Three States Move to Ban Foreclosure Sales From Appraisal Values
03/30/2011
By: Joy Leopold
With foreclosure sales steadily rising, four states are concerned that the use of the foreclosure sale prices in appraisals of neighboring homes is distorting the market.
Legislators in Illinois, Nevada, and Missouri have all proposed separate bills that would exclude or restrict foreclosure sales from being used as comparisons to determine the value of homes around them.
Maryland had proposed a similar bill, but withdrew the legislation on Tuesday.
Industry participants have expressed reservation at the idea of barring distressed sales from consideration when appraising properties, saying such actions would cause homes to be appraised for more than they are really worth.
According to the Appraisal Institute, “Elimination of foreclosures and short sales as comparables would result in an artificial market and would mislead lenders as to the true value of their mortgage collateral.”
Furthermore, the institute notes that under the Uniform Standards of Professional Appraisal Practice, all federally related transactions are required to consider all sales for appraisals, including short sales and other distressed sales. Most residential lending transactions fall into this category.
“In some markets, there are so many distressed sales that they are the market and must be considered. When there is a glut of distress sales in the marketplace, and those properties are truly comparable to the subject, it would be misleading not to use them as part, or in some cases all, of the basis for a value conclusion,” a representative of the institute said in an e-mail.
From: http://ping.fm/dPOZQ
Thursday, March 31, 2011
Tuesday, March 29, 2011
S&P Case-Shiller Index Records Another Drop in Home Prices
S&P Case-Shiller Index Records Another Drop in Home Prices
03/29/2011 By: Carrie Bay
Data released this morning by Standard & Poor’s show that home prices are continuing to trend downwards.
The 10-city and 20-city composites of the S&P/Case-Shiller home price index fell 0.9 percent and 1.0 percent, respectively, in January 2011 when compared to the previous month.
The 10-city composite is down 2.0 percent from its January 2010 level, while the 20-city reading dropped 3.1 percent on a year-over-year basis.
San Diego and Washington D.C. were the only two markets to record positive year-over-year changes. However, San Diego was up a scant 0.1 percent, while Washington D.C. posted a healthier 3.6 percent annual gain.
The same 11 cities that had posted recent index level lows in December 2010, posted new lows in January.
“Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future” said David M. Blitzer, chairman of the index committee at Standard & Poor’s.
“These data confirm what we have seen with recent housing starts and sales reports,” Blitzer continued. “The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing.”
Blitzer explained that S&P defines a double-dip for home prices as seeing the 10- and 20-city composites set new post-peak lows.
He noted that the 10-city composite is still 2.8 percent higher and the 20-city is 1.1 percent above their respective April 2009 lows, but he warns that both series have moved closer to a confirmed double-dip for six consecutive months.
“At this point we are not too far off, and that is what many analysts are seeing with sales, starts, and inventory data too,” Blitzer said.
From: http://ping.fm/SAYqb
03/29/2011 By: Carrie Bay
Data released this morning by Standard & Poor’s show that home prices are continuing to trend downwards.
The 10-city and 20-city composites of the S&P/Case-Shiller home price index fell 0.9 percent and 1.0 percent, respectively, in January 2011 when compared to the previous month.
The 10-city composite is down 2.0 percent from its January 2010 level, while the 20-city reading dropped 3.1 percent on a year-over-year basis.
San Diego and Washington D.C. were the only two markets to record positive year-over-year changes. However, San Diego was up a scant 0.1 percent, while Washington D.C. posted a healthier 3.6 percent annual gain.
The same 11 cities that had posted recent index level lows in December 2010, posted new lows in January.
“Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future” said David M. Blitzer, chairman of the index committee at Standard & Poor’s.
“These data confirm what we have seen with recent housing starts and sales reports,” Blitzer continued. “The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing.”
Blitzer explained that S&P defines a double-dip for home prices as seeing the 10- and 20-city composites set new post-peak lows.
He noted that the 10-city composite is still 2.8 percent higher and the 20-city is 1.1 percent above their respective April 2009 lows, but he warns that both series have moved closer to a confirmed double-dip for six consecutive months.
“At this point we are not too far off, and that is what many analysts are seeing with sales, starts, and inventory data too,” Blitzer said.
From: http://ping.fm/SAYqb
Sunday, March 27, 2011
Dallas-area foreclosures offer bargains, but few can take advantage | Dallas-Fort Worth Business News - News for Dallas, Texas - The Dallas Morning News
Dallas-area foreclosures offer bargains, but few can take advantage
By STEVE BROWN
Real Estate Editor
stevebrown@dallasnews.com
Published 25 March 2011 10:22 PM
Investors who buy homes at foreclosure auctions get a big price break. But not many are able to take advantage of the foreclosure deals.
During March, investors and individuals who acquired foreclosed homes on the courthouse steps paid less than 60 cents on the dollar, according to a Foreclosure Listing Service study of sales in 18 Texas counties.
But only about 6 percent of the foreclosures in this month’s sale were purchased by outside buyers. The rest were taken back by lenders, the Addison foreclosure tracking firm said.
Foreclosure Listing Service looked at home foreclosures in counties in North and Central Texas to come up with the statistics.
In March, 1,236 homes were sold at foreclosure auction in the four-county Dallas-Fort Worth area — only about a quarter of the total foreclosure filings made by lenders.
“Something occurred to prevent these postings from being auctioned on the day of the foreclosure sale,” Foreclosure Listing Service CEO George Roddy said Friday.
In most cases, the foreclosures are delayed while borrowers negotiate with their mortgage companies or because they arrange alternatives to the foreclosure.
When lenders do foreclose, only a small number of the homes sold at public auction wind up in the hands of third-party buyers, Roddy said.
“These buyers are typically investors; however, there are a number of folks out there simply looking for a good deal on a home for their family to live in,” he said.
It’s not practical for most buyers to get a house at a foreclosure auction because bidders must be able to pay the seller almost immediately.
Still, buyers who could purchase a foreclosure paid about 57 cents on the dollar, based on the tax appraisal for the real estate in 18 Texas counties, according to Foreclosure Listing Service’s study of the March foreclosures. The price was even lower in the D-FW area: 47 cents on the dollar in Dallas County and 49 cents in Tarrant.
Denton and Collin counties had the largest share of investment buyers.
“Today’s investors and buyers are getting a great bang for the buck at the foreclosure auctions,” Roddy said.
From: http://ping.fm/aZLHw
By STEVE BROWN
Real Estate Editor
stevebrown@dallasnews.com
Published 25 March 2011 10:22 PM
Investors who buy homes at foreclosure auctions get a big price break. But not many are able to take advantage of the foreclosure deals.
During March, investors and individuals who acquired foreclosed homes on the courthouse steps paid less than 60 cents on the dollar, according to a Foreclosure Listing Service study of sales in 18 Texas counties.
But only about 6 percent of the foreclosures in this month’s sale were purchased by outside buyers. The rest were taken back by lenders, the Addison foreclosure tracking firm said.
Foreclosure Listing Service looked at home foreclosures in counties in North and Central Texas to come up with the statistics.
In March, 1,236 homes were sold at foreclosure auction in the four-county Dallas-Fort Worth area — only about a quarter of the total foreclosure filings made by lenders.
“Something occurred to prevent these postings from being auctioned on the day of the foreclosure sale,” Foreclosure Listing Service CEO George Roddy said Friday.
In most cases, the foreclosures are delayed while borrowers negotiate with their mortgage companies or because they arrange alternatives to the foreclosure.
When lenders do foreclose, only a small number of the homes sold at public auction wind up in the hands of third-party buyers, Roddy said.
“These buyers are typically investors; however, there are a number of folks out there simply looking for a good deal on a home for their family to live in,” he said.
It’s not practical for most buyers to get a house at a foreclosure auction because bidders must be able to pay the seller almost immediately.
Still, buyers who could purchase a foreclosure paid about 57 cents on the dollar, based on the tax appraisal for the real estate in 18 Texas counties, according to Foreclosure Listing Service’s study of the March foreclosures. The price was even lower in the D-FW area: 47 cents on the dollar in Dallas County and 49 cents in Tarrant.
Denton and Collin counties had the largest share of investment buyers.
“Today’s investors and buyers are getting a great bang for the buck at the foreclosure auctions,” Roddy said.
From: http://ping.fm/aZLHw
No Mortgage Lenders in Jail, but a Borrower Lands There - NYTimes.com
In Prison for Taking a Liar LoanBy JOE NOCERA
Published: March 25, 2011
A few weeks ago, when the Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis.
Soon after that column ran, I received an e-mail from a man named Richard Engle, who informed me that I was wrong. There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. It was his 48-year-old son, Charlie.
On Valentine’s Day, the elder Mr. Engle said, his son had entered a minimum-security prison in Beaver, W.Va., to begin serving a 21-month sentence for mortgage fraud. He then proceeded to tell me the tale of how federal agents nabbed his son — a tale he backed up with reams of documents and records that suggest, if nothing else, that when the federal government is truly motivated, there is no mountain it won’t move to prosecute someone it wants to nail. And it was definitely motivated to nail Charlie Engle.
Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?
No. Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans.
“The Department of Justice has made prosecuting financial crimes, including mortgage fraud, a high priority,” said Neil H. MacBride, the United States attorney for the Eastern District of Virginia, in a statement. (Mr. MacBride, whose office prosecuted Mr. Engle, declined to be interviewed.)
Apparently, though, it’s only a high priority if the target is a borrower. Mr. Mozilo’s company made billions in profit, some of it on liar loans that he acknowledged at the time were likely to be fraudulent and which did untold damage to the economy. And he personally was paid hundreds of millions of dollars. Though he agreed last year to a $67.5 million fine to settle fraud charges brought by the Securities and Exchange Commission, it was a small fraction of what he earned. Otherwise, he walked. Thus does the Justice Department display its priorities in the aftermath of the crisis.
•
It’s not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. Although Mr. Engle took out the two stated-income loans, as liar loans are more formally called, in late 2005 and early 2006, it wasn’t until three years later that his troubles began.
As a young man, Mr. Engle had been a serious drug addict, but after he got clean, he became an ultra-marathoner, one of the best in the world. In the fall of 2006, he and two other ultra-marathoners took on an almost unimaginable challenge: they ran across the Sahara Desert, something that had never been done before. The run took 111 days, and was documented in a film financed by Matt Damon, who served as executive producer and narrator. Mr. Engle received $30,000 for his participation.
The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.)
Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly.
In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments.
After acknowledging that he had been speculating in real estate during the bubble to help support his running, he said, according to Mr. Nordlander’s grand jury testimony, “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.”
Mr. Engle added, “Everybody was doing it because it was simply the way it was done. That doesn’t make me proud of the fact that I am at least a small part of the problem.”
Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire.
•
Lying on a stated-income loan is, without question, a crime, and one ought not to excuse it even though, as Mr. Engle says, “everybody was doing it” — usually with the eager encouragement of their brokers. But the Engle case raises questions not just about the government’s priorities, but about something even more basic: did he even commit the crimes he is accused of?
Partly, I concede, Mr. Engle is easy to root for. He is a personable, upbeat man who has conquered some serious demons. Part of his Sahara expedition was aimed at raising money for a charity to help bring clean water to Africa. “Every experience in life has the ability to teach lessons if I am open to them,” he wrote on a blog as he prepared to enter prison. How can you not like someone like that?
But the more I looked into it, the more I came to believe that the case against him was seriously weak. No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.
Perhaps anticipating that problem, when Mr. Nordlander finally arrested Mr. Engle in May 2010, he claims to have elicited a stronger, better confession while Mr. Engle was handcuffed in the back seat of his car. Mr. Engle fervently denies this. This second supposed confession, however, was never captured on tape.
As for the loans themselves, on one of them Mr. Engle claimed an income of $15,000 a month. As it turns out, his total income in 2005, according to his accountant, was $180,000, which amounts to ... hmmm ...$15,000 a month, though of course Mr. Engle didn’t have the kind of job that generated monthly income. (In addition to real estate speculation, Mr. Engle gave motivational speeches and earned around $50,000 a year as a producer on the hit show “Extreme Makeover: Home Edition.”)
The monthly income listed on the second loan was $32,500, an obviously absurd amount, especially since the loan itself was for only $300,000. It was a refinance of a property Mr. Engle already owned, allowing him to pull out $80,000 of the $215,000 in equity he had in the property.
Mr. Engle claims that he never saw that $32,500 claim and never signed the papers. Indeed, a handwriting analysis conducted by the government raised the distinct possibility that Mr. Engle’s signature and his initials in several places in the mortgage documents had been forged. As it happens, Mr. Engle’s broker for that loan, John J. Hellman, recently pleaded guilty to mortgage fraud for playing fast and loose with a number of mortgage applications. Mr. Hellman testified in court that Mr. Engle had signed the mortgage application. Early this week, Mr. Hellman received a reduced sentence of 10 months, less than half of Mr. Engle’s sentence, in no small part because of his willingness to testify against Mr. Engle.
Even the jurors seemed confused about how to think about Mr. Engle’s supposed crime. When it came time to pronounce a verdict, the jury found him not guilty of providing false information to the bank, which would seem to be the only fraud he could possibly have committed. Yet it still found him guilty of mortgage fraud. “I think the prosecution convinced the jury that I was guilty of something but they weren’t sure what,” Mr. Engle wrote in an e-mail.
Like many people, Mr. Engle’s biggest mistake was believing that housing prices could only go up. When the market collapsed, Mr. Engle defaulted on the two properties, which of course is not a crime. Although his accountant tried to persuade the banks to do a complicated refinancing, they refused and foreclosed on the properties. Like many Americans, Mr. Engle wound up being punished by the market for his mistake, losing all his remaining equity along with the properties themselves. Thanks to the government, though, his punishment was far more severe than most.
At his sentencing, Mr. Engle told the judge: “I can say with confidence that I can turn negatives into positives. I have no doubt I will make the best of it.” With his inspiring prison blog, Running in Place: A Blog About Surviving Adversity, he has already begun to do that.
Even when he emerges from prison, though, his ordeal will not be over. As part of his sentence, Mr. Engle was ordered to pay $262,500 in restitution to the owner of his mortgages. And what institution might that be? You guessed it: Countrywide, now owned by Bank of America.
Angelo Mozilo ought to get a good chuckle out of that one.
From: http://ping.fm/KVVTS
Published: March 25, 2011
A few weeks ago, when the Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis.
Soon after that column ran, I received an e-mail from a man named Richard Engle, who informed me that I was wrong. There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. It was his 48-year-old son, Charlie.
On Valentine’s Day, the elder Mr. Engle said, his son had entered a minimum-security prison in Beaver, W.Va., to begin serving a 21-month sentence for mortgage fraud. He then proceeded to tell me the tale of how federal agents nabbed his son — a tale he backed up with reams of documents and records that suggest, if nothing else, that when the federal government is truly motivated, there is no mountain it won’t move to prosecute someone it wants to nail. And it was definitely motivated to nail Charlie Engle.
Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?
No. Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans.
“The Department of Justice has made prosecuting financial crimes, including mortgage fraud, a high priority,” said Neil H. MacBride, the United States attorney for the Eastern District of Virginia, in a statement. (Mr. MacBride, whose office prosecuted Mr. Engle, declined to be interviewed.)
Apparently, though, it’s only a high priority if the target is a borrower. Mr. Mozilo’s company made billions in profit, some of it on liar loans that he acknowledged at the time were likely to be fraudulent and which did untold damage to the economy. And he personally was paid hundreds of millions of dollars. Though he agreed last year to a $67.5 million fine to settle fraud charges brought by the Securities and Exchange Commission, it was a small fraction of what he earned. Otherwise, he walked. Thus does the Justice Department display its priorities in the aftermath of the crisis.
•
It’s not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. Although Mr. Engle took out the two stated-income loans, as liar loans are more formally called, in late 2005 and early 2006, it wasn’t until three years later that his troubles began.
As a young man, Mr. Engle had been a serious drug addict, but after he got clean, he became an ultra-marathoner, one of the best in the world. In the fall of 2006, he and two other ultra-marathoners took on an almost unimaginable challenge: they ran across the Sahara Desert, something that had never been done before. The run took 111 days, and was documented in a film financed by Matt Damon, who served as executive producer and narrator. Mr. Engle received $30,000 for his participation.
The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.)
Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly.
In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments.
After acknowledging that he had been speculating in real estate during the bubble to help support his running, he said, according to Mr. Nordlander’s grand jury testimony, “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.”
Mr. Engle added, “Everybody was doing it because it was simply the way it was done. That doesn’t make me proud of the fact that I am at least a small part of the problem.”
Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire.
•
Lying on a stated-income loan is, without question, a crime, and one ought not to excuse it even though, as Mr. Engle says, “everybody was doing it” — usually with the eager encouragement of their brokers. But the Engle case raises questions not just about the government’s priorities, but about something even more basic: did he even commit the crimes he is accused of?
Partly, I concede, Mr. Engle is easy to root for. He is a personable, upbeat man who has conquered some serious demons. Part of his Sahara expedition was aimed at raising money for a charity to help bring clean water to Africa. “Every experience in life has the ability to teach lessons if I am open to them,” he wrote on a blog as he prepared to enter prison. How can you not like someone like that?
But the more I looked into it, the more I came to believe that the case against him was seriously weak. No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.
Perhaps anticipating that problem, when Mr. Nordlander finally arrested Mr. Engle in May 2010, he claims to have elicited a stronger, better confession while Mr. Engle was handcuffed in the back seat of his car. Mr. Engle fervently denies this. This second supposed confession, however, was never captured on tape.
As for the loans themselves, on one of them Mr. Engle claimed an income of $15,000 a month. As it turns out, his total income in 2005, according to his accountant, was $180,000, which amounts to ... hmmm ...$15,000 a month, though of course Mr. Engle didn’t have the kind of job that generated monthly income. (In addition to real estate speculation, Mr. Engle gave motivational speeches and earned around $50,000 a year as a producer on the hit show “Extreme Makeover: Home Edition.”)
The monthly income listed on the second loan was $32,500, an obviously absurd amount, especially since the loan itself was for only $300,000. It was a refinance of a property Mr. Engle already owned, allowing him to pull out $80,000 of the $215,000 in equity he had in the property.
Mr. Engle claims that he never saw that $32,500 claim and never signed the papers. Indeed, a handwriting analysis conducted by the government raised the distinct possibility that Mr. Engle’s signature and his initials in several places in the mortgage documents had been forged. As it happens, Mr. Engle’s broker for that loan, John J. Hellman, recently pleaded guilty to mortgage fraud for playing fast and loose with a number of mortgage applications. Mr. Hellman testified in court that Mr. Engle had signed the mortgage application. Early this week, Mr. Hellman received a reduced sentence of 10 months, less than half of Mr. Engle’s sentence, in no small part because of his willingness to testify against Mr. Engle.
Even the jurors seemed confused about how to think about Mr. Engle’s supposed crime. When it came time to pronounce a verdict, the jury found him not guilty of providing false information to the bank, which would seem to be the only fraud he could possibly have committed. Yet it still found him guilty of mortgage fraud. “I think the prosecution convinced the jury that I was guilty of something but they weren’t sure what,” Mr. Engle wrote in an e-mail.
Like many people, Mr. Engle’s biggest mistake was believing that housing prices could only go up. When the market collapsed, Mr. Engle defaulted on the two properties, which of course is not a crime. Although his accountant tried to persuade the banks to do a complicated refinancing, they refused and foreclosed on the properties. Like many Americans, Mr. Engle wound up being punished by the market for his mistake, losing all his remaining equity along with the properties themselves. Thanks to the government, though, his punishment was far more severe than most.
At his sentencing, Mr. Engle told the judge: “I can say with confidence that I can turn negatives into positives. I have no doubt I will make the best of it.” With his inspiring prison blog, Running in Place: A Blog About Surviving Adversity, he has already begun to do that.
Even when he emerges from prison, though, his ordeal will not be over. As part of his sentence, Mr. Engle was ordered to pay $262,500 in restitution to the owner of his mortgages. And what institution might that be? You guessed it: Countrywide, now owned by Bank of America.
Angelo Mozilo ought to get a good chuckle out of that one.
From: http://ping.fm/KVVTS
Tuesday, March 22, 2011
Five Foreclosure Myths Debunked in New YouTube Videos - Freddie Mac
FREDDIE MAC - Five Foreclosure Myths Debunked in New YouTube Videos
By SVP Dwight Robinson on March 21, 2011
It's often hard to separate fact from fiction when looking at all the information about foreclosures that's available today. That's why this week, we launched a series of videos on the Freddie Mac YouTube Channel designed to dispel five of the most common myths about foreclosure.
Each video addresses one of these foreclosure-related myths:
If my house is foreclosed, I can never buy a house again – the foreclosure will stay on my record forever.
I should stop paying my mortgage so I can get assistance with my mortgage payments.
If I'm late on my monthly payments, I'll lose my house.
I am getting many offers for help from a variety of people. They are probably all scams.
My lender is not responding to my inquiries, so I should just give up and face foreclosure.
The videos – each one less than two minutes – feature additional facts and helpful information gathered from our Get the Facts on Homeownership education and outreach materials used by housing counselors and other mortgage professionals. We've had success before in bringing information directly to consumers through our YouTube channel:
[http://ping.fm/hPbWN]
– and this time around, we're also encouraging mortgage professionals to use these new videos with their clients. Our goal here is simple: to help separate foreclosure myth from fact and provide individuals and families with good, credible information they can use to make informed decisions about their homes and their futures.
From: http://ping.fm/dcu8Y
By SVP Dwight Robinson on March 21, 2011
It's often hard to separate fact from fiction when looking at all the information about foreclosures that's available today. That's why this week, we launched a series of videos on the Freddie Mac YouTube Channel designed to dispel five of the most common myths about foreclosure.
Each video addresses one of these foreclosure-related myths:
If my house is foreclosed, I can never buy a house again – the foreclosure will stay on my record forever.
I should stop paying my mortgage so I can get assistance with my mortgage payments.
If I'm late on my monthly payments, I'll lose my house.
I am getting many offers for help from a variety of people. They are probably all scams.
My lender is not responding to my inquiries, so I should just give up and face foreclosure.
The videos – each one less than two minutes – feature additional facts and helpful information gathered from our Get the Facts on Homeownership education and outreach materials used by housing counselors and other mortgage professionals. We've had success before in bringing information directly to consumers through our YouTube channel:
[http://ping.fm/hPbWN]
– and this time around, we're also encouraging mortgage professionals to use these new videos with their clients. Our goal here is simple: to help separate foreclosure myth from fact and provide individuals and families with good, credible information they can use to make informed decisions about their homes and their futures.
From: http://ping.fm/dcu8Y
The Second Coming Of Housing Horrors - Shah Gilani - What Moves Markets - Forbes
The Second Coming Of Housing Horrors
Mar. 22 2011 - 10:42 am
By SHAH GILANI
The FHA insures mortgages that conform to their underwriting standards. Too bad their standards aren’t very high.
The housing market is nowhere near its bottom.
In fact, the second punch of a devastating one-two combination is about to be thrown.
Housing prices are already reeling from the huge overhang of shadow inventory, courtesy of stalled foreclosures and sellers waiting for price firming before putting out their for-sale signs.
But as far down as home prices have fallen, they still have further to go.
With the realization that easy and cheap financing isn’t going to be available for would-be buyers, banks sitting on big inventories and impatient sellers will resort to lowering prices again.
There’s just no way the housing market can recover if buyers can’t afford mortgages.
I’m not even talking about the negative impact rising interest rates would have on the mortgage market, that’s a problem we’ll have to face farther on down the road. I’m talking about the likelihood of having to come up with a 20% down-payment.
The Dodd-Frank Act, enacted last year, calls for lenders to retain 5% of the credit risk they would normally pass along when they pool loans into mortgage-backed securities to sell to investors. Banks aren’t all that keen on keeping loans on their books because they have to hold reserves against all their loans in case there are repayment issues. Even holding 5% of a MBS on their books represents a liability against which reserves must be held.
But there’s a way for lenders to not have to endure the 5% risk retention requirement. If mortgages are made against a 20% down-payment, and better income documentation and higher underwriting standards are met, those loans are considered “qualifying residential mortgages” and the risk retention requirement is waived on a pool of those mortgages.
Of course there’s a problem with putting down 20%. It’s extremely prohibitive for most would-be buyers. According to California-based CoreLogic, “nearly half of all current homeowners with a mortgage and 70% of first-time buyers would not make the cut.”
For the past few years lenders have been raising underwriting standards and down-payment requirements. Banks now have to keep more loans on their books because the securitization market is dead and they haven’t been able to easily offload mortgages like they used to in the past. As a result fewer people are able to meet the new higher standards lenders are incorporating to protect themselves.
So, where did buyers with no meaningful down-payment money and poor credit-ratings end up going for their mortgages over the past few years?
To the government of course.
The Federal Housing Administration (FHA) insures mortgages that conform to their underwriting standards. Too bad for taxpayers the FHA’s standards aren’t very high.
Conforming loans that the FHA insures require only a 3.5% down-payment and often as little as only a 550 credit score (that’s been raised recently).
A report from the George Washington University School of Business found that almost 56% of home-purchase mortgages made in 2009 were FHA insured. That’s up from only 6% in 2007. Not only did the FHA save the day for low income home buyers, whom they were meant to help, in high-cost markets loans for up to $729,750 can qualify as “conforming.” If it wasn’t for the FHA the housing market would already be a lot lower.
With only a 3.5% down-payment, a home’s price doesn’t have to fall too far before the loan is underwater, meaning the borrower owes more than the house is worth. A tiny 4% drop can be the beginning of real trouble if the price falls more and a homeowner with no real “skin-in-the-game” walks from the loan. That’s been happening a lot.
Taxpayers are sick of picking up the tab for government-backed mortgage financing programs that are too easy for borrowers to walk away from. The FHA’s programs are already facing scrutiny and may face dramatic changes and possibly future unwinding.
The signposts all point in the same direction. With over 6 million homeowners already having been foreclosed on over the past 3 years and another 3 million likely to face those dim prospects, inventory overhang is going to remain very, very high.
Now, with the high hurdle of a 20% down-payment and increasingly tough underwriting standards becoming the norm and government sponsored entities being bridled back from their runaway generosity, housing may be facing a knockout blow.
A lot of investors have been eagerly anticipating a bounce in the housing market and with that a bounce in homebuilder stocks like Toll Brothers , Lennar Corp., and KB Home. It looks like they’re going to have to wait a lot longer.
In the meantime, with all those foreclosed houses sitting idle and in need of repair once they are sold, and with folks holding on to their old homes longer, I’m betting that Home Depot and Lowe’s won’t give investors a black eye.
From: http://blogs.forbes.com/shahgilani/2011/03/22/the-second-coming-of-housing-horrors/?partner=alerts
Mar. 22 2011 - 10:42 am
By SHAH GILANI
The FHA insures mortgages that conform to their underwriting standards. Too bad their standards aren’t very high.
The housing market is nowhere near its bottom.
In fact, the second punch of a devastating one-two combination is about to be thrown.
Housing prices are already reeling from the huge overhang of shadow inventory, courtesy of stalled foreclosures and sellers waiting for price firming before putting out their for-sale signs.
But as far down as home prices have fallen, they still have further to go.
With the realization that easy and cheap financing isn’t going to be available for would-be buyers, banks sitting on big inventories and impatient sellers will resort to lowering prices again.
There’s just no way the housing market can recover if buyers can’t afford mortgages.
I’m not even talking about the negative impact rising interest rates would have on the mortgage market, that’s a problem we’ll have to face farther on down the road. I’m talking about the likelihood of having to come up with a 20% down-payment.
The Dodd-Frank Act, enacted last year, calls for lenders to retain 5% of the credit risk they would normally pass along when they pool loans into mortgage-backed securities to sell to investors. Banks aren’t all that keen on keeping loans on their books because they have to hold reserves against all their loans in case there are repayment issues. Even holding 5% of a MBS on their books represents a liability against which reserves must be held.
But there’s a way for lenders to not have to endure the 5% risk retention requirement. If mortgages are made against a 20% down-payment, and better income documentation and higher underwriting standards are met, those loans are considered “qualifying residential mortgages” and the risk retention requirement is waived on a pool of those mortgages.
Of course there’s a problem with putting down 20%. It’s extremely prohibitive for most would-be buyers. According to California-based CoreLogic, “nearly half of all current homeowners with a mortgage and 70% of first-time buyers would not make the cut.”
For the past few years lenders have been raising underwriting standards and down-payment requirements. Banks now have to keep more loans on their books because the securitization market is dead and they haven’t been able to easily offload mortgages like they used to in the past. As a result fewer people are able to meet the new higher standards lenders are incorporating to protect themselves.
So, where did buyers with no meaningful down-payment money and poor credit-ratings end up going for their mortgages over the past few years?
To the government of course.
The Federal Housing Administration (FHA) insures mortgages that conform to their underwriting standards. Too bad for taxpayers the FHA’s standards aren’t very high.
Conforming loans that the FHA insures require only a 3.5% down-payment and often as little as only a 550 credit score (that’s been raised recently).
A report from the George Washington University School of Business found that almost 56% of home-purchase mortgages made in 2009 were FHA insured. That’s up from only 6% in 2007. Not only did the FHA save the day for low income home buyers, whom they were meant to help, in high-cost markets loans for up to $729,750 can qualify as “conforming.” If it wasn’t for the FHA the housing market would already be a lot lower.
With only a 3.5% down-payment, a home’s price doesn’t have to fall too far before the loan is underwater, meaning the borrower owes more than the house is worth. A tiny 4% drop can be the beginning of real trouble if the price falls more and a homeowner with no real “skin-in-the-game” walks from the loan. That’s been happening a lot.
Taxpayers are sick of picking up the tab for government-backed mortgage financing programs that are too easy for borrowers to walk away from. The FHA’s programs are already facing scrutiny and may face dramatic changes and possibly future unwinding.
The signposts all point in the same direction. With over 6 million homeowners already having been foreclosed on over the past 3 years and another 3 million likely to face those dim prospects, inventory overhang is going to remain very, very high.
Now, with the high hurdle of a 20% down-payment and increasingly tough underwriting standards becoming the norm and government sponsored entities being bridled back from their runaway generosity, housing may be facing a knockout blow.
A lot of investors have been eagerly anticipating a bounce in the housing market and with that a bounce in homebuilder stocks like Toll Brothers , Lennar Corp., and KB Home. It looks like they’re going to have to wait a lot longer.
In the meantime, with all those foreclosed houses sitting idle and in need of repair once they are sold, and with folks holding on to their old homes longer, I’m betting that Home Depot and Lowe’s won’t give investors a black eye.
From: http://blogs.forbes.com/shahgilani/2011/03/22/the-second-coming-of-housing-horrors/?partner=alerts
Monday, March 21, 2011
Think Mortgages Are Hard To Get Now?..Just Wait | Life Without Fannie and Freddie | Real Estate Insider News
Think Mortgages Are Hard To Get Now?..Just Wait
Life Without Fannie and Freddie
March 20, 2011
Mortgage requirements are going to become significantly tighter…think, larger down payments…higher credit scores….and few surprises…read on.
As we have been reporting on this site for well over a year the governments take over of Fannie and Freddie will result in a more ‘conservative’ approach to home loans.
On the surface, its hard to argue that lending requirements need to be stricter. Afterall, isn’t loosey-goosey lending standards the chief cause of this house depression….(that is what we have been told, afterall)
If you have buyers who are on the fence…waiting for prices to fall, more homes for sale…etc…tell them that lending requirements are changing.
Example of what we expect:
Conforming loan limits to be lowered. I have heard that the NATIONAL limit may be lowered to $427,000…and I have also read that the limit will be $629,750 in the most expensive markets. Time will tell.
Non conforming mortgages will require 30%+ down.
Conforming mortgages will require at least 10% down.
And the biggie…..it seems that there is building momentum behind doing away with 30 years mortgages. In case you didn’t know it, only in the US and Norway do 30 year loans exist. In most of the world you have fewer than 10 year mortgages and its normal to put 50% down.
From: http://realestateinsidernews.com/breaking-real-estate-news/think-mortgages-are-hard-to-get-now-just-wait-life-without-fannie-and-freddie/
Life Without Fannie and Freddie
March 20, 2011
Mortgage requirements are going to become significantly tighter…think, larger down payments…higher credit scores….and few surprises…read on.
As we have been reporting on this site for well over a year the governments take over of Fannie and Freddie will result in a more ‘conservative’ approach to home loans.
On the surface, its hard to argue that lending requirements need to be stricter. Afterall, isn’t loosey-goosey lending standards the chief cause of this house depression….(that is what we have been told, afterall)
If you have buyers who are on the fence…waiting for prices to fall, more homes for sale…etc…tell them that lending requirements are changing.
Example of what we expect:
Conforming loan limits to be lowered. I have heard that the NATIONAL limit may be lowered to $427,000…and I have also read that the limit will be $629,750 in the most expensive markets. Time will tell.
Non conforming mortgages will require 30%+ down.
Conforming mortgages will require at least 10% down.
And the biggie…..it seems that there is building momentum behind doing away with 30 years mortgages. In case you didn’t know it, only in the US and Norway do 30 year loans exist. In most of the world you have fewer than 10 year mortgages and its normal to put 50% down.
From: http://realestateinsidernews.com/breaking-real-estate-news/think-mortgages-are-hard-to-get-now-just-wait-life-without-fannie-and-freddie/
Sales of Previously Owned Homes Slump 9.6%
Sales of Previously Owned Homes Slump 9.6%
03/21/2011 By: Carrie Bay
Existing-home sales fell in February following three straight monthly increases, according to data released by the National Association of Realtors (NAR) Monday.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, dropped 9.6 percent to an annual rate of 4.88 million in February from an upwardly revised 5.40 million in January. February’s reading is 2.8 percent below the 5.02 million pace for the same period last year.
The latest figures came in much lower than analysts were expecting. Lawrence Yun, NAR’s chief economist says current market conditions make for an uneven recovery.
“[H]ome sales are being constrained by the twin problems of unnecessarily tight credit and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers,” Yun said. “This tug and pull is causing a gradual but uneven recovery.”
Still, Yun notes that existing-home sales remain 26.4 percent above the cyclical low seen last July.
From: http://www.dsnews.com/articles/sales-of-previously-owned-homes-slump-96-2011-03-21
03/21/2011 By: Carrie Bay
Existing-home sales fell in February following three straight monthly increases, according to data released by the National Association of Realtors (NAR) Monday.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, dropped 9.6 percent to an annual rate of 4.88 million in February from an upwardly revised 5.40 million in January. February’s reading is 2.8 percent below the 5.02 million pace for the same period last year.
The latest figures came in much lower than analysts were expecting. Lawrence Yun, NAR’s chief economist says current market conditions make for an uneven recovery.
“[H]ome sales are being constrained by the twin problems of unnecessarily tight credit and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers,” Yun said. “This tug and pull is causing a gradual but uneven recovery.”
Still, Yun notes that existing-home sales remain 26.4 percent above the cyclical low seen last July.
From: http://www.dsnews.com/articles/sales-of-previously-owned-homes-slump-96-2011-03-21
Friday, March 18, 2011
Picky first-time buyers losing out on great housing deals - The Washington Post
Picky first-time buyers losing out on great housing deals
By Kenneth R. Harney, Friday, March 4, 11:23 AM
Picky, picky, picky! Are today’s first-time home buyers passing up great deals because they insist on flawless “move-in ready” houses requiring little or no changes — even at the starter-home price levels at which shoppers traditionally have been willing to factor fix-ups and renovations into their offers?
Weigh InCorrections?
Or are they simply reflecting market realities? They see record inventories of houses sitting unsold, and they may not have the money, time or inclination to do fix-ups after making the purchase.
Large numbers of real estate agents consider this a significant and perplexing issue, one that’s having a negative effect on the housing recovery. New research suggests that they may be on to something. A survey by Coldwell Banker Real Estate of 300 first-time buyers found that a startling 87 percent said that “finding a move-in ready home is important” to them.
A posting about fussy buyers on the 203,000-member “Active Rain” online real estate network in late February drew strong support from agents nationwide. Holly Kirby Weatherwax, an agent based in Reston, who wrote the original blog post, said in an interview that some shoppers are so picky that they walk out of well-priced houses solely because of relatively minor imperfections such as:
l The kitchen appliances are by different manufacturers.
l There are no granite countertops — even though the house is a modest-priced starter home.
l A carpet needs to be replaced, or the color doesn’t match their furniture.
l Wall colors are “wrong,” such as white, when for today’s tastes, they should be a warmer hue.
“They’re missing out on some excellent, older lived-in houses — it’s a shame,” she said, “simply because they can’t overlook” flaws that would not have bothered shoppers during the previous two decades.
Zillow, a giant Seattle-based online real estate research and data company, suggests that any shift by consumers toward greater attention to home details may be an inevitable byproduct of today’s higher down-payment minimums and more stringent loan qualification requirements.
According to Zillow researchers, the median down payment in 11 major metropolitan areas has jumped to 20 percent, compared with “close to zero” in some of the same areas just five years ago. In other words, first-time buyers today have to put a huge effort into coming up with their down payment, and they want to make sure that equity investment goes into the house that will need the fewest and least-costly upgrades. Also, Zillow spokeswoman Katie Curnutte said, shoppers in 2011 “are really in the driver’s seat. Nationally, buyers who purchased homes [last] December paid 4 percent less than the asking price. That points to a lot of room for negotiating and opportunities for buyers to be choosy.”
Some agents suggest that buyers today tend to be hipper and more sophisticated about home design, furnishings, floor materials, countertops and appliances because they are exposed to far more information on cable TV than earlier generations. Michael Jacobs, a Coldwell Banker agent in Pasadena, Calif., says cable channels such as HGTV “certainly have opened the eyes of more buyers” to design and presentation details. He said he’s held open houses where young buyers walk in and say immediately, “Oh, this house has been staged” — an observation virtually unheard of years ago.
But constant exposure to cable design shows may also be fostering a lack of realism on the part of some shoppers, according to agents. Cindy Westfall of Prudential NW Properties in Lake Oswego, Ore., said the shows have “given some buyers the impression that all homes should have granite counters, stainless steel appliances, etc. There are a few [shoppers who] want all the bells and whistles of that $500,000 house for $200,000, and no amount of talking to them on the realities can change their minds.”
In an interview, Westfall said she recently had a buyer who was interested only in older houses under $200,000 — starter-home price territory — but who wouldn’t tolerate even the sort of minor imperfections and nicks that older houses typically display.
“The fact is,” Westfall said, “you just can’t have it all. You can’t have the big yard, the top-line updates and all that in a starter home. You’ve got to compromise somewhere or else you’ll never buy anything.”
kenharney@earthlink.net
From: http://ping.fm/iy73j
By Kenneth R. Harney, Friday, March 4, 11:23 AM
Picky, picky, picky! Are today’s first-time home buyers passing up great deals because they insist on flawless “move-in ready” houses requiring little or no changes — even at the starter-home price levels at which shoppers traditionally have been willing to factor fix-ups and renovations into their offers?
Weigh InCorrections?
Or are they simply reflecting market realities? They see record inventories of houses sitting unsold, and they may not have the money, time or inclination to do fix-ups after making the purchase.
Large numbers of real estate agents consider this a significant and perplexing issue, one that’s having a negative effect on the housing recovery. New research suggests that they may be on to something. A survey by Coldwell Banker Real Estate of 300 first-time buyers found that a startling 87 percent said that “finding a move-in ready home is important” to them.
A posting about fussy buyers on the 203,000-member “Active Rain” online real estate network in late February drew strong support from agents nationwide. Holly Kirby Weatherwax, an agent based in Reston, who wrote the original blog post, said in an interview that some shoppers are so picky that they walk out of well-priced houses solely because of relatively minor imperfections such as:
l The kitchen appliances are by different manufacturers.
l There are no granite countertops — even though the house is a modest-priced starter home.
l A carpet needs to be replaced, or the color doesn’t match their furniture.
l Wall colors are “wrong,” such as white, when for today’s tastes, they should be a warmer hue.
“They’re missing out on some excellent, older lived-in houses — it’s a shame,” she said, “simply because they can’t overlook” flaws that would not have bothered shoppers during the previous two decades.
Zillow, a giant Seattle-based online real estate research and data company, suggests that any shift by consumers toward greater attention to home details may be an inevitable byproduct of today’s higher down-payment minimums and more stringent loan qualification requirements.
According to Zillow researchers, the median down payment in 11 major metropolitan areas has jumped to 20 percent, compared with “close to zero” in some of the same areas just five years ago. In other words, first-time buyers today have to put a huge effort into coming up with their down payment, and they want to make sure that equity investment goes into the house that will need the fewest and least-costly upgrades. Also, Zillow spokeswoman Katie Curnutte said, shoppers in 2011 “are really in the driver’s seat. Nationally, buyers who purchased homes [last] December paid 4 percent less than the asking price. That points to a lot of room for negotiating and opportunities for buyers to be choosy.”
Some agents suggest that buyers today tend to be hipper and more sophisticated about home design, furnishings, floor materials, countertops and appliances because they are exposed to far more information on cable TV than earlier generations. Michael Jacobs, a Coldwell Banker agent in Pasadena, Calif., says cable channels such as HGTV “certainly have opened the eyes of more buyers” to design and presentation details. He said he’s held open houses where young buyers walk in and say immediately, “Oh, this house has been staged” — an observation virtually unheard of years ago.
But constant exposure to cable design shows may also be fostering a lack of realism on the part of some shoppers, according to agents. Cindy Westfall of Prudential NW Properties in Lake Oswego, Ore., said the shows have “given some buyers the impression that all homes should have granite counters, stainless steel appliances, etc. There are a few [shoppers who] want all the bells and whistles of that $500,000 house for $200,000, and no amount of talking to them on the realities can change their minds.”
In an interview, Westfall said she recently had a buyer who was interested only in older houses under $200,000 — starter-home price territory — but who wouldn’t tolerate even the sort of minor imperfections and nicks that older houses typically display.
“The fact is,” Westfall said, “you just can’t have it all. You can’t have the big yard, the top-line updates and all that in a starter home. You’ve got to compromise somewhere or else you’ll never buy anything.”
kenharney@earthlink.net
From: http://ping.fm/iy73j
Monday, March 14, 2011
If Prices Are Falling, Why Are the Rich Buying?
If Prices Are Falling, Why Are the Rich Buying?
by The KCM Crew on March 14, 2011 ·
There is an interesting phenomenon taking place in the real estate market. While house prices are falling, the rich are starting to purchase. DataQuick Information Systems reported last week that sales on homes $1 million or more rose 18.6% last year after four consecutive years of decline. This is at the same time that sales outside of this price point actually fell 2.8%.
And even more amazing is that homes over $5 million have also increased substantially. Housing Wire reported that:
In 2010, 975 homes sold in this bracket, up nearly 14% from the year prior.
Why would the wealthy be starting to purchase especially when everyone is predicting that prices will soften? The people of wealth understand finances. They realize that the COST of real estate is a much more important than its PRICE. With the government attempting to make massive changes to the residential lending business, the wealthy know financing a home may never be better. They realize it is time to buy. They can purchase a million dollar+ home for a rate lower than at almost any time in history.
Rates are at historic lows and the spread for jumbo loans has shrunk dramatically. As CNN Money explained:
Normally buyers have to take out a jumbo loan to finance any mortgage beyond the $417,000 threshold ($729,000 in high-cost cities such as New York). These loans have higher interest rates because they are considered non-conforming — or higher risk — and are not backed Fannie Mae or Freddie Mac.
In 2009 buyers of high-end homes paid 1.8 percentage points more in interest than the average buyer. But in 2010, that spread had shrunk to just 0.6 points more.
They can also fix that rate for 30 years. The 30-year-fixed-rate-mortgage may be a victim of the new lending reforms. Mark Zandi, chief economist of Moody’s Economics addressing the administration’s recent report on reform:
“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages.”
Bottom Line
Let’s assume the rich aren’t just lucky. Let’s assume they built their wealth by making good financial decisions. What have they decided about real estate? It’s time to buy.
From: http://kcmblog.com/2011/03/14/if-prices-are-falling-why-are-the-rich-buying/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+KeepingCurrentMatters+%28KCM+Blog%29
by The KCM Crew on March 14, 2011 ·
There is an interesting phenomenon taking place in the real estate market. While house prices are falling, the rich are starting to purchase. DataQuick Information Systems reported last week that sales on homes $1 million or more rose 18.6% last year after four consecutive years of decline. This is at the same time that sales outside of this price point actually fell 2.8%.
And even more amazing is that homes over $5 million have also increased substantially. Housing Wire reported that:
In 2010, 975 homes sold in this bracket, up nearly 14% from the year prior.
Why would the wealthy be starting to purchase especially when everyone is predicting that prices will soften? The people of wealth understand finances. They realize that the COST of real estate is a much more important than its PRICE. With the government attempting to make massive changes to the residential lending business, the wealthy know financing a home may never be better. They realize it is time to buy. They can purchase a million dollar+ home for a rate lower than at almost any time in history.
Rates are at historic lows and the spread for jumbo loans has shrunk dramatically. As CNN Money explained:
Normally buyers have to take out a jumbo loan to finance any mortgage beyond the $417,000 threshold ($729,000 in high-cost cities such as New York). These loans have higher interest rates because they are considered non-conforming — or higher risk — and are not backed Fannie Mae or Freddie Mac.
In 2009 buyers of high-end homes paid 1.8 percentage points more in interest than the average buyer. But in 2010, that spread had shrunk to just 0.6 points more.
They can also fix that rate for 30 years. The 30-year-fixed-rate-mortgage may be a victim of the new lending reforms. Mark Zandi, chief economist of Moody’s Economics addressing the administration’s recent report on reform:
“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages.”
Bottom Line
Let’s assume the rich aren’t just lucky. Let’s assume they built their wealth by making good financial decisions. What have they decided about real estate? It’s time to buy.
From: http://kcmblog.com/2011/03/14/if-prices-are-falling-why-are-the-rich-buying/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+KeepingCurrentMatters+%28KCM+Blog%29
Tuesday, March 8, 2011
New FTC Rule Require Short Sale Disclosure
New FTC Rule Requires Short Sale Disclosures
The Federal Trade Commission (“FTC”) has issued a final rule that may impact real estate professionals who represent clients involved in a short sale transaction. Depending on certain factors, the rules may require real estate professionals to make certain disclosures to consumers if they negotiate a short sale with a lender, advertise short sales experience, or take upfront fees from short sale sellers. The MARS rules took full effect on January 31, 2011- click here to view the MARS rule.
Background
In November 2010, the FTC published the final Mortgage Assistance Relief Services final rule (“MARS rule”). The MARS rule is primarily directed at companies that offer loan modification services to consumers. When a company is marketing these types of services to consumers, the MARS rule requires that the MARS provider make certain disclosures to consumers. In addition, the MARS rule bars advance fees paid to a MARS provider, prohibit certain representations, and imposes record keeping requirements (must retain for 2 years all MARS advertisements, sales records for covered transactions, customer communications, and customer contracts). MARS providers can only receive payment if the consumer’s loan is modified by the lender.
The FTC and state attorney generals have actively prosecuted foreclosure rescue companies, based on evidence that consumers received very little benefit for these services. The prosecutions took place under unfair trade practices laws, although some states did enact laws specifically regulating this business model. The FTC itself has brought 40 cases and FTC staff told NAR that none of these cases involved real estate professionals acting in their licensed capacity.
The FTC began its rulemaking process in 2009. NAR submitted comments and testimony during the rulemaking seeking an exemption for real estate licensees (click here to read NAR’s first and second comment letters). The FTC addressed NAR’s comments in the following footnote:
The Commission concludes that an exemption for real estate agents is not necessary. Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers. The Commission is aware that real estate agents may perform these functions when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS.
Final MARS Rule
The MARS rule covers short sale negotiations, and so this is the area where real estate professionals acting in their licensed capacity may need to comply with these rules. FTC staff has determined that “negotiate” will include communications with a lender about the possibility of a short sale transaction involving a consumer’s loan. A short sale is a transaction where the title to the property changes, the sales price is insufficient to pay all the liens, the seller does not provide funds to clear the liens on the property, and the lender agrees to allow the sale to occur by releasing the liens on the property. In some cases, the lender may hold the seller liable for the shortfall, which is called a “deficiency”.
The MARS rule contains the following definitions:
“Mortgage Assistance Relief Service” is defined as a “service, plan, or program offered or provided to the consumer in exchange for consideration” that provides services in relation to a consumer’s mortgage, including negotiating a possible loan modification, directing a consumer to stop or otherwise alter the amount of his/her mortgage payment, modifying the consumer’s payment arrangements, or negotiating a short sale of a dwelling on behalf of a consumer.
“Mortgage Assistance Relief Service Provider” is someone who “provides, offers to provide, or arranges to provide, any mortgage assistance relief service.”
Based on those definitions, the MARS rule can have an impact on a real estate professional that represents clients involved in a short sale transaction or markets himself/herself as a MARS provider (i.e. short sale specialist). The focus of this article is for real estate professionals who, while acting in their licensed capacity as a real estate professional, provide services that may fall within the MARS rule. If someone is operating a full-time MARS business and not acting as a real estate licensee, they should further review these rules and consult with counsel to assure their business practices comply with MARS.
Disclosures Required by the Rules
There are three types of disclosures that a real estate professional may need to make consumers. The rules have specific requirements on how the disclosures must be presented to consumers, depending on the communication medium. In all cases, the disclosure must be clear and prominent. For printed materials, the written disclosure must be the larger of 12-point type or one-half the size of the largest letter used to list the name of the firm providing the disclosures. Below are models that could be used in written materials; the requirements vary slightly for oral communications made to consumers.
General Commercial Communications Disclosures
A real estate professional that advertises MARS services which is not directed at a specific consumer will need to include in all advertisements a clear and prominent disclosure with the following:
IMPORTANT NOTICE (in two point-type larger than the font size of the disclosure): (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.
Consumer-Specific Commercial Communications
The second disclosure is required in all communications that the MARS provider directs to specific “prospective” clients, and so these disclosures may need to be made by a real estate professional that represents a seller in a short sale transaction. These communications must be provided by the MARS provider before the provider begins mortgage-assistance services on behalf of the consumer. As discussed in this article, the time when the real estate professional needs to provide this disclosure will vary, as a listing broker may not be aware that the transaction will need to be a short sale until far into the listing process.
In order to comply with this disclosure requirement, a listing broker should provide this disclosure to the client in a letter or memo once he/she is aware the transaction may be a short sale, highlighting this fact in the document and prominently displaying the below disclosure statement. The real estate professional should work with their attorney in drafting this document. NAR has also provided a model disclosure form- click here to view. The disclosure must provide the following:
IMPORTANT NOTICE (in two point-type larger than the font size of the disclosure): You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services. (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.
Disclosure When Providing an Offer of Mortgage Relief
The third disclosure needs to be provided, in a clear and prominent manner, at the time the real estate professional presents its client with the lender’s short sale approval letter. The disclosure must be provided on a separate page and state:
IMPORTANT NOTICE: Before buying this service, consider the following information (in two point-type larger than the font size of the disclosure): This is an offer of mortgage assistance we obtained from your lender [or servicer].You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed previously] for our services. If you stop paying your mortgage, you could lose your home and damage your credit rating.
The real estate professional must also provide a notice from the lender or servicer that describes all material differences between the seller’s current loan and the lender’s proposal to modify the loan if the seller accepts the short sale offer, which may include the lender holding the seller liable for the deficiency amount. This information will likely be contained in the lenders short sale approval letter
MARS Scenarios
Real Estate Professionals with Possible Short Sale Listings
Negotiating a short sale with a lender will cause the real estate professional to fall within the definition of a MARS provider and so would be subject to the MARS rule. As stated above, negotiation will include communications with a lender about a short sale transaction on behalf of a client. How the broker will need to comply with MARS will depend on the facts and circumstances of the broker’s business and how the broker has conducted the negotiations. A brokerage which promotes itself as a MARS provider will need to fully comply with MARS.
A broker that becomes involved in a short sale transaction listing during the normal course of his/her real estate brokerage operations and doesn’t otherwise promote himself/herself as a MARS provider will need to comply with the MARS rule for the specific transactions involving a short sale if the broker will negotiate the loan with the lender or otherwise arranges for such negotiations. The broker will provide the Consumer-Specific Commercial Communications disclosure to consumers as soon as he/she is aware of the need for a short sale transaction.
The time when these disclosures need to be made will depend on the facts of each transaction. If the broker learns that a short sale will be required during its initial meeting with the seller, the broker will need to make the required disclosures at that time. A broker who doesn’t learn that a short sale is required until the first offer is received will not need to make disclosures until that time.
The time for disclosure is similar to the requirement that many MLSs impose upon participants. Under those rules, a participant has a duty to let other MLS participants know about the possibility for a short sale when it is “reasonably known” by the listing broker. Real estate professionals should follow a similar process in making MARS disclosures to their clients.
Example #1: Real estate broker A has a residential real estate brokerage business and is paid by commission. He does not advertise as a MARS provider. A takes a listing from a seller, but the property does not sell during the first six months and prices in the local market have dropped during that time. A then receives an offer that is substantially below the listing price, but consistent with the recent sales in the market. The seller informs A that his mortgage exceeds the offer price but the seller will accept the offer if the lender would be willing to accept the offered price. If A decides to continue working with his client during the short sale and will negotiate with the lender or will arrange for a MARS provider to negotiate with the lender, A should now make the Consumer-Specific Commercial Communications disclosure and may also need to update the listing in his local MLS.
Example #2: Real estate salesperson B has a prospect walk into her office, inquiring about possibly selling his home. The prospect tells B that he has lost his job and so needs to sell his home because he cannot afford to continue making mortgage payments. Based on the amount remaining on his loan and current market conditions, B may need a short sale in order to sell his home. B will need to provide the client with the Consumer-Specific Commercial Communications if she decides to pursue this listing.
MARS & Marketing Materials
The MARS rule require an entity who specifically markets MARS to consumers to make certain general disclosures in all advertisements promoting MARS services. So, any brokerage that specifically solicits business from short sale sellers will need to include these disclosures in all of its advertisements, including telephone solicitations.
A real estate brokerage that isn’t specifically seeking to be a MARS provider yet wants to mention its short sale experience/qualifications in its marketing materials may or may not need to provide the general MARS disclosures. The FTC’s practice is to review ads on a case-by-case basis, and determine the impression that a particular ad would make upon a “reasonable” consumer.
So, an advertisement listing the accomplishments of a licensee and the types of services that the licensee provides to his/her clients which mentions experience with short sale transactions, among other services, may not need to comply with the MARS advertising rules. Similarly, an advertisement identifying a licensee as having the SFR designation, without more, is also likely outside of the MARS advertising rules. However, an advertisement promoting a real estate professional’s short sales brokerage business will likely need to comply with the rules, since the average consumer would have the impression that these advertisements are from a MARS provider.
Licensees Accepting Upfront Fees
As stated above, the MARS rule bar the receipt of upfront fees. Therefore, brokers whose business model involves upfront fees need to be aware that if they take an upfront fee from a client and then later help the client negotiate a short sale, they will be in violation of MARS.
Buyer’s Representatives
Buyer’s representatives may need to make the Consumer-Specific Commercial Communication to sellers if they negotiate a modification of the seller’s loan with a lender while representing a potential buyer. Despite the fact that the buyer’s representative does not otherwise represent the seller in the transaction, the buyer’s representative will be seen as a MARS provider once he/she begins negotiating the terms of the short sale with the lender(s). Additionally, the buyer’s representative cannot charge a separate fee to the seller for this service, unless the buyer’s representative has entered into a separate agreement with the seller and this agreement meets the other conditions of the MARS rule (no upfront fee, can only receive payment if the loan is modified, and the other relevant provisions of the regulation).
Referrals
The MARS rule also includes in the definition of MARS provider “any person that…arranges for others to provide any mortgage assistance relief service.” Therefore, any licensee referring a client to MARS provider in exchange for a referral fee will need to be careful that it is not “arranging” the mortgage relief services for its client; otherwise, it will need to comply with the MARS disclosure requirements.
If a real estate professional does have clients in need of short sales but the real estate professional would rather refer the short sale negotiations with the lender(s) to a MARS provider, a possible solution is to offer the client a list of providers and allow the client to choose the MARS provider. Whether the real estate professional is seen as arranging the transaction will again be a factual determination, but allowing the client to choose the provider and making it clear that the client is not required to use the MARS providers offered by the real estate professional should remove the real estate professional from the need to comply with the MARS rule. The real estate professional should also disclose upfront any referral fee arrangements with the MARS provider to the client.
The real estate professional also needs to take steps to assure that any MARS provider to whom it refers customers is complying with the MARS rule, as it is a violation if “substantial assistance” is provided to someone that you know or should have known is not complying with the MARS rule.
Conclusion
If a real estate professional represents clients in short sales, takes an upfront fee for his/her services, or promotes himself/herself to potential short sale sellers, the real estate professional needs to be aware of the MARS rule and the disclosure requirements.
From: http://ping.fm/YyUGL
The Federal Trade Commission (“FTC”) has issued a final rule that may impact real estate professionals who represent clients involved in a short sale transaction. Depending on certain factors, the rules may require real estate professionals to make certain disclosures to consumers if they negotiate a short sale with a lender, advertise short sales experience, or take upfront fees from short sale sellers. The MARS rules took full effect on January 31, 2011- click here to view the MARS rule.
Background
In November 2010, the FTC published the final Mortgage Assistance Relief Services final rule (“MARS rule”). The MARS rule is primarily directed at companies that offer loan modification services to consumers. When a company is marketing these types of services to consumers, the MARS rule requires that the MARS provider make certain disclosures to consumers. In addition, the MARS rule bars advance fees paid to a MARS provider, prohibit certain representations, and imposes record keeping requirements (must retain for 2 years all MARS advertisements, sales records for covered transactions, customer communications, and customer contracts). MARS providers can only receive payment if the consumer’s loan is modified by the lender.
The FTC and state attorney generals have actively prosecuted foreclosure rescue companies, based on evidence that consumers received very little benefit for these services. The prosecutions took place under unfair trade practices laws, although some states did enact laws specifically regulating this business model. The FTC itself has brought 40 cases and FTC staff told NAR that none of these cases involved real estate professionals acting in their licensed capacity.
The FTC began its rulemaking process in 2009. NAR submitted comments and testimony during the rulemaking seeking an exemption for real estate licensees (click here to read NAR’s first and second comment letters). The FTC addressed NAR’s comments in the following footnote:
The Commission concludes that an exemption for real estate agents is not necessary. Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers. The Commission is aware that real estate agents may perform these functions when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS.
Final MARS Rule
The MARS rule covers short sale negotiations, and so this is the area where real estate professionals acting in their licensed capacity may need to comply with these rules. FTC staff has determined that “negotiate” will include communications with a lender about the possibility of a short sale transaction involving a consumer’s loan. A short sale is a transaction where the title to the property changes, the sales price is insufficient to pay all the liens, the seller does not provide funds to clear the liens on the property, and the lender agrees to allow the sale to occur by releasing the liens on the property. In some cases, the lender may hold the seller liable for the shortfall, which is called a “deficiency”.
The MARS rule contains the following definitions:
“Mortgage Assistance Relief Service” is defined as a “service, plan, or program offered or provided to the consumer in exchange for consideration” that provides services in relation to a consumer’s mortgage, including negotiating a possible loan modification, directing a consumer to stop or otherwise alter the amount of his/her mortgage payment, modifying the consumer’s payment arrangements, or negotiating a short sale of a dwelling on behalf of a consumer.
“Mortgage Assistance Relief Service Provider” is someone who “provides, offers to provide, or arranges to provide, any mortgage assistance relief service.”
Based on those definitions, the MARS rule can have an impact on a real estate professional that represents clients involved in a short sale transaction or markets himself/herself as a MARS provider (i.e. short sale specialist). The focus of this article is for real estate professionals who, while acting in their licensed capacity as a real estate professional, provide services that may fall within the MARS rule. If someone is operating a full-time MARS business and not acting as a real estate licensee, they should further review these rules and consult with counsel to assure their business practices comply with MARS.
Disclosures Required by the Rules
There are three types of disclosures that a real estate professional may need to make consumers. The rules have specific requirements on how the disclosures must be presented to consumers, depending on the communication medium. In all cases, the disclosure must be clear and prominent. For printed materials, the written disclosure must be the larger of 12-point type or one-half the size of the largest letter used to list the name of the firm providing the disclosures. Below are models that could be used in written materials; the requirements vary slightly for oral communications made to consumers.
General Commercial Communications Disclosures
A real estate professional that advertises MARS services which is not directed at a specific consumer will need to include in all advertisements a clear and prominent disclosure with the following:
IMPORTANT NOTICE (in two point-type larger than the font size of the disclosure): (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.
Consumer-Specific Commercial Communications
The second disclosure is required in all communications that the MARS provider directs to specific “prospective” clients, and so these disclosures may need to be made by a real estate professional that represents a seller in a short sale transaction. These communications must be provided by the MARS provider before the provider begins mortgage-assistance services on behalf of the consumer. As discussed in this article, the time when the real estate professional needs to provide this disclosure will vary, as a listing broker may not be aware that the transaction will need to be a short sale until far into the listing process.
In order to comply with this disclosure requirement, a listing broker should provide this disclosure to the client in a letter or memo once he/she is aware the transaction may be a short sale, highlighting this fact in the document and prominently displaying the below disclosure statement. The real estate professional should work with their attorney in drafting this document. NAR has also provided a model disclosure form- click here to view. The disclosure must provide the following:
IMPORTANT NOTICE (in two point-type larger than the font size of the disclosure): You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services. (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.
Disclosure When Providing an Offer of Mortgage Relief
The third disclosure needs to be provided, in a clear and prominent manner, at the time the real estate professional presents its client with the lender’s short sale approval letter. The disclosure must be provided on a separate page and state:
IMPORTANT NOTICE: Before buying this service, consider the following information (in two point-type larger than the font size of the disclosure): This is an offer of mortgage assistance we obtained from your lender [or servicer].You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed previously] for our services. If you stop paying your mortgage, you could lose your home and damage your credit rating.
The real estate professional must also provide a notice from the lender or servicer that describes all material differences between the seller’s current loan and the lender’s proposal to modify the loan if the seller accepts the short sale offer, which may include the lender holding the seller liable for the deficiency amount. This information will likely be contained in the lenders short sale approval letter
MARS Scenarios
Real Estate Professionals with Possible Short Sale Listings
Negotiating a short sale with a lender will cause the real estate professional to fall within the definition of a MARS provider and so would be subject to the MARS rule. As stated above, negotiation will include communications with a lender about a short sale transaction on behalf of a client. How the broker will need to comply with MARS will depend on the facts and circumstances of the broker’s business and how the broker has conducted the negotiations. A brokerage which promotes itself as a MARS provider will need to fully comply with MARS.
A broker that becomes involved in a short sale transaction listing during the normal course of his/her real estate brokerage operations and doesn’t otherwise promote himself/herself as a MARS provider will need to comply with the MARS rule for the specific transactions involving a short sale if the broker will negotiate the loan with the lender or otherwise arranges for such negotiations. The broker will provide the Consumer-Specific Commercial Communications disclosure to consumers as soon as he/she is aware of the need for a short sale transaction.
The time when these disclosures need to be made will depend on the facts of each transaction. If the broker learns that a short sale will be required during its initial meeting with the seller, the broker will need to make the required disclosures at that time. A broker who doesn’t learn that a short sale is required until the first offer is received will not need to make disclosures until that time.
The time for disclosure is similar to the requirement that many MLSs impose upon participants. Under those rules, a participant has a duty to let other MLS participants know about the possibility for a short sale when it is “reasonably known” by the listing broker. Real estate professionals should follow a similar process in making MARS disclosures to their clients.
Example #1: Real estate broker A has a residential real estate brokerage business and is paid by commission. He does not advertise as a MARS provider. A takes a listing from a seller, but the property does not sell during the first six months and prices in the local market have dropped during that time. A then receives an offer that is substantially below the listing price, but consistent with the recent sales in the market. The seller informs A that his mortgage exceeds the offer price but the seller will accept the offer if the lender would be willing to accept the offered price. If A decides to continue working with his client during the short sale and will negotiate with the lender or will arrange for a MARS provider to negotiate with the lender, A should now make the Consumer-Specific Commercial Communications disclosure and may also need to update the listing in his local MLS.
Example #2: Real estate salesperson B has a prospect walk into her office, inquiring about possibly selling his home. The prospect tells B that he has lost his job and so needs to sell his home because he cannot afford to continue making mortgage payments. Based on the amount remaining on his loan and current market conditions, B may need a short sale in order to sell his home. B will need to provide the client with the Consumer-Specific Commercial Communications if she decides to pursue this listing.
MARS & Marketing Materials
The MARS rule require an entity who specifically markets MARS to consumers to make certain general disclosures in all advertisements promoting MARS services. So, any brokerage that specifically solicits business from short sale sellers will need to include these disclosures in all of its advertisements, including telephone solicitations.
A real estate brokerage that isn’t specifically seeking to be a MARS provider yet wants to mention its short sale experience/qualifications in its marketing materials may or may not need to provide the general MARS disclosures. The FTC’s practice is to review ads on a case-by-case basis, and determine the impression that a particular ad would make upon a “reasonable” consumer.
So, an advertisement listing the accomplishments of a licensee and the types of services that the licensee provides to his/her clients which mentions experience with short sale transactions, among other services, may not need to comply with the MARS advertising rules. Similarly, an advertisement identifying a licensee as having the SFR designation, without more, is also likely outside of the MARS advertising rules. However, an advertisement promoting a real estate professional’s short sales brokerage business will likely need to comply with the rules, since the average consumer would have the impression that these advertisements are from a MARS provider.
Licensees Accepting Upfront Fees
As stated above, the MARS rule bar the receipt of upfront fees. Therefore, brokers whose business model involves upfront fees need to be aware that if they take an upfront fee from a client and then later help the client negotiate a short sale, they will be in violation of MARS.
Buyer’s Representatives
Buyer’s representatives may need to make the Consumer-Specific Commercial Communication to sellers if they negotiate a modification of the seller’s loan with a lender while representing a potential buyer. Despite the fact that the buyer’s representative does not otherwise represent the seller in the transaction, the buyer’s representative will be seen as a MARS provider once he/she begins negotiating the terms of the short sale with the lender(s). Additionally, the buyer’s representative cannot charge a separate fee to the seller for this service, unless the buyer’s representative has entered into a separate agreement with the seller and this agreement meets the other conditions of the MARS rule (no upfront fee, can only receive payment if the loan is modified, and the other relevant provisions of the regulation).
Referrals
The MARS rule also includes in the definition of MARS provider “any person that…arranges for others to provide any mortgage assistance relief service.” Therefore, any licensee referring a client to MARS provider in exchange for a referral fee will need to be careful that it is not “arranging” the mortgage relief services for its client; otherwise, it will need to comply with the MARS disclosure requirements.
If a real estate professional does have clients in need of short sales but the real estate professional would rather refer the short sale negotiations with the lender(s) to a MARS provider, a possible solution is to offer the client a list of providers and allow the client to choose the MARS provider. Whether the real estate professional is seen as arranging the transaction will again be a factual determination, but allowing the client to choose the provider and making it clear that the client is not required to use the MARS providers offered by the real estate professional should remove the real estate professional from the need to comply with the MARS rule. The real estate professional should also disclose upfront any referral fee arrangements with the MARS provider to the client.
The real estate professional also needs to take steps to assure that any MARS provider to whom it refers customers is complying with the MARS rule, as it is a violation if “substantial assistance” is provided to someone that you know or should have known is not complying with the MARS rule.
Conclusion
If a real estate professional represents clients in short sales, takes an upfront fee for his/her services, or promotes himself/herself to potential short sale sellers, the real estate professional needs to be aware of the MARS rule and the disclosure requirements.
From: http://ping.fm/YyUGL
Research Firm Says U.S. Housing Has Never Been This Undervalued
Research Firm Says U.S. Housing Has Never Been This Undervalued
03/07/2011 By: Carrie Bay
The continuing depreciation of residential property values at the end of last year has made housing look more undervalued relative to income than ever before, according to analysts at the research firm Capital Economics.
Based on the latest Case-Shiller home price index, Capital Economics’ study shows that in the fourth quarter of 2010, housing was 21 percent undervalued when compared with disposable income per capital.
Looking at data included in the index published by the Federal Housing Finance Agency (FHFA), the firm found that housing in Q4 was 15 percent undervalued as measured against individuals’ disposable income.
Capital Economics says its results illustrate “housing is exceptionally undervalued,” and the gap is getting bigger. In its third quarter 2010 report, the research firm pegged the Case-Shiller index readings as 19 percent undervalued and the FHFA index as 14 percent below what would constitute a balanced housing value in relation to income.
The recent fall back in house prices, coupled with low rates, explains why the initial monthly mortgage payment on a median priced house bought with a 20 percent down payment has fallen to a record low of 13 percent of the median income, Capital Economics pointed out in its report.
Home prices in 29 states hit a new cycle low in the fourth quarter of last year, and the research firm says on both
the FHFA and Case-Shiller house price indices, housing now appears close to fair value when set against rents.
Such favorable valuations mean there is plenty of scope for housing to perform well in the medium-term, according to Capital Economics, but over the next year, the firm says the combination of weak demand, high supply, and more forced sales of foreclosed properties will push prices lower.
As Capital Economics pointed out, the sharp fall in the mortgage delinquency rate at the end of last year means there are fewer homes in the foreclosure pipeline, but the elevated number of defaulted properties still in process means home values will continue to be negatively impacted by the presence of distress for some time.
On top of low prices, mortgage rates have fallen back a bit in recent weeks, leaving them even further below the 20-year average of 7 percent, the firm’s analysts wrote. Last week marked the third consecutive week that rates have continued to decline. A national survey conducted by Freddie Mac shows that the average 30-year fixed-rate has dropped to 4.87 percent, while the 15-year fixed-rate has slipped to 4.15 percent.
When you wrap declining home prices and historically low mortgage rates together, Capital Economics says, “The incredibly favorable affordability and valuation environment is the housing market’s one big positive.”
But despite this fact, mortgage applications have remained subdued. While buyer demand is notably weak by conventional standards, Capital Economics says the decrease in mortgage apps of late reflects, at least in part, the prevalence of cash buyers.
The company says the recent “de-valuing” of housing stock appears to be attracting cash buyers and investors back into the market.
They have driven 70 percent of the increase in existing home sales seen since last July, particularly among heavily discounted foreclosed homes, Capital Economics pointed out. Over that same period, first-time buyers have been responsible for just 6 percent of the increase in sales of previously owned homes.
From: http://ping.fm/aj51p
03/07/2011 By: Carrie Bay
The continuing depreciation of residential property values at the end of last year has made housing look more undervalued relative to income than ever before, according to analysts at the research firm Capital Economics.
Based on the latest Case-Shiller home price index, Capital Economics’ study shows that in the fourth quarter of 2010, housing was 21 percent undervalued when compared with disposable income per capital.
Looking at data included in the index published by the Federal Housing Finance Agency (FHFA), the firm found that housing in Q4 was 15 percent undervalued as measured against individuals’ disposable income.
Capital Economics says its results illustrate “housing is exceptionally undervalued,” and the gap is getting bigger. In its third quarter 2010 report, the research firm pegged the Case-Shiller index readings as 19 percent undervalued and the FHFA index as 14 percent below what would constitute a balanced housing value in relation to income.
The recent fall back in house prices, coupled with low rates, explains why the initial monthly mortgage payment on a median priced house bought with a 20 percent down payment has fallen to a record low of 13 percent of the median income, Capital Economics pointed out in its report.
Home prices in 29 states hit a new cycle low in the fourth quarter of last year, and the research firm says on both
the FHFA and Case-Shiller house price indices, housing now appears close to fair value when set against rents.
Such favorable valuations mean there is plenty of scope for housing to perform well in the medium-term, according to Capital Economics, but over the next year, the firm says the combination of weak demand, high supply, and more forced sales of foreclosed properties will push prices lower.
As Capital Economics pointed out, the sharp fall in the mortgage delinquency rate at the end of last year means there are fewer homes in the foreclosure pipeline, but the elevated number of defaulted properties still in process means home values will continue to be negatively impacted by the presence of distress for some time.
On top of low prices, mortgage rates have fallen back a bit in recent weeks, leaving them even further below the 20-year average of 7 percent, the firm’s analysts wrote. Last week marked the third consecutive week that rates have continued to decline. A national survey conducted by Freddie Mac shows that the average 30-year fixed-rate has dropped to 4.87 percent, while the 15-year fixed-rate has slipped to 4.15 percent.
When you wrap declining home prices and historically low mortgage rates together, Capital Economics says, “The incredibly favorable affordability and valuation environment is the housing market’s one big positive.”
But despite this fact, mortgage applications have remained subdued. While buyer demand is notably weak by conventional standards, Capital Economics says the decrease in mortgage apps of late reflects, at least in part, the prevalence of cash buyers.
The company says the recent “de-valuing” of housing stock appears to be attracting cash buyers and investors back into the market.
They have driven 70 percent of the increase in existing home sales seen since last July, particularly among heavily discounted foreclosed homes, Capital Economics pointed out. Over that same period, first-time buyers have been responsible for just 6 percent of the increase in sales of previously owned homes.
From: http://ping.fm/aj51p
Thursday, March 3, 2011
Getting Going: The Great Mortgage Race Is On - WSJ.com
Getting a Mortgage Before the Door Shuts
By KAREN BLUMENTHAL..Article
If you have been sitting on the fence trying to decide whether to buy a new house or refinance a mortgage, you should act soon. New loans are starting to get costlier.
The mortgage market is facing pressures from new laws and regulations, still-declining home prices and the ongoing need for government-owned mortgage players to shore up their finances. The Mortgage Bankers Association predicts mortgage originations, which reached $3 trillion in 2005, will be less than $1 trillion this year, the lowest level since 1997.
"The price of mortgage money is going to go up, and the availability of mortgage money may also be impinged," says Keith Gumbinger, vice president at HSH Associates, which tracks mortgage data.
The silver lining is that the rate for a 30-year fixed loan is hovering around 5% for those with good credit. That is up about a percentage point from last year's lows but is still an attractive rate by historical standards, though expected to keep climbing as the economy improves.
Home prices in some areas are still falling, but they are bottoming out or firming up in others. It may not be the perfect time to buy a home—but better mortgage options today may be a worthy trade-off to the possibility of lower prices tomorrow.
Still not convinced? Consider the following:
• New costs.Fannie Mae and Freddie Mac, which provide liquidity to the mortgage market by buying mortgages and selling securities backed by them, are adding new fees to loans to people with the best credit and raising existing loan fees. Freddie's new fees start March 1, while Fannie's kick in April 1.
Neither Fannie nor Freddie have been assessing fees on most loans for borrowers with credit scores above 720, even if the down payment was small. But citing a need to address risk and price their services appropriately, they will assess a fee of 0.25% to 0.5% of the loan value on borrowers with credit scores of 720 or higher who put down less than 25% of the purchase amount. The current fee for those with credit scores of 700 to 719 who put down less than 20% of the purchase price will double to a full percentage point of the loan value from half a point.
Brokers expect the higher fees will translate into slightly higher mortgage rates.
In addition, the Federal Housing Administration, saying it needs to bolster its capital reserves, is raising its required annual mortgage-insurance premium for FHA loans by 0.25% of the loan value. As a result, FHA loans—which are aimed at first-time home buyers and those with moderate incomes—will include an upfront mortgage insurance payment of 1% of the loan amount and an annual premium of 1.1% to 1.15% when the increase goes into effect on April 18.
For regular loans, private mortgage insurance—which is required when you put down less than 20% of the home's value—is tougher to get than it once was. Generally, it is available only for buyers who make a down payment of at least 5% and have a credit score of 700 or higher.
• Dodd-Frank fallout. The Consumer Financial Protection Bureau, established by the Dodd-Frank financial overhaul, opens its doors for business in July and is expected to take a close look at how interest rates and closing costs are disclosed to borrowers. That could create new costs that lenders are likely to pass along to consumers. In addition, a Federal Reserve rule that takes effect April 18 will change how mortgage brokers are paid, a move intended to curb practices such as steering home buyers to higher-cost loans.
The new rules, which limit the kinds of compensation brokers can receive, have brokers in a tizzy. The brokers claim the changes will raise mortgage costs and put some of them out of business, shrinking the market. How it will play out isn't clear, but given both the changes and the Fannie and Freddie pricing, mortgage prices may vary more than usual, say those in the industry—making it wise for borrowers to shop for rates even more aggressively.
• More restrictions. Earlier this month, the Obama administration proposed a wide-ranging overhaul of the mortgage market, including phasing out Fannie Mae and Freddie Mac, requiring a down payment of at least 10% and reducing the share of FHA loans, which are almost 30% of the market now, up from a historical market share of 10% to 15%.
In addition, the administration recommended letting Fannie and Freddie loan limits for high-cost areas fall back to $625,500. The limits were temporarily increased to $729,750 in 2008 when the market for "jumbo" loans—those above the loan limits—all but disappeared, and that increase is now scheduled to expire Sept. 30. (The $417,000 loan limit for homes in most other markets would remain the same.)
What those proposals will mean depends on where you live. In Manhattan, where the average home price is still around $1 million, a drop in the loan limit means more buyers will need jumbo mortgages, says Melissa Cohn, CEO of Manhattan Mortgage Co. Those currently have rates that are about half a percentage point higher than conventional loans.
Richard Peek, president of the Florida Association of Mortgage Professionals, says much of his business right now is in FHA loans, which allow down payments of as little as 3.5%. Requiring a 10% down payment, he says, would put homes out of reach for many Florida customers.
—karen.blumenthal@wsj.com
Write to Karen Blumenthal at karen.blumenthal@wsj.com
From: http://online.wsj.com/article/SB10001424052748704520504576162632959543492.html
By KAREN BLUMENTHAL..Article
If you have been sitting on the fence trying to decide whether to buy a new house or refinance a mortgage, you should act soon. New loans are starting to get costlier.
The mortgage market is facing pressures from new laws and regulations, still-declining home prices and the ongoing need for government-owned mortgage players to shore up their finances. The Mortgage Bankers Association predicts mortgage originations, which reached $3 trillion in 2005, will be less than $1 trillion this year, the lowest level since 1997.
"The price of mortgage money is going to go up, and the availability of mortgage money may also be impinged," says Keith Gumbinger, vice president at HSH Associates, which tracks mortgage data.
The silver lining is that the rate for a 30-year fixed loan is hovering around 5% for those with good credit. That is up about a percentage point from last year's lows but is still an attractive rate by historical standards, though expected to keep climbing as the economy improves.
Home prices in some areas are still falling, but they are bottoming out or firming up in others. It may not be the perfect time to buy a home—but better mortgage options today may be a worthy trade-off to the possibility of lower prices tomorrow.
Still not convinced? Consider the following:
• New costs.Fannie Mae and Freddie Mac, which provide liquidity to the mortgage market by buying mortgages and selling securities backed by them, are adding new fees to loans to people with the best credit and raising existing loan fees. Freddie's new fees start March 1, while Fannie's kick in April 1.
Neither Fannie nor Freddie have been assessing fees on most loans for borrowers with credit scores above 720, even if the down payment was small. But citing a need to address risk and price their services appropriately, they will assess a fee of 0.25% to 0.5% of the loan value on borrowers with credit scores of 720 or higher who put down less than 25% of the purchase amount. The current fee for those with credit scores of 700 to 719 who put down less than 20% of the purchase price will double to a full percentage point of the loan value from half a point.
Brokers expect the higher fees will translate into slightly higher mortgage rates.
In addition, the Federal Housing Administration, saying it needs to bolster its capital reserves, is raising its required annual mortgage-insurance premium for FHA loans by 0.25% of the loan value. As a result, FHA loans—which are aimed at first-time home buyers and those with moderate incomes—will include an upfront mortgage insurance payment of 1% of the loan amount and an annual premium of 1.1% to 1.15% when the increase goes into effect on April 18.
For regular loans, private mortgage insurance—which is required when you put down less than 20% of the home's value—is tougher to get than it once was. Generally, it is available only for buyers who make a down payment of at least 5% and have a credit score of 700 or higher.
• Dodd-Frank fallout. The Consumer Financial Protection Bureau, established by the Dodd-Frank financial overhaul, opens its doors for business in July and is expected to take a close look at how interest rates and closing costs are disclosed to borrowers. That could create new costs that lenders are likely to pass along to consumers. In addition, a Federal Reserve rule that takes effect April 18 will change how mortgage brokers are paid, a move intended to curb practices such as steering home buyers to higher-cost loans.
The new rules, which limit the kinds of compensation brokers can receive, have brokers in a tizzy. The brokers claim the changes will raise mortgage costs and put some of them out of business, shrinking the market. How it will play out isn't clear, but given both the changes and the Fannie and Freddie pricing, mortgage prices may vary more than usual, say those in the industry—making it wise for borrowers to shop for rates even more aggressively.
• More restrictions. Earlier this month, the Obama administration proposed a wide-ranging overhaul of the mortgage market, including phasing out Fannie Mae and Freddie Mac, requiring a down payment of at least 10% and reducing the share of FHA loans, which are almost 30% of the market now, up from a historical market share of 10% to 15%.
In addition, the administration recommended letting Fannie and Freddie loan limits for high-cost areas fall back to $625,500. The limits were temporarily increased to $729,750 in 2008 when the market for "jumbo" loans—those above the loan limits—all but disappeared, and that increase is now scheduled to expire Sept. 30. (The $417,000 loan limit for homes in most other markets would remain the same.)
What those proposals will mean depends on where you live. In Manhattan, where the average home price is still around $1 million, a drop in the loan limit means more buyers will need jumbo mortgages, says Melissa Cohn, CEO of Manhattan Mortgage Co. Those currently have rates that are about half a percentage point higher than conventional loans.
Richard Peek, president of the Florida Association of Mortgage Professionals, says much of his business right now is in FHA loans, which allow down payments of as little as 3.5%. Requiring a 10% down payment, he says, would put homes out of reach for many Florida customers.
—karen.blumenthal@wsj.com
Write to Karen Blumenthal at karen.blumenthal@wsj.com
From: http://online.wsj.com/article/SB10001424052748704520504576162632959543492.html
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