FHA to Increase Mortgage Insurance Premiums

As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante today announced a new premium structure for FHA-insured single family mortgage loans. FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75 percent. These premium changes will impact new loans insured by FHA beginning in April and June of 2012. Details will soon be published in a Mortgagee Letter to FHA-approved lenders.

The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012. The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.

FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month. These marginal increases are affordable for nearly all homebuyers who would qualify for a new mortgage loan. Borrowers already in an FHA-insured mortgage, Home Equity Conversion Mortgage (HECM), and special loan programs outlined in FHA’s forthcoming Mortgagee Letter will not be impacted by the pricing changes announced today.

Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013.

If you have any questions, please call or text Scott Groves at (818) 679-5188

A Great Website

I came across a great website, the site is http://www.lahomesource.com/ 

The site has a little bit of everything so you can find whatever you are looking for. As a blogger, I really like the blogs about the real estate industry. With great posts like “Ever felt like your real estate professional was not telling you the whole truth?” and “The Open House Myth,” you can’t go wrong. Check it out!

Fewer Foreclosures Could Mean Lower Home Prices

I found another great article, this time by Diana Olick at CNBC.

For years now we have been harping on how distressed home sales put downward pressure on home prices all around them.

Close to twelve million borrowers are now in a negative equity position on their homes because so many other borrowers were unable to afford their mortgages. The logical assumption would then be that as foreclosures ease, organic home prices will rebound.

But what if the current, unique state of the housing market turns that assumption on its head?

Foreclosure sales now make up a full one third of the market nationally and far higher percentages in states like California, Florida, Nevada, and Georgia.

The supply of these properties has actually been dropping, pushing prices higher, even in the distressed category. There is huge investor and first-time home buyer demand for distressed properties at the low end of the market, and that has helped stabilize prices.

“We believe the distressed part of the housing market has already bottomed,” said Morgan Stanley analyst Oliver Chang on CNBC’s Squawkbox. “The bid that we see from the investor is the reason for this bottom.”

He sees further declines in organic home prices.

Why?

Banks have been very slow to release their repossessed (REO) inventory onto the market, not to mention that foreclosure processing delays have literally millions of properties still sitting in foreclosure limbo.

There is a dwindling supply of foreclosures and rising investor demand. Analysts keep pointing to overall falling inventories, but the current existing home sales pace doesn’t account for that drop.

The fact is that with so much of the supply distressed, and so few organic sellers putting their homes up for sale, the inventory drop is artificially skewed to the recent lack of movement in foreclosures and a crisis of confidence among potential organic home sellers.

Okay, so what about the fact that banks are ramping up the process now, which could put more properties on the market? That could boost supply, were it not for a new government program to sell foreclosures in bulk to large investors.

Chang says over $1 billion in investor capital has been raised over just the past six weeks to take advantage of this new program, and he claims this could add up to 1.8 million jobs. Property managers, renovators, rental agents, he says would benefit from these bulk rental investments.

Mortgage analyst Mark Hanson, however, disagrees.

He claims that individual investors will likely spend more on upgrades/renovations than bulk investors and will then sell to owner-occupants at a higher price, thereby not only stabilizing but increasing overall home values, while also juicing jobs.

“Due to epidemic effective negative equity (not having enough equity to pay a Realtor and put a down payment on a new house) the repeat buyer cohort has been cut in half since 2007. They now make up the minority of national resales,” says Hanson.

“Investors and first-time buyers ARE the real estate market,” he adds. “Investors and first timers want REO and short sales. Anything done to prevent the flow of distressed property will hurt the volume of existing home sales and all of the economic benefit that comes along with them. An REO-to-rent program will bring about record lows in monthly existing home sales volume. And volume precedes price.”

Hanson believes that when the distressed supply is choked off, by selling REO in bulk to rent, not re-sell, then the only thing you have left is meager organic sales.

“The housing market will implode,” he adds.

Yes, lower supply, in a normal market, would generally mean a return to home price appreciation, but that’s not the way today’s market is working because organic demand is still so weak and is hampered by tight credit.

There is even less demand for mid- to higher-priced homes.

“$200K to $300K is the new normal for home builders,” says Rick Palacios of John Burns Real Estate Consulting. “Since new home prices peaked in 2007, new single-family sales of over $500K have been more than cut in half, dropping from 13% to just 6% of all new home transactions.

The existing home market is much the same, with the bulk of sales and demand in the very low price tiers. It just goes to show that in the historic recovery from an historic housing crash, the usual rules just don’t apply.

If you have any questions about this or any other mortgage questions, please call or text Scott Groves at (818) 679-5188

Easier Mortgage Statements On The Way

Your monthly mortgage bill soon could get easier to understand, and it wouldn’t change each time your loan is sold to a new servicer.

The Consumer Financial Protection Bureau has developed a proposed standardized mortgage servicer statement designed to provide clear information about the loan on a single page.

The prototype released Monday included a breakdown of how much of the monthly payment went to principal, interest and escrow. The form also detailed the outstanding principal, maturity date, prepayment penalty and, for adjustable-rate mortgages, the time when the interest rate could change.

The agency posted a working draft of the standardized statement on its website, http://www.consumerfinance.gov

If you have any questions please either call or text Scott Grovesat (818) 679-5188

Banks pay delinquent borrowers to sell their homes

I found this article which I thought was interesting by  Les Christie at CNNMoney.com.

 In an effort to cut their losses, banks are paying some struggling homeowners as much as $35,000 to sell their homes before they end up in foreclosure.

The deals are aimed at incentivizing homeowners who owe more on their home than it is worth and who are seriously delinquent on their payments to sell their homes in a short sale.

This new approach by the banks has startled plenty of homeowners, according to Elizabeth Weintraub, a Sacramento-area real estate agent who specializes in short sales.

“Initially, the homeowners are skeptical,” she said. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.’”

When Chase Mortgage (JPM, Fortune 500) told Angelique Pierce, that she would receive a check for $25,000 if she sold her house, she couldn’t believe it.

“I got the offer in the mail,” said the Rancho Cordova, Calif. resident. “I called my bank to ask if it was real.”

After Pierce became disabled a few years ago and had to stop working work, she fell behind on payments on both her first and second mortgages, valued at $250,000 and $50,000, respectively.

Now, she’s trying to sell her three-bedroom ranch for just $95,000 — almost half of the $179,000 she paid for the place in late 2002.

From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.

“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” said John Hayton, a short sale specialist in Orlando, Fla, who has had a number of clients receive offers from the banks.

Short sales also command higher prices than foreclosed homes. In December, foreclosed properties sold for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors.

All that has been true for years, but it is only lately that these outsized incentives, which Bloomberg recently reported on, have surfaced.

Sellers are more cooperative when they’re going to receive a five-figure check for their troubles.

Nick Chaconas, an agent with discount broker Redfin, wondered why one seller was so anxious to sell their home. “Since I represent the buyer, I didn’t even know about the incentive until the closing,” he said.

It turned out that the seller’s bank was writing her a check for $30,000.

Whether sellers can expect incentives from their banks depends on multiple factors, including where they live.

Wells Fargo (WFC, Fortune 500) limits its offers to certain states, such as Florida, where the foreclosure process can be lengthy, according to spokeswoman Veronica Clemons. The bank has paid $10,000 to $20,000 to borrowers who short sell or transfer their title to Wells via a deed-in-lieu.Bank of America (BAC, Fortune 500) had a pilot program in Florida that paid incentives of $5,000 to $20,000 for sales that were initiated between Sept. 26, 2011 and Nov. 30, 2011 and close by the end of this August. The amount of the incentive is based on 5% of the unpaid balance, with a $5,000 minimum and $20,000 maximum.

If you have any questions, please call or text Scott Groves at (818) 679-5188