Galbreath Realtors

442 tips to keep your house in tip-top shape

2012-01-31T11:40:00.002-05:00

Book Review: 'What's a Homeowner to Do?'
By Tara-Nicholle Nelson
Inman News®

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Book Review
Title: "What's a Homeowner to Do?"
Author: Stephen Fanuka and Edward Lewine
Publisher: Artisan, 2011; 432 pages; $17.95

Nearly every mother will attest that at some point in her parenting career, often while still pregnant, every worst-case scenario that could ever possibly happen to her progeny (or progeny-to-be) has run through her mind.

Laid-back moms take a deep breath and dismiss such fears as fanciful.

But many others take the Scout-inspired "be prepared" approach, taking serious measures against kidnapping by tagging their kids with GPS-enabled trackers; against school admission drama by sticking their toddlers in enrichment classes ranging from Kinder Kung Fu to Mandarin; and against the ills of being whatever the opposite of well-rounded is (ill-rounded? squared?) by enrolling them in hip-hop dance, golf, Latin and Hebrew school -- all at the same time, all before they reach grade school.

This is yet one more way in which buying a home has parallels to birthing -- and raising -- children. Years before they ever buy, when they've barely begun padding their down-payment nest eggs, buyers-to-be report tossing and turning, waking up with night sweats, concerned about all the calamities that might befall their home.

What if a hurricane hits? An earthquake? What if they've been completely spoiled by apartment living, neglect to spend 10 hours every weekend working on their house and let the place fall into ruin?

What about all the more mundane, and more-likely-to-arise events that go along with homeownership: Will their effort to unstick a window send them to the hospital, or their do-it-yourself efforts to replace a single roof shingle spiral into a bigger leak than they had before?

These nightmarish concerns of homebuyers everywhere are precisely the issues addressed in the meaty little tome, "What's a Homeowner to Do?" by DIY Network star/contractor Stephen Fanuka and co-author Edward Lewine.

If you've ever bought one of those little gift books that has a year's worth of daily inspirational messages, this book will remind you of one of those -- on steroids. It's a small-format book filled with 442 tips, diagrams, and easy-to-use, bite-sized tutorials for do-it-yourself home improvement, maintenance and safety projects.

Fanuka, the star of the show "Million Dollar Contractor," teams up with Edward Lewine (who writes a couple of home improvement columns for The New York Times Magazine) to comprehensively catalog and address precisely the sorts of items that keep buyers and homeowners awake at night, offering their insomnia-soothing home improvement knowledge in a highly digestible format.

Throughout, they flag items that homeowners need to maintain on a regular basis to avoid disasters, parse out which items owners can do themselves (and which they should refer to the pros), empower them to ask the right questions and have the right conversations with those pros, and walk them through simple instructions for doing it themselves, where applicable.

The book starts out with a "green manifesto" that briefs readers on all the ways in which their homes impact the environment by offering them a long bullet point list of choices they can make to green their homes. It then moves on to cover the down-and-dirty, do-it-yourself tutorials with a chapter on how to assemble and use a basic toolkit, including what not to do (e.g., get "mesmerized by fasteners").

Then, the book proceeds to offer hundreds of mini-lessons categorized by area of a home, from the exterior, to windows, plumbing, electrical, HVAC, and such subjects as carpentry, doors and locks, walls, basements, garages, yards, and safety and security issues.

Many of these lessons, which run from how to locate a roof leak to how a door lock works, come complete with the authors' "Tricks of the Trade," pithy one-liners with uber-handy suggestions, workarounds, troubleshooting, insider secrets for handling common issues and even warnings for avoiding common complications.

And the range of topics the authors cover maps directly to the range of concerns real homeowners have, from maintaining their roofs to installing baseboards, cabinet doors, landscape lighting and supports for adjustable shelves.

Often, these sorts of tips books can be tough to use for readers who have a high need for information -- those who want to know why they should do things a particular way, or why they should trust the proffered advice.

But interspersed throughout the book's tips on what to do to your home are highly interesting briefings on "how" things in your home work. In short-and-sweet plain English, Fanuka and Lewine answer questions like "What's so important about rain gutters?" and "How are wooden stairs constructed?"

If you own a home and feel at loose ends when it comes to knowing what you should be doing to keep it in tip-top shape, "What's a Homeowner to Do" is an accessible, yet smart, primer and reference guide you'll turn to time and time again. If you're still in house hunt mode, definitely put it on your housewarming registry -- it'll save you some sleepless nights, and maybe even some money!

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Refinance or modify while it's still possible

2012-01-25T11:24:00.000-05:00

Refinance or modify while it's still possible
As income and property values change, so do your chances to qualify

By Jack Guttentag
Inman News®

Editor's note: This is the first of a multipart series.

Interest rates have been very low for several years, and right now they are lower than ever, yet millions of mortgage borrowers who could profit from a refinance haven't.

Similarly, millions of borrowers who are having trouble making their mortgage payments but want to remain in their homes could have their mortgages modified to make the payment affordable but haven't.

The reasons in both cases probably include apathy, resignation and ignorance, but this article is about ignorance only. I find that many borrowers are even hazy about the difference between a refinance and a modification.

Refinance vs. modification

In a refinance, you take out a new mortgage, either from your current lender or from a different one, and use the proceeds to pay off your existing mortgage. In a modification, the terms of your current mortgage are changed by your existing servicer, usually for the purpose of reducing the payment.

Most often this involves an interest-rate reduction, but it may also include a term extension and, in some cases, the loan balance may be reduced.

A refinance is a market-based transaction entered into by a lender who wants the new loan. A modification is an administrative measure designed to prevent the costs of a foreclosure. In both cases, however, the borrower must document an ability to make the new payment.

Refinance profitably if you can

In general, borrowers should refinance if a profitable refinance option is available to them. A refinancing will not drop a borrower's credit score, while a modification will. Refinancing borrowers can deal with their existing lenders but are free to shop alternatives.

A modification is a lot more complicated, takes a lot more time, and borrowers are wholly dependent on their existing servicers, which means that they have no bargaining power.

Qualifying for a refinance vs. qualifying for a modification

Declining home values have severely restricted the ability of many borrowers to refinance by eroding the equity in their homes. (Equity is property value less the mortgage balances.) With an important exception noted below, borrowers who have negative equity cannot qualify.

Borrowers with equity of 3 percent to 20 percent can qualify if they purchase mortgage insurance, which in some but not all cases will eliminate the profit from the refinance.

Borrowers with equity of 20 percent or more are best positioned to refinance profitably. In contrast, insufficient or negative equity will not bar a modification.

A low credit score will also prevent a refinance, but not a modification. Because lenders have become extremely risk-averse in the post-crisis market, credit scores have increased in importance and are related to equity.

On a Federal Housing Administration (FHA) mortgage, for example, the minimum score is usually 620, but a 620 score may require equity of 15 percent. If the borrower's equity is the minimum of 3 percent, the required credit score is likely to be 660.

Borrowers who have suffered income declines to the point where the ratio of housing expense to income is viewed as excessively high will have their refinance applications rejected. However, an income decline of this magnitude will not necessarily prevent a loan modification.

On the contrary, an income decline that weakens the ability of the borrower to continue current payments but still enables the borrower to afford lower payments is the major problem loan modifications are designed to meet.

Borrowers can check on whether they qualify for a refinance using the new qualification calculator on my website.

The HARP exception

The earlier statement that borrowers with negative equity cannot refinance has a major exception: If their loan is owned by Fannie Mae or Freddie Mac, they are eligible for refinancing under the Home Affordable Refinance Program (HARP). This program was recently extended and liberalized.

The previous negative equity ceiling of 25 percent was eliminated for fixed-rate mortgages; fees were reduced; the requirement for a new appraisal was eliminated in some cases; and incentives were provided to the lenders servicing the loans to refinance them.

Qualifying for a modification

Determining whether a borrower is eligible for a modification is a complicated exercise on which the rules are anything but clear. The government-supported program, which differs from the strictly private programs, requires that the borrower's income be large enough to afford a reduced payment but it cannot exceed 3.23 times the current mortgage payment. Further, the borrower cannot have "sufficient liquid assets" to make the payments, whatever that means.

In addition, the owner of the loan must be better off with the modification than without it, which is determined by a complicated algorithm that is available to servicers but not to borrowers or to me. The servicer has the final say.

More on navigating the modification maze next week.

(Special thanks to Igor Roitburg.)

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

Perspectives on a 'better' real estate market

2012-01-18T10:26:00.002-05:00

Housing recovery may not bring a sales spike
By Glenn Roberts Jr.
NEW YORK -- When the real estate market improves has a lot to do with your perspective on the market, said Alex Perriello, president and CEO for Realogy Franchise Group, during a panel presentation Thursday at the Real Estate Connect conference.
"Oftentimes I'm asked, 'When's the market going to get better?' It all depends on how you define the word 'better,' " Perriello said during a panel presentation titled "The State of Real Estate: The Year Ahead."

"If you define 'better' as 'When will I not have to deal with foreclosures, short sales, underwater homes, people with damaged credit, (problems with appraisals), tough lending standards?' the answer to that is 'No time soon' -- at least for the next two or three years, and in some places, depending on where you live, it could be much longer than that."

He added, "If you define 'better' as 'When am I going to make more money in this business?' he noted that even if real estate sales fall to 4 million this year -- less than the 4.2 million in 2011, $35 billion in sales commissions are going to be earned by someone in this industry over the next 12 months." Realogy operates company-owned offices and franchise networks under the Coldwell Banker, Century 21, Sotheby's International Realty, and Better Homes and Gardens Real Estate brands, among others.

Diana Olick, real estate correspondent for CNBC and author of the "Realty Check" blog at CNBC.com, who also participated in the panel session, said she doesn't expect a sharp rebound once the real estate recovery takes hold.

She said she expects that at some point in the middle of 2012 "we are going to see the price stabilization we need, then people are going to start to buy," adding, "I don't think we're going to see a great surge up ... we're going to see pockets of strength in certain markets."

The factors that she expects will keep the real estate market subdued: deflated consumer confidence, and the need to work through the stream of distressed properties.

Olick and Perriello agreed that reduction of principal for distressed homeowners has proven one of the most effective deterrents to foreclosure, and panelists generally agreed that the foreclosure process is taking far too long to run its course in many areas.

Olick said that the problem is that many homeowners appear to be "staying in their houses and gaming the system," living in their homes without paying the mortgage for several years, in some cases. "That's a big problem right now," Olick said.

She also said she believes that investors will be at the forefront of the real estate recovery.

While investors -- namely house-flipping speculators -- have been vilified for their role in driving up prices during the boom years, Olick said that "it is the private equity, the institutional markets, coming in and taking the distress out of the markets that we need right now. That's going to be the strength in the market this year, and that's a good thing."

Margaret Kelly, CEO for Re/Max LLC and a fellow panelist, said that real estate professionals "have to embrace investors," agreeing that investors have an important role to play in working through excess inventory. Many investor-bought properties are converted to rental housing, she noted.

Kelly said she believes the short-sale process must be improved and expedited, and appraisal reform is also needed. "Appraisals have been a nightmare," she said.

Perriello's primary hope for the housing market: "If I could fix one thing, it would be a clear, concise national housing policy from Washington, D.C.

"If you think about the last three or four years, it's been a mixed bag," he said. "On the good side we've had government agencies buying up mortgage-backed securities, which has provided capital to the market, which has been a good thing -- it's kept interest rates low."

The series of federal homebuyer tax credit programs have also provided some welcome relief, he said.

"On the negative side, you've got legislation that's been passed -- like Dodd-Frank would be a perfect example -- that's now in the hands of the regulators. And if the regulators have their way it's going to be, I believe, very damaging for housing and it's going to make mortgage lending even more difficult for the homebuyer to get a loan and it's going to be more expensive."

There have also been mixed messages over the mortgage interest tax deduction, and policy reversals over loan limits, he said.

"People are concerned, there's doubt in the market, and whenever there's uncertainty and doubt in the market people sit back and say, 'I think I'll wait,' " he said.

Contact Glenn Roberts Jr.:

2 best ways to boost home's energy efficiency

2012-01-04T13:45:00.000-05:00

Why replacing windows is not one of them

By Arrol GellnerInman News®

The power of real estate negotiators

2012-01-04T13:43:00.000-05:00

The power of real estate negotiators

Letter to the Editor
By Inman News
Inman News®

Re: 'You can't predict the future, but you can plan for it' (Dec. 27)

Dear Editor:

One of the main points of the article by Gahlord Dewald was that a negotiation expert was only necessary when the "two sides" are relatively close in power. He indicates that when one side is particularly powerful or one side particularly vulnerable, there is little point in negotiation.

It is my experience that when there is significant disparity in the power of the parties, negotiating skill is very significant. I have spent most of my adult life negotiating real estate transactions, and it is the negotiator who makes the difference -- not the power of the parties.

A good negotiator is not a steamroller; a good negotiator is a fine-tuned instrument who can evaluate needs and wants and match each participant's needs to the available capital. The more powerful the opponent, the more delicate the touch required.

Negotiation with the government, for example, as Mr. Dewald points out, pits David against Goliath. The point Mr. Dewald tries to make is that in such cases, negotiation has little to do with the outcome.

I have been in that position, and the poor negotiator is indeed at a disadvantage. The good negotiator works to find the goal of the government and uses that to the advantage of the client. You may not win the battle, but artful negotiation will win your client a better outcome.

For example (a real one), the government was widening an exit ramp ... there was never a doubt that it would eventually get the ramp. By negotiation, we were able to save a 40-foot-high road sign for our client (even when the city demanded it be removed) and increase the award to allow our client to rework his lot's traffic flow.

This was (accomplished without) holding up the project with a protracted legal battle, and being willing to put up with several months of business disruption. Our client now has the only highway sign for miles in either direction, and even though his access was harmed, his business has maintained its sales.

While I do not question the wisdom of planning for the new realities of real estate, I also suggest that remembering our strengths and not underestimating that value is worthwhile.

Greg Semos
REALTOR®, Regency Real Estate Brokers
Mission Viejo, Calif.

Contact Inman News:

4 steps to buy again after foreclosure

2011-12-20T11:50:00.000-05:00

Mood of the Market
By Tara-Nicholle Nelson
Inman News®

Homeowners facing foreclosure seem to be desperate to buy again.

Frequently, I receive letters from someone who hasn't yet lost their home to foreclosure but anticipates they soon will, and wants to be able to get back into the market, quick-like.

Many claim their haste is because they don't want to miss out on today's bargain housing prices or interest rates. Yet neither seems poised to rise significantly any time soon.

In the same breath, many of these folks say they're ready to pay top dollar for their next home, and pay an additional premium if they are forced to rely on lease-to-own, seller financing, or a hard-money mortgage.

Others claim they don't want to miss out on the opportunity to build equity in a home instead of paying rent, or cite the tax advantages of homeownership as the piece they particularly want to retain.

My advice is almost always this: Slow down! Most legitimate loan programs now impose a three-year-plus waiting period after a borrower loses a home to foreclosure, even if they would otherwise qualify for a mortgage based on their credit score, income and assets.

Here are my four suggestions for how you can wisely use that waiting period to recover from a foreclosure -- these steps also do double duty in terms of setting you up for success and sustainability the next time you buy a home.

1. Feel the pain.

Many folks who write to me are still in the early stages of grief at the loss of their home: anger and denial. They are angry at the bank, and in denial about the loss of their home and its advantages, from status to tax write-offs.

What I know is that getting through this grief is an essential first step to truly moving forward. Inherent in grief is an acknowledgement that something is dead and over. The acceptance of that finality is what allows you to move forward and learn the lessons that such experiences can teach.

As long as you're stuck in the emotional protestations of how unfair it was that you lost your home, or spinning in a place of outrage about the Wall Street bailouts, you're probably not making emotional progress to the point where you can begin to learn from your experience.

2. Metabolize the loss.

Henry Cloud, bestselling author of "Necessary Endings: The Employees, Businesses, and Relationships That All of Us Have to Give Up in Order to Move Forward" (Harper Business, 2011), recommends that we treat our painful past experiences as our bodies do food, metabolizing them by taking away the lessons we can distill from them that will fuel our future decisions, and leaving behind the pain and other toxic wastes from the experience.

Individuals and couples should take time out to acknowledge what has happened, and distill and discuss mistakes that were made and insights you've gained so that you can avoid repeating them in the future. It's a meaningful method for progressing past grief and repositioning yourself to make smarter decisions about your money and your mortgage for the rest of your life.

3. Avoid rebound home purchases.

There's a whole lot of what I call tuition -- the price we pay to learn life lessons -- involved in the loss a home to foreclosure. If rush in too quickly to the next home purchase, chances are good we'll miss the lesson and get nothing for the tuition. This is evident in the gymnastics many foreclosed homeowners are considering going through in order to buy a home at all costs. These may mirror their willingness a few years ago to take on an unsustainable mortgage, which is what got some portion of them into foreclosure in the first place.

Trying to replace our losses on the rebound, be it after a breakup or after a foreclosure, is how people end up repeating their mistakes. Making new, unsustainable mortgage commitments and chronically overspending or over borrowing is no different from your friend who keeps repeating the same old dysfunctional relationship patterns, year after year.

4. Heal your finances.

My advice to foreclosed homeowners is to devote some real time to working on their finances, without worrying about buying another home. Get your debt paid down or off. Change your spending habits and your overall relationship with money. Get your taxes current and paid. Save some money. Create the habit of paying every bill on time every time. Eliminate unnecessary monthly expenses. Work the programs in "365 Days to Organized Finances or Financial Recovery," or some similar book, or both. Focus for awhile on your career development.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Top reasons to sell home in winter

2011-11-30T12:37:00.000-05:00

Aside from less competition, low borrowing costs give buyers incentive
By Dian Hymer

We're getting close to the end of the year, which begs the question of whether it's worthwhile trying to sell your home now. Is it a waste of time? Will it sit on the market and become shopworn? Should I take my house off the market for the holidays? Will the home-sale market be better for sellers in 2012? The first question you need to ask yourself is: Are you emotionally prepared to sell? Selling is a challenge for most sellers, although some markets are better than others. Unless you bought more than eight to 10 years ago and preserved your equity, you may not be able to sell for enough to pay off the mortgages secured against the property and the other costs of selling. For sellers who have no additional assets, a short sale or foreclosure may be the only option. If so, first look into government programs that might help you out financially. Also, talk to your attorney and tax adviser. Sellers who have the resources to make up the difference between the sale price and the amount they owe need to ask themselves if they are willing to pay the additional cash in order to sell and move on. There are two reasons why you might prefer bringing cash to closing. One is that your credit will not be negatively impacted, as would be the case with a short sale or foreclosure. The second is that many buyers shy away from short sales because of the lengthy and uncertain process involved. The next thing to consider is the condition of your home. Is it ready for the market? The most salable homes are those that are in move-in condition. Before racing to the hardware store, ask your REALTOR® about how much competition there would be for your home if you put it on the market before the holidays. Some areas are shy on inventory of good homes on the market. If so, now could be a good time to sell. HOUSE HUNTING TIP: The supply/demand ratio plays a significant role in the health of a local real estate market. No matter what is said about the housing market nationally, it's the local picture that tells the tale in terms of the possibility of selling your home at any given time. Most sellers don't put their homes on the market during the last or first couple of months of the year. The inventory of homes for sale tends to dwindle during the winter months. Interest rates are low. So, if there are buyers in your local market, you may be at an advantage selling when most sellers are waiting. Some sellers feel that if they've waited this long to sell, they should put the process on hold until spring and get the house ready in the meantime. Certainly, it's not a good idea to put your house on the market until it looks great. But if you and your house are ready to sell, move ahead. The market in general tends to slow down over the holidays. But rather than pull your house off the market and miss a likely prospect, change the showing procedure to require advance notice. And enjoy your holidays. A sale before year end could be a great holiday gift. There is a lot of pent-up demand, on both the buyer and seller sides. Sellers have been waiting for a better time to sell. Buyers have been waiting for more quality inventory and a sense that prices have bottomed or are close to it. THE CLOSING: Recent projections call for another five or so years of bouncing along close to the bottom of this market cycle. Many experts believe that the big price declines are behind us. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide." Contact Dian Hymer:

Economic worries keep lid on mortgage rates

2011-11-30T11:58:00.001-05:00

Rates at or near record lows for fourth week in a row
By Inman News
Inman News™

A weekly survey of lenders by Freddie Mac showed mortgage rates at or near record lows for a fourth consecutive week amid growing expectations that Europe is headed for a recession that will slow U.S. growth.

A separate survey by the Mortgage Bankers Association showed applications for purchase loans jumped to the highest level since August, but demand remained below levels seen at the same time last year.

Freddie Mac's Primary Mortgage Market Survey showed rates for 30-year fixed-rate mortgages averaged 3.98 percent with an average 0.7 point for the week ending Nov. 23, down from 4 percent last week and 4.4 percent a year ago. Rates on 30-year fixed-rate loans hit a 2011 high of 5.05 percent in February, before plummeting to an all-time low in records dating to 1971 of 3.94 percent during the week ending Oct. 6.

Rates on 15-year fixed-rate mortgages averaged 3.3 percent with an average 0.7 point, down from 3.31 percent last week and 3.77 percent a year ago. The 15-year loan, a popular refinancing option, reached a 2011 high of 4.29 percent in February, before falling to an all-time low in records dating to 1991 of 3.26 percent in October.

For five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.91 percent with an average 0.6 point, down from 2.97 percent last week and 3.45 percent a year ago. That's a new all-time low in records dating to 2005, and a 1 percentage point drop from the 2011 high of 3.92 percent seen in February.

Rates on one-year Treasury-indexed ARM loans averaged 2.79 percent with an average 0.6 point, down from 2.98 percent last week and 3.23 percent a year ago. That's also an all-time low in Freddie Mac records dating back to 1984. The one-year ARM saw a 2011 high of 3.4 percent in February.

Looking back a week, the MBA's Weekly Mortgage Applications Survey showed applications for purchase loans were up a seasonally adjusted 8.2 percent during the week ending Nov. 18 compared to the week before. The survey showed demand for purchase mortgages was still down 4.8 percent from a year ago.

Economic uncertainty makes relatively safe bets like mortgage-backed securities that fund most home loans popular with investors.

In a Nov. 18 forecast, Fannie Mae economists said they expect rates on 30-year fixed-rate mortgages to average 4.1 percent next year and 4.4 percent in 2013.

Fannie Mae is forecasting that existing-home sales will remain flat next year at 4.96 million, before rising 4.7 percent to 5.19 million in 2013.

The U.S. remains vulnerable to shocks, including the ongoing financial crisis in Europe and the debate over fiscal policy in the U.S., Fannie Mae said in releasing the forecast. It "appears likely" that Europe will slip into a recession, Fannie Mae economists said, which will weigh on U.S. growth in 2012.

In the U.S., recent economic, employment and housing indicators have been in positive territory, and there's been no slide back into U.S. recession.

"Despite a small numerical pickup in housing activity, the housing market continues to be essentially flat and we do not expect the recent uptick to be a sustained trend," said Fannie Mae chief economist Doug Duncan in a statement.

Contact Inman News:

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Letter to the Editor

Home Affordable Refinancing Program revamped to boost refis

2011-11-15T11:25:00.000-05:00

Lenders shielded from claims associated with original loan
By Inman News

In an attempt to boost participation in the Obama administration's mortgage refinance program, Fannie Mae and Freddie Mac will release lenders who sign off on a refinanced loan from some legal liabilities associated with the original loan.Mortgage market analysts view the waiver of so-called seller servicer "representations and warrants" on Home Affordable Refinancing Program (HARP) loans as the most significant of a series of changes announced today by Fannie and Freddie's regulator, the Federal Housing Finance Agency.Fannie and Freddie will also lift the current 125 percent loan-to-value (LTV) cap on HARP refinancings, and sign off on refis without an appraisal if they have reliable automated valuation model (AVM) estimates for the property.The new HARP guidelines also eliminate some risk-based fees if homeowners refinance into shorter-term mortgages that will get them out from negative equity situations more quickly.A homeowner with a $200,0000 loan on a home worth only $160,000 would be able to pay their loan balance down to that level in 5 1/2 years by refinancing into a 20-year loan at 4.5 percent interest, FHFA said, compared to 10 years with a 30-year loan at the same rate.The HARP program was originally designed to help "responsible" borrowers with little or no equity in their homes refinance without having to purchase additional private mortgage insurance.Although the initial 105 percent LTV cap was raised to 125 percent just a few months after HARP's February 2009 launch, lenders have been reluctant to refinance underwater borrowers and the program has fallen short of its original target of helping as many as 4 million homeowners refinance.According to the latest numbers from FHFA, Fannie and Freddie had completed nearly 894,000 HARP refinancings through August, but only about 72,000 were mortgages with LTVs greater than 105 percent.Data aggregator Lender Processing Services has estimated that 23 percent of an estimated 46 million homes whose owners are current on their mortgages -- nearly 11 million homes -- are underwater. LPS calculates that about 72 percent of homes in foreclosure have negative equity.Only borrowers who are current on a mortgage sold to Fannie and Freddie before June 1, 2009 are eligible for the HARP program. Originally scheduled to phase out this year, FHFA said today the program will continue through the end of 2013.In announcing the program changes, FHFA said it hoped to see HARP refinancings at least double from today's level by the time the program winds down, which would equate to roughly 1 million refinancings.Those refinancings would come at the expense of investors in the mortgage-backed securities (MBS) backed by the loans being refinanced. Because those investors include the Federal Reserve, Treasury and Fannie and Freddie themselves, taxpayers would share in that burden, which would be partially offset by a reduction in foreclosures.Earlier this year the Congressional Budget Office estimated that a hypothetical program that produced 2.9 million refinancings could prevent 111,000 defaults, costing taxpayers $600 million and private investors $13 billion to $15 billion.Dow Jones Newswires reported that prices for MBS issued by Fannie and Freddie fell today after investors were surprised by the extent of the changes to the HARP program. The new policy "runs the risk of alienating the investors that provide the bulk of all credit to homeowners" Dow Jones reported, citing warnings earlier this month from the Mortgage Bankers Association that mortgage rates could go up if investors lose their enthusiasm for MBS. Bond prices and yields move in opposite directions, so reduced demand for MBS drives up mortgage rates.MBA President and CEO David Stevens said in a statement today that the mortgage industry welcomes the changes to the HARP program. Lenders "are particularly gratified" by the decision to grant lenders relief from some representations and warranties in originating new HARP loans, he said.While the changes "are not going to be a silver bullet to solve all the issues facing our housing market ... they will offer lenders another tool to help borrowers and hopefully help bring some stability to housing markets, particularly those most impacted by home-value declines," Stevens said.The "reps and warranties" that protect Fannie and Freddie from losses on defective loans usually show up "in the first few years of a mortgage and so the value of the reps and warrants decline over time," FHFA said in justifying the new incentive."These are seasoned loans made to borrowers who have demonstrated a capacity and commitment to make good on their mortgage obligation through a period of severe economic stress and house price declines," FHFA said.On a conference call with reporters, FHFA acting director Edward DeMarco said lenders would still be liable to claims of mortgage fraud on the original loan. Contact Inman News:

How mortgage payoff works in a refinance

2011-11-15T11:24:00.000-05:00

Failing to understand process can cost borrowers
By Jack Guttentag
Inman News™

A reader asked her loan officer for an explanation of the process by which her existing loan was paid off when she refinanced. The note shown below is the loan officer's written response:

"Basically, the way mortgage companies do payoffs is we take your payoff amount off your credit report plus one month of payment. The reason we do that is because when you make your upcoming October payment, you are paying principle for October, but you're paying September's interest. So when you close this loan -- say, in November -- you still have to account for that monthly interest payment you missed.

"So that's why we roll in the whole loan amount, then at closing we net out the principle and escrow portion of it and just make it the interest only. That's why your payoff is showing up higher than the $219,000. But the way that is combated is you will skip one month of payments all together. So (if) you close in November, you will skip December altogether, then start in January."

The reader found this answer completely incomprehensible, as did I, and immediately suspected that the loan officer was trying to "pad his profit." The borrower, wary about the loan officer's response, decided to look elsewhere.

There are many problem areas in the mortgage process that can result in a borrower overpaying, making a poor selection decision, or both -- but the payoff process associated with refinances is not one of them. That's why I have never written about it before.

But some borrowers do have anxiety about the process because they don't understand how it works and fear that it could be one more place where they can be ripped off. For the most part, this is not a danger, but the process has a few features that can cost borrowers money if they don't understand it.

When you apply for a refinance, one of the documents the new lender will require you to sign authorizes it to request a payoff statement from your existing lender. This is the case even if you are refinancing with the same lender. The new lender should give you a copy of the statement when it gets it. If the loan officer quoted above had simply provided the statement, he could have avoided arousing the borrower's suspicions by spouting gobbledygook.

While no two payoff forms are exactly alike, they all provide the same basic information. The bottom line is the total amount the borrower has to pay the lender on a specific payoff date to eliminate the borrower's debt. Assuming the payoff date is Oct. 7, and that the borrower has not yet made the payment due on Oct. 1, the payoff amount consists of the following:
•The loan balance as of the end of September;
•Plus interest for the month of September (which would have been in the payment due Oct. 1;
•Plus interest for the first six days of October;
•Minus current escrow balance;
•Plus payoff fees;
•Plus other unpaid debts.

If the borrower had made the mortgage payment due Oct. 1, the loan balance would be reduced by the amount of the payment that constituted principal, and the only interest due would be for the first six days of October.

The daily interest covers the period until the payoff date, except on FHA mortgages, where the payment covers the entire month. Evidently, the Federal Housing Administration's accounting system can't deal with days, only months. That means that it is a good idea for borrowers refinancing out of an FHA mortgage to close as close to the end of the month as possible.

Not all lenders deduct the escrow balance from the payoff amount, and there is no requirement that they do so. In such cases, the borrower will receive a check some weeks later. That is a deplorable practice because during that period the borrower is in effect maintaining two escrow accounts. This is important for the borrower to know about.

The payoff fee will be called different things by different lenders, and there could be two of them, but the amounts are small -- on the order of $50 or so.

Any unpaid debts due the lender will also appear on the payoff statement. The most common are late charges, which in some states are difficult for lenders to collect if the borrower refuses to pay them. They can't refuse at payoff if they want the refinance to go through.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

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6 must-haves for mortgage approval

2011-11-15T11:23:00.001-05:00

Even trade-up buyers, owners of multiple properties hit roadblocks
By Dian Hymer
Inman News™

Interest rates fell to new lows in September. Low interest rates increase affordability and should make it easier for buyers to qualify. Yet stories of buyers waiting months to gain loan approval and home purchase transactions not closing on time due to lender's strict underwriting are all too common.

Some buyers are turned down for illogical reasons. For instance, if you have investments -- even if they're performing well -- an underwriter might deny the mortgage because your portfolio doesn't fall into the underwriter's risk assessment model.

One couple was turned down because the husband had worked at his current job for less than a year -- even though he was making more money at the new job than he was before.

These buyers were well-qualified. The wife had worked several years for one employer and was able to qualify for the loan on her own. So, the transaction closed, although two months late.

Generally, it's more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.

You could run into underwriting problems if you're self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won't lend to buyers who have more than three or four residential properties.

If you're buying a new home before selling your current home, you'll need to have 30 percent equity in your current home. This needs to be verified by the lender's appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month's rent to verify rental income if needed to qualify.

HOUSE HUNTING TIP: As soon as you're serious about buying a home, find the best mortgage broker or loan agent you can to assist you. Don't make your selection based on interest rates alone. A good track record counts for a lot.

Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you're not turned down at the last minute, it's worth it.

Be candid with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you'll need to do to satisfy the underwriter.

Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won't be included as livable square feet.

If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.

As of Oct. 1, the conforming jumbo mortgage limit for expensive housing markets like New York City and San Francisco dropped from $729,750 to $625,500. In some cases, conforming jumbo lenders have moved into the market to pick up some slack. You can expect to pay about 0.25 percent more for a 30-year fixed-rate conventional jumbo loan, in some cases. However, today's lower interest rates will help boost affordability.

There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25 percent less than a 30-year fixed jumbo. A five-year fixed starts about 0.5 percent to 0.75 percent lower, but is riskier.

THE CLOSING: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement account counts toward this.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."

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Low rates sparking demand for mortgages

2011-11-15T11:17:00.000-05:00

Home loan rates hovering near historic lows
By Inman News
Inman News™

Mortgage rates were little changed this week amid mixed economic reports, Freddie Mac said in releasing the results of its weekly survey of lenders.

A separate survey by the Mortgage Bankers Association showed demand for both purchase mortgages and refinancings jumped last week, with many homeowners moving into 15-year loans as rates stayed near historic lows.

Freddie Mac's Primary Mortgage Market Survey showed rates on 30-year fixed-rate mortgages averaging 3.99 percent with an average 0.7 point for the week ending Nov. 10. That's essentially unchanged from last week's average of 4 percent, and not far above the all-time low in records dating to 1971 of 3.94 percent seen during the week ending Oct. 6. At this time a year ago, rates on 30-year fixed-rate mortgages averaged 4.17 percent before climbing to a 2011 high of 5.05 percent in February.

Rate on 15-year fixed-rate mortgages averaged 3.3 percent this week with an average 0.8 point, about the same as last week's average of 3.31 percent and only slightly higher than the all-time low in records dating to 1991 of 3.26 percent during the first week of October. At this time a year ago, 15-year fixed-rate mortgages averaged 3.57 percent, before climbing to a 2011 high of 4.29 percent in February.

For five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.98 percent this week with an average 0.6 point, not far above last week's average of 2.96 percent, which tied an all-time low in records dating to 2005. A year ago, the five-year ARM averaged 3.25 percent before hitting a 2011 high of 3.92 percent in February.

The one-year Treasury-indexed ARM averaged 2.95 percent this week with an average 0.6 point, up from 2.88 percent last week. The one-year ARM hit an all-time low in records dating to 1984 of 2.81 percent during the week ending Sept. 15. At this time last year, the one-year ARM averaged 3.26 percent, before climbing to a 2011 high of 3.4 percent in February.

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase mortgages jumped a seasonally adjusted 4.8 percent during the week ending Nov. 4 from the week before. Demand for purchase loans was at its highest level since August, but down 2.5 percent from the same time a year ago.

Applications for refinancings were up 12.1 percent from the previous week, accounting for 78.6 percent of all mortgage applications. Only 5.8 percent of borrowers applying for mortgages last week were seeking ARM loans, the MBA survey showed.

Fannie Mae economists said in an Oct. 17 forecast that they expect rates on 30-year fixed-rate mortgage loans to average 4 percent next year and 4.2 percent in 2013.

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A unique strategy to expedite short sale

2011-11-15T11:07:00.001-05:00

REThink Real Estate
By Tara-Nicholle Nelson
Inman News™

Q: I'm in contract on a second home in Florida. It's a short sale and I know it can take a long time. My mortgage has been approved, but the delay now is that there is a lien on the house. The owner didn't pay a bill for a water purifying system, and the bank is not responsible because it's not a tax lien.

Is there any negotiating leverage here for me? Could I possibly get the price lowered if I pay off the bill, or make some arrangement like that? I just want this process to be over. I have a basement full of furniture waiting to go to its new home! --Ramona L.

A: First things first: Let's be clear that any and all existing liens on the house are the seller's and/or their bank's responsibility, if they want to close the deal. You cannot close escrow and obtain the title insurance that your mortgage lender will require unless and until all liens -- including what I'm assuming is a mechanic's lien recorded by the water purification system installer -- are removed.

I've seen banks pay off back homeowners association dues and delinquent garbage collection bills, so I just want to correct your assumption that the bank "is not responsible" to pay it.

Talk with your own agent to get a sense for whether the bank is at least considering paying it off, and to make a decision about whether you might want to give the bank some time to try to work it out.

With that said, the bank has the right to simply refuse to pay it, and the seller might also refuse or simply not have the cash to pay it. Fortunately, this is real estate, and in real estate everything is negotiable. So if the other parties refuse, or if you simply want to get this thing closed as soon as you can, you should feel free to take your sense of urgency to close the deal and propose some alternative solutions to the bank.

Certainly, lowering the price in the amount of the lien and you paying it off seems like an easy solution, but is effectively the same for the bank's purposes as if it allowed the escrow holder to pay it at closing out of the proceeds of the sale. So, if it's the case that the bank has refused to pay it up to now, chances are good that this won't work. Maybe you offer it anyway and see what the bank says, or perhaps you offer to pay off the lien in exchange for a price reduction of a smaller amount. You might even consider approaching the seller and offering to split the lien costs with them 50/50 or 75/25, or think about proposing a three-way split between yourself, the seller and the bank.

Just keep in mind that every time you submit a proposed renegotiation to the bank, you might be adding anywhere from a few days to a few weeks to your closing calendar; if time is more important to you than a small amount of money, keep that in mind and tailor your proposals around what the bank is likely to accept with minimum back-and-forth, based on what you already know.

You don't mention here how much the lien is, but if it's fairly small (whatever that means for you and your budget), and you really want to close the deal, there's no law against offering to cover the whole thing and keep the transaction moving.

Again, you don't want to jump the gun and offer a large sum of extra cash if the bank (or the seller) has given any indication that it might still pay the lien off, but if it's a relatively small sum and time is truly of the essence to you, you should feel free to forward a proposal strategically designed to expedite the process by taking some of the cost of the lien off the bank's back.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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$2B question: Will FHA keep charging borrowers interest on paid-off mortgages?

2011-11-14T13:35:00.000-05:00

Policy and lack of disclosure upsets homeowners, legislators, NAR

By Ken Harney
Inman News™

California homeowner Renee Bono calls it "unconscionable." Don Bonn, an agent with Champion Realty in Maryland, says it's a federal tax that too many home sellers and refinancers know little or nothing about.

Sens. Johnny Isakson, R-Ga., and Ben Cardin, D-Md., have a legislative fix ready to go if the Obama administration doesn't instruct the U.S. Department of Housing and Urban Development to make the change on its own.

What's got these folks so riled up? It's the Federal Housing Administration's unique practice of requiring anyone who pays off one of its insured loans early -- whether because of a home sale or refinancing -- to be charged interest on the note through the end of the month, even if the actual closing occurs weeks before and the mortgage debt itself no longer exists.

This past spring the agency told Sens. Cardin and Isakson that it would take a hard look at its policy and report back in 90 days with changes, if appropriate. Neither senator has heard a peep out of FHA since then.

I asked FHA last week about the status of the policy study and got an opaque response. It's still "under consideration," said an FHA spokesman.

Meanwhile, the fees keep piling up. According to new figures provided by FHA, between the years 2000-10, FHA borrowers paid nearly $2 billion in what amount to prepayment penalties.

That's an average of nearly $200 million a year because the agency insists on collecting interest through the full month, unlike Fannie Mae, Freddie Mac and the Department of Veterans Affairs, which charge interest only to the day of closing.

Take Renee Bono's situation as a case in point. She emailed me recently with details of her October refinancing of an FHA loan that she and her husband took out in 2009.

Attracted by interest rates in the low 4 percent range, the Bonos, who own a home in Brea, Calif., arranged to refi their FHA-insured mortgage. The closing was Oct. 13.

No one ever told them about FHA's full-month interest policy. As a result, even though they paid off the loan as of Oct. 13, at closing they were charged interest through the end of the month and one day into November.

The total extra in fees amounted to $1,349 -- money out of pocket the Bonos had not anticipated.

"Since my loan broker was scrupulous in disclosing required information, I have to assume he was not required by law to disclose (FHA's policy)," said Bono. "If Congress is unable to pass legislation to stop this unfair practice, then the next best thing would be full disclosure."

The National Association of REALTORS®, which has been pressing FHA to switch to the per-diem interest payoff approach followed in the conventional and VA mortgage markets, says full-month interest charges may amount to prepayment penalties in violation of the Dodd-Frank financial reform legislation enacted in 2010.

In a letter to acting FHA commissioner Carol Galante, NAR President Ron Phipps said that besides playing "unreasonable and often unexpected burdens on FHA consumers who already face high housing and closing costs," the fees appear to violate the Truth in Lending Act (TILA), as amended by Dodd-Frank.

That law bars prepayment penalties or requires them to be phased out over the next three years. The Federal Reserve's proposed regulations implementing the TILA changes clearly cover fees like FHA's, said Phipps, which force borrowers "to pay interest charges based on an outstanding principal loan amount that has already been fully paid."

For its part, FHA maintains that investors in Ginnie Mae bonds containing FHA loan pools are guaranteed a full month's interest no matter what day of the month the loan is paid off.

By collecting the interest at the end of the month, rather than cutting off the interest stream on the day of the prepayment, according to FHA, lenders have been able to charge borrowers slightly lower interest rates than the conventional market.

Ted Tozer, president of Ginnie Mae, estimated the price break earlier this year at somewhere between 0.1 percent and 0.15 percent.

FHA also argued in a letter to the Senate banking committee that any abrupt change to its policy would "effectively create an increase in the cost of borrowing for all FHA" applicants, and require "substantial changes to lender, servicer and FHA systems and loan documentation."

REALTORS® like Don Bonn, who brought the issue to the attention of Sen. Cardin, accuse FHA of being a captive of big banks and mortgage lenders who "make money off the float."

That's in reference to the fact that they've got consumers' cash in hand -- $1,349 in cash from the Bonos, for example -- and can earn an investment return during the time between the closing date and the end of the month, when the money must be disbursed to bond investors.

"This is excessive and it hurts people," Bonn told me in an interview. Though many REALTORS® are knowledgeable and can advise clients to set closing dates toward the end of the month, a lot of them either forget to do so or are not aware of the FHA's full-month interest requirement.

"And, of course," said Bonn, "there's no REALTOR® around to tell refinancers (about the policy), so they get hit the worst."

Where is this headed? Will FHA -- or the White House in an election year -- agree to chuck the controversial prepayment penalties that cost FHA borrowers an average $200 million a year?

And are those fees, which come down heavily on individual home sellers and refinancers, justified by the miniscule and barely perceptible interest-rate "savings" the agency claims are spread around among all FHA borrowers?

With NAR and even political allies banging on the issue, FHA likely will soon have to come up with some good answers.

Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance.

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Senators want to see Fannie, Freddie REO plan

2011-11-09T11:34:00.000-05:00

Foreclosed homes may be converted into rentals

By Inman News
Inman News™

Share ThisAs Fannie Mae and Freddie Mac continue to take possession of foreclosed homes at a rapid pace, Senate Democrats are voicing their impatience with their management of real estate owned (REO) properties.

On Aug. 10, Fannie and Freddie's regulator, the Federal Housing Finance Agency (FHFA), along with the Department of Housing and Urban Development (HUD) and the Treasury Department announced that they were exploring options for allowing bulk sales of homes to investors and converting Fannie, Freddie and Federal Housing Administration (FHA) REOs in some markets into rental properties.

FHFA put out a request for ideas for sales, joint ventures and other strategies that would benefit Fannie, Freddie and FHA REO disposition programs, which were due Sept. 15.

In a letter to Fannie and Freddie's regulator and Obama administration officials, 33 senators -- including Senate Banking Committee Chairman Tim Johnson and every other Democrat on the committee -- asked FHFA when it expected to finish its review of the proposals it's received, and when it expected to move forward with a plan.

"With 10.4 million households in jeopardy of defaulting on their mortgages at the same time that the demand for rental housing is increasing, Americans are facing pressure on all fronts in the housing market," the letter said.

In a Sept. 23 report, the FHFA Office of Inspector General noted that Fannie Mae's REO inventory grew from 25,125 properties in January 2007 to 162,489 at the end of 2010. Taxes and fees on REO properties represent a "significant financial risk" to Fannie and Freddie, and the management of REOs was a primary reason FHFA classified operational risks at both companies as a "critical concern," the report said.

FHFA hasn't conducted a targeted examination of Fannie and Freddie's REO management because the agency is short-staffed, OIG said in the report.

Consumer spending debunks new recession theories

2011-11-02T15:27:00.000-04:00

Commentary: European debt deal is another 'can-kick'

By Lou Barnes
Inman News™

On the same morning the newest Euro-can clunked along came news that American third-quarter GDP jumped 2.5 percent -- not far above forecast, but the shape of the gain was a stunning surprise. The strength was in the consumer, a 2.4 percent increase in household spending. Common distortions were absent: no weird upside-downs in trade accounts, and inventories if anything understated gross domestic product. Inflation also waned.

The Euro-can got all the ink, but in any cross-weaving flow of economic data, the most important thread is always U.S. data. The report distributed concussions evenly among all of those who had bet on a new recession; and banged an especially embarrassing knot on the head of the respected Economic Cycle Research Institute. The ECRI had never in its history false-called a recession; two weeks ago it said that the U.S. was either rapidly falling into recession or was already in one.

Nouriel Roubini, the Count Dracula of economics, brushing up his Transylvania accent for Halloween, said he expects a revision all the way down to 1 percent. The strong consumer does not square with September personal income gaining a mere 0.1 percent (nor the 0.1 percent decline in August), but a 2.5 percent GDP announcement -- right, wrong, temporary or revised -- if you had bought 10-year T-notes down to 1.7 percent, and shorted stocks, you got caught in a huge panic running to the other side of the boat.

The 10-year soared to 2.4 percent, although it's back now to 2.3 percent and it will take a lot of ugly news to do much better. Mortgages, near 4.375 percent, have ended the refi party altogether. Snide churls needle the Fed, saying, "So much for the Fed's sell-short, buy-long 'Operation Twist' to knock down long-term rates," but -- good grief -- nobody stops an avalanche.

Economic data is always ambiguous, if only because it is instantly superseded by guesses at the next reports. Policymaking, on the other hand, tends to turn corners and stay turned. This week brought a turn in housing policy for the first time since meltdown six years ago. On Monday, Oct. 24, Larry Summers wrote for the Financial Times the most compelling policy piece yet, noting among other things that Fannie Mae and Freddie Mac were created as countercyclical agencies, but during the "bubble" aftermath have acted to make the cycle worse. Only antigovernment diehards now fight remobilizing the GSEs (government-sponsored entities). Sadly, there are a lot of those.

A mass-refi proposal for underwaters, "HARP2" (the Housing Assistance and Recovery Program) rolled out this week over the objection of the GSEs' regulator, the Federal Housing Finance Agency, and its director, Edward DeMarco. We'll see. Borrower qualification requirements will not appear for three more weeks, and DeMarco has not been the champion of several previous initiatives. President Obama jumped on the bandwagon at the last instant, having offered not one single housing idea in the last 18 months. He does deserve great credit for this week's student-loan proposal; please, more like that, sir.

Back to Europe, and a scorecard for colonials to follow the action. On Thursday, July 21, the European Union announced a modified European Financial Stability Facility (EFSF), including a private-sector, 21 percent haircut of Greek debt. Markets had a splendid day, with no follow-through the Friday following, and on the next Monday began an eight-week free fall.

The breakthrough deal announced Thursday has no market follow-through Friday. Monday may be as entertaining as July 25, or may take a while; whichever, this new can-kick will have a short roll. It has not one new pfennig (a coin like the U.S. penny in Germany's former currency) in cash or guarantee. The private-sector write-down of Greek debt (voluntary: "You, you, you and you") will be 50 percent, but limited to the 210 billion euros in private/bank hands, leaving at full-phony market value of 140 billion euros held by the European Central Bank. Thus, the net debt relief to Greece leaves 67 percent outstanding, which on the market is worth 40 percent, and the Greeks can't pay even that.

The EFSF is to lever up from 440 billion euros to 1 trillion euros, with a method not specified, but aided by new private and foreign capital. European ministers are off to China, expecting it to throw in 100 billion euros -- a deal so good that the Germans have passed on it.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

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Best day to list real estate for sale: Friday

2011-10-24T11:31:00.000-04:00

Redfin study: day of the week may make a difference

By Inman News
Inman News™

Sellers should list their home on a Friday for the best chance of selling it, according to Seattle-based brokerage Redfin.

Redfin analyzed data for 1.2 million listings in 16 markets nationwide over the past 21 months. The brokerage found that of all listed homes in those 16 markets, those listed on a Friday were 12 percent more likely to sell within 90 days, and homes listed on a Thursday or Friday sold, on average, for slightly closer to list price: 94.4 percent compared with 93.9 percent when homes are listed on a Sunday or Monday. Put another way, that's a $1,000 difference on a $200,000 home.

Homes listed on a Friday were also 18.8 percent more likely to be toured by Redfin customers. Homes listed on a Sunday or Monday were the least likely to be toured.

"Our theory is that since homebuyers tend to tour homes on the weekends (Saturday and Sunday have 2.5 times more tours per day than weekdays), homes listed on Fridays are the freshest in buyers' minds when they're making their weekend plans. It also seems likely that many homebuyers sort their weekend 'must see' lists by date listed, going to see the freshest homes first so they have the best chance of getting in on a potential good deal before other buyers," the brokerage said in a blog post about the findings.

"These factors put homes listed on Friday in front of more touring buyers on the weekend (which our touring data bears out). More tours leads to more offers, and more offers leads to a better price and a better chance of selling."

In one respect, Sunday beat out any other day of the week: Homes listed on Sunday attracted slightly more online page views than the average on Redfin.com.

While the vast majority of homes are listed on weekdays, no one weekday was especially popular, with between 17 percent and 19 percent of homes listed on any given weekday. About 19 percent of homes were listed on a Friday during the time period studied, Redfin reported.

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Mortgage rules put recovery at risk

2011-10-17T14:25:00.000-04:00

A plan to jump-start housing

By Jack Guttentag
Inman News™

Policy proposals for dealing with our current depressed economy are largely at an impasse. Monetary policy has gone about as far as it can go, while fiscal policy is hamstrung by political constraints on any measures that enlarge the federal debt.

Housing policy, in contrast, has enormous expansionary potential that can be released merely by revising or eliminating some of the many unproductive rules governing how home loans are granted.

These rules originate from Fannie Mae, Freddie Mac and in some cases from the Federal Housing Administration (FHA). In combination, these agencies touch the vast majority of all home loans being written today.

Most of the rules apply to who is and who isn't qualified to borrow and, for those who are, how much extra they have to pay for deviations from pristine status. The liberalized rule changes would reduce expected losses to the agencies because the additional housing demand that resulted from them would stabilize home prices.

Housing policy has been procyclical

The backdrop of these proposals is the procyclical federal housing policy that emerged over this decade. The government intensified the unsustainable boom during the go-go years of 2002-2007, and since the bubble burst it has aggravated the contraction.

This was inadvertent, of course. The measures that have aggravated the contraction were designed to curb the abuses of the boom period, but they did not materialize until after the financial crisis, or just in time to make an already bad situation worse.

The housing sector has generally been a source of strength during recessions, but not during the current recession. The major reason is that in prior recessions, interest-rate declines stimulated the housing sector.

But in the current recession, lower rates have been nullified by tougher rules on who can borrow. Many of these rules are new. But some are old ones that have become counterproductive in the current environment.

Expecting the federal government to run a countercyclical housing policy -- becoming more restrictive when private markets are euphoric, and more liberal when private markets are depressed -- is probably expecting too much.

Government officials and legislators live in the same world as private lenders and are subject to the same influences on their expectations. But federal housing policy should at least be neutral, meaning that they should not respond to cyclical changes in markets. The proposals contained in this set of articles would shift federal policy at least part of the way back toward neutrality.

Unleash Fannie and Freddie

Since the crisis, Fannie and Freddie have been working at cross purposes to the Federal Reserve. The Fed has countered economic weakness by forcing down long-term interest rates, including mortgage rates, to all-time lows. But Fannie and Freddie have made it increasingly difficult for potential borrowers to qualify, and cut the number who qualify for the very best rates to a trickle.

To get the lowest rate possible on a loan directed to the agencies, a borrower must have a loan-to-property-value ratio of no more than 60 percent and a credit score no less than 700. The property must be single-family but not manufactured, occupied as a permanent residence by the borrower, and in an area not subject to an "adverse market delivery charge." The mortgage cannot have an interest-only provision, and any second mortgage has to be included in the 60 percent limit.

Millions of refinance transactions that would increase the spending power of homeowners, which would have been funded in prior recessions, are not getting funded today. Either the borrowers no longer qualify, or they don't qualify for rates low enough to help them.

Two strategically important groups have been particularly hard hit. One is the self-employed, predominantly small-business owners who are a major potential source of employment growth. The other: investors who buy homes to resell at a profit, and who are desperately needed right now to buy foreclosed homes sold by lenders. Specific proposals related to these groups are discussed later.

Conservatorship requires liberalization

Since September 2008, Fannie and Freddie have been in conservatorship.

The Federal Housing Finance Agency (FHFA) as conservator is charged with the responsibility of preserving their assets. FHFA has to sign off on any major policy changes affecting Fannie/Freddie.

In the current economic environment, a liberalization of Fannie/Freddie lending terms is a requirement of responsible conservatorship. According to Laurie Goodman, whose analysis of the current housing crisis is the most complete and insightful one I have seen, if government policy does not change, 1 in 5 mortgage borrowers will lose their homes and a second round of home-price declines becomes highly likely. Agency losses will mount as a result.

The tightening of lending terms by Fannie/Freddie in response to the crisis has been very similar to that of private lenders making loans to retain. The difference is that no private lender can materially affect the market, but Fannie/Freddie can.

Next week we'll take a look at some specific proposals.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

Contact Jack Guttentag:

5 SIGNS REAL ESTATE RECOVERY IS NEAR.

2011-10-10T09:12:00.000-04:00

Housing bulls sound off
By Bernice Ross
Inman News™

Editor's note: This is the first of a two-part series.

David Stevens, president and CEO of the Mortgage Bankers Association, is bullish on homeownership.

Stevens -- a former Long & Foster Cos. executive who stepped down as head the Federal Housing Administration (FHA) in March -- thinks there's sunshine on the horizon and it may be here sooner than anyone realizes.

A few days ago I had a chance to interview Stevens about his take on where we are in terms of a real estate recovery. I also asked if he had any good news he could share in light of the constant onslaught of bad economic news. Here's what he had to say.

1. Markets are stabilizing
According to Stevens, the real delinquency rate is down from 10 percent in the second of quarter of 2010 to 8.5 percent in the second quarter of 2011. New foreclosure starts are also down. In addition, three of the hardest-hit states for foreclosures -- Florida, Nevada and Arizona -- are also stabilizing. Furthermore, for standard fixed-rate loans, the delinquency rate was 6 percent in 2010. That number has dropped to 5 percent in 2011. As Stevens put it, "This is very close to being in 'normal' territory."

2. Many markets are experiencing real home-price growth
The problems with negative equity and declining prices are actually concentrated in a few key states. For example, 24 percent of the foreclosure activity is concentrated in Florida, and 50 percent of the foreclosure activity is in five key states. Stevens says that people who quote declines in the average price of homes nationally are using "dangerous data," since each market is different.

According to Stevens, price declines are not a national problem. "The fundamentals are better than ever." In fact, if you remove the foreclosure properties from the equation, nondistressed properties have actually experienced an increase in prices.

The challenge is consumer sentiment. People are scared to purchase now because they don't know whether they will have a job. Nevertheless, for those who are willing to purchase in this market, the opportunity has never been greater.

3. The best time ever to buy
Many people view the cost of homeownership based exclusively on the price they pay for the property. A more accurate way to judge the cost is how much you paid plus the cost of the interest that you pay over the term of the loan. To illustrate this point, assume that a buyer is going to purchase a home with a $200,000 loan. The interest rate is 4 percent. Many buyers are worried about prices falling further. If the prices were to decrease another 5 percent, that means that the property would decline in value by approximately $10,000.

If interest rates increase from 4 percent to 6 percent, the cost of waiting is extremely high. Over the life of a 30-year loan, the borrower will pay $87,937 more in additional interest. The cost of owning that home costs a whopping $77,937 more than the apparent $10,000 they might have saved by buying at the bottom of the market.

4. The coming home shortage
Stevens says that there are two primary factors that will contribute to a home shortage in the not-too-distant future. The first of these factors is the size of Generation Y (those born between 1977 and 1994), which is estimated to be approximately 80 million, or 25 percent of the U.S. population. They are now entering their prime time for starting their careers, their families, and for buying a home.

The second variable is supply. There has been virtually no new construction, despite the predicted explosion in population growth. To illustrate the severity of this problem, the 2010 census put the U.S. population at approximately 309 million. By 2050, the prediction is that the U.S. population will be 439 million. That's an increase of 130 million people in just 40 years. Regardless of whether they own or rent, they will still need housing.

5. Getting from here to there
Stevens believes the major challenges we are facing in the short term are job creation and dealing with the tight credit situation. The government-sponsored enterprises of Fannie Mae and Freddie Mac, as well as FHA, have tightened lending guidelines to such a degree that is extremely difficult for even well-qualified buyers to obtain a loan.

Furthermore, the tremendous amount of new regulation creates additional problems. For example, the Dodd-Frank bill alone adds more than 100 new regulations. Each of these regulations creates additional risk resulting in higher costs for the both the borrower and the lender. Lenders have to alter loan documents, create new systems, and retrain their people to handle these new requirements. Furthermore, the effect of "piling on" more and more regulations increases the cost to consumers, as lenders must defend themselves against additional litigation risks.

According to Stevens, real estate is now at bargain levels that we will never see again in our lifetimes. If there were ever a time to buy a home, that time is now.

If you would like more reasons to be bullish on real estate, see Part 2 on Thursday.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of REALTORS®' No. 1 best-seller, “Real Estate Dough: Your Recipe for Real Estate Success.” Hear Bernice's five-minute daily real estate show, just named "new and notable" by iTunes, at www.RealEstateCoachRadio.com. You can contact her at Bernice@RealEstateCoach.com or @BRoss on Twitter.

Contact Bernice Ross:

Net Neutrality

2011-10-05T14:02:00.000-04:00

FCC’s Net Neutrality Rules Take Effect November 20

The Federal Communications Commission (FCC) today published Network Neutrality rules that it approved on December 21, 2010. This final act of publication was necessary to make the rules official—they will take effect on November 20, 2011.

Net Neutrality is the concept that everyone should have equal access to the web. For example large web publishers like eBay or Amazon should not have the ability to pay their Internet Service Provider (ISP) so that their sites load faster than a smaller retailer with fewer financial resources. These rules give the FCC the authority to step in and mediate disputes about how ISPs are managing their networks.

NAR supported net neutrality rules recognizing that the business of real estate is increasingly conducted on-line. Streaming video, virtual tours and voice-over-internet-protocol are just some of the technologies that are commonly used by REALTORs® today. In the future, new technologies will be adopted which will no doubt require unencumbered network access.

Melanie Wyne, 202-383-1234

Mortgage Loan Limits

2011-10-03T11:20:00.000-04:00

Congress Failed to Act on Loan Limits

Congress has failed to extend the FHA and GSE mortgage loan limits. On Oct. 1, those limits will decline in 669 counties in 42 states. The new limits will be equal to 115% of local area median home price (from 125%). The high cost cap will fall from $729,750 to $625,500. To determine your new loan limit, find your county; if your county is not listed, your limit will not change. NAR will continue to work with Congress to attempt to restore the higher limits as quickly as possible.

National Flood Insurance Program

2011-09-29T09:52:00.000-04:00

Congress to Extend Flood Insurance for 7 Weeks

On Sept. 26, 2011, the Senate passed the Continuing Appropriations Act (H.R. 2608), which also includes a provision extending the National Flood Insurance Program (NFIP) until Nov. 18, 2011. Next week, the House is expected to approve this extension and has ensured that there will be no lapse in NFIP authority in the interim. NAR is urging Congress to finish its work on the 5-year reauthorization bill (H.R. 1309) before this latest extension ends, to provide certainty and avoid further disruption to real estate markets.

Austin Perez, 202-383-1046

2010-12-15T14:02:00.000-05:00

Banks Need To Keep Their Eye on the Ball: Helping Qualified Buyers Buy

Some say that the latest decision of major banks to halt foreclosures temporarily is not all bad. Yes, homeowners facing foreclosure may have just received a reprieve, and the temporary delay in sending these homes to the market could allow for some price stabilization, and that could help sellers who act quickly.
But realistically, doesn’t this just give buyers one more reason to sit on the sidelines in what is already a troubled housing environment? Doesn’t it create fertile ground for lawsuits that won’t benefit anyone except attorneys? And doesn’t it just delay the inevitable and prolong the foreclosure overhang problem?
Banks seem to be “dumbing down” the whole process to help the lowest common denominator – and cover themselves to the max – rather that doing everything possible to help buyers with resources buy homes. If there are truly situations in which a homeowner’s rights were compromised in the foreclosure process, then of course that should be addressed, but if banks are doing this because of minor technicalities, they are once again worrying about those who defaulted, creating a ripple effect of plummeting price comparables, homeowners who will stop making payments because they can, and escalating finger-pointing spawning litigation…instead of focusing on facilitating the home-buying process for qualified buyers.
I just heard about a buyer with a 40% down payment trying to buy a home. The mortgage was declined because other homeowners in the subdivision were behind on assessments. Other banks are saying “no” to qualified buyers because the ratio of renters to owners is too high.
And in some cases, the brokerages being used by asset managers to market foreclosure properties are out of the area or otherwise poorly qualified, making the process difficult if not painful for the buyer and his or her agent.
It’s understood that liberal lending practices are what got us into this mess, but the other extreme is not the answer. The foreclosure problem is a sad one affecting lives, and no one likes to see that – but it is what it is and the sooner we move beyond it the better. What is needed is leadership with thoughtful, practical solutions to problems we haven’t seen before caused by the preponderance of distressed properties. Without such attention, buyer confidence will continue to erode. The data tells us there are many individuals who are sitting on cash and want to buy. We need to do all we can to remove the barriers.
This latest news is yet another example of blocking one of the roads to a better housing market – absorption of foreclosures – as banks take steps to “check their paperwork.” Is anyone else frustrated?

2010-11-10T14:45:00.000-05:00

We Have a Fresh New Look Around Town But We Are the Same Galbreath Realtors Serving Your Community Since 1955! If You Are Interested in Buying a New Home or Selling Your Current Home, Call Us at 937-339-0508. We Have Many New Listings So Check Them Out! www.GalbreathRealtors.com

First Time Home Buyer Tax Credit Q&A

2010-02-11T09:03:00.000-05:00

Frequently Asked Questions

About the First - Time Home Buyers Tax Credit

The Worker, Home ownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for marries couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

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Who is eligible to claim the $8,000 tax credit?

First - time home buyers purchasing any kind of home - new or resale - are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.
However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.
Persons who are claimed as dependents by other taxpayers or who are under age 18 are not qualified for the tax credit program.

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What is the definition of a first - time home buyer?

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the home ownership history of both the home buyer and his/her spouse.

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How is the amount of the tax credit determined?

The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

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Are there any income limits for claiming the tax credit?

Yes. For sales occurring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. This is, the tax credit amount is reduced to zero for taxpayers with MAGI or more than $145,000 (single) or $245,000 (married) and is reduced proportionally with MAGIs between these amounts.

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If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

Possibly. It depends on your income. Partial credits of lass than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.

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How is the home buyer tax credit different from the tax credit that Congress enacted in early 2009?

The tax credit's income limits were increased, the documentation requirements were tightened, and the program's deadlines were extended.

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What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000capital gain tax exclusion for principal residences.
It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren,etc.) or your spouse or your spouse's family members. Please consult with your tax advisor for more information. Also see IRS form 5405.

______________________________

I read that the tax credit is "refundable." What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or n federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

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Is there a way for a home buyer to assess the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?

Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.
In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a down payment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

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HUG is now allowing "monetization" of the tax credit. What does that mean?

It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain down payment and closing cost expenses.
Under HUD's guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

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Move-Up / Repeat Home Buyer Tax Credit

2010-02-10T15:04:00.000-05:00

Frequently Asked Questions

About the Move-Up / Repeat

Home Buyer Tax Credit

The Worker, Home ownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

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Who is eligible to claim the $6,500 tax credit?

Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.

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What is the definition of a move-up or repeat home buyer?

The law defines a tax credit qualified move-up home buyer ("long-time resident") as a home owner who has owned and resided in a home for at least 5 consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the home ownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

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How is the amount of the tax credit determined?

The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.

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Are there any income limits for claiming the tax credit?

Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

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How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? How is this different than the rules established in early 2009?

The previous tax credits applied only for first-time home buyers and were for different amounts of money.

____________________________________

What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price lass than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
It is important to note that you cannot purchase a home from, amount other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse's family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.

_____________________________________

I read that the tax credit is "refundable." What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then with the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).

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