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Banks start to embrace short sales

December 8th, 2009 12:39 PM

Even before the government put pressure on them to embrace short sales, more banks were starting to take their lumps, do the short-sale deals and move on.

Three years into the housing meltdown, short sales have tripled to 40,000 in the first six months of 2009 compared to the same time period a year ago, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

Wells Fargo, Bank of America Corp. and JPMorgan Chase & Co. this year have hired and trained more staff to handle short sales and also developed software for expediting them.

“It’s really finally dawning on banks that they’re better off with a short sale,” says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “I think banks were in denial.”

Source: Bloomberg, John Gittelsohn and Margaret Collins (12/4/2009)

© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

Posted by Marcos Fullana on December 8th, 2009 12:39 PMPost a Comment (0)

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Are fixed-rate mortgages the best loan?

December 18th, 2009 12:22 PM

The think-tank Center for American Progress is questioning the premise that a 30-year, fixed-rate mortgage is the best option for homebuyers.

The reason mortgage-backed securities looked so attractive to banks is that they solved the problem of a mismatch between low rates on mortgages and higher rates for deposits. Banks worried about getting stuck earning low rates on a mortgage for 30 years while having to pay higher rates on bank accounts to attract depositors. Their answer: unload their mortgages to investors and let them worry about the profitability of the loans. Those investors hedged their bets by purchasing interest-rate swaps and other derivatives. Now, even Fannie Mae and Freddie Mac are having a hard time getting a handle on what those hedges are worth.

In other parts of the world, variable rates are the norm. While borrowers face the risk of rates going up, lenders at least can ensure the rates they pay to depositors don’t outstrip what they receive in mortgage products. Homeownership rates in Canada and the European Union, where variable rate mortgages are the norm, are about what they are in the U.S.

And in any case, there are ways for borrowers to mitigate their interest-rate risk. They can take out loans with fixed initial periods, for example. For homeowners who typically hold their homes for seven years, a five-year fixed rate provides considerable security.

If the country persists in choosing fixed-rate mortgages, some observers say, lenders might consider the Danish model where mortgages are financed through the bond market rather than a separate securities market. That’s a system that has worked well for two centuries.

Source: The Wall Street Journal, James R. Hagerty (12/14/2009)

© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

Posted by Marcos Fullana on December 18th, 2009 12:22 PMPost a Comment (0)

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Foreclosure interest wanes as defaults continue their rise

December 18th, 2009 12:21 PM

Consumers’ fascination with foreclosures may be flagging.

In May, 55 percent of adults said they were at least somewhat likely to consider buying a foreclosed home. When a similar online survey was conducted last month by Harris Interactive, only 43 percent of respondents said they’d consider such a purchase.

The survey, released Tuesday by real estate Web companies Trulia.com and RealtyTrac, could portend more difficult times for the housing market, particularly because most economists expect foreclosures to peak nationally next year.

A lack of interest in purchasing bank-owned properties not only would mean that foreclosed individual homes sit vacant longer but also would affect the broader housing market by bringing down median housing prices in neighborhoods beset with foreclosures.

Rick Sharga, senior vice president of RealtyTrac, an online marketplace of foreclosure listings, said the decrease in buyer enthusiasm for foreclosures should be expected. “Some of the early enthusiasm of something new has waned,” he said, but added, “People that are interested are very serious about this.”

RealtyTrac predicts that by year’s end, 3.2 million households nationally will have received a foreclosure notice in 2009. Next year, the number of filings, which include notices of default, sheriff’s sale or bank repossession, could approach 4 million, Sharga said.

“Follow the unemployment numbers” to determine where foreclosures will rise next year, Sharga said. Last week, RealtyTrac said November foreclosure filings in the Chicago area rose 107 percent over a year ago. Illinois’ unemployment rate stands at 11 percent.

Moody’s Economy.com previously has predicted an additional 4.6 million foreclosures nationally in 2010.

“There are really two sides to this story, the positive and the bleak,” said Pete Flint, chief executive of Trulia.com. The positive side is that buyers have grown more realistic about their expectations of what a foreclosed property will cost to purchase and renovate, he said.

The Harris survey included 2,203 adults.

Copyright © 2009 Chicago Tribune. Distributed by McClatchy-Tribune News Service.

Posted by Marcos Fullana on December 18th, 2009 12:21 PMPost a Comment (0)

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Homebuyers are downsizing

December 18th, 2009 12:17 PM

Out of the depths of housing’s worst downturn, smaller new homes are turning into a bright spot for some home builders.

The trend toward more compact new homes is being driven partly by the fact that more customers are first-time buyers who have less to spend.

Home builders are responding by offering smaller designs with features such as high ceilings and large windows that create a spacious feel and options that let buyers personalize the model they choose.

KB Home’s smaller model helped it achieve a 62 percent increase in year-over-year net orders in the third quarter.

The trend cuts across the industry. The median square footage of new homes has dropped 9 percent from a peak of 2,300 square feet in the third quarter of 2006 to 2,100 square feet in the July-September period this year, according to data from the National Association of Home Builders (NAHB).

Housing size drops with each recession, but economists expect the current movement toward smaller homes to continue for some time in part because of the severity of the current housing market slump.

First-time buyers are driving the trend toward smaller homes because that is what they can afford, says David Crowe, chief economist at the NAHB.

As the economy improves, move-up buyers generally enter the market and begin buying larger homes. But this time, so many homeowners owe more on their homes than their properties are worth that many potential move-up buyers will be stuck even as the economy strengthens.

That means first-time homebuyers will still be buying smaller homes while larger homes will find fewer buyers.

“This downsizing is more sustainable,” Crowe says. “The first-time buyer will continue to be a large part of the market because the move-up buyer will not have as much equity. It’s going to take them awhile to climb out.”

The NAHB doesn’t keep data on the percentage of new home sales that are made by first-time home buyers, but about half of all home purchasers were first-time buyers in October, according to the National Association of Realtors.

For builders, smaller, less-expensive homes mean less profit. But the industry is already facing strong competition from a high supply of foreclosed homes selling at comparatively low prices.

A welcome change

Some analysts say the downsizing trend could be good news for builders.

“The appetite for smaller homes may be a welcome change for home builders as new home sales have been challenged in the past few years,” says Tom Lydon, editor of ETF Trends, which educates investors on fund choices and market trends.

Major home builders such as KB Home and Pulte Homes are responding to the shift in demand by offering more of the smaller properties.

At Pulte Homes, its most popular designs today are 100 to 200 square feet less than the most-popular plans in 2005-06.

So the lower-priced homes don’t seem bare-bones to buyers, open floor plans and 9-foot ceilings provide a sense of roominess. Fireplaces are an option.

To hold down costs, Corian – a surfacing material created by DuPont – is a standard for kitchen counters instead of granite. Appliances are standard models instead of pricier stainless steel.

“It’s not just making it smaller, it’s maximizing the space in the home,” says Caryn Klebba, a spokeswoman at Pulte Homes. “It’s a 9- or 10-foot ceiling rather than a cathedral ceiling.” Cathedral ceilings are 14 to 18 feet.

Getaway option

Smaller homes also are appealing as vacation homes.

Nancy Coronado, 55, a retired framer in an art gallery, has a large home in Whitehall, Mich., and bought a second Pulte home in Florence, Ariz., in March. The new home is about 1,400 square feet. “I have a big home in Michigan and didn’t want another big home,” she says. “I wasn’t looking for that.”

KB Home also has redesigned its homes to reflect the trend, because nearly 80 percent of its customers are first-time homebuyers.

Toll Bros., which builds luxury homes, says demand is down across the board, and not just for larger homes. Company officials say they, too, see an increased interest in smaller homes but believe that homebuyers will someday return to wanting larger properties.

Smaller homes, they say, reflect a down economy and tighter credit rather than an appetite for less space.

“We see the demand for smaller homes, but it’s not as though there’s huge demand for smaller homes but no demand for larger homes,” says Kira McCarron, a spokeswoman for Toll Bros. “There is still a demand for luxury homes.”

Copyright © 2009 USA TODAY

Posted by Marcos Fullana on December 18th, 2009 12:17 PMPost a Comment (0)

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Don’t drop price if listing isn’t selling?

December 11th, 2009 11:56 AM

When listings are languishing on the market, real estate agents should not automatically jump to reduce the price – unless the asking price was too high from the start.

If a price reduction is meant to attract attention, experts say it would have to move the listing into a new price range to draw a new set of prospective buyers, which could mean shaving as much as $20,000 off the asking price.

Agents likely priced the home appropriately in the first place, and suggesting a price reduction to the seller could hurt their credibility.

Experts also note that price reductions generally are not the right strategy for sellers, especially when numerous other steps can be taken to spruce up the home and generate interest without budging on price.

Source: Realty Times (12/07/09) Allan, Jennifer

Posted by Marcos Fullana on December 11th, 2009 11:56 AMPost a Comment (0)

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In reality, those real estate shows are really fake

December 11th, 2009 11:53 AM

Flip on your television and tune into HGTV’s “House Hunters” and you might see yet another set of Chicago homebuyers and a local real estate agent in action.

The popular cable TV program seems to like the local real estate market; it’s certainly been featured before. And with every show, another buyer and agent learn the skinny about what’s real and unreal on reality television.

“House Hunters” is one of those programs you can stumble across and then find yourself sitting down to watch, critiquing the three different properties being shown and the buyer’s tastes, and then guessing which one they’ll pick. It also provides a sense of property values in a given locale, as in “look how much more/less house we can get if we moved somewhere else.”

So hearing the behind-the-scenes details of several episodes that have been filmed here recently is a bit like pulling back the curtain to reveal the real Wizard of Oz.

A few months ago while they were looking for another set of homebuyers, the show’s producers stumbled across the blog of Chicago Realtor Eric Rojas (score another one for social marketing) and asked if he had a willing buyer.

He did. But Chicagoans Kurt and Kelly Schnakenberg had to be more than willing to appear on television. They had to have the financial wherewithal to actually close on a home, and they had to have the right personalities for the show, something they demonstrated in a videotape sent to the producers.

Rojas, meanwhile, had to fill out a questionnaire about how he does business.

For the show, the couple looked at three properties in Lakeview: a $415,000 loft, a $355,000 vintage condo with a kitchen that needed work and a $400,000 loft-style town house that needed updating.

Of those three, one of them was the unit the couple did indeed purchase in March. Another one was under contract to someone else so the listing agent had no problem showing it. The third unit was for sale, but the couple had never seen it before and had pretty much already made up their mind.

The conversations aren’t the same, either. Kurt Schnakenberg said he and his wife did debate the merits of various condos but it was never so serious and “usually over a bottle of wine.”

Chicago agent Carrie Georgitsis, who showed properties to her father for a different episode, had no idea how tiring it would be until she found herself involved in 40 hours of filming for what amounts to less than 25 minutes of programming. She found herself having to say the same things over and over, while the camera crew shot her conversations with her father from different angles, and had to be careful not to tip off viewers to which property was chosen.

Why can’t it be more real than it is? Here’s three good reasons: One, it’s a TV show and it’s meant to be entertaining. If it turned out that the buyers had bad credit and couldn’t close on a home, there’d be no happy ending and no “after” shot showing the new homeowners in their abode.

Two, sellers – and homeowners associations – have to agree to the filming and some don’t want to be bothered or don’t want to deal with the legal ramifications if a crew member gets hurt during filming. And three, if the buyers and the real estate agent are totally unlikable and mumble, do you want to watch them buy a house?
Rojas doesn’t think so.

“‘House Hunters’ is house candy,” Rojas said. “It’s not realistic. It’s directed. You don’t learn anything about buying. You learn about real estate values. You learn about how houses look.”

Despite all that, agents who’ve done it say they still watch the show, and they’d go back on it again. After all, it’s great marketing exposure, particularly because programs are repeated.

“It’s totally fake, but does anybody think reality TV is real? It’s all canned, but it’s fun to watch,” said real estate agent Karl Vogel, who also was featured in a recent episode helping a Boston native find a home in Chicago. “Who can say they don’t like to be on television, except you look fat?”

The Schnakenbergs, who’d never before seen the show, already plan to capitalize on their upcoming 30 minutes of fame when it comes time to sell their condo. “Listing it ‘as seen on HGTV’ couldn’t hurt us,” Kurt Schnakenberg said. “I’m not sure if it will get us more money, but it will help us get more showings.”

© 2009 Chicago Tribune, Mary Ellen Podmolik. Distributed by McClatchy-Tribune News Service.

Posted by Marcos Fullana on December 11th, 2009 11:53 AMPost a Comment (0)

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Live-in stagers maintain properties for absentee owners

December 11th, 2009 11:53 AM

The three-bedroom waterfront estate in Fort Lauderdale normally would rent for about $5,000 a month. But Angela Genereux gets to live there for roughly a third of the cost.

The tradeoff is she has to keep the place in show condition – no dirty dishes or wild color schemes, please – and move out when the place sells.

That’s the deal she struck with Showhomes, a home management and staging company that opened a Fort Lauderdale franchise last summer. The Nashville, Tenn.-based company works with owners of vacant residential properties and their real estate agents, providing live-in managers who make the homes more appealing to potential buyers.

Managers, or stagers, typically bring their own furniture and agree to have the homes ready for showing on 30 minutes’ notice. In exchange, they get reduced housing costs.

“A big part of it is psychology,” said Don Vanderhoef, owner of Showhomes’ Fort Lauderdale office. “Buyers see food in the refrigerator, clothes in the closet. They see all the signs of life of a regular home.”

The housing bust has left millions of vacant homes in its wake nationwide during the past four years. Some homes become unmaintained eyesores, with overgrown lawns and swimming pools full of green water. They also can attract squatters and crime, hurting nearby property values.

“Vacant homes are a prime target for vandals,” said Gerry Schilian, a Boca Raton, Fla., lawyer who handles foreclosure cases. “Any way you can keep these homes intact preserves a community.”

Still, some real estate agents are skeptical about the value of Showhomes’ approach.

There’s no guarantee the managers will maintain the homes properly, said Bob Melzer, an agent in Boynton Beach. There also could be legal issues if they didn’t want to leave when the homes are sold.

“It sounds like a clever idea, but then you’ve got to make it work,” Melzer said.
Vanderhoef insists it does work. Managers sign contracts and undergo thorough background checks. Only once in the 24-year history of the company has there been a problem with a manager, he said.

Showhomes prefers to list upscale homes – those that are priced at $500,000 or above – but will consider lower-priced homes. Vanderhoef said properties in the program tend to sell faster and for more money than other vacant listings.

The company’s eight Florida offices have more than 100 staged homes for sale. The start-up Fort Lauderdale office has two so far. Small firms tend to offer similar services in individual markets, Vanderhoef said, but he isn’t aware of a competitor with a national presence.

Showhomes says it has staged about 60 homes statewide this year that sold for an average of $816,000. The homes were on the market for an average of 135 days after staging. High-end homes can take more than a year to sell.

Homeowners – including individuals, builders and lenders – pay Showhomes an upfront fee that ranges from $750 to $1,500 for a 3,000-square-foot property, Vanderhoef said. They continue to pay the mortgage, insurance and taxes while the property is listed for sale. The company covers normal operating expenses, such as utilities, and minor maintenance costs.

Once the home sells, the owner pays a “success” fee, up to 1 percent of the home’s list price. If the property doesn’t sell, Showhomes pockets only the upfront money.

The Fort Lauderdale home Genereux is renting went to contract Nov. 12, less than two weeks after she moved in. Vanderhoef said the home is selling for close to the $599,000 list price.

Genereux will have to find a new place later this month, but she said she doesn’t mind such a transient lifestyle.

“You get to live in luxury on a smaller budget,” she said.

Copyright © 2009 Sun Sentinel, Paul Owers. Distributed by McClatchy-Tribune News Service.

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Good: Floridians continue to get sales and property tax breaks. Bad: a tax on fund managers could hurt REIT investing.

December 11th, 2009 11:52 AM

The House voted Wednesday to extend $31 billion in popular tax breaks, including an income tax deduction for sales and property taxes, to be financed with a tax increase on investment fund managers and a crackdown on international tax cheats.

The 45 tax deductions and credits for businesses and individuals are scheduled to expire at year’s end. The House voted 241-181 to extend them for a year, with only two Republicans voting in favor. The bill now goes to the Senate, which has rejected the tax increase on investment managers in the past.

The tax breaks include a sales tax deduction that mainly helps people in the nine states without local income taxes, a property tax deduction for people who don’t itemize and lucrative credits that help businesses finance research and development. The nine states without a state income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming.

The tax breaks are supported by Democrats and Republicans alike and are routinely extended each year, but there are big disagreements over the tax increases that would pay for them. The dispute, combined with the Senate’s prolonged debate on health care, makes it unclear whether the tax package will be enacted this year.

Lawmakers could retroactively pass the package early next year, but that would make tax planning difficult.

The House bill would raise $24.6 billion over the next decade from the tax increase on investment fund managers. It would affect hedge fund and private equity managers, as well as the more than 1.2 million real estate investment partnerships, according to the Real Estate Roundtable.

The House bill would raise an additional $7.7 billion from a crackdown on international tax cheats, an issue the Internal Revenue Service and the Obama administration have embraced.

Investment managers typically get a fee to manage funds or assets. They also get a share of the profits earned for investors above a certain level. Under current law, the profit-sharing fees, called carried interest, are taxed as capital gains, with a top rate of 15 percent. The House bill would tax the fees as regular income, with a top tax rate of 35 percent, scheduled to rise to 39.6 percent in 2011.

President Barack Obama supports the tax package, including the tax increase on investment managers and the crackdown on international tax havens.

Democrats argued in favor of the tax increase, saying Wall Street financiers shouldn’t be taxed at a lower rate than workers making less money.

“Those who invest their own money will continue to receive capital gains tax treatment,” said Rep. Sander Levin, D-Mich. “Those who manage other people’s money will have to pay ordinary income tax, like everybody else who performs services.”

The two Republicans who voted in favor of the bill were Rep. Anh “Joseph” Cao of Louisiana and Rep. Walter Jones of North Carolina.

Most Republicans argued that the tax increase would reach far beyond Wall Street, hitting real estate investment funds across the country. Instead, Republicans said, the tax breaks should be financed by federal borrowing, increasing the budget deficit.

“It is nothing short of a new tax on the very investments needed to start a new business and create economic growth in this country,” said Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee.

Investment groups argued that the tax on fund managers would discourage investment.

“Raising taxes on growth investments by private equity, real estate and many other partnerships just doesn’t make sense, particularly in this time of fragile economic recovery and continuing joblessness,” said Douglas Lowenstein, president of the Private Equity Council.

A coalition of real estate organizations argued that the tax increase would hurt real estate partnerships, further eroding property values just as they are starting to rebound.

“Why would you want to put a $24.6 billion tax increase on this industry now, especially when it is having all these problems?” said David Pearce, vice president and counsel of the Real Estate Roundtable.

The crackdown on tax havens would impose new reporting requirements on foreign financial institutions doing business in the United States and on American advisers who help U.S. residents make investments overseas. Foreign firms that don’t comply would be hit with a 30 percent withholding tax on income from their U.S. assets.

Lawmakers have been working for years on proposals to stop tax cheats from hiding assets overseas, and the Obama administration has pushed the issue as well.

Rep. Richard Neal, D-Mass., said tax cheats have a patriotic duty to come clean.

“I think that asking tax evaders to pay their fair share for the national defense is not an unreasonable request,” said Neal, a top Democrat on the Ways and Means Committee. The bill is H.R. 4213.

Copyright © 2009 The Associated Press, Stephen Ohlemacher, Associated Press writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Posted by Marcos Fullana on December 11th, 2009 11:52 AMPost a Comment (0)

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Gov. Crist applauds Sunshine State’s increasing home sales

December 11th, 2009 11:51 AM

As part of his focus on strengthening Florida’s economy, Gov. Charlie Crist met with Florida Realtors Wednesday at the capital to discuss the state’s housing market. The governor applauded the contributions of the state’s Realtors on the consistent increase in home sales over the last year, and encouraged Realtors to continue telling homebuyers about the extended federal tax credit for buyers made available through the Worker, Homeownership, and Business Assistance Act of 2009.

“There are great opportunities right now for Floridians and newcomers to Florida to take advantage of tax breaks, bargain prices and beautiful Florida real estate,” said Gov. Crist. “I am encouraged by the continuing rise in home sales.” During the roundtable discussion, the governor emphasized his continued commitment to reducing the tax burden on the state’s homeowners and business property owners.

Roundtable participants included 2009 Florida Realtors President Cynthia Shelton of Lake Mary and President-Elect Wendell Davis of Jacksonville. Florida Real Estate Commission Chair Roger Enzor of Pensacola also joined other participants from Jupiter, Fort Lauderdale, Orlando, Ocala, Sarasota, St. Petersburg and Tallahassee.

“We’re privileged here in Florida to have a governor who is always willing to meet with everyday citizens and learn directly from them what’s important,” said 2009 Florida Realtors President Cynthia Shelton. “He is a true friend to all of us who call Florida home, and he believes — as we do — that issues of concern to Realtors are important to the quality of life we all enjoy and want to preserve in the Sunshine State.”

According to the latest housing data from Florida Realtors, existing single-family home sales in Florida have consistently increased over the last 14 months. Statewide existing home sales were up 26 percent in October 2009 compared to the previous October, while October’s statewide existing condo sales rose 33 percent compared to October 2008.

The Worker, Homeownership and Business Assistance Act of 2009

In effect since Nov. 6, 2009, the federal Worker, Homeownership and Business Assistance Act of 2009 extends the first-time homebuyer credit five months and expands the eligibility requirements to existing homeowners. The law extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to close on the home purchase.

The maximum credit amount remains at $8,000 for a first-time homebuyer – that is, a buyer who has not owned a primary residence during the three years prior to the purchase. Plus, many existing homeowners may qualify for a tax credit of up to $6,500 on a home purchase.

“Florida Realtors appreciated the chance to apprise Gov. Crist of the positive momentum in the state’s housing market,” says John Sebree, vice president of public policy for Florida Realtors. “Real estate is a vital component for the state’s economy, and Realtors are on the frontlines when it comes to helping residents and business owners benefit from some great opportunities in the current marketplace.

“Now, more than ever, it’s important to preserve the state’s housing trust funds and to increase their funding, as more citizens than ever can realize their dream of homeownership and find an affordable Florida home.”

© 2009 Florida Realtors

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Foreclosure filings fall 8% in November

December 11th, 2009 11:50 AM

The number of homeowners on the brink of foreclosure fell in November, the fourth straight monthly decline, as mortgage companies evaluated whether borrowers were eligible for help.

Nearly 307,000 households, or one in every 417 homes, received a foreclosure-related notice in November, down 8 percent from a month earlier, RealtyTrac Inc. said Thursday. Banks repossessed about 77,000 homes last month, down slightly from October.

Millions of borrowers are still being evaluated for the Obama administration’s foreclosure prevention effort. States are also trying to delay the foreclosure process, temporarily lowering foreclosure numbers.

But the foreclosure crisis is likely to get worse before it gets better.

“We don’t really believe the underlying problems have been resolved,” said Rick Sharga, senior vice president at the Irvine, Calif.-based foreclosure listing service. Many borrowers, he said, “simply aren’t going to qualify” for help.

Foreclosure filings were still up 18 percent from a year ago, and a new wave is expected next year as unemployment remains high and borrowers fall out of loan modification programs.

Nevada posted the nation’s highest foreclosure rate, followed by Florida, California, Arizona and Idaho. Rounding out the top 10 were Michigan, Illinois, Utah, Maryland and New Jersey.

Among cities, Merced, Calif. had the highest rate, with one in 83 homes receiving a foreclosure filing. It was followed by fellow California cities Stockton and Modesto, and Cape-Coral-Fort Myers, Fla.

Las Vegas, which had been No. 1 on that list for four-straight months, fell to No. 5. Nevada recently adopted a program that requires mediation before banks can seize a property.

Nationwide, a report Wednesday showed only about 10,000 homeowners received permanent loan modifications this fall under the Obama administration’s mortgage relief plan, more evidence of serious failings in the government’s effort.

Elizabeth Warren, chair of a watchdog panel, told reporters that the program is “not working” and that it had failed to make a dent in the record level of foreclosures. More than 14 percent of homeowners with a mortgage are either late on their payments or in foreclosure, and that number is expected to keep rising as unemployment remains stubbornly high.

The Treasury Department is expected to release updated figures Thursday, but data through October showed that fewer than 5 percent of homeowners who completed the trial periods had their mortgage payments permanently lowered to more affordable levels.

Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete the required paperwork, including proof of income and a hardship letter.

Copyright © 2009 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP Business Writer Daniel Wagner contributed to this report.

Posted by Marcos Fullana on December 11th, 2009 11:50 AMPost a Comment (0)

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Short sales: Playing by the new rules

December 9th, 2009 12:43 PM

The U.S. Treasury hopes to speed transactions under its new short sale rules, but details count, and Realtors should understand the process if they hope to avoid delays. While the new rules become effective no later than April 5, 2010, lenders have been encouraged to make them official as soon as possible.

The new rules, released Nov. 30, 2009, as the Home Affordable Foreclosure Alternatives Program (HAFA), provide financial incentives to spark short sale or deed-in-lieu (DIL) closings. The change was made to grease the wheels of a short sale transaction, giving potential buyers a shorter wait time from contract signing to lender approval of the contract. It also should make a short sale more attractive to buyers by reducing the number of problems.

The rules do not necessarily simplify the amount or complexity of short sale paperwork, however. The oversight doc, Supplemental Directive 09-09, devotes four pages out of 43 to the new short sale requirements. Real estate professionals working with short sales should review the Short Sale section of the Supplemental Directive (pages 5-9) and review the forms and letters in Exhibits A and B.

Supplemental Direction 09-09: https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf

© 2009 Florida Realtors®

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Condo rules could shut out buyers, hit builders

December 9th, 2009 12:41 PM

New lending rules for condominium buyers are already forcing some developers to change or scrap plans for new projects for fear too many buyers will be shut out.

On Monday, the Federal Housing Administration started limiting the number of buyers in condo buildings that can get loans insured by the agency. The rules also put restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals.

The tighter lending standards are designed to protect the financial health of the FHA. Roughly 18 percent of loans insured by the FHA are either delinquent or in foreclosure, and the agency’s financial cushion has dipped below the federal minimum.

But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures roughly one in four new loans today because buyers need only a 3.5 percent downpayment.

“It is a huge debacle for us,” said Rene Oehlerking, marketing director for Salt Lake City developer Garbett Homes.

The company has canceled a 300-unit condo project, spending $300,000 to redesign it into freestanding homes. Most of the builders’ homes and condos this year went to buyers with FHA loans.

Garbett’s condo project didn’t pencil out with the new FHA rule that allows only half of a condo building’s units to have FHA-backed loans, with some exceptions. That number falls to 30 percent in 2011.

Another new rule requires at least 30 percent of units in new buildings be pre-sold before the agency insures any loans. That number will rise to 50 percent in 2011.

Projects in Florida, where the condo market has been devastated, will require special approval before FHA-backed loans can be made.

“Many of our developers won’t be able to pursue condominium projects because the risk is too great that they won’t be able to sell the units,” said David Ledford, senior vice president for housing finance and land development at the National Association of Home Builders.

Government officials, however, say the rules are necessary to ensure consumers are purchasing units in viable buildings and to help ensure that defaults on condo projects don’t rise too high.

“We believe that we have a balanced policy that is flexible ... yet will help us manage and mitigate the risk,” said Joanne Kuczma, director of the FHA’s home mortgage insurance division.

While the rules could be tough for builders, they will protect consumers because lenders will be forced to be more careful about which projects they fund, said Richard Vetstein, a real estate lawyer in Framingham, Mass.

“On the whole, it’s a good thing,” he said. “Financially sound condominiums make better investments.”

During the housing boom, the FHA was not a big source of condo loans, and the agency had not updated its condominium rules since the mid-1990s. When the new rules were released earlier this year, the lending industry lobbied aggressively to persuade the agency to loosen them.

“We worked very closely with them,” said Tamara King, director of loan origination at the Mortgage Bankers Association. Now that the rules have been relaxed, she said, “for the most part we are in support of the direction that they’re going.”

Critics, however, say the industry’s influence on the process shows that the agency is all too willing to bend to pressure from powerful interest groups, and say the condo loans will be highly prone to default and foreclosure.

“Rather than stopping the foreclosure mess, we’re actually adding more foreclosures to the mix,” said Edward Pinto, a financial consultant and an FHA critic.

For buyers, the new rules cinch already tight mortgage financing. Earlier this year both Fannie Mae and Freddie Mac slapped tighter restrictions on condo loans.

The new FHA rules are “going to create substantial confusion and turmoil,” for mortgage companies that make FHA loans, said Jack McCabe, a real estate researcher in Fort Lauderdale, Fla. “They have to be pulling their hair out right now.”

Posted by Marcos Fullana on December 9th, 2009 12:41 PMPost a Comment (0)

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Buyer tax credit effective but not available

December 8th, 2009 12:36 PM

With President Obama’s signature on Nov. 6, 2009, the first-time homebuyer tax credit was extended, and some move-up buyers became eligible for up to $6,500 starting on Dec. 1, 2009.

However, the new law changed the way a home sale must be documented to the Internal Revenue Service (IRS), including additional back-up information to minimize the chance of fraud. And that documentation change became effective immediately when the bill was signed.

But that new form is not yet available.

The homebuyer tax credit is claimed using IRS Form 5405, and that won’t change under the new program; however, Form 5405 must be revised to adhere to rules in the law signed Nov. 6.

Currently, the IRS has only the old version of Form 5405 on its website – the one that applies to sales that took place Nov 6, 2009, or earlier. The revised Form 5405 applicable to sales on Nov. 7, 2009, and later, will not be on the IRS website, according to IRS officials, until late December.

Buyers who close after Nov. 6 and use the old claim form may have trouble collecting their tax credit quickly.

For more information on the tax credit and Form 5405, visit the IRS website.

© 2009 Florida Realtors®

Posted by Marcos Fullana on December 8th, 2009 12:36 PMPost a Comment (0)

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Cities with the most overpriced properties

December 8th, 2009 12:35 PM

Despite having no luck selling their properties, homeowners in some parts of the country have clung tenaciously to their notions of the value of their homes.

Forbes magazine ranked markets it considered the most overpriced based on the ratio of the median initial list prices compared to the median list prices at the time the properties actually sold. It also factored in how long the properties stay on the market.

In addition, the magazine considered expert forecasts of price increases in the areas, which could be what encourages homeowners to price high.

The top 10 areas where Forbes found the most over-priced properties were:

1. Orlando
2. Miami-Fort Lauderdale-Pompano Beach
3. Jacksonville, Fla.
4. Baltimore-Towson
5. Chicago-Naperville-Joliet
6. San Antonio, Texas
7. Denver-Aurora
8. Tampa-St. Petersburg-Clearwater
9. Indianapolis-Carmel
10. Austin-Round Rock

Source: Forbes, Francesca Levy (12/03/2009)

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Posted by Marcos Fullana on December 8th, 2009 12:35 PMPost a Comment (0)

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