National Association of Realtors index spikes 32% as buyers take advantage of first-time homebuyer tax credit. Have You?

In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.

Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.

Between September and October NAR's Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That's the biggest year-over-year gain in the history of the index.

The PHSI is also at its highest level since March 2006, and the rise confounded expert expectations. A panel of industry analysts put together by Briefing.com had forecast a 1% drop in new contracts.

NAR's chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer's tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000.

"The tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," Yun said in a prepared statement.

The credit had been due to lapse on Dec. 1, so many October buyers may have acted to get in under the wire.

However, the credit has been extended through the middle of 2010 and expanded to include many move-up buyers. The housing industry hopes that will keep sales perking until the economy picks up and markets return to a more normal condition.

In a related story, the Census Bureau reported that private residential construction spending surged 3.9% during October.

Yun cautioned, however, that housing market indicators, such as pending sales, may weaken over the next few months.

"The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months," he said.

"Given the lag time, we could see a temporary decline in closed existing home sales from December until early spring when we get another surge," he added. "But the weak job market remains a major concern and could slow the recovery process."

The good news is that number of homes on the market has declined, removing some of the bloat that has depressed prices. There is now a seven month supply of homes on the market at the current rate of sale. which is down from 10.2 months a year ago. Yun predicted that housing conditions could return to near normal and home prices firm up by mid-2010.

"That would mean broad wealth stabilization for the vast number of middle-class families," he said. 

Making Home Affordable Program

The Steve Ticknor Team Can Help: http://www.shortsalesportland.com/ or http://www.stoporegonforeclosures.com/

While America was fretting and tweeting about Tiger Woods’ (and his wife’s) driving skills, the Obama administration on Monday set long-awaited guidance on a plan for mortgage companies to speed up short sales of homes and other loan modification alternatives to stem the 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. The announcement can be found here.

The new federal 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. New financial incentives for completing short sales or similar “deed-in-lieu” transactions — in which the deed is simply transferred to the lender — include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would also receive $1,500 in relocation expenses.

While a short sale may be preferable to a foreclosure, they have been frustrating for borrowers, buyers and realtors, because they are often hung up by lengthy negotiations with multiple lien holders and mortgage insurance companies. Realtors 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.

Under the new rules, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt. The rules 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.

Ostensibly, the federal guidelines apply only to banks and lenders subject to federal banking oversight. That means big boys Bank of America, JP Morgan Chase and Wells Fargo, but not necessarily local and state chartered banks who remain free to be as unreasonable as they want in short sale transactions.

This will help, but by how much remains to be seen.

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Update: Foreclosure Alternatives and Home Price Decline Protection Incentives
On Feb.18th the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the US housing market and offer assistance to up to 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures.

As promised, two weeks later on March 4th, the Administration published detailed program guidelines and authorized servicers to begin modifications and refinancings under the plan immediately. On April 28th, the Administration announced additional details related to the Second Lien Program and strengthening Hope for Homeowners. Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.

Today we are providing a program update, including additional details on Foreclosure Alternatives and Home Price Decline Protection Incentives. Foreclosure Alternatives will help to prevent costly foreclosures by providing incentives for servicers and borrowers to pursue short sales and deeds-in-lieu of foreclosure in cases where a borrower is eligible for a MHA modification but unable to complete the modification process. This program will assist homeowners who cannot afford to stay in their homes by helping them to avoid foreclosure and relocate to a home they can afford.

Building on insights developed by the FDIC, Home Price Decline Protection Incentives will provide additional payments based on recent home price declines, and therefore will incentivize additional modifications in areas where home prices have been falling. By increasing MHA modifications and the use of alternatives to foreclosure, we will reduce the negative impact of foreclosure, minimizing damaging costs for financial institutions, borrowers and communities.

Home Price Decline Protection Incentives and Foreclosure Alternatives, together with the other comprehensive elements of the Making Home Affordable program, will help to stabilize property values for homeowners in neighborhoods hardest hit by foreclosures. Based on estimates of the relationship between foreclosures and home prices, the Home Affordable Modification program could help to bolster home values for the average homeowner by as much as $6,000.
Foreclosure Alternatives and Home Price Decline Protection Incentives

Foreclosure Alternatives for Borrowers Eligible for MHA

Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives

Incentives for servicers to pursue alternatives to foreclosures

Borrower incentives to cover relocation expenses to homes that are affordable

Streamlined process combining short sales and deed-in-lieu transactions

Home Price Decline Protection Incentives to Protect Against Falling Home Prices

Incentives to support modifications in markets hardest hit by falling home prices

Provides incentives for modifications by providing payments based on recent declines in home prices to reduce the risk of loss to lenders from modifications compared to alternatives that could result in the loss of homeownership

Foreclosure Alternatives for Borrowers Eligible for MHA but Unable to Sustain a Modification: For eligible borrowers unable to retain their homes through a Home Affordable Modification, MHA will provide incentives to borrowers, servicers and investors to encourage short sales and deeds-in-lieu. Both allow families and servicers to avoid the costly foreclosure process, and to minimize the negative impact of foreclosures on borrowers, financial institutions and communities.

Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the servicer may consider a short sale, and if that is unsuccessful, a deed-in-lieu (DIL).
Both a short sale and a DIL provide an opportunity for borrowers and servicers to avoid the foreclosure process.

In a short sale, a servicer allows the borrower to sell the property at its current value, even if the sale nets less than the total amount owed on the mortgage. Approval of a short sale requires the borrower to list and actively market the home at its fair value. The sale must be an arms length market transaction with all proceeds (after selling costs) applied to the discounted mortgage payoff. If the borrower actively markets the property but is unable to sell it within the agreed upon time period, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer – provided the title is free and clear.

Short sales and DILs are complex transactions involving careful coordination and close cooperation among a number of parties -- servicers, appraisers, borrowers, purchasers, real estate brokers, title agencies and often mortgage insurance companies and junior lien holders. A short sale or DIL usually provides a better outcome for borrowers, investors and communities. However, due to the complexity of and time required for completion of these transactions, servicers historically have often opted to pursue foreclosure instead, even where a short sale or DIL would have provided a substantially better outcome for borrowers, investors and communities.

The MHA Foreclosure Alternatives Program simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. To compliment a standardized approach, Treasury provides incentives to borrowers, servicers and investors to pursue short sales and DILs.

How The Home Affordable Short Sale/DIL Program Works:

Borrower Eligibility. Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification. Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor's recovery through foreclosure Incentive Payments.

Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.

Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.

Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.

Standardized Documentation: The program will publish streamlined and standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter. These documents will outline specific marketing terms, describe the rights and responsibilities of all parties and establish clear timeframes for performance. Creating one standard set of documents that the industry can use is expected to minimize the complexity of these transactions and significantly increase use of the short sale option.

Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions. The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.

Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.

Selling Commissions and Fees: Reasonable and customary real estate commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement. The Servicer will agree not to negotiate a lower sales commission after an offer has been received.

Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.

Property Eligibility: Any junior liens, mortgages or other debts against the property must be cleared for the property to be sold as a short sale or deeded to the servicer. The servicer can proceed with a short sale or deed-in-lieu if there is a reasonable belief that all liens on the property can be cleared.

Program Expiration: Eligible borrowers will be accepted until December 31, 2012. Program payments will be made upon successful completion of a short sale or DIL.

Deed-in-Lieu: At the servicer’s option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.

Home Price Decline Protection Incentives to Protect Against Falling Home Prices: This initiative provides lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. These incentives will encourage servicers to undertake more modifications by assuring that incremental investor losses will be partially offset.
To encourage the modification of more mortgages and enable more families to keep their homes, the Administration, building on insights pioneered by Chairman Bair and the FDIC, has developed an innovative payment that provides compensation based on recent home price declines, structured as a simple cash payment on every eligible loan. Home Price Decline Protection (HPDP) incentives are designed to address investor concerns that recent home price declines may persist. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed. HPDP payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market.

Increases Number of Loans that Are Modified: Making Home Affordable will make payments totaling up to $10 billion to to encourage lenders, servicers and investors to modify rather than foreclose by addressing concerns that home price declines will persist in the future. This should increase the number of modifications completed under the MHA program in markets hardest hit by falling home prices.

How The Program Works:

Payments will be based on the total number of modified loans that successfully complete the modification trial period and remain in the modification program.

Each successful modification will be eligible for a HPDP incentive, up to a cap for HPDP incentives of $10 billion.

If the trial modification remains successful, 1/24th of the HPDP incentive will accrue to the lender/investor each month for up to 24 months. HPDP incentive payments will be made at the end of the first and second year of the modification.

Calculation of HPDP Incentives: HPDP incentive amounts will be calculated based on a formula incorporating:

Declines in average local market home prices over recent quarters prior to the quarter in which the loan was modified based on housing price indices; and

The average price of a home in each particular market, since the potential loss due to a given rate of home price decline will be larger in higher cost areas.

Fannie Mae Tightens Lending Standards

Posted by Tina Merritt on 11/30/2009 at 1:50 PM
Posted in Real Estate Investing

FHA loans rules are changing. Some are already in place, more are coming. 
 
Why is it important to lock in on a FHA condo loan now? Well, it may be next to impossible to get an FHA 3% money down loan on a condo next year.  There's the big reason why you should act now!

Here are some of the key changes, particularly in condo lending:
 
-FHA loans cannot comprise more than 30% of the loans in the condo complex.
-FHA Spot Loans have been eliminated. This was used on non-approved condo complexes routinely.
-If a condo has FHA approval, if it was approved before 10/1/2007, it will have to be re-certified by FHA.
-Detached (site) condos do not require FHA project approval.
-Owner Occupancy requirements are being reduced from 51% to 50%.
-The 12 month waiting period for condo conversions will be eliminated
-Two-unit condos are now eligible

FHA Streamline - Two Key Program Changes coming 11/18/09.

FHA Streamline has been touted by some lenders as a "no income verification, no appraisal" loan for those with existing FHA mortgage only.
 
Seasoning - Existing mortgages must have 6 months seasoning before they can be refinanced. Currently, there is no minimum seasoning.

Employment Verification: Lenders must now certify in writing that the borrower is employed and has income at the time of loan application.

Asset Verification: any funds required for closing must be verified.

In addition to these changes, each FHA lender often has their own rules. Most now require an appraisal and most have a minimum credit score of 580 to 620 (even though FHA does not) threshold and "add ons" for scores below 660.
 

Coming next year: FHA Appraisals will only be good for 120 days. Currently, an FHA appraisal is good for six months.

What is a CDPE?

A Certified Distressed Property Expert^® is a real estate professional with specific understanding of the complex issues confronting the real estate industry, and the foreclosure avoidance options available to homeowners. Through comprehensive training and experience, CDPEs are able to provide solutions for homeowners facing hardships in today’s market, specifically short sales.

The prospect of foreclosure can be financially and emotionally devastating, and often homeowners proceed without guidance of any kind. The developers of the CDPE Designation believe that the best course of action for a homeowner in distress is to speak with a well-informed, licensed real estate professional. They have the tools needed to help homeowners find the best solution for their situation. Often, when other options have been exhausted, CDPEs can help homeowners avoid foreclosure through the efficient execution of a short sale.

While enduring financial difficulties is challenging for any family, the process of finding a qualified real estate professional should not be. Selecting an agent with the CDPE Designation ensures you are dealing with a professional trained to address your specific needs. For more information, contact the Steve Ticknor Team. CDPE's in the Portland Metro area.

CDPEs don’t merely assist in selling properties, they serve and help save their clients in need. 503-752-1449 or 503-209-7355

How Much Can I Afford?

Lenders use guidelines to determine whether homebuyers will be able to pay their monthly mortgage payments comfortably. The guidelines lenders use generally state that a household should spend no more than 28 percent of its income on housing expenses and no more than 36 percent of its income on all debt obligations (including the monthly mortgage payment).

Additionally, mortgage calculators are helpful to determine how much house you can afford. If you are buying a house with someone else such as a spouse, parent, partner, or companion, that person's annual gross income and debts can be considered in computing the cost of the home.

Contact The Steve Ticknor Team

For more information go to How NW.com - Here is the link: http://www.hownw.com/homeprocess/howmuch.asp

WASHINGTON D.C.

Today the House and Senate voted to extend the tax credit for first time home buyers and allow $6500 for a new home even if it is not your first home.

Did you miss out on Cash for Clunkers? Congress has another deal for you: Buy a home before May 1 and collect up to $6,500 from the government. If you're a first-time homebuyer, get up to $8,000.

As part of the government's efforts to encourage people to spend money to help revive the economy, the House voted 403-12 Thursday to expand a popular tax credit for homebuyers. The bill, which also extends unemployment benefits and expands a tax break for money-losing businesses, now goes to President Barack Obama, who signs it Friday November 6th, 2009.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring -- and to expand it to many people who already own homes.

Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers -- or people who haven't owned homes in the previous three years -- could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.

Contact The Steve Ticknor Team - 503-752-1449

We hear a lot of talk about which months are the most lively ones for getting our listings sold. Many people think the ideal time to put a house on the market is when the azaleas are in bloom and the grass is the greenest. In many parts of the country, the "spring market" is thought of as the real estate industry's Christmas season.

There are important factors that strongly influence the sale of houses. Interest rates, the availability of local employment, tax rates, and the overall economic health of the community all play a large part in determining how quickly homes move and how well the sellers will do at the closing table. Your home may sell quickly during a month when the weather is gloomy but the interest rates are low. Waiting for spring flowers to bloom before planting your "For Sale" sign may improve your home's curb appeal, but may not have as much effect on the sale of your home as interest rates that go up as quickly as your tulips.

Contact The Steve Ticknor Team - 503-906-7170

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

Contact The Steve Ticknor Team