Realtor.com has come out with a new home valuation tool which may well be the most advanced we have seen to date.
Realtor.com says it’s valuation tool has data concerning 80 million homes, including 4 million now for sale and 38 million previous sales.
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For all the talk about rising loan limits, the dull reality is that the limits may be out-of-touch for a growing number of borrowers.
To understand why just take a look at the latest data from Standard & Poors, the S&P/Case-Shiller Home Price Indices. Case-Shiller has followed 10 markets since 1988 and 20 major markets since 2001. The past year has been the worst on record with annual declines of 17.7% for the 10-city index and 16.6% for the 20-city index.
HUD is out with new statistics explaining that 400,000 “families” (not just homeowners, of course) have refinanced with FHA mortgages during the past year.
Fair enough. HUD ought to be congratulated for getting as many people as possible into FHA loans. That’s good for the FHA and it is surely good for a lot of borrowers.
The catch is that such numbers do not exist in a vacuum. The core reason for more FHA financing is very simple: Private-sector loan programs are falling off the table. The private sector is running as fast as it can from option ARMs, interest-only mortgages and stated-income loan applications. To it’s credit the FHA never dabbled in such junk.
But HUD is not telling the whole story when it says that in July of this year that “FHA expands FHASecure to help homeowners with adjustable rate subprime mortgages who can no longer afford their mortgages and missed up to three monthly mortgage payments over the past 12 months. Rather than go into foreclosure, eligible borrowers can refinance with FHA and lenders can voluntarily write down the outstanding subprime mortgage principal balances.”
Low Down Payments! Low Credit? No Problem! You read about all the features and advantages of an FHA loan and you can’t help but wonder, is FHA going to be the new subprime? If subprime and Alt-A borrowers have no where to go, some are wondering if they are going to try and slip by FHA. Now, they’re have been some changes to help avoid this route, but the key difference between FHA and subprime mortgages falls back on the simple issue of income qualifications.
It’s no secret that FHA loans are emerging in the mortgage industry as the go-to option for homeowners around the nation. With the decline in credit options, FHA loans have seen quite an upsurge in popularity; expected to represent more than a third of all U.S. borrowers by the end of this year. There’s been growing support for FHA, and changing guidelines have shown that FHA is no longer outdated even in high-cost areas.
Presidential elections are a team sport. Once primaries are over everyone in each party gets behind their main candidate to show a united front — or stays quietly in the background.
That, anyway, is how it’s supposed to work.
The usual arrangement has now been broken in Seattle. According to the Seattle Post-Intelligencer, HUD Secretary Steve Preston was asked about Sen. John McCain’s plain to spend as much as $300 billion buying out bad loans — that is, paying lenders face value for mortgages may be in default or which may be secured by properties in communities where values have fallen.
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What comes after a foreclosure? In too many it’s bankruptcy and now HUD has come out with a policy that may help some homeowners.
The bankruptcy standards were changed in 2005 under the so-called Bankruptcy Abuse Prevention and Consumer Protection Act. This law actually made bankruptcy far more difficult for consumers and greatly benefited mortgage lenders, credit card companies, student lenders and other creditors.
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For all the talk of higher FHA mortgage limits, a number of buyers and sellers may well find that big FHA loans are no longer available after January 1st.
The FHA loan limit has been bouncing up and down for the past year.
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In light of the recent moves by FHA and their key H4H program, HUD is continuing to stress the importance of education and prevention as core solutions to our housing economy. Many of the problems that we are now facing are due to the lack of financial literacy and education of homeowners; a weakness unfortunately opening them up to predatory tactics and unfair lending. While recent programs implemented by HUD and FHA address our current problems, they also understand that preemptive actions are the best method to avoid these problems again in the future.
A while ago we mentioned how the Hope for Homeowners program would be meaningless if there were no participating lenders. Well late last week they finally updated the long awaited lender list. As of right now, it is available through an excel spreadsheet on the FHA website.
What is the hope for homeowner program? If this program is still new to you, be sure to check out our recent explanation of the Hope for Homeowners program or the FHA issued Factsheet. In short, the H4H program aims to help troubled homeowners by refinancing their current mortgages into cheaper FHA insured mortgages. One of the characteristics of these FHA loans would be that they can be no larger than 90 percent of the property’s new appraised value; this will help lower costs and help avoid the dreaded route of foreclosure.
Why is this so important? The program itself is quite helpful since it addresses the problems of our housing crisis by refinancing these troubled mortgages. But, more importantly, FHA programs like these encourage individuals to simply take action. This could be as simple as calling your lender or shopping with different companies for various loan options. Fortunately, this FHA program will help specific homeowners, as well as set a hopeful trend among homeowners and lenders alike.
With this updated list, we’re starting to see more and more participation and response from lenders to help homeowners. The FHA has since introduced numerous programs, but the Hope for Homeowners program stands out because it specifically details the discounting of mortgages to address the recent decline in home prices.
Given all the steps taken during the past month to calm the financial markets you might think that mortgage investors — the folks who buy local loans — would be a touch more secure.
That does not seem to be the case, however, judging from the sharp and sudden increase in loan rates last week. According to Freddie Mac, a basic 30-year fixed rate mortgage could be had for 6.46 percent — that’s up from 5.94 percent the week before. In both cases you need to add .6 percent for points to get the full rate.
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As a taxpayer you now own a big piece of the nation’s nine largest banks. It’s in the form of preferred stock, so you’ll get dividends — but curiously you won’t have a right to vote. Somehow I can’t imagine Warren Buffett making such a deal, stock without a vote.
And, if the government has its way, it will invest in thousands of other banks, whether they welcome such investment or not.
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While the FHASecure program was able to help fewer than 4,000 delinquent conventional borrowers during the past year, the new Hope for Homeowners Program may do better.
That, at least, is the conclusion from a survey done in late September by the Consumer Credit Counseling Service (CCCS) of Greater Atlanta.
Of 591 people surveyed in late September, 381 of them, or 64.6 percent, said they met five key eligibility criteria for the mortgage refinancing program.
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While much of the mortgage marketplace has been struggling if not comatose during the past year, official figures show that the FHA mortgage program enjoyed spectacular growth.
The federal government operates on the basis of fiscal years, periods which go from October 1st of one year to September 30th of the next. In the just-completed fiscal year — 2008 — the FHA mortgage program showed massive growth, except in the one area many borrowers and communities regard as the most important.
The U.S. Department of Housing and Urban Development launched a new program late last week that would allow Indian tribes and Alaska Native Regional Corporations to issue bonds and secure loans towards more affordable housing opportunities for Native Americans. This announced program would encourage private investment for more affordable financing opportunities in these specific regions. According to the assistance secretary for the HUD’s Office of Native American Program, “this program will give these communities the financial boost they need to meet their housing development needs”.
The Federal Housing Administrations Hope for Homeowners program went into effect last week, but as of right now, there still isn’t a list of participating lenders yet. While the program sounds great in theory, without any lender participation the legislation is almost meaningless.
Why the cold feet?
When we covered this new program earlier this month, we predicted this “less-than-thrilled” response from lenders. The program aims to help those with troubled mortgages and convert them into cheaper fixed rate traditional FHA mortgages, granted these participating lenders must be willing to write off part of the loan and suffer the initial loss. Specifically, the new FHA mortgages can be no more than 90 percent of the property’s new appraised value.
The Mortgage Bankers Association has come out with a new study which tells us a lot about FHA mortgages.
FHA loans have been getting bigger. The 2008 MBA Cost Study shows that a typical FHA mortgage originated in 2003 has an initial balance of $162,454 — a figure that rose to $195,227 in 2007.
That’s quite a jump, especially when you consider what’s happened to household income: Between 2000 and 2007 household income as expressed in buying power has fallen by $324 according to economist Jared Bernstein.
In August 2007 HUD began allowing borrowers to get FHA adjustable loans based on the LIBOR index.
Given the events of the past week a lot of FHA borrowers with LIBOR indexes may wonder about their choice. As Canada’s Financial Post reported last Tuesday “the London Interbank Offered Rate, or LIBOR, which is set by 16 banks, rose the most ever, jumping 431 basis points.”
Translation: The rate for overnight loans among banks rose 4.31 percent in a day to 6.88 percent. That’s right — the rate more than doubled.
If you are 62 or older and have been considering a reverse mortgage, the FHA and HUD just approved a new national limit of $417,000 for HECMs. The new limit is not set in stone yet as there are no set deadlines yet; but their target effective date is November 1st. There was some debate over this increase, and some interpretations of HR 3221 led some to argue that the limit could have been increased up to $625,000. However, after much debate, the final decision was a national limit set at $417,000.
Want to know more about Reverse Mortgages and the FHA HECM Program? Check out our Introduction to FHA Reverse Mortgages.
With FHA stepping up to the plate recently, people are beginning to question whether they are ready to take on such a responsibility. In this current liquidity crisis, if you have less than a 20% down payment your options become quite limited. There aren’t many private investors willing to touch these loans, and Fannie and Freddie couldn’t even help you if they wanted to. That leaves many home owners with the only option of FHA loans and it is expected to be the growing trend as credit continues to tighten.
Bloomberg estimates that by the end of this year, “FHA will guarantee 3 in 10 U.S. borrowers, many of whom have bad credit or loans that required no verification of income.” In addition, Congress wants FHA to do even more. In the past week, the Hope for Homeowners program authorized the agency to guarantee an additional $300 billion worth of struggling mortgages. But with FHA employing less than a thousand people nationwide, FHA is letting Congress know it needs upgraded technology and at least 150 workers immediately.
Peter G. Miller is a syndicated real estate and personal finance columnist who appears in more than 100 newspapers nationwide. His columns for Realty Times are carried by thousands of websites. Author of The Common Sense Mortgage -- a book with unit sales well into six figures -- Mr. Miller has been featured on such media outlets as Oprah, The Today Show, NPR and CNN.
Mr. Miller's work also appears on such sites as RealtyTrac and Mortgage Lenders Plus, and he has been a long-time columnist with the leading magazine for real estate brokers, the Real Estate Professional.
Heindrick So is a mortgage consultant at a local Bay Area Real Estate Brokerage - specializing in residential wholesale lending.
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