The bill that was passed by the House last week, the Senate this week, was signed into law by the President this morning. The following is a summary of H.R. 3221. H.R. 3221, the “Housing and Economic Recovery Act of 2008,” passed the House on July 23, 2008, by a vote of 272-152. On Saturday, July 26, 2008, the Senate passed the bill by a vote of 72-13. The President signed the bill on July 30, 2008. The bill includes the following provisions:
- GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
- FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The downpayment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
- Homebuyer Tax Credit – a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).
- FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
- Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.
- VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.
- Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.
- GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.
- Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.
- National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.
- CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.
- LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.
- Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.
That seems to be it in a nutshell. Stay tuned for another blog that discusses point #5 regarding seller downpayment programs.
Tags: Finances, Foreclosures, H.R.3221, Housing, Housing and Economic Recovery Act of 2008, housing rescue, legislation, mortgages
Posted by
admin on Jul 29, 2008 in
Finances,
Marketplace,
Mortgages,
Real Estate It is believed by former Federal Reserve officials and economists that the central bank will hold the short-term interest rates steady at least in August and September. Also, that the rates likely will not be raised until early 2009. Even though recent reports on inflation have been dismal, the central bank has also taken a tough stance in its language of late. The financial markets are more of a concern because of the problems at Fannie Mae and Freddie Mac. Analysts say the housing slump and tight credit conditions remain key economic issues for the Fed.
“They need to see financial markets settled, some good growth numbers, or good employment numbers,” says Mike Moran, chief economist at Daiwa Securities International in New York.
Tags: credit, Fannie Mae, fed, Freddie Mac, home sales, interest rates, mortgages, rates, real estate sales
The U.S. Senate on Saturday passed a bill that would stem foreclosures by allowing some 400,000 home owners refinance into affordable, government-backed loans. The bill, strongly supported by the NATIONAL ASSOCIATION OF REALTORS®, passed by a margin of 72-13. The House of Representatives approved the bill on Wednesday in a 272-15 vote. “This bill must get to the president quickly, and we urge him to act immediately to sign it into law,” NAR President Dick Gaylord said in a statement last week. NAR says the bill will help bring stability to the housing market and put a dent in the rising rate of foreclosures.
The program will be run by the Federal Housing Administration, and will insure up to $300 billion in refinanced 30-year, fixed-rate loans. The mortgages can’t be for more than 90 percent of a home’s newly appraised value. For mortgages that exceed the value of the home, the lender would have to voluntarily write down the principal to the qualifying level. If the home goes up in value, the borrower must share newly created equity with the FHA.
Experts say the success of the program depends on how receptive banks are to writing down a portion of the loan. If passed into law, the program will begin Oct. 1 and end Sept. 30, 2011. Borrowers won’t be able to qualify if they have intentionally defaulted on their loans or if they had a debt-to-income ratio of less than 31 percent as of March 1.
Posted by
admin on Jul 26, 2008 in
Finances,
Foreclosures,
Marketplace,
Mortgages Did anyone notice the drastic decrease in foreclosures in the State of Maryland? In April, according to RealtyTrac.com, the State of Maryland ranked sixth in foreclosures among all the states but fell to 22nd just 30 days later for the month of May.
You will surely want to know what it is that the State of Maryland did to reduce foreclosure levels so drastically and quickly, and no less important, that other states will certainly want to borrow some of Maryland’s ideas and tactics.
The actual answer has nothing to do with home values, buyer demand or local economics. Even though the reported foreclosure filings dropped from 6,052 in April to 2,351 in May in Maryland this change was not the result of some economic miracle. What happened instead is that Maryland reduced foreclosure levels by changing the rules! Today if you’re a lender and want to foreclose on a home, it will take you longer to complete the process because the rules of the state of Maryland says it will take longer. Under legislation that the state passed in April, the time required to foreclose on a home was increased from 15 days to not less than 135 days. And it probably may take much longer. The State of Maryland now “requires a lender to wait 90 days after default before filing the foreclosure action and to send a uniform Notice of Intent to Foreclose to the homeowner 45 days prior to filing an action.”, according to the governor’s office. That’s at least 135 days under the new rules versus just 15 under the old system.
The revised Maryland rules require lenders to physically notify homeowners about impending foreclosure actions. This is important because the Maryland rules say that a foreclosure sale cannot occur until 45 days after such notice has been provided. Also, under the new legislation a lender must show that it actually owns the loan before it can foreclose. This new standard which may cause problems for lenders because home mortgages are sold, re-sold and divided up with electronic speed on Wall Street, for which records which may not have changed in local courthouses.
Other states are following Maryland’s example:
1. Massachusetts has just passed legislation which will require lenders to give homeowners at least 90 days notice before starting a foreclosure.
2. New York state is reviewing such legislation and is close to adopting similar rules.
While states cannot oversee national banks, savings & loan associations and credit unions regulated by the federal government, the federal government cannot regulate the debt collection process at the state level. But the federal regulators could take the State of Maryland and any other states that adopt the same rules to court with claims that these state governments are interfering with the right of the federal government to regulate national lenders. On the other hand, there are sources at REaltyTrac.com that state that there are endless precedents which favor state authorities and if the Supreme Court were to decide against the states then a new Congress and a changing political climate could well result in new federal laws which support the states.
In revising the debt collection rules the states have have not eliminated foreclosures but only slowed the foreclosure process. The impact of revised state legislation is likely to have several results.
- Foreclosures will still take place, but at a later time. The revised rules just postpone the inevitable, possibly. The number of toxic loans is unchanged, meaning that millions of badly underwritten mortgages, exploding adjustable rate mortgages (ARMs) and interest-only loans remain a potent source of steep foreclosure numbers in the future.
- These longer foreclosure periods give borrowers more leverage and time to negotiate with the lenders.
- There may be some homeowners will be saved from being foreclosed on because of these foreclosure delays. Owners will have more time to sell. And real estate agents will have more time to market these homes without causing the owners to appear to be distressed (which may help them get a better sale prices). Also, because the process now takes perhaps another 135+ days (an additional 4-5 months) to move through the foreclosure process the lender might well be interested in a short sale or a loan modification.
- However, these longer periods may be a benefit to loan servicers and lenders. How? Well, the lending community has been overwhelmed with the number of default loans and foreclosures they have to deal with and they have not had sufficient staff to deal with the large foreclosure increases that we have seen during the past 12-18 months. These state-based foreclosure delays may give lenders and loan servicers the much needed time to hire and train more people that can properly deal with owners and real estate agents. The possible positive result could be more modifications, refinanced loans and repayment plans as opposed to outright foreclosures and short-sales.
In the above cases, both the lenders and owners could come out ahead. Now the foreclosure numbers could fall as increasing numbers of homes were saved instead of delayed.
One concern may be that lenders may back away from those states where the foreclosure process has been tightened/revised, as in the State of Maryland. These lenders have already been writing down billions of dollars in losses so it could make sense to them to suspend loan activities in those areas which represent the most risk (like insurance companies have done in response to floods and hurricanes in certain areas in the recent past). Reduced loan availability in selected states could result in higher local interest rates, slower sales and reduced home prices throughout a state, thus causing an negative impact on the hosuing market in those states.
In trying to balance between the negative and positive aspects of the rule revisions by states, we believe that the positive aspects outweight the negative ones. If there is anything that can or should be done to help owners save their homes from foreclosure due to being victims of predatory loans or because of circumstances completely out of their control, then those actions must be looked at seriously and in greater detail. We look forward to when the State of New Jersey adopts such revisions and does so without causing more problems then it solves.
Linda & Terry Iwaniw
Foreclosure Prevention Consultants
REATOR Associates
RE/MAX Home Team
609-417-1084
Tags: Finances, Foreclosures, loan defaults, loans, mortgage loans, mortgages
The housing market will regain its footing eventually is a certainty – and there are developing signs that we are seeing the early stages of a recovery now. The housing market in New Jersey has neither been worsening or improving, for the past several months. Although, this is not welcome news for both home sellers and new home builders attempting to sell a home now because it likely ensures that prices will continue to drift lower over the short term. However, that may change soon because the Contract-Sales in New Jersey have held pretty steady at a monthly pace of about 7,000 homes for the last 3 months while the Unsold Inventory levels have actually started to decline. Also of interest that over the past 12 months the Unsold Inventory levels have increased by only 1%, suggesting that we’ve reached the high-water market for the supply of homes on the market. But make no mistake about it, the weakness affecting the housing market is not over yet but the end to the downward cycle is getting closer.This past June, the housing market’s performance reflected an Unsold Inventory supply of 10.8 months (a significant decrease from 15.6 months at the beginning of the year and a bit higher than 8.5 months of one year ago). More evidence of stabilization is that the supply of unsold homes has shown little change in the past 4 months (10.5 months in March, 10.0 months in April, 10.4 months in May and 10.8 months in June). Because the Unsold Inventory is operating in such a narrow range implies that the housing market is starting to gain a foothold, which is a significant first-step, toward recovery.
What has clearly worsened recently however, is the weakening of the national and local economy resulting in significant job losses. This environment serves to erode home buyer confidence due to resulting concerns about job security and future earnings growth. As was discussed in detail at our Spring Housing Workshops earlier this year, the timeline for a recovery of the housing market is in the hands of the economy. An optimistic view on the economy is for a short-lived economic slowdown (recession) which reverses course later this year and sets the stage for a more robust market in 2009. Ironically, a short-lived recession could actually benefit the housing market by accelerating the market correction and setting the stage for stronger sales demand next Spring. A longer and deeper recession however, would create even greater challenges for housing by extending the current cycle and forestalling a recovery. An in-depth presentation on how this will affect local submarkets will be included in our Fall Seminar Series.
Tags: home inventories, home marketplace, housing market, real estate in new jersey, real estate inventories, real estate sales, unsold homes
On Wednesday, the House of Representatives passed H.R. 322, The House Rescue Bill. It will now go to the Senate, who is expected to pass it with few or any changes and then send it ot the President for his signature. Word out is that the President will sign this bill next week and thus making it into law effective October 1, 2008.
What affect does this new law have on the the housing market in Southern NJ?
1. FHA loans will now require a 3.5% down payment, instead of 3%, and all seller down payment assistance programs will be prohibited. Buyers must invest at least 3.5% of the appraised value into their own home.
2. This law gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market. The credit will begin to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).
3. It raises the Government Spronsored Enterprise (GSE) loan limits for single family homes to create affordable mortgage loans for moderately priced homes by allowing GSE loans up to 115% of the local area median home price, and to make GSE loans effective in high cost areas by raising the permanent loan limit from $417,000 to $625,500,.
4. Raises the FHA loan limits to create affordable mortgage loans for moderately priced homes by allowing FHA loans up to 115% of the local area median home price, and to make GSE loans more available in high cost areas by raising the permanent loan limit from $362,790 to $625,500.
You can read the summary of this bill at:
Thomas – Library of Congress
Tags: downpayments, housing market, loan limits, loans, mortgages, Real Estate, real estate market
Posted by
admin on Jul 25, 2008 in
Buying,
Finances,
Marketplace,
Mortgages Freddie Mac today released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 6.63 percent with an average 0.6 point for the week ending July 24, 2008, up from last week when it averaged 6.26 percent. Last year at this time, the 30-year FRM averaged 6.69 percent. “Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve (Fed) will raise short-term rates this year all combined to push mortgage rates higher this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Some of the key drivers to these concerns were consumer prices jumping 1.1 percent (annualized) in June — the largest increase since September 2005 on a year-over-year basis — coupled with consumer prices growing at a 5.0 percent clip (on a year-over-year basis), the strongest since February 1991.”
Tags: Federal Reserve, Freddie Mac, mortgage market, mortgages, rates
The following article was written by NAR’s chief economist, Lawrence Yun.
Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year. The Pending Home Sales Index, NAR’s forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5. Some pullback after a sharp increase in the previous month was expected. The overall decline in contract signings suggests we are not out of the woods by any means. The housing stimulus bill that is still being considered in the Congress is critical to assure a healthy recovery in the housing market, jobs and the economy.
But location has never mattered more than in the current market. Look at the pending home sales index for the West. While it’s true the index slipped 1.3 percent to 97.5 in May in that region, it was 2.0 percent higher than it was in May of 2007. Indeed, some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. For instance, double-digit pending sales gains in May from a year ago were noted in Colorado Springs CO, Sacramento CA and Spartanburg SC. In addition, price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.
Current real estate market conditions are positive for most buyers: still-attractive interest rates, a large inventory of homes available for sale, and many sellers willing to negotiate their prices – sometimes significantly. And in spite of the headlines surrounding issues with Fannie Mae and Freddie Mac – as well as the recent federal “takeover” of IndyMac – there is still mortgage capital out there. Credit may be tightened, but lenders are still happy to originate a mortgage loan to households who qualify. And remember: owning a home still provides long-term value – and most buyers today plan to remain in their homes for five or more years. Home buyers can get a great deal right now.
Concerns Remain
Yes, there are some concerns on the horizon. Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009. Based on current indicators, the 30-year fixed-rate mortgage is forecast to rise gradually to 6.5 percent by the end of this year, and then hold at that level for most of 2009. But note – that is still well below the “threshold” level of 7 percent. In spite of a month to month decrease from April to May, housing affordability – as measured by NAR’s housing affordability index — is improving this year and is likely to rise 15 percentage points to 127.0 for all of 2008.
Existing-home sales are expected to grow from an annual pace of 5.01 million in the second quarter to 5.75 million in the fourth quarter. For all of 2008, existing-home sales should total 5.31 million, and then increase 5.0 percent next year to 5.58 million. That is less than 100,000 unit sales off the annual pace last year.
The speed at which home prices have declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market. Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets. The aggregate median existing-home price (on a national basis) is projected to fall 6.2 percent this year to $205,300, and then rise by 4.3 percent in 2009 to $214,100.
New-home sales are a different story. They are likely to fall 32.3 percent to 525,000 in 2008 and decline another 3.4 percent next year to 507,000. In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into next year. Housing starts, including multifamily units, will probably fall 28.7 percent to 966,000 this year, and then drop another 9.0 percent in 2009 to 879,000. The precipitous drop in starts is due in part to some overbuilding during the “boom” years, as well as the rising costs of construction. The median new-home price is expected to decline 3.2 percent to $239,300 this year, and then rise 5.3 percent in 2009 to $251,900.
Officially, the U.S. economy has still not drifted into recession. In fact, GDP growth in the first quarter of this year was revised upward from preliminary estimates – albeit at a slow 1.0 percent rate. Growth in GDP is forecast at 1.6 percent for all of 2008 and 1.4 percent next year – not spectacular, but still positive. Inflation, as measured by the Consumer Price Index, is forecast at 3.7 percent this year and 2.4 percent in 2009. Unfortunately, personal income gains are unlikely to keep pace with rising prices. Inflation-adjusted disposable personal income is projected to grow 1.5 percent in both 2008 and 2009.
Conclusion
So, what does all this mean for housing consumers? It will continue to be a buyer’s market for a while. Obviously, we will need to watch developments with credit markets and the GSEs, but if a potential buyer can qualify for a mortgage, there is plenty of choice out there.
Tags: buyer's market, buyers, Buying, home ownership, homes sales, housing market, Marketplace, real estate sales
Just because low- and no-down-payment conventional loans are hard to come by doesn’t mean home buyers with little cash can’t get a deal.
Two lesser-known federally-sponsored mortgage programs are still available for home buyers with steady jobs, but no savings.
The U.S. Department of Agriculture’s Rural Development program will lend up to 102 percent — maybe more on a property in a community with a population that is less than 10,000 and non-metro communities with populations between 10,000 and 25,000. Eligible areas are surprisingly close to urban centers. For instance, parts of Washington, D.C.’s bedroom counties qualify. There are also income and debt limitations, but the caps are fairly generous. Selected banks nationwide handle the loans.
The second attractive mortgage plan is the Streamline K, a faster version of the Federal Home Administration’s home-rehabilitation loan, the 203(k). The Streamline K allows borrowers to get an extra $35,000 to improve the property they are buying, including replacing or repairing the roof, gutters and downspouts, HVAC, plumbing and electrical systems, flooring, siding, well and septic. Buyers or sellers also can use the money to paint inside and out, buy new appliances, and add or redo windows, doors, waterproofing and weatherproofing.
Tags: 203k, FHA, HUD, mortgages, RD, Rural Development, streamline k, US Dept of Agriculture
Posted by
admin on Jul 19, 2008 in
Misce4llaneous When wood touches soil, it’s prone to rot and attack from wood-eating and wood-boring insects. Inspect vulnerable areas of your property once a year.
The soil is full of creatures great and small that feed on or dwell in wood. Decay microorganisms, termites and carpenter ants can weaken wood to the point of collapse.
Steps
- Look for places where wood touches soil. Here are some typical areas to check:
- Wooden posts supporting decks and porches. Even those on concrete or brick supports are at risk if the supports settle below ground level.
- Bottom steps of porches and decks.
- The risers that hold up the basement stairs. In older homes, the staircase might have been installed before the concrete floor was poured.
- In the basement, the bottom of wooden posts.
- The base of older wood-frame garages built without a proper foundation.
- Wooden frames of basement windows.
- Wherever you find wood touching soil, gently probe the wood with a screwdriver. Rotted wood is soft.
- Look for evidence of insects:
- Termites: Look for sandy soil deposits within the wood and sometimes mud tunnels along the surface of the wood. If you break a tunnel open you might find the termites, which are white and about the size of a grain of rice.
- Carpenter ants: Look for large smooth tunnels, often packed with white eggs. Around the nest are large black ants, sometimes with wings and sometimes with reddish-brown mid-sections.
- If you find areas where soil touches wood, correct the problem if possible. If fixing it is a major project, monitor the area closely.
- If you find or suspect you have insect damage, contact a pest control specialist.
Tips & warnings
- Make sure the wooden frames of basement windows are at least six inches above the soil. You might have to install window wells.
- You can repair small areas of rot by digging out the rotted area into good wood and filling it with an epoxy made for this purpose.
Tags: home preservation, insect damage, maintenance, wood rot
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