Short sale news!

5 New Short Sale Myths - Busted! :)

2011-12-06T11:20:00.000-08:00

ommon short sale myths once evidenced widespread confusion about what a short sale is - mostly misconceptions that they are quick, or faster than “normal” real estate transactions. In reality, the “short” in short sale has nothing to do with timing. Short sales usually take many multiples of time longer than traditional real estate deals - running anywhere from 3 to 8 months-plus, on average, from contract to closing!

The only thing short in a short sale is the sales price - it is less than, or “short” of, the amount the seller would need to pay off all the loans and other outstanding obligations (tax liens, delinquent HOA dues, etc.) against the property. In these situations, unless the seller is willing to write a check to make up the difference, their lender(s) must agree to forgive the shortfall in order for the sale to close.

But most short sale buyers - and sellers - know this stuff by now. With one in four homeowners in America owing more on their homes than they are worth, short sales won’t be going anywhere for a long time to come. And the more people get involved in a short sale transaction, the more confusion and misunderstandings result.

Here are 5 of these “next-generation” myths about short sales, and the facts to shatter them:

Myth #1: That there is anything typical, standard or normal when it comes to getting a short sale approved.

Fact: There’s no such thing as “normal” in a short sale.

Some of the most frequently asked questions in the Trulia Voices Community include things like:

Is it normal for a bank to respond to a short sale with a counteroffer higher than the list price and the appraised price?
What’s the standard amount of time it takes a bank to approve a short sale package?
What’s the rule of thumb for how much below asking a bank will approve?

Despite the recent goverment “streamlining” efforts that promised to impose a set of standards most banks would follow in processing short sales, it’s still a black box experience for most buyers and sellers. Buyers submit their offers, sellers sign them and hand over all their financials to their listing agent who submits it all to the bank - and then often no one hears anything back for a few months, if ever. Other times, the whole thing is approved in a matter of weeks (though this is much less rare).

The bank is in the power position, and can respond to your offer however they want. They may counter at a much higher price and demand a cash payment from the seller. Or not. They may take weeks, or they make take six months. They may approve a way-below asking offer, or require a hundred thousand over the asking price. Forget the idea of standard, when it comes to a short sale.

Hint: short sale listing agents who have done a lot of recent, successful short sales with the same bank do often have insider knowledge that is the closest thing to a rule of thumb over what any individual bank’s practices are. If you’re a buyer, prioritize short sales that are listed by short sale masters - your agent will know who they are. If you’re a seller, ask prospective listing agents for a list of short sales they recently closed, including which bank(s) were involved.

Myth #2: It’s smarter for homeowners to walk away than to short sell their homes.

Fact: Increasingly, I’m hearing those who own upside down homes ask why they would bother with a short sale, when they could just walk away with much less effort and drama. The reality is that walking away and letting your home go to foreclosure is an extremely serious, personal decision - the wisdom of which varies dramatically owner to owner and state-to-state. Some states allow lenders to sue homeowners who default on their mortgages, and impose state taxes on the mortgage debt cancelled out in a foreclosure, sometimes totalling tens of thousands of dollars.

Other homeowners’ family and financial plans would be impaired much less by a short sale than by a foreclosure. For still others, it’s pretty much a wash. For everyone, though, it is faster to recover your credit and ability to take out another mortgage on a new home after a short sale than after a foreclosure.

Given that a short sale costs a seller little or nothing except some time and effort, in many instances it is smarter to make the effort to short sale than it is to walk away.

Myth #3: A short sale is the same as a pre-foreclosure.

Fact: A short sale is a home being sold for less than what is owed on it. A pre-foreclosure is a home that is in some stage of the foreclosure process because the owners are behind on the mortgage payments. Many short sales are pre-foreclosures, because the owners stopped making payments when they put the home on the market, either because they can’t afford them, they are simply done with the property and don’t see a need to continue paying on it, or because they feel the bank is more likely to approve their short sale application if they are in default on their loan (a position many experienced short sale agents argue is true).

But not all. Remember, nothing is standard when it comes to short sales. Short sales are closed every day on which the seller is still in good standing on their loan - these are mostly the short sales of owners who elect this strategy out of a desire to maintain their credit as much as possible, but have to move for work or family reasons.

Buyers should not assume that every short sale will come on the market later as a foreclosure; they should inquire as to any foreclosure notices against the property, and keep track of those time frames. Many a buyer has been surprised when the bank auctions a property they are in contract to buy.

Myth #4: The the buyer’s broker - or even the buyer’s offer - has much to do with getting a short sale approved.

Fact: Writing a clean, well-qualified offer is important to getting a short sale seller to believe that a buyer will hang into the short sale for the duration so they will sign the contract. However, the buyer’s offer and agent have little, if anything, to do with whether the seller’s bank green lights the deal, as needed to close it.

While the bank obviously cares about the price you offer, even that’s not as important as several other factors, including:

the bank’s perception of the home’s fair market value (as usually indicated by a third-party broker’s opinion, or an automated computer model),
the seller’s financials (if they have a bunch of cash stashed, the lenders is unlikely to let them sell the place with no contribution from them)
the completion of the seller’s workout application package and follow-up (squeaky wheel gets the grease and all that, and it’s the listing agent that needs to be that, often, for these transactions to get closed).

Myth #5. That the bank “can’t” do X or “has to” do Y.

Fact: The seller’s bank in a short sale is being asked to waive debt that they are legally owed. They have the absolute right to simply refuse entirely to accomodate this debt forgiveness request. However, if they do choose to waive some or all of the shortfall, they also have the right to place whatever conditions on that waiver. They can ask for more money from the seller - or the buyer (and often do). They can ask the agents to reduce their commissions (and often do that, too). They can refuse to pay various closing costs, if they want. And the buyer or seller can counter, accept or refuse any or all of the bank’s demands, too, but know that the banks do have the right to place whatever conditions on the short sale they want. After all - he, she or it who has the cash (or the mortgage, in this case!) makes the rules!

Psst - you should follow Trulia and Tara on Facebook, too!
So, why buy a short sale? With all the hassle, there are still some great deals to be had. In many cities, most homes on the market are short sales, so if you rule them out, you may never find a home.

Short Sale Rules: Negotiation Negotiating with Buyers.

2011-10-19T11:07:00.000-07:00

As you may have noticed, many short sale articles rehash very basic “this is a short sale package” information. While that is still needed, I think most agents and investors in the game are ready for some advanced techniques. In this two-part series, I will explain my strategies for actual price negotiations with lenders, and discuss setting up the deal so that it “flows” in the price direction that you want to achieve.

The Seven P’s

An old Navy term that simply states: Proper Previous Planning Prevents Piss Poor Performance. In other words, have a plan in place before you submit your short sale. It all starts with the offer, and whether or not you are on the sell side or the buy side, this strategy works both ways. In fact, it is imperative that the listing and selling side work together at this point so that everyone is on board and aware of the strategy.

The Offer

When presented with an offer, or when deciding what to offer, always agree on a “maximum” or “all in” price. When I receive an offer from a buyer, the first call I make is to the buyer or buyer's agent and ask, “What is the all in or maximum price? It is critical that you get the buy side to understand that you want their offer to be successful and that there is a strategy to get these short sales done. You will be glad to submit the lower offer, but we need to know what is the maximum the buyer will tolerate. This spread creates negotiation room. For example, if an offer for $200,000 is tendered, I will find out what is the absolute most that the buyer will pay. Here is my strategy:

Example 1: $200,000 offer. Buyer will not pay any more. “Best and final”

Response: Lower offer to $190,000 with understanding that it may be increased as negotiations proceed.

Example 2: $200,000 offer, will go as far as $220,000.

Response: Submit $200,000. Find out if extra room is cash or financed*

*Very important if there is a credit union or HELOC involved.

In Example 1, the buyer offered a “highest and best” price. A “highest” offer should never be submitted to the lender at this stage. Why? Because you have no negotiating room! What can happen in this scenario is the max price is offered, the lender counter offers, even a small amount, and the listing agent now has to beg and fight with the buyer to come up in price. If the buyer refuses, the only option is to have the seller pay the difference (unlikely) or reduce agent commission. Sound familiar? When I hear agents cry that they lost their commission, many times poor negotiating is the cause. “But Joe, aren’t agents required to disclose the 'highest' offer to the lender?” No, you are not! Your Fiduciary Duty is to the seller, NOT THE LENDER.

The solution in Example 1 is to have the buyer lower their offer to $190,000 (or even lower) as long as you have market data, i.e.; sold comps, to justify the offer. The trick here is to make sure that the buyer understands that they may not close at the lower offer, and that they must agree to counter back up to at least their maximum price. Sometimes an attorney-generated agreement is helpful in this case. You may get a surprised reaction from the buyer agent. Lower my offer?!? But once you explain the strategy, most understand, and there is even a possibility that you may get the lower offer approved, which is an incentive for the buyer to stay in the deal--an important consideration when many buyers walk from contracts on a short sale.

In Example 2, the buyer has submitted an offer of $200,000, but has admitted that they will pay as high as $220,000. This is a great scenario, and explain that, just like in Example 1, you will submit the lower offer and use the spread as negotiating room. If there is a credit union, HELOC second, or collection servicer like GreenTree or SLS involved, keep in mind that there may be a higher demand from the second than what the first will approve, therefore it is important to ask if the buyer can bring extra CASH to close rather than simply raising their offer. This cash can be used to settle deficiency for the seller. As always, allow your buyer to lower their offer to compensate for having to possibly bring extra cash to close. If the buyer is unwilling or unable to bring extra cash, and your seller has a problem second, strongly consider not accepting the offer. Not properly accounting for buyer cash is one of the biggest deal killers, and an experienced short sale negotiator should be able to identify these scenarios early and disclose to the buyers early. In fact, sometimes I have my agents add “Buyer must agree to bring cash to close for seller costs” right in the MLS listing.

Conclusion

By properly setting up negotiation expectations, you will be able to not only close more deals and have happy buyers (which can lead to referrals,) but you can also get sellers deficiencies settled (which can lead to more referrals.) Remember, your duty as a listing agent is to get the deal closed and to put the sellers in the best financial position, so take the time to plan out your short sale deals. In part 2, I will discuss negotiation techniques with the lenders.

Call Justin Thayer @ 541-543-7287 for short sale questions.

Top 2 State of Oregon specific short sale questions.

2011-09-09T16:37:00.000-07:00

1. Do short sale negotiators need to be licensed with the state of Oregon?

Generally, yes. In 2009, the legislature enacted two bills related to short sales and loan
modifications. House Bill 2191 created a registration requirement for persons who provide debt
management services and House Bill 2189 created a licensing requirement for persons doing
mortgage loan origination. The Department of Consumer and Business Services (DCBS) is
responsible for both programs.
A person or company offering short sales / loan modifications in Oregon may legally do so with:
1) A debt management company registration;
2) A mortgage loan originator license; or
3) A real estate broker license if they do NOT charge any special fees related to short sales.
(*Note: Banks, credit unions, and licensed consumer finance companies are also exempt.)

2. Are there any additional requirements that a short sale negotiator or a debt
management company must follow in Oregon?

This applies to debt settlement companies, loan modifiers, and “short sale negotiators.” Loan
modification is defined as modifying or offering to modify terms and conditions of an existing
loan or obligation. The law requires debt management companies to provide consumers with
specified disclosures and written contracts, honor a three-day right of cancellation, evaluate
whether the proposed services will benefit the consumer, and post a $25,000 surety bond. The
bill also prohibits misleading advertising and limits the fees that may be charged -- for short sales
and all other types of debt management services.

HAFA short sale rules may help sellers

2011-08-26T10:03:00.001-07:00

Highlights
Home Affordable Foreclosure Alternatives program changes rules.
Borrowers, lenders incentivized to avoid foreclosure.
Predefined steps intended to speed and facilitate short sale process.

Homeowners struggling to sell their homes in a short sale are getting some relief, thanks to the federal government's Home Affordable Foreclosure Alternatives, or HAFA, program.

Up to now, many short sales -- in which the lender accepts a sale of the property for less than the full amount owed -- have taken months to complete. Sometimes, the complex and lengthy process has failed, .

"The streamlined short sales process will definitely help homeowners," says David Liniger, Re/Max International chairman and co-founder.
Prior to HAFA, homeowners often listed their home for sale without an idea of what the lender would accept.

"A lot of sellers and their Realtors have not been able to sort out the problems with short sales and have given up on the process because, even after sending in the correct paperwork, they have sometimes waited three or four months for their lender to respond," Liniger says.

Under HAFA, borrowers receive preapproved short sale terms from the lender prior to putting the home on the market.

Lisa Matykiewicz, a Realtor and Certified Distressed Property Expert in Gilbert, Ariz., says the updated short sale rules establish an easy-to-understand process with predefined steps that "make it easier for everyone to understand."

Eligibility requirements
The HAFA guidelines apply to lenders who voluntarily participate in the HAMP program. The Department of Housing and Urban Development says more than 100 servicers have signed up to participate in HAMP, covering more than 89 percent of mortgage debt outstanding in the country.
To be eligible for HAFA, homeowners must first apply for a loan modification through the Home Affordable Modification Program, or HAMP. Owners who do not qualify for a loan modification or miss payments during the initial loan modification period qualify for HAFA.

Other HAFA requirements include:
Property is principal residence.
Mortgage originated before Jan. 1, 2009.
Mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
Borrower is delinquent or default is foreseeable.
Homeowner demonstrates hardship.
Borrower's total monthly housing payment exceeds 31 percent of gross income.
Unpaid principal does not exceed $729,750.

According to HAFA rules, lenders now must offer a short sale in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then must respond within 14 days to the lender's short sale agreement.

Shortening the Short Sale Timeline: Broker Price Opinions

2011-08-25T10:04:00.000-07:00

Short sales have been hampered by cycle times that can easily last months. One of the critical steps to improving adoption of this loss mitigation tool is to standardize and shorten the time from initial offer to investor acceptance.

Using BPOs (Broker Price Opinions) to benchmark and vet purchase offers is a critical step that can save weeks or more from the process. Rather than a buyer submitting an offer and not knowing whether it was accepted or rejected for one or two weeks, they could have a response in just a few days.

Anyone who has used or seen the evolution of BPO services over the past six to 12 months understands the comprehensive and statistical data and methodologies that are used to derive a value opinion.

This month, appraiser groups told Treasury Secretary Geithner that real estate agents and brokers have an inherent bias toward quick results that produces a fee for themselves. I have a hard time supporting the argument that BPOs are somehow less accurate or any more subject to fraud than traditional appraisals.

The National Association of Realtors wrote Geithner to say there is no reason why the Treasury Department should ban the use of BPOs in short sales. "There is no evidence that BPO exacerbates mortgage fraud or abuse," NAR says in its letter to Treasury. The group emphasized that BPOs are used frequently to analyze mortgage loan portfolios for risk management and fraud detection.

Is a short sale worth the knock on my credit?

2011-08-11T14:20:00.001-07:00

Is a short sale worth the knock on my credit?
Question: My townhome has lost about 25 percent of its value. I'm barely managing the payments. Similar homes in my complex are renting at less than half of what I am paying every month. We send our child to a private school because we don't care for the public school in our district. I have tried to talk to my lender but because the house is underwater, refinancing is not an option. We also do not qualify for a refinancing. We have an adjustable-rate mortgage, and both my spouse and I have excellent credit histories. I am the only one on the mortgage, but my wife is on the title with me. Is it worth going for a short sale and taking a hit on my credit?

Answer: Yes. I am a big believer that your house is your home first and an investment second. And while a good credit history is important, so is living in a house and in a neighborhood you like. Several weeks ago, I counseled another reader that if the property is in a good location with a good school district, and the payments are affordable, the reader should not be too concerned that the property was worth less than what he owed the bank. Your situation is different in that you don't care for the home or where you live and are even incurring additional expenses based on its location. Further, while your mortgage payment may be low now, you are sitting on a ticking time bomb in that interest rates are sure to rise sooner or later, and when they do, you will no longer be able to afford the payments. Because your wife is not on the loan, her credit will not suffer when you complete a short sale, so you should be able to find a home to live in that's more appropriate for your situation.

Q: I am a co-owner with my brother of a property in Ocala, Fla., that has a dilapidated mobile home on it. No one lives there, but I'm concerned about liability because there is no insurance on it. I'd like to do a quit-claim deed to my brother. Would this release me from any liability?

A: Yes. If you do not want anything more to do with the property, it is best not to keep an ownership interest in it for liability reasons. As long as you own part of the property, you are liable to the tax collector and anyone who may be harmed on the property. Further, if the property is not properly maintained, you may be subject to fines from the city or county. You should arrange with your brother to transfer ownership to him as soon as possible.

Q: I own an investment property that I have stopped paying on. I have one mortgage on the property. Recently, the lender filed a lawsuit against me to collect on the note, but it is not trying to take the property back in foreclosure. I have money in the bank and other assets. I called the lender, and it doesn't really want the property back. I am afraid that the bank will come after my other assets. Can it?

A: Yes. This is getting to be a much more common trend. First mortgage lenders are starting to decide that they really do not want the responsibility of owning the property, especially if it has a low value or is in disrepair. Second mortgage lenders realize that even if they foreclose the property, the first mortgage lender is going to get all of the proceeds from the foreclosure sale, leaving the second mortgage holder with little more than a legal bill. The lenders know that a promissory note case is much easier - and cheaper - to bring than a foreclosure action and can be finished much faster. After the lender wins the lawsuit on the promissory note, it will get a judgment that it can execute against your other property, your bank accounts and even your wages. Plus, it still has the mortgage lien against the original property, so it can go back and take that at a later date if it decides to. I have long advised my clients that this is one of the real dangers in "strategic defaults" and it looks like the lenders are starting to catch on, at least a little. Further, it is too late to try to transfer the assets as most states have a two-year, look-back period for fraudulent transfers made for the purpose of hiding assets to creditors. The best thing that you can do now is to fight your lender in court and try to come to some sort of settlement.

Call: Justin Thayer for short sale questions and/or help @ 541-543-7287 or visit www.teamthayer.com and click on the short sale or Real Estate news links for tons of short sale info.

President Obama’s Short Sale Program

2011-07-15T14:20:00.000-07:00

Since the Obama Administration took office, it seemed that their goal was to keep home owners in their homes. Now, the strategy appears to have changed with a recent announcement from the U.S. Treasury. Recently, the Treasury revealed that it would encourage home owners to leave their properties – by paying them. It is believed that the new plan will prompt home owners that are behind on their mortgages to choose short sales, which could reduce the amount of foreclosures throughout America.

During short sales, home owners who are delinquent on their mortgages agree to sell their houses for less than the remaining balance of the loan. In return, banks and mortgage lenders agree to undertake losses (in lieu of not receiving any debt service from borrowers).

With an increase in short sales being eminent, many people are wondering what bearing Obama’s short sale plan will have on the real estate market. With the new plan coming into play, there are a few things people with a mortgage can expect.

First, fewer people may pursue loan modifications. In the recent past, big banks said that they were committed to helping struggling home owners who had defaulted on their mortgages. Yet, according to ABC News, of the 1.1 million people that have requested help from banks, only 168,000 have completed loan modifications this year. With the loan modification success rate being so low, more home owners may view short sales as a viable option.

Next, the number of foreclosures may decrease as the number of short sales continues to increase. Finally, more home buyers will choose to purchase short sale properties. Prior to the plan, home buyers and real estate agents wanted little to do with short sales because these real estate transactions involve long waits and complicated paperwork. Now, due to the increase in short sales and bargain prices, more home buyers will stop turning a blind eye to these types of properties.

While it is still too early to determine how US real estate markets will be impacted by the President’s short sale plan, it is apparent that more home owners will be persuaded to sell their homes and receive a payout than enter into foreclosure.

New Laws Regulate the Short Sale Process

2011-07-15T14:16:00.000-07:00

If you are trying to keep your property out of foreclosure; you may begin considering selling your property in a short sale. As of April 2010 new regulations apply to second lienholders. Get the pertinent information before deciding whether to apply for a short sale with your lender.

A short sale is a common tool homeowners may use to keep their property out of foreclosure. When a bank forecloses on a property, they repossess it making the bank the property owner. Avoiding this fate is usually in the homeowner’s best interest. If you apply for a short sale with your lender; what you are doing is asking the lender, and any second lien holders, to allow you to sell your property at the current fair market value for the property. In some cases, if approved for a short sale, the lenders will forgive the deficiency between the amount the property sells for and the amount you owe on your mortgage. It all depends on the bank and what you negotiate. This process saves everyone involved the time and expense of the legal proceedings incurred by pursuing a foreclosure. Short sales are done because everyone is better off – you’re stop getting mortgage bills and the bank recoups a sizeable portion of the money they initially loaned to allow you to purchase the property.

There is a hitch in this process; the second lien. Prior to April 2010, secondary lien holders were unlikely to receive any portion of the proceeds of the sale. This likelihood was increased if the property was in a state of negative equity. The secondary lien holder could block the approval of the short sale by refusing signoff on zero payoff.

Enter the new short sale laws. Due to the change in the laws regulating short sales there are now incentives for secondary lien holders to approve the sales. There is also an incentive for the seller to pursue this option.

Secondary lien holders will receive a portion of the sale proceeds; an amount of at least $3,000. The will also receive an additional $1,000 from the federal government.

The seller is encouraged to use this option because the government will provide them with an incentive of $1,500 for relocation expenses.

While the new short sale laws may provide incentives, make the process less time consuming and help homeowners avoid foreclosure; they may only be enough to cause an increase in the number of short sales with only one lender. Homeowners with more than one lien on their property may still be left out in the cold, as far as short sales are concerned, because the second lien holders are still receiving far too little compensation for their initial outlay of funds.

What is a Short Sale Approval Letter?

2011-06-08T23:52:00.000-07:00

Apart from obtaining the short sale approval letter, sellers and buyers don't share a lot of common goals during a short sale. To get the bank to approve the short sale and to lessen the deficiency, if any, sellers generally want the highest price. Buyers want the lowest. Right there they're at odds. The parties to a short sale often sign an arm's length affidavit that keeps them separate.

But somehow short sales come together -- generally with a bit of luck, a lot of prodding, some spit mixed with Crazy Glue, and perhaps a few black-and-blue bruises. All of it is in pursuit of that short sale approval letter.

The time period in which a bank processes the short sale and generates the approval letter can range on average from 2 to 3 days for small banks to 3 to 4 months for major banks. It depends primarily on the investor.

Contents of a Short Sale Approval Letter
The short sale approval letter spells out exactly what the bank expects from the seller. It lays out the following terms, among other considerations:

•The acceptable sales price
•Maximum allowable commissions
•Maximum closing costs
•Minimum net proceeds
•Closing date
Not every short sale approval letter contains a release of liability. In fact, some approval letters don't address a release of liability at all. Lawyers say that if the matter is not addressed, then the lender might retain whatever rights are available to the lender under federal and / or state law to pursue a deficiency judgment.

How Short Sale Approval Letters Vary From Bank to Bank
Every bank designs its own short sale approval letter templates. Most of these short sale approval letters are created by lawyers. The letters will probably contain verbiage about how the loan will be reported to credit agencies, whether a 1099 will be issued and whether the sellers can later sue the bank. Of course, the bank might reserve the right to sue the seller. It is the bank's lawyers who draw these letters. That's why it's very important for sellers to ask a lawyer to review the short sale approval letter before accepting its terms and conditions.

A letter issued for a Bank of America short sale might be different than another BOA short sale approval letter, depending on:

•Whether the bank releases the seller from personal liability
•The position of the existing loans
•The loan's origin.
A Bank of America short sale approval letter will be different in February than a letter issued in November. In fact, a Bank of America short sale approval letter will be very different from a Wells Fargo short sale approval letter.

Often, extensions, if granted, are not a rewrite of the existing short sale approval letter but are an amendment or supplemental to the original approval.

Some banks don't issue the final short sale approval letter until closing. The document issued in advance is often a preliminary or conditional approval of short sale.

Can I Minimize Short Sal e Credit Damage?

2011-05-09T15:38:00.001-07:00

Can I Minimize Short Sale Credit Damage?
Understanding the link between short sale and credit is the first step to reducing the damage. Call up your lender and ask how they treat short sales, particularly in terms of reporting to the credit bureaus. Some lenders require you to be in default before applying; if this is the case, make the application as soon as you're eligible so you can stop the drop before it becomes too drastic. Finally, work with a professional specializing in short sales and credit - you'll not only get it done faster, you’ll also find ways to get what you need with as little damage as possible.

How Does Short Sale Affect Credit?

2011-05-09T15:35:00.000-07:00

How Does Short Sale Affect Credit?
On average, short sales credit damage ranges from 30 to 200 points, while foreclosures pull one's score down by at least 300. It mostly depends on the borrower's situation, particularly the default which prompted the short sale. In fact, there's very little connection between short sale and credit ratings - the drop results more from the missed payments than from the short sale itself. Since one technically doesn't h ave to be in de fault to apply for a short sale, sometimes there’s little to no short sale credit damage at all.

Why do Banks Agree to Short Sales?

2011-05-09T15:34:00.000-07:00

Why do Banks Agree to Short Sales?
Foreclosing on a home is as tedious and costly to a lender as it is to a homeowner. The main reason a short sale makes sense to a lender is that it costs less to them than a foreclosure, both in terms of time and money. A short sale allows them to get rid of a non-performing mortgage without going through the lengthy process of a foreclosure.

Will Landlords Rent to Someone Who Has Had a Foreclosure?

2011-05-06T14:58:00.000-07:00

No doubt about it, a foreclosure is more depressing to one’s credit rating than seeing the bottom of an empty margarita glass on Cinco de Mayo. And landlords—the smart ones anyway—do tend to rely a lot on credit scores and background checks.

However, according to a survey by the National Association of Independent Landlords, over 80% of independent landlords would rent to someone who had lost a property to foreclosure. The one stipulation here being that the applicant should, otherwise, have good credit.

“Landlords typically won’t rent to applicants with poor credit – and a foreclosure will absolutely slam someone’s scores,” explained Tracey Benson, president of the National Association of Independent Landlords. “The exception is when they see people who have paid their bills their whole life, but lost their job, can’t meet their mortgage, and must hand their keys back to the bank.”

Benson further explained that rental applicants with foreclosures are often “good risks” because they were once homeowners.

“These people are used to taking pride in where they live. Often, they lost their jobs and homes through no fault of their own. Because of this abundance of defaults, there is a greater need for rental property, so landlords should carefully vet applicants.”

Contact Justin Thayer of Team Thayer @ 541-543-7287 with short sale help or questions!

Short sales set to swell 25% in 2011

2011-05-06T14:55:00.000-07:00

The Treasury Department set a new standard for short sales in 2010 when it launched the Home Affordable Foreclosure Alternatives program. But short sales were lower than expected last year with HAFA generating fewer than 700.

But the Treasury recently revamped HAFA guidelines, and the industry is starting to ramp up operations. John Vella, the chief operating officer at technology provider Equator, sat down for this edition of In This Corner to explain just why he thinks 2011 will be the year of the short sale.

HousingWire: With so many initiated transactions on the platform, will 2011 be the year of the short sale?

John Vella: With one in five borrowers underwater on their home and an estimated 1.5 million foreclosures scheduled for 2011, the opportunity for short sales will be better than ever. Investors usually see a 20% to 30% better execution on a short sale versus an REO sale when it comes to loss severity. With the foreclosure volume, current and pending REO inventories, servicers will be pressed to do more short sales in 2011.

Servicers are more equipped and skilled than ever in the short sale process which will allow them to convert failed loan modifications and potential failures into short sales. The short sale process, real estate agents’ capabilities and technology have evolved, making for a more mature relationship between the borrower, lender and agent. If the servicers are properly staffed and using proven short sales technology, in 2011 they could see an increase of at least 25% over 2010 in completed short sales.

HW: Do lenders prefer to do a short sale through their own guidelines or HAFA's?

JV: When HAFA was established in April 2010, the purpose was to set guidelines for consistency and process. Over time, it was found that the program did not serve as a “catch-all” but did serve a purpose in laying out ground rules in a very complicated process. Servicers will continue to run short sales through the HAFA waterfall. As soon as they see the HAFA program is not working for a particular property, they will redirect the loan to their internal program. This can be done seamlessly with the proper, proven technology without impacting timelines, compliance or borrower satisfaction.

HW: What is proving to be the weakest link in the chain of short sale decision making?

JV: Short sales can be difficult to execute due to a combination of factors. In order for a transaction to move forward the investor must agree to a realistic list price and net proceeds amount. The timely establishment and reaction to offers is critical, especially when a second lien and mortgage insurance is involved.

The agents must do their homework and ensure they are providing the proper documentation and pre-qualifying buyers to expedite the process. The servicer must act as a well-organized conduit between the agent, borrower, investor, mortgage insurance company and the various vendors involved. To say there is one common weakest link is very difficult, since no two short sales are alike. When there is uncertainty and so many parties involved in a transaction, the proper technology can make all the difference.

HW: Where are the most short sales occurring?

JV: Short sale volumes are tied to the states and locations which have had declines in values and increases in foreclosure volumes. These markets include: Nevada, California, Arizona, Florida, Georgia, Michigan and Mississippi. Short sale buyers are looking for markets that will eventually come back around and also offer investment/rental opportunities.

The key in 2011 will be the ability to obtain financing. With unemployment rising, credit card debt increasing and savings depleting, the potential buyer population will decrease while inventories increase. Without subsidies and the proper programs, the timelines and holding costs of short sales and REO sales will go up.

Contact Justin Thayer of Team Thayer @ 541-543-7287 with short sale help or questions!

A Year of Contrasts in Real Estate

2010-12-27T23:56:00.000-08:00

A Year of Contrasts in Real Estate
This has been a year of real estate contrasts: While many consumers have taken advantage of historic buying opportunities and the market has seen a gradual stabilization of sales and prices, other challenges facing the nation have led some to question the value of home ownership for families, communities, and the country.

“People are passionate about the American dream of home ownership, and this passion underscores how important home ownership is to our nation,” says National Association of REALTORSÒ President Ron Phipps. “Owning a home has long-standing government support in this country because home ownership benefits individuals and families, strengthens our communities, and is integral to our economy. As we begin a new year, REALTORS® remain committed to ensuring that our public policies promote responsible, sustainable home ownership for all of our futures.”

In the first half of the year, the extended $8,000 first-time home buyer tax credit and expanded home $6,500 tax credit for repeat buyers helped encourage sales and stabilize home prices. Home buyers in 2010 have also benefited from historic affordability levels, with the combination of record low mortgage rates coupled with rising household incomes. The NAR Housing Affordability Index currently shows that a median-income family with a down payment of 20 percent has 184.2 percent of the income required to purchase a median-priced home.

“Low interest rates mean real money for today’s home buyers,” Phipps says. “Buyers who purchased a median-priced home five years ago with an FHA mortgage requiring a 3 percent down payment would have a monthly mortgage payment of $1,650. With today’s interest rates and median home prices, that same buyer would pay $1,150 per month — a $500 savings. That’s a savings of $6,000 per year.”

Despite record affordability and buyer incentives, rising foreclosure rates and concerns about proper foreclosure procedures led some to question whether owning a home was a good personal decision.

“Home ownership didn’t create the foreclosure crisis — Wall Street greed and irresponsible lending practices did,” Phipps says. “The decision to own a home is a very personal one, but over the long term, owning a home is one of the best ways to build long-term wealth, in addition to providing numerous social benefits that include reduced crime rates, improved childhood education, and increased stability. After all, a fixed-rate mortgage might last 15 to 30 years; renting is forever.”

Government support of programs and initiatives that encourage home ownership have also been called into question. The deductibility of mortgage interest is one example, with critics suggesting that the mortgage interest deduction primarily benefits the wealthy, while in fact, the MID benefits primarily middle- and lower income families — almost two-thirds of those who claim the MID are middle-income earners. Sixty-five percent of families who claim the MID earn less than $100,000 per year, and 91 percent who claim the benefit earn less than $200,000 annually.

“The ability to deduct the interest paid on a mortgage can mean significant savings at tax time,” Phipps says. “For example, a family who bought a home this year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file next year. That’s money they could use to pay down other debts, supplement their children’s college savings account, or put into savings themselves.”

Despite current economic challenges, most Americans still aspire to the dream of home ownership. According to a survey conducted earlier in the year by Bankrate.com, 90 percent of respondents said they had no regrets buying their current home. And just this month, a Fannie Mae survey found that most Americans — both those who currently own their homes and those who rent — aspire to own a home and to maintain home ownership.

“We believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream, and looking forward, REALTORS® will continue to engage policymakers and industry leaders on behalf of consumers in pursuit of that goal,” Phipps says.

— NAR

5 Reasons to Buy a Home in 2011

2010-12-27T23:53:00.000-08:00

5 Reasons to Buy a Home in 2011
Michele Lerner, author of Homebuying: Tough Times, First Time, Any Time, offers reasons why real estate is likely to improve in 2011. Here are five reasons she thinks consumers should consider a home purchase next year:

▪ Mortgage rates will stay low. Even with rates climbing — maybe to as high as 6 percent by 2012 — they are still well below where they have been historically.
▪ Tax cuts could help. Extending the tax cuts could encourage a more rapid recovery for the economy.
▪ Americans want to be home owners. A recent Fannie Mae survey showed that Americans still believe a home is a safe and desirable investment.
▪ Builders are about to begin building. Home builders have been sitting on the sidelines. This year, they think pent-up demand will create an appetite for new homes.
▪ Homes are shrinking. Homes are getting smaller, which has made them more affordable.

Source: Investopedia, Michele Lerner (12/24/2010)

Second Liens Roadblock for Short Sales

2010-12-01T22:13:00.000-08:00

Second Liens Roadblock for Short Sales
Second mortgages have become one of the biggest roadblocks to closing short sales.

There are about 450,000 properties in some stage of the foreclosure process with at least one junior lien, according to real estate research firm CoreLogic. These second liens are a primary challenge for Freddie Mac, said Mark Johnson, who oversees short sales for Freddie.

Holders of second liens have little left to lose so some of them are willing to get in the way of a deal in hopes of being thrown a bone, said Jon Goodman, a real-estate lawyer and investor in Boulder, Colo.

Source: The Wall Street Journal, Nick Timiraos (11/27/2010)

Foreclosure Crisis Slowing Sales

2010-12-01T22:12:00.001-08:00

Foreclosure Crisis Slowing Sales
The foreclosure mess is making it harder for banks to sell properties. ForeclosureRadar, which tracks foreclosures in five Western states, says the number of properties coming to auction in Arizona, California, and Nevada has declined by more than 30 percent.

Investors are backing away from sales because they fear that the properties they buy will be tied up in an investigation, says Sean O’Toole, CEO of Foreclosure Radar.

O’Toole believes the problem is short-lived and ultimately will be settled in favor of the banks. "The fear that has been created in based more in hype than in law," he says.

Source: CNNMoney.com, Les Christie (11/29/2010)

NAR Extends Relief to Keep Veterans in Their Homes

2010-11-11T22:51:00.000-08:00

The NATIONAL ASSOCIATION OF REALTORS ® is extending its widely successful Facebook Causes campaign, “Operation Home Relief.” The campaign was launched just last month to help military families obtain foreclosure assistance, and America responded with enthusiasm – within 20 days, NAR matched $20,000 in donations to the cause.

“NAR believes that any family who loses a home to foreclosure is one family too many,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “Foreclosures don’t just affect the families that lose their homes; a foreclosure lowers the value of every home in the surrounding neighborhood. That’s why we’re so pleased with America’s response to Operation Home Relief, and why we’re committing additional funds to support military families who need assistance.”

NAR launched Operation Home Relief through its consumer website HouseLogic.com, a free comprehensive website about homeownership for homeowners. Operation Home Relief aims to increase awareness, rally support and raise funding for USA Cares, a nonprofit that provides foreclosure assistance in the form of financial counseling and grants to post-9/11 active duty U.S. military service personnel, veterans and their families.

Initially, HouseLogic donated $1 to USA Cares every time someone “joined” the Cause page, and agreed to match donations made to the Cause up to $20,000. In honor of Veteran’s Day, November 11, HouseLogic is increasing its match grant to USA Cares by $11,000. HouseLogic also offers an online foreclosure guide to help home owners avoid the pitfalls of foreclosure, with tips and solutions to help more families stay in their homes.

For more information on sustaining homeownership, and many other housing topics, visit HouseLogic at www.houselogic.com.

HouseLogic is a free source of information and tools for home owners from the National Association of Realtors® that helps home owners make smart decisions about all aspects of their home. HouseLogic helps home owners plan and organize their home projects and provides timely articles and news; home improvement advice and how-to’s; and information about taxes, home finances and insurance.

USA Cares is a nonprofit 501(c)3 organization that helps post-9/11 military and their families with basic needs, assists veterans suffering from post-traumatic stress disorder (PTSD) and traumatic brain injury (TBI) and their families and works to prevent private military home foreclosures and evictions. In seven years, USA Cares has received over 24,000 requests and responded with more than $7 million in grants. Military families anywhere in America can apply for assistance through the USA Cares web site, www.usacares.org, or by calling 800-773-0387. For more information on USA Cares, contact John Revell, jrevell@usacares.org, or call 270-352-5451.

Source: NAR

Foreclosures Fall 4 Percent in October

2010-11-11T22:49:00.000-08:00

Foreclosures declined by 4 percent in October compared to September, putting the level of foreclosures exactly where it was a year ago, one in every 389 homes in some stage of foreclosure, according to foreclosure sales site RealtyTrac.

RealtyTrac CEO James Saccacio said October was the twentieth consecutive month where more than 300,000 U.S. homeowners received a foreclosure filing. “The numbers probably would have been higher except for the fallout from the recent 'robo-signing' controversy,” he said.

Five states account for more than 50 percent of the national total: California, Florida, Michigan, Illinois, and Arizona.

Source: RealtyTrac (11/11/2010)

Fed Announces Stimulus

2010-11-06T00:15:00.000-07:00

Fed Announces Stimulus
As expected, a week packed with major economic events produced a great deal of daily volatility in mortgage rates. The Fed's announcement was positive for mortgage rates, the Employment report was negative, and the election results were neutral. In the end, mortgage rates finished the week a little lower.
On Wednesday, the Fed announced that it will purchase an additional $600 billion in Treasury securities by the end of the second quarter of 2011 to boost the economy. The Fed expects to purchase about $75 billion per month to reach this target. This fell near the middle of the wide range of investor forecasts. The Fed will regularly review both the pace of the purchases and the overall size of the program. Added demand for Treasury securities generally benefits other bonds as well, including mortgage-backed securities (MBS), and expectations for this plan have helped lower mortgage rates over the last couple of months. Prior to the announcement, there was so much uncertainty surrounding the program that mortgage rates improved a little further when the details contained no major surprises.
Mortgage rates rose on Friday when the Employment report came in stronger than expected. Against a consensus forecast for a gain of 60K jobs, the economy added 151K jobs in October. Private employers hired 159K workers, the highest level since April. Revisions from prior months added an additional 103K private sector jobs. As expected, the Unemployment Rate remained at 9.6%. Average hourly earnings, a proxy for wage growth, rose 0.2% from September. Stronger than expected economic data raises future inflation expectations, which pushed mortgage rates higher after the report. Fed Announces Stimulus
As expected, a week packed with major economic events produced a great deal of daily volatility in mortgage rates. The Fed's announcement was positive for mortgage rates, the Employment report was negative, and the election results were neutral. In the end, mortgage rates finished the week a little lower.
On Wednesday, the Fed announced that it will purchase an additional $600 billion in Treasury securities by the end of the second quarter of 2011 to boost the economy. The Fed expects to purchase about $75 billion per month to reach this target. This fell near the middle of the wide range of investor forecasts. The Fed will regularly review both the pace of the purchases and the overall size of the program. Added demand for Treasury securities generally benefits other bonds as well, including mortgage-backed securities (MBS), and expectations for this plan have helped lower mortgage rates over the last couple of months. Prior to the announcement, there was so much uncertainty surrounding the program that mortgage rates improved a little further when the details contained no major surprises.
Mortgage rates rose on Friday when the Employment report came in stronger than expected. Against a consensus forecast for a gain of 60K jobs, the economy added 151K jobs in October. Private employers hired 159K workers, the highest level since April. Revisions from prior months added an additional 103K private sector jobs. As expected, the Unemployment Rate remained at 9.6%. Average hourly earnings, a proxy for wage growth, rose 0.2% from September. Stronger than expected economic data raises future inflation expectations, which pushed mortgage rates higher after the report.

Week Ahead
Next week will be a very light week for economic data. The Trade Balance and Import Prices, which generally are not market moving reports, will be released on Wednesday. Consumer Sentiment will come out on Friday. There will be Treasury auctions on Monday, Tuesday, and Wednesday. These will be the first auctions since the Fed's announcement about quantitative easing, and the results may produce a significant reaction. Mortgage markets will be closed on Thursday for Veterans Day, while the stock market will not close.

Mortgage Purchases Rise

2010-11-04T23:27:00.000-07:00

Mortgage Purchases Rise
Applications to purchase homes rose 1.4 percent last week compared to the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association weekly survey.

On an unadjusted basis, purchases increased 0.2 percent last week compared to the previous week, but were down 28 percent compared to the same week a year ago.

Overall, mortgage application volume declined 5 percent over the last week on a seasonally adjusted basis because refinances decreased 6.4 percent.

Interest rate changes were mixed.
Average 30-year fixed-rate mortgages increased to 4.28 percent from 4.25 percent, while the average rate for 15-year fixed-rate mortgages decreased to 3.64 percent from 3.67 percent.

Source: Mortgage Bankers Association (11/03/2010)

3 Solutions for the Foreclosure Crisis

2010-11-04T23:26:00.000-07:00

3 Solutions for the Foreclosure Crisis
Analysts say that despite all the fuss over foreclosures, there are really only three solutions. None of them will please everyone.

1. Refinance everybody at today’s ultra-low rates. The result would put money in people’s pockets and that would boost consumer spending. The downside is that some people would still be underwater, plus taxpayers aren’t in the mood to spend any more money.

2. Lean on lenders to forgive principal. Lenders have been opposed to this even when the government stepped in and shared the losses. Also, this solution makes many investors very unhappy.

3. Do nothing and let the market heal itself. Supporters say an improving job market should erase part of the problem. The big downside to this strategy is the possibility that the market will slide back into recession.

Source: The Christian Science Monitor, Mark Trumbull (10/12/2010)

Mortgage Rates Inch Up Again

2010-10-31T23:50:00.000-07:00

Mortgage Rates Inch Up Again
The 30-year fixed mortgage rate rose slightly to 4.23 percent this week compared to 4.21 percent a week ago, Freddie Mac reports.

Interest on 15-year fixed loans also rose, moving to 3.66 percent from 3.64 percent, while the five-year adjustable-rate mortgage fell to 3.41 percent from 3.45 percent and the one-year ARM remained unchanged at 3.30 percent.

Freddie Mac chief economist Frank Nothaft attributed the flat rates to mixed economic data released this week.

Source: Risk Center, Eileen Fitzpatrick (10/29/10)

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State AGs Start Meeting With Banks

2010-10-31T23:48:00.000-07:00

State AGs Start Meeting With Banks
The 50-state attorney general task force that is investigating lender foreclosure practices has begun meeting with banks and loans servicers, but working around the state-specific laws makes a global settlement difficult.

“Our ability to act on behalf of consumers depends in part on the intricacies of state law,” said Janet Mills, Maine’s attorney general. “It is important for the AGs to share what they find out with each other, to monitor what is happening in other states, including the responses from financial entities,”

A member of the task force’s executive committee, Washington Attorney General Rob McKenna, said, “Loan modifications may be a significant part of the solution. If you keep homes out of foreclosure, they don’t depress real estate values.”

Source: Bloomberg, Margaret Cronin Fisk (10/28/2010)

Mortgage Rates Edge Up

2010-10-25T20:13:00.001-07:00

Mortgage Rates Edge Up
Interest on the 30-year fixed mortgage averaged 4.21 percent this week, up from a record low of 4.19 percent a week ago, reports Freddie Mac.

Rates for 15-year fixed loans also rose, climbing to 3.64 percent from 3.62 percent. However, the five-year adjustable-rate mortgage fell to a record low of 3.45 percent, after averaging 3.47 percent the previous week.

Source: Columbus (Ohio) Dispatch (10/22/10)

10% Jump in September Existing-Home Sales

2010-10-25T20:10:00.000-07:00

10% Jump in September Existing-Home Sales
Existing-home sales rose again in September, affirming that a sales recovery has begun, according to the National Association of REALTORS®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, rose 10 percent to a seasonally adjusted annual rate of 4.53 million in September from a downwardly revised 4.12 million in August, but remain 19.1 percent below the 5.60 million-unit pace in September 2009 when first-time buyers were ramping up in advance of the initial deadline for the tax credit last November.

Lawrence Yun, NAR chief economist, said the housing market is in the early stages of recovery. “A housing recovery is taking place but will be choppy at times depending on the duration and impact of a foreclosure moratorium. But the overall direction should be a gradual rising trend in home sales with buyers responding to historically low mortgage interest rates and very favorable affordability conditions,” he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.35 percent in September from 4.43 percent in August; the rate was 5.06 percent in September 2009.

The national median existing-home price for all housing types was $171,700 in September, which is 2.4 percent below a year ago. Distressed homes accounted for 35 percent of sales in September compared with 34 percent in August; they were 29 percent in September 2009.

NAR President Vicki Cox Golder said opportunities abound in the current market. “A decade ago, mortgage rates were almost double what they are today, and they’re about one-and-a-half percentage points lower than the peak of the housing boom in 2005,” she said. “In addition, home prices are running about 22 percent less than five years ago when they were bid up by the biggest housing rush on record.”

To illustrate the jump in housing affordability, the median monthly mortgage payment for a recently purchased home is several hundred dollars less than it was five years ago. “In fact, the median monthly mortgage payment in many areas is less than people are paying for rent,” Golder said.

Housing affordability conditions today are 60 percentage points higher than during the housing boom, so it has become a very strong buyers’ market, especially for families with long-term plans. “The savings today’s buyers are receiving are not a one-time benefit. Buyers with fixed-rate mortgages will save money every year they are living in their home – this is truly an example of how home ownership builds wealth over the long term,” Golder added.

Total housing inventory at the end of September fell 1.9 percent to 4.04 million existing homes available for sale, which represents a 10.7-month supply at the current sales pace, down from a 12-month supply in August. Raw unsold inventory is 11.7 percent below the record of 4.58 million in July 2008.

“Vacant homes and homes where mortgages have not been paid for an extended number of months need to be cleared from the market as quickly as possible, with a new set of buyers helping the recovery along a healthy path,” Yun said. “Inventory remains elevated and continues to favor buyers over sellers. A normal seasonal decline in inventory is expected through the upcoming months.”

A parallel NAR practitioner survey shows first-time buyers purchased 32 percent of homes in September, almost unchanged from 31 percent in August. Investors were at an 18 percent market share in September, down from 21 percent in August; the balance of purchases were by repeat buyers. All-cash sales were at 29 percent in September compared with 28 percent in August.

Single-family home sales increased 10 percent to a seasonally adjusted annual rate of 3.97 million in September from a pace of 3.61 million in August, but are 19.5 percent below the 4.93 million level in September 2009. The median existing single-family home price was $172,600 in September, down 1.9 percent from a year ago.

Existing condominium and co-op sales rose 9.8 percent to a seasonally adjusted annual rate of 560,000 in September from 510,000 in August, but are 16.2 percent lower than the 668,000-unit level one year ago. The median existing condo price was $165,400 in September, down 6.2 percent from September 2009.

Existing-home sales by region:

Northeast – increased 10.1 percent to an annual pace of 760,000 in September but are 20.8 percent below September 2009. The median price in the Northeast was $239,200, which is 1.4 percent below a year ago.

Midwest – jumped 14.5 percent in September to a level of 950,000 but are 26.4 percent below a year ago. The median price in the Midwest was $139,700, down 5.2 percent from September 2009.

South – sales rose 10.6 percent to an annual pace of 1.77 million in September but are 14.9 percent lower than September 2009. The median price in the South was $149,500, down 2.6 percent from a year ago.

West – increased 5.0 percent to an annual level of 1.05 million in September but are 16.7 percent below a year ago. The median price in the West was $213,600, which is 4.9 percent lower than September 2009.

Source: NAR

Economists Say Housing at Bottom

2010-10-12T22:55:00.000-07:00

Economists Say Housing at Bottom
Beacon Economics analyzed home affordability and came away feeling optimistic.

Beacon Economics founding principal Christopher Thornberg, whose firm advises a variety of business clients, says the high level of affordability is likely to drive demand and reduce the stock of excess inventory, ultimately resulting in the need for new housing, a rise in prices, and a pickup in new construction.

"While prices may fluctuate modestly over the next several months, we believe the worst of the housing crisis is behind us," says Beacon Economics Research Manager Jordan G. Levine. "We expect prices to stabilize around current levels and likely be higher in the next 12 months."

Source: Beacon Economics (10/11/2010)

Foreclosure, REO Home Prices Rise

2010-10-06T16:45:00.001-07:00

Foreclosure, REO Home Prices Rise
Average sale prices for homes in foreclosure and those owned by banks rose 1.6 percent in the second quarter compared to the first quarter and 6.1 percent year over year, according to RealtyTrac, a foreclosure marketing service.

The average price of these homes in the second quarter was $174,198 nationwide, but was significantly higher in California where the average price, according to RealtyTrac, was $256,833. These prices reflected homes sold by lenders or by homeowners who had received at least one notice of default.

About 24 percent of all properties sold in the second quarter were REOs and foreclosures. Their prices were on average 26 percent lower than those of homes not in foreclosure, RealtyTrac reported.

RealtyTrac Senior Vice President Rick Sharga projected that it would be the end of 2013 before the housing marked works its way through the foreclosure inventory.

Source: Los Angeles Times, Alejandro Lazo, and Daily Finance, Hugh Collins (09/30/2010)

Mortgage Rate Sinks to 4.32 Percent

2010-10-06T16:43:00.000-07:00

Mortgage Rate Sinks to 4.32 Percent
Average interest on 30-year fixed mortgages fell this week to 4.32 percent, matching the lowest level on record. Interest on 15-year loans, meanwhile, declined to 3.75 percent, setting an all-time low.

Investors have been flocking to the safety of Treasury bonds since the spring, which has driven down their yields and helped to keep rates at or near the lowest levels in decades.

Source: Boston Globe (10/01/10)

HUD Has Loans for Out-of-Work Borrowers

2010-10-06T16:41:00.000-07:00

HUD Has Loans for Out-of-Work Borrowers
The U.S. Department of Housing and Urban Development announced Tuesday that it will offer $50,000 loans to unemployed borrowers who are at least three months behind in their payments, but who have a reasonable likelihood of being able to resume regular payments within two years.

The property must be the borrower’s principal residence and they cannot own a second home. They must have suffered at least a 15 percent decline in income.

The loan is available in 32 states not receiving assistance through the Hardest Hit Fund, which gave 18 states more than $4 billion to devise programs to help the unemployed and underwater borrowers.

Source: CNNMoney.com, Tami Luhby (01/05/2010)

Foreign Buyers Snatch Up U.S. Property

2010-10-06T16:39:00.000-07:00

Foreign Buyers Snatch Up U.S. Property
Foreign investors are swarming Miami, buying up property and paying with cash.

Individual investors from Argentina, Canada, Columbia, France, Israel, Italy, Norway, and Venezuela are investing in what they see as a fire sale of U.S. property.

"I have never seen such a high concentration of foreign nationals acquiring real estate," says Peter Zalewski, who has been in real estate for 15 years and founded Condo Vultures, a consulting and brokerage firm. "Eighty percent of the sales in downtown Miami are foreign-based. This is unprecedented."

Practitioners say they are also seeing similar sales in Seattle, Washington, D.C., New York, Las Vegas, Los Angeles, and San Francisco.

To meet demand, real estate brokers are hiring sales associates who can speak multiple languages and are investing in overseas marketing tools.

Source: Associated Press, Michelle Conlin (10/04/2010)

Pending Home Sales Show Another Gain

2010-10-06T16:37:00.000-07:00

Pending Home Sales Show Another Gain
Pending home sales have increased for the second consecutive month, according to the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, a forward-looking indicator, rose 4.3 percent to 82.3 based on contracts signed in August from a downwardly revised 78.9 in July, but is 20.1 percent below August 2009 when it was 103.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said the latest data is consistent with a gradual improvement in home sales in upcoming months. “Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market,” he said. “However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence.”

Although Yun expects a continuing steady rise in home sales from favorable affordability conditions and some job creation, he cautioned any sudden rise in mortgage rates could slow the recovery. “Current low consumer price inflation has helped keep mortgage interest rates very attractive this year. However, recent rising trends in producer prices at the intermediate and early stages of production, along with very high commodity prices, are raising concerns about future inflation and future mortgage interest rates,” he said. “Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs.”

The PHSI in the Northeast declined 2.9 percent to 60.6 in August and remains 28.8 percent below August 2009. In the Midwest the index rose 2.1 percent in August to 68.0 but is 26.5 percent below a year ago. Pending home sales in the South increased 6.7 percent to an index of 90.8 but are 13.1 percent below August 2009. In the West the index rose 6.4 percent to 101.1 but remains 19.6 percent below a year ago.

Source: NAR

Student Housing: A Potentially Profitable Niche

2010-10-06T16:36:00.001-07:00

Student Housing: A Potentially Profitable Niche
Housing for students is a segment of the real estate market that continues to do well. With a record 19.1 million students enrolled in colleges and universities, the market has a steady source of business and is likely to remain stable through 2018 when the last of the baby boomers’ children are college age, analysts say.

Today’s students expect more amenities than previous generations demanded. For instance, Campus Crest, which manages 27 properties with 13,580 beds, is typical in offering fully furnished units with equipped kitchens, washers, and dryers in each unit and swimming pools on site,

Rents are typically 10 to 20 percent higher than conventional apartments, but management can be challenging. The operations expenses are about 45 percent of revenues, compared to 35 percent in conventional apartments, according to Michael Orsak, vice president at Campus Advantage, which manages and owns 50 properties across the U.S.

Source: MarketWatch.com, Jennifer Waters (10/03/2010)

Applications for Loans Fall

2010-09-27T22:40:00.000-07:00

Applications for Loans Fall
Applications to purchase homes declined 3.3 percent last week on a seasonally adjusted basis compared to the previous week, according to the Mortgage Bankers Association weekly survey.

On an unadjusted basis, the purchase index increased 18.9 percent compared to the previous week, which included Labor Day, but was 38 percent lower than the same week a year ago.

Mortgage rates declined slightly compared to the previous week:
· 30-year fixed-rate mortgages decreased to 4.44 percent from 4.47 percent;
· 15-year fixed-rate mortgages decreased to 3.88 percent from 3.96 percent;
· 1-year ARMs increased to 6.96 percent from 6.89 percent.

Source: Mortgage Bankers Association (09/22/2010)

Fannie Mae Offers New HomePath Incentives

2010-09-27T22:39:00.001-07:00

Fannie Mae Offers New HomePath Incentives
Fannie Mae on Thursday announced an expansion of the company’s REO program, HomePath.com.

HomePath already offers owner-occupant buyers 3 percent down with no mortgage insurance. The expansion gives these home buyers up to 3.5 percent of the final sales price to use toward paying closing costs. A home warranty also will be available.

In addition, real estate practitioners who represent owner-occupants will receive a $1,500 bonus. Eligible offers must be submitted on or after Sept. 23 and must close by Dec. 31.

Source: Fannie Mae (09/23/2010)

What's New in New Housing Design

2010-09-27T21:32:00.001-07:00

What's New in New Housing Design
Here are the products grabbing the attention of the home building and remodeling industries, according to Bill Millholland, executive vice president of sales and marketing at Case Design/Remodeling in Maryland, and Jamie Gibbs, a New York-based interior designer:

· Appliance Drawers. Small warning drawers, modest-sized dishwasher drawers for small loads, refrigerator drawers and microwave drawers.
· Counter-depth refrigerators. Some are only 24 inches deep.
· Motion-detecting faucets. Like you'd find in the restrooms of businesses.
· LED (light-emitting diode) lighting. These are used under cabinets and in ceiling fixtures as a longer-lasting, more efficient alternative to compact fluorescent lamps and incandescent bulbs.
· Electric heated floors. A nice touch in bathrooms,
· Showers with multiple heads and body sprays. Bathtubs are out.

Source: The Washington Post (09/25/2010)

Bank Mortgage Modifications More Likely to Fail

2010-09-27T21:29:00.000-07:00

Bank Mortgage Modifications More Likely to Fail
Mortgages that are modified under the government’s Home Affordable Modification Program, known as HAMP, are significantly more likely to avoid re-default, compared to mortgages modified through a lender program.

Nearly 11 percent of HAMP-modified mortgages are at least two months behind in current payments, according to a report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision released Friday.

At the same time, more than 22 percent of non-HAMP loan modifications had re-defaulted.

"There is a correlation between sustainability of payment and the reduction in the payment," said Joe Evers, deputy comptroller of OCC.

The government brings payments down to 31 percent of income, while mortgage company modifications often take a different tack.

Source: CNNMoney.com, Tami Luhby (09/24/2010)

Fed Considers Ways to Perk Up Slow Economy

2010-08-10T18:24:00.001-07:00

Fed Considers Ways to Perk Up Slow Economy

Following a disappointing July jobs report, the Federal Reserve is under pressure to stimulate economic growth. At their Aug. 10 meeting, officials likely will debate whether to hold down short-term interest rates for the long term or use proceeds from mortgage-backed securities investments to buy a small amount of government debt to lower long-term interest rates; but analysts say the impact of such moves would be minimal. While the Fed could restart programs to purchase MBS and government debt on a large scale to boost growth, there is concern that a Wall Street sell-off could occur if investors panic.

Source: Associated Press, Jeannine Aversa (08/10/10) © Copyright 2010 Information Inc.

Zillow: Fewer Listings Took Price Cuts in July

2010-08-10T18:21:00.000-07:00

Zillow: Fewer Listings Took Price Cuts in July
The prices of 29.1 percent of homes listed for sale on Zillow.com during July had been cut at least once, down from 30 percent in June, Zillow reported Monday.The median price reduction also declined slightly in July to 6.5 percent from 6.6 percent in June.The largest reductions were in Michigan, California and Florida, with prices in Flint, Mi., trimmed by 11.8 percent; Detroit homes cut by 10.7 percent; and prices in Merced, Calif. reduced by 10.5 percent.Source: Reuters News, Julie Haviv (08/09/2010)

Shop for the best interest rate!

2010-07-19T17:29:00.000-07:00

Buyers Should Shop for the Best Rate Anyone shopping for a new mortgage these days should shop around, says Cameron Findlay, chief economist for LendingTree.Although mortgage rates look astoundingly low, the spread between what the bank receives and what it pays investors has actually increased, giving banks more room to negotiate.Applicants with good credit scores should aggressively seek the best rates they can find by comparison shopping, starting with the bank they usually do business with.Source: The New York Times, Jennifer Saranow Schultz (07/17/2010)

Foreclosures to Surpass 2009!

2010-07-18T19:37:00.001-07:00

Foreclosures Likely to Surpass 2009 Levels Repossessions climbed 38 percent in the first six months of 2010 compared 2009 and were up 5 percent from the first quarter, foreclosure listing service RealtyTrac announced Thursday.In all, lenders repossessed nearly 528,000 homes in the first six months of the year. If that rate continues through the end of the year, repossessions will likely top 1 million in 2010, up 100,000 from 2009.Historically, about 100,000 homes per year in total are repossessed, according to Rick Sharga, senior vice president for RealtyTrac.More than 7.3 million home loans are in the foreclosure process, with one in 78 U.S. homes receiving a foreclosure warning in June.On average, it takes home owners 15 months to actually lose their property after they receive the initial warning, reports Lender Processing Services Inc.Source: Associated Press, Alex Veiga (07/15/2010)