Market News in Real Estate

The Los Angeles Times Reports
Shopping for a loan? A good faith estimate will protect you.
Beginning Jan. 1, the Dept. of Housing and Urban Development (HUD) required lenders to issue Good Faith Estimates to protect consumers applying for mortgage loans. Some loan officers, however, sidestep the new requirement by giving their initial quotes on informal worksheets that carry no federal consumer protections. It is important that consumers understand the differences between the federally mandated good faith estimate form and a lender’s informal worksheet.

Keep this in mind. . .

• Last month, HUD told lenders and loan officers that under no circumstances can worksheet quotes be issued to a mortgage applicant in lieu of a good-faith-estimate form.Under the new law, once a mortgage applicant supplies the essential application information, including Social Security number, property address, and estimated value, among other data, lenders must issue a binding-cost good-faith estimate. Once this information is provided, lenders are required to issue the good faith estimate within three days of the application.
• Under the new law, once a mortgage applicant supplies the essential application information, including Social Security number, property address, and estimated value, among other data, lenders must issue a binding-cost good-faith estimate. Once this information is provided, lenders are required to issue the good faith estimate within three days of the application.

• Loan officers cannot refuse to provide a good faith estimate to an applicant who requests one, nor can they tell applicants that they must commit to moving forward with their mortgage company to obtain a mortgage prior to receiving a good faith estimate.

• Once an applicant has received a good faith estimate, they can take the form with them to comparison shop. The new form includes itemized boxes allowing mortgage applicants to compare quotes from up to four lenders, such as interest rates, loan fees, prepayment penalties, and total settlement expenses.

• The good faith estimate also ties upfront estimates to later charges at closing, and encourages borrowers to check line by line for any discrepancies. The form explains which fees come with zero tolerance for changes between upfront estimates and closing—generally the lender’s own fees and local transfer taxes—and which fees allow a 10 percent fluctuation for changes higher than the estimate, such as certain title and closing-related services.
• Some worksheets resemble good-faith estimates, but have titles such as “estimated settlement costs” at the top of the page. Others indicate on the bottom of the form that the worksheet is not a good faith estimate, so consumers should carefully review documents before making any decisions.

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The Mercury News Reports
Refi program for underwater homeowners gets another year.
The government is giving homeowners another year to refinance their loans under a little-used program designed to help borrowers whose homes have plummeted in value.

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Bloomberg News Reports
Home prices decline 1.2 percent, smallest drop in two years.
U.S. home prices fell 1.2 percent in the fourth quarter from a year earlier, the smallest loss in two years, as a federal tax credit for home buyers boosted demand.

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The Wall Street Journal Reports
Bid to curb mortgage tax break falters.
The latest effort to scale back some tax deductions on mortgage interest, one of the nation’s most-enduring tax breaks, is finding little support in Congress.

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The Los Angeles Times Reports
Many borrowers in default stay put as lenders delay evictions.
Despite being months behind, many strapped residents are hanging on to their homes, essentially living rent-free. Pressure on banks to modify loans and a glut of inventory are driving the trend.

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The New York Times Reports
Another foreclosure alternative.
Homeowners on the verge of foreclosure will often seek a short sale as a graceful exit from an otherwise calamitous financial situation. Their homes are sold for less than the mortgage amount, and the remaining loan balance is usually forgiven by the lender.

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The Washington Post Reports
Consumer optimism seen with January rise in spending.
Perhaps the lessons of the Great Recession are not so deep-seated after all. Consumers spent more and saved less in January, according to government data released Monday, a sign that Americans feel increasingly secure about their financial situation, economists said.

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The Wall Street Journal Reports
Freddie Mac abandons ship on interest-only loans.
Freddie Mac said on Friday that it would stop buying and securitizing interest-only loans in September because those mortgages have performed so poorly.

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The Mercury News Reports
Increasing numbers of Californians are suing lenders to avoid foreclosure.
In the last five years, the number of foreclosure lawsuits filed in federal courts in California has ballooned—like an exploding adjustable-rate mortgage—from only 29 statewide in 2005 to nearly 1,400 last year.

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What you should know about the market. . .

• When house hunting, first-time buyers are advised to create long-term budgets to help estimate costs of homeownership. Items such as taxes, insurance, utilities, closing costs, appraisal fees, escrow fees, homeowner’s insurance fees, and moving costs should be included in the budget.

• A common mistake many home buyers make is being too close-minded while searching for a home. To avoid this, home buyers should sit down with their REALTOR® and create a needs/wants list. Thelist should include items that are must-haves or deal-breakers, as well as those that are not necessary, but would be nice to have in the home.

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Market News in Real Estate

Harder to get an Uncle Sam mortgage (CNN Money)
Rising defaults on loans insured by the Federal Housing Administration (FHA) have led the agency to impose future policy changes to its home loan program.   The FHA provides mortgage insurance on loans made by FHA-approved lenders. Borrowers must meet certain requirements established by the FHA to qualify for the insurance, but lenders bear less risk because the FHA will pay the lender if a homeowner defaults on his or her loan.

Keep this in mind. . .

• The FHA is federally mandated to maintain reserve funds at 2 percent or greater. As of November, the agency reported that its fund had declined to .53 percent. The funding is used to cover losses on mortgages insured by the FHA that go into default.

• Loans insured by the FHA generally are less expensive to borrowers because of the lower down payment requirements. However, these loans also have fees, such as up-front mortgage insurance. To help the agency raise its cash reserves, the FHA is increasing the up-front mortgage insurance premium from its current 1.75 percent to 2.25 percent. HUD released a Mortgagee Letter today making the premium increase effective in the spring.

• The agency also is raising the minimum credit score requirements. Currently, borrowers with FICO scores as low as 500 have been approved for FHA-insured loans. Under the policy changes, new borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer once it passes the normal regulatory process.

• The new policy also will reduce the amount of money sellers can provide to home buyers at closing to 3 percent, down from its current 6 percent, of the home’s price. The change brings the agency in line with industry standards and removes the incentive to inflate appraisals. The FHA expects this to take effect in early summer after it passes the normal regulatory process.

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You can’t file for your $8,000 home buyer tax credit (CNN Money)
Did you purchase a home after Nov. 6? Don’t expect your $8,000 home buyer tax credit any time soon.

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What home sellers don’t tell buyers (The Wall Street Journal)
As buyers ease back into the battered real-estate market, they’re often hitting a stumbling block: Fibbing by home sellers.

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Government mortgage plan aids 7 percent of borrowers (CNBC)
The Obama administration’s mortgage relief plan provided help to only 7 percent of borrowers who signed up last year, another black mark for the struggling program.

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Low rates for just a few (The New York Times)
Mortgage borrowers might be forgiven for sometimes feeling like victims of a bait-and-switch scheme

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Investors dominate home flipping, auctions (San Francisco Chronicle)
House flipping, a quick-buck scheme pursued by amateurs and professionals alike during the real estate boom,
now is dominated by investors willing to pay all cash, who troll auctions for foreclosures that banks are
gradually trying to siphon off their books.

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Rates on 30-year home loans fall to 4.99 pct (Sacramento Bee)
Rates for 30-year loans fell to a shade below 5 percent this week, but remained above last month’s record
lows.

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Home loan applications jump 9 percent as interest rates fall (Los Angeles Times)
Applications for home loans jumped 9 percent last week as interest rates declined for all types of mortgages,
falling back to 5 percent for 30-year fixed loans, the industry trade association reported Wednesday.

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What you should know about the market. . .

• Customized rooms with extremely bright or dark colored paint, wallpaper, or wall fixtures can make a house feel like a home for the current homeowner, but often can be a turn off for home buyers. When selling a home, many REALTORS® recommend repainting rooms with neutral colors to help prospective buyers see the potential for the house.

• For homeowners who planned to overhaul the kitchen or bathroom with a major remodel but never found the time, there are some small, inexpensive changes that can be done. Replacing the hardware on cabinets, upgrading light switches, and changing outlet covers are a few examples.

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