Fannie Mae reviews last-minute credit checks

WASHINGTON – July 20, 2010 – Fannie Mae announced last week that it is reviewing the rule it put in place earlier this year requiring lenders to do a second credit check shortly before closing.

The goal of the rule is to identify new debt that might undermine an applicant’s ability to pay, but for both homebuyers and lenders, the second check is problematic. The search can uncover a short-term debt – medical bills that insurance is likely to pay – that would nevertheless derail a purchase.

“We keep telling people: ‘Don’t open new accounts. Don’t close existing accounts. Don’t do anything whatsoever that will alter your credit situation,’” says Eric Gates, a mortgage broker for Apex Home Loans. “But there will be people who can’t avoid increasing their credit card balances, or already have, and that’s where the problems will crop up.”

Lenders are particularly concerned about the rule because Fannie can require them to buy back loans in default up to two years after closing if there is evidence that the borrower had more debt than was disclosed at the time of closing.

Source: Washington Post

Helping sellers to accept realistic pricing

Many times when on a listing appointment, sellers are a bit confused on why their Home may sell for less than they would like.  Below are some tips to help understand the market.  

1. Tell them the odds. Calculate the absorption rate in their area. Divide “1” by the number of months of housing inventory. For instance, if there are 12 months of inventory on the market, the probability of selling in any given month is 8.3 percent. The probability of not selling is 91.7 percent.

2. Explain the cost of not selling. That includes paying the mortgage, insurance, utilities, etc., plus the cost of any further price declines.

3. Compare the price per square foot. Show the seller the prices of comparable homes sold on a price-per-square-foot basis.

4. Point out how much lenders are willing to loan on similar properties. If a house can’t qualify at the price the sellers seek, few will be able to buy it.

5. Show them the goods. Take sellers on a tour of competing properties and show them the online tours of those that sold previously.

6. Use online pricing tools. Sites such as Zillow.com can help you demonstrate competitive pricing.

Source: Inman News

Mortgage rates remain at lowest level in decades

Mortgage Rate Trend Index

Don’t expect rate changes over the short term, say 55% of experts polled by Bankrate.com this week. Most of the others (40%) foresee an increase, however – only 5% think rates will go lower.

WASHINGTON – July 16, 2010 – Mortgage rates were unchanged this week at the lowest point in decades, but it hasn’t been enough to jump-start the housing market.

Government-sponsored mortgage buyer Freddie Mac said Thursday the average rate for 30-year fixed loans this week was 4.57 percent. That’s the same as a week earlier and the lowest since Freddie Mac began tracking rates in 1971.

The last time home loan rates were lower was the 1950s, when most mortgages lasted just 20 or 25 years.

Rates have fallen since the spring. Investors, concerned with the European debt crisis, have poured money into the safety of Treasury bonds. Treasury yields have fallen and so have mortgage rates, which tend to track yields on U.S. debt.

However, low rates have yet to fuel home sales and have sparked only a modest increase in refinancing activity.

The housing market has slowed since federal tax credits for homebuyers expired at the end of April. And the latest decline in mortgage rates is unlikely to boost the market.

Mortgage rates have hovered near record lows for some time, so most people who can afford to buy homes or qualify to refinance their loans have already done so in the past 18 months. Doing so again wouldn’t be worth the cost for most.

Meanwhile, millions of Americans are unable to take advantage of the low rates. Many have seen the value of their homes plummet and have little or no equity. Or they lack good credit or steady income to get or refinance a mortgage.

Rates could go lower and still not budge the housing market, analysts say. That’s because a person without a job can’t afford a home and a person worried about losing their job is unlikely to do so either.

To calculate the national average, 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.

Rates on 15-year fixed-rate mortgages decreased to an average of 4.06 percent, down from 4.07 percent last week. Rates on five-year adjustable-rate mortgages averaged 3.85 percent, up from 3.75 percent a week earlier.

Rates on one-year adjustable-rate mortgages fell to an average of 3.74 percent from 3.75 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for all types of loans in Freddie Mac’s survey averaged 0.7 a point.
 Copyright 2010 The Associated Press

Some banks lower appraisals, killing sales

WASHINGTON – July 13, 2010 – It’s a common Realtor complaint: A property going to contract appraises for less than expected. The buyer cannot put more down; the seller will not lower the price; the sale falls apart.

In some cases, however, the appraiser is not the cause. Banks – fearful of Fannie Mae and Freddie Mac policies that mete out punishment if a house is over-valued – err on the side of caution by shaving value off the appraisal. If guilty of price inflation, they could be forced by Fannie Mae to buy back the mortgage at a substantial cost. By dropping the appraisal value, they hope to avoid any suggestion that they inflated the numbers.

Frank K. Gregoire of St. Petersburg, vice chairman of the National Association of Realtors’ Appraisal Committee, calls the problem widespread. Many sales are “sabotaged by lenders and underwriters arbitrarily reducing the (appraiser’s) value estimate.”

According to Gregoire, many lenders try to double-check an appraiser’s work by ordering a low-cost electronic valuation. The electronic version uses only readily available public records and no on-site inspection, making it less reliable than a true appraisal. However, banks many times get scared if the electronic version is lower than the physical version, and they downgrade the true appraisal value to protect themselves. At other times, they ask the appraiser to explain the price difference, which can also delay closing.

The rules are about to change

Recognizing a problem, Fannie Mae instituted a new rule that becomes effective on Sept. 1. After that date, banks selling their loans to Fannie Mae can no longer simply drop the appraisal value. In guidance issued June 30, Fannie Mae told its participating lenders that they must contact the appraiser to “resolve” disagreements. If that fails, banks must order a second appraisal. In either case, lenders cannot simply drop the original value that supports a sales contract.

A number of appraisers hailed the change as great news.

Pat Turner, an appraiser in Richmond, Va., said that electronic appraisals don’t consider property condition and “are often inaccurate.” According to Turner, he once did a physical appraisal of a property that a California-based firm also did electronically. Afterward, the lender’s review company asked Turner why he did not use one of the comps the electronic firm used. Turner investigated and said he found out that one “comp” was actually a vacant lot, and worth far less than the property being sold.

Fannie Mae’s rule change also attempts to deal with other appraiser complaints, such as the use of inexperienced appraisers who travel to unfamiliar territory by clarifying “appraiser selection” standards.

Fannie Mae and Freddie Mac back about half of all U.S. mortgages, and Freddie Mac officials, when asked about Fannie Mae’s announced rules, said they’re “looking at it.”

Source: Kenneth R. Harney

© 2010 Florida Realtors®

Make a home a vacation destination

WASHINGTON – July 12, 2010 – Whether it’s because of the economy or by choice, millions of Americans are staying close to home this summer, and it’s not too late to get outdoor space ready for a summer fun. How-to information and more is available at HouseLogic – a comprehensive consumer website produced by the National Association of Realtors® (NAR) about all aspects of homeownership.

“HouseLogic has everything a homeowner needs to maintain, protect and increase the value of their home,” says NAR President Vicki Cox Golder. “Summer is all about enjoying the weather and your home’s outdoor space, and with a few improvements your backyard will be a safe and enjoyable place for everyone.”

This may be the year to add a new deck. The experts at HouseLogic say that choosing the right material is the most important decision. While synthetic decking materials, such as composite and PVC decking, and tropical hardwoods like mahogany are initially pricier, they are easier to maintain and can last years longer. Although traditional wood decks initially cost less, the annual cleaning and resealing maintenance can make them more expensive over the long term.

If your home already has a deck, it may simply need some care and maintenance. HouseLogic recommends a few simple steps to keep your deck safe, sound and looking great. First, give your deck’s structure a close inspection for rotting or cracked boards. Pound in any protruding nails and cut back nearby trees or bushes to prevent mold and rotting. Then thoroughly sweep and wash the deck; after it’s completely dry, follow up with a sealer or stain.

Pavers may be a good alternative to a deck and are available in many different colors and finishes. The experts at HouseLogic say that choosing patio paving materials begins with a solid foundation – the base that supports the pavers must be firm, strong and designed to stand up to years of foot traffic and weather. When it comes to pavers, there are many options, including brick pavers, which offer warmth and the possibility of intricate patterns; concrete pavers, which come in countless shapes and sizes and can be fashioned to look like real stone; a variety of stone, slate and marble; and even recycled hardscape materials, such as concrete sections from a neighbor’s old driveway or sidewalk.

If you have a pool, you may want to consider alternatives to chlorine. Chlorine is popular because it’s inexpensive and keeps swimming pools clean by sanitizing, oxidizing and deterring algae; however it also has a strong odor, reddens eyes, and causes allergic reactions in some swimmers. Chlorine alternatives include bromine, ionizers, ozonators or PHMB; but all four have drawbacks, including higher costs.

HouseLogic’s gas and charcoal grill guides offer advice on purchasing a new grill from a wide variety of models and prices – ranging from $29 to $5,000 and up. HouseLogic recommends that homeowners first ask themselves a series of questions, including what type of cooking they’ll be doing, how often they plan to use the grill, the number of guests they expect, and how much they want to spend. The answers can help homeowners narrow down their choices to one that fits their family and budget.

For more great tips on getting a home ready for summer and other homeownership topics, visit HouseLogic at www.houselogic.com.

HouseLogic is a free source of information and tools for homeowners from NAR that helps homeowners make smart decisions and take responsible actions to maintain, protect and increase the value of their home. HouseLogic helps homeowners plan and organize their home projects and provides timely articles and news; home improvement advice and how-to’s; and information about taxes, home finances and insurance.

© 2010 Florida Realtors®

Kitchen comebacks: popular for remodeling

Kitchen comebacks: popular for remodeling
ORLANDO, Fla. – July 8, 2010 – The explosion of remodeling shows on TV and makeover spreads in magazines has whetted America’s appetite for glamorous rooms brimming with the latest furnishings, appliances and color schemes.

Kitchen remodels are among the most popular, according to a report in the just-published August issue of Consumer Reports and online at consumerreports.org. And the economic slowdown means there are outstanding deals on everything from cooktops to countertops. It also means kitchen designers and building contractors are eager for work and willing to negotiate.

But bargain prices and good looks aren’t everything, said Celia Kupersmzid Lehrman, Consumer Reports’ deputy home editor.

“When remodeling a kitchen, functionality is every bit as important as style. Fortunately there are many products that look good and work well,” she said.

The design of your kitchen is every bit as important as what goes into it, said Jim Spence of Spence & Vaughn Fine Kitchen and Bath in Maitland.

The most functional design is based on the “work triangle” -- the relationship between the prep area, the cooking area and the sink, he said. Ideally, the distance between them should never be less than four feet or more than nine feet. Of the three areas, the most-used is the sink.

When planning a remodel, determining your budget is one of the first steps. The National Kitchen & Bath Association (NKBA) calculates the average kitchen remodel costs between 10 percent and 20 percent of the home’s value. But obviously, the extent of the makeover determines its cost. In its latest issue, Consumer Reports takes top-performing products and creates three design schemes: a do-it-yourself makeover for $5,000; a plan that costs $15,000 (the average spent on a kitchen remodel); and a full-scale renovation for $50,000.

Determining your priorities is another key step, said Phil Johnson, a partner at Spence & Vaughn and a certified kitchen designer.

“Do you love to cook? If so, now might be the time to consider professional-style appliances,” he said. “Do you have a large family? Consider how best to accommodate them in your new space. Think about the things you love in your old kitchen -- and the things you dislike.”

In addition, Johnson recommends the following steps for a successful remodel:

--Do your homework. Watch TV remodeling programs, clip appealing pictures and articles from magazines, attend remodeling seminars, visit home shows and parades of homes. Consult with a kitchen designer who is a member of the NKBA, who has the training and experience to avoid many of the things that can go wrong with a remodeling project.

--Visit a showroom. Examine the options in cabinets, countertops, appliances, flooring, plumbing and lighting. Decide what you want -- and can afford.

--Schedule a home visit. The designer/installer need to measure the kitchen and adjacent rooms, and make a note of existing walls, doors and windows, electrical supplies, ceiling height, attic access, type of wall construction, plumbing details, etc.

--Finalize the project. The design is refined, construction plans are completed, appliances and supplies are ordered -- and the initial deposit is paid.

--Survive the dust, noise and workers. With proper supervision, the disruption can be kept to a minimum. Make sure materials are ordered and on the way before beginning the tear-out. Clear a space in the garage for workers’ tools and supplies and items removed from the old kitchen. And communicate regularly with the designer/installer.

Four remodeling rules

The August issue of Consumer Reports identifies these four rules for a successful kitchen remodel:

Don’t rush. There are many kitchen products that combine value, performance and good looks. Take time to meet with professionals, browse the Internet and visit showrooms and home centers. Haste can be costly. Changing your mind after the project is started typically adds about $1,500 to the cost of a kitchen project.

Size matters. In addition to being expensive, oversized kitchens can be exhausting to work in and keep tidy. A more compact kitchen often functions better. The National Kitchen & Bath Association website, nkba.org, provides guidelines for optimal space between appliances, cabinets and islands.

Beware of budget busters. Leave a 10 percent to 15 percent cushion for surprises, such as unexpected structural repairs. Avoid settling for a cheap option, thinking someday you will replace it with something you really want. Chances are that will never happen.

Get it in writing. When using a professional for a remodel, the written contract should list each phase of the project; every product, including the model number; and copies of each contractor’s license, and workers compensation and liability insurance to confirm they are current. Call references and, if possible, visit them.

Copyright © 2010, The Orlando Sentinel, Fla., Jean Patteson, Knight Ridder/Tribune Business News. Distributed by McClatchy-Tribune Information Services.

Related Topics: Trends

For Your Clients: Have You Thought About an Outdoor Kitchen?

For Your Clients: Have You Thought About an Outdoor Kitchen?

By Jean Patteson

RISMEDIA, July 8, 2010--(MCT)--The outdoor kitchen is rapidly becoming the social hub of the home, much as the indoor kitchen is the favorite gathering place for family and friends. The trend is especially strong in areas where the climate favors outdoor living almost year-round.

"It's a hot item," said Scott Redmon, owner of Alfresco Living in Maitland, Fla. "And the outdoor kitchen is becoming a lot more than a grill and a sink in the corner of the porch. It's a whole entertainment system. People have a higher expectation for their exterior spaces since HGTV came around."

Outdoor kitchens are popular because they are fun to live with, said Russ Faulk, vice-president of product development at Kalamazoo Outdoor Gourmet in Kalamazoo, Mich. "They add to the quality of life for the homeowner. Preparing a meal outdoors is not a chore, it's an occasion, a reason to have friends over and enjoy the process."

In addition, an outdoor kitchen expands a home's living space and adds to its value, he said. "The return on your investment is comparable to an indoor kitchen redo."

Since the economic downturn, "People have been unable to sell their homes, so they are starting to upgrade with better landscaping and outdoor kitchens, spending more time at home," said Sue Fern, manager of the Florida chapter of the American Society of Landscape Architects.

The built-in grill was the start of the outdoor-kitchen trend, said Faulk. "Then came the sink, the refrigerator, a counter for food prep, cabinets for storage — pretty much what you'd have in an indoor kitchen."

As more equipment is added, outdoor "rooms" are becoming larger and more covered, he said. Seating areas are added, along with outdoor TV sets, fire pits and water features.

The grill — fired by gas, wood or charcoal — is still the heart of the outdoor kitchen. Especially popular are hybrid grills, which can be switched from gas to wood or charcoal, depending on what is being cooked, said Faulk. "There's nothing like grilling fish over an oak fire."

Pizza ovens are starting to threaten the grill's reign as king of the outdoor kitchen. Oven designs range from large, wood-fired brick and clay ovens that take several hours to heat up, to compact countertop models fired by gas that are ready for baking pizzas in 20 minutes.

Also gaining popularity in outdoor kitchens are keg-tappers, wine chillers, ice makers and warming cabinets.

When designing an outdoor kitchen, be sure to look for low-maintenance equipment, said Faulk, "or you defeat the purpose of carefree outdoor cooking."

Also, make sure any cabinetry is designed to keep the contents clean and dry in inclement weather; install good task and ambient lighting; and choose counter-top material that is stain- and grease-resistant and stays cool in direct sunlight.

"Get counter-top samples, leave them in the sun and see how hot they get," advised Faulk. "Heat-retention is not always related to color. Some light colors get hotter than some dark colors."

He also offers these cost-cutting tips. "Design the outdoor kitchen against the house to reduce the cost of getting utilities to the space. And buy the best grill you can afford."

When designing an outdoor kitchen, "Consider how the space will be used: as a personal refuge or a place to entertain and be social; as a place to cook and eat, or to drink and socialize," said Eduardo Xol, exterior designer on Extreme Makeover: Home Edition and celebrity designer for hayneedle.com.

And remember, he said, "Indoor-outdoor living helps balance the soul. It keeps you connected with nature and helps you become more aware of living green."

(c) 2010, The Orlando Sentinel (Fla.).
Distributed by McClatchy-Tribune Information Services.