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New rules set by Freddie Mac April 15, 2007

Posted by Jay Medina in News and Information.
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Beginning in September, Freddie Mac will change its policies regarding the purchase of subprime adjustable-rate mortgages. From that point, loans with little down and very small payments up-front will undergo much tougher guidelines. It will not buy subprime loans unless the borrower is qualified to pay for the loan at its fully-indexed and fully-amortized rate, not merely a short-term, low-ball rate.

Also, there will be stronger required proof of financial capacity. For most borrowers this will mean showing tax returns and W-2 forms, and they will require lenders to collect money each month to assure that property taxes and insurance are being paid.


New mortgage-related regulatory bill approved April 15, 2007

Posted by Jay Medina in News and Information.
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The new Regulator Reform Bill legislation that would overhaul the oversight of government-sponsored enterprises (GSEs) – Fannie Mae, Freddie Mac and the Federal Home Loan Banks – has been approved by a vote of 45 to 19 by the House of Representative’s Financial Services Committee.

The law would create a new, independent regulator, the Federal Housing Finance Agency, to regulate the GSEs. Also, the bill creates an Affordable Housing Fund to support rental housing and homeownership for low-income families by using contributions from Fannie Mae and Freddie Mac, based on their total outstanding mortgages annually. The program would continue for five years.

Growing opportunities for real estate investors April 15, 2007

Posted by Jay Medina in News and Information.

As most people know, real estate is a cyclical industry. Last year’s downturn in sales activity has motivated some real estate investors to turn away from more property acquisitions. However, some astute analysts say this is a very opportune time to invest, or start a real estate investment program.

“Owning some income-producing real estate, in addition to having a solid portfolio of other investments, can be a very good thing,” said Dave Ramsey, author of the book, “The total Money Makeover.” For investors willing to invest for the long term, owning properties can be a path to financial freedom for many, he noted.

Single-family homes make very good first properties because they don’t entail the same hassles and headaches association with multi-unit apartment buildings. Homes can be easily turned into rentals and are also much more affordable than, say, multi-family units like duplexes and triplexes, according to Robert Sheehan, economist for the National Apartment Association.

Home sellers are now more realistic with pricing, so the current housing market offers a lot more choices for buyers who get more for their money. That translates to more and better opportunities for investors.

Mortgage rates remain low April 15, 2007

Posted by Jay Medina in News and Information.
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Mortgage rates are remaining at near historic lows, keeping the “window of opportunity” open for home buyers and homeowners who want to refinance their mortgage. During the last week in March, the average rate for a 30-year, fixed-rate mortgage was 6.16 percent with 0.4 points (fees), according to Freddie Mac, a major government-sponsored buyer of existing mortgages. The average rate for 15-year fixed-rate loans is 5.86 percent.

“Recent data has been sending conflicting signals about the direction of the housing market,” said Frank Nothaft, Freddie Mac’s chief economist. “The rise in existing home sales in February to a 6.69 million unit pace, the highest level since last April, offered some hope of firming in housing demand. In contrast, February’s new home sales fell unexpectedly to 848,000 units, the slowest pace since June 2000, suggesting that more time will be needed before a housing recovery takes place.

“Despite concerns about possible spillovers from troubles in the subprime market, rates on 30-year fixed-rate mortgages remain stable. The low rates support affordability and aid in the ultimate recovery of the housing market.”

Existing Home Sales Rise 3.9 Percent March 23, 2007

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Friday March 23, 6:19 PM EDT

WASHINGTON (AP) — Sales of existing homes rose in February by the largest amount in nearly three years, but worsening troubles in subprime mortgages were viewed as a roadblock to a full-fledged rebound. The National Association of Realtors reported Friday that existing home sales climbed 3.9 percent last month, pushed up by a milder-than-normal winter that boosted sales in areas of the country such as the Northeast. It was the biggest one-month gain since March 2004 and left sales at an annual rate of 6.69 million units, a pace that was still 3.6 percent below a year ago.On Wall Street, the Dow Jones industrial average rose by 19.87 points to close at 12,481.01 as investors were encouraged by the better-than-expected showing on home sales.

Even with the improvement in sales, the median price of a home kept falling, dropping to $212,800 in February, down 1.3 percent from a year earlier. It marked a record seventh straight decline in prices compared with the same month a year earlier.

The price weakness was a far cry from the double-digit price increases recorded during housing’s boom years.

After five years in which sales set new records, sales of existing homes dropped by 8.5 percent last year, the biggest annual decline in 17 years.

Many economists believe housing sales will fall again this year as the housing industry continues to work through an adjustment following a boom fueled by the lowest mortgage rates in four decades and speculative frenzy as investors rushed to cash in on soaring real estate prices.

Economists are now concerned that rising defaults in subprime mortgages, those offered to borrowers with weak credit, will trigger tighter lending standards that will make it harder for new buyers to qualify for loans. As borrowers default on their mortgages, more properties will be dumped onto an already glutted market.

“The subprime mortgage market has taken a beating because of an unexpected surge in defaults,” said Patrick Newport, an economist at Global Insight. He predicted home prices will fall in 2007, which would be the first decline on an annual basis on record.

By region of the country, existing home sales were up 14.2 percent in the Northeast, a gain attributed in large part to warmer-than-normal weather.

Sales also were up in the Midwest, a gain of 3.9 percent, and 1.6 percent in the South. Sales were unchanged in the West, which analysts blamed in part on a reluctance by sellers there to cut prices to attract buyers.

KB Home, one of the nation’s largest home builders, reported Thursday that its profits for the first quarter had plunged and it warned of continuing pressure on profits for the rest of the year because of such factors as near-record levels of unsold homes and lenders tightening standards.

The Realtors’ report said the inventory of unsold homes rose to 3.75 million units, up by 5.9 percent from the January level.

Senate Banking Committee members at a hearing on Thursday criticized the Federal Reserve for not doing more to regulate risky lending practices during the housing boom. Roger Cole, the Fed’s director of banking supervision, testified that “given what we know now, yes, we could have done more sooner.”

The troubles with subprime lending companies helped to trigger a 416-point drop in the Dow Jones industrial average on Feb. 27 as financial markets worried that housing problems could become severe enough to push the country into a recession.

This week, the Federal Reserve triggered an upturn on Wall Street by signaling that it would consider cutting interest rates if necessary to rescue a faltering economy.

Newport said he believed housing would trim about 1.1 percentage points from overall economic growth this year, a slightly bigger impact than Global Insight had been forecasting a month ago.

David Lereah, the Realtors chief economist, said demand for homes could be cut by 150,000 to 200,000 annually over this year and 2008 because of the lending troubles.

“Our view is that the tightening in the subprime market will have a negative impact on home sales,” Lereah said. “It probably won’t postpone the recovery (in housing) but it will slow it.”

Even with subprime market problems, Lereah said he believed the upturn in sales will be sustainable and the data will show that housing hit bottom in September last year and is now in a period of rebounding.


Condos are alive and healthy March 19, 2007

Posted by Jay Medina in News and Information.
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“Reports of the death of the condominium market are greatly exaggerated,” said Bill Donges, CEO of the Lane Company, a builder of condos at points nationwide. “Despite the current slowdown in sales in some markets, condos won’t go away because people like them. “Today’s buyers want to live close to work, transportation, entertainment and retail outlets. A great location, a distinct product and a good price are critical to a condominium community’s success,” he said.

At the height of the housing peak in 2005, condos accounted for nearly half of the 350,000 or so multifamily construction starts produced annually. Two years earlier the condo share was about 20 percent. Some of the intense demand for condos over the past three years was driven by speculators in the market, and multifamily developers acknowledge it will take some time for the excess inventory of unsold units to burn off, especially in overbuilt markets on and near both coasts.

As condo construction retreats, the next wave of multifamily development activity is likely to be in rental apartments, according to a report from the National Association of Home Builders. That will be especially prevalent in markets where the rental supply is particularly tight. Over the past three years, a significant number of rental units have been converted into condo units. Construction and land cost are up, and that concerns all apartment developers, but especially those trying to build units affordable to working families.

Key features that impact value March 19, 2007

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An interesting study was recently concluded by the National Association of Home Builders that identifies how various features in a home impacts the property’s value. The association’s Housing Economics Department created a house price estimator, based on data from the American Housing Survey, a nationally representative survey of about 60,000 housing units conducted by the U.S. Census Bureau in odd-numbered years.

Waterfront locations have the most significant positive effect on home values, the study determined. This applies to homes in every census region and in every type of setting. For example, being on the waterfront raises the value of a standard home in a Midwestern suburb by an average of 43 percent, and in non-metro areas in the South by 44 percent. In the central city of a large California metro areas, being on or near water raises the value of a home by 41 percent.

The characteristic with the largest negative effect on home values is the presence of abandoned buildings within one-half block or about 300 feet of the home. Bothersome trash, industrial buildings, inadequate shopping and bad roads also have a significant negative effect on the price of a home. For more information about the house price estimator, check out the model online at: http://www.nahb.org/estimator/.

Home values are “correcting” March 19, 2007

Posted by Jay Medina in News and Information.
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Nationally, home values are declining slightly for the first time in years. Overall, the values have declined about half of one percent over the past year, as measured by the Zindex home value indicator that measures the value of all homes in an area, not just those that recently sold.

Of course, home values fluctuate widely from region to region, even in local markets. According to a report in Business 2.0 magazine, the six metro areas that are most likely to see appreciable home value increases over the next five years are: Panama City, Florida (72 percent projected gain over five years); Vero Beach, Florida (63 percent); Bridgeport, Connecticut (63 percent); Lakeland, Florida (59 percent); McAllen, Texas (57 percent); and San Luis Obispo, California (40 percent).

Reasons for projected gains: Panama City has a new airport to be built next year that will open the area to new vacationers and residents. Vero Beach has a rising demand for housing along with moderate property taxes and very nice weather – factors that always drive growth. Bridgeport is in Fairfield County, an area of staggering home prices. This city offers somewhat lower prices, making it increasingly appealing to New York City commuters. Lakeland is in an active growth area, only 30 minutes from Tampa via Interstate 4, but prices are much lower than in Tampa. McAllen is experiencing a Hispanic baby boom and rising incomes. These factors are driving demand for bigger homes. San Luis Obispo currently offers a good inventory of homes at lower prices than other mid-California markets. And it’s in the center of a rapidly developing wine industry.

Tough but potentially positive market for mortgage industry March 19, 2007

Posted by Jay Medina in News and Information.
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It’s tough to survive in today’s mortgage lending industry. Many originators, particularly those that have been specializing in the subprime niche of the market, are folding their tents and silently leaving the business. But there’s a bright side of that development for the mortgage industry and consumers.

“We’re seeing 40 or 50 subprime companies a day throughout the country going down in one form or another,” said Angelo Mozilo, chief executive of Countrywide Financial. About two dozen large subprime mortgage lenders nationwide have gone under or stopped making loans, according to Implode-O-Meter, a Web site that tracks closures in the subprime lending industry.

The failure of so many subprime lenders is symptomatic of a larger trend – Wall Street’s loss of appetite for risk, the site reported. With so many mortgages going bad, investment banks have quit backing subprime mortgages and are actually kicking bad loans back to some originating lenders, forcing some of them to close their business. One of the first mortgage products expected to disappear are zero-down mortgages, sometimes known as 80-20s. These are often structured without verification of income to borrowers with impaired credit ratings.

Many loan originators are going out of business during the first quarter of this year, it was reported by the “For Benefit of the Originator” (FBO) association. This could be a positive development for the business generally, they point out. “The skilled mortgage pro does not lose when the market gets worse because the unreliable lenders tend to go out of business or are acquired by others, and the unreliable loan officers go back to doing whatever they were doing before,” it was noted in a FBO report.

“The slowing market fits well in a trend of expansion and consolidation. The market expands until it’s white hot, then cools and consolidates before the next expansion period. It’s in this period that mortgage loan originators can begin to exert influence in a way they have never been able to before. If they play it smart, today’s slow-down can be the catalyst for a new glory day to come for the loan originator.”

New mortgage-related legislation proposed March 19, 2007

Posted by Jay Medina in News and Information.
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Newly proposed federal legislation would put the brakes on the growing trend of providing home loans to mortgage applicants using an Individual Taxpayer Identification Number instead of a Social Security number. ITINs are normally issued by the Internal Revenue Service to help immigrant workers who don’t qualify for a Social Security number to report their income and pay federal taxes.

An increasing number of banks and other lenders have been offering home mortgages to undocumented immigrants using ITINs. The proposed bill, introduced by Rep. John Doolittle, would amend the Truth in Lending Act to make ITIN mortgage lending illegal.