BluefoxToday blog

NAR – the National Association of Realtors – recently put together a report that should spread some cheer on faces of everyone who is planning on purchasing a home. Actually, it also should quicken the heartbeat in the mortgage loan industry and among real estate agents. And the home building sector, too. And, for that matter, help stabilize the entire economy.

According to NAR, the national median income in the first quarter stood at $61,000, fair enough. So, if a mortgage applicant wanted to buy a property mirroring the national median price, the income to get the home loan approved would be $32,900 with a 10% down payment. Or $29,300 with a 20% down payment. All this is based on a solid credit rating, a 4% interest rate apparently on a 30-year mortgage, 25% front end ratio of principal and interest and it is a single-family home in a metropolitan area.

The above scenario certainly looks very encouraging for the housing market. Scores of mortgage applicants would qualify at least on income. The actual Freddie Mac’s weekly PMMS – primary mortgage market survey – produced last week a rate of 3.83% fixed for a 30-year deal. That simply is attractive, even better than in NAR’s sample.  

Yet, home buyers are hardly overrunning mortgage loan shops dotting the landscape to fill applications and ask relevant questions. True, some regions in the country are doing better than others but overall the real estate market remains in a state of not knowing exactly where to go.

Home buying prospects know that. They like to see some more stability across the board, where prices settle down to form a foundation that holds. Again, values are cautiously rising in some areas where business is picking up and mortgage applications show promising upward trend. In other regions the situation is still in a flux. The famous shadow inventory continues to draw headlines especially in states like Nevada and Florida that raise a red flag about real estate prices.

Then there is the economy. It is slowly improving, but consumers are still wary about making major commitments like purchasing a home with a mortgage loan that could possibly sink them should there be further disruptions. They of course were badly spooked by the near financial market meltdown of a few years ago and are still recovering from that bizarre event. They are looking for more stability.

And then comes JP Morgan Chase galloping onto the scene, quickly reviving worries about the supposedly improving health of the banking sector. It – a major mortgage player - announced last week the loss of over $2 billion on fancy trades hedging the bank’s financial risks. The damage is likely much higher than that in dollar terms. Even its CEO couldn’t explain how it happened, and that’s what really is scary. It’ll take weeks, if not months, to figure out what went wrong. Frankly, they may never find out because this side of the business is rather complex. Setbacks like this gnaw away consumer confidence in the economy.

Regardless, for the brave, 3.83% mortgage money right now might be worth going for it.

Renee's metrics are easy to read, showing what kind of unusual real estate marketplace Vegas still is. It happens rarely that 70% of home sales in any major housing market are REOs and short sales for months, like it has been in Southern Nevada.

It’s hardly a surprise that the homeownership number continues to backpedal in today’s wobbly real estate market and tight mortgage milieu.

Foreclosures mercilessly push borrowers from their homes and this trend seemingly will continue for several more years as another 5-6 million homeowners could face the same fate. The recent $25 billion controversial settlement with mortgage loan servicers over alleged shady practices will predictably lead to home loan lenders accelerating court filings on delinquent borrowers. Mortgage money is very affordable but helps little when strict underwriting standards erode borrower approval chances. Inventory levels in many housing markets – like Las Vegas - are low keeping home buyers on the fence.

The Census Bureau reported that U.S. homeownership rate declined to 65.4% in the first quarter, tumbling a full point from the same time period a year ago. In comparison, it clocked in at 69.2% in the second quarter of 2004, an all-time record. In fact, it hasn’t been this far down since quarter one in 1997. Looking at historical metrics and present economic and housing trends it appears the number will settle somewhere between 60 – 64% when this turmoil comes to an end. Some real estate industry authorities claim it’ll stay there for a long time, too.

The apartment industry is one housing sector that is taking all this in with open arms. People rent because they have to save longer for the required down payment. They have to get their credit score to where it qualifies them for a mortgage loan, so they rent. Foreclosed borrowers need a roof over their heads. Many just want to see the residential market to improve from where it is now before jumping in.

According to Reis, Inc. – a New York commercial real estate information boutique – apartment vacancy rate in U.S. slipped to 4.9% in the first quarter which is the lowest since 2001. With supply slow to catch up to the increased demand a steady upward pressure on rents will undoubtedly make apartment management firms tally up nice profits. Soon, though, more apartments and other rental units will be introduced to the housing marketplace to balance things out.

Obviously a fundamental shift is underway in the housing and mortgage industries that will keep policy makers in Washington on their toes for the foreseeable future.

John,

Washington obviously is determined now to unload as many foreclosures as possible in Fannie Mae's, Freddie Mac's and FHA's books to reduce taxpayer risk. That is understandable. Yet, the consequences could be serious, as you mention. The deeply discounted homes investors buy will further lower property values in the neighborhoods and set existing homeowners even further back, making them potential foreclosure candidates. What about the tax base?

Mortgage fraud of course will exist so long as mortgage loans are being issued. It’s just part of the business. Ever since the residential real estate market began nose-diving seven eight years ago specifically the property valuation fraud has steadily increased. The reason is rather clear; housing prices went chaotically over the edge, and still keep sinking in many areas. To get home loan applications approved by underwriters in a depressed market like today’s over-valuing property on appraisals or BPOs - broker price opinion – has become an issue for mortgage lenders. Usually when there is serious trouble with a file a buyback request will soon arrive in the mail and that can really hurt.

Interthinx, a mortgage risk management shop out of California, discovered that valuation fraud had doubled since 2006 and went to work for a suitable solution. It came up with the idea of using satellite images via Google Maps, adding them to its existing FraudGUARD program. Through Google’s image database a 360-degree street view of the property in real time is available for verification against submitted appraisals and BPOs. That’s surprisingly simple but also clever.

With this tool a mortgage lender risk analyst can let his fingers dance across the keyboard to pull up in seconds the incoming satellite data, easily decipher what he sees and then promptly act on it. On the other hand, manual verification of valuation numbers is time-consuming and costly and often simply impossible to do due to physical distances.

Despite Interthinx’ upgrade to its service the inside of the property still remains a mystery, yet the main characteristics on the outside, including the street address, will reveal plenty as to the BPO’s accuracy. It certainly adds a useful tool to the mortgage risk review process. A day will come when full appraisals are done using an advanced satellite hanging in space peering down counting rooms, tallying up their dimensions and whether there is a fireplace. Predictably, it still won’t completely make mortgage fraud go away, but will lessen its impact.

Good information for home buyers getting ready to visit open houses this spring. One of the key aspects is to get pre-qualified beforehand for a mortgage loan since many sellers won't even consider a purchase offer without one.

If there ever was a nightmare for Realtors in the last few years in the housing market it was the short sale. The psychology profession is still compiling data on how many man hours of sleep per night they lose during each short sale adventure but when the official figure comes out sometime soon it must be several. It has been that bad. The current real estate recession made the short sale famous, the talk of the micro brew pub crowd. It can take months for a real estate agent to navigate one of them through all the different-size hoops the nation’s mortgage lenders have created. Because of its long and unpredictable time frame and sheer complexity many Realtors have steered clear of them.

Some real estate agents may now reconsider taking on short sales thanks to an upcoming policy change from Fannie Mae and Freddie Mac.

FHFA – Federal Housing Finance Agency – had a friendly talk with Fannie Mae and Freddie Mac the other day and cajoled them into setting up firm short sale response time guidelines for mortgage servicers managing their home loans. Under the new GSE program the servicers must respond within 30 days either from getting a purchase offer based on their present short sale practice or a signed BRP – Borrower Response Package – seeking a short sale review. If for some out-of-body reason the mortgage servicer cannot come to a decision in 30 days, the deadline can be extended to 60 days, but now updates must be provided the mortgage borrower every week.

Fannie Mae and Freddie Mac understand that at times getting a BPO – Broker Price Opinion – or an okay from a private mortgage insurer to proceed with the short sale can take extra time and that’s why they allow the additional 30 days. However, the backstop is 60 days, firm. Let’s say the home loan servicer makes a counter offer. Now the mortgage borrower has five business days to answer to that, to which the mortgage lender then shall respond in ten business days, according to the Fannie Mae and Freddie Mac plan. Fair enough.

These guidelines go into effect June 15, 2012, giving the mortgage servicers plenty of time to streamline their operations.

The real estate market is as we speak making some progress in climbing out of the abyss in many areas across the land and this development undertaken by the FHFA through Fannie Mae and Freddie Mac should push things further along in the right direction. States like Nevada – Las Vegas especially - California, Florida and Arizona where housing markets really took it to the chin during the downturn ought to feel its positive impact the most. The thing is, a host of real estate agents would’ve liked to see this being done a few years ago. Well, like they say; better late than never.

With property values being as low as they are, many investors are taking advantage of this opportunity.  Investors will usually purchase a distressed property, foreclosure, short sale, or a property that just needs a little TLC.  This is referred to as Flipping properties, and there is nothing wrong with doing this.  It is a way for investors to make a quick profit, however, the profit might not be as quick as they think.

On all loans there is a required amount of time that the Sellers needs to have Title to the property before a Buyer can purchase the property and obtain financing.  This amount of time is based on the program guidelines, and Lender overlays.  I will give two examples that are based on both program guidelines and the overlays that we have a t McCue Mortgage.  Having said that I believe that you will find that we follow what the industry standard is right now.

My first example is of a Buyer trying to purchase a property with FHA Financing.  In the case of FHA Financing, the Seller will need to have Title to the property for a minimum of 91 days before a Buyer can obtain financing.  If the Seller is selling the property between 91 - 180 days of owning the property, FHA & Lenders will require two appraisals on the property, and one of them HAS to be paid for by the Seller.  The Seller will also have to provide receipts for the work done to justify the increase in the selling price.  After the Seller has held Title to the property for more than 181 days, the sale will be treated pretty much like any other sale.

The second example is for a property being purchased with Fannie Mae Financing.  Here you may see more of a variation between Lenders, but most will likely follow what we follow.  Fannie Mae requires the Seller to hold Title to the property for a minimum of 181 days, and like FHA two appraisals will be required, with one of them being paid by the Seller.  Again receipts will have to be produced to justify the increased selling price.  Lenders may require the same documentation on a Fannie Mae Loan for up to one full year.

These guidelines do not apply to Bank Owned Properties, or properties acquired through a divorce, or inherited property that has gone through Probate Court.

If you are representing investors that are Flipping Properties, make sure that you talk to your local Lender to go over both the program guidelines and the Lender guidelines.  Failure to do this may result in some very unpleasant and costly surprises.

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  Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

**The Freefall Inventory Plunge Continues in Las Vegas!!!**

We are still squeezed for inventory.  New REO listings are few and far between thanks to AB 284 with currently no end to that drama in sight.  Multiple offers on well priced homes are widespread. Everyone from first time buyers to investors are taking advantage of "opportunity".

Read more about Las Vegas Real Estate Inventory Analysis here and consumers may comment on this post.

Las Vegas Area Real Estate Market Watch was created for informational purposes only.

This is for all the buyers wondering "where is the inventory"? The inventory is here, this graph shows that buyer interest is extremely high and gobbling up all that new inventory coming online!

This is also for people saying "shadow inventory exists"! Well I believe it exists but it also exists in Las Vegas short sales which has tripled to quadrupled it's formerly stagnant close ratio since late spring.

These are Listing/Under Contract & Pending/Sold Trends from December 2007-March 2012.

Contracted closings are stalled because of the large amount of Las Vegas short sales that are contracted.

copyright 2006-2011 Renee Burrows, REALTOR®, The Force Realty  702-966-2494

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On Tuesday and Wednesday of this week I wrote blogs on the up coming FHA changes "FHA Streamline Refinance Change" and "FHA Streamling Refinance Charts".  I really should have titled the second blog "FHA Streamline & Purchase Charts" because the charts apply to both.

In those two blogs I did not provide an example of what these changes mean in dollars in cents, so I thought it would be a good idea to do so.  By doing so I think it will make the new UpFront Premium and Annual Mortgage Insurance (MI) multipliers more meaningful to most people.  Also by seeing the changes in dollars in sense I believe it will minimize the initial impression that the April 9th change to Purchases, Refinances, and Streamline Refinances might have created.  But heighten the reason for why someone thinking of doing a FHA Streamline Refinance should wait until June 11th to do so.

On April 9th FHA will raise their UpFront Premium from 1.00% to 1.75%, and the MI multiplier from 1.15 to 1.25. on a mortgage that the Borrower is only putting down the minimum downpayment of 3.5%.  While this seems like a big jump at first glance, it is not as much of an increase to the monthly mortgage payment as it might seem.  For example the increase to the monthly payment on a house that sells for $100,000, would be $11.42.  That increase in the monthly payment would proportionally go up or down according to the selling price, so a house selling for $200,000 the increase to the monthly mortgage would be $22,85.  While any increase is not welcomed, once you see what the impact on the monthly mortgage payment will be in dollars and cents, it is not as bad as might seem initially by just looking at the increased multipliers.

However, the UpFront Premium and MI change to the FHA Streamline Refinances for FHA Loans with Case Numbers prior to May 31, 2009, are as dramatic as the initial impression the new multipliers initially give in my opinion.  For example If a Homeowner who has an FHA Mortgage that has an FHA Case Number before May 31, 2009, waits until June 11th to do a Streamline Refinance, in stead of doing it now, the savings will be $64.08 on a $100,000 loan.  Again this savings would be proportional to the loan amount so a $200,000 loan would have a savings of $128.16 by just waiting about 2-3 months.  This saving would be on top of whatever savings that they would also see through the reduction in their interest rate.

I hope that these examples make it a little more clear as to what the impact of these new FHA changes will mean in dollars and cents.

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 Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com