Market Conditions and Analysis for Mortgage and Housing Professionals

Good article on strategy for presentations by housing professionals. Shows what market demographics indicate are the buying trends by age group.

Market Conditions and Analysis for Mortgage and Housing Professionals

Pending home sales post solid gains two months in a row

There are signs that housing is coming off a second bottom as pending existing home sales rose a very strong 7.3 percent in November on top of October's 10.4 percent gain. Regionally, November's gains were led by the West and include the Northeast and Midwest with the South showing no change. November and October taken together show solid gains for all regions. The index is at its highest level since April 2010.

Recent sales increases have been helped by lower mortgage rates and lower home prices along with a somewhat improved jobs picture.

There is some speculation that the pending sales data are getting a boost, and are likely to continue to get a boost, from re-signings by homebuyers who had prior contracts voided for technical reasons such as missing deadlines due to financing snags. There have been reports that the failure rate of contracts (not going to closing) has risen significantly due to tighter lending standards.
Source: Barron's Online 1/3/2012

2012 Goal Setting

I have been studying goal setting for years now, and doing presentations on the topic.
It never ceases to amaze that the one simple act of writing goals down makes such a tremendous difference. Even when none of the finer points of effective goal setting are employed, it never fails that many of the written goals have been achieved by the time they are reviewed.
I will be offering free personal coaching on the topic to my business associates locally (San Diego area) in the 1st quarter of 2012. Just drop me a call or an email.
Even if we haven't met, send an email and I will send you the reasons most New Year's resolutions fail, the mistakes people make in goal setting, and links to the best mobile, online and computer apps for goal setting to help you get started!

New Higher FHA Loan Limits Signed Into Law Friday

President Obama signed into law Friday H.R. 2112, a bill that among other things has raised the mortgage limit on Federal Housing Administration (FHA) loans. On October 1st of this year, the lending limits for high cost areas was slashed, with the national maximum being reduced from $729,750 to $625,000 and San Diego County's maximum also declining from $697,500 to $546,250. This bill will extend the pre-October 1st high cost area limits from now through December 2013. This increased limit only applies to loans backed by the FHA, as Fannie Mae and Freddie Mac loans were not included in this bill.

This raising of mortgage limits was done for those in high cost areas who simply cannot get a home for the same prices as those in other areas of the country. FHA was created to help low and middle income families acquire loans with very little down payment, encouraging home buying for those who can afford their monthly mortgage payment but otherwise might struggle to come up with the down payment. San Diego is a prime example of a high cost area. The national limit for FHA basic standard mortgages is now 271,050.00. A quick Zillow search of single family homes yielded 21,279 homes on the market in San Diego County. Of those only 9,844 were priced lower than the national limit, the majority being condos or apartments. San Diego is an expensive market to live in, therefore what is considered middle class housing here is higher than in places such as the Midwest. This bill will remove the penalty of living in an expensive region of the country and provide opportunities to purchase great homes for the middle class. If one couples the FHA loans low down payments with the historically low interest rates, this bill will enable more middle class families to afford homes in the county.

This bill will be beneficial to San Diegans, as there will be far more homes eligible for FHA loans and refinancing. Another Zillow search for homes between the prices of $546,250 (previous limit) and $697,500(new limit) shows 1521 homes. This means that 1521 homes in San Diego are now eligible under the FHA programs that were previously ineligible. The FHA wants to encourage home buying, as it stimulates economic growth. With so many more eligible homes home buying should increase, helping both our local and national economies after what has been a rough few years. Purchasing a home now while prices, down payments, and interest rates are low is an excellent investment in the future, and the FHA can make this possible for you.

More Personal Information in the Credit Report

Consumers applying for a mortgage will be sharing more of their personal information with lenders next year.

FICO scores have been based on a person's credit history. But now, tools are being developed to help the lending industry dig deeper.

Fair Isaac Corp., and CoreLogic recently announced a joint project that will result in a separate score that will be available to mortgage lenders and will include payday loans, evictions and child support payments. In the future, the status of utility, rent and cellphone payments may also be included.

Experian, Equifax and TransUnion have recently begun providing estimates of consumer income as an option to the credit report. Experian has also begun including data on on-time rental payments in its reports as of this year.

All this new information could have positive or negative impact for consumers: It may open the door to homeownership to some consumers who otherwise lack sufficient credit histories, and it may help more affluent homeowners who show little use of credit.

On the negative side, the extra information could make a borderline borrower look even worse on paper.

The FICO-CoreLogic partnership will not result in a credit score that will eliminate a borrower for a mortgage backed by FNMA, FHLMC or FHA. This is because the report required for such a loan does not rely on the additional CoreLogic data. It could affect mortgage fees or interest rates charged by lenders who use a risk-based pricing model.This model rewards the most creditworthy borrowers with low rates and tack extra fees onto loans for those with lower credit scores.

It will be interesting to see if the new information will actually expand the number of people who can get a mortgage.

New Home Affordable Refinance Program (HARP II)

Yesterday, Oct 24, 2011, President Obama announced changes to the Making Home Affordable Refinance Program (HARP) so that a person can refinance a first mortgage that is upside-down.

That mortgage must be owned by Fannie Mae or Freddie Mac on or before May 31,2009.

The changes announced yesterday also extend the program to the end of 2013, and will allow a refinance of a first mortgage with no cap on the loan-to-value (LTV) ratio.

Another important enhancement is the elimination of certain risk-based fees for borrowers who choose a shorter term (see examples below) and lowering fees for other borrowers.

No lenders are offering the program yet, although some major lenders have stated they are working on it’s release.

The requirements released to date are as follows:

1. 1st mortgage owned by Fannie Mae or Freddie Mac

2. No late mortgage payments within the previous 6 months

3. No more than 1 late mortgage payment within the past 12 months

4. 2nd mortgages must agree to go back in 2nd position

5. The loan cannot have been refinanced previously under HARP unless it was between March-May of 2009.

6. Condominiums continue to be eligible under the program.

Lenders are expected to receive guidelines, including implementation dates by November 15, 2011.

Some of the enhancements may be available as early as December 1, 2011,

However, availability of the loan for LTV's greater than 125 is not expected until after December 31, 2011.

The FHFA announcement can be found here:

http://www.fhfa.gov/webfiles/22721/HARP%20release%20102411%20Final.pdf

The program is only one of many refinancing options available to homeowners. It is unique in that it enables borrowers who owe more than the home is worth to take advantage of low interest rates and other refinancing benefits.

Examples*

Assume a homeowner currently has a mortgage on which he or she owes $200,000 and
has an interest rate of 6.5 percent – a monthly payment of $1264. If the house is worth $160,000, the homeowner has a current loan-to-value (LTV) ratio of 125 percent.

If this borrower refinanced into a 30-year fixed-rate mortgage with an interest rate of 4.5 percent, the monthly payment would decline to $1013. But, by refinancing into a 30-year loan, the borrower’s loan balance will not reach $160,000 for ten full years.

If the borrower chose a 20-year loan term at a rate of 4.25 percent (mortgage rates tend to be less for shorter term mortgages), the monthly payment would be $1238 ($26 less than the borrower currently pays) and the borrower’s loan balance would reach $160,000 in 5.5 years.

If this same borrower refinanced into a 15 year mortgage, assuming an interest rate of 3.75 percent, the monthly payment would be $1454 ($190 more than the current payment), but the loan balance would be below $160,000 in a bit more than 3.5 years.

*These examples are purely illustrative and are not meant to represent interest rates borrowers should expect to pay. They do show that some HARP-eligible borrowers, depending on their circumstances and priorities, may benefit from a shorter term mortgage.

Are FHA Mortgage Loans Assumable?

You can assume an existing FHA-insured loan, or, if you are the one deciding to sell, allow a buyer to assume yours. Assuming a loan can be very beneficial, since the process is streamlined and less expensive compared to that for a new loan. You must demonstrate that you have enough income to support the mortgage loan. In this way, qualifying to assume a loan is similar to the qualification requirements for a new mortgage loan. After closing, you will then be responsible for an annual premium - paid monthly - if your mortgage is over 15 years or if you have a 15-year loan with an LTV greater than 90%.

Here is how assumable FHA loans benefit the buyer:

The benefits are two fold. The buyer may get an interest rate that is much lower than the current interest rate they could get from a bank AND they have an accelerated pay off schedule because there are less years remaining on the note!

The FHA mortgage is one of the most expensive when it comes to closing costs, although the costs can be financed. To counter that cost, it helps to remember that your FHA mortgage is assumable. When you sell your property you will have an edge over your competition because of the assumable financing you can offer.

The value of assumability is as high as it is ever likely to be because of the broad consensus that interest rates in future years will be higher than they are now.

Loans insured by the FHA are assumable; conventional loans, with a few exceptions, are not. That means that a home buyer who finances the purchase with an FHA-insured loan and who sells the house later, when interest rates are higher, will be able to offer a potential buyer the right to assume his low-rate FHA loan.

After approval of the buyer by the FHA, the buyer would assume all the obligations of the mortgage upon the sale of the property, and the seller would be relieved of liability, provided the loan being assumed was originated after December 14, 1989. It will be just as if the loan had been made to the buyer.