Archive for September, 2008
Housing Bailout?
September 18th, 2008
Categories:Real Estate News
Now that the government has “saved” Wall Street – at least for the moment – hasn’t the time finally come to save Main Street too? – The New York Times
The Treasury Department has spent $125 Billion dollars to bailout Wall Street, and is planning on spending another $125 Billion if need be to keep Wall Street on its feet. What about the housing marketing?
As housing prices continue to fall, more and more homeowners find themselves in “impaired mortgages”, meaning they owe more on their home than it is worth. With the continued outlook being bleak, many of these homeowners have to ask themselves, “is there any incentive to stay in this home?”. Perhaps its time to give them an incentive and keep the number of foreclosures from continuing to climb.
Of course, there are many out there with ethical concerns and complaints about bailing out homeowners, just like those who complained about bailing out Wall Street. Keep in mind, millions of people made the mistake of buying a home at the peak of a housing boom, a poor choice certainly, but mistakes do happen. As for the millions out there who took advantage of the “liar loans”… I rest soundly asleep knowing there are lawyers lined up, just waiting for the court house to clear up the countless lawsuits that have been piling up on Wall Street. And with that I have one word… Karma…
I can’t help but wonder, will the next generation be a conservative with their money and spending habits as those who saw the effects of the great depression first hand?
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Appraisers Call for More Federal Regulatory Power
September 9th, 2008
Categories:Real Estate News
An article published by the Associated Press and redistributed by MSNBC says appraisers want the government to have more power in regulating the state’s attempt to discipline appraisers. The push is being made largely by the big four appraisal associations, who say states know about appraisers who over valued homes in 2005 and have not properly disciplined them. Currently, the government’s only ability to discipline state’s for not properly supervising appraisers, is so severe it would halt all lending in the state. As a result, the associations want the government to have more options on how to discipline states who do not regulate their appraisers. Here is the full article
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Housing and Economic Recovery Act
September 7th, 2008
Categories:Real Estate News
There has been a lot of talk about the Economic Stimulus Act of 2008 that was recently passed. With over 700 pages of documentation and continued revisions, it can be difficult to see through the technical aspect and get to the meat and potatoes of the Act. Beth Wakeley has provided some excellent information to help home buyers and agents understand what is happening and what to expect down the road. Here is a current overview of the Act.
Subject: Conforming Loan Limit
- Changes:Permanently increases the limit and establishes a local area-based system.
- Description and Effective Date:The new limit will be based on 115 percent of the area median home price, but in no case will the limit be more than 150 percent of $417,000, or $625,500, or less than $417,000.
Subject:FHA Loan Limit
- Changes:Increases the percentage for determining local area loan limits; permanently increases the national cap and floor.
- Description and Effective Date:The new limit will be based on 115 percent of the area median home price, but in no case will the limit be more than 150 percent of $417,000, or $625,500, or less than 65 percent of $417,000, or $271,050. Will be effective upon the expiration of the Economic Stimulus Act of 2008, which means the new limits apply to loans endorsed for insurance on or after January 1, 2009.
Subject:Borrower Cash Requirement
- Changes:Increases the borrower’s required contribution
- Description and Effective Date:Requires that the borrower pay 3.5 percent or more of the appraised value of the property.
The borrower’s contribution may be loaned by a family member, however, the principal obligation of the mortgage and the amount loaned may not exceed the appraised value. The family loan must be secured by a subordinate lien. FHA says they will issue regulatory guidance by October 1 but have not yet determined the effective date. FHA says this provision will not be effective before November 1, 2008.
Subject:Seller-Funded Down Payment Assistance
- Changes:Prohibits seller funding of down payment
- Description and Effective Date:No party of interest can contribute any part of a borrower’s down payment either directly or through a third party.
Applies to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.
Subject:Maximum Up-front Mortgage Insurance Premium (MIP)
- Changes:Increases Maximum Up-front MIP
- Description and Effective Date:Changes the statutory maximum up-front FHA mortgage insurance premium from 2.25 to 3 percent (2.75 percent for first-time home buyers who receive HUD-approved counseling). This change does not, in and of itself, increase the MIP that FHA charges. It gives FHA the authority to set premiums within a wider range.
FHA says, due to the moratorium described in the next section, a new, across-the-board, premium will go into effect on October 1, 2008, but has not yet announced the level of the MIP. FHASecure mortgages will have a separate, higher MIP.
Subject:Moratorium on risk-based premiums
- Changes:Temporarily keeps FHA from continuing risk-based MIPs
- Description and Effective Date:Prohibits FHA from implementing a structure of risk-based mortgage insurance premiums beginning on October 1, 2008. FHA implemented a structure of FHA risk-based mortgage insurance premiums on July 14, so it will temporarily have to suspend its use. FHA has not yet set a date for the suspension and has not established an alternative premium structure.
FHA has stated that a loan will be eligible for a risk-based premium under Mortgagee Letter 2008-16 as long as the mortgagee receives a case number before October 1.
Subject:Condominium Loans
- Changes:Moves virtually all singe family programs under the MMIF
- Description and Effective Date:These changes authorize FHA to insure loans secured by condominiums under the Mutual Mortgage Insurance Fund (MMIF), which should enable FHA to streamline its condo project approval requirements. FHA says they will issue regulatory guidance in 60 days, with an effective date of January 1, 2009.
Subject:Treatment of Up-Front Premiums
- Changes:Limits total of loan and MIP
- Description and Effective Date:Prohibits the maximum amount of the mortgage to be increased by the up-front mortgage insurance premium when the principal obligation equals 100 percent of the property value.
Subject:Pilot Program for Automated Process for Borrowers Without Sufficient Credit History
- Changes:Authorizes Pilot Program
- Description and Effective Date:Requires HUD to develop an automated program to make FHA-insured mortgages available to borrowers who have insufficient credit histories to obtain credit using current underwriting criteria. This pilot is authorized for five years from date of enactment.
Subject:Home Equity Conversion Mortgages
- Changes:Program Authority Expanded
- Description and Effective Date:Authorizes FHA to insure HECMs for home purchase transactions.
Ties the FHA’s HECM limit nationally to the base conforming loan limit authorized by the Freddie Mac Charter Act, which is currently $417,000. (Controversy has arisen over the new HECM limit – some are arguing that it should be $625,500 nationally and others are saying it is 115 percent of area median up to $625,500. FHA will make the determination shortly.) FHA says it will issue regulatory guidance in 60 days that will be effective November 1, 2008.
Even though this is a boiled down version of the act it can be confusing. Feel free to contact us with your questions on how this might affect your home purchase.
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Real Estate Market Update
September 7th, 2008
Categories:Real Estate News
A buddy of mine sent me a few articles today, his summary was simply this: On the supply side, inventories remain excessive, with builders holding on to 10 months’ worth of sales. More foreclosures are hitting the market every day. On the demand side, prices are still too high, and financing is still too hard to obtain.
Here were my thoughts on the above statements:
First, most articles published online cover the nation and the media decides which 7 out 50 states to report on.
With Regards to New Builders in Arizona:
I have personally spoken with the regional sales managers of the top five home builders in Arizona and they all say they have little to no inventory. It’s already been cleared out and they aren’t holding on to anything. Everything from here on out will be built to order. DR Horton is the only one going against the crowd, but they are a different company entirely because they are known for selling the same home 6-8 times before ever getting a deal to close.
With Regards to Arizona Foreclosures:
I’ll agree we have an issue with foreclosures, especially in the outlying areas such as Queen Creek and Maricopa. And we can expect to see foreclosures effect the industry for at least the next two years. However banks are starting to respond to the overwhelming number and are getting hit hard by congress to move on the properties quicker… it’s because of the foreclosure market that any home under $150,000 doesn’t last more than a few days on the market and anything under $200,000 doesn’t last more than 2 weeks. Yeah, there are a lot of them on the market, but they are the ones fueling the movement in this industry.
Congress is also making it clear they are going to start forcing the bank’s hands and making them negotiate and rewrite loans. That will help a bunch, but it won’t kick in until mid next year, because everything right now is optional, and not all the banks are willing to take the hit.
With Regards to Prices in Arizona and the East Valley:
Prices aren’t too high… we are bouncing along the bottom for first time and this is the time for buyer’s to buy… anyone waiting too long is going to look back and say “I should have bought back then” … Here is the best way to look at determining when we hit the bottom of the market… “You won’t know the bottom has hit until its already going back up” – ain’t that the truth?
With Regards to Financing in this Industry:
As far as financing… sellers can contribute 6% towards the buyer’s down payment and closing costs… which allows the buyer to essentially do 103% financing how much easier do you want it to be?! … In fact it’s too easy and it’s this crazy 103% financing that got us here in the first place. FHA loans allow great debt to income ratios making it easier to qualify and the 6% seller contribution is a breeze…
Now, you want to talk about not knowing it’s the bottom until it’s already going back up??
FHA just passed a bill that will end ALL seller contributions on October 1st… And 3% down payment will no longer be the minimum, it will be 3.5% and possibly higher. Banks are turning around and moving foreclosure homes faster and dealing with them quickly. They know what it takes to get top dollar on every home and they are doing just that… it’s rare for anyone to get a bank owned home for a penny less than listing price, in fact most will pay over the list price and no bank will pay seller contributions.
To my friends and all who end up reading this… the days of finding a great home at a steal of a price and with easy financing are almost gone!
But… you won’t hear the media talk about that for another 6-9 months… mark my words… better yet, put it on the calendar and we’ll discuss it then…
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Yes on 100 – Protect Our Homes
September 2nd, 2008
Categories:Real Estate News
While, Arizona currently does not have a real estate transfer tax, there is nothing that prevents a tax from being enacted at any time. With our current slow economy and budget crisis, it won’t be long before cities, counties, and the state start looking for new sources of revenue.
Enacting a real estate transfer tax is gaining momentum in Arizona. Just last year a bill was introduced in the state legislature proposing such a tax. Countless citizens’ commissions and county reports mention a transfer tax as a possible source of revenue for the state.
With the momentum for a real estate transfer tax growing, we must act now to put an end to this debate before it is too late!
Join us in passing a constitutional protection that will stop real estate transfer taxes. Click here to get involved today.
Vote YES to PROTECT YOUR HOME on November 4th!
F.A.Q’s
What is a Real Estate Transfer Tax?
A real estate transfer tax (RETT) is a state or local government imposed tax that is collected when you transfer ownership of your home, land or commercial real estate. Typically, once the tax is initiated, the rate can be increased by the state, county or city at any time.
Why are Transfer Taxes Proposed?
Too often, this form of taxation serves as a new source of revenue to balance a government’s bloated budget caused by overspending. Once this type of tax is put in place, no matter how low the tax rate is in the beginning, it always ends up being raised.
What are the Problems with a Transfer Tax?
- IT’S DOUBLE TAXATION!
Governments already collect taxes on your property based on the property’s value. This new tax would unfairly cause a second tax to impact your home or property. - DAMAGES YOUR EQUITY!
Since the tax is assessed against the total value including the amount you owe on your mortgage(s), the overall equity earned by the seller is decreased. - SLOWS AN ALREADY SLOW MARKET!
In the current slow market, a transfer tax would make it more difficult for people to buy or sell homes. Once a transfer tax is put in place, it can be raised at any time. This costs people buying or selling their homes even more money. - PUNISHES THE HOME OWNER!
A home is often the biggest and most important asset a person has in life. A transfer tax reduces the equity people have worked hard building. People already pay multiple taxes and fees on their homes. This tax will layer on one more significant closing cost you will have to pay. - IMPACTS LOWER INCOME THE MOST!
This tax imposes the higher tax burden on lower income households that typically spend a larger percentage of their income on their home.
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