Thursday, 27 November 2008

This week’s issue of C.A.R. Mortgage Update contains information about how mortgage rates are set, how to find a reputable mortgage modification company, and foreclosure suspensions by Fannie Mae and Freddie Mac.

How Rates are Set

· Over the last few months, the Federal Reserve has reduced its key interest rate, the overnight LIBOR, to as low as 1 percent. However, mortgage rates have not declined as dramatically. One of the most commonly-followed indicators to determine where mortgage rates are headed is the yield on the 10-year United States Treasury note. During economic downturns, mortgage rates and yields on 10-year U.S. Treasury tend to decline. In recent months, the difference between the 10-year U.S. Treasury note and the 30-year, fixed-rate mortgage has been as high as 2.75 percentage points, largely due to lenders’ attempts to recoup previous losses by incorporating a larger profit margin into the interest rate.

To read the full story, please click here:

http://www.nytimes.com/2008/11/16/realestate/16mort.html?ref=realestate

Facing foreclosure? Beware when looking for help.

· Due to the large number of foreclosures, many financial institutions have created mortgage modification programs to help homeowners in default modify their existing mortgage loans into fixed-rate, more affordable loans. Many banks are overwhelmed with borrowers applying for mortgage modifications, resulting in some private companies, real estate brokers, nonprofit organizations, and attorneys offering to serve as the liaison between the homeowner and the bank, sometimes for a fee. With the numerous options available to homeowners, it can be difficult to determine which consultants are reputable. Individuals and companies that charge a fee prior to providing the mortgage modification service must register with the California Dept. of Real Estate (DRE). Consumers can verify that a company’s contract has been approved by visiting www.dre.ca.gov or by calling (916) 227-0770. Individuals and companies that charge fees after the service is performed are not required to register with the DRE.

To read the full story, please click here:

http://www.mercurynews.com/realestatenews/ci_11034787

Fannie, Freddie halt foreclosures for holidays

· Fannie Mae and Freddie Mac recently announced they will postpone foreclosure sales and evictions on occupied single-family residences that were scheduled to occur between Nov. 26, 2008 and Jan. 9, 2009. During this time, the companies will streamline their mortgage modification programs, scheduled to launch Dec. 15. Foreclosure attorneys and loan servicers will continue to contact borrowers who have defaulted on their mortgage loans owned or guaranteed by Fannie Mae or Freddie Mac, and continue to pursue workout options.

To read the full story, please click here:

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/20/AR2008112003309.html

The New York Times

Suddenly, Stricter Appraisals

Hoping to mitigate losses, many lenders are requiring more thorough home appraisals and reviewing valuation figures more carefully than in previous years. If an appraisal does not include enough data to support the appraised value, some banks are reducing the loan amount for the property and, in some cases, rejecting the loan altogether, forcing some home buyers and sellers to renegotiate the sales price.

MAKING SENSE OF THE STORY FOR CONSUMERS

· The rapidly changing real estate market has led many lenders to require “comps” – sales of comparable properties used to help determine a home’s value – that are no more than 60 to 90 days old, and within one mile of the property being appraised. In addition to searching multiple listing services, many appraisers are seeking fresh comps by talking to REALTORS® and reviewing public records of recently sold homes.

· Some appraisers determine the value of a property based on the neighborhood’s “absorption rate” – the amount of time it will take to sell that market’s entire housing inventory at the current sales pace. Absorption rates of six months or longer imply the demand for housing in that area is lower than the supply. In October, California’s absorption rate was 5.9 months, a substantial reduction from the 15.2 months’ supply of a year ago. The absorption rate can vary throughout the state, and in October, the rate ranged from 3.5 months in the Sacramento region to 6.9 months in the Orange County and Santa Clara regions. Traditionally, areas with a large number of distressed properties have larger volumes of inventory until the median price declines to a level that enables more home buyers to enter the market.

· Real estate markets are local and can vary from neighborhood to neighborhood. It is important that consumers and REALTORS® work with local appraisers that have knowledge of the region. This will help ensure a more accurate appraisal.

To read the full story, please click here:

http://www.nytimes.com/2008/11/23/realestate/23wczo.html?ref=realestate

Los Angeles Times

Foreclosures, delinquencies skyrocketing among “prime” borrowers

As the economy falters, and more companies are forced to lay off employees, some homeowners who were considered “prime” borrowers now are defaulting on their mortgages and facing foreclosure.

MAKING SENSE OF THE STORY FOR CONSUMERS

· The economy is clearly impacting homeowners across all economic levels, including prime borrowers who were once perceived to be the least risky of all borrowers. Prime borrowers included those who documented their income, had higher FICO scores, and applied for a traditional 30-year, fixed-rate mortgage. However, as the economy falters and more middle-class workers are laid off, prime borrowers are being forced to dip into their savings accounts and apply for mortgage modification programs.

· Regardless of economic status and career stability, most financial advisors recommend all homeowners, regardless of their current economic circumstances, have at least three- to six- months’ worth of mortgage payments and other household expenses in reserve. In the event that that a homeowner is unemployed, the cash reserve will help reduce the stress of making mortgage payments while the individual searches for a new position.

To read the full story, please click here:
http://www.latimes.com/business/la-fi-prime24-2008nov24,0,6174050.story

Los Angeles Times

Earlier closings may be in home buyers’ best interest
Many home buyers, especially first-time buyers, choose to close escrow as close to the end of the month as possible in order to avoid paying a large sum of cash at closing. However, waiting until the end of the month to close escrow can result in mistakes being made during the loan funding process due to the large volume of paperwork required when purchasing a home, and the short amount of time allotted to close.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Approximately 95 percent of all real estate closings take place during the last week in the month because mortgage interest is collected in arrears, meaning the principal and interest payment is due for the interest accrued during the previous 30-day period. The fewer days that are left in the month when escrow closes, the less upfront interest the borrower has to pay at closing.

· The later in the month that a loan closes, the earlier the first full mortgage payment will be due. To avoid paying a large sum of money at closing and then paying a full mortgage payment a few days later, some real estate experts advise clients to close earlier in the month if possible. Providing the lender with additional time to process the paperwork also will help ensure that mistakes aren’t made that could jeopardize funding the loan on time.

· Cash flow can be a challenge for some borrowers; so many lenders offer a credit for the mortgage interest due at closing if the loan closes early in the month. The exact date differs by lender and is determined by the type of loan. If the mortgage is insured by the Federal Housing Administration (FHA) or guaranteed by the Dept. of Veterans Affairs, a borrower can receive a credit for closing by the 7th of the month. With a conventional mortgage, the credit is typically available if the borrower settles by the 10th of the month.

To read the full story, please click here:
http://www.latimes.com/business/la-fi-lew23-2008nov23,0,5616331.story

In Other News...

Los Angeles Times

State Farm, Farmers to raise California homeowner insurance rates

To read the full story, please click here:
http://www.latimes.com/business/la-fi-insure21-2008nov21,0,2080970.story

Los Angeles Daily News

Home sales surge as prices plummet; foreclosures fed October market

To read the full story, please click here:
http://www.dailynews.com/ci_11017591

CNN Money

No job, bad mortgage – out of luck

To read the full story, please click here:

http://money.cnn.com/2008/11/20/news/economy/unemployed_foreclosure/index.htm?cnn=yes

San Francisco Chronicle

Falling prices a bitter pill for homeowners

To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/23/REC4141MVC.DTL

Los Angeles Times

How new bank deposit coverage may affect you

To read the full story, please click here:
http://www.latimes.com/business/la-fi-perfin23-2008nov23,0,1500334.column

San Francisco Chronicle

Foreclosures boost home sales

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/21/BUHT148R9Q.DTL

POSTED BY: Brendan Coen AT 09:08 pm | Permalink | 0 Comments | E-mail this

Friday, 21 November 2008

Market Advisory 11/21/08

Nov. 20, 2008

C.A.R. Resource Guide

REALTORS® throughout the state have a long-standing tradition of community involvement and making a difference in the neighborhoods they serve. The recent wildfires throughout Southern California have devastated many families and caused a great deal of property damage in many Southern California communities. C.A.R. has compiled information in the REALTORS® Care section of car.org. There, REALTORS® and consumers will find a list of resources, including what to do and who to contact after a fire or other natural disaster, as well as insurance-related information.

For a complete list of fire-related resources, please visit:
http://www.car.org/aboutus/realtorscare/firedisaster/

C.A.R. Mortgage Update

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) has created consumer information sheets detailing the various mortgage modification programs available through the larger lenders and government entities, and also has created an easy-to-use reference chart about available programs.

· The consumer sheets contain information such as eligibility requirements; who to contact to apply; costs associated with the program; and other vital data. In general, the loan modification programs on the chart and consumer information sheets are intended for primary residences only.

· Mortgage loan modifications typically are handled on a case-by-case basis. Homeowners having difficulty meeting their mortgage obligation or interested in finding out more about a loan modification program should start by contacting their lender. Prior to calling a lender or loan servicer, homeowners should have the following information available: loan number; income information and documentation; most recent mortgage statement; bank statements; and a letter demonstrating financial hardship.

To download the mortgage modification sheets, please visit:
http://www.car.org/legal/mortgage-workout-programs/?view=Standard

Wall Street Journal

What if you don’t qualify?
The majority of the mortgage modification programs from the larger lenders only are available to homeowners who either already are in default or are at risk of defaulting on their primary residences. However, some homeowners, in particular those who may default on a vacation home or an investment property, have some options available.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Homeowners who are in default or at-risk of defaulting should contact a reputable credit counseling agency to discuss possible options other than foreclosure. When calling a credit counseling agency, the homeowner should have their loan number, most recent mortgage statement, bank statements and a letter demonstrating financial hardship. To find a credit counselor, visit the U.S. Dept. of Housing and Urban Development’s (HUD) Web site at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=CA or the non-profit organization National Foundation for Credit Counseling at http://www.nfcc.org/.

· Homeowners should contact their loan servicer as soon as possible to try to work out potential solutions. According to the Federal Housing Finance Agency (FHFA), some borrowers who do not meet the requirements for an existing mortgage modification program may still be considered for a loan adjustment based on personal circumstances.

· If a mortgage modification is not possible, homeowners may want to consider a short sale -- sell the home for less than the amount of the mortgage. Although a short sale enables a homeowner to avoid foreclosure and often causes less damage to the homeowner’s credit score than a foreclosure, the lender must agree to accept the loss and in some cases the homeowner may have to pay taxes on the difference. Also, many lenders are overwhelmed by the large number of short sales being submitted by homeowners, so it could take longer than usual to receive a short-sale acceptance from the lender.

· If a homeowner cannot qualify for a mortgage modification or a short sale, some lenders will consider a deed in lieu of foreclosure, where the homeowner transfers the title to the lender in exchange for debt forgiveness. Properties that have additional debt, such as home equity lines of credit or additional mortgages, may not qualify for a deed in lieu of foreclosure. Homeowners who have additional debt tied to the property must share this information with their lender for consideration when applying for a short sale.

To read the full story, please click here:
http://online.wsj.com/article/SB122643638528218301.html

Wall Street Journal

HUD Issues New Consumer Protection Rules on Mortgages
The U.S. Dept. of Housing and Urban Development (HUD) has announced updates to the Real Estate Settlement Procedures Act (RESPA), including the requirement of a three-page “good-faith estimate” that provides borrowers with rates, fees, prepayment penalties, and possible increases in monthly payments for every mortgage transaction.

MAKING SENSE OF THE STORY FOR CONSUMERS

· The Real Estate Settlement Procedures Act (RESPA) is a 1974 law that sets standards for home-purchase transactions. The purpose of RESPA is to provide consumers with information about the real estate mortgage transaction and the costs associated with it and to prohibit certain practices, such as referral fees between settlement service providers, that often result in higher costs and reduced quality to consumers

· A key change to RESPA is the creation of a standardized good-faith estimate (GFE) -- an itemized list of fees and costs associated with a mortgage loan. Currently, there are several good-faith closing estimate forms available, which can make it difficult for borrowers to compare rates and offers. Beginning in 2010, the U.S. Dept. of Housing and Urban Development (HUD) will require all lenders and mortgage brokers to use the standardized form. HUD officials estimate that the change will save home buyers as much as $700 at closing, due in part to a requirement limiting the increase between the good-faith closing cost estimate and actual fees to 10 percent. The new three-page good faith estimate also will outline rates, fees, any prepayment penalties, and the possibility of later increases in monthly payments.

· HUD also has created a new page on the HUD-1 Settlement Statement to help homebuyers better understand what they are being charged at closing and how these charges compare to the GFE issued by their lender. The new GFE is designed to help mitigate future foreclosures by ensuring home buyers thoroughly understand their loan terms. Many housing analysts believe the current number of foreclosures is due to many borrowers making “uninformed decisions” during the homebuying process. The new, standardized GFE and revised HUD-1 will not be required until Jan. 1, 2010.

To read the full story, please click here:
http://online.wsj.com/article/SB122651207372121253.html

In Other News

Press Enterprise

Fewer Inland default filings from September to October

To read the full story, please click here:
http://www.pe.com/business/local/stories/PE_Biz_S_realtytrac13.4585ca0.html

Washington Post

Beyond White Walls and Empty Rooms

To read the full story, please click here:
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/14/AR2008111401468.html?hpid=smartliving

Bloomberg

Credit Score More Important Than Ever for Best U.S. Loan Rates

To read the full story, please click here:
http://www.bloomberg.com/apps/news?pid=20601213&sid=aiqk5pwd36ts&refer=home#

San Francisco Chronicle

Bay Area homeowners owe more than home’s worth

To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/11/MNN0142MCG.DTL&type=business&tsp=1

Los Angeles Times

Credit card holders squeezed as issuers cut credit limits

To read the full story, please click here:
http://www.latimes.com/business/la-fi-creditcard18-2008nov18,0,1390093.story

CNBC

Median home prices fall around US in Q3

To read the full story, please click here:
http://www.cnbc.com/id/27785390

POSTED BY: Brendan Coen AT 12:27 pm | Permalink | 0 Comments | E-mail this

Friday, 14 November 2008

C.A.R.'s Mortgage Update

This issue of Mortgage Update contains news and updates on foreclosure assistance programs for borrowers with mortgages issued through Citigroup, and mortgages owned or guaranteed by Fannie Mae and Freddie Mac.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Citigroup is expanding its foreclosure prevention efforts by establishing a new program, Citi Homeowner Assistance Program, which only is available to homeowners who are current on their mortgage payments, but at risk of defaulting. Citi Homeownership Assistance Program will reduce monthly payments, including property taxes and insurance, to 40 percent or less of the borrower’s income. The mortgage modification program will freeze or reduce interest rates, extend the terms of the loan, and possibly reduce the loan principal.

To read the full story, please click here:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aXh_NhG7OLoY&refer=home

· The Federal Housing Finance Agency (FHFA) this week announced a new government program to help mitigate foreclosures on loans owned or guaranteed by Fannie Mae and Freddie Mac. The program is targeted toward borrowers who are at least 90 days delinquent in their mortgage payments and have a high loan-to-value ratio. Reduced interest rates and longer terms of as much as 40 years may be offered to qualified borrowers. Some economists believe that areas such as California, Florida, and other high-cost areas will benefit the most from the program due to larger debt loads and higher rates of nontraditional mortgages.

To read the full story, please click here:
http://money.cnn.com/2008/11/10/real_estate/Citi_steps_up_foreclosure_help/index.htm

San Francisco Chronicle

The market for homeowners looking to sell

Despite declining home values, the market is still providing opportunities to sellers. In September, the median number of days it took to sell a single-family home was 46.1 days, compared with 56.7 days for the same period a year ago. By following a few guidelines sellers can be successful in selling their home.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Accurate pricing continues to be a key factor in selling a home, especially in today’s market. The median home price is expected to decline 31.7 in 2008 in California, according to C.A.R.’s 2009 Housing Market Forecast. Sellers who are expecting to receive offers similar in value to 2005-2006 offers should work with their REALTOR® to ensure that a home is priced accurately and that the current market can support the asking price.

· Pre-housing boom, many homes did not require a lot of marketing. Some homes could be listed on an MLS and sell within days. Today’s market is rapidly changing and the majority of homes for sale require more marketing than in previous cycles. Some sales agents are offering traditional marketing plans such as creating flyers, while others are opting for more elaborate options including catered lunches during an open house for brokers and potential buyers.

· Some economists believe that President-elect Barack Obama will aggressively work to restore the nation’s housing market. Proposals from his administration are likely to include tax credits for first-time home buyers, more loan modification programs, and reductions in down payments for loans owned or guaranteed by Fannie Mae and Freddie Mac. These proposed changed would enable more home buyers to purchase houses and help reduce the inventory of homes on the market.

· The current market and declining home prices are enabling many home buyers to move up by purchasing homes that previously would have been out of their price range. Some sellers, especially those who are seeking move-up opportunities, are accepting lower offers on their current home due to the reduced amount they are spending on their new home.

To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/09/REFR13VJHL.DTL&type=realestate

Reuters

U.S. conforming loan limit unchanged for 2009: FHFA
The Federal Housing Finance Agency (FHFA) earlier this week announced its 2009 conforming loan limits for mortgages owned or guaranteed by Fannie Mae and Freddie Mac.

MAKING SENSE OF THE STORY FOR CONSUMERS

· The FHFA conforming loan limit in many areas of the country will remain at $417,000, unchanged since 2006. Loan limits for high-cost areas, including California, will be capped at $625,500. The “new” limits are a decrease from the previous $729,750 limit, which was established earlier this year by the Economic Stimulus Act of 2008. In California, the new conforming loan limits for metropolitan areas range from $474,950 in the Sacramento-Arden-Arcade-Roseville metropolitan area, covering El Dorado, Placer, Sacramento and Yolo counties; to $625,500 in the Los Angeles-Long Beach-Santa Ana metropolitan area.

· The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.

· The CALIFORNIA ASSOCIATION OF REALTORS® hopes Congress will make permanent the current $729,750 conforming loan limit before the end of the year as one of the provisions in an economic stimulus package. Last week, the board of directors of the NATIONAL ASSOCIATION OF REALTORS® (NAR) formally signed off on a real estate stimulus proposal, which also supports a permanent increase.

· Many lenders recommend that home buyers who are applying for loans above $625,500, but below $729,750 complete the application process by the end of November. This will help ensure that the loan is processed and funded by the Dec. 31 deadline and that the home buyer does not have to qualify for a jumbo loan at a higher interest rate.

To read the full story, please click here:

http://www.reuters.com/article/gc03/idUSTRE4A65G220081107

CNN Money

The best time to buy a home

Recent economic reports and the continued decline of home prices have caused some home buyers to stay on the sidelines and try to time the market so they can purchase a home at an affordable price that will not reduce in value, and will appreciate quickly. However, many housing advisors recommend that home buyers not try to time the market, but instead purchase a home when they are ready.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Despite rising foreclosures, delinquencies, and unemployment rates, and declining home prices, sales of new and existing homes are improving, which is causing some home buyers to try to “time the market.” Many housing analysts advise potential home buyers not to base their homebuying decision on economic reports, but rather to take their time finding the right house and to focus on getting their financing in place.

· Most economists believe that home prices will continue to decline during 2009. C.A.R. predicts that the median home price in California will decline an additional 6 percent next year. Home buyers need to remember that real estate markets are local and prices differ neighborhood to neighborhood. Many REALTORS® advise their clients to visit communities that interest them, and to talk to homeowners, business owners, and financial institutions to become familiar with the area.

· Credit restrictions and loan underwriting standards tightened during the credit crunch, resulting in mortgage loans taking longer to process and fund. Most lenders are requiring more information about income, assets, and expenses than in previous years, so home buyers are advised to get preapproved for their mortgage loan instead of applying once they have identified their ideal home.

To read the full story, please click here:
http://asktheexpert.blogs.money.cnn.com/2008/11/04/the-best-time-to-buy-a-home/

In Other News...

San Francisco Chronicle

Mortgage rates fall farther to 6.2 percent

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/09/REQR13VJLL.DTL

Bloomberg

Pending Sales of Existing Homes in U.S. Fall 4.6% in September

To read the full story, please click here:
http://www.bloomberg.com/apps/news?pid=20601087&sid=awq3yJZ0NBLk&refer=home

Contra Costa Times

Tougher credit rules for consumers

To read the full story, please click here:

http://www.contracostatimes.com/search/ci_10906553?IADID=Search-www.contracostatimes.com-www.contracostatimes.com

Los Angeles Times

What stays, what goes in a home sale

To read the full story, please click here:
http://www.latimes.com/business/la-fi-lew9-2008nov09,0,44714.story

CNN Money

Mounting job losses fueling foreclosures

To read the full story, please click here:
http://money.cnn.com/2008/11/04/real_estate/job_losses_fuel_foreclosure/index.htm?postversion=2008110705

San Diego Union-Tribune

Survey: Almost half buying homes for first time

To read the full story, please click here:

http://www.signonsandiego.com/news/business/20081108-1100-newhomesales-nationalassociationofrealtors.html

POSTED BY: Brendan Coen AT 01:24 pm | Permalink | 0 Comments | E-mail this

To read the full story, please click here: http://asktheexpert.blogs.money.cnn.com/2008/11/04/the-best-time-to-buy-a-home/

To read the full story, please click here:
http://asktheexpert.blogs.money.cnn.com/2008/11/04/the-best-time-to-buy-a-home/