Mortgage Rate Trend Index
This week the mortgage industry experts polled by Bankrate.com say: It’s a tossup, basically. Thirty-one percent of the panelists believe mortgage rates will rise over the next 35 to 45 days. Another 38 percent think rates will fall, and the rest (31 percent) believe rates will remain relatively unchanged.
McLEAN, Va. – July 31, 2009 – Rates for 30-year mortgages rose for the second-straight week, Freddie Mac said Thursday.
The average rate for a 30-year fixed mortgage was 5.25 percent this week, up from 5.2 percent last week. Last year at this time, 30-year mortgages averaged 6.52 percent, Freddie Mac said.
Earlier this year, rates on 30-year mortgages fell to a record low of 4.78 percent, kick-starting refinancing activity. Last month, rates rose to nearly 5.6 percent after yields on long-term government debt, which are closely tied to mortgage rates, climbed.
The yield on the benchmark 10-year Treasury note rose to 3.70 percent from 3.67 percent late Wednesday.
“Bond yields rose slightly higher this week on market optimism that the economy may be stabilizing somewhat, and mortgage rates followed those yields,” said Frank Nothaft, Freddie Mac's chief economist.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage rose to 4.69 percent, up from 4.68 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.75 percent, up slightly from 4.74 percent last week. Rates on one-year, adjustable-rate mortgages increased to 4.8 percent from 4.77 percent.
The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for 30-year and 15-year fixed mortgages. Five-year, adjustable-rate mortgages averaged a fee of 0.6 point, and one-year adjustable rate mortgages averaged 0.5 point.
Copyright © 2009 The Associated Press
Friday, July 31, 2009
Frank threatens banks to stop foreclosures
WASHINGTON – July 30, 2009 – A senior House Democrat threatened banks Wednesday that if they don’t volunteer to save more homeowners from foreclosure, Congress will make them.
In a sternly worded statement, Rep. Barney Frank said Congress will revive legislation that would let bankruptcy judges write down a person’s monthly mortgage payment if the number of loan modifications remains low.
Frank, chairman of the House Financial Services Committee, also said his committee won’t consider legislation to help banks lend unless there is a “significant increase” in mortgage modifications.
Frank’s statement was aimed at adding momentum to a deal struck Tuesday between Treasury Secretary Timothy Geithner and more than two dozen mortgage companies. The two sides agreed to set the goal of adjusting 500,000 loans by Nov. 1.
But it was far from clear whether that would happen.
Loan servicers say they are still trying to play catch up to a deluge of customer requests by hiring and training thousands of new employees. Banks also are trying to sort through which customers face a legitimate financial hardship.
Also, many loans have been bundled and sold to investors as securities, complicating efforts to modify the terms.
Congress tried earlier this spring to pass legislation that would give people a chance to keep their homes by filing for bankruptcy. But while President Barack Obama said he supported the measure, he did little to see it through and it was defeated amid an aggressive lobbying effort by banks.
The measure failed in the Senate by a 45-51 vote, falling 15 votes short of the 60 needed to overcome procedural hurdles.
“People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different,” Frank said.
Copyright © 2009 The Associated Press
In a sternly worded statement, Rep. Barney Frank said Congress will revive legislation that would let bankruptcy judges write down a person’s monthly mortgage payment if the number of loan modifications remains low.
Frank, chairman of the House Financial Services Committee, also said his committee won’t consider legislation to help banks lend unless there is a “significant increase” in mortgage modifications.
Frank’s statement was aimed at adding momentum to a deal struck Tuesday between Treasury Secretary Timothy Geithner and more than two dozen mortgage companies. The two sides agreed to set the goal of adjusting 500,000 loans by Nov. 1.
But it was far from clear whether that would happen.
Loan servicers say they are still trying to play catch up to a deluge of customer requests by hiring and training thousands of new employees. Banks also are trying to sort through which customers face a legitimate financial hardship.
Also, many loans have been bundled and sold to investors as securities, complicating efforts to modify the terms.
Congress tried earlier this spring to pass legislation that would give people a chance to keep their homes by filing for bankruptcy. But while President Barack Obama said he supported the measure, he did little to see it through and it was defeated amid an aggressive lobbying effort by banks.
The measure failed in the Senate by a 45-51 vote, falling 15 votes short of the 60 needed to overcome procedural hurdles.
“People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different,” Frank said.
Copyright © 2009 The Associated Press
Thursday, July 30, 2009
New Federal Housing Administration loan assistance
WASHINGTON – July 30, 2009 – Loans backed by the Federal Housing Administration (FHA) will be eligible for payment reductions similar to the Obama administration’s loan modification program, the government will announce Thursday.
Effective Aug. 15, financially troubled homeowners who have an FHA-insured loan can apply for a modification under a program parallel to “Making Home Affordable” to help lower their payments and avoid foreclosure.
The program, launched in March, is designed to lower monthly payments for 3 million to 4 million borrowers, although only about 200,000 have been helped so far. Lenders agreed this week to adjust 500,000 loans by Nov. 1.
The FHA, which backs about 5 million loans, is a government-run mortgage insurance program. It became the main source of home loans to borrowers with poor credit and low down payments after the collapse of the subprime lending market.
The agency lets borrowers take out home loans with down payments as low as 3.5 percent, compared with 20 percent for a typical loan that doesn’t require mortgage insurance.
By law, FHA cannot offer borrowers interest rates as low as 2 percent, which are available under the Obama plan. Instead, FHA will allow lenders to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. No interest will be charged on that amount.
Government officials did not have an estimate of how many borrowers would qualify.
“We’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” Housing and Urban Development Secretary Shaun Donovan said in a statement.
Lenders who participate in the FHA program will receive an incentive fee of up to $1,250 and can be reimbursed for $250 in costs.
Copyright © 2009 The Associated Press
Effective Aug. 15, financially troubled homeowners who have an FHA-insured loan can apply for a modification under a program parallel to “Making Home Affordable” to help lower their payments and avoid foreclosure.
The program, launched in March, is designed to lower monthly payments for 3 million to 4 million borrowers, although only about 200,000 have been helped so far. Lenders agreed this week to adjust 500,000 loans by Nov. 1.
The FHA, which backs about 5 million loans, is a government-run mortgage insurance program. It became the main source of home loans to borrowers with poor credit and low down payments after the collapse of the subprime lending market.
The agency lets borrowers take out home loans with down payments as low as 3.5 percent, compared with 20 percent for a typical loan that doesn’t require mortgage insurance.
By law, FHA cannot offer borrowers interest rates as low as 2 percent, which are available under the Obama plan. Instead, FHA will allow lenders to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. No interest will be charged on that amount.
Government officials did not have an estimate of how many borrowers would qualify.
“We’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” Housing and Urban Development Secretary Shaun Donovan said in a statement.
Lenders who participate in the FHA program will receive an incentive fee of up to $1,250 and can be reimbursed for $250 in costs.
Copyright © 2009 The Associated Press
Reports show economy mending
WASHINGTON – July 30, 2009 – Economic indicators keep saying what investors have known for months: Things are getting better.
The latest government report to reinforce a more positive view of the economy’s health was the Federal Reserve’s “beige book,” released Wednesday, which indicated many parts of the nation are seeing economic stability. Earlier in the day, President Obama told spectators at a town hall meeting in Raleigh, N.C., “We may be seeing the beginning of the end of the recession.”
And the July update of the USA TODAY/IHS Global Insight Economic Outlook Index predicts the economy will grow October through December, the first increase since September 2008.
“The evidence (of recovery) is building every day,” says Jim Paulsen of Wells Capital Management. “It’s settling and gives people more faith in what they’ve seen” from stock and bond markets.
The reports echo what stock prices have been predicting since March. The Standard & Poor’s 500 index has soared 44 percent from its March 9 low, despite falling 0.5 percent Wednesday.
While the latest pieces of economic data provide some comfort, they by no means signal a return to the boom times. Economic experts say they still are on the watch for information about:
• Clues on when a meaningful recovery is firmly underway. The beige book indicated the economy is still far from robust, because five of the Fed’s 12 regions – Boston, Philadelphia, Richmond, Atlanta and Dallas – were “subdued” or “weak” and Minneapolis was faltering.
“There may be a bottom, but where’s the bounce?” says Doug Roberts of Channel Capital Research. “There’s still a significant level of weakness in the economy.”
• Signs of health in the commercial real estate market. The beige book sounded concerns about the demand for office buildings, retail space and manufacturing facilities, says John Canally of LPL Financial. The fact commercial real estate remains soft could be a sign that employment, too, will be weak until early 2010, he says.
• Evidence of the federal stimulus kicking in. Much of the future hinges on how stimulus spending steers the economy, Roberts says, which won’t be known until next year. Some additional clues, though, will be released this week with reports on jobless claims today and GDP on Friday.
“There’s a lot of information that supports the idea we’ve turned a corner,” Paulsen says. “But there’s still a lot of doubt.”
Copyright © 2009 USA Today
The latest government report to reinforce a more positive view of the economy’s health was the Federal Reserve’s “beige book,” released Wednesday, which indicated many parts of the nation are seeing economic stability. Earlier in the day, President Obama told spectators at a town hall meeting in Raleigh, N.C., “We may be seeing the beginning of the end of the recession.”
And the July update of the USA TODAY/IHS Global Insight Economic Outlook Index predicts the economy will grow October through December, the first increase since September 2008.
“The evidence (of recovery) is building every day,” says Jim Paulsen of Wells Capital Management. “It’s settling and gives people more faith in what they’ve seen” from stock and bond markets.
The reports echo what stock prices have been predicting since March. The Standard & Poor’s 500 index has soared 44 percent from its March 9 low, despite falling 0.5 percent Wednesday.
While the latest pieces of economic data provide some comfort, they by no means signal a return to the boom times. Economic experts say they still are on the watch for information about:
• Clues on when a meaningful recovery is firmly underway. The beige book indicated the economy is still far from robust, because five of the Fed’s 12 regions – Boston, Philadelphia, Richmond, Atlanta and Dallas – were “subdued” or “weak” and Minneapolis was faltering.
“There may be a bottom, but where’s the bounce?” says Doug Roberts of Channel Capital Research. “There’s still a significant level of weakness in the economy.”
• Signs of health in the commercial real estate market. The beige book sounded concerns about the demand for office buildings, retail space and manufacturing facilities, says John Canally of LPL Financial. The fact commercial real estate remains soft could be a sign that employment, too, will be weak until early 2010, he says.
• Evidence of the federal stimulus kicking in. Much of the future hinges on how stimulus spending steers the economy, Roberts says, which won’t be known until next year. Some additional clues, though, will be released this week with reports on jobless claims today and GDP on Friday.
“There’s a lot of information that supports the idea we’ve turned a corner,” Paulsen says. “But there’s still a lot of doubt.”
Copyright © 2009 USA Today
Wednesday, July 29, 2009
Feds push mortgage companies to modify more loans
WASHINGTON – July 29, 2009 – The Obama administration, scrambling to get its main housing initiative on track, extracted a pledge from 25 mortgage company executives to improve their efforts to assist borrowers in danger of foreclosure.
In an all-day series of meetings Tuesday at the Treasury Department, government officials reached a verbal agreement with the executives for a new goal of about 500,000 loan modifications by Nov. 1 and stressed the program’s urgency.
The sessions came amid concerns that the Obama administration will fall far short of its original goal of helping up to 3 million to 4 million troubled borrowers with modified loans.
As of this week, only about 200,000 borrowers were enrolled in three-month trial loan modifications, out of about 370,000 who were offered modifications by mortgage companies.
“Today’s meeting was an opportunity to identify ways to accelerate the program and bring relief faster,” Treasury Secretary Timothy Geithner said in a statement.
But mortgage companies also say the Obama administration – which announced the program in February – left the public with the impression that the program would be instantly available.
“It was very difficult as an industry as a whole to try to live up to those expectations,” said Dan Frahm, a Bank of America spokesman, who described Tuesday’s meeting as a “realistic” exchange about how the industry can improve its efforts and possibly expand the loan modification effort to more borrowers.
For months, borrowers, housing counselors and activist groups alike have complained that the process is a confusing, bureaucratic nightmare.
“There needs to be a lot more accountability and oversight,” said Brenda Muniz, legislative director for the community group ACORN, which has been holding protests around the country to draw attention to the slow progress of the administration’s plan.
Mortgage companies, she said, are “doing things that are just outright prohibited” under the plan.
Housing counselors say borrowers are being charged upfront fees and given inaccurate or confusing information about the program. The delays are long and, in some cases, lenders continue the foreclosure process while loans are being reviewed for a modification.
On Tuesday, an activist group in Minnesota filed a lawsuit seeking to stop home foreclosures in that state. Mark Ireland, an attorney with the Minnesota-based Foreclosure Law Relief Project, said the government has failed to establish the procedures needed to ensure the fair and uniform administration of the program. Loan servicers are not required to tell a homeowner why they were denied a loan modification.
“Decisions are made under a cloak of secrecy and there is no formal way to challenge these decisions,” Ireland said.
Even for those who are accepted, the process is often painful.
Alfred Robinson, 41, a bus driver in Kansas City, Mo. finally got a loan modification this month after a two-month struggle. He originally was told in early May that his income was too high to qualify and was offered a different — and much less favorable — loan modification by Washington Mutual, now owned by JPMorgan Chase & Co.
But two months later, the lender reversed course and offered him the Obama plan — that would lower his payment to about $950 a month. “They just dropped it a hundred bucks,” he said. A Chase spokesman declined to comment.
One reason progress has been sluggish is that loan servicers have had to hire and train thousands of employees. The loans have been bundled and sold to hundreds of investors as securities, which often have differing rules about loan modifications.
Plus, mortgage companies have been swamped with thousands of calls from borrowers who want to take advantage of the program, and must sort out who is facing a legitimate financial hardship.
Many servicers didn’t get set up to deal with the surge in problem loans and modifications until this year, said Thomas Lawler, a housing economist in Northern Virginia.
That, he said, “is pretty depressing because the problems have been going on for more than two years ... It’s a bit of an indictment of the whole mortgage servicing industry.”
The industry, meanwhile, says the Obama administration’s program isn’t exactly simple to set up. It requires that mortgage companies verify borrowers incomes and submit numerous forms to the federal government.
“It’s not the most streamlined process,” said Paul Leonard, director of government affairs at the Housing Policy Council, a mortgage industry group.
Under the program, servicers can pocket up to $4,500 for each loan they modify. But they won’t start to be paid until homeowners have made on-time payments for three months.
If the program doesn’t kick in high-gear soon, the recent optimism about a real estate and economic recovery could fade as more borrowers fall into foreclosure, putting more downward pressure on home prices.
“Foreclosures are still rapidly escalating,” said Andrew Jakabovics of the Center for American Progress, a think tank with close ties to the Obama administration. “If we don’t get a handle on that ... the economy is going to have a difficult time recovering.”
Copyright © 2009 The Associated Press
In an all-day series of meetings Tuesday at the Treasury Department, government officials reached a verbal agreement with the executives for a new goal of about 500,000 loan modifications by Nov. 1 and stressed the program’s urgency.
The sessions came amid concerns that the Obama administration will fall far short of its original goal of helping up to 3 million to 4 million troubled borrowers with modified loans.
As of this week, only about 200,000 borrowers were enrolled in three-month trial loan modifications, out of about 370,000 who were offered modifications by mortgage companies.
“Today’s meeting was an opportunity to identify ways to accelerate the program and bring relief faster,” Treasury Secretary Timothy Geithner said in a statement.
But mortgage companies also say the Obama administration – which announced the program in February – left the public with the impression that the program would be instantly available.
“It was very difficult as an industry as a whole to try to live up to those expectations,” said Dan Frahm, a Bank of America spokesman, who described Tuesday’s meeting as a “realistic” exchange about how the industry can improve its efforts and possibly expand the loan modification effort to more borrowers.
For months, borrowers, housing counselors and activist groups alike have complained that the process is a confusing, bureaucratic nightmare.
“There needs to be a lot more accountability and oversight,” said Brenda Muniz, legislative director for the community group ACORN, which has been holding protests around the country to draw attention to the slow progress of the administration’s plan.
Mortgage companies, she said, are “doing things that are just outright prohibited” under the plan.
Housing counselors say borrowers are being charged upfront fees and given inaccurate or confusing information about the program. The delays are long and, in some cases, lenders continue the foreclosure process while loans are being reviewed for a modification.
On Tuesday, an activist group in Minnesota filed a lawsuit seeking to stop home foreclosures in that state. Mark Ireland, an attorney with the Minnesota-based Foreclosure Law Relief Project, said the government has failed to establish the procedures needed to ensure the fair and uniform administration of the program. Loan servicers are not required to tell a homeowner why they were denied a loan modification.
“Decisions are made under a cloak of secrecy and there is no formal way to challenge these decisions,” Ireland said.
Even for those who are accepted, the process is often painful.
Alfred Robinson, 41, a bus driver in Kansas City, Mo. finally got a loan modification this month after a two-month struggle. He originally was told in early May that his income was too high to qualify and was offered a different — and much less favorable — loan modification by Washington Mutual, now owned by JPMorgan Chase & Co.
But two months later, the lender reversed course and offered him the Obama plan — that would lower his payment to about $950 a month. “They just dropped it a hundred bucks,” he said. A Chase spokesman declined to comment.
One reason progress has been sluggish is that loan servicers have had to hire and train thousands of employees. The loans have been bundled and sold to hundreds of investors as securities, which often have differing rules about loan modifications.
Plus, mortgage companies have been swamped with thousands of calls from borrowers who want to take advantage of the program, and must sort out who is facing a legitimate financial hardship.
Many servicers didn’t get set up to deal with the surge in problem loans and modifications until this year, said Thomas Lawler, a housing economist in Northern Virginia.
That, he said, “is pretty depressing because the problems have been going on for more than two years ... It’s a bit of an indictment of the whole mortgage servicing industry.”
The industry, meanwhile, says the Obama administration’s program isn’t exactly simple to set up. It requires that mortgage companies verify borrowers incomes and submit numerous forms to the federal government.
“It’s not the most streamlined process,” said Paul Leonard, director of government affairs at the Housing Policy Council, a mortgage industry group.
Under the program, servicers can pocket up to $4,500 for each loan they modify. But they won’t start to be paid until homeowners have made on-time payments for three months.
If the program doesn’t kick in high-gear soon, the recent optimism about a real estate and economic recovery could fade as more borrowers fall into foreclosure, putting more downward pressure on home prices.
“Foreclosures are still rapidly escalating,” said Andrew Jakabovics of the Center for American Progress, a think tank with close ties to the Obama administration. “If we don’t get a handle on that ... the economy is going to have a difficult time recovering.”
Copyright © 2009 The Associated Press
Countrywide’s promised loan relief falling short for many
WASHINGTON – July 29, 2009 – Countrywide agreed last year to give Florida customers mortgage relief as part of a settlement over lending practices, but critics say the company is not living up to its end of the bargain. As part of a settlement, the now-defunct subprime mortgage giant promised $1 billion in mortgage relief to its legions of struggling Florida customers.
Now, eight months later, borrowers trapped in problem loans say Countrywide Financial is not living up to the terms of the $8.4 billion deal.
The loan modifications were part of a settlement reached with Florida and 10 other states that allowed Countrywide, which merged with Bank of America a year ago, to avoid prosecution for allegedly using deceptive sales and marketing practices to sell borrowers risky, high-cost mortgages.
“My 1-year-old nephew has more teeth than the settlement agreement,” said Dennis Donet, a Miami foreclosure defense attorney.
Both borrowers and loan modification consultants complain of abysmal customer service and a maddening process that can take months to complete. Mortgage brokers and attorneys criticize the low number of loan modifications completed, considering the company’s past dominance in Florida.
A spokeswoman for Attorney General Bill McCollum said it appears the company is sufficiently complying with the settlement – one of the largest of its kind in U.S. history – but the attorney general’s office still has the matter under review.
Civil suits dropped
Under the settlement, Countrywide admitted no guilt in the civil cases filed by Florida and the other states.
The lawsuits were dropped, but Florida is moving forward with a case against the company’s former chief executive, Angelo Mozilo, for allegedly engaging in deceptive lending and other illegal practices related to the sale of mortgage-backed securities.
A motion to dismiss the case against Mozilo is being heard Wednesday in Broward Circuit Court. If the case proceeds, he would be the highest profile lending executive to face trial since the start of the mortgage debacle.
Back in October, Countrywide estimated about 52,000 Florida borrowers were potentially eligible for help, which included loan modifications for subprime and payment option adjustable rate mortgages – loans especially prone to default because of payments that shoot up.
It promised to waive all fees and penalties and agreed to make cash payments to families needing help to relocate after foreclosure. The company also set aside $21 million to compensate borrowers who quickly defaulted on their loans – often a sign they never had a chance of affording a home to begin with.
As part of its outreach, the company also said it would offer modifications to borrowers even if they had not yet fallen behind. But homeowners, including Michael Lutfey, who lives in Miramar, say they have pleaded for a loan modification to no avail.
Lutfey, who has a payment option ARM that allows the loan balance to grow when minimum payments are made, says the value of his house has fallen by 40 percent. He’s current, but has a loan payment that is about to balloon.
Countrywide, he said, rejected his loan modification application because he made too much money and was not yet behind.
“It did not make any sense to me since a loan modification could have been tailored under their [program] to equal the amount of the minimum monthly payment that I am able to pay,” said Lutfey, who still has not received a modification. He has had to hire a lawyer to help him through the process.
Rick Simon, a spokesman for Bank of America, which now owns Countrywide, defended the company’s efforts. “We are very proud of our record,” he said. “We think we are running ahead of the schedule envisioned.”
He did, however, acknowledge that after a quick start, the pace of modifications slowed during the first part of the year as the company waited for the release of the Making Home Affordable federal loan modification program.
Simon also said the company is struggling with the volume of borrowers calling in for aid. The company has 7,400 home retention specialists handling 80,000 calls a day.
According to its first compliance report to the state, Countrywide said it modified 6,497 Florida loans between December – when the settlement took effect – and March 31.
Critics say it is impossible to gauge the significance of the number, since the total number of Countrywide subprime and payment option loans in Florida is unknown. The attorney general’s office said it does not have the number, which Bank of America also would not disclose.
“We’re in a state of 15 million people and they probably made a loan to one in five adults. Where are the modifications? Countrywide could have modified 52,000 loans in Miami-Dade County alone,” said Grant Stern, a Bay Harbor Islands-based mortgage consultant.
Delays are to be expected, according to Keith Gumbinger, vice president of mortgage industry publisher HSH Associates. The 6,500 modifications completed so far are a promising step, he said.
“It’s not like flipping a switch,” he said. “There’s paperwork that has to be drafted, developed and signed. It’s an uphill battle to get that positive result.”
Countrywide has also made $491,963 in relocation payments. And it said it would begin making payments early next year to borrowers that defaulted quickly. On Tuesday, the attorney general’s office announced another payment from Countrywide: $4 million that will be used to offer foreclosure defense services to borrowers through the Florida Bar Foundation.
Beyond that, neither the state nor the attorney general’s office is making the details of the first compliance report public. Last month, Countrywide obtained a temporary protective order from a Broward Circuit Court judge to prevent the release of further details, citing trade secrets. The state, consequently, released only a single page summary of the report.
Critics claim they need to see a detailed account to evaluate how much the company is doing to repair the damage from its lending practices.
“There is no list of loans. There is no mechanism to ensure transparency or to track what happens with the loans. We don’t know who gets relief and who doesn’t and why,” said April Charney, a senior staff attorney with Jacksonville Area Legal Aid.
Some fault McCollum’s office for giving too much control to Countrywide to administer the relief. “They left it up to Bank of America and Countrywide to help borrowers and that is sort of like asking the tobacco industry to take care of smokers who get cancer,” said Guy Cecala, publisher of Inside Mortgage Finance.
The state should have demanded $1 billion in cash from the company to use for its own foreclosure prevention programs, he said.
Another development some find troublesome is that Countrywide has begun modifying mortgages under the federal Making Home Affordable program, which subsidizes reductions in interest rates and makes incentive payments to lenders for each completed modification.
Austin King, national director of the financial justice center for ACORN, a grass-roots community advocacy group, said Countrywide should not be allowed to substitute one obligation – reviewing loans and making modifications under the federal plan – with its obligations under the settlement.
The settlement should be used to qualify borrowers who cannot be modified under the federal plan, he said. “[The settlement] was to make people whole because of Countrywide’s law-breaking lending practices and that obligation still needs to be satisfied,” King said.
Simon said in many cases borrowers got a better deal under the federal plan and that incentives were used to foot the cost of more modifications.
Bad experience
Even some customers who eventually succeed in getting a Countrywide loan modification have few nice things to say about the experience. Germain Leville, 52, a technician at Memorial Regional Hospital, said she had to jump through hoops for more than six months.
“I kept calling and they kept transferring me from phone to phone,” Leville said. Like Lutfey, she said she had to pay a private loan modification company for help.
Copyright © 2009 The Miami Herald
Now, eight months later, borrowers trapped in problem loans say Countrywide Financial is not living up to the terms of the $8.4 billion deal.
The loan modifications were part of a settlement reached with Florida and 10 other states that allowed Countrywide, which merged with Bank of America a year ago, to avoid prosecution for allegedly using deceptive sales and marketing practices to sell borrowers risky, high-cost mortgages.
“My 1-year-old nephew has more teeth than the settlement agreement,” said Dennis Donet, a Miami foreclosure defense attorney.
Both borrowers and loan modification consultants complain of abysmal customer service and a maddening process that can take months to complete. Mortgage brokers and attorneys criticize the low number of loan modifications completed, considering the company’s past dominance in Florida.
A spokeswoman for Attorney General Bill McCollum said it appears the company is sufficiently complying with the settlement – one of the largest of its kind in U.S. history – but the attorney general’s office still has the matter under review.
Civil suits dropped
Under the settlement, Countrywide admitted no guilt in the civil cases filed by Florida and the other states.
The lawsuits were dropped, but Florida is moving forward with a case against the company’s former chief executive, Angelo Mozilo, for allegedly engaging in deceptive lending and other illegal practices related to the sale of mortgage-backed securities.
A motion to dismiss the case against Mozilo is being heard Wednesday in Broward Circuit Court. If the case proceeds, he would be the highest profile lending executive to face trial since the start of the mortgage debacle.
Back in October, Countrywide estimated about 52,000 Florida borrowers were potentially eligible for help, which included loan modifications for subprime and payment option adjustable rate mortgages – loans especially prone to default because of payments that shoot up.
It promised to waive all fees and penalties and agreed to make cash payments to families needing help to relocate after foreclosure. The company also set aside $21 million to compensate borrowers who quickly defaulted on their loans – often a sign they never had a chance of affording a home to begin with.
As part of its outreach, the company also said it would offer modifications to borrowers even if they had not yet fallen behind. But homeowners, including Michael Lutfey, who lives in Miramar, say they have pleaded for a loan modification to no avail.
Lutfey, who has a payment option ARM that allows the loan balance to grow when minimum payments are made, says the value of his house has fallen by 40 percent. He’s current, but has a loan payment that is about to balloon.
Countrywide, he said, rejected his loan modification application because he made too much money and was not yet behind.
“It did not make any sense to me since a loan modification could have been tailored under their [program] to equal the amount of the minimum monthly payment that I am able to pay,” said Lutfey, who still has not received a modification. He has had to hire a lawyer to help him through the process.
Rick Simon, a spokesman for Bank of America, which now owns Countrywide, defended the company’s efforts. “We are very proud of our record,” he said. “We think we are running ahead of the schedule envisioned.”
He did, however, acknowledge that after a quick start, the pace of modifications slowed during the first part of the year as the company waited for the release of the Making Home Affordable federal loan modification program.
Simon also said the company is struggling with the volume of borrowers calling in for aid. The company has 7,400 home retention specialists handling 80,000 calls a day.
According to its first compliance report to the state, Countrywide said it modified 6,497 Florida loans between December – when the settlement took effect – and March 31.
Critics say it is impossible to gauge the significance of the number, since the total number of Countrywide subprime and payment option loans in Florida is unknown. The attorney general’s office said it does not have the number, which Bank of America also would not disclose.
“We’re in a state of 15 million people and they probably made a loan to one in five adults. Where are the modifications? Countrywide could have modified 52,000 loans in Miami-Dade County alone,” said Grant Stern, a Bay Harbor Islands-based mortgage consultant.
Delays are to be expected, according to Keith Gumbinger, vice president of mortgage industry publisher HSH Associates. The 6,500 modifications completed so far are a promising step, he said.
“It’s not like flipping a switch,” he said. “There’s paperwork that has to be drafted, developed and signed. It’s an uphill battle to get that positive result.”
Countrywide has also made $491,963 in relocation payments. And it said it would begin making payments early next year to borrowers that defaulted quickly. On Tuesday, the attorney general’s office announced another payment from Countrywide: $4 million that will be used to offer foreclosure defense services to borrowers through the Florida Bar Foundation.
Beyond that, neither the state nor the attorney general’s office is making the details of the first compliance report public. Last month, Countrywide obtained a temporary protective order from a Broward Circuit Court judge to prevent the release of further details, citing trade secrets. The state, consequently, released only a single page summary of the report.
Critics claim they need to see a detailed account to evaluate how much the company is doing to repair the damage from its lending practices.
“There is no list of loans. There is no mechanism to ensure transparency or to track what happens with the loans. We don’t know who gets relief and who doesn’t and why,” said April Charney, a senior staff attorney with Jacksonville Area Legal Aid.
Some fault McCollum’s office for giving too much control to Countrywide to administer the relief. “They left it up to Bank of America and Countrywide to help borrowers and that is sort of like asking the tobacco industry to take care of smokers who get cancer,” said Guy Cecala, publisher of Inside Mortgage Finance.
The state should have demanded $1 billion in cash from the company to use for its own foreclosure prevention programs, he said.
Another development some find troublesome is that Countrywide has begun modifying mortgages under the federal Making Home Affordable program, which subsidizes reductions in interest rates and makes incentive payments to lenders for each completed modification.
Austin King, national director of the financial justice center for ACORN, a grass-roots community advocacy group, said Countrywide should not be allowed to substitute one obligation – reviewing loans and making modifications under the federal plan – with its obligations under the settlement.
The settlement should be used to qualify borrowers who cannot be modified under the federal plan, he said. “[The settlement] was to make people whole because of Countrywide’s law-breaking lending practices and that obligation still needs to be satisfied,” King said.
Simon said in many cases borrowers got a better deal under the federal plan and that incentives were used to foot the cost of more modifications.
Bad experience
Even some customers who eventually succeed in getting a Countrywide loan modification have few nice things to say about the experience. Germain Leville, 52, a technician at Memorial Regional Hospital, said she had to jump through hoops for more than six months.
“I kept calling and they kept transferring me from phone to phone,” Leville said. Like Lutfey, she said she had to pay a private loan modification company for help.
Copyright © 2009 The Miami Herald
Tuesday, July 28, 2009
Trying to sell? Clean up any neighborhood eyesores
PORT RICHEY, Fla. – July 28, 2009 – When Vicky Black’s one-story home in Port Richey, Fla., was on the market, prospective buyers told her they liked it. Unfortunately, they made negative comments about her neighbor’s home, which has a stone lawn and little curb appeal.
“They said I was the gem of the neighborhood, and it was too bad I had eyesores around me,” recalled Black, who took her house off the market last year.
The appearance of nearby homes absolutely affects homeowners’ ability to sell, said Pat Vredevoogd Combs, former president of the National Association of Realtors.
“One house that’s an eyesore affects everybody,” said Combs, a real estate agent in Grand Rapids, Mich.
It’s a problem that has grown with the nation’s foreclosure rate, she said. Many foreclosed properties go into disrepair. Problems range from uncut grass to broken windows to trash in the yard.
Combs recommends that sellers and real estate agents take action toward cleaning up unsightly properties. She has encouraged clients to phone neighbors and ask them to address the problem or, in the case of a foreclosure, to take care of it themselves.
“The agent could help if need be,” she said. “It’s better if it’s owner to owner.”
She recommends handling neighbors delicately.
“You do have to defuse the fact that you’re attacking them,” she said. “You can’t go right at them with, ‘You dirty bums, how come you’re so messy?’”
She suggests telling delinquent neighbors that a real estate agent or potential buyer complained. It’s also a good idea to have a solution and to offer to help with the fix, Combs said.
If homeowners are uncomfortable contacting their neighbors, real estate agent Greg Perry is happy to do it. He’s had varying degrees of success. Some neighbors have seen the value of improving their property, others haven’t, said Perry, who sells homes in Kirkland, Wash.
“You run into all kinds of people,” he said. “There are belligerent people in life and there are accommodating people in life.”
“A lot of agents need to think a little bit outside of the box,” Perry said. “I’m always willing to help my seller out, and sometimes that means actually arranging for the neighbor’s cleanup. I’ve done it on my own dime.”
Approaching the neighboring homeowner is the most appropriate first step, said Carl Smart, president of the American Association of Code Enforcement.
“A friendly call from a neighbor is often very much appreciated” over a complaint to the local code enforcement office, said Smart, an executive assistant in the Fort Worth, Texas, city manager’s office. “Sometimes, it’s not so pleasant. At least you tried before moving forward with code officials.”
If a phone call fails to resolve concerns, he recommends contacting the local code enforcement office or neighborhood association. Representatives of those organizations will know whether the issue violates local codes, Smart said. Often people are disappointed to learn that their neighbor is not breaking any rules, he said.
Nor does filing a complaint guarantee an instant remedy, he said. While some homeowners do immediately address the issues, others may appeal the complaint or take their time fixing the problem.
He recommends asking the homeowner before doing any work yourself.
“If they accept, everything is fine,” he said.
Otherwise, it’s trespassing, he said.
“I know it’s happening,” he said. “It’s kind of a neighborly approach. It’s very much akin to a neighborhood cleanup.”
Combs, the real estate agent, encourages clients to take turns on maintenance chores, such as cutting the grass or cleaning up the yard.
“People say, ‘This looks terrible. Why isn’t somebody doing something?’” she said. “Well, guess what? It’s your neighborhood. It’s only hurting you. People have to start stepping up.”
Copyright © 2009 The Associated Press
“They said I was the gem of the neighborhood, and it was too bad I had eyesores around me,” recalled Black, who took her house off the market last year.
The appearance of nearby homes absolutely affects homeowners’ ability to sell, said Pat Vredevoogd Combs, former president of the National Association of Realtors.
“One house that’s an eyesore affects everybody,” said Combs, a real estate agent in Grand Rapids, Mich.
It’s a problem that has grown with the nation’s foreclosure rate, she said. Many foreclosed properties go into disrepair. Problems range from uncut grass to broken windows to trash in the yard.
Combs recommends that sellers and real estate agents take action toward cleaning up unsightly properties. She has encouraged clients to phone neighbors and ask them to address the problem or, in the case of a foreclosure, to take care of it themselves.
“The agent could help if need be,” she said. “It’s better if it’s owner to owner.”
She recommends handling neighbors delicately.
“You do have to defuse the fact that you’re attacking them,” she said. “You can’t go right at them with, ‘You dirty bums, how come you’re so messy?’”
She suggests telling delinquent neighbors that a real estate agent or potential buyer complained. It’s also a good idea to have a solution and to offer to help with the fix, Combs said.
If homeowners are uncomfortable contacting their neighbors, real estate agent Greg Perry is happy to do it. He’s had varying degrees of success. Some neighbors have seen the value of improving their property, others haven’t, said Perry, who sells homes in Kirkland, Wash.
“You run into all kinds of people,” he said. “There are belligerent people in life and there are accommodating people in life.”
“A lot of agents need to think a little bit outside of the box,” Perry said. “I’m always willing to help my seller out, and sometimes that means actually arranging for the neighbor’s cleanup. I’ve done it on my own dime.”
Approaching the neighboring homeowner is the most appropriate first step, said Carl Smart, president of the American Association of Code Enforcement.
“A friendly call from a neighbor is often very much appreciated” over a complaint to the local code enforcement office, said Smart, an executive assistant in the Fort Worth, Texas, city manager’s office. “Sometimes, it’s not so pleasant. At least you tried before moving forward with code officials.”
If a phone call fails to resolve concerns, he recommends contacting the local code enforcement office or neighborhood association. Representatives of those organizations will know whether the issue violates local codes, Smart said. Often people are disappointed to learn that their neighbor is not breaking any rules, he said.
Nor does filing a complaint guarantee an instant remedy, he said. While some homeowners do immediately address the issues, others may appeal the complaint or take their time fixing the problem.
He recommends asking the homeowner before doing any work yourself.
“If they accept, everything is fine,” he said.
Otherwise, it’s trespassing, he said.
“I know it’s happening,” he said. “It’s kind of a neighborly approach. It’s very much akin to a neighborhood cleanup.”
Combs, the real estate agent, encourages clients to take turns on maintenance chores, such as cutting the grass or cleaning up the yard.
“People say, ‘This looks terrible. Why isn’t somebody doing something?’” she said. “Well, guess what? It’s your neighborhood. It’s only hurting you. People have to start stepping up.”
Copyright © 2009 The Associated Press
Monday, July 27, 2009
Staging a high-end home for sale requires a different kind of makeover
SOUTH FLORIDA – July 27, 2009 – The crashing economy and crumbling real estate market have had an unexpected side effect: an emergence of the frugal rich who no longer buy just because, but demand to visualize themselves in a palace before they plunk down the cash.
For most people trying to sell their house, that visualization has always meant “staging” – the strategic placement of a borrowed La-Z-Boy chair, the shifting of a floral arrangement, the hanging of that painting that has gathered dust in the garage for 10 years.
High-end staging, or “hyper-staging,” as some South Florida experts have taken to calling it, is another thing altogether.
We’re talking custom-made light fixtures the size of a small car, hundreds of color-coded books placed in the home’s library to stimulate a buyer’s visual cortex, the removal of a kitchen wall, and the placement of a temporary wall in a bedroom, to name a few changes.
“I would say that we’ve gotten two dozen requests for this hyper-staging over the past couple of years,” said Giselle Loor of Hollywood-based B&G Design. “The way it started was, homeowners and their sales agents began asking us for our opinion, ‘Why won’t this house sell.’ And after we studied the market and even social factors we figured out that it was about buyers in all income categories being cautious.”
Until recently, many high-end home buyers were not as discriminating as the average home buyer, says Barb Schwarz, founder of Staged Homes, a sort of staging university for home decorators and related professionals in California.
Rather than needing to “see themselves in a home” to be convinced, they simply needed to be convinced that the home – the structure and the grounds – and the surrounding community were high quality, she said.
The recession has made many of those buyers more cautious.
Alex Bruno, a RE/MAX agent and historic-home and staging expert, agrees that the failing economy has made staging necessary for top-flight houses.
“It’s strange, but it’s true,” Bruno says. “People with money to spare are not so carefree. I’ve found it with many of my listings over the past couple of years. And now, when I list a higher-priced house, I don’t even wait to see if its size and beauty can sell it anymore. I just automatically stage it, unless it is already well-appointed.”
Bruno says his first sign that high-end home sales were no longer a given was when he listed the Young mansion, the 7,200-square-foot East Hollywood home built in 1925 by Hollywood city founder Joseph W. Young, in mid-2008.
A lot of history
“That house came with so much history, so many stories. It’s on three lots. And the structure itself is just beautiful,” Bruno says. “And at one time, someone who could afford to pay $2 million to $4 million for a home would have just snapped it up, because of its location. That didn’t happen with this house.”
Indeed, the Young mansion hasn’t had any decent offers until recently, Bruno says.
The difference?
“In my mind, the difference came after we changed the look of the inside of the house to suit a new kind of high-end buyer,” he says. “Yes, I mean a more careful buyer. But I’m also talking a more modern buyer who will accept that a home is well built and therefore spend less time questioning the structure and more time trying to see if it feels right. And if people are going to feel right in a house, it has to look like a place where they would live.”
The mansion got new window treatments, less stodgy living room furniture, and bed dressings that emphasized comfort over style.
“It is true that hyper-staging often involves more expensive changes,” Bruno says, “but not always. Sometimes it is the simple things you have to convince a high-end homeowner that he needs to do.
“But even if the price of the staging items isn’t substantially higher, it still tends to cost more than traditional staging because you’re doing more. Suddenly, two sets of drapes and an area rug aren’t enough. You’re outfitting five or six bedrooms, four or five bathrooms, a pool house, and so on.”
According to Debra DiMare, host of In a Fix, a home remodeling show on The Learning Channel, “hyper-staging involves not just furniture and art. If necessary, you alter the landscape of the house itself. This is a huge trend right now. Often you’ll find the architectural changes are temporary.”
When Loor and her partner Brett Sugerman were called in to stage Bruce Weiner’s empty 7,500-square-foot mansion on Indian Creek Island, near Miami Beach, much of what they did involved architectural changes.
“We literally moved walls,” Sugerman says. A wall separating the kitchen from the living room was removed as part of the hyper-staging. Sugerman and Loor also turned a walk-in wine closet into a bar, complete with stools and countertop.
A fireplace in another sitting room that jutted out from a bland yellow wall was resurfaced in hand-carved marble.
And a library/home office, with floor-to-ceiling bookshelves that in past years would have impressed on their own, featured several hundred new books purchased by B&G.
“Notice they’re color-coded,” Loor said of the books. “You think it’s not a big deal. But again, our research shows that the variety of colors has a psychological impact and gives an impression to the viewer that the books all serve a categorical purpose. It makes the library look well-used and important.”
Weiner, president of condominium builder Turnberry Associates, put the $15 million home up for sale two years ago. When the house had not sold a year later, he called in B&G. Within the past few weeks, Weiner has finally begun getting offers.
Weiner admits he “didn’t get it” at first, but insists there is a clear before and after with his Indian Creek home.
“I’ve worked with B&G to have homes decorated,” Weiner says. “But I’ve never really had to do anything to a house to sell it. Frankly, I was skeptical of the whole notion. But I have to say that I didn’t even get a nibble for more than a year. When I heard about this intense form of staging, I threw my hands up and told them to go for it. Since they’ve completed their re-working of my house I’ve gotten several offers – not ‘the’ offer I’m looking for. But they’re getting better!”
Schwarz, of Staged Homes, says she has been urging high-end homeowners to “lose the pride” over the past year or two “so that they can keep up.”
“The problem,” Schwarz says, “is that many of them got spoiled. It’s sort of like the prom queen who thinks she’s the better person because she’s the prettier person. You must have substance, too. And I’ve been telling these types of clients that substance means giving prospective buyers something to look at, the same as middle-class families have been doing for years.”
Schwarz advises clients in high-end homes to study their potential buyers and stage accordingly.
Different strokes
“There is no one-size fits all,” she says. “You may find a trend of home buyers in your area who are looking for a million-dollar home and want that home to feel old, and artistic, museum-like. Or you may find that your wealthy buyers are younger, more energetic, and more carefree. If it’s the latter, you stage with bright, colorful art, oversized furniture, pieces that won’t cause your guests to worry they’ll break ‘em.”
Even in today’s market, staged homes tend to sell almost 150 days sooner than non-staged homes, Schwarz says.
“The bottom line is if you have the kind of money that you can afford a mansion or a McMansion, then you can afford to alter its look to make the next person coming along feel at home,” she says.
Copyright © 2009 The Miami Herald
For most people trying to sell their house, that visualization has always meant “staging” – the strategic placement of a borrowed La-Z-Boy chair, the shifting of a floral arrangement, the hanging of that painting that has gathered dust in the garage for 10 years.
High-end staging, or “hyper-staging,” as some South Florida experts have taken to calling it, is another thing altogether.
We’re talking custom-made light fixtures the size of a small car, hundreds of color-coded books placed in the home’s library to stimulate a buyer’s visual cortex, the removal of a kitchen wall, and the placement of a temporary wall in a bedroom, to name a few changes.
“I would say that we’ve gotten two dozen requests for this hyper-staging over the past couple of years,” said Giselle Loor of Hollywood-based B&G Design. “The way it started was, homeowners and their sales agents began asking us for our opinion, ‘Why won’t this house sell.’ And after we studied the market and even social factors we figured out that it was about buyers in all income categories being cautious.”
Until recently, many high-end home buyers were not as discriminating as the average home buyer, says Barb Schwarz, founder of Staged Homes, a sort of staging university for home decorators and related professionals in California.
Rather than needing to “see themselves in a home” to be convinced, they simply needed to be convinced that the home – the structure and the grounds – and the surrounding community were high quality, she said.
The recession has made many of those buyers more cautious.
Alex Bruno, a RE/MAX agent and historic-home and staging expert, agrees that the failing economy has made staging necessary for top-flight houses.
“It’s strange, but it’s true,” Bruno says. “People with money to spare are not so carefree. I’ve found it with many of my listings over the past couple of years. And now, when I list a higher-priced house, I don’t even wait to see if its size and beauty can sell it anymore. I just automatically stage it, unless it is already well-appointed.”
Bruno says his first sign that high-end home sales were no longer a given was when he listed the Young mansion, the 7,200-square-foot East Hollywood home built in 1925 by Hollywood city founder Joseph W. Young, in mid-2008.
A lot of history
“That house came with so much history, so many stories. It’s on three lots. And the structure itself is just beautiful,” Bruno says. “And at one time, someone who could afford to pay $2 million to $4 million for a home would have just snapped it up, because of its location. That didn’t happen with this house.”
Indeed, the Young mansion hasn’t had any decent offers until recently, Bruno says.
The difference?
“In my mind, the difference came after we changed the look of the inside of the house to suit a new kind of high-end buyer,” he says. “Yes, I mean a more careful buyer. But I’m also talking a more modern buyer who will accept that a home is well built and therefore spend less time questioning the structure and more time trying to see if it feels right. And if people are going to feel right in a house, it has to look like a place where they would live.”
The mansion got new window treatments, less stodgy living room furniture, and bed dressings that emphasized comfort over style.
“It is true that hyper-staging often involves more expensive changes,” Bruno says, “but not always. Sometimes it is the simple things you have to convince a high-end homeowner that he needs to do.
“But even if the price of the staging items isn’t substantially higher, it still tends to cost more than traditional staging because you’re doing more. Suddenly, two sets of drapes and an area rug aren’t enough. You’re outfitting five or six bedrooms, four or five bathrooms, a pool house, and so on.”
According to Debra DiMare, host of In a Fix, a home remodeling show on The Learning Channel, “hyper-staging involves not just furniture and art. If necessary, you alter the landscape of the house itself. This is a huge trend right now. Often you’ll find the architectural changes are temporary.”
When Loor and her partner Brett Sugerman were called in to stage Bruce Weiner’s empty 7,500-square-foot mansion on Indian Creek Island, near Miami Beach, much of what they did involved architectural changes.
“We literally moved walls,” Sugerman says. A wall separating the kitchen from the living room was removed as part of the hyper-staging. Sugerman and Loor also turned a walk-in wine closet into a bar, complete with stools and countertop.
A fireplace in another sitting room that jutted out from a bland yellow wall was resurfaced in hand-carved marble.
And a library/home office, with floor-to-ceiling bookshelves that in past years would have impressed on their own, featured several hundred new books purchased by B&G.
“Notice they’re color-coded,” Loor said of the books. “You think it’s not a big deal. But again, our research shows that the variety of colors has a psychological impact and gives an impression to the viewer that the books all serve a categorical purpose. It makes the library look well-used and important.”
Weiner, president of condominium builder Turnberry Associates, put the $15 million home up for sale two years ago. When the house had not sold a year later, he called in B&G. Within the past few weeks, Weiner has finally begun getting offers.
Weiner admits he “didn’t get it” at first, but insists there is a clear before and after with his Indian Creek home.
“I’ve worked with B&G to have homes decorated,” Weiner says. “But I’ve never really had to do anything to a house to sell it. Frankly, I was skeptical of the whole notion. But I have to say that I didn’t even get a nibble for more than a year. When I heard about this intense form of staging, I threw my hands up and told them to go for it. Since they’ve completed their re-working of my house I’ve gotten several offers – not ‘the’ offer I’m looking for. But they’re getting better!”
Schwarz, of Staged Homes, says she has been urging high-end homeowners to “lose the pride” over the past year or two “so that they can keep up.”
“The problem,” Schwarz says, “is that many of them got spoiled. It’s sort of like the prom queen who thinks she’s the better person because she’s the prettier person. You must have substance, too. And I’ve been telling these types of clients that substance means giving prospective buyers something to look at, the same as middle-class families have been doing for years.”
Schwarz advises clients in high-end homes to study their potential buyers and stage accordingly.
Different strokes
“There is no one-size fits all,” she says. “You may find a trend of home buyers in your area who are looking for a million-dollar home and want that home to feel old, and artistic, museum-like. Or you may find that your wealthy buyers are younger, more energetic, and more carefree. If it’s the latter, you stage with bright, colorful art, oversized furniture, pieces that won’t cause your guests to worry they’ll break ‘em.”
Even in today’s market, staged homes tend to sell almost 150 days sooner than non-staged homes, Schwarz says.
“The bottom line is if you have the kind of money that you can afford a mansion or a McMansion, then you can afford to alter its look to make the next person coming along feel at home,” she says.
Copyright © 2009 The Miami Herald
June new home sales rise 11 percent
WASHINGTON (AP) – July 27, 2009 – New U.S. home sales rose by the largest amount in more than eight years last month, in another sign the housing market is finally bouncing back from the worst downturn in decades.
The Commerce Department said Monday that sales rose 11 percent in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000.
It was the strongest sales pace since November 2008 and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 360,000 units. The last time sales rose so dramatically was in December 2000.
Sales have risen for three straight months. The median sales price of $206,200, however, was down 12 percent from $234,300 a year earlier and down nearly 6 percent from $219,000 in May.
The report is another encouraging sign that the beleaguered housing sector is finally coming back to life. Last Thursday, the National Association of Realtors reported that home resales posted a monthly increase of 3.6 percent in June.
There were 281,000 new homes for sale at the end of June, down more than 4 percent from May. At the current sales pace, that represents 8.8 months of supply — the lowest level since October 2007.
Fallout from the housing crisis has played a central role in the U.S. recession, now the longest since World War II. Foreclosures have spiked, homebuilders have slashed construction, and financial companies have lost billions.
Copyright © 2009 The Associated Press
The Commerce Department said Monday that sales rose 11 percent in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000.
It was the strongest sales pace since November 2008 and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 360,000 units. The last time sales rose so dramatically was in December 2000.
Sales have risen for three straight months. The median sales price of $206,200, however, was down 12 percent from $234,300 a year earlier and down nearly 6 percent from $219,000 in May.
The report is another encouraging sign that the beleaguered housing sector is finally coming back to life. Last Thursday, the National Association of Realtors reported that home resales posted a monthly increase of 3.6 percent in June.
There were 281,000 new homes for sale at the end of June, down more than 4 percent from May. At the current sales pace, that represents 8.8 months of supply — the lowest level since October 2007.
Fallout from the housing crisis has played a central role in the U.S. recession, now the longest since World War II. Foreclosures have spiked, homebuilders have slashed construction, and financial companies have lost billions.
Copyright © 2009 The Associated Press
Sunday, July 26, 2009
Homeowners with tainted drywall may get a tax deduction
SARASOTA, Fla. – July 24, 2009 – Homeowners affected by Chinese drywall might be able to claim a tax deduction equal to the loss in the value of their homes triggered by the problematic imported material.
This month, an Internal Revenue Service attorney outlined the possibility that homes with corroded air conditioner coils, blackened wiring and sulfuric smells might qualify for a casualty loss deduction.
Thousands of homes in Florida and across the country are thought to be affected by drywall imported from China, though scientific tests so far don’t make a direct link between the import and the problems homeowners are experiencing, including headaches, nosebleeds and breathing trouble.
As of Thursday, about 500 Florida residents had reported complaints to the Florida Department of Health about problems related to drywall.
Many homeowners are stuck living in the unsavory conditions because they cannot afford to pay rent in addition to their mortgages. Only some builders have offered to pay for repairs. And home insurance companies have not yet responded to owners’ complaints. Lawsuits filed against builders, manufacturers, distributors and suppliers may not be resolved for years.
Claiming the deduction won’t be simple either. In a letter to Florida Sen. Bill Nelson, IRS counsel George Blaine said first the Environmental Protection Agency and Consumer Product Safety Commission will have to find that Chinese drywall is responsible for the problems homeowners are experiencing.
Both agencies have only just begun to investigate the problem. Initial EPA tests show Chinese-made drywall contains sulfur, unlike domestic drywall, and the foreign-made gypsum board also had strontium at 10 times the rate of U.S. drywall.
But the agency drew no conclusions about whether the wallboard’s chemical composition has anything to do with homeowners’ experiences.
If it does, Blaine said federal tax law would allow for a deduction in the amount of the difference between the fair market value of a home immediately before and immediately after the casualty. Homeowners would have to subtract any money they get to address drywall problems from insurance companies or builders. They would not be able to claim costs incidental to the casualty loss, such as temporary housing homeowners may have paid for.
For more details about claiming a casualty loss, visit www.irs.gov/taxtopics/tc515.html.
Copyright © 2009 The Miami Herald
This month, an Internal Revenue Service attorney outlined the possibility that homes with corroded air conditioner coils, blackened wiring and sulfuric smells might qualify for a casualty loss deduction.
Thousands of homes in Florida and across the country are thought to be affected by drywall imported from China, though scientific tests so far don’t make a direct link between the import and the problems homeowners are experiencing, including headaches, nosebleeds and breathing trouble.
As of Thursday, about 500 Florida residents had reported complaints to the Florida Department of Health about problems related to drywall.
Many homeowners are stuck living in the unsavory conditions because they cannot afford to pay rent in addition to their mortgages. Only some builders have offered to pay for repairs. And home insurance companies have not yet responded to owners’ complaints. Lawsuits filed against builders, manufacturers, distributors and suppliers may not be resolved for years.
Claiming the deduction won’t be simple either. In a letter to Florida Sen. Bill Nelson, IRS counsel George Blaine said first the Environmental Protection Agency and Consumer Product Safety Commission will have to find that Chinese drywall is responsible for the problems homeowners are experiencing.
Both agencies have only just begun to investigate the problem. Initial EPA tests show Chinese-made drywall contains sulfur, unlike domestic drywall, and the foreign-made gypsum board also had strontium at 10 times the rate of U.S. drywall.
But the agency drew no conclusions about whether the wallboard’s chemical composition has anything to do with homeowners’ experiences.
If it does, Blaine said federal tax law would allow for a deduction in the amount of the difference between the fair market value of a home immediately before and immediately after the casualty. Homeowners would have to subtract any money they get to address drywall problems from insurance companies or builders. They would not be able to claim costs incidental to the casualty loss, such as temporary housing homeowners may have paid for.
For more details about claiming a casualty loss, visit www.irs.gov/taxtopics/tc515.html.
Copyright © 2009 The Miami Herald
Saturday, July 25, 2009
Mortgage rates rise after falling for 3 weeks
Mortgage Rate Trend Index
Mortgage industry experts polled by Bankrate.com this week predict rates will likely remain unchanged (46 percent) over the next 35 to 45 days. Twenty-seven percent of the panelists believe mortgage rates will rise, while another 27 percent think they’ll fall.
WASHINGTON – July 24, 2009 – Rates for 30-year mortgages have edged up after falling for three-consecutive weeks.
The average rate for a 30-year fixed mortgage this week was 5.2 percent, up from 5.14 percent a week earlier, mortgage company Freddie Mac said Thursday.
Rates on 30-year mortgages fell to a record low of 4.78 percent earlier this year, but then rose to nearly 5.6 percent last month after yields on long-term government debt, which are closely tied to mortgage rates, climbed.
Though the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since prospective buyers would be able to borrow less money and might decide to hold off on their purchases.
Sales of previously occupied homes rose for the third month in a row in June, the National Association of Realtors reported Thursday. That hasn’t happened since early 2004, during the boom.
“The worst may be behind us,” said Frank Nothaft, Freddie Mac’s chief economist, in a statement.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage rose to 4.68 percent, up from 4.63 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.74 percent, down from 4.83 percent a week earlier. Rates on one-year, adjustable-rate mortgages edged up to 4.77 percent from 4.76 percent.
The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for all loans in Freddie Mac’s survey except for one-year adjustable rate mortgages, which averaged a fee of 0.6 percent.
Copyright © 2009 The Associated Press
Mortgage industry experts polled by Bankrate.com this week predict rates will likely remain unchanged (46 percent) over the next 35 to 45 days. Twenty-seven percent of the panelists believe mortgage rates will rise, while another 27 percent think they’ll fall.
WASHINGTON – July 24, 2009 – Rates for 30-year mortgages have edged up after falling for three-consecutive weeks.
The average rate for a 30-year fixed mortgage this week was 5.2 percent, up from 5.14 percent a week earlier, mortgage company Freddie Mac said Thursday.
Rates on 30-year mortgages fell to a record low of 4.78 percent earlier this year, but then rose to nearly 5.6 percent last month after yields on long-term government debt, which are closely tied to mortgage rates, climbed.
Though the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since prospective buyers would be able to borrow less money and might decide to hold off on their purchases.
Sales of previously occupied homes rose for the third month in a row in June, the National Association of Realtors reported Thursday. That hasn’t happened since early 2004, during the boom.
“The worst may be behind us,” said Frank Nothaft, Freddie Mac’s chief economist, in a statement.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage rose to 4.68 percent, up from 4.63 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.74 percent, down from 4.83 percent a week earlier. Rates on one-year, adjustable-rate mortgages edged up to 4.77 percent from 4.76 percent.
The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for all loans in Freddie Mac’s survey except for one-year adjustable rate mortgages, which averaged a fee of 0.6 percent.
Copyright © 2009 The Associated Press
Friday, July 24, 2009
Existing home sales show signs of recovery
WASHINGTON – July 24, 2009 – The U.S. housing market is finally on the mend after its most far-reaching collapse in 70 years. That could help rebuild consumer confidence and revive the economy.
For the first time in five years, sales of previously occupied homes rose for the third consecutive month in June, while foreclosure sales and the glut of homes on the market both declined.
The figures, released Thursday by the National Association of Realtors, and a string of rosy corporate earnings reports sparked a rally on Wall Street as the Dow Jones industrials rose above 9,000 for the first time since January.
“People believe that the worst is behind us,” said Julie Longtin, a real estate agent with Re/Max Professionals in Providence, R.I., an area that has suffered deeply from record foreclosures of risky loans.
Sales also have risen for three straight months in 40 out of 55 major metropolitan areas tracked by the Associated Press-Re/Max Housing Report, also released Thursday. Prices rose during that period in about half of those areas.
Still, unlike past recessions, the turnaround in the real estate sector is likely to have a muted effect overall. That’s largely because homebuilders are expected to keep bulldozers idle as long as they face competition from bargain-priced foreclosures. And it’s likely to take at least another year before job losses and foreclosures peak.
The Labor Department said Thursday the number of newly laid-off workers seeking jobless benefits rose 30,000 to a seasonally adjusted 554,000 last week, though the government said its report again was distorted by the timing of auto plant shutdowns.
Unemployment insurance claims have declined steadily since the spring, but most private economists and the Federal Reserve expect jobs to remain scarce and the unemployment rate to top 10 percent by year-end.
“We’re not going to see much growth in (home) sales until the labor market turns around,” said Patrick Newport, an economist with IHS Global Insight. “People don’t move as much when they can’t find work.”
But companies should start hiring as their fortunes improve – and there were some early signs Thursday that’s starting to happen.
Ford Motor Co. surprised investors with a profit of $2.3 billion, due mainly to a huge gain for debt reduction, while manufacturing conglomerate 3M Co. and candy maker Hershey Co. raised their profit forecasts for the year.
The Dow Jones industrial average, the stock market’s best-known indicator, shot up almost 190 points Thursday to 9,069.29, its highest level since November, and all the big indexes gained more than 2 percent.
Analysts said signs that the housing market is finally, gradually turning around could help spur demand as buyers become less fearful of losing their shirts.
“It’s been the abject pessimism about house prices that has placed a pall over the housing market,” said Mark Zandi, chief economist at Moody’s Economy.com. “As that psychology reverses itself, things start to work in the opposite direction.”
Home sales rose 3.6 percent to a seasonally adjusted annual rate of 4.89 million last month, from a downwardly revised pace of 4.72 million in May. Sales are now around the same level as before last fall’s financial crisis.
Foreclosures, however, continue to put pressure on home prices. About one out of three homes sold in June was foreclosure-related, down from nearly half earlier this year.
And despite some buyers’ optimism, some still see potential problems ahead. A tax credit of up to $8,000 for first-time homebuyers expires Nov. 30. Mortgage rates are up from record lows reached last spring, and companies are still shedding jobs.
The nationwide median sales price was $181,800 in June, down 15 percent from year-ago levels but up slightly from $174,700 in May. And an Associated Press analysis shows the shows that the gap is narrowing between the sellers’ asking price and the final sales price, indicating homeowners have finally accepted that their homes are worth far less today.
Jim Dugan, a 53-year-old plumber, is looking for foreclosures and other low-priced properties in Providence. He wants to buy eight investment properties this year and is slated to close on a small bungalow next week for $62,500.
The property was originally listed for $85,000. But Dugan was able to snare a deal because he didn’t need a mortgage, instead tapping a line of credit and his savings.
“Cash talks,” he said.
Investor activity is helping to pare the number of homes on the market. Nationwide there are about 3.8 million, or a 9.4-month supply at the current sales pace. When the market balances at a 7-month supply, prices should begin to stabilize.
A healthy housing market is characterized by prices that rise a relatively modest 4 to 5 percent every year. But this year’s sales prices are still far lower than last year.
Those low prices combined with mortgage rates around 5 percent and a tax credit for first-time homebuyers have made homeownership more affordable than it’s been in decades.
“We are seeing contracts like crazy,” said Valerie Huffman, a vice president of Weichert Realtors, in Montgomery County, Md., where home sales are up by 42 percent over last year. “We’re having multiple bids on anything that’s priced well.”
Copyright © 2009 The Associated Press,
For the first time in five years, sales of previously occupied homes rose for the third consecutive month in June, while foreclosure sales and the glut of homes on the market both declined.
The figures, released Thursday by the National Association of Realtors, and a string of rosy corporate earnings reports sparked a rally on Wall Street as the Dow Jones industrials rose above 9,000 for the first time since January.
“People believe that the worst is behind us,” said Julie Longtin, a real estate agent with Re/Max Professionals in Providence, R.I., an area that has suffered deeply from record foreclosures of risky loans.
Sales also have risen for three straight months in 40 out of 55 major metropolitan areas tracked by the Associated Press-Re/Max Housing Report, also released Thursday. Prices rose during that period in about half of those areas.
Still, unlike past recessions, the turnaround in the real estate sector is likely to have a muted effect overall. That’s largely because homebuilders are expected to keep bulldozers idle as long as they face competition from bargain-priced foreclosures. And it’s likely to take at least another year before job losses and foreclosures peak.
The Labor Department said Thursday the number of newly laid-off workers seeking jobless benefits rose 30,000 to a seasonally adjusted 554,000 last week, though the government said its report again was distorted by the timing of auto plant shutdowns.
Unemployment insurance claims have declined steadily since the spring, but most private economists and the Federal Reserve expect jobs to remain scarce and the unemployment rate to top 10 percent by year-end.
“We’re not going to see much growth in (home) sales until the labor market turns around,” said Patrick Newport, an economist with IHS Global Insight. “People don’t move as much when they can’t find work.”
But companies should start hiring as their fortunes improve – and there were some early signs Thursday that’s starting to happen.
Ford Motor Co. surprised investors with a profit of $2.3 billion, due mainly to a huge gain for debt reduction, while manufacturing conglomerate 3M Co. and candy maker Hershey Co. raised their profit forecasts for the year.
The Dow Jones industrial average, the stock market’s best-known indicator, shot up almost 190 points Thursday to 9,069.29, its highest level since November, and all the big indexes gained more than 2 percent.
Analysts said signs that the housing market is finally, gradually turning around could help spur demand as buyers become less fearful of losing their shirts.
“It’s been the abject pessimism about house prices that has placed a pall over the housing market,” said Mark Zandi, chief economist at Moody’s Economy.com. “As that psychology reverses itself, things start to work in the opposite direction.”
Home sales rose 3.6 percent to a seasonally adjusted annual rate of 4.89 million last month, from a downwardly revised pace of 4.72 million in May. Sales are now around the same level as before last fall’s financial crisis.
Foreclosures, however, continue to put pressure on home prices. About one out of three homes sold in June was foreclosure-related, down from nearly half earlier this year.
And despite some buyers’ optimism, some still see potential problems ahead. A tax credit of up to $8,000 for first-time homebuyers expires Nov. 30. Mortgage rates are up from record lows reached last spring, and companies are still shedding jobs.
The nationwide median sales price was $181,800 in June, down 15 percent from year-ago levels but up slightly from $174,700 in May. And an Associated Press analysis shows the shows that the gap is narrowing between the sellers’ asking price and the final sales price, indicating homeowners have finally accepted that their homes are worth far less today.
Jim Dugan, a 53-year-old plumber, is looking for foreclosures and other low-priced properties in Providence. He wants to buy eight investment properties this year and is slated to close on a small bungalow next week for $62,500.
The property was originally listed for $85,000. But Dugan was able to snare a deal because he didn’t need a mortgage, instead tapping a line of credit and his savings.
“Cash talks,” he said.
Investor activity is helping to pare the number of homes on the market. Nationwide there are about 3.8 million, or a 9.4-month supply at the current sales pace. When the market balances at a 7-month supply, prices should begin to stabilize.
A healthy housing market is characterized by prices that rise a relatively modest 4 to 5 percent every year. But this year’s sales prices are still far lower than last year.
Those low prices combined with mortgage rates around 5 percent and a tax credit for first-time homebuyers have made homeownership more affordable than it’s been in decades.
“We are seeing contracts like crazy,” said Valerie Huffman, a vice president of Weichert Realtors, in Montgomery County, Md., where home sales are up by 42 percent over last year. “We’re having multiple bids on anything that’s priced well.”
Copyright © 2009 The Associated Press,
Thursday, July 23, 2009
Florida’s existing home, condo sales rise in June 2009
Existing-home sales up again, says NAR
ORLANDO, Fla. – July 23, 2009 – Florida’s existing home sales rose in June – the 10th consecutive month that sales activity showed gains in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors® (FAR). Statewide sales in June also increased over the previous month’s sales level in both the existing home and existing condominium markets. And, for the second month in a row, the statewide median sales price for existing homes was higher than the previous month’s statewide median.
Existing home sales rose 28 percent last month with a total of 15,850 homes sold statewide compared to 12,339 homes sold in June 2008, according to FAR. Statewide existing home sales in June increased 13.8 percent over May’s statewide activity.
Florida Realtors also reported a 39 percent rise in statewide sales of existing condos in June; existing condo sales last month rose 8.3 percent over the total units sold in May.
Sixteen of Florida's metropolitan statistical areas (MSAs) reported increased existing-home sales in June and 14 MSAs also showed gains in condo sales. A majority of the state’s MSAs have reported increased sales for the past year (12 consecutive months).
Florida’s median sales price for existing homes last month was $148,000; a year ago, it was $205,300 for a 28 percent decrease. However, the statewide existing home median price in June increased 2.49 percent over May’s median price; it also was higher than the statewide median price reported each month since the start of 2009. According to housing industry analysts with the National Association of Realtors® (NAR), sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in May 2009 was $172,900, down 16.1 percent from a year earlier, according to NAR. In Massachusetts, the statewide median resales price was $284,000 in May; in California, it was $267,570; in Maryland, it was $265,724; and in New York, it was $189,000.
NAR’s latest housing industry outlook notes the $8,000 tax credit for first-time homebuyers is boosting the sector. “Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade,” said NAR Chief Economist Lawrence Yun. “However, the increase in sales is less than expected because poor appraisals are stalling transactions. The big question is how much the appraisal issue will impact the ability of contracts to go to closing.”
In Florida’s year-to-year comparison for condos, 5,241 units sold statewide compared to 3,771 units in June 2008 for a 39 percent increase. The statewide existing condo median sales price last month was $112,900; in June 2008 it was $180,400 for a 37 percent decrease. The national median existing condo price was $173,800 in May 2009, according to NAR.
Interest rates for a 30-year fixed-rate mortgage averaged 5.42 percent last month, down significantly from the average rate of 6.32 percent in June 2008, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Among the state’s smaller markets, the Punta Gorda MSA reported a total of 216 homes sold in June compared to 196 homes a year ago for a 10 percent increase. The existing home median sales price was $145,600; a year ago, it was $141,000 for a 3 percent increase. The market’s existing condo median price last month was $140,000; a year earlier, it was $160,000 for a 13 percent decrease.
© 2009 FLORIDA ASSOCIATION OF REALTORS
ORLANDO, Fla. – July 23, 2009 – Florida’s existing home sales rose in June – the 10th consecutive month that sales activity showed gains in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors® (FAR). Statewide sales in June also increased over the previous month’s sales level in both the existing home and existing condominium markets. And, for the second month in a row, the statewide median sales price for existing homes was higher than the previous month’s statewide median.
Existing home sales rose 28 percent last month with a total of 15,850 homes sold statewide compared to 12,339 homes sold in June 2008, according to FAR. Statewide existing home sales in June increased 13.8 percent over May’s statewide activity.
Florida Realtors also reported a 39 percent rise in statewide sales of existing condos in June; existing condo sales last month rose 8.3 percent over the total units sold in May.
Sixteen of Florida's metropolitan statistical areas (MSAs) reported increased existing-home sales in June and 14 MSAs also showed gains in condo sales. A majority of the state’s MSAs have reported increased sales for the past year (12 consecutive months).
Florida’s median sales price for existing homes last month was $148,000; a year ago, it was $205,300 for a 28 percent decrease. However, the statewide existing home median price in June increased 2.49 percent over May’s median price; it also was higher than the statewide median price reported each month since the start of 2009. According to housing industry analysts with the National Association of Realtors® (NAR), sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in May 2009 was $172,900, down 16.1 percent from a year earlier, according to NAR. In Massachusetts, the statewide median resales price was $284,000 in May; in California, it was $267,570; in Maryland, it was $265,724; and in New York, it was $189,000.
NAR’s latest housing industry outlook notes the $8,000 tax credit for first-time homebuyers is boosting the sector. “Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade,” said NAR Chief Economist Lawrence Yun. “However, the increase in sales is less than expected because poor appraisals are stalling transactions. The big question is how much the appraisal issue will impact the ability of contracts to go to closing.”
In Florida’s year-to-year comparison for condos, 5,241 units sold statewide compared to 3,771 units in June 2008 for a 39 percent increase. The statewide existing condo median sales price last month was $112,900; in June 2008 it was $180,400 for a 37 percent decrease. The national median existing condo price was $173,800 in May 2009, according to NAR.
Interest rates for a 30-year fixed-rate mortgage averaged 5.42 percent last month, down significantly from the average rate of 6.32 percent in June 2008, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Among the state’s smaller markets, the Punta Gorda MSA reported a total of 216 homes sold in June compared to 196 homes a year ago for a 10 percent increase. The existing home median sales price was $145,600; a year ago, it was $141,000 for a 3 percent increase. The market’s existing condo median price last month was $140,000; a year earlier, it was $160,000 for a 13 percent decrease.
© 2009 FLORIDA ASSOCIATION OF REALTORS
Florida Foreclosure aid program helps 59 homeowners
TALLAHASSEE, Fla. – July 23, 2009 – Florida CFO Alex Sink today announced that the Florida Attorneys Saving Homes program showed an increase in its success rate following an April 20, 2009, roundtable discussion between the lawyers and Florida leaders that focused on finding ways to keep more Floridians in their homes.
To date, lawyers with the Florida Attorneys Saving Homes program have helped 59 state homeowners prevent foreclosure by successfully negotiating outcomes such as lower interest rates, decreased payments, and even reductions in the principal of the loan.
“I want to thank the thousands of lawyers and top Florida lenders that have stepped up to the plate. I am optimistic that the progress we’ve seen so far will continue and encourage even more success and more cooperation,” says Sink.
According to Sink, the roundtable gave lenders and pro bono lawyers with the program a chance to discuss how to improve their communication and interaction. They also discussed how the new homeowner assistance plan from the Obama Administration affects their work moving forward.
In addition to the Florida Attorneys Saving Homes Program, CFO Sink has also launched the Florida Housing Help Initiative to assist homeowners facing foreclosure. The initiative partners with community organizations and elected officials to hold foreclosure workshops around the state, and over 5,000 families have attended events to date.
To learn more about the Florida Attorneys Saving Homes Program, visit the Florida Department of Financial Services website at: http://www.myFloridacfo.com/Floridahousinghelp/legal.htm
© 2009 FLORIDA ASSOCIATION OF REALTORS®
To date, lawyers with the Florida Attorneys Saving Homes program have helped 59 state homeowners prevent foreclosure by successfully negotiating outcomes such as lower interest rates, decreased payments, and even reductions in the principal of the loan.
“I want to thank the thousands of lawyers and top Florida lenders that have stepped up to the plate. I am optimistic that the progress we’ve seen so far will continue and encourage even more success and more cooperation,” says Sink.
According to Sink, the roundtable gave lenders and pro bono lawyers with the program a chance to discuss how to improve their communication and interaction. They also discussed how the new homeowner assistance plan from the Obama Administration affects their work moving forward.
In addition to the Florida Attorneys Saving Homes Program, CFO Sink has also launched the Florida Housing Help Initiative to assist homeowners facing foreclosure. The initiative partners with community organizations and elected officials to hold foreclosure workshops around the state, and over 5,000 families have attended events to date.
To learn more about the Florida Attorneys Saving Homes Program, visit the Florida Department of Financial Services website at: http://www.myFloridacfo.com/Floridahousinghelp/legal.htm
© 2009 FLORIDA ASSOCIATION OF REALTORS®
Wednesday, July 22, 2009
Rent plan may keep people in homes
TAMPA, Fla. – July 22, 2009 – Losing your home to foreclosure may no longer mean you have to leave.
Congress and the Obama administration are considering a controversial plan that would allow homeowners to rent their foreclosed home for at least five years. The proposal is setting the real estate community abuzz.
“It’s clear that the modification plans have not been as successful as Congress had hoped,” said Dean Baker, co-director of the Center for Economics and Policy Research. “We need something that will make more of an impact.”
The program could reshape Florida’s real estate market and the overall economy. Experts disagree on whether the effects would be positive or negative. One thing everyone agrees on is this: Florida doesn’t need any more vacant homes.
The Sunshine State’s foreclosure rate remains the third highest in the nation. During the first six months of the year, foreclosure filings jumped 50 percent from the same period last year. One in every 33 households received a default notice, auction notice or bank repossession.
Details of the rental plan are sketchy, but the idea is gaining momentum, according to U.S. Treasury Assistant Secretary Herbert Allison. He told the Senate Banking Committee last week that the proposal was being considered for homeowners whose mortgages did not qualify for modification programs to make them affordable.
Some versions of the plan involve lenders selling foreclosed homes to approved professional landlords. In other versions, the lenders would sell to private investors or keep the home and hire a management firm to handle the rental arrangement.
The rent would be determined by the market-rate rent in the area, determined by a professional appraiser.
Jack Rodriguez, president of the Greater Tampa Association of Realtors, said the plan would “tinker with the free-market enterprise.”
“I know where Congress is coming from,” he said. “But my gut tells me investors would shy away from this, and banks will end up stuck in the real estate market.”
Baker, who first proposed the plan two years ago, said it has evolved and continues to be tweaked. Even though people who take advantage of the plan would still lose their homes, Baker said, the plan could keep that from happening to others.
“The lender would have more of an incentive to work something out through a modification because the home would be worth less,” Baker said.
Under the plan, the lender still could sell the home but, Baker said, “The homeowner would come with the home.”
The homeowner, turned renter, would be allowed to stay until the lease runs out, which could last as long as 10 years.
One potential problem, however, is that many homeowners who lose their properties aren’t interested in staying as renters, according to William Apgar, senior mortgage advisor for the Department of Housing an Urban Development.
The program could have an unintended consequence, Rodriguez said. Lenders would feel pressure to shed properties to avoid becoming a landlord. Investors, who would have to give up some property rights, would low-ball lenders. The result could drag down housing prices even more. (The median sales price in the Tampa, St. Petersburg, Clearwater area was $141,100 in May, down 20 percent from $176,100 in May 2008, according to the Florida Association of Realtors.) Others think the plan is a win-win for everyone involved.
Don Burnham, a real estate investor in the Tampa area and co-founder of the Wealth Restoration Institute LLC, said the plan could be a hit.
Investors, he said, would want to buy the homes because they will know they have a long-term tenant and a steady revenue source. Lenders will like the plan, he said, because they’ll be able to find buyers faster. Homeowners would be happy because they’ll have a secure lease and not have to foot the bill to move.
Mike Larson, a real estate analyst with Weiss Research in Jupiter, said the plan is one of several the Obama administration is hoping will keep more homes from becoming vacant.
“We don’t yet know fully how the plan would work,” he said. “But if you have a warm body in the house who will keep it from going into disrepair and keep the lawn mowed, that will be at least somewhat helpful.”
Copyright © 2009 Tampa Tribune, Fla
Congress and the Obama administration are considering a controversial plan that would allow homeowners to rent their foreclosed home for at least five years. The proposal is setting the real estate community abuzz.
“It’s clear that the modification plans have not been as successful as Congress had hoped,” said Dean Baker, co-director of the Center for Economics and Policy Research. “We need something that will make more of an impact.”
The program could reshape Florida’s real estate market and the overall economy. Experts disagree on whether the effects would be positive or negative. One thing everyone agrees on is this: Florida doesn’t need any more vacant homes.
The Sunshine State’s foreclosure rate remains the third highest in the nation. During the first six months of the year, foreclosure filings jumped 50 percent from the same period last year. One in every 33 households received a default notice, auction notice or bank repossession.
Details of the rental plan are sketchy, but the idea is gaining momentum, according to U.S. Treasury Assistant Secretary Herbert Allison. He told the Senate Banking Committee last week that the proposal was being considered for homeowners whose mortgages did not qualify for modification programs to make them affordable.
Some versions of the plan involve lenders selling foreclosed homes to approved professional landlords. In other versions, the lenders would sell to private investors or keep the home and hire a management firm to handle the rental arrangement.
The rent would be determined by the market-rate rent in the area, determined by a professional appraiser.
Jack Rodriguez, president of the Greater Tampa Association of Realtors, said the plan would “tinker with the free-market enterprise.”
“I know where Congress is coming from,” he said. “But my gut tells me investors would shy away from this, and banks will end up stuck in the real estate market.”
Baker, who first proposed the plan two years ago, said it has evolved and continues to be tweaked. Even though people who take advantage of the plan would still lose their homes, Baker said, the plan could keep that from happening to others.
“The lender would have more of an incentive to work something out through a modification because the home would be worth less,” Baker said.
Under the plan, the lender still could sell the home but, Baker said, “The homeowner would come with the home.”
The homeowner, turned renter, would be allowed to stay until the lease runs out, which could last as long as 10 years.
One potential problem, however, is that many homeowners who lose their properties aren’t interested in staying as renters, according to William Apgar, senior mortgage advisor for the Department of Housing an Urban Development.
The program could have an unintended consequence, Rodriguez said. Lenders would feel pressure to shed properties to avoid becoming a landlord. Investors, who would have to give up some property rights, would low-ball lenders. The result could drag down housing prices even more. (The median sales price in the Tampa, St. Petersburg, Clearwater area was $141,100 in May, down 20 percent from $176,100 in May 2008, according to the Florida Association of Realtors.) Others think the plan is a win-win for everyone involved.
Don Burnham, a real estate investor in the Tampa area and co-founder of the Wealth Restoration Institute LLC, said the plan could be a hit.
Investors, he said, would want to buy the homes because they will know they have a long-term tenant and a steady revenue source. Lenders will like the plan, he said, because they’ll be able to find buyers faster. Homeowners would be happy because they’ll have a secure lease and not have to foot the bill to move.
Mike Larson, a real estate analyst with Weiss Research in Jupiter, said the plan is one of several the Obama administration is hoping will keep more homes from becoming vacant.
“We don’t yet know fully how the plan would work,” he said. “But if you have a warm body in the house who will keep it from going into disrepair and keep the lawn mowed, that will be at least somewhat helpful.”
Copyright © 2009 Tampa Tribune, Fla
Tuesday, July 21, 2009
When foreclosure is too slow
WAYNE, Pa. – July 21, 2009 – It’s not a very common question: How do you get a lender to speed up the foreclosure process?
But when you think about it, prolonging the process can be costly for a homeowner, who likely does not have the money to pay for maintenance and utilities.
This is the situation in which Clark Engle finds himself. And I discovered, after simply scraping a thin layer from the surface, that it is a problem homeowners in high-foreclosure areas increasingly are facing.
Engle, who lives in Wayne, Pa., owns a couple of condos in Florida he bought as investments when he lived there. When he moved to this area in 2006, he tried to sell, and then rent, the condos, but with no luck either way.
To say the Florida market is glutted is an understatement. Homes, especially condos, began plummeting in value about three years ago, and today, for example, a unit in the St. Petersburg/Tampa area purchased for $350,000 in 2005 is selling for $90,000, according to Pinellas County records.
“I can’t keep them, rent them, or sell them,” Engle said.
About 14 months ago, Engle was served with foreclosure papers by his lender, but nothing has happened since. Because there are so many homes in foreclosure, he assumes that “the bank obviously does not want to take them over because then they become responsible for the back taxes, condo fees, and maintenance until there is a market.”
So, on his lawyer’s advice, Engle continues to pay the liability insurance and the utilities – more than $1,000 a year.
“I ... didn’t want to ask (the lawyer) to write a letter unless it’s really going to make the bank move faster,” he said. “If he could cite some law or legal precedent that the bank can’t leave these in limbo, perhaps that might do something.”
Bankrate.com columnist Holden Lewis, who is based in South Florida, said he’s not sure the process can be pushed along.
“Florida has judicial foreclosures,” Lewis said. “Courts have backlogs, law firms are probably overwhelmed, too. Tax receipts are down. I doubt anyone is spending stimulus money to hire more court personnel to speed up foreclosures.”
According to Florida law, the foreclosure process typically should take only five months; thanks to the backlog, it is taking 10 months or more. That may be good news for people trying to avoid foreclosure, but it’s bad news for people like Engle who have been caught in the real estate squeeze and want out.
Rick Sharga, chief economist at RealtyTrac, which tracks foreclosures nationally, said Engle’s assumption that the bank wants to avoid more costs is right on the money. “I don’t believe there’s any way to compel them to conduct the (process) faster than they want to.”
Engle “could try discussing a deed-in-lieu-of-foreclosure arrangement with the lender, suggesting that it would save the bank thousands of dollars compared to a formal foreclosure and maybe allow them to come out ahead,” he said.
If that doesn’t work, Engle will just have to wait it out.
© 2009 The Philadelphia Inquirer
But when you think about it, prolonging the process can be costly for a homeowner, who likely does not have the money to pay for maintenance and utilities.
This is the situation in which Clark Engle finds himself. And I discovered, after simply scraping a thin layer from the surface, that it is a problem homeowners in high-foreclosure areas increasingly are facing.
Engle, who lives in Wayne, Pa., owns a couple of condos in Florida he bought as investments when he lived there. When he moved to this area in 2006, he tried to sell, and then rent, the condos, but with no luck either way.
To say the Florida market is glutted is an understatement. Homes, especially condos, began plummeting in value about three years ago, and today, for example, a unit in the St. Petersburg/Tampa area purchased for $350,000 in 2005 is selling for $90,000, according to Pinellas County records.
“I can’t keep them, rent them, or sell them,” Engle said.
About 14 months ago, Engle was served with foreclosure papers by his lender, but nothing has happened since. Because there are so many homes in foreclosure, he assumes that “the bank obviously does not want to take them over because then they become responsible for the back taxes, condo fees, and maintenance until there is a market.”
So, on his lawyer’s advice, Engle continues to pay the liability insurance and the utilities – more than $1,000 a year.
“I ... didn’t want to ask (the lawyer) to write a letter unless it’s really going to make the bank move faster,” he said. “If he could cite some law or legal precedent that the bank can’t leave these in limbo, perhaps that might do something.”
Bankrate.com columnist Holden Lewis, who is based in South Florida, said he’s not sure the process can be pushed along.
“Florida has judicial foreclosures,” Lewis said. “Courts have backlogs, law firms are probably overwhelmed, too. Tax receipts are down. I doubt anyone is spending stimulus money to hire more court personnel to speed up foreclosures.”
According to Florida law, the foreclosure process typically should take only five months; thanks to the backlog, it is taking 10 months or more. That may be good news for people trying to avoid foreclosure, but it’s bad news for people like Engle who have been caught in the real estate squeeze and want out.
Rick Sharga, chief economist at RealtyTrac, which tracks foreclosures nationally, said Engle’s assumption that the bank wants to avoid more costs is right on the money. “I don’t believe there’s any way to compel them to conduct the (process) faster than they want to.”
Engle “could try discussing a deed-in-lieu-of-foreclosure arrangement with the lender, suggesting that it would save the bank thousands of dollars compared to a formal foreclosure and maybe allow them to come out ahead,” he said.
If that doesn’t work, Engle will just have to wait it out.
© 2009 The Philadelphia Inquirer
Bidding wars break out on low-priced homes
FORT LAUDERDALE, Fla. – July 21, 2009 – Bidding wars are returning to South Florida’s housing market, as investors and first-time buyers compete for homes and condominiums listed at $200,000 or less.
The race for properties is reminiscent of the boom years from 2000 to 2005, when multiple offers on all types of dwellings helped push prices to record highs.
Back then, a dearth of properties for sale had buyers rushing to scoop up anything they could find, for fear that prices would keep rising. Now, frustrated with a bloated inventory of foreclosed homes in disrepair, buyers go to great lengths when they spot a house or condo in pristine condition.
“When they find a good listing, people are pouncing,” said Terry Story, a real estate agent for Coldwell Banker in Broward and Palm Beach counties.
Agents say the heated competition has been building in recent months, a result of low mortgage rates and the $8,000 tax credit for first-time buyers that expires Nov. 30.
Steady sales increases during the past year gradually have worked off the inventory of available homes. Real estate agents are convinced that the overall market has hit bottom or is close to one.
Housing market researchers have a different take.
Because of mounting job losses and the lingering recession, the bidding wars are mostly confined to homes offered at deeply discounted prices. Also, housing experts say, the market needs more than investors and first-time buyers taking the plunge for a rebound to occur.
Analysts don’t expect across-the-board price increases soon and predict that prices in Broward and Palm Beach counties will keep falling, albeit at a slower rate, through this year and into 2010.
The bidding wars “are a good sign, but I don’t think it’s the sign that we’re at the bottom,” said Brad Hunter, a housing analyst with Metrostudy, a market research firm with an office in West Palm Beach.
Rising unemployment is sure to lead to more foreclosures and property sales later this year, which almost certainly will lower prices, Hunter and other analysts say.
Some observers suspect that lenders are holding back the supply of foreclosed homes, promoting bidding wars to increase prices now before the flood of new listings further depresses prices.
Banks dispute that notion. They say they’re overwhelmed with foreclosures and try to market them for sale as quickly as possible.
“The longer we hold them, the more money it costs us,” said Nancy Norris, a spokeswoman for banking giant Chase.
The bidding wars in South Florida are giving sellers more leverage after three years of buyers calling the shots.
Investor Greg Bales bought a three-bedroom home in Lauderdale Lakes three months ago for $65,000 – $1,900 less than what it sold for in 1985.
Bales, 41, beefed up the curb appeal with a new paint job, trees and other landscaping. Inside, he installed laminate floors, granite countertops, new kitchen appliances and an alarm system.
He put the home back on the market July 10 for $139,900 and fielded 10 offers, three for more than the asking price.
He selected a bid from a first-time buyer for $145,000, and the deal is expected to be complete next month.
“We would have had a bunch more offers, but my real estate agent told the people it really wasn’t worth their time if they weren’t submitting a full-price offer,” Bales said.
Eric Cormier of Philadelphia is searching for a small home for his sister-in-law in Delray Beach. He offered $120,000 cash for a house listed for $152,000, only to be out-bid by a few thousand dollars.
Another home he considered received four offers in one day.
“I was surprised,” said Cormier, 47. “I thought there was a fire sale going on in Florida.”
In some cases, first-time buyers are losing homes because sellers prefer dealing with cash investors who don’t have to fiddle with financing.
Meanwhile, some real estate agents are creating “drama pricing” – listing properties for far less than the market value to attract bidders and drive up the eventual selling price.
“It’s like ‘Ta-da’,” said Douglas Rill, an agent for Century 21 America’s Choice in West Palm Beach. “It creates so much of a buzz that it results in a bidding war.”
Drama pricing typically happens with short sales. Those homes aren’t as much in demand because buyers know that it can take months for the deals to close. In a short sale, a lender accepts less than what’s owed on the mortgage and forgives the remaining debt.
Tony Thomas, 44, is looking for a home in the $200,000 range in central Palm Beach County. He made three offers, only to be told each time that another buyer out-bid him.
His agent, Liz Golub, told him to “run like a bunny” to make strong offers as soon as properties come on the market. The strategy paid off recently when the owner of a home near Lantana accepted his offer. But because it’s a short sale, the bank must approve the deal, and that could take months.
“It’s frustrating,” Thomas said. “I have not seen the benefits of this buyer’s market right now.”
Copyright © 2009 Sun Sentinel, Fort Lauderdale, Fla
The race for properties is reminiscent of the boom years from 2000 to 2005, when multiple offers on all types of dwellings helped push prices to record highs.
Back then, a dearth of properties for sale had buyers rushing to scoop up anything they could find, for fear that prices would keep rising. Now, frustrated with a bloated inventory of foreclosed homes in disrepair, buyers go to great lengths when they spot a house or condo in pristine condition.
“When they find a good listing, people are pouncing,” said Terry Story, a real estate agent for Coldwell Banker in Broward and Palm Beach counties.
Agents say the heated competition has been building in recent months, a result of low mortgage rates and the $8,000 tax credit for first-time buyers that expires Nov. 30.
Steady sales increases during the past year gradually have worked off the inventory of available homes. Real estate agents are convinced that the overall market has hit bottom or is close to one.
Housing market researchers have a different take.
Because of mounting job losses and the lingering recession, the bidding wars are mostly confined to homes offered at deeply discounted prices. Also, housing experts say, the market needs more than investors and first-time buyers taking the plunge for a rebound to occur.
Analysts don’t expect across-the-board price increases soon and predict that prices in Broward and Palm Beach counties will keep falling, albeit at a slower rate, through this year and into 2010.
The bidding wars “are a good sign, but I don’t think it’s the sign that we’re at the bottom,” said Brad Hunter, a housing analyst with Metrostudy, a market research firm with an office in West Palm Beach.
Rising unemployment is sure to lead to more foreclosures and property sales later this year, which almost certainly will lower prices, Hunter and other analysts say.
Some observers suspect that lenders are holding back the supply of foreclosed homes, promoting bidding wars to increase prices now before the flood of new listings further depresses prices.
Banks dispute that notion. They say they’re overwhelmed with foreclosures and try to market them for sale as quickly as possible.
“The longer we hold them, the more money it costs us,” said Nancy Norris, a spokeswoman for banking giant Chase.
The bidding wars in South Florida are giving sellers more leverage after three years of buyers calling the shots.
Investor Greg Bales bought a three-bedroom home in Lauderdale Lakes three months ago for $65,000 – $1,900 less than what it sold for in 1985.
Bales, 41, beefed up the curb appeal with a new paint job, trees and other landscaping. Inside, he installed laminate floors, granite countertops, new kitchen appliances and an alarm system.
He put the home back on the market July 10 for $139,900 and fielded 10 offers, three for more than the asking price.
He selected a bid from a first-time buyer for $145,000, and the deal is expected to be complete next month.
“We would have had a bunch more offers, but my real estate agent told the people it really wasn’t worth their time if they weren’t submitting a full-price offer,” Bales said.
Eric Cormier of Philadelphia is searching for a small home for his sister-in-law in Delray Beach. He offered $120,000 cash for a house listed for $152,000, only to be out-bid by a few thousand dollars.
Another home he considered received four offers in one day.
“I was surprised,” said Cormier, 47. “I thought there was a fire sale going on in Florida.”
In some cases, first-time buyers are losing homes because sellers prefer dealing with cash investors who don’t have to fiddle with financing.
Meanwhile, some real estate agents are creating “drama pricing” – listing properties for far less than the market value to attract bidders and drive up the eventual selling price.
“It’s like ‘Ta-da’,” said Douglas Rill, an agent for Century 21 America’s Choice in West Palm Beach. “It creates so much of a buzz that it results in a bidding war.”
Drama pricing typically happens with short sales. Those homes aren’t as much in demand because buyers know that it can take months for the deals to close. In a short sale, a lender accepts less than what’s owed on the mortgage and forgives the remaining debt.
Tony Thomas, 44, is looking for a home in the $200,000 range in central Palm Beach County. He made three offers, only to be told each time that another buyer out-bid him.
His agent, Liz Golub, told him to “run like a bunny” to make strong offers as soon as properties come on the market. The strategy paid off recently when the owner of a home near Lantana accepted his offer. But because it’s a short sale, the bank must approve the deal, and that could take months.
“It’s frustrating,” Thomas said. “I have not seen the benefits of this buyer’s market right now.”
Copyright © 2009 Sun Sentinel, Fort Lauderdale, Fla
Monday, July 20, 2009
A new confidence in construction?
WASHINGTON – July 20, 2009 – U.S. homebuilders seem to be coming out of hibernation as the gloom over the housing market begins to lift.
Builder confidence in the current market for newly built single-family homes rose three points in July to 17, the highest level since September 2008, according to a National Association of Home Builders/Wells Fargo Housing Market Index released on July 16. Another index measuring the traffic of prospective buyers rose 1 point to 14. But the index that gauges sales expectations for the next six months stayed flat at 26.
The South posted the strongest gain, rising 5 points to 20. The Northeast dropped 3 points, to 16, while the Midwest and the West remained unchanged, both at 15.
All three indexes show that builder confidence is extremely low: Any reading below 50 is poor. The homebuilder confidence index dropped to a record low of 8 in January after peaking around 70 during the housing boom.
Deeply discounted home prices, low interest rates, and tax incentives have brought out first-time homebuyers. But foreclosures continue to rise, which will keep pressure on home prices.
Still “every reason” for pessimism
Zach Pandl, economist with Nomura Securities in New York, said builders remain pessimistic. Their change in mood might be better described as “less gloomy,” he said.
“We’re still a very long way from the [index’s] 50 break-even level,” Pandl said. “Homebuilders have every reason to have a pessimistic outlook now. They have a huge amount of competition from excess inventory, including foreclosed properties. There’s very little reason to think that this will be cleared any time soon.”
The good news, according to Patrick Newport, the U.S. economist at IHS Global Insight, is that single-family home starts probably have already hit bottom.
Those builders that have managed to hang on are in for better times, Newport said.
Economists are eagerly awaiting the June report on housing starts and building permits that the Commerce Dept. will release on July 17. But the May report was encouraging and suggested the market might be at – or at least close to – a bottom. Single-family home starts rose 7.5 percent in May, the third consecutive monthly rise. And building permits jumped 7.9 percent for single family homes, a promising sign for future construction activity.
Copyright © 2009 The McGraw-Hill Cos., Business Week Online
Builder confidence in the current market for newly built single-family homes rose three points in July to 17, the highest level since September 2008, according to a National Association of Home Builders/Wells Fargo Housing Market Index released on July 16. Another index measuring the traffic of prospective buyers rose 1 point to 14. But the index that gauges sales expectations for the next six months stayed flat at 26.
The South posted the strongest gain, rising 5 points to 20. The Northeast dropped 3 points, to 16, while the Midwest and the West remained unchanged, both at 15.
All three indexes show that builder confidence is extremely low: Any reading below 50 is poor. The homebuilder confidence index dropped to a record low of 8 in January after peaking around 70 during the housing boom.
Deeply discounted home prices, low interest rates, and tax incentives have brought out first-time homebuyers. But foreclosures continue to rise, which will keep pressure on home prices.
Still “every reason” for pessimism
Zach Pandl, economist with Nomura Securities in New York, said builders remain pessimistic. Their change in mood might be better described as “less gloomy,” he said.
“We’re still a very long way from the [index’s] 50 break-even level,” Pandl said. “Homebuilders have every reason to have a pessimistic outlook now. They have a huge amount of competition from excess inventory, including foreclosed properties. There’s very little reason to think that this will be cleared any time soon.”
The good news, according to Patrick Newport, the U.S. economist at IHS Global Insight, is that single-family home starts probably have already hit bottom.
Those builders that have managed to hang on are in for better times, Newport said.
Economists are eagerly awaiting the June report on housing starts and building permits that the Commerce Dept. will release on July 17. But the May report was encouraging and suggested the market might be at – or at least close to – a bottom. Single-family home starts rose 7.5 percent in May, the third consecutive monthly rise. And building permits jumped 7.9 percent for single family homes, a promising sign for future construction activity.
Copyright © 2009 The McGraw-Hill Cos., Business Week Online
Google tweaks real estate listings on Google Maps
LOS ANGELES – July 20, 2009 – Google Inc. may crush all other Internet search portals, yet when it comes to real estate listings, it’s often less of a destination than a pit stop. But will that change?
The Internet search behemoth drives a ton of Web traffic to real estate sites everyday. Still, Google hasn’t made a major play for domination in the online property search market, unlike sites such as Zillow.com, Trulia.com and Yahoo Real Estate.
So when Google makes a move in the real estate space, everyone watches for clues that might signal the sleeping giant is hungry for a bigger piece of the real estate pie. Such a move came about last week, when Google decided to spruce up its popular Google Maps page to highlight its real estate search tools and also began making searches for home listings available in Australia and New Zealand.
In the short term, the move will boost traffic to other real estate Web sites, figures Bill Tancer, general manager of research for Hitwise, an Internet tracking firm. But long-term, could be a different story.
“It’s a competitive threat,” Tancer suggests.
Established online listing hubs like Trulia and Zillow aren’t quaking in their boots, yet. And they don’t appear to have any reason to, according to Google spokeswoman Elaine Filadelfo.
“We’re certainly thinking about ways to improve the product,” Filadelfo says, “but it’s more about improving user experience, as opposed to how can we become the No. 1 real estate destination.”
For years, Google invited real estate professionals and others to submit their listings of homes for sale to the site via the Google Base portal – for free. It began letting users of its maps tool look up homes for sale about a year ago.
Still, the company didn’t trumpet its real estate functions on its sparse home page. You had to dig to get to Google’s property search functions, which are primarily tied to its maps tool. Even there, the option to search for real estate listings was hard to find.
If you typed in, say, “real estate Los Angeles,” Google displayed links to real estate firms and showed a city map splayed with dots where those businesses were located.
Cue Google’s redesign last week.
Now, a real estate query on Google Maps brings up a page with a link in the top left corner advertising real estate listings search. Or you can select the search options tab and click on a drop-down menu that includes a link to search for real estate listings.
An easier way to get there from the main Google page is to enter the search term “Google housing search.” That kicks back a link for Google Maps Real Estate at maps.google.com.
This page has a search box for looking up properties currently on the market by city, suburb or neighborhood within Google Maps. Like many other real estate Web sites, users here can refine their searches according to certain criteria, including number of bedrooms, bathrooms, square feet and price range.
Type in Los Angeles, for example, and the site shows a map of the city nearly covered with red dots representing everything from homes for sale to homes that have received a foreclosure-related notice. Zoom in closer and a bubble pops up with photos, price and links for other information, including the Web site that is hosting the listing. Users also can use Google’s Street View function to get a virtual on-the-ground peek at the neighborhood for any given property.
Since Google put in the changes, Google Maps has begun driving more traffic to real estate Web sites, Tancer says.
That’s still a far cry from Google’s main search site, which Hitwise says is the No. 1 source of traffic to real estate Web sites. Last week, users looking up real estate search terms on Google.com generated roughly 24 percent of all traffic to real estate sites, Tancer said.
Greg Sterling, an Internet analyst with Sterling Market Intelligence in San Francisco, says it would be tough for Google to compete with real estate-focused Web sites.
“That would be difficult for them to do, given that there are sites ... that have much richer and very specialized experiences around real estate that Google isn’t going to compete with because they’re not going to devote the kind of resources (needed),” Sterling says.
Trulia and Zillow executives say they’re not losing sleep over the possibility, either.
“The real estate search and transaction process is very complex and very nuanced,” says Pete Flint, CEO of Trulia. “Google just doesn’t have the focus to be able to deliver an amazing experience on this.”
We’ll see.
On the Net: Google Maps Real Estate
The Internet search behemoth drives a ton of Web traffic to real estate sites everyday. Still, Google hasn’t made a major play for domination in the online property search market, unlike sites such as Zillow.com, Trulia.com and Yahoo Real Estate.
So when Google makes a move in the real estate space, everyone watches for clues that might signal the sleeping giant is hungry for a bigger piece of the real estate pie. Such a move came about last week, when Google decided to spruce up its popular Google Maps page to highlight its real estate search tools and also began making searches for home listings available in Australia and New Zealand.
In the short term, the move will boost traffic to other real estate Web sites, figures Bill Tancer, general manager of research for Hitwise, an Internet tracking firm. But long-term, could be a different story.
“It’s a competitive threat,” Tancer suggests.
Established online listing hubs like Trulia and Zillow aren’t quaking in their boots, yet. And they don’t appear to have any reason to, according to Google spokeswoman Elaine Filadelfo.
“We’re certainly thinking about ways to improve the product,” Filadelfo says, “but it’s more about improving user experience, as opposed to how can we become the No. 1 real estate destination.”
For years, Google invited real estate professionals and others to submit their listings of homes for sale to the site via the Google Base portal – for free. It began letting users of its maps tool look up homes for sale about a year ago.
Still, the company didn’t trumpet its real estate functions on its sparse home page. You had to dig to get to Google’s property search functions, which are primarily tied to its maps tool. Even there, the option to search for real estate listings was hard to find.
If you typed in, say, “real estate Los Angeles,” Google displayed links to real estate firms and showed a city map splayed with dots where those businesses were located.
Cue Google’s redesign last week.
Now, a real estate query on Google Maps brings up a page with a link in the top left corner advertising real estate listings search. Or you can select the search options tab and click on a drop-down menu that includes a link to search for real estate listings.
An easier way to get there from the main Google page is to enter the search term “Google housing search.” That kicks back a link for Google Maps Real Estate at maps.google.com.
This page has a search box for looking up properties currently on the market by city, suburb or neighborhood within Google Maps. Like many other real estate Web sites, users here can refine their searches according to certain criteria, including number of bedrooms, bathrooms, square feet and price range.
Type in Los Angeles, for example, and the site shows a map of the city nearly covered with red dots representing everything from homes for sale to homes that have received a foreclosure-related notice. Zoom in closer and a bubble pops up with photos, price and links for other information, including the Web site that is hosting the listing. Users also can use Google’s Street View function to get a virtual on-the-ground peek at the neighborhood for any given property.
Since Google put in the changes, Google Maps has begun driving more traffic to real estate Web sites, Tancer says.
That’s still a far cry from Google’s main search site, which Hitwise says is the No. 1 source of traffic to real estate Web sites. Last week, users looking up real estate search terms on Google.com generated roughly 24 percent of all traffic to real estate sites, Tancer said.
Greg Sterling, an Internet analyst with Sterling Market Intelligence in San Francisco, says it would be tough for Google to compete with real estate-focused Web sites.
“That would be difficult for them to do, given that there are sites ... that have much richer and very specialized experiences around real estate that Google isn’t going to compete with because they’re not going to devote the kind of resources (needed),” Sterling says.
Trulia and Zillow executives say they’re not losing sleep over the possibility, either.
“The real estate search and transaction process is very complex and very nuanced,” says Pete Flint, CEO of Trulia. “Google just doesn’t have the focus to be able to deliver an amazing experience on this.”
We’ll see.
On the Net: Google Maps Real Estate
Saturday, July 18, 2009
June housing construction rises unexpectedly
WASHINGTON (AP) – July 17, 2009 – Construction of new U.S. homes rose in June to the highest level in seven months, a sign builders are starting to regain confidence as they emerge from the housing bust.
The Commerce Department said Friday that construction of new homes and apartments jumped 3.6 percent last month to a seasonally adjusted annual rate of 582,000 units, from an upwardly revised rate of 562,000 in May.
That was better than the 530,000-unit pace economists expected, and the second straight increase after April's record low of 479,000 units.
In another encouraging sign, applications for building permits, seen as a good indicator of future activity, rose 8.7 percent in June to an annual rate of 563,000 units. Economists polled by Thomson Reuters expected an annual rate of 520,000 units.
The jump in housing starts reflected a more than 14 percent rise in construction of single-family homes.
Over the past three years, the collapse in the housing market led to soaring loan losses, a severe banking system crisis and the longest recession since World War II. Even with the better-than-expected figures, analysts don’t expect a quick rebound in housing. That's because the economy is still shedding jobs and home prices are falling, making people hesitant to commit to buying a new home.
The National Association of Home Builders said Thursday that its housing market index rose two points to 17 in July, the highest level in nearly a year. Readings below 50 indicate negative sentiment about the market. The last time it was above 50 was April 2006.
While housing normally leads the economy out of a recession, a glut of unsold homes and a record wave of mortgage foreclosures dumping more properties on the market is expected to temper demand. Despite the rise in housing construction for June, activity still was 46 percent below the year-ago level.
Copyright 2009 The Associated Press
The Commerce Department said Friday that construction of new homes and apartments jumped 3.6 percent last month to a seasonally adjusted annual rate of 582,000 units, from an upwardly revised rate of 562,000 in May.
That was better than the 530,000-unit pace economists expected, and the second straight increase after April's record low of 479,000 units.
In another encouraging sign, applications for building permits, seen as a good indicator of future activity, rose 8.7 percent in June to an annual rate of 563,000 units. Economists polled by Thomson Reuters expected an annual rate of 520,000 units.
The jump in housing starts reflected a more than 14 percent rise in construction of single-family homes.
Over the past three years, the collapse in the housing market led to soaring loan losses, a severe banking system crisis and the longest recession since World War II. Even with the better-than-expected figures, analysts don’t expect a quick rebound in housing. That's because the economy is still shedding jobs and home prices are falling, making people hesitant to commit to buying a new home.
The National Association of Home Builders said Thursday that its housing market index rose two points to 17 in July, the highest level in nearly a year. Readings below 50 indicate negative sentiment about the market. The last time it was above 50 was April 2006.
While housing normally leads the economy out of a recession, a glut of unsold homes and a record wave of mortgage foreclosures dumping more properties on the market is expected to temper demand. Despite the rise in housing construction for June, activity still was 46 percent below the year-ago level.
Copyright 2009 The Associated Press
Friday, July 17, 2009
Mortgage rates fall again
Mortgage Rate Trend Index
Half the experts (50 percent) polled by Bankrate.com this week predict rates will rise over the next 30 to 45 days. The rest are evenly split. While 25 percent predict further rate drops, 25 percent expect no change.
McLEAN, Va. – July 17, 2009 – Rates for 30-year home loans dropped for the third-straight week, inching toward a record low reached earlier this year, Freddie Mac said Thursday.
The average rate for 30-year fixed mortgages was 5.14 percent this week, down from 5.2 percent last week. Last year at this time, the rate for a 30-year mortgage averaged 6.26 percent, Freddie Mac said.
Falling mortgage rates can spur refinance activity, which increased as rates on 30-year mortgages fell to a record low of 4.78 percent in April.
But rates then rose as high as 5.6 percent in June after yields on long-term government debt – closely tied to mortgage rates – climbed as investors worried that the huge surplus of government debt hitting the market could trigger inflation.
Since then, the yield on the 10-year Treasury note has fallen back from an eight-month high of 4.01 percent reached in June to 3.53 percent on Thursday.
Frank Nothaft, Freddie Mac’s chief economist, said rate reductions over the past five weeks translate into monthly savings of $56 on a $200,000 mortgage.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
This week, the average rate on a 15-year fixed-rate mortgage fell to 4.63 percent, down from 4.69 percent last week, according to Freddie Mac.
Average rates on five-year, adjustable-rate mortgages were 4.83 percent, up just a bit from 4.82 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.76 percent from 4.82 percent.
The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for 30-year and 15-year fixed rate mortgages, and five year adjustable rate mortgages. The fee for one-year adjustable rate mortgages was 0.5 point.
Copyright 2009 The Associated Press
Half the experts (50 percent) polled by Bankrate.com this week predict rates will rise over the next 30 to 45 days. The rest are evenly split. While 25 percent predict further rate drops, 25 percent expect no change.
McLEAN, Va. – July 17, 2009 – Rates for 30-year home loans dropped for the third-straight week, inching toward a record low reached earlier this year, Freddie Mac said Thursday.
The average rate for 30-year fixed mortgages was 5.14 percent this week, down from 5.2 percent last week. Last year at this time, the rate for a 30-year mortgage averaged 6.26 percent, Freddie Mac said.
Falling mortgage rates can spur refinance activity, which increased as rates on 30-year mortgages fell to a record low of 4.78 percent in April.
But rates then rose as high as 5.6 percent in June after yields on long-term government debt – closely tied to mortgage rates – climbed as investors worried that the huge surplus of government debt hitting the market could trigger inflation.
Since then, the yield on the 10-year Treasury note has fallen back from an eight-month high of 4.01 percent reached in June to 3.53 percent on Thursday.
Frank Nothaft, Freddie Mac’s chief economist, said rate reductions over the past five weeks translate into monthly savings of $56 on a $200,000 mortgage.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
This week, the average rate on a 15-year fixed-rate mortgage fell to 4.63 percent, down from 4.69 percent last week, according to Freddie Mac.
Average rates on five-year, adjustable-rate mortgages were 4.83 percent, up just a bit from 4.82 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.76 percent from 4.82 percent.
The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for 30-year and 15-year fixed rate mortgages, and five year adjustable rate mortgages. The fee for one-year adjustable rate mortgages was 0.5 point.
Copyright 2009 The Associated Press
Thursday, July 16, 2009
Foreclosures rise 15 percent in first half of 2009
WASHINGTON – July 16, 2009 – The number of U.S. households on the verge of losing their homes soared by nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills.
The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.
The data show that, despite the Obama administration’s plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation’s housing woes continue to spread. Experts don’t expect foreclosures to peak until the middle of next year.
Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said.
“Despite all the efforts to date, we clearly haven’t got a handle on how to address the situation,” said Rick Sharga, RealtyTrac’s senior vice president for marketing.
More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm’s report. That works out to one in every 380 U.S. homes.
It was the fourth-straight month in which more than 300,000 households received a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in June, up from about 65,000 a month earlier.
On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado.
The Obama administration in March launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments, but it’s off to a slow start.
As of early July, about 130,000 borrowers were enrolled in three-month trial modifications under the plan, and 25 mortgage companies have signed up to receive potential payments of up to $18.6 billion, according to the Treasury Department. But analysts and housing counselors say it isn’t having much of an impact.
“The plan isn’t going well, at least not yet,” said Mark Zandi, chief economist at Moody’s Economy.com. “It’s a creative plan with lots of incentives, but it’s very complex.”
In testimony prepared for delivery at a Senate hearing on Thursday, Bank of America executive Allen Jones said the company has about 80,000 loan modifications in the works under the new government guidelines, including some that aren’t in the three-month trial phase yet.
“We have achieved this level of success by devoting substantial resources to this effort,” Jones said, noting that the company has more than 7,000 employees handling calls and working on modifications. Industry experts, however, say the response from most mortgage companies has been lackluster.
“They’ve been slow to make sure they understand it and put all the processes and people in place,” said Joel Lewis, vice president of financial services at Convergys Corp., which runs call centers for the financial industry and other companies.
A week ago, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan sought to ramp up pressure on the industry, saying in a letter to participating mortgage companies that the industry needs to “devote substantially more resources to this program for it to fully succeed.” They also summoned mortgage executives to a July 28 meeting with top government officials.
Though the program was launched months ago, few companies are upgrading their computer systems to process loans rapidly, said Bill Kelvie, chairman of Overture Technologies in Bethesda, Md.
“They need to automate the process, and they need better technology, and they need to do this quickly,” he said.
Copyright © 2009 The Associated Press
The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.
The data show that, despite the Obama administration’s plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation’s housing woes continue to spread. Experts don’t expect foreclosures to peak until the middle of next year.
Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said.
“Despite all the efforts to date, we clearly haven’t got a handle on how to address the situation,” said Rick Sharga, RealtyTrac’s senior vice president for marketing.
More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm’s report. That works out to one in every 380 U.S. homes.
It was the fourth-straight month in which more than 300,000 households received a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in June, up from about 65,000 a month earlier.
On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado.
The Obama administration in March launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments, but it’s off to a slow start.
As of early July, about 130,000 borrowers were enrolled in three-month trial modifications under the plan, and 25 mortgage companies have signed up to receive potential payments of up to $18.6 billion, according to the Treasury Department. But analysts and housing counselors say it isn’t having much of an impact.
“The plan isn’t going well, at least not yet,” said Mark Zandi, chief economist at Moody’s Economy.com. “It’s a creative plan with lots of incentives, but it’s very complex.”
In testimony prepared for delivery at a Senate hearing on Thursday, Bank of America executive Allen Jones said the company has about 80,000 loan modifications in the works under the new government guidelines, including some that aren’t in the three-month trial phase yet.
“We have achieved this level of success by devoting substantial resources to this effort,” Jones said, noting that the company has more than 7,000 employees handling calls and working on modifications. Industry experts, however, say the response from most mortgage companies has been lackluster.
“They’ve been slow to make sure they understand it and put all the processes and people in place,” said Joel Lewis, vice president of financial services at Convergys Corp., which runs call centers for the financial industry and other companies.
A week ago, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan sought to ramp up pressure on the industry, saying in a letter to participating mortgage companies that the industry needs to “devote substantially more resources to this program for it to fully succeed.” They also summoned mortgage executives to a July 28 meeting with top government officials.
Though the program was launched months ago, few companies are upgrading their computer systems to process loans rapidly, said Bill Kelvie, chairman of Overture Technologies in Bethesda, Md.
“They need to automate the process, and they need better technology, and they need to do this quickly,” he said.
Copyright © 2009 The Associated Press
Wednesday, July 15, 2009
New home appraisal rules stir industry backlash
WASHINGTON – July 15, 2009 – Less than three months after new rules for home appraisers kicked in, the real estate industry is in an uproar.
Realtors, homebuilders, mortgage brokers and the appraisal industry itself all agree the rules are causing problems. Some are backing a bill in Congress to kill them.
The new guidelines essentially put a firewall between lenders and home appraisers. They also ended the practice of lenders using their in-house staff for initial home appraisals and prohibit the use of appraisal-management companies owned or controlled by lenders.
But since they went into effect May 1, the rules have created a slew of unintended consequences that critics say are causing delays in closing sales, or undermining sales because botched appraisals are coming in too low.
“This thing is not only preventing the housing market from recovering, it’s destroying the housing market,” said Marc Savitt, president of the National Association of Mortgage Brokers. “We’re eliminating competition, and we all know what happens when you eliminate competition: Prices go up.”
After a homebuyer and seller agree on a price, the buyer applies for a mortgage. The lender then orders an appraisal to ensure the value of the property, because if the borrower defaults the property will be sold to satisfy the debt. The appraisal fee, which can run between $250 and $500, is usually paid by the buyer.
To determine what a home is worth, the appraiser compares prices of similar homes that were recently sold in the area and makes adjustments for different features, such as a swimming pool or extra bathroom. If the property appraisal comes in below the agreed upon price, the buyer usually has to make up the difference and may instead walk away.
Suzanne Wilhelm, who has been trying to sell her home in Henderson, Nev., for six months, blames an appraisal done under the new rules for scuttling what had been a done deal with a buyer several weeks ago.
The appraisal valued her four-bedroom, 2,000 square-foot house at $190,000 - $45,000 less than the price the buyer agreed to pay. Wilhelm, who paid $187,000 for the house in 2001, believes the appraiser based his estimate on the sale of several foreclosed homes in the area but ignored sales of regular homes that would have reflected a higher price.
“It’s very unfair that we’re put into the same bracket as those people who were so irresponsible in buying their homes,” said Wilhelm, a teacher.
The rules, dubbed the Home Valuation Code of Conduct, are meant to eliminate conflicts of interest that created pressure on real estate appraisers to inflate the value of a property. Lenders, agents and brokers have been known to pressure appraisers to “hit the number” that the homebuyer and seller agreed on so the deal would close and everyone could collect their fees. Inflated appraisals were partly blamed for fueling the housing bubble.
But under a settlement last year with New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac agreed only to buy loans from lenders that don’t directly hire appraisers. The move sent shock waves through the industry because Fannie Mae and Freddie Mac own or guarantee about half of all U.S. home loans.
So lenders started giving more business to appraisal management companies, which critics say draw appraisers from a pool of candidates willing to do the job for less money and who, in some cases, may be unfamiliar with a neighborhood.
Paul Conforti, a broker with Prudential Douglas Elliman in Merrick, N.Y., said he’s seen appraisers based as far as Maryland, about 200 miles away, come into New York’s Nassau County to evaluate homes there.
“If you’re appraising a house, all you really have to go on is the” recent sale of similar properties, Conforti said. “If the person doesn’t know the area ... they end up using comparables from another town. It doesn’t make sense.”
Almost 60 percent of builders are reporting that inadequate appraisals are causing serious problems in the market, often comparing newly built homes to foreclosures without considering the money needed for property repairs. Of those reporting appraisal problems, more than half said the appraisal amount was actually less than the cost of building the home, according to a survey released this week by the National Association of Home Builders.
Cuomo’s office maintains the rules are necessary, and that critics are using the appraisal rules as a scapegoat for a declining housing market made worse by the recession.
“With homes prices falling and foreclosures rising, this complaint is simply wrong and risks returning us to a corrupt system filled with conflicts of interest that promoted artificially inflated values,” said Emily Browne, a spokeswoman for Cuomo.
Browne added that there’s no evidence of a spike in appraisal delays in the two months that the rules took effect.
“Even if there are some delays, there is no reason to think the (rules are) the cause, as opposed to the unrelated, nationwide drop in home values which has made the appraisal process more complicated,” she said.
But the real estate industry is coming out against the rules in force.
The National Association of Mortgage Brokers went to court in February to block the changes, which it claims limit competition. Since then, other key industry groups, including the Appraisal Institute, have voiced their opposition to all or elements of the home appraisal guidelines.
Last week, the National Association of Realtors urged members of Congress to support a bill that would impose an 18-month moratorium on the new appraisal guidelines. The measure is still working its way through Congress.
The Realtors said the new appraisal guidelines are hurting the real estate industry. It contends that appraisers hired by appraisal management companies are not hired “for their competency and qualifications, but for their turnaround time and price.”
Freddie Mac tried to address some of those concerns last week when it issued new home appraisal “best practices” guidelines for lenders.
Among its recommendations, the mortgage finance company said appraisers must be certified or licensed in the state where the property being appraised is located and be familiar with the local market.
Fannie Mae issued similar guidelines in April.
“We’re optimistic that the push to quality will in fact solve some of the problems,” said Ken Chitester, spokesman for the Appraisal Institute. “If consumers are demanding that qualified appraisers perform the valuation on the properties, then that’s a big step in the right direction.”
Copyright © 2009 The Associated Press
Realtors, homebuilders, mortgage brokers and the appraisal industry itself all agree the rules are causing problems. Some are backing a bill in Congress to kill them.
The new guidelines essentially put a firewall between lenders and home appraisers. They also ended the practice of lenders using their in-house staff for initial home appraisals and prohibit the use of appraisal-management companies owned or controlled by lenders.
But since they went into effect May 1, the rules have created a slew of unintended consequences that critics say are causing delays in closing sales, or undermining sales because botched appraisals are coming in too low.
“This thing is not only preventing the housing market from recovering, it’s destroying the housing market,” said Marc Savitt, president of the National Association of Mortgage Brokers. “We’re eliminating competition, and we all know what happens when you eliminate competition: Prices go up.”
After a homebuyer and seller agree on a price, the buyer applies for a mortgage. The lender then orders an appraisal to ensure the value of the property, because if the borrower defaults the property will be sold to satisfy the debt. The appraisal fee, which can run between $250 and $500, is usually paid by the buyer.
To determine what a home is worth, the appraiser compares prices of similar homes that were recently sold in the area and makes adjustments for different features, such as a swimming pool or extra bathroom. If the property appraisal comes in below the agreed upon price, the buyer usually has to make up the difference and may instead walk away.
Suzanne Wilhelm, who has been trying to sell her home in Henderson, Nev., for six months, blames an appraisal done under the new rules for scuttling what had been a done deal with a buyer several weeks ago.
The appraisal valued her four-bedroom, 2,000 square-foot house at $190,000 - $45,000 less than the price the buyer agreed to pay. Wilhelm, who paid $187,000 for the house in 2001, believes the appraiser based his estimate on the sale of several foreclosed homes in the area but ignored sales of regular homes that would have reflected a higher price.
“It’s very unfair that we’re put into the same bracket as those people who were so irresponsible in buying their homes,” said Wilhelm, a teacher.
The rules, dubbed the Home Valuation Code of Conduct, are meant to eliminate conflicts of interest that created pressure on real estate appraisers to inflate the value of a property. Lenders, agents and brokers have been known to pressure appraisers to “hit the number” that the homebuyer and seller agreed on so the deal would close and everyone could collect their fees. Inflated appraisals were partly blamed for fueling the housing bubble.
But under a settlement last year with New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac agreed only to buy loans from lenders that don’t directly hire appraisers. The move sent shock waves through the industry because Fannie Mae and Freddie Mac own or guarantee about half of all U.S. home loans.
So lenders started giving more business to appraisal management companies, which critics say draw appraisers from a pool of candidates willing to do the job for less money and who, in some cases, may be unfamiliar with a neighborhood.
Paul Conforti, a broker with Prudential Douglas Elliman in Merrick, N.Y., said he’s seen appraisers based as far as Maryland, about 200 miles away, come into New York’s Nassau County to evaluate homes there.
“If you’re appraising a house, all you really have to go on is the” recent sale of similar properties, Conforti said. “If the person doesn’t know the area ... they end up using comparables from another town. It doesn’t make sense.”
Almost 60 percent of builders are reporting that inadequate appraisals are causing serious problems in the market, often comparing newly built homes to foreclosures without considering the money needed for property repairs. Of those reporting appraisal problems, more than half said the appraisal amount was actually less than the cost of building the home, according to a survey released this week by the National Association of Home Builders.
Cuomo’s office maintains the rules are necessary, and that critics are using the appraisal rules as a scapegoat for a declining housing market made worse by the recession.
“With homes prices falling and foreclosures rising, this complaint is simply wrong and risks returning us to a corrupt system filled with conflicts of interest that promoted artificially inflated values,” said Emily Browne, a spokeswoman for Cuomo.
Browne added that there’s no evidence of a spike in appraisal delays in the two months that the rules took effect.
“Even if there are some delays, there is no reason to think the (rules are) the cause, as opposed to the unrelated, nationwide drop in home values which has made the appraisal process more complicated,” she said.
But the real estate industry is coming out against the rules in force.
The National Association of Mortgage Brokers went to court in February to block the changes, which it claims limit competition. Since then, other key industry groups, including the Appraisal Institute, have voiced their opposition to all or elements of the home appraisal guidelines.
Last week, the National Association of Realtors urged members of Congress to support a bill that would impose an 18-month moratorium on the new appraisal guidelines. The measure is still working its way through Congress.
The Realtors said the new appraisal guidelines are hurting the real estate industry. It contends that appraisers hired by appraisal management companies are not hired “for their competency and qualifications, but for their turnaround time and price.”
Freddie Mac tried to address some of those concerns last week when it issued new home appraisal “best practices” guidelines for lenders.
Among its recommendations, the mortgage finance company said appraisers must be certified or licensed in the state where the property being appraised is located and be familiar with the local market.
Fannie Mae issued similar guidelines in April.
“We’re optimistic that the push to quality will in fact solve some of the problems,” said Ken Chitester, spokesman for the Appraisal Institute. “If consumers are demanding that qualified appraisers perform the valuation on the properties, then that’s a big step in the right direction.”
Copyright © 2009 The Associated Press
Lobbyist pushes to extend homebuyer tax credit
LAS VEGAS – July 14, 2009 – Realtors’ lobbyist Jerry Giovaniello thinks he has better than a 50-50 chance of getting Congress to extend the $8,000 tax credit for first-time homebuyers past its Dec. 1 deadline.
He’s also pushing to raise the tax credit to $15,000 and expand it to all homebuyers, though that will take a lot more work, Giovaniello said Friday at Bally’s.
Giovaniello, senior vice president of government affairs for the Washington, D.C.-based National Association of Realtors, detailed three major bills on Capitol Hill and how they’ll affect the real estate industry for the Greater Las Vegas Association of Realtors.
The most important legislation is the energy bill, he said. It started at about 1,100 pages, including 50 pages on energy auditing for existing homes.
The legislation would require inspections to determine the energy efficiency rating of any home before it could be sold.
“This is not something we could live with,” Giovaniello said.
“The buyer has to buy a new water heater, a new furnace. This would be a lender red line on older homes.”
Irene Vogel, executive director of Greater Las Vegas Association of Realtors, said real estate agents don’t have the expertise to look at SEER rating, or seasonal energy efficiency rating. She told one of her friends whose husband was laid off from his job as construction superintendent that he should go for SEER certification.
“Now we’re opening up a new field,” Vogel said. “What a business. You know home inspectors will do it.”
The Nevada Legislature in 2000 passed a statute requiring an energy audit of all homes sold effective 2011, but buyers can waive the audit for the sellers, said Kit Cooper, government affairs director for the local Realtors.
Giovaniello said the homebuyer tax credit has been popular and seems to be working. It would end up costing the Treasury to raise the amount, but members of Congress have children trying to buy homes, so they understand the need, he said.
The recent increase in the loan-to-value ratio for refinancing under President Barack Obama’s loan-modification program may help some areas, particularly high-cost areas, Giovaniello said.
“California, Vegas, Massachusetts – essentially the paradigm there is different and there should be recognition of that,” he said.
© 2009 The Las Vegas Review-Journal
He’s also pushing to raise the tax credit to $15,000 and expand it to all homebuyers, though that will take a lot more work, Giovaniello said Friday at Bally’s.
Giovaniello, senior vice president of government affairs for the Washington, D.C.-based National Association of Realtors, detailed three major bills on Capitol Hill and how they’ll affect the real estate industry for the Greater Las Vegas Association of Realtors.
The most important legislation is the energy bill, he said. It started at about 1,100 pages, including 50 pages on energy auditing for existing homes.
The legislation would require inspections to determine the energy efficiency rating of any home before it could be sold.
“This is not something we could live with,” Giovaniello said.
“The buyer has to buy a new water heater, a new furnace. This would be a lender red line on older homes.”
Irene Vogel, executive director of Greater Las Vegas Association of Realtors, said real estate agents don’t have the expertise to look at SEER rating, or seasonal energy efficiency rating. She told one of her friends whose husband was laid off from his job as construction superintendent that he should go for SEER certification.
“Now we’re opening up a new field,” Vogel said. “What a business. You know home inspectors will do it.”
The Nevada Legislature in 2000 passed a statute requiring an energy audit of all homes sold effective 2011, but buyers can waive the audit for the sellers, said Kit Cooper, government affairs director for the local Realtors.
Giovaniello said the homebuyer tax credit has been popular and seems to be working. It would end up costing the Treasury to raise the amount, but members of Congress have children trying to buy homes, so they understand the need, he said.
The recent increase in the loan-to-value ratio for refinancing under President Barack Obama’s loan-modification program may help some areas, particularly high-cost areas, Giovaniello said.
“California, Vegas, Massachusetts – essentially the paradigm there is different and there should be recognition of that,” he said.
© 2009 The Las Vegas Review-Journal
Tuesday, July 14, 2009
Condo associations forced into bankruptcy as fees dry up
MIAMI – July 14, 2009 – At least seven Florida condo associations have filed for bankruptcy since the real estate market took a nose dive – and there may be more on the way.
For a growing number of strapped condo associations, bankruptcy could be the last defense against their hallways going dark and their spigots running dry.
In one of the most recent Chapter 11 filings, the creditors of Maison Grande in Miami Beach are planning to meet Tuesday to discuss the bankruptcy.
A rare occurrence in better days, such filings now are seen as a last-ditch bid by associations to shield themselves from bill collectors and find a way out of mounting financial problems. While an association is in bankruptcy, utilities can’t cut off the power or turn off the water, problems that have already surfaced at some South Florida condos.
“Without question it’s being talked about and asked about,” said Robert White, a managing director for KW Property Management in Coral Gables, “especially in some of these associations that have delinquencies that exceed 30 percent. They’re looking for options about how to solve the problem.”
Maison Grande, a complex of 502 luxury condos in Miami Beach at 6039 Collins Ave., filed for Chapter 11 protection in June after Dorten developers sued the association for about $658,000 in back payments on a recreational lease for the pool and parking areas. Chapter 11 bankruptcy offers private companies protection from creditors while they reorganize their debts, restructure contracts and find new sources of revenue.
Forty-four units are in foreclosure at the Maison Grande, and about 165 owners are two months or more past due on association payments.
Also last month, the Legacy Park town home association in the Central Florida city of Davenport filed for Chapter 11. Among its biggest creditors: Comcast, which says the association owes $105,305 for a past-due cable bill.
With the weak economy, many condo associations – which are classified as not-for-profit corporations – find bills are piling up as units enter foreclosure and homeowners stop paying association fees, putting enormous financial strain on residents left holding the bill.
A risky alternative
Still, filing for bankruptcy is a costly endeavor – and may not be a cure. It’s unclear whether any Florida association has successfully reorganized in bankruptcy in recent years.
Bankruptcy attorney Thomas Lehman with Tew Cardenas in Miami said he wasn’t sure how bankruptcy could benefit associations, because their only assets are the property’s common areas and, possibly, their ability to assess individual unit owners.
Corporations need an exit strategy when filing Chapter 11, Lehman said. He added it wasn’t clear how an association having trouble covering basic monthly services could reorganize. They also have nothing to sell off, except common areas such as the lobby and rec room.
“They’re better off trying to negotiate with vendors to come up with an out-of-court restructuring plan,” Lehman said.
Last month a Miami bankruptcy court dismissed a bankruptcy petition by View West Condo in Kendall essentially because its creditor, Z Roofing, won a state case upholding its lien and forcing a special assessment on unit owners to pay a balance of more than $100,000 for repairs.
“The thing about a condo association is that often times their main asset is really only its accounts receivable from unit owners paying maintenance fees or assessments,” said Carla Barrow, an attorney who represented Z Roofing in the matter.
The company also won approval from a state court to foreclose on individual unit owners who failed to pay their share of the assessment.
Filing of the petition did little to protect the association, Barrow said, because it still owed the roofing company for the work, as well as $50,000 in legal fees and court costs – not to mention fees owed to its own attorney.
Punishing the payers
While a condo association’s ability to repay creditors by levying special assessments could be a stumbling block, Lisa Magill, an attorney with condo firm Becker & Poliakoff, said a high rate of fee delinquencies could make that less of an issue.
“If you have nonpayers, and those who are paying don’t have the ability to pay more and you have a significant number of owners that have abandoned the property, your ability to levy assessments is limited,” Magill said. There comes a point when paying owners may also throw in the towel and stop payments if their assessments rise too much.
Despite the potential pitfalls, Magill said there are benefits to be gained by filing.
Bankruptcy protection allows debtors to renegotiate onerous leases, like the one saddling Maison Grande. It could also delay, and even prevent, creditors from seizing assets and garnishing bank accounts.
Utilities and other vendors would have to get court permission to drop services, said Robert Kaye, a partner with Kaye & Bender law firm in Fort Lauderdale, which represents close to 700 homeowner associations.
After several months of investigating the matter, residents of St. Andrews condo in Miramar decided against filing bankruptcy earlier this year, even though nearly half its unit owners at the time were in foreclosure and the association had fallen behind on several bills.
William Quigley, who served on his association’s budget advisory committee, said the association determined that filing for bankruptcy would cost more money than it would save. They were told, he said, it would cost about $30,000 to pay lawyers just to file the petition, not to mention costs going forward.
“Now you are going to have to assess the community to file rather than working out what you owe to your vendors,” Quigley said.
In the end, the association decided to level with vendors and find ways to begin slowly paying off past due balances.
Copyright © 2009 The Miami Herald
For a growing number of strapped condo associations, bankruptcy could be the last defense against their hallways going dark and their spigots running dry.
In one of the most recent Chapter 11 filings, the creditors of Maison Grande in Miami Beach are planning to meet Tuesday to discuss the bankruptcy.
A rare occurrence in better days, such filings now are seen as a last-ditch bid by associations to shield themselves from bill collectors and find a way out of mounting financial problems. While an association is in bankruptcy, utilities can’t cut off the power or turn off the water, problems that have already surfaced at some South Florida condos.
“Without question it’s being talked about and asked about,” said Robert White, a managing director for KW Property Management in Coral Gables, “especially in some of these associations that have delinquencies that exceed 30 percent. They’re looking for options about how to solve the problem.”
Maison Grande, a complex of 502 luxury condos in Miami Beach at 6039 Collins Ave., filed for Chapter 11 protection in June after Dorten developers sued the association for about $658,000 in back payments on a recreational lease for the pool and parking areas. Chapter 11 bankruptcy offers private companies protection from creditors while they reorganize their debts, restructure contracts and find new sources of revenue.
Forty-four units are in foreclosure at the Maison Grande, and about 165 owners are two months or more past due on association payments.
Also last month, the Legacy Park town home association in the Central Florida city of Davenport filed for Chapter 11. Among its biggest creditors: Comcast, which says the association owes $105,305 for a past-due cable bill.
With the weak economy, many condo associations – which are classified as not-for-profit corporations – find bills are piling up as units enter foreclosure and homeowners stop paying association fees, putting enormous financial strain on residents left holding the bill.
A risky alternative
Still, filing for bankruptcy is a costly endeavor – and may not be a cure. It’s unclear whether any Florida association has successfully reorganized in bankruptcy in recent years.
Bankruptcy attorney Thomas Lehman with Tew Cardenas in Miami said he wasn’t sure how bankruptcy could benefit associations, because their only assets are the property’s common areas and, possibly, their ability to assess individual unit owners.
Corporations need an exit strategy when filing Chapter 11, Lehman said. He added it wasn’t clear how an association having trouble covering basic monthly services could reorganize. They also have nothing to sell off, except common areas such as the lobby and rec room.
“They’re better off trying to negotiate with vendors to come up with an out-of-court restructuring plan,” Lehman said.
Last month a Miami bankruptcy court dismissed a bankruptcy petition by View West Condo in Kendall essentially because its creditor, Z Roofing, won a state case upholding its lien and forcing a special assessment on unit owners to pay a balance of more than $100,000 for repairs.
“The thing about a condo association is that often times their main asset is really only its accounts receivable from unit owners paying maintenance fees or assessments,” said Carla Barrow, an attorney who represented Z Roofing in the matter.
The company also won approval from a state court to foreclose on individual unit owners who failed to pay their share of the assessment.
Filing of the petition did little to protect the association, Barrow said, because it still owed the roofing company for the work, as well as $50,000 in legal fees and court costs – not to mention fees owed to its own attorney.
Punishing the payers
While a condo association’s ability to repay creditors by levying special assessments could be a stumbling block, Lisa Magill, an attorney with condo firm Becker & Poliakoff, said a high rate of fee delinquencies could make that less of an issue.
“If you have nonpayers, and those who are paying don’t have the ability to pay more and you have a significant number of owners that have abandoned the property, your ability to levy assessments is limited,” Magill said. There comes a point when paying owners may also throw in the towel and stop payments if their assessments rise too much.
Despite the potential pitfalls, Magill said there are benefits to be gained by filing.
Bankruptcy protection allows debtors to renegotiate onerous leases, like the one saddling Maison Grande. It could also delay, and even prevent, creditors from seizing assets and garnishing bank accounts.
Utilities and other vendors would have to get court permission to drop services, said Robert Kaye, a partner with Kaye & Bender law firm in Fort Lauderdale, which represents close to 700 homeowner associations.
After several months of investigating the matter, residents of St. Andrews condo in Miramar decided against filing bankruptcy earlier this year, even though nearly half its unit owners at the time were in foreclosure and the association had fallen behind on several bills.
William Quigley, who served on his association’s budget advisory committee, said the association determined that filing for bankruptcy would cost more money than it would save. They were told, he said, it would cost about $30,000 to pay lawyers just to file the petition, not to mention costs going forward.
“Now you are going to have to assess the community to file rather than working out what you owe to your vendors,” Quigley said.
In the end, the association decided to level with vendors and find ways to begin slowly paying off past due balances.
Copyright © 2009 The Miami Herald
Monday, July 13, 2009
Mortgages: More rules and longer waits
WASHINGTON – July 13, 2009 – People trying to buy or sell a home may be seeing the process drag out longer than expected and wondering why.
Until recently, a real estate deal could close, on average, in 30 days, real estate agents said. But, bankers and real estate agents said increased scrutiny and tighter restrictions following the subprime mortgage meltdown, and an increased demand for government insured FHA loans has pushed closing times to 45-60 days.
Or longer.
Ask Morgantown, W. Va., resident Denny Vac, who tried to sell his house to a friend. It took 85 days for the loan to close.
That “is a long time,” Vac said. “It seems to me if they’re trying to get an economic recovery going, they’d be trying to make this a little easier to get through.”
Jerry Hall, a broker at Morgantown’s RE/MAX office, said he’s experienced the delays.
“Underwriters have been looking at properties with a microscope,” he said. They’re scrutinizing the loans, too. Properties may drop out the day before closing.
He had one sale hit a snag the day before closing because of the underwriter, he said. It was a bungalow with minor foundation problems. Two inspectors said it needed monitoring but not immediate repair. However, the underwriters wanted it fixed before the money was released. The sale took an extra month. Asked if he also considered the problem counterproductive to economic stimulus, Hall said “very much so.”
There are two distinct issues affecting the home loan process, bankers told The Dominion Post, depending on whether buyers are working with a conventional loan or an FHA loan.
FHA loans
Vac’s friend is pursuing a Federal Housing Administration (FHA) loan through BB&T, Vac said.
FHA says its loans can be good for several types of homebuyers: first-timers, those with little money for a down payment, and those with less-than-perfect credit, among others.
Jane Haines, vice president for mortgage sales at Clear Mountain Bank, said homebuyers putting less than 20 percent down on their homes are required to obtain mortgage insurance to protect against default in the event of foreclosure. Private mortgage insurance firms provide the insurance for homebuyers using conventional loans.
For FHA loans, the FHA doesn’t lend the money, but it insures the loans against defaults, said U.S. Department of Housing and Urban Development spokesman Lemar Wooley. This can make lenders more willing to part with their money.
And, while underwriters for conventional home loans are requiring at least 5 percent down, bankers said, the FHA requires only 3.5 percent and the rules are less strict about where that money can come from.
Vac put his house on the market with a realty firm for $180,000, he said, but listed it with the exception his friend could buy it for $150,000 without involving a real estate commission. His friend was pre-approved by BB&T and they signed a contract between April 16-20, expecting the deal to close not later than June 20.
Vac encountered various frustrations and problems during his long wait. The bank sent the wrong appraiser, and there have been communication problems.
When the deal started dragging out, he said, he considered renegotiating the contract at a higher price, but because of the way the appraisal system works, the house was appraised at $155,000, so he and his friend would have to start the whole process over again.
So he waited. His accountant told him the delay was costing him about $120 a day to hold onto the unoccupied, unrented house – more than $3,000 all told. Meanwhile, the buyer had to rent an apartment for an extra month, costing him more money, too.
BB&T media relations manager A.C. McGraw couldn’t address Vac’s specific situation, but said BB&T has a “longer processing time [on FHA loans] because of increasing volume. ... We’re literally pushing more loans through the pipeline.”
There are also more documentation requirements, she said.
McGraw said BB&T doesn’t keep separate statistics for closing times on conventional and FHA loans, but overall they’re averaging 45-60 days.
In cases like Vac’s, she said, “I’m sure other factors are involved.”
McGraw said BB&T is trying to prioritize home loan processing “to meet sales contract deadlines.”
Wooley said the FHA has noted “no appreciable increase in time for closures,” but the weak economy, the subprime mortgage market meltdown and tightened lending practices produced an “absolute increase in demand” for FHA-insured loans. The market share ballooned from less than 4 percent of all home loans in 2004, to 18 percent now.
“More and more people are turning to FHA as a safe product,” he said.
But Haines is among the local bankers who has seen “a lot longer turnaround” time for FHA loans – because of their growing popularity.
“It may take three weeks to hear back” from the FHA, she said, “and they want more information.”
“It is frustrating for the customer, the Realtor and the banker,” she said.
Another appealing factor for FHA loans, she said, is credit scores. FHA requires only a 620.
Credit scores can range from about 300 to 850, as rated by the credit-scoring system Fair Isaac Co. (FICO), according to various banking sources, and major lenders like to see scores at 700 or above, but typically offer “prime” loans (best interest rates) to folks at 650 or above. A score below 620 is considered bad credit, with a high risk for default.
Despite the increased lag time, Haines said, FHA is still the best route for many people. “Without FHA, more people would be unable to get into homes.”
Conventional loans
Jeff Stewart, associate broker at Pat Stewart Realtors, said, “There are more hoops to jump through. ... It’s just been difficult.” Underwriters will sign off sometimes, he said, and then come back with more requirements.
Another problem he and Hall have observed is appraisals. They’re taking longer, and sometimes homes are getting evaluated by nonlocal appraisers. Hall said that stems from a new regulation designed to prevent conflicts of interest. Banks are no longer permitted to contact the appraiser – the job has to be set up by someone not connected to the loan. For some banks, Hall said, that means bringing in people less qualified who don’t know the area or the market.
Haines and Centra Bank President and CEO Doug Leech said their banks are still using local appraisers. “We know our appraisers,” Leech said, but he’s aware it’s an issue elsewhere.
Centra, he said, has about $1.2 billion in assets, and lent out more than $500 million in 2008. Lending at that rate means Centra would exhaust its assets in about two years. So Centra and other banks sell their mortgages on the “secondary market.” This means Centra approves the mortgage and issues the money to the borrower. But then it packages its mortgages and sells them to megalenders such as Freddie Mac, Fannie Mae, Citibank or GMAC. In this way, Centra gets its money back and puts it back into the lending pot.
Leech said Centra is still closing 99 percent of its loans in 30 days. Haines said Clear Mountain’s in-house loans are going as quickly as ever, while there is a “slightly longer turnaround” for conventional mortgage loans.
But, Leech said, since the economic meltdown, requirements for conventional mortgages are more stringent. He ticked off a number of issues:
“Appraisals are scrutinized like never before.” An appraiser may say a home is worth $200,000, but the underwriter may mark it down.
They focus on the neighborhood and “comparables” – similar homes within the local geographic area.
They want higher downpayments.
“The days of the 100-percent loan are gone,” he said. The secondary lenders want a minimum of 5 percent down, but some don’t like that little.
People with credit scores at 680 or higher could at one time get a loan for 100 percent of the home’s value, he said, but now they want a near-perfect 720 or higher to even consider it.
They want a lower debt-to-income ratio. It used to be 50 percent to 60 percent, he said. That means 60 percent of a borrower’s income could be committed to debt payments. But now they want 36 percent to 40 percent.
They want to make sure the buyer has sufficient assets after closing, he said, to provide padding in case of job loss, income cut or other issues.
“Any one [factor] makes it difficult, but the combination makes it more difficult,” he said.
Customers are also more cautious, he said.
When housing prices rose, some people expected incomes to rise, too, but that didn’t happen.
“People don’t have the confidence to go out on a limb quite as much.”
Copyright © 2009 The Dominion Post
Until recently, a real estate deal could close, on average, in 30 days, real estate agents said. But, bankers and real estate agents said increased scrutiny and tighter restrictions following the subprime mortgage meltdown, and an increased demand for government insured FHA loans has pushed closing times to 45-60 days.
Or longer.
Ask Morgantown, W. Va., resident Denny Vac, who tried to sell his house to a friend. It took 85 days for the loan to close.
That “is a long time,” Vac said. “It seems to me if they’re trying to get an economic recovery going, they’d be trying to make this a little easier to get through.”
Jerry Hall, a broker at Morgantown’s RE/MAX office, said he’s experienced the delays.
“Underwriters have been looking at properties with a microscope,” he said. They’re scrutinizing the loans, too. Properties may drop out the day before closing.
He had one sale hit a snag the day before closing because of the underwriter, he said. It was a bungalow with minor foundation problems. Two inspectors said it needed monitoring but not immediate repair. However, the underwriters wanted it fixed before the money was released. The sale took an extra month. Asked if he also considered the problem counterproductive to economic stimulus, Hall said “very much so.”
There are two distinct issues affecting the home loan process, bankers told The Dominion Post, depending on whether buyers are working with a conventional loan or an FHA loan.
FHA loans
Vac’s friend is pursuing a Federal Housing Administration (FHA) loan through BB&T, Vac said.
FHA says its loans can be good for several types of homebuyers: first-timers, those with little money for a down payment, and those with less-than-perfect credit, among others.
Jane Haines, vice president for mortgage sales at Clear Mountain Bank, said homebuyers putting less than 20 percent down on their homes are required to obtain mortgage insurance to protect against default in the event of foreclosure. Private mortgage insurance firms provide the insurance for homebuyers using conventional loans.
For FHA loans, the FHA doesn’t lend the money, but it insures the loans against defaults, said U.S. Department of Housing and Urban Development spokesman Lemar Wooley. This can make lenders more willing to part with their money.
And, while underwriters for conventional home loans are requiring at least 5 percent down, bankers said, the FHA requires only 3.5 percent and the rules are less strict about where that money can come from.
Vac put his house on the market with a realty firm for $180,000, he said, but listed it with the exception his friend could buy it for $150,000 without involving a real estate commission. His friend was pre-approved by BB&T and they signed a contract between April 16-20, expecting the deal to close not later than June 20.
Vac encountered various frustrations and problems during his long wait. The bank sent the wrong appraiser, and there have been communication problems.
When the deal started dragging out, he said, he considered renegotiating the contract at a higher price, but because of the way the appraisal system works, the house was appraised at $155,000, so he and his friend would have to start the whole process over again.
So he waited. His accountant told him the delay was costing him about $120 a day to hold onto the unoccupied, unrented house – more than $3,000 all told. Meanwhile, the buyer had to rent an apartment for an extra month, costing him more money, too.
BB&T media relations manager A.C. McGraw couldn’t address Vac’s specific situation, but said BB&T has a “longer processing time [on FHA loans] because of increasing volume. ... We’re literally pushing more loans through the pipeline.”
There are also more documentation requirements, she said.
McGraw said BB&T doesn’t keep separate statistics for closing times on conventional and FHA loans, but overall they’re averaging 45-60 days.
In cases like Vac’s, she said, “I’m sure other factors are involved.”
McGraw said BB&T is trying to prioritize home loan processing “to meet sales contract deadlines.”
Wooley said the FHA has noted “no appreciable increase in time for closures,” but the weak economy, the subprime mortgage market meltdown and tightened lending practices produced an “absolute increase in demand” for FHA-insured loans. The market share ballooned from less than 4 percent of all home loans in 2004, to 18 percent now.
“More and more people are turning to FHA as a safe product,” he said.
But Haines is among the local bankers who has seen “a lot longer turnaround” time for FHA loans – because of their growing popularity.
“It may take three weeks to hear back” from the FHA, she said, “and they want more information.”
“It is frustrating for the customer, the Realtor and the banker,” she said.
Another appealing factor for FHA loans, she said, is credit scores. FHA requires only a 620.
Credit scores can range from about 300 to 850, as rated by the credit-scoring system Fair Isaac Co. (FICO), according to various banking sources, and major lenders like to see scores at 700 or above, but typically offer “prime” loans (best interest rates) to folks at 650 or above. A score below 620 is considered bad credit, with a high risk for default.
Despite the increased lag time, Haines said, FHA is still the best route for many people. “Without FHA, more people would be unable to get into homes.”
Conventional loans
Jeff Stewart, associate broker at Pat Stewart Realtors, said, “There are more hoops to jump through. ... It’s just been difficult.” Underwriters will sign off sometimes, he said, and then come back with more requirements.
Another problem he and Hall have observed is appraisals. They’re taking longer, and sometimes homes are getting evaluated by nonlocal appraisers. Hall said that stems from a new regulation designed to prevent conflicts of interest. Banks are no longer permitted to contact the appraiser – the job has to be set up by someone not connected to the loan. For some banks, Hall said, that means bringing in people less qualified who don’t know the area or the market.
Haines and Centra Bank President and CEO Doug Leech said their banks are still using local appraisers. “We know our appraisers,” Leech said, but he’s aware it’s an issue elsewhere.
Centra, he said, has about $1.2 billion in assets, and lent out more than $500 million in 2008. Lending at that rate means Centra would exhaust its assets in about two years. So Centra and other banks sell their mortgages on the “secondary market.” This means Centra approves the mortgage and issues the money to the borrower. But then it packages its mortgages and sells them to megalenders such as Freddie Mac, Fannie Mae, Citibank or GMAC. In this way, Centra gets its money back and puts it back into the lending pot.
Leech said Centra is still closing 99 percent of its loans in 30 days. Haines said Clear Mountain’s in-house loans are going as quickly as ever, while there is a “slightly longer turnaround” for conventional mortgage loans.
But, Leech said, since the economic meltdown, requirements for conventional mortgages are more stringent. He ticked off a number of issues:
“Appraisals are scrutinized like never before.” An appraiser may say a home is worth $200,000, but the underwriter may mark it down.
They focus on the neighborhood and “comparables” – similar homes within the local geographic area.
They want higher downpayments.
“The days of the 100-percent loan are gone,” he said. The secondary lenders want a minimum of 5 percent down, but some don’t like that little.
People with credit scores at 680 or higher could at one time get a loan for 100 percent of the home’s value, he said, but now they want a near-perfect 720 or higher to even consider it.
They want a lower debt-to-income ratio. It used to be 50 percent to 60 percent, he said. That means 60 percent of a borrower’s income could be committed to debt payments. But now they want 36 percent to 40 percent.
They want to make sure the buyer has sufficient assets after closing, he said, to provide padding in case of job loss, income cut or other issues.
“Any one [factor] makes it difficult, but the combination makes it more difficult,” he said.
Customers are also more cautious, he said.
When housing prices rose, some people expected incomes to rise, too, but that didn’t happen.
“People don’t have the confidence to go out on a limb quite as much.”
Copyright © 2009 The Dominion Post
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