FHA Mortgage Guide

Here are two news releases obtained in the past few days that offer directly opposing views on the near-term real estate market:

From the National Association of Home Builders:

WASHINGTON, November 29 — New single-family home sales edged up 1.7 percent in October following a dramatic downward revision to the preliminary estimate for September, the U.S. Commerce Department reported today. October’s seasonally adjusted annual rate of 728,000 units was 23.5 percent below a year ago.

“The progressive tightening of mortgage lending conditions during 2007 has been the major factor behind the setback in home sales this year,” said David Seiders, chief economist at the National Association of Home Builders (NAHB). “NAHB expects home sales to begin a gradual recovery in the early part of 2008.”

From the U.S. Conference of Mayors

Detroit, MI – The U.S. Conference of Mayors unveiled today an economic impact report on the foreclosure crisis that forecasts sharp losses in the growth of gross domestic product and projects economic output losses for 361 metro areas — referred to as gross metropolitan product (GMP). The total GDP growth loss equals $166 billion, with the combined economic loss of the top ten metro areas exceeding $45 billion.

Prepared by the respected economic and financial analysis firm Global Insight, the report projects that the foreclosure crisis will result in 524,000 fewer jobs being created next year and a potential loss of $6.6 billion in tax revenues in ten states. While the report stops short of forecasting a recession, 128 metro areas will be pushed into a “sluggish” GMP growth of less than 2 percent in 2008. Growth will be cut by more than a third in 65 metro areas and by more than a quarter in 143 metro areas. The largest metro, New York, loses over $10 billion in 2008 economic output as a result of the mortgage crisis, followed by Los Angeles ($8.3 billion), Dallas ($4.0 billion), Washington ($4.0 billion), and Chicago ($3.9 billion).

The Mayoral report says that “homeowners will also see property values decline by $1.2 trillion in 2008.”

So which is it? Gradual recovery or a trillion-dollar fiasco?

Stay tuned.

The Federal Reserve is out with its “Beige Book,” a look at how the economy is doing nationwide and in each of the 12 Federal Reserve Districts.
On the housing front, the Fed says that “Demand for residential real estate remained quite depressed, with only a few tentative and scattered signs of stabilization amidst the ongoing […] read more

As reported in mid-October, FHA loan limits for 2008 will be the same as 2007 — $417,000 for a single-family home in high-cost areas in the lower 48 states.
In an official announcement, the Office of Federal Housing Enterprise Oversight (OFHEO) says it’s keeping the current loan limit even though property values nationwide dropped by more […] read more

Last July we reported the HUD decision to allow the use of the LIBOR index for adjustable FHA mortgages.
The use of the LIBOR is really part of the internationalization of the mortgage marketplace, the idea that an investor in any country can buy U.S. mortgages. On many levels this is good for U.S. borrowers because […] read more

A letter from a reader asks: “Why are the closing costs so high on an FHA loan? They want to charge me $7,000 or $8,000.”
Most likely your closing costs include several large charges, some of which do not relate directly to your FHA mortgage.
First, your state and local government believes real estate transfers should result […] read more

Bloomberg has reported that mortgage bond trading among banks has been suspended until Monday, Nov. 26th.
“The European Covered Bond Council, an industry group that represents securities firms and borrowers, recommended banks withdraw from trades for the first time in its three-year history until Nov. 26. Banks are still obliged to provide prices to investors, according […] read more

Today we have a chance to spend time with friends and family, to eat well, and to reflect on the words of the old song, a song which says “there but for fortune go you or I.”
There are many places in the world which are neither free nor fortunate. Whatever our debates and disputes, if […] read more

We have a second posting from Jason Vondrak, this follows our first exchange at Mortgages: Who’s To Blame For The Lending Crisis?
Allow me to respond to some of the points raised in Jason’s second posting.
Jason says: “Peter,I agree with you partially, you are an intelligent person. However, consumers do have access to more information than […] read more

During the last two weeks of October the FHA program continued to sail along. Applications ran at an annualized rate of 1,180,300 while the number of actual applications for the period topped 55,000.
During the period, 32,518 mortgages were endorsed — 25.9 percent over early October. Eighty percent of the applicants were first-time purchasers, suggesting that […] read more

Jason Vondrak provided us with a view regarding the Fed and risk-based premiums for FHA loans. Fair enough. Allow me to respond to the points which were raised.
Jason says: In response to the “Gimme a break comment” The consumer must also be held accountable for their lack of due diligence. We live in the information […] read more

Below is the news release from the House Financial Services Committee showing the general features of the reform measure, H.R. 3915, just passed in the House. The bill, of course, will also need approval by the Senate and then must gain the President’s signature.
This is the first time in years that anything approaching pro-borrower legislation
has been considered, much less passed, by […] read more

This week I want to take notice of several interesting blogs and sites:
Calculated Risk had a terrific posting regarding the Boyko decision in Cleveland. This is the court case where 14 foreclosure actions were dumped because the plaintiff could not prove it actually owned the loans. Great job, Tanta. And great job, Judge Boyko. Why […] read more

The House of Representatives has passed H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007. The bill passed the House by a vote of 291-127.
Kieran P. Quinn, CMB, Chairman of the Mortgage Bankers Association (MBA) said his group believed that “this bill will limit credit availability and options for thousands of Americans who […] read more

I was interested to discover that, according to The Nation we are facing a coming foreclosure tsunami!
This, of course, is startling news. Not a single newspaper or magazine in the past year has even mentioned foreclosures, right? No congressional hearings have been held. Right? No proposed legislation has been suggested to deal with the 2 […] read more

Anyone look at the latest metro foreclosure figures from RealtyTrac, the foreclosure data and property listings company?
It is absolutely amazing to see some of the numbers.
If we rank metro areas by the ratio of foreclosures to households, then the top five are Stockton, CA (one foreclosure for every 31 households), Detroit/Livonia/Dearborn (1 for 33), Riverside/San […] read more

In my column for Realty Times this morning there is a discussion of recorded home values.
In many communities it would appear that despite a huge increase in foreclosures that home prices are pretty stable. This logically makes no sense if the idea of supply-and-demand is valid.
So why are reported sale prices so high?
As the column […] read more

Richard Armey, Republican majority leader of the U.S. House of Representatives from 1995 to 2001, and now chairman of FreedomWorks Foundation, says that current proposals to reform the FHA mortgage program won’t work.
Writing in The Washington Times, Armey says that “use of FHA insured loans so more people can experience the ‘American Dream’ of homeownership […] read more

New York state attorney general Andrew Cuomo has created a firestorm by alleging that appraisals have been systematically inflated. In response, the Mortgage Bankers Association defines the issue this way:
“Accurate appraisals are one of the fundamental components of the loan decision because a borrower’s credit and willingness and ability to repay are only two of […] read more

With lenders getting slapped around on Capitol Hill, it’s not surprising to find that the Mortgage Bankers Association “cannot support” the current efforts at mortgage reform.
The idea of “broad national uniformity” sure sounds enticing, the idea of having one set of mortgage rules across the country. But if federal rules are weak and pre-empt stronger […] read more

With the passage of H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, the House Financial Services Committee chaired by Rep. Barney Frank (D-MA) and with bipartisan backing has taken a huge step toward reforming the lending system.
Below please find a re-cap from the Committee explaining what the measure actually says at this […] read more