By Alex Veiga, AP Business Writer
Tuesday, February 19, 2008
(02-19) 12:13 PST Los Angeles (AP) --
Frustrated California renters take heed: A trade group says it's getting easier for people to afford their first home.
With home prices in a downward spiral in many once-booming areas, the percentage of California households that can afford to finance an entry-level home increased in the last three months of 2007 compared to the same period a year earlier, the California Association of Realtors said Tuesday.
The trade group for real estate agents calculates affordability based on the minimum household income required to make a 10 percent downpayment and secure an adjustable interest rate loan at 6.21 percent.
Some 33 percent of the households in the state met those guidelines in the fourth quarter — up from 25 percent in the same three months of 2006, the association said.
Buyers needed to earn $82,200 to afford financing of $411,170, the typical statewide price for an entry-level home during the quarter, the trade association estimated.
The monthly payment for such a purchase, including taxes and insurance, was $2,740, the association said.
An entry-level home was defined as one priced at about 85 percent of the median home price in an area.
The most affordable area of the state during the quarter was the desert north of Los Angeles, where some 54 percent of households met the association's $43,800 annual income threshold to finance an entry-level home priced at $218,880.
Sacramento County was next, with 53 percent of households within the income range needed to afford a home priced at $252,920.
The least affordable area was the Central Coast region of Monterey, where only 20 percent of households earned the $118,200 needed to finance an entry-level home at $591,200.
In Los Angeles County, 27 percent of households earned the $86,700 a year needed to buy a home priced at $433,200.
Some 46 percent of households in Riverside and San Bernardino counties, which have been hit particularly hard by rising foreclosures and falling home values, earned $57,600 a year, enough to finance a $287,330 home, the association said.
In the San Francisco Bay area, meanwhile, only 23 percent of households reported income of at least $132,300, the minimum to purchase a home priced at $660,660.
TEAM WELLS TELLS - WHAT DOES THAT MEAN FOR YOU???
• As the median home price declines, many potential home buyers who had previously believed an entry-level home was out of reach may now find themselves in a position to buy.
• The median price of an existing, single-family detached home in California during December 2007 was $475,460, a 16.5 percent decrease from the revised $569,350 median for December 2006.
• Prospective buyers for the most part need not worry about the bidding wars that drove up home prices during the housing boom.
• First-time home buyers needed to earn an annual income of $82,200 to buy an entry-level home in California in the fourth quarter of 2007, down 15 percent from the $96,600 annual income needed to buy during the last three months of 2006.
Thursday, February 21, 2008
Tuesday, February 19, 2008
Lenders to Offer Reprieves To Delinquent Borrowers
By Renae MerleWashington Post Staff WriterWednesday, February 13, 2008; D01
The Bush administration and six large mortgage lenders unveiled a plan yesterday to offer some homeowners facing foreclosure 30-day reprieves to work out alternatives.
The program, which will target homeowners who are 90 or more days late on payments, is the industry's latest attempt to untangle the mess caused by years of lax mortgage standards.
These homeowners will receive a letter offering a "pause" in the foreclosure process to try to work out a repayment schedule.
Delinquent borrowers have always had the option of calling their lender for help in advance of a foreclosure. But the foreclosure process typically continued during those talks. Under this plan, there would be a 30-day freeze in the process.
Unlike a government-endorsed rescue effort announced last year, the new program, called Project Lifeline, is not limited to subprime mortgages, home loans given to borrowers with weak credit. It also includes foreclosures triggered by home-equity loans, prime loans and second liens.
Modifications to loans would be made on a case-by-case basis, and not all eligible loans are expected to be salvageable, industry officials said.
Homeowners in bankruptcy protection will not be eligible for the program, which also excludes vacant and investment properties. The offer also will not apply to borrowers whose homes are scheduled for a foreclosure sale within 30 days.
"None of these efforts are a silver bullet that will undo the excesses of the past years," said Treasury Secretary Henry M. Paulson Jr. For example, the program won't help borrowers who put down little or no money and who don't want to continue to live in the house, he said.
Countrywide Financial, Bank of America, Citigroup, J.P. Morgan Chase, Washington Mutual and Wells Fargo are participating in Project Lifeline. They are also members of the Hope Now Alliance, the industry-financed nonprofit group that has been coordinating efforts to reach struggling subprime mortgage borrowers.
"For some homeowners, that extra time will make the difference," said Floyd Robinson, president of consumer real estate at Bank of America.
The plan is a good-faith effort by lenders to reach out to delinquent borrowers, said Alex J. Pollock, a resident fellow at the American Enterprise Institute, a conservative policy research and advocacy group. "It seems to be a quite a reasonable, sensible program to be done along with other things," he said. "There is obviously a lot of thinking going on.".
Critics said the plan is still far short of what is needed to stem the tide of foreclosures, which cost lenders millions of dollars and are expected to increase as subprime borrowers face interest rate increases on adjustable-rate mortgages. The national foreclosure rate rose more than 50 percent last year.
"The industry and the Administration are running to catch up as fast as they can to a problem that is getting broader and deeper by the day, but they seem to be falling further and further behind," Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said in a statement.
Giving borrowers an extra 30 days is prudent but a common measure, said John Taylor, president of the National Community Reinvestment Coalition.
"A lot of the industry under normal circumstances tries to avoid foreclosure and work with the borrower," he said. "The real problem is that most of these borrowers are in properties that are not worth what the mortgage is. They are locked into a loan they can no longer afford. This program doesn't get at any of that."
He said: "You can give them 60 more days, or 90 days. If there isn't a product that they can be refinanced into that matches their ability to pay, then we're really not going to be helping eight out of 10 people."
The plan will probably assist only a small percentage of the estimated 425,000 homeowners who are 90 days or more delinquent on their loans, said Mark Zandi, chief economist at Moody's Economy.com. These homeowners are already under stress, and lenders would have to be willing to make significant changes, including reducing mortgage balances substantially, he said. "I would be surprised if we're talking more than tens of thousands of homeowners that are helped."
The mortgage industry has been fighting the perception that it is not doing enough to help troubled homeowners, pointing out that the number of loans modified, including freezing and lowering interest rates, has doubled in the past year. During the fourth quarter of last year, lenders modified 141,000 loans, up from 76,000 in the previous three months, according to the Hope Now Alliance.
Those numbers are likely to increase as lenders implement the program announced last year to freeze the interest rates of qualified subprime borrowers, industry officials said yesterday.
But Taylor said the industry has targeted the "low-hanging fruit" for modifications -- "those borrowers who have a strong financial condition, who with slight modifications would be able to continue under their mortgage."
The Bush administration and six large mortgage lenders unveiled a plan yesterday to offer some homeowners facing foreclosure 30-day reprieves to work out alternatives.
The program, which will target homeowners who are 90 or more days late on payments, is the industry's latest attempt to untangle the mess caused by years of lax mortgage standards.
These homeowners will receive a letter offering a "pause" in the foreclosure process to try to work out a repayment schedule.
Delinquent borrowers have always had the option of calling their lender for help in advance of a foreclosure. But the foreclosure process typically continued during those talks. Under this plan, there would be a 30-day freeze in the process.
Unlike a government-endorsed rescue effort announced last year, the new program, called Project Lifeline, is not limited to subprime mortgages, home loans given to borrowers with weak credit. It also includes foreclosures triggered by home-equity loans, prime loans and second liens.
Modifications to loans would be made on a case-by-case basis, and not all eligible loans are expected to be salvageable, industry officials said.
Homeowners in bankruptcy protection will not be eligible for the program, which also excludes vacant and investment properties. The offer also will not apply to borrowers whose homes are scheduled for a foreclosure sale within 30 days.
"None of these efforts are a silver bullet that will undo the excesses of the past years," said Treasury Secretary Henry M. Paulson Jr. For example, the program won't help borrowers who put down little or no money and who don't want to continue to live in the house, he said.
Countrywide Financial, Bank of America, Citigroup, J.P. Morgan Chase, Washington Mutual and Wells Fargo are participating in Project Lifeline. They are also members of the Hope Now Alliance, the industry-financed nonprofit group that has been coordinating efforts to reach struggling subprime mortgage borrowers.
"For some homeowners, that extra time will make the difference," said Floyd Robinson, president of consumer real estate at Bank of America.
The plan is a good-faith effort by lenders to reach out to delinquent borrowers, said Alex J. Pollock, a resident fellow at the American Enterprise Institute, a conservative policy research and advocacy group. "It seems to be a quite a reasonable, sensible program to be done along with other things," he said. "There is obviously a lot of thinking going on.".
Critics said the plan is still far short of what is needed to stem the tide of foreclosures, which cost lenders millions of dollars and are expected to increase as subprime borrowers face interest rate increases on adjustable-rate mortgages. The national foreclosure rate rose more than 50 percent last year.
"The industry and the Administration are running to catch up as fast as they can to a problem that is getting broader and deeper by the day, but they seem to be falling further and further behind," Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said in a statement.
Giving borrowers an extra 30 days is prudent but a common measure, said John Taylor, president of the National Community Reinvestment Coalition.
"A lot of the industry under normal circumstances tries to avoid foreclosure and work with the borrower," he said. "The real problem is that most of these borrowers are in properties that are not worth what the mortgage is. They are locked into a loan they can no longer afford. This program doesn't get at any of that."
He said: "You can give them 60 more days, or 90 days. If there isn't a product that they can be refinanced into that matches their ability to pay, then we're really not going to be helping eight out of 10 people."
The plan will probably assist only a small percentage of the estimated 425,000 homeowners who are 90 days or more delinquent on their loans, said Mark Zandi, chief economist at Moody's Economy.com. These homeowners are already under stress, and lenders would have to be willing to make significant changes, including reducing mortgage balances substantially, he said. "I would be surprised if we're talking more than tens of thousands of homeowners that are helped."
The mortgage industry has been fighting the perception that it is not doing enough to help troubled homeowners, pointing out that the number of loans modified, including freezing and lowering interest rates, has doubled in the past year. During the fourth quarter of last year, lenders modified 141,000 loans, up from 76,000 in the previous three months, according to the Hope Now Alliance.
Those numbers are likely to increase as lenders implement the program announced last year to freeze the interest rates of qualified subprime borrowers, industry officials said yesterday.
But Taylor said the industry has targeted the "low-hanging fruit" for modifications -- "those borrowers who have a strong financial condition, who with slight modifications would be able to continue under their mortgage."
30-Year Mortgage Rates Continue to Climb
Freddie Mac reports a jump in the 30-year fixed mortgage rate to 5.72 percent during the week ended Feb. 14, from 5.67 percent the prior week.
Interest on 15-year fixed loans, meanwhile, climbed to 5.25 percent from 5.15 percent over the same period.
Rates dropped, however, for five-year adjustable mortgages to 5.19 percent from 5.21 percent; while the one-year ARM held steady at 5.03 percent.
Freddie Mac chief economist Frank Nothaft says economic uncertainty is responsible for the movement in mortgage rates, noting that some borrowers are finding it difficult to obtain mortgages due to stricter credit standards.
Source: San Jose Mercury News, Martin Crutsinger (Calif.) (02/15/08)
Interest on 15-year fixed loans, meanwhile, climbed to 5.25 percent from 5.15 percent over the same period.
Rates dropped, however, for five-year adjustable mortgages to 5.19 percent from 5.21 percent; while the one-year ARM held steady at 5.03 percent.
Freddie Mac chief economist Frank Nothaft says economic uncertainty is responsible for the movement in mortgage rates, noting that some borrowers are finding it difficult to obtain mortgages due to stricter credit standards.
Source: San Jose Mercury News, Martin Crutsinger (Calif.) (02/15/08)
Wednesday, February 6, 2008
Narrow Refinance Plan Will Help Few
The current Federal Housing Administration (FHA) Secure program is expected to help only 44,000 subprime borrowers, or 5 percent of those who are more than two months behind in their payments.
A study circulated by the American Securitization Forum suggests that one way around this poor showing is by allowing borrowers delinquent for any reason to refinance into an FHA loan. Currently, the option is available only to borrowers facing a rising interest rate.
Another problem with the program is that the FHA Secure program is unattractive to lenders because they may have a hard time selling the loans. That’s because the agency’s own securitization arm, facing pressure from traders, pledged to keep its FHA Secure loans out of standard Ginnie Mae bonds.
Source: Reuters News (02/05/2008)
A study circulated by the American Securitization Forum suggests that one way around this poor showing is by allowing borrowers delinquent for any reason to refinance into an FHA loan. Currently, the option is available only to borrowers facing a rising interest rate.
Another problem with the program is that the FHA Secure program is unattractive to lenders because they may have a hard time selling the loans. That’s because the agency’s own securitization arm, facing pressure from traders, pledged to keep its FHA Secure loans out of standard Ginnie Mae bonds.
Source: Reuters News (02/05/2008)
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