Fixer Upper Loans Are Still Available

My Comment: Here is an article by our Loan Officer business partner, Justin Harris, about an exciting loan program. You may have heard that these types of loans have gone the way of the saber-tooth tiger - extinct, but not so. So, don't automatically eliminate a potential home, just because it might need some fixing and you don't have the cash for the upgrades. This type of loan would help you do either repairs or upgrades.

A 203(k) loan is an FHA insured loan that allows buyers to purchase a home and include money for renovations and/or repairs into the same mortgage loan used to purchase the home. The repairs can be either required or optional repairs.

Some of the allowed repairs include:
    Remodel an outdated kitchen and/or baths
    Replace roof
    Add rooms, including a garage
    Get a new roof
    Upgrades to central heat/air
    Landscaping
    Convert a home to be handicapped accessible
    Plus much, much more…
A 203(k) loan is not only for the “handyman special,” but can also be used to remodel a home to the buyers’ liking.

Please feel free to call me if you have any questions.

Justin Harris
Senior Loan Officer
Prospect Mortgage
NMLS# 289494
1260 N Dutton Ave, Ste 220
Santa Rosa, CA 95401
Office: (707) 535-1263
Fax: (877) 412-9909
Justin.Harris@prospectmtg.com

Gov. HAFA Short Sale Program

My Comment: I have been to a couple of special trainings on this and have meant to post my notes here, but our referral partner in Las Vegas, Billy O'Keefe, has saved me the trouble. As he points out, it is not all that easy, but it should be better than it has been. The biggest possible problem is if the lenders set the sales price too high above the real market. We shall see about that. 

 

Here is his very good summary.

 

 

As many of you have heard there is a government program that has taken effect on April 5th, 2010 called HAFA (Home Affordable Foreclosure Alternatives) that is suppose to help expedite the short sale process by offering incentives to servicers and investors on loans, as well as borrowers, in the hopes that is cooperative effort with shorten the recovery time of the housing market.  I am going to provide a quick overview below as to what the program entails and how to qualify.  Keep in mind that you have likely heard ads on the radio or seen them on tv or in magazines, making it seems like this process is a breeze.  Don't be fooled!  It is potentially easier than it has been but there are still a lot of hoops to jump through to qualify!  I have been specializing in SHORT SALES for almost 2 years and have seen a lot.  If you have any questions or know someone that wants to know their options please have them call me asap because time is of the essence especially if they are late on their mortgage payment.

 

HAFA Overview

- takes place 4/5/10

- helps by pre-approving short sales and releasing borrowers from future liability of the debt

- pertains only to first mortgages!

- must go through HAMP (Making Home Affordable) program first

- financial incentives provided to servicers, investors, and homeowners who qualify

- uses standardized processes, documents, and timeframes (however there are no concequences to servicers that don't comply)

- investors must waive right to seek deficiency judgements

 

HAFA Requirements (for eligibility)

- must be borrower's principle residence

- loan must be a 1st mortgage

- loan must be originated before January 1st, 2009

- mortgage is delinquent or default is imminent

- current unpaid principle balance is equal to or less than $729,750

- borrower's total monthly mortgage payment exceeds 31% of borrower's gross income

 

Incentives (subject to change)

- borrowers qualify for $3,000 in relocation assistance

- servicers qualify for $1,500 for administration and processing fees (may be increased due to recent changes)

- investors qualify for $2,000 for subordinate lien holder payoff (may be increased due to recent changes)

 

 

Affordability - continued

My Comment:

Affordability is a huge factor in local real estate markets. 

The conclusion of the article below is: "Regardless of where your town ranks, home affordability remains high as compared to historical values but it likely won’t last long. Home values are recovering in many markets and mortgage rates won’t stay this low forever.All things equal, buying a home may never come this cheap again. If you were planning to buy later this year, consider moving up your time frame.

As I posted recently, affordability is way up in Sonoma county from a few years ago. The local article put it at over 60% of locals could buy a lowered priced home. 

In this national ranking, using a different criteria of who can buy a median priced home, they say 47% could buy. This is a bit misleading as it does not factor in that most sales are in the lower price ranges.  Using this criteria, there are still many more affordable places, but would you want to live there? That is the question. I think that for the premier weather, amenities and other advantages, Sonoma county represents great value. 

 

Home Opportunity Index Ranks 225 Metro Areas For Affordability

Posted by Jack Sternberg on Friday, May 21st 2010     

Read more: http://realestate.bryanellis.com/2113/home-opportunity-index-ranks-225-metro-areas-for-affordability/#wSr4vDhOIVGO#ixzz0oafvvzoX

Still Plenty of Potentail Buyers - for lower priced homes that is

My Comment: 

It is probable that there will continue to be a steady flow of "distress" sales coming to the market (either "short sales," where the lender agrees to let the home owner sell for less than the mortgage amount, or bank owned, where the lender has foreclosed and put the property up for sale. And these homes will continue to sell at a brisk pace, as there are a good number of qualified buyers.

Here are the major factors:

1. 2 or 3 years ago, when homes were not affordable for folks earning the median income in this area.  many fell into the trap of buying with adjustable mortgages with low teaser rates to get them into the home. They were told that the home would continue to go up in value and they could refinance the mortgage before it would adjust up. Of course, that did not happen. So now over 10% of local mortgages are past due on their payments. 

2. Even though a lot of first time home buyers took advantage of the recent government subsidies and bought homes, there is still a good number who can afford to buy now. Please see the article below:

 

Nearly two thirds of Sonoma County households can afford starter homes.

by real.estate

Sixty-two percent of Sonoma County households could have qualified to buy an entry-level home during the first three months of the year.

A buyer would have needed a minimum household income of $51,660 in order to buy that starter home, which the California Association of Realtors pegged at a price of $306,290. The group set the price of an entry-level home at about 85 percent of the county’s median sales price.
The percentage of potential households was little changed from a year earlier, when 63 percent could afford to make such a purchase.
For California, 66 percent of households could afford a starter home at an estimated cost of $246,270. That compares with 69 percent who could purchase such a home in the first quarter of 2009.
The typical state buyer needed a minimum annual income of $41,540. That was $3,910 greater than a year earlier, when the minimum qualifying household income would have been $37,630.
For Sonoma County, the estimated monthly house payment, including taxes and insurance, would have been $1,720. That assumed a 10-percent down payment and a mortgage with an adjustable interest rate of 4.33 percent.
Fifty-three percent of Bay Area households could qualify to purchase a starter home, compared to 62 percent a year earlier.
The association reported that the High Desert region was the state’s most affordable area, with 84 percent of households able to purchase a starter home. San Luis Obispo County was the least affordable in the state at 52 percent.
— Robert Digitale

Sonoma County Real Estate Update May 2010

My Comment: This article confirms what we are seeing at the Realtor level as well. 

There are still some good deals out there, where the mortgage payments can be lower than an equivalent rent. 

Short sales can be iffy, but some are getting done.

Lending is tight unless you are an ideal profile, W2 income, good FICO score, etc. but we work with some good lenders who can generally work with self-employed as well.

Inventory is down and demand has been up for homes under (I would say $400k, the article says $500k.) This is partly because more Bank Owned properties are selling for discounts on the courthouse steps to investors. This is a rather recent phenomenon. 

Condos are  

 

April home sales, contracts up in Sonoma County

Median single family home price still $345,000

By STEVE HART
THE PRESS DEMOCRAT

Published: Tuesday, May 18, 2010 at 5:12 p.m.

( page of 3 )

Sonoma County home sales picked up in April, and pending sales grew even faster, a sign the housing market is warming up.

 

It's unclear whether an $8,000 federal tax credit for first-time homebuyers — which expired April 30 — had an impact on last month's sales.

“Sales are up, but they're limited by the lack of inventory,” said Rick Laws, manager at Coldwell Banker in Santa Rosa, which compiles real estate data for The Press Democrat monthly housing report.

Buyers purchased 371 single family homes in April, up from 359 in March and 302 in February. Another 642 homes went under sale contracts, compared to 489 in March.

“We haven't seen that many properties go under contract for a long time,” Laws said.

Not all of those deals will result in sales, however. Many are short sales, offering less than is owed on the mortgage. Banks are slow to approve them, and such deals frequently fall apart, according to market analysts.

“Short sales have a habit of bouncing in and out of escrow,” Laws said.

April's median single family home price remained flat at $345,000. So far this year, prices are up more than 11 percent from 2009.

Katharina and Jules Rodigou jumped into the market last month, purchasing a bank-owned home priced in the high $200,000s in the Piner area of northwest Santa Rosa.

They had been renting and looking to buy for more than a year. “I think we got a fantastic deal,” said Katharina Rodigou.

With a low interest rate, their monthly payment will be less than what they've been paying in rent, she said.

“It was very hard to get a loan, but we got a good rate,” said Rodigou, who owns The Smog Center in Santa Rosa with her husband. “It was worth it to hang in there.”

Home sales normally pick up in spring, but buyers are being cautious, said Belinda Andrews of Century 21 in Santa Rosa, who handled the Rodigou's purchase.

“No one knows where the economy's going, and that's still making people a little nervous,” she said.

There were 1,486 homes on the market last month, down 5 percent from March. While there's a shortage of homes priced below $500,000, there's plenty of inventory above that mark.

Nearly half of homes for sale are bank-owned or otherwise distressed, Laws said. But that's down from late 2008, when bank-owned property dominated the market.

“We're seeing more activity in non-distressed properties,” Laws said, including homes price above $500,000. “I'd say it's warming up because there's some stability in the marketplace.”

Last month's performance may have been helped by the federal government's tax credit for first-time homebuyers, said Mike Kelly, senior sale consultant at Keller Williams Realty in Santa Rosa.

Those sales have until the end of June to close. “We'll have to wait to see if it was because of first-time buyers,” he said. “A lot of buyers had been waiting.”

Meanwhile, the state started offering a $10,000 tax credit for first-time homebuyers and a separate tax credit for new home purchases on May 1.

But the $100 million state fund for first-time buyers could run out as early as next month because of high demand, according to state officials.

Sonoma County condominium sales were down 16 percent last month, with 64 deals closed. The median price was $158,700, down 11 percent from March.

 

John Paulson goes positive on real estate/housing/building!

My Comment: Notorious hedge fund manager, who called the housing bubble (and made gazillions on shorting it) is now going positive on real estate/housing, even adding home builder. I"m optimistic, but even I would not bet on a builder at this juncture.


As reported in Reuters -

Paulson adds homebuilder as he bets on housing recovery
 

* Extends bet on Bank of America (Adds details on fund managers' holdings)
By Svea Herbst-Bayliss
BOSTON, May 17 (Reuters) - Hedge fund manager John Paulson, who correctly bet that housing prices would fall three years ago, is now betting that the market will come back soon and added a homebuilder to his portfolio while raising his stake in the country's leading bank.
Paulson's New York-based Paulson & Co raised its holdings in Bank of America (BAC.N), already one of his top 10, by 11 percent to 167.8 million shares, according to a regulatory filing released on Monday. The numbers detail the positions managers held at the end of the first quarter.
The Charlotte, North Carolina-based bank remained Paulson's second-largest position, valued at $2.99 billion at the end of the first quarter.
Late last year, Paulson told investors that he expected Bank of America's stock price to almost double in two years, expecting it to rise to $29.81. Shares closed at $16.35 on Monday.
Paulson's holding in Citigroup, his third biggest, was unchanged at 506.7 million shares.
Perhaps most notably, Paulson bought 5 million shares in Beazer Homes USA (BZH.N), marking an unusual move among most hedge fund managers who concentrated more on financials and other big industries..
A week ago Paulson told investors that he expected to see a strong economic recovery plus a rebound in housing prices.
Last month, Paulson's firm became drawn into the fallout surrounding Goldman Sachs' civil fraud suit for misleading investors in a deal in which Paulson helped select mortgages and then bet that they would fail. Paulson's firm was not accused of any wrong-doing by the government.
The fund manager kept his biggest position in SPDR Gold Trust, which was also unchanged at 31.5 million shares in the first quarter.
Late last year Paulson announced plans to make a big bet on gold by launching a new fund devoted to the precious metal.
During the quarter, Paulson raised his stake in AngloGold Ashanti Ltd to 43.7 million shares from 42.8 million.
Money managers are required to file form 13-F within 45 days after the end of each quarter. The forms include only U.S.-listed equity securities and related derivatives. Bonds, other securities and short positions are typically not disclosed. Managers may also leave off U.S.-listed equities they own under certain circumstances or file some holdings on confidential filings.
Paulson's firm manages about $35 billion and the filing made on Monday shows about $21.2 billion in holdings.
The fund manager also bet big on casino owners on MGM Mirage and Boyd Gaming Corp during the first three months of the year. (Reporting by Svea Herbst-Bayliss, editing by Bernard Orr)

Homeowners are being kicked out of Loan Mods

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Shahien Nasiripour

shahien@huffingtonpost.com | HuffPost Reporting

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HAMP Update: Twice As Many Homeowners Kicked Out Of Obama Foreclosure Program As Given Permanent Relief, New Data Show

More than twice as many homeowners were kicked out of the Obama administration's signature foreclosure-prevention program last month as were granted permanent relief, new data released Monday show. More than 123,000 homeowners were bounced from the administration's Home Affordable Modification Program in April versus about 60,000 who were offered five-year plans of lowered monthly payments. This is the first month since the administration started reporting cancellation figures that the number of canceled modifications outpaced the number of new permanent modification offers. The number of canceled modifications skyrocketed 82 percent in April compared to March. "I think it's important to remember that our focus has been on getting homeowners in trial modifications through the decision," said Phyllis Caldwell, chief of Treasury's Homeownership Preservation Office, during a conference call with reporters. "As those decisions get made, it's certainly expected that there would be some that would fall out of HAMP and be considered for other foreclosure alternatives." "The number is a very, very small percentage of the total amount of permanent modifications," Caldwell added. More than 295,000 homeowners currently are in five-year modification plans, which are considered "permanent" because the interest rate won't increase very much over the life of the loan. Interest rates are at historic lows. There were more cancellations in April than there were new permanent and trial modifications combined. The number of cancellations was about 27 percent higher than the number of new trial and permanent plans, according to Treasury Department data. "I think it's great to take these numbers in context... with the broad efforts to stabilize the housing market," said David Stevens, chief of the Federal Housing Administration. Stevens pointed out that home prices and the number of new foreclosures have started to stabilize. He credited the administration's efforts in keeping down interest rates with helping homeowners to refinance their existing mortgages into lower rates, resulting in lower payments. Trial modifications have been offered to more than 1.2 million homeowners during the year-long program. "You know, while enabling eligible homeowners to modify their mortgages is vital to addressing the housing crisis with HAMP, it's also extremely important to keep this in context that this is just one part of the administration's comprehensive approach to assisting homeowners and stabilizing the housing market," said Stevens, assistant secretary for housing at the Department of Housing and Urban Development. "We don't claim that the housing market is totally out of the woods, but it's certainly showing signs of stabilizing," added Herbert M. Allison Jr., assistant secretary for financial stability at the Treasury Department.

Comment:

Industry sources have told me that the lenders are just going to do the minimum number of loan mods that the Feds are demanding. They have more and better compensation for foreclosing and getting reimbursed for their "losses" other ways. It stinks, but that is the way it is.

 

 

 

 

Economic Update and Comment May 15

My Comment:

This is a standard weekly update I get from Lenders


The news all looks pretty good, but there is a shadow side. Realtors are wondering about
4 BIG THINGS.
1. Will demand for homes continue now that the federal tax break incentives are gone? The expectation at this time is that there will be some fall-off of demand, but not too much.
2. Will the lenders with huge inventories of REO (Real Estate Owned - by them) homes continue to parcel them into the marketplace at a moderate rate, thus holding up values? They seem to have figured this part out and will continue what they are doing.
3. Will the new government HAFA program (http://www.realtor.org/government_affairs/short_sales_hafa) flood the market with new, improved short sales? Lenders will now be required to offer that option to distressed home owners. Will the home owners even open the letter? We'll see.
3. When will interest rates/mortgages adjust upward? Not for awhile. There is a lot of interest in U.S. debt securities (flight from Europe, etc.) which underlie the mortgage rates. Talk of Fed pull-back of insuring mortgage is just talk. It's an election year. They are not going to risk further damage to the housing market.



Last Week in the News

The Commerce Department said wholesalers increased their inventories by 0.4% in March, following a 0.6% rise in February. Sales at the wholesale level rose a robust 2.4% in March, marking the 12th straight monthly gain.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending May 7 rose 3.9%. Refinancing applications jumped 14.8%. Purchase volume decreased 9.5%.

The trade deficit increased 2.5% to $40.4 billion in March, from a revised $39.4 billion gap in February. Economists had expected the trade deficit to widen to $40.1 billion. Exports rose 3.2% to $147.87 billion. Imports increased 3.1% to $188.3 billion.

Retail sales rose 0.4% in April, following an upwardly revised 2.1% increase in March. Economists had anticipated retail sales to rise 0.2% in April. On a year-over-year basis, retail sales increased 8.8%.

Industrial production at the nation’s factories, mines and utilities increased 0.8% in April, following a 0.1% gain in March. It was the 10th consecutive monthly increase. The overall factory-operating rate rose to 73.7% of capacity in April, the highest reading since November 2008.

Total business inventories rose 0.4% in March, following an upwardly revised 0.5% increase in February. All components showed nearly uniform increases in March: manufacturers up 0.3%, retailers up 0.4%, wholesalers up 0.4%.

Initial claims for unemployment benefits fell by 4,000 to 444,000 for the week ending May 8. Continuing claims for the week ending May 1 rose by 12,000 to 4.627 million.

Upcoming on the economic calendar are reports on the housing market index on May 17, housing starts on May 18 and the index of leading economic indicators on May 20.Last Week in the News

The Commerce Department said wholesalers increased their inventories by 0.4% in March, following a 0.6% rise in February. Sales at the wholesale level rose a robust 2.4% in March, marking the 12th straight monthly gain.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending May 7 rose 3.9%. Refinancing applications jumped 14.8%. Purchase volume decreased 9.5%.

The trade deficit increased 2.5% to $40.4 billion in March, from a revised $39.4 billion gap in February. Economists had expected the trade deficit to widen to $40.1 billion. Exports rose 3.2% to $147.87 billion. Imports increased 3.1% to $188.3 billion.

Retail sales rose 0.4% in April, following an upwardly revised 2.1% increase in March. Economists had anticipated retail sales to rise 0.2% in April. On a year-over-year basis, retail sales increased 8.8%.

Industrial production at the nation’s factories, mines and utilities increased 0.8% in April, following a 0.1% gain in March. It was the 10th consecutive monthly increase. The overall factory-operating rate rose to 73.7% of capacity in April, the highest reading since November 2008.

Total business inventories rose 0.4% in March, following an upwardly revised 0.5% increase in February. All components showed nearly uniform increases in March: manufacturers up 0.3%, retailers up 0.4%, wholesalers up 0.4%.

Initial claims for unemployment benefits fell by 4,000 to 444,000 for the week ending May 8. Continuing claims for the week ending May 1 rose by 12,000 to 4.627 million.

Upcoming on the economic calendar are reports on the housing market index on May 17, housing starts on May 18 and the index of leading economic indicators on May 20.