By Gerri Willis, CNN personal finance editor
NEW YORK (CNNMoney.com) -- Question 1.We would really like to get rid of the house, but we don't want to let it go into foreclosure. Someone mentioned a short-sale. If our lender agrees, should we try this? What impact will it have on our credit rating? - Confused in California
Here's the skinny on a short sale: Basically you sell the house for less than what the mortgage is worth and the lender forgives the difference.
The problem is that your FICO score will drop about as much as it would with a foreclosure.
But that doesn't mean you can't ever take out another mortgage. In fact, you may be eligible to buy a home with a loan backed by Fannie Mae or Freddie Mac more quickly with a short sale than you would if your home went into foreclosure. Lenders generally try to encourage short sales instead of foreclosures since they cost less.
Tuesday, March 31, 2009
Monday, March 30, 2009
Mortgage rates at 52-year low
The average 30-year fixed mortgage rate dips to 5.19%, according to a report from Bankrate.com, the lowest rate since 1956.
By Catherine Clifford, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Home mortgage rates dropped to a 52-year low this week, according to a report released Thursday, in the wake of the government's announcement that it will buy more than $1 trillion in debt.
The average 30-year fixed mortgage rate fell to 5.19% this week, down from 5.29% in the week prior, according to Bankrate.com's weekly national survey.
The previous low was 5.28%, hit this January and in June 2003; the last time rates dipped lower than 5.19% was in 1956, according to Bankrate.com.
To put the plunge in mortgage rates into perspective, 30-year fixed home mortgage rates averaged 6.77% in late October. At that time, a $200,000 home loan would have meant a monthly payment of $1,299.86. Now, with the mortgage rates down at 5.19%, the monthly payment for the same loan would be $1,096.99. That works out to a savings of more than $200 per month.
Meanwhile, the average 15-year fixed mortgage rate fell to 4.80% from 4.86% in the the prior week. The 15-year fixed mortgage rate carried an average of 0.49 points.
The government announced last week that it would be buying more than $1 trillion in debt in order to increase liquidity and improve credit conditions. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee - the policymaking committee of the Fed that sets interest rates - turned to less traditional means to encourage lending.
The Federal Reserve said that it would buy an additional $750 billion in mortgage-backed securities and $300 billion of long-term Treasurys. The so called "quantitative easing" policy essentially increases the money supply and is designed to push interest rates down, making borrowing cheaper.
Not much further to drop: Analysts say that while mortgage rates could edge a smidgen lower, they won't make any more dramatic plunges.
"At this point, what we are going to see is mortgage rates fluctuate at these levels," said Brian Bethune, chief financial analyst at IHS Global Insight. "I don't see them dropping significantly from where they are now."
Mortgage rates move in relation to the yield on the 10-year government bond. While there is not a direct correlation, they do move in the same direction. Bethune said that there are two factors that will prevent Treasury yields, and by extension mortgage rates, from dropping much further.
"One is the huge Treasury borrowing requirements," he said. As the government looks to fund its massive stimulus spending programs, it has had to issue a record amount of debt. The increased supply keeps a lid on the price of bonds and stabilizes yields.
"In addition, as we get closer to perceptions of a trough in the economy, the yields will tend to see upward pressure," said Bethune. Uncle Sam's debt is considered one of the safest places for investors to keep their cash. During times of market uncertainty, demand surges, the prices increase, and yields fall. But as market sentiment begins to believe the economy could be headed for recovery, demand for Treasurys will lessen, lifting yields.
Surge in refinance: The dramatic drop in mortgage rates has motivated home owners to refinance in great numbers, but the drop in mortgage rates has not spurred as large an increase in new home purchases, said Mike Larson, real estate analyst at Weiss Research.
"We are still not seeing a huge impact on home buying," he said. "All else being equal, it will help the market," said Larson. "But it is not the huge impact you are seeing on the refinance side."
Bankrate.com compiles national averages every Wednesday by surveying the top 10 banks and thrifts in the top 10 housing markets. For historical data, Bankrate.com cites the National Bureau of Economic Research
By Catherine Clifford, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Home mortgage rates dropped to a 52-year low this week, according to a report released Thursday, in the wake of the government's announcement that it will buy more than $1 trillion in debt.
The average 30-year fixed mortgage rate fell to 5.19% this week, down from 5.29% in the week prior, according to Bankrate.com's weekly national survey.
The previous low was 5.28%, hit this January and in June 2003; the last time rates dipped lower than 5.19% was in 1956, according to Bankrate.com.
To put the plunge in mortgage rates into perspective, 30-year fixed home mortgage rates averaged 6.77% in late October. At that time, a $200,000 home loan would have meant a monthly payment of $1,299.86. Now, with the mortgage rates down at 5.19%, the monthly payment for the same loan would be $1,096.99. That works out to a savings of more than $200 per month.
Meanwhile, the average 15-year fixed mortgage rate fell to 4.80% from 4.86% in the the prior week. The 15-year fixed mortgage rate carried an average of 0.49 points.
The government announced last week that it would be buying more than $1 trillion in debt in order to increase liquidity and improve credit conditions. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee - the policymaking committee of the Fed that sets interest rates - turned to less traditional means to encourage lending.
The Federal Reserve said that it would buy an additional $750 billion in mortgage-backed securities and $300 billion of long-term Treasurys. The so called "quantitative easing" policy essentially increases the money supply and is designed to push interest rates down, making borrowing cheaper.
Not much further to drop: Analysts say that while mortgage rates could edge a smidgen lower, they won't make any more dramatic plunges.
"At this point, what we are going to see is mortgage rates fluctuate at these levels," said Brian Bethune, chief financial analyst at IHS Global Insight. "I don't see them dropping significantly from where they are now."
Mortgage rates move in relation to the yield on the 10-year government bond. While there is not a direct correlation, they do move in the same direction. Bethune said that there are two factors that will prevent Treasury yields, and by extension mortgage rates, from dropping much further.
"One is the huge Treasury borrowing requirements," he said. As the government looks to fund its massive stimulus spending programs, it has had to issue a record amount of debt. The increased supply keeps a lid on the price of bonds and stabilizes yields.
"In addition, as we get closer to perceptions of a trough in the economy, the yields will tend to see upward pressure," said Bethune. Uncle Sam's debt is considered one of the safest places for investors to keep their cash. During times of market uncertainty, demand surges, the prices increase, and yields fall. But as market sentiment begins to believe the economy could be headed for recovery, demand for Treasurys will lessen, lifting yields.
Surge in refinance: The dramatic drop in mortgage rates has motivated home owners to refinance in great numbers, but the drop in mortgage rates has not spurred as large an increase in new home purchases, said Mike Larson, real estate analyst at Weiss Research.
"We are still not seeing a huge impact on home buying," he said. "All else being equal, it will help the market," said Larson. "But it is not the huge impact you are seeing on the refinance side."
Bankrate.com compiles national averages every Wednesday by surveying the top 10 banks and thrifts in the top 10 housing markets. For historical data, Bankrate.com cites the National Bureau of Economic Research
Thursday, March 26, 2009
Financial experts say recession ends by year's end
Financial experts predict economic turnaround by year's end
• David Pitt, AP Personal Finance Writer
A group of financial wizards looked into their crystal ball Tuesday and saw some good news.
The recession will ease by the end of this year and companies will begin adding workers, signaling the end of the worst economic downturn since the Great Depression.
It was the 64th day of the Obama administration and Chicago-based Dow Jones Indexes assembled a group of financial experts to assess the impact of government actions, whether they will work to stem the recession and what opportunities that might present investors.
The recession has affected every region of the country and nearly every sector of the economy, said Gus Faucher, director of macroeconomics at Moody's Economy.com, which conducts independent research and provides economic forecasts.
"It's really unprecedented in the U.S. to have nearly the entire country in a recession simultaneously," he said.
The good news is there's an end in sight.
The economy will pull out of the recession at the end of this year, marking a duration of 24 months, about twice as long as the average post-World War II recession, Faucher said.
The unemployment rate is expected to peak at nearly 10 percent in the first half of 2010. Without the $787 billion government stimulus package, he estimated job losses would have continued into the second half of the year and peaked at about 12 percent.
"That would take what is now a severe recession and actually turn it into a deep depression," he said. "We think the fiscal stimulus package is vital in turning around attitudes toward the economy."
He said we are at or near a stock market bottom and stock prices should soon stabilize.
That certainly wasn't the case so far this week. The Dow Jones industrial average gained 498 points on Monday but dropped 115 points, or 1.5 percent, on Tuesday.
Home sales will turn around by midyear and home prices will begin recovering by the end of this year after bottoming out at 35 percent of their value from peak to trough. Home prices won't return to their values of a few years ago during the boom, but will recover from current lows, he said.
Banks will likely begin seeing improvement in capital as the government program to remove bad assets kicks in and the Federal Reserve provides more economic support. Faucher predicted major bank and financial services company failures will abate in the second half of this year and credit will begin to move again.
Those improvements and additional government spending will provide investors some opportunities in companies that own bridges, toll roads and utilities. It also will drive growth in areas of green energy production.
The stimulus package will spend $50 billion on roads, bridges, utilities and other infrastructure, said Craig Noble, portfolio manager, for Brookfield Redding LLC, a Chicago-based investment manager of global real estate and infrastructure securities.
He sees a potential sweet spot for investors in companies that own the assets that will benefit from the needed spending. He said the stimulus package is only a small portion of government spending on transportation and utilities. Congress must reauthorize this year a multiyear transportation bill that provides hundreds of billions of dollars in spending and sets priorities for the next five years or more.
"The infrastructure class currently offers a unique and compelling investment case with trillions needed to be spend across the globe in coming years," he said.
Stimulus packages rolled out in Canada, Europe, Australia, South America and China show the global nature of the infrastructure asset class, he said.
Obama administration polices that emphasize renewable energy such as wind power will also push billions of dollars into building electricity-carrying power lines and the towers to hold them. That construction is needed to carry wind power from expanding wind turbine farms in the Midwest to population centers in the Eastern United States.
Personal Finance Writer David Pitt reported from Des Moines, Iowa
• David Pitt, AP Personal Finance Writer
A group of financial wizards looked into their crystal ball Tuesday and saw some good news.
The recession will ease by the end of this year and companies will begin adding workers, signaling the end of the worst economic downturn since the Great Depression.
It was the 64th day of the Obama administration and Chicago-based Dow Jones Indexes assembled a group of financial experts to assess the impact of government actions, whether they will work to stem the recession and what opportunities that might present investors.
The recession has affected every region of the country and nearly every sector of the economy, said Gus Faucher, director of macroeconomics at Moody's Economy.com, which conducts independent research and provides economic forecasts.
"It's really unprecedented in the U.S. to have nearly the entire country in a recession simultaneously," he said.
The good news is there's an end in sight.
The economy will pull out of the recession at the end of this year, marking a duration of 24 months, about twice as long as the average post-World War II recession, Faucher said.
The unemployment rate is expected to peak at nearly 10 percent in the first half of 2010. Without the $787 billion government stimulus package, he estimated job losses would have continued into the second half of the year and peaked at about 12 percent.
"That would take what is now a severe recession and actually turn it into a deep depression," he said. "We think the fiscal stimulus package is vital in turning around attitudes toward the economy."
He said we are at or near a stock market bottom and stock prices should soon stabilize.
That certainly wasn't the case so far this week. The Dow Jones industrial average gained 498 points on Monday but dropped 115 points, or 1.5 percent, on Tuesday.
Home sales will turn around by midyear and home prices will begin recovering by the end of this year after bottoming out at 35 percent of their value from peak to trough. Home prices won't return to their values of a few years ago during the boom, but will recover from current lows, he said.
Banks will likely begin seeing improvement in capital as the government program to remove bad assets kicks in and the Federal Reserve provides more economic support. Faucher predicted major bank and financial services company failures will abate in the second half of this year and credit will begin to move again.
Those improvements and additional government spending will provide investors some opportunities in companies that own bridges, toll roads and utilities. It also will drive growth in areas of green energy production.
The stimulus package will spend $50 billion on roads, bridges, utilities and other infrastructure, said Craig Noble, portfolio manager, for Brookfield Redding LLC, a Chicago-based investment manager of global real estate and infrastructure securities.
He sees a potential sweet spot for investors in companies that own the assets that will benefit from the needed spending. He said the stimulus package is only a small portion of government spending on transportation and utilities. Congress must reauthorize this year a multiyear transportation bill that provides hundreds of billions of dollars in spending and sets priorities for the next five years or more.
"The infrastructure class currently offers a unique and compelling investment case with trillions needed to be spend across the globe in coming years," he said.
Stimulus packages rolled out in Canada, Europe, Australia, South America and China show the global nature of the infrastructure asset class, he said.
Obama administration polices that emphasize renewable energy such as wind power will also push billions of dollars into building electricity-carrying power lines and the towers to hold them. That construction is needed to carry wind power from expanding wind turbine farms in the Midwest to population centers in the Eastern United States.
Personal Finance Writer David Pitt reported from Des Moines, Iowa
Get the best refinancing deal
Gerri Willis gives tips on how to secure a low rate when renegotiating your existing mortgage.
By Gerri Willis, CNN personal finance editor
March 25, 2009: 12:58 PM ET
NEW YORK (CNNMoney.com) -- Mortgage rates are lower than 5% - but how can you get the best refinancing deal?
Everyone has been asking me about how to secure these low, low mortgage rates. And many people are having a hard time even getting through to their lender on the phone. They're pretty frustrated.
I spoke with the chief economist of Fannie Mae yesterday. He told me it will take as much as three months for the mortgage industry to start working at full capacity. His full year outlook for mortgage rates is 4.8 to 5%. The takeaway here: Be patient - there will be lines.
1. Recognize opportunity
Look - there is opportunity here. 30-year fixed mortgage rates are at 4.6%. Historically, that rate is 8%. And that is significant.
Let's take a look. 30-year fixed mortgage rates are at 4.6%. If you took out a 30-year fixed loan of $170, 300 (the average cost of a home) at 5%, your monthly payments would be around $915. And at 8% you would pay $1,250. The savings? $335 dollars a month or $4,000 dollars a year.
2. Be wary
We've told you it might take longer to get a refinance now. And that's something to be aware of. And according to bankrate.com, Fannie Mae and Freddie Mac have increased their fees.
So you could be paying extra fees of 1% or 2% of the loan amount, and sometimes even higher on top of all other closing costs.
3. Get the best rates
Having enough equity is one of the biggest obstacles. These days you'll need at least 20% equity to get the best rates.
Make sure you keep your credit score as high as possible. Get copies of your credit report to make sure there are no errors at annualcreditreport.com.
Shop around to get the best rate. Get all your paperwork together now.
Here's a list of what you'll need to start collecting: Your refinance application, two years of tax returns, one month of paystubs, three months of asset statements (checking, savings, mutual funds), your most recent mortgage statement and a copy of the deed.
By Gerri Willis, CNN personal finance editor
March 25, 2009: 12:58 PM ET
NEW YORK (CNNMoney.com) -- Mortgage rates are lower than 5% - but how can you get the best refinancing deal?
Everyone has been asking me about how to secure these low, low mortgage rates. And many people are having a hard time even getting through to their lender on the phone. They're pretty frustrated.
I spoke with the chief economist of Fannie Mae yesterday. He told me it will take as much as three months for the mortgage industry to start working at full capacity. His full year outlook for mortgage rates is 4.8 to 5%. The takeaway here: Be patient - there will be lines.
1. Recognize opportunity
Look - there is opportunity here. 30-year fixed mortgage rates are at 4.6%. Historically, that rate is 8%. And that is significant.
Let's take a look. 30-year fixed mortgage rates are at 4.6%. If you took out a 30-year fixed loan of $170, 300 (the average cost of a home) at 5%, your monthly payments would be around $915. And at 8% you would pay $1,250. The savings? $335 dollars a month or $4,000 dollars a year.
2. Be wary
We've told you it might take longer to get a refinance now. And that's something to be aware of. And according to bankrate.com, Fannie Mae and Freddie Mac have increased their fees.
So you could be paying extra fees of 1% or 2% of the loan amount, and sometimes even higher on top of all other closing costs.
3. Get the best rates
Having enough equity is one of the biggest obstacles. These days you'll need at least 20% equity to get the best rates.
Make sure you keep your credit score as high as possible. Get copies of your credit report to make sure there are no errors at annualcreditreport.com.
Shop around to get the best rate. Get all your paperwork together now.
Here's a list of what you'll need to start collecting: Your refinance application, two years of tax returns, one month of paystubs, three months of asset statements (checking, savings, mutual funds), your most recent mortgage statement and a copy of the deed.
Wednesday, March 25, 2009
Mortgage applications surge 30%
Report says refinancing applications made up the bulk of last week's gain. Interest rates fall to historic lows.
March 25, 2009: 7:28 AM ET
NEW YORK (Reuters) -- U.S. mortgage applications jumped last week as record low interest rates spurred a surge in demand for home refinancing loans, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2% to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5% of all applications.
Interest rates on mortgages fell after the Federal Reserve last week said it would buy Treasury securities for the first time in more than four decades as well as more than double its planned purchases of mortgage-related securities, according to Orawin Velz, associate vice president of economic forecasting at the MBA in Washington.
"The drop offered a sizable refinance incentive for most homeowners, sparking a pick-up in refinance activity," she said in a statement.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.63%, down 0.26 percentage point from the previous week, reaching a record low, the MBA said. It has been conducting the weekly survey since 1990.
Interest rates were well below year-ago levels of 5.74%.
Leif Thomsen, chief executive of Mortgage Master in Walpole, Massachusetts, said his company is doing more business now than every before, with just over $1 billion in total mortgage lending since the beginning of the year, 85% of which has been in refinancing.
"The housing market is coming back, but not roaring back," he said. "We have gone from a crawl to a brisk walk and we will still have to navigate some pitfalls before we are able to get running again."
The Fed's purchases are part of its ongoing efforts to reduce mortgage rates to stimulate borrowing and boost the U.S. housing market, currently in the throes of the worst downturn since the Great Depression.
However, so far, the low rates have had only a moderate impact on demand for loans to buy homes.
The MBA's seasonally adjusted purchase index rose 4.2% to 267.8. The index, however, was 33.7% below its year-ago level of 403.7.
Overall mortgage applications last week were 20% above their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 13.9%.
Weekly refinancing activity surges
Mortgage Master, to keep up with sales, has hired over 100 people in the past 90 days alone, Thomsen said.
"There are some fantastic deals out there and as more people begin to realize that, competition will come back and drive a significant amount of activity," he said.
The Mortgage Bankers seasonally adjusted index of refinancing applications surged 41.5% to 6,363.2. The index was up 49.5% from its year-ago level of 4,255.2.
The refinance share of applications increased to 78.5% from 72.9% the previous week. The adjustable-rate mortgage share of activity decreased to 1.4% in the latest week, down from 2% the previous week.
Fixed 15-year mortgage rates averaged 4.48%, down from 4.52% the previous week. Rates on one-year ARMs increased to 6.22%from 6.2%.
March 25, 2009: 7:28 AM ET
NEW YORK (Reuters) -- U.S. mortgage applications jumped last week as record low interest rates spurred a surge in demand for home refinancing loans, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2% to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5% of all applications.
Interest rates on mortgages fell after the Federal Reserve last week said it would buy Treasury securities for the first time in more than four decades as well as more than double its planned purchases of mortgage-related securities, according to Orawin Velz, associate vice president of economic forecasting at the MBA in Washington.
"The drop offered a sizable refinance incentive for most homeowners, sparking a pick-up in refinance activity," she said in a statement.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.63%, down 0.26 percentage point from the previous week, reaching a record low, the MBA said. It has been conducting the weekly survey since 1990.
Interest rates were well below year-ago levels of 5.74%.
Leif Thomsen, chief executive of Mortgage Master in Walpole, Massachusetts, said his company is doing more business now than every before, with just over $1 billion in total mortgage lending since the beginning of the year, 85% of which has been in refinancing.
"The housing market is coming back, but not roaring back," he said. "We have gone from a crawl to a brisk walk and we will still have to navigate some pitfalls before we are able to get running again."
The Fed's purchases are part of its ongoing efforts to reduce mortgage rates to stimulate borrowing and boost the U.S. housing market, currently in the throes of the worst downturn since the Great Depression.
However, so far, the low rates have had only a moderate impact on demand for loans to buy homes.
The MBA's seasonally adjusted purchase index rose 4.2% to 267.8. The index, however, was 33.7% below its year-ago level of 403.7.
Overall mortgage applications last week were 20% above their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 13.9%.
Weekly refinancing activity surges
Mortgage Master, to keep up with sales, has hired over 100 people in the past 90 days alone, Thomsen said.
"There are some fantastic deals out there and as more people begin to realize that, competition will come back and drive a significant amount of activity," he said.
The Mortgage Bankers seasonally adjusted index of refinancing applications surged 41.5% to 6,363.2. The index was up 49.5% from its year-ago level of 4,255.2.
The refinance share of applications increased to 78.5% from 72.9% the previous week. The adjustable-rate mortgage share of activity decreased to 1.4% in the latest week, down from 2% the previous week.
Fixed 15-year mortgage rates averaged 4.48%, down from 4.52% the previous week. Rates on one-year ARMs increased to 6.22%from 6.2%.
Tuesday, March 24, 2009
Existing home sales spike 5%
Realtors group says sales of existing homes rose in February. Prices tumble more than 15%.
By Ben Rooney, CNNMoney.com staff writer
Last Updated: March 23, 2009: 11:14 AM ET
NEW YORK (CNNMoney.com) -- Sales of existing homes unexpectedly rose in February, recovering from a sharp drop in the previous month, according to an industry report released Monday.
The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January. February sales were down nearly 5% from year ago levels.
Economists surveyed by Briefing.com were expecting existing home sales to decline to 4.45 million.
The report said first-time buyers made up half of all purchases in February, and that sales of distressed properties accounted for about 45% of all transactions.
Sales were unexpectedly strong in the West, with activity increasing more than 30% over last year.
"February wasn't too shabby for the existing-home market," said Mike Larson, real estate analyst at Weiss Research. "The catch? The increase in sales activity is coming at the expense of pricing."
The national median existing-home price was $165,400 in February, down 15.5% from last year, when the median price was $195,800.
Prices were depressed by the large number of foreclosed properties on the market, said NAR chief economist Lawrence Yun in a statement.
"Our analysis shows that distressed homes typically are selling for 20% less than the normal market price, and this naturally is drawing down the overall median price."
Meanwhile, the total number of existing homes on the market at the end of February rose 5.2% to 3.80 million units. At the current sales pace, it would take an estimated 9.7 months to sell down that inventory of properties.
The report also said the total number of homes for sale has steadily declined over the past six months from a record level last July.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said there's a "good chance" the collapse in home sales that has been going on since September is "now over." "Though a sustained recovery is still a long way off," he added.
By Ben Rooney, CNNMoney.com staff writer
Last Updated: March 23, 2009: 11:14 AM ET
NEW YORK (CNNMoney.com) -- Sales of existing homes unexpectedly rose in February, recovering from a sharp drop in the previous month, according to an industry report released Monday.
The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January. February sales were down nearly 5% from year ago levels.
Economists surveyed by Briefing.com were expecting existing home sales to decline to 4.45 million.
The report said first-time buyers made up half of all purchases in February, and that sales of distressed properties accounted for about 45% of all transactions.
Sales were unexpectedly strong in the West, with activity increasing more than 30% over last year.
"February wasn't too shabby for the existing-home market," said Mike Larson, real estate analyst at Weiss Research. "The catch? The increase in sales activity is coming at the expense of pricing."
The national median existing-home price was $165,400 in February, down 15.5% from last year, when the median price was $195,800.
Prices were depressed by the large number of foreclosed properties on the market, said NAR chief economist Lawrence Yun in a statement.
"Our analysis shows that distressed homes typically are selling for 20% less than the normal market price, and this naturally is drawing down the overall median price."
Meanwhile, the total number of existing homes on the market at the end of February rose 5.2% to 3.80 million units. At the current sales pace, it would take an estimated 9.7 months to sell down that inventory of properties.
The report also said the total number of homes for sale has steadily declined over the past six months from a record level last July.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said there's a "good chance" the collapse in home sales that has been going on since September is "now over." "Though a sustained recovery is still a long way off," he added.
Monday, March 23, 2009
These Days, First-Time Home Buyers Are Primed to Cash In
By Ilyce R. Glink with Samuel J. Tamkin
Saturday, March 21, 2009; F05
In the nearly 16 years that I've been writing this column, I've never seen a better market in which to be a first-time home buyer.
The rising tide of foreclosures has pushed down home prices significantly over the past 18 months. Homes, relative to income, are about at the historic norm, which means they're more affordable than they've been in at least a decade.
Beyond that, if you buy a foreclosed property, you might wind up spending even less, as lenders struggle to process all of the foreclosures and short sales that are piling up. (If there were no more foreclosures in Florida, it would take the courts nearly two years to process all of the foreclosures on the docket today.)
Not only have homes come down in price significantly, but 30-year fixed-rate loans are at about 5 percent. Some first-time buyers are getting 15-year rates at 4.5 percent or lower. These are historically low interest rates that will seem downright cheap if rates rise above 7 percent, which they will probably do several years from now.
Spending less to finance a property means you can get more for your money or save more for retirement or other purposes. With interest rates so low and home prices falling, homeownership becomes affordable to many first-time home buyers.
Also, first-time home buyers (defined as those who have never owned a home or have not owned a home in the past three years) who close on a home purchase by Dec. 1 can get up to an $8,000 tax credit on their 2009 income tax return. If you bought a house after Jan. 1, you can file for the credit on your 2008 tax return.
This year, about 4 million people will buy a new or existing home. If you want to make sure the house you buy this year is a smart financial move, follow these quick tips:
-- Get preapproved for your loan before looking for a house. That means the lender has to pull a copy of your credit history and score, you have to apply for the loan, and the lender has to approve your application. Make sure you shop around for the best lender and loan before putting in an application.
-- Once you know what you can spend, find the right neighborhood for the next seven to 10 years. Over that time, you've got a good chance of at least breaking even on the sale, plus you'll have built up a decent amount of equity by paying down your mortgage each month. Remember, it'll cost you about 10 percent of the sales price to sell that home.
-- Don't go for flash -- buy what you need. You can always add granite countertops to a kitchen. It's a lot harder to buy the size house you need in your school district of choice. So, buy something a little faded and dated and upgrade over time as your budget allows.
-- Make sure you have cash in reserve. Houses always need something, so when you're calculating your budget, make sure you allow some extra cash for upkeep and maintenance.
-- Buy a home that you can afford and suits your needs now and for the long term. In the past I have written about overbuying -- that is, buying a bigger and better house than you need. Good planning in the purchase of your home should go hand in hand with good financial planning for your future.
Saturday, March 21, 2009; F05
In the nearly 16 years that I've been writing this column, I've never seen a better market in which to be a first-time home buyer.
The rising tide of foreclosures has pushed down home prices significantly over the past 18 months. Homes, relative to income, are about at the historic norm, which means they're more affordable than they've been in at least a decade.
Beyond that, if you buy a foreclosed property, you might wind up spending even less, as lenders struggle to process all of the foreclosures and short sales that are piling up. (If there were no more foreclosures in Florida, it would take the courts nearly two years to process all of the foreclosures on the docket today.)
Not only have homes come down in price significantly, but 30-year fixed-rate loans are at about 5 percent. Some first-time buyers are getting 15-year rates at 4.5 percent or lower. These are historically low interest rates that will seem downright cheap if rates rise above 7 percent, which they will probably do several years from now.
Spending less to finance a property means you can get more for your money or save more for retirement or other purposes. With interest rates so low and home prices falling, homeownership becomes affordable to many first-time home buyers.
Also, first-time home buyers (defined as those who have never owned a home or have not owned a home in the past three years) who close on a home purchase by Dec. 1 can get up to an $8,000 tax credit on their 2009 income tax return. If you bought a house after Jan. 1, you can file for the credit on your 2008 tax return.
This year, about 4 million people will buy a new or existing home. If you want to make sure the house you buy this year is a smart financial move, follow these quick tips:
-- Get preapproved for your loan before looking for a house. That means the lender has to pull a copy of your credit history and score, you have to apply for the loan, and the lender has to approve your application. Make sure you shop around for the best lender and loan before putting in an application.
-- Once you know what you can spend, find the right neighborhood for the next seven to 10 years. Over that time, you've got a good chance of at least breaking even on the sale, plus you'll have built up a decent amount of equity by paying down your mortgage each month. Remember, it'll cost you about 10 percent of the sales price to sell that home.
-- Don't go for flash -- buy what you need. You can always add granite countertops to a kitchen. It's a lot harder to buy the size house you need in your school district of choice. So, buy something a little faded and dated and upgrade over time as your budget allows.
-- Make sure you have cash in reserve. Houses always need something, so when you're calculating your budget, make sure you allow some extra cash for upkeep and maintenance.
-- Buy a home that you can afford and suits your needs now and for the long term. In the past I have written about overbuying -- that is, buying a bigger and better house than you need. Good planning in the purchase of your home should go hand in hand with good financial planning for your future.
Friday, March 20, 2009
Realtors® Say Fed Move to Buy More Securities Will Boost Housing Markets
The following is a statement by National Association of Realtors® President Charles McMillan:
“The National Association of Realtors® applauds the Federal Reserve announcement today that it would purchase an additional $750 billion in Fannie Mae and Freddie Mac mortgage-backed securities and up to $300 billion in longer term Treasury securities. This is great news for American home buyers and homeowners because mortgage interest rates will continue to remain at historic lows.
“NAR has been advocating since last fall that the Fed be more active in buying mortgage-backed securities. We are excited that the Fed acted on this provision of the stimulus plan that we offered to the government in November.
“Greater numbers of home buyers will be able to purchase a home, and homeowners facing challenges will be able to refinance into better terms. We already are experiencing a great improvement in housing affordability due to historically low interest rates, and the Fed’s move will push affordability conditions to the best levels in 40 years. In addition, continued low rates will lessen foreclosure pressure and help stabilize home prices sooner, as more American buy homes and draw down inventory.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
“The National Association of Realtors® applauds the Federal Reserve announcement today that it would purchase an additional $750 billion in Fannie Mae and Freddie Mac mortgage-backed securities and up to $300 billion in longer term Treasury securities. This is great news for American home buyers and homeowners because mortgage interest rates will continue to remain at historic lows.
“NAR has been advocating since last fall that the Fed be more active in buying mortgage-backed securities. We are excited that the Fed acted on this provision of the stimulus plan that we offered to the government in November.
“Greater numbers of home buyers will be able to purchase a home, and homeowners facing challenges will be able to refinance into better terms. We already are experiencing a great improvement in housing affordability due to historically low interest rates, and the Fed’s move will push affordability conditions to the best levels in 40 years. In addition, continued low rates will lessen foreclosure pressure and help stabilize home prices sooner, as more American buy homes and draw down inventory.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
Thursday, March 19, 2009
Fed buying $300B in Treasurys
Central bank also announces it will buy another $750B in mortgage bonds as it tries to get credit flowing again.
By Chris Isidore, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- The Federal Reserve announced Wednesday it would buy $300 billion of long-term Treasurys over the next six months in order to try and get credit flowing more freely again.
The Fed also announced plans to buy an additional $750 billion in mortgage-backed securities, a move designed to lower mortgage rates.
The Fed suggested it was planning to buy Treasurys in statements issued after the two previous meetings of the Federal Open Market Committee, the policymaking committee of the Fed that sets interest rates. So Wednesday's announcement, which came at the conclusion of the FOMC's latest meeting, was not a major surprise.
Still, stocks turned higher on the news. Bond prices also surged, causing yields on longer-term Treasurys to fall sharply. The rate on the 10-year note fell about 0.3 percentage points immediately after the news to about 2.6%, while the yield on the 30-year note also fell 0.3 percentage points to around 3.6%.(Bond prices and rates move in opposite directions.)
The Fed also left interest rates unchanged at a range of 0% to 0.25%. Interest rates have been near zero since December.
"The message to the financial market is that the central bank is willing to do whatever it takes to stabilize the market," said Sung Won Sohn, economics professor at Cal State Channel Islands.
Sohn said the programs announced Wednesday show that the Fed "has plenty of ammunition even though interest rates are near zero."
The rally in stocks came even as the Fed warned in its statement that the U.S. economy has gotten worse since its last meeting in January. The central bank pointed to further job losses, declines in the value of stocks and homes, tight credit conditions and weak consumer sentiment and spending.
While the government reported the biggest jump in its key inflation reading earlier in the day Wednesday, the Fed said in its statement it believes that inflation would remain "subdued."
Instead, the Fed expressed more concern about deflation, in which falling prices lead businesses to further cut their output and employment. In its statement, the Fed said it "sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."
The Fed's decision to buy Treasurys and more mortgages has the potential of leading to inflation down the road by significantly increasing the money supply. The Fed is essentially printing money to buy these bonds and securities, rather than drawing on tax dollars.
Some Fed watchers expressed concern about the Fed taking this step.
"Maybe this is the only way out. Maybe it is just that bad. But there is a real chance that the patient could die from the medicine, not the disease," said Kevin Giddis, managing director of fixed income at Morgan Keegan.
Giddis called the Fed's decision to spell out in specific terms the dollar amount and timing of the purchases as the "the ultimate gift card" for Treasury speculators.
The U.S. dollar was one immediate victim of the Fed's decision. The greenback hit a two-month low versus the euro and lost ground against other currencies as well. A weaker dollar could lead to Americans paying higher prices for imported goods, including oil.
Foreign exchange expert Ashraf Laidi, chief market strategist at CMC Markets in London, said the flood of new dollars into the system is a concern to currency traders, and will likely lead to further declines in the coming days.
"Dollar selling is going to be quite aggressive at times," he predicted
By Chris Isidore, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- The Federal Reserve announced Wednesday it would buy $300 billion of long-term Treasurys over the next six months in order to try and get credit flowing more freely again.
The Fed also announced plans to buy an additional $750 billion in mortgage-backed securities, a move designed to lower mortgage rates.
The Fed suggested it was planning to buy Treasurys in statements issued after the two previous meetings of the Federal Open Market Committee, the policymaking committee of the Fed that sets interest rates. So Wednesday's announcement, which came at the conclusion of the FOMC's latest meeting, was not a major surprise.
Still, stocks turned higher on the news. Bond prices also surged, causing yields on longer-term Treasurys to fall sharply. The rate on the 10-year note fell about 0.3 percentage points immediately after the news to about 2.6%, while the yield on the 30-year note also fell 0.3 percentage points to around 3.6%.(Bond prices and rates move in opposite directions.)
The Fed also left interest rates unchanged at a range of 0% to 0.25%. Interest rates have been near zero since December.
"The message to the financial market is that the central bank is willing to do whatever it takes to stabilize the market," said Sung Won Sohn, economics professor at Cal State Channel Islands.
Sohn said the programs announced Wednesday show that the Fed "has plenty of ammunition even though interest rates are near zero."
The rally in stocks came even as the Fed warned in its statement that the U.S. economy has gotten worse since its last meeting in January. The central bank pointed to further job losses, declines in the value of stocks and homes, tight credit conditions and weak consumer sentiment and spending.
While the government reported the biggest jump in its key inflation reading earlier in the day Wednesday, the Fed said in its statement it believes that inflation would remain "subdued."
Instead, the Fed expressed more concern about deflation, in which falling prices lead businesses to further cut their output and employment. In its statement, the Fed said it "sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."
The Fed's decision to buy Treasurys and more mortgages has the potential of leading to inflation down the road by significantly increasing the money supply. The Fed is essentially printing money to buy these bonds and securities, rather than drawing on tax dollars.
Some Fed watchers expressed concern about the Fed taking this step.
"Maybe this is the only way out. Maybe it is just that bad. But there is a real chance that the patient could die from the medicine, not the disease," said Kevin Giddis, managing director of fixed income at Morgan Keegan.
Giddis called the Fed's decision to spell out in specific terms the dollar amount and timing of the purchases as the "the ultimate gift card" for Treasury speculators.
The U.S. dollar was one immediate victim of the Fed's decision. The greenback hit a two-month low versus the euro and lost ground against other currencies as well. A weaker dollar could lead to Americans paying higher prices for imported goods, including oil.
Foreign exchange expert Ashraf Laidi, chief market strategist at CMC Markets in London, said the flood of new dollars into the system is a concern to currency traders, and will likely lead to further declines in the coming days.
"Dollar selling is going to be quite aggressive at times," he predicted
Wednesday, March 18, 2009
Housing starts unexpectedly surge
Government report shows construction of new homes jumped 22% in February.
By Ben Rooney, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Initial construction of U.S. homes unexpectedly surged in February, after falling for eight months, according to a government report released Tuesday.
Housing starts rose to a seasonally adjusted annual rate of 583,000 last month, up 22% from a revised 477,000 in January, according to the Commerce Department. It was the first time housing starts increased since June, when they rose 11%.
Economists were expecting housing starts to decline to 450,000, according to consensus estimates compiled by Briefing.com. Still, starts are down more than 47% from February 2008, when over 1.1 million new homes broke ground.
New construction of single-family homes, considered the core of the housing market, increased 1.1% to an annual rate of 357,000 versus 353,000 in January.
February's increase was driven by a nearly 80% increase in construction of multi-family homes. New construction of buildings with 5 or more units increased surged 80% to 212,000 from 118,000 in January.
Applications for building permits, considered a reliable sign of future construction activity, rose 3% to a seasonally adjusted annual rate of 547,000 last month. Economists were expecting permits to fall to 500,000.
While the surge in new construction was a welcome sign for the nation's battered housing market, analysts warned that the increase could be short lived.
"With new home sales still falling and the months' supply at a record, there is no reason for homebuilding to rise," wrote Ian Sheperdson, chief U.S. economist at High Frequency Economics in a research note. "This is a temporary rebound, not a recovery."
New home construction surged in the Northeast, jumping nearly 89% last month. Starts also increased in the Midwest and the South.
In the West, where the housing market was overbuilt in the boom years and where there is a glut of foreclosed homes, starts declined nearly 25% versus the previous month
By Ben Rooney, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Initial construction of U.S. homes unexpectedly surged in February, after falling for eight months, according to a government report released Tuesday.
Housing starts rose to a seasonally adjusted annual rate of 583,000 last month, up 22% from a revised 477,000 in January, according to the Commerce Department. It was the first time housing starts increased since June, when they rose 11%.
Economists were expecting housing starts to decline to 450,000, according to consensus estimates compiled by Briefing.com. Still, starts are down more than 47% from February 2008, when over 1.1 million new homes broke ground.
New construction of single-family homes, considered the core of the housing market, increased 1.1% to an annual rate of 357,000 versus 353,000 in January.
February's increase was driven by a nearly 80% increase in construction of multi-family homes. New construction of buildings with 5 or more units increased surged 80% to 212,000 from 118,000 in January.
Applications for building permits, considered a reliable sign of future construction activity, rose 3% to a seasonally adjusted annual rate of 547,000 last month. Economists were expecting permits to fall to 500,000.
While the surge in new construction was a welcome sign for the nation's battered housing market, analysts warned that the increase could be short lived.
"With new home sales still falling and the months' supply at a record, there is no reason for homebuilding to rise," wrote Ian Sheperdson, chief U.S. economist at High Frequency Economics in a research note. "This is a temporary rebound, not a recovery."
New home construction surged in the Northeast, jumping nearly 89% last month. Starts also increased in the Midwest and the South.
In the West, where the housing market was overbuilt in the boom years and where there is a glut of foreclosed homes, starts declined nearly 25% versus the previous month
Monday, March 16, 2009
American Recovery and Reinvestment Act of 2009
H.R. 1, the “American Recovery and Reinvestment Act of 2009,” passed the House on February 13, 2009, by a vote of 246 - 184. Later that day, the Senate also passed the bill by a vote of 60 - 38. The President signed the bill on February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.
View how the U.S. House of Representatives voted>
View how the U.S. Senate voted>
The mix of provisions of interest to REALTORS® changed frequently throughout the legislative process, with changes continuing to be made just hours before the measure was released prior to the vote. In the end, the elements of NAR’s housing agenda were included. Congress and the President have announced that a finance and housing package (including tax provisions) will be the next “big” initiative, so Congress has by no means finished its work as it affects the housing industry and REALTORS®.
The bill includes the following provisions:
Homebuyer Tax Credit
FHA, Fannie Mae and Freddie Mac Loan Limits
Neighborhood Stabilization
Commercial Real Estate
Rural Housing Service
Low Income-Housing Grants
Tax Exempt Housing Bonds
Energy Efficient Housing Tax Credits & Grants
Transportation Investments
Broadband Deployment
View how the U.S. House of Representatives voted>
View how the U.S. Senate voted>
The mix of provisions of interest to REALTORS® changed frequently throughout the legislative process, with changes continuing to be made just hours before the measure was released prior to the vote. In the end, the elements of NAR’s housing agenda were included. Congress and the President have announced that a finance and housing package (including tax provisions) will be the next “big” initiative, so Congress has by no means finished its work as it affects the housing industry and REALTORS®.
The bill includes the following provisions:
Homebuyer Tax Credit
FHA, Fannie Mae and Freddie Mac Loan Limits
Neighborhood Stabilization
Commercial Real Estate
Rural Housing Service
Low Income-Housing Grants
Tax Exempt Housing Bonds
Energy Efficient Housing Tax Credits & Grants
Transportation Investments
Broadband Deployment
Friday, March 13, 2009
Mortgage rates inch downward
The 30-year fixed mortgage rate falls to 5.37% as lack of investment keeps prices low.
By Kenneth Musante, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Mortgage rates slipped last week, according to a weekly survey released Thursday.
The average 30-year fixed mortgage fell to 5.37% for the week ended March 11, according to Bankrate.com. Rates were little changed from four weeks ago, when they averaged 5.34%.
The average jumbo 30-year fixed rate rose to 6.99% from 6.77% in the prior week.
The average 15-year fixed rate mortgage slipped to 4.88% from 4.94% a week earlier.
Adjustable-rate mortgages were also mixed, with the 1-year ARM rising to 5.58% from 5.43%; the 5/1 adjustable-rate mortgage decreasing to 5.34% from 5.39%.
"Downward pressure on rates is certainly welcome news, but there's no clear direction at the moment that we can discern," according to Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information.
A year ago, the average 30-year fixed mortgage rate was 6.39%, meaning a $200,000 loan would have carried a monthly payment of $1,249.70, according to Bankrate.com. With the average rate now at 5.37%, the monthly payment for the same size loan would be $1,119.32, a savings of $130.38 per month.
The lack of private investment in the mortgage market has kept rates from climbing back toward those year-ago rates, Gumbinger said. Most of the mortgage financing is coming from government-backed institutions such as Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Federal Housing Administration.
"There are very few investors interested in investing in mortgage-backed securities," said Gumbinger.
Low mortgage rates spurred an 11.3% growth in applications last week, according to a report from the Mortgage Bankers Association. Most of them were from existing homeowners seeking refinancing.
However, many of the requirements that borrowers need to meet to obtain a home loan - such as a large down payment, good credit or home equity (for refinancing) - are increasingly difficult to meet. "A lot of borrowers find themselves unable to get over the hurdles to get today's lower rates," Gumbinger said.
An increasing number of existing homeowners have found themselves owing more on their homes than what they are worth - a problem that led to an unexpected jump in foreclosures last month, according to a report released Thursday.
Congress is currently debating a bill that would allow bankruptcy judges to reduce mortgage debt for bankrupt homeowners as a last resort for preventing foreclosure.
Supporters say the bill will significantly reduce the foreclosure rate, but opponents say that mortgage modification could further pull investment out of the mortgage market.
Allowing judges to modify loans would add a new layer of risk for mortgage investors, which would drive up costs and thus mortgage rates, according to Gumbinger. "This is not a well-trodden path, nor is it well understood," he said.
Bankrate.com's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
By Kenneth Musante, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Mortgage rates slipped last week, according to a weekly survey released Thursday.
The average 30-year fixed mortgage fell to 5.37% for the week ended March 11, according to Bankrate.com. Rates were little changed from four weeks ago, when they averaged 5.34%.
The average jumbo 30-year fixed rate rose to 6.99% from 6.77% in the prior week.
The average 15-year fixed rate mortgage slipped to 4.88% from 4.94% a week earlier.
Adjustable-rate mortgages were also mixed, with the 1-year ARM rising to 5.58% from 5.43%; the 5/1 adjustable-rate mortgage decreasing to 5.34% from 5.39%.
"Downward pressure on rates is certainly welcome news, but there's no clear direction at the moment that we can discern," according to Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information.
A year ago, the average 30-year fixed mortgage rate was 6.39%, meaning a $200,000 loan would have carried a monthly payment of $1,249.70, according to Bankrate.com. With the average rate now at 5.37%, the monthly payment for the same size loan would be $1,119.32, a savings of $130.38 per month.
The lack of private investment in the mortgage market has kept rates from climbing back toward those year-ago rates, Gumbinger said. Most of the mortgage financing is coming from government-backed institutions such as Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Federal Housing Administration.
"There are very few investors interested in investing in mortgage-backed securities," said Gumbinger.
Low mortgage rates spurred an 11.3% growth in applications last week, according to a report from the Mortgage Bankers Association. Most of them were from existing homeowners seeking refinancing.
However, many of the requirements that borrowers need to meet to obtain a home loan - such as a large down payment, good credit or home equity (for refinancing) - are increasingly difficult to meet. "A lot of borrowers find themselves unable to get over the hurdles to get today's lower rates," Gumbinger said.
An increasing number of existing homeowners have found themselves owing more on their homes than what they are worth - a problem that led to an unexpected jump in foreclosures last month, according to a report released Thursday.
Congress is currently debating a bill that would allow bankruptcy judges to reduce mortgage debt for bankrupt homeowners as a last resort for preventing foreclosure.
Supporters say the bill will significantly reduce the foreclosure rate, but opponents say that mortgage modification could further pull investment out of the mortgage market.
Allowing judges to modify loans would add a new layer of risk for mortgage investors, which would drive up costs and thus mortgage rates, according to Gumbinger. "This is not a well-trodden path, nor is it well understood," he said.
Bankrate.com's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
Thursday, March 12, 2009
Getting out of a bad real estate deal
By Gerri Willis, CNN personal finance editor
NEW YORK (CNNMoney.com) -- Consumers are finding new tools to fight back against the deteriorating housing market.
The downturn of the real estate market has led a lot of purchasers to re-evaluate their condo purchases. And now there are companies out there that will help those folks get out of their contracts and get their deposit money back.
No-condo.com was started last year -it's a company staffed by lawyers who currently have about 10 cases in litigation.
How do they overturn a signed contract?
They find legal loopholes - they maintain there were certain procedures these firms were supposed to follow through on, but they failed to do so ...rendering the contract null and void.
It's not just condo buyers trying to get out of a deal. People who have seen their monthly mortgage payment balloon in cost often sue their lender, claiming that their mortgage documents are invalid.
Here are some reasons why: the lender may have failed to provide a good faith estimate of the loan cost, there may have been excessive fees or perhaps the lender created a false income for the borrower.
These borrowers threaten a lawsuit and that may encourage the lender to modify the loan instead of foreclosing on it.
It's a fairly new technique that's being used. One expert we talked to said that lenders have been slow to respond to inquiries.
Challenging the legality of your mortgage shouldn't be your first step. It's much more cost effective to try to work out a loan modification with your lender. But if you've been denied any kind of a workout, it may be worthwhile to give your mortgage documents a second look - paying close attention to good faith estimates and any modifications or addendums.
If you decide to pursue this route, you can get a forensic loan audit, but be prepared to pay at least $1,000. And make sure you vet any auditor you use with the better business bureau.
NEW YORK (CNNMoney.com) -- Consumers are finding new tools to fight back against the deteriorating housing market.
The downturn of the real estate market has led a lot of purchasers to re-evaluate their condo purchases. And now there are companies out there that will help those folks get out of their contracts and get their deposit money back.
No-condo.com was started last year -it's a company staffed by lawyers who currently have about 10 cases in litigation.
How do they overturn a signed contract?
They find legal loopholes - they maintain there were certain procedures these firms were supposed to follow through on, but they failed to do so ...rendering the contract null and void.
It's not just condo buyers trying to get out of a deal. People who have seen their monthly mortgage payment balloon in cost often sue their lender, claiming that their mortgage documents are invalid.
Here are some reasons why: the lender may have failed to provide a good faith estimate of the loan cost, there may have been excessive fees or perhaps the lender created a false income for the borrower.
These borrowers threaten a lawsuit and that may encourage the lender to modify the loan instead of foreclosing on it.
It's a fairly new technique that's being used. One expert we talked to said that lenders have been slow to respond to inquiries.
Challenging the legality of your mortgage shouldn't be your first step. It's much more cost effective to try to work out a loan modification with your lender. But if you've been denied any kind of a workout, it may be worthwhile to give your mortgage documents a second look - paying close attention to good faith estimates and any modifications or addendums.
If you decide to pursue this route, you can get a forensic loan audit, but be prepared to pay at least $1,000. And make sure you vet any auditor you use with the better business bureau.
Wednesday, March 11, 2009
House OKs bill to modify mortgages
Senate expected to soon debate its own version of the 'cramdown' bill that will allow bankruptcy judges to reduce mortgage debt.
Last Updated: March 5, 2009: 9:28 PM ET
WASHINGTON (Reuters) -- Bankruptcy judges could cut the mortgage debt of homeowners in bankruptcy court as a last resort to avert foreclosure, under a bill approved by a 234-191 vote Thursday in the U.S. House of Representatives.
Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments to limit its scope, including one restricting it to existing mortgages.
The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain.
The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.
Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.
But Democrats backing the bill discount such fears and say it could sharply cut the high U.S. home foreclosure rate.
About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported Thursday.
President Obama launched a $75 billion foreclosure relief plan Wednesday, part of a $275 billion housing stimulus program announced last month.
Meant to dovetail with that program, the House bill also contains a provision that would give mortgage service firms legal protection if they try to revise distressed loans.
Mortgage servicers collect the monthly payments made by homeowners. Servicers are now often hamstrung by legal agreements with mortgage-backed securities investors that can force servicers to foreclose on delinquent borrowers.
The "safe harbor" provision in the bill would shield servicers from legal action by mortgage-backed securities investors whose returns could be crimped by eased loan terms.
House minority leader John Boehner, R-Ohio, criticized the bill.
"When it comes to housing, today is another example of why taxpayers are fed up with the way Washington works," he said. "The American people are sick and tired of Washington forcing taxpayers to pay for those who have been irresponsible."
But Michael Calhoun, president of the Center for Responsible Lending, a homeowner advocacy group, praised the House's passage of the bill.
"Hundreds of thousands of families have lost their homes unnecessarily and tens of millions of neighboring families have watched the value of their homes plummet. We urge the Senate to act quickly to approve this bill and put it on President Obama's desk for his signature," Calhoun said.
The bill would also overhaul the under-performing Hope for Homeowners program, an effort to help struggling mortgage borrowers drawn up last year by Congress that attracted little interest due to its high cost and complexity.
In addition, federal deposit insurance coverage would rise permanently to $250,000 from $100,000 and the Federal Deposit Insurance Corp's credit line with the Treasury Department would rise to $100 billion from $30 billion, under the bill. To top of page
Last Updated: March 5, 2009: 9:28 PM ET
WASHINGTON (Reuters) -- Bankruptcy judges could cut the mortgage debt of homeowners in bankruptcy court as a last resort to avert foreclosure, under a bill approved by a 234-191 vote Thursday in the U.S. House of Representatives.
Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments to limit its scope, including one restricting it to existing mortgages.
The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain.
The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.
Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.
But Democrats backing the bill discount such fears and say it could sharply cut the high U.S. home foreclosure rate.
About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported Thursday.
President Obama launched a $75 billion foreclosure relief plan Wednesday, part of a $275 billion housing stimulus program announced last month.
Meant to dovetail with that program, the House bill also contains a provision that would give mortgage service firms legal protection if they try to revise distressed loans.
Mortgage servicers collect the monthly payments made by homeowners. Servicers are now often hamstrung by legal agreements with mortgage-backed securities investors that can force servicers to foreclose on delinquent borrowers.
The "safe harbor" provision in the bill would shield servicers from legal action by mortgage-backed securities investors whose returns could be crimped by eased loan terms.
House minority leader John Boehner, R-Ohio, criticized the bill.
"When it comes to housing, today is another example of why taxpayers are fed up with the way Washington works," he said. "The American people are sick and tired of Washington forcing taxpayers to pay for those who have been irresponsible."
But Michael Calhoun, president of the Center for Responsible Lending, a homeowner advocacy group, praised the House's passage of the bill.
"Hundreds of thousands of families have lost their homes unnecessarily and tens of millions of neighboring families have watched the value of their homes plummet. We urge the Senate to act quickly to approve this bill and put it on President Obama's desk for his signature," Calhoun said.
The bill would also overhaul the under-performing Hope for Homeowners program, an effort to help struggling mortgage borrowers drawn up last year by Congress that attracted little interest due to its high cost and complexity.
In addition, federal deposit insurance coverage would rise permanently to $250,000 from $100,000 and the Federal Deposit Insurance Corp's credit line with the Treasury Department would rise to $100 billion from $30 billion, under the bill. To top of page
Tuesday, March 10, 2009
Homeowner Affordability and Stability Plan
Here is a concise and comprehensive review of the Obama Administration’s Homeowner Affordability and Stability Plan. Literally, hundreds of pages long, this (below) is a snapshot of the plans parameters and intent. Keeping it rather short is difficult; however, there are hyper-links to assist you with possible requirements for more information. As always, if my team and I can be of assistance, please do not hesitate to contact me directly; my contact info is at the bottom of this email.
The Homeowner Affordability and Stability Plan
On March 4th 2009, the Department of Treasury released new details of the Homeowner Affordability and Stability Plan, announced by President Obama on February 18th.
Designed to help between 7 to 9 million families avoid foreclosure, the plan has three main components, two of which directly address struggling homeowners.
The Home Affordable Refinance Program is aimed at homeowners who have less than 20% equity in their home or owe more than their home is worth. The Home Affordable Modification Program addresses borrowers at risk of losing their home because their payments are too high.
It's important to note that only loans insured or owned by Fannie Mae and Freddie Mac with unpaid principal balances of up to $729,750 for a single principle residence will benefit from this program.
Finally, the President's plan creates an additional $100 billion in support for government-sponsored enterprises Fannie Mae and Freddie Mac, to help increase lending and reduce mortgage interest rates. These insurance payments, linked to declines in the home price index, would compensate lenders if home price declines are higher than expected.
Opponents of the plan suggest that this is simply an extension of the Hope For Homeowners plan of 2008, which was ineffective because of the voluntary nature of the program. The new plan does not address homeowners with negative equity or borrowers with sub-prime, Alt-A, and jumbo mortgages, borrowers most vulnerable to foreclosure. Opponents also wonder how an increase in risk for GSEs won't lead to increases in fee rates – not to mention how mortgage insurance and second mortgages fit into the process. Others suggest that the government, since new mortgage terms will stay in place for five years, is in essence offering a 5-year ARM that will cause a similar market "melt-down" in the future. Finally, industry opponents of the program wonder what role, if any, mortgage professionals will have in this execution of the plan if investors don't participate in or purchase loans originated with DU Refi Plus.
Proponents of the plan suggest that, even though participation in the President's new plan is still voluntary, lending institutions that benefit from the TARP could be required – or at least feel serious pressure – to participate. In addition, the plan will also create a standard industry practice for mortgage modifications required by all participating lenders, and the government will offer new monetary incentives for borrowers, lenders, servicers, and investors in an effort to attract more participation. The Treasury will also create a $10 billion Insurance Fund to provide partial guarantees to lenders.
Some suggest that, in lieu of mandatory lender participation, bankruptcy laws will have to be amended to protect lenders from lawsuits in order to significantly increase their participation. Obama was in favor of bankruptcy law modification as part of the plan, however, this kind of change requires brand new legislation from Congress.
Here are some quick highlights of the three programs:
1) The Home Affordable Refinance Program, which ends in June 2010, will reportedly help up to 3 to 4 million at-risk homeowners avoid foreclosure. The bill will remove the current restriction on Fannie Mae and Freddie Mac that prohibits them from guaranteeing refinancing on mortgages valued at more than 80% of the home's value. This will allow many more homeowners to refinance at lower rates.
The program could help homeowner-occupants who are current in making loan payments and have loan-to-value ratios (LTVs) above 80 percent but not more than 105 percent. Cash-out refinances are not permitted.
Click here to learn about DU Refi Plus and Refi Plus Requirements, New Refinance Options for Fannie Mae Loans
2) The Home Affordable Modification Program: Under the modification program, which ends on December 31st, 2012, participating loan servicers will be required to evaluate mortgages at risk of default to determine if they qualify for the program. If so, the program provides incentives for lenders to modify the terms of the loan. Participating lenders will reduce payments to no more than 38% of borrower's income, with the government matching further reductions down to 31% by reducing the interest rate to as low as 2% for five years, extending terms up to 40 years, and forgiving part of the principal.
• Loans must have been originated on or before January 1, 2009;
• Loans must be first-lien loans on owner-occupied properties with unpaid principal balance up to $729,750;
• Loan must be primary residence;
• Loans can be modified only once under the program.
Click here learn about the Department of Treasury's Loan Modification Terms and Procedures
3) Increased Support for the GSEs: The plan provides additional support for the GSEs, including doubling of potential Treasury investment from $100 billion to $200 billion for each GSE, to maintain their positive net worth.
Click here for information on the President's Housing Plan
The Homeowner Affordability and Stability Plan
On March 4th 2009, the Department of Treasury released new details of the Homeowner Affordability and Stability Plan, announced by President Obama on February 18th.
Designed to help between 7 to 9 million families avoid foreclosure, the plan has three main components, two of which directly address struggling homeowners.
The Home Affordable Refinance Program is aimed at homeowners who have less than 20% equity in their home or owe more than their home is worth. The Home Affordable Modification Program addresses borrowers at risk of losing their home because their payments are too high.
It's important to note that only loans insured or owned by Fannie Mae and Freddie Mac with unpaid principal balances of up to $729,750 for a single principle residence will benefit from this program.
Finally, the President's plan creates an additional $100 billion in support for government-sponsored enterprises Fannie Mae and Freddie Mac, to help increase lending and reduce mortgage interest rates. These insurance payments, linked to declines in the home price index, would compensate lenders if home price declines are higher than expected.
Opponents of the plan suggest that this is simply an extension of the Hope For Homeowners plan of 2008, which was ineffective because of the voluntary nature of the program. The new plan does not address homeowners with negative equity or borrowers with sub-prime, Alt-A, and jumbo mortgages, borrowers most vulnerable to foreclosure. Opponents also wonder how an increase in risk for GSEs won't lead to increases in fee rates – not to mention how mortgage insurance and second mortgages fit into the process. Others suggest that the government, since new mortgage terms will stay in place for five years, is in essence offering a 5-year ARM that will cause a similar market "melt-down" in the future. Finally, industry opponents of the program wonder what role, if any, mortgage professionals will have in this execution of the plan if investors don't participate in or purchase loans originated with DU Refi Plus.
Proponents of the plan suggest that, even though participation in the President's new plan is still voluntary, lending institutions that benefit from the TARP could be required – or at least feel serious pressure – to participate. In addition, the plan will also create a standard industry practice for mortgage modifications required by all participating lenders, and the government will offer new monetary incentives for borrowers, lenders, servicers, and investors in an effort to attract more participation. The Treasury will also create a $10 billion Insurance Fund to provide partial guarantees to lenders.
Some suggest that, in lieu of mandatory lender participation, bankruptcy laws will have to be amended to protect lenders from lawsuits in order to significantly increase their participation. Obama was in favor of bankruptcy law modification as part of the plan, however, this kind of change requires brand new legislation from Congress.
Here are some quick highlights of the three programs:
1) The Home Affordable Refinance Program, which ends in June 2010, will reportedly help up to 3 to 4 million at-risk homeowners avoid foreclosure. The bill will remove the current restriction on Fannie Mae and Freddie Mac that prohibits them from guaranteeing refinancing on mortgages valued at more than 80% of the home's value. This will allow many more homeowners to refinance at lower rates.
The program could help homeowner-occupants who are current in making loan payments and have loan-to-value ratios (LTVs) above 80 percent but not more than 105 percent. Cash-out refinances are not permitted.
Click here to learn about DU Refi Plus and Refi Plus Requirements, New Refinance Options for Fannie Mae Loans
2) The Home Affordable Modification Program: Under the modification program, which ends on December 31st, 2012, participating loan servicers will be required to evaluate mortgages at risk of default to determine if they qualify for the program. If so, the program provides incentives for lenders to modify the terms of the loan. Participating lenders will reduce payments to no more than 38% of borrower's income, with the government matching further reductions down to 31% by reducing the interest rate to as low as 2% for five years, extending terms up to 40 years, and forgiving part of the principal.
• Loans must have been originated on or before January 1, 2009;
• Loans must be first-lien loans on owner-occupied properties with unpaid principal balance up to $729,750;
• Loan must be primary residence;
• Loans can be modified only once under the program.
Click here learn about the Department of Treasury's Loan Modification Terms and Procedures
3) Increased Support for the GSEs: The plan provides additional support for the GSEs, including doubling of potential Treasury investment from $100 billion to $200 billion for each GSE, to maintain their positive net worth.
Click here for information on the President's Housing Plan
Monday, March 9, 2009
Signs of Life From the Real Estate Market
by Prashant Gopal
provided byBusinessWeek
In ZIP codes across the country, as once-inflated property prices bottom out housing sales are increasing dramatically
Earlier this year Herson and Liz Enerio put in a $400,000 bid on a four-bedroom house on a private street in Fairfield, Calif., with three pine trees and a backyard that opens onto a hiking trail.
One would think that the 30-year-old police officer and his wife, who works as a nurse, were well positioned to negotiate, especially in a market like Fairfield, a town about 40 miles from both San Francisco and Sacramento where more than 80% of homes for sale are owned by banks or by homeowners facing foreclosure. For one thing, the people selling the home are under water on their mortgage and are trying for a so-called short sale, where the lender agrees to take less than what's owed to prevent a foreclosure. But the Enerios decided to play it safe, bidding $1,000 above the asking price and offering to cover some of the closing costs, because Fairfield—like many of the most battered areas of California, Florida, Nevada, and Arizona—is suddenly hot again.
Prices have dropped so low that cash-ready investors and first-time buyers are making multiple offers on distressed properties. Fairfield sales jumped 226% in the fourth quarter of last year compared to the same quarter in 2007 and home prices during that period fell 19% to $179,500, according to mortgage and housing data analytics company First American CoreLogic.
The Enerios bid on another house in November but lost out to a buyer who agreed to pay $5,000 more. They're hoping that their current offer is accepted, but they aren't necessarily in a rush to buy. Homes in this Bay Area market are once again affordable for people in their income bracket.
"I tried looking for a home when I was living in Orange County four years ago, but homes there were ridiculously expensive," said Herson Enerio, a first-time buyer. "The only thing I was able to handle down there was a three-bedroom condo… Now we're looking at a house for sure."
Not All Sun Belt Cities
The Fairfield ZIP code had the biggest annual increase in sales in the fourth quarter of last year, according to a ranking of the 25 U.S. ZIP codes with the most improved sales compiled for BusinessWeek.com by Santa Ana (Calif.)-based First American CoreLogic. California, Florida, Arizona, and Nevada ZIPs dominated the list, as we expected, but Howell, Mich., near Detroit; Woodbury, Minn.; Rio Rancho, N.M.; Humble, Tex., outside Houston; Duluth, Ga., in the Atlanta metro area; and the Chicago suburb of Des Plaines, Ill., also showed strong or at least stable sales at the end of last year. We limited the ranking to ZIPs with at least 10,000 households and selected only one ZIP for any given metro area. (If we hadn't done this, California would have taken almost all of the top 25 slots).
Of course, even though sales are strong in these places, the pace is increasing from anemic levels. In many markets, foreclosure sales are driving down prices, which are only making things worse. At the same time, the accelerating sales pace appears to be finally cutting into inventories of unsold homes.
In Fairfield, for example, about 1,900 homes were listed for sale in January compared to 3,000 listings in January 2008, according to Christine Wiley, a Fairfield-based agent who works with her Realtor mother Katherine Wiley. But Christine Wiley, who has studied the pre-foreclosure data, said she expects another wave of foreclosures in Fairfield. Many of the homes built in Fairfield during the boom have been taken back by the banks, but even more are likely to be foreclosed on, she said.
Across the country in Prince William County, Va., outside Washington D.C., buyers are out in force. The market, where subprime loans and boom-time construction were rampant, was badly damaged in the downturn. Making matters worse, a controversial law in Prince William County that allowed police officers to enforce immigration laws helped drive out many of the Central American immigrants who came in to work on building the new homes during the boom. Many of those immigrants who moved to neighboring Fairfax County allowed their Prince William County homes to go into foreclosure, said John McClain, senior fellow at George Mason University's Center for Regional Analysis.
Proximity to D.C. Helps
The good news now is that inventories of unsold homes are shrinking because of the accelerating sales, though homeowners who could afford to have also likely taken their properties off the market, McClain said. In January, 3,346 homes were on the market compared to 5,355 in January, 2007, McClain said. In January, 647 homes sold in Prince William County compared to 312 a year earlier. Home prices, however, fell 34%.
One factor that could help Prince William County toward recovery is its proximity to Washington D.C., one of the few local economies with relatively good prospects thanks to its federal government and defense contractor jobs. Woodbridge, Va., in Prince William County, came in at No. 14 in our ranking. Woodbridge sales jumped 32% in the fourth quarter while median home prices dropped 18% to $215,500, according to First American CoreLogic.
The drop in inventory and the rise in sales are "good signs" for Prince William County, McClain said.
"We are at that point with that trend [in Prince William County] where the economics have to kick in," McClain said. "Prices have to stabilize and then start up again."
Erick Blackwelder, associate broker with Exit Realty in Woodbridge, said buyers have flocked to the market and have already bought many of the foreclosed homes that were in good shape. The remaining foreclosures are largely "junk," he said.
"It started in April 2008," Blackwelder said. "It was like all of a sudden, somebody flicked on a light switch and there were buyers galore."
ZIP Codes With the Most Improved Home Sales
No. 1
Fairfield, Calif.
ZIP: 94533
Metro area: Vallejo-Fairfield
Annual home sale increase: 226%
Fourth-quarter sales: 342
Median home price: $179,500
Median home price change: -19.0%
Nondistressed sales percentage: 17%*
No. 2
Rialto, Calif.
ZIP: 92376
Metro area: Riverside-San Bernardino-Ontario
Annual home sale increase: 170%
Fourth-quarter sales: 243
Median home price: $148,000
Median home price change: -19.1%
Nondistressed sales percentage: 10%
No. 3
Sylmar, Calif.
ZIP: 91342
Metro area: Los Angeles-Long Beach-Santa Ana
Annual home sale increase: 149%
Fourth-quarter sales: 254
Median home price: $295,000
Median home price change: -19.2%
Nondistressed sales percentage: 31%
No. 4
San Diego (Mira Mesa community)
ZIP: 92126
Metro area: San Diego-Carlsbad-San Marcos, Calif.
Annual home sale increase: 119%
Fourth-quarter sales: 195
Median home price: $337,500
Median home price change: -13.2%
Nondistressed sales percentage: 48%
No. 5
Cape Coral, Fla.
ZIP: 33914
Metro area: Coral-Fort Myers
Annual home sale increase: 103%
Fourth-quarter sales: 274
Median home price: $137,450
Median home price change: -14.5%
Nondistressed sales percentage: 30%
provided byBusinessWeek
In ZIP codes across the country, as once-inflated property prices bottom out housing sales are increasing dramatically
Earlier this year Herson and Liz Enerio put in a $400,000 bid on a four-bedroom house on a private street in Fairfield, Calif., with three pine trees and a backyard that opens onto a hiking trail.
One would think that the 30-year-old police officer and his wife, who works as a nurse, were well positioned to negotiate, especially in a market like Fairfield, a town about 40 miles from both San Francisco and Sacramento where more than 80% of homes for sale are owned by banks or by homeowners facing foreclosure. For one thing, the people selling the home are under water on their mortgage and are trying for a so-called short sale, where the lender agrees to take less than what's owed to prevent a foreclosure. But the Enerios decided to play it safe, bidding $1,000 above the asking price and offering to cover some of the closing costs, because Fairfield—like many of the most battered areas of California, Florida, Nevada, and Arizona—is suddenly hot again.
Prices have dropped so low that cash-ready investors and first-time buyers are making multiple offers on distressed properties. Fairfield sales jumped 226% in the fourth quarter of last year compared to the same quarter in 2007 and home prices during that period fell 19% to $179,500, according to mortgage and housing data analytics company First American CoreLogic.
The Enerios bid on another house in November but lost out to a buyer who agreed to pay $5,000 more. They're hoping that their current offer is accepted, but they aren't necessarily in a rush to buy. Homes in this Bay Area market are once again affordable for people in their income bracket.
"I tried looking for a home when I was living in Orange County four years ago, but homes there were ridiculously expensive," said Herson Enerio, a first-time buyer. "The only thing I was able to handle down there was a three-bedroom condo… Now we're looking at a house for sure."
Not All Sun Belt Cities
The Fairfield ZIP code had the biggest annual increase in sales in the fourth quarter of last year, according to a ranking of the 25 U.S. ZIP codes with the most improved sales compiled for BusinessWeek.com by Santa Ana (Calif.)-based First American CoreLogic. California, Florida, Arizona, and Nevada ZIPs dominated the list, as we expected, but Howell, Mich., near Detroit; Woodbury, Minn.; Rio Rancho, N.M.; Humble, Tex., outside Houston; Duluth, Ga., in the Atlanta metro area; and the Chicago suburb of Des Plaines, Ill., also showed strong or at least stable sales at the end of last year. We limited the ranking to ZIPs with at least 10,000 households and selected only one ZIP for any given metro area. (If we hadn't done this, California would have taken almost all of the top 25 slots).
Of course, even though sales are strong in these places, the pace is increasing from anemic levels. In many markets, foreclosure sales are driving down prices, which are only making things worse. At the same time, the accelerating sales pace appears to be finally cutting into inventories of unsold homes.
In Fairfield, for example, about 1,900 homes were listed for sale in January compared to 3,000 listings in January 2008, according to Christine Wiley, a Fairfield-based agent who works with her Realtor mother Katherine Wiley. But Christine Wiley, who has studied the pre-foreclosure data, said she expects another wave of foreclosures in Fairfield. Many of the homes built in Fairfield during the boom have been taken back by the banks, but even more are likely to be foreclosed on, she said.
Across the country in Prince William County, Va., outside Washington D.C., buyers are out in force. The market, where subprime loans and boom-time construction were rampant, was badly damaged in the downturn. Making matters worse, a controversial law in Prince William County that allowed police officers to enforce immigration laws helped drive out many of the Central American immigrants who came in to work on building the new homes during the boom. Many of those immigrants who moved to neighboring Fairfax County allowed their Prince William County homes to go into foreclosure, said John McClain, senior fellow at George Mason University's Center for Regional Analysis.
Proximity to D.C. Helps
The good news now is that inventories of unsold homes are shrinking because of the accelerating sales, though homeowners who could afford to have also likely taken their properties off the market, McClain said. In January, 3,346 homes were on the market compared to 5,355 in January, 2007, McClain said. In January, 647 homes sold in Prince William County compared to 312 a year earlier. Home prices, however, fell 34%.
One factor that could help Prince William County toward recovery is its proximity to Washington D.C., one of the few local economies with relatively good prospects thanks to its federal government and defense contractor jobs. Woodbridge, Va., in Prince William County, came in at No. 14 in our ranking. Woodbridge sales jumped 32% in the fourth quarter while median home prices dropped 18% to $215,500, according to First American CoreLogic.
The drop in inventory and the rise in sales are "good signs" for Prince William County, McClain said.
"We are at that point with that trend [in Prince William County] where the economics have to kick in," McClain said. "Prices have to stabilize and then start up again."
Erick Blackwelder, associate broker with Exit Realty in Woodbridge, said buyers have flocked to the market and have already bought many of the foreclosed homes that were in good shape. The remaining foreclosures are largely "junk," he said.
"It started in April 2008," Blackwelder said. "It was like all of a sudden, somebody flicked on a light switch and there were buyers galore."
ZIP Codes With the Most Improved Home Sales
No. 1
Fairfield, Calif.
ZIP: 94533
Metro area: Vallejo-Fairfield
Annual home sale increase: 226%
Fourth-quarter sales: 342
Median home price: $179,500
Median home price change: -19.0%
Nondistressed sales percentage: 17%*
No. 2
Rialto, Calif.
ZIP: 92376
Metro area: Riverside-San Bernardino-Ontario
Annual home sale increase: 170%
Fourth-quarter sales: 243
Median home price: $148,000
Median home price change: -19.1%
Nondistressed sales percentage: 10%
No. 3
Sylmar, Calif.
ZIP: 91342
Metro area: Los Angeles-Long Beach-Santa Ana
Annual home sale increase: 149%
Fourth-quarter sales: 254
Median home price: $295,000
Median home price change: -19.2%
Nondistressed sales percentage: 31%
No. 4
San Diego (Mira Mesa community)
ZIP: 92126
Metro area: San Diego-Carlsbad-San Marcos, Calif.
Annual home sale increase: 119%
Fourth-quarter sales: 195
Median home price: $337,500
Median home price change: -13.2%
Nondistressed sales percentage: 48%
No. 5
Cape Coral, Fla.
ZIP: 33914
Metro area: Coral-Fort Myers
Annual home sale increase: 103%
Fourth-quarter sales: 274
Median home price: $137,450
Median home price change: -14.5%
Nondistressed sales percentage: 30%
Friday, March 6, 2009
Snag a great deal on a short sale
Short sales - where a lender agrees to take less than it's owed on a mortgage - are rising sharply. Here's how you can profit.
By Joe Light, Money Magazine staff reporter
(Money Magazine) -- When Brian Gavitt, a physician, and his wife Gayleen, a stay-at-home mom, started to eye homes in Sacramento last winter, they knew they were looking in the hardest-hit areas of the housing bust. So the couple, who were relocating from Lansing, figured they could land a fantastic bargain in no time at all.
The part about the bargain turned out to be true. The Gavitts bought a five-bedroom house in the upscale Natomas Park neighborhood ("Even now, you don't see FOR SALE signs up anywhere," says Gayleen.) And it was a steal at $300,000, a full $200,000 less than they would have paid just two years ago.
The amount of time it took to land the deal was another story. It was more than six months from when the Gavitts first saw their dream home to the moment they held the keys in their hands. The reason: The home they bought was a short sale.
Not along ago, few people had even heard of a short sale, which occurs when the bank agrees to discount the loan balance for a seller who owes more on his mortgage than the home is currently worth.
If you're in the market for a home today, you're almost guaranteed to be looking at some short sales. Nationwide, 14% of homeowners are currently underwater on their mortgages, calculates real estate website Zillow.com. And in many areas, it's far more: In the Gavitts' zip code, for example, over half of homeowners would owe more than their home is worth if they sold today, calculates Dee Schwindt, the Gavitts' realtor.
The good news is that short sellers are likely to still be living in the home and some may even be current on their payments. That means these aren't the run-down, distressed properties that you often find among foreclosures; in fact, there's a good chance that some of the most deluxe homes for sale in your market are underwater.
Before you get too excited about buying a short sale, know that they generally aren't, well, short. For the sale to go through, the seller's lender must approve the price and agree to take the shortfall as a loss. That extra step can cause the process to drag on three times as long as a normal home sale.
But as the Gavitts discovered, the hassles can be well worth it. Some buyers and realtors don't want to deal with short sales, leaving many choice homes with very few bidders. So if you're willing to brave the intricacies of the process, you'll be far more likely to land the home you always wanted. The key to snagging a good deal is knowing how to avoid the land mines.
Know what you're getting into. In a short sale, you are dealing with several parties: the sellers, their agent and the sellers' lender. That's why a short sale can take anywhere between two and six months to execute, compared with about 30 days for a typical sale. Though many banks are willing to take a loss on a mortgage in a short sale if it means avoiding an even bigger loss in a foreclosure, with so many owners trying to unload properties, the lender's negotiators are flooded with short-sale offers. So if you're moving or selling another property, keep in mind that you'll likely need to budget for a few months' worth of rental payments so you have somewhere to live in the interim.
Find the right pro. Lenders often make realtors who work on short sales take a hit on their commission, so some brokers may be loath to show you the listings. But don't even think about going solo. These deals take a lot of work and persistence, says Loni Parmelly, author of Success in Short Sales. Before you sign up with an agent, ask him how many short sales he's closed. If he hasn't done at least two, find someone more experienced.
Weed out candidates. In most cities, home listings will indicate in the description whether the property is a short sale. Ideally, you want to knock off ones that come with extra complexities. If possible, pass on any home that has more than one lien against it; having to negotiate loans with two lenders can greatly increase the amount of time it takes to complete the deal. Also avoid homes where the seller has other offers. That's because if another offer is pending, the seller's agent isn't likely to even submit yours for approval until the first one is rejected, meaning you'll have to wait for another negotiation to play out before you even get a chance.
Set the right price. The first step is to have your agent submit your offer to the seller. Don't just rely on the current list price to come up with your initial bid, says Bill Richardson, a district sales manager for the Keyes Co. Realtors in Boca Raton, Fla. The seller's agent may have far underpriced it in hopes of attracting buyers, but the bank likely won't accept a lowball offer. Ask your agent to determine the home's fair market value by searching comparable sales in the area, with an emphasis on other short sales and foreclosures (or get a rough estimate yourself at zillow.com). If the fair market value is lower than the list price, set your offer 10% lower than that.
At this point, you'll also want to get pre-approval for a mortgage; many banks won't even consider your offer if you don't have one, says Schwindt.
Protect yourself. Next, the seller's agent will submit your offer to the seller's lender. At this point, you'll be asked to sign a sales contract. See if the lender will agree to pick up all closing costs as part of the contract, says author Parmelly. Also ask your realtor to specify that you won't do an appraisal or inspection of the property until the offer is approved. That way you won't have to shell out hundreds of dollars until you know you realistically have a good chance of getting the home.
Finally, though most lenders will require you to make some kind of deposit along with the contract, don't put down more than $3,000 before your bid is accepted. That will give you room to put offers on other homes or even to pull out of the sale if it drags on for too long.
Be a pain in the neck. After your offer is submitted to the lender, you're likely to hear nothing for weeks, if not months. This is no time to relax. Call your agent at least once a week, and make sure the seller's agent is contacting the bank's negotiator nearly every day.
"These negotiators may have 400 files on their desk. They'll want to get rid of the squeaky wheels," says Parmelly, who worked as a loan negotiator for lenders for 16 years. To help the seller's realtor in her negotiations with the lender, it's a good idea to have your agent show her which comparable homes you used to arrive at your number.
If the clock keeps ticking and you're reaching the end of your rope, try playing hardball. After months, the lender the Gavitts negotiated with was still dragging its feet and their pre-approved loan rate was about to expire. "We said, 'We need an answer by Friday or we walk,' " Gayleen says. The bank responded by week's end.
Keep your eye on the market. When the bank finally sends its counter-offer, use it as a guideline rather than an ultimatum. Most of the time, the lender's number is based on its own research, that of a local realtor it hires and the outstanding loan balance. Usually its goal is to sell for at least 90% of the home's value, says Amy Bohutinsky, a spokes-person for Zillow.com.
The lender's offer may not be what you'd hoped for, but don't despair: You have a chance to counter. If the market has been flat since your initial bid, try for 5% to 10% less than the bank's number. If the market has been sinking rapidly, however, you may be able to prove that the home's value has shrunk further and offer even less. Once you have the lender's ear, the new offer should take less time to process.
Despite all the legwork and wait, the Gavitts are thrilled with their new home. "I'm glad people are turned off by short sales," says Brian. "It just means more choices for the rest of us."
By Joe Light, Money Magazine staff reporter
(Money Magazine) -- When Brian Gavitt, a physician, and his wife Gayleen, a stay-at-home mom, started to eye homes in Sacramento last winter, they knew they were looking in the hardest-hit areas of the housing bust. So the couple, who were relocating from Lansing, figured they could land a fantastic bargain in no time at all.
The part about the bargain turned out to be true. The Gavitts bought a five-bedroom house in the upscale Natomas Park neighborhood ("Even now, you don't see FOR SALE signs up anywhere," says Gayleen.) And it was a steal at $300,000, a full $200,000 less than they would have paid just two years ago.
The amount of time it took to land the deal was another story. It was more than six months from when the Gavitts first saw their dream home to the moment they held the keys in their hands. The reason: The home they bought was a short sale.
Not along ago, few people had even heard of a short sale, which occurs when the bank agrees to discount the loan balance for a seller who owes more on his mortgage than the home is currently worth.
If you're in the market for a home today, you're almost guaranteed to be looking at some short sales. Nationwide, 14% of homeowners are currently underwater on their mortgages, calculates real estate website Zillow.com. And in many areas, it's far more: In the Gavitts' zip code, for example, over half of homeowners would owe more than their home is worth if they sold today, calculates Dee Schwindt, the Gavitts' realtor.
The good news is that short sellers are likely to still be living in the home and some may even be current on their payments. That means these aren't the run-down, distressed properties that you often find among foreclosures; in fact, there's a good chance that some of the most deluxe homes for sale in your market are underwater.
Before you get too excited about buying a short sale, know that they generally aren't, well, short. For the sale to go through, the seller's lender must approve the price and agree to take the shortfall as a loss. That extra step can cause the process to drag on three times as long as a normal home sale.
But as the Gavitts discovered, the hassles can be well worth it. Some buyers and realtors don't want to deal with short sales, leaving many choice homes with very few bidders. So if you're willing to brave the intricacies of the process, you'll be far more likely to land the home you always wanted. The key to snagging a good deal is knowing how to avoid the land mines.
Know what you're getting into. In a short sale, you are dealing with several parties: the sellers, their agent and the sellers' lender. That's why a short sale can take anywhere between two and six months to execute, compared with about 30 days for a typical sale. Though many banks are willing to take a loss on a mortgage in a short sale if it means avoiding an even bigger loss in a foreclosure, with so many owners trying to unload properties, the lender's negotiators are flooded with short-sale offers. So if you're moving or selling another property, keep in mind that you'll likely need to budget for a few months' worth of rental payments so you have somewhere to live in the interim.
Find the right pro. Lenders often make realtors who work on short sales take a hit on their commission, so some brokers may be loath to show you the listings. But don't even think about going solo. These deals take a lot of work and persistence, says Loni Parmelly, author of Success in Short Sales. Before you sign up with an agent, ask him how many short sales he's closed. If he hasn't done at least two, find someone more experienced.
Weed out candidates. In most cities, home listings will indicate in the description whether the property is a short sale. Ideally, you want to knock off ones that come with extra complexities. If possible, pass on any home that has more than one lien against it; having to negotiate loans with two lenders can greatly increase the amount of time it takes to complete the deal. Also avoid homes where the seller has other offers. That's because if another offer is pending, the seller's agent isn't likely to even submit yours for approval until the first one is rejected, meaning you'll have to wait for another negotiation to play out before you even get a chance.
Set the right price. The first step is to have your agent submit your offer to the seller. Don't just rely on the current list price to come up with your initial bid, says Bill Richardson, a district sales manager for the Keyes Co. Realtors in Boca Raton, Fla. The seller's agent may have far underpriced it in hopes of attracting buyers, but the bank likely won't accept a lowball offer. Ask your agent to determine the home's fair market value by searching comparable sales in the area, with an emphasis on other short sales and foreclosures (or get a rough estimate yourself at zillow.com). If the fair market value is lower than the list price, set your offer 10% lower than that.
At this point, you'll also want to get pre-approval for a mortgage; many banks won't even consider your offer if you don't have one, says Schwindt.
Protect yourself. Next, the seller's agent will submit your offer to the seller's lender. At this point, you'll be asked to sign a sales contract. See if the lender will agree to pick up all closing costs as part of the contract, says author Parmelly. Also ask your realtor to specify that you won't do an appraisal or inspection of the property until the offer is approved. That way you won't have to shell out hundreds of dollars until you know you realistically have a good chance of getting the home.
Finally, though most lenders will require you to make some kind of deposit along with the contract, don't put down more than $3,000 before your bid is accepted. That will give you room to put offers on other homes or even to pull out of the sale if it drags on for too long.
Be a pain in the neck. After your offer is submitted to the lender, you're likely to hear nothing for weeks, if not months. This is no time to relax. Call your agent at least once a week, and make sure the seller's agent is contacting the bank's negotiator nearly every day.
"These negotiators may have 400 files on their desk. They'll want to get rid of the squeaky wheels," says Parmelly, who worked as a loan negotiator for lenders for 16 years. To help the seller's realtor in her negotiations with the lender, it's a good idea to have your agent show her which comparable homes you used to arrive at your number.
If the clock keeps ticking and you're reaching the end of your rope, try playing hardball. After months, the lender the Gavitts negotiated with was still dragging its feet and their pre-approved loan rate was about to expire. "We said, 'We need an answer by Friday or we walk,' " Gayleen says. The bank responded by week's end.
Keep your eye on the market. When the bank finally sends its counter-offer, use it as a guideline rather than an ultimatum. Most of the time, the lender's number is based on its own research, that of a local realtor it hires and the outstanding loan balance. Usually its goal is to sell for at least 90% of the home's value, says Amy Bohutinsky, a spokes-person for Zillow.com.
The lender's offer may not be what you'd hoped for, but don't despair: You have a chance to counter. If the market has been flat since your initial bid, try for 5% to 10% less than the bank's number. If the market has been sinking rapidly, however, you may be able to prove that the home's value has shrunk further and offer even less. Once you have the lender's ear, the new offer should take less time to process.
Despite all the legwork and wait, the Gavitts are thrilled with their new home. "I'm glad people are turned off by short sales," says Brian. "It just means more choices for the rest of us."
Thursday, March 5, 2009
Obama housing fix open for business
Officials release details of $75 billion loan modification and refinancing programs. Borrowers can start contacting loan servicers, though companies will need time.
By Tami Luhby, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- The Obama administration's foreclosure prevention program was launched Wednesday.
The multipronged fixcalls for companies to help as many 4 million struggling borrowers by modifying loans so housing payments are no more than 31% of monthly gross income. Separately, homeowners who haven't missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.
While borrowers are being encouraged to contact their loan servicers, companies said it would be several weeks before they can start processing applications.
The $75 billion loan modification plan will provide incentives to borrowers, servicers and mortgage investors. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.
"This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans," said Housing Secretary Shaun Donovan.
Administration officials once again stressed that they are not using taxpayer money to bail out irresponsible homebuyers, listing those who will not qualify for assistance: people who bought investment properties, lied on their mortgage documents or purchased multimillion dollar homes.
"The cost of not acting outstrips that of acting boldly," said a senior administration official.
Borrowers can now contact their servicers to see whether they are eligible for assistance. Federal officials have posted additional information for borrowers to determine their eligibility at www.hud.gov. They will also promote the program at homeownership events nationwide.
However, servicers, who just received the guidelines on Wednesday, said it will take them some time to upgrade their systems and train their staffs to handle borrower calls. Fannie Mae, for instance, said the lenders and mortgage brokers it works with will be able to process refinancing applications starting in April.
Many firms, however, have said they will put foreclosures on hold until they can implement the guidelines.
Who's eligible?
The administration Wednesday released additional eligibility criteria and guidelines for the refinancing and modification prongs of the program.
The refinancing portion, which is open to homeowners who took out loans from Fannie Mae and Freddie Mac, allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However, borrowers cannot owe more than 105% of the value of their home and must be current on their payments.
The program ends in June 2010. Each servicer will provide details on the terms and costs associated with refinancing, which is aimed at helping borrowers suffering from the decline in home values.
The government provided far more information on the loan modification plan, which it is spearheading. This portion focuses on people who are behind in their payments or are at risk of default.
Federal officials clarified the definition of "at risk" as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.
The modification program will be in effect until the end of 2012, but loans can only be adjusted once.
Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers' total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% - but the interest rate can't go below 2%.
The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower. This should prevent borrowers from suffering the "payment shock" that sent many borrowers with adjustable-rate mortgage into default in recent years.
If rate reductions aren't enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan's balance.
Servicers will receive $1,000 for each loan modified, as well as additional annual bonuses if borrowers keep up with payments. Mortgage investors will receive one-time $1,500 incentive payments for restructuring qualifying loans that are not yet delinquent. Finally, borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.
While the program is voluntary, once servicers commit to participating, they must evaluate all loans that may be eligible. Financial institutions that receive government money going forward must participate.
Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify.
The government is also providing incentives to servicers and borrowers to enter into "short sales" or "deed-in-lieu of foreclosure" agreements with those who can't afford to stay in their homes. In these cases, the bank agrees to take back the home for less than what's owed without filing for foreclosure.
The program also includes a new provision to eliminate borrowers' second mortgages, which will reduce their overall debt levels. Investors in those mortgages, who at times have blocked modifications because they don't benefit from the adjustments, will be paid to eliminate those claims. Details on how much they'll receive will be announced in coming weeks, senior government officials said.Servicers that get second-mortgage holders to participate will receive an additional $250.
Be patient
While borrowers can now start contacting servicers, it may take several weeks for companies to implement the guidelines, said a senior mortgage industry official in a conference call with reporters.
Servicers are adding staff to handle the expected deluge of calls. Bank of America, for instance, just boosted its servicing staff by 1,000 people.
JPMorgan Chase, which said it "strongly supports" the president's plan, will need a few weeks to get the program up and running, a spokesman said.
Officials warned borrowers - many of whom have complained of long waits and unresponsive staff at servicers - to be patient. Until then, they can find out whether they meet the basic criteria and can start gathering the financial documents they'll need to give their servicer.
"There will definitely be a flood of activity, so it's important for consumers to be patient and be persistent and to take a hard look at their own personal financial situation so they can come prepared to really move the process forward as rapidly as possible," the official said. To top of page
By Tami Luhby, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- The Obama administration's foreclosure prevention program was launched Wednesday.
The multipronged fixcalls for companies to help as many 4 million struggling borrowers by modifying loans so housing payments are no more than 31% of monthly gross income. Separately, homeowners who haven't missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.
While borrowers are being encouraged to contact their loan servicers, companies said it would be several weeks before they can start processing applications.
The $75 billion loan modification plan will provide incentives to borrowers, servicers and mortgage investors. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.
"This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans," said Housing Secretary Shaun Donovan.
Administration officials once again stressed that they are not using taxpayer money to bail out irresponsible homebuyers, listing those who will not qualify for assistance: people who bought investment properties, lied on their mortgage documents or purchased multimillion dollar homes.
"The cost of not acting outstrips that of acting boldly," said a senior administration official.
Borrowers can now contact their servicers to see whether they are eligible for assistance. Federal officials have posted additional information for borrowers to determine their eligibility at www.hud.gov. They will also promote the program at homeownership events nationwide.
However, servicers, who just received the guidelines on Wednesday, said it will take them some time to upgrade their systems and train their staffs to handle borrower calls. Fannie Mae, for instance, said the lenders and mortgage brokers it works with will be able to process refinancing applications starting in April.
Many firms, however, have said they will put foreclosures on hold until they can implement the guidelines.
Who's eligible?
The administration Wednesday released additional eligibility criteria and guidelines for the refinancing and modification prongs of the program.
The refinancing portion, which is open to homeowners who took out loans from Fannie Mae and Freddie Mac, allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However, borrowers cannot owe more than 105% of the value of their home and must be current on their payments.
The program ends in June 2010. Each servicer will provide details on the terms and costs associated with refinancing, which is aimed at helping borrowers suffering from the decline in home values.
The government provided far more information on the loan modification plan, which it is spearheading. This portion focuses on people who are behind in their payments or are at risk of default.
Federal officials clarified the definition of "at risk" as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.
The modification program will be in effect until the end of 2012, but loans can only be adjusted once.
Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers' total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% - but the interest rate can't go below 2%.
The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower. This should prevent borrowers from suffering the "payment shock" that sent many borrowers with adjustable-rate mortgage into default in recent years.
If rate reductions aren't enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan's balance.
Servicers will receive $1,000 for each loan modified, as well as additional annual bonuses if borrowers keep up with payments. Mortgage investors will receive one-time $1,500 incentive payments for restructuring qualifying loans that are not yet delinquent. Finally, borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.
While the program is voluntary, once servicers commit to participating, they must evaluate all loans that may be eligible. Financial institutions that receive government money going forward must participate.
Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify.
The government is also providing incentives to servicers and borrowers to enter into "short sales" or "deed-in-lieu of foreclosure" agreements with those who can't afford to stay in their homes. In these cases, the bank agrees to take back the home for less than what's owed without filing for foreclosure.
The program also includes a new provision to eliminate borrowers' second mortgages, which will reduce their overall debt levels. Investors in those mortgages, who at times have blocked modifications because they don't benefit from the adjustments, will be paid to eliminate those claims. Details on how much they'll receive will be announced in coming weeks, senior government officials said.Servicers that get second-mortgage holders to participate will receive an additional $250.
Be patient
While borrowers can now start contacting servicers, it may take several weeks for companies to implement the guidelines, said a senior mortgage industry official in a conference call with reporters.
Servicers are adding staff to handle the expected deluge of calls. Bank of America, for instance, just boosted its servicing staff by 1,000 people.
JPMorgan Chase, which said it "strongly supports" the president's plan, will need a few weeks to get the program up and running, a spokesman said.
Officials warned borrowers - many of whom have complained of long waits and unresponsive staff at servicers - to be patient. Until then, they can find out whether they meet the basic criteria and can start gathering the financial documents they'll need to give their servicer.
"There will definitely be a flood of activity, so it's important for consumers to be patient and be persistent and to take a hard look at their own personal financial situation so they can come prepared to really move the process forward as rapidly as possible," the official said. To top of page
Wednesday, March 4, 2009
Citi: Mortgage break to unemployed
The bank will lower mortgage payments for three months and waive fees for certain unemployed borrowers.
NEW YORK (CNNMoney.com) -- Unemployed homeowners whose houses are financed by CitiMortgage may be eligible to have their mortgages temporarily reduced to $500 a month, the company announced Tuesday.
"We're planning to help recently unemployed homeowners by giving them the ability to pay as little as $500 a month on their mortgage, which is effectively less than the price of an average one-bedroom rental nationally," Sanjiv Das, CitiMortgage's president and CEO, told CNN Radio.
Borrowers are covered by the program for 90 days when they submit documents proving they are recent recipients of state unemployment benefits, Das said. Some homeowners may be able to get extensions after the 90 days expire, depending on their situation.
"This is intended to keep the neediest borrowers in their homes," Das said.
It's unclear how many of the 1.4 million CitiMortgage customers will seek assistance, but Das noted that about 4 million people have lost jobs over the past year.
"We hope to help thousands of customers with this," he said.
The company is the housing lender arm of Citigroup, a beleaguered bank that has received $45 billion in federal bailout funds and recently lost 36% of its ownership to the government. To top of page
NEW YORK (CNNMoney.com) -- Unemployed homeowners whose houses are financed by CitiMortgage may be eligible to have their mortgages temporarily reduced to $500 a month, the company announced Tuesday.
"We're planning to help recently unemployed homeowners by giving them the ability to pay as little as $500 a month on their mortgage, which is effectively less than the price of an average one-bedroom rental nationally," Sanjiv Das, CitiMortgage's president and CEO, told CNN Radio.
Borrowers are covered by the program for 90 days when they submit documents proving they are recent recipients of state unemployment benefits, Das said. Some homeowners may be able to get extensions after the 90 days expire, depending on their situation.
"This is intended to keep the neediest borrowers in their homes," Das said.
It's unclear how many of the 1.4 million CitiMortgage customers will seek assistance, but Das noted that about 4 million people have lost jobs over the past year.
"We hope to help thousands of customers with this," he said.
The company is the housing lender arm of Citigroup, a beleaguered bank that has received $45 billion in federal bailout funds and recently lost 36% of its ownership to the government. To top of page
Tuesday, March 3, 2009
Columnist's Construction Project To Finish Ahead of Schedule, Under Budget
Thanks to the housing slowdown, a conscientious contractor and a little bit of luck
By NANCY KEATES
This is the latest installment of Teardown Diary, columnist Nancy Keates's account of building a new home in Portland, Ore.
Amidst our worries about the credit markets and falling housing prices there is one piece of good news: Our house will very likely finish under budget and ahead of schedule.
The lower cost and faster time frame is partly due to the efforts of our contractor -- JDL Development Inc. They have been fantastic about finding lower-cost options and methods and staying on top of their subcontractors to keep the project moving.
Most of the some dozen or so change orders for our project were in our favor – orders that deleted the laminate floor from the mechanical room, substituted broom finished concrete for acid washed concrete in the front walkway and used simpler window trim. We opted for interior doors with less elaborate woodwork and worked with the cabinetmaker to keep built-in cabinets to a minimum.
Luck played a role: There have been (as of yet) no unforeseen disasters like hitting an underground creek or a tree falling on the house. And the collapse in the home construction market made it easier to find subcontractors who are willing to work for more reasonable prices and and are available to get the work done faster. JDL was able to lower the painting cost by $6,000 by re-bidding the work and they found a local garage-door maker whose work was better and less pricey than those of a larger company.
Anyone just starting the process now will find even more to cheer: Construction cost increases–which have been above inflation for the past five years–are finally coming down. Framing lumber is now 18% cheaper than it was 18 months ago, while drywall is selling for 40% less. The cost of roofing and sheathing materials fell as well.
Back at the end of 2006 when we started the design, our architect Dave Giulietti of Giulietti/Schouten Architects warned us about the emotional rollercoaster that building and renovation can involve. He referenced a book called "Managing The Emotional Homeowner" (by David Lupberger) that chronicles the up-and-down stages people go through when building a home. For example, the framing stage, when the walls go up quickly and lots of workers swarm the site, is a homeowner high; the post-drywall stage–when the trim and cabinets go in–can be excruciating as progress seems slow and there's no clear answer about why things are taking so long.
Mr. Lupberger's timeline ends at nine months and we are already at a year. And he wrote the book in 2000 and thus couldn't have anticipated the agony the tight credit markets would wreak. We are near the end of the hardest part: Post drywall, when the house looks like it should be done in a month, but actually has three more months to go.
To find out exactly why the contractor needs three months I met with our home's construction manager, Ron Boersma -- someone I have been in twice-daily contact with for months. Mr. Boersma is the kind of contractor who cares more than I do about details like the stain on the wood floor. He insisted the tub spout be placed on the end next to the window so we could look outside while using it without hitting our heads. And he has helped me make every little niggling decision, from the placement of the doorbell ringer to the width of the bookshelves.
Mr. Boersma prepared a timeline of the steps needed to complete the house. Much to my astonishment, his timeline showed completion on May 1–a whole six weeks before the company's partner Dave Lyons had told us the house would be finished. Mr. Lyons was being careful because anything can happen–and it is best to factor in a contingency, said Mr. Boersma.
Mr. Boersma explained that for a few weeks our first floor was held hostage to the finish carpenter. Until he completed that work–on the staircase, the trim and moldings and the installation of the cabinets--nothing else could be done on the first floor. There's no point in finishing the floor, putting in tiles or painting the walls until everything else is ready; scruffs and scrapes unintentionally caused by workers could mean having to do the job over again, he said.
[The Stairs] Nancy Keates
The now-finished staircase
The finish carpenter has workers who helped put in the cabinets and doors, but only two workers are accomplished enough to do the fine work required for the mantles, the staircase and the various moldings. It could have gone faster if we wanted to hire additional skilled workers, but that would have cost more money. We had to wait for some parts for the staircase, which added to the timeframe.
Meanwhile, the painting and tile work could be done on the second floor. Painting a floor takes three weeks: two weeks for prepping alone. But when the floors are sanded and refinished, no other workers can be around for a day or two because of the smell. At that point, the concrete for the driveway and patio can be poured.
Once the floors are finished, the lighting and plumbing fixtures will be installed. Again, he could do that earlier, but there's always the danger that workers could bang the floors or get paint on them.
Even though the exterior siding is still not finished – and has been taking months – that's not holding up the job, Mr. Boersma told me. It is the interior that is driving the schedule.
To keep everyone motivated, Mr. Boersma says he has to "be charming and I have to cry a little bit." If there are no natural or human disasters, our project will be finished a month ahead of schedule and some $50,000 under the cost estimated by our contractor.
By NANCY KEATES
This is the latest installment of Teardown Diary, columnist Nancy Keates's account of building a new home in Portland, Ore.
Amidst our worries about the credit markets and falling housing prices there is one piece of good news: Our house will very likely finish under budget and ahead of schedule.
The lower cost and faster time frame is partly due to the efforts of our contractor -- JDL Development Inc. They have been fantastic about finding lower-cost options and methods and staying on top of their subcontractors to keep the project moving.
Most of the some dozen or so change orders for our project were in our favor – orders that deleted the laminate floor from the mechanical room, substituted broom finished concrete for acid washed concrete in the front walkway and used simpler window trim. We opted for interior doors with less elaborate woodwork and worked with the cabinetmaker to keep built-in cabinets to a minimum.
Luck played a role: There have been (as of yet) no unforeseen disasters like hitting an underground creek or a tree falling on the house. And the collapse in the home construction market made it easier to find subcontractors who are willing to work for more reasonable prices and and are available to get the work done faster. JDL was able to lower the painting cost by $6,000 by re-bidding the work and they found a local garage-door maker whose work was better and less pricey than those of a larger company.
Anyone just starting the process now will find even more to cheer: Construction cost increases–which have been above inflation for the past five years–are finally coming down. Framing lumber is now 18% cheaper than it was 18 months ago, while drywall is selling for 40% less. The cost of roofing and sheathing materials fell as well.
Back at the end of 2006 when we started the design, our architect Dave Giulietti of Giulietti/Schouten Architects warned us about the emotional rollercoaster that building and renovation can involve. He referenced a book called "Managing The Emotional Homeowner" (by David Lupberger) that chronicles the up-and-down stages people go through when building a home. For example, the framing stage, when the walls go up quickly and lots of workers swarm the site, is a homeowner high; the post-drywall stage–when the trim and cabinets go in–can be excruciating as progress seems slow and there's no clear answer about why things are taking so long.
Mr. Lupberger's timeline ends at nine months and we are already at a year. And he wrote the book in 2000 and thus couldn't have anticipated the agony the tight credit markets would wreak. We are near the end of the hardest part: Post drywall, when the house looks like it should be done in a month, but actually has three more months to go.
To find out exactly why the contractor needs three months I met with our home's construction manager, Ron Boersma -- someone I have been in twice-daily contact with for months. Mr. Boersma is the kind of contractor who cares more than I do about details like the stain on the wood floor. He insisted the tub spout be placed on the end next to the window so we could look outside while using it without hitting our heads. And he has helped me make every little niggling decision, from the placement of the doorbell ringer to the width of the bookshelves.
Mr. Boersma prepared a timeline of the steps needed to complete the house. Much to my astonishment, his timeline showed completion on May 1–a whole six weeks before the company's partner Dave Lyons had told us the house would be finished. Mr. Lyons was being careful because anything can happen–and it is best to factor in a contingency, said Mr. Boersma.
Mr. Boersma explained that for a few weeks our first floor was held hostage to the finish carpenter. Until he completed that work–on the staircase, the trim and moldings and the installation of the cabinets--nothing else could be done on the first floor. There's no point in finishing the floor, putting in tiles or painting the walls until everything else is ready; scruffs and scrapes unintentionally caused by workers could mean having to do the job over again, he said.
[The Stairs] Nancy Keates
The now-finished staircase
The finish carpenter has workers who helped put in the cabinets and doors, but only two workers are accomplished enough to do the fine work required for the mantles, the staircase and the various moldings. It could have gone faster if we wanted to hire additional skilled workers, but that would have cost more money. We had to wait for some parts for the staircase, which added to the timeframe.
Meanwhile, the painting and tile work could be done on the second floor. Painting a floor takes three weeks: two weeks for prepping alone. But when the floors are sanded and refinished, no other workers can be around for a day or two because of the smell. At that point, the concrete for the driveway and patio can be poured.
Once the floors are finished, the lighting and plumbing fixtures will be installed. Again, he could do that earlier, but there's always the danger that workers could bang the floors or get paint on them.
Even though the exterior siding is still not finished – and has been taking months – that's not holding up the job, Mr. Boersma told me. It is the interior that is driving the schedule.
To keep everyone motivated, Mr. Boersma says he has to "be charming and I have to cry a little bit." If there are no natural or human disasters, our project will be finished a month ahead of schedule and some $50,000 under the cost estimated by our contractor.
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