Friday, May 29, 2009
Wednesday, May 27, 2009
Fannie Mae and Freddie Mac's new rules are raising appraisal costs, critics say
Fannie Mae and Freddie Mac's new rules are raising appraisal costs, critics say
http://www.latimes.com/classified/realestate/news/la-fi-harney17-2009may17,0,5903005.story
The rules, intended to improve the accuracy of home valuations, push most large lenders to use third-party appraisal management companies.
Reporting from Washington -- How about this scenario the next time you refinance or apply for a mortgage: The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.Plus, your appraisal-related charges may now be subject to add-on fees that you'd never heard of before -- $50 to $100 extra in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser. Or an extra $50 to $150 tacked on if the property is worth more than $500,000.
What's My House Worth?
Find your home's current market value online with HouseValues.com.
www.HouseValues.com
See Todays FHA Loan Rates
$180,000 Refinance for only $639/mo Calculate Your New Mortgage Payment
www.CalculateNewPayment.com
On top of all this, your mortgage loan officer requires you to pay for the appraisal upfront with a credit or debit card, rather than including the fee with the usual lender origination costs at settlement. In some cases your card may be charged more than the anticipated cost of the appraisal, leaving debit cardholders in a potential overdraft situation.Worse yet, the person conducting your appraisal may be new to the field -- willing to work for a cut-rate fee -- and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.And if your mortgage application is denied by one lender, you could be forced to pay for a second appraisal because the new lender may not accept the first one.
That scenario is now reality, according to critics of the controversial new appraisal rules imposed nationwide May 1 by Fannie Mae and Freddie Mac. Advocates of the rules vigorously deny that the new system is flawed and say any increase in appraisal costs should be manageable for most consumers.The rules, which go by the name Home Valuation Code of Conduct, are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party "appraisal management companies" that contract with networks of independent appraisers around the country who have no direct contact with retail loan officers or mortgage brokers.Mortgage brokers, who formerly chose appraisers and kept a competitive eye on appraisal fees, say Fannie's and Freddie's rules are adding 20% to 30% to consumers' appraisal costs. Jeffrey T. Hawk, vice president of Maryland Mutual Mortgage in Forest Hill, Md., says a standard appraisal that previously went for $325 jumped to $400 or more May 1 when he was forced to use management company appraisers.Some applicants also are balking at handing over credit card information upfront when they're not sure what the charge will be. "I lost three clients the first week" because of the credit card requirement, Hawk said.Buddy McCombs, senior vice president of EverBank, a Jacksonville, Fla., lender that buys loans originated by Hawk's firm and now contracts with management companies for appraisals, concedes that "there's probably a little increased cost" with the new system, "but I don't think it's devastating."Sacramento-based appraiser James Facchini of American Pacific Appraisal Co. says, "What's terrible is what's happening to [long-established] appraisers who won't work for the low fees" management companies pay."On May 1," Facchini said, "I lost almost my entire customer base" -- mortgage brokers who now can't pick up a phone and order an appraisal from him.Instead, Facchini and other appraisers either have to sign up with management companies or find other employment. What "really bothers me," he said, "is that the consumer has no idea what's going on."After Facchini signed up with one management company, he said, two consumers commented to him after he finished his appraisal, "Wow, you really charge a lot."They were each being hit with $550 appraisal fees, although Facchini was getting just $250 through the management company. As he sees it, that leaves $300 of "slush" somewhere in the process -- some going to the management company, but the rest probably "flowing to the lender for doing absolutely nothing."Rich Kuegler, a vice president at MDA Lending Services Inc., a national appraisal management company, says payments to firms like his are compensation for creating, managing and reviewing a network of thousands of individual appraisers -- MDA has 9,000 under contract across the country -- and for the "processing and administrative" costs that have been taken off the backs of brokers and lenders.As to appraisers' complaints about fees, Kuegler said, his firm offers them "the ability to have a steady stream of work, training and support." In other words, appraisers can expect to make up in overall volume what they're sacrificing per assignment.
http://www.latimes.com/classified/realestate/news/la-fi-harney17-2009may17,0,5903005.story
The rules, intended to improve the accuracy of home valuations, push most large lenders to use third-party appraisal management companies.
Reporting from Washington -- How about this scenario the next time you refinance or apply for a mortgage: The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.Plus, your appraisal-related charges may now be subject to add-on fees that you'd never heard of before -- $50 to $100 extra in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser. Or an extra $50 to $150 tacked on if the property is worth more than $500,000.
What's My House Worth?
Find your home's current market value online with HouseValues.com.
www.HouseValues.com
See Todays FHA Loan Rates
$180,000 Refinance for only $639/mo Calculate Your New Mortgage Payment
www.CalculateNewPayment.com
On top of all this, your mortgage loan officer requires you to pay for the appraisal upfront with a credit or debit card, rather than including the fee with the usual lender origination costs at settlement. In some cases your card may be charged more than the anticipated cost of the appraisal, leaving debit cardholders in a potential overdraft situation.Worse yet, the person conducting your appraisal may be new to the field -- willing to work for a cut-rate fee -- and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.And if your mortgage application is denied by one lender, you could be forced to pay for a second appraisal because the new lender may not accept the first one.
That scenario is now reality, according to critics of the controversial new appraisal rules imposed nationwide May 1 by Fannie Mae and Freddie Mac. Advocates of the rules vigorously deny that the new system is flawed and say any increase in appraisal costs should be manageable for most consumers.The rules, which go by the name Home Valuation Code of Conduct, are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party "appraisal management companies" that contract with networks of independent appraisers around the country who have no direct contact with retail loan officers or mortgage brokers.Mortgage brokers, who formerly chose appraisers and kept a competitive eye on appraisal fees, say Fannie's and Freddie's rules are adding 20% to 30% to consumers' appraisal costs. Jeffrey T. Hawk, vice president of Maryland Mutual Mortgage in Forest Hill, Md., says a standard appraisal that previously went for $325 jumped to $400 or more May 1 when he was forced to use management company appraisers.Some applicants also are balking at handing over credit card information upfront when they're not sure what the charge will be. "I lost three clients the first week" because of the credit card requirement, Hawk said.Buddy McCombs, senior vice president of EverBank, a Jacksonville, Fla., lender that buys loans originated by Hawk's firm and now contracts with management companies for appraisals, concedes that "there's probably a little increased cost" with the new system, "but I don't think it's devastating."Sacramento-based appraiser James Facchini of American Pacific Appraisal Co. says, "What's terrible is what's happening to [long-established] appraisers who won't work for the low fees" management companies pay."On May 1," Facchini said, "I lost almost my entire customer base" -- mortgage brokers who now can't pick up a phone and order an appraisal from him.Instead, Facchini and other appraisers either have to sign up with management companies or find other employment. What "really bothers me," he said, "is that the consumer has no idea what's going on."After Facchini signed up with one management company, he said, two consumers commented to him after he finished his appraisal, "Wow, you really charge a lot."They were each being hit with $550 appraisal fees, although Facchini was getting just $250 through the management company. As he sees it, that leaves $300 of "slush" somewhere in the process -- some going to the management company, but the rest probably "flowing to the lender for doing absolutely nothing."Rich Kuegler, a vice president at MDA Lending Services Inc., a national appraisal management company, says payments to firms like his are compensation for creating, managing and reviewing a network of thousands of individual appraisers -- MDA has 9,000 under contract across the country -- and for the "processing and administrative" costs that have been taken off the backs of brokers and lenders.As to appraisers' complaints about fees, Kuegler said, his firm offers them "the ability to have a steady stream of work, training and support." In other words, appraisers can expect to make up in overall volume what they're sacrificing per assignment.
Monday, May 25, 2009
Saturday, May 23, 2009
Index: Price declines leveling
Index: Price declines leveling
Inman News
http://www.inman.com/news/2009/05/22/index-price-declines-leveling
The price per square foot of homes improved from February to March in 11 of 25 metro areas tracked, real estate analytics and data company Radar Logic reported this week.
The composite price-per-square-foot index for the 25 metro areas fell 0.3 percent on a month-over-month basis in both February and March, which is less than the 1.2 percent and 0.9 percent declines in February and March 2008.
Radar Logic noted in an announcement that the price-per-square-foot declines have moderated since January 2009, "after being in a virtual freefall for much of 2008."
Prices decreased on a month-over-month basis in four of the five California metropolitan statistical areas (MSAs) tracked by Radar Logic.
The price per square foot shrank in all 25 markets year-over-year in March, with the most substantial declines in Phoenix (-37.1 percent), Las Vegas (-35.3 percent) and San Francisco (-34.5 percent).
The slightest year-over-year decline in March was in Charlotte, N.C. (-4.6 percent), followed by Milwaukee (-4.8 percent) and Columbus, Ohio (-5.2 percent).
Motivated sales -- defined as sales to third parties at foreclosure auctions and sales of foreclosed homes by financial institutions and foreclosure service firms, increased in 23 MSAs on a year-over-year basis, and in 21 MSAs in a month-over-month basis.
Transactions increased on a month-over-month basis in 23 MSAs in March, comparable to the February results.
Inman News
http://www.inman.com/news/2009/05/22/index-price-declines-leveling
The price per square foot of homes improved from February to March in 11 of 25 metro areas tracked, real estate analytics and data company Radar Logic reported this week.
The composite price-per-square-foot index for the 25 metro areas fell 0.3 percent on a month-over-month basis in both February and March, which is less than the 1.2 percent and 0.9 percent declines in February and March 2008.
Radar Logic noted in an announcement that the price-per-square-foot declines have moderated since January 2009, "after being in a virtual freefall for much of 2008."
Prices decreased on a month-over-month basis in four of the five California metropolitan statistical areas (MSAs) tracked by Radar Logic.
The price per square foot shrank in all 25 markets year-over-year in March, with the most substantial declines in Phoenix (-37.1 percent), Las Vegas (-35.3 percent) and San Francisco (-34.5 percent).
The slightest year-over-year decline in March was in Charlotte, N.C. (-4.6 percent), followed by Milwaukee (-4.8 percent) and Columbus, Ohio (-5.2 percent).
Motivated sales -- defined as sales to third parties at foreclosure auctions and sales of foreclosed homes by financial institutions and foreclosure service firms, increased in 23 MSAs on a year-over-year basis, and in 21 MSAs in a month-over-month basis.
Transactions increased on a month-over-month basis in 23 MSAs in March, comparable to the February results.
Wednesday, May 20, 2009
Information on VA Home Loans
Information on the Home Loan Program
PDF Documents - To read PDF documents, you need a PDF viewer. Links to viewer software can be found at this link.
http://www.homeloans.va.gov/veteran.htm
IN THE NEWS:
Effective immediately, Certificates of Eligibility will no longer display a veteran’s date of birth. This change was made to limit the amount of personal data being displayed on Certificates of Eligibility. Please note, however, that veterans will still need to provide their date of birth when submitting an application for a determination of eligibility in order to process their request.
--------------------------------------------------------------------------------
Act now to get the help you need through the Making Home Affordable Program. This part of the President’s Homeowner Affordability and Stability Plan was created to help millions of homeowners refinance or modify their mortgages to a payment that is affordable, both now and in the future. Please use the self-assessment tools provided on MakingHomeAffordable.gov to see if you are among the 7 to 9 million homeowners who may be able to benefit from Making Home Affordable. For more information about the plan, and to find out if you are eligible, please go to this link.
--------------------------------------------------------------------------------
VA Reaching Out to Vets with Mortgage Problems. Please read this link for important information to veteran homeowners. Additionally, please read this link which provides some additional information and assistance for Veterans.
--------------------------------------------------------------------------------
Enhanced VA Mortgage Options Now Available for Veterans Of Potential Benefit to Those in Financial Distress. Please go to this link for more information.
--------------------------------------------------------------------------------
Please go to this link for 2009 VA County Loan Limits and this link for 2008 VA County Loan Limits. This link has examples for calculating the VA guaranty.
--------------------------------------------------------------------------------
On October 10, 2008, the President signed S. 3023, the Veterans' Benefits Improvement Act of 2008. Please go to this link for important information to veteran homeowners.
--------------------------------------------------------------------------------
If you have been affected by natural disasters, please click on this link for important information to veteran homeowners.
--------------------------------------------------------------------------------
Public Law 110-289 has expanded the Specially Adapted Housing (SAH) grant program, and increased SAH grant amounts. Click on this link to read the most recent release regarding these changes. Please note that updates to Specially Adapted Housing Fact Sheet (SAH) – October 2008 and Special Housing Adaptation Fact Sheet (SHA) – October 2008 have been posted, and can be found at www.homeloans.va.gov/sah.
--------------------------------------------------------------------------------
About the Loan Guaranty Service
The VA Loan Guaranty Service is the organization within the Veterans Benefits Administration charged with the responsibility of administering the home loan program. See an independent evaluation of the Loan Guaranty program here: Final Report | Final Report Appendices
Link To Online Videos for Veterans
Short videos provide information on the VA Home Loan process.
Pamphlets on the VA Home Loan Program
On-line copies of VA Home Loan Pamphlets.
Home Ownership Education for First Time Buyers
Valuable information for first time home buyers from the Ginnie Mae Home Ownership Center.
Frequently Asked Questions
Answers to questions most frequently asked about he VA Home Loan program.
Information on Specially Adapted Housing for Disabled Veterans
Information on the Specially Adapted Housing program for certain seriously disabled Veterans.
VA Regional Loan Centers
Addresses, telephone numbers and websites of our Regional Loan Centers.
Contact VA Loan Guaranty Service
E-mail, phone numbers and website addresses for the Loan Guaranty Service
Interest Rate Reduction Refinancing Loans
Have interest rates fallen since you obtained your VA loan? Do you have an Adjustable Rate VA loan that you want to convert to a fixed rate loan? The IRRRL program, also called the VA streamlined refinancing program, may be for you. No appraisal or underwriting is required and a certificate of eligibility is not necessary.
If You Have Trouble Making Your Payments
If you have a VA loan but are having trouble making your mortgage payments, it is very important that you take steps to avoid a foreclosure. VA may be able to help.
Information for Elderly Home Owners
Information for Elderly Home Owners covers Reverse Mortgages, Interest Rate Reduction Refinancing Loans, and Home Equity Fraud.
VA Direct Home Loans for Native American Veterans Living on Trust Lands
VA direct home loans are available to eligible Native American Veterans who wish to purchase or construct a home on trust lands.
PDF Documents - To read PDF documents, you need a PDF viewer. Links to viewer software can be found at this link.
http://www.homeloans.va.gov/veteran.htm
IN THE NEWS:
Effective immediately, Certificates of Eligibility will no longer display a veteran’s date of birth. This change was made to limit the amount of personal data being displayed on Certificates of Eligibility. Please note, however, that veterans will still need to provide their date of birth when submitting an application for a determination of eligibility in order to process their request.
--------------------------------------------------------------------------------
Act now to get the help you need through the Making Home Affordable Program. This part of the President’s Homeowner Affordability and Stability Plan was created to help millions of homeowners refinance or modify their mortgages to a payment that is affordable, both now and in the future. Please use the self-assessment tools provided on MakingHomeAffordable.gov to see if you are among the 7 to 9 million homeowners who may be able to benefit from Making Home Affordable. For more information about the plan, and to find out if you are eligible, please go to this link.
--------------------------------------------------------------------------------
VA Reaching Out to Vets with Mortgage Problems. Please read this link for important information to veteran homeowners. Additionally, please read this link which provides some additional information and assistance for Veterans.
--------------------------------------------------------------------------------
Enhanced VA Mortgage Options Now Available for Veterans Of Potential Benefit to Those in Financial Distress. Please go to this link for more information.
--------------------------------------------------------------------------------
Please go to this link for 2009 VA County Loan Limits and this link for 2008 VA County Loan Limits. This link has examples for calculating the VA guaranty.
--------------------------------------------------------------------------------
On October 10, 2008, the President signed S. 3023, the Veterans' Benefits Improvement Act of 2008. Please go to this link for important information to veteran homeowners.
--------------------------------------------------------------------------------
If you have been affected by natural disasters, please click on this link for important information to veteran homeowners.
--------------------------------------------------------------------------------
Public Law 110-289 has expanded the Specially Adapted Housing (SAH) grant program, and increased SAH grant amounts. Click on this link to read the most recent release regarding these changes. Please note that updates to Specially Adapted Housing Fact Sheet (SAH) – October 2008 and Special Housing Adaptation Fact Sheet (SHA) – October 2008 have been posted, and can be found at www.homeloans.va.gov/sah.
--------------------------------------------------------------------------------
About the Loan Guaranty Service
The VA Loan Guaranty Service is the organization within the Veterans Benefits Administration charged with the responsibility of administering the home loan program. See an independent evaluation of the Loan Guaranty program here: Final Report | Final Report Appendices
Link To Online Videos for Veterans
Short videos provide information on the VA Home Loan process.
Pamphlets on the VA Home Loan Program
On-line copies of VA Home Loan Pamphlets.
Home Ownership Education for First Time Buyers
Valuable information for first time home buyers from the Ginnie Mae Home Ownership Center.
Frequently Asked Questions
Answers to questions most frequently asked about he VA Home Loan program.
Information on Specially Adapted Housing for Disabled Veterans
Information on the Specially Adapted Housing program for certain seriously disabled Veterans.
VA Regional Loan Centers
Addresses, telephone numbers and websites of our Regional Loan Centers.
Contact VA Loan Guaranty Service
E-mail, phone numbers and website addresses for the Loan Guaranty Service
Interest Rate Reduction Refinancing Loans
Have interest rates fallen since you obtained your VA loan? Do you have an Adjustable Rate VA loan that you want to convert to a fixed rate loan? The IRRRL program, also called the VA streamlined refinancing program, may be for you. No appraisal or underwriting is required and a certificate of eligibility is not necessary.
If You Have Trouble Making Your Payments
If you have a VA loan but are having trouble making your mortgage payments, it is very important that you take steps to avoid a foreclosure. VA may be able to help.
Information for Elderly Home Owners
Information for Elderly Home Owners covers Reverse Mortgages, Interest Rate Reduction Refinancing Loans, and Home Equity Fraud.
VA Direct Home Loans for Native American Veterans Living on Trust Lands
VA direct home loans are available to eligible Native American Veterans who wish to purchase or construct a home on trust lands.
Monday, May 18, 2009
Home Front: First-time buyers reap reward of median price in Sacramento County
Home Front: First-time buyers reap reward of median price in Sacramento County
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/1863568.html
For all the pain and trouble associated with this housing bust, one thing is clear: It's getting better and better for first-time buyers.
And few places beat Sacramento, according to a new report from the California Association of Realtors.
CAR says 80 percent of Sacramento County first-timers could afford a median-priced entry-level home in the first quarter of 2009.
The same quarter in 2008 it was 65 percent – considered then to be amazing.
Only the high desert region of Southern California and the San Joaquin Valley's Merced County – which has seen a median entry-level price tumble to an astonishing $89,040 – were more affordable than Sacramento County. (Median is where half the homes cost more and half less.)
In California, 69 percent of buyers could afford a median-priced entry-level house at $213,040, CAR said.
The report, issued Thursday, pegged Sacramento County's entry-level median at $143,870, requiring a qualifying income of $25,720 based on 10 percent down and a 4.96 percent interest rate. Sacramento County tends to do well in CAR's affordability index with its relatively good public-sector salaries and its inland California home values.
Median sales prices for all existing homes sold in Sacramento County have dropped by a third in the past year to $160,000, according to researcher MDA DataQuick. They're off 57 percent from an August 2005 high of $374,000.
Roadblocks still abound for first-time buyers, including qualifying for loans. Many of these great prices, too, are attached to beat-up bank repos that account for two-thirds of sales and reflect the stresses of their previous owners.
Yet there are lots of first-timers out there, say real estate agents, and they're scoring. It's the happy corner of a market still greatly suffering from its many excesses of 2003-2007.
Stagers losing their role
Remember when people "staged" their homes to sell, and an entire industry of stagers grew up around them?
Home Front, wondering what happened to them all, checked in with Placer County real estate agent Lisa Morris, who staged many of her own listings in those good times.
Staging, it appears, is largely another casualty of a market heavy with repos, short sales and price-cutting.
"I just think the Sacramento and Placer area has been hit so hard, there's just no money for that," said Morris. She's working a lot now in San Mateo County, where "almost any normal sale is staged."
Staging still happens in the capital region. But Morris told a story about trying to unload some accessories and spare furniture used to turn houses into showcases.
"Some of the stagers I called were out of business," she said. Many of the rest had their own extras taking space in storage.
A small anecdote tells a big story. There were few takers.
Protect yourself from scams
Chalk up three months between Home Front warnings to dodge loan-modification scams. This one is prompted by a ripped-off caller who urged a new reminder, saying, "These guys are getting rich on other people's heartaches."
An e-mail writer, "under water," also wonders about calls from 800 numbers, hawking a new "bailout program" for Sacramento County residents.
Once more: Be wary of those who call or ring doorbells offering help, and especially wary of those with a friend or relative who can help you.
The California Department of Real Estate says this is what borrowers should know before dealing with someone offering to get a loan modified:
• If your lender has issued a notice of default against you (after you missed numerous payments), loan-modification companies cannot collect an advance fee, even if they have a real estate license.
• Lawyers are exempt and can charge an upfront fee if they are rendering legal services and operating under the scope of their licenses.
• If you haven't received a notice of default you can be charged an advance fee. But the firm must provide an agreement for you to sign that explains what services will be performed, when they will be performed and what they will cost.
• Before you sign it, the agreement must have been sent to the Department of Real Estate for review and permission to collect upfront fees. Those fees then must be held in a trust account and spent only on agreed-upon services.
A look at real estate agents
Finally, here's a new National Association of Realtors survey with a quick, interesting look at real estate agents.
The typical agent is 54 years old, registered to vote, and voted in the last national and local election.
Six in 10 are women and 14 percent are fluent in more than one language. About 40 percent own at least one investment property and 16 percent have a vacation home. Nine in 10 use a computer and e-mail daily and 42 percent use phones with wireless e-mail and Internet capability.
The findings are from responses of 8,113 NAR members.
By Jim Wasserman jwasserman@sacbee.com
http://www.sacbee.com/business/story/1863568.html
For all the pain and trouble associated with this housing bust, one thing is clear: It's getting better and better for first-time buyers.
And few places beat Sacramento, according to a new report from the California Association of Realtors.
CAR says 80 percent of Sacramento County first-timers could afford a median-priced entry-level home in the first quarter of 2009.
The same quarter in 2008 it was 65 percent – considered then to be amazing.
Only the high desert region of Southern California and the San Joaquin Valley's Merced County – which has seen a median entry-level price tumble to an astonishing $89,040 – were more affordable than Sacramento County. (Median is where half the homes cost more and half less.)
In California, 69 percent of buyers could afford a median-priced entry-level house at $213,040, CAR said.
The report, issued Thursday, pegged Sacramento County's entry-level median at $143,870, requiring a qualifying income of $25,720 based on 10 percent down and a 4.96 percent interest rate. Sacramento County tends to do well in CAR's affordability index with its relatively good public-sector salaries and its inland California home values.
Median sales prices for all existing homes sold in Sacramento County have dropped by a third in the past year to $160,000, according to researcher MDA DataQuick. They're off 57 percent from an August 2005 high of $374,000.
Roadblocks still abound for first-time buyers, including qualifying for loans. Many of these great prices, too, are attached to beat-up bank repos that account for two-thirds of sales and reflect the stresses of their previous owners.
Yet there are lots of first-timers out there, say real estate agents, and they're scoring. It's the happy corner of a market still greatly suffering from its many excesses of 2003-2007.
Stagers losing their role
Remember when people "staged" their homes to sell, and an entire industry of stagers grew up around them?
Home Front, wondering what happened to them all, checked in with Placer County real estate agent Lisa Morris, who staged many of her own listings in those good times.
Staging, it appears, is largely another casualty of a market heavy with repos, short sales and price-cutting.
"I just think the Sacramento and Placer area has been hit so hard, there's just no money for that," said Morris. She's working a lot now in San Mateo County, where "almost any normal sale is staged."
Staging still happens in the capital region. But Morris told a story about trying to unload some accessories and spare furniture used to turn houses into showcases.
"Some of the stagers I called were out of business," she said. Many of the rest had their own extras taking space in storage.
A small anecdote tells a big story. There were few takers.
Protect yourself from scams
Chalk up three months between Home Front warnings to dodge loan-modification scams. This one is prompted by a ripped-off caller who urged a new reminder, saying, "These guys are getting rich on other people's heartaches."
An e-mail writer, "under water," also wonders about calls from 800 numbers, hawking a new "bailout program" for Sacramento County residents.
Once more: Be wary of those who call or ring doorbells offering help, and especially wary of those with a friend or relative who can help you.
The California Department of Real Estate says this is what borrowers should know before dealing with someone offering to get a loan modified:
• If your lender has issued a notice of default against you (after you missed numerous payments), loan-modification companies cannot collect an advance fee, even if they have a real estate license.
• Lawyers are exempt and can charge an upfront fee if they are rendering legal services and operating under the scope of their licenses.
• If you haven't received a notice of default you can be charged an advance fee. But the firm must provide an agreement for you to sign that explains what services will be performed, when they will be performed and what they will cost.
• Before you sign it, the agreement must have been sent to the Department of Real Estate for review and permission to collect upfront fees. Those fees then must be held in a trust account and spent only on agreed-upon services.
A look at real estate agents
Finally, here's a new National Association of Realtors survey with a quick, interesting look at real estate agents.
The typical agent is 54 years old, registered to vote, and voted in the last national and local election.
Six in 10 are women and 14 percent are fluent in more than one language. About 40 percent own at least one investment property and 16 percent have a vacation home. Nine in 10 use a computer and e-mail daily and 42 percent use phones with wireless e-mail and Internet capability.
The findings are from responses of 8,113 NAR members.
Friday, May 15, 2009
Co-signing FHA loan strings attached
Co-signing FHA loan has strings attached
REThink Real EstateBy Tara-Nicholle Nelson, Friday, May 15, 2009.
Inman News
http://www.inman.com/buyers-sellers/columnists/tara-nicholle-nelson/co-signing-fha-loan-has-strings-attached
Q: We have income that we are unable to document on our FHA loan application. We need to qualify for just $50,000 more than we are approved for. We have elected to have a co-signer, but we would like to have a co-signer release after 12 months of on-time payments built into the loan. We do not want our co-signer to have any ownership interest in the property and he will not be on the title. Is it possible to do this with FHA loans?
And if he co-signs on our FHA loan and is removed after 12 months of on-time payments, will he need to wait three years from that point before he can apply for his own FHA loan or could he apply immediately once removed?
A: It sounds like you read somewhere that everything in real estate is negotiable. Between a buyer and seller, virtually everything is -- that's true. But when it comes to getting a mortgage -- and especially an FHA-insured mortgage -- the adage must be flipped backwards: Nothing is negotiable. You've got to play by the FHA's rules, not vice versa.
Mindset Management
Back to basics: The FHA loan is a loan made by a regular mortgage bank, but insured by the Federal Housing Administration, whose goal is to make sure homeownership is available to people who might have less-than-perfect credit or a down payment less than 20 percent. Accordingly, the FHA loan allows lending in some circumstances where a non-FHA-backed, conventional loan would not. However, in order for it to make sense to back these loans, the FHA requires that the borrowers, the properties and the ownership scenario comply with certain guidelines -- actually, with a lot of guidelines -- which minimize the risk of default. This is why FHA loans are thought to be paperwork-heavy: There are just a lot of i's to dot and t's to cross to seal the deal.
So, on your deal, the short answer is that you cannot negotiate your own custom co-signer arrangement with the FHA. Rather, you need to learn what the FHA guidelines are about co-signers, and decide whether that will work for you.
And, one more thing: Why on earth would a co-signer agree to take on all the potential liabilities of co-signing for your home, with none of the advantages or even protections of having his name on the title? It doesn't pass the smell test, and I'd be surprised if it didn't raise a red flag to your underwriter, who might become concerned that there was something fishy going on. FHA loan underwriters exercise a high degree of scrutiny and personal judgment; if something doesn't seem right, they have the power (rightfully so) to nitpick your deal to death or even decline the loan.
Need-to-Knows
FHA loans do allow for a non-occupant co-borrower, but that person must be a blood relative or be able to demonstrate a long, family-esque relationship with the occupant-borrower (i.e. you), unless you plan to put 25 percent-plus down. In my research, the only FHA loans I found that allow for a co-signer -- that is, a non-occupant who assists with qualifying for the loan and agrees to be fully responsible for repayment but is not on title -- were refinance programs. In general, on an FHA purchase loan, all borrowers must sign the note and the deed of trust, and take title to the property, but you should double-check that with your mortgage broker.
REThink Real EstateBy Tara-Nicholle Nelson, Friday, May 15, 2009.
Inman News
http://www.inman.com/buyers-sellers/columnists/tara-nicholle-nelson/co-signing-fha-loan-has-strings-attached
Q: We have income that we are unable to document on our FHA loan application. We need to qualify for just $50,000 more than we are approved for. We have elected to have a co-signer, but we would like to have a co-signer release after 12 months of on-time payments built into the loan. We do not want our co-signer to have any ownership interest in the property and he will not be on the title. Is it possible to do this with FHA loans?
And if he co-signs on our FHA loan and is removed after 12 months of on-time payments, will he need to wait three years from that point before he can apply for his own FHA loan or could he apply immediately once removed?
A: It sounds like you read somewhere that everything in real estate is negotiable. Between a buyer and seller, virtually everything is -- that's true. But when it comes to getting a mortgage -- and especially an FHA-insured mortgage -- the adage must be flipped backwards: Nothing is negotiable. You've got to play by the FHA's rules, not vice versa.
Mindset Management
Back to basics: The FHA loan is a loan made by a regular mortgage bank, but insured by the Federal Housing Administration, whose goal is to make sure homeownership is available to people who might have less-than-perfect credit or a down payment less than 20 percent. Accordingly, the FHA loan allows lending in some circumstances where a non-FHA-backed, conventional loan would not. However, in order for it to make sense to back these loans, the FHA requires that the borrowers, the properties and the ownership scenario comply with certain guidelines -- actually, with a lot of guidelines -- which minimize the risk of default. This is why FHA loans are thought to be paperwork-heavy: There are just a lot of i's to dot and t's to cross to seal the deal.
So, on your deal, the short answer is that you cannot negotiate your own custom co-signer arrangement with the FHA. Rather, you need to learn what the FHA guidelines are about co-signers, and decide whether that will work for you.
And, one more thing: Why on earth would a co-signer agree to take on all the potential liabilities of co-signing for your home, with none of the advantages or even protections of having his name on the title? It doesn't pass the smell test, and I'd be surprised if it didn't raise a red flag to your underwriter, who might become concerned that there was something fishy going on. FHA loan underwriters exercise a high degree of scrutiny and personal judgment; if something doesn't seem right, they have the power (rightfully so) to nitpick your deal to death or even decline the loan.
Need-to-Knows
FHA loans do allow for a non-occupant co-borrower, but that person must be a blood relative or be able to demonstrate a long, family-esque relationship with the occupant-borrower (i.e. you), unless you plan to put 25 percent-plus down. In my research, the only FHA loans I found that allow for a co-signer -- that is, a non-occupant who assists with qualifying for the loan and agrees to be fully responsible for repayment but is not on title -- were refinance programs. In general, on an FHA purchase loan, all borrowers must sign the note and the deed of trust, and take title to the property, but you should double-check that with your mortgage broker.
Wednesday, May 13, 2009
Big-screen TV's: prime time to subprime
Big-screen TVs: prime time to subprime
By Marcie Geffner, Tuesday, May 12, 2009.
Inman News
http://www.inman.com/buyers-sellers/columnists/marciegeffner/big-screen-tvs-prime-time-subprime
Plenty of people have been blamed for the nation's mortgage meltdown and housing market slump: Irresponsible lenders, incompetent regulators, unethical brokers, spineless appraisers, greedy investors, foolish homebuyers and even headline-hungry reporters have all been said to have participated in some way in the factors that triggered the crisis.
But so far, the real culprit has remained on the sidelines, where it has been often mentioned but never directly accused in so many words. The plain truth, as I see it: the big-screen TV is to blame.
By Marcie Geffner, Tuesday, May 12, 2009.
Inman News
http://www.inman.com/buyers-sellers/columnists/marciegeffner/big-screen-tvs-prime-time-subprime
Plenty of people have been blamed for the nation's mortgage meltdown and housing market slump: Irresponsible lenders, incompetent regulators, unethical brokers, spineless appraisers, greedy investors, foolish homebuyers and even headline-hungry reporters have all been said to have participated in some way in the factors that triggered the crisis.
But so far, the real culprit has remained on the sidelines, where it has been often mentioned but never directly accused in so many words. The plain truth, as I see it: the big-screen TV is to blame.
Monday, May 11, 2009
Loan mod: Go it alone?
Part 2: Nuts and bolts of mortgage modificationBy Jack Guttentag, Monday, May 11, 2009.
Inman News
http://www.inman.com/buyers-sellers/columnists/jackguttentag/loan-mod-go-it-alone
Editor's note: This is Part 2 of a two-part series. Read Part 1.
Last week, I went over the steps involved in getting a loan modified. This article examines which, if any of these steps, may require a borrower to seek help.
The bottom line is that many, perhaps most, borrowers can handle it all themselves, but some may need an assist here or there. And some may want to delegate the entire responsibility.
Negotiating the Deal: Firms hustling for modification business sometimes pretend that they have the knowledge and skills needed to negotiate a favorable deal with the loan servicer. In fact, a modification is not negotiated -- it is granted (or denied) by the servicer, applying rules or principles set out by the investors who own the loans. In the case of modifications under the Making Home Affordable (MHA) program, the rules are set by the federal government, but these do not override investor rules. If the documents governing the servicing of a particular loan -- known as the Pooling and Servicing Agreement -- prohibits a particular modification, the MHA program will not help.
Delivering Information to the Servicer: Legitimate firms in the modification business know the information that each servicer wants and where to deliver it. This is their principle stock in trade. But borrowers can now obtain this information from my Web site, see Mortgage Servicer Information.
Assuring the Accuracy of Information Provided: Filling out the servicer's questionnaire form correctly is a challenge to some borrowers, but free help is readily available. One of the purposes of HOPE NOW, the alliance of servicers, investors and counseling agencies established last year to help borrowers in trouble, was to provide free counseling. Borrowers can call 1-888-995-HOPE, or they can find a HUD counselor in their state by going to http://www.hud.gov/local/index.cfm.
Follow-Up: Mistakes happen in modifying loans because the process is complex, and servicer employees may be overworked and/or undertrained. Either the borrower or the borrower's designee should follow up the request for modification to make sure the papers haven't been lost and the case is in an active queue. If the request has been rejected on the grounds that the borrower is not eligible, the borrower or the borrower's representative should find out why and attempt to confirm the reason is legitimate.
Many, if not most, borrowers can do it all themselves, perhaps with some assistance from free counselors. But some borrowers are clueless -- they need to be represented, not just counseled. They want someone to "take over" the process for them and follow it to a conclusion.
Inman News
http://www.inman.com/buyers-sellers/columnists/jackguttentag/loan-mod-go-it-alone
Editor's note: This is Part 2 of a two-part series. Read Part 1.
Last week, I went over the steps involved in getting a loan modified. This article examines which, if any of these steps, may require a borrower to seek help.
The bottom line is that many, perhaps most, borrowers can handle it all themselves, but some may need an assist here or there. And some may want to delegate the entire responsibility.
Negotiating the Deal: Firms hustling for modification business sometimes pretend that they have the knowledge and skills needed to negotiate a favorable deal with the loan servicer. In fact, a modification is not negotiated -- it is granted (or denied) by the servicer, applying rules or principles set out by the investors who own the loans. In the case of modifications under the Making Home Affordable (MHA) program, the rules are set by the federal government, but these do not override investor rules. If the documents governing the servicing of a particular loan -- known as the Pooling and Servicing Agreement -- prohibits a particular modification, the MHA program will not help.
Delivering Information to the Servicer: Legitimate firms in the modification business know the information that each servicer wants and where to deliver it. This is their principle stock in trade. But borrowers can now obtain this information from my Web site, see Mortgage Servicer Information.
Assuring the Accuracy of Information Provided: Filling out the servicer's questionnaire form correctly is a challenge to some borrowers, but free help is readily available. One of the purposes of HOPE NOW, the alliance of servicers, investors and counseling agencies established last year to help borrowers in trouble, was to provide free counseling. Borrowers can call 1-888-995-HOPE, or they can find a HUD counselor in their state by going to http://www.hud.gov/local/index.cfm.
Follow-Up: Mistakes happen in modifying loans because the process is complex, and servicer employees may be overworked and/or undertrained. Either the borrower or the borrower's designee should follow up the request for modification to make sure the papers haven't been lost and the case is in an active queue. If the request has been rejected on the grounds that the borrower is not eligible, the borrower or the borrower's representative should find out why and attempt to confirm the reason is legitimate.
Many, if not most, borrowers can do it all themselves, perhaps with some assistance from free counselors. But some borrowers are clueless -- they need to be represented, not just counseled. They want someone to "take over" the process for them and follow it to a conclusion.
Friday, May 8, 2009
Zillow: Many in area owe more than home is worth
Zillow: Many in area owe more than home is worth
http://www.sacbee.com/business/story/1837044.html
Published: Wednesday, May. 6, 2009 - 12:00 am Page 8B
Home values in El Dorado, Placer, Sacramento and Yolo counties dropped by $7.3 billion in the first three months of 2009 and have lost $40 billion in the past year, according to online real estate evaluator Zillow.com.
The Seattle firm estimates that 35.4 percent of homeowners in the four-county area now owe more on their mortgages than their homes are worth.
That's up from 33.9 percent in the fourth quarter of 2008, according to Zillow.
It's worst for those who bought in the past five years. Zillow said 68 percent of those Sacramento-area homeowners have negative equity.
In Yuba and Sutter counties, 78 percent of those who bought in the past five years owe more than their homes are worth, Zillow reported.
– Jim Wasserman
http://www.sacbee.com/business/story/1837044.html
Published: Wednesday, May. 6, 2009 - 12:00 am Page 8B
Home values in El Dorado, Placer, Sacramento and Yolo counties dropped by $7.3 billion in the first three months of 2009 and have lost $40 billion in the past year, according to online real estate evaluator Zillow.com.
The Seattle firm estimates that 35.4 percent of homeowners in the four-county area now owe more on their mortgages than their homes are worth.
That's up from 33.9 percent in the fourth quarter of 2008, according to Zillow.
It's worst for those who bought in the past five years. Zillow said 68 percent of those Sacramento-area homeowners have negative equity.
In Yuba and Sutter counties, 78 percent of those who bought in the past five years owe more than their homes are worth, Zillow reported.
– Jim Wasserman
Wednesday, May 6, 2009
What makes a Realtor good?
What makes a Realtor good:
http://www.inman.com/news/2009/05/5/what-makes-a-realtor-good-answer
A few months ago, I asked "What Makes an Agent Good?" and triggered a bit of a conversation. I was after an objective standard of quality by which a particular real estate agent can be measured, but ended up in a discussion (which is still ongoing one way or another) about professionalism, understanding technology, perspectives, and viewpoints, and so on.
Marc Davison, of 1000Watt Consulting, even wrote a post somewhat in response and concluded: "A bad Realtor is one whose marketing effort for a six-figure listing pales in comparison to a 7-year-old's playful regard for his $11.95 pet dinosaur. A good agent is one who says, 'no problem, I'll take care of that' when asked to compensate for the bad agent's job.
As much as I like that colorful description, it still raised more questions than it answered and didn't provide a framework for analysis. In what way does a bad Realtor's effort pale in comparison? If comparing two Realtors with each other, does the one who puts out more effort automatically trump the one who doesn’t? Would the agent who hires a skywriting airplane be "better" than the one who doesn't?
Over the weeks, I've been turning the question over in my head. Then I found the answer today.
The answer
The answer came from a law blog I read periodically. Dan Hull of "What About Clients" is one of the finest commentators on issues of client service, from a lawyer's perspective, but other service professionals can learn much from him.
His post, Ease-of-Use for Services: Will we ever get there? is an eye-opener. Read the whole thing. Dan posits that companies in every sector are competing more and more on concepts of ease of use, and advocates that services companies also embrace the concept, as difficult as it is: "Law firms, of course, have always sold services. And we are a small but powerful engine in the growth of the services sector. We strategize with and guide big clients every day. While that's all going on -- day in and day out -- what is it like for the client to work with you and yours?
"Are clients experiencing a team, or hearing and seeing isolated acts by talented but soulless techies? Do you make reports and communications short, easy and to the point? Who gets copied openly so clients don't have to guess about who knows what? Is it fun (yeah, we just said 'fun') to work with your firm? How are your logistics for client meetings, travel and lodging? Do you make life easier? Or harder? Are you accessible 24/7? In short, aside from the technical aspects of your service (i.e., the client 'is safe'), do your clients 'feel safe'?
"What if law firms -- or any other service provider for that matter -- 'thought through,' applied and constantly improved the delivery of our services and how clients really experience them? And then competed on it?"
A lightbulb went off in my head.
Following Dan's lead, I am ready to advocate that what makes one Realtor superior to another is ease of use. Her services are easier to use for the client than another Realtor's services.
Ease of use in real estate services
What constitutes ease of use in real estate services?
I'm going to attempt one answer, recognizing that more conversation and refinement need to happen before consensus can be reached.
Ease of use is the degree to which the client achieves peace of mind about the real estate transaction.
Ease of use must encompass communication. Communication must be relevant, at the frequency at which the client achieves peace of mind, and by a method the client wants. If I want to be called, then don't e-mail me. If I want to hear from you every day, then contact me every single day. Contra "Depeche Mode," words are most definitely not violence, and clients do not enjoy the silence. (Unless they really do for some bizarre reason.)
Ease of use must encompass guidance. Clients recognize that they need help; otherwise, they wouldn't hire a Realtor at all. That help then must be authoritative, educated, and capable of being explained. "Because I said so" or "Just trust me" are not good responses to a client who wants to know why you are recommending that he repaint his living room from fuschia to white.
http://www.inman.com/news/2009/05/5/what-makes-a-realtor-good-answer
A few months ago, I asked "What Makes an Agent Good?" and triggered a bit of a conversation. I was after an objective standard of quality by which a particular real estate agent can be measured, but ended up in a discussion (which is still ongoing one way or another) about professionalism, understanding technology, perspectives, and viewpoints, and so on.
Marc Davison, of 1000Watt Consulting, even wrote a post somewhat in response and concluded: "A bad Realtor is one whose marketing effort for a six-figure listing pales in comparison to a 7-year-old's playful regard for his $11.95 pet dinosaur. A good agent is one who says, 'no problem, I'll take care of that' when asked to compensate for the bad agent's job.
As much as I like that colorful description, it still raised more questions than it answered and didn't provide a framework for analysis. In what way does a bad Realtor's effort pale in comparison? If comparing two Realtors with each other, does the one who puts out more effort automatically trump the one who doesn’t? Would the agent who hires a skywriting airplane be "better" than the one who doesn't?
Over the weeks, I've been turning the question over in my head. Then I found the answer today.
The answer
The answer came from a law blog I read periodically. Dan Hull of "What About Clients" is one of the finest commentators on issues of client service, from a lawyer's perspective, but other service professionals can learn much from him.
His post, Ease-of-Use for Services: Will we ever get there? is an eye-opener. Read the whole thing. Dan posits that companies in every sector are competing more and more on concepts of ease of use, and advocates that services companies also embrace the concept, as difficult as it is: "Law firms, of course, have always sold services. And we are a small but powerful engine in the growth of the services sector. We strategize with and guide big clients every day. While that's all going on -- day in and day out -- what is it like for the client to work with you and yours?
"Are clients experiencing a team, or hearing and seeing isolated acts by talented but soulless techies? Do you make reports and communications short, easy and to the point? Who gets copied openly so clients don't have to guess about who knows what? Is it fun (yeah, we just said 'fun') to work with your firm? How are your logistics for client meetings, travel and lodging? Do you make life easier? Or harder? Are you accessible 24/7? In short, aside from the technical aspects of your service (i.e., the client 'is safe'), do your clients 'feel safe'?
"What if law firms -- or any other service provider for that matter -- 'thought through,' applied and constantly improved the delivery of our services and how clients really experience them? And then competed on it?"
A lightbulb went off in my head.
Following Dan's lead, I am ready to advocate that what makes one Realtor superior to another is ease of use. Her services are easier to use for the client than another Realtor's services.
Ease of use in real estate services
What constitutes ease of use in real estate services?
I'm going to attempt one answer, recognizing that more conversation and refinement need to happen before consensus can be reached.
Ease of use is the degree to which the client achieves peace of mind about the real estate transaction.
Ease of use must encompass communication. Communication must be relevant, at the frequency at which the client achieves peace of mind, and by a method the client wants. If I want to be called, then don't e-mail me. If I want to hear from you every day, then contact me every single day. Contra "Depeche Mode," words are most definitely not violence, and clients do not enjoy the silence. (Unless they really do for some bizarre reason.)
Ease of use must encompass guidance. Clients recognize that they need help; otherwise, they wouldn't hire a Realtor at all. That help then must be authoritative, educated, and capable of being explained. "Because I said so" or "Just trust me" are not good responses to a client who wants to know why you are recommending that he repaint his living room from fuschia to white.
Monday, May 4, 2009
Fed says more banks tighten home loan standards
Fed says more banks tighten home loan standards
By JEANNINE AVERSA AP Economics Writer
http://www.sacbee.com/830/story/1832585.html
Published: Monday, May. 4, 2009 - 11:09 am Last Modified: Monday, May. 4, 2009 - 12:34 pm
WASHINGTON -- A larger share of banks has made it more difficult for people to obtain home mortgages over the last three months even as demand has grown, the Federal Reserve reported Monday.
The Fed's new quarterly survey found that about 50 percent of U.S. banks tightened their lending standards on prime mortgages, up from about 45 percent in the survey issued in early February.
Meanwhile, 65 percent of banks said they tightened standards on nontraditional mortgages, such as adjustable-rate loans with multiple payment options. That was up from 50 percent in the last survey.
"Even if you had a stellar credit history, banks were reluctant to lend in this environment," said Richard Yamarone, economist at Argus Research. With unemployment rising, it raises the odds of more people defaulting on their mortgages, he said.
Demand for nearly all types of consumer and business loans continued to weaken over the last three months, with one exception. Demand for prime mortgages registered its first increase since the Fed began to track those loans separately in April 2007.
That uptick in demand comes as mortgage rates dropped, helped by a concerted effort by the Fed to drive down rates to help revive the crippled housing industry.
Rates on 30-year mortgages slid to 4.78 percent last week, trying a record low, according to figures compiled by mortgage giant Freddie Mac.
In other lending, nearly 60 percent of banks said they tightened standards on credit card loans over the last three months, the same proportion as in the previous Fed survey.
There were some spots of improvement in the latest Fed survey. About 40 percent of banks said they tightened standards on commercial and industrial loans over the last three months. That was down from around 65 percent in the last survey.
Looking ahead, however, "the vast majority" of banks said they expected deterioration in credit quality for all types of household and business loans.
More than 70 percent said the quality of their banks loan portfolio was likely to deteriorate this year with nontraditional mortgages and credit cards figuring prominently in that scenario. That response was to a special question contained in Monday's survey not asked in the previous one.
Regulators are scheduled to release the results of "stress tests" on the nation's 19 largest banks on Thursday, shedding light on which ones may need government support to withstand a more severe recession.
The Fed survey was based on the responses of 53 domestic banks and 23 U.S. offices of foreign banks.
Getting banks to boost lending is critical to lifting the country out of recession.
The Fed has slashed a key bank lending rate to a record low near zero and is expected to hold it there well into next year to entice businesses and consumers to spend more.
The Obama administration is counting on tax cuts and increased government spending to revive the economy. And it has put forward plans to rescue banks and curb home foreclosures, also key ingredients to turning the economy around.
Lax lending standards during the housing boom allowed some people to buy homes that they couldn't afford. When the boom ended, dragging home values down, foreclosures skyrocketed and banks wracked up huge losses on soured mortgage investments.
By JEANNINE AVERSA AP Economics Writer
http://www.sacbee.com/830/story/1832585.html
Published: Monday, May. 4, 2009 - 11:09 am Last Modified: Monday, May. 4, 2009 - 12:34 pm
WASHINGTON -- A larger share of banks has made it more difficult for people to obtain home mortgages over the last three months even as demand has grown, the Federal Reserve reported Monday.
The Fed's new quarterly survey found that about 50 percent of U.S. banks tightened their lending standards on prime mortgages, up from about 45 percent in the survey issued in early February.
Meanwhile, 65 percent of banks said they tightened standards on nontraditional mortgages, such as adjustable-rate loans with multiple payment options. That was up from 50 percent in the last survey.
"Even if you had a stellar credit history, banks were reluctant to lend in this environment," said Richard Yamarone, economist at Argus Research. With unemployment rising, it raises the odds of more people defaulting on their mortgages, he said.
Demand for nearly all types of consumer and business loans continued to weaken over the last three months, with one exception. Demand for prime mortgages registered its first increase since the Fed began to track those loans separately in April 2007.
That uptick in demand comes as mortgage rates dropped, helped by a concerted effort by the Fed to drive down rates to help revive the crippled housing industry.
Rates on 30-year mortgages slid to 4.78 percent last week, trying a record low, according to figures compiled by mortgage giant Freddie Mac.
In other lending, nearly 60 percent of banks said they tightened standards on credit card loans over the last three months, the same proportion as in the previous Fed survey.
There were some spots of improvement in the latest Fed survey. About 40 percent of banks said they tightened standards on commercial and industrial loans over the last three months. That was down from around 65 percent in the last survey.
Looking ahead, however, "the vast majority" of banks said they expected deterioration in credit quality for all types of household and business loans.
More than 70 percent said the quality of their banks loan portfolio was likely to deteriorate this year with nontraditional mortgages and credit cards figuring prominently in that scenario. That response was to a special question contained in Monday's survey not asked in the previous one.
Regulators are scheduled to release the results of "stress tests" on the nation's 19 largest banks on Thursday, shedding light on which ones may need government support to withstand a more severe recession.
The Fed survey was based on the responses of 53 domestic banks and 23 U.S. offices of foreign banks.
Getting banks to boost lending is critical to lifting the country out of recession.
The Fed has slashed a key bank lending rate to a record low near zero and is expected to hold it there well into next year to entice businesses and consumers to spend more.
The Obama administration is counting on tax cuts and increased government spending to revive the economy. And it has put forward plans to rescue banks and curb home foreclosures, also key ingredients to turning the economy around.
Lax lending standards during the housing boom allowed some people to buy homes that they couldn't afford. When the boom ended, dragging home values down, foreclosures skyrocketed and banks wracked up huge losses on soured mortgage investments.
Friday, May 1, 2009
Are short sales ruining home values?
http://www.inman.com/buyers-sellers/columnists/tara-nicholle-nelson/are-short-sales-ruining-home-values
Q: My neighbors bought a home for their mother, who has since passed away. They owed $125,000 on the mortgage. The bank allowed them to do a short sale for $56,000. The three daughters who bought the home for their mother have considerable assets. How can they be forgiven for this debt by the Internal Revenue Service if they are not distressed?
The people who are doing the short sales are ruining the values of our homes, yet we have always made our payments on time, and owe much more than these short sales. Can you please explain this to me?
A: A month ago, I wrote about the Mortgage Debt Forgiveness Act, under which some folks who sell their homes for less than they owe on it (e.g., a short sale) are exempt from being charged income tax on the debt that is forgiven by their lender(s), if the short sale is completed before the end of 2012. Many upside-down homeowners who are staying on time with their payments, like yourself, have cried, "That's just not fair!" This took me back to my childhood, the days when I would say those same exact words -- "it's not fair" -- only to hear my Dad, a former Marine, deadpan, "Life isn't fair."
I won't be so gruff as my Dad, but I submit to you that (a) your diligent on-time payment history has and will be rewarded; (b) life, and the situation are not fair, but fairness is beside the point here; and (c) your interests are better served by this law than they would be without it.
Mindset Management
First things first. The level of detail you have provided isn't sufficient to fully understand your neighbors' situation. Was the property owned by one daughter, all the women, the mother's estate or a trust? That would have a bearing on why a short sale would have been allowed. Also, many people who appear to or once did have "considerable assets" are actually drowning in credit-card debt, upside down on their homes, and taking a bath on the stock market -- looks can be deceiving. My point is that there's a lot about that scenario that may not be as it appears, so don't assume that they are in an enviable position.
On the other hand, don't assume that your position is unenviable, or that you are a sucker for being the nice guy and paying your mortgage and other bills on time. The algorithms used to calculate FICO scores were recently revised to render short sales about equally as damaging to the seller's credit as a foreclosure. In the credit-crunched market we're facing these days, having a stellar credit score is a very valuable currency, which you can obtain only by doing what you are doing and paying your bills on time. Those who have done short sales or lost their homes to foreclosure will simply not have the same access as you do to credit and even certain employment opportunities, which require a strong credit history.
Need-to-Knows
When it gets down to your question of why the IRS would allow this to happen, first let's be clear -- it is a mortgage lender who actually forgives debt; all the IRS is doing right now is refraining from charging income tax on debt that is forgiven by the lender. And let me tell you what -- it may not seem fair, but it is actually somewhat slowing the hemorrhage in your home's value.
Q: My neighbors bought a home for their mother, who has since passed away. They owed $125,000 on the mortgage. The bank allowed them to do a short sale for $56,000. The three daughters who bought the home for their mother have considerable assets. How can they be forgiven for this debt by the Internal Revenue Service if they are not distressed?
The people who are doing the short sales are ruining the values of our homes, yet we have always made our payments on time, and owe much more than these short sales. Can you please explain this to me?
A: A month ago, I wrote about the Mortgage Debt Forgiveness Act, under which some folks who sell their homes for less than they owe on it (e.g., a short sale) are exempt from being charged income tax on the debt that is forgiven by their lender(s), if the short sale is completed before the end of 2012. Many upside-down homeowners who are staying on time with their payments, like yourself, have cried, "That's just not fair!" This took me back to my childhood, the days when I would say those same exact words -- "it's not fair" -- only to hear my Dad, a former Marine, deadpan, "Life isn't fair."
I won't be so gruff as my Dad, but I submit to you that (a) your diligent on-time payment history has and will be rewarded; (b) life, and the situation are not fair, but fairness is beside the point here; and (c) your interests are better served by this law than they would be without it.
Mindset Management
First things first. The level of detail you have provided isn't sufficient to fully understand your neighbors' situation. Was the property owned by one daughter, all the women, the mother's estate or a trust? That would have a bearing on why a short sale would have been allowed. Also, many people who appear to or once did have "considerable assets" are actually drowning in credit-card debt, upside down on their homes, and taking a bath on the stock market -- looks can be deceiving. My point is that there's a lot about that scenario that may not be as it appears, so don't assume that they are in an enviable position.
On the other hand, don't assume that your position is unenviable, or that you are a sucker for being the nice guy and paying your mortgage and other bills on time. The algorithms used to calculate FICO scores were recently revised to render short sales about equally as damaging to the seller's credit as a foreclosure. In the credit-crunched market we're facing these days, having a stellar credit score is a very valuable currency, which you can obtain only by doing what you are doing and paying your bills on time. Those who have done short sales or lost their homes to foreclosure will simply not have the same access as you do to credit and even certain employment opportunities, which require a strong credit history.
Need-to-Knows
When it gets down to your question of why the IRS would allow this to happen, first let's be clear -- it is a mortgage lender who actually forgives debt; all the IRS is doing right now is refraining from charging income tax on debt that is forgiven by the lender. And let me tell you what -- it may not seem fair, but it is actually somewhat slowing the hemorrhage in your home's value.
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