New FHA rules created to protect at-risk homeowners

WASHINGTON – July 1, 2016 – HUD announced changes to its Distressed Asset Stabilization Program (DASP), which sells severely delinquent FHA mortgages to private investors. HUD says the new rules should protect homeowners from “payment shock.”

According to HUD, “certain families with distressed mortgages insured by the Federal Housing Administration (FHA) may soon be eligible for a reduction of their outstanding loan amounts should their mortgages be sold through DASP.”

On average, mortgages sold through DASP are 29 months delinquent at the time of the auction.

Additional details on the latest enhancements are posted on HUD’s website.

“While thousands of homeowners avoided foreclosure through this note sales program, we continue to explore new ways to help these families and to offer more opportunities for public-minded organizations to have a seat at the table,” says Ed Golding, HUD’s Principal Deputy Assistant Secretary for the Office of Housing.

FHA’s new DASP enhancements include:

  • Principal reduction/capital arrearage forgiveness
    Principal forgiveness is the first option investors must consider when evaluating borrowers for a modification
  • Payment shock protection
    FHA will limit interest rate increases to no more than one percent per year after a five-year period where the rate is fixed
  • Walk-away prohibition
    FHA prohibits any purchaser of single-family mortgages under DASP from abandoning lower value properties in order to prevent neighborhood blight
  • Alternative bidding for non-profit buyers
    Qualified non-profit organizations may now bid on a partial pool of notes – up to five percent of a National Pool – and to pay the reserve price. This offers another opportunity for non-profit organizations and local governments to participate in DASP, HUD says
  • Streamline direct sales to government entities
    FHA is providing new standard guidance on the sale of distressed mortgages directly to qualified government entities and local governments
  • Target loans for DASP sales based on the non-profits and local governments
    FHA says it will enhance its efforts to identify and offer loans in targeted distressed areas to non-profits and local governments

FHA strengthened DASP last year, too. It expanded a foreclosure moratorium from six-to-12 months, requiring purchasers of these distressed mortgages to suspend any foreclosure action. It also provided advanced notice of pending sales and extended the due diligence periods; offered a “first look” opportunity for non-profits to purchase vacant properties; and created specific pools of mortgages exclusively for non-profit organizations and local governments.

© 2016 Florida Realtors®

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Buy vs. rent: 5 things to consider

PITTSBURGH, Pa. – July 1, 2016 – Buying a house is the largest investment most people ever make, and it’s not a decision you should enter into lightly, say personal finance experts at the Pennsylvania Institute of Certified Public Accountants. If you’re considering making the leap from renter to owner, there are some things you should consider.

Where you are
A 2016 study from the National Association of Realtors found that more than one-third of all homebuyers are 35 and younger. While people five or 10 years older might still be recovering from the housing crash, millennials seem ready to start a new chapter in their lives. And this group may be onto something.

In 70 percent of the major markets across the nation, buying beats renting in less than two years. A Zillow analysis of rent vs. purchase costs found that it takes an average of 1.9 years to break even on a home purchase. In larger cities, you would need to live in a home for three years or more to break even on comparable rent, but that number drops to 1.5 years or less in Cleveland, San Antonio, Kansas City, Houston, Atlanta, Detroit and Indianapolis.

When to buy
A study from Black Knight Financial Services analyzed national price appreciation and household income. Today, 21 percent of median income is required to purchase a median-priced home with a 30-year fixed-rate mortgage. Considering the current rate of home price appreciation, combined with a 0.5 percent annual increase in mortgage interest rates, it may become more difficult.

If home prices and interest rates continue to rise at the same pace, the average monthly payment on the median home will rise by $114 within 12 months and would be $240 more per month in 24 months.

How long to stay
House prices fluctuate year to year. And you’re leveraged when you buy, so a price drop of just 5 percent could mean a huge loss if you have to sell. However, if you own for five or more years, there’s much less risk. Home prices are more likely to move at least a bit higher over longer periods of time. And you’ll have built up more equity in your home by paying down the mortgage over five years that will cushion you against a drop in prices.

Affordability
CPAs advise not spending more than 28 percent of your gross pretax income on your monthly housing payment. Another rule of thumb is that your combined debt (housing expenses, credit cards, student loans, alimony, car loans, etc.) should be between 30 percent and 40 percent of your pretax income.

Costs of remaining a renter
Renters aren’t immune from price increases. If you live in a popular neighborhood with no rent control, your rent is most likely to rise over time. A fixed-rate mortgage won’t increase, and you will build equity if you own rather than rent. Also, there aren’t any tax write offs available to renters; your landlord generally gets those honors.

When you sit down and crunch the numbers, does it make more financial sense to buy or rent? There are many free calculators online to help you create and analyze different financial scenarios. If now isn’t the right time, you can continue to save for a downpayment until you’re ready.

A CPA can help
As a trusted, independent financial advisor, a CPA understands the different options available to you.

Copyright New Pittsburgh Courier Jun 8-Jun 14, 2016

 

‘Jumbo’ mortgages now cheaper than smaller loans

NEW YORK – July 1, 2016 – Banks will give you a better interest rate if you buy a more expensive and, presumably, bigger home.

The interest rate on a 30-year jumbo loan currently stands at 3.71 percent – a notch below the rate for a “conforming” mortgage, which weighs in at 3.73 percent, says Greg McBride, senior vice president and chief financial analyst for Bankrate.

The lower rate on jumbo mortgages is a reversal from the typical trend over the years, in which banks have charged higher interest rates for larger loans on the theory that they are inherently riskier.

However, the two rates “have gradually compressed over a couple of years,” McBride notes. “About 12 months ago, they flipped.”

Jumbo rates spiked during the Great Recession, rising to more than 1.5 percentage points higher than conventional, conforming loans before settling out one percentage point higher around 2011, according to HSH, an online mortgage resource site.

While smaller, conforming loans are backed by federal mortgage giants Fannie Mae and Freddie Mac, jumbos are not, which makes them inherently riskier to banks. However, conforming loans have become relatively more expensive for banks to offer. That forces them to charge somewhat higher rates compared to jumbos.

Bankers have also determined that while jumbo loans may be bigger, the more affluent homebuyers who take out jumbos are better bets overall, with lower default rates. As a result, lenders feel less pressure to include the cost of future foreclosures in the cost of a jumbo mortgage.

Source: Boston Globe (06/28/16)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

Average rate on 30-year mortgage falls to 3.71%

WASHINGTON (AP) – March 24, 2016 – Average long-term U.S. mortgage rates declined this week after three straight weeks of increases. The decline could be a spur to prospective buyers as the spring homebuying season gets started.

Mortgage buyer Freddie Mac said Thursday the average rate on a 30-year, fixed-rate mortgage slipped to 3.71 percent from 3.73 percent last week. The benchmark rate is above the 3.69 percent level it marked a year ago.

The average rate on 15-year fixed-rate mortgages eased to 2.96 percent from 2.99 percent last week.

After the Federal Reserve’s decision last week to keep a key interest rate unchanged in light of global economic pressures, prices of U.S. government bonds have risen sharply. That has pushed down the yields on the bonds, which mortgage rates follow.

The yield on the 10-year Treasury bond stood at 1.87 percent Wednesday, down from 1.91 percent a week earlier. The yield declined further to 1.85 percent Thursday morning.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year loan also held steady, at 0.4 point.

Rates on adjustable five-year mortgages averaged 2.89 percent this week, down from 2.93 percent last week. The fee remained at 0.5 point.

Copyright © 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Buyers seeking a lower-end home? Good luck!

NEW YORK – March 16, 2016 – The number of homes for-sale below $100,000 plunged 8.6 percent in January compared to a year earlier. As more first-time homebuyers step into homeownership, lower-priced homes are increasingly difficult to find in many areas.

On the other hand, luxury home buyers are finding more to choose from: homes above $1 million increased 15 percent year-over-year, according to housing data from the National Association of Realtors®.

“The lower the price, the smaller the growth in the number of homes on the market,” The Wall Street Journal reports. “Lower-priced homes [are] selling quickly even as inventory of expensive ones piles up.”

High-end buyers, on the other hand, are more sensitive to stock-market changes and some may be delaying purchases recently – which may explain, at least in part, why inventory is rising in the higher brackets, analysts note.

“In certain price points, it’s really tough for buyers right now. There’s limited inventory and lots of demand,” says Alec Traub, a Los Angeles real estate professional.

In the Phoenix area, for example, real estate pro Cami Elliott says that a buyer she recently assisted had more than 45 potential homes to view in the $750,000 range. But buyers looking for a home close to $400,000, only had about three or four options.

Overall, the housing market nationwide has about a four-month supply of existing homes for sale, according to NAR. Most economists consider six months to be a more balanced, healthy housing market.

Source: “Housing Market Takes on Split Levels,” The Wall Street Journal (March 9, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688
Related Topics: Trends

Where are the nation’s second homes?

WASHINGTON – March 14, 2016 – The nation’s second-home stock rose to 7.5 million in 2014, estimates the National Association of Home Builders (NAHB) – up 0.6 million second homes from 2009, when NAHB Economics last produced its estimate of the market.

Second homes now account for 5.6 percent of the nation’s total housing stock, up from 5.4 percent.

The county with the most second homes was Maricopa County, Ariz., with 118,282, but the next four counties were Florida ones: Palm Beach County was second with 98,627 second homes, followed by Lee County with 93,152, Broward County with 92,907 and Miami-Dade County with 88,940.

In addition, Pinellas County, Fla., ranked seventh with 65,867 second homes and Collier County, Fla., placed ninth with 61,905.

Source: RISMedia (03/13/16) Zhao, Na

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

It’s not a housing bubble: 3 reasons

WASHINGTON – March 17, 2016 – Home prices are rising three to four times faster than wages, and credit conditions are loosening, say Lawrence Yun, chief economist for the National Association of Realtors®. Those conditions usually prompt housing analysts to start uttering the words “housing bubble,” but Yun discounts those warnings.

“Even though the credit conditions appear to be easing somewhat, the move is from overly stringent conditions to not-so-overly-stringent conditions,” Yun writes on Forbes.com. “It is a far-fetched view to imply the current mortgage approval process in any way resembles the loosey-goosey, easy subprime mortgage access conditions of a decade ago.”

Reason one: Mortgage credit scores today aren’t anywhere near where they were during the housing bubble. Today, approval scores average about 740 to 750 compared to 710 to 720 during the housing crisis, according to Fannie Mae data.

Reason two: The no-doc requirements for subprime mortgages of yesteryear are nearly gone today.

Yun also says that while home prices are rising above wages, low mortgage rates have been a silver lining.

“For someone making a 20 percent downpayment, the monthly mortgage payment at today’s mortgage rates would take up 15 percent of a person’s gross income,” Yun writes. “During the bubble years, it was reaching 25 percent of income.”

Reason three: Yun says experts can squash bubble fears by just looking at the housing supply. Inventories are at about four to five months today, which is similar to the bubble years.

However, sales aren’t moving at the same pace. Existing-home sales and new-home sales combined were at 8.4 million back then. In 2015, combined home sales were 5.76 million – about one-third lower.

A limited supply of for-sale homes is mostly behind the latest home-price increases, Yun says.

“We are not in a housing market bubble in terms of an inevitable impending home-price crash,” Yun says. “Rather, we are facing an above-normal home-price growth trend, which admittedly is unhealthy on several levels because of the simple economic law of insufficient supply. We need more homebuilding.”

Source: “Are we Entering a New Housing Bubble?” Forbes.com (March 14, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

Hispanic ownership rate up for first time in 6 years

WASHINGTON – March 18, 2016 – According to a report released by the Hispanic Wealth Project and the National Association of Hispanic Real Estate Professionals (NAHREP), the Hispanic homeownership rate rose in 2015 for the first time since 2009.

According to the State of Hispanic Homeownership Report, the Hispanic homeownership rate averaged 45.6 percent last year, up 0.2 percent from 2014. However, a comparison of year-to-year December numbers found that the rate surged from 44.5 percent in 2014 to 46.7 percent in 2015 – the biggest one-year gain in over a decade.

“Policymakers and the housing industry need to recognize that the face of homeownership in America has changed, and it is in everyone’s interest to ensure that these new consumers have access to relevant lending products, affordable housing stock, and culturally competent service providers in the coming years,” says NAHREP President Joseph Nery.

Meanwhile, “The Latino community is massive, it’s ready to own, and it’s now,” says Mortgage Bankers Association President and CEO David Stevens notes. “The significance of Hispanics to housing and the economy will only grow, creating opportunity for all who focus on this vibrant, dynamic and impactful part of the U.S. economy.”

Source: RealtorMag (03/16/2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

Buyers seeking a lower-end home? Good luck

NEW YORK – March 16, 2016 – The number of homes for-sale below $100,000 plunged 8.6 percent in January compared to a year earlier. As more first-time homebuyers step into homeownership, lower-priced homes are increasingly difficult to find in many areas.

On the other hand, luxury home buyers are finding more to choose from: homes above $1 million increased 15 percent year-over-year, according to housing data from the National Association of Realtors®.

“The lower the price, the smaller the growth in the number of homes on the market,” The Wall Street Journal reports. “Lower-priced homes [are] selling quickly even as inventory of expensive ones piles up.”

High-end buyers, on the other hand, are more sensitive to stock-market changes and some may be delaying purchases recently – which may explain, at least in part, why inventory is rising in the higher brackets, analysts note.

“In certain price points, it’s really tough for buyers right now. There’s limited inventory and lots of demand,” says Alec Traub, a Los Angeles real estate professional.

In the Phoenix area, for example, real estate pro Cami Elliott says that a buyer she recently assisted had more than 45 potential homes to view in the $750,000 range. But buyers looking for a home close to $400,000, only had about three or four options.

Overall, the housing market nationwide has about a four-month supply of existing homes for sale, according to NAR. Most economists consider six months to be a more balanced, healthy housing market.

Source: “Housing Market Takes on Split Levels,” The Wall Street Journal (March 9, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

Do buyers like the new mortgage disclosure rules?

SAN DIEGO – March 16, 2016 – A survey of people who bought two homes – one before new truth-in-lending disclosure rules went into effect in October 2015 and one after – found that the lending process is easier to understand, but it’s tougher to complete.

ClosingCorp conducted the survey of repeat buyers to find out how the new TILA-RESPA Integrated Disclosure (TRID) rule impacts the customer experience in getting and closing a residential mortgage.

Major findings

64 percent of respondents said it was easier getting a mortgage under the old pre-TRID rules
70 percent, however, said that the actual closing day was faster post-TRID; 19 percent said it was about the same; 11 percent said it was slower
In terms of the time it took to get and close a mortgage, 57 percent said it took more time post-TRID
63 percent said that the new “Know Before You Owe” forms for loan estimates and closing disclosures were easier to understand.
68 percent said the new forms did a better job preparing them for the closing costs; only 6 percent disagreed
65 percent said costs and fees were “explained better” post-TRID
51 percent, however, said there were more “unexpected costs, fees and surprises” post-TRID
Respondents highlighted one consumer benefit with the new TRID disclosures: The ability to shop for service providers, such as title companies, inspectors, pest services, etc.; 78 percent said they were informed about this option, and 74 percent took advantage of it
55 percent of buyers said they saved money post-TRID due to the ability to shop around for services
Of the respondents, more women (61 percent) said they weren’t told they could shop around for services than men (39 percent)
“There’s been a lot of speculation about TRID’s impact and its value to consumers,” says Brian Benson, chief executive officer of ClosingCorp. “Our new study of consumers who have bought homes and gotten mortgages both the new and the old way suggests that TRID is making it easier for consumers to understand the costs and fees that they’ll face at closing – but at the same time, the new rules are adding time and anxiety to the closing process.”

According to Benson, “The findings suggest that our industry has more work to do to get comfortable with the TRID forms and processes, and to educate consumers and their advisors.”

© 2016 Florida Realtors®