The bailout bill has failed in the U.S. House !!!!
What next, nobody knows at this stage. Probably Thursday before they can restart negotiations.
Monday, September 29, 2008
Brief Overview of Bailout Plan
From Realty Times on September 29, 2008
Washington Report: Overview of Bailout Plan by Kenneth R. Harney
There's no question what's been dominating debate in Washington -- the Treasury's and Congress's plans to buy hundreds of billions of dollars of distressed mortgages from lenders and investors.
The fine print rules and regulations for the bailout plan won't be known for weeks, but here's a quick overview from a real estate perspective on how it's supposed to work:
At its core, the plan is all about taking home loans off lenders' and investors' books that are currently illiquid -- they can't be sold, or are extremely difficult to sell -- because no one is sure what they're really worth.
Consider this hypothetical example: Say you own a mortgage-backed bond that has 100 subprime home mortgages in it. At the moment, 24 of those loans are delinquent; but 76 are paying on time. That proportion is pretty close to reality, according to the latest delinquency numbers from the Mortgage Bankers Association.
Now, because there are serious defaults in the pool, there's a stigma attached to your subprime bond. The best offer you've heard is maybe 20 cents on the dollar - which is ridiculous because over three quarters of your loans are paying on time, and the monthly cash flows should be worth a lot more.
You need an organization or program to intervene, buy your mortgage pool for a fairer price. That, in turn, will allow you to take in some cash and make some new mortgages.
The buyer of your loans can now work to see whether the interest rates, monthly payments, and other features of the 24 “bad” mortgages can be modified to be more affordable for the home owners involved.
Let's say that over a period of three years, those modifications end up saving 15 of the 24 delinquent mortgages from going into foreclosure. The new owner of the pool now has 90 loans paying on time, making it a lot more valuable than it paid.
Although the example is simplified, it's pretty much what the bailout plan is all about: Taking undervalued assets, holding them for awhile and turning them into better assets -- lemons into lemonade -- and reselling them, maybe even at a profit.
It's not clear at the moment how successful this will be long-term. But by buying up incorrectly valued mortgages at a “fair” price, the government has a chance to pump new money into the market -- money for new home mortgages -- and even lower interest rates in the process.
Exactly how to do that -- with what rules and guidelines -- has been what all the noise in Washington has been about.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
Washington Report: Overview of Bailout Plan by Kenneth R. Harney
There's no question what's been dominating debate in Washington -- the Treasury's and Congress's plans to buy hundreds of billions of dollars of distressed mortgages from lenders and investors.
The fine print rules and regulations for the bailout plan won't be known for weeks, but here's a quick overview from a real estate perspective on how it's supposed to work:
At its core, the plan is all about taking home loans off lenders' and investors' books that are currently illiquid -- they can't be sold, or are extremely difficult to sell -- because no one is sure what they're really worth.
Consider this hypothetical example: Say you own a mortgage-backed bond that has 100 subprime home mortgages in it. At the moment, 24 of those loans are delinquent; but 76 are paying on time. That proportion is pretty close to reality, according to the latest delinquency numbers from the Mortgage Bankers Association.
Now, because there are serious defaults in the pool, there's a stigma attached to your subprime bond. The best offer you've heard is maybe 20 cents on the dollar - which is ridiculous because over three quarters of your loans are paying on time, and the monthly cash flows should be worth a lot more.
You need an organization or program to intervene, buy your mortgage pool for a fairer price. That, in turn, will allow you to take in some cash and make some new mortgages.
The buyer of your loans can now work to see whether the interest rates, monthly payments, and other features of the 24 “bad” mortgages can be modified to be more affordable for the home owners involved.
Let's say that over a period of three years, those modifications end up saving 15 of the 24 delinquent mortgages from going into foreclosure. The new owner of the pool now has 90 loans paying on time, making it a lot more valuable than it paid.
Although the example is simplified, it's pretty much what the bailout plan is all about: Taking undervalued assets, holding them for awhile and turning them into better assets -- lemons into lemonade -- and reselling them, maybe even at a profit.
It's not clear at the moment how successful this will be long-term. But by buying up incorrectly valued mortgages at a “fair” price, the government has a chance to pump new money into the market -- money for new home mortgages -- and even lower interest rates in the process.
Exactly how to do that -- with what rules and guidelines -- has been what all the noise in Washington has been about.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
Tuesday, September 23, 2008
Snag for FHA Hope
From Realty Times of September 22, 2008
Washington Report: Snag for FHA Hope
by Kenneth R. Harney
Although Wall Street's woes got a lot of attention on Capitol Hill last week, so did the continuing crisis in home foreclosures.
Starting October 1, home owners who owe more on their mortgage than their property is worth may be able to qualify for new FHA "Hope" refinancings that cut their debt, lower their interest rates and help them start rebuilding equity.
Sounds like a great opportunity for hundreds of thousands of hard-pressed owners, but there's a huge potential snag: Their lenders and loan servicers have to agree to participate, and they may not.
Why? Because among other requirements, lenders and bond market owners of mortgages will have to agree to write down the balances due on the loans below current market values for the house -- in other words, they'd need to take immediate and sizable losses on those mortgages.
At a House financial services hearing last Wednesday, a top Bank of America executive, Michael Gross, said Congress may have unrealistic assumptions about how many lenders and investors will agree to participate in Hope refinancings.
"My biggest concern," said Gross, "is that expectations for (this) program might be too high."
Rather than booking instant losses many banks and bond investors might prefer to work out customized loan modifications with borrowers instead -- renegotiating loan balances, reducing monthly payments and even interest rates - without having to deal with FHA.
But Congressional critics like House financial services committee chairman Barney Frank say the banks have already been doing that -- and foreclosure rates are still rising in many markets.
Frank is threatening to make massive -- though as yet unspecified -- changes in the federal rules governing home mortgage servicing that would force lenders to be more responsive to borrowers stuck with underwater properties.
In the meantime, borrowers who believe they might benefit from a Hope refinancing, should start talking with their servicers to see whether there's a chance. The law expressly makes the decision voluntary for all financial institutions -- borrowers cannot compel them or take them to court to force their hands.
But Barney Frank's ominous warning to lenders just might get some banks' attention and soften their stances on taking part in the Hope program. At the very least, home owners who talk to their lenders about Hope refinancings could open the door to customized loan modifications that help them out of their jams.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
Washington Report: Snag for FHA Hope
by Kenneth R. Harney
Although Wall Street's woes got a lot of attention on Capitol Hill last week, so did the continuing crisis in home foreclosures.
Starting October 1, home owners who owe more on their mortgage than their property is worth may be able to qualify for new FHA "Hope" refinancings that cut their debt, lower their interest rates and help them start rebuilding equity.
Sounds like a great opportunity for hundreds of thousands of hard-pressed owners, but there's a huge potential snag: Their lenders and loan servicers have to agree to participate, and they may not.
Why? Because among other requirements, lenders and bond market owners of mortgages will have to agree to write down the balances due on the loans below current market values for the house -- in other words, they'd need to take immediate and sizable losses on those mortgages.
At a House financial services hearing last Wednesday, a top Bank of America executive, Michael Gross, said Congress may have unrealistic assumptions about how many lenders and investors will agree to participate in Hope refinancings.
"My biggest concern," said Gross, "is that expectations for (this) program might be too high."
Rather than booking instant losses many banks and bond investors might prefer to work out customized loan modifications with borrowers instead -- renegotiating loan balances, reducing monthly payments and even interest rates - without having to deal with FHA.
But Congressional critics like House financial services committee chairman Barney Frank say the banks have already been doing that -- and foreclosure rates are still rising in many markets.
Frank is threatening to make massive -- though as yet unspecified -- changes in the federal rules governing home mortgage servicing that would force lenders to be more responsive to borrowers stuck with underwater properties.
In the meantime, borrowers who believe they might benefit from a Hope refinancing, should start talking with their servicers to see whether there's a chance. The law expressly makes the decision voluntary for all financial institutions -- borrowers cannot compel them or take them to court to force their hands.
But Barney Frank's ominous warning to lenders just might get some banks' attention and soften their stances on taking part in the Hope program. At the very least, home owners who talk to their lenders about Hope refinancings could open the door to customized loan modifications that help them out of their jams.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
Friday, September 19, 2008
AN INTERESTING PIECE OF DATA
The following is an article in the Realty Times of 9-19-08 entitled "Investor Report: Small-scale Investors Beware by Kenneth R. Harney"
Small-scale rental home investors need to be aware of a new campaign by the nation's largest apartment owners that could have the effect of scaring away potential tenants.
The National Multi Housing Council is mounting the campaign to warn consumers about what it considers the imminent dangers of renting with landlords who don't own many properties and don't offer "professional management."
According to the council, "nearly 40 percent of today's foreclosures involve a single family house, condominium or other housing rented out" by private, small-scale owners, including investors.
"People who choose to rent these properties put themselves at risk for losing their lease, losing their security deposits, and having to move on short notice" if the owner cannot pay the mortgage and taxes and the unit goes to foreclosure, said the council in announcing its nationwide "rent from the pros" publicity campaign.
Douglas Bibby, president of the council, said the problem is serious, but heads-up tenants can get "peace of mind in a volatile housing market" by "renting at a professionally managed property," such as a large apartment complex.
The council, whose members own and manage hundreds of thousands of apartment units across the country, is the principal lobby group for the industry on Capitol Hill.
In a brochure prepared for the "rent from a pro" campaign, the group warns that "even renters aren't necessarily safe" from the foreclosure epidemic. "(I)f you choose to rent from a private individual, the risk of losing your rental home is very real," it says.
Asked by Realty Times for documentation of the "nearly 40 percent" figure used centrally in the campaign, a spokesman for the council said it came from a report "based on data from Realty Trac" that was cited on the CBS Evening News last March.
But the actual 38 percent foreclosure figure released by Realty Trac related to all non-owner occupied housing units, including second homes - many of which are never rented out or only rented seasonally.
Meanwhile, the largest private company in the U.S. involved in rental home investing, Dallas-based Home Vestors, whose 230 franchisees have bought over 36,000 houses in the past 12 years -- many of them rented out -- called the Multi Housing Council's campaign "a scare tactic" with no statistical basis.
John Hayes, president and CEO of Home Vestors, told RealtyTimes, "in our experience, we have not to my knowledge had a complaint or even heard of a franchisee ending up in foreclosure with a rental (home) property."
Copyright © 2008 Realty Times. All Rights Reserved.
-----------------------------------------------------------------
My own observations:
The key element of the article, which addresses the National Multi Housing Council's effort to drive renters back to Apartments, is the data which suggests "nearly 40 percent" of the National foreclosure problem is private investor rentals. That data, if true, certainly sheds a different light to our National problem of foreclosures.
Our local TV stations have highlighted cases of renters in single family homes being forced to move and losing deposits due to "investor foreclosures". But each has been a single report format - not suggesting a wide spread problem.
Back to the adage, liars figure, figures lie. Who to beleive?
.
Small-scale rental home investors need to be aware of a new campaign by the nation's largest apartment owners that could have the effect of scaring away potential tenants.
The National Multi Housing Council is mounting the campaign to warn consumers about what it considers the imminent dangers of renting with landlords who don't own many properties and don't offer "professional management."
According to the council, "nearly 40 percent of today's foreclosures involve a single family house, condominium or other housing rented out" by private, small-scale owners, including investors.
"People who choose to rent these properties put themselves at risk for losing their lease, losing their security deposits, and having to move on short notice" if the owner cannot pay the mortgage and taxes and the unit goes to foreclosure, said the council in announcing its nationwide "rent from the pros" publicity campaign.
Douglas Bibby, president of the council, said the problem is serious, but heads-up tenants can get "peace of mind in a volatile housing market" by "renting at a professionally managed property," such as a large apartment complex.
The council, whose members own and manage hundreds of thousands of apartment units across the country, is the principal lobby group for the industry on Capitol Hill.
In a brochure prepared for the "rent from a pro" campaign, the group warns that "even renters aren't necessarily safe" from the foreclosure epidemic. "(I)f you choose to rent from a private individual, the risk of losing your rental home is very real," it says.
Asked by Realty Times for documentation of the "nearly 40 percent" figure used centrally in the campaign, a spokesman for the council said it came from a report "based on data from Realty Trac" that was cited on the CBS Evening News last March.
But the actual 38 percent foreclosure figure released by Realty Trac related to all non-owner occupied housing units, including second homes - many of which are never rented out or only rented seasonally.
Meanwhile, the largest private company in the U.S. involved in rental home investing, Dallas-based Home Vestors, whose 230 franchisees have bought over 36,000 houses in the past 12 years -- many of them rented out -- called the Multi Housing Council's campaign "a scare tactic" with no statistical basis.
John Hayes, president and CEO of Home Vestors, told RealtyTimes, "in our experience, we have not to my knowledge had a complaint or even heard of a franchisee ending up in foreclosure with a rental (home) property."
Copyright © 2008 Realty Times. All Rights Reserved.
-----------------------------------------------------------------
My own observations:
The key element of the article, which addresses the National Multi Housing Council's effort to drive renters back to Apartments, is the data which suggests "nearly 40 percent" of the National foreclosure problem is private investor rentals. That data, if true, certainly sheds a different light to our National problem of foreclosures.
Our local TV stations have highlighted cases of renters in single family homes being forced to move and losing deposits due to "investor foreclosures". But each has been a single report format - not suggesting a wide spread problem.
Back to the adage, liars figure, figures lie. Who to beleive?
.
Saturday, September 13, 2008
THE STATE OF US FINANCES AND FORECLOSURES
The following statement recently appeared in a News Article:
"Lenders have repossessed a record 656,545 properties nationwide – or 8.6 of every 1,000 households in the US" - the data was attributed to ForeclosureS.com.
It concerns me that it is stated in terms of 1,000 households - in reality it is 0.86% of households, less than 1%, but sounds more ominous when they say it as they do. I do agree it is a very painful experience for those affected, and do not mean to minimize the impact to those folks, but let's at least keep it in a reasonable perspective.
In a similar fashion, August Foreclosures were a new record! However, have any of you heard that the percentage of foreclosures in August reflected a reduced rate of foreclosures over July? Stated differently, the rate of foreclosures dropped! Hmmm, don't guess you heard that.
How about the Bank Foreclosure Crisis. Some large banks have fallen, and no doubt others will follow. I can't prove the numbers I heard but this is what I heard. "The Feds are still looking at 117 banks that are potential Lehman Brothers or Bear Stearns". The speaker then went on to say that there are 8500 banks in the U.S.
Hmmmm, if that's accurate, then the 0.0138% largest of the 8500 banks may be in trouble.
What is the old expression, liars figure, figures lie? Well, it does sell papers. Maybe this makes me guilty of being a liar?
Again, not trying to minimize the concerns we face but let's at least try to offer the whole story after we sell the paper.
.
"Lenders have repossessed a record 656,545 properties nationwide – or 8.6 of every 1,000 households in the US" - the data was attributed to ForeclosureS.com.
It concerns me that it is stated in terms of 1,000 households - in reality it is 0.86% of households, less than 1%, but sounds more ominous when they say it as they do. I do agree it is a very painful experience for those affected, and do not mean to minimize the impact to those folks, but let's at least keep it in a reasonable perspective.
In a similar fashion, August Foreclosures were a new record! However, have any of you heard that the percentage of foreclosures in August reflected a reduced rate of foreclosures over July? Stated differently, the rate of foreclosures dropped! Hmmm, don't guess you heard that.
How about the Bank Foreclosure Crisis. Some large banks have fallen, and no doubt others will follow. I can't prove the numbers I heard but this is what I heard. "The Feds are still looking at 117 banks that are potential Lehman Brothers or Bear Stearns". The speaker then went on to say that there are 8500 banks in the U.S.
Hmmmm, if that's accurate, then the 0.0138% largest of the 8500 banks may be in trouble.
What is the old expression, liars figure, figures lie? Well, it does sell papers. Maybe this makes me guilty of being a liar?
Again, not trying to minimize the concerns we face but let's at least try to offer the whole story after we sell the paper.
.
Wednesday, September 10, 2008
MARKET CONDITIONS
From Realty Times:
Market Conditions
by Realty Times Staff
When the government decided to place Fannie Mae and Freddie Mac into its conservatorship, it opened up many different possible avenues the heal the ailing giants.
The New York Times reports that there haven't been any specific proposals made by lawmakers to date on what to do -- but in one option, some lawmaker "favors restoring the companies to health and then returning them to the way they were before they went into conservatorship, but with safeguards to prevent another crisis."
This seems a much milder approach than free-market theorists who favor a liquidation of the companies.
National Association of Realtors President, Richard Gaylord, issued the statement: "I commend Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart for their bold actions to bring stability and continued liquidity to the nation’s mortgage market. Fannie Mae and Freddie Mac have always played a vital role in the U.S. economy by making fair and affordable mortgage loans available for home buyers and owners. Their critical mission must not be interrupted, and Sunday’s announcement goes a long way in making sure that does not happen."
Many experts hope that with this takeover will come restored confidence and more movement in the mortgage markets -- and maybe more affordable housing.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
Market Conditions
by Realty Times Staff
When the government decided to place Fannie Mae and Freddie Mac into its conservatorship, it opened up many different possible avenues the heal the ailing giants.
The New York Times reports that there haven't been any specific proposals made by lawmakers to date on what to do -- but in one option, some lawmaker "favors restoring the companies to health and then returning them to the way they were before they went into conservatorship, but with safeguards to prevent another crisis."
This seems a much milder approach than free-market theorists who favor a liquidation of the companies.
National Association of Realtors President, Richard Gaylord, issued the statement: "I commend Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart for their bold actions to bring stability and continued liquidity to the nation’s mortgage market. Fannie Mae and Freddie Mac have always played a vital role in the U.S. economy by making fair and affordable mortgage loans available for home buyers and owners. Their critical mission must not be interrupted, and Sunday’s announcement goes a long way in making sure that does not happen."
Many experts hope that with this takeover will come restored confidence and more movement in the mortgage markets -- and maybe more affordable housing.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
Tuesday, September 9, 2008
Real Estate Outlook: Recession Fears Put to Rest
From the September 9, 2008 REALTY TIMES:
Real Estate Outlook: Recession Fears Put to Rest
by Kenneth R. Harney
The latest national economic growth numbers should finally put to rest fears of a recession that could choke the real estate recovery now getting underway.
Second quarter Gross Domestic Product (or GDP) came in at an upwardly-revised 3.3 percent -- far above the 1.9 percent the federal government had previously estimated.
Key reasons for the robust economic performance: Exports, which have been riding the weak dollar to record levels, and lower imports because the prices of foreign-made goods have been priced higher.
Why should anyone interested in real estate care about GDP? Well, number one, when the economic growth rate accelerates, consumer confidence in the economy rises. That, in turn, pulls potential buyers off the sidelines and opens the door to higher housing sales.
And sure enough, the consumer confidence numbers for August, released last week by the Conference Board, are up by 5 points.
We're already seeing some impressive jumps in home sales in places that haven't seen positive news in two to three years -- central Florida and even some of the hardest-hit parts of California. According to a new report from the real estate tracking firm, DataQuick, sales in southern California jumped 16.7 percent in July over June, and were 14 percent above the pace of July the year before.
Another encouraging sign: Last week's mortgage rates dropped to 6.39 percent for 30-year fixed rate loans, according to the Mortgage Bankers Association of America. Fifteen year rates are still just under 6 percent. Applications for loans to buy homes jumped by 6 percent for conventional loans and an impressive 19.9 percent for FHA mortgages.
The federal government's latest quarterly survey on home prices reveals that the best price appreciation performances are now coming from areas that barely got noticed during the hottest years of the housing boom -- markets like Charleston, West Virginia ( up 6 percent for the year), Greenville, South Carolina (up 5.8 percent), Tulsa, Oklahoma (up by nearly 5 percent) and Scranton, Pennsylvania, where values were up by 4.7 percent..
All these markets -- and there are dozens more spread through Texas, the Midwest and the South -- never experienced the wild days of double digit appreciation.
They offer affordable housing prices and moderate - but steady and slow - price growth. They're not flashy -- never have been, probably never will be -- but that's why they're still producing positive appreciation numbers, while the boom to bust markets are not.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
There are some who feel that the numbers on which this article is based are not really correct - that the Feds are leaving out some things that would negatively effect the GDP. October may give us a better indicator and hopefully still support the premise that the Recession is no longer a concern.
Real Estate Outlook: Recession Fears Put to Rest
by Kenneth R. Harney
The latest national economic growth numbers should finally put to rest fears of a recession that could choke the real estate recovery now getting underway.
Second quarter Gross Domestic Product (or GDP) came in at an upwardly-revised 3.3 percent -- far above the 1.9 percent the federal government had previously estimated.
Key reasons for the robust economic performance: Exports, which have been riding the weak dollar to record levels, and lower imports because the prices of foreign-made goods have been priced higher.
Why should anyone interested in real estate care about GDP? Well, number one, when the economic growth rate accelerates, consumer confidence in the economy rises. That, in turn, pulls potential buyers off the sidelines and opens the door to higher housing sales.
And sure enough, the consumer confidence numbers for August, released last week by the Conference Board, are up by 5 points.
We're already seeing some impressive jumps in home sales in places that haven't seen positive news in two to three years -- central Florida and even some of the hardest-hit parts of California. According to a new report from the real estate tracking firm, DataQuick, sales in southern California jumped 16.7 percent in July over June, and were 14 percent above the pace of July the year before.
Another encouraging sign: Last week's mortgage rates dropped to 6.39 percent for 30-year fixed rate loans, according to the Mortgage Bankers Association of America. Fifteen year rates are still just under 6 percent. Applications for loans to buy homes jumped by 6 percent for conventional loans and an impressive 19.9 percent for FHA mortgages.
The federal government's latest quarterly survey on home prices reveals that the best price appreciation performances are now coming from areas that barely got noticed during the hottest years of the housing boom -- markets like Charleston, West Virginia ( up 6 percent for the year), Greenville, South Carolina (up 5.8 percent), Tulsa, Oklahoma (up by nearly 5 percent) and Scranton, Pennsylvania, where values were up by 4.7 percent..
All these markets -- and there are dozens more spread through Texas, the Midwest and the South -- never experienced the wild days of double digit appreciation.
They offer affordable housing prices and moderate - but steady and slow - price growth. They're not flashy -- never have been, probably never will be -- but that's why they're still producing positive appreciation numbers, while the boom to bust markets are not.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
There are some who feel that the numbers on which this article is based are not really correct - that the Feds are leaving out some things that would negatively effect the GDP. October may give us a better indicator and hopefully still support the premise that the Recession is no longer a concern.
Monday, September 1, 2008
FHA Increasing Premiums
From Realty Times:
Washington Report: FHA Increasing Premiums
by Kenneth R. Harney
The politicians may have fled Washington for conventions and vacations, but there's been lots of action at the Federal Housing Administration that could affect home buyers and borrowers across the country.
Tops on the list: Forced by Congress to raise prices, FHA is increasing the mortgage premiums it charges applicants in its booming programs. Starting October 1st, upfront premiums will jump by one quarter of a percentage point -- from the current one and half percent of the loan amount to one and three quarters.
Annual premiums will remain in the half-point range. Home owners seeking refinancing under the expanded "FHASecure" program will be charged 3 points in premiums up front.
FHA had no choice but to raise premiums across the board following Congress's imposition of a one year moratorium on the agency's planned move to "risk based pricing" for all applicants, using credit scores and downpayment amounts.
Under those plans, people with high credit scores and downpayments would be charged lower insurance premiums. Borrowers with low scores and downpayments would be charged more - precisely as they are in the private mortgage insurance industry.
But Congress decided to keep the traditional "one-size-fits-all" cross-subsidization approach that FHA has used for decades, at least for another year.
Seller-paid downpayment gift assistance through third-party organizations such as Nehemiah and Ameridream -- which the agency says have contributed heavily to insurance claims -- will no longer be accepted by FHA as of October 1.
The net effect of the premium increase for most buyers: An extra $500 more in fees up front on a typical $200,000 mortgage.
At the same time, FHA announced a series consumer-friendly changes to the ways it handles loan modifications for borrowers in financial trouble. The bottom line is that when home owners fall behind and need to have their payment terms changed to enable them to stay in the house, fees will be tacked onto their principal debts and any rate hikes will be limited.
Finally, FHA's parent department -- HUD -- made good on its promise and sent its final version of real estate settlement and mortgage disclosure rules -- the so-called "RESPA reform" regulations - for final White House clearance. Though mortgage and real estate industry groups - along with 243 members of the House -- have criticized the rules as unwieldy and potentially costly to implement, HUD said consumers need better disclosures now, not later. The RESPA changes appear likely to be adopted before the next administration arrives in January -- tossing a political hot potato to either John McCain or Barack Obama.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
Washington Report: FHA Increasing Premiums
by Kenneth R. Harney
The politicians may have fled Washington for conventions and vacations, but there's been lots of action at the Federal Housing Administration that could affect home buyers and borrowers across the country.
Tops on the list: Forced by Congress to raise prices, FHA is increasing the mortgage premiums it charges applicants in its booming programs. Starting October 1st, upfront premiums will jump by one quarter of a percentage point -- from the current one and half percent of the loan amount to one and three quarters.
Annual premiums will remain in the half-point range. Home owners seeking refinancing under the expanded "FHASecure" program will be charged 3 points in premiums up front.
FHA had no choice but to raise premiums across the board following Congress's imposition of a one year moratorium on the agency's planned move to "risk based pricing" for all applicants, using credit scores and downpayment amounts.
Under those plans, people with high credit scores and downpayments would be charged lower insurance premiums. Borrowers with low scores and downpayments would be charged more - precisely as they are in the private mortgage insurance industry.
But Congress decided to keep the traditional "one-size-fits-all" cross-subsidization approach that FHA has used for decades, at least for another year.
Seller-paid downpayment gift assistance through third-party organizations such as Nehemiah and Ameridream -- which the agency says have contributed heavily to insurance claims -- will no longer be accepted by FHA as of October 1.
The net effect of the premium increase for most buyers: An extra $500 more in fees up front on a typical $200,000 mortgage.
At the same time, FHA announced a series consumer-friendly changes to the ways it handles loan modifications for borrowers in financial trouble. The bottom line is that when home owners fall behind and need to have their payment terms changed to enable them to stay in the house, fees will be tacked onto their principal debts and any rate hikes will be limited.
Finally, FHA's parent department -- HUD -- made good on its promise and sent its final version of real estate settlement and mortgage disclosure rules -- the so-called "RESPA reform" regulations - for final White House clearance. Though mortgage and real estate industry groups - along with 243 members of the House -- have criticized the rules as unwieldy and potentially costly to implement, HUD said consumers need better disclosures now, not later. The RESPA changes appear likely to be adopted before the next administration arrives in January -- tossing a political hot potato to either John McCain or Barack Obama.
--------------------------------------------------------------------------------
Copyright © 2008 Realty Times. All Rights Reserved.
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