The Federal Reserve is introducing its new mortgage protection plan today to help bailout struggling borrowers. The rules it’s proposing are particularly aimed at protecting those who might find subprime loans their only alternative because of low income or poor credit.The Fed proposes these regulations:
* Barring or restricting lenders from penalizing subprime borrowers who pay their loans off early.
* Forcing lenders to make sure that borrowers, especially subprime ones, set aside money to pay for taxes and insurance.
* Barring or limiting loans that do not require proof of a borrower's income.
* Setting new standards for how lenders determine a borrower's ability to repay a home loan.
The plan, if ultimately adopted, offers Federal Reserve Chairman Ben Bernanke, who took over the helm in February 2006, an important opportunity to put his imprint on the Fed's regulatory powers.
Source: The Associated Press, Jeannine Aversa (12/18/07)
Tuesday, December 18, 2007
Thursday, December 13, 2007
3 Places to Find Money for a Down Payment
Buyers who don’t have a 20 percent down payment are finding it harder and harder to buy a home. Here are some sources of money that are still available and the pluses and minuses of using them.
Borrowing from a 401(k). Only some companies allow this. The maximum available is $50,000 ($100,00 if both spouses have 401(k)s) and the loan must be repaid within five years. Failure to do so and the loan will be considered a withdrawal, leaving the borrower liable for penalties and federal income tax.
Withdrawing up to $10,000 from an IRA for a purchase of a first home. Spouses who both have IRAs can withdrawal a total of $20,000. A potential borrower who hasn’t owned a home in the past three years is considered a "first-time buyer" for this specific purpose and can make a withdrawal. Federal taxes must be paid on the withdrawal at the borrower’s current marginal tax rate.
A gift. If buyers are comfortable asking for money, their parents, friends, and relatives can give a gift toward the down payment. But for the lender to approve it, the giver must sign a gift letter stating that the money doesn’t need to be repaid.
Source: ThinkGlink.com, Ilyce Glink (12/07/2007)
Borrowing from a 401(k). Only some companies allow this. The maximum available is $50,000 ($100,00 if both spouses have 401(k)s) and the loan must be repaid within five years. Failure to do so and the loan will be considered a withdrawal, leaving the borrower liable for penalties and federal income tax.
Withdrawing up to $10,000 from an IRA for a purchase of a first home. Spouses who both have IRAs can withdrawal a total of $20,000. A potential borrower who hasn’t owned a home in the past three years is considered a "first-time buyer" for this specific purpose and can make a withdrawal. Federal taxes must be paid on the withdrawal at the borrower’s current marginal tax rate.
A gift. If buyers are comfortable asking for money, their parents, friends, and relatives can give a gift toward the down payment. But for the lender to approve it, the giver must sign a gift letter stating that the money doesn’t need to be repaid.
Source: ThinkGlink.com, Ilyce Glink (12/07/2007)
Wednesday, December 12, 2007
Tougher Standards Drive Up the Cost of Homeownership
Even borrowers with decent credit are beginning to feel the mortgage crisis pinch.
Fannie Mae, soon to be followed by Freddie Mac, has imposed an extra 0.25 percent upfront charge on all new mortgages that it buys or guarantees.
In a statement, Fannie said the new fee is needed "to ensure that what we charge aligns with the risk we bear." The National Association of Home Builders labeled the fee "a broad tax on homeownership" because more than 40 percent of all mortgages outstanding are owned or guaranteed by Fannie or Freddie.
Mortgage insurers have raised premiums for certain borrowers and tightened standards. PMI Group Inc. has stopped writing mortgage insurance for borrowers with credit scores below 620 who are financing more than 95 percent of their home's value. Triad Guaranty Insurance Corp. has stopped providing mortgage insurance on option adjustable-rate mortgages, which carry low introductory rates but can lead to a rising loan balance.
The bar for credit scores is rising, too. "Historically, lenders would consider top-tier credit [a score of] 680," says David Soleymani, a mortgage broker in Los Angeles. "Now, many of those lenders want to see a 720," but are rewarding such borrowers with better rates, he says.
Source: The Wall Street Journal, James R. Hagerty and Ruth Simon (12/11/07)
Fannie Mae, soon to be followed by Freddie Mac, has imposed an extra 0.25 percent upfront charge on all new mortgages that it buys or guarantees.
In a statement, Fannie said the new fee is needed "to ensure that what we charge aligns with the risk we bear." The National Association of Home Builders labeled the fee "a broad tax on homeownership" because more than 40 percent of all mortgages outstanding are owned or guaranteed by Fannie or Freddie.
Mortgage insurers have raised premiums for certain borrowers and tightened standards. PMI Group Inc. has stopped writing mortgage insurance for borrowers with credit scores below 620 who are financing more than 95 percent of their home's value. Triad Guaranty Insurance Corp. has stopped providing mortgage insurance on option adjustable-rate mortgages, which carry low introductory rates but can lead to a rising loan balance.
The bar for credit scores is rising, too. "Historically, lenders would consider top-tier credit [a score of] 680," says David Soleymani, a mortgage broker in Los Angeles. "Now, many of those lenders want to see a 720," but are rewarding such borrowers with better rates, he says.
Source: The Wall Street Journal, James R. Hagerty and Ruth Simon (12/11/07)
Tuesday, December 11, 2007
Fed cuts key rate a quarter-point
Central bank reacts to widening mortgage crisis with third drop of the year
The Associated Press updated 11:45 a.m. PT, Tues., Dec. 11, 2007
The Federal Reserve cut a key interest rate by one-quarter of a percentage point Tuesday, trying to keep the country out of recession.
The reduction in the federal funds rate to 4.25 percent marked the third rate cut in the past three months. Fed officials signaled that further cuts were possible if a severe downturn in housing and a crisis in mortgage lending get worse.
Commercial banks were expected to quickly match the latest reduction by trimming their prime lending rate, which would reduce this benchmark rate for millions of consumer and business loans to 7.25 percent.
In addition to cutting the funds rate, the Fed announced it was reducing its discount rate, the interest it charges to make direct loans to banks, by a quarter-point as well to 4.75 percent. This reduction was aimed at encouraging banks to borrow more freely from the Fed at a time when there are worries that a rising number of bad loans will prompt banks to tighten credit conditions too severely, adding another strain on the already fragile economy.
The Fed embarked on this round of rate cuts in September in response to severe turbulence in credit markets around the globe as investors reacted to various reports of mounting losses from defaults in subprime mortgages, the latest fallout from the worst slump in the U.S. housing market in more than two decades.
After cutting the funds rate by a half-point on Sept. 11 and a quarter-point on Oct. 31, the central bank indicated that those two reductions might be all that were needed to combat the threat of a recession given that financial markets appeared to be stabilizing.
However, increased market turbulence following the October meeting and growing fears of a recession caused the Fed to do an about-face.
In a brief statement explaining its action, the Fed said that recent economic data indicated that the economy is slowing, “reflecting the intensification of the housing correction and some softening in business and consumer spending.”
The Fed also noted that “strains in financial markets have increased in recent weeks.”
In its Oct. 31 statement, the Fed said it viewed the risks from weak growth as roughly balanced with the risks of higher inflation.
However, that phrase was changed in the current statement to read, “Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.”
The Fed vote for the rate cut was 9 to 1 with Eric S. Rosengren dissenting, arguing for a bigger, half-point cut in the funds rate.
Many economists believe the housing slump and credit turmoil have raised the risks of a recession. Many analysts believe that economic growth, as measured by the gross domestic product, may have dipped to a barely perceptible 1 percent rate, raising the chance that some shock, such as another surge in energy prices, could push the country into a recession.
But many analysts still believe the Fed will be able to respond forcefully enough with rate cuts that it will keep the current expansion alive. These analysts believe that the economy will start to rebound to faster growth by the middle of next year, when they expect that lower mortgage rates will have spurred a rebound in home sales.
“I think a full blown recession can be avoided but just barely,” said David Jones, chief economist at DMJ Advisors. He predicted that the Fed will follow up its December rate cut with three more reductions at its first three meetings of 2008.
Full text of Fed statementThe full text of the Fed's statement released with the announcement is below:
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.
Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.
Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; and Kevin M. Warsh. Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points
© 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: http://www.msnbc.msn.com/id/22202624/
The Associated Press updated 11:45 a.m. PT, Tues., Dec. 11, 2007
The Federal Reserve cut a key interest rate by one-quarter of a percentage point Tuesday, trying to keep the country out of recession.
The reduction in the federal funds rate to 4.25 percent marked the third rate cut in the past three months. Fed officials signaled that further cuts were possible if a severe downturn in housing and a crisis in mortgage lending get worse.
Commercial banks were expected to quickly match the latest reduction by trimming their prime lending rate, which would reduce this benchmark rate for millions of consumer and business loans to 7.25 percent.
In addition to cutting the funds rate, the Fed announced it was reducing its discount rate, the interest it charges to make direct loans to banks, by a quarter-point as well to 4.75 percent. This reduction was aimed at encouraging banks to borrow more freely from the Fed at a time when there are worries that a rising number of bad loans will prompt banks to tighten credit conditions too severely, adding another strain on the already fragile economy.
The Fed embarked on this round of rate cuts in September in response to severe turbulence in credit markets around the globe as investors reacted to various reports of mounting losses from defaults in subprime mortgages, the latest fallout from the worst slump in the U.S. housing market in more than two decades.
After cutting the funds rate by a half-point on Sept. 11 and a quarter-point on Oct. 31, the central bank indicated that those two reductions might be all that were needed to combat the threat of a recession given that financial markets appeared to be stabilizing.
However, increased market turbulence following the October meeting and growing fears of a recession caused the Fed to do an about-face.
In a brief statement explaining its action, the Fed said that recent economic data indicated that the economy is slowing, “reflecting the intensification of the housing correction and some softening in business and consumer spending.”
The Fed also noted that “strains in financial markets have increased in recent weeks.”
In its Oct. 31 statement, the Fed said it viewed the risks from weak growth as roughly balanced with the risks of higher inflation.
However, that phrase was changed in the current statement to read, “Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.”
The Fed vote for the rate cut was 9 to 1 with Eric S. Rosengren dissenting, arguing for a bigger, half-point cut in the funds rate.
Many economists believe the housing slump and credit turmoil have raised the risks of a recession. Many analysts believe that economic growth, as measured by the gross domestic product, may have dipped to a barely perceptible 1 percent rate, raising the chance that some shock, such as another surge in energy prices, could push the country into a recession.
But many analysts still believe the Fed will be able to respond forcefully enough with rate cuts that it will keep the current expansion alive. These analysts believe that the economy will start to rebound to faster growth by the middle of next year, when they expect that lower mortgage rates will have spurred a rebound in home sales.
“I think a full blown recession can be avoided but just barely,” said David Jones, chief economist at DMJ Advisors. He predicted that the Fed will follow up its December rate cut with three more reductions at its first three meetings of 2008.
Full text of Fed statementThe full text of the Fed's statement released with the announcement is below:
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.
Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.
Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; and Kevin M. Warsh. Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points
© 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: http://www.msnbc.msn.com/id/22202624/
Wednesday, November 7, 2007
House Committee Passes Mortgage Reform Bill
The U.S. House Financial Services Committee approved legislation on Tuesday creating new consumer protection standards in the mortgage industry.
The bill drafted by Rep. Barney Frank (D-Mass.) would:
* Ban lenders from making loans that borrowers don't have the ability to repay.
* Prohibit lenders from steering home owners into refinanced mortgages that don't provide any benefit.
* Make Wall Street banks that package mortgage securities into investments liable for violations of lending laws
* Create a nationwide licensing system for mortgage brokers and bank loan officers.
The bill now moves to the full House. Similar legislation was introduced in May by Sen. Charles Schumer (D-N.Y.), but has been stalled in the Senate.
Source: The Associated Press, Alan Zibel (11/06/2007)
The bill drafted by Rep. Barney Frank (D-Mass.) would:
* Ban lenders from making loans that borrowers don't have the ability to repay.
* Prohibit lenders from steering home owners into refinanced mortgages that don't provide any benefit.
* Make Wall Street banks that package mortgage securities into investments liable for violations of lending laws
* Create a nationwide licensing system for mortgage brokers and bank loan officers.
The bill now moves to the full House. Similar legislation was introduced in May by Sen. Charles Schumer (D-N.Y.), but has been stalled in the Senate.
Source: The Associated Press, Alan Zibel (11/06/2007)
Tuesday, October 30, 2007
Sanity-Saving Rules for New Landlords
Thinking of becoming a landlord? It's not as easy as you might think, experts say. Here are six rules that will help you find good tenants and make money.
Rule 1: Don’t be deluded about the market. Joseph Cooper, vice president of Massachusetts-based Monument Mortgage, cites "underestimating the cost in time and the cost in money of actually owning property" as the biggest mistake investors make. To overcome that weakness, he and others suggest studying local vacancy rates, getting a good appraisal and gathering information about any construction in the area that could change the status quo.
Rule 2: Get out your calculator. To get a good estimate of the initial rate of return: Take the first-year revenue minus estimated first-year expenses (including some value placed on your time) divided by the full cost of the property when purchased (essentially price plus transaction costs minus mortgage). To calculate the rate of return in later years, divide by estimated equity in the property (what you could sell it for after deducting transaction costs and the remaining mortgage), taking into account price appreciation or depreciation. It’s also wise to consult an accountant on how much of a tax and cash-flow benefit depreciation will provide.
Rule 3: Choose tenants carefully. Prospective tenants who respond promptly and conscientiously to calls or e-mails and who show up on time to see units likely will be responsible when it comes to paying rent and taking care of the property. And be careful to observe discrimination laws. Landlords can choose among prospective tenants for economic reasons that arise after credit, employment, and reference checks. Set financial standards for prospective tenants that make you comfortable that they can cover the monthly rent.
Rule 4: Avoid getting sued. An aspect of the landlord-tenant relationship that can lead to litigation include mishandling of security deposits. If a tenant pays a security deposit, in many states several conditions must be satisfied, including placement of the money in an interest-bearing account and inspection of the property. Other issues include lead paint levels and failure to provide a minimum standard of habitability.
Rule 5: Get Expert Help. Keep an electrician on speed-dial — as well as a plumber and handyman. It also helps for landlords to know a good lawyer, financial adviser, mortgage broker, and real estate professional.
Rule 6: Forget about flipping. "Anybody who buys something and says to you, 'I'm going to make a ton of money in two years and sell this thing' isn't being realistic," says mortgage banker Joseph Cooper. "That does happen, but it's extremely rare. You should be buying real estate with the idea that you're going to hold it for five to 10 years. That will take you through a cycle of up and down."
Source: Boston Globe, Shira Springer (10/21/07)
Rule 1: Don’t be deluded about the market. Joseph Cooper, vice president of Massachusetts-based Monument Mortgage, cites "underestimating the cost in time and the cost in money of actually owning property" as the biggest mistake investors make. To overcome that weakness, he and others suggest studying local vacancy rates, getting a good appraisal and gathering information about any construction in the area that could change the status quo.
Rule 2: Get out your calculator. To get a good estimate of the initial rate of return: Take the first-year revenue minus estimated first-year expenses (including some value placed on your time) divided by the full cost of the property when purchased (essentially price plus transaction costs minus mortgage). To calculate the rate of return in later years, divide by estimated equity in the property (what you could sell it for after deducting transaction costs and the remaining mortgage), taking into account price appreciation or depreciation. It’s also wise to consult an accountant on how much of a tax and cash-flow benefit depreciation will provide.
Rule 3: Choose tenants carefully. Prospective tenants who respond promptly and conscientiously to calls or e-mails and who show up on time to see units likely will be responsible when it comes to paying rent and taking care of the property. And be careful to observe discrimination laws. Landlords can choose among prospective tenants for economic reasons that arise after credit, employment, and reference checks. Set financial standards for prospective tenants that make you comfortable that they can cover the monthly rent.
Rule 4: Avoid getting sued. An aspect of the landlord-tenant relationship that can lead to litigation include mishandling of security deposits. If a tenant pays a security deposit, in many states several conditions must be satisfied, including placement of the money in an interest-bearing account and inspection of the property. Other issues include lead paint levels and failure to provide a minimum standard of habitability.
Rule 5: Get Expert Help. Keep an electrician on speed-dial — as well as a plumber and handyman. It also helps for landlords to know a good lawyer, financial adviser, mortgage broker, and real estate professional.
Rule 6: Forget about flipping. "Anybody who buys something and says to you, 'I'm going to make a ton of money in two years and sell this thing' isn't being realistic," says mortgage banker Joseph Cooper. "That does happen, but it's extremely rare. You should be buying real estate with the idea that you're going to hold it for five to 10 years. That will take you through a cycle of up and down."
Source: Boston Globe, Shira Springer (10/21/07)
Tuesday, October 23, 2007
Countrywide to Refinance $16 Billion in ARMs
Countrywide Financial Corp., the nation’s largest mortgage lender, is offering to refinance up to $16 billion of adjustable-rate mortgages.
The lender announced the program today as pressure mounts from legislative and consumer groups to clean up lending practices.
Countrywide said it would reach out to borrowers who are current on their loans but are facing an imminent rate reset to discuss options. Countrywide said it would refinance about $10 billion in loans and modify another $4 billion. It also plans to contact borrowers of some $2.2 billion who are late on their loans and are having trouble paying because of a recent rate reset.
"Unprecedented times call for unprecedented remedies," Chief Operating Officer David Sambol said in a statement. "We are determined to assist borrowers who have the willingness and wherewithal to remain in their homes, but need a little help."
Source: Reuters News, Jonathan Stempel (10/23/07)
The lender announced the program today as pressure mounts from legislative and consumer groups to clean up lending practices.
Countrywide said it would reach out to borrowers who are current on their loans but are facing an imminent rate reset to discuss options. Countrywide said it would refinance about $10 billion in loans and modify another $4 billion. It also plans to contact borrowers of some $2.2 billion who are late on their loans and are having trouble paying because of a recent rate reset.
"Unprecedented times call for unprecedented remedies," Chief Operating Officer David Sambol said in a statement. "We are determined to assist borrowers who have the willingness and wherewithal to remain in their homes, but need a little help."
Source: Reuters News, Jonathan Stempel (10/23/07)
Thursday, October 11, 2007
IRS Plans to Take Hard Look at 1031 Exchanges
The Internal Revenue Service is stepping up its oversight of 1031 like-kind exchanges after a report by the U.S. Department of Treasury Inspector General for Tax Administration pointed out that its use has doubled since 1998.
The IRS will be providing guidance on the issue of 1031 exchanges for second and vacation homes that aren’t used exclusively by the owner.
The report said some "may see this as an opportunity to invest in second and vacation homes at reasonable prices." Given the lack of regulations, statutes and court cases in this area, taxpayers and promoters "may mistakenly take the position that any transaction not specifically prohibited by IRS guidance would be entitled" to like-kind exchange treatment, the report said. "Unscrupulous or uninformed promoters" already are taking advantage of the IRS's "silence" on this subject. "For example, one promoter advised that taxpayers could sell their vacation homes using like-kind exchanges even though the homes were never rented."
Bruce Friedland, an IRS spokesman, said the agency "urges taxpayers to keep documentation on hand to substantiate 1031 exchanges." That documentation "is critical if the IRS has questions," he said.
Source: The Wall Street Journal, Tom Herman (10/10/2007)
The IRS will be providing guidance on the issue of 1031 exchanges for second and vacation homes that aren’t used exclusively by the owner.
The report said some "may see this as an opportunity to invest in second and vacation homes at reasonable prices." Given the lack of regulations, statutes and court cases in this area, taxpayers and promoters "may mistakenly take the position that any transaction not specifically prohibited by IRS guidance would be entitled" to like-kind exchange treatment, the report said. "Unscrupulous or uninformed promoters" already are taking advantage of the IRS's "silence" on this subject. "For example, one promoter advised that taxpayers could sell their vacation homes using like-kind exchanges even though the homes were never rented."
Bruce Friedland, an IRS spokesman, said the agency "urges taxpayers to keep documentation on hand to substantiate 1031 exchanges." That documentation "is critical if the IRS has questions," he said.
Source: The Wall Street Journal, Tom Herman (10/10/2007)
Saturday, September 22, 2007
Top 10 Places to be a Renter
People have to live somewhere, and if they can’t buy a home, then they rent.
Normally, when housing prices fall, as they have over the last six quarters in many parts of the country, the rental market tightens. But this time as the housing market softens, vacant homes have been turned into rentals, pushing rental rates down.
Using a variety of data, Forbes magazine ranked rental markets in 40 of the largest U.S. cities. It identified these 10 markets as the best places for a renter to get a good deal.
1. Atlanta: continued build-ins downtown and on the beltway have caused the vacancy rate for rental property here to be just over 18 percent — and residents only have to spend 21 percent of their annual income on rent.
2. Denver: rental prices grew at the lowest rate for any city measured, and renters spend just 22.5 percent of income on rent.
3. Phoenix: low rents and high vacancy rater.
4. Las Vegas. This is one of the nation’s most over-stocked housing markets, although strong job creation suggests that may soon end.
5. Tampa, Fla.: high inventory and low prices.
6. Houston: this market has the highest rental vacancy rate of any city on the list.
7. Cincinnati: this is a highly affordable market for both buyers and renters.
8. Indianapolis: another affordable housing market. Renters spend only 18 percent of median gross salary.
9. Sacramento, Calif.: price increases were low this year, but the market is tightening and that’s likely to drive this city off the bargain list soon.
10. Dallas: rental prices have risen slowly despite a relatively high return on investment for owners.
Source: Forbes, Matt Woolsey (08/30/07)
Normally, when housing prices fall, as they have over the last six quarters in many parts of the country, the rental market tightens. But this time as the housing market softens, vacant homes have been turned into rentals, pushing rental rates down.
Using a variety of data, Forbes magazine ranked rental markets in 40 of the largest U.S. cities. It identified these 10 markets as the best places for a renter to get a good deal.
1. Atlanta: continued build-ins downtown and on the beltway have caused the vacancy rate for rental property here to be just over 18 percent — and residents only have to spend 21 percent of their annual income on rent.
2. Denver: rental prices grew at the lowest rate for any city measured, and renters spend just 22.5 percent of income on rent.
3. Phoenix: low rents and high vacancy rater.
4. Las Vegas. This is one of the nation’s most over-stocked housing markets, although strong job creation suggests that may soon end.
5. Tampa, Fla.: high inventory and low prices.
6. Houston: this market has the highest rental vacancy rate of any city on the list.
7. Cincinnati: this is a highly affordable market for both buyers and renters.
8. Indianapolis: another affordable housing market. Renters spend only 18 percent of median gross salary.
9. Sacramento, Calif.: price increases were low this year, but the market is tightening and that’s likely to drive this city off the bargain list soon.
10. Dallas: rental prices have risen slowly despite a relatively high return on investment for owners.
Source: Forbes, Matt Woolsey (08/30/07)
Thursday, September 20, 2007
Fannie, Freddie Get More Subprime Flexibility
The Office of Federal Housing Enterprise Oversight, which oversees Fannie Mae and Freddie Mac, on Wednesday agreed to allow both companies to buy more subprime loans — a decision that NAR applauds.
Fannie Mae and Freddie Mac will have more flexibility to address problems in the mortgage market, which will benefit the housing market overall, says the NATIONAL ASSOCIATION OF REALTORS®. As a result of Wednesday’s action, more subprime loans will be made available to borrowers and home owners who are having problems refinancing their mortgage.
In providing the ability to make a two percent adjustment to the portfolio limit formula for Fannie Mae, OFHEO director James Lockhart “sends an important signal to America’s home owners and buyers that the government recognizes that there is a major problem and that it is willing to act,” NAR President Pat Combs says.
This week, actions by both houses of Congress to reform FHA programs, and the Federal Reserve to decrease interest rates, should make borrowing more affordable and money more available, Combs says. “With reduced housing prices and increased housing inventory, interest rates that are near historic lows, and now with Fannie’s and Freddie’s increased ability to lend, we may see positive movement in the housing market,” said Combs.
NAR continues to urge Congress to increase Fannie Mae and Freddie Mac’s conforming loan limits, which would help borrowers in high-cost areas who are finding it extremely difficult to secure affordable financing.
“This would have the effect of making more money available for more of our nation’s borrowers,” Combs says.
— REALTOR® Magazine Online
Fannie Mae and Freddie Mac will have more flexibility to address problems in the mortgage market, which will benefit the housing market overall, says the NATIONAL ASSOCIATION OF REALTORS®. As a result of Wednesday’s action, more subprime loans will be made available to borrowers and home owners who are having problems refinancing their mortgage.
In providing the ability to make a two percent adjustment to the portfolio limit formula for Fannie Mae, OFHEO director James Lockhart “sends an important signal to America’s home owners and buyers that the government recognizes that there is a major problem and that it is willing to act,” NAR President Pat Combs says.
This week, actions by both houses of Congress to reform FHA programs, and the Federal Reserve to decrease interest rates, should make borrowing more affordable and money more available, Combs says. “With reduced housing prices and increased housing inventory, interest rates that are near historic lows, and now with Fannie’s and Freddie’s increased ability to lend, we may see positive movement in the housing market,” said Combs.
NAR continues to urge Congress to increase Fannie Mae and Freddie Mac’s conforming loan limits, which would help borrowers in high-cost areas who are finding it extremely difficult to secure affordable financing.
“This would have the effect of making more money available for more of our nation’s borrowers,” Combs says.
— REALTOR® Magazine Online
Wednesday, September 19, 2007
Fed Half-Point Rate Cut to Help Home Buyers
The Federal Reserve Tuesday sliced one-half a percentage point off the federal funds rate, cutting it to 4.75 percent from 5.25 percent.
It also cut its discount rate by the same amount, also bringing it to 5.25 percent.
The cuts could be a mixed blessing for homebuyers, pushing fixed-rate mortgages higher if inflation worries grow, economists say.
But relief could come in other ways. Consumers should start feeling the impact quickly in the form of reduced payments on home-equity lines of credit, credit cards and some car loans.
There is likely to be little immediate relief for borrowers with many adjustable-rate mortgages because the rates on roughly half of these loans are tied to the London interbank offered rate (LIBOR). Libor recently jumped sharply above the Fed funds rate because of the continuing credit crunch in the markets.
"If Libor doesn't come down, there is no relief" for many mortgage borrowers, says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.
Source: The Wall Street Journal, Jane J. Kim and Ruth Simon (09/19/2007)
It also cut its discount rate by the same amount, also bringing it to 5.25 percent.
The cuts could be a mixed blessing for homebuyers, pushing fixed-rate mortgages higher if inflation worries grow, economists say.
But relief could come in other ways. Consumers should start feeling the impact quickly in the form of reduced payments on home-equity lines of credit, credit cards and some car loans.
There is likely to be little immediate relief for borrowers with many adjustable-rate mortgages because the rates on roughly half of these loans are tied to the London interbank offered rate (LIBOR). Libor recently jumped sharply above the Fed funds rate because of the continuing credit crunch in the markets.
"If Libor doesn't come down, there is no relief" for many mortgage borrowers, says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.
Source: The Wall Street Journal, Jane J. Kim and Ruth Simon (09/19/2007)
Monday, September 10, 2007
FHA Gives Practitioners Chance to Help Past Clients
Real estate practitioners with past clients who tapped risky subprime mortgage financing for their purchase have a reason to give those home owners a call.
In a key policy shift, the federal mortgage insurer FHA is allowing subprime borrowers with good payment histories and at least 3 percent in home equity to refinance to safe FHA financing.
The policy shift — strongly supported by the NATIONAL ASSOCIATION OF REALTORS® and put into effect by the U.S. Department of Housing and Urban Development in mid-July — is one of the first tangible changes to come out of the federal government's efforts to curb defaults in the subprime market.
Defaults are expected to rise significantly among subprime borrowers in the next two years as the low starter rates that lenders used to lure customers expire and interest rates move upward, making monthly payments unaffordable for potentially millions of borrowers.
Only a portion of subprime borrowers who are facing spiraling monthly payments will be able to refinance into a government-backed loan because of the payment-history and equity restrictions imposed by FHA . But for those who qualify, the new policy opens the door for borrowers in high-risk financing to move into a fixed, long-term mortgage that's far safer.
That option is something practitioners will want to pass along if they have past clients who tapped subprime financing and now might be facing payment pressure from higher interest rate payments.
Details of the new policy, called FHASecure, are available in a HUD Mortgagee Letter. You can also read NAR's statement in support of the program on REALTOR.org.
— REALTOR® Magazine Online
In a key policy shift, the federal mortgage insurer FHA is allowing subprime borrowers with good payment histories and at least 3 percent in home equity to refinance to safe FHA financing.
The policy shift — strongly supported by the NATIONAL ASSOCIATION OF REALTORS® and put into effect by the U.S. Department of Housing and Urban Development in mid-July — is one of the first tangible changes to come out of the federal government's efforts to curb defaults in the subprime market.
Defaults are expected to rise significantly among subprime borrowers in the next two years as the low starter rates that lenders used to lure customers expire and interest rates move upward, making monthly payments unaffordable for potentially millions of borrowers.
Only a portion of subprime borrowers who are facing spiraling monthly payments will be able to refinance into a government-backed loan because of the payment-history and equity restrictions imposed by FHA . But for those who qualify, the new policy opens the door for borrowers in high-risk financing to move into a fixed, long-term mortgage that's far safer.
That option is something practitioners will want to pass along if they have past clients who tapped subprime financing and now might be facing payment pressure from higher interest rate payments.
Details of the new policy, called FHASecure, are available in a HUD Mortgagee Letter. You can also read NAR's statement in support of the program on REALTOR.org.
— REALTOR® Magazine Online
Thursday, August 30, 2007
LOS ANGELES (Aug. 29) The percentage of households that could afford tobuy an entry-level home in California stood at 24 percent in the second quarter of2007, compared with 23 percent for the same period a year ago, according to areport released today by the CALIFORNIA ASSOCIATION OF REALTORS®(C.A.R.).
C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures thepercentage of households that can afford to purchase an entry-level home inCalifornia. C.A.R. also reports first-time buyer indexes for regions and selectcounties within the state. The Index is the most fundamental measure ofhousing well-being for first-time buyers in the state.
The minimum household income needed to purchase an entry-level home at$504,080 in California in the second quarter of 2007 was $101,550, based on anadjustable interest rate of 6.29 percent and assuming a 10 percent downpayment. First-time buyers typically purchase a home equal to 85 percent ofthe prevailing median price. The monthly payment including taxes andinsurance was $3,380 for the second quarter of 2007.
At 45 percent, the High Desert region was the most affordable in the state,followed by the Sacramento region at 44 percent. Santa Barbara was the leastaffordable region in the state at 12 percent, followed by the Monterey region at17 percent.
Quarterly FTB-HAI historical data from 2003 – 2007 is available on C.A.R.Online at http://www.car.org/index.php?id=MzY0ODU.
Leading the way...® in real estate news and information for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® ( file:///C:/exchweb/bin/redir.asp?URL=http:/www.car.org/) is one of the largest state trade organizations in the United States, with nearly 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
C.A.R. FIRST-TIME BUYER HOUSING AFFORDABILITY INDEX *
C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures thepercentage of households that can afford to purchase an entry-level home inCalifornia. C.A.R. also reports first-time buyer indexes for regions and selectcounties within the state. The Index is the most fundamental measure ofhousing well-being for first-time buyers in the state.
The minimum household income needed to purchase an entry-level home at$504,080 in California in the second quarter of 2007 was $101,550, based on anadjustable interest rate of 6.29 percent and assuming a 10 percent downpayment. First-time buyers typically purchase a home equal to 85 percent ofthe prevailing median price. The monthly payment including taxes andinsurance was $3,380 for the second quarter of 2007.
At 45 percent, the High Desert region was the most affordable in the state,followed by the Sacramento region at 44 percent. Santa Barbara was the leastaffordable region in the state at 12 percent, followed by the Monterey region at17 percent.
Quarterly FTB-HAI historical data from 2003 – 2007 is available on C.A.R.Online at http://www.car.org/index.php?id=MzY0ODU.
Leading the way...® in real estate news and information for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® ( file:///C:/exchweb/bin/redir.asp?URL=http:/www.car.org/) is one of the largest state trade organizations in the United States, with nearly 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
C.A.R. FIRST-TIME BUYER HOUSING AFFORDABILITY INDEX *
Monday, August 27, 2007
NAR: Existing-Home Sales Stabilize in July
Existing-home sales were essentially unchanged in July, with increases in the West and Northeast offset by a decline in the Midwest, according to the NATIONAL ASSOCIATION OF REALTORS®.
Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — slipped 0.2 percent to a seasonally adjusted annual rate of 5.75 million units in July from an upwardly revised pace of 5.76 million in June. They are 9 percent below the 6.32 million-unit level in July 2006.
Lawrence Yun, NAR senior economist, says the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” he says. “Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize.”
However, the rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is a promising sign, especially since this was the first region that underwent sales and price weakness after the boom, Yun says. “Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path,” he notes.
Regional Sales
Here’s how existing-home sales fared across the country:
* West: rose 1.8 percent in July to an annual pace of 1.12 million, but are 15.2 percent below a year ago. Median price: $349,400, up 0.9 percent from July 2006.
* Northeast: increased 1 percent to a level of 1.02 million in July, but are 2.9 percent lower than July 2006. Median price: $290,900, up 5.9 percent from a year ago.
* South: unchanged at an annual rate of 2.26 million in July, but are 10.7 percent below a year ago. Median price: $186,300, down 3.2 percent from July 2006.
* Midwest: fell 2.2 percent in July to a level of 1.35 million, and are 5.6 percent below July 2006. Median price: $173,800, which is 1.8 percent below a year ago.
Single-Family Home Sales Slip, Condos Rise
Overall, single-family home sales dipped 0.4 percent to a seasonally adjusted annual rate of 5 million in July from an upwardly revised level of 5.02 million in June. Those numbers are 9.3 percent below the year-ago pace of 5.51 million units. The median existing single-family home price was $228,600 in July, down 1 percent from July 2006.
On the other hand, existing condominium and co-op sales rose 1.4 percent to a seasonally adjusted annual rate of 750,000 units in July from 740,000 in June. But condo an co-op sales are 7.5 percent below the 811,000-unit level in July 2006. The median existing condo price was $230,600 in July, up 2.4 percent from a year ago.
NAR President: A Good Time to Buy
NAR’s latest research on July housing figures also revealed:
* The national median existing-home price for all housing types was $228,900 in July, down 0.6 percent from July 2006 when the median was $230,200 — the highest monthly price on record. The median is a typical market price where half of the homes sold for more and half sold for less.
* Total housing inventory rose 5.1 percent at the end of June to 4.59 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. That number is up from an upwardly revised 9.1-month supply in June.
* The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.7 percent in July, up from 6.66 percent in June, according to Freddie Mac. The rate was 6.76 percent in July 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 6.52 percent.
“For buyers able to qualify for conventional financing, there are ample opportunities in the current market,” says NAR President Pat V. Combs. “Availability and pricing of conventional loans are reasonable, and FHA-insured mortgage applications have been rising as low- and moderate-income buyers seek alternatives to subprime loans. If buyers are in it for the long haul, now can be a good time to get into your home.”
But Combs says it’s important to boost FHA’s viability. “NAR is advocating for a stronger FHA to help creditworthy borrowers who may be trapped in subprime loans with unfavorable terms,” she says. “We’d also like to see the elimination of prepayment penalties, which can trap borrowers in mortgages they can no longer afford.”
— REALTOR® Magazine Online
Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — slipped 0.2 percent to a seasonally adjusted annual rate of 5.75 million units in July from an upwardly revised pace of 5.76 million in June. They are 9 percent below the 6.32 million-unit level in July 2006.
Lawrence Yun, NAR senior economist, says the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” he says. “Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize.”
However, the rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is a promising sign, especially since this was the first region that underwent sales and price weakness after the boom, Yun says. “Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path,” he notes.
Regional Sales
Here’s how existing-home sales fared across the country:
* West: rose 1.8 percent in July to an annual pace of 1.12 million, but are 15.2 percent below a year ago. Median price: $349,400, up 0.9 percent from July 2006.
* Northeast: increased 1 percent to a level of 1.02 million in July, but are 2.9 percent lower than July 2006. Median price: $290,900, up 5.9 percent from a year ago.
* South: unchanged at an annual rate of 2.26 million in July, but are 10.7 percent below a year ago. Median price: $186,300, down 3.2 percent from July 2006.
* Midwest: fell 2.2 percent in July to a level of 1.35 million, and are 5.6 percent below July 2006. Median price: $173,800, which is 1.8 percent below a year ago.
Single-Family Home Sales Slip, Condos Rise
Overall, single-family home sales dipped 0.4 percent to a seasonally adjusted annual rate of 5 million in July from an upwardly revised level of 5.02 million in June. Those numbers are 9.3 percent below the year-ago pace of 5.51 million units. The median existing single-family home price was $228,600 in July, down 1 percent from July 2006.
On the other hand, existing condominium and co-op sales rose 1.4 percent to a seasonally adjusted annual rate of 750,000 units in July from 740,000 in June. But condo an co-op sales are 7.5 percent below the 811,000-unit level in July 2006. The median existing condo price was $230,600 in July, up 2.4 percent from a year ago.
NAR President: A Good Time to Buy
NAR’s latest research on July housing figures also revealed:
* The national median existing-home price for all housing types was $228,900 in July, down 0.6 percent from July 2006 when the median was $230,200 — the highest monthly price on record. The median is a typical market price where half of the homes sold for more and half sold for less.
* Total housing inventory rose 5.1 percent at the end of June to 4.59 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. That number is up from an upwardly revised 9.1-month supply in June.
* The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.7 percent in July, up from 6.66 percent in June, according to Freddie Mac. The rate was 6.76 percent in July 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 6.52 percent.
“For buyers able to qualify for conventional financing, there are ample opportunities in the current market,” says NAR President Pat V. Combs. “Availability and pricing of conventional loans are reasonable, and FHA-insured mortgage applications have been rising as low- and moderate-income buyers seek alternatives to subprime loans. If buyers are in it for the long haul, now can be a good time to get into your home.”
But Combs says it’s important to boost FHA’s viability. “NAR is advocating for a stronger FHA to help creditworthy borrowers who may be trapped in subprime loans with unfavorable terms,” she says. “We’d also like to see the elimination of prepayment penalties, which can trap borrowers in mortgages they can no longer afford.”
— REALTOR® Magazine Online
Friday, August 24, 2007
Mortgage Crisis: What Went Wrong?
Nearly 2 million mortgages are scheduled for rate increases this fall, which is expected to send foreclosures soaring.
President Bush has blamed the failure of borrowers to read the fine print. But many experts say the problem runs much deeper. The mortgage business has long been a tug of war between a social commitment to broad homeownership and the efforts of private financial operators to earn money.
Robert Kuttner, co-editor of The American Prospect and a senior fellow at Demos, a New York-based think tank, says the government should resume directly subsidizing starter mortgages and construction of homes for moderate-income buyers. He says these programs need to combine careful credit assessment with counseling, rather than relying totally on the private mortgage industry. He says he also would prevent irresponsible, speculative lenders from selling mortgages in the secondary market.
“We've now had an experiment in the claims made for mortgage deregulation, extending over three decades, and deregulation flunked," Kuttner says. "America needs to restore a system in which government supports homeownership — and makes sure that mortgage lenders serve as responsible creditors, not predators.”
Source: The Associated Press, Nathan K. Martin (08/19/07)
President Bush has blamed the failure of borrowers to read the fine print. But many experts say the problem runs much deeper. The mortgage business has long been a tug of war between a social commitment to broad homeownership and the efforts of private financial operators to earn money.
Robert Kuttner, co-editor of The American Prospect and a senior fellow at Demos, a New York-based think tank, says the government should resume directly subsidizing starter mortgages and construction of homes for moderate-income buyers. He says these programs need to combine careful credit assessment with counseling, rather than relying totally on the private mortgage industry. He says he also would prevent irresponsible, speculative lenders from selling mortgages in the secondary market.
“We've now had an experiment in the claims made for mortgage deregulation, extending over three decades, and deregulation flunked," Kuttner says. "America needs to restore a system in which government supports homeownership — and makes sure that mortgage lenders serve as responsible creditors, not predators.”
Source: The Associated Press, Nathan K. Martin (08/19/07)
Monday, August 20, 2007
Fed Cuts Discount Rate, Promises More
In an effort to stabilize financial markets, the Federal Reserve last Friday cut the discount rate that it charges to make direct loans to banks from 6.25 percent to 5.75 percent.
The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year, but it sent a strong signal in the wording of its statement that it was prepared to cut that rate as well.
In making the reduction the Fed stated, "the downside risks to growth have increased appreciably." It didn’t refer to inflation, which was the concern that previously kept it from cutting the federal funds rate.
"They provided a much needed response to the growing market turmoil today, but they will have to do more," said Mark Zandi, chief economist at Moody's Economy.com.
The move to cut the discount rate will not have a major impact on consumer interest rates in the way that cutting the federal funds rate triggers an immediate drop in banks' prime lending rate, the benchmark for millions of consumer and business loans.
However, Friday's move was expected to help with a severe cash crunch facing many businesses, including mortgage companies, which are having trouble getting loans for short-term financing needs.
Source: The Associated Press, Martin Crutsinger (08/17/2007)
The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year, but it sent a strong signal in the wording of its statement that it was prepared to cut that rate as well.
In making the reduction the Fed stated, "the downside risks to growth have increased appreciably." It didn’t refer to inflation, which was the concern that previously kept it from cutting the federal funds rate.
"They provided a much needed response to the growing market turmoil today, but they will have to do more," said Mark Zandi, chief economist at Moody's Economy.com.
The move to cut the discount rate will not have a major impact on consumer interest rates in the way that cutting the federal funds rate triggers an immediate drop in banks' prime lending rate, the benchmark for millions of consumer and business loans.
However, Friday's move was expected to help with a severe cash crunch facing many businesses, including mortgage companies, which are having trouble getting loans for short-term financing needs.
Source: The Associated Press, Martin Crutsinger (08/17/2007)
Monday, August 13, 2007
Buy Retirement Home Now, Move in Later
With prices in many areas at a low ebb, it might make good financial sense for Baby Boomers to buy their retirement homes now, even if they're still years away from actually moving. They can find renters who will pay the bills until they're ready to live there.
Here’s some advice for people who are considering this strategy:
* Shop carefully. It's best to buy a home that can be rented for a rate that, after tax considerations, will cover the mortgage, real estate taxes, and insurance.
* Study up on housing trends. Ask the local or state planning department for demographic and economic data. The information can reveal facts that will influence whether or not to buy. For example, big companies going out of business or military base closings can be bad news.
* Don’t forget maintenance. Consider who’ll take care of the house in the owner’s absence. Property managers charge 6 percent to 15 percent of the monthly rent. Family members may be willing to do the job for free, but they could be ill equipped to do the job if the don't have any experience.
* Consider financing. Boomers with sufficient equity in their current homes can tap it to either buy their retirement home outright or secure a much lower mortgage rate compared with a loan at the rate often offered to buyers of investment property.
Source: The Washington Post, Belly L. Kass, Esq. (08/11/2007)
Here’s some advice for people who are considering this strategy:
* Shop carefully. It's best to buy a home that can be rented for a rate that, after tax considerations, will cover the mortgage, real estate taxes, and insurance.
* Study up on housing trends. Ask the local or state planning department for demographic and economic data. The information can reveal facts that will influence whether or not to buy. For example, big companies going out of business or military base closings can be bad news.
* Don’t forget maintenance. Consider who’ll take care of the house in the owner’s absence. Property managers charge 6 percent to 15 percent of the monthly rent. Family members may be willing to do the job for free, but they could be ill equipped to do the job if the don't have any experience.
* Consider financing. Boomers with sufficient equity in their current homes can tap it to either buy their retirement home outright or secure a much lower mortgage rate compared with a loan at the rate often offered to buyers of investment property.
Source: The Washington Post, Belly L. Kass, Esq. (08/11/2007)
Monday, August 6, 2007
Kinder, gentler lenders
Mortgage servicers are finding ways to treat delinquent borrowers more patiently to avoid foreclosures.
NEW YORK (CNNMoney.com) -- The light at the end of the subprime tunnel seems a long way off, but some lenders are trying to get there without losing too many customers.
A flood of hybrid adjustable rate mortgages (ARMs) comes up for reset this fall - peaking in October with more than $50 billion due, with more delinquencies than ever expected. Foreclosures could explode, which would hurt everyone on the food chain: Borrowers lose their homes; lenders lose their payments; local governments lose tax base; and neighborhoods lose resiliency.
Rather than head straight to foreclosure though, many lenders are finding ways to help troubled borrowers -- although assistance is still less than universal.
"Servicers are beginning to understand that they're better off renegotiating," said Bruce Dorpalen, director of housing development for the Association of Community Organizations for Reform (ACORN), a non-profit community development group. Their average loss on a foreclosure for a lender is now $58,000, he said.
Lenders are beefing up mortgage mitigation departments and instructing staffs to offer more concessions, according to Vicki Vidal, Senior Director of Government Affairs for the Mortgage Bankers Association (MBA). Many of the concessions have been around for years, but they're now getting more play.
The first is a simple forbearance. Lenders allow delinquent borrowers to repay arrears later.
Say a borrower has a one-time money drain, like a large hospital bill. If he's $2,400 behind, the lender will accept an extra $200 a month for the next 12 months. Or, it can tack the $2,400 on the end of the loan, either as a one-time payment or as extra months of bills.
Forbearance is less useful for borrowers facing hybrid ARM resets. They may have fallen behind after their initial "teaser rates" expired, and their payments jumped. Forbearance can't help because the new payments are simply unaffordable.
Lenders can modify the mortgage, however, by changing the loan's length or its interest rate; they can even switch it to a fixed-rate loan from an ARM, all of which lower payments. Borrowers who've demonstrated good credit by keeping current with their bills during lower rate years are the likeliest candidates.
Another mitigation option is open only to delinquent borrowers with mortgages issued and insured by the Federal Housing Administration (FHA). They may be eligible for partial claim payments, one-time payoffs from the FHA's insurance fund that wipe out arrears.
Other foreclosure prevention options may help save borrowers' credit, but they don't keep them from losing their homes.
A deed in lieu of foreclosure has owners signing their deeds over to lenders, allowing them to walk away without obligation. You lose the house, but it doesn't appear as a foreclosure on your credit report.
Lenders can also encourage "short sales," third-party transactions in which new buyers offer less than the mortgage debt in exchange for properties. The practice has been around, but what's new, according to Vidal, "is that companies are looking more closely at how deep they can go."
In the past, a substantial difference between the loan balance and the third-party offer would derail a short sale. But with prices falling and inventories growing, lenders are more willing to accept lower short-sale prices.
An ounce of prevention
Even before emergency efforts are needed, lenders are taking new steps to keep borrowers out of trouble. Many are joining non-profit agencies, such as ACORN and NeighborWorks to reach out to risky borrowers.
Doug Robinson, a spokesman for NeighborWorks, said, "Lenders, like Countrywide in particular, have stepped up their borrower outreach efforts. They want to contact borrowers before the problem grows unsolvable."
Amy Schur, ACORN's national campaign director, said her organization is working with 35 mortgage servicers on a home ownership preservation initiative. Partners include the biggest names in mortgage lending: Countrywide (Charts, Fortune 500), Citibank (Charts, Fortune 500), Wells Fargo (Charts, Fortune 500) and JP Morgan Chase (Charts, Fortune 500).
"It's a case-by-case system where we all work very hard to get the best outcome for home owners," she said. In some cases, lenders have even forgiven arrears and just allowed borrowers to resume payments.
Counseling often focuses on lifestyle changes: helping a borrower figure out how to cut back on unnecessary or wasteful spending. That's sometimes enough to free up sufficient cash for the mortgage payment.
Some lenders are even hiring employment specialists to find new jobs for clients, according to Vidal.
The biggest hurdle, however, is simple communication. According to NeighborWorks, nearly 50 percent of all owners of foreclosed properties never once talked to their lenders before losing their home. If they had, the outcomes may have been different.
By Les Christie, CNNMoney.com staff writer
August 6 2007: 1:03 PM EDT
NEW YORK (CNNMoney.com) -- The light at the end of the subprime tunnel seems a long way off, but some lenders are trying to get there without losing too many customers.
A flood of hybrid adjustable rate mortgages (ARMs) comes up for reset this fall - peaking in October with more than $50 billion due, with more delinquencies than ever expected. Foreclosures could explode, which would hurt everyone on the food chain: Borrowers lose their homes; lenders lose their payments; local governments lose tax base; and neighborhoods lose resiliency.
Rather than head straight to foreclosure though, many lenders are finding ways to help troubled borrowers -- although assistance is still less than universal.
"Servicers are beginning to understand that they're better off renegotiating," said Bruce Dorpalen, director of housing development for the Association of Community Organizations for Reform (ACORN), a non-profit community development group. Their average loss on a foreclosure for a lender is now $58,000, he said.
Lenders are beefing up mortgage mitigation departments and instructing staffs to offer more concessions, according to Vicki Vidal, Senior Director of Government Affairs for the Mortgage Bankers Association (MBA). Many of the concessions have been around for years, but they're now getting more play.
The first is a simple forbearance. Lenders allow delinquent borrowers to repay arrears later.
Say a borrower has a one-time money drain, like a large hospital bill. If he's $2,400 behind, the lender will accept an extra $200 a month for the next 12 months. Or, it can tack the $2,400 on the end of the loan, either as a one-time payment or as extra months of bills.
Forbearance is less useful for borrowers facing hybrid ARM resets. They may have fallen behind after their initial "teaser rates" expired, and their payments jumped. Forbearance can't help because the new payments are simply unaffordable.
Lenders can modify the mortgage, however, by changing the loan's length or its interest rate; they can even switch it to a fixed-rate loan from an ARM, all of which lower payments. Borrowers who've demonstrated good credit by keeping current with their bills during lower rate years are the likeliest candidates.
Another mitigation option is open only to delinquent borrowers with mortgages issued and insured by the Federal Housing Administration (FHA). They may be eligible for partial claim payments, one-time payoffs from the FHA's insurance fund that wipe out arrears.
Other foreclosure prevention options may help save borrowers' credit, but they don't keep them from losing their homes.
A deed in lieu of foreclosure has owners signing their deeds over to lenders, allowing them to walk away without obligation. You lose the house, but it doesn't appear as a foreclosure on your credit report.
Lenders can also encourage "short sales," third-party transactions in which new buyers offer less than the mortgage debt in exchange for properties. The practice has been around, but what's new, according to Vidal, "is that companies are looking more closely at how deep they can go."
In the past, a substantial difference between the loan balance and the third-party offer would derail a short sale. But with prices falling and inventories growing, lenders are more willing to accept lower short-sale prices.
An ounce of prevention
Even before emergency efforts are needed, lenders are taking new steps to keep borrowers out of trouble. Many are joining non-profit agencies, such as ACORN and NeighborWorks to reach out to risky borrowers.
Doug Robinson, a spokesman for NeighborWorks, said, "Lenders, like Countrywide in particular, have stepped up their borrower outreach efforts. They want to contact borrowers before the problem grows unsolvable."
Amy Schur, ACORN's national campaign director, said her organization is working with 35 mortgage servicers on a home ownership preservation initiative. Partners include the biggest names in mortgage lending: Countrywide (Charts, Fortune 500), Citibank (Charts, Fortune 500), Wells Fargo (Charts, Fortune 500) and JP Morgan Chase (Charts, Fortune 500).
"It's a case-by-case system where we all work very hard to get the best outcome for home owners," she said. In some cases, lenders have even forgiven arrears and just allowed borrowers to resume payments.
Counseling often focuses on lifestyle changes: helping a borrower figure out how to cut back on unnecessary or wasteful spending. That's sometimes enough to free up sufficient cash for the mortgage payment.
Some lenders are even hiring employment specialists to find new jobs for clients, according to Vidal.
The biggest hurdle, however, is simple communication. According to NeighborWorks, nearly 50 percent of all owners of foreclosed properties never once talked to their lenders before losing their home. If they had, the outcomes may have been different.
By Les Christie, CNNMoney.com staff writer
August 6 2007: 1:03 PM EDT
Friday, August 3, 2007
Lenders Get Creative With Delinquent Borrowers
In an effort to talk with delinquent borrowers who have not answered their numerous phone calls, mortgage servicers are getting creative.
Quantum Servicing Corp. plans to mail out 100 prepaid cell phones at no cost to borrowers, although they will have to first make contact with the company in order to activate the phones for personal use.
While some experts believe such a move is cost-prohibitive, Quantum executive Joe Caravetta says the company can save upwards of 70 percent of the mortgage's value by helping borrowers avoid foreclosure.
A face-to-face approach is preferred, meanwhile, by Marix Servicing LLC of Phoenix, which will send representatives to borrowers' doors and present them with a cell phone already connected to a loss-mitigation worker.
Source: American Banker, William Launder; Kate Berry (07/18/07)
Quantum Servicing Corp. plans to mail out 100 prepaid cell phones at no cost to borrowers, although they will have to first make contact with the company in order to activate the phones for personal use.
While some experts believe such a move is cost-prohibitive, Quantum executive Joe Caravetta says the company can save upwards of 70 percent of the mortgage's value by helping borrowers avoid foreclosure.
A face-to-face approach is preferred, meanwhile, by Marix Servicing LLC of Phoenix, which will send representatives to borrowers' doors and present them with a cell phone already connected to a loss-mitigation worker.
Source: American Banker, William Launder; Kate Berry (07/18/07)
Thursday, August 2, 2007
Survey: Borrowers Say Lenders Are Less Patient Today
Lenders are less accommodating to mortgage customers who pay late than they were in 2006, according to a consumer survey by J.D. Power and Associates.
The survey measured customer satisfaction with their mortgages company based on four primary areas: the administration of the customer's account, the billing process, the payment process, and the process of contacting the mortgage servicer.
The study determined that mortgage companies are more flexible in rescheduling payments than they were a year ago, but are less likely to be understanding or patient when customers pay late.
The 2007 Primary Mortgage Servicer Study is based on responses from 11,481 home owners regarding their experiences with their primary mortgage servicer. The study was fielded in three waves in November 2006, February 2007, and May 2007.
Here are the 10 mortgage companies that scored highest, based on a 1,000-point scale:
BB&T (Branch Banking and Trust), 860
M & T Mortgage, 828
Citizens Bank, 825
Countrywide Home Loans, 824
SunTrust Mortgage, 822
First Horizon Home Loans, 818
Wells Fargo, 817
GMAC Mortgage, 816
Regions Mortgage, 807
CitiMortgage, 805
— REALTOR® Magazine Online
The survey measured customer satisfaction with their mortgages company based on four primary areas: the administration of the customer's account, the billing process, the payment process, and the process of contacting the mortgage servicer.
The study determined that mortgage companies are more flexible in rescheduling payments than they were a year ago, but are less likely to be understanding or patient when customers pay late.
The 2007 Primary Mortgage Servicer Study is based on responses from 11,481 home owners regarding their experiences with their primary mortgage servicer. The study was fielded in three waves in November 2006, February 2007, and May 2007.
Here are the 10 mortgage companies that scored highest, based on a 1,000-point scale:
BB&T (Branch Banking and Trust), 860
M & T Mortgage, 828
Citizens Bank, 825
Countrywide Home Loans, 824
SunTrust Mortgage, 822
First Horizon Home Loans, 818
Wells Fargo, 817
GMAC Mortgage, 816
Regions Mortgage, 807
CitiMortgage, 805
— REALTOR® Magazine Online
Tuesday, July 24, 2007
McMansions Under Siege
Cities all over the country are fighting the growth of giant homes. In 1973, the median size of a new American home was 1,525 square feet; in 2006, it was 2,248 square feet.
Cities like Minneapolis and Atlantic Beach, Fla., have passed laws restricting home size to half the square footage of its lot. Boulder County, Colo., is considering forcing people in some rural areas to pay extra to build homes bigger than 3,000 square feet.
The unprecedented explosion in homes in the last five years "has produced so much change on the landscape that this is really a counter-response to it," says James W. Hughes, dean of Rutgers University's Bloustein School of Planning and Public Policy.
Opponents to these kinds of laws say they infringe on property rights. Bellevue, Wash., has tried to circumvent this issue while still protecting owners of small, older homes from view-blocking McMonsters by requiring preservation of trees and limiting height above grade.
"Change occurs," says Cheryl Kuhn, Bellevue’s neighborhood outreach manager. “But you want that to happen in a graceful way."
Source: The Los Angeles Times, Nicholas Riccardi (07/23/07
Cities like Minneapolis and Atlantic Beach, Fla., have passed laws restricting home size to half the square footage of its lot. Boulder County, Colo., is considering forcing people in some rural areas to pay extra to build homes bigger than 3,000 square feet.
The unprecedented explosion in homes in the last five years "has produced so much change on the landscape that this is really a counter-response to it," says James W. Hughes, dean of Rutgers University's Bloustein School of Planning and Public Policy.
Opponents to these kinds of laws say they infringe on property rights. Bellevue, Wash., has tried to circumvent this issue while still protecting owners of small, older homes from view-blocking McMonsters by requiring preservation of trees and limiting height above grade.
"Change occurs," says Cheryl Kuhn, Bellevue’s neighborhood outreach manager. “But you want that to happen in a graceful way."
Source: The Los Angeles Times, Nicholas Riccardi (07/23/07
Friday, July 20, 2007
6 Ways to Quickly Boost Credit Scores
As lenders tighten their underwriting guidelines, borrowers are wise to raise their credit scores to qualify for loans, secure better loan terms, and receive lower interest rates.
"Individuals can positively affect their credit scores in as little as three weeks," says Edward Jamison, a Los Angeles-based credit attorney. "It's just a matter of getting educated and focused on the best, fastest, and most reliable course of action."
Jamison, who you may know as a credit expert on the NBC show, “Starting Over,” offers these six tips for improving credit strength quickly.
1. Know your limits. Borrowers should first check their credit limits and evenly distribute the balances they're carrying to help increase their credit scores, or better yet, pay them off in full to get the highest score increase. "Make sure your maximum limit is reported," Jamison says. "When no limit is reported, credit scoring software presumes the account is maxed out."
2. Bring the balances near zero. The credit scoring software scores more favorably to those with a closer balance to zero. Balances over 70 percent damage credit the most, followed by the next tier of 50 percent and then 30 percent of the maximum credit limit. "Rather than carrying a large balance in an unfavorable tier, redistribute outstanding balances over several credit cards," advises Jamison.
3. Don’t cancel your cards. "Closing credit card accounts can hurt your score unless the accounts were opened less than two years ago, and you have over six credit cards," Jamison says. Fair Isaac's credit scoring software assumes that people who have had credit for a longer time are at less risk of defaulting on payments.
4. Eliminate late payments (but ask nice). Get rid of late payments listed on the credit report. "Contact the creditors that report late payments and request a good faith adjustment that removes the late payments reported on your account," Jamison says. The creditor may work with you, but it may require more than one phone call; patience is required. Your odds of success will dwindle if you're rude or unclear about your request, he adds.
5. Get rid of collection accounts. But only if the collection agency agrees to delete them in return. Paying them off can otherwise actually lead to a decreased credit score due to the date of last activity getting updated to the current date when you pay. The consumer should contact the collector and request a letter explicitly stating the agreement to delete the account upon receipt or clearance of the payment, Jamison says. Not all collection agencies will delete reporting, but it's certainly worth the effort.
6. Pay off past due amounts on accounts that are not in charge-off status. After that, Jamison advises getting rid of charge-offs and liens that are less than two years old. "Charge-offs and liens that are older than 24 months do not affect your credit score nearly as much as ones under 24 months," says Jamison. "But if they're newer than 24 months, they can seriously damage your credit." If you have both charge-offs and collection accounts, but have limited funds, pay off the past due balances first, then pay collection accounts as long as the collectors agree to remove all references to credit bureaus.
SOURCE: REALTOR® Magazine Online
"Individuals can positively affect their credit scores in as little as three weeks," says Edward Jamison, a Los Angeles-based credit attorney. "It's just a matter of getting educated and focused on the best, fastest, and most reliable course of action."
Jamison, who you may know as a credit expert on the NBC show, “Starting Over,” offers these six tips for improving credit strength quickly.
1. Know your limits. Borrowers should first check their credit limits and evenly distribute the balances they're carrying to help increase their credit scores, or better yet, pay them off in full to get the highest score increase. "Make sure your maximum limit is reported," Jamison says. "When no limit is reported, credit scoring software presumes the account is maxed out."
2. Bring the balances near zero. The credit scoring software scores more favorably to those with a closer balance to zero. Balances over 70 percent damage credit the most, followed by the next tier of 50 percent and then 30 percent of the maximum credit limit. "Rather than carrying a large balance in an unfavorable tier, redistribute outstanding balances over several credit cards," advises Jamison.
3. Don’t cancel your cards. "Closing credit card accounts can hurt your score unless the accounts were opened less than two years ago, and you have over six credit cards," Jamison says. Fair Isaac's credit scoring software assumes that people who have had credit for a longer time are at less risk of defaulting on payments.
4. Eliminate late payments (but ask nice). Get rid of late payments listed on the credit report. "Contact the creditors that report late payments and request a good faith adjustment that removes the late payments reported on your account," Jamison says. The creditor may work with you, but it may require more than one phone call; patience is required. Your odds of success will dwindle if you're rude or unclear about your request, he adds.
5. Get rid of collection accounts. But only if the collection agency agrees to delete them in return. Paying them off can otherwise actually lead to a decreased credit score due to the date of last activity getting updated to the current date when you pay. The consumer should contact the collector and request a letter explicitly stating the agreement to delete the account upon receipt or clearance of the payment, Jamison says. Not all collection agencies will delete reporting, but it's certainly worth the effort.
6. Pay off past due amounts on accounts that are not in charge-off status. After that, Jamison advises getting rid of charge-offs and liens that are less than two years old. "Charge-offs and liens that are older than 24 months do not affect your credit score nearly as much as ones under 24 months," says Jamison. "But if they're newer than 24 months, they can seriously damage your credit." If you have both charge-offs and collection accounts, but have limited funds, pay off the past due balances first, then pay collection accounts as long as the collectors agree to remove all references to credit bureaus.
SOURCE: REALTOR® Magazine Online
Wednesday, July 18, 2007
Bernanke: Economy Will Expand at 'Moderate Pace'
Federal Reserve Chairman Ben Bernanke told Congress Wednesday that the economy has emerged from its anemic spell, but overall growth for the year will be lower than expected. Inflation remains the chief concern, he said.
Delivering a midyear Fed economic report to Capitol Hill, Bernanke struck a somewhat cautious tone. He suggested that the economy appears likely to expand "at a moderate pace" over the second half.
Still, the Fed chief told the House Financial Services Committee that growth this year will be a bit slower than the Fed projected in February. Growth should strengthen a bit next year, he said. The inflation forecast, however, wasn't changed. It calls for prices other than food and energy to edge lower.
Against this backdrop, the Fed is likely to leave interest rates where they are through the rest of this year.
For just over a year, the Federal Reserve has held a key interest rate at 5.25 percent, providing a period of stability to borrowers. Before that, the Fed had boosted rates for two years to fend off inflation.
On Wall Street, stocks fell after Bear Stearns Cos. told investors there was little value left in two failed hedge funds, renewing concerns about risky mortgages.
Bernanke took pains Wednesday to hedge the Fed's bets and outline risks to the economy.
One risk is that energy and commodity prices could continue to rise sharply, boosting the prices of lots of other goods and services and thus spreading inflation through the economy.
The Fed "has consistently stated that upside risks to inflation are its predominant" concern, Bernanke said.
Gasoline prices, which peaked in May, receded somewhat in June and are now up past $3 a gallon.
Overall consumer prices calmed down in June, the government reported Wednesday. They rose by just 0.2 percent -- the smallest increase in five months.
Another risk is that the housing slump could turn out worse than expected, sapping consumer spending and possibly causing overall economic growth to be weaker.
The economy barely budged in the first quarter, growing at pace of just 0.7 percent, the worst in more than four years. The sour housing market was the principal culprit.
The housing market will remain sluggish for some time, partly because of some now tighter lending standards and the recent rise in mortgage rates, Bernanke said.
Even if the demand for housing were to stabilize somewhat, the pace of new home building will probably fall as builders work down excess stocks of unsold homes, he said.
"Thus declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time," Bernanke said.
Bernanke also outlined efforts by regulators to deal with problems in the market for risky mortgages. Those are mortgages made to people with spotty credit histories.
Foreclosures and delinquencies for these "subprime" mortgages have spiked. Some big subprime lenders have been forced out of business.
Borrowers and lenders have been clobbered by rising interest rates and weak home values. Congress has blasted the Fed and other regulators for not doing enough to crack down on lax lending standards, which had contributed to the problems.
"Rising delinquencies and foreclosures are creating personal, economic and social distress for many homeowners and communities -- problems that likely will get worse before they get better," Bernanke said.
To better protect consumers, the Fed is looking at ways to improve mortgage disclosure and ways to curb unfair or deceptive lending practices. It also is encouraging lenders to work with troubled homeowners.
In new economic projections, the Fed expects the economy to grow between 2.25 and 2.50 percent, as measured from the fourth quarter of last year to the fourth quarter of this year. That's lower than the old forecast of 2.5 percent and 3 percent.
For 2008, the economy should pick up and expand between 2.50 and 2.75 percent.
"Core" inflation, meanwhile, should increase by 2 percent and 2.25 percent this year, the same as the previous projection. Core inflation excludes the more volatile categories of energy and food.
The unemployment rate -- currently at 4.5 percent -- could rise as high as 4.75 percent this year, which would still be considered relatively low by historical standards. That's also unchanged from the Fed's old forecast.
Source: Associated Press
Delivering a midyear Fed economic report to Capitol Hill, Bernanke struck a somewhat cautious tone. He suggested that the economy appears likely to expand "at a moderate pace" over the second half.
Still, the Fed chief told the House Financial Services Committee that growth this year will be a bit slower than the Fed projected in February. Growth should strengthen a bit next year, he said. The inflation forecast, however, wasn't changed. It calls for prices other than food and energy to edge lower.
Against this backdrop, the Fed is likely to leave interest rates where they are through the rest of this year.
For just over a year, the Federal Reserve has held a key interest rate at 5.25 percent, providing a period of stability to borrowers. Before that, the Fed had boosted rates for two years to fend off inflation.
On Wall Street, stocks fell after Bear Stearns Cos. told investors there was little value left in two failed hedge funds, renewing concerns about risky mortgages.
Bernanke took pains Wednesday to hedge the Fed's bets and outline risks to the economy.
One risk is that energy and commodity prices could continue to rise sharply, boosting the prices of lots of other goods and services and thus spreading inflation through the economy.
The Fed "has consistently stated that upside risks to inflation are its predominant" concern, Bernanke said.
Gasoline prices, which peaked in May, receded somewhat in June and are now up past $3 a gallon.
Overall consumer prices calmed down in June, the government reported Wednesday. They rose by just 0.2 percent -- the smallest increase in five months.
Another risk is that the housing slump could turn out worse than expected, sapping consumer spending and possibly causing overall economic growth to be weaker.
The economy barely budged in the first quarter, growing at pace of just 0.7 percent, the worst in more than four years. The sour housing market was the principal culprit.
The housing market will remain sluggish for some time, partly because of some now tighter lending standards and the recent rise in mortgage rates, Bernanke said.
Even if the demand for housing were to stabilize somewhat, the pace of new home building will probably fall as builders work down excess stocks of unsold homes, he said.
"Thus declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time," Bernanke said.
Bernanke also outlined efforts by regulators to deal with problems in the market for risky mortgages. Those are mortgages made to people with spotty credit histories.
Foreclosures and delinquencies for these "subprime" mortgages have spiked. Some big subprime lenders have been forced out of business.
Borrowers and lenders have been clobbered by rising interest rates and weak home values. Congress has blasted the Fed and other regulators for not doing enough to crack down on lax lending standards, which had contributed to the problems.
"Rising delinquencies and foreclosures are creating personal, economic and social distress for many homeowners and communities -- problems that likely will get worse before they get better," Bernanke said.
To better protect consumers, the Fed is looking at ways to improve mortgage disclosure and ways to curb unfair or deceptive lending practices. It also is encouraging lenders to work with troubled homeowners.
In new economic projections, the Fed expects the economy to grow between 2.25 and 2.50 percent, as measured from the fourth quarter of last year to the fourth quarter of this year. That's lower than the old forecast of 2.5 percent and 3 percent.
For 2008, the economy should pick up and expand between 2.50 and 2.75 percent.
"Core" inflation, meanwhile, should increase by 2 percent and 2.25 percent this year, the same as the previous projection. Core inflation excludes the more volatile categories of energy and food.
The unemployment rate -- currently at 4.5 percent -- could rise as high as 4.75 percent this year, which would still be considered relatively low by historical standards. That's also unchanged from the Fed's old forecast.
Source: Associated Press
Monday, July 16, 2007
Preapproved or Prequalified: What's the Difference?
Confusing prequalification with preapproval can mean disappointment for both a home seller and a buyer. Real estate experts say it's smart to urge buyers to become preapproved by their lender – not just prequalified.
For a buyer to obtain a bona fide preapproval, he must submit a loan application with the necessary documentation and fee. After the lender verifies and analyzes the application, it will notify the applicant of how much money he can afford to borrow. Armed with that information, the buyer can confidently go home shopping.
Prequalifications are simply an estimate of what a buyer can afford. A buyer who assumes that this estimate is accurate and chooses a home based on the information may, in fact, be denied a loan when he actually applies, a situation that wastes his time and can put a seller in an a bad position if they've already turned away a qualified buyer. And, of course it wastes the real estate practitioner's time as well.
Source: Kiplinger’s Personal Finance Magazine (08/01/2007)
For a buyer to obtain a bona fide preapproval, he must submit a loan application with the necessary documentation and fee. After the lender verifies and analyzes the application, it will notify the applicant of how much money he can afford to borrow. Armed with that information, the buyer can confidently go home shopping.
Prequalifications are simply an estimate of what a buyer can afford. A buyer who assumes that this estimate is accurate and chooses a home based on the information may, in fact, be denied a loan when he actually applies, a situation that wastes his time and can put a seller in an a bad position if they've already turned away a qualified buyer. And, of course it wastes the real estate practitioner's time as well.
Source: Kiplinger’s Personal Finance Magazine (08/01/2007)
Friday, July 13, 2007
Mortgage Rates Climb This Week
Freddie Mac reports an increase in the 30-year fixed mortgage rate to 6.73 percent this week, up from 6.63 percent a week ago. Chief Economist Frank Nothaft expects the benchmark to remain at or near this level for the remainder of the year.
The 15-year mortgage rate edged up at 6.39 percent from 6.3 percent over the same time span, and the five-year adjustable mortgage rate climbed to 6.35 percent from 6.29 percent.
Meanwhile, interest on one-year ARMs held steady at 5.71 percent. Nothaft attributes the jump in borrowing costs to a positive June jobs report and a jump in consumer credit in May.
Source: The Wall Street Journal (07/13/07)
The 15-year mortgage rate edged up at 6.39 percent from 6.3 percent over the same time span, and the five-year adjustable mortgage rate climbed to 6.35 percent from 6.29 percent.
Meanwhile, interest on one-year ARMs held steady at 5.71 percent. Nothaft attributes the jump in borrowing costs to a positive June jobs report and a jump in consumer credit in May.
Source: The Wall Street Journal (07/13/07)
Thursday, July 12, 2007
Mortgage Foreclosure Rate Falls from May High
U.S. home foreclosure filings fell 7 percent in June to 164,644 with 33 states reporting month-over-month decreases, according to data from RealtyTrac.
The rate remained 87 percent above last June’s pace, but it was less than the 30-month high reached in May.
Nevada had the highest foreclosure rate, with one filing in June for every 175 households. Rounding out the top 10 were: California, Colorado, Florida, Arizona, Ohio, Michigan, Georgia, Connecticut, and Indiana.
Source: Reuters News (07/12/2007)
The rate remained 87 percent above last June’s pace, but it was less than the 30-month high reached in May.
Nevada had the highest foreclosure rate, with one filing in June for every 175 households. Rounding out the top 10 were: California, Colorado, Florida, Arizona, Ohio, Michigan, Georgia, Connecticut, and Indiana.
Source: Reuters News (07/12/2007)
Friday, July 6, 2007
Thursday, July 5, 2007
What's the Cost of Going Solar?
The cost of solar panels has fallen by half in the past 15 years, cutting the cost of a system capable of powering a home to about $30,000. Analysts expect the cost to fall even more rapidly in the next few years.
Throw in tax breaks and other incentives offered in some states, and the systems can often pay for themselves within a decade. To find out if there are incentives available in your area, check out the online Database of State Incentives for Renewables & Efficiency.
What other costs can you expect when going solar? Setup costs can include as much as $1,500 for upgrading your fuse box. Another issue is the roof, which might be unable to support the solar panels. Eliminating shade from trees on the property also has a cost beyond sentimental reluctance.
However, the hefty costs pay off when it's time to sell. According to a study by ICF consulting, every $1 reduction in annual fuel bills increases a home’s resale value by $10 to $25.
If you decide to take the solar plunge, look for installers who have been approved by the North American Board of Certified Energy Practitioners, which requires professionals to pass a four-hour exam and have at least one year of experience in the field.
Source: SmartMoney, Daren Fonda (07/01/2007)
Throw in tax breaks and other incentives offered in some states, and the systems can often pay for themselves within a decade. To find out if there are incentives available in your area, check out the online Database of State Incentives for Renewables & Efficiency.
What other costs can you expect when going solar? Setup costs can include as much as $1,500 for upgrading your fuse box. Another issue is the roof, which might be unable to support the solar panels. Eliminating shade from trees on the property also has a cost beyond sentimental reluctance.
However, the hefty costs pay off when it's time to sell. According to a study by ICF consulting, every $1 reduction in annual fuel bills increases a home’s resale value by $10 to $25.
If you decide to take the solar plunge, look for installers who have been approved by the North American Board of Certified Energy Practitioners, which requires professionals to pass a four-hour exam and have at least one year of experience in the field.
Source: SmartMoney, Daren Fonda (07/01/2007)
Wednesday, July 4, 2007
Fast Facts about California housing
Calif. median home price - May 07: $591,180
(Source: C.A.R.)
Calif. highest median home price by C.A.R. region May 07: Santa Barbara So. Coast $1,325,000
(Source: C.A.R.)
Calif. lowest median home price by C.A.R. region May 07: High Desert $313,550
(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - First Quarter 07:25 percent
(Source: C.A.R.)
Mortgage rates - week ending 6/28:
30-yr. fixed: 6.67%; Fees/points: 0.4%
15-yr. fixed: 6.34%; Fees/points: 0.4%
1-yr. adjustable: 5.65%; Fees/points: 0.5%
(Source: Freddie Mac)
(Source: C.A.R.)
Calif. highest median home price by C.A.R. region May 07: Santa Barbara So. Coast $1,325,000
(Source: C.A.R.)
Calif. lowest median home price by C.A.R. region May 07: High Desert $313,550
(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - First Quarter 07:25 percent
(Source: C.A.R.)
Mortgage rates - week ending 6/28:
30-yr. fixed: 6.67%; Fees/points: 0.4%
15-yr. fixed: 6.34%; Fees/points: 0.4%
1-yr. adjustable: 5.65%; Fees/points: 0.5%
(Source: Freddie Mac)
Monday, July 2, 2007
Fed Leaves Key Interest Rate Untouched
Federal Reserve policymakers voted unanimously last week to leave the key short-term interest rate at 5.25 percent, which is the highest in 6 ½ years, but unchanged since June 2006.
In the post-meeting statement, Fed Chairman Ben Bernanke said the economy is expected to continue to grow at a moderate pace during the rest of the year. He suggested that growth isn’t strong enough to warrant a rate increase to slow it.
"Some market participants may have been holding out for a signal that (the Fed) will cut rates, and they didn't get that," says chief economist Scott Brown of Raymond James & Associates. He says he expects the Fed to leave rates unchanged for the rest of 2007, but isn't sure where rates will be headed after that. "The next move is as likely to be higher as it is to be lower."
This short-term interest rate drives mortgage and other sorts of consumer loan rates.
Source: USA Today, Barbara Hagen Baugh (06/29/2007)
In the post-meeting statement, Fed Chairman Ben Bernanke said the economy is expected to continue to grow at a moderate pace during the rest of the year. He suggested that growth isn’t strong enough to warrant a rate increase to slow it.
"Some market participants may have been holding out for a signal that (the Fed) will cut rates, and they didn't get that," says chief economist Scott Brown of Raymond James & Associates. He says he expects the Fed to leave rates unchanged for the rest of 2007, but isn't sure where rates will be headed after that. "The next move is as likely to be higher as it is to be lower."
This short-term interest rate drives mortgage and other sorts of consumer loan rates.
Source: USA Today, Barbara Hagen Baugh (06/29/2007)
Friday, June 29, 2007
7 Tips for Foreclosure Property Investing
With foreclosures rising nationwide, prices falling, and inventories swelling to historic levels, investors with a discerning eye and knowledge of the foreclosure process can build a profitable portfolio of distressed properties, says James Saccacio, CEO of RealtyTrac, which tracks foreclosure data.
Saccacio offers this basic advice to foreclosure investors:
* Know your market. The most important tool in your real estate investing toolbox is knowledge of the area where you plan to invest.
* Develop an appropriate investment strategy. Find an investment strategy that will work in your market, and then do what it takes to implement that strategy.
* Make the foreclosure process work for you. Decide what foreclosure buying technique works best with your investment strategy and your strengths as a person.
* Scrutinize each deal. Many real estate investors wrongly assume that if a home is in foreclosure it's a good deal.
* Rely on a trustworthy team. You'll be in over your head if you try to do all the work involved in foreclosure investing on your own.
* Network with banks and lenders. In a slow real estate market, banks and other lenders are saddled with larger inventories of foreclosed properties and will be more motivated to sell those properties at bargain prices.
* Act quickly, but don't be in a hurry. A slow real estate market gives you the upper hand as a buyer, but you'll still need to act quickly to get the best deals.
— REALTOR® Magazine Online
Saccacio offers this basic advice to foreclosure investors:
* Know your market. The most important tool in your real estate investing toolbox is knowledge of the area where you plan to invest.
* Develop an appropriate investment strategy. Find an investment strategy that will work in your market, and then do what it takes to implement that strategy.
* Make the foreclosure process work for you. Decide what foreclosure buying technique works best with your investment strategy and your strengths as a person.
* Scrutinize each deal. Many real estate investors wrongly assume that if a home is in foreclosure it's a good deal.
* Rely on a trustworthy team. You'll be in over your head if you try to do all the work involved in foreclosure investing on your own.
* Network with banks and lenders. In a slow real estate market, banks and other lenders are saddled with larger inventories of foreclosed properties and will be more motivated to sell those properties at bargain prices.
* Act quickly, but don't be in a hurry. A slow real estate market gives you the upper hand as a buyer, but you'll still need to act quickly to get the best deals.
— REALTOR® Magazine Online
Thursday, June 28, 2007
3 Reasons to Be Happy About the Housing Market
The worst of the housing bust may be behind us, some economists say. Here are three reasons for their somewhat optimistic look on housing.
1. Fewer houses built mean fewer houses waiting to be sold. In May, the number of new housing units completed fell to 1.534 million from 1.542 million in April and 1.61 in March. "The numbers [of starts] are at a low enough level that the inventories can start to be worked down," says National Association of Home Builders Chief Economist David Seiders.
2. Mortgage rates are going up, but the economy is strong enough that people can afford the increase. "The economy appears able to absorb these subtractions, especially since they remain on track to be smaller than what the market grew accustomed to over the past year," says Action Economics Chief Economist Mike Englund in a June 19 note.
3. There’s no improvement yet, but the decline has slowed. "I don't think we're out of the woods here, but we may not be that far from the bottom. Since late last year things have been trending downward but not nearly as rapidly now as during 2006," says Seiders.
Source: BusinessWeek Online, Maya Roney (06/20/2007)
1. Fewer houses built mean fewer houses waiting to be sold. In May, the number of new housing units completed fell to 1.534 million from 1.542 million in April and 1.61 in March. "The numbers [of starts] are at a low enough level that the inventories can start to be worked down," says National Association of Home Builders Chief Economist David Seiders.
2. Mortgage rates are going up, but the economy is strong enough that people can afford the increase. "The economy appears able to absorb these subtractions, especially since they remain on track to be smaller than what the market grew accustomed to over the past year," says Action Economics Chief Economist Mike Englund in a June 19 note.
3. There’s no improvement yet, but the decline has slowed. "I don't think we're out of the woods here, but we may not be that far from the bottom. Since late last year things have been trending downward but not nearly as rapidly now as during 2006," says Seiders.
Source: BusinessWeek Online, Maya Roney (06/20/2007)
Wednesday, June 27, 2007
Passing the All-Crucial Sniff Test in Selling the Home
In addition to depersonalizing and de-cluttering, experts say home sellers need to be concerned about odors.
Sales associates polled informally by REALTOR® Magazine Online a few years ago said the lingering presence of pets, tobacco, mildew, and decay in the air are major deal-breakers.
Given that not everyone smells the same odors and that people can become accustomed to a particular smell over time, it is important for property sellers to have their sales associates or another objective party inform them about unpleasant scents in their homes.
According to Chevy Chase, Md.-based Long & Foster practitioner Joan Cromwell, if buyers "can't imagine clearing the smell, they can't imagine occupying that space." The smell of cat urine is especially difficult to remove, with Chris Coffin of the Alexandria, Va.-based branch of the cleaning company ServiceMaster estimating that spot-cleaning carpets and replacing the carpet pad would cost home buyers upwards of $400; removing and replacing saturated floors would cost much more. Coffin adds that it often takes three cleanings to remove nicotine odors from walls, and some cases involve the replacement of insulation.
Experts urge home buyers to be wary of air fresheners, candles, and other scents when touring homes, as they could be used to conceal offensive odors. A better solution for sellers, they say, is to clean drapes, sheets, and pet bedding as well as to air out the house.
Source: Washington Post, Dina ElBoghdady (06/23/07)
Sales associates polled informally by REALTOR® Magazine Online a few years ago said the lingering presence of pets, tobacco, mildew, and decay in the air are major deal-breakers.
Given that not everyone smells the same odors and that people can become accustomed to a particular smell over time, it is important for property sellers to have their sales associates or another objective party inform them about unpleasant scents in their homes.
According to Chevy Chase, Md.-based Long & Foster practitioner Joan Cromwell, if buyers "can't imagine clearing the smell, they can't imagine occupying that space." The smell of cat urine is especially difficult to remove, with Chris Coffin of the Alexandria, Va.-based branch of the cleaning company ServiceMaster estimating that spot-cleaning carpets and replacing the carpet pad would cost home buyers upwards of $400; removing and replacing saturated floors would cost much more. Coffin adds that it often takes three cleanings to remove nicotine odors from walls, and some cases involve the replacement of insulation.
Experts urge home buyers to be wary of air fresheners, candles, and other scents when touring homes, as they could be used to conceal offensive odors. A better solution for sellers, they say, is to clean drapes, sheets, and pet bedding as well as to air out the house.
Source: Washington Post, Dina ElBoghdady (06/23/07)
Tuesday, June 26, 2007
How reliable are square-footage figures? Variables that skew public record
Misrepresenting square footage can get a seller into big trouble. If a buyer relies on a seller's disclosure about the living square feet in his home and the buyer later finds out that the representation was overly ambitious, a lawsuit could ensue.
Sellers have a tendency to round up the number of square feet in their home. The more cautious approach would be to round down. The safest approach would be to make no representation about square feet at all. In an ideal world, this would be the perfect solution. In the real world, however, buyers want to know how many square feet are included.
It's easy to understand why. Most buyers are busy and don't want to waste time looking at homes that won't work for them. Describing a listing by the number of bedrooms and bathrooms, without any reference to square feet, is a safe approach. But, it tells buyers little about the actual size of a listing.
In the diverse housing stock in many older neighborhoods, such as the desirable Rockridge area in Oakland, Calif., three-bedroom homes range in size from about 1,300 square feet to more than 3,000 square feet. To say a house has three bedrooms tells a buyer little about the usable space.
When the number of livable square feet -- square feet excluding such things as decks, terraces, garages, basements and storage rooms -- is not provided in the listing information, buyers often search on their own for this information.
It's not that hard to come up with a figure. Simply go to Zillow.com and type in an address. The square-footage figure that pops up is presumably from the public record. Unfortunately, the "public record" often doesn't reflect reality. It may be accurate for new homes that haven't been modified since the original building permits were approved. The figure is far more subject to error for older homes that have been remodeled over the years.
Remodels are often done without building permits, which wouldn't be reflected in the public record. However, even when add-ons are done with permits, the public record is not always changed to reflect the increase in square feet.
HOUSE HUNTING TIP: It's a good idea for buyers to visit the local building or planning department to find out what documents are on record regarding a listing they're considering buying. This should be done during the inspection contingency time period. If possible, ask for copies of all the permits that were taken out on the property, starting with the original building permit.
If permits for obvious modifications to the property are missing, this could indicate the seller, or a previous owner, took shortcuts. Or, it could reflect a shortcoming in the planning department records. For example, fires in the City of Oakland Planning Department partially destroyed the permit archives.
Buyers often like to compare listings they're considering based on the price per square foot. This is a far-from-accurate way to figure out if you're paying a fair price for a property, unless you're looking at homes in a new housing development where there is little variability.
Also, if the figures you're using are from the public record, which is often wrong, the reliability is even more in question. The most accurate source of square footage is the information from the local permitting agency. If that information is not available, a licensed appraiser can measure the house to provide square-footage calculations.
THE CLOSING: Keep in mind that an appraiser might call a room a bedroom -- even though it wasn't permitted as such by the building department -- if the work was done by licensed professionals and complies with building-code requirements.
By Dian Hymer
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Sellers have a tendency to round up the number of square feet in their home. The more cautious approach would be to round down. The safest approach would be to make no representation about square feet at all. In an ideal world, this would be the perfect solution. In the real world, however, buyers want to know how many square feet are included.
It's easy to understand why. Most buyers are busy and don't want to waste time looking at homes that won't work for them. Describing a listing by the number of bedrooms and bathrooms, without any reference to square feet, is a safe approach. But, it tells buyers little about the actual size of a listing.
In the diverse housing stock in many older neighborhoods, such as the desirable Rockridge area in Oakland, Calif., three-bedroom homes range in size from about 1,300 square feet to more than 3,000 square feet. To say a house has three bedrooms tells a buyer little about the usable space.
When the number of livable square feet -- square feet excluding such things as decks, terraces, garages, basements and storage rooms -- is not provided in the listing information, buyers often search on their own for this information.
It's not that hard to come up with a figure. Simply go to Zillow.com and type in an address. The square-footage figure that pops up is presumably from the public record. Unfortunately, the "public record" often doesn't reflect reality. It may be accurate for new homes that haven't been modified since the original building permits were approved. The figure is far more subject to error for older homes that have been remodeled over the years.
Remodels are often done without building permits, which wouldn't be reflected in the public record. However, even when add-ons are done with permits, the public record is not always changed to reflect the increase in square feet.
HOUSE HUNTING TIP: It's a good idea for buyers to visit the local building or planning department to find out what documents are on record regarding a listing they're considering buying. This should be done during the inspection contingency time period. If possible, ask for copies of all the permits that were taken out on the property, starting with the original building permit.
If permits for obvious modifications to the property are missing, this could indicate the seller, or a previous owner, took shortcuts. Or, it could reflect a shortcoming in the planning department records. For example, fires in the City of Oakland Planning Department partially destroyed the permit archives.
Buyers often like to compare listings they're considering based on the price per square foot. This is a far-from-accurate way to figure out if you're paying a fair price for a property, unless you're looking at homes in a new housing development where there is little variability.
Also, if the figures you're using are from the public record, which is often wrong, the reliability is even more in question. The most accurate source of square footage is the information from the local permitting agency. If that information is not available, a licensed appraiser can measure the house to provide square-footage calculations.
THE CLOSING: Keep in mind that an appraiser might call a room a bedroom -- even though it wasn't permitted as such by the building department -- if the work was done by licensed professionals and complies with building-code requirements.
By Dian Hymer
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Thursday, June 21, 2007
Mortgage Rates Drop After 7-Week Climb
Mortgage rates broke a 7-week streak of increases, with the average 30-year fixed mortgage rate falling back to 6.76 percent, according to Bankrate’s weekly national survey of large lenders.
The national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
The average 15-year fixed rate mortgage, popular for refinancing, dropped by an equal amount, to 6.45 percent, Bankrate said in its report. With larger loans, the average jumbo 30- year fixed rate dipped back below the 7 percent mark to 6.99 percent. Adjustable rate mortgages were no different, with the average one-year ARM inching lower to 6.18 percent and the 5/1 ARM sinking to 6.58 percent.
After rising significantly in the preceding three weeks, mortgage rates responded to signs that core inflation was moderating as the Federal Reserve has forecast, Bankrate said.
“Any indication that inflation is less of a threat is good news to bond investors that fear its erosive effects on the purchasing power of a bond's fixed payments. The resulting increase in bond prices pushed both bond yields and mortgage rates lower. Mortgage rates are closely related to yields on long-term government bonds,” the report said.
Fixed mortgage rates remain nearly one-half percentage point higher than at the beginning of May. At the time, the average 30-year fixed mortgage rate was 6.28 percent, meaning that a $165,000 loan would have carried a monthly payment of $1,019.16.
With the average 30-year fixed rate now 6.76 percent, the same loan originated today would carry a monthly payment of $1,071.28.
Source: Bankrate.com
The national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
The average 15-year fixed rate mortgage, popular for refinancing, dropped by an equal amount, to 6.45 percent, Bankrate said in its report. With larger loans, the average jumbo 30- year fixed rate dipped back below the 7 percent mark to 6.99 percent. Adjustable rate mortgages were no different, with the average one-year ARM inching lower to 6.18 percent and the 5/1 ARM sinking to 6.58 percent.
After rising significantly in the preceding three weeks, mortgage rates responded to signs that core inflation was moderating as the Federal Reserve has forecast, Bankrate said.
“Any indication that inflation is less of a threat is good news to bond investors that fear its erosive effects on the purchasing power of a bond's fixed payments. The resulting increase in bond prices pushed both bond yields and mortgage rates lower. Mortgage rates are closely related to yields on long-term government bonds,” the report said.
Fixed mortgage rates remain nearly one-half percentage point higher than at the beginning of May. At the time, the average 30-year fixed mortgage rate was 6.28 percent, meaning that a $165,000 loan would have carried a monthly payment of $1,019.16.
With the average 30-year fixed rate now 6.76 percent, the same loan originated today would carry a monthly payment of $1,071.28.
Source: Bankrate.com
Tuesday, June 19, 2007
Regulators Seek End to Shady Credit Score Sites
Mortgage industry regulators are trying to crack down on Web sites that offer consumers a fast way to boost their credit scores and look a lot more appealing on loan applications.
These sites promise to connect a home shopper's credit history to a stranger's credit card or provide pay stubs from bogus companies. One even offers consumers the opportunity to rent a well-stocked bank account for a month.
''We think these types of Web sites are increasing,'' says Frank McKenna, chief fraud strategist at BasePoint Analytics, which helps banks and mortgage lenders identify fraudulent transactions.
The operators of these sites are hard to track down because they shut down and disappear when investigators come calling. These sites also are hard to police because it is unclear which laws, if any, the they're breaking, says McKenna. The repercussions for the consumers are clear, as it's illegal to lie on a form, but there aren’t laws that specifically prohibit what the Web sites are doing.
One site, RaiseCreditScoreNow.com offers to add a person to four separate $20,000 credit lines with 10 years of perfect pays for $4,000. The site says that doing so could increase an individual’s credit score by 200 points in 90 days.
Another company, SeasonedTradeLines.com, says it has an inventory of 100 real, verifiable credit card accounts with perfect payment histories dating back to 1974.
Fair Isaac Corp., which developed FICO credit scores, says it is trying to shut down this practice, which it calls piggybacking.
Source: The New York Times, Julie Creswell (06/16/2007)
These sites promise to connect a home shopper's credit history to a stranger's credit card or provide pay stubs from bogus companies. One even offers consumers the opportunity to rent a well-stocked bank account for a month.
''We think these types of Web sites are increasing,'' says Frank McKenna, chief fraud strategist at BasePoint Analytics, which helps banks and mortgage lenders identify fraudulent transactions.
The operators of these sites are hard to track down because they shut down and disappear when investigators come calling. These sites also are hard to police because it is unclear which laws, if any, the they're breaking, says McKenna. The repercussions for the consumers are clear, as it's illegal to lie on a form, but there aren’t laws that specifically prohibit what the Web sites are doing.
One site, RaiseCreditScoreNow.com offers to add a person to four separate $20,000 credit lines with 10 years of perfect pays for $4,000. The site says that doing so could increase an individual’s credit score by 200 points in 90 days.
Another company, SeasonedTradeLines.com, says it has an inventory of 100 real, verifiable credit card accounts with perfect payment histories dating back to 1974.
Fair Isaac Corp., which developed FICO credit scores, says it is trying to shut down this practice, which it calls piggybacking.
Source: The New York Times, Julie Creswell (06/16/2007)
Quote of the Day, June 19, 2007
Nobody can make you feel inferior without your permission.
-Eleanor Roosevelt-
-Eleanor Roosevelt-
Monday, June 18, 2007
Real Estate Companies Sued for Alleged Kickbacks
The Justice Department filed a lawsuit Thursday against two big real-estate brokerage firms, alleging they took illegal kickbacks for steering home sellers to a provider of information about such hazards as earthquake and flood risks that are needed for disclosure statements.
The lawsuit was filed in federal court for the central district of California over a now-dissolved venture between Realogy Corp., the owner of the Coldwell Banker and Century 21 groups; Prudential California Realty, a franchisee of Prudential Real Estate Affiliates, a unit of Prudential Financial Inc. Newark, N.J.; and information provider Property I.D. Corp., Los Angeles. It seeks to recover what it calls "illegitimate profits" generated by "sham" joint ventures.
The lawsuit alleges the real estate companies and Property I.D. set up joint ventures designed to funnel payments of $25 per report — a quarter of the fee paid by home sellers — to the real estate companies in exchange for referrals.
The Department of Housing and Urban Development, which has been investigating the case since 2005, argues that this arrangement violated a provision of the Real Estate Settlement Procedures Act (RESPA), which bans kickbacks for the referral of services related to the settlement of home sales.
The three companies deny wrongdoing, including any violation of RESPA. Realogy says the hazard reports aren't covered by RESPA, and they believe they acted lawfully in the joint venture.
Source: The Wall Street Journal, James R. Hagerty (05/25/07)
The lawsuit was filed in federal court for the central district of California over a now-dissolved venture between Realogy Corp., the owner of the Coldwell Banker and Century 21 groups; Prudential California Realty, a franchisee of Prudential Real Estate Affiliates, a unit of Prudential Financial Inc. Newark, N.J.; and information provider Property I.D. Corp., Los Angeles. It seeks to recover what it calls "illegitimate profits" generated by "sham" joint ventures.
The lawsuit alleges the real estate companies and Property I.D. set up joint ventures designed to funnel payments of $25 per report — a quarter of the fee paid by home sellers — to the real estate companies in exchange for referrals.
The Department of Housing and Urban Development, which has been investigating the case since 2005, argues that this arrangement violated a provision of the Real Estate Settlement Procedures Act (RESPA), which bans kickbacks for the referral of services related to the settlement of home sales.
The three companies deny wrongdoing, including any violation of RESPA. Realogy says the hazard reports aren't covered by RESPA, and they believe they acted lawfully in the joint venture.
Source: The Wall Street Journal, James R. Hagerty (05/25/07)
Sunday, June 17, 2007
A Warning to Those Who Use 1031 Exchanges
Investors using 1031 exchanges to defer capital-gains taxes on an investment property they have sold can run into trouble if the Internal Revenue Service-required qualified intermediary, known as a QI, has financial trouble.
IRS regulations say that investors can’t touch the money from the sale of an investment property and must use a QI to manage the money while their search for a “like kind” property to invest in. The IRS doesn’t place restrictions on where the money is invested.
In the past year, at least two independent QIs have allegedly misappropriated client funds. In one case, businessman Donald McGhan is accused of operating a Ponzi scheme with money in his care — he lost more than $95 million of customer proceeds. The 1031 Tax Group has filed for bankruptcy protection after its principals lost $151 million through bad investments and loans.
The Federation of Exchange Accommodators, the qualified intermediaries' industry-trade group, says it has been working with states and the federal government to enhance oversight of the industry.
Source: The Wall Street Journal, Peter Lattman and Kemba Dunham (05/26/07)
IRS regulations say that investors can’t touch the money from the sale of an investment property and must use a QI to manage the money while their search for a “like kind” property to invest in. The IRS doesn’t place restrictions on where the money is invested.
In the past year, at least two independent QIs have allegedly misappropriated client funds. In one case, businessman Donald McGhan is accused of operating a Ponzi scheme with money in his care — he lost more than $95 million of customer proceeds. The 1031 Tax Group has filed for bankruptcy protection after its principals lost $151 million through bad investments and loans.
The Federation of Exchange Accommodators, the qualified intermediaries' industry-trade group, says it has been working with states and the federal government to enhance oversight of the industry.
Source: The Wall Street Journal, Peter Lattman and Kemba Dunham (05/26/07)
Wednesday, June 13, 2007
California Fast Facts
Calif. median home price - April 07:
$597,640 (Source: C.A.R.)
Calif. highest median home price by C.A.R. region April 07:
Santa Barbara So. Coast $1,475,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region April 07:
High Desert $317,420 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - First Quarter 07:
25 percent (Source: C.A.R.)
Mortgage rates - week ending 6/7:
30-yr. fixed: 6.53%; Fees/points: 0.4%
15-yr. fixed: 6.22%; Fees/points: 0.4%
1-yr. adjustable: 5.65%; Fees/points: 0.7%
(Source: Freddie Mac)
$597,640 (Source: C.A.R.)
Calif. highest median home price by C.A.R. region April 07:
Santa Barbara So. Coast $1,475,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region April 07:
High Desert $317,420 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - First Quarter 07:
25 percent (Source: C.A.R.)
Mortgage rates - week ending 6/7:
30-yr. fixed: 6.53%; Fees/points: 0.4%
15-yr. fixed: 6.22%; Fees/points: 0.4%
1-yr. adjustable: 5.65%; Fees/points: 0.7%
(Source: Freddie Mac)
What to Know About Using IRA Money for Real Estate
Self-directed IRAs give investors lots more options than do traditional company-sponsored retirement plans, including the option of investing in real estate.
For many people, real estate is the alternative investment of choice, according to Tom Anderson, president of PENSCO Trust, a custodial firm specializing in self-directed IRAs.
"The slowdown in the real estate market really hasn't affected our business because we're talking about investment properties versus personal residences, and people are taking advantage of down market opportunities," he says.
The rules and regulations for investing an IRA in real estate are complex, and failure to pay attention will result in substantial taxes and penalties, experts say.
Accountant Ed Slott, founder of the IRAhelp.com Web site, offers these suggestions:
* Set up a separate IRA for real estate investments. Even if only a small portion of the IRA is used for real estate, the IRS could penalize the entire balance in a prohibited transaction.
* Check the investment scenario with custodians and other professionals who have experience in these transactions and can spot red flags.
* If possible, choose to invest in a Roth IRA. The money in the Roth has already been taxed and any distributions, including capital gains on the property, are generally tax-free.
Source: MarketWatch, Marla Brill, (06/06/07)
For many people, real estate is the alternative investment of choice, according to Tom Anderson, president of PENSCO Trust, a custodial firm specializing in self-directed IRAs.
"The slowdown in the real estate market really hasn't affected our business because we're talking about investment properties versus personal residences, and people are taking advantage of down market opportunities," he says.
The rules and regulations for investing an IRA in real estate are complex, and failure to pay attention will result in substantial taxes and penalties, experts say.
Accountant Ed Slott, founder of the IRAhelp.com Web site, offers these suggestions:
* Set up a separate IRA for real estate investments. Even if only a small portion of the IRA is used for real estate, the IRS could penalize the entire balance in a prohibited transaction.
* Check the investment scenario with custodians and other professionals who have experience in these transactions and can spot red flags.
* If possible, choose to invest in a Roth IRA. The money in the Roth has already been taxed and any distributions, including capital gains on the property, are generally tax-free.
Source: MarketWatch, Marla Brill, (06/06/07)
Thursday, June 7, 2007
Fed Chair: Home Slump Lasting Longer than Expected
Federal Reserve Chairman Ben Bernanke told a bankers’ conference in South Africa Tuesday that the U.S. housing slump will last longer than he had previously expected, but it hadn’t spilled over into other parts of the economy.
Speaking via satellite, he also expressed concern about rising inflation, but made it clear that it was unlikely that the Fed would raise interest rates any time soon.
The Fed meets next on June 27-28, and many economists predict policymakers again will hold a key interest rate steady at 5.25 percent, where it has been for a year.
Bernanke said that when home sales leveled off last year, it appeared that demand had stabilized, but sales have continued to decline further this year and tighter lending standards have further constrained demand. Lessened demand makes it harder to sell off the still-large supply of unsold homes, he said, and as a result, construction “will likely remain subdued for a time.”
Source: The Wall Street Journal, Greg Ip (06/06/2007)
Speaking via satellite, he also expressed concern about rising inflation, but made it clear that it was unlikely that the Fed would raise interest rates any time soon.
The Fed meets next on June 27-28, and many economists predict policymakers again will hold a key interest rate steady at 5.25 percent, where it has been for a year.
Bernanke said that when home sales leveled off last year, it appeared that demand had stabilized, but sales have continued to decline further this year and tighter lending standards have further constrained demand. Lessened demand makes it harder to sell off the still-large supply of unsold homes, he said, and as a result, construction “will likely remain subdued for a time.”
Source: The Wall Street Journal, Greg Ip (06/06/2007)
Tuesday, June 5, 2007
Quote of the Day, June 5, 2007
We are what we pretend to be, so we must be careful what we pretend to be.
- Kurt Vonnegut
Google Adds Street-Level Views and Services
Google is introducing street-level map views of U.S. cities, starting with San Francisco, New York, Las Vegas, Denver, and Miami. Other metropolitan areas will follow, the company says.
Through a Web browser, users of Google Maps can navigate around a city, virtually walking the streets, checking out restaurants, landmarks, and homes.
Google also announced Mapplets, which can display a variety of information about a small area, including home-for-sale listings and crime data. The tool also can be used to measure distance between objects.
Other companies have experimented with similar services, including Amazon’s A9.com, which dropped its BlockView mapping venture when its CEO joined Google as vice president of engineering.
Source: Reuters News, Eric Auchard (05/29/07)
Through a Web browser, users of Google Maps can navigate around a city, virtually walking the streets, checking out restaurants, landmarks, and homes.
Google also announced Mapplets, which can display a variety of information about a small area, including home-for-sale listings and crime data. The tool also can be used to measure distance between objects.
Other companies have experimented with similar services, including Amazon’s A9.com, which dropped its BlockView mapping venture when its CEO joined Google as vice president of engineering.
Source: Reuters News, Eric Auchard (05/29/07)
Thursday, May 31, 2007
Mortgage Rates Hit Highest Point Since August
Mortgage rates increased for the fifth consecutive week, with the average 30-year fixed mortgage rate rising to the highest point since August, according to Bankrate.com's weekly national survey of large lenders.
The average 30-year fixed mortgage rate is now 6.47 percent and has an average of 0.26 discount and origination points.
The average 15-year fixed rate mortgage, popular for refinancing, increased by a similar amount, to 6.21 percent. With larger loans, the average jumbo 30-year fixed rate climbed to 6.68 percent. On adjustable rate mortgages, the average one-year ARM nudged higher to 6.09 percent while the 5/1 ARM jumped up to 6.37 percent.
“Mortgage rates often show short spurts of volatility and prolonged periods of little movement,” Bankrate says in its survey report. “Mortgage rates had been confined to a narrow range of approximately one-third of a percentage point for nearly seven months — including weeks on end with virtually no movement. But they broke out of that range with this week's move, as hopes for a Fed interest rate cut continue to wane.”
Fixed mortgage rates have increased nearly one-third percentage point since mid-March. At the time, the average 30-year fixed mortgage rate dipped to 6.16 percent, meaning that a $165,000 loan would have carried a monthly payment of $1,006.30. With the average 30-year fixed rate now 6.47 percent, the same loan originated today would carry a monthly payment of $1,039.66. Fixed mortgage rates still remain a compelling refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.
Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
— REALTOR® Magazine Online
The average 30-year fixed mortgage rate is now 6.47 percent and has an average of 0.26 discount and origination points.
The average 15-year fixed rate mortgage, popular for refinancing, increased by a similar amount, to 6.21 percent. With larger loans, the average jumbo 30-year fixed rate climbed to 6.68 percent. On adjustable rate mortgages, the average one-year ARM nudged higher to 6.09 percent while the 5/1 ARM jumped up to 6.37 percent.
“Mortgage rates often show short spurts of volatility and prolonged periods of little movement,” Bankrate says in its survey report. “Mortgage rates had been confined to a narrow range of approximately one-third of a percentage point for nearly seven months — including weeks on end with virtually no movement. But they broke out of that range with this week's move, as hopes for a Fed interest rate cut continue to wane.”
Fixed mortgage rates have increased nearly one-third percentage point since mid-March. At the time, the average 30-year fixed mortgage rate dipped to 6.16 percent, meaning that a $165,000 loan would have carried a monthly payment of $1,006.30. With the average 30-year fixed rate now 6.47 percent, the same loan originated today would carry a monthly payment of $1,039.66. Fixed mortgage rates still remain a compelling refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.
Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
— REALTOR® Magazine Online
Thursday, May 24, 2007
How to Find a Dog-Friendly Home
The American Kennel Club says 86 percent of all owners of purebred dogs and 91 percent of the club’s members are home owners. That said, many buyers are not only looking for the perfect home for themselves, but one that can accommodate their furry friends, too.
The club offers these suggestions for dog owners who are considering buying a home:
* Check with your local city government on zoning ordinances governing pets and fencing to keep your pet safe. If you're buying a condo or dealing with a homeowner's association, read the rules carefully.
* Certain dog breeds are banned in some areas. Make sure your breed is a fit with local ordinances.
* Consider where your pet will live; while nearby green space isn’t mandatory, the dog may appreciate it.
Source: The San Diego Union-Tribune, Cathy Lubenski (05/20/07)
The club offers these suggestions for dog owners who are considering buying a home:
* Check with your local city government on zoning ordinances governing pets and fencing to keep your pet safe. If you're buying a condo or dealing with a homeowner's association, read the rules carefully.
* Certain dog breeds are banned in some areas. Make sure your breed is a fit with local ordinances.
* Consider where your pet will live; while nearby green space isn’t mandatory, the dog may appreciate it.
Source: The San Diego Union-Tribune, Cathy Lubenski (05/20/07)
Monday, May 14, 2007
NAR: CBS News Magazine Misses the Mark
In the world of political campaigns, it's a standard ploy to set the stage with an empty chair when one candidate refuses to debate his opponents.
The CBS show 60 Minutes gave the NATIONAL ASSOCIATION OF REALTORS® the empty chair treatment in a May 13 segment that examined the impact of online brokerages on the real estate industry. The show featured interviews with a representative from the now-defunct eRealty and the president and CEO of Redfin, but no one from NAR, even though NAR twice offered and prepared association spokespersons for interviews with Leslie Stahl.
NAR expressed disappointment that CBS made the decision it would rather interview opponents and let them make unanswered — and inaccurate and unfair — accusations about REALTORS® and NAR policies.
The one-sided journalism and egregious errors served no one well, especially the once-vaunted news magazine show, NAR says. NAR staff spent nearly a year working with CBS, briefing producers on the issues involved. The producers attended the REALTORS® Conference in New Orleans and met with NAR's legal counsel for half a day in Chicago. Yet, still the segment was full of major errors, NAR says.
NAR: What They Got Wrong
NAR is in communication with 60 Minutes and accuses the program for being unbalanced in its reporting and presentation of misinformation. NAR will be sending the CBS network a letter demanding an opportunity to correct any errors and misrepresentations. Here are some examples of the misinformation that NAR notes:
Error: The 6 percent commission is "sacrosanct."
Fact: All commissions are negotiable. The average commission rate is not 6 percent, but 5.1 percent, according to Real Trends.
Error: NAR is the industry's "governing body."
Fact: NAR is a trade association. It does not govern the industry.
Error: In 2003, NAR issued new rules of its own that threatened to block Internet discounters' access to the MLS.
Fact: The Virtual Office Web site policy did not block access to MLSs for discounters or any other brokers who are members of the MLS.
Error: The MLS is the database that lists virtually every home for sale in the country.
Fact: There is no single national MLS. Rather, there are more than 900 local and regional multiple listing services. These are not simply "databases" but a private exchange of offers of cooperation and compensation between real estate brokers.
Error: Eight states have "minimum service laws" that require REALTORS® to provide a level of service many Internet discounters can't afford.
Fact: "REALTOR®" is a trademarked term and should never be used synonymously with "real estate agent." The intent of minimum service laws is to ensure consumers receive a minimal level of service from licensees.
Error: The brokerage industry has a powerful lobby. Eleven states flatly prohibit rebates.
Fact: The intent of anti-rebate laws is to prevent kickbacks in real estate transactions, not to limit brokers' incentives to attract customers. The brokerage industry does not lobby for anti-rebate laws.
Other key points 60 Minutes misrepresented or overlooked that NAR cites include:
* NAR supports all business models and favors none. NAR's 1.3 million members include REALTORS® who work on a full-service basis, as well as those who consider themselves to be limited service, fee-for-service, minimum service, and discounters. NAR says it's great that consumers have a choice today.
* The real estate industry has harnessed technology for the benefit of consumers and will continue to do so. Real estate is both high-tech and high-touch, so it can be enhanced by both electronic and personal interaction.
* There is no such thing as a "standard commission." Commissions are negotiable and prices vary. The fact is that commission rates have decreased 16 percent from 1991 to 2004, according to Real Trends.
* The real estate business is unique in that competitors must also cooperate with each other to ensure a successful transaction, and MLS systems facilitate that cooperation. The first MLS was created more than 100 years ago as a way for brokers to share their listing agreements with each other in the hopes of procuring buyers for their properties more quickly and efficiently than they could on their own.
* The MLS is a tool to help listing brokers find cooperative buyer brokers to help sell their clients' homes. Without the collaborative incentive of the existing MLS, brokers would create their own separate systems, fragmenting rather than consolidating property information, NAR says.
NAR is encouraging real estate professionals to contact CBS to voice their concerns about the program.
— REALTOR® Magazine Online
The CBS show 60 Minutes gave the NATIONAL ASSOCIATION OF REALTORS® the empty chair treatment in a May 13 segment that examined the impact of online brokerages on the real estate industry. The show featured interviews with a representative from the now-defunct eRealty and the president and CEO of Redfin, but no one from NAR, even though NAR twice offered and prepared association spokespersons for interviews with Leslie Stahl.
NAR expressed disappointment that CBS made the decision it would rather interview opponents and let them make unanswered — and inaccurate and unfair — accusations about REALTORS® and NAR policies.
The one-sided journalism and egregious errors served no one well, especially the once-vaunted news magazine show, NAR says. NAR staff spent nearly a year working with CBS, briefing producers on the issues involved. The producers attended the REALTORS® Conference in New Orleans and met with NAR's legal counsel for half a day in Chicago. Yet, still the segment was full of major errors, NAR says.
NAR: What They Got Wrong
NAR is in communication with 60 Minutes and accuses the program for being unbalanced in its reporting and presentation of misinformation. NAR will be sending the CBS network a letter demanding an opportunity to correct any errors and misrepresentations. Here are some examples of the misinformation that NAR notes:
Error: The 6 percent commission is "sacrosanct."
Fact: All commissions are negotiable. The average commission rate is not 6 percent, but 5.1 percent, according to Real Trends.
Error: NAR is the industry's "governing body."
Fact: NAR is a trade association. It does not govern the industry.
Error: In 2003, NAR issued new rules of its own that threatened to block Internet discounters' access to the MLS.
Fact: The Virtual Office Web site policy did not block access to MLSs for discounters or any other brokers who are members of the MLS.
Error: The MLS is the database that lists virtually every home for sale in the country.
Fact: There is no single national MLS. Rather, there are more than 900 local and regional multiple listing services. These are not simply "databases" but a private exchange of offers of cooperation and compensation between real estate brokers.
Error: Eight states have "minimum service laws" that require REALTORS® to provide a level of service many Internet discounters can't afford.
Fact: "REALTOR®" is a trademarked term and should never be used synonymously with "real estate agent." The intent of minimum service laws is to ensure consumers receive a minimal level of service from licensees.
Error: The brokerage industry has a powerful lobby. Eleven states flatly prohibit rebates.
Fact: The intent of anti-rebate laws is to prevent kickbacks in real estate transactions, not to limit brokers' incentives to attract customers. The brokerage industry does not lobby for anti-rebate laws.
Other key points 60 Minutes misrepresented or overlooked that NAR cites include:
* NAR supports all business models and favors none. NAR's 1.3 million members include REALTORS® who work on a full-service basis, as well as those who consider themselves to be limited service, fee-for-service, minimum service, and discounters. NAR says it's great that consumers have a choice today.
* The real estate industry has harnessed technology for the benefit of consumers and will continue to do so. Real estate is both high-tech and high-touch, so it can be enhanced by both electronic and personal interaction.
* There is no such thing as a "standard commission." Commissions are negotiable and prices vary. The fact is that commission rates have decreased 16 percent from 1991 to 2004, according to Real Trends.
* The real estate business is unique in that competitors must also cooperate with each other to ensure a successful transaction, and MLS systems facilitate that cooperation. The first MLS was created more than 100 years ago as a way for brokers to share their listing agreements with each other in the hopes of procuring buyers for their properties more quickly and efficiently than they could on their own.
* The MLS is a tool to help listing brokers find cooperative buyer brokers to help sell their clients' homes. Without the collaborative incentive of the existing MLS, brokers would create their own separate systems, fragmenting rather than consolidating property information, NAR says.
NAR is encouraging real estate professionals to contact CBS to voice their concerns about the program.
— REALTOR® Magazine Online
Monday, May 7, 2007
Bank of America Rolls Out No-Fee Mortgage
Bank of America on Tuesday will begin offering nationally a no-fee mortgage, which will eliminate most of the charges that add a few thousand dollars to every closing.
Bank of America, which is the nation’s second largest lender by assets, has been offering this mortgage in Washington state since September. In February, it expanded the program to eight additional states. Tomorrow, it will begin advertising the “No Fee Mortgage Plus” nationally.
The loan also eliminates private mortgage insurance and the bank is guaranteeing its customers the best deal on interest rates and an on-time closing. Borrowers must put down at least 5 percent. The loans aren’t available to sub-prime customers.
Floyd Robinson, Bank of America's president of consumer real estate and insurance services, said the loan eliminates on average $3,350 in closing costs on a $200,000 loan.
No other major bank appears to be offering similar loans. Robinson says the bank is able to make money by cross-selling new products. "This is about a relationship more so than about a single product sell," he says.
Source: The Associated Press, Ieva M. Augstums (05/07/2007)
Bank of America, which is the nation’s second largest lender by assets, has been offering this mortgage in Washington state since September. In February, it expanded the program to eight additional states. Tomorrow, it will begin advertising the “No Fee Mortgage Plus” nationally.
The loan also eliminates private mortgage insurance and the bank is guaranteeing its customers the best deal on interest rates and an on-time closing. Borrowers must put down at least 5 percent. The loans aren’t available to sub-prime customers.
Floyd Robinson, Bank of America's president of consumer real estate and insurance services, said the loan eliminates on average $3,350 in closing costs on a $200,000 loan.
No other major bank appears to be offering similar loans. Robinson says the bank is able to make money by cross-selling new products. "This is about a relationship more so than about a single product sell," he says.
Source: The Associated Press, Ieva M. Augstums (05/07/2007)
Saturday, May 5, 2007
Buying a Home is (Not Really) Like Buying a Car
By Barry James
Anyone who has ever bought a car knows you must first find out the cost of similar cars in the marketplace. It's easy to gather the information you need from newspapers, the Blue Book, or online used car sales sites. Your research will provide you with the range of prices you might pay and you can make an informed purchase decision as a result. It's really pretty simple and requires very little pricing expertise.
If you want to buy a home, it's not so easy and certainly not simple. The value of a home is much more difficult to predict and the information available to homebuyers can be untrustworthy. Online home valuation sites are fun to play with, but they are based on past sales, not current market factors. Newspaper listings give you some information, but houses are usually so different that it's hard to compare. And, you don't know how many other buyers want to buy the same house. Competitive bidding can drive a house's price up beyond what you thought it was worth.
The best resource available to homebuyers to learn the current value of a home they might wish to purchase is a CMA, or Comparative Market Analysis. CMA is the term real estate agents use when they conduct an in-depth analysis of a home's worth in today's market.
The best part about a CMA is that it's usually free!
When should I ask for a CMA?
If you don't get a CMA you might offer a price that's more than the home is worth; conversely, you might submit a price that's too low and lose out to another, better informed homebuyer. Every real estate agent in the country will want to complete a CMA on the home you want to buy before helping you buy it. Buyers who haven't yet chosen a real estate agent often ask several agents to complete CMAs so there is opportunity to meet different agents and to see how they work.
How is a CMA prepared?
First, an agent will walk through the home you're thinking of buying. The agent will point out needed improvements that you might have to pay for after purchasing the home, or that you may ask the seller to address before buying the home.
Second, the agent will research information about comparable properties in the area, usually using a real estate industry resource called the Multiple Listing Service. This includes:
· Properties that have sold and closed within the last 12 months
· Active listings – properties currently for sale
· Pending sales – listings that have sold but not yet closed
· Expired listings – properties that did not sell during the listing period
· Lastly, the agent suggests a probable selling price. Don't be surprised if a CMA results in a price range rather than a set price, particularly in markets were there are price differences due to property size, age, architectural style or physical condition.
What can you expect to see in a CMA?
A completed CMA is presented in the form of a report, which includes the selling price, detailed information about the home, and the comparable properties that were researched to determine its value. Because the price derived from a CMA is somewhat subjective, some agents may include brief statements on the perceived selling points your home.
A CMA is not an appraisal.
A real estate appraisal is a comprehensive evaluation performed by an independent professional appraiser. With a CMA, the agent's experience in the business and familiarity with the local area can affect the accuracy. Typically, a CMA prepared by an experienced agent with good knowledge of the local market is right in line with the home's appraised value. A CMA can therefore be a very useful tool in a real estate transaction.
When buying your car an incorrect price might cost you a few hundred dollars. If you offer the wrong price for a home, you could lose tens of thousands of dollars, or not get the home of your dreams. Do your homework and ask a real estate professional for a Comparative Market Analysis to ensure you get the most value for your money.
Copyright © 2007 HomeGain.com, Inc.
Anyone who has ever bought a car knows you must first find out the cost of similar cars in the marketplace. It's easy to gather the information you need from newspapers, the Blue Book, or online used car sales sites. Your research will provide you with the range of prices you might pay and you can make an informed purchase decision as a result. It's really pretty simple and requires very little pricing expertise.
If you want to buy a home, it's not so easy and certainly not simple. The value of a home is much more difficult to predict and the information available to homebuyers can be untrustworthy. Online home valuation sites are fun to play with, but they are based on past sales, not current market factors. Newspaper listings give you some information, but houses are usually so different that it's hard to compare. And, you don't know how many other buyers want to buy the same house. Competitive bidding can drive a house's price up beyond what you thought it was worth.
The best resource available to homebuyers to learn the current value of a home they might wish to purchase is a CMA, or Comparative Market Analysis. CMA is the term real estate agents use when they conduct an in-depth analysis of a home's worth in today's market.
The best part about a CMA is that it's usually free!
When should I ask for a CMA?
If you don't get a CMA you might offer a price that's more than the home is worth; conversely, you might submit a price that's too low and lose out to another, better informed homebuyer. Every real estate agent in the country will want to complete a CMA on the home you want to buy before helping you buy it. Buyers who haven't yet chosen a real estate agent often ask several agents to complete CMAs so there is opportunity to meet different agents and to see how they work.
How is a CMA prepared?
First, an agent will walk through the home you're thinking of buying. The agent will point out needed improvements that you might have to pay for after purchasing the home, or that you may ask the seller to address before buying the home.
Second, the agent will research information about comparable properties in the area, usually using a real estate industry resource called the Multiple Listing Service. This includes:
· Properties that have sold and closed within the last 12 months
· Active listings – properties currently for sale
· Pending sales – listings that have sold but not yet closed
· Expired listings – properties that did not sell during the listing period
· Lastly, the agent suggests a probable selling price. Don't be surprised if a CMA results in a price range rather than a set price, particularly in markets were there are price differences due to property size, age, architectural style or physical condition.
What can you expect to see in a CMA?
A completed CMA is presented in the form of a report, which includes the selling price, detailed information about the home, and the comparable properties that were researched to determine its value. Because the price derived from a CMA is somewhat subjective, some agents may include brief statements on the perceived selling points your home.
A CMA is not an appraisal.
A real estate appraisal is a comprehensive evaluation performed by an independent professional appraiser. With a CMA, the agent's experience in the business and familiarity with the local area can affect the accuracy. Typically, a CMA prepared by an experienced agent with good knowledge of the local market is right in line with the home's appraised value. A CMA can therefore be a very useful tool in a real estate transaction.
When buying your car an incorrect price might cost you a few hundred dollars. If you offer the wrong price for a home, you could lose tens of thousands of dollars, or not get the home of your dreams. Do your homework and ask a real estate professional for a Comparative Market Analysis to ensure you get the most value for your money.
Copyright © 2007 HomeGain.com, Inc.
Monday, April 30, 2007
Can a Home Stager Help Sell Homes?
Everyone who sells a home thinks to tidy it before potential buyers visit. But do sellers understand how to play up their home's assets and mask its flaws in order to sell it quickly and for top dollar? This is exactly what a home stager does. A home stager is a designer or stylist who suggests ways to make the home more appealing to potential buyers.
"When selling your house, you're emotionally invested in the home you've created," said Holly Slaughter, editor-in-chief of the RealEstate.com Tips and Tools. "Hiring a professional home stager, who is impartial, can help highlight your home's selling points and make it more appealing to a wide range of buyers."
When deciding whether or not to hire a home stager, consider:
Select your level
Home staging offers many levels of service. For $100 or less, a home stager will walk through your house and offer advice on what is the best way to present your home for your upcoming showings. You may be told to clean up the clutter, hang pictures or mirrors in new locations, repaint the walls or scrub those hard to reach areas of the floors. For a higher fee, a stager can perform a more hands-on role such as repositioning furniture, arranging flowers and suggesting great tips for highlighting your home's curb appeal. And then for an even higher fee, home stagers can redecorate your home from a warehouse full of furniture and decor items, bring in shrubs and annuals or clean out that one room collecting clutter over the years.
It may be worth every penny
Stagers say the cost is worth it. Some studies show that a house that has been staged is on the market for fewer days and sells for a higher price than comparable homes. Depending on the home and the neighborhood, a home stager may be just what you need to sell your home more quickly and get the top dollar you're looking for.
Your time is valuable
Consider your time. For busy people, hiring a home stager is money well spent. If you need to sell quickly, or if your house has been on the market for some time with little interest from prospective buyers, home staging might be the answer.
You can find home stagers through associations such as the International Association of Home Staging Professionals, Accredited Staging Professionals or the Interior Redesign Industry Specialists.
RealEstate.com Offers Advice
RISMEDIA, April 23, 2007
"When selling your house, you're emotionally invested in the home you've created," said Holly Slaughter, editor-in-chief of the RealEstate.com Tips and Tools. "Hiring a professional home stager, who is impartial, can help highlight your home's selling points and make it more appealing to a wide range of buyers."
When deciding whether or not to hire a home stager, consider:
Select your level
Home staging offers many levels of service. For $100 or less, a home stager will walk through your house and offer advice on what is the best way to present your home for your upcoming showings. You may be told to clean up the clutter, hang pictures or mirrors in new locations, repaint the walls or scrub those hard to reach areas of the floors. For a higher fee, a stager can perform a more hands-on role such as repositioning furniture, arranging flowers and suggesting great tips for highlighting your home's curb appeal. And then for an even higher fee, home stagers can redecorate your home from a warehouse full of furniture and decor items, bring in shrubs and annuals or clean out that one room collecting clutter over the years.
It may be worth every penny
Stagers say the cost is worth it. Some studies show that a house that has been staged is on the market for fewer days and sells for a higher price than comparable homes. Depending on the home and the neighborhood, a home stager may be just what you need to sell your home more quickly and get the top dollar you're looking for.
Your time is valuable
Consider your time. For busy people, hiring a home stager is money well spent. If you need to sell quickly, or if your house has been on the market for some time with little interest from prospective buyers, home staging might be the answer.
You can find home stagers through associations such as the International Association of Home Staging Professionals, Accredited Staging Professionals or the Interior Redesign Industry Specialists.
RealEstate.com Offers Advice
RISMEDIA, April 23, 2007
Sunday, April 29, 2007
Real estate and self-directed IRAs
By Laura Bruce • Bankrate.com
If you're tired of being limited to the typical lineup of stocks, mutual funds, bonds and CDs that most brokerages allow you to buy in your IRA, you might consider creating a self-directed IRA that enables you to invest in real estate.
The addition of real estate can diversify a portfolio and, to be sure, buying actual property to be held in your IRA is just one way to do it. The process is not terribly complicated, but as with any retirement account, you must follow the letter of the law or face penalties from the IRS. Additionally, unlike the run-of-the-mill self-directed IRAs that allow you to invest in the aforementioned stocks and bonds, a self-directed account that holds real estate arguably requires considerably more work on your part. It is also a much higher-risk investment.
In his book, "The No-Nonsense Real Estate Investor's Kit," Thomas Lucier writes, "... the real estate investment business is full of four-letter words such as: hard, work, risk and loss."
If you don't know much about real estate, if you're not willing to do a lot of so-called "due diligence," and if you're not financially or emotionally prepared to handle significant risk, don't attempt this. Sure, you can make painful mistakes in the stock market, but, generally speaking, your investments are liquid and you can cut your losses quickly if you feel it's necessary. The real estate market is not as forgiving.
What an IRA custodian does
But if you're determined, start by opening a self-directed IRA or self-directed Roth IRA with a custodian or administrator. Although this article focuses on real estate, a self-directed IRA can hold trust deeds, secured and unsecured notes, limited partnerships, private stock and other nontraditional investments. An Internet search will probably turn up a couple dozen companies that will handle these types of investments.
However, don't expect them to advise you on what properties to buy. A custodian is a neutral third party and it is not allowed by law to give that type of advice.
"We act only as the IRA custodian," says Kelli Click, vice president at Sterling Trust Company in Waco, Texas. "This is a simple illustration of what takes place, but an individual comes to us, sets up an IRA and tells us they want to purchase the property at 100 Main Street. They find the title company, get everything in place, tell us to wire the funds to the title company and here's the closing date. We purchase the property and make sure it's in the name of the IRA account. We hold the property and provide the account holder with a quarterly statement, and we provide any IRS reporting for the IRA account."
Fees for custodian services vary, so be sure to get a complete list of fees before hiring someone.
You can use your self-directed IRA to buy your future retirement home, but you can't live in the home until you retire. You also cannot put a piece of property that you currently own into your IRA.
If you're tired of being limited to the typical lineup of stocks, mutual funds, bonds and CDs that most brokerages allow you to buy in your IRA, you might consider creating a self-directed IRA that enables you to invest in real estate.
The addition of real estate can diversify a portfolio and, to be sure, buying actual property to be held in your IRA is just one way to do it. The process is not terribly complicated, but as with any retirement account, you must follow the letter of the law or face penalties from the IRS. Additionally, unlike the run-of-the-mill self-directed IRAs that allow you to invest in the aforementioned stocks and bonds, a self-directed account that holds real estate arguably requires considerably more work on your part. It is also a much higher-risk investment.
In his book, "The No-Nonsense Real Estate Investor's Kit," Thomas Lucier writes, "... the real estate investment business is full of four-letter words such as: hard, work, risk and loss."
If you don't know much about real estate, if you're not willing to do a lot of so-called "due diligence," and if you're not financially or emotionally prepared to handle significant risk, don't attempt this. Sure, you can make painful mistakes in the stock market, but, generally speaking, your investments are liquid and you can cut your losses quickly if you feel it's necessary. The real estate market is not as forgiving.
What an IRA custodian does
But if you're determined, start by opening a self-directed IRA or self-directed Roth IRA with a custodian or administrator. Although this article focuses on real estate, a self-directed IRA can hold trust deeds, secured and unsecured notes, limited partnerships, private stock and other nontraditional investments. An Internet search will probably turn up a couple dozen companies that will handle these types of investments.
However, don't expect them to advise you on what properties to buy. A custodian is a neutral third party and it is not allowed by law to give that type of advice.
"We act only as the IRA custodian," says Kelli Click, vice president at Sterling Trust Company in Waco, Texas. "This is a simple illustration of what takes place, but an individual comes to us, sets up an IRA and tells us they want to purchase the property at 100 Main Street. They find the title company, get everything in place, tell us to wire the funds to the title company and here's the closing date. We purchase the property and make sure it's in the name of the IRA account. We hold the property and provide the account holder with a quarterly statement, and we provide any IRS reporting for the IRA account."
Fees for custodian services vary, so be sure to get a complete list of fees before hiring someone.
You can use your self-directed IRA to buy your future retirement home, but you can't live in the home until you retire. You also cannot put a piece of property that you currently own into your IRA.
Monday, April 23, 2007
Fannie, Freddie Plan to Help Distressed Borrowers
The heads of Fannie Mae and Freddie Mac told a House Financial Services committee Tuesday that they are devising new types of loans to help distressed borrowers.
Richard Syron, Freddie Mac's chairman and CEO, says the company is developing more consumer-friendly subprime products that will provide stable financing alternatives. He expects them to be available by mid-summer. He says the new products will include 30-year and possibly 40-year fixed-rate mortgages as well as adjustable-rate mortgages with longer fixed-rate periods.
Fannie Mae, in a new program called "HomeStay," is offering new options so that lenders can help subprime borrowers refinance out of high-interest adjustable-rate mortgages or other difficult loans, says president and CEO Daniel Mudd.
He said the company plans to stretch the term on sub-prime loans to 40 years from the current maximum 30 years – which will reduce monthly payments for borrowers by about 5 percent.
Source: Associated Press (04/18/2007)
Richard Syron, Freddie Mac's chairman and CEO, says the company is developing more consumer-friendly subprime products that will provide stable financing alternatives. He expects them to be available by mid-summer. He says the new products will include 30-year and possibly 40-year fixed-rate mortgages as well as adjustable-rate mortgages with longer fixed-rate periods.
Fannie Mae, in a new program called "HomeStay," is offering new options so that lenders can help subprime borrowers refinance out of high-interest adjustable-rate mortgages or other difficult loans, says president and CEO Daniel Mudd.
He said the company plans to stretch the term on sub-prime loans to 40 years from the current maximum 30 years – which will reduce monthly payments for borrowers by about 5 percent.
Source: Associated Press (04/18/2007)
Sunday, April 22, 2007
New Credit Score Based on Rent, Utility Payments
Fair Isaac has launched the FICO Expansion Score to help prospective borrowers with minimal credit histories obtain loans and credit scores.
The Expansion score gauges a borrower's creditworthiness using timely utilities and rent payments and clean checking accounts, among other factors.
While car dealers and credit-card companies have already embraced the new scoring model, mortgage lenders are unlikely to do so unless Fannie Mae and Freddie Mac purchase the resulting loans.
Kiplinger's Personal Finance, Joan Goldwasser (03/07)
The Expansion score gauges a borrower's creditworthiness using timely utilities and rent payments and clean checking accounts, among other factors.
While car dealers and credit-card companies have already embraced the new scoring model, mortgage lenders are unlikely to do so unless Fannie Mae and Freddie Mac purchase the resulting loans.
Kiplinger's Personal Finance, Joan Goldwasser (03/07)
Friday, April 20, 2007
San Diego Plans for Population Boom
Daily Real Estate News April 20, 2007
San Diego Plans for Population Boom
With 1 million people expected to call San Diego, Calif., home over the next two decades, local county officials believe developers need to plan early so that enough housing is available to accommodate demand.
Tony Pauker, Urban Land Institute of San Diego/Tijuana chairman, says multifamily, high-density infill construction will account for many of these new units; single-family homes will make up only 30 percent of dwellings built this year.
"Within a decade, new single-family home developments will be the rare exception as we adopt development models more judicious of our precious land resources," Pauker says. County planners say developers should focus their efforts on erecting affordable housing near jobs and public transit.
"Well-planned compact growth can help provide more housing, while saving the region from the urban sprawl that has overrun and gridlocked other major metro areas," says Garry Bonelli of the San Diego Association of Governments.
Source: San Diego Daily Transcript, Jill Esterbrooks (04/19/07)
San Diego Plans for Population Boom
With 1 million people expected to call San Diego, Calif., home over the next two decades, local county officials believe developers need to plan early so that enough housing is available to accommodate demand.
Tony Pauker, Urban Land Institute of San Diego/Tijuana chairman, says multifamily, high-density infill construction will account for many of these new units; single-family homes will make up only 30 percent of dwellings built this year.
"Within a decade, new single-family home developments will be the rare exception as we adopt development models more judicious of our precious land resources," Pauker says. County planners say developers should focus their efforts on erecting affordable housing near jobs and public transit.
"Well-planned compact growth can help provide more housing, while saving the region from the urban sprawl that has overrun and gridlocked other major metro areas," says Garry Bonelli of the San Diego Association of Governments.
Source: San Diego Daily Transcript, Jill Esterbrooks (04/19/07)
Thursday, April 19, 2007
Californians Stretch Dollars to Buy a Home
Daily Real Estate News (Originally Published February 7, 2007)
Californians Stretch Dollars to Buy a Home
Even as the California housing market slowed in 2006, more people have taking on riskier mortgages so they can become a home owner.
More than 21 percent of buyers in 2006 chose mortgages with no down payment, up from 4.5 in 2000, according to a survey conducted for the California Association of REALTORS®.
The median down payment fell 8.8 percent to $73,000 last year from $80,000 in 2005, even as median home prices rose, at least modestly, in many parts of the state. It was the first annual drop in median down payments since 1995.
People purchasing their first home were four times more likely to take out a loan with nothing down than repeat buyers, according to the report. About 40 percent of first-time buyers opted for loans without down payments.
Even as many first-time buyers showed a willingness to take on higher debt, the overall percentage of first-time buyers fell, reaching its second-lowest level on record. Only 27.1 percent of purchasers last year were buying for the first time, down from 30.5 percent in 2005.
"The market is going to have to find a way to add new buyers," says Ed Leamer, director of the UCLA Anderson Forecast. "That's another symptom of a market gone awry."
Source: The San Francisco Chronicle, Marni Leff Kottle (02/07/07)
Californians Stretch Dollars to Buy a Home
Even as the California housing market slowed in 2006, more people have taking on riskier mortgages so they can become a home owner.
More than 21 percent of buyers in 2006 chose mortgages with no down payment, up from 4.5 in 2000, according to a survey conducted for the California Association of REALTORS®.
The median down payment fell 8.8 percent to $73,000 last year from $80,000 in 2005, even as median home prices rose, at least modestly, in many parts of the state. It was the first annual drop in median down payments since 1995.
People purchasing their first home were four times more likely to take out a loan with nothing down than repeat buyers, according to the report. About 40 percent of first-time buyers opted for loans without down payments.
Even as many first-time buyers showed a willingness to take on higher debt, the overall percentage of first-time buyers fell, reaching its second-lowest level on record. Only 27.1 percent of purchasers last year were buying for the first time, down from 30.5 percent in 2005.
"The market is going to have to find a way to add new buyers," says Ed Leamer, director of the UCLA Anderson Forecast. "That's another symptom of a market gone awry."
Source: The San Francisco Chronicle, Marni Leff Kottle (02/07/07)
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