foreclosure.”

In addition to the cost of the foreclosure process itself, foreclosed properties sell for less than short sales on average. According to the National Association of REALTORS®, foreclosed properties sold for 22% less than conventional sales, while short sales sold for around 14% less.

We’ve said it before, and we’ll say it again: This year looks to be the year of the short sale.

For more information on the distressed property market and how we can help you with your short sale visit us at The Short Sale Toolbox

I have had many homeowners recently receive incentives on their Short Sale.  

Major news in the short sale and housing industry! On Friday, March 9, the Obama Administration announced updates to the Home Affordable Foreclosure Alternative (Certified HAFA Specialist) program. Created in 2009, HAFA is a government-sponsored initiative assisting all Home Affordable Modification Program (HAMP) eligible homeowners in avoiding foreclosure through short sales and died-in-lieus.

The Certified HAFA Specialist updates will allow more distressed homeowners to seek assistance. Most importantly, the deadline for submitting for Certified HAFA Specialist eligibility has been extended a full year, from December 31, 2012, to December 31, 2013.

Other major changes from March’s updates to the Certified HAFA Specialist program include:

• The removal of occupancy requirements. Previously, Certified HAFA Specialist required homeowners to have lived in the property within the last 12 months.

• $3,000 relocation incentives are now limited to properties occupied by an owner or tenant at the time of the short sale.

• mortgage payments may now be allowed to exceed 31% of the homeowner’s gross monthly income. This update will allow a homeowner to stay current on her mortgage and still qualify, minimizing the overall impact to her credit.

• Secondary lienholders may now receive up to a maximum of $8,500, up from $6,000 previously.

• And one of the most dramatic changes: The Credit Bureau Reporting will now be Account Status Code 13 (paid or closed account/zero balance) or 65 (account paid in full/a foreclosure was started), as applicable.

So now a homeowner can be current on their mortgage, qualify for Certified HAFA Specialist, continue to make their payments, and execute a short sale with minimum impact on their credit!

For More Information About short sales and How We Help Homeowners -   

Visit Us At  The Short Sale Toolbox