There are tons of crazy things happening in the banking industry these days. If you've talked to a bank or mortgage broker about the possibility of a loan, line of credit, home equity loan, etc. then you know exactly what I'm talking about. There are tighter restrictions on consumers, which is not necessarily a bad thing. These restrictions aren't any tighter than they were 5-7 years ago before banks started handing out money to anybody that could sign a piece of paper- and at 100% LTV no less! The values of the properties being mortgaged were also totally inflated in a lot of areas in the United States. There should not be a case when a 3 Bedroom, 2 Bathroom, brick ranch with 2000 square feet built in 1967 should be selling for $735,000- that is unless it's sitting atop an oil field or diamond mine. So, property values were inflated and banks were making 100% loans to people on these properties.
At this same time, the Mortgage Bankers Association was purchasing a $53 Billion building in Washington, DC to serve as their new headquarters. They were growing out of their old space and were tired of leasing- they thought it would make a great investment. After all, I'm sure they knew somebody that would give them a loan : )
So, all was well, getting loans was easy, consumers were upgrading properties, and so was the Mortgage Banker's Association. THEN, there was the meltdown. Property prices began to correct and people were stuck with properties that they couldn't afford- properties that were worth less than the loan amount, and the owner(s) didn't qualify for refinancing.
These restrictions and problems for consumers getting approval aren't necessarily my concern in this entry- just the background for it- so I'll move on to my point. Consumers that were in the aforementioned situation began to analyze it, and some came to the conclusion that letting the property go into foreclosure was the best bet. They felt there was no way to overcome the lack of equity in their property, and they had to have some equity to refinance. They felt like it was a "rock and a hard place" situation, or an "up $%@t creek without a paddle," or any other cliche terms that you want to throw at it. The bottom line is that some saavy consumers figured out that it was the best move to make. Lenders weren't willing to work with consumers on adjusting the terms of their mortgage to allow them to stay in their property, and even began to pull guilt-trips on consumers who mentioned considering just letting the property go.
One of the biggest guilt-trips was when this practice of consumers letting their properties go into foreclosure started to become more widespread, and the head of the Mortgage Bankers Association released a letter to all consumers that told a big tale of how "mortgages were an obligation, and a promise to another." He went on and on about the importance of these agreements between consumers and lenders, and actually made reference to these responsibilites as "being one of the most important to the foundation of the building blocks of the American dream."
Well, things moved forward and were getting worse before they got better. So, the Mortgage Bankers Association decided to look at their own financial situation, the status of their building, it's loss in value, and inevitably decided to- YES, you guessed it- to allow it to go into foreclosure "because of a loss in equity that made the building a bad investment." They now rent a building two blocks over. They continuously refuse to comment on the move to everyone who inquires, and I guess it's like all other things, if they decline to talk about it long enough, people will start to forget about it
The hypocrisy in things - especially in big establishments like Banking never ceases to amaze...
Friday, October 29, 2010
Tuesday, September 28, 2010
Existing Home Sales Moving On Up / FHA Changes Minimum Credit Score
Existing-home sales rose in August following a big correction in July, according to the National Association of Realtors®. Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 4.13 million in August from an upwardly revised 3.84 million in July, but remain 19.0 percent below the 5.10 million-unit pace in August 2009.
Lawrence Yun, NAR chief economist, said home sales still remain subpar. “The housing market is trying to recover on its own power without the home buyer tax credit. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.43 percent in August from 4.56 percent in July; the rate was 5.19 percent in August 2009.
Yun added, “Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the home buyer tax credit stimulus. Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own.”
The national median existing-home price for all housing types was $178,600 in August, up 0.8 percent from a year ago. Distressed homes rose to 34 percent of sales in August from 32 percent in July; they were 31 percent in August 2009.
NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said consumers have been getting mixed signals about the housing market. “People understand the good affordability conditions with stable home prices in most areas, but they’re concerned about the economy and speculation on Wall Street,” she said. “We need to stick with the facts about the long-term value of homeownership and avoid unrealistic assessments. Tight credit and slow short sales are ongoing problems – expediting short sales will help the market to recover more quickly.”
Total housing inventory at the end of August slipped 0.6 percent to 3.98 million existing homes available for sale, which represents an 11.6-month supply at the current sales pace, down from a 12.5-month supply in July.
A parallel NAR practitioner survey shows first-time buyers purchased 31 percent of homes in August, down from 38 percent in July. Investors rose to a 21 percent market share in August from 19 percent in July; the balance of purchases were by repeat buyers. All-cash sales slipped to 28 percent in August from 30 percent in July.
Single-family home sales rose 7.4 percent to a seasonally adjusted annual rate of 3.62 million in August from a level of 3.37 million in July, but are 19.2 percent lower than the 4.48 million level in August 2009. The median existing single-family home price was $179,300 in August, up 1.2 percent from a year ago.
Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in August from a year ago (the price in one of 20 tracked markets was not available). Existing single-family home sales were down in all 20 metro areas from August 2009.
Existing condominium and co-op sales increased 8.5 percent to a seasonally adjusted annual rate of 510,000 in August from 470,000 in July, but are 17.1 percent below the 615,000-unit pace in August 2009. The median existing condo price5 was $174,000 in August, which is 2.8 percent below a year ago.
Regionally, existing-home sales in the Northeast rose 7.9 percent to an annual level of 680,000 in August but are 24.4 percent below August 2009. The median price in the Northeast was $260,300, up 7.6 percent from a year ago.
Existing-home sales in the Midwest increased 5.0 percent in August to a pace of 840,000 but are 26.3 percent below a year ago. The median price in the Midwest was $149,600, up 0.4 percent from August 2009.
In the South, existing-home sales rose 5.2 percent to an annual level of 1.62 million in August but are 13.4 percent below August 2009. The median price in the South was $155,000, down 1.5 percent from a year ago.
Existing-home sales in the West jumped 13.8 percent to an annual pace of 990,000 in August but are 16.1 percent lower than August 2009. The median price in the West was $214,700, which is 2.5 percent below a year ago.
COURTESY WALTER MOLONY, NATIONAL ASSOCIATION OF REALTORS (www.Realtor.org)
Additionally, On September 3, 2010, the US Department of Housing and Urban Development (HUD) released Mortgagee Letter 2010-29, Minimum Credit Scores and Loan-to-Value Ratios. This is in accordance with Federal Register Notice FR-5404-N-01, which proposes minimum credit scores and loan-to-value (LTV) ratios. So, we'll have to see what effect this new score guideline has on sales as we move forward. Here's the jist of it:
Effective October 4, 2010, borrowers with a credit score below 500 are not eligible for FHA-insured mortgage financing. Borrowers with a credit score between 500 and 579 are limited to 90 percent LTV, which requires a 10 percent down payment. Borrowers with a credit score of 580 or higher are eligible for maximum financing, which requires a minimum 3.5 percent down payment. Borrowers with nontraditional credit histories may be eligible for maximum financing.
Lawrence Yun, NAR chief economist, said home sales still remain subpar. “The housing market is trying to recover on its own power without the home buyer tax credit. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.43 percent in August from 4.56 percent in July; the rate was 5.19 percent in August 2009.
Yun added, “Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the home buyer tax credit stimulus. Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own.”
The national median existing-home price for all housing types was $178,600 in August, up 0.8 percent from a year ago. Distressed homes rose to 34 percent of sales in August from 32 percent in July; they were 31 percent in August 2009.
NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said consumers have been getting mixed signals about the housing market. “People understand the good affordability conditions with stable home prices in most areas, but they’re concerned about the economy and speculation on Wall Street,” she said. “We need to stick with the facts about the long-term value of homeownership and avoid unrealistic assessments. Tight credit and slow short sales are ongoing problems – expediting short sales will help the market to recover more quickly.”
Total housing inventory at the end of August slipped 0.6 percent to 3.98 million existing homes available for sale, which represents an 11.6-month supply at the current sales pace, down from a 12.5-month supply in July.
A parallel NAR practitioner survey shows first-time buyers purchased 31 percent of homes in August, down from 38 percent in July. Investors rose to a 21 percent market share in August from 19 percent in July; the balance of purchases were by repeat buyers. All-cash sales slipped to 28 percent in August from 30 percent in July.
Single-family home sales rose 7.4 percent to a seasonally adjusted annual rate of 3.62 million in August from a level of 3.37 million in July, but are 19.2 percent lower than the 4.48 million level in August 2009. The median existing single-family home price was $179,300 in August, up 1.2 percent from a year ago.
Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in August from a year ago (the price in one of 20 tracked markets was not available). Existing single-family home sales were down in all 20 metro areas from August 2009.
Existing condominium and co-op sales increased 8.5 percent to a seasonally adjusted annual rate of 510,000 in August from 470,000 in July, but are 17.1 percent below the 615,000-unit pace in August 2009. The median existing condo price5 was $174,000 in August, which is 2.8 percent below a year ago.
Regionally, existing-home sales in the Northeast rose 7.9 percent to an annual level of 680,000 in August but are 24.4 percent below August 2009. The median price in the Northeast was $260,300, up 7.6 percent from a year ago.
Existing-home sales in the Midwest increased 5.0 percent in August to a pace of 840,000 but are 26.3 percent below a year ago. The median price in the Midwest was $149,600, up 0.4 percent from August 2009.
In the South, existing-home sales rose 5.2 percent to an annual level of 1.62 million in August but are 13.4 percent below August 2009. The median price in the South was $155,000, down 1.5 percent from a year ago.
Existing-home sales in the West jumped 13.8 percent to an annual pace of 990,000 in August but are 16.1 percent lower than August 2009. The median price in the West was $214,700, which is 2.5 percent below a year ago.
COURTESY WALTER MOLONY, NATIONAL ASSOCIATION OF REALTORS (www.Realtor.org)
Additionally, On September 3, 2010, the US Department of Housing and Urban Development (HUD) released Mortgagee Letter 2010-29, Minimum Credit Scores and Loan-to-Value Ratios. This is in accordance with Federal Register Notice FR-5404-N-01, which proposes minimum credit scores and loan-to-value (LTV) ratios. So, we'll have to see what effect this new score guideline has on sales as we move forward. Here's the jist of it:
Effective October 4, 2010, borrowers with a credit score below 500 are not eligible for FHA-insured mortgage financing. Borrowers with a credit score between 500 and 579 are limited to 90 percent LTV, which requires a 10 percent down payment. Borrowers with a credit score of 580 or higher are eligible for maximum financing, which requires a minimum 3.5 percent down payment. Borrowers with nontraditional credit histories may be eligible for maximum financing.
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