New Changes To FHA Lending Guidelines ~ Will You Be Impacted?

This is very important news about the recent changes to FHA loans, the new FHA guidelines. Especially since 95% of new financing is being originated as FHA loans. The changes in mortgage insurance really wont impact borrowers as much. For example, on a $150,000 purchase, the monthly insurance payment will increase by $18.00 a month.

However, the following notice to the FHA loan requirements is going to knock out a lot people from the market. This is FHA’s solution to motivate borrowers to clean up their credit and negotiate payment plans.

Collection Accounts and Judgments:

Open collection accounts and judgments must be addressed in following ways:

If the total outstanding balance of all collection accounts is equal to or greater than $1,000 the borrower must resolve the accounts (e.g. entered into payment arrangements with a minimum of three months verified payments made as agreed in payment plan) or paid in full prior to closing. Documentation must be provided to show that each account was resolved or paid in full. Any payments arranged for the collections must be included in the calculation of the borrower’s debt-to-income ratios.

If the total outstanding balance of all collection accounts is less than $1,000, the borrower is not required to pay off the collection accounts as a condition of mortgage approval.

Note: Paying “down” of balances on collections to reduce the singular or cumulative balance to below $1,000, is not an acceptable resolution of accounts

Have Home Prices Finally Reached Bottom?

“Prices are bottoming now,” according to a Bank of America Merrill Lynch forecast, released this week.

In the fall, the analysts had predicted home prices would drop by 8 percent from the second quarter of 2011 through the first quarter of 2013 — but now they’re revising that forecast, realizing the housing market is stabilizing faster than they originally thought.

The analysts now predict that prices will remain flat for the next two years, as the excess foreclosure inventory is absorbed. They then expect to see a pickup in home prices by 2014.

And in the long-term, they see a big rise in housing prices. From 2012 through 2020, analysts forecast a cumulative growth of 42 percent in home prices (at 4 percent on an annualized basis).

Phoenix Arizona real estate prices have started to increase due to increase demand from investors and home buyers looking for a good deal. The Phoenix real estate market is currently in a transition phase where buyers are now submitting offers over asking price. The days of the sellers have to lower their prices to sell their homes is now over. Phoenix real estate agents are advising their client to submit offers over asking price so that their buyers can purchase a home at the bottom of the market.

US Economic Update ~ Week of March 17th

New unemployment claims hit their lowest level in four years during the week ending March 17. Initial jobless claims filed skirted down to 348,000, a decrease of 5,000 from the previous week’s revised figure of 353,000, the Employment and Training Administration reported. The four-week moving average was 355,000, a decrease of 1,250 from the previous week’s revised average of 356,250.

The Administration also reported that the total population of insured unemployed U.S. workers during the week ending March 10 was 3,352,000, a decrease of 9,000 from the preceding week’s revised level of 3,361,000. The four-week moving average was 3,385,750, a decrease of 13,000 from the preceding week’s revised average of 3,398,750.

Real estate was also a big newsmaker in last week’s economic news, with existing home sales slightly off February’s pace, but still well above the pace of a year ago, the National Association of REALTORS® reported last week. Total sales of existing single-family homes, townhomes, condominiums and co-ops slipped 0.9 percent to an annual rate of 4.59 million in February from an upwardly revised 4.63 million in January, but were 8.8 percent higher than the 4.22 million-unit level in February 2011, thanks to improving real estate conditions.

“The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” said NAR chief economist Lawrence Yun. “Although relatively unusual, there will be rising demand for both rental space and homeownership this year.”

Looking at price, the national median existing-home price for all housing types was $156,600 in February, up 0.3 percent from February 2011, NAR reported. Distressed homes, such as foreclosures and short sales that are sold at deep discounts, accounted for 34 percent of February sales (20 percent were foreclosures and 14 percent were short sales), down from 35 percent in January and 39 percent in February 2011.

Total housing inventory at the end of February rose 4.3 percent to 2.43 million existing homes available for sale, which represents a 6.4-month supply at the current sales pace, up from a 6-month supply in January. Even so, unsold listed inventory has trended down from a record 4.04 million in July 2007, and is 19.3 percent below a year ago.

Permits issued in February for construction of privately owned housing units were at an annual rate of 717,000, which was 5.1 percent over January’s revised rate of 682,000 and 34.3 percent higher than the February 2011 estimate of 534,000, the Census Bureau reported last month. Permits for single-family homes issued in February were at a rate of 472,000, which is 4.9 percent over January’s revised figure of 450,000.

Construction starts of privately owned housing in February were at an annual rate of 698,000, which was 1.1 percent down from January’s revised estimate of 706,000, but was 34.7 percent over the February 2011 rate of 518,000. Starts on single-family homes in February were at a rate of 457,000; this is 9.9 percent below the revised January figure of 507,000.

Completed constructions of private homes in February were at an annual rate of 568,000, which was 6.2 percent over January’s revised estimate of 535,000, but was 7 percent below the February 2011 rate of 611,000. Completions of single-family homes in February were at a rate of 421,000; this was 8.2 percent over the revised January rate of 389,000.

This week’s financial news starts off tomorrow with consumer confidence scores for March from the Conference Board. Wednesday, the Census Bureau reports on durable goods orders for February.

On Thursday, the Employment and Training Administration releases initial jobless claims totals for last week, and the Bureau of Economic Analysis releases its third estimate for Q4 2011′s gross domestic product.

Short Sales Get Shorter: New Deadlines to go into Effect

As part of a settlement with state attorneys general, the five largest mortgage servicers are adopting new requirements for short sales, which is expected to speed-up what has been known as a lengthy process.
Here are some of the new requirements for servicers under the settlement:

Servicers must provide borrowers with a decision within 30 days after receiving a short sale package request.

Servicers will be required to notify a borrower, also within 30 days, if any necessary documents are missing to process the short sale request.
Servicers must notify a borrower immediately if a deficiency payment is needed to approve the short sale. They also must provide an estimated amount for the deficiency payment needed for the short sale.
Servicers are also required to form an internal group to review all short sale requests.
Banks will be considered in violation of the settlement requirements if they take longer than 30 days on more than 10 percent of the short sale requests. Violations can carry fines of up to $1 million and $5 million for repeat offenses.

“If a real estate broker can get a checklist from the bank detailing what documentation is needed, everything can be provided up front, and the bank will be required to give a thumbs-up or a thumbs-down within 30 days,” short sale specialist Chris Hanson with the Hanson Law Firm told HousingWire. “That’s not a bad deal.”

5 Foreclosure Myths for 2012

Beginning in 2007, foreclosures rocked the real estate world. Like an out-of-control freight train, they began decimating the market, peaking in 2009. Myths and rumors began propagating like mushrooms as consumers struggled to understand the new reality. Although many misconceptions have come and gone, we still encounter five myths on a regular basis.

1. There is going to be a flood of new foreclosures to the market.

This rumor has appeared every year since 2008 and has been routinely debunked. However, recent announcements that the Feds reached a settlement over the robo-signing scandal have reignited speculation. The idea is simple: Since the cork is now out of the foreclosure bottle, we’ll soon see another flood of REOs inundating the marketplace.

My personal opinion: don’t hold your breath.

Banks have learned that if they control inventory, they can affect local prices. By releasing homes in measured amounts, they realize higher prices than if they released a glut of homes. In addition, they’ve learned that if they can mitigate their losses by agreeing to a short sale, everyone wins.

2. You can go directly to a bank to buy a foreclosure.

Every few weeks I’m asked how to buy foreclosures direct from a bank. Someone knows a friend being foreclosed on and they want to step in and grab the house before it hits the market. Don’t we all? In reality, banks have a simple system – they first offer properties on the courthouse steps. The rest they assign to asset mangers who then hire local real estate agents to put them on the market along with all the other homes. Want an REO? Pay cash at the courthouse steps or get in line witheveryone else when they hit the local MLS (Multiple Listing Service).

3. You can get a killer deal by submitting lowball offers on foreclosures.

You would think this myth would be dead by now. Unfortunately, like Elvis sightings, it just won’t go away. Here’s the truth: Banks want REOs sold in 30 days or less, so they typically appear on the market priced slightly under comparable properties. If the property doesn’t sell quickly, the bank will lower the price after about 30 days. Lowball offers are ignored and are, quite frankly, a waste of everyone’s time and effort. You might get a deal by offering a lower price on a foreclosure that’s been sitting on the market for more than 90 days, but remember that there are good reasons it’s gone unsold for so long. And even if you have cash, your lowball offer won’t be accepted —seriously.

4. You can’t use foreclosures when doing an appraisal.

Or short sales, for that matter. That is no longer true. In fact, in many neighborhoods, that’s all that’s there. Therefore, foreclosed or distressed sales represent the actual value of homes in the area and HAVE to be used to appraise other properties. Don’t like it? Get over it. Times have changed and the ways neighborhoods are valued have changed as well.

5. Foreclosures are only affecting the bottom end of the market.

This used to be true. However, while foreclosure rates on the lower end of the market have actually decreased, they’re actually increasing on the upper end. According to Daren Blomquist, vice president of RealtyTrac, the market share of foreclosed homes under $1 million is shrinking, but those among properties valued over $1 million are rising – up 115% since 2007. And foreclosures on properties valued upwards of $2 million have increased by 273%. While some well-known jet-setters have melted down and lost everything, others are choosing to strategically default. They see it like liquidating a poorly performing portfolio – they have enough resources to cut their losses and move on. Historically, banks have been reticent to foreclose high-end homes and absorb a large loss, but defaulters are now forcing their hands and mansion foreclosure rates are moving on up.

Myths control behavior, and this has never been truer than in the housing market. Savvy agents will work hard to educate their clients, debunk myths, explain market trends, educate with solid facts – and actually close transactions.

REO Discounts to Grow Even Bigger?

Foreclosures are expected to pick-up as soon as banks begin to clear their backlog of troubled loans. RealtyTrac is projecting a 25 percent increase in foreclosures in 2012.

If an increase does occur, some housing experts wonder how it will impact overall home prices and whether the discounts for REOs will be even larger this time around.

For example, in metro areas like Las Vegas, the average foreclosure sells at 6.1 percent less than a non-foreclosure home. In Miami, the foreclosure discount is 7.1 percent, according to data by LPS Applied Analytics. In some places, it’s even more.

“A spike in sales of bank-owned homes can be bad news for other sellers,” The Wall Street Journal reports. “And foreclosure sales make it hard for prices to rise overall since they boost sales activity at the lower end of the market.”

This time around, however, housing experts don’t expect the discounts in distressed properties to grow.
“More often than not, prices are determined more by demand than supply,” Paul Dales, senior U.S. economist at Capital Economics, told The Wall Street Journal. Areas with a high number of REOs may have greater demand for REOs in good condition and less supply for other properties. Plus, Capital Economics predicts that demand will improve nationwide this year as the housing markets starts to recover.

The number of Phoenix foreclosures have been declining since July 2012 due to the increased number of purchases at Phoenix trustee sale and the declining supply of foreclosure inventory. The chart below shows the decline in the number of foreclosure in Phoenix due the lower inventory levels:

Phoenix real estate prices are starting to increase in the $200,000 and below price range. The number of Phoenix homes for sale a year ago was approximately 48,000 listing but now the number of homes on the market are approximately 22,000.

Economic Indicators Show Positive Signs Of Improvement

Consumers seem to be growing more confident in the economy as retail sales for February posted their largest gain in five months, according to last week’s report from the Census Bureau. Retail and food services sales for the month hit $407.8 billion, an increase of 1.1 percent from January, and 6.5 percent over February 2011.

Total sales for the December 2011 through February 2012 period were up 6.4 percent from the same period a year ago. The December 2011 to January 2012 percent change was revised from 0.4 percent to 0.6 percent.

Retail trade sales were up 1.1 percent from January 2012 and 6.3 percent over last year. Key gains were experienced by dealers of building materials and garden equipment and supplies, whose sales were up 13.8 percent from February 2011, and gasoline stations, whose sales were up 10.3 percent from last year.

Phoenix Arizona retail sales increased 6.8% in January compared to year earlier levels. Maricopa County retail sales were up 5.8% for the same time period. While this is moderate given the extent of the decline during the recession, it is still respectable and should continue. Autos and light trucks continue to do well.

Prices certainly didn’t impact February’s sales, as last month’s consumer price index for all urban consumers (CPI-U) increased 0.4 percent, according to numbers the Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 2.9 percent before seasonal adjustment.

A key factor contributing to February’s CPI gains was the gasoline index, which rose sharply in February, accounting for over 80 percent of the change in the all-items index. The gasoline increase led to a 3.2 percent rise in the energy index despite a decline in the index for natural gas. The food index was unchanged in February, with the food-at-home index unchanged for the second month in a row as major grocery store food indexes were mixed.

Similarly, the producer price index for finished goods advanced 0.4 percent in February, the Bureau of Labor Statistics also reported. Finished goods prices rose 0.1 percent in January after a decrease of 0.1 percent in December. The increase in finished goods prices, like consumer prices, was led by energy. The index for finished energy goods moved up 1.3 percent, while prices for finished goods less foods and energy rose 0.2 percent.

Turning to employment, initial claims for jobless benefits by the newly unemployed placed in the week ending March 10 dropped to 351,000, a decrease of 14,000 from the previous week’s revised figure of 365,000, according to last week’s report from the Employment Training Administration. The four-week moving average was 355,750, unchanged from the previous week’s revised average.

The Administration also reported last week that the total population of insured unemployed workers during the week ending March 3 dropped to 3,343,000, a decline of 81,000 from the preceding week’s revised level of 3,424,000. The four-week moving average was 3,394,250, a decrease of 25,250 from the preceding week’s revised average of 3,419,500.

This week’s financial headlines see a good bit of real estate news, kicking off tomorrow with housing starts and building permit totals for new homes in February from the Census Bureau. This will be followed Wednesday with February sales data for existing homes from the National Association of REALTORS®. Friday we’ll receive new home sales data for February from the Census Bureau.

8 Metros Where List Prices Are on the Rise

A number of housing markets nationwide have been seeing modest increases in median list prices. In the last year alone, median national list prices ticked up 6.82 percent year over year in February, according to Realtor.com data of 146 metro markets. And a number of markets have seen increases in just one month by 3 or 4 percent.

The following are the eight metro areas that saw the highest median list price increases from January to February:

1. San Jose, Calif.
Month-over-month increase: 4.20 percent
Median list price: $468,888

2. Washington, D.C.-Md.-Va.-W.Va.
Month-over-month increase: 4.17 percent
Median list price: $384,950

3. Detroit
Month-over-month increase: 3.92 percent
Median list price: $84,900

4. Corpus Christi, Texas
Month-over-month increase: 3.89 percent
Median list price: $165,700

5. San Francisco
Month-over-month increase: 3.77 percent
Median list price: $611,700

6. Punta Gorda, Fla.
Month-over-month increase: 3.35 percent
Median list price: $185,000

7. Atlanta
Month-over-month increase: 3.27 percent
Median list price: $154,900

8. Phoenix, AZ
Month-over-month increase: 3.23 percent
Median list price: $146,000

And where have median list prices fallen the most in the last month? Iowa City, Iowa, where median list prices have declined 4.95 percent, and Toledo, Ohio, where list prices dropped 4.31 percent from January to February, according to Realtor.com data.

What Do Americans Want Most Once Finances Improve?

Fifty-one percent of Americans in a recent poll say that if their financial situation were to improve, they’d buy a home. Coming in second on the list of wishes, they’d make repairs or improvements to the home they already have, according to the poll of more than 1,400 Americans conducted by the National Foundation for Credit Counseling Web site, www.DebtAdvice.org.

Meanwhile, 17 percent of Americans polled said they’d upgrade their car and 9 percent said they’d take a vacation.

“Home ownership has traditionally been a part of sound financial planning,” says Gail Cunningham, spokesperson for the NFCC, a nonprofit credit counseling organization. “With a combined total of 74 percent of respondents selecting a home-oriented option, the poll results strongly suggests that people continue to place value in owning a home, and are anxious to buy a house or improve their existing one.”

More Home Owners Stay-Put in Foreclosure

More lenders are allowing home owners in default to stay-put in their homes longer–and even negotiating special arrangements with them, such as the lender paying the home insurance if the home owner pays the utility costs, The New York Times reports.

Why the postponement? Banks don’t want the cost of maintaining more homes on their books. Many municipalities are forcing banks to better maintain foreclosed homes, which has been adding to the costs.
By the end of January, more than 644,458 homes were under bank ownership. What’s more, about 710,725 are in the foreclosure process, awaiting to add to that number, according to data by RealtyTrac.

“Under normal circumstances, the banks would be able to cover the cost of maintenance, upkeep, and property taxes by just reselling the property, but these are desperate times, and banks are resorting to somewhat desperate measures in some cases,” Daren Blomquist, a vice president at RealtyTrac, told The New York Times. “It is more of a factor now because property values have come down and will not cover all these costs when the banks resell the property, if they can resell the property.”

In 2007, the average time it took to complete a foreclosure was four months. By the end of 2011, that has stretched to a year. In some states the slowdown is even more pronounced, such as in Florida where defaulting home owners often stay put for more than two years, or in New York in which foreclosures in 2007 once took 263 days to complete and in 2011 now average 1,019 days.

In Phoenix, Arizona, many homeowners are able to stay in their homes for 1 year or more before receiving the Arizona Notice of Foreclosure and then they still have 90 days before the trustee sale. Approximately half of all Arizona trustee sale are being postponed on any given day for one reason or another.

Results No Excuses

Monthly Archives: March 2012