The House-passed bill to address the housing crisis through targeted FHA intervention and other NAR-backed provisions isn’t dead in the Senate just because President Bush has threatened to veto it.
That's the message from House Financial Services Committee Chairman Barney Frank (D-Mass.), who spoke to REALTORS® at NAR's 2008 Midyear Legislative Meetings & Trade Expo on Thursday.
“It’s still an open question whether President Bush will veto the bill,” said Frank, who praised REALTORS® for their highly effective grassroots activism in working for this and other measures.
Frank’s optimism about prospects for his bill, the American Housing Rescue and Foreclosure Prevention Act (H. R. 3221), stems in part from his ongoing conversations with key Senate lawmakers and U.S. Department of Treasury Secretary Henry Paulson, he said.
The bill includes reforms to FHA as well as oversight reforms of the secondary mortgage market companies Fannie Mae and Freddie Mac. Both were provisions sought by the Bush administration. The bill also includes a $7,500 tax credit for first-time home buyers.
The administration’s main objection to the bill is a provision that would allow FHA to insure replacement financing for troubled borrowers. The bill would encourage lenders to write down a borrower’s existing mortgage to 85 percent of the appraised value of the home in exchange for government-backed insurance on the replacement loan.
The program is expected to help an estimated 500,000 borrowers, at a cost of about $4,800 per borrower. “That’s a small price to pay to avoid all the problems associated with foreclosure,” said Frank.
The Bush administration’s approach to foreclosure prevention, which includes an initiative called FHASecure, is ineffective without any incentive for lenders to make significant write-downs on troubled mortgages, he said.
Frank said he’s willing to see the bill broken up and passed in pieces if that’s what it takes, as each individual provision is critical.
One of the key pieces would make the higher FHA and conforming loan limits passed earlier this year permanent. To let those limits, which now stand at $720,750, go back down at the end of 2008 would be “very disruptive” to the housing market, Frank said. Before their increase, the limit was fixed at $417,000.
— By Robert Freedman for REALTOR® magazine online
Veto of Foreclosure Bill Not a Certainty
Fannie Mae Scraps Declining Markets Policy
Fannie Mae will no longer require borrowers to put up an extra 5 percent down payment when purchasing homes in areas deemed "declining markets," the country’s largest secondary mortgage market company said Friday.
Fannie Mae had been hearing concerns from REALTORS® and others for months that its declining-markets policy was bad for the housing market because it discouraged consumers from buying homes in markets hardest-hit by foreclosures.
"It stigmatized communities with lower sales and prices," said Dick Gaylord, president of the NATIONAL ASSOCIATION OF REALTORS®.
NAR met several times this spring with Fannie Mae officials and sent letters reflecting members' unease with the policy. “We heard the concerns of NAR and we reviewed and determined that changes in our policy were needed,” Gwen MuseEvans, Fannie Mae vice president for credit policy and controls, said in a statement Friday.
Fannie Mae's announcement comes as more than 8,000 REALTORS® are gathered in Washington, D.C., where Fannie Mae is headquartered, for NAR's 2008 Midyear Legislative Meetings & Trade Expo.
Under the policy change, borrowers can get loans up to 95 percent loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90 percent to give lenders a 5-percentage-point cushion to protect against possible price declines in the future.
“This new down payment policy reinforces our goal to support successful home-owning,” says Marianne Sullivan, Fannie Mae's senior vice president of credit policy and risk management for single-family homes.
The new policy takes effect June 1.
— By Robert Freedman for REALTOR® magazine online
U.S. House Passes Plan to Help Borrowers
The U.S. House passed a housing aid plan Thursday that would provide $300 billion to refinance mortgages for homeowners facing foreclosure.
Under the program, lenders will get an FHA guarantee on the loan if they write down the principal amount by 15 percent from the home’s current appraised value. The bill excludes investors and those who lied about their income on a loan application.
A companion measure would give first-time home buyers a $7,500 tax credit and provide $15 billion to allow communities to buy and fix abandoned homes. The vote on the FHA plan was 266 to 155, drawing support from 39 Republicans. The homebuyer tax credit was approved by a margin of 322 to 94.
The bill now goes to the Senate, which must debate and vote on it. President Bush has said he would veto the measure if it passes.
Source: Reuters News, Patrick Rucker (05/08/2008)
Democrats Face Rescue Backlash
Democrats, pressing for approval of a taxpayer-funded effort to rescue homeowners in danger of foreclosure, may pay the price in this year's elections, experts say.
That's because many U.S. home owners — specifically, those who continue to make their mortgage payments in a timely manner — agree with the Bush administration and most GOP members of Congress that the Democratic plan is tantamount to using taxpayer dollars to reward irresponsible actions.
According to a Gallup Poll conducted in late March, 42 percent of Americans are against the government stepping in to help home owners facing foreclosure.
Bush economic policy advisor Keith Hennessey says the response from home owners keeping up with their home payments will be: "Hey, wait a second, why are you helping him when I'm making hard choices every single month to stay current on my mortgage?"
Democrats, however, say their plan is only doing for home owners what the government is doing for Wall Street financial institutions. While Republican consultant Todd Harris concedes that "there will be massive public opinion on the side of helping the single mom who got swindled," he says there also "will be massive voter retribution against any plan that is perceived to bail out greedy and unscrupulous speculators and mortgage companies."
Source: Wall Street Journal (05/12/08)
Best Cities for Relocating Families
Two organizations that work with companies to help them successfully transfer employees have identified the best small, medium and large cities for relocating families.
The study, by Primacy Relocation and Worldwide ERC, looked at many factors to pinpoint spots where a relocation of the entire family is most likely to be successful.
Among the most important factors: The health of the housing market and the economy. Other categories included percentage of nearby top-ranked colleges, cost of in-state tuition for four-year public colleges, a green-living index that measures environmental policies, state and income taxes, and availability of pediatricians.
Here the top fives cities in all three categories:
Population 1.3 million-plus
Pittsburgh, Pa.
Indianapolis/Carmel, Ind.
Austin/Round Rock, Texas
Fort Worth/Arlington, Texas
San Antonio, Texas
Population 600,000 to 1.3 million
Omaha/Council Bluffs, Neb.
Syracuse, NY
Rochester, NY
Knoxville, Tenn.
Buffalo/Niagara Falls, NY
Population 360,000 to 600,000
Rockingham County/Strafford County, N.H.
Lexington/Fayette, Ky.
Durham, NC
Provo/Orem, Utah
Des Moines/West Des Moines, Iowa
Source: Worldwide ERC and Primacy Relocation (05/12/2008)
Mortgage Volume Down From Year Ago
First-quarter mortgage volume was down 22 percent from the first quarter 2007, but it rose 3 percent from the fourth quarter, according to publisher MortgageDaily.com.
There were $370.6 billion mortgage originations in first quarter 2008.
Compared with the first quarter of 2007, U.S. Bancorp mortgage activity jumped 86 percent. Flagstar Bancorp Inc. was up 44 percent and First Horizon National Corp. rose 19 percent.
The five largest mortgage lenders and their first quarter totals were:
1. Countrywide Financial Corp., $73 billion
2. Wells Fargo & Co., $66 billion
3. JPMorgan Chase & Co., $53.8 billion
4. Bank of America Corp., $38.6 billion
5. Citigroup, $34.3 billion
Source: MortgageDaily.com (05/05/2008)
Lots of Land, But Building Can Be Risky
There’s a lot of vacant land for sale at the moment, but does building a custom home make sense? Ask different real estate professionals, and you'll get different answers.
Debbie Jensen, an associate with Fairfax Realty in Herndon, Va., says the answer is simple: Just don't build. At least not now. Buyers take on too much risk and are at the mercy of builders, she says. "I can't tell you the amount of tears and frustration I've seen.” She recommends instead that her clients buy an existing home, even if it's only 80 percent of what they want. It's much easier to redo an existing house than to start from scratch, she contends.
Other see it differently. "Land is a good deal right now," says Mark Hastings, an associate with RE/MAX Gateway in Chantilly, Va., where prices in many nearby areas are down. Hastings says he's seeing a lot of nervousness from potential buyers who are worried that they will get in over their heads and then not be able to sell their custom home. But he believes that concern is overblown because top-quality homes hold their value. "The people who are building are in the more affluent range," he says.
Source: The Washington Post, Diane Reynolds (05/03/2008)
Condo Owners Face Rental Dilemma
Condo owners who can’t sell their units often consider leasing the space to tenants until the market improves. Yet, increasingly, such owners are discovering that their condo association has rules preventing them from doing so.
Rental policies vary by condo association, but generally associations limit the percentage of units that can be occupied by tenants. Some communities require owners to submit the lease they plan to use to the condo board for approval.
The rental restrictions are meant to guard against the condo being viewed as a risky investment by lenders who believe that buildings with a high concentration of rentals are harder to market to homebuyers. Fannie Mae will not guarantee a loan for a condo in which renters make up more than 49 percent of the occupants.
The rules generally stem from a feeling that renters don’t take good care of a unit and can reduce the value of the unit.
Source: The Washington Post, Renae Merle (05/03/2008)
Buffett Does His Part to Keep Rates Stable
Berkshire Hathaway, the insurance and investment company chaired by Warren Buffett, the world’s wealthiest man, has bought portfolios of subprime mortgages and frozen their rates.
Buffett, who spoke at Berkshire Hathaway’s annual meeting Sunday, said Clayton Homes, a unit of Berkshire that makes and provides financing on manufactured homes, purchased the subprime mortgages. Clayton sent letters to all the borrowers involved telling them the interest rates wouldn’t reset higher.
"We're not in the business of resetting mortgages higher," Buffett said.
Source: Dow Jones Business News, Alistair Barr (05/04/2008)
Renters Face Their Own Woes
For some, it might not seem like a great time to buy a house, but it’s a dreadful time to rent, especially in the western part of the United States.
The average apartment rent through March rose from the previous year in all 19 major Western markets surveyed by the research firm RealFacts,
San Jose, Calif. -- the heart of Silicon Valley -- is now the West's most expensive rental market, with the average apartment leasing for $1,660 per month, up 9.1 percent, $139 per month, from the same time last year. That means a Silicon Valley renter can expect to pay nearly $20,000 to lease an average apartment during the next year.
Tucson, Ariz. offers the West's least expensive apartments, with rents creeping up 2 percent to $668 per month.
Source: The Associated Press, Michael Liedtke (04/16/2008)
Pew Report Offers Up Dire View
One in every 33 homeowners is likely to be in foreclosure sometime in the next two years, according to a study released today by the Pew Charitable Trusts.
"Stronger standards from federal policy makers could have helped avert this crisis," said Shelley A. Hearne, managing director of Pew's Health and Human Services Program. "Future legislation must consider ways to strengthen standards to prevent more troubling loans from being made.”
Homeowners won’t be the only ones affected, the study predicts. It found that an additional 40 million neighboring residents will see their property values decline, while municipal tax bases drop by as much as $356 billion nationwide over the next two years.
Pew's research analyzes two principal data sets: the Mortgage Bankers Association 4th Quarter National Delinquency Survey and the Center for Responsible Lending's foreclosure projections and Subprime Spillover data.
Source: Pew Charitable Trusts (04/15/2008)
Why Lenders Balk at Short Sales
The NATIONAL ASSOCIATION OF REALTORS® says 18 percent of home transactions are now short sales, though experts point out that lenders are reluctant to approve such deals.
Research from Clayton Holdings Inc. indicates that lenders lose only 19 percent of the loan amount on average with a short sale, compared to 40 percent on a traditional foreclosure sale. However, short sales require approvals from primary lenders, servicers, investors, and home-equity lenders--a process that can take several months to complete.
Mortgage servicers blame delays on staff shortages resulting from the unexpected rise in problem loans, and Mortgage Bankers Association Senior Director Vicki Vidal points out that pricing also poses a challenge because buyers are making low-ball offers on distressed properties.
While servicers prefer repayment plans and modifications to short sales, the process is getting easier for borrowers who are encountering financial difficulties but continue to make timely payments. Additionally, Fannie Mae and Freddie Mac both are taking steps to speed up the process, with Fannie Mae looking to make acceptable minimum prices known beforehand and Freddie Mac giving servicers more leeway in approving short sales.
Source: Wall Street Journal, Ruth Simon and James Hagerty (04/17/08)
Bargain Home Prices Boost Sales
In cities where housing prices have fallen dramatically, bargain hunters are swooping in and pushing sales upward.
Boston, Cleveland, Detroit, Sacramento, and San Diego have all seen sales increases recently after a period of price declines, according to a March report by Radar Logic, a real estate data and analytics firm. In Detroit, sales of homes and condos rose 12.8 percent in February compared with a year ago, according to Realcomp.
The most aggressive shoppers include investors, particularly nationally based ones who are cherry-picking single-family homes in good neighborhoods all over the country.
International buyers also see U.S. home prices as a bargain. With the dollar down against the Euro, European buyers get particularly good deals, but buyers from Asia and Canada also are active, according to international real estate practitioners.
First-time homebuyers are finding this a good time to dip toes in the water. In November 2007, 39 percent of purchasers were first-time homebuyers, according to the NATIONAL ASSOCIATION OF REALTORS®.
Source: USA Today, Stephanie Armour (04/17/2008)
S&P Creates Risk Oversight Plan
In an effort to rebuild confidence in credit ratings, Standard & Poor's says it has established a risk oversight committee and will hire an ombudsman.
S&P, the world’s largest credit-rating firm, will mandate that loan data for mortgage-backed securities be made available and periodically move analysts from one issuer to another.
The plan also calls for a change in the company's computer models, which will address complaints that S&P and other credit raters didn't react quickly enough to rising mortgage defaults and losses in the mortgage-backed securities market.
Source: Washington Post (04/11/08)
Foreclosures Up 57% Since March 2007
Foreclosure filings continue to increase, up 5 percent in March over February, and up 57 percent from March 2007. This includes default notices, auction sale notices, and bank repossessions.
"What we're really looking at is ongoing fallout from people overextending themselves to buy homes they couldn't afford and using highly toxic loan products to get into the houses in the first place," Rick Sharga, vice president of marketing at RealtyTrac, an online publisher of foreclosure data.
Sharga predicts a record number of foreclosures in the third or fourth quarter of this year, reflecting a round of rate increases on subprime mortgages in May and June.
Nevada, California and Florida posted the highest rate of foreclosure filings in March, followed by Arizona, Colorado, Georgia, Ohio, Michigan, Massachusetts, and Maryland.
California, Florida, and Ohio report the highest actual number of foreclosures. Other states in the top 10 for total properties with filings are Texas, Georgia, Michigan, Arizona, Illinois, Nevada and Colorado.
Source: Reuters News, Lynn Adler, and RealtyTrac (04/15/2008)