Common surprises in real estate negotiation

January 28, 2013 By Leave a Comment

When contingencies are involved, expect the unexpected

BY DIAN HYMER, MONDAY, JANUARY 28, 2013.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=22697938" target="_blank">Underwater minefield</a> image via Shutterstock.Purchase offers usually aren’t accepted as written. Commonly, buyers and sellers engage in the equivalent of a tennis match, counter offering back and forth until they meet a mutually agreeable purchase contract. At this point, you might be inclined to think the negotiation phase of the transaction is over.

That may have been the case decades ago. But the home sale process has become more complicated over the years. Today, it might be more appropriate to say that the negotiations are over when the transaction closes. That is, if there aren’t any after-closing issues, like a leaky roof that wasn’t disclosed that could require more negotiation.

After a purchase contract is signed — including all the addenda and counteroffers — it is said to be ratified. A ratified contract is binding on both parties and usually can’t be unilaterally changed by one party without agreement from the other party. Any modification to a ratified purchase contract needs to be in writing. Verbal agreements to sell real estate are not binding.

Most purchase contracts include contingencies that provide buyers a time period to comply with certain parts of the transaction. The most common contingencies are for inspections and investigations, loan approval, appraisal of the property, and the sale of another property.

Usually, if the buyers use their best efforts to satisfy these contingencies but are unable to do so, they can withdraw from the contract without penalty and have their good faith deposit returned to them.

You should fully understand any purchase offer you sign as well as the impact of the buyers removing or not removing contingencies before you sign the contract. Not all contingencies contain the same language.

For example, some inspection contingencies give the sellers the right to remedy a defect; others allow the buyers to withdraw from the contract for any reason at the end of the inspection contingency period. Any questions should be directed to a real estate attorney.

HOUSE HUNTING TIP: Even though the ratified contract is legally binding on both the buyer and seller, circumstances can change during the transaction that may result in renegotiation. The most common occurs when the buyers’ inspection contingency is due. If buyers’ inspections reveal new information about the property, the buyers may agree to remove the inspection contingency but only if the sellers repair defects or contribute financially to repairs.

This puts the contract in limbo and requires good faith negotiation to salvage the transaction. Otherwise, the buyers and sellers agree in writing to cancel the contract. The sellers put their home back on the market and the buyers look for another home to buy.

Not all buyers renegotiate the contract when the inspection contingency is due. If the sellers have provided presale inspection reports and thorough disclosures before the buyers made an offer, it’s less likely that the buyers will make further requests from the sellers.

Another trigger for further negotiations can occur when an appraisal ordered by the buyers’ lender values the property at a price that’s lower than the purchase contract price. The effect of this is that the buyers’ lender will lend less than it said it would before the appraisal was done.

The buyers could ask for another appraisal, withdraw from the contract or try to negotiate a solution with the sellers. This might mean that the buyers agree to put more cash down, or they could ask the sellers to lower the purchase price, or a combination of the two. The goal is to reach a price that will work with the lower loan amount.

Buyers who feel they overpaid for the property may be more inclined to request a reduction to the appraised value and hold firm at that price.

THE CLOSING: If the sellers won’t agree, the transaction will fail.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

 

Courtesy of your Arcadia Real Estate Agent

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Eight ways to improve your home appraisal

January 25, 2013 By Leave a Comment
  • By Lou Carlozo

WASHINGTON (Reuters) – When Kellie and Michael May decided to refinance their home in the New York suburbs, they wanted to take advantage of historically low interest rates. But before landing a new 30-year fixed-rate mortgage, they had to get through a home appraisal.

“It was a major stumbling block,” says Kellie May, who has owned the 4-bedroom, 3-bath colonial for seven years. Not that she and her husband were unprepared; they’d been through an appraisal for another refinance in 2010, so they knew to point out improvements they’d made to the 3,400 square foot home, and supply prices for other neighborhood properties that had sold recently.

But the appraisal came back roughly $70,000 less than the $1,230,000 the Mays were expecting, and too low to support their new loan.

They responded with a paperwork arsenal aimed at their lender, asserting that the appraisal had been based on faulty recent sales data. The loan squeaked through, after the bank crafted an exception for the Mays. It was able to do that because their loan was a jumbo loan, not subject to the more rigid underwriting standards they would have encountered if it were a conventional loan aimed at secondary buyers like Fannie Mae and Freddie Mac.

Low appraisals are becoming a bigger problem for many would-be buyers and refinancers as home values have started to stabilize and rise in some markets.

In Leesburg, Florida, for example, low appraisals have caused the cancellation of as many as 15 percent of home sales for local real estate broker Gus Grizzard.

“We are seeing higher price appreciation and are starting to run into appraisal problems,” said Charlie Young, chief executive officer of ERA Franchise Systems, a firm with a national network of real estate brokerage offices, including Grizzard’s. The National Association of Realtors reported on Tuesday that inventories of homes were low and the median price a home resale was, at $180,800 in December, up 11.5 percent in a year.

Appraisals are based on recent sales prices of comparable properties. And in rising price markets, those sales prices might not be high enough to support the newest deals. Young said there were many places in California reporting appraisal problems.

On Friday, the federal government issued new rules aimed at improving the appraisal process as it pertains to high-interest mortgages on rapidly appreciating homes.

But those rules don’t go into effect for a year, and don’t apply to most conventional loans. It pays to protect your own loan before the bank even thinks about sending that guy with the clipboard over to your house.

“The reality is that the appraiser is only there for 30 minutes at most,” says Brian Coester, chief executive of CoesterVMS, a nationwide appraisal management company based in Rockville, Maryland. “The best thing a homeowner can do to get the highest appraisal possible is make sure they have all the important features of the home readily available for the appraiser.”

Here are eight ways you can bolster your appraisal:

MAKE SURE APPRAISER KNOWS YOUR NEIGHBORHOOD

Is the appraiser from within a 10-mile radius of your property? “This is one of the first questions you should ask the appraiser,” says Ben Salem, a real estate agent with Rodeo Realty in Beverly Hills, California.

He recalled a recent case where an appraiser visited an unfamiliar property in nearby Orange County and produced an appraisal that Salem said was $150,000 off. “If the appraiser doesn’t know the area intimately, chances are the appraisal will not come back close to what a property is really worth.”

You can request that your lender send a local appraiser; if that still doesn’t happen, supply as much information as you can about the quality of your neighborhood.

PROVIDE YOUR OWN COMPARABLES

Provide your appraiser with at least three solid and well-priced comparable properties. You will save her some work, and insure that she is getting price information from homes that really are similar to yours.

Websites including Realtor.com, Zillow and Trulia offer recent sales prices and details such as the number of bedrooms and bathrooms in a home.

KNOW WHAT ADDS THE MOST VALUE

If you’re going to do minor renovations, start with your kitchen and bathrooms, says G. Stacy Sirmans, a professor of real estate at Florida State University. He reviewed 150 variables that affect home values for a study sponsored by the National Association of Realtors. Wood floors, landscaping and an enclosed garage can also drive up appraisals.

DOCUMENT YOUR FIX-UPS

If you’ve put money into the house, prove it, says Salem.

“Before-and-after photos, along with a well-defined spreadsheet of what was spent on each renovation, should persuade an appraiser to turn in a number that far exceeds what he or she first called out.”

Don’t forget to highlight all-important structural improvements to electrical systems, heating and cooling systems – which are harder to see, but can dramatically boost an appraisal. Show receipts.

TALK UP YOUR TOWN

If your town has recently seen exciting developments, such as upscale restaurants, museums, parks or other amenities, make sure your appraiser knows about them, says Craig Silverman, principal and chief appraiser at Silverman & Co. in Newtown, Pennsylvania.

DISTINGUISH BETWEEN UPSTAIRS AND DOWNSTAIRS

Many homeowners covet that refinished basement, but that doesn’t mean appraisers look at it the same way. “Improvements and additions made below grade, such as a finished basement, do not add to the overall square footage of your house,” says John Walsh, president of Total Mortgage Services in New York. “So they don’t add anywhere near as much value as improvements made above grade.”

According to Remodeling magazine, a basement renovation that cost $63,000 in 2011-12 will recoup roughly 66 percent of that in added home value. That’s not as good as an attic bedroom, which will recoup 73 percent of its cost. Even similar bedrooms typically count for more if they are upstairs instead of downstairs.

CLEAN UP

Even jaded appraisers can be swayed by a good looking yard. “Tree trimming, cleaning up, a few flowers in the flower beds and paint touch up can all help the appraisal,” says Agnes Huff, a real estate investor based in Los Angeles.

That advice holds true indoors, too. “Get rid of all the clutter in your home,” says Jonathan Miller, a longtime appraiser in New York. “It makes the home appear larger.”

GIVE THE APPRAISER SOME SPACE

Don’t follow the appraiser around like a puppy. “I can’t tell you how many homeowners or listing agents follow me around in my personal space during the inspection,” he says. “It’s a major red flag there is a problem with the home.”

And while you’re at it, make the appraiser’s job as pleasant as possible by giving your home a pleasant smell. At a minimum, clean out the litter box. Baking some fresh cookies and offering him one or two probably won’t sway your appraisal, nor should it. But it couldn’t hurt.

(The writer is a Reuters contributor. The opinions expressed are his own.)

Courtesy of your Arcadia Real Estate Agent

Filed Under: For Sale, Make Over Tagged With: , , , , , ,

4 reasons your home isn’t selling

January 22, 2013 By Leave a Comment

Even in recovering markets, listings must be priced right and properly marketed

BY DIAN HYMER, MONDAY, JANUARY 21, 2013.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=32385181" target="_blank">Price reduced</a> image via Shutterstock.
Price reduced image via Shutterstock.

There’s a buzz in the air. The real estate market has improved and may be on the road to recovery.

But the improvement in the housing market is not treating all home sellers equally. Some well-priced listings in prime locations are selling within a couple of weeks. In other areas, it still takes months to sell, and prices haven’t fully stabilized.

There are several factors that could be keeping your home from selling. One is the state of the local housing market. Residential real estate is a local business. National trends, while informative, don’t necessarily apply to the state of the market in your neighborhood.

Other factors include: the list price; the condition of your property; or lack of broad marketing exposure.

HOUSE HUNTING TIP: Today’s buyers don’t overpay. They need to be convinced that the price you’re asking for your home is a fair market value.

The housing market is pulling out of the worst recession since the Great Depression. This is fresh in buyers’ minds. There are plenty of buyers who think this is the right time to buy, but they’re not inclined to make offers on overpriced listings.

Sellers often wonder why buyers won’t make an offer at a lower price if they think the list price is high. Buyers don’t want to waste their time making an offer if the seller is unrealistic. Making an offer takes a lot of time and emotional energy. Most buyers who have the wherewithal to buy a home don’t have time to waste.

There are “bottom feeders” who give sellers lowball offers below market value hoping to get lucky. These buyers also won’t pay over the asking price. They want a bargain. You can do better than that if you price your home right for the market.

Here are clues that your listing might be priced too high. You don’t receive any showings, or you receive showings but no repeat showings. Buyers usually look at a listing more than once before making an offer. Another possibility is that buyers look at your home and then buy another listing that is priced more in line with the market.

Let your real estate agent know that you want to hear feedback from buyers who have seen your home. If they like the house but not at the price you’re asking, that’s a clear indication that you should adjust the price if you want to sell.

Some sellers have false expectations about the current picked-up market. In some areas, the improved market means that homes are taking less time to sell, not that prices have increased.

In other markets, like Phoenix, prices have jumped approximately 25 percent from a year ago but are still way below where they were at the peak of the market. If prices dropped 50 percent in your area, they need to increase 100 percent to get back to where they were before the decline.

For instance, if your home was worth $100,000 in 2006 and dropped 50 percent in value and then increased 50 percent of the lower value, it would be worth $75,000. It needs to increase 100 percent ($50,000 plus $50,000) to recoup your loss.

The condition of your home will influence the market value. You need to lower the price to account for deferred maintenance or a dated decor, or take care of these issues so that you can present your home in move-in condition. You’ll then attract more buyers and sell for more.

It’s always possible that your home has not been properly marketed. Ask your listing agent to provide you with copies of all advertising. More than 88 percent of today’s homebuyers use the Internet to find a home.

THE CLOSING: Make sure your listing is receiving wide Internet exposure, including a lot of good-quality photographs.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

Courtesy of your Arcadia Real Estate Agent

Filed Under: For Sale, Lending, Market Tagged With: , , , , , , ,

Fed missed the housing bust

January 21, 2013 By Leave a Comment

By

JILL SCHLESINGER /

MONEYWATCH/ January 20, 2013, 5:52 PM

CHIP SOMODEVILLA/GETTY IMAGES

(MoneyWatch) Who would want a detailed, public record of our business decisions? Unfortunately, if you are an esteemed Fed governor, you must confront your exact words from meetings that occurred 5 years ago. The central bank released 1,566 pages of transcripts from each of the Fed’s eight monetary policy meetings in 2007, which is customary. What is not customary, of course, is that 2007 was the year that one would have hoped that our most esteemed bankers would have gotten the drift that there was something rotten in the nation’s housing market.

Clearly Chairman Ben Bernanke would like to take back this January 2007 comment: “The housing market has looked a bit more solid, and the worst outcomes have been made less likely.” Or his June remarks, which may have been a “bit” of an understatement: “A bit of cooling in the financial markets might not be an entirely bad thing.” Bernanke is not alone in his misjudgment of the economic and financial industry landscape. Outgoing Treasury Secretary Tim Geithner, who in 2007 was the NY Fed president, said “Direct exposure of the counterparties to Bear Stearns is very, very small compared with other things.” Oops!

 

There was one Fed governor who nailed the situation. Janet Yellen, who at the time served as the San Francisco Fed president, expressed the danger that loomed in June 2007: “I still feel the presence of a 600-pound gorilla in the room, and that is the housing sector. The risk for further significant deterioration in the housing market, with house prices falling and mortgage delinquencies rising further, causes me appreciable angst.”

 

Yellen’s prescience is reminiscent of Brooksley Born, the late 1990s chairman of the Commodity Futures Trading Commission, who was the only regulator who saw the danger of over-the-counter derivatives, the vehicles that a decade later would contribute to the financial crisis. The big difference in 2007 was that Yellen was not the lone voice and she was not bullied by her colleagues.

 

Still, Yellen could not rally the other central bankers to her cause. In September 2007, she reiterated her concerns: “A big worry is that a significant drop in house prices might occur in the context of job losses, and this could lead to a vicious spiral of foreclosures, further weakness in housing markets, and further reductions in consumer spending. … at this point I am concerned that the potential effects of the developing credit crunch could be substantial.” Yellen is currently the Vice Chair of the Board of Governors of the Federal Reserve System and if she was seen as a potential successor to Ben Bernanke prior to this release, these comments beef up her chances in a big way.

 

Eventually, the Fed did recognize the magnitude of the problem, but as is often the case, the governors were late in their diagnosis and remedies. That’s why so many economists are worried about the central bank’s ability to withdraw its easy monetary policy when the U.S. economy improves. With the current low level of inflation (running below the Fed’s target of 2 percent on a year-over-year basis) and the high level of unemployment, the Fed will keep buying bonds and pushing money into the system until further notice. But will the Fed be able to predict when its time to stop?

 

Right now, economic growth is stuck in a low gear of about 2 percent annually, but when it reaccelerates, perhaps due to an uptick in global growth or a housing sector that perks up, the Fed could once again be behind the curve. When that happens, inflation will re-emerge; bonds will finally see the much-predicted sell-off; and the Fed will likely cringe when future transcripts are released.

 

This week, evidence of housing’s recovery will continue to trickle in. There’s little doubt that 2012 was the year that housing bottomed nationally. Prices were up about 6 percent; existing and new home sales rose by about 15 percent each; and housing starts increased 28.1 percent.

 

While this is good news, the housing crash created quite a hole. Prices are still down about 30 percent from the peak and even with the big jump in starts, 2012 ranks as the fourth lowest year since the Census Bureau started tracking starts in 1959 (the three lowest years were 2009 through 2011).

 

Meanwhile, the third straight week of gains brought two of the three U.S. stock indexes to their highest levels since December 2007. As the nation prepares for Inauguration Day, here’s a tidbit: President Obama’s first term was good for investors, with stocks up over 70 percent.

 

– DJIA: 13,649 up 1.2 percent on week, up 4.1 percent on year (4 percent below all-time high of 14,164, reached in 10/07)

– S&P 500: 1,485, up 1 percent on week, up 4.2 percent on year (5 percent below all-time high of 1,565, reached in 10/07)

– NASDAQ: 3,134, up 0.3 percent on week, up 3.8 percent on year (still a whopping 38 percent below all-time high of 5,048, reached in 03/00)

– February Crude Oil: $95.56, up 2.1 percent on week

– February Gold: $1,687, up 1.6 percent on week

– AAA nat’l average price for gallon of regular gas: $3.31

Courtesy of your Arcadia Real Estate Agent

Filed Under: Market, Mortgage Tagged With: , , , , ,

Coldwell Banker partners with Videolicious

January 16, 2013 By Leave a Comment

1,000 agents will get access to automated video creation platform

BY INMAN NEWS, WEDNESDAY, JANUARY 16, 2013.

Inman News®

In a new relationship that it says could grow, franchising giant Coldwell Banker Real Estate LLC has announced it will provide a customized version of the Videolicious automated video creation platform to 1,000 agents who have demonstrated a desire to grow their business through video.

Videolicious will allow Coldwell Banker agents to create videos without complex software, the company said, using their iPad or iPhone and integrating existing stills and video to create shorts in minutes.

“We believe that video content needs to go beyond slide shows, and our system has adapted to video as a critical component in showcasing their personality and industry knowledge,” said Michael Fischer, chief marketing officer at Coldwell Banker Real Estate, in a statement.

Fischer said Coldwell Banker On Location, the brand’s YouTube channel, has more than 50,000 videos and saw a 121 percent increase in views last year.

Videolicious was one of a number of new companies demonstrating new services at last summer’s Real Estate Connect conference in San Francisco, and is one of 25 exhibitors in “Start-Up Alley” this week at Real Estate Connect New York City.

Videolicious CEO Matt Singer will team up at the conference Thursday with HDhat CEO Mark Passerby and Andreas Klavehn of Carl Zeiss AG, to present alive demo at 10:05 a.m. EST on using smartphones to produce high-quality video.

Courtesy of your Arcadia Real Estate Agent

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First impressions are made at the front door

January 14, 2013 By Leave a Comment

Home’s entrance is seldom high on remodeling priorities

BY ARROL GELLNER, FRIDAY, JANUARY 11, 2013.

Inman News®

Front door of a <a href="http://www.shutterstock.com/pic.mhtml?id=75275389" target="_blank">Georgian era townhouse</a> in Salisbury, England image via Shutterstock.Front door of a Georgian era townhouse in Salisbury, England image via Shutterstock.

Have you ever been to a house where you had to skirt the gas meter or sidle around garbage cans to get to the front door? Or one where there was such a bewildering array of doors, you weren’t sure which one to knock at?

The front entrance is seldom high on people’s remodeling priorities. Yet, just like that old saw about first impressions, it’s your home’s entrance that people notice first. It’s practically impossible to rectify a bad impression made at the front door.

Tract-home builders have known this for years; even in the cheapest house, they’ll never cut corners on the front door. They know that a strong impression of quality here subtly colors a visitor’s perception of the whole house.

For much of architectural history, front entrances have been a focal point of a home’s design. In colonial New England, for example, the front door was often flanked by sidelights and topped by a pediment, setting it apart from an otherwise austere facade.

The entrance should also be clearly apparent from the street. That doesn’t mean it has to be glaringly exposed to view — just that its location should be easily deduced by an unfamiliar passerby. Architects call this principle “demarcation.”

There are lots of subtle ways to demarcate a front entrance. The most common is to surround the door with an architectural form such as a pediment or other type of trim. Another traditional strategy places the door in a recess, on a projection, or under a roofed porch. You can find a well-known example of the latter on the back of a $20 bill.

Here are some thoughts for planning your own grand entrance:

  • Don’t place an unsheltered entrance door flush with the front wall of the house; it’ll create an unwelcoming “side door” or trailer-door effect.
  • Don’t bring the path to the front door past utilities such as gas or electric meters, or past unsightly storage areas for trash or the like. Keep these kinds of features out of the visitor’s line of sight.
  • Don’t force visitors to walk on a driveway to get to your front door. Provide a separate walking path, or at least set aside a portion of the driveway paving using a different color or texture so it’s clearly meant just for those on foot.
  • If you plan to provide a covered entrance porch, make it at least 6 feet wide — enough for a person to stretch out both arms without touching either wall. Anything less will feel cramped and uncomfortable. Also, make the porch at least 4 feet deep (6 feet is better), or it’ll feel cramped when more than one person is waiting outside the front door. A cheaper alternative to building a projecting porch is simply to recess the front door. Again, make the recess at least 6 feet wide, and not less than 2 feet deep.
  • Lastly, if your house has several doors facing the street, make sure your front approach aims your visitors toward the main entrance. Your front door may seem obvious to you, but, hey, you live there.

Courtesy of your Arcadia Real Estate Agent

Filed Under: Brian Peralez, Bussiness, Design, For Sale, Make Over Tagged With: , , , ,

Consumer watchdog tightens mortgage lending rules on banks

January 10, 2013 By Leave a Comment

In

Elise Amendola / AP

In this Thursday, Dec. 20, 2012, photo, a sign hangs in North Andover, Mass. The Consumer Financial Protection Bureau will force banks to verify a borrower’s ability to repay loans to ward off the kind of loose lending that helped push the U.S. economy into recession.

More than five years after the housing market collapsed, the U.S. government’s newly created consumer watchdog said Thursday it will force banks to verify a borrower’s ability to repay loans to ward off the kind of loose lending that helped push the U.S. economy into recession.

The Consumer Financial Protection Bureau said its new guidelines would also protect borrowers from irresponsible mortgage lending by providing some legal shields for lenders who issue safer, lower-priced loan products.

Lenders and consumer groups have anxiously awaited the new rules, which are among the most controversial the government watchdog is required to issue by the 2010 Dodd-Frank financial reform law.

“When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford,” Richard Cordray, the bureau’s director, said in a statement.

The new rules are intended to combat lending abuses that contributed to the U.S. housing bubble, when shoddy mortgage standards led American households to take on billions of dollars in debt they could not afford.

The U.S. economy is still feeling the after-effects of the bubble, which sparked a global credit crisis after it burst in 2006. As the housing market imploded, banks sharply tightened the screws on lending.

Regulators said the new rules would head off future crises by preventing irresponsible lending, without forcing banks to restrict credit further. Lenders will have to verify a potential borrower’s income, the amount of debt they have and their job status before issuing a mortgage.

And because lenders are likely to want the heightened legal protection that comes with offering certain “plain vanilla” loans, the rules could go a long way in determining who gets a loan and who can access low-cost borrowing rates.

Safe harbor for lenders
Dodd-Frank directed regulators to designate a category of “qualified mortgages” that would automatically be considered compliant with the ability-to-repay requirement. The rule was first set in motion by the Federal Reserve and then handed off to the consumer bureau in July 2011.

The consumer protection bureau said on Thursday that it would define “qualified mortgages” as those that have no risky loan features – such as interest-only payments or balloon payments – and with fees that add up to no more than 3 percent of the loan amount.

In addition, these loans must go to borrowers whose debt does not exceed 43 percent of their income.

These loans would carry extra legal protection for lenders under a two-tiered system that appears to create a compromise between the housing industry and consumer advocates.

Bank groups had lobbied the bureau to extend a full “safe harbor” to all qualified loans, preventing consumers from claiming in lawsuits that they did not have the ability to repay them. But consumer advocates wanted a lower form of protection that would allow borrowers greater latitude to sue.

Under the rules announced on Thursday, the highest level of protection would go to lower-priced qualified mortgages. Such prime loans generally will go to less-risky consumers with sound credit histories, the bureau said.

Higher priced loans would receive less protection. Lenders would be presumed to have verified the ability to repay the loan, but borrowers could sue if they could show that they did not have sufficient income to pay the mortgage and cover other living expenses.

Credit availability
Some lawmakers and mortgage lenders had warned against a draconian rule that could exacerbate the current credit crunch and set back a housing market that has become a bright spot in an otherwise tepid economic recovery.

Consumer bureau officials said they were sensitive to concerns about credit tightening, and they baked into the rules several provisions meant to keep credit flowing and to smooth the transition to the new regime.

The new rules establish an additional category of loans that would be temporarily treated as qualified. These mortgages could exceed the 43 percent debt-to-income ratio as long as they met the underwriting standards required by Fannie Mae, Freddie Mac or other U.S. government housing agencies.

The provision would phase out in seven years, or sooner if housing agencies issue their own qualified mortgage rules or if the government ends its support of Fannie Mae and Freddie Mac, the two housing finance giants it rescued in 2008.

Regulators also proposed creating a qualified mortgage category that would apply to community banks and credit unions.

Banks will have until January 2014 to comply with the new rules, the consumer bureau said.

 

Visit NBCNews.com for breaking news, world news, and news about the economy

Courtesy of your Arcadia Real Estate Agent

Filed Under: Market Tagged With: , , , , ,

Fannie, Freddie short sales hit record high

January 8, 2013 By Leave a Comment

REO inventories down 36 percent from 2010 peak

BY INMAN NEWS, MONDAY, JANUARY 7, 2013.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=50051371" target="_blank">Short sale sign</a> image via Shutterstock.
Short sale sign image via Shutterstock.

Loan servicers working on behalf of Fannie Mae and Freddie Mac signed off on a record number of short sales in the third quarter of 2012, according to a report from the mortgage giants’ regulator, the Federal Housing Finance Agency (FHFA).

Short sales and deeds-in-lieu of foreclosure totaled 37,966 for the three months ending Sept. 30, 2012, up 4 percent from the previous quarter and 23 percent from a year ago. Fannie and Freddie implemented accelerated timelines in June 2012 for reviewing and approving short-sale transactions.

Fannie and Freddie short sales and deeds-in-lieu


Right-click graph to enlarge. Source: Federal Housing Finance Agency.

The mortgage giants’ inventories of “real estate owned” (REO) homes also continued to decline, as Fannie and Freddie got rid of homes faster than they acquired them through foreclosures.

During the first nine months of the year, Fannie and Freddie acquired 197,507 homes through foreclosure, and sold 218,321 REOs and foreclosed homes.

Fannie and Freddie REO inventories (thousands of homes)


Right-click graph to enlarge. Source: Federal Housing Finance Agency.

All told, Fannie and Freddie had 158,138 homes in their REO inventories as of Sept. 30, 2012, down 13 percent from a year ago and a drop of nearly 36 percent from a Sept. 30, 2010, peak of 241,684.

Fannie and Freddie were placed under government control, or conservatorship, in September 2008. Since then, loan servicers working on their behalf have approved 2.1 million home retention actions, including 1.26 million permanent loan modifications.

During the same period, Fannie and Freddie acquired more than 1.1 million homes through foreclosure, and signed off on 413,436 short sales and deeds-in-lieu of foreclosure.

There have been about 4 million completed foreclosures nationwide since September 2008, according to data aggregator CoreLogic.

Of the 62,561 loan modifications completed in the third quarter, about 45 percent of borrowers saw their monthly payments decrease by more than 30 percent. More than a third of loan mods included principal forbearance. Less than 15 percent of loans modified in fourth-quarter 2011 had missed two or more payments as of Sept. 30, 2012, nine months after modification, the report said.

Since the beginning of the Obama administration’s Home Affordable Modification Program (HAMP) in April 2009, just over 1 million borrowers have been offered a trial loan modification, and more than half had been granted a permanent modification. Of those, 21.2 percent had defaulted as of the third quarter. The vast majority of the remainder, 428,946 borrowers, were in active permanent modifications as of the third quarter.

Since October 2009, Fannie and Freddie have offered 564,822 non-HAMP permanent loan modifications. Non-HAMP modifications made up two-thirds of all permanent loan mods in the third quarter, the report said.

The share of mortgage loans 30-59 days delinquent rose slightly to 2.08 percent of all loans serviced in the third quarter, but the share of seriously delinquent loans fell slightly to 3.39 percent. Seriously delinquent loans are those that are 90 days or more delinquent or in the process of foreclosure. More than half of seriously delinquent borrowers had missed more than a year of mortgage payments as of the end of the third quarter, the report said.

Nearly 3 in 10 of these deeply delinquent borrowers are located in Florida.

 

Courtesy of your Arcadia Real Estate Agent

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10 Banks Agree to Pay $8.5B for Foreclosure Abuse

January 7, 2013 By Leave a Comment

By Associated PressJan. 07, 2013
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(WASHINGTON) — Ten major banks and mortgage companies agreed Monday to pay $8.5 billion to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes.

The banks, which include JPMorgan Chase, Bank of America and Wells Fargo, will pay billions to homeowners to end a review process of foreclosure files that was required under a 2011 enforcement action. The review was ordered because banks mishandled people’s paperwork and skipped required steps in the foreclosure process.

Under the new settlement, people who were wrongfully foreclosed on could receive from $1,000 up to $125,000. Failing to offer someone a loan modification would be considered a lighter offense; unfairly seizing and selling a person’s home would entitle that person to the biggest payment, according to guidelines released last summer by the Office of the Comptroller of the Currency. Monday’s settlement was announced jointly by the OCC and the Federal reserve.

The agreement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. Of those, about 400,000 may be entitled to payments, advocates estimate.

About $3.3 billion would be direct payments to borrowers, regulators said. Another $5.2 billion would pay for other assistance including loan modifications.

The companies involved in the settlement also include: Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora. The 2011 action also included GMAC Mortgage, HSBC Finance Corp. and EMC Mortgage Corp.

The deal “represents a significant change in direction” from the original, 2011 agreements, Comptroller of the Currency Thomas Curry said in a statement.

Banks and consumer advocates had complained that the loan-by-loan reviews required under the 2011 order were time consuming and costly without reaching many homeowners. Banks were paying large sums to consultants who were reviewing the files. Some questioned the independence of those consultants, who often ruled against homeowners.

Curry said the new deal meets the original objectives “by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner.”

“It has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers,” Curry said.

Some consumer advocates said that the agreement lets banks off the hook for payments that could have ended up being much higher.

“It’s another get out of jail free card for the banks,” said Diane Thompson, a lawyer with the National Consumer Law Center. “It caps their liability at a total number that’s less than they thought they were going to pay going in.”

Leaders of a House oversight panel asked regulators for a briefing on the proposed settlement on Friday. Regulators agreed to brief committee staff after the settlement was announced on Monday.

– By DANIEL WAGNER

 

Courtesy of your Arcadia Real Estate Agent

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