The Gate Arty Blog - Mortgage and Finance Archive
January 2010 Foreclosure Report
Friday, February 12, 2010 - By Gate Arty
RealtyTrac reports that foreclosure rates fell in January compared to December, but remained sharply higher than a year ago. This is thought to be a temporary incident most likely a product of the holiday season & office closings. The number of Americans receiving foreclosure notices was down 9.7 percent in January from December 2009, but 15 percent higher than last January. All told, 315,716 properties generated a foreclosure notice. That means one in every 409 homes in America received a foreclosure notice. The top five states in foreclosures respectively are: Nevada, Arizona, California, Florida, & Utah. Which sate had the least? South Dakota is the winner. Foreclosures don't appaer to be going away anytime soon as a report found one in five US mortgages were “underwater" during the fourth quarter.
Tags: , foreclosure, real estate
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Facebook90 Day FHA Rule is Waived
Wednesday, January 20, 2010 - By Gate Arty
HUD has taken a major step to stabilize the real estate market by waiving the “90 day flip rule” effective February 1st, 2010. Currently, FHA prohibits insuring a mortgage on a home owned by the seller for less than 90 days. Originally the 90 day rule was put in place to protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at INFLATED prices to unsuspecting borrowers. This act will give FHA borrowers access to a broader array of recently foreclosed properties. The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. To qualify these conditions must be met:
• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
This waiver will be a major coup for real estate investors because the pool of available buyers is substantially increased. Before, investors had to wait 90 days before listing a property in MLS or hold a property for 90 days before selling to a FHA buyer – something most are unwilling to do because of holding costs & risks associated with delayed closings. This should be a major shot in the arm & should drastically reduce the “days on market” for home inventory.
Tags: buying, fha, home value, HUD, mls, mortgage, real estate. real estate investor, selling
Growing Number of Foreclosures
Tuesday, January 12, 2010 - By Gate Arty
Statistics from Lender Processing Services indicate that as of November 30th 2009, one in every 7.5 homeowners either fell into delinquency or foreclosure. The total number of delinquencies reached a record high of 9.97%, a 5.46% increase from the previous month and a 21.29% increase from November 2008. Loans falling into more severe delinquent categories reached 5.01% through November, compared to 1.52% of loans improved toward a current status. That's compared to November’s mortgage monitor report, when 4.02% of current mortgages through December 2008 fell into delinquency by October 2009. The states with the most non-current loans were Florida, Nevada and Mississippi. Those with the fewest were North Dakota, South Dakota and Alaska.
Vacancies Increase in 2009
Friday, January 08, 2010 - By Gate Arty
The apartment vacancy rate ended the year at 8%, the highest level since 1980. This according to Reis Inc., a New York research firm that tracks vacancies and rents in the top 79 U.S. markets. Rents fell 3% last year, according to Reis. Led by major metropolitan cities that experienced brisk growth until the recession. Effective rents -- which include concessions such as one month of free rent -- fell 5.6% in New York last year, the worst since Reis began tracking the data in 1990. Very few markets have been spared. During the fourth quarter, vacancies increased in 52 markets, while they improved in 17 and stayed flat in 10.
Apartments have been squeezed because younger workers, who are more likely to rent, have experienced the brunt of job losses during the downturn. Such oversupplied markets as Florida, Phoenix and Las Vegas are hurting, even though housing sales have picked up. Marcus & Millichap is to release a separate report on Friday that forecasts a further 2% to 3% drop in apartment rents over the next year, most of which will be concentrated over the next six months. One potential silver lining for apartment owners is the fact that many of those developments had secured financing before credit markets seized up, and since the credit crunch has frozen most new development, new apartment completions should fall by half in 2011. However, government efforts to prop up the housing market also threaten the apartment sector by making it easier for some renters to buy homes. Some landlords have reported a slight uptick in renters moving out to buy homes. Thanks to falling home prices and record low mortgage rates, it now costs less to own than it has in the past decade on a mortgage-payment-to-rent basis. But falling rents are expected to offset some of the recent improvement in affordability, making renting more attractive than owning in some markets
Tags: buy real state, construction, real estate, rent, sell real estate, vacancy
High-Water Mark for Foreclosures
Friday, October 16, 2009 - By Gate Arty
Foreclosures are at an ALL-TIME HIGH. In the 3rd quarter of this year 937,84 homes received a foreclosure letter. How do you put this in perspective? Well, that means that 1 in every 136 homes were in foreclosure. That’s a 5% increase from the 2nd quarter. It’s also a whopping 24% leap from this point in 2008! These numbers represent the worst 3 month stretch in terms of foreclosures ever. The foreclosure toll this year is reported to be 623,852 & climbing. Perhaps with these numbers on the rise, banks will begin being more cooperative with short-sales? Wouldn't that be rational? Either way, the real estate investors will be back in full-force to pick up REO properties & pre-foreclosures that are indeed priced to sell. Check out investing opportunities at MidFloridaREO.com.
High-End Mortgage Foreclosures
Tuesday, October 13, 2009 - By Gate Arty
Recent statistics have shown that the trend of foreclosures is now hitting the top-tier of mortgages. In June 30% of foreclosures involved homes that were in the top 1/3 of local residential values. When the foreclosure crisis began 3 years ago, this figure was around 16%. On the opposite end of the spectrum, the bottom 1/3 of the residential market only accounts for 35% of foreclosures now. This figure is way down from 55% in 2006.
Tags: finance, foreclosures, home values, mortgage, statistics
The Effect of the $8000 Tax Credit
Friday, September 18, 2009 - By Gate Arty
Has the $8000 home-buyer tax credit increased real estate activity? Well, based on a report from the Internal Revenue Service, over 1.4 million buyers have already claimed the new tax credit. The $8000 tax credit is available to home buyers that purchase a home between January thru December 1st, 2009 and you could not have owned a home for the three consecutive years prior to the purchase. . Unlike the $7,500 first-time homebuyer tax credit that could be applied to sales made between April 2008 and July 1 2009, this refund actually puts money DIRECTLY into consumers' pockets. 1.8 million people are expected to participate in the program by the time it lapses on 11/30/09.
Sale Increase 4 Straight Months!
Monday, August 24, 2009 - By Gate Arty
Existing home sales rose a whopping 7.2% in July to 5.24 million units. In June, there were 4.89 million units sold. This increase was the largest month-to-month gain in over 2 years! The percentage increase was the largest since 1999. This also marks 4 straight months that we have seen sales increases. Lawrence Yun, NAR chief economist, said, “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.” Remember that the $8000 stimulus tax credit runs through November so act NOW!
Foreclosure News - 2nd Quarter 2009
Thursday, August 13, 2009 - By Gate Arty
Foreclosures continue to be the driving force in today’s real estate market. In the 2nd quarter, foreclosures & distressed sales accounted for over a third of all sales! According to recent statistics, the rate of foreclosures jumped another 7% in July from June. This also represents a 32% increase from the same time period last year. More than 360,000 homes with mortgages received foreclosure filings in July. This was the highest point since January 2005. California, Florida, Arizona, & Nevada accounted for an astounding 57% of July foreclosures nationwide! Many factors contribute to the tidal wave of foreclosures like: tighter lending guidelines & unemployment, but chiefly responsible is the negative home equity that many homeowners now have. Many homeowners are finding it “easier” to go into foreclosure than ride out the market waiting for values to rebound or restructure the loan.
Homes Sales Increase Again
Thursday, August 13, 2009 - By Gate Arty
Homes sales increased 3.8% in the 2nd quarter of 2009 from the 1st quarter. The annual adjusted rate was 4.76 million in the 2nd quarter & 4.58 million in the first quarter. What is accounting for this rise in activity? No doubt, the great values in the housing market are beginning to capture the attention of prospective home buyers. The $8000 tax credit that will expire on November 30th is also a major motivation. The median sales price in the first quarter was $174,100, which represents a decrease of 16% below this time one year ago. “With low interest rates, lower home prices and a first-time buyer tax credit, we’ve been seeing healthy increases in home sales, which are a hopeful sign for the economy,” said Lawrence Yun, NAR’s chief economist.
Momentum for Home Sales
Tuesday, August 04, 2009 - By Gate Arty
The Natiional Association of Realtors has reported that the pending home sales index rose again for the fifth consecutive month. It rose 3.6% (94.6 from 91.3) in June from May. The pending home sales index tracks signed home purchase contracts and is considered a leading indicator of activity. What is driving this upward momentum? Simply put, distress sales (like short-sales) & foreclosures continue to drive real estate prices downward to levels where buyers can no longer ignore the values. Most people consider this a "once in a lifetime" buyer's market. Let's look at some of the positives: record low interest rates, $8000 tax government credit, large selection of properties available for sale, & discounted property values. The time to buy is NOW!
Neighborhood Stabilization Program
Wednesday, June 24, 2009 - By Gate Arty
The Obama administration has made up to $6 billion available for redevelopment of foreclosed homes & distressed properties. The Neighborhood Stabilization Program is intended to help communities that have suffered from foreclosures & abandonment, & the hope is that it will facilitate purchases & neighborhood revitalization. Nearly $4 billion of the proposed NSP funding will come from the Economic Recovery Act of 2008. Funds will be used for activities including: redevelopment of foreclosed residential properties, purchase of abandoned properties, demolition of properties, & financing programs. Current guidelines state that funds will go to households earning less than 120% of the median income of the area, with 25% of the funds going towards households earning less than half the median.
Home Sales Rise in May 2009
Tuesday, June 23, 2009 - By Gate Arty
The National Association of Realtors announced that existing home sales rose to 4.77 million units in May 2009. This represents a rise of 2.4% over from April. This is promising because it’s the second straight month that sales have risen, undoubtedly spurred by attractive mortgage interest rates. The NAR announced that this is the first month-on-month increase since August/September 2005. The total hosing inventory stood at 3.80 million units, which represents nearly a 9.6 month supply, down from 10.1 in April.
Foreclosure Property Search Made Easy
Friday, June 12, 2009 - By Gate Arty
When real estate is discussed nowadays, it seems as if the topics foreclosures & short sales are never far behind. Government and Bank-owned foreclosures offer tremendous home-buying opportunities for investors of all types. These foreclosures are called REO (Real Estate Owned) properties. These distress sales have the savvy investors licking their chops as property values are once again affordable, & instant equity is attainable on a large scale. Now the only challenge investors have is actually finding & identifying great values underneath the mountains of available homes for sale. Well, if you are searching for homes in Central Florida, a new website, midfloridareo.com, has made it easy. If you are considering buying an investment property, or simply looking for a good bargain, I suggest checking out this site.
National Real Estate Sales Increase Overall
Thursday, May 28, 2009 - By Gate Arty
The National Association of Realtors just announced that home sales rose a respectable 2.9% in the month of April from March. The increase can be attributed to the increased volume of sales in the “lower-end” market. I touched upon this in my last BLOG posting. The market for the “high-end” properties has been particularly slow. With the continued tightening of mortgage qualification standards, it is getting difficult to obtain “jumbo loans.” Jumbo loans are defined as those mortgages above $730,000. These loans accounted for over 17% of the mortgage market in 2007. Now they account for only 5%. Another contributing factor is that Fannie Mae & Freddie Mac cannot purchase jumbo loans. The chief economist at NAR, Lawrence Yun, has lobbied for the Federal Reserve to buy jumbo loans to restore liquidity in this segment of the market as well.
Market Activity Affected by Economy
Wednesday, May 27, 2009 - By Gate Arty
As the unemployment rate hovers around 9%, most economists expect that the rate of foreclosures will account for approximately 60% of mortgage defaults this year alone. The next wave of foreclosures is expected to include not only the “sub-prime” mortgages, but also those who have been traditionally financially healthy, but have been affected by job-loss. As a result of these foreclosures, housing prices are expected to decline overall. Do not expect to see price declines at ALL price points however. Many realtors have expressed that in some of the moderate price ranges, prices have become so attractive that buyers are jumping back into the fray in waves. In many instances buyers & sellers are once again involved in “multiple offer negotiations.” This has been scarce since the real estate boom of 2006. The home price decline that has resulted from the increasing number of foreclosures, tighter lending standards, & large supply of unsold inventory will eventually spur activity. With mortgage interest rates still at all-time lows, many buyers are viewing NOW as the time to act upon golden buying opportunities. According to Standard & Poor's/Case-Shiller Home Price Indices, home prices in the U.S. fell by 18.7% in March from a year earlier.
Tags: buying a home, economy, finance, home prices, mortgage, real estate, realtors, selling a home
Commercial Mortgages Down
Thursday, May 14, 2009 - By Gate Arty
The Mortgage Bankers Association’s (MBA) Quarterly Survey reports that commercial mortgage loan originations continued to drop in the first quarter of 2009. At this point, they are an astounding 70% lower than during the same period in 2008, and down 26% from the fourth quarter of 2008. The 70% overall decrease in commercial lending activity during the first quarter was driven by decreases in originations for all property types. When compared to the first quarter of 2008, the decrease included:
• 88% decrease in loans for hotel properties
• 80% decrease in loans for health care properties
• 76% decrease in loans for retail properties
• 66% decrease in loans for office properties
• 61% decrease in multifamily property loans
• 50% decrease in industrial property loans
Tags: commercial real estate, finance, mortgage
Mortgage Activity Strengthens
Friday, March 27, 2009 - By Gate Arty
Mortgage applications spiked last week as a result of the record low interest rates. This fueled demand for home refinance loans. Mortgage applications increased a whopping 32.2% for the week ending March 20th. Refinancing accounted for nearly 80% of all of these applications. Despite stricter lending guidelines, the majority of those that apply for a loan, still get approved. The Mortgage Bankers Association reported an approximate 60% approval rate. As a point of reference, in 2003 nearly 80% of applicants got their loans approved. OOPS!
At least activity is finally picking up . . .
Tags: finance, loan, mortgage application, refinance
Fannie Mae Loosens Up
Tuesday, March 10, 2009 - By Gate Arty
Effective March 1st, Fannie Mae (which guarantees approximately half of the $12 TRILLION of the United State’s mortgage market) loosened loan restrictions on real estate investors & secondary home buyers. This move is seen as a major coup for real estate investors that wanted back IN the real estate market, but were essentially locked out. The new guidelines allow these borrowers to obtain Fannie Mae-secured financing for up to 10 properties. Most recently the amended limit was only 4 properties. Meaning, if you had already four mortgages, you could not buy another property with Fannie-backed financing. In essence, making it nearly impossible to buy & borrow. There are, of course, stricter financial underwriting guidelines. Some things to expect are:
• No foreclosures or bankruptcies in the last 7 years.
• A minimum credit score of 720 when the four property threshold is exceeded.
• Heightened reserve requirements that are tied to the type of property being purchased. For example, a multi-family dwelling (duplex, triplex, etc.) would have stricter reserve requirements than a single-family home.
• A borrower MUST have at least 25% down on a second home & at least 30% down on an investment property.
In spite of these stricter guidelines, this is great news for professional real estate investors, and is a major step toward loosening the credit flow stranglehold on the housing market. Now Freddie Mac, the other major player & insurer of mortgages, needs to follow suit.
Citigroup Lowering Payments
Wednesday, March 04, 2009 - By Gate Arty
The national unemployment rate has climbed to 5.8%. Citigroup has announced however that it plans on lowering payments for those recently unemployed. The bank, which is now 36% owned by the federal government, established the Homeowner Unemployment Assist program, which will modify those who are unemployed and are 60 days behind on payments to an average payment of $500 for three months. Customers must have a loan that is owned and serviced by CitiMortgage to participate in the program.
Houses More Affordable Than Ever
Wednesday, March 04, 2009 - By Gate Arty
The National Association of Realtors has reported that the Housing Affordability Index jumped 13.6% in January to a record high of 166.8. Another sign that buyers bold enough to jump into the market will be rewarded. Not to mention the tax benefit they will receive for doing so prior to the end of the year! The aforementioned index measures the relationship between home prices, income, & mortgage interest rates. The index is the best it has ever been since monitoring of this relationship began back in 1970.
More Foreclosures
Wednesday, March 04, 2009 - By Gate Arty
National filings of foreclosure exceeded 3 million in the 2008. Sound like a lot? Let's put this into some context. That figure represents a staggering 81% increase from the already trying year in 2007. What's even worse that that is it's an astonishing 225% increase over 2006. If you are an investor looking for the "PERFECT" time to jump into the market, that time is NOW! With mortgage rates as low as they are, it is the perfect storm for the savvy investor or entrepreneur. The bold buyers must seize the opportunity because markets like this only come around once in a great while.
The "NEW" housing tax CREDIT
Tuesday, February 17, 2009 - By Gate Arty
The American Recovery and Reinvestment Act of 2009 is now in effect. A tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. Unlike the tax credit enacted in 2008, that offered a $7500 deduction that had to be repaid, the new $8000 figure credit does NOT have to be repaid. The high points of the tax credit are as follows:
- It is for first-time home buyers only. A first-time home buyer is defined as as a buyer who has not owned a principal residence during the three-year period prior to the purchase.
- This is a tax credit & does not have to be repaid. For example, If you owe $5,000 in taxes & qualify for the $8,000 credit, then you would get a REFUND of $3,000! A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. Windfall!
- The duration of this program is only for homes purchased between January 1st, 2009 to December 1st, 2009. Act NOW!
- There is an income imit. It is $75,000 for singles & $150,000 for married couple's combined incomes.
Keller WIlliams Realty Continues to Grow
Monday, February 02, 2009 - By Gate Arty
In an economic climate frought with foreclosures, credit crunch, bail-outs, & other negative news, it is nice to see that a company is outpacing its competitors & doing well. Keller Williams Realty, continues to outperform the market, remains debt-free, & profit-sharing more than $30 million to it's agents.
For the first 11 months of 2008, existing home sales for the United States fell 17% when compared to the same period the year before. Keller Williams Realty, however, is poised to outdo those numbers by 10 percentage points, and in addition, the company experienced a much smaller contraction in its agent base compared to the National Association of REALTORS®, who saw a 10% decline in membership.
Freddie Mac . . . your landlord?
Friday, January 30, 2009 - By Gate Arty
Freddie Mac announced today that it would permit homeowners who have lost their home to foreclosure to actually turn around and rent them back from Freddie Mac. "Keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in the housing market," said Freddie Mac CEO David Moffett.
Tags: foreclosure, freddie mac, real estate
Chase acquires Washington Mutual
Friday, September 26, 2008 - By Gate Arty
After months of speculation, Washington Mutual became the largest U.S. bank to collapse to date. Although WaMu shareholders have no reason to celebrate, those at JP Morgan Chase seized an opportunity. Chase bought WaMu’s $307 billion in assets and $188 billion in deposits for a mere $1.9 billion, which actually goes to the FDIC. The bank will also re-capitalize by selling some of its stock to raise $8 billion. JP Morgan Chase will now have 5,400 branches in 23 states. Wall Street’s reaction was positive on news of the acquisition, while shares advanced 10%. Investors believe the company continues to scoop up assets cheaply that will eventually provide substantial shareholder return. Once again, proving that those properly positioned in this market will succeed & seize investment opportunities. Top-to-bottom, investors large & small will buy assets that will eventually increase in value.
The Housing and Economic Recovery Act of 2008 & FHA
Wednesday, September 17, 2008 - By Gate Arty
The Housing and Economic Recovery Act of 2008 (HERA) is beginning to be implemented by FHA. As of October 1, 2008 HERA will mandate FHA to require a minimum of 3.5% in down payment, up from the current 2.25% down payment. Accordingly, mortgages with new FHA case numbers assigned on or after January 1, 2009, will require a down payment of 3.5% of the lesser of the appraised value or purchase price, PLUS ANY CLOSING COSTS TO BE PAID BY THE BORROWER. The seller will still be able to pay up to 6% of the sale price towards the borrowers closing costs and prepaids. FHA does allow gifts from relatives and government down payment and/or closing cost assistance (Keystone/SHIP), but no longer allows seller-funded down payment assistance (Nehemiah and Ameridream) as of October 1, 2008.
Asset Protection & the FDIC
Wednesday, September 10, 2008 - By Gate Arty
After the failure of IndyMac Bank, many people have wondered how safe their accounts really are. While the Federal Deposit Insurance Corporation (FDIC) guarantees most bank deposits, here are some important details to remember.
What types of accounts are covered?
The FDIC protects checking and savings accounts, certificates of deposits (CDs), Christmas club accounts, and money-market savings accounts. However, Stocks, Bonds, and mutual fund shares...even those purchased through an FDIC bank...are not protected.
What are the limits of FDIC insurance?
Bank accounts that have less than $100,000 in them and certain retirement accounts (IRAs held in CDs and money market accounts) that have less than $250,000 are fully protected by the FDIC even if the bank fails. If you want to exceed these account limits, you can keep your deposits fully protected by:
Dividing your money among several different bank companies. Note that dividing your money among several different branches of the same bank does not guarantee full protection. If you prefer to keep your money in the same bank company, you can still be fully protected if you divide your money among various "ownership categories". Ownership categories include a personal account in your name, a personal account in your spouse's name, a joint account co-owned by you and someone else, and a trust account that names someone other than you as a beneficiary.
What are some common ways customers end up with uncovered deposits?
If you purchase a CD through an investment broker, this CD will often be placed with a bank at which you already have an account. If the CD and your other accounts exceed the $100,000 limit, you may not be full protected. Before purchasing CD's through a broker, ask where they will be placed.
In addition, keep track of the interest your accounts earn so you don't exceed the limits this way.
What will happen if your bank fails?
In most cases, depositors can fully access their funds by the next business day. Typically, failed banks are closed on Fridays, and funds are available by the following Monday. People can also usually use their ATM cards and write checks over that weekend as well. And for customers whose accounts exceeded the FDIC limit, all hope is not lost. Though this amount has varied, they can generally expect to recover 70 cents on the dollar of their uncovered funds after the bank's assets are sold.
The good news is that the vast majority of US banks are secure, but the above information will help you stay fully protected. For more information, visit www.fdic.gov.
Foreclosure vs. Short Sale
Sunday, August 24, 2008 - By Gate Arty
What follows is a brief synopsis of the differences between a FORECLOSURE and a SHORT SALE and their affects on certain issues.
Fannie Mae Loan: A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years. Homeowners who successfully negotiate & close a short sale will be eligible for A Fannie Mae backed mortgage after only 2 years. For investors that allow a property to go to foreclosure, a Fannie Mae backed investment mortgage will be unattainable for 7 years!
On any future 1003 application, a prospective borrower will have to answer "YES" to question C in Section VIII of the standard 1003 that asks: "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" There is no similar declaration or question currently regarding a short sale.
Credit Score: A foreclosure can lower a credit score anywhere from 250 to over 300 points. Typically this will affect a score for about 3 years. A short sale will only affect your credit report to the extent that late payments will be reported. The satisfaction of the mortgage resulting from a short sale will be reported as paid or negotiated. This can lower the credit score as little as 50 points just as long as all other payments are being made. The affect of a short sale can be as brief as 12 to 18 months.
Credit History: Foreclosure will remain as a public record on an individual's credit history for 10 years or more. A short sale is NOT reported on a credit history. In this instance, the loan is typically reported, "paid in full, settled."
Insurance NOW
Saturday, August 16, 2008 - By Gate Arty
Experience has shown me that many prospective home buyers shop for homes during the summer months for a variety of reasons. First off, there is more time. Many people take vacation time during the summer months. Other "snowbird" retirees elect to buy a summer home during their regular time here in sunny Florida. More often than not however, the reason involves children. Many parents have told me that they would prefer buying during the summer so they will not have to uproot & disrupt their children's school year midway, in the event that a change of school is necessary.
One important thing (especially in Florida) to consider if you are buying during the summer is HURRICANE SEASON! For buyers who have identified a home and are in the closing process, thoughts of mortgages, inspections, & moving dominate. Another important item to consider is binding your homeowner's insurance policy. One can not close on a purchase transaction without binding insurance coverage if there is a mortgage attached to the transaction. At many points during the hurricane season, writing & binding policies is suspended, however. This can & will delay your closing.
There are two ways insurance companies determine when to temporarily suspend issuing new coverage:
1. When the National Hurricane Center issues a tropical storm or hurricane watch or warning.
2. When a tropical storm or hurricane enters a company’s “storm box.” A storm box is literally a box drawn on a map around a large geographical area. When a name storm enters that "imaginary box," policies are no longer written or bound until the threat of said storm has passed.
There can be delays in real estate closings when availability of insurance coverage is suspended. This is unfortunate, but suspensions only span a couple of days, unless there has been a major hurricane landfall, and then the delay could be longer. When a company suspends binding privileges it only affects those people who don’t already have insurance. If you are in the midst of a closing & have already secured insurance, your closing will not be delayed.
In the event a real estate closings are delayed, the properties are still, of course, insured. If it is a new home, it is still covered by the “builder’s risk insurance.” A re-sale property theoretically would still be insured by the current owner.
Housing Stimulis Tax Credit
Wednesday, August 06, 2008 - By Gate Arty
A major component of the recent housing stimulis legislation was the temporary first-time home buyer tax credit. According to Census data, first-time home buyers constitute about 40 percent of all buyers. It is thought that the tax credit will stimulate home buying & selling, reduce the amount of inventory in the housing market, and as a result bolster the economy. This incentive is temporary, however. The temporary tax credit is good for a home purchased on or after April 9, 2008 and before July 1, 2009. Buyers can take the tax credit in their 2008 or 2009 tax return. If you purchased the home in 2008, the tax credit is taken on your 2008 tax return. If you buy in 2009, you have the option of taking the credit on your 2008 or 2009 tax returns.
For details, click HERE.
Here's how it works:
- The new law authorizes a temporary $7,500 tax credit for qualified first-time home buyers for the purchase of any home.
- A first-time home buyer is defined as a buyer who has not owned a home during the past three years.
- Single taxpayers with modified adjusted gross incomes of up to $75,000 are eligible to take the full credit. For married couples filing a joint return, the income limit doubles to $150,000.
- Single taxpayers earning between $75,000 and $95,000 can claim a partial credit of less than $7,500 while the phase-out for married couples ends for those earning above $170,000.
- Since the tax credit is refundable, it means that the home buyer can claim the credit even if they owe little or no federal income taxes. In other words, the government would write you a check. For example, if a home buyer owes the federal government $2,500 in federal taxes and qualifies for the $7,500 home buyer tax credit, the taxpayer would receive a $5,000 refund check from the IRS ($7,500 minus the $2,500 owed).
- To reduce the cost to the federal Treasury, Congress has mandated that the tax credit essentially serves as an interest-free loan to be repaid over 15 years. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.
Tags: business, buy real estate, census, economy, housing stimulis, irs, rela estate, sell real estate, tax, tax credit
Downpayment Reform
Monday, August 04, 2008 - By Gate Arty
The new Housing and Economic Recovery Act of 2008 contains a provision that forbids FHA from insuring mortgages in which the downpayment comes directly, or indirectly, from an interested third party (such as the seller), beginning October 1, 2008.
On Thursday, July 31, 2008, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) was introduced by several members of Congress. Representatives Maxine Waters, Gary Miller, Al Green and Christopher Shays sponsored this bill that if passed and signed into law will allow downpayment assistance to continue indefinitely.
Housing and Economic Recovery Act of 2008
Friday, August 01, 2008 - By Gate Arty
On July 30th, President Bush signed the Housing and Economic Recovery Act of 2008. All provision details are not yet available, but the major components included broad authority for the Treasury Department to safeguard the nation’s two largest mortgage finance giants (Fannie Mae and Freddie Mac) and a plan to help hundreds of thousands of troubled homeowners avoid foreclosure.
As anticipated, all seller-funded DPA programs will be abolished October 1st, 2008. Meaning the minimum cash investment requirement will increase to 3.5% of the purchase price.
More news to come on this as it becomes available!
Tags: business, down payment, economy, fannie mae, finance, freddie mac, mortgage, real estate
Down-Payment Assistance Eliminated?
Wednesday, July 23, 2008 - By Gate Arty
Mortgage programs that offer down-payment assistance (DPA) assisted nearly $80,000 people buy homes in the depressed market of 2007. The Senate and House of Representatives are fast-tracking legislation that would likely abolish DPA programs. The repercussions could be devastating to the already ultra-sensitive real estate market.
DPA programs are operated by nonprofit organizations. These organizations provide buyers with money for their down-payment. In turn, home sellers reimburse the organizations and pay an administrative fee. These loans are insured by the Federal Housing Administration (FHA).
Mortgages with DPA account for almost 40% of FHA’s volume! It has been estimated that if DPA programs are eliminated, the direct impact on real estate could result in an estimated $50 billion in lost real estate sales & mortgages, not to mention the loss of jobs in the building & lending sectors of the real estate industry.
Fannie Mae & Freddie Mac Concerns
Monday, July 14, 2008 - By Gate Arty
Concerns about the solvency of both Fannie Mae and Freddie Mac, which guarantee over $5 trillion of the nation's $12 trillion in mortgage debt, sent the stocks of both companies into a tailspin this past week. Fannie Mae, open the day trading at $23.00 previously had a 52 week high of $41.65. Freddie Mac opened at $23.50 today with a 52-week high of $45.50. The Federal Reserve voted Sunday to allow Fannie and Freddie to borrow directly from the central bank.
Add to this the announcement that IndyMac Bancorp shut its doors, which marks the first time in 15 years that a bank with over $10 billion has collapsed. The Federal Deposit Insurance Corporation seized control of the bank late Friday. IndyMac focused on deposits and originating home mortgages.
Tags: fannie mae, fdic, federal reserve, finance, freddie mac, mortgage
Real Estate Foreclosure Opportunities
Monday, July 14, 2008 - By Gate Arty
A turbulent real estate market has presented opportunity for local investors. Polk County has never had as many real estate foreclosures as our present day market. In June alone there were 815 foreclosures. In June of 2007, there were only 381 filings . . . a whopping 114% increase! In all of 2007, there were 5132 foreclosures. Thru June there have already been 4,481.
So what of this opportunity? Buyers, specifically investors, have a treasure trove of real estate inventory to select from. Banks are not in the business of owning real estate. Once a property is foreclosed & in their ownership they will either sell the property at auction, or typically secure the services of a REALTOR to sell the property. It is wise to consult with a REALTOR adept at handling foreclosures, known in the real estate profession as REO (real estate owned) properties. Typically these REALTORS work with several banks & are often the first to know about a property before it even hits the multiple listing service (MLS) database. Working with a REO professional could give you insight on market conditions, incoming inventory, potential resale values, & financing options on rehab properties.
Real Estate Values & Sales on the Rise
Saturday, July 12, 2008 - By Gate Arty
According to the latest report from the National Associaton of Realtors (NAR), real estate values & sales volume appear to be trending upward, in spite of the recent credit crisis and barrage of negative real estate news reports. After reaching a relative low of $195,600 in February of 2008, the NAR reports the median sales price have increased 4 consecutive months. In the month of May (June’s value will be revised on July 24th) the median sales price was $208,600. This represents an increase of 6.6% from the February low! On an annualized basis, home sales volume has also risen.
Mortgage Insurance
Friday, July 11, 2008 - By Gate Arty
Three mortgage insurance (MI) companies filed for bankruptcy this week. Mortgage insurance is insurance to offset losses in the case where a mortgagor (borrower) is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property. Mortgage insurance is typically required on loans where the borrower has less than a 20% down payment.
Remaining mortgage insurers have been tightening their standards and offering borrowers fewer ways to avoid purchasing mortgage insurance. The MI companies have begun categorizing more and more of the country as a "declining market," raising the requirements and making such insurance more difficult to obtain. Stated simply, without MI, buyers will have to put more money down to qualify for loans - perhaps 10%.
During the previous housing boom, borrowers were often able to avoid mortgage insurance by taking out two loans: one that covered four-fifths of the home's purchase price and a second "piggyback" loan that covered the traditional 20-percent down payment. With this type of lending practice now being non-existent, potential home buyers need MI to buy, and the overall buying pool has consequently significantly decreased.
Tags: bankruptcy, finance, foreclosure, insurance, loan, loans, mortgage, property value
100% Financing options?
Friday, July 11, 2008 - By Gate Arty
With the mortgage & lending industries further tightening their lending requirements & guidelines, it is becoming increasingly difficult for home buyers to qualify for homes. Are there still low down payment options available? The USDA / Rural Development program is certainly a very viable option for certain buyers in certain areas. The advantages of a USDA loan are:
- No down payment & 100% financing
- Loan not limited by contract amount
- No PMI
- No need for "seasoned funds"
- No maximum purchase price
- Not limited to first-time buyers
The property does have to be in an area that qualifies as rural. To check if a property qualifies, click: USDA.
Tags: down payment, finance, insurance, mortgage, usda loans
Debt Forgiveness
Friday, April 11, 2008 - By Gate Arty
In my last post, I described the short sale process. Some have expressed concerns about the effect the resulting debt-forgiveness of a short sale has on your tax situation. In prior years, any form of debt-forgiveness on a mortgage was considered earned income. Now, however, the Mortgage Forgiveness Debt Relief Act of 2007 allows a 3-year window for homeowners to refinance their mortgage with no tax penalty on any debt relief that is received. This act will increase the incentive for borrowers & lenders to work together to refinance loans , and realtors to negotiate short sales to avoid foreclosure. This act only applies to principal (homestead) property.
Click here for more information on the Mortgage Forgiveness Debt Relief Act.
What is a short sale?
Wednesday, April 09, 2008 - By Gate Arty
A "short sale" or "pre-foreclosure" occurs when a bank (or lien-holder) agrees to accept a discounted pay-off of a mortgage. In other words, the bank(s) will release the lien(s) that is secured on the real estate, upon receipt of LESS money than is actually owed. Why would any bank accept less than what is owed? Well, it must make financial sense for this to occur. Here's a scenario . . .assuming there is an offer, of course!
First off, the mortgage(s) in question is typically in some stage of default. The bank, faced with a mortgage that is not being paid, must decide whether selling at a discount makes better financial sense than actually going through a long & costly foreclosure process. In our current real estate climate (because of the increasing alarming rate of bank foreclosed properties), most institutions are deciding that short sales are a viable route. Remember, banks and other lending institutions are not in the business of owning real estate. They want good mortgages. Foreclosures are not only time-consuming, but they are expensive.
The bank will not accept just any offer, however. They will have the property appraised to establish approximate market value. If they can negotiate a sales price "close" to that figure, a short sale may then be consummated. If the short-sale offer is not considered valuable enough, then they may opt to foreclose, and eventually sell the property on the retail market once they obtain "possession." This is what we know of as a foreclosure property.
Short sales represent a tremendous purchase opportunity for buyers and especially investors. Since most transactions occur on a distressed level, many sales prices occur below appraised value giving the buyer "instant equity."
Mortgage rates
Monday, March 17, 2008 - By Gate Arty
Long-term mortgage interest rates were down again Monday, and the benchmark 10-year Treasury bond yield sank to 3.31 percent.
The 30-year fixed-rate average dropped to 5.74 percent, and the 15-year fixed rate fell to 5.09 percent. The 1-year adjustable rate dipped to 5.07 percent.
Tags: finance, interest rates, mortgage
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