Saturday, January 28, 2012
Administration Revamps HAMP to Reach More Borrowers
Changes announced Friday to the administration’s Home Affordable Modification Program (HAMP) are expected to extend relief to a larger share of struggling homeowners as well as renters, according to federal officials.
One of the key adjustments to the program centers around principal reductions. HAMP currently includes an option for servicers to provide underwater homeowners who are struggling with their payments with a modification that includes a principal writedown.
To encourage investors to agree to principal reduction modifications, Treasury is tripling the incentives for such restructurings, paying from 18 to 63 cents on the dollar, depending on the degree of change in the loan-to-value (LTV) ratio.
The Federal Housing Finance Agency (FHFA) has prohibited Fannie Mae and Freddie Mac from employing HAMP’s principal reducing option for their borrowers. Treasury has notified FHFA that it will pay these same principal reduction incentives to Fannie and Freddie if they allow servicers to forgive principal in conjunction with a HAMP modification.
FHFA issued a statement in response noting that it recently released analysis concluding principal forgiveness does not offer any greater benefits than principal forbearance as a loss mitigation tool.
But the agency says it will reassess the investor incentives now being offered, taking into consideration the number of eligible loans, operational costs to implement such changes, and the potential effects of incentivizing borrowers to remain current.
Among the other changes announced, borrowers who are struggling because of debt beyond their mortgages, such as second liens and medical bills, will be eligible for an alternative program evaluation with more flexible debt-to-income criteria.
In addition, Treasury will expand eligibility to include investor properties that are currently occupied by a tenant as well as vacant properties slated for rental use.
Tim Massad, Treasury’s assistant secretary for financial stability says single-family homes serve an important function as affordable rental housing, and foreclosure of investor-owned homes has disproportionate negative effects on low- and moderate-income renters, as well as communities.
The deadline for HAMP will be extended for an additional year through December 31, 2013.
To date, HAMP has helped approximately 900,000 struggling homeowners permanently modify their mortgage loans, providing them with a median savings of more than $500 a month.
Massad says the administration is committed to a multi-pronged effort to support American homeowners and the housing market recovery.
In addition to foreclosure prevention initiatives such as HAMP, Massad says the federal government plans to focus on transitioning foreclosed properties into rental housing, making it possible for responsible homeowners to refinance, and providing hard-hit states with resources to develop targeted relief programs.
One of the key adjustments to the program centers around principal reductions. HAMP currently includes an option for servicers to provide underwater homeowners who are struggling with their payments with a modification that includes a principal writedown.
To encourage investors to agree to principal reduction modifications, Treasury is tripling the incentives for such restructurings, paying from 18 to 63 cents on the dollar, depending on the degree of change in the loan-to-value (LTV) ratio.
The Federal Housing Finance Agency (FHFA) has prohibited Fannie Mae and Freddie Mac from employing HAMP’s principal reducing option for their borrowers. Treasury has notified FHFA that it will pay these same principal reduction incentives to Fannie and Freddie if they allow servicers to forgive principal in conjunction with a HAMP modification.
FHFA issued a statement in response noting that it recently released analysis concluding principal forgiveness does not offer any greater benefits than principal forbearance as a loss mitigation tool.
But the agency says it will reassess the investor incentives now being offered, taking into consideration the number of eligible loans, operational costs to implement such changes, and the potential effects of incentivizing borrowers to remain current.
Among the other changes announced, borrowers who are struggling because of debt beyond their mortgages, such as second liens and medical bills, will be eligible for an alternative program evaluation with more flexible debt-to-income criteria.
In addition, Treasury will expand eligibility to include investor properties that are currently occupied by a tenant as well as vacant properties slated for rental use.
Tim Massad, Treasury’s assistant secretary for financial stability says single-family homes serve an important function as affordable rental housing, and foreclosure of investor-owned homes has disproportionate negative effects on low- and moderate-income renters, as well as communities.
The deadline for HAMP will be extended for an additional year through December 31, 2013.
To date, HAMP has helped approximately 900,000 struggling homeowners permanently modify their mortgage loans, providing them with a median savings of more than $500 a month.
Massad says the administration is committed to a multi-pronged effort to support American homeowners and the housing market recovery.
In addition to foreclosure prevention initiatives such as HAMP, Massad says the federal government plans to focus on transitioning foreclosed properties into rental housing, making it possible for responsible homeowners to refinance, and providing hard-hit states with resources to develop targeted relief programs.
Will High Rents Push People to Buy Homes?
With Marcus & Millichap's National Apartment Report showing that the U.S. average for asking rents in 2011 came in at $1,061 a month, housing analysts believe more apartment tenants will look to own.
Some expect the average monthly rent to rise to as much as $1,101 this year, which Paul Bishop of the National Association of REALTORS® says should prompt more potential home buyers to "think twice before renting."
Source: "High Apartment Rents Seen Pushing People to Buy Homes," Investor's Business Daily (Jan. 27, 2012)
Some expect the average monthly rent to rise to as much as $1,101 this year, which Paul Bishop of the National Association of REALTORS® says should prompt more potential home buyers to "think twice before renting."
Source: "High Apartment Rents Seen Pushing People to Buy Homes," Investor's Business Daily (Jan. 27, 2012)
President Ford’s Home on Market for $1.7 Million
The 6,316-square-foot Rancho Mirage, Calif., home belonging to the late President Gerald Ford and First Lady Betty Ford is up for sale at $1.699 million.
The one-story, flat-roof home overlooks a golf course and features his and her offices, five bedrooms, and six-and-a-half bathrooms. The Ford’s moved into the home after leaving the White House in 1978.
The home still contains the original furniture and looks very similar to the way it did when the Ford’s first moved there, says the real estate agent listing the home, Nelda Linsk. The home still has floral patterns in the bedroom and lime and avocado fabrics featured in the dining and great rooms.
“They were very private people,” Linsk told the Gannett News Service. “They didn’t want anything showy.”
President Ford passed away in December 2006, and Betty Ford died in July 2011.
Source: “Fords’ Rancho Mirage Home Goes up for Sale for $1.7 Million,” The Desert Sun (Palm Springs) (Jan. 23, 2012) and “President Ford’s House for Sale,” Gannett News Service (Jan. 25, 2012)
The one-story, flat-roof home overlooks a golf course and features his and her offices, five bedrooms, and six-and-a-half bathrooms. The Ford’s moved into the home after leaving the White House in 1978.
The home still contains the original furniture and looks very similar to the way it did when the Ford’s first moved there, says the real estate agent listing the home, Nelda Linsk. The home still has floral patterns in the bedroom and lime and avocado fabrics featured in the dining and great rooms.
“They were very private people,” Linsk told the Gannett News Service. “They didn’t want anything showy.”
President Ford passed away in December 2006, and Betty Ford died in July 2011.
Source: “Fords’ Rancho Mirage Home Goes up for Sale for $1.7 Million,” The Desert Sun (Palm Springs) (Jan. 23, 2012) and “President Ford’s House for Sale,” Gannett News Service (Jan. 25, 2012)
First-Time Buyers More Willing to Compromise
When it comes to space and upgrades, first-time home buyers are more willing to compromise than repeat buyers, according to the National Association of REALTORS®’ 2011 “Profile of Home Buyers and Sellers.”
While they have big wish lists too, first-time buyers seem to be most driven by finding a home that offers a reasonable monthly mortgage payment.
"Single home buyers tend to value affordability above all when they are choosing a home and a neighborhood," says Jessica Lautz, NAR’s manager of member and consumer survey research. "They also focus more on living some place convenient to friends and family, as well as entertainment and leisure activities."
The median age of first-time home buyers is 31, and about 26 percent are married with children.
First-time home buyers tend to rate energy efficiency high on their wish list, as well as simple, no-hassle technology use in their house, the study finds.
But "even if they like the idea of solar panels, first-time buyers are not likely to spend an extra $20,000 to have them," says Stephen Melman, director of economic services for economics and housing policy for the National Association of Home Builders.
First-time buyers also are willing to compromise on space: The median-size of a home purchased by a first-time buyer is 1,570 square feet.
Overall, "the top three things that buyers want are a great room instead of a formal living room, a walk-in closet in the master bedroom, and a laundry room," says Melman. "First-time buyers want the same thing, but they are more likely to be satisfied with a small laundry room without an attached mudroom and with a smaller master bedroom and a smaller walk-in closet."
But one thing first-time buyers aren’t as willing to compromise on: Buying a home that needs a lot of repairs.
"Buyers that don't have any experience with home maintenance tend to be afraid of renovations, so home sellers should be sure to fix everything they can and make minor home improvements in order to appeal to first-time buyers," Melman says.
Source: “Size Matters Most to First-time Buyers,” HSH.com and Fox Business News (Jan. 26, 2012)
While they have big wish lists too, first-time buyers seem to be most driven by finding a home that offers a reasonable monthly mortgage payment.
"Single home buyers tend to value affordability above all when they are choosing a home and a neighborhood," says Jessica Lautz, NAR’s manager of member and consumer survey research. "They also focus more on living some place convenient to friends and family, as well as entertainment and leisure activities."
The median age of first-time home buyers is 31, and about 26 percent are married with children.
First-time home buyers tend to rate energy efficiency high on their wish list, as well as simple, no-hassle technology use in their house, the study finds.
But "even if they like the idea of solar panels, first-time buyers are not likely to spend an extra $20,000 to have them," says Stephen Melman, director of economic services for economics and housing policy for the National Association of Home Builders.
First-time buyers also are willing to compromise on space: The median-size of a home purchased by a first-time buyer is 1,570 square feet.
Overall, "the top three things that buyers want are a great room instead of a formal living room, a walk-in closet in the master bedroom, and a laundry room," says Melman. "First-time buyers want the same thing, but they are more likely to be satisfied with a small laundry room without an attached mudroom and with a smaller master bedroom and a smaller walk-in closet."
But one thing first-time buyers aren’t as willing to compromise on: Buying a home that needs a lot of repairs.
"Buyers that don't have any experience with home maintenance tend to be afraid of renovations, so home sellers should be sure to fix everything they can and make minor home improvements in order to appeal to first-time buyers," Melman says.
Source: “Size Matters Most to First-time Buyers,” HSH.com and Fox Business News (Jan. 26, 2012)
2011 Marks Worst Year on Record for New-Home Sales
Sales of new-home declined in December, dropping 2.2 percent, and marking the end to the worst year on record for new-home sales, the Commerce Department reported Thursday.
New-home sales reached a seasonally adjusted annual pace of 307,000 in December — less than half the 700,000 pace that economists consider healthy for the sector.
In 2011, 302,000 new homes were sold nationwide, overtaking 2010’s 323,000 sales that had previously marked the worst year for sales on record.
The new-home sector continues to struggle to compete against discounted distressed properties that are plaguing many markets and have put downward pressure on home prices. Builders also say tighter lending standards are preventing some home buyers for qualifying for financing, and appraisals of new-homes are coming in lower on the agreed upon purchase price, causing more deals to fall through.
In December, the median sales price of a new-home was $210,300, according to the Commerce Department.
Turnaround Coming?
Despite the latest numbers from December, new-home sales rose in the overall final quarter of 2011. Home construction for single-family homes increased in the final three months of 2011, and an index measuring homebuilder sentiment showed builders are more positive about where the market is heading too.
"Although this [December] decline was unexpected, it does not change the story that housing has likely bottomed," Jennifer H. Lee, senior economist at BMO Capital Markets, told the Associated Press.
Source: “New Home Sales 2011: Worst Year on Record,” Associated Press (Jan. 26, 2012)
New-home sales reached a seasonally adjusted annual pace of 307,000 in December — less than half the 700,000 pace that economists consider healthy for the sector.
In 2011, 302,000 new homes were sold nationwide, overtaking 2010’s 323,000 sales that had previously marked the worst year for sales on record.
The new-home sector continues to struggle to compete against discounted distressed properties that are plaguing many markets and have put downward pressure on home prices. Builders also say tighter lending standards are preventing some home buyers for qualifying for financing, and appraisals of new-homes are coming in lower on the agreed upon purchase price, causing more deals to fall through.
In December, the median sales price of a new-home was $210,300, according to the Commerce Department.
Turnaround Coming?
Despite the latest numbers from December, new-home sales rose in the overall final quarter of 2011. Home construction for single-family homes increased in the final three months of 2011, and an index measuring homebuilder sentiment showed builders are more positive about where the market is heading too.
"Although this [December] decline was unexpected, it does not change the story that housing has likely bottomed," Jennifer H. Lee, senior economist at BMO Capital Markets, told the Associated Press.
Source: “New Home Sales 2011: Worst Year on Record,” Associated Press (Jan. 26, 2012)
Mortgage Rates Rise After Posting Record Lows
Mortgage rates started to edge higher this week, after a series of recent positive reports showing the housing market on the mend, Freddie Mac reported in its weekly mortgage market survey.
The 30-year fixed-rate mortgage after posting all-time record lows for the past three weeks reversed course this week and ticked up to 3.98 percent. Still, this is the eighth consecutive week that 30-year fixed-rate mortgages have remained below 4 percent, Freddie Mac reported.
"Fixed mortgage rates ticked up this week as the housing market ended 2011 on a high note,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement. Existing-home sales increased 5 percent in December, the largest amount since May 2010.
Here’s a closer look at mortgage rates for the week ending Jan. 26:
30-year fixed-rate mortgages: averaged 3.98 percent, with an average 0.7 point, up from last week’s low of 3.88 percent. A year ago at this time, 30-year rates averaged 4.80 percent.
15-year fixed-rate mortgages: averaged 3.24 percent, with an average 0.8 point, inching up after last week’s 3.17 percent average. Last year at this time, 15-year rates averaged 4.09 percent.
5-year adjustable-rate mortgages: averaged 2.85 percent, with an average 0.7 point, also up from last week’s 2.82 average. Last year at this time, 5-year ARMs averaged 3.70 percent.
1-year ARMs: averaged 2.74 percent this week, with an average 0.6 point--holding at last week’s 2.74 percent average. A year ago at this time, 1-year ARMs averaged 3.26 percent.
Source: Freddie Mac
The 30-year fixed-rate mortgage after posting all-time record lows for the past three weeks reversed course this week and ticked up to 3.98 percent. Still, this is the eighth consecutive week that 30-year fixed-rate mortgages have remained below 4 percent, Freddie Mac reported.
"Fixed mortgage rates ticked up this week as the housing market ended 2011 on a high note,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement. Existing-home sales increased 5 percent in December, the largest amount since May 2010.
Here’s a closer look at mortgage rates for the week ending Jan. 26:
30-year fixed-rate mortgages: averaged 3.98 percent, with an average 0.7 point, up from last week’s low of 3.88 percent. A year ago at this time, 30-year rates averaged 4.80 percent.
15-year fixed-rate mortgages: averaged 3.24 percent, with an average 0.8 point, inching up after last week’s 3.17 percent average. Last year at this time, 15-year rates averaged 4.09 percent.
5-year adjustable-rate mortgages: averaged 2.85 percent, with an average 0.7 point, also up from last week’s 2.82 average. Last year at this time, 5-year ARMs averaged 3.70 percent.
1-year ARMs: averaged 2.74 percent this week, with an average 0.6 point--holding at last week’s 2.74 percent average. A year ago at this time, 1-year ARMs averaged 3.26 percent.
Source: Freddie Mac
Where the Biggest Foreclosure Discounts Are
Foreclosures in the third quarter sold, on average, for about a 34 percent discount compared to the average sales price of homes not in foreclosure, according to the latest report from RealtyTrac.
But in some metro areas discounts can be even larger between foreclosures and other home sales.
Here are the metro areas that offered some of the largest discounts in foreclosure sales in the third quarter of 2011:
Trenton-Ewing, N.J.: The average price of a foreclosure sale here was $108,302 — which is nearly 68 percent below the average sales price of a home not in foreclosure. In the third quarter, foreclosures accounted for 8 percent of all sales in the metro area.
St. Louis: Foreclosures sold for an average price of $80,545 — nearly 55 percent below the average sales price of a home not in foreclosure. Foreclosure accounted for nearly 13 percent of all home sales in the St. Louis metro area.
Milwaukee: The average foreclosure sold for $93,250, about 53 percent below the average sales price of a home not in foreclosure. Foreclosure sales accounted for 17 percent of all sales in the area.
Other metro areas posting large foreclosure discounts: Springfield, Mass. (52 percent); Saginaw, Mich. (52 percent); New Haven-Milford, Conn. (51 percent); Memphis (51 percent); San Francisco (51 percent); Toledo, Ohio (50 percent); Bridgeport-Stamford-Norwalk, Conn. (50 percent); and Atlanta (50 percent).
Source: “Foreclosures Account for 20% of Residential Sales in Q3,” RISMedia (Jan. 25, 2012)
But in some metro areas discounts can be even larger between foreclosures and other home sales.
Here are the metro areas that offered some of the largest discounts in foreclosure sales in the third quarter of 2011:
Trenton-Ewing, N.J.: The average price of a foreclosure sale here was $108,302 — which is nearly 68 percent below the average sales price of a home not in foreclosure. In the third quarter, foreclosures accounted for 8 percent of all sales in the metro area.
St. Louis: Foreclosures sold for an average price of $80,545 — nearly 55 percent below the average sales price of a home not in foreclosure. Foreclosure accounted for nearly 13 percent of all home sales in the St. Louis metro area.
Milwaukee: The average foreclosure sold for $93,250, about 53 percent below the average sales price of a home not in foreclosure. Foreclosure sales accounted for 17 percent of all sales in the area.
Other metro areas posting large foreclosure discounts: Springfield, Mass. (52 percent); Saginaw, Mich. (52 percent); New Haven-Milford, Conn. (51 percent); Memphis (51 percent); San Francisco (51 percent); Toledo, Ohio (50 percent); Bridgeport-Stamford-Norwalk, Conn. (50 percent); and Atlanta (50 percent).
Source: “Foreclosures Account for 20% of Residential Sales in Q3,” RISMedia (Jan. 25, 2012)
Wednesday, January 25, 2012
Housing Inventory Down 22% From Year-Ago Levels
At the national level, the inventory of for-sale single-family homes, condominiums, townhouses, and co-ops dropped by 22.29 percent over the last year, according to new statistics released by Realtor.com.
The site concludes that at the close of 2011, there were 1.89 million single-family homes on the market, down 6 percent from just one month prior.
The median age of the inventory in December increased by 7.02 percent from November, but Realtor.com says the
bump is largely seasonal reflecting the end of the homebuying season.
The median age of existing inventory during December was 122 days, which is down nearly 4 percent when compared to a year ago.
Realtor.com notes that median list prices, which have remained essentially unchanged since June, are up by 5.03 percent nationally on a year-over-year basis.
Each of these developments can be viewed as “a positive sign that the housing market is holding its own at the national level,” according to Realtor.com.
Patterns differed across the 146 metropolitan statistical areas (MSAs) monitored by Realtor.com. Over the past several months, the site reports an increasing number of markets have registered year-over-year increases in median list prices while fewer markets have experienced year-over-year declines.
Still, markets remain fragile, according to Realtor.com, particularly in light of the large number of potential foreclosures and the recent uptick in delinquency rates in November.
The site concludes that at the close of 2011, there were 1.89 million single-family homes on the market, down 6 percent from just one month prior.
The median age of the inventory in December increased by 7.02 percent from November, but Realtor.com says the
bump is largely seasonal reflecting the end of the homebuying season.
The median age of existing inventory during December was 122 days, which is down nearly 4 percent when compared to a year ago.
Realtor.com notes that median list prices, which have remained essentially unchanged since June, are up by 5.03 percent nationally on a year-over-year basis.
Each of these developments can be viewed as “a positive sign that the housing market is holding its own at the national level,” according to Realtor.com.
Patterns differed across the 146 metropolitan statistical areas (MSAs) monitored by Realtor.com. Over the past several months, the site reports an increasing number of markets have registered year-over-year increases in median list prices while fewer markets have experienced year-over-year declines.
Still, markets remain fragile, according to Realtor.com, particularly in light of the large number of potential foreclosures and the recent uptick in delinquency rates in November.
Additional Servicers May Join in AG Settlement
The settlement negotiations between the state attorneys general and the top five servicers have dragged on for more than a year now throughout frequent reports that a settlement is “close.” Working out a deal that banks feel is fair and that attorneys general feel serves their states’ residents has been challenging at best.
However, with a settlement once again reportedly “weeks away,” it appears the proposal on the table is agreeable to more than just the five banks involved from day one: Bank of America, Wells Fargo, JPMorgan Chase, Citi, and GMAC.
US Bancorp and PNC may be interested in signing onto the proposed settlement, according to a recent Reuters article.
Both banks have designated sums of money to mortgage servicing matters, according to Reuters.
In PNC’s latest earnings report, the bank reported $240 million noninterest expense for “residential foreclosure-related expenses primarily as a result of ongoing governmental matters.”
Additionally, Reuters reports the Justice Department is reaching out to other banks about the possibility of joining a settlement with the attorneys general.
Regardless, Capital Economics commented Tuesday that “the likely size of the settlement won’t force banks to reign in lending this year,” but “nor will principal reductions, which are likely to be required as part of the settlement, significantly reduce the overall amount of negative equity in the housing market.”
However, with a settlement once again reportedly “weeks away,” it appears the proposal on the table is agreeable to more than just the five banks involved from day one: Bank of America, Wells Fargo, JPMorgan Chase, Citi, and GMAC.
US Bancorp and PNC may be interested in signing onto the proposed settlement, according to a recent Reuters article.
Both banks have designated sums of money to mortgage servicing matters, according to Reuters.
In PNC’s latest earnings report, the bank reported $240 million noninterest expense for “residential foreclosure-related expenses primarily as a result of ongoing governmental matters.”
Additionally, Reuters reports the Justice Department is reaching out to other banks about the possibility of joining a settlement with the attorneys general.
Regardless, Capital Economics commented Tuesday that “the likely size of the settlement won’t force banks to reign in lending this year,” but “nor will principal reductions, which are likely to be required as part of the settlement, significantly reduce the overall amount of negative equity in the housing market.”
DBRS Expects a Year of Reform for Mortgage Servicing
The ratings agency DBRS published its U.S. residential mortgage servicing review and 2012 outlook this week.
The agency’s analysts stress that mortgage servicers are going to continue to see “much needed reform” in 2012 as the industry moves to standardize the servicing business.
Kathleen Tillwitz, SVP of operational risk for DBRS, expects the first go at such standardization will center around implementing all of the items noted in the consent orders handed down by federal regulators to address robo-signing issues.
Tillwitz adds that servicer reports will likely be aligned to increase transparency and match servicer compensation with the performance of the loans, i.e. lower servicing fees for performing loans and higher servicing fees for non-performing loans.
“The new minimum standards for servicing will likely result in the exit of some servicers from the mortgage business in 2012 as the expenses associated with achieving these standards will likely be too costly for servicers with weak balance sheets,” according to Tillwitz.
According to DBRS’ assessment, modifications that reduce rates and extend terms will continue to be the preferred loss mitigation strategy for many servicers. The agency notes, however, that there is expected to be an increase in principal forgiveness modifications once the multi-state attorney general settlement is finalized
Tillwitz says DBRS does expect the U.S. government to implement some of the REO programs outlined in the white paper released by the Federal Reserve earlier this month, such as the REO to rental program.
DBRS says, though, that because of the time it will take to implement such a program and get the subsidized financing approved, the industry will not see lower losses on REO properties until late 2012 or 2013.
The agency’s analysts stress that mortgage servicers are going to continue to see “much needed reform” in 2012 as the industry moves to standardize the servicing business.
Kathleen Tillwitz, SVP of operational risk for DBRS, expects the first go at such standardization will center around implementing all of the items noted in the consent orders handed down by federal regulators to address robo-signing issues.
Tillwitz adds that servicer reports will likely be aligned to increase transparency and match servicer compensation with the performance of the loans, i.e. lower servicing fees for performing loans and higher servicing fees for non-performing loans.
“The new minimum standards for servicing will likely result in the exit of some servicers from the mortgage business in 2012 as the expenses associated with achieving these standards will likely be too costly for servicers with weak balance sheets,” according to Tillwitz.
According to DBRS’ assessment, modifications that reduce rates and extend terms will continue to be the preferred loss mitigation strategy for many servicers. The agency notes, however, that there is expected to be an increase in principal forgiveness modifications once the multi-state attorney general settlement is finalized
Tillwitz says DBRS does expect the U.S. government to implement some of the REO programs outlined in the white paper released by the Federal Reserve earlier this month, such as the REO to rental program.
DBRS says, though, that because of the time it will take to implement such a program and get the subsidized financing approved, the industry will not see lower losses on REO properties until late 2012 or 2013.
Housing Crisis to End in 2012 as Banks Loosen Credit Standards
Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.
However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.
However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.
Tuesday, January 24, 2012
Investors With Cash Place Downward Pressure on Home Prices
Homebuyers with enough cash in hand to cover their offer price in full are able to bid significantly lower on properties and according to a new industry report released Monday, because they offer a shorter and more reliable closing timeline without the impediments of a mortgage, they often win out with that lower bid.
The study, provided by Campbell Surveys and Inside Mortgage Finance as part of the companies’ monthly HousingPulse Tracking Survey, found that this low-bid-winning dynamic is particularly true for distressed properties because mortgage servicers selling foreclosed or REO homes generally prefer transactions that can settle within 30 days.
The total share of distressed properties in the housing market in December, as represented by the HousingPulse Distressed Property Index (DPI), continued at a high level of 47.2 percent, based on a three-month moving average. December marked the 24th month in a row that the DPI has been above 40 percent.
Cash buyers, many of them investors, are putting downward pressure on home prices across the board, according to the HousingPulse Survey.
In December 2011, data collected for the HousingPulse Survey shows that the overall proportion of cash buyers in the housing market surged to a record 33.2 percent, up from 29.6 percent a year earlier.
Among investor homebuyers, however, the proportion of cash buyers was much higher, with 74 percent of investors laying down the money to purchase homes outright last month.
The latest survey results indicate investors accounted for 22.8 percent of all home purchase transactions in December 2011, up from 22.2 percent a month earlier.
Despite their relatively small share among homebuyers, investors have an outsize effect on home values because their bids bring down market prices, according to the HousingPulse survey report.
While investor bids may not be the first offers accepted, the report notes that they often end up winning properties after other homebuyers are eliminated because of mortgage approval or timeline problems.
Real estate agents responding to the HousingPulse Survey commented on low bids from investors.
“Investors usually offer 10 percent – 20 percent below list up to a price of $250K. First-time homebuyers are [offering] close to list [price] as are current homeowners. Investors want 2-4 weeks to close…Financing buyers end up with 6- 8 weeks plus,” reported an agent in Arizona.
“In competitive offer situations, cash offers prevail for the most part because of the common knowledge of lender closing issues,” noted an agent in New Jersey. “Cash sales close in 21-30 days. FHA sales close in 45 to 60 days.”
The HousingPulse Tracking Survey from Campbell Surveys and Inside Mortgage Finance polls 2,500 real estate agents nationwide each month to assess market trends surrounding homes sales and mortgage lending
The study, provided by Campbell Surveys and Inside Mortgage Finance as part of the companies’ monthly HousingPulse Tracking Survey, found that this low-bid-winning dynamic is particularly true for distressed properties because mortgage servicers selling foreclosed or REO homes generally prefer transactions that can settle within 30 days.
The total share of distressed properties in the housing market in December, as represented by the HousingPulse Distressed Property Index (DPI), continued at a high level of 47.2 percent, based on a three-month moving average. December marked the 24th month in a row that the DPI has been above 40 percent.
Cash buyers, many of them investors, are putting downward pressure on home prices across the board, according to the HousingPulse Survey.
In December 2011, data collected for the HousingPulse Survey shows that the overall proportion of cash buyers in the housing market surged to a record 33.2 percent, up from 29.6 percent a year earlier.
Among investor homebuyers, however, the proportion of cash buyers was much higher, with 74 percent of investors laying down the money to purchase homes outright last month.
The latest survey results indicate investors accounted for 22.8 percent of all home purchase transactions in December 2011, up from 22.2 percent a month earlier.
Despite their relatively small share among homebuyers, investors have an outsize effect on home values because their bids bring down market prices, according to the HousingPulse survey report.
While investor bids may not be the first offers accepted, the report notes that they often end up winning properties after other homebuyers are eliminated because of mortgage approval or timeline problems.
Real estate agents responding to the HousingPulse Survey commented on low bids from investors.
“Investors usually offer 10 percent – 20 percent below list up to a price of $250K. First-time homebuyers are [offering] close to list [price] as are current homeowners. Investors want 2-4 weeks to close…Financing buyers end up with 6- 8 weeks plus,” reported an agent in Arizona.
“In competitive offer situations, cash offers prevail for the most part because of the common knowledge of lender closing issues,” noted an agent in New Jersey. “Cash sales close in 21-30 days. FHA sales close in 45 to 60 days.”
The HousingPulse Tracking Survey from Campbell Surveys and Inside Mortgage Finance polls 2,500 real estate agents nationwide each month to assess market trends surrounding homes sales and mortgage lending
FHFA Says Principal Writedowns by GSEs Would Cost $100B
The Federal Housing Finance Agency (FHFA) says as of June 30, 2011, Fannie Mae and Freddie Mac held nearly 3 million first lien mortgages in which the borrower owed more on the loan that the home was worth.
FHFA estimates principal forgiveness for all of these mortgages would require funding of almost $100 billion to pay down the loans to the value of the homes securing them.
In response to a request from members of Congress, FHFA on Monday publicly disclosed the analysis that led the agency to exclude principal forgiveness from the menu of loss mitigation tools available to the GSEs.
Reps. Elijah E. Cummings (D-Maryland) and John F. Tierney (D-Massachusetts) have been pressing for a subpoena to be issued to obtain this data from FHFA in order to evaluate the agency’s reasoning for prohibiting principal reductions on Fannie and Freddie’s loans.
The lawmakers cited public statements by high-level officials at the Federal Reserve, championing principal forgiveness as a viable solution for heading off defaults and foreclosures, and they questioned FHFA’s determination that reducing principal balances would not serve the best interests of the GSEs, taxpayers, and the housing market at large.
Edward DeMarco, acting director of FHFA, responded with a lengthy letter, supplemented with data charts, equations, and the findings of three separate staff analyses prepared over the past year.
He said FHFA did not conclude that “principal reduction never serves the long-term interest of the taxpayer when compared to foreclosure,” as the congressmen alleged.
In considering principal forgiveness, FHFA compared taxpayer losses from principal forgiveness versus principal
forbearance, an alternate approach the GSEs currently use in which no interest is charged on a portion of the underwater amount.
In the event of a successful modification, FHFA determined that forbearance offers greater cash flows to the investor than forgiveness. The net result of the analysis is that forbearance achieves marginally lower losses for the taxpayer than forgiveness, although both forgiveness and forbearance reduce the borrower’s payment to the same affordable level, FHFA explained.
“Given that any money spent on this [principal forgiveness] endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” DeMarco stated in his letter to Cummings and Tierney.
The FHFA director also pointed out that nearly 80 percent of the GSEs’ underwater borrowers were current on their mortgages as of June 30, 2011. Even among those deeply underwater, with loan-to-value ratios (LTVs) above 115 percent, DeMarco says 74 percent were current on their payments.
“Being underwater does not imply that a borrower lacks the ability or the desire to make good on their financial obligation, nor does it relieve a household from that responsibility,” DeMarco stated matter-of-factly in his letter to lawmakers.
For delinquent and deeply underwater borrowers, Fannie Mae and Freddie Mac offer loan modifications that include principal forbearance to relieve some of the debt burden. DeMarco says these modifications reduce monthly payments to the same affordable rate that would be in place with forgiveness.
For underwater borrowers who remain current on their mortgage, DeMarco notes that the agency made several changes to the Home Affordable Refinance Program (HARP) last October to open it up to more borrowers, allowing them to take advantage of today’s lower rates and shorten their mortgage term in order to get back above water more quickly.
“While it is not in the best interests of taxpayers for FHFA to require the [GSEs] to offer principal forgiveness to high LTV borrowers, a principal forgiveness strategy might reduce losses for other loan holders,” DeMarco conceded.
FHFA estimates principal forgiveness for all of these mortgages would require funding of almost $100 billion to pay down the loans to the value of the homes securing them.
In response to a request from members of Congress, FHFA on Monday publicly disclosed the analysis that led the agency to exclude principal forgiveness from the menu of loss mitigation tools available to the GSEs.
Reps. Elijah E. Cummings (D-Maryland) and John F. Tierney (D-Massachusetts) have been pressing for a subpoena to be issued to obtain this data from FHFA in order to evaluate the agency’s reasoning for prohibiting principal reductions on Fannie and Freddie’s loans.
The lawmakers cited public statements by high-level officials at the Federal Reserve, championing principal forgiveness as a viable solution for heading off defaults and foreclosures, and they questioned FHFA’s determination that reducing principal balances would not serve the best interests of the GSEs, taxpayers, and the housing market at large.
Edward DeMarco, acting director of FHFA, responded with a lengthy letter, supplemented with data charts, equations, and the findings of three separate staff analyses prepared over the past year.
He said FHFA did not conclude that “principal reduction never serves the long-term interest of the taxpayer when compared to foreclosure,” as the congressmen alleged.
In considering principal forgiveness, FHFA compared taxpayer losses from principal forgiveness versus principal
forbearance, an alternate approach the GSEs currently use in which no interest is charged on a portion of the underwater amount.
In the event of a successful modification, FHFA determined that forbearance offers greater cash flows to the investor than forgiveness. The net result of the analysis is that forbearance achieves marginally lower losses for the taxpayer than forgiveness, although both forgiveness and forbearance reduce the borrower’s payment to the same affordable level, FHFA explained.
“Given that any money spent on this [principal forgiveness] endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” DeMarco stated in his letter to Cummings and Tierney.
The FHFA director also pointed out that nearly 80 percent of the GSEs’ underwater borrowers were current on their mortgages as of June 30, 2011. Even among those deeply underwater, with loan-to-value ratios (LTVs) above 115 percent, DeMarco says 74 percent were current on their payments.
“Being underwater does not imply that a borrower lacks the ability or the desire to make good on their financial obligation, nor does it relieve a household from that responsibility,” DeMarco stated matter-of-factly in his letter to lawmakers.
For delinquent and deeply underwater borrowers, Fannie Mae and Freddie Mac offer loan modifications that include principal forbearance to relieve some of the debt burden. DeMarco says these modifications reduce monthly payments to the same affordable rate that would be in place with forgiveness.
For underwater borrowers who remain current on their mortgage, DeMarco notes that the agency made several changes to the Home Affordable Refinance Program (HARP) last October to open it up to more borrowers, allowing them to take advantage of today’s lower rates and shorten their mortgage term in order to get back above water more quickly.
“While it is not in the best interests of taxpayers for FHFA to require the [GSEs] to offer principal forgiveness to high LTV borrowers, a principal forgiveness strategy might reduce losses for other loan holders,” DeMarco conceded.
Loan Modifications Are on the Decline: Moody's
As robo-signing reviews reach completion, servicers are beginning to work through some of their foreclosure backlogs, according to a third-quarter report from Moody’s Investors Service.
Moody’s reports that as servicers work through the bulk of their delinquencies, modifications are on the decline. Servicers are now turning to loss mitigation alternatives, including short sales and deeds in lieu, Moody’s says.
Moody’s calculated a decline in “total cure and cash flowing,” measuring successful loss mitigation efforts in the third quarter. The decline “resulted from servicers having worked through significant portions of their eligible 60-plus delinquencies,” according to Moody’s.
Citi, GMAC, and Chase experienced the greatest decreases in cures.
Among subprime loans, Ocwen posted the highest cure rate – 44 percent. The high cure rate at Ocwen is linked to high numbers of modifications relative to its peers.
Moody’s notes that the high cure rate includes “a significant number of re-modifications,” which occur when an initial modification fails.
Ocwen saw re-defaults among 54.5 percent of its subprime modifications, the highest rate among its peers.
Ocwen was followed by Bank of America with a 50.5 percent re-default rate on modifications of subprime loans.
BofA also posted the highest rate of re-defaults of ALT-A loans (42.3 percent) and the second-highest re-default rate for jumbo loans (35 percent).
Consistent with its high re-default rate, Ocwen ranked highest for re-modifications of subprime loans. Ocwen’s re-modification rate for the third quarter was 24.8 percent. The second-highest re-modification rate was seen at Wells – 6.8 percent.
The high re-default and re-modification rates at Ocwen “calls into question Ocwen’s process in evaluating borrowers for a modification,” Moody’s states.
However, Moody’s also concedes, “not all of the first modifications were necessarily completed by Ocwen due to servicing acquisitions prior to the analysis period.”
Moody’s also reports foreclosure sale to REO liquidation timelines are little changed from the second to third quarter. However, Moody’s forecasts longer timelines throughout the year.
Moody’s reports that as servicers work through the bulk of their delinquencies, modifications are on the decline. Servicers are now turning to loss mitigation alternatives, including short sales and deeds in lieu, Moody’s says.
Moody’s calculated a decline in “total cure and cash flowing,” measuring successful loss mitigation efforts in the third quarter. The decline “resulted from servicers having worked through significant portions of their eligible 60-plus delinquencies,” according to Moody’s.
Citi, GMAC, and Chase experienced the greatest decreases in cures.
Among subprime loans, Ocwen posted the highest cure rate – 44 percent. The high cure rate at Ocwen is linked to high numbers of modifications relative to its peers.
Moody’s notes that the high cure rate includes “a significant number of re-modifications,” which occur when an initial modification fails.
Ocwen saw re-defaults among 54.5 percent of its subprime modifications, the highest rate among its peers.
Ocwen was followed by Bank of America with a 50.5 percent re-default rate on modifications of subprime loans.
BofA also posted the highest rate of re-defaults of ALT-A loans (42.3 percent) and the second-highest re-default rate for jumbo loans (35 percent).
Consistent with its high re-default rate, Ocwen ranked highest for re-modifications of subprime loans. Ocwen’s re-modification rate for the third quarter was 24.8 percent. The second-highest re-modification rate was seen at Wells – 6.8 percent.
The high re-default and re-modification rates at Ocwen “calls into question Ocwen’s process in evaluating borrowers for a modification,” Moody’s states.
However, Moody’s also concedes, “not all of the first modifications were necessarily completed by Ocwen due to servicing acquisitions prior to the analysis period.”
Moody’s also reports foreclosure sale to REO liquidation timelines are little changed from the second to third quarter. However, Moody’s forecasts longer timelines throughout the year.
State AGs Reviewing Settlement Draft
After HUD Secretary Shaun Donovan announced last Wednesday that the state attorneys general settlement with the nation’s largest servicers is just weeks away – with a spokesperson for Iowa Attorney General Tom Miller’s office corroborating the claim – news today is a settlement draft is now in the hands of the state attorneys general for review.
The Associated Press released the update Tuesday, stating the settlement terms could require as much as $25 billion from the banks – keeping consistent with projections made in October.
Under the settlement draft, about 750,000 individuals will receive about $1,800, according to the Associated Press.
Donovan also stated last week that about 1 million homeowners may receive principal reductions if the proposed settlement wins approval.
Dispelling rumors suggesting President Barack Obama will announce a settlement during his State of the Union address Tuesday evening, Miller’s office released a statement Monday saying, “We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week.”
In a letter to officials involved in the settlement negotiations last week Ohio Attorney General Sherrod Brown expressed concerns that the proposed settlement may be too easy on banks.
“A settlement must provide meaningful, widespread relief to Ohio homeowners. Unfortunately, the numbers reported in various media accounts fail to meet this test,” Sherrod wrote.
He also stated, “The proposed principal reduction program must focus on banks settling with their own money, rather than shifting their financial liability to Private Label Securities (PLS) trusts.”
Brown reiterated his concerns Monday, according to Reuters. “Instead of criminal prosecutions, we are talking about not much more than a slap on the wrist,” Brown said. “In many ways, Wall Street isn’t just too big to fail, it’s also too big to jail.”
The Associated Press released the update Tuesday, stating the settlement terms could require as much as $25 billion from the banks – keeping consistent with projections made in October.
Under the settlement draft, about 750,000 individuals will receive about $1,800, according to the Associated Press.
Donovan also stated last week that about 1 million homeowners may receive principal reductions if the proposed settlement wins approval.
Dispelling rumors suggesting President Barack Obama will announce a settlement during his State of the Union address Tuesday evening, Miller’s office released a statement Monday saying, “We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week.”
In a letter to officials involved in the settlement negotiations last week Ohio Attorney General Sherrod Brown expressed concerns that the proposed settlement may be too easy on banks.
“A settlement must provide meaningful, widespread relief to Ohio homeowners. Unfortunately, the numbers reported in various media accounts fail to meet this test,” Sherrod wrote.
He also stated, “The proposed principal reduction program must focus on banks settling with their own money, rather than shifting their financial liability to Private Label Securities (PLS) trusts.”
Brown reiterated his concerns Monday, according to Reuters. “Instead of criminal prosecutions, we are talking about not much more than a slap on the wrist,” Brown said. “In many ways, Wall Street isn’t just too big to fail, it’s also too big to jail.”
2 States Ask Obama for Help With Vacant Home Crisis
Sixteen Ohio and Michigan lawmakers have written President Barack Obama a letter, urging federal intervention in handling the swell of abandoned, vacant homes that are battering home prices in the states.
The bipartisan group of lawmakers are concerned that the vacant homes will attract crime and further deteriorate neighborhoods.
In the letter to Obama, the lawmakers said their local governments need “federal support to demolish the decaying properties on a large scale,” the Associated Press reports.
In Ohio, state officials estimate that more than 70,000 empty homes are beyond repair and need to be torn down. Congresswoman Marcia L. Fudge from Ohio said in a statement that 15,000 of those vacant homes are located in Cleveland alone, and will cost an estimated $100 million to tear down.
“Home owners are depending on us to help stop the free fall of their property values,” Fudge said in a statement. “It’s time we develop and pass meaningful legislation that promotes the revitalization of our neighborhoods.”
Source: “Ohio, Mich. Lawmakers Write Obama on Vacant Homes,” Associated Press (Jan. 23, 2012)
The bipartisan group of lawmakers are concerned that the vacant homes will attract crime and further deteriorate neighborhoods.
In the letter to Obama, the lawmakers said their local governments need “federal support to demolish the decaying properties on a large scale,” the Associated Press reports.
In Ohio, state officials estimate that more than 70,000 empty homes are beyond repair and need to be torn down. Congresswoman Marcia L. Fudge from Ohio said in a statement that 15,000 of those vacant homes are located in Cleveland alone, and will cost an estimated $100 million to tear down.
“Home owners are depending on us to help stop the free fall of their property values,” Fudge said in a statement. “It’s time we develop and pass meaningful legislation that promotes the revitalization of our neighborhoods.”
Source: “Ohio, Mich. Lawmakers Write Obama on Vacant Homes,” Associated Press (Jan. 23, 2012)
Housing Inventory Down 22% Nationwide
Housing inventory slid to 1.89 million homes in December — down 6 percent from the previous month and 22.3 percent from the prior year, according to REALTOR.com.
Although supply ended 2011 at a four-year low, it remains to be seen whether it is a sign of a recovery — especially when considering there is a backlog of foreclosed homes that has yet to hit the market and some sellers are delaying sales until prices rise again.
In the 145 markets tracked by REALTOR.com, only Springfield, Ill., registered a year-over-year increase. Inventories plunged 49.7 percent in Miami, 49.1 percent in Phoenix, and 46.6 percent in Bakersfield, Calif.
Meanwhile, the national median price edged up 5 percent year-over-year; and asking prices climbed 32.5 in Miami, 21.7 percent in Naples, 21.5 percent in Fort Myers-Cape Coral, and 19.4 percent in Punta Gorda. However, asking prices were down 11 percent in Detroit, 10 percent in Chicago, 7.6 percent in Las Vegas, and 7 percent in Sacramento.
Source: "Housing Inventory Ends Year Down 22 Percent," Wall Street Journal (01/19/12)
Although supply ended 2011 at a four-year low, it remains to be seen whether it is a sign of a recovery — especially when considering there is a backlog of foreclosed homes that has yet to hit the market and some sellers are delaying sales until prices rise again.
In the 145 markets tracked by REALTOR.com, only Springfield, Ill., registered a year-over-year increase. Inventories plunged 49.7 percent in Miami, 49.1 percent in Phoenix, and 46.6 percent in Bakersfield, Calif.
Meanwhile, the national median price edged up 5 percent year-over-year; and asking prices climbed 32.5 in Miami, 21.7 percent in Naples, 21.5 percent in Fort Myers-Cape Coral, and 19.4 percent in Punta Gorda. However, asking prices were down 11 percent in Detroit, 10 percent in Chicago, 7.6 percent in Las Vegas, and 7 percent in Sacramento.
Source: "Housing Inventory Ends Year Down 22 Percent," Wall Street Journal (01/19/12)
Home Owner Satisfaction Remains High
Nearly three out of every four home owners say they are satisfied with their purchase – and the No. 1 reason for their satisfaction is pride they feel about owning a home, according to HomeGain’s 2012 National Home Ownership Survey.
In addition to pride, home owners also said they enjoy the freedom and control they have to make improvement and upgrades to their home.
Of the 1,400 home owners surveyed nationwide, satisfaction was found to be highest in the Northeast at 77 percent, followed by the Southeast at 73 percent, the West at 71 percent, and the Midwest at 68 percent.
“The HomeGain 2012 National Home Ownership satisfaction survey shows in spite of declines in the values of homes nationwide, satisfaction among home owners remains high at 72 percent,” said Louis Cammarosano, general manager of HomeGain.
Of the 28 percent of surveyed home owners who indicated they are dissatisfied, price depreciation was cited as the primary cause. Other reasons for their discontent include property taxes, homeowner association fees, and maintenance and repairs.
Noteworthy survey statistics:
Home owners who paid less than $75,000 for their home were the most satisfied at 77 percent.
Home owners who paid more than $800,000 were least satisfied at 69 percent.
Buyers who purchased a home via short sale had the highest satisfaction rate at 83 percent, followed by foreclosed home buyers at 79 percent.
New-home buyers had a satisfaction rate of 73 percent, and existing-home buyers had a satisfaction rate of 71 percent.
Home owners ages 55-65 were the most satisfied at 76 percent. Home owners between 18 and 25 had the lowest satisfaction rate at 45 percent.
By Erica Christoffer, REALTOR® Magazine
In addition to pride, home owners also said they enjoy the freedom and control they have to make improvement and upgrades to their home.
Of the 1,400 home owners surveyed nationwide, satisfaction was found to be highest in the Northeast at 77 percent, followed by the Southeast at 73 percent, the West at 71 percent, and the Midwest at 68 percent.
“The HomeGain 2012 National Home Ownership satisfaction survey shows in spite of declines in the values of homes nationwide, satisfaction among home owners remains high at 72 percent,” said Louis Cammarosano, general manager of HomeGain.
Of the 28 percent of surveyed home owners who indicated they are dissatisfied, price depreciation was cited as the primary cause. Other reasons for their discontent include property taxes, homeowner association fees, and maintenance and repairs.
Noteworthy survey statistics:
Home owners who paid less than $75,000 for their home were the most satisfied at 77 percent.
Home owners who paid more than $800,000 were least satisfied at 69 percent.
Buyers who purchased a home via short sale had the highest satisfaction rate at 83 percent, followed by foreclosed home buyers at 79 percent.
New-home buyers had a satisfaction rate of 73 percent, and existing-home buyers had a satisfaction rate of 71 percent.
Home owners ages 55-65 were the most satisfied at 76 percent. Home owners between 18 and 25 had the lowest satisfaction rate at 45 percent.
By Erica Christoffer, REALTOR® Magazine
6 Housing Markets Gear Up for a Rebound
Stronger job markets are pushing several cities’ housing markets into recovery-mode. Forbes and the Local Market Monitor, a real estate research firm, recently profiled its top picks for cities that are most poised for a real estate rebound. The list is based on housing and economic data from the 100 largest cities in the country.
“For real estate to do well you want to see two things: that incomes are growing rapidly … and that the growth in jobs attracts other people to that market,” Ingo Winzer, founder and president of Local Market Monitor, told Forbes.
Here are the cities topping the list:
1. San Jose, Calif.
Population growth: 5 percent
Job growth: 3.3 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 97 percent increase
2. Houston, Texas
Population growth: 7 percent
Job growth: 3 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 38 percent increase
3. Boston, Mass.
Population growth: 3 percent
Job growth: 2.1 percent
Home prices for the past 12 months: 1 percent decrease
New-home construction: 1 percent increase
4. Raleigh, N.C.
Population growth: 12 percent
Job growth: 1.4 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 14 percent increase
5. Austin, Texas
Population growth: 11 percent
Job growth: 1.5 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 20 percent increase
6. Oklahoma City, Okla.
Population growth: 4 percent
Job growth: 2.6%
Home prices for the past 12 months: 3 percent decrease
New-home construction: 1 percent decrease
Find out more about why these cities are poised for a rebound, and see what other cities made the list.
Source: “Cities Where Real Estate Is Ripe for a Rebound,” Forbes (January 2012)
“For real estate to do well you want to see two things: that incomes are growing rapidly … and that the growth in jobs attracts other people to that market,” Ingo Winzer, founder and president of Local Market Monitor, told Forbes.
Here are the cities topping the list:
1. San Jose, Calif.
Population growth: 5 percent
Job growth: 3.3 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 97 percent increase
2. Houston, Texas
Population growth: 7 percent
Job growth: 3 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 38 percent increase
3. Boston, Mass.
Population growth: 3 percent
Job growth: 2.1 percent
Home prices for the past 12 months: 1 percent decrease
New-home construction: 1 percent increase
4. Raleigh, N.C.
Population growth: 12 percent
Job growth: 1.4 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 14 percent increase
5. Austin, Texas
Population growth: 11 percent
Job growth: 1.5 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 20 percent increase
6. Oklahoma City, Okla.
Population growth: 4 percent
Job growth: 2.6%
Home prices for the past 12 months: 3 percent decrease
New-home construction: 1 percent decrease
Find out more about why these cities are poised for a rebound, and see what other cities made the list.
Source: “Cities Where Real Estate Is Ripe for a Rebound,” Forbes (January 2012)
Progressive Policy Institute Offers Suggestions to Boost Housing
Americans have lost $7 trillion in home equity in the past five years, and nearly 12 million homeowners are currently underwater.
The Progressive Policy Institute says these issues deserve just as much attention in the upcoming presidential election as the issue of unemployment, and in a January report, the institute offers a few suggestions to improve the housing market – and ultimately, the economy at large.
The first of the institute’s three suggestions is one it says has already been supported by Sen. Robert Menendez
(D-New Jersey) and Richard Smith, president and CEO of Realogy.
Shared appreciation mortgages, the Institute says, “are not only ‘fair’ but could actually work.”
In a shared appreciation mortgage, a homeowner receives a lower balance on his or her mortgage loan but promises to share any future appreciation when he or she eventually sells the home.
The institute’s second suggestion is for congress to create a “HomeK” account to help potential first-time homebuyers save for a down payment.
Under the proposal, individuals could designate up to 50 percent of their existing 401(k) contributions up to $50,000 toward a down payment on a home.
Lastly, the institute urges congress and the administration to end “regulatory uncertainty over whether a 20% down payment is required for a mortgage to be a ‘qualified residential mortgage’ under the Dodd-Frank Act.”
“[T]his requirement would unnecessarily stifle demand for housing and burden prospective buyers,” states the Progressive Policy Institute.
The Progressive Policy Institute says these issues deserve just as much attention in the upcoming presidential election as the issue of unemployment, and in a January report, the institute offers a few suggestions to improve the housing market – and ultimately, the economy at large.
The first of the institute’s three suggestions is one it says has already been supported by Sen. Robert Menendez
(D-New Jersey) and Richard Smith, president and CEO of Realogy.
Shared appreciation mortgages, the Institute says, “are not only ‘fair’ but could actually work.”
In a shared appreciation mortgage, a homeowner receives a lower balance on his or her mortgage loan but promises to share any future appreciation when he or she eventually sells the home.
The institute’s second suggestion is for congress to create a “HomeK” account to help potential first-time homebuyers save for a down payment.
Under the proposal, individuals could designate up to 50 percent of their existing 401(k) contributions up to $50,000 toward a down payment on a home.
Lastly, the institute urges congress and the administration to end “regulatory uncertainty over whether a 20% down payment is required for a mortgage to be a ‘qualified residential mortgage’ under the Dodd-Frank Act.”
“[T]his requirement would unnecessarily stifle demand for housing and burden prospective buyers,” states the Progressive Policy Institute.
FHA Steps Up Lender Requirements to Limit Default Risk
The Federal Housing Administration (FHA) on Friday announced new measures to strengthen standards for the lenders it works with – measures the agency says will help it better manage the risk that comes with insuring mortgages against default.
The new regulations institute tighter requirements for lenders authorized to insure mortgages on the agency’s behalf under the Lender Insurance mortgagee program. FHA says these institutions will be required to meet stricter performance standards to obtain and maintain their approval status.
More than 80 percent of all FHA forward mortgages are insured through lenders participating in the Lender Insurance program. FHA’s second mortgagee program – the Direct Endorsement program – requires the agency’s approval for endorsement.
In order to be eligible to participate in the FHA single-family programs as a
Lender Insurance mortgagee, a lender must be an unconditionally approved Direct
Endorsement mortgagee that is high performing.
Under the new rule, a Lender Insurance mortgagee must demonstrate a two-year seriously delinquent and claim rate at or below 150 percent of the aggregate rate for the states in which the lender does business.
HUD and FHA will review Lender Insurance mortgagee performance on an ongoing basis to ensure participating lenders continue to meet the program’s eligibility standards.
The new rule also establishes a process by which new HUD-approved lenders created through corporate mergers, acquisitions, or reorganizations may be considered for Lender Insurance authority.
In addition, FHA has shored up its processes for requiring lenders to cover potential losses from insurance claims paid on mortgages that involve fraud or that are found not to meet the agency’s underwriting guidelines, which could force lenders to buy back more defaulted loans.
For those loans insured by Lender Insurance lenders, HUD may require indemnification for “serious and material” violations of FHA origination requirements and for fraud and misrepresentation.
In a separate notice to be published soon, FHA plans to propose to reduce the maximum amount allowed for seller concessions, in which the seller contributes a share of the purchase price toward the buyer’s closing costs.
FHA says it will bring the maximum allowable amount to a level more in line with industry norms. The current level exposes FHA to excess risk by creating incentives to inflate appraised value, the agency explained in a press statement.
FHA says these measures will help to protect and strengthen its Mutual Mortgage Insurance Fund, which has fallen below the level mandated by Congress, while enabling the agency to continue to fulfill its mission of providing qualified borrowers with access to homeownership.
“Taken together, the changes announced today will protect FHA’s insurance fund from unnecessary and inappropriate risks while offering clear guidance to lenders regarding HUD’s underwriting expectations,” said Carol J. Galante, FHA’s acting commissioner.
“FHA must continue to strike a balance between managing risks to its insurance funds and ensuring that FHA products are offered as widely as possible to qualified borrowers,” Galante continued. “We hope that the added clarity and certainty provided through these rules will enable lenders to extend financing opportunities to larger numbers of American families.”
The new regulations institute tighter requirements for lenders authorized to insure mortgages on the agency’s behalf under the Lender Insurance mortgagee program. FHA says these institutions will be required to meet stricter performance standards to obtain and maintain their approval status.
More than 80 percent of all FHA forward mortgages are insured through lenders participating in the Lender Insurance program. FHA’s second mortgagee program – the Direct Endorsement program – requires the agency’s approval for endorsement.
In order to be eligible to participate in the FHA single-family programs as a
Lender Insurance mortgagee, a lender must be an unconditionally approved Direct
Endorsement mortgagee that is high performing.
Under the new rule, a Lender Insurance mortgagee must demonstrate a two-year seriously delinquent and claim rate at or below 150 percent of the aggregate rate for the states in which the lender does business.
HUD and FHA will review Lender Insurance mortgagee performance on an ongoing basis to ensure participating lenders continue to meet the program’s eligibility standards.
The new rule also establishes a process by which new HUD-approved lenders created through corporate mergers, acquisitions, or reorganizations may be considered for Lender Insurance authority.
In addition, FHA has shored up its processes for requiring lenders to cover potential losses from insurance claims paid on mortgages that involve fraud or that are found not to meet the agency’s underwriting guidelines, which could force lenders to buy back more defaulted loans.
For those loans insured by Lender Insurance lenders, HUD may require indemnification for “serious and material” violations of FHA origination requirements and for fraud and misrepresentation.
In a separate notice to be published soon, FHA plans to propose to reduce the maximum amount allowed for seller concessions, in which the seller contributes a share of the purchase price toward the buyer’s closing costs.
FHA says it will bring the maximum allowable amount to a level more in line with industry norms. The current level exposes FHA to excess risk by creating incentives to inflate appraised value, the agency explained in a press statement.
FHA says these measures will help to protect and strengthen its Mutual Mortgage Insurance Fund, which has fallen below the level mandated by Congress, while enabling the agency to continue to fulfill its mission of providing qualified borrowers with access to homeownership.
“Taken together, the changes announced today will protect FHA’s insurance fund from unnecessary and inappropriate risks while offering clear guidance to lenders regarding HUD’s underwriting expectations,” said Carol J. Galante, FHA’s acting commissioner.
“FHA must continue to strike a balance between managing risks to its insurance funds and ensuring that FHA products are offered as widely as possible to qualified borrowers,” Galante continued. “We hope that the added clarity and certainty provided through these rules will enable lenders to extend financing opportunities to larger numbers of American families.”
Rise in Home Sales Signifies Strengthening Market: Economists
The long-awaited housing recovery is beginning to blossom, according to industry experts taking a look at recent existing-home sales.
While admitting home sales “are still very low,” Paul Dales, chief economist at Capital Economics, says “it is clear that housing recovery is now well underway.”
The evidence: home sales have been on the rise for the past three months, posting a 5 percent increase in December.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), concurs with Dales’ assessment, saying “The pattern of home sales in recent months demonstrates a market in recovery.”
Yun suggests consumers are gaining confidence from “record low mortgage interest rates, job growth and bargain home prices.”
In addition to the 5 percent increase in December, NAR reported a 1.7 percent annual increase in existing-home sales in 2011, a total of 4.26 million homes for the year.
Distressed homes made up 32 percent of sales in December, according to NAR’s existing home sales report for the month.
Foreclosed home sales closed at about 22 percent below market rate in December, a discount 2 percent higher than that recorded a year earlier.
Investor demand remains steady with 21 percent of homes sold in December going to investors after this category of buyers took 19 percent of purchases in November and 20 percent one year ago.
Cash sales – commonly linked to investors – made up 31 percent of December’s existing-home sales. This rate was 28 percent in November and 29 percent a year ago.
Purchases by first-time home buyers declined in December – both from the previous month and the previous year. First-time home buyers accounted for 31 percent of purchases in December, down from 35 percent in November and 33 percent in December 2010.
Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.
“The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future,” Yun said.
However, listed inventory is only part of the equation, and according to CoreLogic’s latest numbers, shadow inventory stands at about 1.6 million.
Regardless, Dales believes sales will rise this year. “Housing still won’t contribute much to GDP growth over the next few years, but at least it will no longer subtract from it,” Dales says.
While admitting home sales “are still very low,” Paul Dales, chief economist at Capital Economics, says “it is clear that housing recovery is now well underway.”
The evidence: home sales have been on the rise for the past three months, posting a 5 percent increase in December.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), concurs with Dales’ assessment, saying “The pattern of home sales in recent months demonstrates a market in recovery.”
Yun suggests consumers are gaining confidence from “record low mortgage interest rates, job growth and bargain home prices.”
In addition to the 5 percent increase in December, NAR reported a 1.7 percent annual increase in existing-home sales in 2011, a total of 4.26 million homes for the year.
Distressed homes made up 32 percent of sales in December, according to NAR’s existing home sales report for the month.
Foreclosed home sales closed at about 22 percent below market rate in December, a discount 2 percent higher than that recorded a year earlier.
Investor demand remains steady with 21 percent of homes sold in December going to investors after this category of buyers took 19 percent of purchases in November and 20 percent one year ago.
Cash sales – commonly linked to investors – made up 31 percent of December’s existing-home sales. This rate was 28 percent in November and 29 percent a year ago.
Purchases by first-time home buyers declined in December – both from the previous month and the previous year. First-time home buyers accounted for 31 percent of purchases in December, down from 35 percent in November and 33 percent in December 2010.
Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.
“The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future,” Yun said.
However, listed inventory is only part of the equation, and according to CoreLogic’s latest numbers, shadow inventory stands at about 1.6 million.
Regardless, Dales believes sales will rise this year. “Housing still won’t contribute much to GDP growth over the next few years, but at least it will no longer subtract from it,” Dales says.
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