"Tax Credit Extension Seems Likely It seems likely that the U.S. Senate will approve a deal to extend the First-Time Homebuyer Tax Credit, but the devil is in the details.
Florida Democrat Sen. Bill Nelson told reporters traveling to Florida with President Obama on Monday that he thought that the extension would be approved, but both senators and representatives are among those who think that there should be some fiscal offset for the cost of the extension. Spending any more money on the stimulus effort also could stir up a hornets' nest in some circles. The proposal in the Senate that appears to have the most likelihood of passage would extend the $8,000 credit through March 31, then its value would drop by $2,000 for each of the subsequent three quarters of 2010. This plan was offered by Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus, a Montana Democrat."
Source: Associated Press, Andrew Taylor (10/26/2009) and The Wall Street Journal, John D. McKinnon (10/27/2009)
http://www.realtor.org/RMODaily.nsf/pages/News2009102701?OpenDocument10/27/09
Wednesday, October 28, 2009
Wednesday, October 21, 2009
Jumbo Loan changes??
"Jumbo Freeze Might be Thawing
October 15, 2009 by Robert Freedman · 4 Comments
Filed under: Economics, Mortgage Financing
By Robert Freedman, senior editor, REALTOR® Magazine
It’s still early but there are signs the availability of jumbo financing might be improving—although underwriting standards probably won’t ease any time soon. That means the days of creditworthy borrowers having a tough time getting financing for an amount over the conforming loan limit might be ending but they’ll still have to come up with a significant down payment and be prepared to show lots of documentation, like three years worth of tax returns instead of the customary two.
NAR Chief Economist Lawrence Yun says lenders are slowly getting back into the game because the climate of dread is lifting: Wall Street analysts and business executives have recalibrated their performance scenarios to reflect the greatly improved conditions among lower-priced homes (thanks to the home buyer tax credit and steeply discounted pricing). That in turn is creating a virtuous cycle as the improved scenarios help relax concerns over the economy, pushing up equities, which in turn creates the wealth that further increases confidence.
In other words, the improving lower-end housing market and the rising stock market are helping to push big financial services companies back into the business of loaning money rather than hoarding cash. As a result, it’s not just safe agency loans that lenders are willing to make (Fannie, Freddie and FHA) but also non-conforming jumbo loans. That helps further the narrowing of the interest rate spread between comforming and non-conforming loans.
I spoke with Las Vegas luxury home sales specialist Kenneth Lowman yesterday and he says the jumbo market has a long way to go before it’s back to where it needs to be, but, importantly, big loans are being made again. Earlier this year, that wasn’t so clear-cut.
“We recenty did a jumbo loan in record time,” he says. It was for a home listed at a couple of million dollars—obviously not an everyday deal for most salespeople—but it closed in just 22 days. Six months ago, he says, that never would have happened.
Yun predicts that financing for jumbo loans, second homes, and commercial real estate will show marked improvement by the middle of 2010. By late 2011 or early 2012, we might even see more non-agency, private-label loans securitized by Wall Street.
Yet the mortgage market by then will surely be different than it was during the housing boom, and in a good way. Buyers will be far more careful about staying within budget and lenders will be far more cautious about making loans to buyers who aren’t staying within budget.
Yet there remains a big concern: inflation. Although prices remain stable because of continuing slack in the economy (high unemployment, excess business capacity), once the enconomy starts growing again federal budget deficits will create inflationary pressure. The main way to head that off, says Yun, is for the government to produce a credible plan for getting the deficit under control."
http://speakingofrealestate.blogs.realtor.org/2009/10/15/jumbo-freeze-might-be-thawing/
October 15, 2009 by Robert Freedman · 4 Comments
Filed under: Economics, Mortgage Financing
By Robert Freedman, senior editor, REALTOR® Magazine
It’s still early but there are signs the availability of jumbo financing might be improving—although underwriting standards probably won’t ease any time soon. That means the days of creditworthy borrowers having a tough time getting financing for an amount over the conforming loan limit might be ending but they’ll still have to come up with a significant down payment and be prepared to show lots of documentation, like three years worth of tax returns instead of the customary two.
NAR Chief Economist Lawrence Yun says lenders are slowly getting back into the game because the climate of dread is lifting: Wall Street analysts and business executives have recalibrated their performance scenarios to reflect the greatly improved conditions among lower-priced homes (thanks to the home buyer tax credit and steeply discounted pricing). That in turn is creating a virtuous cycle as the improved scenarios help relax concerns over the economy, pushing up equities, which in turn creates the wealth that further increases confidence.
In other words, the improving lower-end housing market and the rising stock market are helping to push big financial services companies back into the business of loaning money rather than hoarding cash. As a result, it’s not just safe agency loans that lenders are willing to make (Fannie, Freddie and FHA) but also non-conforming jumbo loans. That helps further the narrowing of the interest rate spread between comforming and non-conforming loans.
I spoke with Las Vegas luxury home sales specialist Kenneth Lowman yesterday and he says the jumbo market has a long way to go before it’s back to where it needs to be, but, importantly, big loans are being made again. Earlier this year, that wasn’t so clear-cut.
“We recenty did a jumbo loan in record time,” he says. It was for a home listed at a couple of million dollars—obviously not an everyday deal for most salespeople—but it closed in just 22 days. Six months ago, he says, that never would have happened.
Yun predicts that financing for jumbo loans, second homes, and commercial real estate will show marked improvement by the middle of 2010. By late 2011 or early 2012, we might even see more non-agency, private-label loans securitized by Wall Street.
Yet the mortgage market by then will surely be different than it was during the housing boom, and in a good way. Buyers will be far more careful about staying within budget and lenders will be far more cautious about making loans to buyers who aren’t staying within budget.
Yet there remains a big concern: inflation. Although prices remain stable because of continuing slack in the economy (high unemployment, excess business capacity), once the enconomy starts growing again federal budget deficits will create inflationary pressure. The main way to head that off, says Yun, is for the government to produce a credible plan for getting the deficit under control."
http://speakingofrealestate.blogs.realtor.org/2009/10/15/jumbo-freeze-might-be-thawing/
Housing Starts are rising
Well, not everything is bad in the real estate news, at least!!
"Housing Starts Rise
Single-family home construction, which accounts for 85 percent of the market, increased 3.9 percent to a 501,000 annual rate. Multi-family housing fell 15 percent to an 89,000 rate.
Building permits, an indicator of future construction, declined 1.2 percent from the August rate to a 573,000 annual rate in September.
Most of the gain in single-family starts was attributable to a 7.1 percent increase in the South. The other regions fell with the West declining 8.8 percent.
Source: Bloomberg News, Courtney Schlisserman (10/20/2009)"
http://www.realtor.org/RMODaily.nsf/pages/News2009102001?OpenDocument#
First Time Tax Credit further infomation
Here, here! Let's hope that we do keep the tax credit, and keep on going forward :)
"NAR: Housing Tax Credit Is Working
One of the key ways to do that is for Congress to extend the home buyer tax credit, “The data on the present home buyer tax credit show that the credit has had its intended impact—sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably,” Phipps said. He also pointed out that each home sale generates approximately $63,000 in additional economic activity, providing a tremendous economic boost to the national economy.
“But it is a fragile recovery, and now is the time to build on home sales momentum by extending the tax credit throughout 2010 and expanding it to all home buyers,” he said. The present credit, due to expire on November 30, cannot help new purchasers now who write a contract today—they won’t be able to close before the deadline, and will lose out on the credit, said Phipps. “Without congressional action now, the market and our national economy may freeze again—possibly as soon as this month.”
Make Loan Limits Permanent
Phipps called upon Congress to take action on a number of additional fronts to strengthen the recovery. First, make the FHA and Fannie Mae/Freddie Mac loan limits permanent; these are set to expire on December 31. “Maintaining current loan limits would ensure that families have access to low-cost financing to purchase homes and can refinance problematic loans into safer, more affordable mortgages,” Phipps said.
Secondary Mortgage Markets
In addition, Congress should continue the federal government's involvement in the secondary mortgage market. “Without the government’s involvement in the secondary mortgage market, market participants will have no incentive to reach out to lower-income, creditworthy consumers. We must ensure that the housing market works in all markets and at all times, and that mortgage capital is provided to all potential and qualified purchasers in a way that promotes sustainable homeownership,” said Phipps."
http://www.realtor.org/rmodaily.nsf/pages/News2009102101?OpenDocument
Daily Real Estate News | October 21, 2009
Tuesday, October 6, 2009
Mortgage Brokers and Mortgage Bankers
http://www.nga.org/Files/pdf/0805FORECLOSUREBANKER.PDF
"Mortgage Bankers and Mortgage Brokers Perform
Different Functions in the Mortgage Process
■ Brokers Act as Intermediaries between Consumers and Mortgage Bankers
Mortgage brokers are independent intermediaries who bring together prospective borrowers and
mortgage bankers. According to NAMB, a mortgage broker has “a working relationship with
numerous banks and other mortgage bankers and provides the consumer with access to hundreds
of options when it comes to financing a home.”6 Mortgage brokers tend to be small businesses and
frequently have little capital.
Mortgage brokers help arrange loans, performing application-related services, such as requesting
verification of the borrower’s employment, requesting credit and other information, and compiling
borrower documentation.7 Brokers typically do not provide loan funds.8
Brokers can — and do — provide substantial benefits to borrowers and mortgage bankers and contribute
to the efficiency of the mortgage industry. Brokers are an important distribution channel for
6 http://www.namb.org/namb/Mission.asp?SnID=1411867994
7 Until recently, brokers often arranged for property appraisals. Freddie Mac and Fannie Mae recently announced several
changes in their appraisal requirements, including a new policy that prohibits brokers from selecting or compensating appraisers.
See http://www.fanniemae.com/media/pdf/030308_agreement.pdf
8 In most instances, the mortgage broker assigns the mortgage to the mortgage banker at settlement and the mortgage broker
is paid for his or her origination services. This process is known as “table funding.”
A Report on Mortgage Bankers and Mortgage Brokers from the Mortgage Bankers Association
© Mortgage Bankers Association May 2008. All Rights Reserved.
...mortgage bankers’ loan products and, in particular, can enhance mortgage bankers’ ability to serve
traditionally underserved borrowers and communities.
■ Mortgage Bankers Provide Mortgage Funds
Mortgage bankers lend money through various channels: directly to consumers through their own
retail sales forces, by funding loans arranged by brokers or other mortgage bankers, and by purchasing
loans originated by other mortgage bankers. In most cases, mortgage bankers offer their own
products.9 Regardless of the lending channel, mortgage bankers are responsible for underwriting the
loan, which involves evaluating the borrower’s credit worthiness and the value of the home.
Once a loan is funded, mortgage bankers — depending on their business models — pursue various
paths. Some mortgage bankers hold the loans in their own portfolios; others sell the loan to a secondary
market investor. Separately, a mortgage banker may service the loan or sell the servicing rights.
Mortgage banking is highly competitive — mortgage bankers compete with each other and at times,
with mortgage brokers, for customers. Nearly 8,900 mortgage lenders reported under HMDA in
2006.10 Mortgage bankers compete for consumers through price, products, and services. Mortgage
bankers seek to offer attractive interest rates and loan terms and to develop innovative loan products
and services to meet a variety of consumer mortgage needs. Additionally, if a mortgage banker
services loans, they provide continuous customer service and support to borrowers during the life
of the loan.
Mortgage bankers are organized in many forms, such as federal- and state-chartered banks, thrifts,
credit unions, and other depository institutions, as well as non-depository mortgage companies.
Mortgage bankers come in many different sizes, from small businesses to large multinational
corporations.
Differing Functions of Mortgage Bankers and Brokers
Lead to Vastly Different Consumer Expectations
The different functions and services of mortgage bankers and mortgage brokers lead consumers to
have vastly differing expectations of each. Consumer expectations of mortgage brokers often do not
match brokers’ actions and responsibilities, which effectively limits the consumer’s ability to protect
his or her own interests.
9 Mortgage bankers sometimes function as mortgage brokers, offering the loan products of other, larger mortgage bankers.
Where a mortgage banker performs the function of a mortgage broker, MBA believes that the banker should be subject
to the same disclosure requirements as a broker.
"Mortgage Bankers and Mortgage Brokers Perform
Different Functions in the Mortgage Process
■ Brokers Act as Intermediaries between Consumers and Mortgage Bankers
Mortgage brokers are independent intermediaries who bring together prospective borrowers and
mortgage bankers. According to NAMB, a mortgage broker has “a working relationship with
numerous banks and other mortgage bankers and provides the consumer with access to hundreds
of options when it comes to financing a home.”6 Mortgage brokers tend to be small businesses and
frequently have little capital.
Mortgage brokers help arrange loans, performing application-related services, such as requesting
verification of the borrower’s employment, requesting credit and other information, and compiling
borrower documentation.7 Brokers typically do not provide loan funds.8
Brokers can — and do — provide substantial benefits to borrowers and mortgage bankers and contribute
to the efficiency of the mortgage industry. Brokers are an important distribution channel for
6 http://www.namb.org/namb/Mission.asp?SnID=1411867994
7 Until recently, brokers often arranged for property appraisals. Freddie Mac and Fannie Mae recently announced several
changes in their appraisal requirements, including a new policy that prohibits brokers from selecting or compensating appraisers.
See http://www.fanniemae.com/media/pdf/030308_agreement.pdf
8 In most instances, the mortgage broker assigns the mortgage to the mortgage banker at settlement and the mortgage broker
is paid for his or her origination services. This process is known as “table funding.”
A Report on Mortgage Bankers and Mortgage Brokers from the Mortgage Bankers Association
© Mortgage Bankers Association May 2008. All Rights Reserved.
...mortgage bankers’ loan products and, in particular, can enhance mortgage bankers’ ability to serve
traditionally underserved borrowers and communities.
■ Mortgage Bankers Provide Mortgage Funds
Mortgage bankers lend money through various channels: directly to consumers through their own
retail sales forces, by funding loans arranged by brokers or other mortgage bankers, and by purchasing
loans originated by other mortgage bankers. In most cases, mortgage bankers offer their own
products.9 Regardless of the lending channel, mortgage bankers are responsible for underwriting the
loan, which involves evaluating the borrower’s credit worthiness and the value of the home.
Once a loan is funded, mortgage bankers — depending on their business models — pursue various
paths. Some mortgage bankers hold the loans in their own portfolios; others sell the loan to a secondary
market investor. Separately, a mortgage banker may service the loan or sell the servicing rights.
Mortgage banking is highly competitive — mortgage bankers compete with each other and at times,
with mortgage brokers, for customers. Nearly 8,900 mortgage lenders reported under HMDA in
2006.10 Mortgage bankers compete for consumers through price, products, and services. Mortgage
bankers seek to offer attractive interest rates and loan terms and to develop innovative loan products
and services to meet a variety of consumer mortgage needs. Additionally, if a mortgage banker
services loans, they provide continuous customer service and support to borrowers during the life
of the loan.
Mortgage bankers are organized in many forms, such as federal- and state-chartered banks, thrifts,
credit unions, and other depository institutions, as well as non-depository mortgage companies.
Mortgage bankers come in many different sizes, from small businesses to large multinational
corporations.
Differing Functions of Mortgage Bankers and Brokers
Lead to Vastly Different Consumer Expectations
The different functions and services of mortgage bankers and mortgage brokers lead consumers to
have vastly differing expectations of each. Consumer expectations of mortgage brokers often do not
match brokers’ actions and responsibilities, which effectively limits the consumer’s ability to protect
his or her own interests.
9 Mortgage bankers sometimes function as mortgage brokers, offering the loan products of other, larger mortgage bankers.
Where a mortgage banker performs the function of a mortgage broker, MBA believes that the banker should be subject
to the same disclosure requirements as a broker.
10 Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner, “The HMDA Data,” Federal Reserve Bulletin, December 2007."
http://www.federalreserve.gov/pubs/bulletin/2007/pdf/hmda06final.pdf
Time to buy is now!
"Daily Real Estate News | October 6, 2009 | Share
A Historic Time to Buy
Young people just starting to invest and buying their first homes are potentially the winners in this recession.
First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®
"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."
A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.
"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."
Source: The Associated Press, Chip Cutter (10/05/2009)"
http://www.realtor.org/RMODaily.nsf/pages/News2009100601?OpenDocument#
A Historic Time to Buy
Young people just starting to invest and buying their first homes are potentially the winners in this recession.
First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®
"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."
A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.
"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."
Source: The Associated Press, Chip Cutter (10/05/2009)"
http://www.realtor.org/RMODaily.nsf/pages/News2009100601?OpenDocument#
First Time Buyer Tax Credit expiring??
"First-time home buyer tax credit set to expire
Robert Selna, Chronicle Staff Writer
Wednesday, September 30, 2009
(09-29) 20:28 PDT -- The $8,000 federal tax credit for first-time home buyers is soon to expire, causing anxious house hunters to hustle and prompting a debate in Congress over extending a program that some say is central to the fragile real estate recovery.
The rebate is available to anyone who has not owned a home in the past three years. The government introduced the program in February as part of the stimulus package, and several studies estimate that by the Nov. 30 expiration date, it will have spurred several hundred thousand home sales.
The real estate industry in California and across the nation is lobbying Congress to extend the credit through next summer. Meanwhile, local Realtors and prospective buyers are eager to complete sales - which sometimes take months - not knowing whether the credit will be continued.
"The refund has had a tremendously positive impact," said James Liptak, president of the California Association of Realtors. "Home prices are down considerably, and one of the big things that has made people jump into the market is the credit."
Critics argue that American taxpayers are simply footing a windfall for purchasers who would have bought homes anyway. Real estate industry statistics suggest that approximately 1.8 million people are expected to receive the credit. They also indicate that the rebate spurred 350,000 home sales.
"That means that about 85 percent of the people who got the credit were already going to buy homes," said Ted Gayer, a Brookings Institution economist who focuses on housing and public finance. "The idea of a subsidy is to get people to change their behavior. This subsidy costs a lot of money and is only getting small number of people to change their behavior."
New homeowners Nicole Kitchen and her husband, Jared, said the tax rebate was a significant factor in pushing them to buy their Martinez house this summer. The credit allowed them to purchase a new washer, dryer, refrigerator, stove, television, two couches and other furniture.
The couple amended their 2008 taxes and received the benefit almost immediately.
"We would have had to pay for the new things with a credit card or put a smaller payment down on the house," said Nicole Kitchen, a 31-year-old teacher in Martinez. "This is a great way to boost the economy."
The Kitchens had additional motivation for buying a house, including the fact that the couple's first child was nearly a year old, interest rates were low and prices had fallen dramatically from years past.
Members of the House and the Senate have proposed more than 20 bills to extend and/or expand the credit.
A proposal by Rep. Ken Calvert, R-Corona (Riverside County), mirrors a bill sponsored by Sen. Johnny Isakson, R-Ga. The lawmakers want to offer the tax credit for another year, increase it to $15,000 and make it available to any buyer who stays in a home for at least two years.
Gayer from Brookings estimates that such a program could cost $30 billion. As it stands, the government is on track to spend $15 billion.
"California needs to stimulate demand; there's a lot of inventory out there and increasing the program to $15,000 could help (decrease) some of that supply," said Calvert's spokeswoman, Rebecca Rudman.
Others agree. They say that extending the tax incentive program is worthwhile given the importance of the housing market to the overall economy and the relatively small cost of the credit.
The housing market is unpredictable. It slumped in August after four months of gains. Nationally, sales of existing (not new) homes dropped 2.7 percent. The Bay Area saw a 15 percent decline.
Additional foreclosures also are on the horizon. In 2010, many option adjustable rate mortgages, which were popular in the Bay Area, will begin to readjust. When they do, borrowers will be hit with much higher monthly mortgage bills, possibly triggering the next big wave of foreclosures.
"The economy is trying to gain traction and the housing market is a big piece of that," said Mark Zandi, chief economist at Moody's Economy.com. "We are likely to have a lot of foreclosures next year, so it's good to give everyone who wants to buy a chance to buy."
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