By Al Yoon
NEW YORK, Nov 30 (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed “short sales” of homes and other loan modification alternatives to stem a rising tide of foreclosures.
The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury’s website.
Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders.
The incentives, first announced in May, expand on the government’s Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 modifications offered under trial conditions.
“While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve” a modification, the Treasury said in its announcement.
Short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.
In one of the most contentious issues for real estate agents, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000.
The Treasury’s guidance would require that the borrower be fully released from future liabilities.
It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings. ( End of article.)
(Editing by Leslie Adler) ((firstname.lastname@example.org; +1 646-223-6347; Reuters Messaging: email@example.com))
A personal note from Bob Phillips. This is outstanding news for both sellers and buyers! Many of today’s better buys are short sales.
I have considerable experience with short sales, which cost a seller $0, and with consulting on loan modifications, with no up front fees. If you, or someone you know is in trouble with a mortgage, such as being “under water”, please give me a call, or shoot me an email, before it’s too late.
Mortgage markets improved last week on stronger-than-expected economic data and safe haven buying.
The holiday-shortened trading week amplified what should have been modest gains into large ones.
Conforming mortgage rates dropped by about a quarter-percent last week, dropping them near their best levels of the year — and of all-time.
Oddly, mortgage rates are falling as the U.S. dollar weakens. This is atypical because mortgage bonds are repaid in U.S. dollars. When the value of the dollar is falling, therefore, the value of holding mortgage bonds become less over time.
Investors are snapping up bonds with fury, however. Partially because of lingering concerns related to Dubai, and partially because of faith in the U.S. economy’s long-term health.
This week, those beliefs could be shaken to the core — specifically because of Friday’s jobs report.
It’s no secret that the economy is growing. Housing is improving, banks are re-capitalizing, and businesses are making capital investment. However, employment is lagging.
More than 4 million jobs have been lost this year and the unemployment rate is north of 10 percent for the first time since 1983. Consumers are worried for their jobs and are guarding their wallets the holiday season as a result.
The economy can’t grow without consumer spending, though, and that’s why Friday’s job figures will play an especially large role in mortgage markets. If employment data goes positive, stock markets will rally at the expense of mortgage rates.
Conversely, if data looks worse, mortgage rates should dip.
Either way, it’s a gamble. If you haven’t looked at the benefits of a refinance lately, waiting until Friday to see what happens may be ill-advised. This is because the last two times mortgage rates fell this low, markets corrected within 48 hours, sending rates soaring higher.
Rates look good today. Consider locking something in before rates have reason to rise.
For today’s home buyers and homeowners that can manage the higher monthly payments, 15-year fixed rate mortgage rates look attractive as compared to comparable 30-year products.
The 15-year/30-year interest rate spread is near its 5-year high.
Despite lower rates, however, homeowners opting for a 15-year fixed mortgage should be prepared for its higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30-year amortizing product.
As compared to 30-year terms, 15-year products repay 3 times as much principal each month.
Versus a 30-year, 15-year fixed mortgages have a few downsides worth noting. The first is that, because 15-year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.
Another negative is that the sheer size of the payment. If you run into fiscal trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30-year product and that costs money to do.
In other words, be sure you can manage the payments over the long-term before you opt for a 15-year term. If you can manage it, though, the rewards are tangible.
At today’s rates, a 15-year fixed vs. a 30-year fixed costs $230 extra per $100,000 borrowed.
Hello again – I hope your Thanksgiving Day ( And Black Friday.) went beautifully!
In our local housing market, the number of available houses is now the lowest in at least a few years. In Coto de Caza, for example, it went from a previous low of 131 houses, back in mid January, to hovering around 150 in the Spring, but has since steadily declined, to now being less than 115.
Correspondingly, the number of houses in escrow has followed a slightly different path over that time, from a low of 9 in January, up to a high in mid-summer close to 40, but recently staying in the high 20’s to the low 30’s. Prices in the lowest ranges have nudged up from their low levels over the first half of the year, while the higher price ranges have continued to slightly decline. ( This is still the most negotiable price range.) Meanwhile, interest rates, have fluctuated slightly up and down, but are presently at historical lows – in the high 4’s and low 5’s. This has shaped up as an excellent opportunity to buy real estate, in South Orange County. ( Between now and February 1st is typically the best time to buy a house in our area.)
The median price for Orange County has nudged upward every month, since January. While the hottest market is in the lower ranges – under $350k for condos, and under $500k for detached houses – the flurry of activity there – 5 – 10 offers on virtually every property – is starting to move up to the next tier of prices – into more medium priced houses. These are becoming a much easier sell than they were 6 months ago – giving those sellers more hope that they can actually sell and move up to one of the more negotiable bigger houses.
If you are thinking of buying and/or selling a house in South Orange County this is an excellent time – especially if you’re moving upwards. The lower market is still hot – a seller’s market, while the highest price ranges are extremely negotiable. Selling in either the lower or medium range is good – IF you choose to be competitive. The upper market is still not a good market for equity seller’s – you HAVE to be competitive with neighboring short sales and lender owned properties! In this higher price range, in MOST cases, price trumps nice “features” or amenities.
To assist you in your quest, I have a couple of superb resources that have been improved this past year. First, you can conduct your own MLS search, with no need to register ( unless you’d prefer to be notified of updates, or new listings.) by clicking here. The other resource that some friends are using and enjoying is called ListingBook. It allows you to do a bit more tweaking, and notifies you daily of new listings or price reductions. Click here for ListingBook Both of these venues also assist potential sellers, giving you up to date info on your potential competition.
I suggest that you try both sites, to see if one feels more comfortable for you. With both you can search practically all areas of Southern California, and both are soon expanding to the entire state. By the way – you can also search for leases at either venue – just plug in a monthly payment range instead of a full price. ( for example: $900. to $1300. per month, rather than $350,000 – to $400,000., in the price box.)
Do you know of someone who is having difficulty with their mortgage? Such homeowners are almost everywhere you look. Here is information about President Obama’s Stimulus and Affordability & Stability Programs – a couple of links to information about the plans:
If you know of someone who is thinking about doing a short sale or a loan modification, I am well schooled in both situations, and would be pleased to counsel them with no obligation. There are a lot of scams out there – including heavily advertised attorneys, who have gone out of business, overnight.
In case you’re not aware, I have been blogging about real estate in South Orange County for over two years. Here are some recent posts on my blog regarding other recent real estate matters:
I also have a weekly update on mortgages, to keep you updated on that activity. Here’s the latest:
Feel free to subscribe to my blog – I average 5 new posts per week, and they are easy to either read or delete. You can also connect with me on Facebook, Twitter, LinkedIN, or Plaxo if you’re on any of those.
That’s all for now – thanks for your time. Let’s talk again soon.
It’s official — home prices are no longer in free fall.
According to the Federal Housing Finance Agency, the Home Price Index posted its first quarterly increase since 2007 last quarter.
The news was reported Tuesday.
The Home Price Index is an interesting metric. It’s huge in its scope, accounting for every home sold in the country that backs a mortgage bound for Fannie Mae or Freddie Mac with two notable exceptions:
- It doesn’t track new construction
- It doesn’t track multi-unit homes
Because the Home Price Index makes these specific exclusions, and because it doesn’t account for FHA and jumbo mortgages, some analysts discount the HPI’s relevance. They prefer the private-sector Case-Shiller Index instead.
Now, to be fair, the Case-Shiller has its own set of flaws, too.
For example, it excludes condos and co-ops, and only tracks sales in 20 cities nationwide. But, of all the private home valuation models, Case-Shiller is the most well-known and most widely-used.
The Case-Schiller Index was also released Tuesday and the report showed the same results as its government-issued counterpart — home values increased between the second and third quarter.
When the Home Price Index and Case-Shiller Index reach similar conclusions, markets tend to buy-in. Home buyers should, too.
Home values have likely bottomed and are starting to turn higher, as shown in two separate reports. High sales volume and dwindling supply are contributing factors. So are low mortgage rates and a tax credit.
If you’re on the fence about buying a home, at least consider your options. In 2010, homes are unlikely to be as cheap to buy, or as cheap to finance.
Home affordability improved this week after the Federal Reserve released its November 3-4, 2009 meeting minutes.
The FOMC Minutes is a companion to the Federal Reserve’s post-meeting press release. It’s released 3 weeks after the Fed adjourns and details the internal debates that shape our nation’s monetary policy.
However, this extra level of detail shapes markets and mortgage rates. With Wall Street unsure about the economy’s path, investors look to our nation’s central bankers for guidance.
The Fed has made several points clear:
- The economy shows tell-tale signs of improvement
- Unemployment threatens the recovery
- Inflation pressures are low, for now
Overall, the FOMC Minutes paint the economy as in a state of measured repair, and under tight federal surveillance. Investors like this message and, as a result, stock and bonds markets are improving.
If you haven’t checked mortgage rates lately, make a point to do that. In the wake of the FOMC Minutes, conforming mortgage rates are now hovering near their all-time lows set exactly 1 year ago.
Another month, another piece of evidence that the housing market is in recovery.
Existing Home Sales surged in October as the nation’s homebuyers took advantage of low mortgage rates, low list prices, and, for some, a generous tax credit.
Home resales are 23 percent higher versus a year ago and home supply is down to 7 months nationwide.
Inventory hasn’t been this low since February 2007.
The news shouldn’t be surprising, however. The same real estate trade group that produces the Existing Home Sales report also publishes a monthly report meant to predict future home sales called the Pending Home Sales Index.
Pending Home Sales have been through the roof since mid-May.
So, with pending home sales showing no signs of slowing and 80% of pendings turning into actual, closed sales, we can expect existing home sales volume to rise in the coming months, too. Especially because Congress extended the home buyer tax credit to include (1) “Move-up” buyers and, (2) Buyers with higher household incomes.
It’s terrific news for home sellers. The housing market turnaround means higher sale prices and fewer concessions to buyers long-term.
To buyers, on the other hand, the news isn’t so good. The window to find a “deal” appears to be closing quickly.
Mortgage markets worsened last week on a mixed bag of economic data. Inflation data came in soft, but so did the start of the holiday shopping season.
For the first time in a month, mortgage rates worsened last week, adding roughly 0.125 percent on conforming fixed-rate products, and a little bit more on ARMs.
Despite rates worsening, there was still some good news for home buyers and would-be refinancers. Mortgage rate volatility was markedly lower than in recent weeks. You could shop for mortgage rate last week and actually take your time about it.
This is in stark contrast to the last month or so over which mortgage rates changed every few hours, on average.
This week, though, because a heavy data calendar is combining with a holiday-shortened trading week, rates aren’t likely to stay as tame.
- Monday: Existing Home Sales
- Tuesday: Consumer Confidence, Home Price Index, Fed Minutes
- Wednesday: New Home Sales, Personal Income and Outlays
Each of these data points are market-movers by themselves. In tandem, however, they could really shake things up. Then, at the tail end of the week, markets will react to Black Friday.
If stores look full Friday and initial receipts appear high, stock markets should rise at the expense of bonds, leading mortgage rates higher.
Additionally, expect that mortgage rate changes will be amplified because of low trading volume. This could work in your favor, or out of your favor — depending on the market direction.
With mortgage rates at such low levels and unlikely to fall much further, locking a rate is advisable. If you choose to float, though, keep your loan officer on speed dial because when rates do rise, they’re going to rise quickly.
A “Housing Start” is a home on which construction has started and, for the 4th straight month, national single-family housing starts held steady last month.
When the demand for homes grows faster than the number of homes for sale, prices increase.
As recent home sales data confirms, buyers currently outpace sellers and one consequence of this is an increase in multiple-offer situations this year.
It’s no wonder home prices are up across so many neighborhoods.
October’s Housing Starts report is yet another piece of housing data foreshadowing rising home prices into 2010.
Building Permits were also down in October, a potential demand-to-supply imbalance magnifier. Without permits, there’s no future construction. This drains supply. Meanwhile, tax breaks and low rates tend to stimulate demand and, right now, we’ve got both.
Therefore, so long as demand remains semi-constant into the New Year, expect home prices to rise.
In many markets – like in South Orange County, California, where I live and work – they already are.
Here is the latest Orange County, California, Housing Report from my friend Steven Thomas, the President of Altera Real Estate.
Monday, November 16, 2009
Have you ever pedaled up a steep hill on your bicycle as a kid only to wonder if you were going to ever make it? That’s the same feeling that some buyers, sellers and agents get in trying to arrive at a successful close date. Short sales are homes where the asking price is less than the outstanding loan amounts. These are subject to the lender’s approval. This approval takes anywhere from weeks to months. There is nothing short about a short sale.
About a year ago, it was just about impossible for agents to show a short sale to a prospective buyer. Nine times out of ten, the short sale already had at least one offer on the home, which had been submitted to the lender for approval. However, the home remained on the market as an active listing until that approval was received. So, agents would show their buyers home after home only to find out that most short sales already had an offer submitted, which amounted to a gigantic waste of everybody’s time.
Agents then would contact every short sale to see if it was “really” available. This stemmed from the fact that an escrow is not opened until after lender approval. Escrow is not opened so that expenses are not incurred for any work completed. Inspections, homeowner association documentation, appraisals, etcetera, are all fee based and time sensitive and nobody is going to want to pick up the tab if a lender does not approve a file or if there are significant delays.
Short sale data has been cleaned up over the course of the last year. It is now mandatory for all properties that have offers submitted to a lender to be placed in “Backup Offer” status or “Pending Sale” status within the Multiple Listing Service.
I used to reference the overstated active listing inventory and the understated pending sale statistics last year at this time. The data is still not perfect, but is much improved and easier for agents and buyers to look at homes.
In response to so many short sales no longer counted as a part of the active listing inventory, the total pending sale inventory has blossomed. There are currently 6,838 total pending sales. 58% are short sales, only 8% are foreclosures and 33% are homeowners with equity.
There are 3,703 pending sales that have been pending for more than one month. 76% are short sales, 5% are foreclosures and 19% are homeowners with equity. There are 2,132 pending sales that are have been pending for more than two months. A stunning 91% are short sales, 1% are foreclosures and 8% are homeowners with equity.
Almost a third of the total pending sales count has been pending for more than two months and most are short sales. Even though more and more homeowners have defaulted on loans, lenders have not been foreclosing. As a result, the market has grown much hotter with an increase in successful short sales and a shift to more equity sellers.
The huge increase in pending short sales has not materialized as a huge increase in closed short sales. All of these numbers illustrate that dealing with short sales is like bicycling up a steep hill as a kid. Just because a buyer’s offer is accepted, if it is a short sale, it is going to take a long time to close escrow.
Since short sales are distressed, their pricing attracts a lot of attention from buyers. Buyers can expect multiple offers in dealing with short sales. In the end, buyers have to move quickly and compete with other offers only to wait for a long period of time for the seller to obtain lender approval.
Sometimes the process takes such a long time that the buyer walks away and looks for something else. Many of them move onto equity sellers. The Orange County real estate market and the entire state of California are at the mercy of lenders. The bottom line, the market is full of challenges and the short sale process makes the current real estate landscape even more challenging.
So, how do the rest of the numbers look? The market has continued to not change much over the past few months. Once again, the past two weeks are no exception. The active listing inventory decreased slightly by 30 homes over the past two weeks, totaling 7,719. That’s 5,539 fewer than last year and 9,514 fewer than two years ago. The inventory has dropped by 4,123 homes so far this year, a 35% drop. We can expect the active listing inventory to drop slightly for the remainder of the year.
Demand – the number of new pending sales within the past month – increased by 75 in the past couple of weeks to 3,241, a 2% increase. Last year’s demand was 684 fewer and two years ago was 1,946 fewer. The expected market time for all of Orange County decreased in the past couple of weeks from 2.48 to 2.38 months. The expected market time last year was at 5.18 months and two years ago it was at 13.31 months. For homes priced below $1 million, the expected market time is 1.87 months.
For homes priced above $1 million, the expected market time is 8.79 months. That range represents 27% of the active listing inventory, but just 7% of demand. For only the second time this year, the number of distressed properties on the market increased. The distressed inventory increased by 73 homes, or 3%. 32% of the active inventory is distressed compared to 44% last year.
There are currently only 339 foreclosures in all of Orange County, an increase of 25 in the past two weeks. Foreclosures only represent 4% of the active listing market and have an expected market time of 0.82 months. Last year the expected market time was at 1.22 months.
Foreclosures continue to be exceptionally HOT and are, on average, selling for 3% above their asking prices. There are currently 2,123 short sales on the active market, an increase of 48 in the past two weeks. Short sales currently represent 28% of the active listing inventory. The expected market time for short sales is currently at 1.72 month versus 7.08 months one year ago (this number was grossly overstated as illustrated earlier).
Homeowners with equity in their home now account for 68% of the current active inventory. If a buyer wants to avoid the many pitfalls of dealing with short sales and foreclosures, they should turn their attention to equity sellers. End of Steven’s report.
Personal note from Bob Phillips: I have been involved on each side of short sales, both as a listing agent – with great success – and as a buyer’s agent – also with excellent success. I have seen approvals from lenders in as short as a few weeks, resulting in a 60 day period from offer to close of escrow, and I have also seen approvals take more than 3 months to obtain.
If you are thinking of doing a short sale, as a seller, or getting involved with one, as a buyer, you’d be best advised to consult with a Realtor experienced with the process. ( And have a lot of patience.)