National Debt = $47K for Each Resident!
By · CommentsThe heads of President Barack Obama’s national debt commission painted a gloomy picture Sunday as the United States struggles to get its spending under control.
Bowles said if the U.S. makes no changes it will be spending $2 trillion by 2020 just for interest on the national debt.
“Just think about that: All that money, going somewhere else, to create jobs and opportunity somewhere else,” he said.
Simpson, the former Republican senator from Wyoming, and Bowles, the former White House chief of staff under Democratic President Bill Clinton, head an 18-member commission. It’s charged with coming up with a plan by Dec. 1 to reduce the government’s annual deficits to 3 percent of the national economy by 2015.
Bowles led successful 1997 talks with Republicans on a balanced budget bill that produced government surpluses the last three years Clinton was in office and the first year of Republican George W. Bush’s presidency. Simpson, as the Senate’s GOP whip in 1990, helped round up votes for a budget bill in which President George H.W. Bush broke his “read my lips” pledge not to raise taxes.
Despite their backgrounds, both Simpson and Bowles said they were not 100 percent confident of success this time around.
Simpson labeled the commission members “good people of deep, deep difference, knowing the possibility of the odds of success are rather harrowing to say the least.”
Bowles also said Congress had to be ready to accept the commission’s findings.
“What we do is not so hard to figure out; it’s the political consequences of doing it that makes it really tough,” he said.
Arkansas Gov. Mike Beebe was one of those leaders who sat in rapt attention during the presentation, one of the first in public by the commission leaders.
“I don’t know that I ever heard a gloomier picture painted that created more hope for me,” said Beebe, commending its frankness.
“Federal Housing Finance Agency” update!
By · Comments(FHFA) issued a statement on 7/7/10, concerning energy retrofit lending programs that are finances through a county or city’s tax assessment regime. The so-called Property Assessed Clean Energy (PACE) programs allow homeowners to finance energy retrofit improvements to their homes through an assessment on their property tax bill. They have created concerns because the loans acquire priority lien over existing mortgages.
In the statement, FHFA directs Fannie Mae, Freddie Mac and the Federal Home Loan Banks to follow certain guidelines concerning the PACE loans. These allow the agencies to purchase mortgages on properties that previously acquired a PACE loan with a first-lien position. However, the agencies are directed to develop new underwriting guidelines going forward. For these new loans, the agencies will be required to adjust loan-to-value and debt-to-income ratios to reflect the “maximum permissible” PACE loan amount available to borrowers.
More info: http://www.fhfa.gov/webfiles/15884/PACESTMT7610.pdf
Fannie Mae Mortgage Modifications
By · CommentsAfter announcing this week that it intends to crack down on strategic defaulters, Fannie Mae issued a servicing guide (download here) implementing another new policy — requiring servicers to verify income, liabilities, and monthly expenses for all borrowers prior to granting a permanent standard Fannie Mae mortgage modification.
Previously, servicers were allowed to evaluate borrowers for standard mortgage modifications using stated information from the borrower.
Now, the servicer must not agree to change the terms of a mortgage until it verifies the borrower has a hardship, determines that a permanent standard Fannie Mae mortgage modification is the appropriate foreclosure prevention alternative and obtains Fannie Mae’s prior written approval, the guideline said.
Items that must be verified include salary and other income with paystubs or benefits checks, bills and a credit report.
If a borrower that receives a Fannie Mae modification becomes 60 or more days delinquent within the first year after the effective date of the modification, the new policy requires servicers to “immediately” work with the borrower to pursue either a preforeclosure sale or deed-in-lieu of foreclosure, or commence foreclosure proceedings, in accordance with applicable state law. If the servicer determines another modification is appropriate for the borrower, the servicer must first obtain Fannie Mae’s prior written approval.
With as many as 1/3 of all mortgage defaults occurring by borrowers strategically deciding to walk away, Fannie Mae announced a plan to crack down on strategic defaulters with a policy announced Wednesday that prevents strategic defaulters from getting another Fannie Mae-backed mortgage for seven years.
Fannie Mae will also take legal action against borrowers who strategically default in order to recoup mortgage debt. These would be limited to locations that allow deficiency judgments.
Great article and information by AUSTIN KILGORE
Mortgage Rates Hit an All-Time Low
By · CommentsAverage interest on a 30-year fixed mortgage fell to an all-time low of 4.69 percent this week, down from 4.75 percent a week ago, reports Freddie Mac.
Although rates have held below 5 percent since early May, Michael Fratantoni of the Mortgage Bankers Association notes that demand for purchase loans has fallen in six of the past seven weeks and now is at a 13-year low. Consumers have grown used to low rates, he explains, adding that they balk at buying because they are more concerned about stagnant wages and high unemployment.
Source: Washington Post, Dina ElBoghdady (06/25/10)
Dealing With IRS “Tax Credit Rejections”
By · CommentsThe IRS has been rejecting first-time home buyer claims from anyone who shows a Form 1098 Mortgage Interest Expense in their prior year files.
In many cases, the applicants are entitled to the credit because their previous mortgage interest deduction is for a timeshare, mobile home, boat, or other recreational property.
If you have a client who is in this unfortunate position, here is some advice from Enrolled Agent Eva Rosenberg, who authors the Web site TaxMama.com.
• Respond to the IRS immediately and tell them why their rejection is wrong. Be prepared to prove that the mortgage the IRS is seeing isn’t on a personal residence. First-time home buyers are entitled to own other types of real estate and still get the home buyers credit, so provide proof that the previous mortgage was on something else.
• Send a letter explaining the situation and providing proof of a previous rental or other non-ownership living situation, including copies of rental contracts for the last three years, an old driver’s license showing that address, utility bills, etc.
• Home buyers who believe the IRS may view their situation in this way should be proactive, providing proof that they are a first-time buyer when they initially file for the credit.
• Anyone who is rejected after two attempts to explain the problem to the IRS should call the Taxpayers Advocate Service toll-free, (877) 777-4778, their Congressman, and their Senator, Rosenberg advises.
Source: TaxMama.com, Eva Rosenberg, EA (06/16/2010)
Could New Home Appraisal Rules Get Scrapped?
By · CommentsThere is an increasing amount of opposition to the new home appraisal rules as many mortgage brokers and real estate agents are serving up criticism that the Code “Home Valuation of Conduct “(HVCC) guidelines adopted in 2009 are resulting in inaccurate and low-ball appraisals.
The main argument amongst critics is that the new rules have undesirable affects where appraisers are now being overextended, underpaid and forced to churn out appraisals in a hurried fashion. Conversely, many mortgage lenders, including J.P. Morgan and CitiGroup, have vested interests in the appraisal management companies that now play the role of divvying up appraisal assignments, so they naturally are against revamping the current appraisal guidelines.
Implemented last spring by Fannie Mae and Freddie Mac, the Code of Conduct bans mortgage brokers and loan officers from selecting appraisers to valuate homes in the deals which they are brokering. The purpose is to prevent the inflated and sometimes fraudulent appraisals which were partly responsible for an artificial surge in home prices during the past decade.
According to a recent article by Jessica Holzer in the Wall Street Journal , realtors and mortgage brokers have succeeded in inserting language into a House-passed financial-regulation bill that would end the new protocols. The measure would direct federal regulators to come up with an improved set of rules.
Under the new system, appraisal management companies now solicit out appraisal assignments for a fraction of the cost of what the work used to pay - in some cases less than half of the industry’s former compensation rate. As a result, many appraisals end up in the hands of the lowest bidder, and the work is being done by appraisers who have limited industry experience or are lacking of knowledge as it pertains to a specific real estate market and neighborhoods.
“More and more people are leaving the appraisal business than ever before because appraisals are now going out to the lowest bidders, commanding lower pay and fees,” says Bill Schettler, Vice President of Sales at Total Mortage Services, LLC.
Mr. Schettler, who worked six years as an appraiser himself, added, “Unfortunately, because of what the appraisal management companies are paying, many people are no longer able to make a living in the industry and there are more inexperienced people now doing the job. What is happening now is that appraisers have to travel further and further to cover more territory, so they can’t be as familiar with the homes as they were before”
National Association of Mortgage Brokers CEO Roy DeLoach told the Journal that out-of-town appraisers hired by vendors are diminishing homeowner equity through home valuations that aren’t credible: “It’s basically hollowing out the equity in communities whether you intend to sell or not.”
Interesting information and “take” By Bradley Markano • Jun 10th, 2010 • first tuesday blogs the news
Many of the small businesses that have successfully weathered the recession thus far are now looking to take advantage of skyrocketing commercial vacancy rates, and move into new property that would formerly have been unaffordable. These investors looking to purchase commercial property are increasing, but they are consistently frustrated by a still-tight credit market.
Nationally, commercial real estate values have dropped over 40% in the aftermath of the millennium boom, and rents and operating costs have dropped accordingly, leading some businesses to see an opportunity for expansion. Unfortunately for business owners, however, most lenders have already been burned once, and are not yet ready to reenter the commercial market.
The default rate on commercial mortgages nationwide is currently at 4.2%, according to a study from Real Capital Analytics’ study. As a result, commercial lenders are reluctant to put more capital into originating income property loans unless the borrower demonstrates extensive security to back it up. Even those borrowers that ultimately secure financing must often wait twice as long for the loan to be processed, thanks to greatly increased underwriting scrutiny.
first tuesday take: As in residential real estate, rumors of tight credit in commercial markets are likely to prove overblown for buyers and their brokers who provide abundant data on the collateral property’s value and the buyer’s creditworthiness. While those who expect a return to the easy lending standards of the mid-2000s will be instantly disappointed, buyers with sufficient cash to make a large down payment are still able to locate financing.
Lenders, whether they be residential or commercial, only care about one thing: making loans so they can return to profitability. Buyers who show that they are less likely to default, and who can back up their creditworthiness with hard cash for a down payment, have little to fear.
So make the offer, get it accepted, and move on with the loan application process. And if the process collapses the first time or with the first lender, move on to the next deal and the next lender: somewhere, there is always a lender who will make that loan.
Re: “Commercial Deals Abound but Loans Are Scarce”, from the Wall Street Journal
Bradley Markano • Jun 10th, 2010 • first tuesday Realty Publications, Inc.
Proposal to Extend Tax-Credit Closings
By · CommentsThe National Association of REALTORS® today expressed thanks on behalf of America’s homebuyers to three Senators for introducing a measure to extend the present home buyer tax credit closing deadline to Sept. 30. They are Senate Majority Leader Harry Reid, D-Nev., and Sens. Johnny Isakson, R-Ga., and Chris Dodd, D-Conn.
“As the leading advocate for homeownership and housing issues, NAR commends these Senators for their attentiveness and sensitivity to thousands of qualified home purchasers, who through no fault of their own, are not able to meet the closing deadline of June 30 for the home buyer tax credit. Now we urge the Senate and the House to act quickly to pass this legislation and ease the minds and pocketbooks of these home buyers,” said NAR President Vicki Cox Golder.
NAR estimates that approximately 75,000 home buyers of distressed properties who have qualified for the tax credit and met the contract deadline of April 30 would not be able to close their transaction by the June 30 closing deadline. REALTORS® have reported as many as one-third of qualified applicants have been notified by lenders that their mortgages will not close before June 30 due to the sheer volume of applications in the pipeline.
“These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a work-flow jam with the lenders or other delays and might not be able to complete the purchase of their homes,” said Golder. “It would be a tragedy for them not to be able to complete the purchase in time to claim the credit.”
Golder said she also wanted to make this clear: “This amendment does not extend the deadline for home buyers to qualify for the tax credit; it extends the deadline for closing the transaction, from June 30 to Sept. 30. Since these applications were already in the pipeline and figured into the program’s cost, the extension of the closing deadline should not incur any further government costs.”
Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac last week released guidelines for implementing the Treasury Dept.’s Home Affordable Foreclosure Alternatives Program (HAFA). The new guidelines apply to loans owned or guaranteed by the GSEs; servicers are required to implement the new policies no later than Aug. 1.
While largely consistent with the HAFA guidelines for non-GSE mortgages, both Fannie and Freddie have implemented changes. To qualify for the Freddie Mac HAFA program, borrowers must be moreHAFA than 60 days delinquent and have cash reserves of less than $5,000 or three times the current monthly mortgage payment, whichever is greater. Similar to the non-GSE HAFA program, Fannie Mae allows borrowers to qualify if they are at imminent risk of default. However, Fannie prohibits borrowers from participating in HAFA if the borrower: Has the ability to continue making mortgage payment, but chooses not to do so; has substantial encumbered assets of significant cash reserves equal to or exceeding three times the borrower’s total monthly mortgage payment or $5,000, whichever is greater; or has high surplus income.
Fannie and Freddie both allow the real estate commission in the listing agreement, but not more than 6 percent. Consistent with the non-GSE HAFA program, Fannie and Freddie guidelines do not permit subordinate lien holders to require contributions from the real estate agent or borrower as a condition for releasing its lien and releasing the borrower from personal liability.
Easy Money is Gone!
By · CommentsThe 2010 NAR “Member Profile makes it clear that consumers’ difficulty in securing mortgage financing was the root problem in getting transactions to the closing table.” Agents haven’t studied financing in the last 15 years because obtaining a loan was so easy. The recently released Member Profile state that REALTORS with more than 16 years in the business were least likely to have some of the financing problems that agents with less experience were.
2010 NAR President Vicki L. Cox Golder suggest “It’s time to showcase your market knowledge and educate clients about why it’s still smart to buy a house or condominium – not only because of attractive interest rates and homeowner’s tax deductions but because home is where we make memories, build our future, and feel secure.”
People buy homes for emotional reasons like pride of ownership, a place to raise a family and share with friends. Owning a home is part of the American Dream. They justify the purchase with logical reasons like the tax benefits, investment aspects and current low interest rates.
Agents are turning their weaknesses into strengths with information and tools that help buyers and sellers understand the tax advantages, financing alternatives and investment aspects of homeownership. Buyers value agents who can skillfully guide them through this process of uncertainty and Sellers need professionals who understand how to package their home to sell.
Finding the “right” home is at the top of the list for buyers but if they can’t get financing, it will never have their address on it. Acquiring this specialized knowledge provides the solutions to the issues that are challenging buyers and keeping homes from selling.
This knowledge, accompanied with the proper tools, give professionals a distinct point of difference from other agents. Please let me know of any questions or unique assistance you may have!