Archive for October, 2009

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I Hate To Say I TOLD You So!

Friday, October 30th, 2009

I hate to tell everyone I told them so, but I posted a blog similar to this GREAT article a while back. I cannot stress to you enough how important it is to work with an FHA Lender in Texas that UNDERSTANDS and foresees these types of things! Read on.

Addressing Continued Concerns About the FHA

by Brian Montgomery

In January of this year, both Joe Murin and I were asked by HUD Secretary Donovan to remain as Ginnie Mae president and FHA Commissioner respectively to help the new Administration deal with the on-going housing crisis.  We both were privileged to be asked and were honored to continue serving in the Obama Administration for several more months.

However, today, as a former government official, if I could leave you with one message it would be this:

There has never been a point in our nation’s history that better illustrates exactly why FHA and Ginnie Mae exist. During these uncertain economic times, their counter-cyclical role of ensuring adequate mortgage activity and liquidity has been necessary and vital.

FHA has saved close to one million sub-prime/Alt-A borrowers from possible financial ruin by allowing them to refinance into a safe and secure 30-year fixed rate mortgage.  Another 2 million qualified borrowers (80% of them first-time homebuyers) have taken advantage of the declining house prices and historically low interest rates to purchase a home using FHA.  FHA’s role has grown substantially from three percent of lending activity by dollar volume in 2006 to nearly 25 percent of all mortgages originated today. That massive uptick in volume occurred almost overnight beginning in spring 2008.

Through it all…. FHA has helped pump more than $400 billion of mortgage activity and liquidity into the market since 2008, while still managing to deliver a higher credit quality borrower whose average FICO score is 700.

One can only imagine how much worse our economy would be right now without the FHA. However, the growth of FHA in the past 18 months has understandably attracted a lot of attention. While the FHA did not take part in the housing boom, it is feeling its effects.

As many anticipated, given the current sluggish economy, the FHA is experiencing an increased rate of delinquencies and more foreclosures.

Simultaneously, as home values fall or just fail to appreciate, the number of homes the FHA insures is rising significantly. In October, this forced HUD to announce that in 2010 the FHA’s reserves could dip below the mandatory 2% level required by Congress.

Reminder: FHA collects premiums from borrowers (revenue) and also pays out claims to lenders when loans go into default and foreclosure (outlays).

For FHA, the primary reason for continued defaults and foreclosures will be macro-economic problems that go beyond the scope of underwriting. For instance, continued job losses and the further decline of home values and equity.

Absent a massive economic downturn, I don’t believe FHA will face the same type of catastrophic losses we saw in the subprime sector. The reasons for FHA’s problems are very different from the ones experienced in the subprime sector where unsafe loan features and poor underwriting made investing in non-agency mortgages risky from the start.

The FHA has undeniably tightened guidelines in an effort to help ensure a higher loan quality.  Prospective borrowers must verify income and job history as part of a rigorous underwriting process.

I offer this assurance in an effort to raise your comfort level as to the future of FHA.  FHA must keep its eyes on the ball to make certain that American homeowners and renters are served while American taxpayers are protected.

As a reminder, I offer the following insight about the strategies the FHA is considering to ensure the market remains confident in the FHA’s risk management models:

  • Tighten underwriting criteria
  • Increase premiums
  • Raise the down payment requirements above 3.5%
  • Overlay a credit score cut-off

Looking forward it’s important for all of us to continue advocating for reforms that better ensure a vibrant, transparent, and sound mortgage marketplace. Current market conditions highlight the critical role of the private and public sectors in keeping mortgage credit flowing.

All of us are trying to make sure we are well positioned to continue serving customers as this industry moves through truly tectonic change. I welcome the opportunity to hear about the challenges you face and discuss how all of us are addressing this brave new world of mortgage finance.

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Posted in Texas Mortgage Info | No Comments »

I Hate To Say I TOLD You So!

Friday, October 30th, 2009

I hate to tell everyone I told them so, but I posted a blog similar to this GREAT article a while back. I cannot stress to you enough how important it is to work with an FHA Lender in Texas that UNDERSTANDS and foresees these types of things! Read on.

Addressing Continued Concerns About the FHA

by Brian Montgomery

In January of this year, both Joe Murin and I were asked by HUD Secretary Donovan to remain as Ginnie Mae president and FHA Commissioner respectively to help the new Administration deal with the on-going housing crisis.  We both were privileged to be asked and were honored to continue serving in the Obama Administration for several more months.

However, today, as a former government official, if I could leave you with one message it would be this:

There has never been a point in our nation’s history that better illustrates exactly why FHA and Ginnie Mae exist. During these uncertain economic times, their counter-cyclical role of ensuring adequate mortgage activity and liquidity has been necessary and vital.

FHA has saved close to one million sub-prime/Alt-A borrowers from possible financial ruin by allowing them to refinance into a safe and secure 30-year fixed rate mortgage.  Another 2 million qualified borrowers (80% of them first-time homebuyers) have taken advantage of the declining house prices and historically low interest rates to purchase a home using FHA.  FHA’s role has grown substantially from three percent of lending activity by dollar volume in 2006 to nearly 25 percent of all mortgages originated today. That massive uptick in volume occurred almost overnight beginning in spring 2008.

Through it all…. FHA has helped pump more than $400 billion of mortgage activity and liquidity into the market since 2008, while still managing to deliver a higher credit quality borrower whose average FICO score is 700.

One can only imagine how much worse our economy would be right now without the FHA. However, the growth of FHA in the past 18 months has understandably attracted a lot of attention. While the FHA did not take part in the housing boom, it is feeling its effects.

As many anticipated, given the current sluggish economy, the FHA is experiencing an increased rate of delinquencies and more foreclosures.

Simultaneously, as home values fall or just fail to appreciate, the number of homes the FHA insures is rising significantly. In October, this forced HUD to announce that in 2010 the FHA’s reserves could dip below the mandatory 2% level required by Congress.

Reminder: FHA collects premiums from borrowers (revenue) and also pays out claims to lenders when loans go into default and foreclosure (outlays).

For FHA, the primary reason for continued defaults and foreclosures will be macro-economic problems that go beyond the scope of underwriting. For instance, continued job losses and the further decline of home values and equity.

Absent a massive economic downturn, I don’t believe FHA will face the same type of catastrophic losses we saw in the subprime sector. The reasons for FHA’s problems are very different from the ones experienced in the subprime sector where unsafe loan features and poor underwriting made investing in non-agency mortgages risky from the start.

The FHA has undeniably tightened guidelines in an effort to help ensure a higher loan quality.  Prospective borrowers must verify income and job history as part of a rigorous underwriting process.

I offer this assurance in an effort to raise your comfort level as to the future of FHA.  FHA must keep its eyes on the ball to make certain that American homeowners and renters are served while American taxpayers are protected.

As a reminder, I offer the following insight about the strategies the FHA is considering to ensure the market remains confident in the FHA’s risk management models:

  • Tighten underwriting criteria
  • Increase premiums
  • Raise the down payment requirements above 3.5%
  • Overlay a credit score cut-off

Looking forward it’s important for all of us to continue advocating for reforms that better ensure a vibrant, transparent, and sound mortgage marketplace. Current market conditions highlight the critical role of the private and public sectors in keeping mortgage credit flowing.

All of us are trying to make sure we are well positioned to continue serving customers as this industry moves through truly tectonic change. I welcome the opportunity to hear about the challenges you face and discuss how all of us are addressing this brave new world of mortgage finance.

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Posted in FHA Mortgage Information | No Comments »

5 Buyer Mistakes in a Short Sale

Friday, October 30th, 2009
Get Pre-Approved for a Houston Mortgage
By Lora Shinn
With hundreds of thousands of homes in foreclosure or on short sale lists, there’s never been a better time to score a sweet deal. But discount-priced foreclosures and short sales can come with a raft of expensive problems.
Just ask Adam Melson of Philadelphia. Melson had looked at more than two dozen houses and he jumped at the chance to purchase a short sale home that seemed like a decent buy in a good neighborhood.

But $40,000 in renovations later, he feels differently.Melson’s home inspector had said the short sale house was fine — just a little termite damage in the basement. But when Melson tore up the linoleum to repair a soft spot in the kitchen floor, he found the damage went layers deep.

“The boards supporting the kitchen floor were entirely eaten by termites,” he says. “I also learned at this time that the kitchen sink did not drain anywhere. It drained openly under the house.”

Melson ended up replacing an entire wall of his house. That was before his roof started leaking and he discovered thick, smelly mold behind the entire shower unit. “With several other things I wasn’t expecting, I wound up hauling over 10,000 pounds of my house to the dump in rented box trucks,” he says.

There’s a flood of properties on the market with lots of motivated sellers, says Jim Randel, real estate investor and author of “The Skinny on the Housing Crisis.”

“The only people who are selling in a declining market are those who have to sell,” he says.

Although they have to sell, you don’t have to buy. Know what you’re getting into before you buy a short sale or foreclosure property and be mindful of these five common mistakes:

1. Ignoring property problems

Foreclosure property owners didn’t want to leave.“They’ll often take that frustration out on the property,” says J. Scott Steinhorn, a real estate investor with Lish Properties LLC in Cobb County, Ga., with experience in foreclosures and short sales.

“I’ve seen a couple foreclosure properties where the previous owners clearly took a sledgehammer to the nice hardwood floors, the tiled showers and the cabinets, just to be spiteful,” he says.

Empty foreclosure properties may suffer from issues that arise from neglect — leaks, mold, termites, thieves, squatters and filth — because the property sat vacant for weeks, months or years before purchase.

Yet in many states, banks are typically exempt from providing the disclosure statement typically required of a traditional seller. The statement outlines the condition of the property. “The buyer of a foreclosure is essentially starting from scratch when it comes to determining the property issues,” Steinhorn says.

For example, a bank won’t reveal whether the house is constructed from defective materials — materials later resulting in class-action lawsuits, Steinhorn says. Most claims by homeowners in these lawsuits are subject to strict deadlines. You won’t know whether the previous homeowner missed the deadline for court-ordered remediation or if the faux stucco is bad.

Short sellers will fill out the disclosure form. But while short sellers are motivated to sell and repair their credit, they could have skimped on essential maintenance of the roof, furnace, air conditioner and hot water heater.

“If a house is between 15 to 30 years old, there’s a very good chance it needs some expensive maintenance,” Steinhorn says.

Also, it’s unlikely the cash-strapped seller has given the home a cosmetic facelift for years, Steinhorn says. So the buyer might have to update a bathroom featuring orange shag carpet, a wooden toilet seat and gold-foil wallpaper.

2. Skipping the home inspection

Clear your calendar and make time to tag along on your home inspection. “Most of what we do is education,” says Kathleen Kuhn, president of New Jersey-based HouseMaster, one of the largest home-inspection franchisers in North America.Melson wishes he’d been more aggressive in asking questions during his inspection. “This is the time where the house is open for all criticism and inquiries,” he says. “Maybe I was a little young and anxious to be living on my own again. But if asking another five questions could have dropped the price of the home another $5,000, I would have asked about everything.”

Ask for repair estimates when an inspector notes a problem, or do some research online later that night. “Every homeowner underestimates how much renovation costs,” Kuhn says.

Some buyers are even doing an inspection before making an offer, particularly in areas such as Florida and California where foreclosures and short sales are numerous. While most inspections are done after the initial offer, with the sale contingent upon mutual agreement of remedies, a preoffer inspection allows house shoppers to walk away and find a better buy.

You may wish to call in specialized inspectors to look for expensive problems such as termites, mold and structural damage, particularly if it’s a common problem in your area. “Mold gets more expensive to remediate the longer you wait, and it can severely impact your health and the property’s resalability,” Steinhorn says.

If you note sloping floors or cracks in walls around doors, windows and basement walls, bring in a structural engineer for a full report and repair recommendations.

Then do something not on the inspector’s list: Knock on neighbors’ doors. They may know something you don’t.

“The seller is not there to disclose the crime from last year or the loud music down the block,” says Brendon DeSimone, a San Francisco-based real estate agent.

3. Ignoring legal and insurance information

A typical disclosure statement would indicate if a house was in a flood plain or had any unpermitted renovation, Steinhorn says. Because bank-owned properties often sell as is without disclosure, buyers need to do a little extra research on the home’s status.If the property is in a flood zone, you may pay thousands yearly in additional insurance costs, and you may find it difficult to resell the property. You can read more about flood prevention and insurance at FloodSmart.gov.

Ensure that all renovations have been permitted and approved. “If not, and there is a problem, the city can cite you,” DeSimone says.

Check with the local planning department and make sure there aren’t any neighbors with plans to build an enormous house or to demolish an existing one, DeSimone suggests. “Any nearby plans or work would normally be known and disclosed by the seller, but not in the case of a foreclosure,” he says.

4. Leaving too little time

Short sale and foreclosure homebuyers need to be aware that the sale won’t necessarily close as quickly as it would for a traditional home. The short seller’s lender must grant approval of either foreclosure terms or a short sale price which is less than the short seller owes. Even so, troubled banks may be overwhelmed with foreclosures and slow to respond.“Banks are taking huge losses so they are going to do their best to get their money back, get the most amount of money or go after the seller to try to recoup something,” DeSimone says. “They aren’t just going to let the house go.”

Sometimes legal troubles can also influence closing. For more than six months, Steinhorn has waited on one bank-owned property while the bank repeatedly pushes back the close date due to unresolved liens.

Steinhorn isn’t moving into his investment property. But costs increase if you must extend your lease, find a storage facility or rent an apartment at the last minute.

5. Falling hard for a bad home

Don’t assume you’re getting a great deal in today’s real estate marketplace, Randel says. “Think of yourself as an investor,” he says. Consider the house’s condition, inspection, price and value dispassionately.He suggests that you ask yourself these common sense questions:

  • If you were to buy this property, could you afford to rent it out for as much as, or less than, your mortgage payment?
  • What if the home’s value drops another 20 percent, will you still feel satisfied with your purchase?
  • How much money will you have to pour into the property to make it habitable? If the problems are too costly, you might pass on this home purchase.

Kuhn says that sometimes HouseMaster inspectors provide bad news, but homebuyers just won’t listen. She says buyers declare, “This is our house and we love this house,” despite a broken sewer line, rats in the basement or a collapsed (and rotting) roof.

On the other hand, Kuhn says more buyers are taking off the rose-colored glasses and inspecting the house and neighborhood more thoroughly. A cooler, less-competitive market nixes bidding wars, home-inspection waivers and overextended budgets.

In short, this may be the right time for you to buy a home, especially if you know what you’re getting into.

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Revised Land Contract Guidelines

Friday, October 30th, 2009

A quick Friday fact from your Texas FHA Refinance Lender

DID YOU KNOW?

If a borrower will use the loan to complete payment on a land contract, contract for deed, or other similar type financing arrangement in which the borrower does not have title to the property, the new mortgage may be processed as either a purchase or a refinance transaction with maximum FHA-insured financing if the borrower receives no cash at closing. If all loan proceeds are used to pay the outstanding balance on the land contract and eligible repairs, renovations, etc., the appropriate LTV ratio is applied to the lesser of:

1. The appraised value; or

2. The total cost to acquire the property (the original purchase price, plus any documented costs the purchaser incurs for rehabilitation, repairs, renovation, or weatherization), plus allowable closing costs and, if treated as an FHA refinance, reasonable discount points.

Equity in the property (original sales price minus the amount owed) may be used for the borrower’s entire cash investment. However, if the borrower receives more than $500 cash at closing, the loan is limited to 85 percent of the sum of the appraised value and allowable closing costs. Replenishment of the borrower’s own cash expended for repairs, improvements, renovation, etc., is not considered as “cash back,” provided the borrower can substantiate with canceled checks and paid receipts all out-of-pocket funds spent for those purposes.

NOTE: TO BE TREATED AS A REFINANCE, THE CONTRACT FOR DEED MUST BE SEASONED AT LEAST ONE YEAR.

IF OWNED LESS THAN A FULL 12 MONTHS, THE LOAN MUST BE TREATED AS A PURCHASE.  THE SALES PRICE WILL BE THE AMOUNT LISTED ON THE LAND CONTRACT.  MUST VERIFY BORROWER’S 3.5% OF OWN FUNDS INTO THE TRANSACTION.  EQUITY, IF ANY, CAN BE USED TOWARDS THE REQUIRED DOWN PAYMENT.  EQUITY DETERMINED BY DIFFERENCE IN SALES PRICE AND OUTSTANDING BALANCE.

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7 Steps to a Great Foreclosure Buy

Thursday, October 29th, 2009

Reposted by the best Houston Mortgage Lender

—

By Tracey C. Velt • Bankrate.com

Foreclosure. It seems half the country is in it and the other half is trying to make a killing on it.

The number of foreclosed homes staggers the imagination and with more adjustable-rate loans about to reset, the end is nowhere in sight. The crisis, however, provides the opportunity to purchase a house that was all but impossible for many to afford in the boom years.

But there are many pitfalls and a hasty buyer can end up in a quagmire.

With investors flocking to capitalize on discounted properties, good deals usually go fast. It’s unrealistic to think you’re going to get a pristine property in a prime location for 50 percent less than area comparables. But 20 percent under the neighborhood market is very possible. If you’re a potential foreclosure buyer, the obvious place to start is price and condition. But there’s far more to it. Consider these seven top tips to get your best deal.

“This can happen two different ways,” says Sean O’Toole, founder and CEO of ForeclosureRadar.com.

“The underpriced properties get a ton of activity and go quickly, but you can really get a better deal on an overpriced property,” he says.

An overpriced property will generally get little interest and may sit on the market for a year or more. Therefore, when someone actually makes an offer, the bank may act on it quickly.

“For the homebuyer who’s up for the challenge, it can mean getting a property at less than market value,” says Aaron Lewis, broker/owner of The Lewis Team at Prudential California Realty in Turlock, Calif.

He offers this example: “If the home is listed at $170,000 and needs $10,000 worth of repairs, take a look at comparable properties in the area. If the house would be worth $200,000 with the repairs done, then you’re getting a $200,000 property for $180,000 and that’s a great deal.”

In addition, to move properties more quickly, says F.F. “Chappy” Adams, president of Illustrated Properties, in Palm Beach Gardens, Fla., “lenders are often making significant repairs, replacing major items or offering repair assistance.” That alone may make the home, once repaired, a good investment down the road.

“A good neighborhood supports your home value over time,” says Lewis. How do you determine that?

In addition to scouring the neighborhoods for well-kept yards, easy access to shopping and short work commute times, look at school scores, says Lewis. “A good school district will usually help housing hold its value over the years.”

Check out the number of foreclosures in the neighborhood as well. “If there are a lot of homes in one neighborhood that are in foreclosure, be wary,” says Jim Mazziotti, broker/owner of EXIT Realty Bend in Bend, Ore. “Values may still be declining there.”

“Some lenders are favoring cash transactions over finance purchases and taking deeper discounts to sell the property,” says Adams, whose company has a department that handles only bank-owned properties.

If cash is not an option for you, it’s important to get prequalified for a loan so you can react quickly once you find a home.

You can look for the best interest rate by searching Bankrate’s mortgage rate tables, then contact the lender to get pre-approved.

“Particularly for a cash buyer, this strategy makes a lot of sense.

“Make your offer at the end of a month, quarter or year,” says O’Toole. “Many times, banks will want to get deals closed and off the books.

So, consider making a November or December offer and highlight the fact that you can close by Dec. 31,” he says. You can get a lower price simply because it works for the bank’s timing.

Many times listing agents — who often get 20 or more properties from the bank to list at one time — simply don’t have the time or manpower to include every detail about every house in their online marketing.

“An REO (real estate-owned) broker may run out to the house, take a look around the inside and snap a few photos of the outside, but they may not mention in the online listing that the home has a beautiful backyard and upgraded landscaping,” says O’Toole. It pays to do more than simply check out the property online. If the property meets your criteria for size, number of bedrooms and neighborhood, go see it in person. And, says Adams, “Always have a licensed home inspector check out the home.”

With REO properties, go directly to the listing agent, who has the relationship with the bank asset manager, who approves or denies the sale. Or, find a real estate professional who works extensively in the foreclosure arena who will have more experience in bank-owned properties.

The bottom line: When it comes to buying a foreclosure, homebuyers need to throw emotion out the window and think like an investor.

“If you can purchase homes needing rehab work at significantly lower prices (than those homes that don’t need work), complete the work yourself and build instant equity, then you’re ahead of the game,” says Adams.

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New FHA Mortgagee Letter 2009-45

Wednesday, October 28th, 2009

New FHA Mortgagee Letter:

October 27, 2009

MORTGAGEE LETTER 2009-45

TO: ALL FHA-APPROVED MORTGAGEES, ALL HUD-APPROVED HOUSING COUNSELING AGENCIES

ATTENTION: Single Family Servicing Managers

SUBJECT: Introduction of HUD’s Web-Based Training Application: Electronic Class (EClass) on Loss Mitigation and Servicing System

The purpose of this Mortgagee Letter is to announce that the Department’s on-line, web-based training application, EClass, is now available. The EClass System will provide additional training on FHA’s Loss Mitigation Programs, including FHA’s Home Affordable Modification Program (FHA-HAMP), as well as continuing education on issues that have generated the most industry questions and requests for further training. It is our expectation that servicers will fully utilize the training to ensure that they are well-informed of FHA’s Loss Mitigation policies and procedures…

To read this mortgagee letter and any attachments in their entirety, please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ view the 2009 letters and click on the letter of your choice. An index of FHA Mortgagee Letters from previous years can be found on the same page.

AND

Southern California Foreclosure Counselor Forum:

November 13, 2009 – Costa Mesa, CA. Southern California Foreclosure Counselor Forum. A Peer to Peer Forum for HUD Approved Counseling Agencies. Sponsored by OCHOPC, HUD & NeighborWorks®. Learn about best practices, successful strategies & challenges in helping borrowers resolve delinquent mortgage situations, improve program results, loan modification programs & submission methods, an update from the National Foreclosure Mitigation & Counseling program (NFMC), & attend a roundtable discussion on mitigating the effects of being a foreclosure counselor & managing a foreclosure program. Registration required, no fee. More info at: http://www.hud.gov/offices/hsg/sfh/events/sca111309.pdf

Source: HUD

For more information on FHA loans, feel free to contact us.

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Checking if a property is USDA Eligible

Wednesday, October 28th, 2009

I just wanted to send out a quick note to advise everyone (Realtors, Buyers, Sellers) that when looking to go USDA, it is ALWAYS best to check with us at Texas Mortgage Lender to look up the address for you.

Sometimes even though the property might not be in an eligible county, by having a specific property in mind, we can look it up and give you an answer within a couple minutes.

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Existing Homes Sales Benefit from Tax Credit

Sunday, October 25th, 2009

by Adam Quinones

The National Association of Realtors released Existing Home Sales data this morning.

Think about the materials that go into building and maintaining a home….WOOD, STEEL, PLASTICS, WIRING, PIPING, CONCRETE, GLASS, ELECTRICITY, FURNITURE, CARPETING ,ELECTRONICS, APPLIANCES….LABOR.

How about the commissions earned by Realtors and mortgage originators who help the borrowers close on their home? What about the home sellers? They are either moving into a bigger house, which implies they will be spending to furnish their bigger home, or downsizing, which would imply a lower payment and therefore more disposable income to spend.

The point is, when homes are selling, money moves around the economy more efficiently. The size of the housing market combined with the broad influences it has over the economy make the real estate sector a reliable leading indicator of economic activity. Real estate is one of the first sectors to contract when a recession is looming and one of the first to show signs of recovery when economic activity begins to improve.

A caveat regarding Existing Home Sales: because existing home sales data is only reported at the time of closing, when the deed is transferred to the new owner, this report is considered less “forward looking” than other housing indicators like Pending Home Sales, Housing Starts, and Building Permits. This is because it can take up to three months for a purchase transaction to close. This problem has been more relevant in recent months as lender turn times have slowed and other roadblocks like HVCC, new RESPA rules, and market volatility have delayed closings. Pending Home Sales data helps provide more timely market data because it reports on the number of contracts that have been signed, not actual closing, therefore giving economists and traders a more timely read on the health of housing.

READ HOW THE NAR COMPILES DATA AND GAIN A BETTER UNDERSTANDING OF SEASONAL INFLUENCES

Last month, the NAR reported that Existing Home Sales in August gave back a portion of their their strong July gains. Existing Home Sales, including single-family, townhomes, condominiums and co-ops, declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July. This was 3.4 percent above the 4.93 million unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.

This month the NAR reported the following:

From the NAR press release…

Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.

Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.

Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.

The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4 percent to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7 percent above the 4.54 million-unit level in September 2008.

The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.

Existing condominium and co-op sales jumped 9.7 percent to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7 percent above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008.

Regionally, existing-home sales in the Northeast increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price in the Northeast was $234,700, down 7.0 percent from a year ago.

Existing-home sales in the Midwest jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price in the Midwest was $147,600, which is 1.0 percent below September 2008.

In the South, existing-home sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price in the South was $153,500, down 7.6 percent from a year ago.

Existing-home sales in the West surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000, which is 15.0 percent below September 2008.
————————————————————————————————————————————————

Overall, today’s release indicated continued progress in the stabilization of the housing market. However we are troubled by the forward looking statements Yun made regarding the variables that must continue to improve if housing it to undergo further stabilization and recovery.

“We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”

Given our in-depth involvement in the primary mortgage market, we are not encouraged by Yun’s outlook. Specifically the comment on QUALIFIED BORROWERS. The continual contraction of the labor market and ongoing tightening of lender underwriting guidelines is already having a direct impact on Yun’s recovery assumptions, and we expect these issues to continue to impact the stabilization process.

On a regular basis we are contacted by consumers who complain of higher cost loans and loan denial due to an unexplained drop in their FICO score. We ask the same question each time we hear these outcrys: Did your credit card limits fall? The answer is almost always YES, my credit card limit was cut.  Next we ask, have you missed a payment on your car loan or even a credit card? If the answer is yes…credit scores have been drastically effected, which has resulted in outright loan denial or a higher mortgage rate.

Adding to our relatively negative outlook is the soon to expire first time home buyer tax credit. Yun says the tax credit has played a role in the stabilization so far:

“Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

We could go on and on about the industry, lender, and borrower specific problems limiting the housing recovery, however we believe the general big picture economic environment is providing enough roadblocks to recovery on its own. Thus, we will continue to state that until the labor market stabilizes and jobs start being created, the housing market will undergo a slow, frustrating recovery process (for mortgage and real estate professionals especially).

Consumers: Have you found the loan qualification process difficult?

Mortgage and Real Estate Professionals: Are you turning down more applicants? Are less deals closing? Are lending regs still tightening?

Are we being too bearish here?

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Posted in FHA Mortgage Information | No Comments »

Existing Homes Sales Benefit from Tax Credit

Friday, October 23rd, 2009

by Adam Quinones

The National Association of Realtors released Existing Home Sales data this morning.

Think about the materials that go into building and maintaining a home….WOOD, STEEL, PLASTICS, WIRING, PIPING, CONCRETE, GLASS, ELECTRICITY, FURNITURE, CARPETING ,ELECTRONICS, APPLIANCES….LABOR.

How about the commissions earned by Realtors and mortgage originators who help the borrowers close on their home? What about the home sellers? They are either moving into a bigger house, which implies they will be spending to furnish their bigger home, or downsizing, which would imply a lower payment and therefore more disposable income to spend.

The point is, when homes are selling, money moves around the economy more efficiently. The size of the housing market combined with the broad influences it has over the economy make the real estate sector a reliable leading indicator of economic activity. Real estate is one of the first sectors to contract when a recession is looming and one of the first to show signs of recovery when economic activity begins to improve.

A caveat regarding Existing Home Sales: because existing home sales data is only reported at the time of closing, when the deed is transferred to the new owner, this report is considered less “forward looking” than other housing indicators like Pending Home Sales, Housing Starts, and Building Permits. This is because it can take up to three months for a purchase transaction to close. This problem has been more relevant in recent months as lender turn times have slowed and other roadblocks like HVCC, new RESPA rules, and market volatility have delayed closings. Pending Home Sales data helps provide more timely market data because it reports on the number of contracts that have been signed, not actual closing, therefore giving economists and traders a more timely read on the health of housing.

READ HOW THE NAR COMPILES DATA AND GAIN A BETTER UNDERSTANDING OF SEASONAL INFLUENCES

Last month, the NAR reported that Existing Home Sales in August gave back a portion of their their strong July gains. Existing Home Sales, including single-family, townhomes, condominiums and co-ops, declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July. This was 3.4 percent above the 4.93 million unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.

This month the NAR reported the following:

From the NAR press release…

Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.

Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.

Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.

The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4 percent to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7 percent above the 4.54 million-unit level in September 2008.

The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.

Existing condominium and co-op sales jumped 9.7 percent to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7 percent above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008.

Regionally, existing-home sales in the Northeast increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price in the Northeast was $234,700, down 7.0 percent from a year ago.

Existing-home sales in the Midwest jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price in the Midwest was $147,600, which is 1.0 percent below September 2008.

In the South, existing-home sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price in the South was $153,500, down 7.6 percent from a year ago.

Existing-home sales in the West surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000, which is 15.0 percent below September 2008.
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Overall, today’s release indicated continued progress in the stabilization of the housing market. However we are troubled by the forward looking statements Yun made regarding the variables that must continue to improve if housing it to undergo further stabilization and recovery.

“We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”

Given our in-depth involvement in the primary mortgage market, we are not encouraged by Yun’s outlook. Specifically the comment on QUALIFIED BORROWERS. The continual contraction of the labor market and ongoing tightening of lender underwriting guidelines is already having a direct impact on Yun’s recovery assumptions, and we expect these issues to continue to impact the stabilization process.

On a regular basis we are contacted by consumers who complain of higher cost loans and loan denial due to an unexplained drop in their FICO score. We ask the same question each time we hear these outcrys: Did your credit card limits fall? The answer is almost always YES, my credit card limit was cut.  Next we ask, have you missed a payment on your car loan or even a credit card? If the answer is yes…credit scores have been drastically effected, which has resulted in outright loan denial or a higher mortgage rate.

Adding to our relatively negative outlook is the soon to expire first time home buyer tax credit. Yun says the tax credit has played a role in the stabilization so far:

“Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

We could go on and on about the industry, lender, and borrower specific problems limiting the housing recovery, however we believe the general big picture economic environment is providing enough roadblocks to recovery on its own. Thus, we will continue to state that until the labor market stabilizes and jobs start being created, the housing market will undergo a slow, frustrating recovery process (for mortgage and real estate professionals especially).

Consumers: Have you found the loan qualification process difficult?

Mortgage and Real Estate Professionals: Are you turning down more applicants? Are less deals closing? Are lending regs still tightening?

Are we being too bearish here?

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Posted in Texas Mortgage News | No Comments »

How Bad Are Your Credit Card Mistakes

Thursday, October 22nd, 2009
by Erin Peterson
Wednesday, October 21, 2009

provided by
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Grade yours on a 10-point scale.

Nobody’s perfect. When it comes to our financial lives, we’ve all done things we later regretted — whether it’s getting slapped with a $3 fee for using an out-of-network ATM or going on a Las Vegas bender and losing the house on an overly aggressive poker bet.

The key is to understand the scale of the transgression. With credit card blunders, that’s no easy task — is it worse to take a cash advance or to pay a bill a day or two late? Experts graded a range of credit card mistakes on a scale from 1 (losing a few bucks to a cash machine) to 10 (losing the house). Find out which worry the pros most — and which may (almost) get a free pass.

Paying Late
How bad is it? 6
The details: Credit card companies are notoriously prickly about late payments — even a payment that’s late by a few minutes can pile up fees, interest charges and other penalties. Depending on how late the payment is, your card issuer may also report the problem to any of the credit bureaus, which can wreak havoc on your credit score. The good news, says Stacy Francis, president of Francis Financial, is that the error may be reversible. “You do have the option of giving the credit card company a call and asking them not to report it,” she says. “If you’ve generally been an on-time payer, they may waive the fees and not report it.”

Paying Only the Minimum on Your Card
How bad is it? 4
The details: Credit card companies love it when you pay off your debt slowly, but you should loathe it. It won’t necessarily affect your credit score, but that doesn’t mean it’s a good practice. Sending in only the minimum payment “is definitely going to keep you in debt longer, and you’re going to pay a heck of a lot more in interest,” says Francis. “You may be paying twice as much — or more — as you would by paying in cash.”

Buying On a Card Just For Rewards
How bad is it? 1
The details: If you’re paying off your balance on time and in full, using your cards to grab extra rewards isn’t necessarily a bad plan, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. “You can win the rewards card game if you know how to play,” she says. “But you do have to know yourself.” Because most people spend more when they’re paying with plastic than with cash, be cautious and recognize when you’re buying something only because plastic makes the purchase painless.

Missing a Payment
How bad is it? 9
The details: Not only are you going to be slammed with fees, interest charges and other penalties when you miss a payment, but you’ll likely see a rise in your interest rates. If that weren’t bad enough, you’ll also have to contend with a significant hit to your credit report — about 35 percent of your credit score is based on your ability to pay bills on time. As a result, you’ll pay more when you try to get a loan. “Missing a payment has both immediate and long-term consequences,” says Clarky Davis, Care One Debt Relief’s Debt Diva. “You may be dealing with the fallout for years.”

Having Too Many Cards
How bad is it? 6
The details: If you’re the type to apply for a card just so you can grab a discount on clothes or other merchandise, you likely have a huge stack of cards in your purse or wallet. You’re probably not getting enough value from the card to make it worth the high interest rates or additional complications from additional bills and junk cluttering your mailbox — and you’re increasing the likelihood that a payment slips through the cracks or that you’ll be a victim of identity theft. “There’s rarely a good reason to get a new card if you’ve already got a general-purpose card, a rewards card and a low interest card,” says Cunningham.

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Maxing Out a Card
How bad is it? 7
The details: Maxing out a card can have a serious impact on your credit score, since about 30 percent of your score is based on “credit utilization” — the amount of credit you’ve used relative to the amount you have available. More important, says Davis, is the fact that it likely signifies a distressing trend in your personal finances. “Maxing out a card may not have an immediate financial pull, but it’s a sign that you’re not budgeting or spending your money wisely,” she says. “It means you don’t have enough saved up to cover unexpected expenses.”

Playing the Balance Transfer Game
How bad is it? 5
The details: Moving your debt from a high-interest card to a low-interest card with a balance transfer isn’t as smart a move as you think, says Francis. “About 15 percent of your credit score is affected by your recent credit applications,” she notes. Pile up a few transfers and your score will take a hit. “Credit bureaus don’t (differentiate) that these cards are for the same [debt], they just see it as you getting pre-approved for more and more credit.” Add in the fees that generally accompany balance transfers and you’re not gaming the system — you’re getting hammered by it.

Debt Settlement Plans
How bad is it? 9.5
The details: If you’re overwhelmed by debt, negotiating down your balance with the credit card company (also called debt settlement) sometimes helps you pay pennies on the dollar on your debt — but you’ll pay a steep price. First, there’s the tax hit you’ll take for the amount of debt that’s forgiven — it will count as income during that tax year. And your credit score will be decimated, so don’t expect you’ll be able to take out a loan soon after consolidation. Next to bankruptcy, debt settlement “is the most negative thing you can do to your credit score,” says Francis.

Getting a Cash Advance?
How bad is it? 8
The details: It may feel like free money, but the truth is that it’s anything but: You’ll likely have a fee associated with the advance, and you’ll likely pay a higher interest rate than you would by using the card associated with it. “You also have no grace period,” notes Cunningham. “You’ll start accruing interest from the moment you get the money.” While these are all dangerous attributes in and of themselves, they’re not the worst part, says Cunningham. “When you start using cash advances, you have to understand why you’re using them as they’re likely symptomatic of a deep financial problem.”

Using a Card in a Pinch
How bad is it? 2
The details: If the fridge went on the fritz or the furnace conked out in mid-January, you might not have the means to fund its immediate replacement. Putting the bill on a credit card — and paying it off quickly over the course of a few months — is a pretty solid option, says Cunningham. “You don’t want something like that to become standard operating procedure,” says Cunningham. “But it’s OK to have a balance on a card for a few months when you’re going through a rough patch in your financial life. Just make sure it’s on a card without an annual fee or with a very low annual fee.”

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Posted in Texas Mortgage Info | No Comments »

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