At-risk FHA Borrowers in Marin Will Receive Early Relief Assistance

Homeowners with loans insured by the Federal Housing Administration (FHA), including those in Marin County, experiencing financial hardship now are eligible for loss mitigation assistance prior to defaulting on their mortgage, the Dept. of Housing and Urban Development announced Friday. Previously, borrowers with FHA-insured loans were not eligible for such assistance until after they had missed payments.

FHA also issued guidance to FHA-approved loan servicers on how to assist FHA borrowers who are facing “imminent default,” defined as an FHA borrower who is current or less than 30 days past due on the mortgage obligation and is experiencing a significant reduction in income or some other hardship that will prevent him or her from making the next required payment on the mortgage during the month that it is due. Unfortunately, in this economic climate, that includes more and more of us in Marin County.

To become eligible, borrowers must be able to document the cause of the imminent default which may include, but is not limited to, a reduction in, or loss of, income that was supporting the mortgage; or a change in household financial circumstances.

Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer’s documentation must also include information on the borrower’s financial condition. Not yet known is how this will affect the creditworthiness of the borrower. Call me for further information, 415.302.7787. Cheers!

Treasury Gives Fanny, Freddie Blank Check

In light of what many view as the failure of their Foreclosure Alternatives Program (FAP), the U.S. Treasury  announced on Christmas Eve that it was removing  limits on federal financial aid for Fannie Mae and Freddie Mac, the companies which were seized by the government in September 2008 amid mounting mortgage losses. Restrictions had capped aid at $200 billion for each firm: Freddie  has tapped $51 billion and Fannie has used $60 billion to date.

The government said it was removing the caps to “leave no uncertainty about the Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during this current crisis.”

This helps the Marin property owners in at least three ways:

1.  Now that these companies are fully backed, without condition, by the U.S. government, which controls 70% of each firm, the companies can borrow at the most favorable rates. After all, with the Federal security net, there is no risk to a lender. Freddie and Fanny can then make mortgages at lower rates. Ergo, cheaper mortgages for buyers.

2.  The Treasury, by now permitting Freddie and Fannie to retain larger mortgage-asset portfolios, will allow them to provide more significant loan modification assistance to greater numbers of seriously troubled Marin borrowers.

3.  Most important, they will reduce the principal amount owed by borrowers who are delinquent or upside down, something not permitted until now. While some mortgage companies had reduced interest rates to lower payments for delinquent borrowers, none had been willing to reduce the principal owed. Owners who have equity in their home will be less likely to walk away or allow the home to go into default.

What next, Jumbo Loans?

For more details, or if I can help in any way, call Jack now at 415.300.0432

Visualizing the Effect of Tax Credits

Guest blog from Altos Research

Ah the glorious Home Buyer Tax Credit. Consumers lust for it, and NAR spent a fortune getting it extended. Realtors are indeed finding it a valuable incentive for business this year.

40 Largets Metros, by price quartile. Days on Market and Absorption Rate. 90-day Rolling Average, single family homes. (Click for full image)

And housing stimulus goes beyond the tax credit too, the feds are pumping money into mortgages, keeping rates on conforming loans ridiculously low.

But Uncle Sam doesn’t do jumbos.  And while eight grand makes a big impact on a $150,000 home. For a $750,000 home, not so much. Besides, if I can’t get a jumbo loan, who’s going to use it anyway? So all the money is aimed at the entry points in the market.

All sounds good, I suppose. But is it working? Maybe too well. In city after city, housing demand is active at the entry level and dry everywhere else.

Check it out. This chart shows the 40 largest metro markets in the US, each divided into four price range quartiles. We looked at the Days on Market and Absorption Rate for each. (note: the absorbed stat is measured as of last Friday and is not exactly a count of everything “sold”, closings take a while, contracts fall through. The actual sold won’t be known for a few months, so this number is close enough.) Red is bad relative to the whole country. Green is good. Click through to get the full chart.

Notice that in almost every single metro housing demand, as indicated by higher absorption rates and lower time on market, is significantly more active  in the bottom price quartile (4) and gets weaker as you climb the price range.

As a result of all these goodies, the US Housing market is now like the retailer with a predictable clearance-sale schedule. No one wants to buy at regular prices. I can wait till Boxing Day.

More reading on the tax credit and how Realtors should get it while it’s hot.

California Mortgage Protection Program (FREE)

What if you buy a house and then get laid off? How are you going to make the monthly?

Payment insurance makes it a bit easier

We can help. Through the state association of Realtors, we can offer a new program designed to provide peace of mind to first-time buyers who are hesitant to enter the housing market due to concerns about potential job loss, and as a result being unable to meet their monthly mortgage obligations. Qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months to help pay the mortgage. The insurance is effective upon close of escrow, and kicks in upon job loss.

Best of all, the program is FREE to qualified home buyers.

To qualify for the Mortgage Protection Program, Applicants must:

• Be a first-time home buyer – someone who has not owned property in the last three years (includes co-buyer)
• Close on or before Dec. 31, 2009 (purchase agreement cannot be dated before April 2, 2009)

• Use a California REALTOR® in the transaction (ahem!)
• Purchase the property in California
• Be a W-2 employee (cannot be self-employed)

Call or text me 415.300.0432 right away for more details. Cheers! Jack

New Borrower Rules Take Effect

	Likely to have major effect on Marin mortgages Beginning Oct. 1, new rules adopted by the Federal Reserve will go into effect, requiring greater diligence on the part of mortgage lenders and brokers who issue high-cost loans for borrowers with less than favorable credit.  The interest rates on these loans are at least 1.5 percentage points greater than the average prime mortgage rate. The regulations, which were finalized in July 2008 and which were not fast tracked after the economic panic, prohibit lenders from making a high-cost mortgage without verifying that a borrower could repay the loan in the conventional way, and not through a foreclosure sale. Large Sums of Mortgage Cash During the height of the market, subprime lenders often would offer loans without requiring borrowers to provide proof that they could make the monthly payments.  In some cases, borrowers used stated income loans, which allowed some borrowers to fabricate annual income figures and buy homes without down payments. Many lenders did not even require documentation. Remember? Sort of a don’t Ask, Don’t Tell policy for borrowers. Although many believe the Federal Reserve’s new rules represent one of the more substantial efforts on the part of the federal government to combat such lending practices, some consumer advocates are concerned.  According to a policy associate at the Center for Responsible Lending, the new regulations do not cover option ARMs, which enable borrowers to choose from several monthly payment options during the loan’s early years. To read the full story, please click here.

Top Five Reasons Your House Didn’t Appraise

By Jack@mmsmarin.com

You found just the right house at last. Or you are trying to lock in a low refi rate. You know what the house is worth, but the appraisal comes in well below value: what’s up with that? You are not alone. In today’s tight lending climate, if your house doesn’t appraise, here are the most common reasons.

1. Under the new rules, your lender can no longer select, or even communicate with, the appraiser. They must use an independent – but often bank-owned – appraisal management company (AMC).
2. The appraiser couldn’t find your house. The AMC maximizes profits by selecting the cheapest appraiser, regardless of their location. The appraiser may come from Pleasanton to value your Mill Valley house. And local knowledge, especially in eclectic communities like Marin County, is critical to determining market value.
3. Your lender no longer can perform “value checks,” where appraisers informally pull comps to see if the numbers are likely to work for a client, before the actual appraisal is ordered and paid for.
4. The appraiser was incompetent. AMC requires professional appraisers to cut their fees as much as 50%. Since the best won’t work for less, they hire the new and less skilled appraisers, who may perform less thorough valuations.
5. There aren’t any good comps. With fewer sales, appraisers may need to look in dissimilar areas or go back in time to find similar properties that sold.

Call me if you have a problem. I can likely help you get the numbers up. Jack 415.302.7787